<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: December 20, 1996
(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 September 24, 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 1996-3 Asset Backed Notes and Asset Backed Certificates, Series
1996-3, consisting of (A) the following classes of Asset Backed Notes
(collectively, the "Notes"): (i) Class A-1 Notes, Class A-2 Notes, Class A-3
Notes, Class A-4 Notes, Class A-5 Notes, Class A-6 Notes, Class A-7 Notes, and
Class A-8 Notes, and (B) the Asset Backed Certificates (the "Certificates" and,
together with the Notes, the "Offered Securities").
The Offered Securities were sold to Banc One Capital Corporation and
Bear, Stearns & Co. Inc. (collectively, the "Underwriter") pursuant to the
terms of an underwriting agreement dated as of September 24, 1996, as
supplemented by a terms agreement of even date therewith (collectively, the
"Underwriting Agreement") between the Registrant, FIRSTPLUS FINANCIAL, INC.
("FFI") and the Underwriter. A copy of the Underwriting Agreement is filed
herewith as Exhibit 1.1.
The Notes were issued pursuant to an Indenture dated as of September
1, 1996 (the "Indenture") between FIRSTPLUS HOME LOAN OWNER TRUST 1996-3 (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 September
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.
The Home Loans were sold by FFI to the Registrant pursuant to the
terms of a Loan Sale Agreement dated as of September 27, 1996 (the "Loan Sale
Agreement") and were simultaneously
-2-
<PAGE> 3
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 September 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 10,265 Home Loans having a Pool
Principal Balance as of the respective Cut-off Dates of the related Home Loans
of $299,994,397.14. 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>
8.001 - 9.000 1 $ 10,108.62 0.00%
9.001 - 10.000 2 30,893.95 0.01
11.001 - 12.000 85 2,794,281.94 0.93%
12.001 - 13.000 686 23,189,624.16 7.73%
13.001 - 14.000 2,785 88,104,897.89 29.37%
14.001 - 15.000 3,653 106,955,339.83 35.65
15.001 - 16.000 2,184 57,816,047.19 19.27
16.001 - 17.000 644 15,907,851.08 5.30
17.001 - 18.000 173 3,994,495.36 1.33
18.001 - 19.000 35 803,973.69 0.27
19.001 - 20.000 15 336,903.87 0.11
20.001 - 21.000 2 49,979.56 0.02
------ --------------- ------
Totals . . . . . . . . 10,265 $299,994,397.14 100.00%
====== =============== ======
</TABLE>
The weighted average Home Loan Rate of the Home Loans as of the Cut-
Off Date was approximately 14.610% per annum.
-3-
<PAGE> 4
CUT-OFF DATE LOAN PRINCIPAL BALANCES
<TABLE>
<CAPTION>
RANGE OF PERCENT OF TOTAL
CUT-OFF DATE NUMBER OF AGGREGATE BY AGGREGATE
PRINCIPAL BALANCE ($) HOME LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
--------------------- ---------- ----------------- -----------------
<S> <C> <C> <C>
0.01 - 10,000.00 . . . . . . . . . . . . . . 82 $ 638,644.78 0.21%
10,000.01 - 20,000.00 . . . . . . . . . . . . . . 1,495 25,458,942.17 8.49
20,000.01 - 30,000.00 . . . . . . . . . . . . . . 5,130 130,319,461.99 43.44
30,000.01 - 40,000.00 . . . . . . . . . . . . . . 2,424 88,760,871.74 29.59
40,000.01 - 50,000.00 . . . . . . . . . . . . . . 1,003 46,690,537.61 15.56
50,000.01 - 60,000.00 . . . . . . . . . . . . . . 79 4,429,879.10 1.48
60,000.01 - 70,000.00 . . . . . . . . . . . . . . 22 1,453,117.66 0.48
70,000.01 - 80,000.00 . . . . . . . . . . . . . . 30 2,242,942.09 0.75
------ --------------- ------
Totals . . . . . . . . . . . . . . . . . 10,265 $299,994,397.14 100.00%
====== =============== =======
</TABLE>
The average principal balance of the Home Loans as of the Cut-Off Date
was approximately $32,524.44.
ORIGINAL LOAN PRINCIPAL BALANCES
<TABLE>
<CAPTION>
RANGE OF PERCENT OF TOTAL
PRINCIPAL BALANCE NUMBER OF AGGREGATE BY AGGREGATE
AT ORIGINATION ($) HOME LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
------------------ ---------- ----------------- -----------------
<S> <C> <C> <C>
0.01 - 10,000.00 . . . . . . . . . . . . . 81 $ 628,658.55 0.21%
10,000.01 - 20,000.00 . . . . . . . . . . . . . . 1,493 25,409,118.59 8.47
20,000.01 - 30,000.00 . . . . . . . . . . . . . . 5,128 130,229,783.46 43.41
30,000.01 - 40,000.00 . . . . . . . . . . . . . . 2,428 88,870,391.76 23.65
40,000.01 - 50,000.00 . . . . . . . . . . . . . 1,004 46,730,505.93 9.78
50,000.01 - 60,000.00 . . . . . . . . . . . . . . 79 4,429,879.10 1.48
60,000.01 - 70,000.00 . . . . . . . . . . . . . . 22 1,453,117.66 0.48
70,000.01 - 80,000.00 . . . . . . . . . . . . . . 30 2,242,942.09 0.75
------ --------------- ------
Totals . . . . . . . . . . . . . . . . . 10,165 $299,994,397.14 100.00%
====== =============== =======
</TABLE>
The average principal balance of the Home Loans at origination was
approximately $32,578.16.
-4-
<PAGE> 5
GEOGRAPHIC CONCENTRATION
<TABLE>
<CAPTION>
PERCENT OF TOTAL
NUMBER OF AGGREGATE BY AGGREGATE
STATE HOME LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
----- ---------- ----------------- -----------------
<S> <C> <C> <C>
Alabama . . . . . . . . . . . . . . . . . . . . . 4 $ 112,338.19 0.04%
Arizona . . . . . . . . . . . . . . . . . . . . . 818 23,096,616.75 7.70
Arkansas . . . . . . . . . . . . . . . . . . . . 2 75,656.70 0.03
California . . . . . . . . . . . . . . . . . . . 5,499 169,911,352.31 56.64
Colorado . . . . . . . . . . . . . . . . . . . . 559 15,460,838.82 5.15
Connecticut . . . . . . . . . . . . . . . . . . . 21 610,636.09 0.20
Florida . . . . . . . . . . . . . . . . . . . . . 549 13,722,323.85 4.57
Georgia . . . . . . . . . . . . . . . . . . . . . 246 5,656,258.49 1.89
Hawaii . . . . . . . . . . . . . . . . . . . . . 1 31,449.26 0.01
Idaho . . . . . . . . . . . . . . . . . . . . . . 47 1,283,281.15 0.43
Illinois . . . . . . . . . . . . . . . . . . . . 42 1,058,670.46 0.35
Indiana . . . . . . . . . . . . . . . . . . . . . 8 229,885.90 0.08
Iowa . . . . . . . . . . . . . . . . . . . . . . 9 204,921.55 0.07
Kansas . . . . . . . . . . . . . . . . . . . . . 2 72,339.49 0.02
Kentucky . . . . . . . . . . . . . . . . . . . . 19 560,363.79 0.19
Louisiana . . . . . . . . . . . . . . . . . . . . 9 252,780.94 0.08
Maryland . . . . . . . . . . . . . . . . . . . . 46 1,377,267.67 0.45
Michigan . . . . . . . . . . . . . . . . . . . . 4 104,115.75 0.03
Minnesota . . . . . . . . . . . . . . . . . . . . 89 2,178,611.82 0.73
Mississippi . . . . . . . . . . . . . . . . . . . 25 695,478.17 0.23
Missouri . . . . . . . . . . . . . . . . . . . . 10 295,654.87 0.10
Montana . . . . . . . . . . . . . . . . . . . . . 1 25,000.00 0.01
Nebraska . . . . . . . . . . . . . . . . . . . . 3 78,325.54 0.03
Nevada . . . . . . . . . . . . . . . . . . . . . 591 17,192,855.01 5.73
New Hampshire . . . . . . . . . . . . . . . . . . 1 39,890.88 0.01
New Jersey . . . . . . . . . . . . . . . . . . . 10 394,862.61 0.13
New Mexico . . . . . . . . . . . . . . . . . . . 15 412,765.09 0.14
New York . . . . . . . . . . . . . . . . . . . . 7 151,786.46 0.05
North Carolina . . . . . . . . . . . . . . . . . 192 6,045,768.09 2.02
Ohio . . . . . . . . . . . . . . . . . . . . . . 8 203,323.68 0.07
Oklahoma . . . . . . . . . . . . . . . . . . . . 55 1,281,088.75 0.43
Oregon . . . . . . . . . . . . . . . . . . . . . 117 3,301,303.77 1.10
Pennsylvania . . . . . . . . . . . . . . . . . . 1 29,989.85 0.01
Rhode Island . . . . . . . . . . . . . . . . . . 31 908,634.87 0.30
South Carolina . . . . . . . . . . . . . . . . . 142 3,388,075.80 1.13
Tennessee . . . . . . . . . . . . . . . . . . . . 75 1,758,368.59 0.59
Texas . . . . . . . . . . . . . . . . . . . . . . 13 182,823.64 0.06
Utah . . . . . . . . . . . . . . . . . . . . . . 240 6,461,031.72 2.15
Virginia . . . . . . . . . . . . . . . . . . . . 205 5,630,682.09 1.88
Washington . . . . . . . . . . . . . . . . . . . 514 14,728,911.94 4.91
Wisconsin . . . . . . . . . . . . . . . . . . . . 35 788,066.74 0.26
------ --------------- ------
Totals . . . . . . . . . . . . . . . . . 10,265 $299,994,397.14 100.00%
====== =============== ======
</TABLE>
-5-
<PAGE> 6
REMAINING TERM TO MATURITY
<TABLE>
<CAPTION>
RANGE OF PERCENT OF TOTAL
REMAINING TERM TO NUMBER OF AGGREGATE BY AGGREGATE
MATURITY (MONTHS) HOME LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
----------------- ---------- ----------------- -----------------
<S> <C> <C> <C>
1 - 30 . . . . . . . . . . . . . . . . . . . . 3 $ 3,243.45 0.00%
31 - 60 . . . . . . . . . . . . . . . . . . . . 45 754,702.84 0.25
61 - 90 . . . . . . . . . . . . . . . . . . . . 35 573,285.87 0.19
91 - 120 . . . . . . . . . . . . . . . . . . . . 413 9,055,640.33 3.02
121 - 150 . . . . . . . . . . . . . . . . . . . . 32 732,137.98 0.24
151 - 180 . . . . . . . . . . . . . . . . . . . . 2,838 77,520,880.59 25.84
181 - 210 . . . . . . . . . . . . . . . . . . . . 6 103,721.12 0.03
211 - 240 . . . . . . . . . . . . . . . . . . . . 5,056 151,383,649.92 50.46
241 - 270 . . . . . . . . . . . . . . . . . . . . 3 77,933.07 0.03
271 - 300 . . . . . . . . . . . . . . . . . . . . 1,834 59,789,201.97 19.93
------ --------------- ------
Totals . . . . . . . . . . . . . . . . . . . . 10,265 $299,994,397.14 100.00%
====== =============== ======
</TABLE>
The weighted average remaining term to maturity of the Home Loans as
of the Cut-Off Date was approximately 231 months.
MONTHS SINCE ORIGINATION
<TABLE>
<CAPTION>
PERCENT OF
NUMBER TOTAL BY
AGE OF AGGREGATE AGGREGATE
(IN MONTHS) HOME LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
----------- ---------- ----------------- -----------------
<S> <C> <C> <C>
Less than 1 3,023 $ 87,851,431.85 29.28%
1 to 6 7,112 209,333,463.73 69.78
7 to 12 127 2,791,182.96 0.93
13 to 18 2 18,121.07 0.01
19 to 24 1 197.53 0.00
------ --------------- ------
Totals . . . . . . . . . . . . . . . . . . 10,265 $299,994,397.14 100.00%
====== =============== ======
</TABLE>
The weighted average age of the Home Loans as of the Cut-Off Date was
approximately one month.
-6-
<PAGE> 7
Item 7. Financial Statements and Exhibits.
(c) Exhibits
Exhibit No. Description
----------- -----------
1.1 Copy of Underwriting Agreement
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-
<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
January 9, 1997
By: /S/ CHRISTOPHER J. GRAMLICH
----------------------------------------------
Christopher J. Gramlich, Senior Vice President
-8-
<PAGE> 9
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
1.1 Copy of Underwriting Agreement
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 1.1
NON-REMIC UA
EXECUTION
FIRSTPLUS HOME LOAN OWNER TRUSTS
ASSET-BACKED SECURITIES
(Issuable in Series)
UNDERWRITING AGREEMENT
Banc One Capital Corporation September 24,
1996
300 Crescent Court
Dallas, Texas 75201
Attention: Socrates Aramburu
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Attention: Timothy Small
Ladies and Gentlemen:
FIRSTPLUS INVESTMENT CORPORATION, a corporation organized and
existing under the laws of the State of Nevada (the "Company"), proposes to
cause FIRSTPLUS HOME LOAN OWNER TRUSTS (each, a "Trust") to offer for sale from
time to time its Asset-Backed Securities evidencing interests in pools of
certain contracts and mortgage loans (the "Securities"). The Securities may be
issued in various series, and within each series, in one or more classes, in
one or more offerings on terms determined at the time of sale (each such
series, a "Series" and each such class, a "Class"). Each Trust may issue one
or more classes of Asset-Backed Notes (the "Notes") pursuant to an Indenture to
be dated as of the respective cut-off date (each, a "Cut-off Date") as
supplemented by one or more supplements to such Indenture (such Indenture, as
supplemented, the "Indenture") between the related Trust and the indenture
trustee named therein (the "Indenture Trustee"). Simultaneously with the
issuance of the Notes, the Trust may issue Asset-Backed Certificates (the
"Certificates"), each representing a fractional undivided ownership interest in
the related Trust,
<PAGE> 2
pursuant to a separate Trust Agreement (each, a "Trust Agreement") to be dated
as of the respective Cut-off Date among the Trust, one or more affiliates of
the Company and the owner trustee, named therein (the "Owner Trustee").
The assets of each Trust will consist primarily of a pool of
fixed- or adjustable-rate, fully-amortizing property improvement and/or debt
consolidation loans, and the related notes and mortgages (collectively, the
"Home Loans") having the original terms to maturity and interest rate types
specified in the related Terms Agreement referred to hereinbelow. Certain of
the Home Loans may be partially insured by the Federal Housing Administration
(the "FHA") of the United States Department of Housing and Urban Development
("HUD") pursuant to Title I of the National Housing Act of 1934, as amended
("Title I Home Loans"). Unless otherwise specified in the related Prospectus
Supplement and the related Sale and Servicing Agreement (as defined below), the
Company or its affiliate, as FHA Insurance Holder (the "FHA Insurance Holder"),
will enter into an FHA claims administration agreement (each, an "FHA Claims
Agreement") with FIRSTPLUS FINANCIAL, INC., as transferor and servicer (the
"Transferor" or "Servicer") pursuant to which the Servicer will administer,
process and submit claims (the Servicer in such capacity, the "FHA Claims
Administrator") to the FHA in respect of Title I Home Loans.
Capitalized terms used and not otherwise defined herein shall have the
meanings assigned thereto in the related sale and servicing agreement to be
dated as of the applicable Cut-off Date (the "Sale and Servicing Agreement"),
among the Company as seller (the "Seller"), the Servicer, the Indenture Trustee
and the related Trust, or, if not defined therein, in the respective Indenture
or Trust Agreement.
If and to the extent specified in the related Sale and Servicing
Agreement, in addition to the Home Loans conveyed to the Trust on the Closing
Date (such Home Loans so conveyed to the Trust at such time, the "Initial Home
Loans"), the Seller shall be obligated to convey to the Trust, from time to
time during the period commencing after the Closing Date and ending at the
expiration of the period specified in such Sale and Servicing Agreement (each,
a "Pre-Funding Period")(the date of any such conveyance, a "Subsequent Transfer
Date"), additional Home Loans
-2-
<PAGE> 3
(any such additional Home Loans so conveyed to the Trust through the Pre-
Funding Period, the "Subsequent Home Loans").
The Securities may have the benefit of one or more insurance policies
(each, a "Policy") issued by the securities insurer named therein (the
"Securities Insurer") pursuant to an indemnity and insurance agreement among
the Seller, the Indenture Trustee, the Servicer and the Securities Insurer (the
"Insurance Agreement").
Underwritten offerings of Securities may be made through you
or through an underwriting syndicate managed by you. The Company proposes to
sell one or more Series of the Securities to you and to each of the other
several underwriters, if any, participating in an underwriting syndicate
managed by you.
Whenever the Company determines to make an offering of
Securities (each, an "Offering") pursuant to this Agreement through you, it
will enter into an agreement (the "Terms Agreement") providing for the sale of
specified Classes of Offered Securities (as defined below) to, and the purchase
and public offering thereof by, you and such other underwriters, if any,
selected by you as have authorized you to enter into such Terms Agreement on
their behalf (the underwriters designated in any such Terms Agreement being
referred to herein as "Underwriters," which term shall include you whether
acting alone in the sale of any Offered Securities of any series or as a member
of an underwriting syndicate). Each such Offering which the Company elects to
make pursuant to this Agreement shall be governed by this Agreement, as
supplemented by the related Terms Agreement, and this Agreement and such Terms
Agreement shall inure to the benefit of and be binding upon each underwriter
participating in the offering of such Offered Securities. Each Terms
Agreement, which shall be substantially in the form of Exhibit A hereto, shall
specify, among other things, the Classes of Securities to be purchased by the
Underwriters (the "Offered Securities"), whether such Offered Securities
constitute Notes or Certificates, the principal balance or balances of the
Offered Securities, each subject to any stated variance, the names of the
Underwriters participating in such offering (subject to substitution as
provided in Section 13 hereof) and the price or prices at which such Offered
Securities are to be purchased by the Underwriters from the Company.
- 3 -
<PAGE> 4
1. Representations and Warranties. (a) The Company and
FFI represent and warrant to and agree with the Underwriters, as of the date of
the related Terms Agreement, that:
(i) The registration statement
specified in the related Terms Agreement, on Form S-3,
including a prospectus, has been filed with the Securities and
Exchange Commission (the "Commission") for the registration
under the Securities Act of 1933, as amended (the "Act"), of
asset-backed securities issuable in series, which registration
statement has been declared effective by the Commission. Such
registration statement, as amended to the date of the related
Terms Agreement, including any documents incorporated by
reference therein pursuant to Item 12 of Form S-3 under the
Act which were filed under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), on or before the
effective date of the Registration Statement, is hereinafter
called the "Registration Statement," and such prospectus, as
such prospectus is supplemented by a prospectus supplement
relating to the Offered Securities of the related Series, each
in the form first filed via EDGAR by a financial printer or
another person designated by the Company (the "Financial
Printer") after the date of the related Terms Agreement
pursuant to Rule 424(b) under the Act, including any documents
incorporated by reference therein pursuant to Item 12 of Form
S-3 under the Act which were filed under the Exchange Act on
or before the date of such Prospectus Supplement (other than
any such incorporated documents that relate to Collateral Term
Sheets (as defined herein)) (such prospectus supplement,
including such incorporated documents (other than those that
relate to Collateral Term Sheets), in the form first filed
after the date of the related Terms Agreement pursuant to Rule
424(b) is hereinafter called the "Prospectus Supplement"), is
hereinafter called the "Final Prospectus". Any preliminary
prospectus, including any preliminary prospectus supplement
which, as completed, is proposed to be used in connection with
the sale of a Series of Offered Securities and any prospectus
filed with the Commission pursuant to Rule 424(a) of the Act
is hereinafter referred to as a "Preliminary Prospectus." Any
reference herein to the terms "amend,"
- 4 -
<PAGE> 5
"amendment" or "supplement" with respect to the Registration
Statement, the Preliminary Prospectus, the Final Prospectus or
the Prospectus Supplement shall be deemed to refer to and
include the filing of any document under the Exchange Act
after the effective date of the Registration Statement or the
issue date of the Preliminary Prospectus, the Final Prospectus
or Prospectus Supplement, as the case may be, deemed to be
incorporated therein by reference pursuant to Item 12 of Form
S-3 under the Act.
(ii) The related Registration
Statement, at the time it became effective, and the prospectus
contained therein, and any amendments thereof and supplements
thereto filed prior to the date of the related Terms
Agreement, conformed in all material respects to the
requirements of the Act and the rules and regulations of the
Commission thereunder; on the date of the related Terms
Agreement and on each Closing Date (as defined in Section 3
below), the related Registration Statement and the related
Final Prospectus, and any amendments thereof and supplements
thereto, will conform in all material respects to the
requirements of the Act and the rules and regulations of the
Commission thereunder; such Registration Statement, at the
time it became effective, did not contain any untrue statement
of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements
therein not misleading; such Final Prospectus, on the date of
any filing pursuant to Rule 424(b) and on each Closing Date,
will not include any untrue statement of a material fact or
omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they
are made, not misleading; and the Form 8-K relating to any
Subsequent Home Loans, on the date of any filing thereof, will
not include any untrue statement of a material fact or omit to
state any information which such Final Prospectus states will
be included in such Form 8-K; provided, however, that the
Company makes no representations or warranties as to the
information contained in or omitted from (A) such Registration
Statement or such Final Prospectus (or any supplement thereto)
in reliance upon and in conformity
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<PAGE> 6
with written information furnished to the Company by or on
behalf of the Underwriters specifically for use in the
preparation thereof or (B) any Current Report (as defined in
Section 5(b) below), or in any amendment thereof or supplement
thereto, incorporated by reference in such Registration
Statement or such Final Prospectus (or any amendment thereof
or supplement thereto).
(iii) The Securities of the
related Series will conform to the description thereof
contained in the related Final Prospectus; and will each on
the related Closing Date be duly and validly authorized, and,
when validly executed, countersigned, issued and delivered in
accordance with the related Indenture or Trust Agreement, as
applicable, and sold to you as provided herein and in the
related Terms Agreement, will each be validly issued and
outstanding and entitled to the benefits of such Indenture or
Trust Agreement, as applicable, and, if applicable, the
related Policy.
(iv) Neither the issuance nor
sale of the Securities of the related Series nor the
consummation of any other of the transactions herein
contemplated, nor the fulfillment of the terms hereof or of
the related Terms Agreement, will conflict with any statute,
order or regulation applicable to the Company of any court,
regulatory body, administrative agency or governmental body
having jurisdiction over the Company or with any
organizational document of the Company or any instrument or
any agreement under which the Company is bound or to which it
is a party.
(v) This Agreement and the
related Terms Agreement have been duly authorized, executed
and delivered by the Company.
(vi) At or prior to the related
Closing Date, the Trust will have entered into the related
Indenture, Trust Agreement and any Insurance Agreement and,
assuming the due authorization, execution and delivery thereof
by the other parties thereto, such Indenture, such Trust
Agreement and such Insurance Agreement (on such Closing Date)
will constitute the
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<PAGE> 7
valid and binding agreement of the Trust enforceable in
accordance with its terms, subject as to enforceability, to
bankruptcy, insolvency, reorganization or other similar laws
affecting creditors' rights and to general principles of
equity (regardless of whether the enforceability of such
Indenture, such Trust Agreement or such Insurance Agreement is
considered in a proceeding in equity or at law).
(vii) At or prior to the related
Closing Date, the Company will have entered into the related
Sale and Servicing Agreement and any related FHA Claims
Agreement and, assuming the due authorization, execution and
delivery thereof by the other parties thereto, such Sale and
Servicing Agreement and such FHA Claims Agreement (on such
Closing Date) will constitute the valid and binding agreement
of the Company enforceable in accordance with its terms,
subject as to enforceability, to bankruptcy, insolvency,
reorganization or other similar laws affecting creditors'
rights and to general principles of equity (regardless of
whether the enforceability of such Sale and Servicing
Agreement and such FHA Claims Agreement is considered in a
proceeding in equity or at law).
(viii) The FHA Insurance Holder and
the Transferor are each approved by the FHA as a lender under
the Title I program and each holds a valid contract of
insurance or approval for insurance under the Title I program;
the FHA Insurance Holder, will have received prior to each
Closing Date or Subsequent Transfer Date, as the case may be,
all material consents, authorizations, orders and approvals
from governmental authorities, agencies or bodies and all
other material actions will have been taken prior to such
Closing Date or Subsequent Transfer Date, which are necessary
to permit the FHA Insurance Holder to obtain the benefit of
the FHA Insurance in respect of the related Title I Home Loan
as described in the related Final Prospectus and will have
completed prior to each Closing Date or Subsequent Transfer
Date, as the case may be, all material actions of the
Transferor and the FHA Insurance Holder that are necessary to
duly and validly effect the
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<PAGE> 8
transfer of the FHA Insurance applicable to the Title I Home
Loans into the FHA contract of insurance coverage reserve
account of the FHA Insurance Holder.
(ix) If applicable, the related
Policy, when delivered, will constitute the legal, valid and
binding obligation of the Securities Insurer, enforceable in
accordance with its terms.
(x) Any funds or accounts
established from time to time with respect to a Series of
Securities in accordance with the related Indenture, Trust
Agreement or Sale and Servicing Agreement will have been
properly funded at the Closing Date by the deposit by the
Seller of the requisite cash therein, in the manner specified
by such Indenture, Trust Agreement or Sale and Servicing
Agreement.
(xi) Immediately prior to the
transfer and assignment thereof on the Closing Date, and on
any Subsequent Transfer Date, Transferor had good title to,
and was the sole owner of, each Home Loan and all action had
been taken to obtain good record title to each related Home
Loan. Each Home Loan has, as of such date(s), will be
transferred free and clear of any lien, mortgage, pledge,
charge, security interest, adverse claim or other encumbrance.
(xii) Neither the Seller, the
Transferor, the Trust nor any funds or accounts established
thereunder is an "investment company" (as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"))
or is under the "control" (as such term is defined in the 1940
Act) of an "investment company" that is registered or required
to be registered under, or is otherwise subject to the
provisions of, the 1940 Act.
2. Purchase and Sale. Subject to the execution of the
Terms Agreement for a particular Offering and subject to the terms and
conditions and in reliance upon the representations and warranties set forth in
this Agreement and such Terms Agreement, the Company agrees to sell to each
Underwriter, severally and not jointly, and each Underwriter, severally and not
jointly, agrees to
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<PAGE> 9
purchase from the Company, the respective original principal amounts of the
related Offered Securities set forth in the related Terms Agreement opposite
the name of such Underwriter, plus any additional original principal amount of
Offered Securities which such Underwriter may be obligated to purchase pursuant
to Section 13 hereof, at the purchase price therefor set forth in such Terms
Agreement (the "Purchase Price").
The parties hereto agree that settlement for all securities
sold pursuant to this Agreement shall take place on the terms set forth herein
and not as set forth in Rule 15c6-1(a) under the Exchange Act.
3. Delivery and Payment. Delivery of and payment for
the Offered Securities of a Series shall be made at the specified offices of
Andrews & Kurth L.L.P., at 10:00 a.m. New York City time, on the Closing Date
specified in the related Terms Agreement, which date and time may be postponed
by agreement between the Underwriters and the Company (such date and time being
herein called the "Closing Date"). Delivery of such Offered Securities shall
be made to the Underwriters against payment by the Underwriters of the Purchase
Price thereof to or upon the order of the Company by wire transfer in federal
or other immediately available funds. Unless delivery is made through the
facilities of The Depository Trust Company, the Offered Securities shall be
registered in such names and in such authorized denominations as the
Underwriters may request not less than two full business days in advance of
each Closing Date.
The Company agrees to notify the Underwriters at least two
business days before each Closing Date of the exact principal balance evidenced
by the Offered Securities and to have such Offered Securities available for
inspection, checking and packaging in New York, New York, no later than 12:00
noon on the business day prior to such Closing Date.
4. Offering by the Underwriters. It is understood that
the Underwriters propose to offer the Offered Securities of the related Series
for sale to the public as set forth in the related Final Prospectus.
5. Agreements. The Company and FFI agree with the
Underwriters that:
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<PAGE> 10
(a) The Company will cause the each of the
Preliminary Prospectus and the Final Prospectus as supplemented by a
Prospectus Supplement relating to the Offered Securities to be filed
pursuant to Rule 424 under the Act and will promptly advise the
Underwriters when such Preliminary Prospectus and such Final
Prospectus as so supplemented has been so filed, and prior to the
termination of the Offering to which such Preliminary Prospectus and
Final Prospectus relates also will promptly advise the Underwriters
(i) when any amendment to the related Registration Statement
specifically relating to such Offered Securities shall have become
effective or any further supplement to such Preliminary Prospectus or
such Final Prospectus has been filed, (ii) of any request by the
Commission for any amendment of such Registration Statement,
Preliminary Prospectus or Final Prospectus or for any additional
information, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of such Registration Statement or the
institution or threatening of any proceeding for that purpose and (iv)
of the receipt by the Company of any written notification with respect
to the suspension of the qualification of such Offered Securities for
sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose. The Company will not file any amendment
of the related Registration Statement or supplement to the related
Preliminary Prospectus or Final Prospectus (other than any amendment
or supplement specifically relating to one or more Series of
asset-backed securities other than the Series that includes the
related Offered Securities) unless (i) the Company has given
reasonable notice of its intention to file any such amendment or
supplement, (ii) the Company has furnished the Underwriters with a
copy for their review within a reasonable time prior to filing, and
(iii) the Underwriters do not reasonably object to the filing of such
amendment or supplement. The Company will use its best efforts to
prevent the issuance of any such stop order and, if issued, to obtain
as soon as possible the withdrawal thereof.
(b) The Company will cause any Computational
Materials and any Structural Term Sheets (each as defined in Section 8
below) with respect to the Offered Securities of a Series that are
delivered by an Underwriter to the Company pursuant to Section 8 to be
filed with the Commission on a
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<PAGE> 11
Current Report on Form 8-K (a "Current Report") pursuant to Rule
13a-11 under the Exchange Act in accordance with Section 10 on the
business day immediately following the date on which the related Terms
Agreement is executed and delivered. The Company will cause any
Collateral Term Sheet (as defined in Section 9 below) with respect to
the Offered Securities of a Series that is delivered by the
Underwriters to the Company in accordance with the provisions of
Section 9 to be filed with the Commission on a Current Report pursuant
to Rule 13a-11 under the Exchange Act in accordance with Section 10 on
the business day immediately following the day on which such
Collateral Term Sheet is delivered to counsel for the Company by the
Underwriters prior to 10:30 a.m. In addition, if at any time prior to
the availability of the related Prospectus Supplement, the
Underwriters have delivered to any prospective investor a subsequent
Collateral Term Sheet that reflects, in the reasonable judgment of the
Underwriters and the Company, a material change in the characteristics
of the Home Loans for the related Series from those on which a
Collateral Term Sheet with respect to the related Series previously
filed with the Commission was based, the Company will cause any such
Collateral Term Sheet that is delivered by the Underwriters to the
Company in accordance with the provisions of Section 9 hereof to be
filed with the Commission on a Current Report in accordance with
Section 10. Each such Current Report shall be incorporated by
reference in the related Final Prospectus and the related Registration
Statement.
(c) If, at any time when a prospectus relating to
the Offered Securities of a Series is required to be delivered under
the Act, any event occurs as a result of which the related Final
Prospectus as then amended or supplemented would include any untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein in light of the circumstances
under which they were made not misleading, or if it shall be necessary
at any time to amend or supplement the related Final Prospectus to
comply with the Act or the rules thereunder, the Company promptly will
prepare and file with the Commission, subject to paragraph (a) of this
Section 5, an amendment or supplement which will correct such
statement or omission or an amendment which will effect such
compliance; provided, however, that the Company will not be required
to file any such amendment or
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<PAGE> 12
supplement with respect to any Computational Materials, Structural
Term Sheets or Collateral Term Sheets incorporated by reference in
the Final Prospectus other than any amendments or supplements of such
Computational Materials or Structural Term Sheets that are furnished
to the Company by the Underwriters pursuant to Section 8(e) hereof or
any amendments or supplements of such Collateral Term Sheets that are
furnished to the Company by the Underwriters pursuant to Section 9(d)
hereof which are required to be filed in accordance therewith.
(d) The Company will furnish to the Underwriters
and counsel for the Underwriters, without charge, and, so long as
delivery of a prospectus by the Underwriters or a dealer may be
required by the Act, as many copies of the related Preliminary
Prospectus and the related Final Prospectus and any supplements
thereto (other than exhibits to the related Current Report) as the
Underwriters may reasonably request.
(e) The Company will furnish such information,
execute such instruments and take such actions as may be reasonably
requested by the Underwriters to qualify the Offered Securities of a
Series for sale under the laws of such jurisdictions as the
Underwriters may designate, to maintain such qualifications in effect
so long as required for the distribution of such Offered Securities
and to determine the legality of such Offered Securities for purchase
by investors; provided, however, that the Company shall not be
required to qualify to do business in any jurisdiction where it is not
qualified on the date of the related Terms Agreement or to take any
action which would subject it to general or unlimited service of
process or corporate or franchise taxation as a foreign corporation in
any jurisdiction in which it is not, on the date of the related Terms
Agreement, subject to such service of process.
(f) So long as the Offered Securities of a Series
are outstanding, the Company will furnish to the Underwriters copies
of the annual independent public accountants' servicing report
furnished to the Indenture Trustee pursuant to the related Sale and
Servicing Agreement.
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<PAGE> 13
(g) Whether or not the transactions
contemplated hereby and by the related Terms Agreement shall be
consummated, the Company shall be responsible for the payment of any
costs and expenses for which details are submitted, in connection with
the performance of its obligations under this Agreement and the
related Terms Agreement, including, without limitation, (a) the cost
and expenses of printing or otherwise reproducing the related
Registration Statement, the related Preliminary Prospectus, the
related Final Prospectus, this Agreement, the related Terms Agreement,
the related Sale and Servicing Agreement, the related Trust Agreement,
the related Indenture and the Offered Securities, and (b) the cost of
delivering the related Offered Securities to the office of the
Underwriters, insured to the satisfaction of the Underwriters, (c) the
fees and disbursements of the Seller's and the Servicer's counsel and
accountants, (d) the qualification of the Securities under state
securities or blue sky laws, including filing fees and the fees and
disbursements of counsel for you in connection therewith and in
connection with the preparation of any blue sky survey and legal
investment survey, (e) the printing, word processing and duplicating
expenses and supervision related to preparation of and delivery to the
Underwriter of copies of any document contemplated hereunder and any
blue sky survey and legal investment survey, (f) the fees of rating
agencies, (g) the fees and expenses, if any, incurred in connection
with the listing of the Offered Securities on any national securities
exchange, (h) the fees, if any, of the National Association of
Securities Dealers, Inc., and the fees and expenses of counsel for you
in connection with any required written submission to or appearance
before such entity, (i) the fees and expenses of the Indenture
Trustee, the Owner Trustee, any custodian, the backup servicer and the
Securities Insurer, and their respective counsel, and (j) any such
other related expenses not specified above.
6. Conditions to the Obligations of the Underwriters.
The obligations of the Underwriters to purchase the Offered Securities of any
Series shall be subject to the accuracy in all material respects of the
representations and warranties on the part of the Company contained in this
Agreement, as supplemented by the related Terms Agreement, as of the respective
dates thereof and the related Closing Date, to the accuracy of the statements
of the
- 13 -
<PAGE> 14
Company made in any applicable officers' certificates pursuant to the
provisions hereof, to the performance by the Company of its obligations under
this Agreement and such Terms Agreement and to the following additional
conditions applicable to the related Offering:
(a) No stop order suspending the effectiveness of
the related Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or threatened.
(b) Andrews & Kurth, counsel for the Company,
shall have furnished to the Underwriters an opinion, dated the related
Closing Date, to the effect that:
(i) this Agreement and the
related Terms Agreement have been duly executed and delivered
by the Company;
(ii) each of the related Sale and
Servicing Agreement and any FHA Claims Agreement have been
duly executed and delivered by the Company and is a legal,
valid and binding agreement of the Company enforceable against
the Company in accordance with its terms;
(iii) each of the related
Indenture, Trust Agreement and any Insurance Agreement have
been duly executed and delivered by the Trust and is a legal,
valid and binding agreement of the Trust enforceable against
the Trust in accordance with its terms;
(iv) the Notes, when duly
executed and delivered by the Owner Trustee and when
authenticated by the Indenture Trustee in accordance with the
related Indenture, will be validly issued and outstanding and
entitled to the benefits of such Indenture;
(v) the Certificates, when duly
executed and delivered by the Owner Trustee in accordance with
the related Trust Agreement, will be validly issued and
outstanding and entitled to the benefits of such Trust
Agreement;
- 14 -
<PAGE> 15
(vi) the related Trust Agreement
is not required to be qualified under the Trust Indenture Act
of 1939, as amended, (the "Trust Indenture Act") and the Trust
created thereunder is not required to be registered under the
1940 Act;
(vii) the Indenture has been duly
qualified under the Trust Indenture Act;
(viii) the related Indenture
constitutes a grant by the Trust to the Indenture Trustee of a
valid and perfected security interest in, on the Closing Date,
and on any Subsequent Transfer Date, the Home Loans and any
funds or accounts to be deposited or established with such
Indenture Trustee for the benefit and security of the holders
of the related Notes (and any cash deposited therein), subject
to no prior lien, mortgage, pledge, charge, security
interest, adverse claim or other encumbrance.
(ix) such counsel confirms that
the related Registration Statement is effective under the Act
and, to the best of such counsel's knowledge, no stop order
with respect thereto has been issued, and no proceeding for
that purpose has been instituted or threatened by the
Commission under the Act; such Registration Statement (except
the financial statements and schedules and other financial and
statistical data included therein and the documents
incorporated by reference therein), at the time it became
effective and the related Final Prospectus (except the
financial statements and schedules and the other financial and
statistical data included therein, the documents incorporated
by reference therein and the information included in the first
sentence of the last paragraph on the cover page, the
information under the heading "Underwriting" therein insofar
as such information relates to the offer and sale of the
Securities by the Underwriters, as of the date of the
Prospectus Supplement, conformed in all material respects to
the requirements of the Act and the rules and regulations
thereunder; and no information has come to the attention of
such counsel that causes it to believe that (A) such
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<PAGE> 16
Registration Statement (except the financial statements and
schedules and the other financial and statistical data
included therein and the documents incorporated by reference
therein) at the time it became effective, contained an untrue
statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading or (B) such Final Prospectus
or any amendment or supplement thereto (except the financial
statements and schedules and the other financial and
statistical data included therein, the documents incorporated
by reference therein and the information included in the first
sentence of the last paragraph on the cover page, the
information under the heading "Underwriting" therein insofar
as such information relates to the offer and sale of the
Securities by the Underwriters), as of the date of the
Prospectus Supplement or at the related Closing Date,
contained or contains an untrue statement of a material fact
or omitted or omits to state a material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(x) the statements set forth
under the headings "Description of the Transfer and Servicing
Agreements" and "Description of the Offered Securities" in the
related Final Prospectus, insofar as such statements purport
to summarize certain provisions of the related Trust
Agreement, the related Indenture, the related Sale and
Servicing Agreement" and the related Offered Securities,
provide a fair summary of such provisions;
(xi) the statements set forth in
the related Final Prospectus under the headings "Certain Legal
Aspects of the Loan Assets", "Certain Federal Income Tax
Consequences" (insofar as they relate specifically to the
purchase, ownership and disposition of the related Offered
Securities) and "ERISA Considerations" (insofar as they relate
specifically to the purchase, ownership and disposition of
such Offered Securities), to the extent that they constitute
matters
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<PAGE> 17
of law or legal conclusions, provide a fair summary of such
law or conclusions;
(xii) such HUD/FHA regulatory
matters as reasonably required by the Underwriters; and
(xiii) the statements set forth in
the related Final Prospectus under the heading "Certain
Federal Income Tax Consequences" and in the related Prospectus
Supplement under the heading "Summary of Terms -- Tax Status",
to the extent such statements relate to federal income tax
consequences, accurately describe the material federal income
tax consequences to holders of the Securities.
Such opinion may express its reliance as to factual matters on the
representations and warranties made by, and on certificates or other
documents furnished by, officers of the parties to this Agreement, the
related Terms Agreement, the related Sale and Servicing Agreement, the
related Indenture, the related Trust Agreement or any related
Insurance Agreement. Such opinion may assume the due authorization,
execution and delivery of the instruments and documents referred to
therein by the parties thereto other than the Company. Such opinion
may be qualified, insofar as it concerns the enforceability of the
documents referred to therein, to the extent that such enforceability
may be limited by bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights in general
and by general equity principles (regardless of whether such
enforcement is considered in a proceeding in equity or at law). Such
opinion may be further qualified as expressing no opinion as to (x)
the statements in the related Final Prospectus under the heading
"Certain Legal Aspects of the Loan Assets" except insofar as such
statements relate to the laws of the State of Texas and the laws of
the United States, and (y) the statements in such Final Prospectus
under the headings "ERISA Considerations" and "Certain Federal Income
Tax Consequences" except insofar as such statements relate to the laws
of the United States.
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<PAGE> 18
(c) Ronald M. Mankoff, as General Counsel for
the Company and FFI, shall have furnished to the Underwriters an
opinion, dated the related Closing Date, to the effect that:
(i) Each of the Company and FFI
have been duly incorporated and each is validly existing as a
corporation in good standing in the jurisdiction of its
organization with corporate power to own its properties, to
conduct its business as described in the related Final
Prospectus and to enter into and perform its obligations under
this Agreement, the related Terms Agreement, the related Sale
and Servicing Agreement, the related Indenture, the related
Trust Agreement, the related Insurance Agreement and the
Securities of the related Series, as applicable;
(ii) The Company has full power
and authority to deposit the related Home Loans as
contemplated herein and in the related Trust Agreement and FFI
has full power and authority to transfer and service the
related Home Loans as contemplated in the related Sale and
Servicing Agreement;
(iii) No consent, approval,
authorization or order of any court or governmental agency or
body is required for the consummation by (a) the Company of
the transactions contemplated herein and in the related Sale
and Servicing Agreement, Trust Agreement and Indenture (b) by
FFI of the transactions contemplated in the related Sale and
Servicing Agreement, except such as may be required under the
blue sky laws of any jurisdiction and such other approvals as
have been obtained;
(iv) Neither the issuance of the
Securities of the related Series nor delivery of the related
Offered Securities, nor the consummation of any other of the
transactions contemplated in this Agreement, the related Terms
Agreement, the related Sale and Servicing Agreement, the
related Trust Agreement, the related Indenture or the related
Insurance Agreement, nor the fulfillment of the terms of the
related Securities, the related Sale and Servicing Agreement,
the related Indenture, the related Trust Agreement, this
Agreement,
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<PAGE> 19
the related Terms Agreement or the related Insurance
Agreement, as applicable, will conflict with or violate any
term or provision of the articles of incorporation or by-laws
of the Company or FFI, as applicable or any statute, order or
regulation applicable to the Company of any court, regulatory
body, administrative agency or governmental body having
jurisdiction over the Company or FFI and will not conflict
with, result in a breach or violation or the acceleration of
or constitute a default under the terms of any indenture or
other agreement or instrument known to such counsel to which
the Company or FFI is a party or by which it is bound; and
(v) There are no actions,
proceedings or investigations pending or, to the best
knowledge of such counsel, threatened before any court,
administrative agency or other tribunal (i) asserting the
invalidity of this Agreement, the related Terms Agreement, the
related Sale and Servicing Agreement, the related Trust
Agreement, the related Indenture, the related Insurance
Agreement or the related Securities, (ii) seeking to prevent
the issuance of the Securities of the related Series or the
consummation by the Company or FFI, as applicable, of any of
the transactions contemplated by this Agreement, such Terms
Agreement, such Sale and Servicing Agreement, such Indenture,
such Trust Agreement or such Insurance Agreement, or (iii)
which might materially and adversely affect the performance by
the Company or FFI, as applicable, of its obligations under,
or the validity or enforceability of, this Agreement, such
Terms Agreement, such Sale and Servicing Agreement, such
Indenture, such Trust Agreement, such Insurance Agreement or
the related Securities.
In rendering his opinion such counsel may rely as to matters of fact,
to the extent deemed proper and as stated therein, on certificates of
responsible officers of the Company, FFI or public officials.
(d) The Underwriters shall have received from
Brown & Wood, counsel for the Underwriters, such opinion or opinions,
dated the related Closing Date, with respect to the issuance and sale
of the Securities of the related Series, the
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<PAGE> 20
related Registration Statement, the related Final Prospectus and such
other related matters in form and substance that is customary and
reasonably acceptable to the Underwriters, and the Company shall have
furnished to such counsel such documents as the Underwriters may
reasonably request for the purpose of enabling them to pass upon such
matters.
(e) The Company shall have furnished to the
Underwriters a certificate of the Company, signed by the President or
any Vice President dated the related Closing Date, to the effect that
the signers of such certificate have carefully examined the related
Registration Statement (excluding any Current Reports and any other
documents incorporated by reference therein), the related Final
Prospectus, the Form 8-K relating to the Subsequent Home Loans, this
Agreement and the related Terms Agreement and that:
(i) the representations and
warranties of the Company in this Agreement are true and
correct in all material respects on and as of the related
Closing Date with the same effect as if made on such Closing
Date, and the Company has complied with all the agreements and
satisfied all the conditions on its part to be performed or
satisfied at or prior to such Closing Date;
(ii) no stop order suspending the
effectiveness of such Registration Statement has been issued
and no proceedings for that purpose have been instituted or,
to their knowledge, threatened; and
(iii) nothing has come to their
attention that would lead them to believe that such
Registration Statement (excluding any Current Report) contains
any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading, that the related
Final Prospectus (excluding the related Current Report)
contains any untrue statement of a material fact or omits to
state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or
that the Form 8-K relating to
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<PAGE> 21
the Subsequent Home Loans includes any untrue statement of a
material fact or omits to state any information which the
Final Prospectus states will be included in such Form 8-K.
(f) Counsel for the Indenture Trustee shall have
furnished to the Underwriters an opinion, dated the related Closing
Date, in form and substance that is customary and reasonably
acceptable to the Underwriters regarding certain matters relating to
the Indenture Trustee.
(g) Counsel for the Owner Trustee shall have
furnished to the Underwriters an opinion, dated the related Closing
Date, in form and substance that is customary and reasonably
acceptable to the Underwriters regarding certain matters relating to
the Owner Trustee.
In addition, such counsel shall furnish to the Underwriters
such opinions as to the treatment of the Trust Fund for purposes of
state tax law where the Owner Trustee maintains possession of the
assets of the Trust Fund as are customary and reasonably satisfactory
to the Underwriters.
(h) Ernst & Young LLP shall have furnished to the
Underwriters one or more letters in form and substance that is
customary and reasonably satisfactory to the Underwriters, to the
effect that they have performed certain specified procedures requested
by the Underwriters with respect to certain information relating to
the Offered Securities and certain matters relating to the Company and
the Servicer.
(i) The Policy relating to the Offered Securities
of the related Series, if any, shall have been duly executed and
issued prior to the Closing Date, in form and substance that is
customary and reasonably satisfactory to the Underwriters, and shall
conform in all respects to the description thereof in the Prospectus.
(j) If applicable, counsel for the Securities
Insurer shall have furnished to the Underwriters an opinion, dated the
related Closing Date, in form and substance that is customary and
reasonably acceptable to the Underwriters
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<PAGE> 22
regarding to certain matters relating to the Securities Insurer.
In rendering his opinion such counsel may rely as to matters
of fact, to the extent deemed proper and as stated therein, on
certificates of responsible officers of the Securities Insurer or
public officials.
(k) The Owner Trustee shall have received from
the Seller all funds required to be delivered by the Seller to be
deposited in any account required to be established in accordance with
the related Trust Agreement.
(l) If applicable, the Servicer, as FHA Claims
Administrator, and the Seller, as FHA Insurance Holder, shall have
executed and delivered the FHA Claims Agreement in form and substance
reasonably acceptable to the Underwriters.
(m) The Offered Securities of the related Series
shall have received the ratings specified in the related Terms
Agreement (the "Required Ratings").
(n) On or prior to the Closing Date, there has
been no downgrading, nor has any notice been given of (i) any intended
or possible downgrading or (ii) any review or possible changes in
rating the direction of which has not been indicated, in the rating
accorded and originally requested by the Company relating to any
previously issued asset-backed securities of the Company by any
"nationally recognized statistical rating organization" (as such terms
is defined for purposes of the Exchange Act).
(o) On or prior to the Closing Date, there has
been no downgrading, not has any notice been given of (i) any intended
or possible downgrading or (ii) any review or possible changes in
rating the direction of which has not been indicated, in the rating
accorded the Securities Insurer's claims paying ability by any
"nationally recognized statistical rating organization" (as such terms
is defined for purposes of the Exchange Act).
(p) Subsequent to the date of the related Terms
Agreement, there shall not have been any change, or any
- 22 -
<PAGE> 23
development involving a prospective change, in or affecting the
business or properties of (i) the Company, its parent company or any
of its subsidiaries, (ii) the Transferor or (iii) the Securities
Insurer which the Underwriters conclude in their reasonable judgment,
after consultation with the Company, materially impairs the investment
quality of the Offered Securities of the related Series so as to make
it impractical or inadvisable to proceed with the public offering or
the delivery of such Offered Securities as contemplated by the related
Final Prospectus.
(q) Prior to the related Closing Date, the
Company shall have furnished to the Underwriters such further
information, certificates and documents as the Underwriters may
reasonably request.
If any of the conditions specified in this Section 6 shall not
have been fulfilled in all material respects with respect to the particular
Offered Securities of a Series when and as provided in this Agreement and the
related Terms Agreement, or if any of the opinions and certificates mentioned
above or elsewhere in this Agreement and the related Terms Agreement shall not
be in all material respects reasonably satisfactory in form and substance to
the Underwriters and their counsel, this Agreement (with respect to the related
Offered Securities) and the related Terms Agreement and all obligations of the
Underwriters hereunder (with respect to the related Offered Securities) and
thereunder may be canceled at, or at any time prior to, the related Closing
Date by the Underwriters. Notice of such cancellation shall be given to the
Company in writing, or by telephone or telegraph confirmed in writing.
7. Indemnification and Contribution. (a) The Company
and FFI jointly and severally, agree to indemnify and hold harmless each
Underwriter and each person who controls any Underwriter within the meaning of
the Act or the Exchange Act against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may become subject
under the Act, the Exchange Act, or other Federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained
in the Registration
- 23 -
<PAGE> 24
Statement relating to the Offered Securities of the applicable Series as it
became effective or in any amendment or supplement thereof, or in such
Registration Statement, in the related Preliminary Prospectus or the related
Final Prospectus, or in any amendment thereof, or in the Form 8-K referred to
in such Final Prospectus or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and agrees
to reimburse each such indemnified party for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
Company and FFI will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein (A) in reliance upon and in conformity with written information
furnished to the Company as herein stated by or on behalf of any Underwriter
through you specifically for use in connection with the preparation thereof or
(B) in any Computational Materials or ABS Term Sheets furnished to prospective
investors by the Underwriters or any Current Report or any amendment or
supplement thereof, except to the extent that any untrue statement or alleged
untrue statement therein or omission therefrom results directly from an error
(a "Home Loan Pool Error") in the information concerning the characteristics of
the Home Loans furnished by the Company to any Underwriter in writing or by
electronic transmission that was used in the preparation of either (x) any
Computational Materials or ABS Term Sheets (or amendments or supplements
thereof) included in such Current Report (or amendment or supplement thereof)
or (y) any written or electronic materials furnished to prospective investors
on which the Computational Materials (or amendments or supplements) were based.
(b) Each Underwriter agrees, severally, and not jointly,
to indemnify and hold harmless the Company, each of its directors, each of its
officers who signs the Registration Statement relating to the Offered
Securities of the applicable Series, and each person who controls the Company
within the meaning of the Act or the Exchange Act to the same extent as the
foregoing indemnities from the Company to each Underwriter, but only with
reference to (A) written information furnished to the Company by or on behalf
of such Underwriter through you specifically for use in the preparation of the
documents referred to in the foregoing indemnity
- 24 -
<PAGE> 25
with respect to the related Series, or (B) any Computational Materials or ABS
Term Sheets (or amendments or supplements thereof) delivered to prospective
investors by such Underwriter, including any Computational Materials or ABS
Term Sheets that are furnished to the Company by such Underwriter pursuant to
Section 8 and incorporated by reference in such Registration Statement, the
related Preliminary Prospectus or the related Final Prospectus or any amendment
or supplement thereof (except that no such indemnity shall be available for any
losses, claims, damages or liabilities, or actions in respect thereof,
resulting from any Home Loan Pool Error, other than a Corrected Home Loan Pool
Error).
(c) Promptly after receipt by an indemnified party under
Section 7 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party
under this Section 7, notify such indemnifying party in writing of the
commencement thereof; but the omission so to notify such indemnifying party
will not relieve it from any liability which it may have to any indemnified
party otherwise than under this Section 7. In case any such action is brought
against any indemnified party, and it notifies the indemnifying party or
parties of the commencement thereof, the indemnifying party or parties will be
entitled to participate therein, and to the extent that they may elect by
written notice delivered to an indemnified party promptly after receiving the
aforesaid notice from such indemnified party, to assume the defense thereof,
with counsel satisfactory to such indemnified party; provided, however, that
if the defendants in any such action include both an indemnified party and an
indemnifying party and such indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to an
indemnifying party, such indemnified party or parties shall have the right to
select separate counsel to assert such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party
or parties. Upon receipt of notice from an indemnifying party or parties to
such indemnified party of their election so to assume the defense of such
action and approval by such indemnified party of counsel, such indemnifying
party or parties will not be liable to such indemnified party under this
Section 7 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) such
indemnified party shall have employed
- 25 -
<PAGE> 26
separate counsel in connection with the assertion of legal defenses in
accordance with the proviso to the next preceding sentence (it being
understood, however, that the indemnifying party or parties shall not be liable
for the expenses of more than one separate counsel approved by the indemnified
party or parties in the case of subparagraph (a) or (b), representing the
indemnified parties under subparagraph (a) or (b), who are parties to such
action), (ii) the indemnifying party or parties shall not have employed counsel
satisfactory to the indemnified party or parties to represent such indemnified
party or parties within a reasonable time after notice of commencement of the
action or (iii) the indemnifying party or parties have authorized the
employment of counsel for an indemnified party at the expense of the
indemnifying parties; and except that, if clause (i) or (iii) is applicable,
such liability shall be only in respect of the counsel referred to in such
clause (i) or (iii).
(d) If the indemnification provided for in paragraph (a)
or (b) of this Section 7 is due in accordance with its terms but is for any
reason held by a court to be unavailable from the Company, FFI or any
Underwriter, on grounds of policy or otherwise, or if an indemnified party
failed to give notice under paragraph (c) of this Section 7 in respect of a
claim otherwise subject to indemnification in accordance with paragraph (a) or
(b) of this Section 7, the Company, FFI and each Underwriter shall contribute
to the aggregate losses, claims, damages and liabilities (including legal and
other expenses reasonably incurred in connection with investigating or
defending same) to which the Company, FFI and such Underwriter may be subject
in such proportion so that such Underwriter is responsible for that portion
represented by the difference between the portion of the proceeds to the
Company in respect of the Offered Securities underwritten by such Underwriter
for the related Series and the portion of the total proceeds received by such
Underwriter from the sale of such Offered Securities (the "Underwriting
Discount"), and the Company and FFI are responsible for the balance; provided,
however, that in no case shall any such Underwriter be responsible under this
subparagraph for any amount in excess of such Underwriting Discount applicable
to the Offered Securities purchased by such Underwriter pursuant to this
Agreement and the related Terms Agreement. Notwithstanding anything to the
contrary in this Section 7(d), no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who
- 26 -
<PAGE> 27
was not guilty of such fraudulent misrepresentation. For purposes of this
Section 7, each person who controls any Underwriter within the meaning of
either the Act or the Exchange Act shall have the same rights to contribution
as such Underwriter, and each person who controls the Company within the
meaning of either the Act or the Exchange Act, each officer of the Company who
shall have signed the Registration Statement and each director of the Company
shall have the same rights to contribution as the Company, subject in each case
to the immediately preceding sentence of this paragraph (d).
8. Computational Materials and Structural Term Sheets.
(a) In accordance with Section 10, the Underwriters shall deliver to the
Company one complete copy of all materials provided by the Underwriters to
prospective investors in such Offered Securities which constitute (i)
"Computational Materials" within the meaning of the no-action letter dated May
20, 1994 issued by the Division of Corporation Finance of the Commission to
Kidder, Peabody Acceptance Corporation I, Kidder, Peabody & Co. Incorporated,
and Kidder Structured Asset Corporation and the no-action letter dated May 27,
1994 issued by the Division of Corporation Finance of the Commission to the
Public Securities Association (together, the "Kidder Letters") and the filing
of such material is a condition of the relief granted in such letter (such
materials being the "Computational Materials"), and (ii) "Structural Term
Sheets" within the meaning of the no-action letter dated February 17, 1995
issued by the Division of Corporation Finance of the Commission to the Public
Securities Association (the "PSA Letter") and the filing of such material is a
condition of the relief granted in such letter (such materials being the
"Structural Term Sheets"). Each delivery of Computational Materials and
Structural Term Sheets to the Company pursuant to this paragraph (a) shall be
effected in accordance with Section 10.
(b) Each Underwriter represents and warrants to and
agrees with the Company, as of the date of the related Terms Agreement and as
of the Closing Date, that:
(i) the Computational Materials furnished to the
Company by such Underwriter pursuant to Section 8(a)
constitute (either in original, aggregated or consolidated
form) all of the materials furnished to prospective investors
by such Underwriter prior to the
- 27 -
<PAGE> 28
time of delivery thereof to the Company that are required to
be filed with the Commission with respect to the related
Offered Securities in accordance with the Kidder Letters, and
such Computational Materials comply with the requirements of
the Kidder Letters;
(ii) the Structural Term Sheets furnished to the
Company by such Underwriter pursuant to Section 8(a)
constitute all of the materials furnished to prospective
investors by such Underwriter prior to the time of delivery
thereof to the Company that are required to be filed with the
Commission as "Structural Term Sheets" with respect to the
related Offered Securities in accordance with the PSA Letter,
and such Structural Term Sheets comply with the requirements
of the PSA Letter; and
(iii) on the date any such Computational Materials
or Structural Term Sheets with respect to such Offered
Securities (or any written or electronic materials furnished
to prospective investors on which the Computational Materials
are based) were last furnished to each prospective investor by
such Underwriter and on the date of delivery thereof to the
Company pursuant to Section 8(a) and on the related Closing
Date, such Computational Materials (or such other materials)
or Structural Term Sheets did not and will not include any
untrue statement of a material fact or, when read in
conjunction with the Final Prospectus and Prospectus
Supplement, omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading.
Notwithstanding the foregoing, each Underwriter makes no representation or
warranty as to whether any Computational Materials or Structural Term Sheets
(or any written or electronic materials on which the Computational Materials
are based) included or will include any untrue statement resulting directly
from any Home Loan Pool Error.
(c) If, at any time when a prospectus relating to the
Offered Securities of a Series is required to be delivered under the Act, it
shall be necessary to amend or supplement the related
- 28 -
<PAGE> 29
Final Prospectus as a result of an untrue statement of a material fact
contained in any Computational Materials or Structural Term Sheets provided by
any Underwriter pursuant to this Section 8 or the omission to state therein a
material fact required, when considered in conjunction with the related Final
Prospectus and Prospectus Supplement, to be stated therein or necessary to make
the statements therein, when read in conjunction with the related Final
Prospectus and Prospectus Supplement, not misleading, or if it shall be
necessary to amend or supplement any Current Report relating to any
Computational Materials or Structural Term Sheets to comply with the Act or the
rules thereunder, such Underwriter promptly will prepare and furnish to the
Company for filing with the Commission an amendment or supplement which will
correct such statement or omission or an amendment which will effect such
compliance. Each Underwriter represents and warrants to the Company, as of the
date of delivery by it of such amendment or supplement to the Company, that
such amendment or supplement will not include any untrue statement of a
material fact or, when read in conjunction with the related Final Prospectus
and Prospectus Supplement, omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; provided,
however, each such Underwriter makes no representation or warranty as to
whether any such amendment or supplement will include any untrue statement
resulting directly from any Home Loan Pool Error.
9. Collateral Term Sheets. (a) Prior to the
delivery of any "Collateral Term Sheet" within the meaning of the PSA Letter,
the filing of which material is a condition of the relief granted in such
letter (such material being the "Collateral Term Sheets"), to a prospective
investor in the Offered Securities, the Underwriters shall notify the Company
and its counsel by telephone of their intention to deliver such materials and
the approximate date on which the first such delivery of such materials is
expected to occur. Not later than 10:30 a.m., New York time, on the business
day immediately following the date on which any Collateral Term Sheet was first
delivered to a prospective investor in the Offered Securities, the Underwriters
shall deliver to the Company one complete copy of all materials provided by the
Underwriters to prospective investors in such Offered Securities which
constitute "Collateral Term Sheets." Each delivery of a Collateral Term Sheet
to the Company pursuant to this paragraph (a) shall be effected in accordance
with Section 10. (Collateral Term Sheets and Structural
- 29 -
<PAGE> 30
Term Sheets are, together, referred to herein as "ABS Term Sheets.") At the
time of each such delivery, the Underwriter making such delivery shall indicate
in writing that the materials being delivered constitute Collateral Term
Sheets, and, if there has been any prior such delivery with respect to the
related Series, shall indicate whether such materials differ in any material
respect from any Collateral Term Sheets previously delivered to the Company
with respect to such Series pursuant to this Section 9(a) as a result of the
occurrence of a material change in the characteristics of the related Home
Loans.
(b) Each Underwriter represents and warrants to and
agrees with the Company as of the date of the related Terms Agreement and as of
the Closing Date, that:
(i) The Collateral Term Sheets furnished
to the Company by such Underwriter pursuant to Section 9(a) constitute
all of the materials furnished to prospective investors by such
Underwriter prior to time of delivery thereof to the Company that are
required to be filed with the Commission as "Collateral Term Sheets"
with respect to the related Offered Securities in accordance with the
PSA Letter, and such Collateral Term Sheets comply with the
requirements of the PSA Letter; and
(ii) On the date any such Collateral Term
Sheets with respect to such Offered Securities were last furnished to
each prospective investor by such Underwriter and on the date of
delivery thereof to the Company pursuant to Section 9(a) and on the
related Closing Date, such Collateral Term Sheets did not and will not
include any untrue statement of a material fact or, when read in
conjunction with the Final Prospectus and Prospectus Supplement, omit
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading.
Notwithstanding the foregoing, each Underwriter makes no representation or
warranty as to whether any Collateral Term Sheet included or will include any
untrue statement or material omission resulting directly from any Home Loan
Pool Error.
(c) If, at any time when a prospectus relating to the
Offered Securities of a Series is required to be delivered under
- 30 -
<PAGE> 31
the Act, it shall be necessary to amend or supplement the related Final
Prospectus as a result of an untrue statement of a material fact contained in
any Collateral Term Sheets provided by any Underwriter pursuant to this Section
9 or the omission to state therein a material fact required, when considered in
conjunction with the related Final Prospectus and Prospectus Supplement, to be
stated therein or necessary to make the statements therein, when read in
conjunction with the related Final Prospectus and Prospectus Supplement, not
misleading, or if it shall be necessary to amend or supplement any Current
Report relating to any Collateral Term Sheets to comply with the Act or the
rules thereunder, such Underwriter promptly will prepare and furnish to the
Company for filing with the Commission an amendment or supplement which will
correct such statement or omission or an amendment which will effect such
compliance. Each Underwriter represents and warrants to the Company, as of the
date of delivery of such amendment or supplement to the Company, that such
amendment or supplement will not include any untrue statement of a material
fact or, when read in conjunction with the related Final Prospectus and
Prospectus Supplement, omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; provided,
however, each such Underwriter makes no representation or warranty as to
whether any such amendment or supplement will include any untrue statement
resulting directly from any Home Loan Pool Error.
10. Delivery and Filing of Current Reports, Collateral
Term Sheets, Structural Term Sheets.
(a) Any Current Report, Collateral Term Sheet or
Structural Term Sheet that is required to be delivered by the
Underwriter to the Company hereunder shall be effected by the delivery
of four copies to counsel for the Company and one copy in computer
readable format to the Financial Printer on or prior to 10:30 a.m. on
the date so specified herein.
(b) The Company shall cause the Financial Printer to file
with the Commission any such Current Report, Collateral Term Sheet or
Structural Term Sheet within one business day immediately following
the delivery thereof pursuant to the preceding subsection. The
Company shall use its best efforts to cause any such Current Report,
Collateral Term Sheet or Structural Term Sheet to be so filed prior to
2:00 p.m., New
- 31 -
<PAGE> 32
York time, on such business day and will promptly advise the
Underwriters of such filing.
11. Termination. This Agreement (with respect to a
particular Offering) and the related Terms Agreement shall be subject to
termination in the absolute discretion of the Underwriters, by notice given to
the Company prior to delivery of and payment for the related Offered
Securities, if prior to the related Closing Date (i) trading in securities
generally on the New York Stock Exchange shall have been suspended or
materially limited, (ii) a general moratorium on commercial banking activities
in New York shall have been declared by either federal or New York State
authorities, or (iii) there shall have occurred any outbreak or material
escalation of hostilities or other calamity or crisis the effect of which on
the financial markets of the United States is such as to make it, in the
reasonable judgment of the Underwriters, impracticable to market such Offered
Securities.
12. Representations and Indemnities to Survive Delivery.
The agreements, representations, warranties, indemnities and other statements
of the Company or its officers and of the Underwriters set forth in or made
pursuant to this Agreement and the related Terms Agreement will remain in full
force and effect, regardless of any investigation made by or on behalf of the
Underwriters or the Company or any of the officers, directors of controlling
persons referred to in Section 7 hereof, and will survive delivery of and
payment for the related Offered Securities. The provisions of Section 7 hereof
shall survive the termination or cancellation of this Agreement and the related
Terms Agreement.
13. Default by One or More of the Underwriters. If one
or more of the Underwriters shall fail on the Closing Date to purchase the
Offered Securities which it or they are obligated to purchase hereunder and
under the applicable Terms Agreement (the "Defaulted Securities"), you shall
have the right, within 24 hours thereafter, to make arrangements for one or
more of the non-defaulting Underwriters, or any other underwriters, to purchase
all, but not less than all, of the Defaulted Securities in such amounts as may
be agreed upon and upon the terms herein set forth and under the applicable
Terms Agreement. If, however, you have not completed such arrangements within
such 24-hour period, then:
- 32 -
<PAGE> 33
(a) if the aggregate original Certificate Principal
Balance of Defaulted Securities does not exceed 10% of the aggregate
original Certificate Principal Balance of the Offered Securities to be
purchased pursuant to such Terms Agreement, the non-defaulting
Underwriters named in such Terms Agreement shall be obligated to
purchase the full amount thereof in the proportions that their
respective underwriting obligations thereunder bear to the
underwriting obligations of all non-defaulting Underwriters; and
(b) if the aggregate original Certificate Principal
Balance of Defaulted Securities exceeds 10% of the aggregate original
Certificate Principal Balance of the Offered Securities to be
purchased pursuant to such Terms Agreement, the applicable Terms
Agreement shall terminate without any liability on the part of any
non-defaulting Underwriter.
No action taken pursuant to this Section 13 and nothing in this
Agreement shall relieve any defaulting Underwriter from liability in respect of
its default.
In the event of any such default which does not result in a
termination of this Agreement or such applicable Terms Agreement, either you or
the Company shall have the right to postpone the Closing Date for a period of
time not exceeding seven days in order to effect any required changes in the
Registration Statement or in any other documents or arrangements.
14. Guarantor. RAC Financial Group, Inc., the parent of
the Company and FFI, ("RAC") shall guarantee any obligation or liability of the
Company or FFI pursuant to Section 7 hereof. RAC's acceptance of its guarantee
obligation is acknowledged by the execution of the signature page of this
Agreement by an authorized signatory of RAC.
15. Successors. This Agreement and the related Terms
Agreement will inure to the benefit of and be binding upon the parties hereto
and thereto and their respective successors and the officers, directors and
controlling persons referred to in Section 7 hereof, and their successors and
assigns, and no other person will have any right or obligation hereunder or
thereunder. No purchaser of any Offered Certificate from the Underwriters
shall be deemed a successor or assign by reason of such purchase.
- 33 -
<PAGE> 34
16. APPLICABLE LAW. THIS AGREEMENT AND THE RELATED TERMS
AGREEMENT WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
THEREIN.
17. Miscellaneous. This Agreement, as supplemented by
the related Terms Agreement, supersedes all prior and contemporaneous
agreements and understandings relating to the subject matter hereof. This
Agreement and the related Terms Agreement or any term of each may not be
changed, waived, discharged or terminated except by an affirmative written
agreement made by the party against whom enforcement of the change, waiver,
discharge or termination is sought. The headings in this Agreement and the
related Terms Agreement are for purposes of reference only and shall not limit
or otherwise affect the meaning hereof or thereof.
16. Notices. All communications by one party hereunder
to all other parties hereunder will be in writing and effective only on receipt
by such other parties, and will be delivered as follows: (A) to the
Underwriters at the addresses first above written; (B) to the Company at 3773
Howard Hughes Parkway, Suite 300N, Las Vegas, Nevada 89109, Attention: Michael
Orendorf; and (C) to FFI at FIRSTPLUS FINANCIAL, INC., 1250 Mockingbird Lane,
Dallas, Texas 75247-4902, Attention: Mr. Chris Gramlich.
- 34 -
<PAGE> 35
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to the undersigned a counterpart hereof,
whereupon this letter and your acceptance shall represent a binding agreement
between the Company and the Underwriters.
Very truly yours,
FIRSTPLUS INVESTMENT CORPORATION
By:
-----------------------------
Christopher J. Gramlich
Senior Vice President
FIRSTPLUS FINANCIAL INC.
By:
-----------------------------
Christopher J. Gramlich
Senior Vice President
ACKNOWLEDGED BY:
RAC FINANCIAL GROUP, INC.
By:
----------------------------
Christopher J. Gramlich
Senior Vice President
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above written.
BANC ONE CAPITAL CORPORATION
By:
------------------------------
Soc Aramburu
Vice President
BEAR, STEARNS & CO. INC.
By:
------------------------------
Matthew Perkins
Associate Director
-35-
<PAGE> 36
EXHIBIT A
FIRSTPLUS HOME LOAN TRUST ___-__
ASSET-BACKED SECURITIES
TERMS AGREEMENT
(to Underwriting Agreement,
dated September 24, 1996
among the Company, FFI and the Underwriters)
FIRSTPLUS INVESTMENT CORPORATION [Date]
1250 Mockingbird Lane
Dallas, Texas 75247-4902
FIRSTPLUS FINANCIAL INC.
1250 Mockingbird Lane
Dallas, Texas 75247-4902
Each of Banc One Capital Corporation ("Banc One Capital") and
Bear, Stearns & Co. Inc. ("Bear, Stearns," each an "Underwriter" and
collectively the "Underwriters") agrees, severally and not jointly, subject to
the terms and provisions herein and of the captioned Underwriting Agreement
(the "Underwriting Agreement"), to purchase such Classes of Series ____-__
Securities specified opposite its name in Section 2(a) hereof (the "Offered
Securities"). This letter supplements and modifies the Underwriting Agreement
solely as it relates to the purchase and sale of the Offered Securities
described below. The Series ____-__ Securities are registered with the
Securities and Exchange Commission by means of an effective Registration
Statement (No. _____). Capitalized terms used and not defined herein have the
meanings given them in the Underwriting Agreement.
Section 1. The Home Loan Pool: The Series _____-__
Securities shall evidence the entire beneficial ownership interest in a
mortgage pool (the "Home Loan Pool") of mortgage loans (the "Home Loans")
having the characteristics described in the Prospectus Supplement dated the
date hereof.
<PAGE> 37
Section 2. The Securities: The Offered Securities shall
be issued as follows:
(a) Classes: The Offered Securities shall be issued with the
following Class designations, interest rates and principal balances,
subject in the aggregate to the variance referred to in the Final
Prospectus:
<TABLE>
<CAPTION>
Principal Interest Class Purchase
Class Balance Rate Price Percentage
----- ------- ---- ----------------
<S> <C> <C> <C>
</TABLE>
Each of the Underwriters agrees, severally and not jointly, subject to
the terms and provisions herein and of the captioned Underwriting Agreement, to
purchase the principal balances of the Classes of Series ____-__ Securities
specified opposite its name below.
<TABLE>
<CAPTION>
Class Bear, Stearns Banc One Capital
----- -------------------- ---------------------
<S> <C> <C>
</TABLE>
(b) The Offered Securities shall have such other
characteristics as described in the related Final Prospectus.
Section 3. Purchase Price: The Purchase Price for each
Class of the Offered Securities shall be the Class Purchase Price Percentage
therefor (as set forth in Section 2(a) above) of the initial Class Principal
Balance thereof plus accrued interest at the applicable interest rate per annum
of each such Class from and including the Cut-off Date up to, but not
including, _____________ (the "Closing Date").
Section 4. Required Ratings: The Offered
Securities shall have received Required Ratings of at least [ ] from [ ].
Section 5. Securities Insurer:
Section 6. Location of Closing:
<PAGE> 38
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to the undersigned a counterpart hereof,
whereupon this letter and your acceptance shall represent a binding agreement
between the Underwriters and the Company.
Very truly yours,
[UNDERWRITER]
as Representative of the several
Underwriters
By:
------------------------------
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above written.
FIRSTPLUS INVESTMENT CORPORATION
By:
-------------------------------
Name:
Title:
FIRSTPLUS FINANCIAL INC.
By:
-------------------------------
Name:
Title:
ACKNOWLEDGED BY:
RAC FINANCIAL GROUP, INC.
By:
--------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 4.1
INDENTURE
between
FIRSTPLUS HOME LOAN OWNER TRUST 1996-3,
as Issuer
and
FIRST BANK NATIONAL ASSOCIATION,
as Indenture Trustee
Dated as of September 1, 1996
FIRSTPLUS HOME LOAN OWNER TRUST 1996-3
Asset Backed Securities, Series 1996-3
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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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 Indenture Trust Estate . . . . . 25
SECTION 3.6 Annual Opinions as to Indenture Trust Estate . 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
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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 Indenture Trust
Estate . . . . . . . . . . . . . . . . . . . . 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
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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 Indenture Trust Estate . . . . . . 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
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EXHIBITS
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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
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INDENTURE dated as of September 1, 1996, between FIRSTPLUS HOME LOAN
OWNER TRUST 1996-3, 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
6.75% Asset Backed Notes (the "Class A-1 Notes"), Class A-2 6.85% Asset Backed
Notes (the "Class A-2 Notes"), Class A-3 7.05% Asset Backed Notes (the "Class
A-3 Notes"), Class A-4 7.20% Asset Backed Notes (the "Class A-4 Notes"), Class
A-5 7.25% Asset Backed Notes (the "Class A-5 Notes"), Class A-6 7.60% Asset
Backed Notes (the "Class A-6 Notes"), Class A-7 7.80% Asset Backed Notes (the
"Class A-7 Notes") and Class A-8 8.00% Asset Backed Notes (the "Class A-8
Notes") and, together with 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, the Class
A-7 Notes and the Class A-8 Notes, the "Notes"):
GRANTING CLAUSE
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); and (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 (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 item of Collateral that is
physically delivered to the Indenture Trustee will be held by the Indenture
Trustee in St. Paul, Minnesota.
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ARTICLE 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 September 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 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,
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which shall be transferred to the Capitalized Interest Account); (iv) with
respect to the final Distribution Date or an early retirement 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 June 2003.
"Class A-1 Interest Rate" means 6.75% 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 6.75% Asset Backed Notes,
substantially in the form of Exhibit A-1.
"Class A-2 Final Scheduled Distribution Date" means the Distribution
Date occurring in June 2007.
"Class A-2 Interest Rate" means 6.85% per annum (computed on the basis
of a 360-day year consisting of twelve 30-day months).
"Class A-2 Notes" means the Class A-2 6.85% Asset Backed Notes,
substantially in the form of Exhibit A-2.
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"Class A-3 Final Scheduled Distribution Date" means the Distribution
Date occurring in November 2008.
"Class A-3 Interest Rate" means 7.05% 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 7.05% Asset Backed Notes,
substantially in the form of Exhibit A-3.
"Class A-4 Final Scheduled Distribution Date" means the Distribution
Date occurring in July 2010.
"Class A-4 Interest Rate" means 7.20% 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 7.20% Asset Backed Notes,
substantially in the form of Exhibit A-4.
"Class A-5 Final Scheduled Distribution Date" means the Distribution
Date occurring in June 2011.
"Class A-5 Interest Rate" means 7.25% 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 7.25% Asset Backed Notes,
substantially in the form of Exhibit A-5.
"Class A-6 Final Scheduled Distribution Date" means the Distribution
Date occurring in September 2014.
"Class A-6 Interest Rate" means 7.60% 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 7.60% Asset Backed Notes,
substantially in the form of Exhibit A-6.
"Class A-7 Final Scheduled Distribution Date" means the Distribution
Date occurring in March 2016.
"Class A-7 Interest Rate" means 7.80% per annum (computed on the basis
of a 360 day year consisting of twelve 30-day months).
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"Class A-7 Notes" means the Class A-7 7.80% Asset Backed Notes,
substantially in the form of Exhibit A-7.
"Class A-8 Final Scheduled Distribution Date" means the Distribution
Date occurring in November 2019.
"Class A-8 Interest Rate" means 8.00% 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 8.00% 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 September 27, 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 State thereof, (b) is subject to
supervision and examination by federal or state banking authorities
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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 20th day of any month or if such 20th
day is not a Business Day, the first Business Day immediately following such
day, commencing in October 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 Trust Estate" or "Trust Estate" means all money,
instruments, rights and other property that are subject or intended to be
subject to the lien and security interest of this Indenture for the benefit of
the Noteholders (including, without limitation, all Collateral Granted to the
Indenture Trustee pursuant to the Granting Clause), including all proceeds
thereof.
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"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.
"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 1996-3 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 September 26,
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
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Participant or as an indirect participant, in each case in accordance with the
rules of such Clearing Agency).
"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.
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"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.
"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.
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"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.
"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 VicePresident, 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
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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 September 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.
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.
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"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.
ARTICLE II
THE NOTES
SECTION 2.1 Form. The Notes shall be designated as the "FIRSTPLUS
HOME LOAN OWNER TRUST 1996-3 Asset Backed Notes, Series 1996-3". 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,
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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 $65,000,000, Class A-2 Notes
for original issue in an aggregate principal amount of $49,000,000, Class A-3
Notes for original issue in an aggregate principal amount of $22,000,000, Class
A-4 Notes for original issue in an aggregate principal amount of $32,000,000,
Class A-5 Notes for original issue in an aggregate principal amount of
$20,000,000, Class A-6 Notes for original issue in an aggregate principal
amount of $47,000,000 and Class A-7 Notes for original issue in an aggregate
principal amount of $29,000,000 and Class A-8 Notes for original issue in an
aggregate principal amount of $24,750,000. The aggregate principal amount of
Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes, Class A-5
Notes, Class A-6 Notes, Class A-7 Notes and Class A-8 Notes outstanding at any
time may not exceed such respective amounts.
The Notes that are authenticated and delivered by the Indenture
Trustee to or upon the order of the Issuer on the Closing Date shall be dated
September 27, 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
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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.
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.
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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.
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.
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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 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
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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.
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 constituting the Indenture
Trust Estate, 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
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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 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 Indenture Trust Estate to the Trustee as security for the Notes
and the Owner Trustee has taken all necessary action under the Trust
Agreement to Grant the Indenture Trust Estate 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
Indenture Trust Estate to the Indenture Trustee, creates a valid
security interest in the Indenture Trust Estate 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 Indenture Trust Estate, 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 Indenture Trust
Estate 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.
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(e) An Officer's Certificate complying with the
requirements of Section 11.1 and stating that:
(i) the Issuer is not in Default under this
Indenture and the issuance of the Notes applied for will not
result in any breach of any of the terms, conditions or
provisions of, or constitute a default under, the Trust
Agreement, any indenture, mortgage, deed of trust or other
agreement or instrument to which the Issuer is a party or by
which it is bound, or any order of any court or administrative
agency entered in any proceeding to which the Issuer is a
party or by which it may be bound or to which it may be
subject, and that all conditions precedent provided in this
Indenture relating to the authentication and delivery of the
Notes applied for have been complied with;
(ii) the Issuer is the owner of all of the Home
Loans, has not assigned any interest or participation in the
Home Loans (or, if any such interest or participation has been
assigned, it has been released) and has the right to Grant all
of the Home Loans to the Indenture Trustee;
(iii) the Issuer has Granted to the Indenture
Trustee all of its right, title, and interest in the Indenture
Trust Estate, 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
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to the Indenture Trustee and the Securities Insurer an Issuer Request (A)
identifying the Home Loan and the related Mortgaged Property to be released,
(B) requesting the release thereof, (C) setting forth the amount deposited in
the Collection Account with respect thereto, and (D) certifying that the amount
deposited in the Collection Account (x) equals the Purchase Price of the Home
Loan, in the event a Home Loan and the related Mortgaged Property are being
released from the lien of this Indenture pursuant to item (i) above, (y) equals
the Substitution Adjustment related to the Qualified Substitute Home Loan and
the Deleted Home Loan released from the lien of the Indenture pursuant to item
(ii) above, or (z) equals the entire amount of Recoveries received with respect
to such Home Loan and the related Mortgaged Property in the event of a release
from the lien of this Indenture pursuant to items (iii) or (iv) above.
(c) The Indenture Trustee shall, if requested by the Servicer,
temporarily release or cause the Custodian to temporarily release to the
Servicer the Indenture Trustee's Home Loan File pursuant to the provisions of
Section 7.02 of the Sale and Servicing Agreement upon compliance by the
Servicer of the provisions thereof provided that the Indenture Trustee's Home
Loan File shall have been stamped to signify the Issuer's pledge to the
Indenture Trustee under the Indenture.
SECTION 2.10 Book-Entry Notes. The Notes, upon original issuance,
will be issued in the form of typewritten Notes representing the Book-Entry
Notes, to be delivered to The Depository Trust Company, the initial Clearing
Agency, by, or on behalf of, the Issuer. The Book-Entry Notes shall be
registered initially on the Note Register in the name of Cede & Co., the
nominee of the initial Clearing Agency, and no Owner thereof will receive a
definitive Note representing such Note Owner's interest in such Note, except as
provided in Section 2.12. Unless and until definitive, fully 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
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(v) whenever this Indenture requires or
permits actions to be taken based upon instructions or
directions of Holders of Notes evidencing a specified
percentage of the Outstanding Amount of the Notes, the
Clearing Agency shall be deemed to represent such percentage
only to the extent that it has received instructions to such
effect from Note Owners and/or Clearing Agency Participants
owning or representing, respectively, such required percentage
of the beneficial interest in the Notes and has delivered such
instructions to the Indenture Trustee.
SECTION 2.11 Notices to Clearing Agency. Whenever a notice
or other communication to the Noteholders is required under this Indenture,
unless and until Definitive Notes shall have been issued to such Note Owners
pursuant to Section 2.12, the Indenture Trustee shall give all such notices and
communications specified herein to be given to Holders of the Notes to the
Clearing Agency, and shall have no obligation to such Note Owners.
SECTION 2.12 Definitive Notes. If (i) the Administrator
advises the Indenture Trustee in writing that the Clearing Agency is no longer
willing or able to properly discharge its responsibilities with respect to the
Book-Entry Notes and the Administrator is unable to locate a qualified
successor, (ii) the Administrator at its option advises the Indenture Trustee
in writing that it elects to terminate the book-entry system through the
Clearing Agency or (iii) after the occurrence of an Event of Default, Owners of
the Book-Entry Notes representing beneficial interests aggregating at least a
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 Indenture Trust
Estate. 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.
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ARTICLE III
COVENANTS
SECTION 3.1 Payment of Principal and Interest. The Issuer will
duly and punctually pay (or will cause to be duly and punctually paid) the
principal of and interest, if any, on the Notes in accordance with the terms of
the Notes and this Indenture. Without limiting the foregoing, subject to and
in accordance with Section 8.2(c), the Issuer will cause to be distributed all
amounts on deposit in the Note Distribution Account on a Distribution Date
deposited therein pursuant to the Sale and Servicing Agreement (i) for the
benefit of the Class A-1 Notes, to the Class A-1 Noteholders, (ii) for the
benefit of the Class A-2 Notes, to the Class A-2 Noteholders, (iii) for the
benefit of the Class A-3 Notes, to the Class A-3 Noteholders, (iv) for the
benefit of the Class A-4 Notes, to the Class A-4 Noteholders, (v) for the
benefit of the Class A-5 Notes, to the Class A-5 Noteholders, (vi) for the
benefit of the Class A-6 Notes, to the Class A-6 Noteholders, (vii) for the
benefit of the Class A-7 Notes, to the A-7 Noteholders, and (viii) for the
benefit of the Class A-8 Notes, to the Class A-8 Noteholders. Amounts properly
withheld under the Code by any Person from a payment to any Noteholder of
interest and/or principal shall be considered as having been paid by the Issuer
to such Noteholder for all purposes of this Indenture.
The Notes shall be non-recourse obligations of the Issuer and shall be
limited in right of payment to amounts available from the Indenture Trust
Estate 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.
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On or before the third Business Day preceding each Distribution Date
and Redemption Date, the Indenture Trustee shall deposit or cause to be
deposited in the Note Distribution Account an aggregate sum sufficient to pay
the amounts due on such Distribution Date or Redemption Date under the Notes,
such sum to be held in trust for the benefit of the Persons entitled thereto,
and (unless the Paying Agent is the Indenture Trustee) shall promptly notify
the Indenture Trustee of its action or failure so to act.
Any Paying Agent shall be appointed by Issuer Order with written
notice thereof to the Indenture Trustee and the Securities Insurer. Any Paying
Agent appointed by the Issuer shall be a Person who would be eligible to be
Indenture Trustee hereunder as provided in Section 6.11. The Issuer shall not
appoint any Paying Agent (other than the Indenture Trustee) which is not, at
the time of such appointment, a Depository Institution.
The Issuer will cause each Paying Agent other than the Administrator
to execute and deliver to the Indenture Trustee an instrument in which such
Paying Agent shall agree with the Indenture Trustee (and if the Indenture
Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions
of this Section, that such Paying Agent will:
(i) hold all sums held by it for the payment of
amounts due with respect to the Notes in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons
or otherwise disposed of as herein provided and pay such sums to such
Persons as herein provided;
(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
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upon the same trusts as those upon which the sums were held by such Paying
Agent; and upon such payment by any Paying Agent to the Indenture Trustee, such
Paying Agent shall be released from all further liability with respect to such
money.
Subject to applicable laws with respect to escheat of funds or
abandoned property, any money held by the Indenture Trustee or any Paying Agent
in trust for the payment of any amount due with respect to any Note and
remaining unclaimed for two years after such amount has become due and payable
shall be discharged from such trust and be paid to the Issuer on Issuer
Request; and the Holder of such Note shall thereafter, as an unsecured general
creditor, look only to the Issuer for payment thereof (but only to the extent
of the amounts so paid to the Issuer), and all liability of the Indenture
Trustee or such Paying Agent with respect to such trust money shall thereupon
cease; provided, however, that the Indenture Trustee or such Paying Agent,
before being required to make any such repayment, shall at the expense and
direction of the Issuer cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in The City of New York, notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such publication, any unclaimed balance of such money then
remaining will be repaid to the Issuer. The Indenture Trustee shall also adopt
and employ, at the expense and direction of the Issuer, any other reasonable
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, the Collateral and each other
instrument or agreement included in the Indenture Trust Estate.
(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.
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SECTION 3.5 Protection of Indenture Trust Estate. 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 Indenture Trust Estate;
(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
(v) preserve and defend title to the Indenture
Trust Estate and the rights of the Indenture Trustee, the Noteholders
and the Securities Insurer in such Indenture Trust Estate 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 Indenture Trust Estate.
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 Indenture Trust Estate
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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 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 Indenture Trust Estate,
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 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.
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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 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.
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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 Indenture
Trust Estate, 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
Indenture Trust Estate;
(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;
(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 Indenture Trust Estate 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 Indenture Trust Estate;
(viii) remove the Administrator without cause unless
the Rating Agency Condition shall have been satisfied in connection
with such removal; or
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(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.
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.
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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.
ARTICLE 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
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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 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.
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ARTICLE V
REMEDIES
SECTION 5.1 Events of Default. "Event of Default,"wherever used
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body):
(a) default in the payment of any interest on any Note when the
same becomes due and payable; or
(b) default in the payment of the principal of or any installment
of the principal of any Note when the same becomes due and payable; or
(c) default in the observance or performance of any covenant or
agreement of the Issuer made in this Indenture (other than a covenant or
agreement, a default in the observance or performance of which is elsewhere in
this Section specifically dealt with), or any representation or warranty of the
Issuer made in this Indenture, the Insurance Agreement, the Sale and Servicing
Agreement or in any certificate or other writing delivered pursuant hereto or
in connection herewith proving to have been incorrect in any material respect
as of the time when the same shall have been made, and such default shall
continue or not be cured, or the circumstance or condition in respect of which
such misrepresentation or warranty was incorrect shall not have been eliminated
or otherwise cured, for a period of 30 days after there shall have been given,
by registered or certified mail, to the Issuer by the Indenture Trustee or to
the Issuer and the Indenture Trustee by the Holders of at least 25% of the
Outstanding Amount of the Notes, a written notice specifying such default or
incorrect representation or warranty and requiring it to be remedied and
stating that such notice is a notice of Default hereunder; or
(d) default in the observance or performance of any covenant or
agreement of the Company made in the Trust Agreement or any representation or
warranty of the Company made in the Trust Agreement, proving to have been
incorrect in any material respect as of the time when the same shall have been
made, and such default shall continue or not be cured, or the circumstance or
condition in respect of which such misrepresentation or warranty was incorrect
shall not have been eliminated or otherwise cured, for a period of 30 days
after there shall have been given, by registered or certified mail, 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 Indenture Trust Estate 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
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official of the Issuer or for any substantial part of the Indenture Trust
Estate, or ordering the winding-up or liquidation of the Issuer's affairs, and
such decree or order shall remain unstayed and in effect for a period of 60
consecutive days; or
(f) the commencement by the Issuer of a voluntary case under any
applicable federal or state bankruptcy, insolvency or other similar law now or
hereafter in effect, or the consent by the Issuer to the entry of an order for
relief in an involuntary case under any such law, or the consent by the Issuer
to the appointment or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Issuer or for any
substantial part of the Indenture Trust Estate, 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
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.
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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.
(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 Indenture Trust Estate, 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
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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;
(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
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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.
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 Indenture Trust
Estate;
(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 Indenture Trust Estate 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 Indenture Trust Estate 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
Indenture Trust Estate 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 Indenture Trust Estate for such purpose.
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(b) If the Indenture Trustee collects any money or property
pursuant to this Article V, it shall pay out the money or property in the
following order:
FIRST: to the Indenture Trustee for the Indenture Trustee Fee
then due and any costs or expenses incurred by it in connection with
the enforcement of the remedies provided for in this Article V and to
the Owner Trustee for the Owner Trustee Fee then due;
SECOND: to the Securities Insurer for the Guaranty Insurance
Premium then due and unpaid;
THIRD: to the Servicer for the Servicing Fee then due and
unpaid;
FOURTH: to 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;
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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 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 Indenture Trust Estate.
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 Indenture Trust Estate. 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 Indenture Trust Estate. In determining whether to
maintain possession of the Indenture Trust Estate, 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 Indenture Trust Estate 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:
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(a) such Holder has previously given written notice to the
Indenture Trustee of a continuing Event of Default;
(b) the Holders of not less than 25% of the Outstanding Amount of
the Notes have made written request to the Indenture Trustee to institute such
Proceeding in respect of such Event of Default in its own name as Indenture
Trustee hereunder;
(c) such Holder or Holders have offered to the Indenture Trustee
reasonable indemnity against the costs, expenses and liabilities to be incurred
in complying with such request;
(d) the Indenture Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute such
Proceedings; and
(e) no direction inconsistent with such written request has been
given to the Indenture Trustee during such 60-day period by the Holders of a
majority of the Outstanding Amount of the Notes.
It is understood and intended that no one or more Holders of Notes
shall have any right in any manner whatever by virtue of, or by availing of,
any provision of this Indenture to affect, disturb or prejudice the rights of
any other Holders of Notes or to obtain or to seek to obtain priority or
preference over any other Holders or to enforce any right under this Indenture,
except in the manner herein provided.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of
Notes, each representing less than a majority of the Outstanding Amount of the
Notes, the Indenture Trustee in its sole discretion may determine what action,
if any, shall be taken, notwithstanding any other provisions of this Indenture.
SECTION 5.7 Unconditional Rights of Noteholders To Receive
Principal and Interest. Notwithstanding any other provisions in this
Indenture, the Holder of any Note shall have the right, which is absolute and
unconditional, to receive payment of the principal of and interest, if any, on
such Note on or after the respective Final Scheduled Distribution Date thereof
expressed in such Note or in this Indenture (or, in the case of redemption, on
or after the Redemption Date) and to institute suit for the enforcement of any
such payment, and such right shall not be impaired without the consent of such
Holder.
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.
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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 Indenture Trust Estate 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 Indenture Trust Estate 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 Indenture Trust Estate shall be of no force and effect;
and
(d) the Indenture Trustee may take any other action deemed proper
by the Indenture Trustee that is not inconsistent with such direction.
Notwithstanding the rights of the Securities Insurer and the
Noteholders set forth in this Section, subject to Section 6.1, the Indenture
Trustee need not take any action that it determines might involve it in
liability or might materially adversely affect the rights of any Noteholders
not consenting to such action.
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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.
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 Indenture Trust Estate or upon any of the
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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.
ARTICLE 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
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(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.
(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 Indenture Trust Estate pursuant to Section 6.7.
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(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.
(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
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and so long as a committee of its Responsible Officers in good faith determines
that withholding the notice is in the interests of Noteholders.
SECTION 6.6 Reports by Indenture Trustee to Holders. The Indenture
Trustee shall deliver to each Noteholder such information as may be required to
enable such holder to prepare its federal and state income tax returns.
SECTION 6.7 Compensation and Indemnity. As compensation for its
services hereunder, the Indenture Trustee shall be entitled to receive, on each
Distribution Date, the Indenture Trustee's Fee pursuant to Section 8.2(c)
hereof (which compensation shall not be limited by any law on compensation of a
trustee of an express trust) and shall be entitled to reimbursement for all
reasonable out-of-pocket expenses incurred or made by it, including costs of
collection, in addition to the compensation for its services. Such expenses
shall include the reasonable compensation and expenses, disbursements and
advances of the Indenture Trustee's agents, counsel, accountants and experts.
The Issuer agrees to cause the Servicer to indemnify the Indenture Trust Estate
and 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
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(d) the Indenture Trustee otherwise becomes incapable of
acting.
If the Indenture Trustee resigns or is removed or if a vacancy exists
in the office of Indenture Trustee for any reason (the Indenture Trustee in
such event being referred to herein as the retiring Indenture Trustee), the
Issuer shall promptly appoint a successor Indenture Trustee acceptable to the
Securities Insurer.
A successor Indenture Trustee shall deliver a written acceptance of
its appointment to the retiring Indenture Trustee, the Securities Insurer and
to the Issuer. Thereupon the resignation or removal of the retiring Indenture
Trustee shall become effective, and the successor Indenture Trustee shall have
all the rights, powers and duties of the Indenture Trustee under this
Indenture. The successor Indenture Trustee shall mail a notice of its
succession to Noteholders. The retiring Indenture Trustee shall promptly
transfer all property held by it as Indenture Trustee to the successor
Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Issuer or the Holders of a majority in Outstanding
Amount of the Notes may petition any court of competent jurisdiction for the
appointment of a successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Indenture Trustee and the appointment of a successor Indenture Trustee.
Notwithstanding the replacement of the Indenture Trustee pursuant to
this Section, the Issuer's and the Administrator's obligations under Section
6.7 shall continue for the benefit of the retiring Indenture Trustee.
SECTION 6.9 Successor Indenture Trustee by Merger. If the
Indenture Trustee consolidates with, merges or converts into, or transfers all
or substantially all its corporate trust business or assets to, another
corporation or banking association, the resulting, surviving or transferee
corporation without any further act shall be the successor Indenture Trustee;
provided, that such corporation or banking association shall be otherwise
qualified and eligible under Section 6.11. The Indenture Trustee shall provide
the Securities Insurer and the Rating Agencies prior written notice of any such
transaction.
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
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force which it is anywhere in the Notes or in this Indenture provided that the
certificate of the Indenture Trustee shall have.
SECTION 6.10 Appointment of Co-Indenture Trustee or Separate
Indenture Trustee.
(a) Notwithstanding any other provisions of this Indenture, at any
time, for the purpose of meeting any legal requirement of any jurisdiction in
which any part of the Indenture Trust Estate 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 Indenture Trust Estate, 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 Indenture Trust Estate 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.
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,
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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 A 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.
ARTICLE 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 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
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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.
(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.
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ARTICLE 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 Indenture Trust Estate, the Indenture Trustee may, and upon written
request of the Securities Insurer shall, take such action as may be
appropriate to enforce such payment or performance, including the institution
and prosecution of appropriate Proceedings. Any such action shall be without
prejudice to any right to claim a Default or Event of Default under this
Indenture and any right to proceed thereafter as provided in Article V.
(b) Claims Under Guaranty Policy. The Notes and the Certificates
will be insured by the Guaranty Policy pursuant to the terms set forth therein,
notwithstanding any provisions to the contrary contained in this Indenture or
the Sale and Servicing Agreement. All amounts received under the Guaranty
Policy shall be used solely for the payment to Securityholders of principal and
interest on the Notes and the Certificates.
SECTION 8.2 Trust Accounts; Distributions.
(a) On or prior to the Closing Date, the Issuer shall cause the
Servicer to establish and maintain, in the name of the Indenture Trustee for
the benefit of the Noteholders, or the Co-Owner Trustee for the benefit of the
Certificateholders, the Trust Accounts as provided in ARTICLE V of the Sale and
Servicing Agreement. The Indenture Trustee or Co-Owner Trustee shall deposit
amounts into the Trust Accounts in accordance with the terms hereof, the Sale
and Servicing Agreement and the Servicer's Monthly Remittance Report.
(b) On or before the third Business Day prior to each Distribution
Date, the Indenture Trustee shall withdraw from the Collection Account, the
Pre-Funding Account, the Capitalized Interest Account and the Reserve Account,
as applicable, the Available Collection Amount and the Reserve Account
Withdrawal Amount, if any, with respect to the preceding Due Period pursuant to
Section 5.01(b)(2) of the Sale and Servicing Agreement and will deposit such
amount into the Note Distribution Account. No later than the second Business
Day prior to each Distribution Date, to the extent funds are available in the
Note Distribution Account, the Indenture Trustee shall either retain funds in
the Note Distribution Account or make the withdrawals from the Note
Distribution Account and deposits into the other Trust Accounts for
distribution on such Distribution Date as required pursuant to Section 5.01(c)
of the Sale and Servicing Agreement.
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(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, 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;
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(vi) to the Holders of the Class A-3 Notes, the
remaining Noteholders' Principal Distributable Amount after
distributions pursuant to clauses (iv) and (v) above until the
Outstanding Amount of the Class A-3 Notes is reduced to zero;
(vii) to the Holders of the Class A-4 Notes, the
remaining Noteholders' Principal Distributable Amount after
distributions pursuant to clauses (iv) through (vi) above until the
Outstanding Amount of the Class A-4 Notes is reduced to zero;
(viii) to the Holders of the Class A-5 Notes, the
remaining Noteholders' Principal Distributable Amount after
distributions pursuant to clauses (iv) through (vii) above until the
Outstanding Amount of the Class A-5 Notes is reduced to zero;
(ix) to the Holders of the Class A-6 Notes, the
remaining Noteholders' Principal Distributable Amount after
distributions pursuant to clauses (iv) through (viii) above until the
Outstanding Amount of the Class A-6 Notes is reduced to zero;
(x) to the Holders of the Class A-7 Notes, the
remaining Noteholders' Principal Distributable Amount after
distributions pursuant to clauses (iv) through (ix) above until the
Outstanding Amount of the Class A-7 Notes is reduced to zero; and
(xi) to the Holders of the Class A-8 Notes, the
remaining Noteholders' Principal Distributable Amount after
distributions pursuant to clauses (iv) through (x) above until the
Outstanding Amount of the Class A-8 Notes is reduced to zero.
(d) On each Distribution Date and each Redemption Date, to the
extent of the interest of the Indenture Trustee in the Certificate Distribution
Account (as described in Section 5.08(a) of the Sale and Servicing Agreement),
the Indenture Trustee hereby authorizes the Owner Trustee, the Co-Owner Trustee
or the Paying Agent, as applicable, to make the distributions from the
Certificate Distribution Account as required pursuant to Section 5.06(c) of the
Sale and Servicing Agreement.
(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.
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SECTION 8.3 General Provisions Regarding Accounts.
(a) So long as no Default or Event of Default shall have occurred
and be continuing, all or a portion of the funds in the Trust Accounts shall be
invested in Permitted Investments and reinvested by the Indenture Trustee at
the direction of the Affiliated Holder in accordance with the provisions of
ARTICLE V of the Sale and Servicing Agreement. All income or other gain from
investments of moneys deposited in the Trust Accounts shall be deposited by the
Indenture Trustee into the Note Distribution Account, and any loss resulting
from such investments shall be charged to such account. The Issuer will not
direct the Indenture Trustee to make any investment of any funds or to sell any
investment held in any of the Trust Accounts unless the security interest
Granted and perfected in such account will continue to be perfected in such
investment or the proceeds of such sale, in either case without any further
action by any Person, and, in connection with any direction to the Indenture
Trustee to make any such investment or sale, if requested by the Indenture
Trustee, the Issuer shall deliver to the Indenture Trustee an Opinion of
Counsel, acceptable to the Indenture Trustee, to such effect.
(b) Subject to Section 6.1(c), the Indenture Trustee shall not in
any way be held liable by reason of any insufficiency in any of the Trust
Accounts resulting from any loss on any Eligible Investment included therein
except for losses attributable to the Indenture Trustee's failure to make
payments on such Eligible Investments issued by the Indenture Trustee, in its
commercial capacity as principal obligor and not as trustee, in accordance with
their terms.
(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 Indenture Trust Estate 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.
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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 Indenture Trust Estate.
(a) Subject to the payment of its fees and expenses pursuant to
Section 6.7, the Indenture Trustee may, and when required by the provisions of
this Indenture shall, execute instruments to release property from the lien of
this Indenture, or convey the Indenture Trustee's interest in the same, in a
manner and under circumstances that are not inconsistent with the provisions of
this Indenture. No party relying upon an instrument executed by the Indenture
Trustee as provided in this Article VIII shall be bound to ascertain the
Indenture Trustee's authority, inquire into the satisfaction of any conditions
precedent or see to the application of any moneys.
(b) The Indenture Trustee shall, at such time as there are no
Notes Outstanding and all sums due to (i) the Certificateholders pursuant to
Section 5.06(c) of the Sale and Servicing Agreement, (ii) the Servicer pursuant
to Section 8.2(c)(i)(A) hereof, (iii) the Securities Insurer pursuant to
Section 8.2(c)(i)(B) hereof, the Indenture Trustee pursuant to Section
8.2(c)(i)(C) hereof, the Owner Trustee pursuant to Section 8.2(c)(i)(D) hereof,
and the Custodian pursuant to Section 8.2(c)(i)(E) hereof have been paid,
release any remaining portion of the Indenture Trust Estate 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 Indenture Trust
Estate. 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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ARTICLE 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 statute hereafter
enacted and to add to this Indenture such other provisions as may be expressly
required by the TIA.
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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 Indenture Trust Estate to payment of principal
of or interest on the Notes, or change any place of payment where, or the coin
or currency in which, any Note or the interest thereon is payable, or impair
the right to institute suit for the enforcement of the provisions of this
Indenture requiring the application of funds available therefor, as provided in
Article V, to the payment of any such amount due on the Notes on or after the
respective due dates thereof (or, in the case of redemption, on or after the
Redemption Date);
(b) reduce the percentage of the Outstanding Amount of the Notes,
the consent of the Holders of which is required for any such supplemental
indenture, or the consent of the Holders of which is required for any waiver of
compliance with certain provisions of this Indenture or certain defaults
hereunder and their consequences provided for in this Indenture;
(c) modify or alter the provisions of the proviso to the
definition of the term "Outstanding";
(d) reduce the percentage of the Outstanding Amount of the Notes
required to direct the Indenture Trustee to direct the Issuer to sell or
liquidate the Indenture Trust Estate pursuant to Section 5.4;
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(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
Indenture Trust Estate or, except as otherwise permitted or contemplated
herein, terminate the lien of this Indenture on any property at any time
subject hereto or deprive the Holder of any Note of the security provided by
the lien of this Indenture.
The Indenture Trustee may in its discretion determine whether or not
any Notes would be affected by any supplemental indenture and any such
determination shall be conclusive upon the Holders of all Notes, whether
theretofore or thereafter authenticated and delivered hereunder. The Indenture
Trustee shall not be liable for any such determination made in good faith.
In connection with requesting the consent of the Noteholders pursuant
to this Section, the Indenture Trustee shall mail to the Holders of the Notes
to which such amendment or supplemental indenture relates a notice setting
forth in general terms the substance of such supplemental indenture. It shall
not be necessary for any Act of Noteholders under this Section to approve the
particular form of any proposed supplemental indenture, but it shall be
sufficient if such Act shall approve the substance thereof.
SECTION 9.3 Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modification thereby of the trusts created
by this Indenture, the Indenture Trustee shall be entitled to receive, and
subject to Sections 6.1 and 6.2, shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Indenture Trustee may, but
shall not be obligated to, enter into any such supplemental indenture that
affects the Indenture Trustee's own rights, duties, liabilities or immunities
under this Indenture or otherwise.
SECTION 9.4 Effect of Supplemental Indenture. Upon the execution
of any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and shall be deemed to be modified and amended in accordance therewith
with respect to the Notes affected thereby, and the respective rights,
limitations of rights, obligations, duties, liabilities and immunities under
this Indenture of the Indenture Trustee, the Issuer and the Holders of the
Notes shall thereafter be determined, exercised and enforced hereunder subject
in all respects to such modifications and amendments, and all the terms and
conditions of any such supplemental indenture shall be and be deemed to be part
of the terms and conditions of this Indenture for any and all purposes.
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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 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.
ARTICLE X
REDEMPTION OF NOTES
SECTION 10.1 Redemption.
(a) 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
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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 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).
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Notice of redemption of the Notes shall be given by the Indenture
Trustee in the name of the Issuer and at the expense of the Servicer. Failure
to give notice of redemption, or any defect therein, to any Holder of any Note
shall not impair or affect the validity of the redemption of any other Note.
SECTION 10.3 Notes Payable on Redemption Date; Provision for
Payment of Indenture Trustee and Securities Insurer. The Notes or portions
thereof to be redeemed shall, following notice of redemption as required by
Section 10.2 (in the case of redemption pursuant to Section 10.1), on the
Redemption Date become due and payable at the Redemption Price and (unless the
Issuer shall default in the payment of the Redemption Price) no interest shall
accrue on the Redemption Price for any period after the date to which accrued
interest is calculated for purposes of calculating the Redemption Price. The
Issuer may not redeem the Notes unless, (i) all outstanding obligations under
the Notes have been paid in full and (ii) the Indenture Trustee has been paid
all amounts to which it is entitled hereunder and the Securities Insurer has
been paid all Securities Insurer Reimbursement Amounts to which it is entitled
as of the applicable Redemption Date.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Compliance Certificates and Opinions, etc.
(a) Upon any application or request by the Issuer to the Indenture
Trustee to take any action under any provision of this Indenture, the Issuer
shall furnish to the Indenture Trustee (i) an Officer's Certificate stating
that all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with, (ii) an Opinion of Counsel
stating that in the opinion of such counsel all such conditions precedent, if
any, have been complied with and (iii) (if required by the TIA) an Independent
Certificate from a firm of certified public accountants meeting the applicable
requirements of this Section, except that, in the case of any such application
or request as to which the furnishing of such documents is specifically
required by any provision of this Indenture, no additional certificate or
opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that each signatory of such certificate or opinion
has read or has caused to be read such covenant or condition
and the definitions herein relating thereto;
(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
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informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
signatory, such condition or covenant has been complied with.
(b) (i) Prior to the deposit of any Collateral or other property
or securities with the Indenture Trustee that is to be made the basis for the
release of any property or securities subject to the lien of this Indenture,
the Issuer shall, in addition to any obligation imposed in Section 11.1(a) or
elsewhere in this Indenture, furnish to the Indenture Trustee an Officer's
Certificate certifying or stating the opinion of each person signing such
certificate as to the fair value (within 90 days of such deposit) to the Issuer
of the Collateral or other property or securities to be so deposited.
(ii) Whenever the Issuer is required to furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of any
signer thereof as to the matters described in clause (i) above, the Issuer
shall also deliver to the Indenture Trustee an Independent Certificate as to
the same matters, if the fair value to the Issuer of the securities to be so
deposited and of all other such securities made the basis of any such
withdrawal or release since the commencement of the then-current fiscal year of
the Issuer, as set forth in the certificates delivered pursuant to clause (i)
above and this clause (ii), is 10% or more of the Outstanding Amount of the
Notes, but such a certificate need not be furnished with respect to any
securities so deposited, if the fair value thereof to the Issuer as set forth
in the related Officer's Certificate is less than $25,000 or less than one
percent of the Outstanding Amount of the Notes.
(iii) Whenever any property or securities are to be released from
the lien of this Indenture, the Issuer shall also furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of each
person signing such certificate as to the fair value (within 90 days of such
release) of the property or securities proposed to be released and stating that
in the opinion of such person the proposed release will not impair the security
under this Indenture in contravention of the provisions hereof.
(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.
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SECTION 11.2 Form of Documents Delivered to Indenture Trustee. In
any case where several matters are required to be certified by, or covered by
an opinion of, any specified Person, it is not necessary that all such matters
be certified by, or covered by the opinion of, only one such Person, or that
they be so certified or covered by only one document, but one such Person may
certify or give an opinion with respect to some matters and one or more other
such Persons as to other matters, and any such Person may certify or give an
opinion as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which such officer's
certificate or opinion is based are erroneous. Any such certificate of an
Authorized Officer or Opinion of Counsel may be based, insofar as it relates to
factual matters, upon a certificate or opinion of, or representations by, an
officer or officers of the Servicer, the Seller, the Issuer or the
Administrator, stating that the information with respect to such factual
matters is in the possession of the Servicer, the Seller, the Issuer or the
Administrator, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of
the facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however,
be construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article VI.
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
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(subject to Section 6.1) conclusive in favor of the Indenture Trustee and the
Issuer, if made in the manner provided in this Section.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Indenture Trustee
deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Holder of any Notes shall bind the
Holder of every Note issued upon the registration thereof or in exchange
therefor or in lieu thereof, in respect of anything done, omitted or suffered
to be done by the Indenture Trustee or the Issuer in reliance thereon, whether
or not notation of such action is made upon such Note.
SECTION 11.4 Notices, etc., to Indenture Trustee, Issuer, Rating
Agencies and Securities Insurer. Any request, demand, authorization,
direction, notice, consent, waiver or Act of Noteholders or other documents
provided or permitted by this Indenture shall be in writing and if such
request, demand, authorization, direction, notice, consent, waiver or act of
Noteholders is to be made upon, given or furnished to or filed with:
(a) the Indenture Trustee by any Noteholder or by the Issuer shall
be sufficient for every purpose hereunder if made, given, furnished or filed in
writing to or with the Indenture Trustee at its Corporate Trust Office, or
(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
1996-3, in care of Wilmington Trust Company, Rodney Square North, 1100 North
Market Street, Wilmington, Delaware 19890, Attention: Emmett R. Harmon, or at
any other address previously furnished in writing to the Indenture Trustee by
the Issuer or the Administrator. The Issuer shall promptly transmit any notice
received by it from the Noteholders to the Indenture Trustee.
Notices required to be given to the Rating Agencies by the Issuer, the
Indenture Trustee or the Owner Trustee shall be in writing, personally
delivered or mailed by certified mail, return receipt requested, to (i) in the
case of Moody's, at the following address: Moody's Investors Service, Inc.,
Residential Mortgage Monitoring Department, 99 Church Street, New York, New
York 10007, and (ii) in the case of Standard & Poor's, at the following
address: Standard & Poor's Ratings Group, 26 Broadway (15th Floor), New York,
New York 10004, Attention of Asset Backed Surveillance Department; or as to
each of the foregoing, at such other address as shall be designated by written
notice to the other parties.
Notices required to be given to the Securities Insurer by the Issuer,
the Indenture Trustee or the Owner Trustee shall be in writing, personally
delivered or mailed by certified mail, return receipt requested, to the
following address: MBIA Insurance Corporation, 113 King Street, Armonk, New
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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.
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.
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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 Indenture Trust Estate, 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.
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
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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 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.
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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, 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.
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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 1996-3
By: Wilmington Trust Company
not in its individual capacity but
solely as Owner Trustee
By:
-------------------------------
Name: Emmett R. Harmon
Title: Vice President
FIRST BANK NATIONAL ASSOCIATION,
as Indenture Trustee
By:
----------------------------------------
Name: Sheri Christopherson
Title: Vice President
<PAGE> 74
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 Emmett R. Harmon, 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 1996-3, a Delaware
business trust, and that such person executed the same as the act of said
business trust for the purpose and consideration therein expressed, and in the
capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 27th day of September,
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 27th day of September,
1996.
-------------------------------------
Notary Public in and for the State of
New York
(Seal)
My commission expires:
- ----------------------
<PAGE> 75
SCHEDULE A
(To be Provided at the Closing and Supplemented on each Subsequent
Transfer Date on which Subsequent Home Loans are transferred to the Trust)
Available upon request to the Indenture Trustee
<PAGE> 76
EXHIBIT A-1
(FORM OF CLASS A-1 NOTE)
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR
TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
$____________
No. ____ CUSIP NO. 337928 AA 3
FIRSTPLUS HOME LOAN OWNER TRUST 1996-3
CLASS A-1 ____% ASSET BACKED NOTES
FIRSTPLUS HOME LOAN OWNER TRUST 1996-3, a business trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to CEDE & CO., or
registered assigns, the principal sum of ___________________________ DOLLARS
and NO/100 CENTS ($__________) payable on each Distribution Date in an amount
equal to the result obtained by multiplying (i) a fraction the numerator of
which is $[INSERT INITIAL PRINCIPAL AMOUNT OF NOTE] and the denominator of
which is $__________ by (ii) the aggregate amount, if any, payable from the
Distribution Account in respect of principal on the Class A-1 Notes pursuant to
Section 8.2(c)(iv) of the Indenture dated as of September 1, 1996, between the
Issuer and First Bank National Association, a national banking association, as
Indenture Trustee (the "Indenture Trustee"); provided, however, that the entire
unpaid principal amount of this Note shall be due and payable on the earlier of
(i) the Distribution Date occurring in June 2003 (the "Class A-1 Final
Scheduled Distribution Date"), (ii) the Redemption Date, if any, pursuant to
Section 10.1(a) of the Indenture 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
A-1-1
<PAGE> 77
Section 5.2. Capitalized terms used but not defined herein are defined in
Article I of the Indenture, which also contains rules as to construction that
shall be applicable herein.
The Issuer will pay interest on this Note at the rate per annum shown
above on each Distribution Date until the principal of this Note is paid or
made available for payment in full, on the principal amount of this Note
outstanding on the preceding Distribution Date (after giving effect to all
payments of principal made on the preceding Distribution Date). Interest on
this Note will accrue for each Distribution Date during the calendar month
preceding such Distribution Date (each, a "Due Period"). Interest will be
computed on the basis of a 360-day year of twelve 30-day months. Such
principal of and interest on this Note shall be paid in the manner specified on
the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the
Issuer with respect to this Note shall be applied first to interest due and
payable on this Note as provided above and then to the unpaid principal of this
Note.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture referred to on the
reverse hereof, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer, as of the date set
forth below.
Date: September 27, 1996
FIRSTPLUS HOME LOAN OWNER TRUST 1996-3
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement,
By:
----------------------------------------
Authorized Signatory
A-1-2
<PAGE> 78
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: September 27, 1996
FIRST BANK NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Indenture Trustee,
By:
--------------------------------------
Authorized Signatory
A-1-3
<PAGE> 79
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-1 ____% Asset Backed Notes (herein called the "Class
A-1 Notes"), all issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of
the respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class A-1 Notes are subject to all
terms of the Indenture.
The Class A-1 Notes, the Class A-2 Notes, Class A-3 Notes, 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 (collectively, the "Notes") are and will be equally and ratably
secured by the collateral pledged as security therefor as provided in the
Indenture.
Principal of the Class A-1 Notes will be payable on each Distribution
Date in an amount described on the face hereof. "Distribution Date" means the
20th day of each month, or, if any such date is not a Business Day, the next
succeeding Business Day, commencing October 21, 1996.
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Class A-1 Final Scheduled
Distribution Date and the Redemption Date, if any, pursuant to Section 10.1(a)
of the Indenture. Notwithstanding the foregoing, the entire unpaid principal
amount of the Notes shall be due and payable on the date on which an Event of
Default shall have occurred and be continuing and the Indenture Trustee, at the
direction or upon the prior written consent of the Securities Insurer or the
Holders of the 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 of the Indenture. All principal payments
on the Class A-1 Notes shall be made pro rata to the Class A-1 Noteholders
entitled thereto.
MBIA Insurance Corporation, as the Securities Insurer, has issued a
Guaranty Policy in the name of the Indenture Trustee for the benefit of the
Note Owners, which policy guarantees payments on each Distribution Date to the
Indenture Trustee for the benefit of the Note Owners of the related
Noteholders' Distributable Amount then payable on the Notes. Unless a
Securities Insurer Default shall be continuing, the Securities Insurer shall be
deemed to be the Holder of 100% of each Class of the outstanding Notes for the
purpose of exercising the rights, including voting rights, of the Holders of
each Class of the Notes under the Indenture. In addition, on each Distribution
Date, after the Note Owners have been paid all amounts to which they are
entitled, the Securities Insurer will be entitled to be reimbursed for any
unreimbursed Guaranteed Payments and any other amounts owed under the Guaranty
Policy.
Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not in
full payment of this Note, shall be made by check mailed to the Person whose
name appears as the Registered Holder of this Note (or one or more Predecessor
Notes) on the Note Register as of the close of business on each Record Date,
except that 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.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of
A-1-4
<PAGE> 80
payment. Any reduction in the principal amount of this Note (or any one or
more Predecessor Notes) effected by any payments made on any Distribution Date
shall be binding upon all future Holders of this Note and of any Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu
hereof, whether or not noted hereon. If funds are expected to be available, as
provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Distribution Date, then the Indenture
Trustee, in the name of and on behalf of the Issuer, will notify the Person who
was the Registered Holder hereof as of the Record Date preceding such
Distribution Date by notice mailed or transmitted by facsimile prior to such
Distribution Date, and the amount then due and payable shall be payable only
upon presentation and surrender of this Note at the Indenture Trustee's
principal Corporate Trust Office or at the office of the Indenture Trustee's
agent appointed for such purposes located in The City of New York.
As provided in the Indenture and the Sale and Servicing Agreement, the
Class A-1 Notes may be redeemed (a) in whole, but not in part, at the option of
the Affiliated Holder, on any Distribution Date on and after the date on which
the Pool Balance is less than or equal to 15% of the Pool Principal Balance of
the Initial Home Loans and the Subsequent Home Loans conveyed to the Trust as
of the respective Cut-off Dates and (b) in part on the Distribution Date on
which the Funding Period ends (or on the Distribution Date immediately
following the last day of the Funding Period, if the Funding Period does not
end on a Distribution Date), in the manner and to the extent described in the
Indenture and the Sale and Servicing Agreement in the event that any amount
remains on deposit in the Pre-Funding Account after giving effect to the
purchase of all Subsequent Home Loans, including any such purchase on such
Redemption Date.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or
agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof 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 Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the transferor may be required to pay a
sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that 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
the Indenture or any certificate or other writing delivered in connection
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,
A-1-5
<PAGE> 81
director or employee 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 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.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees by
accepting the benefits of the Indenture that such Noteholder or Note Owner will
not at any time institute against the Seller or the Issuer, or join in any
institution against the Seller or the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings under any
United States federal or state bankruptcy or similar law in connection with any
obligations relating to the Notes, the Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is 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 Trust Estate. Each Noteholder, by acceptance of a Note (and
each Note Owner by acceptance of a beneficial interest in a Note), agrees to
treat the Notes for federal, state and local income, single business and
franchise tax purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this
Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the
Indenture Trustee may treat the Person in whose name this Note (as of the day
of determination or as of such other date as may be specified in the Indenture)
is registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The
Indenture also permits the Indenture Trustee to amend or waive certain terms
and conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
A-1-6
<PAGE> 82
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the 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
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note
at the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of the Issuer in its individual capacity,
the Owner Trustee in its individual capacity, any owner of a beneficial
interest in the Issuer, or any of their respective partners, beneficiaries,
agents, officers, directors, employees or successors or assigns shall be
personally liable for, nor shall recourse be had to any of them for, the
payment of principal of or interest on this Note or performance of, or omission
to perform, any of the covenants, obligations or indemnifications contained in
the Indenture. The Holder of this Note by its acceptance hereof agrees that,
except as expressly provided in the Basic Documents, in the case of an Event of
Default under the Indenture, the Holder shall have no claim against any of the
foregoing for any deficiency, loss or claim therefrom; provided, however, that
nothing contained herein shall be taken to prevent recourse to, and enforcement
against, the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
A-1-7
<PAGE> 83
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
- --------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto:
- --------------------------------------------------------------------------------
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints , attorney, to transfer said Note on the books kept for
registration thereof, with full power of substitution in the premises.
Dated: */
--------------------
Signature Guaranteed:
*/
- --------------------------
*/ NOTICE: The signature to this assignment must correspond with the
name of the registered owner as it appears on the face of the within Note in
every particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in 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 Securities Exchange Act of 1934, as amended.
A-1-8
<PAGE> 1
EXHIBIT 4.2
================================================================================
TRUST AGREEMENT
among
FIRSTPLUS INVESTMENT CORPORATION,
as Depositor,
FIRSTPLUS RESIDUAL HOLDINGS, INC.,
as the Company,
WILMINGTON TRUST COMPANY,
as Owner Trustee
and
FIRST BANK NATIONAL ASSOCIATION,
as Co-Owner Trustee
Dated as of September 1, 1996
FIRSTPLUS HOME LOAN OWNER TRUST 1996-3
Asset Backed Securities, Series 1996-3
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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<S> <C> <C>
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 . . . . . . . . . . . . . . . . 8
SECTION 2.8 Title to Trust Property . . . . . . . . . . . . . . . . 9
SECTION 2.9 Situs of Trust . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.10 Representations and Warranties of the Depositor and the
Company; Covenant of the Company . . . . . . . . . . . 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
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 . . . . . 16
SECTION 3.11 Book-Entry Certificates . . . . . . . . . . . . . . . . 17
SECTION 3.12 Notices to Clearing Agency . . . . . . . . . . . . . . 18
SECTION 3.13 Definitive Certificates . . . . . . . . . . . . . . . . 18
</TABLE>
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TABLE OF CONTENTS
(Continued)
<TABLE>
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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 . . . . . . . . . . . . . . . . . . . 23
ARTICLE V
Application of Trust Funds; Certain Duties
SECTION 5.1 Establishment of Trust Account . . . . . . . . . . . . 24
SECTION 5.2 Application Of Trust Funds . . . . . . . . . . . . . . 24
SECTION 5.3 Method of Payment . . . . . . . . . . . . . . . . . . . 25
SECTION 5.4 Segregation of Moneys; No Interest . . . . . . . . . . 25
SECTION 5.5 Accounting and Reports to the Certificateholder, Owners,
the Internal Revenue Service and Others . . . . . 25
SECTION 5.6 Signature on Returns; Tax Matters Partner . . . . . . . 26
ARTICLE VI
Authority and Duties of Owner Trustee
SECTION 6.1 General Authority . . . . . . . . . . . . . . . . . . . 26
SECTION 6.2 General Duties . . . . . . . . . . . . . . . . . . . . 26
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 Instruction . . . . . . . . . . . . . . . . . 28
SECTION 6.6 Restrictions . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE VII
Concerning the Owner Trustee
SECTION 7.1 Acceptance of Trusts and Duties . . . . . . . . . . . . 29
</TABLE>
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TABLE OF CONTENTS
(Continued)
<TABLE>
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<S> <C> <C>
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 . . 32
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 . . . . . . . . . . . . . 33
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 . . . . . . . . . . . . . . . . 37
SECTION 10.4 Merger or Consolidation of Owner Trustee . . . . . . . 38
SECTION 10.5 Appointment of Co-Trustee or Separate Trustee . . . . . 38
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 . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 11.5 Severability . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
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(Continued)
<TABLE>
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SECTION 11.6 Separate Counterparts . . . . . . . . . . . . . . . . . 42
SECTION 11.7 Successors and Assigns . . . . . . . . . . . . . . . . 42
SECTION 11.8 Covenants of the Company . . . . . . . . . . . . . . . 42
SECTION 11.9 No Petition . . . . . . . . . . . . . . . . . . . . . . 42
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 . . . . . . . . . . . . . . . . . . 43
SECTION 11.15 Third-Party Beneficiary . . . . . . . . . . . . . . . . 44
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
</TABLE>
-iv-
<PAGE> 6
TRUST AGREEMENT, dated as of September 1, 1996, among FIRSTPLUS
INVESTMENT CORPORATION, a Nevada corporation, as Depositor (the "Depositor"),
FIRSTPLUS RESIDUAL HOLDINGS, INC. (the "Company"), a Nevada corporation,
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 September 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.
"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.
<PAGE> 7
"Certificate Distribution Account" shall have the meaning assigned to
such term in Section 5.1.
"Certificate of Trust" shall mean the Certificate of Trust in the form
of Exhibit C to be filed for the Trust pursuant to Section 3810(a) of the
Business Trust Statute.
"Certificate Owner" shall mean, with respect to a Book-Entry
Certificate, the Person who is the beneficial owner of such Book-Entry
Certificate, as reflected on the books of the Clearing Agency, or on the books
of a Person maintaining an account with such Clearing Agency (directly as a
Clearing Agency Participant or as an indirect participant, in each case in
accordance with the rules of such Clearing Agency).
"Certificate Register" and "Certificate Registrar" shall mean the
register mentioned and the registrar appointed pursuant to Section 3.4.
"Certificateholder" or "Holder" shall mean a Person in whose name a
Certificate is registered.
"Clearing Agency" shall mean an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" shall mean a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with
the Clearing Agency.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
Treasury Regulations promulgated thereunder.
"Corporate Trust Office" shall mean, with respect to the Owner
Trustee, the principal corporate trust office of the Owner Trustee located at
Rodney Square North, 1100 North Market Street, Wilmington, DE 19890-0001; or
at such other address in the State of Delaware as the Owner Trustee may
designate by notice to the Owners and the Company, or the principal corporate
trust office of any successor Owner Trustee (the address (which shall be in the
State of Delaware) of which the successor owner trustee will notify the Owners
and the Company).
"Demand Note" means the Demand Note dated September 27, 1996, in the
amount of $2,500,000.00 from RAC to the Company in substantially the form
attached hereto as Exhibit D.
"Definitive Certificates" means a certificated form of security that
represents a Certificate pursuant to Section 3.13 or a Residual Interest
Instrument.
"DTC" shall mean the Depository Trust Company, as the initial Clearing
Agency.
"ERISA" shall have the meaning assigned thereto in Section 11.13.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
-2-
<PAGE> 8
"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 September 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 $11,250,000.
"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;
(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.
-3-
<PAGE> 9
"Insurance Agreement" shall mean the Insurance Agreement, dated as of
September 27, 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 1996-3, 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 Investment, as applicable.
"Owner Trust Estate" shall mean all right, title and interest of the
Trust in and to the property and rights assigned to the Trust pursuant to
Section 2.5 hereof and Article II of the Sale and Servicing Agreement
(including the Trust Estate), all funds on deposit from time to time in the
Trust Accounts (including the Certificate Distribution Account) and all other
property of the Trust from time to time, including any rights of the Owner
Trustee and the Trust pursuant to the Sale and Servicing Agreement and the
Administration Agreement.
"Owner Trustee" shall mean Wilmington Trust Company, a Delaware
banking corporation, not in its individual capacity but solely as owner trustee
under this Agreement, and any successor owner trustee hereunder.
"Paying Agent" shall mean the Co-Owner Trustee or any successor in
interest thereto or any other paying agent or co-paying agent appointed
pursuant to Section 3.9 and authorized by the Issuer to make payments to and
distributions from the Certificate Distribution Account, including payment of
principal of or interest on the Certificates on behalf of the Issuer.
"Percentage Interest" shall mean with respect to any Certificate, the
portion of the Certificates as a whole evidenced by such single Certificate,
expressed as a percentage rounded to five decimal places, equivalent to a
fraction, the numerator of which is the denomination represented by such single
Certificate and the denominator of which is the Initial Certificate Principal
Balance. With respect to each Residual Interest Instrument, the percentage
portion of all of the Residual Interest evidenced thereby as stated on the face
of such Residual Interest Instrument.
"Prospective Owner" shall have the meaning set forth in Section
3.14(a).
"RAC" shall mean RAC Financial Corporation, a Nevada corporation.
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"Rating Agency Condition" means, with respect to any action to which a
Rating Agency Condition applies, that each Rating Agency shall have been given
10 days (or such shorter period as is acceptable to each Rating Agency) prior
notice thereof and that each of the Rating Agencies shall have notified the
Seller, the Servicer, the Securities Insurer, the Owner Trustee and the Issuer
in writing that such action will not result in a reduction or withdrawal of the
then current rating of the Notes and Certificates.
"Record Date" shall mean as to each Distribution Date the last
Business Day of the month immediately preceding the month in which such
Distribution Date occurs.
"Residual Interest" shall mean the right to receive distributions of
Excess Spread, if any, and certain other funds, if any, on each Distribution
Date, pursuant to Section 5.06 of the Sale and Servicing Agreement.
"Residual Interest Instrument" shall mean an instrument substantially
in the form attached as Exhibit B hereto and evidencing the Residual Interest.
"Residual Interestholders" shall mean, initially, FFI, as holder of
99% Percentage Interest of the Residual Interest, and the Company, as holder of
1% Percentage Interest of the Residual Interest.
"Sale and Servicing Agreement" shall mean the Sale and Servicing
Agreement dated as of the date hereof, among the Trust as Issuer, the
Depositor, as Seller, the Indenture Trustee as Indenture Trustee and Co-Owner
Trustee and FFI, as Transferor and Servicer.
"Secretary of State" shall mean the Secretary of State of the State of
Delaware.
"Securities Insurer shall mean MBIA Insurance Corporation.
"Securities Insurer Default": The failure of the Securities Insurer to
make payments under the Guaranty Policy, if such failure has not been remedied
with ten (10) days of notice thereof, or the entry of an order or decree with
respect to the Securities Insurer in any insolvency or bankruptcy proceedings
which remain unstayed or undischarged for 90 days.
"Treasury Regulations" shall mean regulations, including proposed or
temporary regulations, promulgated under the Code. References herein to
specific provisions of proposed or temporary regulations shall include
analogous provisions of final Treasury Regulations or other successor Treasury
Regulations.
"Trust" shall mean the trust established by this Agreement.
"Trust Certificates" shall mean the Certificates and the Residual
Interest Instruments, collectively.
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"Underwriters" shall mean those underwriters named in and parties to
the Underwriting Agreement dated as of September 24, 1996 pursuant to which
the Certificates will be offered publicly.
SECTION 1.2 Other Definitional Provisions.
(a) Capitalized terms used herein and not
otherwise defined herein have the meanings
assigned to them in the Sale and Servicing
Agreement or, if not defined therein, in the
Indenture.
(b) All terms defined in this Agreement shall have the
defined meanings when used in any certificate or
other document made or delivered pursuant hereto
unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or
other document made or delivered pursuant hereto or
thereto, accounting terms not defined in this
Agreement or in any such certificate or other
document, and accounting terms partly defined in
this Agreement or in any such certificate or other
document to the extent not defined, shall have the
respective meanings given to them under generally
accepted accounting principles. To the extent that
the definitions of accounting terms in this
Agreement or in any such certificate or other
document are inconsistent with the meanings of such
terms under generally accepted accounting
principles, the definitions contained in this
Agreement or in any such certificate or other
document shall control.
(d) The words "hereof", "herein", "hereunder" and words
of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any
particular provision of this Agreement; Section and
Exhibit references contained in this Agreement are
references to Sections and Exhibits in or to this
Agreement unless otherwise specified; and the term
"including" shall mean "including without
limitation".
(e) The definitions contained in this Agreement are
applicable to the singular as well as the plural
forms of such terms and to the masculine as well as
to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or
referred to herein or in any instrument or
certificate delivered in connection herewith means
such agreement, instrument or statute as from time
to time amended, modified or supplemented and
includes (in the case of agreements or instruments)
references to all attachments thereto and
instruments incorporated therein; references to a
Person are also to its permitted successors and
assigns.
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ARTICLE II
Organization
SECTION 2.1 Name. The Trust created hereby shall be known as
"FIRSTPLUS HOME LOAN OWNER TRUST 1996-3", 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 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 Trust Estate released from the lien of,
and remitted to the Trust pursuant to, the
Indenture;
(iv) to enter into and perform its obligations
under the Basic Documents to which it is to
be a party;
(v) to engage in those activities, including
entering into agreements, that are necessary,
suitable or convenient to accomplish the
foregoing or are incidental thereto or
connected therewith; and
(vi) subject to compliance with the Basic
Documents, to engage in such other activities
as may be required in connection with
conservation of the Owner Trust Estate and
the making of distributions to the Owners and
the Noteholders.
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(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.
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
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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.
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.
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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 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
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<PAGE> 16
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.
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<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.
(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.
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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.
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
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<PAGE> 19
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 Interest presented or surrendered for registration of
transfer and exchange must be accompanied by a letter from the Prospective Owner
certifying as to the representations set forth in Section 3.14(a) and (b). Each
Trust Certificate surrendered for registration of transfer or exchange shall be
canceled disposed of by the Owner Trustee in accordance with its customary
practice.
No service charge shall be made for any registration of transfer or
exchange of Trust Certificates, but the Owner Trustee or the Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Trust Certificates.
The preceding provisions of this Section notwithstanding, the Owner
Trustee shall not make and the Certificate Registrar shall not register
transfer or exchanges of Trust Certificates for a period of 15 days preceding
the due date for any payment with respect to the Trust Certificates.
SECTION 3.5 Mutilated, Destroyed, Lost or Stolen Trust
Certificates. If (a) any mutilated Trust Certificate shall be surrendered to
the Certificate Registrar, or if the Certificate Registrar shall receive
evidence to its satisfaction of the destruction, loss or theft of any Trust
Certificate and (b) there shall be delivered to the Certificate Registrar and
the Owner Trustee such security or indemnity as may be required by them to save
each of them harmless, then in the absence of notice that such
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<PAGE> 20
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 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
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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.
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;
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(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 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
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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 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
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<PAGE> 24
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 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
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<PAGE> 25
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.
(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.
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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):
(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;
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<PAGE> 27
(i) merge or consolidate the Trust with or into
any other entity, or convey or transfer all
or substantially all of the Trust's assets to
any other entity;
(j) cause the Trust to incur, assume or guaranty
any indebtedness other than as set forth in
this Agreement;
(k) do any act that conflicts with any other
Basic Document;
(l) do any act which would make it impossible to
carry on the ordinary business of the Trust
as described in Section 2.13 hereof;
(m) confess a judgment against the Trust;
(n) possess Trust assets, or assign the Trust's
right to property, for other than a Trust
purpose;
(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.
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SECTION 4.2 Action by Owners with Respect to Certain
Matters. The Owner Trustee shall not have the power, except upon the direction
of the Owners and the consent of the Securities Insurer, to (a) remove the
Administrator under the Administration Agreement pursuant to Section 8 thereof,
(b) appoint a successor Administrator pursuant to Section 8 of the
Administration Agreement, (c) remove the Servicer under the Sale and Servicing
Agreement pursuant to Section 10.01 thereof or (d) sell the Home Loans after
the termination of the Indenture. The Owner Trustee shall take the actions
referred to in the preceding sentence only upon written instructions signed by
the Owners and only after obtaining the consent of the Securities Insurer.
SECTION 4.3 Action by Owners with Respect to Bankruptcy. The
Owner Trustee shall not have the power to commence a voluntary proceeding in
bankruptcy relating to the Trust without the consent and approval of the
Securities Insurer, the unanimous prior approval of all Owners and the
Securities Insurer and the delivery to the Owner Trustee by each such Owner of
a certificate certifying that such Owner reasonably believes that the Trust is
insolvent.
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 1996-3". 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
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distributions therefrom. Except as otherwise expressly provided herein or in
the Sale and Servicing Agreement, the Certificate Distribution Account shall be
under the sole dominion and control of the Owner Trustee or Co-Owner Trustee
for the benefit of the Owners, the Securities Insurer and the Servicer.
In addition to the foregoing, the Certificate Distribution
Account is a Trust Account under the Sale and Servicing Agreement and
constitutes part of the Trust Estate pledged by the Trust to the Indenture
Trustee under the Indenture. The Certificate Distribution Account shall be
subject to and established and maintained in accordance with the applicable
provisions of the Sale and Servicing Agreement and the Indenture, including,
without limitation, the provisions of Section 5.06(c) of the Sale and Servicing
Agreement regarding distributions from the Certificate Distribution Account.
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 the
Co-Owner Trustee shall direct the Paying Agent to
distribute to the Certificateholders, the Securities
Insurer, the Servicer and the Residual
Certificateholders from amounts on deposit in the
Certificate Distribution Account the distributions
as provided in Section 5.06 of the Sale and
Servicing Agreement with respect to such
Distribution Date.
(b) On each Distribution Date, the Owner Trustee shall
cause the Paying Agent to send to the DTC and each
Residual Interestholder the statement provided to
the Owner Trustee by the Servicer pursuant to
Section 6.01 of the Sale and Servicing Agreement
with respect to such Distribution Date.
(c) In the event that any withholding tax is imposed
on the Trust's payment (or allocations of income) to
an owner, such tax shall reduce the amount otherwise
distributable to the Owner in accordance with this
Section. The Owner Trustee is hereby authorized and
directed to retain from amounts otherwise
distributable to the Owners sufficient funds for the
payment of any tax that is legally owed by the Trust
(but such authorization shall not prevent the Owner
Trustee from contesting any such tax in appropriate
proceedings, and withholding payment of such tax, if
permitted by law, pending the outcome of such
proceedings). The amount of any withholding tax
imposed with respect to an Owner shall be treated as
cash distributed to such Owner at the time it is
withheld by the Trust and remitted to the
appropriate taxing authority. If there is a
possibility that withholding tax is payable with
respect to a distribution (such as a distribution to
a non- U.S. Owner), the Owner Trustee may in its
sole discretion withhold such
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<PAGE> 30
amounts in accordance with this paragraph (c). In
the event that an Owner wishes to apply for a refund
of any such withholding tax, the Owner Trustee shall
reasonably cooperate with such owner in making such
claim so long as such Owner agrees to reimburse the
Owner Trustee for any out-of-pocket expenses
incurred.
SECTION 5.3 Method of Payment. Subject to Section 3.11,
distributions required to be made to Owners on any Distribution Date shall be
made to each Owner of record on the preceding Record Date either by wire
transfer, in immediately available funds, to the account of such Holder at a
bank or other entity having appropriate facilities therefor, if such Owner
shall have provided to the Certificate Registrar appropriate written
instructions at least five Business Days prior to such Distribution Date and
such Holder's Certificates in the aggregate evidence a denomination of not less
than $1,000,000, or, if not, by check mailed to such Owner at the address of
such holder appearing in the Certificate Register.
SECTION 5.4 Segregation of Moneys; No Interest. Subject to
Sections 4.1 and 5.2, moneys received by the Owner Trustee hereunder and
deposited into the Certificate Distribution Account 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.
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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 $65,000,000, Class A-2 Notes in the aggregate
principal amount of $49,000,000, Class A-3 Notes in the aggregate principal
amount of $22,000,000, Class A-4 Notes in the aggregate principal amount of
$32,000,000, Class A-5 Notes in the aggregate principal amount of $20,000,000,
Class A-6 Notes in the aggregate principal amount of $47,000,000, Class A-7
Notes in the aggregate principal amount of $29,000,000, Class A-8 Notes in the
aggregate principal amount of $24,750,000 and Certificates in the aggregate
principal amount of $11,250,000. In addition to the foregoing, the Owner
Trustee is authorized, but shall not be obligated, to take all actions required
of the Trust, pursuant to the Basic Documents.
SECTION 6.2 General Duties. It shall be the duty of the Owner
Trustee:
(a) to discharge (or cause to be discharged) all of its
responsibilities pursuant to the terms of this
Agreement and the Basic Documents to which the Trust
is a party and to administer the Trust in the
interest of the Owners, subject to the Basic
Documents and in accordance with the provisions of
this Agreement. Notwithstanding the foregoing, the
Owner Trustee shall be deemed to have discharged its
duties and responsibilities hereunder and under the
Basic Documents to the extent the Administrator or
the Co-Owner Trustee has agreed in the
Administration Agreement or this Agreement,
respectively, to perform any act or to discharge any
duty of the Owner Trustee or the Trust hereunder or
under any Basic Document, and the Owner Trustee
shall not be held liable for the default or failure
of the Administrator or the Co-Owner Trustee to
carry out its obligations under the Administration
Agreement or this Agreement, respectively; and
(b) to obtain and preserve, the Issuer's qualification
to do business in each jurisdiction in which such
qualification is or shall be necessary to protect
the validity and enforceability of the Indenture,
the Notes, the Collateral and each other instrument
and agreement included in the Trust Estate.
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<PAGE> 32
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
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Basic Documents, as it shall deem to be in the best
interests of the Owners, and shall have no
liability to any Person for such action or
inaction.
SECTION 6.4 No Duties Except as Specified in this Agreement,
the Basic Documents or in Instructions. The Owner Trustee shall not have any
duty or obligation to manage, make any payment with respect to, register,
record, sell, dispose of, or otherwise deal with the Owner Trust Estate, or to
otherwise take or refrain from taking any action under, or in connection with,
any document contemplated hereby to which the Owner Trustee is a party, except
as expressly provided by the terms of this Agreement, any Basic Document or in
any document or written instruction received by the Owner Trustee pursuant to
Section 6.3; and no implied duties or obligations shall be read into this
Agreement or any Basic Document against the Owner Trustee. The Owner Trustee
shall have no responsibility for filing any financing or continuation statement
in any public office at any time or to otherwise perfect or maintain the
perfection of any security interest or lien granted to it hereunder or to
prepare or file any Securities and Exchange Commission filing for the Trust or
to record this Agreement or any Basic Document. The Owner Trustee nevertheless
agrees that it will, at its own cost and expense, promptly take all action as
may be necessary to discharge any liens on any part of the Owner Trust Estate
that result from actions by, or claims against, the Owner Trustee that are not
related to the ownership or the administration of the Owner Trust Estate.
SECTION 6.5 No Action Except Under Specified Documents or
Instructions. The Owner Trustee shall not manage, control, use, sell, dispose
of or otherwise deal with any part of the Owner Trust Estate except (i) in
accordance with the powers granted to and the authority conferred upon the
Owner Trustee pursuant to this Agreement, (ii) in accordance with the Basic
Documents and (iii) in accordance with any document or instruction delivered to
the owner Trustee pursuant to Section 6.3.
SECTION 6.6 Restrictions. The Owner Trustee shall not take any
action (a) that is inconsistent with the purposes of the Trust set forth in
Section 2.3 or (b) that, to the actual knowledge of the Owner Trustee, would
result in the Trust's becoming taxable as a corporation for Federal income tax
purposes. The Owners shall not direct the Owner Trustee to take action that
would violate the provisions of this Section.
ARTICLE VII
Concerning the Owner Trustee
SECTION 7.1 Acceptance of Trusts and Duties. The Owner Trustee
accepts the trusts hereby created and agrees to perform its duties hereunder
with respect to such trusts but only upon the terms of this Agreement and the
Basic Documents. The Owner Trustee also agrees to disburse all moneys actually
received by it constituting part of the Owner Trust Estate upon the terms of
the Basic Documents and this Agreement. The Owner Trustee shall not be
answerable or accountable hereunder or under any Basic Document under any
circumstances, except (i) for its own willful misconduct or gross negligence or
(ii) in the case of the inaccuracy of any representation or warranty contained
in Section 7.3 expressly made by the Owner Trustee. In particular, but not by
way of limitation (and subject to the exceptions set forth in the preceding
sentence):
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(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
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in this Agreement or in any Basic Document shall
not be construed as a duty, and the Owner Trustee
shall not be answerable for other than its gross
negligence or willful misconduct in the performance
of any such act provided, that the Owner Trustee
shall be liable for its negligence or willful
misconduct in the event that it assumes the duties
and obligations of the Co-Owner Trustee under the
Sale and Servicing Agreement pursuant to Section
10.5 hereof.
SECTION 7.2 Furnishing of Documents. The Owner Trustee shall
furnish (a) to the Owners promptly upon receipt of a written request therefor,
duplicates or copies of all reports, notices, requests, demands, certificates,
financial statements and any other instruments furnished to the Owner Trustee
under the Basic Documents and (b) to Noteholders promptly upon written request
therefor, copies of the Sale and Servicing Agreement, the Administration
Agreement and the Trust Agreement.
SECTION 7.3 Representations and Warranties.
(a) The Owner Trustee hereby represents and warrants to
the Depositor and the Company, for the benefit of
the Owners, that:
(i) It is a banking corporation duly organized
and validly existing in good standing under
the laws of the State of Delaware. It has
all requisite corporate power and authority
to execute, deliver and perform its
obligations under this Agreement.
(ii) It has taken all corporate action necessary
to authorize the execution and delivery by it
of this Agreement, and this Agreement will be
executed and delivered by one of its officers
who is duly authorized to execute and deliver
this Agreement on its behalf.
(iii) Neither the execution nor the delivery by it
of this Agreement nor the consummation by it
of the transactions contemplated hereby nor
compliance by it with any of the terms or
provisions hereof will contravene any Federal
or Delaware law, governmental rule or
regulation governing the banking or trust
powers of the owner Trustee or any judgment
or order binding on it, or constitute any
default under its charter documents or
by-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
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requisite corporate power and authority to
execute, deliver and perform its obligations
under this Agreement.
(ii) It has taken all corporate action necessary
to authorize the execution and delivery by it
of this Agreement, and this Agreement will be
executed and delivered by one of its officers
who is duly authorized to execute and deliver
this Agreement on its behalf.
(iii) Neither the execution nor the delivery by it
of this Agreement nor the consummation by it
of the transactions contemplated hereby nor
compliance by it with any of the terms or
provisions hereof will contravene any Federal
or Minnesota law, governmental rule or
regulation governing the banking or trust
powers of the owner Trustee or any judgment
or order binding on it, or constitute any
default under its charter documents or
by-laws or any indenture, mortgage, contract,
agreement or instrument to which it is a
party or by which any of its properties may
be bound.
SECTION 7.4 Reliance; Advice of Counsel.
(a) The Owner Trustee shall incur no liability to
anyone in acting upon any signature, instrument,
notice, resolution, request, consent, order,
certificate, report, opinion, bond, or other
document or paper believed by it to be genuine and
believed by it to be signed by the proper party or
parties. The Owner Trustee may accept a certified
copy of a resolution of the board of directors or
other governing body of any corporate party as
conclusive evidence that such resolution has been
duly adopted by such body and that the same is in
full force and effect. As to any fact or matter
the method of the determination of which is not
specifically prescribed herein, the Owner Trustee
may for all purposes hereof rely on a certificate,
signed by the president or any vice president or by
the treasurer or other authorized officers of the
relevant party, as to such fact or matter and such
certificate shall constitute full protection to the
Owner Trustee for any action taken or omitted to be
taken by it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts
hereunder and in the performance of its duties and
obligations under this Agreement or the Basic
Documents, the Owner Trustee (i) may act directly
or through its agents or attorneys pursuant to
agreements entered into with any of them, and the
Owner Trustee shall not be liable for the conduct
or misconduct of such agents or attorneys if such
agents or attorneys shall have been selected by the
Owner Trustee with reasonable care, and (ii) may
consult with counsel, accountants and other skilled
persons to be selected with reasonable care and
employed by it. The Owner Trustee shall not be
liable for anything done, suffered or omitted in
good faith by it in accordance with the written
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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 Owner Trustee on the Trust
Certificates) shall be taken as the statements of the Depositor and the
Company, and the Owner Trustee assumes no responsibility for the correctness
thereof. The Owner Trustee makes no representations as to the validity or
sufficiency of this Agreement, of any Basic Document or of the Trust
Certificates (other than the signature and countersignature of the Owner
Trustee on the Trust Certificates and as specified in Section 7.3) or the
Notes, or of any Home Loans or related documents. The Owner Trustee shall at
no time have any responsibility or liability for or with respect to the
legality, validity and enforceability of any Home Loan, or the perfection and
priority of any security interest created by any Home Loan or the maintenance
of any such perfection and priority, or for or with respect to the sufficiency
of the Owner Trust Estate or its ability to generate the payments to be
distributed to Owners under this Agreement or the Noteholders under the
Indenture, including, without limitation: the existence, condition and
ownership of any Mortgaged Property; the existence and enforceability of any
insurance thereon; the existence and contents of any Home Loan on any computer
or other record thereof; the validity of the assignment of any Home Loan to the
Trust or of any intervening assignment; the completeness of any Home Loan; the
performance or enforcement of any Home Loan; the compliance by the Depositor,
the Company or the Servicer with any warranty or representation made under any
Basic Document or in any related document or the accuracy of any such warranty
or representation or any action of the Administrator, the Indenture Trustee or
the Servicer or any subservicer taken in the name of the Owner Trustee.
SECTION 7.7 Owner Trustee May Own Trust Certificates and Notes.
The Owner Trustee in its individual or any other capacity may become the owner
or pledgee of Trust Certificates or Notes and may deal with the Depositor, the
Company, the Administrator, the Indenture Trustee and the Servicer in banking
transactions with the same rights as it would have if it were not Owner
Trustee.
SECTION 7.8 Licenses. The Owner Trustee shall cause the Trust
to use its best efforts to obtain and maintain the effectiveness of any
licenses required in connection with this Agreement and the Basic Documents and
the transactions contemplated hereby and thereby until such time as the Trust
shall terminate in accordance with the terms hereof.
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ARTICLE VIII
Compensation of Owner Trustee
SECTION 8.1 Owner Trustee's Fees and Expenses. The Owner
Trustee shall receive as compensation for its services hereunder such fees as
have been separately agreed upon before the date hereof between the Company and
the Owner Trustee, and the Owner Trustee shall be entitled to be reimbursed by
the Company for its other reasonable expenses hereunder, including the
reasonable compensation, expenses and disbursements of such agents,
representatives, experts and counsel as the Owner Trustee may employ in
connection with the exercise and performance of its rights and its duties
hereunder.
SECTION 8.2 Indemnification. The Depositor shall be liable as
primary obligor, and the Servicer as secondary obligor pursuant to the
Administration Agreement, for, and shall indemnify the Owner Trustee and its
successors, assigns, agents and servants (collectively, the "Indemnified
Parties") from and against, any and all liabilities, obligations, losses,
damages, taxes, claims, actions and suits, and any and all reasonable costs,
expenses and disbursements (including reasonable legal fees and expenses) of
any kind and nature whatsoever (collectively, "Expenses") which may at any time
be imposed on, incurred by, or asserted against the Owner Trustee or any
Indemnified Party in any way relating to or arising out of this Agreement, the
Basic Documents, the Owner Trust Estate, the administration of the Owner Trust
Estate or the action or inaction of the Owner Trustee hereunder, except only
that the Depositor shall not be liable for or required to indemnify an
Indemnified Party from and against Expenses arising or resulting from any of
the matters described in the third sentence of Section 7.01. The indemnities
contained in this Section shall survive the resignation or termination of the
Owner Trustee or the termination of this Agreement. In any event of any claim,
action or proceeding for which indemnity will be sought pursuant to this
Section, the Owner Trustee's choice of legal counsel shall be subject to the
approval of the Depositor, which approval shall not be unreasonably withheld.
SECTION 8.3 Payments to the Owner Trustee. Any amounts paid to
the Owner Trustee pursuant to this Article VIII shall be deemed not to be a
part of the Owner Trust Estate immediately after such payment.
ARTICLE IX
Termination of Trust Agreement
SECTION 9.1 Termination of Trust Agreement.
(a) This Agreement (other than Article VIII) and the
Trust shall terminate and be of no further force or
effect on the earlier of: (i) the satisfaction and
discharge of the Indenture pursuant to Section 4.1
of the Indenture and the termination of the Sale and
Servicing Agreement; (ii) at the time provided in
Section 9.2.; and (iii) the expiration of 21 years
from the death of the last survivor of the
descendants of Joseph P. Kennedy (The late
ambassador of
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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.
(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
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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.
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
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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 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
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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 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.
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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 distributions therefrom to the Persons entitled
thereto pursuant to Section 5.06 of the Sale and Servicing Agreement. The
Owner Trustee and the Co-Owner Trustee each agree that upon the occurrence and
continuation of a Securities Insurer Default, the Co-Owner Trustee shall resign
and the Owner Trustee shall assume the duties and obligations of the Co-Owner
Trustee under the Sale and Servicing Agreement and this Agreement, including
without limitation, the obligations of the Co-Owner Trustee as Paying Agent
pursuant to Section 3.9 hereof.
Each separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provision and
conditions:
(i) all rights, powers, duties and obligations
conferred or imposed upon the Owner Trustee
shall be conferred upon and exercised or
performed by the Owner Trustee and such
separate trustee or co-trustee jointly (it
being understood that such separate trustee
or co-trustee is not authorized to act
separately without the Owner Trustee
joining in such act), except to the extent
that under any law of any
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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.
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
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<PAGE> 45
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 Basic Document) and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject to such reasonable
requirements as the Owner Trustee may prescribe.
Promptly after the execution of any amendment to the Certificate of
Trust, the Owner Trustee shall cause the filing of such amendment with the
Secretary of State.
Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement. The Owner Trustee may, but shall
not be obligated to, enter into any such amendment which affects the Owner
Trustee's own rights, duties or immunities under this Agreement or otherwise.
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<PAGE> 46
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 1996-3, telephone: 914-765-3810, confirmation: 914-765-3781;
(v) if to the Co-Owner Trustee, First Bank National Association, 180 East Fifth
Street, St. Paul, Minnesota 55101, Attention: Corporate Trust Department; or,
as to each such party, at such other address as shall be designated by such
party in a written notice to each other party.
(b) Any notice required or permitted to be given to an Owner shall
be given by first-class mail, postage prepaid, at the address of such Owner as
shown in the Certificate Register. Any notice so mailed within the time
prescribed in this Agreement shall be conclusively presumed to have been duly
given, whether or not the Owner receives such notice.
SECTION 11.5 Severability. Any provision of this Agreement that
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
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.
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<PAGE> 47
SECTION 11.7 Successors and Assigns. All covenants and
agreements contained herein shall be binding upon, and inure to the benefit of,
the Depositor, the Company, the Securities Insurer, the Owner Trustee and its
successors and each owner and its successors and permitted assigns, all as
herein provided. Any request, notice, direction, consent, waiver or other
instrument or action by an Owner shall bind the successors and assigns of such
Owner.
SECTION 11.8 Covenants of the Company. In the event that (a)
the Certificate Principal Balance shall be reduced by Realized Losses and (b)
any litigation with claims in excess of $1,000,000 to which the Company is a
party which shall be reasonably likely to result in a material judgment against
the Company that the Company will not be able to satisfy shall be commenced by
an Owner, during the period beginning nine months following the commencement of
such litigation and continuing until such litigation is dismissed or otherwise
terminated (and, if such litigation has resulted in a final judgment against
the Company, such judgment has been satisfied), the Company shall not pay any
dividend to RAC, or make any distribution on or in respect of its capital stock
to RAC, or repay the principal amount of any indebtedness of the Company held
by RAC, unless (i) after giving effect to such payment, distribution or
repayment, the Company's liquid assets shall not be less than the amount of
actual damages claimed in such litigation or (ii) the Rating Agency Condition
shall have been satisfied with respect to any such payment, distribution or
repayment and the Securities Insurer consents to such payment. The Company
will not at any time institute against the Trust any bankruptcy proceedings
under any United States Federal or state bankruptcy or similar law in
connection with any obligations relating to the Trust Certificates, the Notes,
the Trust Agreement or any of the Basic Documents.
SECTION 11.9 No Petition. The Owner Trustee, by entering into
this Agreement, each Owner, by accepting a Trust Certificate, and the Indenture
Trustee and each Noteholder by accepting the benefits of this Agreement, hereby
covenant and agree that they will not at any time institute against the
Company, the Depositor or the Trust, or join in any institution against the
Company or the Trust of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any United
States Federal or state bankruptcy or law in connection with any obligations
relating to the Trust Certificates, the Notes, this Agreement or any of the
Basic Documents.
SECTION 11.10 No Recourse. Each Owner by accepting a Trust
Certificate acknowledges that such Owner's Trust Certificate represents a
beneficial interest in the Trust only and does not represent an interest in or
an obligation of the Seller, the Servicer, the Company, the Administrator, the
Owner Trustee, the Co-Owner Trustee or any Affiliate thereof and no recourse
may be had against such parties or their assets, except as may be expressly set
forth or contemplated in this Agreement, the Trust Certificates or the Basic
Documents.
SECTION 11.11 Headings. The headings of the various Articles
and Sections herein are for convenience of reference only and shall not define
or limit any of the terms or provisions hereof.
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<PAGE> 48
SECTION 11.12 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.13 Certificate and Residual Interest Transfer
Restrictions. Neither the Certificates nor the Residual Interest may be
acquired, by or for the account of (i) an employee benefit plan (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) that is subject to the provisions of Title I of ERISA, (ii) a plan
described in Section 4975(e)(1) of the Internal Revenue Code of 1986, as
amended, or (iii) any entity, including an insurance company separate account
or general account, whose underlying assets include plan assets by reason of a
plan's investment in the entity (each, a "Benefit Plan"). By accepting and
holding a Trust Certificate, the Owner thereof shall be deemed to have
represented and warranted that it is not a Benefit Plan.
SECTION 11.14 Grant of Certificateholder and Residual Interest
Holder Rights to Securities Insurer.
(a) In consideration for the guarantee of the
Certificates by the Securities Insurer pursuant to
the Guaranty Policy, the Certificateholders hereby
grant to the Securities Insurer the right to act as
the Holder of 100% of the outstanding Certificates
for the purpose of exercising the rights of the
Certificateholders under this Agreement without the
consent of the Certificateholders, including the
voting rights of such holders hereunder, but
excluding those rights requiring the consent of all
such Holders under Section 11.1 and any rights of
such Holders to distributions under Section 5.06 of
the Sale and Servicing Agreement; provided that the
preceding grant of rights to the Securities Insurer
by the Certificateholders shall be subject to
Section 11.16.
(b) In consideration for the issuance of the Residual
Interest and for the guarantee of the
Certificates by the Securities Insurer pursuant
to the Guaranty Policy, the holders of the
Residual Interest hereby grant to the Securities
Insurer the right to act as the holder of 100% of
the Residual Interest for the purpose of
exercising the rights of the holders of the
Residual Interest under this Agreement, including
the voting rights of such holders hereunder, but
excluding those rights requiring the consent of
all such holders under Section 11.1 and any
rights of such holders to Distributions under
Section 5.06 of the Sale and Servicing Agreement;
provided that the preceding grant of rights to
the Securities Insurer by the holders of the
Residual Interest shall be subject to Section
11.16.
(c) The rights of the Securities Insurer to direct
certain actions and consent to certain actions of
the Certificateholders hereunder will terminate
at such time as the Certificate Principal Balance
of the Certificates has been
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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..
(b) At such time as either (i) the Certificate
Principal Balance has been reduced to zero or
(ii) the Guaranty Policy has been terminated, and
in either case of (i) or (ii) the Securities
Insurer has been reimbursed for all Guaranteed
Payments and any other amounts owed under the
Guaranty Policy and the Insurance Agreement (and
the Securities Insurer no longer has any
obligation under the Guaranty Policy, except for
breach thereof by the Securities Insurer), then
the rights and benefits granted or reserved to
the Securities Insurer hereunder (including the
rights to direct certain actions and receive
certain notices) shall terminate and the Owner
shall be entitled to the exercise of such rights
and to receive such benefits of the Securities
Insurer following such termination to the extent
that such rights and benefits are applicable to
the Owners.
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<PAGE> 50
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: Emmett R. Harmon Title:
Vice President
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> 51
EXHIBIT A
TO THE TRUST AGREEMENT
(FORM OF CERTIFICATE)
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<PAGE> 52
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO. HAS AN INTEREST HEREIN.
THIS CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION OF FIRSTPLUS
INVESTMENT CORPORATION, FIRSTPLUS FINANCIAL, INC. OR ANY OF THEIR RESPECTIVE
AFFILIATES, EXCEPT TO THE EXTENT DESCRIBED BELOW.
FIRSTPLUS HOME LOAN OWNER TRUST 1996-3
8.30% ASSET BACKED CERTIFICATE
evidencing a fractional undivided interest in the Trust, as defined below, the
property of which includes a pool of Home Loans sold to the Trust by FIRSTPLUS
INVESTMENT CORPORATION.
NUMBER:______ FRACTIONAL UNDIVIDED INTEREST: __________/11,250,00th CUSIP
NO. 337928 AH 8
(See Reverse Pages for certain definitions)
THIS CERTIFIES THAT___________ is the registered owner of a
_________/11,250,000th nonassessable, fully-paid, fractional undivided interest
in FIRSTPLUS HOME LOAN OWNER TRUST 1996-3 (the "Trust") formed by FIRSTPLUS
INVESTMENT CORPORATION, a Nevada corporation (the "Seller").
The Trust was created pursuant to a Trust Agreement dated as of
September 1, 1996 (as amended and supplemented from time to time, the "Trust
Agreement"), among the Seller, FIRSTPLUS RESIDUAL HOLDINGS, INC a Nevada
corporation (the "Company"), Wilmington Trust Company, as owner trustee (the
"Owner Trustee") and First Bank National Association, as Co-Owner Trustee (the
"Co-Owner Trustee"), a summary of certain of the pertinent provisions of which
is set forth below. To the extent not otherwise defined herein, the
capitalized terms used herein have the meanings assigned to them in the Trust
Agreement or the Sale and Servicing Agreement dated as of September 1, 1996 (as
amended and supplemented from time to time, the "Sale and Servicing
Agreement"), among the Trust, the Seller, FIRSTPLUS INVESTMENT CORPORATION, as
servicer (the "Servicer") and the Co-Owner Trustee, as applicable.
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<PAGE> 53
This Certificate is one of the duly authorized Certificates designated
as "FIRSTPLUS Asset Backed Certificates, Series 1996-3" (herein called the
"Certificates") issued under the Trust Agreement. Also issued under an
Indenture dated as of September 1, 1996, between the Trust and First Bank
National Association, as Indenture Trustee, are the eight classes of Notes
designated as "FIRSTPLUS Asset Backed Notes, Series 1996-3, 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
(collectively, the "Notes"). This Certificate is issued under and is subject
to the terms, provisions and conditions of the Trust Agreement to which Trust
Agreement the holder of this Certificate by virtue of the acceptance hereof
assents and by which such holder is bound. Payments of principal and interest
on this Certificate shall be made by First Bank National Association, in its
capacity as Co-Owner Trustee under the Sale and Servicing Agreement. The
property of the Trust includes a pool of Initial Home Loans and Subsequent Home
Loans (collectively, the "Home Loans"), all monies due thereunder on or after
the respective Cut-off Dates thereof, certain bank accounts and the proceeds
thereof, proceeds from claims on certain insurance policies and certain other
rights under the Trust Agreement and the Sale and Servicing Agreement and all
proceeds of the foregoing. The rights of the holders of the Certificates are
subordinated to the rights of the holders of the Notes, as set forth in the
Sale and Servicing Agreement and the Indenture.
Under the Trust Agreement, there will be distributed on the 20th day
of each month or, if such 20th day is not a Business Day, the next Business
Day, (each, a "Distribution Date"), commencing in October, 1996, to the person
in whose name this Certificate is registered at the close of business on the
last Business Day of the month immediately preceding the month in which each
Distribution Date occurs (the "Record Date") such Certificateholder's
fractional undivided interest in the Certificateholder Distributable Amount to
Certificateholders on such Distribution Date pursuant to Section 5.06 of the
Sale and Servicing Agreement; provided however, that no principal will be
distributed to the Certificateholders until on or after the Distribution Date
on which the Class A-8 Notes have been paid in full.
The holder of this Certificate acknowledges and agrees that its rights
to receive distributions in respect of this Certificate are subordinated to the
rights of the Noteholders as described in the Sale and Servicing Agreement and
the Indenture.
It is the intent of the Seller, the Company, the Servicer and the
Certificateholders that, for purposes of Federal Income, state and local income
and single business tax and any other income taxes, the Trust will be treated
as a partnership and the Certificateholders (including the Company) will be
treated as partners in that partnership. The Company and the other
Certificateholders by acceptance of a Certificate, agree to treat, and to take
no action inconsistent with the treatment of, the Certificates for such tax
purposes as partnership interests in the Trust.
Each Certificateholder or Certificate Owner, by its acceptance of a
Certificate or, in the case of a Certificate Owner, a beneficial interest in a
Certificate, covenants and agrees that such Certificateholder or Certificate
Owner, as the case may be, will not at any time institute against the Company,
or join in any institution against the Company 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 Certificates, the Notes, the
Trust Agreement or any of the Basic Documents.
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<PAGE> 54
Distributions on this Certificate will be made as provided in the
Trust Agreement, and the Indenture by the Indenture Trustee by wire transfer or
check mailed to the Certificateholder of record in the Certificate Register
without the presentation or surrender of this Certificate or the making of any
notation hereon, except that with respect to Certificates registered on the
Record Date in the name of the nominee of the Clearing Agency (initially, such
nominee to be Cede & Co.), payments will be made by wire transfer in
immediately available funds to the account designated by such nominee. Except
as otherwise provided in the Trust Agreement and notwithstanding the above, the
final distribution on this Certificate will be made after due notice by the
Co-Owner Trustee of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the office or agency
maintained for the purpose by the Co-Owner Trustee in the Borough of Manhattan,
The City of New York.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
[Remainder of page intentionally left blank]
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<PAGE> 55
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Owner Trustee, by manual or facsimile
signature, this Certificate shall not entitle the holder hereof to any benefit
under the Trust Agreement or the Sale and Servicing Agreement or be valid for
any purpose.
THIS TRUST CERTIFICATE 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.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not
in its individual capacity, has caused this Certificate to be duly executed.
FIRSTPLUS HOME LOAN OWNER TRUST 1996-3
By: Wilmington Trust Company, not in its
individual capacity but solely as
Owner Trustee under the Trust
Agreement
By:
----------------------------
Authorized Signatory
DATED:
-------------------
CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned
Trust Agreement.
FIRST BANK NATIONAL ASSOCIATION,
as Authenticating Agent
By:
----------------------------------
Authorized Signatory
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<PAGE> 56
(REVERSE OF TRUST CERTIFICATE)
The Certificates do not represent an obligation of, or an interest in,
the Seller, the Servicer, the Company, the Owner Trustee, the Co-Owner Trustee
or any affiliates of any of them and no recourse may be had against such
parties or their assets, except as may be expressly set forth or contemplated
herein or in the Trust Agreement or the Basic Documents. In addition, this
Certificate is not guaranteed by any governmental agency or instrumentality and
to limited in right of payment to certain collections with respect to the Home
Loans (and certain other amounts), all as more specifically set forth herein
and in the Sale and Servicing Agreement. The Certificates are limited in right
of payment to certain collections and recoveries respecting the Home Loans, all
as more specifically set forth in the Sale and Servicing Agreement and the
Indenture. A copy of each of the Sale and Servicing Agreement, the Indenture
and the Trust Agreement may be examined during normal business hours at the
principal office of the Seller, and at such other places, if any, designated by
the Seller, by any Certificateholder upon written request.
MBIA Insurance Corporation, as the Securities Insurer, has issued a
Guaranty Policy in the name of the Indenture Trustee for the benefit of the
Certificateholders, which policy guarantees payments on each Distribution Date
to the Indenture Trustee for the benefit of the Certificateholders of the
related Certificateholders' Interest Distributable Amount and the portion of
the Regular Principal Distribution Amount then payable on the Certificates.
Unless a Securities Insurer Default shall be continuing, the Securities Insurer
shall be deemed to be the Holder of 100% of the outstanding Certificates for
the purpose of exercising the rights, including voting rights, of the
Certificateholders under the Trust Agreement and the Sale and Servicing
Agreement. In addition, on each Distribution Date, after the
Certificateholders have been paid all amounts to which they are entitled, the
Securities Insurer will be entitled to be reimbursed for any unreimbursed
Guaranteed Payments and any other amounts owed under the Guaranty Policy.
The Trust Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of the
Seller and the Company and the rights of the Certificateholders under the Trust
Agreement at any time by the Seller, the Company and the Owner Trustee with the
consent of the holders of the Notes and the Certificates each voting as a class
evidencing not less than a majority of the outstanding Notes and the
Certificate Principal Balance. Any such consent by the holder of this
Certificate shall be conclusive and binding on such holder and on all future
holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange herefor or in lieu hereof whether or not notation of such
consent is made upon this Certificate. The Trust Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
holders of any of the Certificates.
As provided in the Trust Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registerable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies of the Certificate Registrar maintained by
the Co-Owner Trustee in the Borough of Manhattan, The City of New York,
accompanied by a written instrument of transfer in form satisfactory to the Co-
Owner Trustee and the Certificate Registrar duly executed by the holder hereof
or such holder's attorney duly authorized in writing, and thereupon one or more
new Certificates of authorized denominations evidencing the same aggregate
interest
-5-
<PAGE> 57
in the Trust will be issued to the designated transferee. The initial
Certificate Registrar appointed under the Trust Agreement is the Co-Owner
Trustee.
The Certificates are issuable only as registered Certificates without
coupons in denominations of $100,000 and in integral multiples of $1,000 in
excess thereof. As provided in the Trust Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of authorized denominations evidencing the same aggregate
denomination, as requested by the holder surrendering the same. No service
charge will be made for any such registration of transfer or exchange, but the
Co-Owner Trustee or the Certificate Registrar may require payment of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
The Owner Trustee, the Co-Owner Trustee, the Certificate Registrar and
any agent of the Owner Trustee, the Co-Owner Trustee or the Certificate
Registrar may treat the person in whose name this Certificate is registered as
the owner hereof for all purposes and none of the Owner Trustee, the Co-Owner
Trustee, the Certificate Registrar or any such agent shall be affected by any
notice to the contrary.
The obligations and responsibilities created by the Trust Agreement
and the Trust created thereby and the Servicing Agreement shall terminate
eighteen months after the payment to Certificateholders of all amounts required
to be paid to them pursuant to the Trust Agreement and the Sale and Servicing
Agreement and the disposition of all property held as part of the Trust. The
Company may at its option purchase the corpus of the Trust at a price specified
in the Sale and Servicing Agreement, and such purchase of the Home Loans and
other property of the Trust will effect early retirement of the Certificates;
however, such right of purchase is exercisable only on a Distribution Date on
which the Pool Principal Balance is less than or equal to 15% of the Pool
Principal Balance of the Initial Home Loans and the Subsequent Home Loans
conveyed to the Trust as of the respective Cut-off Dates.
The Certificates may not be acquired by (a) an employee benefit plan
(as defined in Section 3(3) of ERISA) that is subject to the provisions of
Title I of ERISA, (b) a plan described in Section 4975(e)(1) of the Code or (c)
any entity, including an insurance company separate 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 this Certificate, the
Holder hereof shall be deemed to have represented and warranted that it is not
a Benefit Plan.
-6-
<PAGE> 58
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
- --------------------------------------------------------------------------------
(Please print or type name and address, including postal zip code, of assignee)
- --------------------------------------------------------------------------------
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
- --------------------------------------------------------------------------------
Attorney to transfer said Certificate on the books of the Certificate
Registrar, with full power of substitution in the premises.
Dated:
---------------------
*/
--------------------------------
Signature Guaranteed:
*/
--------------------------------
- --------------------
*/ NOTICE: The signature to this assignment must correspond with the
name as it appears upon the face of the within Certificate in every particular,
without alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the Now York Stock Exchange or a commercial bank
or trust company.
-7-
<PAGE> 59
EXHIBIT A-2
TO THE TRUST AGREEMENT
(FORM OF CERTIFICATE ISSUED TO THE COMPANY)
-1-
<PAGE> 60
EXHIBIT B
TO THE TRUST AGREEMENT
(FORM OF RESIDUAL INTEREST INSTRUMENT]
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 PERSON IS
OBLIGATED TO REGISTER THIS RESIDUAL INTEREST UNDER THE ACT OR ANY STATE
SECURITIES LAWS.
NO TRANSFER OF THIS RESIDUAL INTEREST INSTRUMENT OR ANY BENEFICIAL INTEREST
THEREIN SHALL BE MADE TO ANY PERSON UNLESS THE OWNER TRUSTEE HAS RECEIVED A
CERTIFICATE FROM THE TRANSFEREE TO THE EFFECT THAT SUCH TRANSFEREE (I) IS NOT A
PERSON WHICH IS AN EMPLOYEE BENEFIT PLAN, TRUST OR ACCOUNT SUBJECT TO TITLE I
OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA") OR
SECTION 4975 OF THE CODE OR A GOVERNMENTAL PLAN, DEFINED IN SECTION 3(32) OF
ERISA SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A MATERIAL
EXTENT, SIMILAR TO THE FOREGOING PROVISIONS OF ERISA OR THE CODE (ANY SUCH
PERSON BEING A "PLAN") AND (II) IS NOT AN 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.
[THIS AGREEMENT IS NONTRANSFERABLE. NOTWITHSTANDING ANYTHING HEREIN OR IN THE
TRUST AGREEMENT TO THE CONTRARY, ANY ATTEMPTED TRANSFER OF THIS RESIDUAL
INTEREST INSTRUMENT SHALL BE NULL AND VOID FOR ALL PURPOSES.]
-1-
<PAGE> 61
FIRSTPLUS HOME LOAN OWNER TRUST 1996-3
RESIDUAL INTEREST CERTIFICATE
No. _____
THIS CERTIFIES THAT __________________________________ (the "Owner")
is the registered owner of a _____% residual interest in FIRSTPLUS HOME LOAN
OWNER TRUST 1996-3 (the "Trust") existing under the laws of the State of
Delaware and created pursuant to the Trust Agreement dated as of September 1,
1996 (the "Trust Agreement") between FIRSTPLUS INVESTMENT CORPORATION, as
Depositor, FIRSTPLUS RESIDUAL HOLDINGS, INC., as the Company, WILMINGTON TRUST
COMPANY, not in its individual capacity but solely in its fiduciary capacity as
owner trustee under the Trust Agreement (the "Owner Trustee") and First Bank
National Association, as Co-Owner Trustee (the "Co-Owner Trustee"). Initially
capitalized terms used but not defined herein have the meanings assigned to
them in the Trust Agreement. The Owner Trustee, on behalf of the Issuer and
not in its individual capacity, has executed this Residual Interest Instrument
by one of its duly authorized signatories as set forth below. This Residual
Interest Instrument is one of the Residual Interest Instruments referred to in
the Trust Agreement and is issued under and is subject to the terms, provisions
and conditions of the Trust Agreement to which the holder of this Residual
Interest Instrument by virtue of the acceptance hereof agrees and by which the
holder hereof is bound. Reference is hereby made to the Trust Agreement and
the Sale and Servicing Agreement for the rights of the holder of this Residual
Interest Instrument, as well as for the terms and conditions of the Trust
created by the Trust Agreement.
The holder, by its acceptance hereof, agrees not to transfer this
Residual Interest Instrument [except in accordance with terms and provisions of
the Agreement].
-2-
<PAGE> 62
THIS RESIDUAL INTEREST INSTRUMENT 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.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not
in its individual capacity, has caused this Residual Interest Instrument to be
duly executed.
FIRSTPLUS HOME LOAN OWNER TRUST 1996-3
By: Wilmington Trust Company, not in its
individual capacity but solely as
Owner Trustee under the Trust
Agreement
By:
---------------------------------
DATED: September 27, 1996 Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Residual Interest referred to in the within-
mentioned Agreement.
FIRST BANK NATIONAL ASSOCIATION,
as Authenticating Agent
By:
-----------------------------------------
Authorized Signatory
-3-
<PAGE> 63
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
- --------------------------------------------------------------------------------
(Please print or type name and address, including postal zip code, of assignee)
- --------------------------------------------------------------------------------
the within Instrument, and all rights thereunder, hereby irrevocably
constituting and appointing
Attorney to
- -------------------------------------------------------------------
transfer said Instrument on the books of the Certificate Registrar, with full
power of substitution in the premises.
Dated:
--------------------
*/
-----------------------------------
Signature Guaranteed:
*/
-----------------------------------
- --------------------
*/ NOTICE: The signature to this assignment must correspond with the name
as it appears upon the face of the within Certificate in every particular,
without alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the Now York Stock Exchange or a commercial bank
or trust company.
-4-
<PAGE> 64
EXHIBIT B-2
TO THE TRUST AGREEMENT
(FORM OF RESIDUAL INTEREST ISSUED TO THE COMPANY)
-1-
<PAGE> 65
EXHIBIT C
TO THE TRUST AGREEMENT
CERTIFICATE OF TRUST OF
FIRSTPLUS HOME LOAN OWNER TRUST 1996-3
THIS Certificate of Trust of FIRSTPLUS HOME LOAN OWNER TRUST 1996-3
(the "Trust"), dated as of September __, 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 1996-3.
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
September 1 1996.
By:
-------------------------------------------
Name:
Title:
-1-
<PAGE> 66
EXHIBIT D TO
THE TRUST AGREEMENT
(Form of Demand Note)
-2-
<PAGE> 67
EXHIBIT E
TO THE TRUST AGREEMENT
(Form of Certificate Depository Agreement)
SEE TAB NUMBER 9
-3-
<PAGE> 1
EXHIBIT 10.1
LOAN SALE AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
This LOAN SALE AGREEMENT dated as of September 27, 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 August 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 1996-3 (the "Trust") in order to facilitate the issuance by
the Trust of a series of asset backed notes and certificates (the "Asset
Backed Securities");
NOW, THEREFORE, in consideration of these premises and of the mutual
agreements herein set forth, Purchaser and FFI each agree as follows:
Section 1. Representations and Warranties.
FFI hereby represents and warrants to the Purchaser and the Issuer, with
respect to each Subsequent Home Loan, as of the applicable Subsequent Transfer
Date; and with respect to each Initial Home Loan, as of the date hereof (each,
a "Closing Date") and with respect to itself, as follows:
(a) Home Loan Information. The information with respect to each Home
Loan set forth in the Home Loan Schedule is true and correct in all material
respects as of the applicable Cut-Off Date.
(b) Delivery of Home Loan Documents. All of the original or
certified documentation required to be delivered to the Indenture Trustee or to
the Custodian on or prior to the Closing Date
<PAGE> 2
or the Subsequent Transfer Date, as applicable, or as otherwise provided in
this Agreement has or will be so delivered.
(c) Payments Current. As of the applicable Cut-off Date, no more
than 0.15% (by aggregate Cut-off Date Principal Balance) of the Initial Home
Loans are more than 30 days but not more than 60 days delinquent, based on the
terms under which the related Mortgages, 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.
(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
-2-
<PAGE> 3
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.
-3-
<PAGE> 4
(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.
-4-
<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 August 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)
-5-
<PAGE> 6
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- 2/3% 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 fulfulling 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.
-6-
<PAGE> 7
(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.
-7-
<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
Secutities . 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
-8-
<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 September 1, 1996, by and between FFI, as
Transferor and Servicer, the Purchaser, as Seller, FIRSTPLUS HOME LOAN TRUST
1996-3, as Issuer and First Bank National Association, as Indenture Trustee and
Co-Owner Trustee.
-9-
<PAGE> 10
IN WITNESS WHEREOF, the undersigned Purchaser and FFI have executed this
Loan Sale Agreement as of the 27th day of September, 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
-10-
<PAGE> 1
EXHIBIT 10.2
================================================================================
SALE AND SERVICING AGREEMENT
Dated as of September 1, 1996
among
FIRSTPLUS HOME LOAN OWNER TRUST 1996-3
(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 1996-3
ASSET BACKED SECURITIES
SERIES 1996-3
================================================================================
<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>
-i-
<PAGE> 3
TABLE OF CONTENTS
(Cont'd)
<TABLE>
<CAPTION>
Page
----
<S> <C>
Credit Support Reduction Date . . . . . . . . . . . . . . . . . . . . 5
Custodial Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 5
Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Custodian Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Cut-Off Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Debt Consolidation Loan . . . . . . . . . . . . . . . . . . . . . . . 5
Debt Instrument . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
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
</TABLE>
-ii-
<PAGE> 4
TABLE OF CONTENTS
(Cont'd)
<TABLE>
<CAPTION>
Page
----
<S> <C>
Initial Overcollateralization Amount . . . . . . . . . . . . . . . . 10
Initial Home Loan . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Initial Pool Principal Balance . . . . . . . . . . . . . . . . . . . 10
Insurance Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 10
Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . 10
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
</TABLE>
-iii-
<PAGE> 5
TABLE OF CONTENTS
(Cont'd)
<TABLE>
<CAPTION>
Page
----
<S> <C>
Permitted Investments . . . . . . . . . . . . . . . . . . . . . . . . 16
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Pool Principal Balance . . . . . . . . . . . . . . . . . . . . . . . 17
Post Liquidation Proceeds . . . . . . . . . . . . . . . . . . . . . . 17
Preference Amount . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Pre-Funded Amount . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Pre-Funding Account . . . . . . . . . . . . . . . . . . . . . . . . . 18
Pre-Funding Account Deposit . . . . . . . . . . . . . . . . . . . . . 18
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
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Qualified Substitute Home Loan . . . . . . . . . . . . . . . . . . . 18
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
Required Distribution 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
Secured Home Loan . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Securities Insurer . . . . . . . . . . . . . . . . . . . . . . . . . 22
Securities Insurer Commitment . . . . . . . . . . . . . . . . . . . . 22
Securities Insurer Default . . . . . . . . . . . . . . . . . . . . . 22
Securities Insurer Reimbursement Amount . . . . . . . . . . . . . . . 22
Securityholder . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Series or Series 1996-3 . . . . . . . . . . . . . . . . . . . . . . . 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 Advances Reimbursement Amount. . . . . . . . . . . . . . . . 23
</TABLE>
-iv-
<PAGE> 6
TABLE OF CONTENTS
(Cont'd)
<TABLE>
<CAPTION>
Page
----
<S> <C>
Servicing Compensation . . . . . . . . . . . . . . . . . . . . . . . 23
Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
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 . . . . . . . . . . . . . . . . . . . . . . . 24
Substitution Adjustment . . . . . . . . . . . . . . . . . . . . . . . 24
Superior Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Termination Price . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Transferor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Trust Account Property . . . . . . . . . . . . . . . . . . . . . . . 25
Trust Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Trust Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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. . . . . . . . . . 27
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 . . . . . . . . . . . . . . . . . . . 30
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 . . . . . 35
Section 3.02 Representations, Warranties and Covenants of
the Servicer and Transferor . . . . . . . . . . . . . . 37
Section 3.03 Individual Home Loans . . . . . . . . . . . . . . . . . 39
</TABLE>
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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 . . . . . . . . . . . . . . . . 48
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 . . . . . . . . . . . . . . . . . . . . . . . 51
Section 4.05 Access to Certain Documentation and Information
Regarding the Home Loans . . . . . . . . . . . . . . . 52
Section 4.06 Superior Liens . . . . . . . . . . . . . . . . . . . . 52
Section 4.07 Subservicing . . . . . . . . . . . . . . . . . . . . . 52
Section 4.08 Successor Servicers. . . . . . . . . . . . . . . . . . 54
ARTICLE V
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01 Collection Account and Note Distribution Account . . . 54
Section 5.02 Claims Under Guaranty Policy . . . . . . . . . . . . . 57
Section 5.03 Pre-Funding Account. . . . . . . . . . . . . . . . . . 59
Section 5.04 Capitalized Interest Account . . . . . . . . . . . . . 59
Section 5.05 [Reserved] . . . . . . . . . . . . . . . . . . . . . . 60
Section 5.06 Certificate Distribution Account . . . . . . . . . . . 60
Section 5.07 Reserve Account . . . . . . . . . . . . . . . . . . . . 62
Section 5.08 Trust Accounts; Trust Account Property . . . . . . . . 63
Section 5.09 Allocation of Losses. . . . . . . . . . . . . . . . . . 66
ARTICLE VI
STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS
Section 6.01 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 6.02 Reports of Foreclosure and Abandonment of Mortgaged
Property . . . . . . . . . . . . . . . . . . . . . . . 70
Section 6.03 Specification of Certain Tax Matters . . . . . . . . . 70
</TABLE>
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TABLE OF CONTENTS
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ARTICLE VII
GENERAL SERVICING PROCEDURE
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Section 7.01 Assumption Agreements . . . . . . . . . . . . . . . . . 70
Section 7.02 Satisfaction of Mortgages and Release of Home Loan
Files . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 7.03 Servicing Compensation . . . . . . . . . . . . . . . . 73
Section 7.04 Quarterly Statements as to Compliance . . . . . . . . . 73
Section 7.05 Annual Independent Public Accountants' Servicing
Report . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 7.06 Right to Examine Servicer Records . . . . . . . . . . . 74
Section 7.07 Reports to the Indenture Trustee; Collection Account
Statements . . . . . . . . . . . . . . . . . . . . . . 74
ARTICLE VIII
REPORTS TO BE PROVIDED BY SERVICER
Section 8.01 Financial Statements . . . . . . . . . . . . . . . . . 74
ARTICLE IX
THE SERVICER
Section 9.01 Indemnification; Third Party Claims . . . . . . . . . . 75
Section 9.02 Merger or Consolidation of the Servicer . . . . . . . . 76
Section 9.03 Limitation on Liability of the Servicer and Others . . 76
Section 9.04 Servicer Not to Resign; Assignment . . . . . . . . . . 77
Section 9.05 Relationship of Servicer to Issuer and the Indenture
Trustee . . . . . . . . . . . . . . . . . . . . . . . . 77
ARTICLE X
DEFAULT
Section 10.01 Events of Default . . . . . . . . . . . . . . . . . . . 77
Section 10.02 Indenture Trustee to Act; Appointment of Successor . . 79
Section 10.03 Waiver of Defaults . . . . . . . . . . . . . . . . . . . 81
Section 10.04 Accounting Upon Termination of Servicer . . . . . . . . 81
ARTICLE XI
TERMINATION
Section 11.01 Termination . . . . . . . . . . . . . . . . . . . . . . 81
Section 11.02 Optional Termination by Affiliated Holder or the
Securities Insurer . . . . . . . . . . . . . . . . . . . 82
Section 11.03 Notice of Termination . . . . . . . . . . . . . . . . . 83
</TABLE>
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ARTICLE XII
MISCELLANEOUS PROVISIONS
<S> <C>
Section 12.01 Acts of Securityholders . . . . . . . . . . . . . . . . 83
Section 12.02 Amendment . . . . . . . . . . . . . . . . . . . . . . . 83
Section 12.03 Recordation of Agreement . . . . . . . . . . . . . . . . 84
Section 12.04 Duration of Agreement . . . . . . . . . . . . . . . . . 84
Section 12.05 Governing Law . . . . . . . . . . . . . . . . . . . . . 84
Section 12.06 Notices . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 12.07 Severability of Provisions . . . . . . . . . . . . . . . 85
Section 12.08 No Partnership . . . . . . . . . . . . . . . . . . . . . 85
Section 12.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . 85
Section 12.10 Successors and Assigns . . . . . . . . . . . . . . . . . 85
Section 12.11 Headings . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 12.12 Actions of Securityholders . . . . . . . . . . . . . . . 86
Section 12.13 Reports to Rating Agencies . . . . . . . . . . . . . . . 86
Section 12.14 Grant of Securityholder Rights to Securities Insurer . . 87
Section 12.15 Third Party Beneficiary . . . . . . . . . . . . . . . . 87
Section 12.16 Suspension and Termination of Securities Insurer's
Rights . . . . . . . . . . . . . . . . . . . . . . . . . 87
EXHIBITS
EXHIBIT A Home Loan Schedule
EXHIBIT B Form of Servicer's Monthly Remittance Report to Trustee
EXHIBIT C Contents of Home Loan File
EXHIBIT D Form of Subsequent Transfer Agreement
</TABLE>
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This Sale and Servicing Agreement is entered into effective as of
September 1, 1996, among FIRSTPLUS Home Loan Owner Trust 1996-3, 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 1996-3) - Page 1
<PAGE> 11
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 $300,000,000.
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
$1,478,978.66.
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 December 26, 1996, 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 1996-3) - Page 2
<PAGE> 12
occurring prior to December 27, 1996, 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 1996-3) - Page 3
<PAGE> 13
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: September 27, 1996.
SALE AND SERVICING AGREEMENT (Series 1996-3) - Page 4
<PAGE> 14
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 Home 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 September 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 August 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 Home 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 1996-3) - Page 5
<PAGE> 15
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 1996-3) - Page 6
<PAGE> 16
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 20th day of any month or if such 20th day is not
a Business Day, the first Business Day immediately following such day,
commencing in October 1996.
DTC: The Depository Trust Company.
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<PAGE> 17
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 September 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 1996-3) - Page 8
<PAGE> 18
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 below $25,000 and the Transferor directs that the Funding
Period end, (b) the close of business on December 27, 1996; 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 22063 dated September 27, 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 Home 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 or
Combination Loan that is included in the Home Loan Pool. As applicable, 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.
Home Loan Pool: The pool of Initial Home Loans and Subsequent Home
Loans.
Home Loan Schedule: The schedule of Initial Home Loans attached hereto
as Exhibit A, as amended or supplemented from time to time, including any
schedules of Subsequent Home Loans attached as exhibits to any Subsequent
Transfer Agreement, such schedules identifying each Home Loan by address of the
related Mortgaged Property, if any, and the name(s) of each Obligor and setting
forth as to each Home Loan the following information: (i) the Principal
Balance as of the
SALE AND SERVICING AGREEMENT (Series 1996-3) - Page 9
<PAGE> 19
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 September 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 August 31, 1996 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: $214,820,812.36, which is the Pool
Principal Balance as of the August 31, 1996 Cut-Off Date.
Insurance Agreement: The Insurance and Indemnification Agreement, dated
as of September 27, 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.
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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 October 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
November 1996, December 1996 and January 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 4.7655%.
Interim Required Overcollateralization: means an amount equal to 5.0%
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 1996-3) - Page 11
<PAGE> 21
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 have 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 1996-3) - Page 12
<PAGE> 22
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 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 1996-3) - Page 13
<PAGE> 23
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 6.75%; the Note
Interest Rate with respect to the Class A-2 Notes is equal to 6.85%; the Note
Interest Rate with respect to the Class A-3 Notes is equal to 7.05%; the Note
Interest Rate with respect to the Class A-4 Notes is equal to 7.20%; the Note
Interest Rate with respect to the Class A-5 Notes is equal to 7.25%; the Note
Interest Rate with respect to the Class A-6 Notes is equal to 7.60%; the Note
Interest Rate with respect to the Class A-7 Notes is equal to 7.80%; and the
Note Interest Rate with respect to the Class A-8 Notes is equal to 8.00%.
Obligor: Each obligor on a Debt Instrument.
SALE AND SERVICING AGREEMENT (Series 1996-3) - Page 14
<PAGE> 24
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: $11,250,000.
Original Class Principal Balance: In the case of the Class A-1 Notes,
$65,000,000; in the case of the Class A-2 Notes, $49,000,000; in the case of
the Class A-3 Notes, $22,000,000; in the case of the Class A-4 Notes,
$32,000,000; in the case of the Class A-5 Notes, $20,000,000; in the case of
the Class A-6 Notes, $47,000,000; in the case of the Class A-7 Notes,
$29,000,000; and in the case of the Class A-8 Notes, $24,750,000.
Overcollateralization Amount: As to any 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 on 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 September each year during the
term of this Agreement commencing in September 1997; provided that the initial
Owner Trustee Fee shall be paid on the Closing Date.
Pass-Through Rate: With respect to the Certificates, the per annum rate
of 8.30%.
Percentage Interest: As defined in the Trust Agreement.
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<PAGE> 25
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 1996-3) - Page 16
<PAGE> 26
(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.
Physical Property: As defined in the definition of "Delivery" above.
Pool Principal Balance: The aggregate Principal Balances of the Home
Loans as of any Determination 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.
Pre-Funding Account: The account established and maintained pursuant
to Section 5.03.
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<PAGE> 27
Pre-Funding Account Deposit: An amount equal to $84,993,867.
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 December 27, 1996, 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 December
27, 1996, 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 December 27, 1996, 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, dated as of September 24,
1996, prepared by the Transferor and the Seller in connection with the issuance
and sale of the Securities.
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
SALE AND SERVICING AGREEMENT (Series 1996-3) - Page 18
<PAGE> 28
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: The close of business on the last Business Day of the
month immediately preceding the month in which a Distribution Date occurs.
Regular Principal Distribution Amount: On each Distribution Date, an
amount equal to the lesser of:
(A) the sum of the aggregate Class Principal Balance of the Notes and
the Certificate Principal Balance of the Certificates immediately prior to such
Distribution Date; and
(B) the greater of (1) the sum of (i) each scheduled payment of
principal collected by the Servicer in the related Due Period, (ii) all partial
and full principal prepayments applied by the Servicer during such related Due
Period, (iii) the principal portion of all Net Liquidation Proceeds, Insurance
Proceeds and Released Mortgaged Property Proceeds received during the related
Due Period, (iv) (a) that portion of the purchase price of any repurchased Home
Loan which represents principal and (b) the principal portion of any
Substitution Adjustments required to be deposited in the Collection Account as
of the related Determination Date, (v) the amount of any Net Loan Losses 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
SALE AND SERVICING AGREEMENT (Series 1996-3) - Page 19
<PAGE> 29
(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 5.0% (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 6.0% (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 7.0% (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 7.0% 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 3.0% 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 August 31, 1996 Cut-Off Date, or if 6.5% 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 second anniversary of the August
31, 1996 Cut-Off Date, or if 8.5% 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 August 31, 1996 Cut-Off Date, or if 10.5% 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 fourth anniversary of the August
31, 1996 Cut-Off Date and thereafter, 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 3.0%, 6.5%, 8.5% and 10.5% 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
SALE AND SERVICING AGREEMENT (Series 1996-3) - Page 20
<PAGE> 30
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 expiration of the Funding Period, 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) 8.75% 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) 8.75% of the aggregate Principal Balances as of the
applicable Cut-Off Dates of the Home Loans and (B) 17.5% of the aggregate
outstanding Principal Balances of the Home Loans; provided further, however,
that the Required OC Level shall not be reduced pursuant to the preceding
proviso clause if the rolling three month delinquency and 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.
SALE AND SERVICING AGREEMENT (Series 1996-3) - Page 21
<PAGE> 31
Reserve Account: The account established and maintained by the
Indenture Trustee pursuant to Section 5.07 hereof.
Reserve Account Initial Deposit: $11,250,000.
Reserve Account Requirement: On the Closing Date, an amount equal to
$11,250,000, 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 amounts
after all required distributions have been made for the Trust Fees and Expenses
and on the Notes and the Certificates 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.
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
SALE AND SERVICING AGREEMENT (Series 1996-3) - Page 22
<PAGE> 32
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 1996-3: FIRSTPLUS Asset Backed Securities, Series 1996-
3.
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 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
SALE AND SERVICING AGREEMENT (Series 1996-3) - Page 23
<PAGE> 33
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 D hereto.
Subsequent Transfer Date: The date specified in each Subsequent
Transfer Agreement, but no later than December 27, 1996.
Subservicer: Any Person with whom the Servicer has entered into a
Subservicing Agreement and who is an Eligible Servicer and who satisfies any
requirements set forth in Section 4.07(a) in respect of the qualifications of a
Subservicer.
Subservicing Account: An account established by a Subservicer pursuant
to a Subservicing Agreement, which account must be an Eligible Account.
Subservicing Agreement: Any agreement between the Servicer and any
Subservicer relating to subservicing and/or administration of any or all Home
Loans as provided in Section 4.07(a), 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
SALE AND SERVICING AGREEMENT (Series 1996-3) - Page 24
<PAGE> 34
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 September 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 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
SALE AND SERVICING AGREEMENT (Series 1996-3) - Page 25
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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;
(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.
SALE AND SERVICING AGREEMENT (Series 1996-3) - Page 26
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(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 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.
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(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, 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
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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
(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
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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 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
SALE AND SERVICING AGREEMENT (Series 1996-3) - Page 30
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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 1996-3, 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 1996-3" 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
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.
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(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 of Mortgage, intervening assignments of Mortgage or assumption and
modification 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, Florida, Georgia, Nevada, 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
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is delivered on or before October 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 holders 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 receipt by the Custodian thereof) and to cause the Custodian to deliver to
the Transferor, the Seller, the Indenture Trustee, the Issuer, the Securities
Insurer and the Servicer a certification to the effect that, as to each Home
Loan listed in the Home Loan Schedule and as to each Subsequent Home Loan
Listed in a Subsequent Home Loan Schedule (other than any Home Loan paid in
full or any Home Loan specifically identified in such certification as not
covered by such certification), (i) all documents required to be delivered to
the Indenture Trustee pursuant to this Agreement are in its possession or in
the possession of the Custodian on its behalf (other than as expressly
permitted by Section 2.05(a)(ii) or 2.05(c)), (ii) all documents delivered by
the Seller and the Transferor to the Custodian pursuant to Section 2.05 have
been reviewed by the Custodian and have not been mutilated or damaged and
appear regular on their face (handwritten additions, changes or corrections
shall not constitute irregularities if initialed by the Obligor) and relate to
such Home Loan, (iii) based on the examination of the Custodian on behalf of
the Indenture Trustee, and
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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) (1) 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) (1) which, in the aggregate, 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 in any event may only effect
substitutions under this Section 2.06(c) (2) which 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
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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 October of each year commencing in
1997, the Issuer shall deliver (or cause the Custodian to deliver) to the
Seller, the Securities Insurer, the Indenture Trustee and the Servicer a
certification listing all Indenture Trustee's Home Loan Files held by the
Custodian on behalf of the Issuer on such Distribution Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
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:
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(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;
(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
SALE AND SERVICING AGREEMENT (Series 1996-3) - Page 36
<PAGE> 46
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 being conducted and is licensed,
qualified and in good standing in each Mortgaged Property State if the laws of
such state require licensing or qualification in order to conduct business of
the type conducted by the Servicer and perform its obligations as Servicer
hereunder; the Servicer has the power and authority to execute and deliver this
Agreement and to perform in accordance herewith; the execution, delivery and
performance of this Agreement (including all instruments of transfer to be
delivered pursuant to this Agreement) by the Servicer and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
all necessary action of the Servicer; this Agreement evidences the valid,
binding and enforceable obligation of the Servicer; and all requisite action
has been taken by the Servicer to make this Agreement valid, binding and
enforceable upon the Servicer in accordance with its terms, subject to the
effect of bankruptcy,
SALE AND SERVICING AGREEMENT (Series 1996-3) - Page 37
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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
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;
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(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.
(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.
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(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 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
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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.
(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.
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(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 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.
(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.
(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.
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(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- 2/3% 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) 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
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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.
(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.
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(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;
(ii) No Subsequent Home Loan has a Cut-Off Date or a Subsequent
Transfer Date later than December 27, 1996;
(iii) No Subsequent Home Loan has a maturity date later than
December 31, 2021;
(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
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(vii) To the extent applicable to each Subsequent Home Loan
being transferred to the Issuer, the quantitative criteria set forth in
paragraph 25 of that certain Commitment to Issue a Financial Guaranty
Insurance Policy (Application No. 96-09-7709 dated as of September 27,
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 25 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. If, however, within 60 days after the notice to the Transferor
respecting such breach the Transferor has not remedied the breach and the
breach materially and adversely affects the interests of the Securityholders or
the Securities Insurer generally or in the related Home Loan (the "Defective
Home Loan"), the Seller shall cause the Transferor on or before the
Determination Date next succeeding the end of such 60 day period either (i) to
remove such Defective Home Loan from the Trust (in which case it shall become a
Deleted Home Loan) and substitute one or more Qualified Substitute Home Loans
in the manner and subject to the conditions set forth in this Section 3.05 or
(ii) to purchase such Defective Home Loan at a purchase price equal to the
Purchase Price (as defined below) by depositing such Purchase Price in the
Collection Account. In addition, the Transferor shall indemnify the Trust and
the Securities Insurer for any losses incurred in excess of the proceeds
received from the repurchase or substitution of any such Defective Home Loan.
In the event the Seller or the Transferor is notified that any Mortgaged
Property 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
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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 more Qualified Substitute Home
Loans for, any Home Loan from the Issuer in the event that such Home Loan is in
foreclosure, default or imminent 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
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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.
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
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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 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
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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 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").
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(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.
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
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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 4.06 Superior Liens.
(a) The Servicer shall file (or cause to be filed) of record a
request for notice of any action by a lienholder under a Superior Lien for the
protection of the 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, on behalf of the Issuer and the Indenture Trustee, all
reasonable actions that are necessary to protect the interests of the
Securityholders and the Securities Insurer, and/or to preserve the security of
the related Home Loan, including making any Servicing Advances that are
necessary to cure the default or reinstate the Superior Lien. The Servicer
shall immediately notify the Issuer and the Indenture Trustee of any such
action or circumstances. Any Servicing Advances by the Servicer pursuant to its
obligations in this Section 4.06 shall comply with requirements set forth in
Section 4.01(b) hereof.
Section 4.07 Subservicing.
(a) The Servicer may, with the prior written consent of the
Securities Insurer and the Indenture Trustee, enter into Subservicing
Agreements for any servicing and administration of Home Loans with any
institution which is in compliance with the laws of each state necessary to
enable it to perform its obligations under such Subservicing Agreement and is
an Eligible Servicer. The Servicer shall give prior written notice to the
Issuer, the Indenture Trustee and the Securities Insurer of the appointment of
any Subservicer. The Servicer shall be entitled to terminate any Subservicing
Agreement in accordance with the terms and conditions of such Subservicing
Agreement and to either directly service the related Home Loans or enter into a
Subservicing Agreement with a successor subservicer which qualifies hereunder.
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(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 of amounts collected and held by it
and otherwise use its best efforts to effect the orderly and efficient transfer
of the Subservicing Agreements to the assuming party.
(d) As part of its servicing activities hereunder, the Servicer, for
the benefit of the Issuer, the Indenture Trustee, the Securities Insurer and
the Securityholders, shall enforce the obligations of each Subservicer under
the related Subservicing Agreement. Such enforcement, including, without
limitation, the legal prosecution of claims and the pursuit of other
appropriate remedies, shall be in such form and carried out to such an extent
and at such time as the Servicer, in its good faith business judgment, would
require were it the owner of the related Home Loans. The Servicer shall pay
the costs of such enforcement at its own expense, and shall be reimbursed
therefor only (i) from a general recovery resulting from such enforcement to
the extent, if any, that such recovery exceeds all amounts due in respect of
the related Home Loan or (ii) from a specific recovery of costs, expenses or
attorneys fees against the party against whom such enforcement is directed.
(e) Any Subservicing Agreement that may be entered into and any other
transactions or services relating to the Home Loans involving a Subservicer in
its capacity as such and not as an originator shall be deemed to be between the
Subservicer and the Servicer alone and none of the Issuer, the Indenture
Trustee, the Securityholders or the Securities Insurer shall be deemed parties
thereto or shall have any claims, rights, obligations, duties or liabilities
with respect to the Subservicer in its capacity as such except as set forth in
Section 4.07(c) above.
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Section 4.08 Successor Servicers. In the event that the Servicer is
terminated pursuant to Section 10.01 hereof, or resigns pursuant to Section
9.04 hereof or otherwise becomes unable to perform its obligations under this
Agreement, the Indenture Trustee will become the successor servicer or will
appoint a successor servicer in accordance with the provisions of Section 10.02
hereof; provided that any successor servicer, including the Indenture Trustee,
shall satisfy the requirements of an Eligible Servicer and shall be approved by
the Rating Agencies and the Securities Insurer.
ARTICLE V
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01 Collection Account and Note Distribution Account.
(a)(1) Establishment of Collection Account. The Servicer, for the
benefit of the Securityholders and the Securities Insurer, shall cause to
be established and maintained one or more Collection Accounts, which shall be
separate Eligible Accounts, which may be interest-bearing, entitled "COLLECTION
ACCOUNT, FIRST BANK NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, IN TRUST FOR
THE FIRSTPLUS ASSET BACKED SECURITIES, SERIES 1996-3". 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.
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 1996-3". Funds in the Note Distribution
Account shall be invested in accordance with Section 5.08.
(b)(1) Deposits to Collection Account. The Servicer shall use its best
efforts to deposit or cause to be deposited (without duplication) within one
(1) Business Day, and shall in any event deposit within two (2) Business Days,
of receipt thereof in the Collection Account and retain therein in trust for
the benefit of the Securityholders and the Securities Insurer:
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(i) all payments on account of principal on the Home Loans
collected after the applicable Cut-Off Date;
(ii) all payments on account of interest on the Home Loans
collected after the applicable Cut-Off Date;
(iii) all Net Liquidation Proceeds and Post Liquidation Proceeds
pursuant to Sections 4.02 or 4.04;
(iv) all Insurance Proceeds;
(v) all Released Mortgaged Property Proceeds;
(vi) any amounts payable in connection with the repurchase of
any Home Loan and the amount of any Substitution Adjustment pursuant to
Sections 2.06 and 3.05;
(vii) any amount required to be deposited in the Collection
Account pursuant to the receipt of proceeds from any fidelity bond or
errors and omission insurance under Section 4.03 or the deposit of the
Termination Price under Section 11.02; and
(viii) interest and gains on funds held in the Collection
Account.
The Servicer shall be entitled to retain and not deposit into the
Collection Account any amounts received with respect to a Home Loan that
constitute additional servicing compensation pursuant to Section 7.03, and such
amounts retained by the Servicer during a Due Period shall be excluded from the
calculation of the Servicing Compensation that is distributable to the Servicer
from the Note Distribution Account on the next Distribution Date following such
Due Period.
(b)(2) Deposits to Note Distribution Account. On the third Business Day
prior to 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,
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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 included in the
Noteholders' Monthly Principal Distributable Amount and deposited
only in the Note Distribution Account;
(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;
(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;
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(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
(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
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Guaranteed Payments are to be made by the Securities Insurer pursuant to the
Guaranty Policy, on behalf of the Noteholders and Certificateholders, the
Indenture Trustee shall distribute such Guaranteed Payments as part of the
Noteholders' Distributable Amount under the Indenture to the extent such
Guaranteed Payments relate to the Notes and as part of the Certificateholders'
Distributable Amount under this Agreement to the extent such Guaranteed
Payments relate to the Certificates.
(b)(ii) In addition, if the Indenture Trustee has notice that any
of the Securityholders have been required to disgorge payments of interest or
principal on the related Notes or the related Certificates pursuant to a final
judgment by a court of competent jurisdiction that such payment constitutes a
voidable preference to such Securityholders within the meaning of any
applicable bankruptcy laws, then the Indenture Trustee shall notify the
Securities Insurer as set forth in the Guaranty Policy for making a claim for a
Preference Amount. Such payment for a Preference Amount shall be disbursed to
the receiver or trustee in bankruptcy named in the final order of the court
exercising jurisdiction on behalf of the Securityholder and not to any
Securityholder directly unless such Securityholder has returned principal or
interest paid on the Securities to such receiver or trustee in bankruptcy, in
which case such payment shall be disbursed to such Securityholder.
(c) The Securities Insurer is entitled to the benefit of the
following provisions in the event that a Guaranteed Payment has been made.
Notwithstanding any other provision hereof:
(i) The Indenture Trustee shall immediately apply all moneys
constituting a Guaranteed Payment to the payment to Securityholders of
principal and interest on the Notes and Certificates, as applicable, by
depositing such amounts in the Note Distribution Account for Guaranteed
Payments payable on the related Class of Notes or in the Certificate
Distribution Account for Guaranteed Payments payable on the related
Certificates. All amounts received under the Guaranty Policy shall be
used solely for the payment to Securityholders of principal and interest
on Notes and the Certificates, as applicable. The Securities Insurer's
obligations under the Guaranty Policy with respect to a particular
Guaranteed Payment shall be discharged to the extent funds equal to the
applicable Guaranteed Payment are received by the Indenture Trustee,
whether or not such funds are properly applied by the Indenture Trustee,
the Owner Trustee or Co-Owner Trustee. The parties hereto recognize
that the making of the Guaranteed Payment does not relieve any of the
parties hereto of any obligation hereunder or any of the Basic
Documents.
(ii) The parties hereto recognize that, to the extent that the
Securities Insurer makes payments, directly or indirectly, on account of
principal of or interest on the Notes and the Certificates, as
applicable, the Securities Insurer shall be subrogated to the rights of
the Securityholders to receive distributions of principal and interest
in accordance with the terms hereof.
(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.
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(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 1996-3".
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.
(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 to the Securityholders
pro rata based on the Class Principal Balance of the Notes and the Certificate
Principal Balance of the Certificates, 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, shall cause to be
established and maintained with the Indenture Trustee one or more separate
Eligible Accounts entitled "CAPITALIZED INTEREST ACCOUNT, FIRST BANK
SALE AND SERVICING AGREEMENT (Series 1996-3) - Page 59
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NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, IN TRUST FOR FIRSTPLUS ASSET BACKED
SECURITIES, SERIES 1996-3". 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 December 27,
1996, the Transferor and the Seller may request the Servicer to calculate the
amount, if any, of the Capitalized Interest Excess. If the Capitalized
Interest Excess is greater than zero on any such Business Day prior to December
27, 1996, 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 holder
of 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 1996-3". 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
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Certificates for principal and interest and to the other parties specified
below in the amounts and in the following order of priority:
(i) only to the extent of funds withdrawn from the Pre-Funding
Account attributable to the remaining amount therein and deposited in
the Certificate Distribution Account by the Indenture Trustee pursuant
to Section 5.01(c), pro rata, to the Certificateholders;
(ii) to the Certificateholders, the Certificateholders'
Interest Distributable Amount; provided, that if there are not
sufficient funds in the Certificate Distribution Account to pay the
entire amount of accrued and unpaid interest then due on the
Certificates, the amount in the Certificate Distribution Account shall
be applied to the payment of such interest on the Certificates pro rata
on the basis of the total such interest due on the Certificates;
(iii) to the Certificateholders, on or after the Distribution
Date on which the Class Principal Balance of the Class A-8 Notes has
been reduced to zero, the Certificateholders' Principal Distributable
Amount until the Certificate Principal Balance thereof is reduced to
zero;
(iv) to the Securities Insurer, from any remaining amounts in
the Certificate Distribution Account after the distributions pursuant to
items (i) through (iii) above, the Securities Insurer Reimbursement
Amount;
(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.
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(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 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 1996-3". 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. On the Closing Date, the Reserve
Account Initial Deposit will be equal to the Reserve Account Requirement.
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 date of determination
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
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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 holder 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
holder 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 holder
of the Residual Interest and any Permitted Investments in the Reserve Account
shall be transferred to the holder of the Residual Interest.
(f) [Reserved]
(g) Withdrawals. Subject to the total amount on deposit in the
Reserve Account with respect to each Distribution Date the Indenture Trustee
shall withdraw funds from such Reserve Account and deposit in the Note
Distribution Account an amount equal to the excess (the "Reserve Account
Withdrawal Amount") of (A) the sum of the Trust Fees and Expenses and the
Required Distribution Amount, over (B) the Available Collection Amount.
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
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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
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 1996-3". 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 1996-3".
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(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 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
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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.
(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 1996-3"), the Series designation of the
Securities (i.e. "Series 1996-3"), 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
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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 1996-3"), the series designation of the Notes and Certificates
(i.e. "Series 1996-3"), the date of this Agreement and the following
information:
(i) the Available Collection Amount and Required
Distribution Amount for the related Distribution Date;
(ii) the amount, if any, on deposit in the Pre-Funding
Account and the Capitalized Interest Account on such Distribution Date;
(iii) the Class Principal Balance of each Class of Notes, the
Certificate Principal Balance of the Certificates, and the Pool
Principal Balance (including, until the Funding Period ends, the amount
remaining in the Pre-Funding Account and the Capitalized Interest
Account as of such Distribution Date) as of the first day of the related
Due Period and after giving effect to distributions made to the holders
of such Securities on such Distribution Date;
(iv) the Class Pool Factor with respect to each Class of
Notes then outstanding and the Certificate Pool Factor with respect to
the Certificates then outstanding;
(v) the amount of principal and interest received on the
Home Loans during the related Due Period;
(vi) the Noteholders' Distributable Amount and the
Certificateholders' Distributable Amount;
(vii) the amount, if any, of the Excess Overcollateralization
Amount and, if applicable, the Overcollateralization Reduction Amount or
any other amount to be distributed to the Securityholders or the holder
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;
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(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;
(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) the cumulative aggregate Principal Balance of Home
Loans that became Defaulted Home Loans and the cumulative aggregate
Principal Balance of Home Loans that became Liquidated Home Loans from
the Closing Date through the most current Due Period,
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including the foregoing amounts by loan type (i.e. Combination Loans,
Debt Consolidation Loans and Home Improvement Loans); 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.
(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 holder 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
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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 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
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substitution or assumption agreement, which original shall be added by the
Custodian to the related Indenture Trustee's Home Loan File and shall, for all
purposes, be considered a part of such Indenture Trustee's Home Loan File to
the same extent as all other documents and instruments constituting a part
thereof. In connection with any assumption or substitution agreement entered
into pursuant to this Section 7.01, the Servicer shall not change the Home Loan
Interest Rate or the Monthly Payment, defer or forgive the payment of principal
or interest, reduce the outstanding principal amount or extend the final
maturity date on such Home Loan. Any fee collected by the Servicer for
consenting to any such conveyance or entering into an assumption or
substitution agreement shall be retained by or paid to the Servicer as
additional Servicing Compensation.
Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Home Loan by operation of law or any assumption which the Servicer may be
restricted by law from preventing, for any reason whatsoever.
Section 7.02 Satisfaction of Mortgages and Release of Home Loan Files.
Subject to the provisions of s 4.01 and 4.02, the Servicer shall not
grant a satisfaction or release of a Mortgage without having obtained payment
in full of the indebtedness secured by the Mortgage or otherwise prejudice any
right the Securityholders or the Securities Insurer may have under the mortgage
instruments. The Servicer shall maintain the fidelity bond and errors and
omissions insurance as provided for in Section 4.03 insuring the Servicer
against any loss it may sustain with respect to any Home Loan not satisfied in
accordance with the procedures set forth herein.
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
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ambiguities, provided that such corrections shall be performed and returned to
the Custodian in a prompt manner, and provided further that no more than 100
Indenture Trustee's Home Loan Files shall be released and held by the Servicer
at any one time. In the case of a release of the related Indenture Trustee's
Home Loan File to the Servicer in connection with a substitution or repurchase
of any Home Loan pursuant to Section 2.06(c) and (d), Section 3.05 or Section
11.02 or a release for other servicing reasons, such release of the Indenture
Trustee's Home Loan File by the Custodian shall be subject to the prior
approval of the Indenture Trustee.
The Indenture Trustee shall execute and deliver to the Servicer any
court pleadings, requests for trustee's sale or other documents necessary to
the foreclosure or trustee's sale in respect of a Mortgaged Property or to any
legal action brought to obtain judgment against any Obligor on the Debt
Instrument or Mortgage or to obtain a deficiency judgment, or to enforce any
other remedies or rights provided by the Debt Instrument or Mortgage or
otherwise available at law or in equity. Together with such documents or
pleadings, the Servicer shall deliver to the Indenture Trustee a certificate of
a Servicing Officer requesting that such pleadings or documents be executed by
the Indenture Trustee and certifying as to the reason such documents or
pleadings are required and that the execution and delivery thereof by the
Indenture Trustee will not invalidate or otherwise affect the lien of the
Mortgage, except for the termination of such a lien upon completion of the
foreclosure or trustee's sale. The Indenture Trustee shall, upon receipt of a
written request from a Servicing Officer, execute any document provided to the
Indenture Trustee by the Servicer or take any other action requested in such
request that is, in the opinion of the Servicer as evidenced by such request,
required by any state or other jurisdiction to discharge the lien of a Mortgage
upon the satisfaction thereof and the Indenture Trustee will sign and post, but
will not guarantee receipt of, any such 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.
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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.
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
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conducted substantially in compliance with the audit program for mortgages
serviced for the United States Department of Housing and Urban Development
Mortgage Audit Standards, or the Uniform Single Attestation Program for
Mortgage Bankers (the "Applicable Accounting Standards"), such firm is of the
opinion that such servicing has been conducted in compliance with the
Applicable Accounting Standards except for (a) such exceptions as such firm
shall believe to be immaterial and (b) such other exceptions as shall be set
forth in such statement.
Section 7.06 Right to Examine Servicer Records.
Each Securityholder, the Indenture Trustee, the Issuer, the Securities
Insurer and each of their respective agents shall have the right upon
reasonable prior notice, during normal business hours and as often as
reasonably required, to examine, audit and copy, at the expense of the Person
making such examination, any and all of the books, records or other information
of the Servicer (including without limitation any Subservicer to the extent
provided in the related Subservicing Agreement) whether held by the Servicer or
by another on behalf of the Servicer, which may be relevant to the performance
or observance by the Servicer of the terms, covenants or conditions of this
Agreement. Each Securityholder, the Indenture Trustee, the Issuer and the
Securities Insurer agree that any information obtained pursuant to the terms of
this Agreement shall be held confidential.
Section 7.07 Reports to the Indenture Trustee; Collection Account
Statements.
If the Collection Account is not maintained with the Indenture Trustee,
then not later than 25 days after each Record Date, the Servicer shall forward
to the Indenture Trustee and the Securities Insurer a statement, certified by a
Servicing Officer, setting forth the status of the Collection Account as of the
close of business on the preceding Record Date and showing, for the period
covered by such statement, the aggregate of deposits into the Collection
Account for each category of deposit specified in Section 5.01(b), the
aggregate of withdrawals from the Collection Account for each category of
withdrawal specified in Section 5.01(b)(2) and (d) and the aggregate amount of
permitted withdrawals not made in the related Due Period in each case, for the
related Due Period.
ARTICLE VIII
REPORTS TO BE PROVIDED BY SERVICER
Section 8.01 Financial Statements.
The Servicer understands that, in connection with the transfer of the
Securities, Securityholders may request that the Servicer make available to the
Securityholders, to prospective Securityholders and the Securities Insurer
annual audited financial statements of the Servicer for one or more of the most
recently completed five fiscal years for which such statements are available,
which request shall not be unreasonably denied.
The Servicer also agrees to make available on a reasonable basis to the
Securityholders, any prospective Securityholder and the Securities Insurer a
knowledgeable financial or accounting officer for the purpose of answering
reasonable questions respecting recent developments affecting the Servicer or
the financial statements of the Servicer and to permit the Securityholders, any
prospective Securityholder and the Securities Insurer to inspect the Servicer's
servicing facilities during normal business hours for the purpose of satisfying
the Securityholders and such prospective
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Securityholder and the Securities Insurer that the Servicer has the ability to
service the Home Loans in accordance with this Agreement.
ARTICLE IX
THE SERVICER
Section 9.01 Indemnification; Third Party Claims.
(a) The Servicer agrees to indemnify and hold the Indenture Trustee,
the 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 September 1996 up to
the fifth (5th) anniversary of the August 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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August 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 holder 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 1996-3, c/o Wilmington
Trust Company, Rodney Square North, 1100 North Market Street, Wilmington,
Delaware 19890, Attention: Emmett R. Harmon, or
SALE AND SERVICING AGREEMENT (Series 1996-3) - Page 84
<PAGE> 94
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.
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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
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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).
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IN WITNESS WHEREOF, the Servicer, the Transferor, the Issuer and the
Seller have caused their names to be signed by their respective officers
thereunto duly authorized, as of the day and year first above written, to this
SALE AND SERVICING AGREEMENT.
FIRSTPLUS HOME LOAN OWNER TRUST 1996-3,
By: Wilmington Trust Company, as Owner Trustee
By:
-------------------------------------------
Name: Emmett R. Harmon
Title: Vice President
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 1996-3) - Page 88
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THE STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared Emmett R. Harmon, 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 1996-3, 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 27th day of
September, 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 27th day of
September, 1996.
-------------------------------------
Notary Public, State of New York
SALE AND SERVICING AGREEMENT (Series 1996-3) - Page 89
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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 27th day of
September, 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 27th day of
September, 1996.
-------------------------------------
Notary Public, State of New York
SALE AND SERVICING AGREEMENT (Series 1996-3) - Page 90
