<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: January 17, 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 (File 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 September 16,
1996 and the related Prospectus Supplement, dated November 15, 1996
(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 1996-4 Asset Backed Notes and Asset Backed Certificates, Series
1996-4, 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 Bear, Stearns & Co. Inc. and Banc One
Capital Corporation (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 November 15,
1996, 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 Form 8-K dated December
20, 1996.
The Notes were issued pursuant to an Indenture dated as of November 1,
1996 (the "Indenture") between FIRSTPLUS HOME LOAN OWNER TRUST 1996-4 (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 (1) secured 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; and (2) unsecured loans which will not be secured by any interest
in real or personal property. 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 November 1,
1996 (the "Trust Agreement") among the Registrant, as Depositor, 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.
-2-
<PAGE> 3
The Home Loans were sold by FFI to the Registrant pursuant to the terms of
a Loan Sale Agreement dated as of November 15, 1996 (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.
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 November 1, 1996 (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 13,895 Home Loans having a Pool Principal
Balance as of the respective Cut-off Dates of the related Home Loans of
$399,999,913.94. 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
HOME LOAN HOME AGGREGATE BY AGGREGATE
RATES (%) LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
- --------------- --------- ----------------- -----------------
<S> <C> <C> <C>
10.001 - 11.000 1 $ 15,000.00 0.00%
11.001 - 12.000 105 3,606,204.47 0.90
12.001 - 13.000 1,231 40,427,202.14 10.11
13.001 - 14.000 4,318 130,348,000.28 32.59
14.001 - 15.000 4,761 134,161,543.12 33.54
15.001 - 16.000 2,271 61,405,295.62 15.35
16.001 - 17.000 827 21,126,849.40 5.28
17.001 - 18.000 304 7,203,283.31 1.80
18.001 - 19.000 58 1,274,315.31 0.32
19.001 - 20.000 17 397,094.10 0.10
20.001 - 21.000 2 35,126.19 0.01
--------- ----------------- -------
Totals . . . . . 13,895 $399,999,913.94 100.00%
========= ================= =======
</TABLE>
The weighted average Home Loan Rate of the Home Loans as of the Cut-Off
Date was approximately 14.529% per annum.
-3-
<PAGE> 4
CUT-OFF DATE LOAN PRINCIPAL BALANCES
<TABLE>
<CAPTION>
RANGE OF PERCENT OF TOTAL
CUT-OFF DATE NUMBER OF AGGREGATE BY AGGREGATE
PRINCIPAL BALANCE ($) HOME LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ------------------------- -------------- ------------------ -----------------
<S> <C> <C> <C>
0.01 - 10,000.00 . . . . 53 $ 496,177.29 0.12%
10,000.01 - 20,000.00 . . . . 1,971 33,434,622.73 8.36
20,000.01 - 30,000.00 . . . . 7,538 190,852,572.27 47.71
30,000.01 - 40,000.00 . . . . 2,913 106,402,530.33 26.60
40,000.01 - 50,000.00 . . . . 1,264 59,415,550.23 14.85
50,000.01 - 60,000.00 . . . . 118 6,736,786.62 1.68
60,000.01 - 70,000.00 . . . . 26 1,759,236.11 0.44
70,000.01 - 80,000.00 . . . . 12 902,438.36 0.23
---------- ------------------ --------
Totals 13,895 $399,999,913.94 100.00%
========== ================== ========
</TABLE>
The average principal balance of the Home Loans as of the Cut-Off Date was
approximately $31,861.13.
ORIGINAL LOAN PRINCIPAL BALANCES
<TABLE>
<CAPTION>
RANGE OF PERCENT OF TOTAL
PRINCIPAL BALANCE NUMBER OF AGGREGATE BY AGGREGATE
AT ORIGINATION($) HOME LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
- -------------------------- -------------- ------------------ -----------------
<S> <C> <C> <C>
0.01 - 10,000.00 . . . . 52 $ 496,124.64 0.12%
10,000.01 - 20,000.00 . . . . 1,966 33,335,918.94 8.33
20,000.01 - 30,000.00 . . . . 7,538 190,802,482.15 47.70
30,000.01 - 40,000.00 . . . . 2,913 106,316,731.56 26.58
40,000.01 - 50,000.00 . . . . 1,270 59,650,195.56 14.91
50,000.01 - 60,000.00 . . . . 118 6,736,786.62 1.68
60,000.01 - 70,000.00 . . . . 26 1,759,236.11 0.44
70,000.01 - 80,000.00 . . . . 12 902,438.36 0.23
--------- ---------------- -------
Totals 13,895 $399,999,913.94 100.00%
========= ================ =======
</TABLE>
The average principal balance of the Home Loans at origination was
approximately $31,960.16.
-4-
<PAGE> 5
GEOGRAPHIC CONCENTRATION
<TABLE>
NUMBER OF PERCENT OF TOTAL
HOME AGGREGATE BY AGGREGATE
STATE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
--------- ------------------ -----------------
<S> <C> <C> <C>
Alabama . . . . 21 $ 487,584.74 0.12%
Arizona . . . . 862 24,196,112.38 6.05
California . . 7,179 217,451,561.66 54.36
Colorado. . . . 773 20,868,302.87 5.22
Connecticut . . 40 1,240,363.73 0.31
Delaware. . . . 1 58,655.93 0.01
Florida . . . . 1,194 30,575,195.31 7.64
Georgia . . . . 369 9,478,984.43 2.37
Hawaii . . . . 1 24,314.63 0.01
Idaho . . . . . 80 2,074,524.43 0.52
Illinois . . . 121 3,166,816.27 0.79
Indiana . . . . 27 710,382.96 0.18
Iowa . . . . . 20 445,559.68 0.11
Kansas. . . . . 2 62,966.51 0.02
Kentucky. . . . 28 732,329.94 0.18
Louisiana . . . 25 558,504.68 0.14
Maryland. . . . 111 3,183,641.21 0.80
Massachusetts . 154 4,553,817.94 1.14
Michigan. . . . 6 145,033.61 0.04
Minnesota . . . 122 3,045,102.77 0.76
Mississippi . . 21 608,544.26 0.15
Missouri . . . 25 762,220.33 0.19
Montana . . . . 7 202,047.34 0.05
Nebraska. . . . 3 65,762.87 0.02
Nevada. . . . . 579 16,702,477.05 4.18
New Hampshire . 2 54,983.83 0.01
New Jersey. . . 5 181,065.60 0.05
New Mexico. . . 35 999,328.81 0.25
New York. . . . 10 292,054.77 0.07
North Carolina. 236 6,352,506.86 1.59
North Dakota. . 1 19,704.96 0.00
Ohio. . . . . . 58 1,508,281.70 0.34
Oklahoma. . . . 58 1,371,749.01 0.34
Oregon. . . . . 189 5,661,484.23 1.42
Pennsylvania. . 4 120,627.63 0.03
Rhode Island. . 35 1,026,406.18 0.26
South Carolina. 299 7,538,193.39 1.88
South Dakota. . 3 88,751.43 0.02
Tennessee . . . 125 3,086,827.88 0.77
Texas . . . . . 3 79,089.30 0.02
Utah. . . . . . 236 6,284,054.64 1.57
Virginia. . . . 259 7,455,348.34 1.86
Washington. . . 524 15,490,612.70 3.87
Wisconsin . . . 40 934,161.60 0.23
Wyoming . . . . 2 53,873.55 0.01
------ ---------------- -------
Totals 13,895 $399,999,913.94 100.00%
====== ================ =======
</TABLE>
-5-
<PAGE> 6
REMAINING TERM TO MATURITY
<TABLE>
<CAPTION>
RANGE OF NUMBER OF PERCENT OF TOTAL
REMAINING TERM TO HOME AGGREGATE BY AGGREGATE
MATURITY (MONTHS) LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ----------------- -------- ----------------- -----------------
<S> <C> <C> <C>
31 - 60 .............. 85 $ 1,646,058.90 0.41%
61 - 90 .............. 33 683,799.35 0.17
91 - 120 .............. 644 14,987,123.56 3.75
121 - 150 .............. 25 555,155.48 0.14
151 - 180 .............. 3,962 108,137,292.66 27.03
181 - 210 .............. 11 246,229.80 0.06
211 - 240 .............. 6,867 199,717,943.01 49.93
241 - 270 .............. 3 69,755.51 0.02
271 - 300 .............. 2,265 73,956,555.67 18.49
------- ---------------- ------
Totals ................ 13,895 $399,999,913.94 100.00%
======= ================ ======
</TABLE>
The weighted average remaining term to maturity of the Home Loans as of
the Cut-Off Date was approximately 227 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>
Less than 1 2,424 $ 71,526,102.84 17.88%
1 to 6 10,727 307,096,865.02 76.77
7 to 12 741 21,280,347.66 5.32
13 to 18 1 28,206.74 0.01
61 to 66 2 68,391.68 0.02
------ --------------- ------
Totals...................... 13,895 $399,999,913.94 100.00%
====== =============== ======
</TABLE>
The weighted average age of the Home Loans as of the Cut-Off Date was
approximately three months.
-6-
<PAGE> 7
Item 7. Financial Statements and Exhibits.
(c) Exhibits
<TABLE>
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
-7-
</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
February 3, 1997 By: /s/ CHRISTOPHER J. GRAMLICH
-------------------------------
Christopher J. Gramlich, Senior
Vice President
-8-
<PAGE> 9
EXHIBIT INDEX
<TABLE>
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> 1
EXHIBIT 4.1
INDENTURE
between
FIRSTPLUS HOME LOAN OWNER TRUST 1996-4,
as Issuer
and
FIRST BANK NATIONAL ASSOCIATION,
as Indenture Trustee
Dated as of November 1, 1996
FIRSTPLUS HOME LOAN OWNER TRUST 1996-4
Asset Backed Securities, Series 1996-4
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - DEFINITIONS AND INCORPORATION BY REFERENCE. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.2 Incorporation by Reference of Trust Indenture Act . . . . . . . . . . . . . . . . 11
SECTION 1.3 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE II - THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.1 Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.10 Book-Entry Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.11 Notices to Clearing Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.12 Definitive Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.13 Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE III - COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.1 Payment of Principal and Interest . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.2 Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.3 Money for Payments To Be Held in Trust . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.4 Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 3.5 Protection of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 3.6 Annual Opinions as to Collateral . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 3.7 Performance of Obligations; Servicing of Home Loans . . . . . . . . . . . . . . . 25
SECTION 3.8 Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 3.9 Annual Statement as to Compliance . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 3.10 Covenants of the Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 3.11 Servicer's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 3.12 Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 3.14 Notice of Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 3.15 Further Instruments and Acts . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE IV - SATISFACTION AND DISCHARGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 4.1 Satisfaction and Discharge of Indenture . . . . . . . . . . . . . . . . . . . . . 30
SECTION 4.2 Application of Trust Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 4.3 Repayment of Moneys Held by Paying Agent . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE V - REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 5.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 5.2 Acceleration of Maturity; Rescission and Annulment . . . . . . . . . . . . . . . . 33
SECTION 5.3 Collection of Indebtedness and Suits for
Enforcement by Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 5.4 Remedies; Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 5.5 Optional Preservation of the Collateral . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 5.6 Limitation of Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 5.7 Unconditional Rights of Noteholders To
Receive Principal and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 5.8 Restoration of Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 5.9 Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 5.10 Delay or Omission Not a Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 5.11 Control by Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 5.12 Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 5.13 Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 5.14 Waiver of Stay or Extension Laws . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 5.15 Action on Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 5.16 Performance and Enforcement of Certain Obligations . . . . . . . . . . . . . . . . 42
ARTICLE VI - THE INDENTURE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 6.1 Duties of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 6.2 Rights of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 6.3 Individual Rights of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 6.4 Indenture Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 6.5 Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 6.6 Reports by Indenture Trustee to Holders . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 6.7 Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 6.8 Replacement of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 6.9 Successor Indenture Trustee by Merger . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 6.10 Appointment of Co-Indenture Trustee or
Separate Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 6.11 Eligibility; Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 6.12 Preferential Collection of Claims Against Issuer . . . . . . . . . . . . . . . . . 48
ARTICLE VII - NOTEHOLDERS' LISTS AND REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 7.1 Issuer To Furnish Indenture Trustee Names
and Addresses of Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 7.2 Preservation of Information; Communications
to Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 7.3 Reports by Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 7.4 Reports by Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE VIII - ACCOUNTS, DISBURSEMENTS AND RELEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 8.1 Collection of Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 8.2 Trust Accounts; Distributions . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 8.3 General Provisions Regarding Accounts . . . . . . . . . . . . . . . . . . . . 53
SECTION 8.4 Servicer's Monthly Statements. . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 8.5 Release of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 8.6 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE IX - SUPPLEMENTAL INDENTURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 9.1 Supplemental Indentures Without Consent of Noteholders . . . . . . . . . . . . 55
SECTION 9.2 Supplemental Indentures with Consent of Noteholders . . . . . . . . . . . . . 56
SECTION 9.3 Execution of Supplemental Indentures . . . . . . . . . . . . . . . . . . . . 57
SECTION 9.4 Effect of Supplemental Indenture . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 9.5 Conformity with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . 58
SECTION 9.6 Reference in Notes to Supplemental Indentures . . . . . . . . . . . . . . . . 58
ARTICLE X - REDEMPTION OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 10.1 Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 10.2 Form of Redemption Notice . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 10.3 Notes Payable on Redemption Date . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE XI - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 11.1 Compliance Certificates and Opinions, etc. . . . . . . . . . . . . . . . . . . 60
SECTION 11.2 Form of Documents Delivered to Indenture Trustee . . . . . . . . . . . . . . . 62
SECTION 11.3 Acts of Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 11.4 Notices, etc., to Indenture Trustee, Issuer,
Rating Agencies and Securities Insurer . . . . . . . . . . . . . . . . . . . . 63
SECTION 11.5 Notices to Noteholders; Waiver . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 11.6 [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 11.7 Conflict with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 11.8 Effect of Headings and Table of Contents . . . . . . . . . . . . . . . . . . . 64
SECTION 11.9 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 11.10 Separability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 11.11 Benefits of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 11.12 Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 11.13 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 11.14 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 11.15 Recording of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 11.16 Trust Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 11.17 No Petition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 11.18 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
</TABLE>
-iii-
<PAGE> 5
EXHIBITS
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
-iv-
<PAGE> 6
INDENTURE dated as of November 1, 1996, between FIRSTPLUS HOME LOAN
OWNER TRUST 1996-4, 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
6.12% Asset Backed Notes (the "Class A-1 Notes"), Class A-2 6.14% Asset Backed
Notes (the "Class A-2 Notes"), Class A-3 6.28% Asset Backed Notes (the "Class
A-3 Notes"), Class A-4 6.45% Asset Backed Notes (the "Class A-4 Notes"), Class
A-5 6.53% Asset Backed Notes (the "Class A-5 Notes"), Class A-6 6.87% Asset
Backed Notes (the "Class A-6 Notes"), Class A-7 7.09% Asset Backed Notes (the
"Class A-7 Notes") and Class A-8 7.31% 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 Turst 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 1996-4) - Page 1
<PAGE> 7
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 November 1, 1996, 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 1996-4) - Page 2
<PAGE> 8
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 principal office of 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 August 2004.
"Class A-1 Interest Rate" means 6.12% 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 6.12% Asset Backed Notes,
substantially in the form of Exhibit A-1.
"Class A-2 Final Scheduled Distribution Date" means the Distribution
Date occurring in October 2006.
"Class A-2 Interest Rate" means 6.14% per annum (computed on the basis
of a 360-day year consisting of twelve 30-day months).
INDENTURE (Series 1996-4) - Page 3
<PAGE> 9
"Class A-2 Notes" means the Class A-2 6.14% Asset Backed Notes,
substantially in the form of Exhibit A-2.
"Class A-3 Final Scheduled Distribution Date" means the Distribution
Date occurring in March 2009.
"Class A-3 Interest Rate" means 6,28% 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 6.28% Asset Backed Notes,
substantially in the form of Exhibit A-3.
"Class A-4 Final Scheduled Distribution Date" means the Distribution
Date occurring in March 2010.
"Class A-4 Interest Rate" means 6.45% 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 6.45% Asset Backed Notes,
substantially in the form of Exhibit A-4.
"Class A-5 Final Scheduled Distribution Date" means the Distribution
Date occurring in July 2011.
"Class A-5 Interest Rate" means 6.53% 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 6.53% Asset Backed Notes,
substantially in the form of Exhibit A-5.
"Class A-6 Final Scheduled Distribution Date" means the Distribution
Date occurring in August 2014.
"Class A-6 Interest Rate" means 6.87% 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-6.87% Asset Backed Notes,
substantially in the form of Exhibit A-6.
"Class A-7 Final Scheduled Distribution Date" means the Distribution
Date occurring in May 2016.
"Class A-7 Interest Rate" means 7.09% per annum (computed on the basis
of a 360 day year consisting of twelve 30-day months).
INDENTURE (Series 1996-4) - Page 4
<PAGE> 10
"Class A-7 Notes" means the Class A-7 7.09% Asset Backed Notes,
substantially in the form of Exhibit A-7.
"Class A-8 Final Scheduled Distribution Date" means the Distribution
Date occurring in December 2018.
"Class A-8 Interest Rate" means 7.31% 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 7.31% 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 November 22, 1996.
"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 1996-4) - Page 5
<PAGE> 11
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 December 1996.
"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 1996-4) - Page 6
<PAGE> 12
"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 1996-4 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 November 21,
1996, 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 1996-4) - Page 7
<PAGE> 13
"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 that the
pledgee is not the Issuer, any other obligor upon the Notes, the
Seller or any Affiliate of any of the foregoing Persons.
INDENTURE (Series 1996-4) - Page 8
<PAGE> 14
"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 1996-4) - Page 9
<PAGE> 15
"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 10.4,
the Distribution Date specified by the Servicer or the Issuer pursuant to
Section 10.1 or 10.4, as applicable.
"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
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 minus the sum of (a)
the amount included in clause (v) above for such Distribution Date and
(b) the amount of Net Loan Losses 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 Offered
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.
"Reserve Account" means, the account established and maintained
pursuant to Section 5.07 of the Sale and Servicing Agreement.
INDENTURE (Series 1996-4) - Page 10
<PAGE> 16
"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 November 1, 1996, among the Issuer, FIRSTPLUS INVESTMENT
CORPORATION, as Seller, and, FIRSTPLUS FINANCIAL, INC., as 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.
(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.
INDENTURE (Series 1996-4) - Page 11
<PAGE> 17
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 agreements or instruments) references to all attachments thereto and
instruments incorporated therein; references to a Person are also to its
permitted successors and assigns.
INDENTURE (Series 1996-4) - Page 12
<PAGE> 18
II
THE NOTES
SECTION 2.1 Form. The Notes shall be designated as the "FIRSTPLUS
HOME LOAN OWNER TRUST 1996-4 Asset Backed Notes, Series 1996-4". 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 $100,750,000, Class A-2
Notes for original issue in an aggregate principal amount of $37,740,000, Class
A-3 Notes for original issue in an aggregate principal amount of $50,270,000
Class A-4 Notes for original issue in an aggregate principal amount of
$27,520,000, Class A-5 Notes for original issue in an aggregate principal
amount of $37,100,000, Class A-6 Notes for original issue in an aggregate
principal amount of $56,620,000 and Class A-7 Notes for original issue in an
aggregate principal amount of $44,340,000 and Class A-8 Notes for original
issue in an aggregate principal amount of $21,950,000. 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.
INDENTURE (Series 1996-4) - Page 13
<PAGE> 19
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
November 22, 1996. 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
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.
INDENTURE (Series 1996-4) - Page 14
<PAGE> 20
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 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.
INDENTURE (Series 1996-4) - Page 15
<PAGE> 21
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 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
INDENTURE (Series 1996-4) - Page 16
<PAGE> 22
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 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.
INDENTURE (Series 1996-4) - Page 17
<PAGE> 23
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 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
INDENTURE (Series 1996-4) - Page 18
<PAGE> 24
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 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;
INDENTURE (Series 1996-4) - Page 19
<PAGE> 25
(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 an Independent Person.
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 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.
INDENTURE (Series 1996-4) - Page 20
<PAGE> 26
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 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.
INDENTURE (Series 1996-4) - Page 21
<PAGE> 27
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 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
INDENTURE (Series 1996-4) - Page 22
<PAGE> 28
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 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
INDENTURE (Series 1996-4) - Page 23
<PAGE> 29
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;
(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
INDENTURE (Series 1996-4) - Page 24
<PAGE> 30
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 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;
(iv) enforce any rights with respect to the Collateral; or
INDENTURE (Series 1996-4) - Page 25
<PAGE> 31
(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 1997, 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 by
the Issuer. Initially, the Issuer has contracted
with the Servicer and the Administrator to assist
the Issuer in performing its duties
INDENTURE (Series 1996-4) - Page 26
<PAGE> 32
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 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
INDENTURE (Series 1996-4) - Page 27
<PAGE> 33
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 the
Indenture Trustee hereunder, the Issuer agrees
(i) that it will not, without the prior written
consent of the Indenture Trustee and the
INDENTURE (Series 1996-4) - Page 28
<PAGE> 34
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,
(iv) issue debt obligations under any other indenture;
INDENTURE (Series 1996-4) - Page 29
<PAGE> 35
(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 1996), 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 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.
INDENTURE (Series 1996-4) - Page 30
<PAGE> 36
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 1996-4) - Page 31
<PAGE> 37
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 amount sufficient to pay and
discharge the entire
INDENTURE (Series 1996-4) - Page 32
<PAGE> 38
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.
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
INDENTURE (Series 1996-4) - Page 33
<PAGE> 39
(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, 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
INDENTURE (Series 1996-4) - Page 34
<PAGE> 40
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 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:
a. 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
INDENTURE (Series 1996-4) - Page 35
<PAGE> 41
b. 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
(b) 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 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.
INDENTURE (Series 1996-4) - Page 36
<PAGE> 42
(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
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 (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;
INDENTURE (Series 1996-4) - Page 37
<PAGE> 43
(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 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.
INDENTURE (Series 1996-4) - Page 38
<PAGE> 44
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,
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;
INDENTURE (Series 1996-4) - Page 39
<PAGE> 45
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 the Custodian for the Custodian Fee then due and
unpaid;
FIFTH: 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);
SIXTH: 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;
SEVENTH: 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;
EIGHTH: 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;
NINTH: 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;
TENTH: 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;
ELEVENTH: 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;
TWELFTH: 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;
THIRTEENTH: 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
INDENTURE (Series 1996-4) - Page 40
<PAGE> 46
Class A-8 Notes for principal, until the Outstanding Amount of the
Class A-8 Notes is reduced to zero;
FOURTEENTH: to the Owner Trustee or Co-Owner Trustee, as
applicable, for amounts required to be distributed to the
Certificateholders pursuant to the Trust Agreement;
FIFTEENTH: to the Securities Insurer for any amounts then due
and payable under the Insurance Agreement;
SIXTEENTH: to the Servicer for any amounts then due and
payable as the Servicing Advance Reimbursement Amount under the Sale
and Servicing Agreement; and
SEVENTEENTH: 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.
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;
INDENTURE (Series 1996-4) - Page 41
<PAGE> 47
(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.
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.
INDENTURE (Series 1996-4) - Page 42
<PAGE> 48
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 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
INDENTURE (Series 1996-4) - Page 43
<PAGE> 49
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).
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.
INDENTURE (Series 1996-4) - Page 44
<PAGE> 50
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 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.
INDENTURE (Series 1996-4) - Page 45
<PAGE> 51
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
(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.
INDENTURE (Series 1996-4) - Page 46
<PAGE> 52
(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 determining 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.
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.
INDENTURE (Series 1996-4) - Page 47
<PAGE> 53
(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.
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.
INDENTURE (Series 1996-4) - Page 48
<PAGE> 54
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:
(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 (Series 1996-4) - Page 49
<PAGE> 55
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.
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.
INDENTURE (Series 1996-4) - Page 50
<PAGE> 56
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 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.
INDENTURE (Series 1996-4) - Page 51
<PAGE> 57
Every instrument appointing any separate trustee
or co-trustee shall refer to this Agreement and
the conditions of this Article VI. Each separate
trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the
estates or property specified in its instrument
of appointment, 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.
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 the earlier of (i) each
Record Date and (ii) three months after the last Record Date, a list, in such
form as the Indenture Trustee may reasonably require, of the names and
addresses of the Holders of
INDENTURE (Series 1996-4) - Page 52
<PAGE> 58
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 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.
INDENTURE (Series 1996-4) - Page 53
<PAGE> 59
(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, 1997,
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 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
INDENTURE (Series 1996-4) - Page 54
<PAGE> 60
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 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, (D) to the Owner Trustee, an amount equal to
the Owner Trustee Fee and all unpaid Owner Trustee Fees from prior Due
Periods,
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and (E) to the Custodian, an amount equal to the Custodian Fee and all
unpaid Custodian 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;
(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;
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(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.
(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
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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.
(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 (iii) if such
Notes shall have 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
INDENTURE (Series 1996-4) - Page 58
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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 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.
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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;
(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
INDENTURE (Series 1996-4) - Page 60
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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 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);
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(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 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
INDENTURE (Series 1996-4) - Page 62
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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.
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
INDENTURE (Series 1996-4) - Page 63
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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, the Custodian, and the Servicer.
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
INDENTURE (Series 1996-4) - Page 64
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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).
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
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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;
(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)
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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.
(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.
INDENTURE (Series 1996-4) - Page 67
<PAGE> 73
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.
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 the Indenture Trustee
and the Issuer, if made in the manner provided in
this Section.
INDENTURE (Series 1996-4) - Page 68
<PAGE> 74
(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
(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 1996-4, 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.
INDENTURE (Series 1996-4) - Page 69
<PAGE> 75
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 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.
INDENTURE (Series 1996-4) - Page 70
<PAGE> 76
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.
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.
INDENTURE (Series 1996-4) - Page 71
<PAGE> 77
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.
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
INDENTURE (Series 1996-4) - Page 72
<PAGE> 78
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 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 1996-4) - Page 73
<PAGE> 79
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 1996-4
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 1996-4) - Page 74
<PAGE> 80
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 James P. Lawler, 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 1996-4, 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 22nd day of November,
1996.
________________________________________________
Notary Public in and for the State of New York
(Seal)
My commission expires:
__________________________________
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 22nd day of November,
1996.
________________________________________________
Notary Public in and for the State of New York
(Seal)
My commission expires:
__________________________________
INDENTURE (Series 1996-4) - Page 75
<PAGE> 81
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)
INDENTURE (Series 1996-4) - Page 1
<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 November 1, 1996
FIRSTPLUS HOME LOAN OWNER TRUST 1996-4
Asset Backed Securities, Series 1996-4
================================================================================
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
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 .............................. 9
SECTION 2.8 Title to Trust Property .............................. 9
SECTION 2.9 Situs of Trust ....................................... 10
SECTION 2.10 Representations and Warranties of the Depositor and
the Company; Covenant of the Company ................. 10
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 .................................... 13
SECTION 3.2 The Trust Certificates ............................... 13
SECTION 3.3 Execution, Authentication and Delivery of Trust
Certificates ......................................... 14
SECTION 3.4 Registration of Transfer and Exchange of Trust
Certificates ......................................... 14
SECTION 3.5 Mutilated, Destroyed, Lost or Stolen Trust
Certificates ......................................... 15
<PAGE> 3
SECTION 3.6 Persons Deemed Owners ..................................... 15
SECTION 3.7 Access to List of Owners' Names and Addresses ............. 15
SECTION 3.8 Maintenance of Office or Agency ........................... 16
SECTION 3.9 Appointment of Paying Agent ............................... 16
SECTION 3.10 Ownership by Company of the FRH Certificates .............. 17
SECTION 3.11 Book-Entry Certificates ................................... 17
SECTION 3.12 Notices to Clearing Agency ................................ 18
SECTION 3.13 Definitive Certificates ................................... 18
SECTION 3.14 Restrictions on Transfer of Residual Interest Instruments.. 18
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
SECTION 4.1 Prior Notice to Owners with Respect to Certain Matters .... 21
SECTION 4.2 Action by Owners with Respect to Certain Matters .......... 23
SECTION 4.3 Action by Owners with Respect to Bankruptcy ............... 23
SECTION 4.4 Restrictions on Owners' Power ............................. 23
SECTION 4.5 Majority Control .......................................... 24
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
SECTION 5.1 Establishment of Trust Account ............................ 24
SECTION 5.2 Application Of Trust Funds ................................ 25
SECTION 5.3 Method of Payment ......................................... 25
SECTION 5.4 Segregation of Moneys; No Interest ........................ 26
SECTION 5.5 Accounting and Reports to the Certificateholder, Owners,
the Internal Revenue Service and Others ................... 26
SECTION 5.6 Signature on Returns; Tax Matters Partner ................. 26
ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
SECTION 6.1 General Authority ......................................... 26
SECTION 6.2 General Duties ............................................ 27
SECTION 6.3 Action upon Instruction ................................... 27
SECTION 6.4 No Duties Except as Specified in this Agreement, the
Basic Documents or in Instructions ........................ 28
SECTION 6.5 No Action Except Under Specified Documents or Instructions. 29
<PAGE> 4
SECTION 6.6 Restrictions .............................................. 29
ARTICLE VII
CONCERNING THE OWNER TRUSTEE
SECTION 7.1 Acceptance of Trusts and Duties ........................... 29
SECTION 7.2 Furnishing of Documents ................................... 30
SECTION 7.3 Representations and Warranties ............................ 30
SECTION 7.4 Reliance; Advice of Counsel ............................... 31
SECTION 7.5 Not Acting in Individual Capacity ........................ 32
SECTION 7.6 Owner Trustee Not Liable for Trust Certificates or
Home Loans ................................................ 32
SECTION 7.7 Owner Trustee May Own Trust Certificates and Notes ........ 33
SECTION 7.8 Licenses .................................................. 33
ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE
SECTION 8.1 Owner Trustee's Fees and Expenses ......................... 33
SECTION 8.2 Indemnification ........................................... 33
SECTION 8.3 Payments to the Owner Trustee ............................. 34
ARTICLE IX
TERMINATION OF TRUST AGREEMENT
SECTION 9.2 Dissolution Upon Bankruptcy of the Company ................ 35
ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
SECTION 10.1 Eligibility Requirements for Owner Trustee ................ 36
SECTION 10.2 Resignation or Removal of Owner Trustee ................... 37
SECTION 10.3 Successor Owner Trustee ................................... 38
SECTION 10.4 Merger or Consolidation of Owner Trustee .................. 38
SECTION 10.5 Appointment of Co-Trustee or Separate Trustee ............. 38
<PAGE> 5
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Supplements and Amendments ................................ 40
SECTION 11.2 No Legal Title to Owner Trust Estate in Owners ............ 41
SECTION 11.3 Limitations on Rights of Others ........................... 41
SECTION 11.4 Notices ................................................... 42
SECTION 11.5 Severability .............................................. 42
SECTION 11.6 Separate Counterparts ..................................... 42
SECTION 11.7 Successors and Assigns .................................... 42
SECTION 11.8 Covenants of the Company .................................. 43
SECTION 11.9 No Petition ............................................... 43
SECTION 11.10 No Recourse ............................................... 43
SECTION 11.11 Headings .................................................. 43
SECTION 11.12 GOVERNING LAW ............................................. 43
SECTION 11.13 Certificate and Residual Interest Transfer Restrictions ... 44
SECTION 11.14 Grant of Certificateholder and Residual Interest Holder
Rights to Securities Insurer .............................. 44
SECTION 11.15 Third-Party Beneficiary ................................... 45
SECTION 11.16 Suspension and Termination of Securities Insurer's Rights.. 45
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
<PAGE> 6
TRUST AGREEMENT, dated as of November 1, 1996, 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 November 1, 1996 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.
<PAGE> 7
"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.
"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 November 22, 1996, in the amount
of $4,800,000.00 from RAC to the Company in substantially the form attached
hereto as Exhibit D.
<PAGE> 8
"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.
"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 November 1, 1996, 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 $23,710,000.
"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;
<PAGE> 9
(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.
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
November 22, 1996, 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 1996-4, 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.
<PAGE> 10
"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.
"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,
<PAGE> 11
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.
"Underwriters" shall mean those underwriters named in and parties to the
Underwriting Agreement dated as of November 15, 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".
<PAGE> 12
(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.
ARTICLE II
ORGANIZATION
SECTION 2.1 Name. The Trust created hereby shall be known as
"FIRSTPLUS HOME LOAN OWNER TRUST 1996-4", 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;
<PAGE> 13
(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.
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.
<PAGE> 14
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 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.
<PAGE> 15
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 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
<PAGE> 16
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 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.
<PAGE> 17
(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.
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 tor 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.
<PAGE> 18
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 Section 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 $1,000 in excess 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.
<PAGE> 19
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 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
<PAGE> 20
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.
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
<PAGE> 21
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 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.
<PAGE> 22
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 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 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
<PAGE> 23
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 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
<PAGE> 24
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 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
<PAGE> 25
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 4975(c)(1) of
the Code for which a statutory or administrative exemption is
unavailable.
<PAGE> 26
(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):
<PAGE> 27
(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;
<PAGE> 28
(n) possess Trust assets, or assign the Trust's right to
property, for other than a Trust purpose;
(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
<PAGE> 29
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.
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 1996-4". 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
<PAGE> 30
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.
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 or 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.
<PAGE> 31
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 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.
<PAGE> 32
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 $100,750,000, Class A-2 Notes in the aggregate
principal amount of $37,740,000, Class A-3 Notes in the aggregate principal
amount of $50,270,000, Class A-4 Notes in the aggregate principal amount of
$27,520,000, Class A-5 Notes in the aggregate principal amount of $37,100,000,
Class A-6 Notes in the aggregate principal amount of $56,620,000, Class A-7
Notes in the aggregate principal amount of $44,340,000, Class A-8 Notes in the
aggregate principal amount of $21,950,000 and Certificates in the aggregate
principal amount of $23,710,000. 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.
<PAGE> 33
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 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.
<PAGE> 34
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 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
<PAGE> 35
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;
(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
<PAGE> 36
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-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.
<PAGE> 37
(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 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
<PAGE> 38
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.
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
<PAGE> 39
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 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.
<PAGE> 40
(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.
(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.
<PAGE> 41
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
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
<PAGE> 42
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
<PAGE> 43
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.
<PAGE> 44
SECTION 10.4 Merger or Consolidation of Owner Trustee. Any corporation
into which the Owner Trustee may be merged or converted or with which it may be
consolidated or any corporation resulting from any merger, conversion or
consolidation to which the Owner Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Owner Trustee, shall be the successor of the Owner Trustee hereunder, provided
such corporation shall be eligible pursuant to Section 10.1, without the
execution or filing of any instrument or any further act on the part of any of
the parties hereto, anything herein to the contrary notwithstanding; 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
<PAGE> 45
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 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.
<PAGE> 46
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
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
<PAGE> 47
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.
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 1996-4, 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.
<PAGE> 48
(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.
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
<PAGE> 49
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.
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
<PAGE> 50
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 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.
<PAGE> 51
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, not in its
individual capacity but solely 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> 52
EXHIBIT A-1
TO THE TRUST AGREEMENT
(FORM OF CERTIFICATE)
<PAGE> 53
EXHIBIT A-2
TO THE TRUST AGREEMENT
(FORM OF CERTIFICATE ISSUED TO THE COMPANY)
<PAGE> 54
EXHIBIT B-1
TO THE TRUST AGREEMENT
(FORM OF RESIDUAL INTEREST INSTRUMENT]
<PAGE> 55
EXHIBIT B-2
TO THE TRUST AGREEMENT
(FORM OF RESIDUAL INTEREST ISSUED TO THE COMPANY)
<PAGE> 56
EXHIBIT C
TO THE TRUST AGREEMENT
CERTIFICATE OF TRUST OF
FIRSTPLUS HOME LOAN OWNER TRUST 1996-4
THIS Certificate of Trust of FIRSTPLUS HOME LOAN OWNER TRUST 1996-4 (the
"Trust"), dated as of November __, 1996, 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 1996-4.
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
November 1, 1996.
By:
------------------------------
Name:
Title:
<PAGE> 57
EXHIBIT D
TO THE TRUST AGREEMENT
(Form of Demand Note)
<PAGE> 58
EXHIBIT E
TO THE TRUST AGREEMENT
(Form of Certificate Depository Agreement)
<PAGE> 59
EXHIBIT F-1
FORM OF INVESTMENT LETTER
<PAGE> 60
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 November 22, 1996 (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., formerly known as Remodelers
National Funding Corp., 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 October 31, 1996;
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 1996-4 (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.
<PAGE> 2
(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, if applicable, 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, if applicable, 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, if applicable, 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, if applicable, 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, if applicable, 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, if applicable, 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, if
applicable, 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.
-2-
<PAGE> 3
(h) Valid Lien. With respect to each Debt Instrument that is secured by a
Mortgage, if applicable, such 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. Each Debt Instrument and each
Mortgage, if applicable, 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, if applicable, 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,
if applicable, 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, if applicable, 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, if applicable, 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 that
is secured by a Mortgaged Property, the related Servicer's Home Loan File
contains a title document reflecting that title to such 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, if applicable, 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) No Condemnation or Damage. 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.
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(o) Mortgage Remedies Adequate. Each Mortgage, if applicable, 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.
(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 [20] years and [32] days 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, if applicable.
(s) Deed of Trust. If a Mortgage for a Secured 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
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.
(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
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.
(v) Origination Practices. 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.
(w) Servicing Practices. Each Home Loan has been serviced in accordance
with all applicable laws and, to the best of the Transferor's knowledge, no
fraud or misrepresentation was committed by any Person in connection therewith.
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<PAGE> 5
(x) No Bulk Transfer. The sale, transfer, assignment, conveyance and
grant of the Debt Instruments and the Mortgages, if applicable, 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.
(y) Delinquencies. As of the October 31, 1996 Cut-Off Date, no more than
[0.15%] of the Initial Home Loans (by outstanding principal balance) were 31
days or more delinquent.
(z) Relief Act Matters. No Obligor has notified the Transferor, and no
relief has been requested or allowed to an Obligor under the Soldiers' and
Sailors' Civil Relief Act of 1940.
(aa) Selection Criteria. 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.
(bb) Superior Lien Delinquencies. No Superior Lien was more than 30 days
past due at the time of origination of the related Home Loan.
(cc) Treasury Regulation Section 301.7701. On the Closing Date and on each
Subsequent Transfer Date, 55% (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)
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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 obligations means more than 66- % of the gross
proceeds.
(dd) Good Repair. To the best of the Transferor's knowledge, the related
Mortgaged Property described in each Debt Instrument 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.
(ee) 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.
(ff) With respect to those Home Loans that are retail installment
contracts for goods or services, such Home Loans are home improvement loans for
goods or services, and are either "consumer credit contracts" or "purchase
money loans" as such terms are defined in 16 C.F.R. Part 433.1.
(gg) 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 property securing the Mortgages, if
applicable, have been made, obtained or issued as applicable.
(hh) 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.
(ii) 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.
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(jj) If required by federal or state law, each property securing a Home
Loan is covered by flood and insurance with a standard mortgagee clause and
extended coverage in an amount which is not less than the value of such
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 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.
(kk) To the best of the Transferor's knowledge, all improvements which were
considered in determining the appraised value of the property securing each
Mortgage, if applicable, 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.
(ll) The Home Loans are not being transferred with any intent to hinder,
delay or defraud any creditors.
(mm) 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 securing same, the Obligor 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 the Home
Loan.
(nn) 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.
(oo) 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.
(pp) 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.
(qq) 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.
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<PAGE> 8
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 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
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<PAGE> 9
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
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 November 1, 1996, by and between FFI, as Transferor and
Servicer, the Purchaser, as Seller, FIRSTPLUS HOME LOAN TRUST 1996-4, as Issuer
and First Bank National Association, as Indenture Trustee and Co-Owner Trustee.
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IN WITNESS WHEREOF, the undersigned Purchaser and FFI have executed this
Loan Sale Agreement as of the 22nd day of November, 1996.
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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Exhibit 10.2
================================================================================
SALE AND SERVICING AGREEMENT
Dated as of November 1, 1996
among
FIRSTPLUS HOME LOAN OWNER TRUST 1996-4
(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 1996-4
ASSET BACKED SECURITIES
SERIES 1996-4
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE I
DEFINITIONS
<S> <C>
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 ................................................................... 2
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 ............................................ 3
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 ....................................................................... 4
Closing Date .................................................................................. 4
Code .......................................................................................... 5
Collection Account ............................................................................ 5
Completion Certificate ........................................................................ 5
Combination Loan .............................................................................. 5
</TABLE>
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<TABLE>
<S> <C>
Credit Support Reduction Date ................................................................... 5
Custodial Agreement ............................................................................. 5
Custodian ....................................................................................... 5
Custodian Fee ................................................................................... 5
Cut-Off Date .................................................................................... 5
Debt Consolidation Loan ......................................................................... 5
Defaulted Home Loan ............................................................................. 6
Defective Home Loan ............................................................................. 6
Deficiency Amount ............................................................................... 6
Deleted Home Loan ............................................................................... 7
Determination Date .............................................................................. 7
Distribution Date ............................................................................... 7
DTC ............................................................................................. 7
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 ........................................................................... 8
FDIC ............................................................................................ 8
FHLMC ........................................................................................... 8
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 .................................................................................. 9
Home Loan Interest Rate ......................................................................... 9
Home Loan Pool .................................................................................. 9
Home Loan Schedule .............................................................................. 9
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 ............................................................................. 10
Insurance Proceeds .............................................................................. 10
</TABLE>
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<TABLE>
<S> <C>
Insured Securities ............................................................................ 11
Interest Distribution Amount .................................................................. 11
Interest Shortfall ............................................................................ 11
Interest Shortfall Rate ....................................................................... 11
Liquidated Home Loan .......................................................................... 11
Liquidation Proceeds .......................................................................... 11
Loan Sale Agreement ........................................................................... 11
Majority Securityholders ...................................................................... 12
Monthly Payment ............................................................................... 12
Moody's ....................................................................................... 12
Mortgage ...................................................................................... 12
Mortgaged Property ............................................................................ 12
Mortgaged Property States ..................................................................... 12
Net Liquidation Proceeds ...................................................................... 12
Net Loan Losses ............................................................................... 12
Note(s) ....................................................................................... 13
Note Distribution Account ..................................................................... 13
Noteholder .................................................................................... 13
Noteholders' Distributable Amount ............................................................. 13
Noteholders' Interest Carry-Forward Amount .................................................... 13
Noteholders' Interest Distributable Amount .................................................... 13
Noteholders' Monthly Interest Distributable Amount ............................................ 13
Noteholders' Monthly Principal Distributable Amount ........................................... 13
Noteholders' Principal Distributable Amount ................................................... 13
Noteholders' Principal Carry-Forward Amount ................................................... 14
Note Interest Rate ............................................................................ 14
Obligor ....................................................................................... 14
Officer's Certificate ......................................................................... 15
Original Certificate Principal Balance ........................................................ 15
Original Class Principal Balance .............................................................. 15
Overcollateralization Amount .................................................................. 15
Overcollateralization Reduction Amount ........................................................ 15
Overcollateralization Stepdown Date ........................................................... 15
Ownership Interest ............................................................................ 15
Owner Trustee ................................................................................. 15
Owner Trustee Fee ............................................................................. 15
Pass-Through Rate ............................................................................. 15
Percentage Interest ........................................................................... 15
Permitted Investments ......................................................................... 16
Person ........................................................................................ 17
Personal ...................................................................................... 17
Physical Property ............................................................................. 17
Pool Principal Balance ........................................................................ 17
Post Liquidation Proceeds ..................................................................... 17
Preference Amount ............................................................................. 17
Pre-Funded Amount ............................................................................. 17
Pre-Funding Account ........................................................................... 18
Pre-Funding Account Deposit ................................................................... 18
</TABLE>
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<TABLE>
<S> <C>
Pre-Funding Account Weighted Average Balance .................................................... 18
Pre-Funding Termination Distribution Date ....................................................... 18
Principal Balance ............................................................................... 18
Principal Prepayment ............................................................................ 18
Projected Interest Shortfall .................................................................... 18
Prospectus ...................................................................................... 18
Prospectus Supplement .......................................................................... 18
Purchase or Refinance Loan ...................................................................... 19
Purchase Price .................................................................................. 19
Qualified Substitute Home Loan .................................................................. 19
Rating Agency or Rating Agencies ................................................................ 19
Ratings ......................................................................................... 19
Record Date ..................................................................................... 19
Regular Principal Distribution Amount ........................................................... 19
Released Mortgaged Property Proceeds ............................................................ 20
Required Credit Support Multiple ................................................................ 20
Required Overcollateralization Amount ........................................................... 21
Reserve Account ................................................................................. 22
Reserve Account Initial Deposit ................................................................. 22
Reserve Account Requirement ..................................................................... 22
Residual Interest: .............................................................................. 22
Reserve Account Withdrawal Amount ............................................................... 22
Responsible Officer ............................................................................. 22
Securities ...................................................................................... 22
Securities Insurer .............................................................................. 23
Securities Insurer Commitment ................................................................... 23
Securities Insurer Default ...................................................................... 23
Securities Insurer Reimbursement Amount ........................................................ 23
Securityholder .................................................................................. 23
Seller .......................................................................................... 23
Series or Series 1996-4 ......................................................................... 23
Servicer ........................................................................................ 23
Servicer's Fiscal Year .......................................................................... 23
Servicer's Home Loan Files ...................................................................... 23
Servicer's Monthly Remittance Report ............................................................ 23
Servicer's Monthly Statement .................................................................... 23
Servicing Advances .............................................................................. 23
Servicing Compensation .......................................................................... 24
Servicing Fee ................................................................................... 24
Servicing Officer ............................................................................... 24
Standard & Poor's ............................................................................... 24
Subsequent Home Loan ............................................................................ 24
Subsequent Purchase Price ....................................................................... 24
Subsequent Transfer Agreement ................................................................... 24
Subsequent Transfer Date ........................................................................ 24
Subservicer ..................................................................................... 24
Subservicing Account ............................................................................ 24
Subservicing Agreement .......................................................................... 25
</TABLE>
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<TABLE>
<S> <C>
Substitution Adjustment ........................................................................ 25
Superior Lien .................................................................................. 25
Termination Price .............................................................................. 25
Transferor ..................................................................................... 25
Trust .......................................................................................... 25
Trust Account Property ......................................................................... 25
Trust Accounts ................................................................................. 25
Trust Agreement ................................................................................ 25
Trust Fees and Expenses ........................................................................ 26
Weighted Average Interest Rate ................................................................. 26
Section 1.02 Other Definitional Provisions ................................................. 27
ARTICLE II
CONVEYANCE OF THE HOME LOANS
Section 2.01 Conveyance of the Initial Home Loans........................................... 28
Section 2.02 Conveyance of the Subsequent Home Loans ....................................... 28
Section 2.03 Ownership and Possession of Home Loan Files ................................... 30
Section 2.04 Books and Records ............................................................. 31
Section 2.05 Delivery of Home Loan Documents ............................................... 31
Section 2.06 Acceptance by Indenture Trustee of the Home Loans; Certain
Substitutions; Initial Certification by Custodian ............................. 33
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Seller .................................. 36
Section 3.02 Representations, Warranties and Covenants of the Servicer and Transferor ...... 37
Section 3.03 Individual Home Loans ......................................................... 39
Section 3.04 Subsequent Home Loans ......................................................... 45
Section 3.05 Purchase and Substitution ..................................................... 46
ARTICLE IV
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
Section 4.01 Duties of the Servicer ........................................................ 49
Section 4.02 Liquidation of Home Loans ..................................................... 50
Section 4.03 Fidelity Bond; Errors and Omission Insurance .................................. 51
Section 4.04 Title, Management and Disposition of Foreclosure Property...................... 52
Section 4.05 Access to Certain Documentation and Information Regarding the Home Loans....... 52
Section 4.06 Superior Liens ................................................................ 52
Section 4.07 Subservicing .................................................................. 53
Section 4.08 Successor Servicers............................................................ 54
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ARTICLE V
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01 Collection Account and Note Distribution Account .............................. 54
Section 5.02 Claims Under Guaranty Policy .................................................. 58
Section 5.03 Pre-Funding Account............................................................ 59
Section 5.04 Capitalized Interest Account .................................................. 60
Section 5.05 [Reserved] .................................................................... 61
Section 5.06 Certificate Distribution Account .............................................. 61
Section 5.07 Reserve Account ............................................................... 62
Section 5.08 Trust Accounts; Trust Account Property ........................................ 64
Section 5.09 Allocation of Losses........................................................... 66
ARTICLE VI
STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS
Section 6.01 Statements..................................................................... 67
Section 6.02 Reports of Foreclosure and Abandonment of Mortgaged Property .................. 71
Section 6.03 Specification of Certain Tax Matters .......................................... 71
ARTICLE VII
GENERAL SERVICING PROCEDURE
Section 7.01 Assumption Agreements ......................................................... 71
Section 7.02 Satisfaction of Mortgages and Release of Home Loan Files ...................... 72
Section 7.03 Servicing Compensation ........................................................ 73
Section 7.04 Quarterly Statements as to Compliance ......................................... 74
Section 7.05 Annual Independent Public Accountants' Servicing Report ....................... 74
Section 7.06 Right to Examine Servicer Records ............................................. 75
Section 7.07 Reports to the Indenture Trustee; Collection Account Statements................ 75
ARTICLE VIII
REPORTS TO BE PROVIDED BY SERVICER
Section 8.01 Financial Statements .......................................................... 75
ARTICLE IX
THE SERVICER
Section 9.01 Indemnification; Third Party Claims ........................................... 76
Section 9.02 Merger or Consolidation of the Servicer ....................................... 77
Section 9.03 Limitation on Liability of the Servicer and Others ............................ 77
Section 9.04 Servicer Not to Resign; Assignment ............................................ 78
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Section 9.05 Relationship of Servicer to Issuer and the Indenture Trustee .................. 78
ARTICLE X
DEFAULT
Section 10.01 Events of Default ............................................................. 78
Section 10.02 Indenture Trustee to Act; Appointment of Successor ............................ 80
Section 10.03 Waiver of Defaults ............................................................ 82
Section 10.04 Accounting Upon Termination of Servicer ....................................... 82
ARTICLE XI
TERMINATION
Section 11.01 Termination ................................................................... 82
Section 11.02 Optional Termination by Affiliated Holder or the Securities Insurer ........... 83
Section 11.03 Notice of Termination ......................................................... 84
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01 Acts of Securityholders ....................................................... 84
Section 12.02 Amendment ..................................................................... 84
Section 12.03 Recordation of Agreement ...................................................... 85
Section 12.04 Duration of Agreement ......................................................... 85
Section 12.05 Governing Law ................................................................. 85
Section 12.06 Notices ....................................................................... 85
Section 12.07 Severability of Provisions .................................................... 86
Section 12.08 No Partnership ................................................................ 86
Section 12.09 Counterparts .................................................................. 86
Section 12.10 Successors and Assigns ........................................................ 86
Section 12.11 Headings ...................................................................... 86
Section 12.12 Actions of Securityholders .................................................... 87
Section 12.13 Reports to Rating Agencies..................................................... 87
Section 12.14 Grant of Securityholder Rights to Securities Insurer .......................... 88
Section 12.15 Third Party Beneficiary ....................................................... 88
Section 12.16 Suspension and Termination of Securities Insurer's Rights ..................... 88
Section 12.17 Holders of the Residual Interest .............................................. 89
EXHIBITS
EXHIBIT A Home Loan Schedule
EXHIBIT B Form of Servicer's Monthly Remittance Report to Trustee
EXHIBIT C Form of Subsequent Transfer Agreement
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This Sale and Servicing Agreement is entered into effective as of
November 1, 1996, among FIRSTPLUS Home Loan Owner Trust 1996-4, 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 secured by a
Mortgage, an assignment, notice of transfer or equivalent instrument sufficient
under the laws of the jurisdiction wherein the related Mortgaged 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.
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 1
<PAGE> 10
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 $400,000,000.
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 Offered 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 banking institutions in New York City or in 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.
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
$526,130.28.
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 January 21, 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, 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
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 2
<PAGE> 11
occurring prior to January 21, 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 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 such 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.
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
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 3
<PAGE> 12
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 and any outstanding Certificateholders'
Principal Carry-Forward Amount from the 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
date of determination, the then applicable 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 date of
determination, the then applicable Certificate Principal Balance of the
respective Certificates divided by the Original Certificate Principal Balance
of the Certificates.
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: November 22, 1996.
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 4
<PAGE> 13
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 November 1, 1996
by and between 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.
Custodian Fee: If applicable, the annual fee payable to the
Custodian, calculated and payable monthly on each Distribution Date equal to
the per annum percentage (as set forth in the Custodial Agreement) of the Pool
Principal Balance as of the immediately preceding Determination Date, except
with respect to the first Distribution Date, when such monthly fee shall be pro
rated based on four (4) days for the first Due Period.
Cut-Off Date: With respect to the Initial Home Loans, the close of
business on October 31, 1996 and with respect to each Subsequent Home Loan,
the close of business on the date specified as such in the applicable
Subsequent Transfer Agreement.
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".
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 5
<PAGE> 14
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 Interest Distribution Amount for the Notes and the Certificates and the
Regular 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
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
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 6
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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.
Determination Date: The day of each month which is five (5) 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 December 1996.
DTC: The Depository Trust Company.
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 7
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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 November 1, 1996.
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.
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 the related Due Period 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.
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 8
<PAGE> 17
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 January 21, 1997 provided,
however, that the Funding Period shall end upon the occurrence of an Event of
Default.
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
Offered Securities, number [ ] dated November 22, 1996, 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 or Personal Property Loan that is
included in the Home Loan Pool. As applicable, a Home Loan 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
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 9
<PAGE> 18
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 November 1, 1996, 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 based on four (4) days 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 October 31 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: $350,439,097.18, which is the Pool
Principal Balance as of the October 31, 1996 Cut-Off Date.
Insurance Agreement: The Insurance and Indemnification Agreement,
dated as of November 22, 1996, between 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.
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 10
<PAGE> 19
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 December 1996 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, based on the
respective Class Principal Balances on the Closing Date. With respect to the
January 1997 and February 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).
Interest Shortfall Rate: The per annum rate equal to 4.07%.
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 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
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 11
<PAGE> 20
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: If applicable, 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 secured Home
Loan.
Mortgaged Property: If applicable, the property (real, personal or
mixed) encumbered by the Mortgage which secures the Debt Instrument evidencing
a secured 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, any other state wherein a Mortgaged Property securing any Subsequent
Home Loan may be located as set forth in the applicable Home Loan Schedule, and
in the case of an unsecured Home Loan the principal residence of the Obligor.
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
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 12
<PAGE> 21
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 and the
Noteholders' Interest Distributable Amount.
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.
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 such 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
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, plus (iii) if 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
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 13
<PAGE> 22
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 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 6.12%; the Note
Interest Rate with respect to the Class A-2 Notes is equal to 6.14%; the Note
Interest Rate with respect to the Class A-3 Notes is equal to 6.28%; the Note
Interest Rate with respect to the Class A-4 Notes is equal to 6.45%; the Note
Interest Rate with respect to the Class A-5 Notes is equal to 6.53%; the Note
Interest Rate with respect to the Class A-6 Notes is equal to 6.87%; the Note
Interest Rate with respect to the Class A-7 Notes is equal to 7.09%; and the
Note Interest Rate with respect to the Class A-8 Notes is equal to 7.31%.
Obligor: Each obligor on a Debt Instrument.
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 14
<PAGE> 23
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: $23,710,000.
Original Class Principal Balance: In the case of the Class A-1 Notes,
$100,750,000; in the case of the Class A-2 Notes, $37,740,000; in the case of
the Class A-3 Notes, $50,270,000; in the case of the Class A-4 Notes,
$27,520,000; in the case of the Class A-5 Notes, $37,100,000; in the case of
the Class A-6 Notes, $56,620,000; in the case of the Class A-7 Notes,
$44,340,000; and in the case of the Class A-8 Notes, $21,950,000.
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
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 as a
result of a reduction in the Required Credit Support Multiple.
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 November each year during the
term of this Agreement commencing in November 1997; provided that the initial
Owner Trustee fee shall be paid on the Closing Date.
Pass-Through Rate: The per annum rate of 7.60%.
Percentage Interest: As defined in the Trust Agreement.
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 15
<PAGE> 24
Permitted Investments: Each of the following:
(i) 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;
(ii) 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 (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;
(iii) 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;
(iv) 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;
(v) 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;
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 16
<PAGE> 25
(vi) 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);
(vii) 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
(viii) 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.
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.
Personal Property Loan: A loan, the net proceeds of which were or
will be used by the related Obligor to acquire personal property.
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 October 31,
1996 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, 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.
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 17
<PAGE> 26
Pre-Funding Account: The account established and maintained pursuant
to Section 5.03.
Pre-Funding Account Deposit: An amount equal to $49,560,902.82.
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 or, with respect
to the first Due Period, four (4) 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 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 January 21, 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 January 21, 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 January 21,
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 September 16, 1996, as
supplemented by the related Prospectus Supplement.
Prospectus Supplement: The Prospectus Supplement dated as of November
15, 1996, prepared by the Transferor and the Seller in connection with the
issuance and sale of the Securities.
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 18
<PAGE> 27
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) with respect to a Secured Home
Loan 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. 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 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 (and not more than two percentage points
more than) the Home Loan Interest Rate for the designated Deleted Home Loan or
Home Loans, 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
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 19
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(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 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 minus the sum of (a) the amount included in clause (v) above
for such Distribution Date and (b) the amount of Net Loan Losses 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 Offered 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.
Released Mortgaged Property Proceeds: With respect to any secured Home
Loan, 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 October 31, 1996 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
October 31, 1996 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 October 31, 1996 Cut-Off Date, or
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 20
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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 October 31, 1996 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 October 31, 1996
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
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 beginning 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, in the event that
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, then, upon written notice to
each of the other parties hereto and the Rating Agencies, the Securities
Insurer, in its sole discretion, may modify the preceding definition, without
the requirement of an amendment of this Agreement, for a sixty (60) day period
after the last day of the Due Period in which the Funding Period ends.
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) 7.25% 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) 7.25% of the aggregate Principal Balances as of the
applicable Cut-Off Dates of the Home Loans and (B) 14.50% of the aggregate
outstanding
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 21
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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, in the
event that 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, then, upon
written notice to each of the other parties hereto and the Rating Agencies, the
Securities Insurer, in its sole discretion, may modify the preceding
definition, without the requirement of an amendment of this Agreement, for a
sixty (60) day period after the last day of the Due Period in which the Funding
Period ends.
Reserve Account: The account established and maintained by the
Indenture Trustee pursuant to Section 5.07 hereof.
Reserve Account Initial Deposit: $13,000,000.
Reserve Account Requirement: On the Closing Date, an amount equal to
$13,000,000, but on any Distribution Date occurring after the Funding Period
ends and if the Overcollateralization Amount exceeds the Interim Required
Overcollateralization such amount shall be reduced pursuant to Section 5.07.
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.
Secured Home Loan: A Home Loan that is secured by Mortgaged Property.
Securities: The Notes and/or the Certificates, as applicable.
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 22
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Securities Insurer: MBIA Insurance Corporation, as issuer of the
Guaranty Policy, and its successors and assigns.
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 1996-4: FIRSTPLUS Asset Backed Securities, Series
1996-4.
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 Remittance Report: A report prepared and computed
by the Servicer in substantially the form of Exhibit B attached hereto.
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
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 23
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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).
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 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;
provided, that such Home Loan shall not be more than 29 days delinquent as of
the related Cut-Off Date.
Subsequent Purchase Price: The Principal Balance of any Subsequent
Home Loans as of the applicable Cut-Off 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 January 21, 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.
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 24
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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), 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 secured Home Loan which is secured
by other than a first priority lien, the mortgage loan(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 November 1, 1996,
among the Seller, the Affiliated Holder, 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 1996-4) - Page 25
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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, the Owner Trustee Fee and the Custodian Fee.
Weighted Average Interest Rate: As of any particular date of
determination, the sum (expressed as a percentage) of:
(i) 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;
(ii) 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;
(iii) 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;
(iv) 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;
(v) 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;
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 26
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(vi) 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;
(vii) 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.
(viii) 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.
(ix) 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.
(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
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 27
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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: (i) Home Loans then in the possession of the
Seller that satisfy the requirements of this Section 2.02 or (ii) the maximum
principal balance of Home Loans that satisfies 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 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,
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 28
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conveyance and grant 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) The amount released from the Pre-Funding Account on any
Subsequent Transfer Date in connection with any conveyance of Subsequent Home
Loans shall be equal to the aggregate of the Subsequent Purchase Prices for
such Subsequent Home Loans, which amount shall not exceed the amount then on
deposit in the Pre-Funding Account. If the Subsequent Purchase Price for such
Subsequent Home Loans 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) 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;
(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;
(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
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 29
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(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.
(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 opinions of counsel
with respect to the transfer of all of the Subsequent Home Loans to
the Issuer on any Subsequent Transfer Date substantially in the form
of the opinions of counsel delivered to the Issuer, the Indenture
Trustee and the Securities Insurer on the Closing Date (as to certain
bankruptcy, corporate, securities and tax law matters);
(iii) the Issuer shall pledge the Subsequent Mortgage Loans
to the Indenture Trustee under the Indenture;
(iv) the Issuer shall deliver to the Securities Insurer
and the Seller an opinion of counsel with respect to each of the
Subsequent Transfer Agreements substantially in the form of the
opinion of counsel delivered to the Seller and the Securities Insurer
on the Closing Date;
(v) the Transferor and Seller shall make the
representations and warranties set forth in Section 3.04(b) hereof;
and
(vi) 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 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
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 30
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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 1996-4, 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 for a Secured
Home Loan, 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 for a Secured
Home Loan, either (A) the original Assignment of Mortgage assigned to
"FIRST BANK NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE FOR THE
FIRSTPLUS ASSET BACKED SECURITIES, SERIES 1996-4" 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 Mortgage is
not being delivered to the Custodian, such Responsible Officer may
complete one or more blanket
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 31
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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 for a Secured
Home Loan, 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 Secured 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 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
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of Mortgage, intervening assignments of Mortgage or assumption and tion
agreement, respectively.
With respect to each Secured Home Loan in respect of which the Mortgaged
Property is located in the States of Arizona, California, Colorado, Georgia,
Nevada, South Carolina, Texas, Utah and 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
Secured 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 December 31, 1996. 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 Assignment of Mortgages for the
related Secured 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 holder
of the offered 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 respect of Secured
Loans 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 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
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 33
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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.
(c) (i) Subject to (3) below, each of the Seller and the
Transferor shall have the option 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) (i) which, in the
aggregate,
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 34
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amount to 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) which equal or exceed
such 1% with Securities Insurer approval (except as otherwise provided in
Sections 2.06(c)(2) and 3.05(a)).
(2) 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) (2) 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 which exceed 5%
of the aggregate Cut-Off Date Principal Balances of the 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 the Qualified Substitute Home Loan
complies with the definition hereof 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 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.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 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 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;
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(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
(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.
Section 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
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 37
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being conducted and is licensed, qualified and in good standing in each
Mortgaged Property State if the laws of such state require g 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;
(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
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 38
<PAGE> 47
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.
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, if applicable, 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.
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 39
<PAGE> 48
(d) No Waiver or Modification. The terms of each Debt Instrument
and Mortgage, if applicable, 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, if
applicable, 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, if applicable,
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, if applicable, 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, if
applicable, 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, if applicable, 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 that is
secured by a Mortgage, if applicable, such 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. Each Debt Instrument and
each Mortgage, if applicable, 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, if applicable, 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
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 40
<PAGE> 49
thereunder, all costs, fees and expenses incurred in making or closing each
Home Loan and the recording of the Mortgage, if applicable, 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, if applicable, 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, if applicable,
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 that is secured by a Mortgaged Property, the related Servicer's Home Loan
File contains a title document reflecting that title to such 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, if applicable,
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) No Condemnation or Damage. 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.
(o) Mortgage Remedies Adequate. Each Mortgage, if applicable,
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.
(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, if applicable.
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 41
<PAGE> 50
(s) Deed of Trust. If a Mortgage for a Secured 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 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.
(t) Types of Home Loans. Each Home Loan whether or not a Secured
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, Personal Property
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
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.
(w) Servicing Practices. Each Home Loan has been serviced in
accordance with all applicable laws and, to the best of the Transferor'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, if applicable, 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.
(y) Delinquencies. As of the applicable Cut-Off Date, no more
than 0.15% of the Home Loans (by outstanding principal balance) were 31 days
or more delinquent.
(z) Relief Act Matters. No Obligor has notified the Transferor,
and no relief has been requested or allowed to an Obligor under the Soldiers'
and Sailors' Civil Relief Act of 1940.
(aa) Selection Criteria. 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.
(bb) Superior Lien Delinquencies. No Superior Lien was more than
30 days past due at the time of origination of the related Home Loan.
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 42
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(cc) 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 obligations means more than
66-_% of the gross proceeds.
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(dd) Good Repair. To the best of the Transferor's knowledge, the
related Mortgaged Property described in each Debt Instrument 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.
(ee) 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.
(ff) 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.
(gg) Inspections to 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 property securing the Mortgages, if applicable, 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 property securing each Mortgage, if applicable, 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.
(hh) 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.
(ii) Consent of Senior Lien. 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.
(jj) Flood Insurance. If required by federal or state law, each
property securing a Home Loan 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 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 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.
(kk) No Fraudulent Conveyance. The Home Loans are not being
transferred with any intent to hinder, delay or defraud any creditors.
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 44
<PAGE> 53
(ll) 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
securing same, the Obligor 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 the Home Loan.
(mm) 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.
(nn) 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.
(oo) 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.
(pp) 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.
(qq) Entire Agreement. The Debt Instrument and the Mortgage, if
applicable, 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).
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 provides for negative
amortization;
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 45
<PAGE> 54
(ii) No Subsequent Home Loan has a Cut-Off Date or a
Subsequent Transfer Date later than January 21, 1997;
(iii) No Subsequent Home Loan has a scheduled maturity date
later than March 31, 2022;
(iv) 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;
(v) 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;
(vi) 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
(vii) To the extent applicable to each Subsequent Home Loan
being transferred to the Issuer, the quantitative criteria set forth
in paragraph 23 of that certain Commitment to Issue a Financial
Guaranty Insurance Policy (Application No. 96-11-9670 dated as of
November 21, 1996) (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 paragraph 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 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
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 46
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the Determination Date next succeeding the end of such 60 day period either (i)
to remove such Defective Home Loan from the Trust (in which case it shall become
a Deleted Home Loan) and substitute one or more d 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 for a
secured Home Loan 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 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) on the Determination Date for such Distribution Date.
As to any Deleted Home Loan for which the Transferor substitutes a
Qualified Substitute Home Loan or Loans, the Transferor shall effect such
substitution by delivering to the Issuer (i) a certification executed by a
Responsible Officer of the Transferor to the effect that the Substitution
Adjustment has been credited to the Collection Account and remitted to the
Indenture Trustee for deposit into the Note Distribution Account and/or the
Certificate Distribution Account, and (ii) 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
Seller and the Transferor shall have the option, exercisable in its sole
discretion at any time, to repurchase, or to substitute one or
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more Qualified Substitute Home Loans for, any Home Loan from the Issuer in the
event that such Home Loan 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. Monthly 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
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
certain losses as described herein in connection with a Defective Home Loan)
constitute the sole remedies of the Issuer, 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 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.
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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
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 of 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
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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 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) with respect to any Home Loan
that is not a Defaulted Home Loan 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 of any Home Loan
thereafter shall be subject to the prior written consent of the Securities
Insurer; and (2) with, respect to any Home Loan that is a Defaulted Home Loan,
the Servicer may modify, vary or waive such 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, if applicable. 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.
(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
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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 resale 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 Issuer for the benefit of
Securityholders and the Securities Insurer). 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.
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.
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Section 4.04 Title, Management and Disposition of Foreclosure
Property.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure (a "Foreclosure Property"), the
deed or certificate of sale 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.
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 4.05 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 Issuer'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,
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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 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 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
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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.
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 1996-4". 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.
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The Collection Account shall be established, as of the Closing Date,
with Bank One, Texas, N.A., as an Eligible Account pursuant to the definition
thereof. The Collection Account may, upon written notice to the Issuer and the
Indenture Trustee, be transferred to a different depository institution upon
prior written consent of the Securities Insurer 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 1996-4". 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:
(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.
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(b)(2) Deposits to Note Distribution Account. On the third Business
Day prior to the 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 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 by 11:00 a.m. (New York City time), in the
following order of priority:
(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, (d) to the Owner Trustee, an amount equal to the Owner Trustee Fee
and all unpaid Owner Trustee Fees from prior Due Periods, and (e) to the
Custodian, an amount equal to the Custodian Fee and all unpaid Custodian 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 the
Certificate Distribution Account for distribution pursuant to Section 5.06, pro
rata, any amounts 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 amount will be retained
in the Note Distribution Account and be included in the Noteholders' Monthly
Principal Distributable Amount and deposited only in the Note Distribution
Account; 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 clause (i)
through (ii), the Noteholders' Interest Distributable Amount;
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(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 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 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 the Certificate Distribution Account, for distribution
pursuant to Section 5.06 on such Distribution Date to the Securities
Insurer, from the Available Distribution Amount after application of
clauses (i) through (vi) above the Securities Insurer Reimbursement Amount;
(viii) on an Overcollateralization Stepdown Date, to 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, after application of clauses (i) through
(vii) above the Overcollateralization Reduction Amount;
(ix) to the Certificate Distribution Account, for distribution
pursuant to Section 5.06 on such Distribution Date to the Servicer, from
the Available Distribution Amount, 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 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
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(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.
(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
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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.
(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 1996-4".
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 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; and
(ii) pay such 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.
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(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:
(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 1996- 4". 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 January
21, 1997, the Transferor and the Seller may
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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 January 21, 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.
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 1996-4". 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'
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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;
(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, 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
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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 1996-4". 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.
(b) Substitution. 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.
(c) Release of Excess. If the amount on deposit in the Reserve Account
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) 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.
(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
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Account with respect to each Distribution Date the Indenture Trustee shall
withdraw funds from such 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, 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
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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
1996-4". 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 1996- 4".
(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 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
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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 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:
(i) 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;
(ii) 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;
(iii) 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
(iv) 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.
(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.
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(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; (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, by facsimile, the receipt
and legibility of which shall be confirmed telephonically, and with hard copy
thereof to be delivered no later than one (1) Business Day after such
Determination Date, the Servicer's Monthly Remittance Report, setting forth the
date of such Report (day, month and year), the name of the Issuer (i.e.
"FIRSTPLUS Home Loan Owner Trust 1996-4"), the Series designation of the
Securities (i.e. "Series 1996-4"), and the date of this Agreement. Furthermore,
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) 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, on 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 Home Loan Owner Trust
1996-4"), the series designation of the Notes and Certificates (i.e. "Series
1996-4"), the date of this Agreement and the following information:
(i) the Available Collection Amount and Required
Distribution Amount for the related Distribution Date;
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(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, the Custodian Fee, if any, 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;
(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;
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(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, Personal Property Loan 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
(i.e. Combination Loans, Debt Consolidation Loans, Home Improvement Loans,
Personal Property Loan and Purchase or Refinance Loan); and
(xx) the scheduled principal payments and the principal
prepayments received with respect to the Home Loans during the Due Period.
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.
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(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 holder 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 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 holder of 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 holder of 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
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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.
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 Mortgage 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.
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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.
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 Service 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 pursuant 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
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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 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.
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 Services
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.
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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.
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 February, 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 officers 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.
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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.
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 VII
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.
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ARTICLE IX
THE SERVICER
Section 9.01 Indemnification; Third Party Claims.
(a) The Servicer agrees to indemnify and hold the Indenture 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 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.
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(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 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.
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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.
(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:
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(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
(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
(1) has experienced a material adverse change in its
business, assets, liabilities, operations, condition
(financial or otherwise) or prospects,
(2) has defaulted on any of its material obligations,
or
(3) 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 November 1996 up to the
fifth (5th) anniversary of the October 31, 1996 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
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October 31, 1996 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).
(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
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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.
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
Fees, 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 Fees 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 Servicer's successor. 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
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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.
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 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
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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.
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 Offered 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 Offered 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 Loan
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 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 shall
have the right to modify the definitions relating to the calculation of the
Required Overcollateralization Amount without the requirement of an amendment to
this Agreement.
(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
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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.
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 1996-4, c/o Wilmington Trust Company, Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890, Attention:
Emmett R. Harmon, or
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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: Chris 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, except that notices
to the Securityholders shall be effective upon mailing or personal delivery.
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 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.
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 86
<PAGE> 95
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.
(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
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 87
<PAGE> 96
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, (ii) if to Moody's, 99 Church Street, Corporate Department - 4th
Floor, New York, New York 10007, Attention: Residential Mortgage Monitoring
Department, or (iii) if to DCR, 55 East Monroe Street, Chicago, Illinois, 60603,
Attention: Asset-Backed 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 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).
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 88
<PAGE> 97
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 1996-4) - Page 89
<PAGE> 98
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 1996-4,
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 1996-4) - Page 90
<PAGE> 99
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
1996-4, 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 22nd day of November,
1996.
______________________________________
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 22nd day of November,
1996.
_____________________________________
Notary Public, State of New York
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 91
<PAGE> 100
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 22nd day of November,
1996.
______________________________________
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 22nd day of November,
1996.
_________________________________________
Notary Public, State of New York
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 92
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EXHIBIT A
Home Loan Schedule
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EXHIBIT B
Form of Servicer's Monthly Remittance Report to Trustee
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 94
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EXHIBIT C
Form of Subsequent Transfer Agreement
SALE AND SERVICING AGREEMENT (Series 1996-4) - Page 95
