Exhibit 10.2
EXECUTION
==============================================================================
SALE AND SERVICING AGREEMENT
among
FIRSTPLUS HOME LOAN OWNER TRUST 1998-4,
as Issuer
FIRSTPLUS INVESTMENT CORPORATION,
as Seller
FIRSTPLUS FINANCIAL, INC.,
as Transferor and Servicer
and
U.S. BANK NATIONAL ASSOCIATION,
as Indenture Trustee and Co-Owner Trustee
Dated as of June 1, 1998
FIRSTPLUS HOME LOAN OWNER TRUST 1998-4
Asset Backed Securities, Series 1998-4
==============================================================================
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
Section 1.01. Definitions.................................................1
Section 1.02. Other Definitional Provisions..............................25
Section 1.03. Interest Calculation.......................................25
ARTICLE II
CONVEYANCE OF THE HOME LOANS
Section 2.01. Conveyance of the Initial Home Loans.......................26
Section 2.02. Conveyance of Subsequent Home Loans........................26
Section 2.03. Ownership and Possession of Home Loan Files................28
Section 2.04. Books and Records..........................................28
Section 2.05. Delivery of Home Loan Documents............................29
Section 2.06. Acceptance by Indenture Trustee of the Home
Loans; Initial Certification by Custodian..................31
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties of the Seller...............33
Section 3.02. Representations, Warranties and Covenants of
the Servicer and Transferor................................34
Section 3.03. Individual Home Loans......................................36
Section 3.04. Subsequent Home Loans......................................42
Section 3.05. Purchase and Substitution..................................43
ARTICLE IV
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
Section 4.01. Duties of the Servicer.....................................46
Section 4.02. Liquidation of Home Loans..................................48
Section 4.03. Fidelity Bond; Errors and Omission Insurance...............48
Section 4.04. Title, Management and Disposition of
Foreclosure Property.......................................49
Section 4.05. Access to Certain Documentation and Information
Regarding the Home Loans...................................49
Section 4.06. Superior Liens.............................................49
Section 4.07. Subservicing...............................................50
Section 4.08. Successor Servicers........................................51
ARTICLE V
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01. Collection Account and Note Payment Account................52
Section 5.02. Pre-Funding Account........................................58
Section 5.03. [Reserved].................................................58
Section 5.04. [Reserved].................................................58
Section 5.05. Certificate Distribution Account...........................58
Section 5.06. Trust Accounts; Trust Account Property.....................60
Section 5.07. Allocation of Losses.......................................65
ARTICLE VI
STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS
Section 6.01. Statements.................................................66
Section 6.02. Reports of Foreclosure and Abandonment of
Mortgaged Property.........................................69
Section 6.03. Specification of Certain Tax Matters.......................69
ARTICLE VII
GENERAL SERVICING PROCEDURES
Section 7.01. Assumption Agreements......................................70
Section 7.02. Satisfaction of Mortgages and Release of Home
Loan Files.................................................70
Section 7.03. Servicing Compensation.....................................72
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..........................73
Section 7.07. Reports to the Indenture Trustee; Collection
Account Statements.........................................73
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........................74
Section 9.02. Merger or Consolidation of the Servicer....................75
Section 9.03. Limitation on Liability of the Servicer and Others.........76
Section 9.04. Servicer Not to Resign; Assignment.........................76
Section 9.05. Relationship of Servicer to the Issuer and the
Indenture Trustee..........................................76
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.........................................80
Section 10.04. Accounting Upon Termination of Servicer....................80
ARTICLE XI
TERMINATION
Section 11.01. Termination................................................81
Section 11.02. Optional Termination by Seller.............................81
Section 11.03. Notice of Termination......................................82
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01. Acts of Securityholders....................................82
Section 12.02. Amendment..................................................82
Section 12.03. Recordation of Agreement...................................83
Section 12.04. Duration of Agreement......................................83
Section 12.05. Governing Law..............................................83
Section 12.06. Notices....................................................83
Section 12.07. Severability of Provisions.................................84
Section 12.08. No Partnership.............................................84
Section 12.09. Counterparts...............................................84
Section 12.10. Successors and Assigns.....................................84
Section 12.11. Headings...................................................84
Section 12.12. Actions of Securityholders.................................84
Section 12.13. Reports to Rating Agencies.................................85
Section 12.14. [Reserved].................................................86
Section 12.15. No Petition................................................86
EXHIBITS
EXHIBIT A Home Loan Schedule
EXHIBIT B Form of Subsequent Transfer Agreement
EXHIBIT C Form of Addition Notice
EXHIBIT D Schedule of Specified Home Loans
EXHIBIT E Form of Lost Note Affidavit
This Sale and Servicing Agreement is entered into effective as of June 1,
1998, among FIRSTPLUS Home Loan Owner Trust 1998-4, a Delaware business trust
(the "Issuer" or the "Trust"), FIRSTPLUS Investment Corporation, a Nevada
corporation, as Seller (the "Seller"), FIRSTPLUS FINANCIAL, INC., a Texas
corporation ("FFI"), as Transferor (in such capacity, the "Transferor") and
Servicer (in such capacity, the "Servicer") and U.S. 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.
A IO Component's Interest Carry-Forward Amount: With respect to the
----------------------------------------------
initial Payment Date, zero; with respect to each other Payment Date, the
excess (if any) of (a) the A IO Component's Monthly Interest Distributable
Amount for the immediately preceding Payment Date and any A IO Component's
Interest Carry-Forward Amount remaining outstanding with respect to prior
Payment Dates, over (b) the amount in respect of interest that was paid on
such Component on such immediately preceding Payment Date.
A IO Component's Interest Distributable Amount: With respect to any
----------------------------------------------
Payment Date, the sum of the A IO Component's Monthly Interest Distributable
Amount for such date and the A IO Component's Interest Carry-Forward Amount
for such date; PROVIDED, HOWEVER, that on the Payment Date, if any, on which
the Component Principal Balance of the B-2 Component is reduced to zero, and
on each succeeding Payment Date, the amount of the A IO Component's Interest
Distributable Amount will be equal to the A IO Component's Interest
Distributable Amount calculated without giving effect to this proviso, minus
the portion of any Allocable Loss Amount that otherwise would be applied to
any Class of Notes on such Payment Date in the absence of this proviso.
A IO Component's Monthly Interest Distributable Amount: With respect to
------------------------------------------------------
any Payment Date, interest accrued for the related Accrual Period at the
applicable Interest Rate on the Component Notional Balance of the A IO
Component immediately preceding such Payment Date.
Accrual Period: With respect to each Class of LIBOR Securities, the
--------------
period beginning on the Payment Date in the calendar month preceding the month
in which the related Payment Date occurs (or, in the case of the first Payment
Date, beginning on the Closing Date) and ending on the day preceding the
related Payment Date. With respect to the other Classes of Securities, the
calendar month preceding the month in which the related Payment Date occurs
(or, in the case of the first Payment Date, the period from the Closing Date
through the end of June 1998).
Addition Notice: With respect to a sale of Subsequent Home Loans to the
---------------
Issuer pursuant to Section 2.02 of this Agreement, a notice from the Seller
and the Issuer substantially in the form of Exhibit C hereto delivered to the
Indenture Trustee and each Rating Agency.
Administration Agreement: The Administration Agreement dated as of June
------------------------
1, 1998 among the Issuer, FFI, and U.S. Bank National Association, as
Administrator, as such may be amended or supplemented from time to time.
Administrator: U.S. Bank National Association, or any successor in
-------------
interest thereto, in its capacity as Administrator under the Administration
Agreement.
Agreement: This Sale and Servicing Agreement and all amendments hereof
---------
and supplements hereto.
Allocable Loss Amount: With respect to each Payment Date after the
---------------------
Initial Undercollateralization Amount has been reduced to zero, the excess, if
any, of (a) the aggregate of the Class Principal Balances of the Securities
(after giving effect to all payments and distributions on such Payment Date)
over (b) the sum of (i) the Pool Principal Balance as of the immediately
preceding Determination Date and (ii) the amount, if any, on deposit in the
Pre-Funding Account as of the end of the immediately preceding Due Period (net
of investment earnings thereon). With respect to each Payment Date prior to
the Payment Date on which the Initial Undercollateralization Amount is reduced
to zero.
Allocable Loss Amount Priority: With respect to any Payment Date,
------------------------------
sequentially, to the B-2 Component, the Class B-1 Notes, the Class M-2 Notes
and the Class M-1 Notes, in that order, until the respective Class Principal
Balances (or Component Principal Balances) thereof are reduced to zero.
Assignment of Mortgage: With respect to each Home Loan, an assignment,
----------------------
notice of transfer or equivalent instrument sufficient under the laws of the
jurisdiction where the related Mortgaged Property is located to reflect of
record the assignment of the Mortgage with respect to such Home Loan to the
Indenture Trustee for the benefit of the Securityholders.
Assumed Pool Principal Balance: As of any date of determination, the sum
------------------------------
of (a) the Initial Pool Principal Balance, (b) the Cut-Off Date Principal
Balance of each Subsequent Home Loan and (c) the amount, if any, on deposit in
the Pre-Funding Account as of such date (other than investment earnings).
Available Collection Amount: With respect to each Payment Date, an amount
---------------------------
equal to the sum of (a) all amounts received in respect of the Home Loans or
paid by the Servicer, the Transferor or the Seller (exclusive of amounts not
required to be deposited in the Collection Account) during the related Due
Period (and, in the case of amounts required to be paid by the Transferor in
connection with the purchase or substitution of a Defective Home Loan,
deposited in the Collection Account on or before the related Determination
Date), 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, (b) in the case of the Payment Date following the Due Period
in which the Funding Period ends, amounts, if any, remaining in the
Pre-Funding Account at the end of the Funding Period, (c) with respect to the
final Payment Date, or an early redemption or termination of the Securities
pursuant to Section 11.02(b), the Termination Price, or in the case of an
early redemption or termination of the Securities pursuant to Section
11.02(a), the proceeds from the sale of the Home Loans; (d) any income or gain
from investment of funds on deposit in the Collection Account and (e) any
investment income on amounts in the Pre-Funding Account.
Available Funds: With respect to any Payment Date, the amount deposited
---------------
in the Note Payment Account with respect to such Payment Date less the
Servicing Compensation (net of the Servicing Fees, to the extent previously
paid or withheld) for such Payment Date.
Basic Documents: This Agreement, the Indenture, the Loan Sale Agreement,
---------------
the Certificate of Trust, the Trust Agreement, the Administration Agreement,
the Custodial Agreement, the Note Depository Agreement and the documents and
certificates delivered in connection therewith.
B-2 Component Optimal Principal Balance: With respect to any Payment Date
---------------------------------------
prior to the Overcollateralization Stepdown Date, zero; and with respect to
any other Payment Date, the Pool Principal Balance as of the immediately
preceding Determination Date minus the sum of (a) the aggregate of the Class
Principal Balances of the Notes (after taking into account any payments made
on such Payment Date) and (b) the Required Overcollateralization Amount for
such Payment Date.
B-2 Component's Interest Carry-Forward Amount: With respect to the
---------------------------------------------
initial Payment Date, zero; with respect to each other Payment Date, the
excess (if any) of (a) the B-2 Component's Monthly Interest Distributable
Amount for the immediately preceding Payment Date and any B-2 Component's
Interest Carry-Forward Amount remaining outstanding with respect to prior
Payment Dates, over (b) the amount in respect of interest that was paid on
such Component on such immediately preceding Payment Date.
B-2 Component's Interest Distributable Amount: With respect to any
---------------------------------------------
Payment Date, the sum of the B-2 Component's Monthly Interest Distributable
Amount for such date and the B-2 Component's Interest Carry-Forward Amount for
such date; PROVIDED, HOWEVER, that on the Payment Date, if any, on which the
Component Principal Balance of the B-2 Component is reduced to zero through
application of the Allocable Loss Amount with respect to such Payment Date,
the amount of the B-2 Component's Interest Distributable Amount will be equal
to the B-2 Component's Interest Distributable Amount calculated without giving
effect to this proviso, minus the portion, if any, of such Allocable Loss
Amount that otherwise would be applied to any Class of Notes on such Payment
Date in the absence of this proviso.
B-2 Component's Monthly Interest Distributable Amount: With respect to
-----------------------------------------------------
any Payment Date, interest accrued for the related Accrual Period at the
applicable Interest Rate on the Component Principal Balance of the B-2
Component immediately preceding such Payment Date.
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
corporate trust office of the Indenture Trustee is located are authorized or
obligated by law or executive order to be closed.
Certificate: The Residual Interest Certificate issued pursuant to the
-----------
Trust Agreement.
Certificate Distribution Account: The Account established and maintained
--------------------------------
pursuant to Section 5.05.
Certificateholder: The holder of the Residual Interest Certificate.
-----------------
Class: With respect to the Notes, all Notes bearing the same class
-----
designation.
Class B-1 Noteholders' Interest Carry-Forward Amount: With respect to the
----------------------------------------------------
initial Payment Date, zero; with respect to each other Payment Date, the
excess (if any) of (a) the Class B-1 Noteholders' Monthly Interest
Distributable Amount for the immediately preceding Payment Date and any Class
B-1 Noteholders' Interest Carry-Forward Amount remaining outstanding with
respect to prior Payment Dates, over (b) the amount in respect of interest
that was paid on such Notes on such immediately preceding Payment Date.
Class B-1 Noteholders' Interest Payable Amount: With respect to any
----------------------------------------------
Payment Date, the sum of the Class B-1 Noteholders' Monthly Interest Payable
Amount for such date and the Class B-1 Noteholders' Interest Carry-Forward
Amount for such date.
Class B-1 Noteholders' Monthly Interest Payable Amount: With respect to
------------------------------------------------------
any Payment Date, interest accrued for the related Accrual Period at the
applicable Interest Rate on the Class Principal Balance of the Class B-1 Notes
immediately preceding such Payment Date.
Class B-1 Optimal Principal Balance: With respect to any Payment Date
-----------------------------------
prior to the Overcollateralization Stepdown Date, zero; and with respect to
any other Payment Date, the Pool Principal Balance as of the immediately
preceding Determination Date minus the sum of (a) the aggregate of the Class
Principal Balances of the Senior Notes, the Class M-1 Notes and the Class M-2
Notes (after taking into account payments made on such Payment Date) and (b)
the greater of (i) 5.05% of the Pool Principal Balance as of the immediately
preceding Determination Date plus the Required Overcollateralization Amount
for such Payment Date (calculated without giving effect to the proviso in the
definition thereof) and (ii) 0.50% of the Assumed Pool Principal Balance.
Class M-1 Noteholders' Interest Carry-Forward Amount: With respect to the
----------------------------------------------------
initial Payment Date, zero; with respect to each other Payment Date, the
excess (if any) of (a) the Class M-1 Noteholders' Monthly Interest Payment
Amount for the immediately preceding Payment Date and any Class M-1
Noteholders' Interest Carry-Forward Amount remaining outstanding with respect
to prior Payment Dates, over (b) the amount in respect of interest that was
paid on such Notes on such immediately preceding Payment Date.
Class M-1 Noteholders' Interest Payment Amount: With respect to any
----------------------------------------------
Payment Date, the sum of the Class M-1 Noteholders' Monthly Interest Payment
Amount for such date and the Class M-1 Noteholders' Interest Carry-Forward
Amount for such date.
Class M-1 Noteholders' Monthly Interest Payment Amount: With respect to
------------------------------------------------------
any Payment Date, interest accrued for the related Accrual Period at the
applicable Interest Rate on the Class Principal Balance of the Class M-1 Notes
immediately preceding such Payment Date.
Class M-1 Optimal Principal Balance: With respect to any Payment Date
-----------------------------------
prior to the Overcollateralization Stepdown Date, zero; and with respect to
any other Payment Date, the Pool Principal Balance as of the immediately
preceding Determination Date minus the sum of (a) the aggregate of the Class
Principal Balances of the Senior Notes (after taking into account payments
made on such Payment Date and (b) the greater of (i) 26.765% of the Pool
Principal Balance as of the immediately preceding Determination Date plus the
Required Overcollateralization Amount for such Payment Date (calculated
without giving effect to the proviso in the definition thereof) and (ii) 0.50%
of the Assumed Pool Principal Balance.
Class M-2 Noteholders' Interest Carry-Forward Amount: With respect to the
----------------------------------------------------
initial Payment Date, zero; with respect to each other Payment Date, the
excess (if any) of (a) the Class M-2 Noteholders' Monthly Interest Payment
Amount for the immediately preceding Payment Date and any Class M-2
Noteholders' Interest Carry-Forward Amount remaining outstanding with respect
to prior Payment Dates, over (b) the amount in respect of interest that was
paid on such Notes on such immediately preceding Payment Date.
Class M-2 Noteholders' Interest Payment Amount: With respect to any
----------------------------------------------
Payment Date, the sum of the Class M-2 Noteholders' Monthly Interest Payment
Amount for such date and the Class M-2 Noteholders' Interest Carry-Forward
Amount for such date.
Class M-2 Noteholders' Monthly Interest Payment Amount: With respect to
------------------------------------------------------
any Payment Date, interest accrued for the related Accrual Period at the
applicable Interest Rate on the Class Principal Balance of the Class M-2 Notes
immediately preceding such Payment Date.
Class M-2 Optimal Principal Balance: With respect to any Payment Date
-----------------------------------
prior to the Overcollateralization Stepdown Date, zero; and with respect to
any other Payment Date, the Pool Principal Balance as of the immediately
preceding Determination Date minus the sum of (a) the aggregate of the Class
Principal Balances of the Senior Notes and the Class M-1 Notes (after taking
into account any payments made on such Payment Date) and (b) the greater of
(i) 14.l4% of the Pool Principal Balance as of the immediately preceding
Determination Date plus the Required Overcollateralization Amount for such
Payment Date (calculated without giving effect to the proviso in the
definition thereof) and (ii) 0.50% of the Assumed Pool Principal Balance.
Class Pool Factor: With respect to each Class of Securities and any
-----------------
Payment Date, the Class Principal Balance thereof (giving effect to payments
thereon on such Payment Date) divided by the Original Class Principal Balance
of such Class.
Class Principal Balance: With respect to each Class of Securities and any
-----------------------
date of determination, the Original Class Principal Balance thereof as reduced
by (a) all amounts previously paid in respect of such Class in reduction of
the Class Principal Balance thereof and (b) in the case of the Subordinate
Securities, any Allocable Loss Amounts previously applied thereto.
Clearing Agency: An organization registered as a "clearing agency"
---------------
pursuant to Section 17A of the Exchange Act.
Clearing Agency Participant: 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: June 24, 1998.
------------
Code: The Internal Revenue Code of 1986, as amended from time to time,
----
and Treasury Regulations promulgated thereunder.
Collection Account: An account established and maintained by the Servicer
------------------
in accordance with Section 5.01(a)(1).
Combination Loan: A loan, the proceeds of which were used by the related
----------------
Obligor in combination to finance property improvements, debt consolidation,
cash-out, or other consumer purposes.
Component: Any of the components of the Residual Interest Certificate
---------
having the designations, initial Component Principal Balances and Component
Interest Rates as follows:
Original Component
Designation Interest Rate Principal Balance
- ----------- ------------- -----------------
A IO Component 6.10%(1) (2)
B-2 Component 8.53%(3) $15,150,000.00
Excess Component (4) (5)
- -------------
(1) After the Payment Date in August 2000, the Interest Rate applicable to the
Class A IO Component will be 0.00%
(2) The A IO Component will have an initial Component Notional Balance of
$52,379,000.00.
(3) The Interest Rate applicable to the B-2 Component, if the Residual
Certificate remains outstanding, will be increased by 0.50% with respect to
each Payment Date occurring after the date on which the Seller is first
permitted to exercise its option to redeem or terminate the Securities
pursuant to Section 11.02(b).
(4) The Excess Component will not have an interest rate.
(5) The Excess Component will not have a principal balance.
Component Notional Balance: With respect to any Payment Date and the A IO
--------------------------
Component, the sum of the Class Principal Balances of the Class A-7 and Class
A-8 Notes immediately prior to such date.
Component Principal Balance: With respect to each Component, other than a
---------------------------
Notional Component, and any date of determination, the Original Component
Principal Balance thereof as reduced by (a) all amounts previously paid in
respect of such Component in reduction of the Component Principal Balance
thereof and (b) any Allocable Loss Amounts previously applied thereto.
Control: The meaning specified in Section 8-106 of the New York UCC.
-------
Co-Owner Trustee: U.S. 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 Score: With respect to the obligor on a home loan (including the
------------
Obligor on a Home Loan), a numerical assessment of default risk with respect
to such obligor, determined based on a methodology developed by Fair, Isaac
and Company.
Custodial Agreement: The custodial agreement dated as of June 1, 1998 by
-------------------
and among the Seller, FFI, as the Transferor and the Servicer, the Indenture
Trustee, and Bank One, Texas, National Association, as the Custodian, and any
subsequent custodial agreement, in similar form and substance, providing for
the retention of the Home Loan Files by the Custodian on behalf of the
Indenture Trustee.
Custodian: Any custodian appointed by the Indenture Trustee pursuant to
---------
the Custodial Agreement, which shall not be affiliated with the Servicer, the
Transferor, any Subservicer, or the Seller. Bank One, Texas, National
Association, shall be the initial Custodian pursuant to the terms of the
Custodial Agreement.
Cut-Off Date: With respect to the Initial Home Loans, the close of
------------
business on May 31, 1998, and with respect to each Subsequent Home Loan, the
close of business on the date specified as such in the applicable Subsequent
Transfer Agreement.
DCR: Duff & Phelps Credit Rating Co., or any successor thereto.
---
Debt Consolidation Loan: A loan, the proceeds of which were primarily
-----------------------
used by the related Obligor for debt consolidation purposes or purposes other
than to finance property improvements.
Debt Instrument: With respect to any Home Loan, the note or other
---------------
evidence of indebtedness evidencing the indebtedness of an Obligor under such
Home Loan.
Defective Home Loan: As defined in Section 3.05 hereof.
-------------------
Deferred Amount: As of any Payment Date and as to each Class of
---------------
Subordinate Securities (or the B-2 Component), the amount of Allocable Loss
Amounts previously applied in reduction of the Class Principal Balance (or
Component Principal Balance) thereof, to the extent not previously reimbursed,
plus interest accrued thereon at the applicable Interest Rate from the date
when so applied through the end of the Due Period immediately preceding such
Payment Date.
Delinquency Event: With respect to any Payment Date, a Delinquency Event
-----------------
will have occurred and be continuing if the Net Delinquency Calculation Amount
for such date exceeds the Required Overcollateralization Amount for such date.
Deleted Home Loan: A Home Loan replaced by or to be replaced by a
-----------------
Qualified Substitute Home Loan pursuant to Section 3.05 hereof.
Determination Date: With respect to a Payment Date in a given month, the
------------------
day of such month that is three (3) Business Days prior to such Payment Date.
DTC: The Depository Trust Company.
---
Due Date: With respect to any Home Loan, the day of the month on which
--------
the related Monthly Payment is due.
Due Period: With respect to each Payment Date, the calendar month
----------
immediately preceding the month in which such Payment Date occurs, with the
first Due Period commencing on June 1, 1998.
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 Securities, as evidenced in writing by
such Rating Agency.
Eligible Servicer: A Person that is qualified to act as Servicer of the
-----------------
Home Loans under applicable federal and state laws and regulations and who
satisfies the criteria of Section 9.04(b) hereof.
Entitlement Holder: The meaning specified in Section 8-102(a)(7) of the
------------------
New York UCC.
Entitlement Order: The meaning specified in Section 8-102(a)(8) of the
-----------------
New York UCC (I.E., generally, orders directing the transfer or redemption of
any Financial Asset).
Event of Default: As specified in Section 10.01 hereof.
----------------
Excess Spread: With respect to any Payment Date, the excess of (a) the
-------------
Available Funds with respect to such Payment Date over (b) the Regular Payment
Amount with respect to such Payment Date.
Exchange Act: The Securities Exchange Act of 1934, as amended.
------------
FDIC: The Federal Deposit Insurance Corporation and any successor
----
thereto.
FHLMC: The Federal Home Loan Mortgage Corporation and any successor
-----
thereto.
Fidelity Bond: As described in Section 4.03 hereof.
-------------
Financial Asset: The meaning specified in Section 8-102(a)(9) of the New
---------------
York UCC.
Fitch: Fitch IBCA, Inc., or any successor thereto.
-----
FNMA: The Federal National Mortgage Association and any successor
----
thereto.
Foreclosure Property: Any real 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 such Home Loan.
Funding Period: The period beginning on the Closing Date and ending on
--------------
the earlier of (a) the date on which the amount on deposit in the Pre-Funding
Account is reduced to $50,000 or less and the Transferor directs that the
Funding Period end, and (b) the close of business on August 21, 1998;
provided, however, that the Funding Period shall end upon the occurrence of an
Event of Default hereunder or under the Indenture.
HUD: The United States Department of Housing and Urban Development and
---
any successor thereto.
Home Improvement Loan: A loan, the net proceeds of which were or will be
---------------------
used by the Obligor to finance property improvements.
Home Loan: A Home Improvement Loan, Debt Consolidation Loan, 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: With respect to any Home Loan, the fixed annual
-----------------------
rate of interest borne by the related Debt Instrument, as shown on the Home
Loan Schedule, as such rate of interest may be modified from time to time by
the Servicer in accordance with Section 4.01(c) hereof.
Home Loan Pool: Initially, the Initial Home Loans, and thereafter, as of
--------------
any date, all of the Home Loans that are subject to the lien of the Indenture
as of such date, as identified in the Home Loan Schedule.
Home Loan Schedule: The schedule of Initial Home Loans attached hereto as
------------------
Exhibit A, as amended from time to time pursuant to the terms of this
Agreement, such schedule identifying each Home Loan by address of the related
Mortgaged Property, if any, and the name(s) of each Obligor and setting forth
as to each Home Loan the following information: (i) the Principal Balance as
of the applicable Cut-Off Date, (ii) the account number, (iii) the original
principal amount, (iv) the Due Date, (v) the Home Loan Interest Rate, (vi) the
first date on which a Monthly Payment is due under the related Debt
Instrument, (vii) the Monthly Payment, (viii) the maturity date of the related
Debt Instrument, (ix) the remaining number of months to maturity as of the
applicable Cut-Off Date and (x) the product type.
Indenture: The Indenture dated as of June 1, 1998 between the Issuer and
---------
the Indenture Trustee, as such may be amended or supplemented from time to
time.
Indenture Event of Default: Any event of default specified in Section 5.1
--------------------------
of the Indenture.
Indenture Trustee: U.S. Bank National Association, a national banking
-----------------
association, as Indenture Trustee under the Indenture, or any successor
indenture trustee under the Indenture.
Indenture Trustee Fee: The annual fee payable to the Indenture Trustee,
---------------------
calculated and payable monthly on each Payment Date, equal to $416.67, except
that with respect to the first Payment Date such monthly amount shall be pro
rated for the first Due Period.
Indenture Trustee's Home Loan File: As defined in Section 2.05(d).
----------------------------------
Initial 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 Cut-Off Date, LESS 76.67% of amounts attributable to
interest collected during the initial Due Period. The Initial Home Loans
subject to this Agreement are identified on the Home Loan Schedule annexed
hereto as Exhibit A.
Initial Overcollateralization Amount: Zero.
------------------------------------
Initial Pool Principal Balance: $450,000,022.13.
------------------------------
Initial Undercollateralization Amount: With respect to any Payment Date,
-------------------------------------
an amount (not less than zero) equal to the excess, if any, of (a) the
aggregate of the Class Principal Balances of all Classes of Securities, after
giving effect to payments and distributions in respect of the Securities on
such Payment Date, over (b) the sum of (i) the Pool Principal Balance as of
the end of the preceding Due Period and (ii) the amount, if any, on deposit in
the Pre-Funding Account as of the end of such Due Period (net of investment
earnings thereon). Notwithstanding the foregoing, on any date after the
Payment Date on which the Initial Undercollateralization Amount is first
reduced to zero, such amount shall be deemed to be zero.
Insurance Proceeds: With respect to each Payment Date, an amount equal
------------------
to, with respect to any Home Loan, the proceeds paid during the immediately
preceding Due Period to the Indenture Trustee or the Servicer by any insurer
pursuant to any insurance policy covering a Home Loan, Mortgaged Property or
REO Property or any other insurance policy that relates to a Home Loan, net of
any expenses incurred by the Indenture Trustee or the Servicer in connection
with the collection of such proceeds and not otherwise reimbursed, but
excluding the proceeds of any insurance policy that are to be applied to the
restoration or repair of the Mortgaged Property or released to the borrower in
accordance with customary loan servicing procedures.
Interest Rate: With respect to each Class of Securities, the per annum
-------------
rate of interest applicable to Securities of such Class, as specified below:
Class Interest Rate(1)
----- -------------
A-1 (2)
A-2 6.12%
A-3 6.24%
A-4 6.32%
A-5 6.38%
A-6 6.61%
A-7 6.80%
A-8 6.99%
M-1 6.80%
M-2 7.19%
B-1 8.21%
Residual Interest Certificate (3)
(1) The Interest Rate applicable to each Class of Notes remaining
outstanding will be increased by 0.50% with respect to each Payment
Date occurring after the date on which the Seller is first permitted to
exercise its option to redeem or terminate the Securities pursuant to
Section 11.02(b).
(2) Interest will accrue on the Class A-1 Notes during each Accrual Period
at a per annum rate equal to LIBOR for the related LIBOR Determination
Date plus 0.04%, subject to a maximum rate equal to the Net Weighted
Average Rate. The Interest Rate applicable to the Class A-1 Notes for
the initial Accrual Period will be 5.69625% per annum.
(3) Interest will accrue on the Residual Interest Certificate during each
Accrual Period at a per annum rate calculated on the basis of the Class
Principal Balance thereof and the aggregate amount of interest accrued
on the A IO and B-2 Components during such Accrual Period.
With respect to each Component other than the Excess Component, the per annum
rate of interest applicable thereto is as specified in the definition of
Components.
LIBOR: With respect to each Accrual Period (other than the initial
-----
Accrual Period) and each Class of LIBOR Securities, the rate for United States
dollar deposits for one month that appears on Telerate Screen Page 3750 as of
11:00 a.m., London time, on the second LIBOR Business Day before the first day
of such Accrual Period, as determined by the Indenture Trustee. If such rate
does not appear on such page (or such other page as may replace that page on
that service, or if such service is no longer offered, such other service for
displaying LIBOR or comparable rates as may be reasonably selected by the
Indenture Trustee), LIBOR for the applicable Accrual Period will be the
Reference Bank Rate. If no such quotations can be obtained by the Indenture
Trustee and no Reference Bank Rate is available, LIBOR will be LIBOR
applicable to the preceding Accrual Period. LIBOR for the initial Accrual
Period will be 5.65625%.
LIBOR Business Day: Any day on which banks are open for dealing in
------------------
foreign currency and exchange in London and New York City.
LIBOR Securities: The Class A-1 Notes.
----------------
Liquidated Home Loan: A defaulted Home Loan as to which the Servicer has
--------------------
determined that all recoverable liquidation and insurance proceeds have been
received, which will be deemed to occur upon the earlier of: (a) the
liquidation of the related Mortgaged Property acquired through foreclosure or
similar proceedings, (b) the Servicer's determination in accordance with
customary servicing practices that no further amounts are collectible from the
Home Loan and any related security, or (c) the 180th day that any portion of a
scheduled monthly payment of principal and interest is 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 Sections 4.02 or 4.04, in each case other than Post-Liquidation
Proceeds, Insurance Proceeds and Released Mortgaged Property Proceeds.
Loan Sale Agreement: Individually or collectively, as the context in
-------------------
which this term is used may require, any or all of the following: (i) the loan
sale agreement between the Transferor, as seller, and the Seller, as
purchaser, pursuant to which the Seller has acquired any of the Home Loans;
and (ii) each loan sale agreement entered into by the Transferor, as
purchaser, pursuant to which the Transferor has acquired any of the Home Loans
and which shall include all of the rights and benefits of the Transferor
thereunder with respect to such Home Loans, subject to any limitations
thereunder regarding assignment by the Transferor.
Majority Securityholders: (i) Until such time as the sum of the Class
------------------------
Principal Balances of all Classes of Notes has been reduced to zero, the
holder or holders of in excess of 50% of the aggregate Class Principal Balance
of all Classes of Notes (accordingly, the holder of the Residual Interest
Certificate shall be excluded from any rights or actions of the Majority
Securityholders during such period); and (ii) thereafter, the holder of the
Residual Interest Certificate.
Monthly Payment: With respect to a Home Loan, the scheduled monthly
---------------
payment of principal and/or interest required to be made by the related
Obligor on the related Home Loan, as set forth in the related Debt Instrument.
Moody's: Moody's Investors Service, Inc., or any successor thereto.
-------
Mortgage: The mortgage, deed of trust or other security instrument
--------
creating a lien in accordance with applicable law on a Mortgaged Property to
secure the Debt Instrument which evidences a Home Loan.
Mortgaged Property: The property (real, personal or mixed) encumbered by
------------------
the Mortgage which secures the Debt Instrument evidencing a Home Loan.
Mortgaged Property States: Each state in which any Mortgaged Property
-------------------------
securing an Initial Home Loan is located as set forth in the Home Loan
Schedule, and any other state wherein a Mortgaged Property securing any
Subsequent Home Loan may be located as set forth in the applicable Home Loan
Schedule.
Net Delinquency Calculation Amount: With respect to any Payment Date, the
----------------------------------
excess, if any, of (x) the product of 1.4 and the Rolling Six-Month
Delinquency Average over (y) the aggregate of the amounts of Excess Spread for
the three preceding Payments Dates.
Net Liquidation Proceeds: With respect to each Payment Date, an amount
------------------------
equal to any cash amounts received during the related Due Period from
Liquidated Home Loans, whether through trustee's sale, foreclosure sale,
disposition of REO Property, whole loan sales or otherwise (other than
Insurance Proceeds and Released Mortgaged Property Proceeds), and any other
cash amounts received during the related Due Period in connection with the
management of the Mortgaged Properties from defaulted Home Loans, in each
case, net of any reimbursements to the Servicer made from such amounts for any
unreimbursed Servicing Advances made and any other fees and expenses paid in
connection with the foreclosure, conservation and liquidation of the related
Liquidated Home Loans or Mortgaged Properties pursuant to Sections 4.02 and
4.04 hereof.
Net Loan Losses: With respect to a Payment Date, the sum of (A) with
---------------
respect to the Home Loans that became 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 related Determination Date and without the
application of any amounts included in clause (ii) below, minus
(ii) the aggregate amount of any recoveries attributable to
principal from whatever source received during any Due Period, with
respect to such Liquidated Home Loans, including any subsequent Due
Period, and including without limitation any Net Liquidation Proceeds,
any Insurance Proceeds, any Released Mortgaged Property Proceeds, any
payments from the related Obligor and any payments made pursuant to
Section 3.05, less the amount of any expenses incurred in connection with
such recoveries; and
(B) with respect to any defaulted Home Loan that is subject to a modification
by the Servicer, an amount equal to the portion of the Principal Balance, if
any, released in connection with such modification.
Net Weighted Average Rate: With respect to any Accrual Period, the per
-------------------------
annum rate equal to the weighted average (by Principal Balance) of the
interest rates of the Home Loans as of the first day of the related Due
Period, as reduced by the Servicing Fee Rate.
New York UCC: The Uniform Commercial Code as in effect in the State of
------------
New York.
Non-Recordation State: Any state with respect to which the Transferor and
---------------------
the Seller shall have delivered to the Indenture Trustee (and to each Rating
Agency, in the case of any state in which 10% or more by Principal Balance as
of the Cut-Off Date of the Mortgaged Properties are located) on or prior to
July 31, 1998 an opinion, memorandum or other written assurance of counsel in
a form reasonably acceptable to the Indenture Trustee (and, where applicable,
to each Rating Agency), to the effect that, as to any Home Loan with respect
to which the related Mortgaged Property is located in such state, recordation
of an Assignment of Mortgage in such state is not necessary to transfer title
to the related Mortgage Note to the Issuer or to pledge to the Indenture
Trustee the issuer's rights under such Mortgage Note in respect of which the
Mortgaged Property is located in such state.
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, the Class A-8 Notes, the Class M-1 Notes, the
Class M-2 Notes and the Class B-1 Notes.
Note Payment Account: The account established and maintained pursuant to
--------------------
Section 5.01(a)(2).
Noteholder: A holder of a Note.
----------
Noteholders' Interest Carry-Forward Amount: With respect to the initial
------------------------------------------
Payment Date, zero; with respect to each other Payment Date, the excess (if
any) of (A) the Noteholders' Monthly Interest Payment Amount for the
immediately preceding Payment Date and any Noteholders' Interest Carry-Forward
Amount remaining outstanding with respect to prior Payment Dates, over (B) the
amount in respect of interest on the Notes that was paid on the Notes on such
immediately preceding Payment Date.
Noteholders' Interest Payment Amount: With respect to any Payment Date,
------------------------------------
the sum of the Noteholders' Monthly Interest Payment Amount for such Payment
Date and the Noteholders' Interest Carry-Forward Amount for such Payment Date.
Noteholders' Monthly Interest Payment Amount: With respect to any Payment
--------------------------------------------
Date, the aggregate of interest accrued for the related Accrual Period on each
Class of Notes at the applicable Interest Rate on the Class Principal Balance
thereof immediately preceding such Payment Date.
Notional Component: The A IO Component.
------------------
Obligor: Each obligor on a Debt Instrument.
-------
Officer's Certificate: A certificate delivered to the Indenture Trustee
---------------------
or the Issuer signed by the President or a Vice President or Assistant Vice
President of the Seller, the Servicer, the Transferor or the Issuer, in each
case, as required by this Agreement.
Original Class Principal Balance: With respect to each Class of
--------------------------------
Securities, the original principal balance of such Class, as set forth below:
Original
Class Principal Balance
----- -----------------
A-1 $ 173,836,000.00
A-2 $ 37,456,000.00
A-3 $ 77,898,000.00
A-4 $ 46,039,000.00
A-5 $ 17,773,000.00
A-6 $ 52,149,000.00
A-7 $ 20,123,000.00
A-8 $ 32,256,000.00
M-1 $ 68,175,000.00
M-2 $ 37,875,000.00
B-1 $ 27,270,000.00
Residual Interest Certificate (1)
(1) The Original Class Principal Balance of the Residual Interest
Certificate is equal to the Original Component Principal Balance of the
B-2 Component, as set forth under the definition of "Component" herein.
The Original Class Principal Balance of the Residual Interest
Certificate is $15,150,000.00.
Overcollateralization Amount: With respect to any Payment Date, an amount
----------------------------
(not less than zero) equal to the excess of (a) the sum of (i) the Pool
Principal Balance as of the immediately preceding Determination Date and (ii)
the amount, if any, on deposit in the Pre-Funding Account (other than
investment earnings) as of the end of such immediately preceding Due Period
over (b) the aggregate of the Class Principal Balances of all Classes of
Securities, after giving effect, unless otherwise specified, to all payments
on the Notes and distributions in respect of the Residual Interest Certificate
on such Payment Date.
Overcollateralization Shortfall: With respect to any Payment Date, the
-------------------------------
excess, if any, of the Required Overcollateralization Amount for such Payment
Date over the Overcollateralization Amount before giving effect to payments on
the Notes and distributions in respect of the Residual Interest Certificate to
be made on such Payment Date pursuant to Section 5.01(c)(4).
Overcollateralization Stepdown Date: The first Payment Date occurring
-----------------------------------
after June 2001 as to which the aggregate of the Class Principal Balances of
the Senior Notes has been reduced to an amount equal to or less than the
amount, if any, by which (a) the Pool Principal Balance as of the immediately
preceding Determination Date exceeds (b) the greater of (i) 49.49% of the Pool
Principal Balance as of such immediately preceding Determination Date plus the
greater of (x) 7.0% of the Pool Principal Balance as of the immediately
preceding Determination Date and (y) the Net Delinquency Calculation Amount
for such Payment Date, and (ii) 0.50% of the Assumed Pool Principal Balance as
of such Payment Date.
Overcollateralization Surplus: With respect to any Payment Date, the
-----------------------------
excess, if any, of the Overcollateralization Amount for such Payment Date over
the Required Overcollateralization Amount for such date.
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 payable to the Owner Trustee
-----------------
on the Payment Date occurring in July each year during the term of this
Agreement commencing in July 1999; provided that the initial Owner Trustee Fee
shall be paid on the Closing Date.
Payment Date: The 10th day of any month or if such 10th day is not a
------------
Business Day, the first Business Day immediately following such day,
commencing in July 1998 and ending upon termination of this Agreement.
Permitted Investments: Each of the following:
---------------------
(1) obligations of, or guaranteed as to principal and interest by,
the United States or any agency or instrumentality thereof when such
obligations are backed by the full faith and credit of the United States;
(2) a repurchase agreement that satisfies the following criteria:
(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 ratings for short-term unsecured debt obligations by each
Rating Agency, or (b) banks rated in one of the two highest categories
for short-term unsecured debt obligations by each Rating Agency; and (2)
the written repurchase agreement must include the following: 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 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, market-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;
(3) certificates of deposit, time deposits and bankers acceptances
of any United States depository institution or trust company incorporated
under the laws of the United States or any state, including the Indenture
Trustee; provided that the debt obligations of such depository
institution or trust company at the date of the acquisition thereof have
been rated by each Rating Agency in one of its two highest short-term
ratings;
(4) deposits, including deposits with the Indenture Trustee, which
are fully insured by the Bank Insurance Fund or the Savings Association
Insurance Fund of the FDIC, as the case may be;
(5) commercial paper of any corporation incorporated under the laws
of the United States or any state thereof, including corporate affiliates
of the Indenture Trustee, which at the date of acquisition is rated by
each Rating Agency in its highest short-term rating category and which
has an original maturity of not more than 365 days;
(6) debt obligations rated by each Rating Agency at the time at
which the investment is made in its highest short-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 short-term ratings);
(7) money market funds which are rated by each Rating Agency at the
time at which the investment is made in its highest short-term rating
category, any such money market funds which provide for demand
withdrawals being conclusively deemed to satisfy any maturity
requirements for Permitted Investments set forth in this Agreement; or
(8) any other demand, money market or time deposit obligation,
security or investment as may be acceptable to each Rating Agency 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.
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.
Pool Principal Balance: As of any Determination Date, the aggregate of
----------------------
the Principal Balances as of the close of business on the last day of the
immediately preceding Due Period of all Home Loans in the Home Loan Pool as of
the close of such Due Period.
Post-Liquidation Proceeds: As defined in Section 4.02(b).
-------------------------
Pre-Funded Amount: With respect to any Payment 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 5.02.
Pre-Funding Account Deposit: An amount equal to $149,999,977.87.
---------------------------
Pre-Funding Termination Payment Date: The first Payment Date following
------------------------------------
the Due Period in which the Funding Period ends.
Principal Balance: With respect to any date of determination and with
-----------------
respect to any Home Loan or related Foreclosure Property, an amount equal to
the Cut-Off Date principal balance of such Home Loan minus all principal
reductions credited against the Principal Balance of such Home Loan since such
Cut-Off Date through the end of the immediately preceding Due Period;
provided, however, that the Principal Balance of a Liquidated Home Loan shall
be 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.
Prospectus: The final Prospectus, dated September 10, 1997, as
----------
supplemented by the Prospectus Supplement.
Prospectus Supplement: The Prospectus Supplement dated June 18, 1998,
---------------------
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 3.05, which (i) has or have an
interest rate or rates not more than 0.50% lower than the Home Loan Interest
Rate for the Deleted Home Loan, (ii) matures or mature not more than one year
later than and not more than one year earlier than the Deleted Home Loan,
(iii) has or have a principal balance or principal balances (after application
of all payments received on or prior to the date of substitution) equal to or
less than the Principal Balance of the Deleted Home Loan as of such date, (iv)
has or have a lien priority no lower than the Deleted Home Loan, (v) has a
related obligor with a Credit Score equal to or greater than the Credit Score
of the Obligor with respect to the Deleted Mortgage 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 30 days delinquent as of the
date of substitution for such loan; and (vii) has a related obligor with a
Credit Score at origination of not less than 620. For purposes of determining
whether multiple home loans proposed to be substituted for one or more Deleted
Home Loans pursuant to Section 3.05 are in fact "Qualified Substitute Home
Loans" as provided above, the criteria specified in clauses (i), (ii), (iii),
(v) and (vii) 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 nor more than one percentage point different from the Home Loan
Interest Rate for the designated Deleted Home Loan or Home Loans and the
weighted average Credit Score of any Qualified Substitute Home Loans
cumulatively substituted is equal to the weighted average Credit Score of the
Deleted Home Loans, the requirements of clauses (i) and (v) above would be
deemed satisfied), except that, with respect to any such substitution, the
lowest Credit Score of any home loan substituted shall not be lower than the
lowest Credit Score of the related Deleted Home Loans.
Rating Agency: Each of DCR, Fitch, Moody's and S&P and their respective
-------------
successors; provided, however, that 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, notice of which designation shall have been given to the Indenture
Trustee, the Issuer and the Servicer.
Ratings: The ratings initially assigned to the rated Securities by the
-------
Rating Agencies, as evidenced by letters from the Rating Agencies.
Record Date: With respect to each Payment Date, the close of business on
-----------
the last Business Day of the calendar month immediately preceding the month in
which such Payment Date occurs.
Reference Bank Rate: With respect to any Accrual Period, the arithmetic
-------------------
mean (rounded upwards, if necessary, to the nearest one sixteenth of a
percent) of the offered rates for United States dollar deposits for one month
that are offered by the Reference Banks as of 11:00 a.m., New York City time,
on the second LIBOR Business Day prior to the first day of such Accrual Period
to prime banks in the London interbank market for a period of one month in
amounts approximately equal to the outstanding Class Principal Balance of the
Class A-1 Notes, provided that at least two such Reference Banks provide such
rate. If fewer than two offered rates appear, the Reference Bank Rate will be
the arithmetic mean of the rates quoted by one or more major banks in New York
City, selected by the Indenture Trustee, as of 11:00 a.m., New York City time,
on such date for loans in U.S. Dollars to leading European Banks for a period
of one month in amounts approximately equal to the outstanding Class Principal
Balance of the Class A-1 Notes. If no such quotations can be obtained, the
Reference Bank Rate will be the Reference Bank Rate applicable to the
preceding Accrual Period.
Reference Banks: Three money center banks selected by the Indenture
---------------
Trustee.
Regular Payment Amount: With respect to any Payment Date, the lesser of
----------------------
(a) the Available Funds and (b) the sum of (i) the Noteholders' Interest
Payment Amount, (ii) the aggregate of the A IO Component's Interest
Distributable Amount and the B-2 Component's Interest Distributable Amount and
(iii) the Regular Principal Payment Amount.
Regular Principal Payment Amount: With respect to each Payment Date, an
--------------------------------
amount equal to the lesser of:
(a) 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 Due Period, (iii) the
principal portion of all Net Liquidation Proceeds, Insurance Proceeds and
Released Mortgaged Property Proceeds received by the Servicer during the
related Due Period in respect of any Home Loan, to the extent received on or
prior to the date on which such Home Loan became a Liquidated Home Loan, (iv)
that portion of the Purchase Price of any repurchased Home Loan which
represents principal and (v) the principal portion of any Substitution
Adjustments required to be deposited in the Collection Account as of the
related Determination Date; and
(b) the aggregate of the outstanding principal balances of the Securities
immediately prior to such Payment Date.
Released Mortgaged Property Proceeds: With respect to each Payment Date,
------------------------------------
an amount equal to, with respect to any Home Loan, the 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 borrower in accordance with applicable law, customary
mortgage servicing procedures and this Agreement.
Required Overcollateralization Amount: With respect to any Payment Date
-------------------------------------
occurring prior to the Overcollateralization Stepdown Date, an amount equal to
the greater of (x) 3.5% of the Assumed Pool Principal Balance as of the end of
the related Due Period and (y) the Net Delinquency Calculation Amount for such
Payment Date; with respect to any other Payment Date, an amount equal to the
greater of (x) 7.0% of the Pool Principal Balance as of the immediately
preceding Determination Date and (y) the Net Delinquency Calculation Amount
for such Payment Date; provided, however, that the Required
Overcollateralization Amount with respect to a Payment Date will in no event
be less than 0.5% of the Assumed Pool Principal Balance as of the end of the
related Due Period.
Residual Interest Certificate: The residual interest certificate issued
-----------------------------
pursuant to the Trust Agreement which, for purposes of calculating
distributions of interest and principal and of allocating Allocable Loss
Amounts, will be composed of the three payment Components having the
designations and, with respect to each of the A IO Component and the B-2
Component, the Interest Rates and Original Component Notional Balance or
Original Component Principal Balance as set forth under "Component" herein.
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, the Transferor, the
Seller, or the Servicer, the President or any Vice President, Assistant Vice
President, or any Secretary or Assistant Secretary thereof.
Rolling Six-Month Delinquency Average: With respect to any Payment Date,
-------------------------------------
the average of the applicable 60-Day Delinquency Amounts for each of the six
immediately preceding Due Periods.
S&P: Standard & Poor's Rating Services, a division of The McGraw-Hill
---
Companies, Inc., or any successor thereto.
Securities Act: The Securities Act of 1933, as amended.
--------------
Securities Intermediary: The Person acting as Securities Intermediary
-----------------------
under this Agreement (which is U.S. Bank National Association), its successor
in interest, and any successor Securities Intermediary appointed pursuant to
Section 5.06(d).
Security or Securities: Any Notes or the Residual Interest Certificate,
----------------------
as applicable.
Security Entitlement: The meaning specified in Section 8-102(a)(17) of
--------------------
the New York UCC.
Securityholder: A holder of a Note or the Residual Interest Certificate,
--------------
as applicable.
Seller: FIRSTPLUS Investment Corporation, a Nevada corporation, and any
------
successor thereto.
Senior Noteholders' Interest Carry-Forward Amount: With respect to the
-------------------------------------------------
initial Payment Date, zero; with respect to each other Payment Date, the
excess (if any) of (A) the Senior Noteholders' Monthly Interest Payment Amount
for the immediately preceding Payment Date and any Senior Noteholders'
Interest Carry-Forward Amount remaining outstanding with respect to prior
Payment Dates, over (B) the amount in respect of interest that was paid on
such Notes on such immediately preceding Payment Date.
Senior Noteholders' Interest Payment Amount: With respect to any Payment
-------------------------------------------
Date, the sum of the Senior Noteholders' Monthly Interest Payment Amount for
such Payment Date and the Senior Noteholders' Interest Carry-Forward Amount
for such Payment Date.
Senior Noteholders' Monthly Interest Payment Amount: With respect to each
---------------------------------------------------
Payment Date, the aggregate of interest accrued for the related Accrual Period
on each Class of Senior Notes at the applicable Interest Rates on the
respective Class Principal Balances of such Classes immediately preceding such
Payment Date.
Senior Notes: The Class A-1, the Class A-2, the Class A-3, the Class A-4,
------------
the Class A-5, the Class A-6, the Class A-7 and the Class A-8 Notes.
Senior Optimal Principal Balance: With respect to any Payment Date prior
--------------------------------
to the Overcollateralization Stepdown Date, zero; with respect to any other
Payment Date, an amount equal to the Pool Principal Balance as of the
immediately preceding Determination Date minus the greater of (a) 49.49% of
the Pool Principal Balance as of such immediately preceding Determination Date
plus the Required Overcollateralization Amount for such Payment Date
(calculated without giving effect to the proviso in the definition thereof)
and (b) 0.50% of the Assumed Pool Principal Balance.
Series or Series 1998-4: FIRSTPLUS Asset Backed Securities, Series
-----------------------
1998-4.
Servicer: FFI, in its capacity as the servicer hereunder, or any
--------
successor appointed as herein provided.
Servicer's Fiscal Year: October 1st of each year through September 30th
----------------------
of the following year.
Servicer's Home Loan Files: In respect of each Home Loan, all documents
--------------------------
customarily included in the servicer's loan file for the related type of Home
Loan in accordance with the servicing standard set forth in Section 4.01.
Servicer's Monthly Statement: As defined in Section 6.01(b).
----------------------------
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 any 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 as provided in
Section 5.01(c)(3)(xv) to the extent not previously deducted or retained by
the Servicer in calculating Net Liquidation Proceeds hereunder.
Servicing Advance Reimbursement Amount: As defined in Section
--------------------------------------
5.01(c)(3)(xv).
Servicing Compensation: With respect to a Payment Date, the Servicing Fee
----------------------
and other amounts to which the Servicer is entitled pursuant to Sections
5.01(b)(1), 5.01(b)(2), 5.01(c)(1), 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 Payment
Date, which shall be (a) the product of the Servicing Fee Rate and the
Principal Balance of such Home Loan as of the second preceding Determination
Date (or, in the case of the first Payment Date, the Principal Balance as of
the May 31, 1998 Cut-Off Date) divided by (b) 12. The Servicing Fee includes
any servicing fees owed or payable to any Subservicer and any custodial fees
owed or payable to the Custodian which fees shall be paid from the Servicing
Fee.
Servicing Fee Rate: 0.75% per annum.
------------------
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, as such list may from time to time be amended.
60-Day Delinquency Amount: With respect to any Due Period, the aggregate
-------------------------
of the Principal Balances of all Home Loans that are 61 or more days
delinquent, in foreclosure or REO Property as of the end of such Due Period,
excluding any Liquidated Home Loan.
Subordinate Security: Any Class M-1 Note, Class M-2 Note, Class B-1 Note
--------------------
or Residual Interest Certificate.
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,
received on or after the applicable Cut-Off Date, which Subsequent Home Loans
shall be identified on a schedule attached as an exhibit to the related
Subsequent Transfer Agreement.
Subsequent Purchase Price: With respect to each Subsequent Transfer Date,
-------------------------
as of the applicable Cut-Off Date, the Principal Balance of any Subsequent
Home Loans to be conveyed to the Trust on such Subsequent Transfer Date.
Subsequent Transfer Agreement: With respect to any Subsequent Home Loan,
-----------------------------
the agreement pursuant to which Subsequent Home Loans are transferred to the
Trust by the Seller, substantially in the form of Exhibit B hereto.
Subsequent Transfer Date: The date specified in each Subsequent Transfer
------------------------
Agreement, but no later than August 21, 1998.
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 and the Indenture Trustee.
Substitution Adjustment: As to any date on which a substitution occurs
-----------------------
pursuant to Section 3.05, the amount, if any, by which (a) the aggregate of
the Principal Balances after application of principal payments received
through the close of the preceding Due Period of any Qualified Substitute Home
Loans plus any accrued and unpaid interest thereon that is scheduled to be
paid during the Due Period in which such substitution occurs, is less than (b)
the aggregate of the Principal Balances, together with accrued and unpaid
interest scheduled to be paid during the Due Period in which such substitution
occurs, of the related Deleted Home Loans.
Superior Lien: With respect to any Home Loan which is secured by other
-------------
than a first priority lien, the mortgage(s) relating to the corresponding
Mortgaged Property having a superior priority lien.
Termination Price: An amount equal to the sum of (i) the then outstanding
-----------------
aggregate Class Principal Balances of the Securities plus all accrued and
unpaid interest thereon at the applicable Interest Rates, (ii) any Servicing
Compensation due and unpaid, and (iii) any unreimbursed Servicing Advances
including such Servicing Advances deemed to be nonrecoverable.
Third-Party Purchaser: As defined in Section 11.02(a).
---------------------
Total Collection Amount: With respect to each Payment Date, an amount
-----------------------
equal to the sum of the Available Collection Amount and any investment
earnings on amounts in the Note Payment Account and the Certificate
Distribution Account during the related Due Period.
Transferor: FFI, in its capacity as the transferor hereunder.
----------
Trust: The Issuer.
-----
Trust Account Property: The Trust Accounts, the Certificate Distribution
----------------------
Account, all amounts and investments held from time to time in any Trust
Account or in the Certificate Distribution Account and all proceeds of the
foregoing.
Trust Accounts: The Note Payment Account, the Collection Account and the
--------------
Pre-Funding Account.
Trust Agreement: The Trust Agreement dated as of June 1, 1998 among the
---------------
Seller as Depositor, the Co-Owner Trustee and the Owner Trustee, as such may
be amended or supplemented from time to time.
Trust Estate: The assets subject to this Agreement and the Indenture
------------
pledged by the Issuer to the Indenture Trustee, which assets consist of (a)
all of the Seller's right, title and interest in and to: (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 Issuer as provided in
this Agreement and as listed in the Home Loan Schedule, as the same may be
amended or supplemented from time to time (including to reflect the removal of
Deleted Home Loans and the addition of Qualified Substitute Home Loans),
together with the Servicer's Home Loan Files and the Indenture Trustee's Home
Loan Files relating thereto and all proceeds thereof, (ii) all payments and
proceeds received on or with respect to the Home Loans after the applicable
Cut-Off Dates, LESS 76.67% of amounts attributable to interest collected
during the initial Due Period, (iii) such assets as from time to time are
identified as Foreclosure Property, (iv) all assets and funds as are from time
to time deposited in any Trust Account, including amounts on deposit in such
accounts which are invested in Permitted Investments, (v) all insurance
policies with respect to the Home Loans and any Insurance Proceeds, (vi) Net
Liquidation Proceeds, Post-Liquidation Proceeds and Released Mortgaged
Property Proceeds, (vii) that certain Loan Sale Agreement under which the
Seller acquired the Initial Home Loans from the Transferor, and (b) all right,
title and interest of the Issuer, as purchaser, under each Subsequent Transfer
Agreement.
Weighted Average Interest Rate: As of any date of determination, the per
------------------------------
annum rate equal to the weighted average (by Class Principal Balance) of the
Interest Rates applicable to the Classes of Securities.
Withdrawal Date: With respect to a Payment Date, the second Business Day
---------------
prior to such Payment Date.
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.
Section 1.03. Interest Calculation. Unless otherwise specified, all
--------------------
calculations of accrued interest and accrued fees shall be made on the basis
of a 360-day year consisting of twelve 30-day months, except that with respect
to the Class A-1 Notes, calculations of accrued interest shall be made on the
basis of a 360-day year and the actual number of days elapsed in each Accrual
Period.
ARTICLE II
CONVEYANCE OF THE HOME LOANS
Section 2.01. Conveyance of the Initial Home Loans. (a) As of the Closing
------------------------------------
Date, in consideration of the Issuer's delivery of the Notes and the Residual
Interest Certificate 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 and the Certificate Distribution
Account. 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
by the Seller of all of the Seller's right, title and interest in and to the
Trust Estate, receipt of which is hereby acknowledged by the Issuer.
Concurrently with such delivery, the Issuer has pledged to the Indenture
Trustee the Trust Estate, and in exchange for the conveyance to it by the
Seller of all of the Seller's right, title and interest in and to the Trust
Estate (i) the Owner Trustee (not in its individual capacity, but solely as
Owner Trustee on behalf of the Issuer) has executed the Notes and (ii) the
Issuer has caused the Indenture Trustee to authenticate and deliver the Notes
to the Seller or its designee, upon the order of the Issuer. In addition,
concurrently with the delivery to the Issuer of all of the Seller's right,
title and interest in and to the Trust Estate 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 Residual Interest
Certificate to the Seller or its designee, upon the order of the Seller.
Section 2.02. Conveyance of Subsequent Home Loans. (a) On or before the
-----------------------------------
last day of the Funding Period, the Seller shall convey to the Issuer, and the
Issuer shall purchase pursuant to this Section 2.02 the lesser of (calculated
by aggregate principal balance): (i) the Home Loans then in the possession of
the Seller that satisfy the requirements of this Section 2.02 and (ii) the
maximum principal balance of Home Loans that satisfy the requirements of this
Section 2.02, with respect to which the aggregate Subsequent Purchase Price
does not exceed the Pre-Funding Account Deposit. Subject to the conditions set
forth in this Section 2.02, in consideration of the Issuer's delivery on the
related Subsequent Transfer Dates to the Seller or its designee, or upon the
order of the Seller, of the Subsequent Purchase Price of the related
Subsequent Home Loans from amounts on deposit in the Pre-Funding Account, the
Seller shall, from time to time, on any Subsequent Transfer Date sell,
transfer, assign, set over and otherwise convey to the Issuer, without
recourse, but subject to the other terms and provisions of this 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 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. In
connection therewith, the Transferor shall amend the Home Loan Schedule to
reflect the inclusion of the applicable Subsequent Home Loans in the Home Loan
Pool. The Transferor shall promptly deliver to the Issuer, the Servicer (if
the Transferor is not then acting as such), and the Indenture Trustee a copy
of the Home Loan Schedule as so amended. The sale, transfer, assignment, set
over and conveyance by the Seller of 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 such Subsequent Home Loans or under any agreement or
instrument relating thereto except as specifically set forth herein.
(b) If the Subsequent Purchase Price for the Subsequent Home Loans to be
conveyed to the Trust on any Subsequent Transfer Date is less than the amount
required to obtain the release of the interest of any third party (including
any lienholder therein), then the Transferor or the Seller shall cause the
delivery of immediately available funds equal to such insufficiency to the
Issuer in escrow (which funds shall not be property of the Trust) and the
Issuer, in turn, shall remit such immediately available funds, together with
funds from the Pre-Funding Account equal to the Subsequent Purchase Price, to
the third party designated by the Transferor or the Seller that is releasing
its interest in such Subsequent Home Loans.
On each Subsequent Transfer Date, the Seller shall transfer to the Issuer
the applicable 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 (except in the case of clause (iii) below) 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 and (y) no Subsequent Home Loan shall be 31 or more
days delinquent as of the related Cut-Off Date;
(ii) the Transferor and/or Seller shall have provided the Indenture
Trustee, the Issuer and each Rating Agency with such data as they may
reasonably request regarding all Subsequent Home Loans transferred to the
Issuer, delivered at least five Business Days prior to such Subsequent
Transfer Date;
(iii) the Servicer shall deposit in the Collection Account within
two Business Days following the Subsequent Transfer Date all collections
in respect of the Subsequent Home Loans received after the related
Cut-Off Date;
(iv) the Transferor and/or Seller shall have provided the Issuer,
the Indenture Trustee and each Rating Agency with an Addition Notice at
least five Business Days prior to such Subsequent Transfer Date and shall
have provided any information reasonably requested by the Issuer or the
Indenture Trustee with respect to the applicable Subsequent Home Loans;
(v) the Transferor and the Seller shall certify to 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 Seller and the Issuer shall have delivered to the
Indenture Trustee a duly executed Subsequent Transfer Agreement,
including all exhibits listed therein;
(viii) the Funding Period shall not have terminated;
(ix) as of such Subsequent Transfer Date, the funds on deposit in
the Pre-Funding Account shall equal or exceed the applicable Subsequent
Transfer Price;
(x) the Transferor and Seller shall have delivered to the Issuer and
the Indenture Trustee an Officer's Certificate confirming the
satisfaction of each condition precedent specified in this Section 2.02
and in the related Subsequent Transfer Agreements; and
(xi) each Rating Agency shall have either (i) notified the
Transferor and/or the Seller in writing that such transfer of Subsequent
Home Loans will not result in a reduction or withdrawal of the then
current rating of any Class of Securities or (ii) not responded within
five Business Days after delivery of the applicable Addition Notice.
Section 2.O3. 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 Issuer, subject to
the lien created by the Indenture in favor of the Indenture Trustee for the
benefit of the Securityholders, 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 the Indenture Trustee and for the
benefit of the Securityholders 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 to the Issuer under generally accepted accounting
principles ("GAAP"). The Servicer shall be responsible for maintaining, and
shall maintain, a complete set of books and records for each Home Loan which
shall be clearly marked to reflect the record ownership of each Home Loan by
the Issuer, subject to the lien created by the Indenture in favor of the
Indenture Trustee for the benefit of the Securityholders.
It is the intention of the parties hereto that the transfers and
assignments contemplated by this Agreement shall constitute a sale of the
Trust Estate from the Seller to the Issuer and upon the execution of this
Agreement by the parties hereto, the Trust Estate shall no longer be owned by
the Seller. If the assignment, transfer and conveyance of the Trust Estate to
the Issuer pursuant to this Agreement is held or deemed not to be a sale or is
held or deemed to be a pledge of security for a loan, the Seller intends that
the rights and obligations of the parties to this Agreement shall be
established by the terms of this Agreement and that, in such event, (i) the
Seller shall be deemed to have granted to the Issuer a first priority security
interest in the entire right, title and interest of the Seller in and to the
Trust Estate and all proceeds thereof, and (ii) this Agreement shall
constitute a security agreement under applicable law. Prior to or promptly
after the Closing Date, the Seller shall cause to be filed a UCC-1 financing
statement with the Secretary of State of Delaware naming the Seller as
"debtor" and the Issuer as "secured party" and describing the Trust Estate.
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 U.S.
Bank National Association, as Indenture Trustee for the FIRSTPLUS Asset
Backed Securities, Series 1998-4, without recourse" and signed, by
facsimile or manual signature, in the name of the Seller by a Responsible
Officer thereof, together with all intervening endorsements that evidence
a complete chain of title from the originator thereof to the Transferor;
provided that any of the foregoing endorsements may be contained on an
allonge which shall be firmly affixed to such Debt Instrument;
(ii) With respect to each Debt Instrument, either: (A) the original
Mortgage, with evidence of recording thereon, (B) a copy of the Mortgage
certified as a true copy by a Responsible Officer of the Transferor or by
the closing attorney, if the original has been transmitted for recording
but has not, at the time of delivery of this Agreement, been returned or
(C) a copy of the Mortgage certified by the public recording office in
those instances where the original recorded Mortgage has been lost or has
been retained by the public recording office;
(iii) With respect to each Debt Instrument, either (A) the original
Assignment of Mortgage assigned to "U.S. Bank National Association, as
Indenture Trustee for the FIRSTPLUS Asset Backed Securities, Series
1998-4" and signed in the name of the Transferor by a Responsible Officer
with evidence of recording thereon, (B) a copy of the Assignment of
Mortgage, certified as a true copy by a Responsible Officer of the
Transferor where the original has been transmitted for recording but has
not, at the time of delivery of this Agreement, been returned or (C) a
copy of the Assignment of Mortgage certified by the public recording
office in those instances where the original recorded Assignment of
Mortgage has been lost or has been retained by the public recording
office (provided, however, that where the original Assignment of Mortgage
is not being delivered to the Custodian, such Responsible Officer may
complete one or more blanket 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 Non-Recordation States;
(iv) With respect to each Debt Instrument, either: (A) originals of
all intervening assignments of the Mortgage, with evidence of recording
thereon, (B) if the original intervening assignments have not yet been
returned from the recording office, a copy of the originals of such
intervening assignments together with a certificate of a Responsible
Officer of the Transferor or the closing attorney certifying that the
copy is a true copy of the original of such intervening assignments or
(C) a copy of the intervening assignment certified by the public
recording office in those instances where the original recorded
intervening assignment has been lost or has been retained by the public
recording office; provided that the chain of intervening recorded
assignments shall not be required to match the chain of intervening
endorsements of the Debt Instrument, so long as the chain of intervening
recorded assignments, if applicable, evidences one or more assignments of
the Mortgage from the original mortgagee 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.
Notwithstanding the foregoing, if the original Debt Instrument with respect to
a Home Loan cannot be located, the Seller and Transferor may deliver a lost
note affidavit substantially in the form attached as Exhibit E hereto;
provided, that the aggregate of Home Loans as to which lost note affidavits
are delivered shall not exceed 1.0% (by aggregate principal balance) of the
Home Loans.
(b) The Seller agrees to deliver or cause to be delivered on or before
the applicable Subsequent Transfer Date to the Custodian each of the documents
identified in paragraphs (i) through (v) of subsection (a) above with respect
to any Subsequent Home Loans.
(c) With respect to each Home Loan, the Transferor shall, within five
Business Days after the receipt thereof, and in any event, within nine (9)
months of the Closing Date (in the case of the Initial Home Loans) or the
related Subsequent Transfer Date (in the case of the Subsequent Home Loans),
deliver or cause to be delivered to the Custodian: (i) the original recorded
Mortgage in those instances where a copy thereof certified by the Transferor
was delivered to the Custodian; (ii) the original recorded Assignment of
Mortgage, except with respect to Non-Recordation States; (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 with respect
to the delivery of any such document 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.
The Transferor and the Seller shall not be required to record Assignments
of Mortgages for any Home Loan with respect to which the related Mortgaged
Property is located in a Non-Recordation State, and the delivery of the
Assignments of Mortgages for such Home Loans to the Custodian in recordable
form on the Closing Date or Subsequent Transfer Date, as applicable, shall
constitute full compliance with subsection (a)(iii) above and the Transferor,
in its capacity as Servicer, shall retain record title to such Mortgages on
behalf of the Indenture Trustee and the holders of the Securities.
Notwithstanding the preceding provisions allowing for the non-recordation of
Assignments of Mortgage in the Non-Recordation 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 to record all Assignments
of Mortgage in Non-Recordation States.
(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; 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. The Indenture Trustee agrees, for the benefit of the
Securityholders, to cause the Custodian to review each Indenture Trustee's
Home Loan File within 45 days after the Closing Date (or, with respect to any
Qualified Substitute Home Loan or Subsequent Home Loan, within 45 days after
the conveyance of the related Home Loan to the Issuer) and to cause the
Custodian to deliver to the Transferor, the Seller, the Indenture Trustee, the
Issuer and the Servicer an interim 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(c)) (ii) all documents delivered by the Seller and
the Transferor to the Custodian pursuant to Section 2.05 have been reviewed by
the Custodian and have not been mutilated or damaged and appear regular on
their face (handwritten additions, changes or corrections shall not constitute
irregularities if initialed by the Obligor) and relate to such Home Loan,
(iii) based on the examination of the Custodian on behalf of the Indenture
Trustee, and only as to the foregoing documents, the information set forth on
the Home Loan Schedule accurately reflects the information set forth in the
Indenture Trustee's Home Loan File and (iv) each Debt Instrument has been
endorsed as provided in Section 2.05. Neither the Issuer nor the Custodian
shall be under any duty or obligation (i) to inspect, review or examine any
such documents, instruments, certificates or other papers to determine that
they are genuine, enforceable, or appropriate for the represented purpose or
that they are other than what they purport to be on their face or (ii) to
determine whether any Indenture Trustee's Home Loan File should include any of
the documents specified in Section 2.05(a)(v). Prior to the first anniversary
of the Closing Date, the Indenture Trustee shall cause the Custodian to
deliver to the Transferor, the Seller, the Indenture Trustee, the Issuer and
the Servicer a final certification evidencing the completeness of the Home
Loans in its possession or control.
(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 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) On the Payment Date in December of each year commencing in 1998, the
Issuer shall deliver (or cause the Custodian to deliver) to the Seller, the
Indenture Trustee and the Servicer a certification listing all Indenture
Trustee's Home Loan Files held by the Custodian on behalf of the Indenture
Trustee on such Payment 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 and the Securityholders as of the Closing
Date:
(a) The Seller is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Nevada and has all licenses
necessary to carry on its business as now being conducted and is licensed,
qualified and in good standing in each Mortgaged Property State if the laws of
such state require licensing or qualification in order to conduct business of
the type conducted by the Seller and perform its obligations as Seller
hereunder except where the failure to be so licensed, qualified or in good
standing, either singularly or in the aggregate, would not have a material
adverse effect on its business or its ability to perform its obligations
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 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 assets included in the Trust
Estate as of such date free and clear of any lien, mortgage, pledge, charge,
security interest or other encumbrance other than the lien of the Indenture.
(h) As of each 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.
(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 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 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 except where the failure to be so licensed, qualified or in good
standing, either singularly or in the aggregate, would not have a material
adverse effect on its business or its ability to perform its obligations
hereunder; the Servicer has the power and authority to execute and deliver
this Agreement and to perform in accordance herewith; the execution, delivery
and performance of this Agreement (including all instruments of transfer to be
delivered pursuant to this Agreement) by the Servicer and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
all necessary action of the Servicer; this Agreement evidences the valid,
binding and enforceable obligation of the Servicer; and all requisite action
has been taken by the Servicer to make this Agreement valid, binding and
enforceable upon the Servicer in accordance with its terms, subject to the
effect of bankruptcy, insolvency, reorganization, moratorium and other,
similar laws relating to or affecting creditors' rights generally or the
application of equitable principles in any proceeding, whether at law or in
equity;
(b) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required to
be taken, given or obtained, as the case may be, by or from any federal, state
or other governmental authority or agency (other than any such actions,
approvals, etc. under any state securities laws, real estate syndication or
"Blue Sky" statutes, as to which the Servicer makes no such representation or
warranty) that are necessary in connection with the execution and delivery by
the Servicer of this Agreement and the other related documents to which it is
a party, have been duly taken, given or obtained, as the case may be, are in
full force and effect, are not subject to any pending proceedings or appeals
(administrative, judicial or otherwise) and either the time within which any
appeal therefrom may be taken or review thereof may be obtained has expired or
no review thereof may be obtained or appeal therefrom taken, and are adequate
to authorize the consummation of the transactions contemplated by this
Agreement and such other documents on the part of the Servicer and the
performance by the Servicer of its obligations as Servicer under this
Agreement and such other documents to which it is a party;
(c) The consummation of the transactions contemplated by this Agreement
will not result in (i) the breach of any terms or provisions of the charter or
by-laws of the Servicer, (ii) the breach of any term or provision of, or
conflict with or constitute a default under or result in the acceleration of
any obligation under, any material agreement, indenture or loan or credit
agreement or other material instrument to which the Servicer or its property
is subject, or (iii) the violation of any law, rule, regulation, order,
judgment or decree to which the Servicer or its property is subject;
(d) Neither this Agreement nor the Prospectus nor any statement, report
or other document prepared by the Servicer and furnished or to be furnished
pursuant to this Agreement or in connection with the transactions contemplated
hereby contains any untrue statement of material fact or omits to state a
material fact necessary to make the statements contained herein or therein not
misleading;
(e) There is no action, suit, proceeding or investigation pending or, to
the best of the Servicer's knowledge, threatened against the Servicer which,
either in any one instance or in the aggregate, may result in any material
adverse change in the business, operations, financial condition, properties or
assets of the Servicer or in any material impairment of the right or ability
of the Servicer to carry on its business substantially as now conducted, or in
any material liability on the part of the Servicer or which would draw into
question the validity of this Agreement or the Home Loans or of any action
taken or to be taken in connection with the obligations of the Servicer
contemplated herein, or which would be likely to impair materially the ability
of the Servicer to perform under the terms of this Agreement;
(f) The Servicer is not in default with respect to any order or decree of
any court or any order, regulation or demand of any federal, state, municipal
or other governmental agency, which default might have consequences that would
materially and adversely affect the condition (financial or otherwise) or
operations of the Servicer or its properties or might have consequences that
would materially and adversely affect its performance hereunder;
(g) So long as FFI is the Servicer of the Home Loans hereunder, the
Servicer's Home Loan Files will be maintained at 1600 Viceroy, Dallas, Texas
75235, 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 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 and the
Securityholders, with respect to the Initial Home Loans, as of the Closing
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, none of the
----------------
Initial Home Loans are more than 30 days contractually delinquent, based on
the terms under which the related Mortgages and Debt Instruments have been
made. The Transferor has not advanced funds, or induced, solicited or
knowingly received any advance of funds from a party other than the related
Obligor, directly or indirectly, for the payment of any amount required by any
Home Loan.
(d) No Waiver or Modification. The terms of each Debt Instrument and
-------------------------
Mortgage, have not been impaired, waived, altered or modified in any respect,
except by written instruments reflected in the Indenture Trustee's Home Loan
File and no provision of any Mortgage or Debt Instrument has been "whited out"
or erased unless such modification has been initialed by each of the parties
to the related Home Loan. No instrument of waiver, alteration, modification or
assumption has been executed except for the instruments that are part of the
Indenture Trustee's Home Loan File and the terms of which are reflected in the
Indenture Trustee's Home Loan File.
(e) No Defenses. No Debt Instrument or Mortgage is subject to any claim,
-----------
set-off, counterclaim or defense, including the defense of usury, nor will the
operation of any of the terms of any Debt Instrument or Mortgage or the
exercise of any right thereunder, render such Debt Instrument or Mortgage
unenforceable, in whole or in part, or subject to any claim, right of
rescission, set-off, counterclaim or defense, including the defense of usury,
and no such claim, right of rescission, set-off, counterclaim or defense has
been asserted in any proceeding or was asserted in any state or federal
bankruptcy or insolvency proceeding at the time the related Home Loan was
originated.
(f) Compliance with Laws; Relief Act Matters. Any and all requirements of
----------------------------------------
any federal, state or local law applicable to each Home Loan have been
complied with including, without limitation, all licensing, real estate
settlement procedures act, consumer, usury, truth-in-lending, consumer credit
protection, equal credit opportunity or disclosure laws applicable to each
Home Loan. Each Home Loan was originated in compliance with all applicable
laws and no fraud or misrepresentation was committed by any Person in
connection therewith. No relief has been requested by or allowed to an Obligor
under the Soldiers' and Sailors' Civil Relief Act of 1940.
(g) No Satisfaction or Release of Lien. No Mortgage has been satisfied,
----------------------------------
canceled, subordinated or rescinded, in whole or in part. No Mortgaged
Property has been released from the lien of the related Mortgage in whole or
in part, nor has any instrument been executed that would effect any such
release, cancellation, subordination or rescission, other than the
subordination of the lien of such Mortgage securing a Home Loan with respect
to a Superior Lien on such Mortgaged Property in connection with the
refinancing of the mortgage loan relating to such Superior Lien.
(h) Valid Lien. With respect to each Debt Instrument, the related
----------
Mortgage is or creates a valid, subsisting and enforceable lien on the related
Mortgaged Property.
(i) Validity of Home Loan Documents; Entire Agreement. Each Debt
-------------------------------------------------
Instrument and each Mortgage is genuine and each is the legal, valid and
binding obligation of the Obligor thereof, enforceable in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting creditors' rights
in general and by general principles of equity. All parties to each Debt
Instrument and each Mortgage had legal capacity at the time to enter into the
related Home Loan and to execute and deliver such Debt Instrument and
Mortgage, and such Debt Instrument and Mortgage have been duly and properly
executed by such parties. The Debt Instrument and the Mortgage contain the
entire agreement between the related Obligor and the lender and all
obligations of the lender under the related Home Loan, and no other agreement
defines, modifies, or expands the obligations of the lender under the Home
Loan, except for any assumptions or modifications included in the Indenture
Trustee's Home Loan File pursuant to Section 2.05(a)(v) or referred to in
Section 3.03(m).
(j) Full Disbursement of Proceeds. 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 have been disbursed. The Obligor
is not entitled to any refund of any amounts paid or due under the Debt
Instrument or any related Mortgage and any and all requirements set forth in
the related Home Loan documents have been complied with.
(k) Ownership. Immediately prior to the conveyance thereof to the Seller,
---------
the Transferor had good and marketable title to each Home Loan, Debt
Instrument and Mortgage, the Transferor was the sole owner thereof and had
full right to sell each Home Loan, Debt Instrument and Mortgage to the Seller;
and upon the conveyance thereof by the Transferor to the Seller, the Seller
became the sole owner of each Home Loan, Debt Instrument and Mortgage free and
clear of any encumbrance, equity, lien, pledge, charge, claim or security
interest.
(l) Ownership of Mortgaged Property. With respect to each Home Loan, the
-------------------------------
related Servicer's Home Loan File contains a title document reflecting that
title to the related Mortgaged Property is held at least 50% by the Obligor
under such Home Loan.
(m) No Defaults. There is no default, breach, violation or event of
-----------
acceleration existing under any Mortgage or any Debt Instrument and, to the
best of the Transferor's knowledge, there is no event which, with the passage
of time or with notice and/or the expiration of any grace or cure period,
would constitute such a default, breach, violation or event of acceleration
and neither the Transferor nor its predecessors have waived any such default,
breach, violation or event of acceleration, except as set forth in an
instrument of waiver, alteration, modification or assumption that is included
in the Indenture Trustee's Home Loan File.
(n) Consent and Delinquency of Superior Lien. No obligation secured by a
----------------------------------------
Superior Lien was more than 30 days past due at the time of origination of the
related Home Loan. With respect to each Home Loan that is not a first mortgage
loan, either (i) no consent for the Home Loan is required by the holder of the
related prior lien or (ii) such consent has been obtained and has been
delivered to the Indenture Trustee.
(o) No Condemnation or Damage; Good Repair. To the best of the
--------------------------------------
Transferor's knowledge, the physical condition of each Mortgaged Property has
not deteriorated since the date of origination of the related Home Loan
(normal wear and tear excepted) and there is no proceeding pending for the
total or partial condemnation of any Mortgaged Property. To the best of the
Transferor's knowledge, the related Mortgaged Property described in each
Mortgage is free of damage and in good repair or will be free of damage and in
good repair following the completion of any improvements or repairs to be
financed by the related Home Loan.
(p) Environmental Compliance. To the best of the Transferor's knowledge,
------------------------
the Mortgaged Property is free from any and all toxic or hazardous substances
and there exists no violation of any local, state or federal environmental
law, rule or regulation.
(q) Mortgage Remedies Adequate. Each Mortgage contains customary and
--------------------------
enforceable provisions such as to render the rights and remedies of the holder
thereof adequate for the realization against the related Mortgaged Property of
the benefits of the security provided thereby, including, (i) in the case of a
Mortgage designated as a deed of trust, by trustee's sale, and (ii) otherwise,
by judicial foreclosure.
(r) Remedies Against Originators. In the event that any Home Loan was
----------------------------
originated by an entity (such entity, the "Originator") other than the
Transferor and to the extent that the Transferor has failed to fulfill or is
not capable of fulfilling its obligations to cure, substitute or repurchase
such Home Loan as required hereunder, then the Indenture Trustee on behalf of
the Securityholders may enforce any remedies for breach of representations and
warranties made by the Originator with respect to such Home Loan.
(s) Security. No Debt Instrument is, or has been, secured by any
--------
collateral except the lien of the related Mortgage.
(t) Deed of Trust. If a Mortgage for a Home Loan constitutes a deed of
-------------
trust, a trustee, duly qualified under applicable law to serve as such, has
been properly designated and currently so serves as such and is named in such
Mortgage, or a valid substitution of trustee has been recorded or may be
recorded and no extraordinary fees or expenses are, or will become, payable by
the Transferor to the trustee under the deed of trust, except in connection
with default proceedings and a trustee's sale after default by the related
Obligor.
(u) Use of Proceeds of Combination Loan. With respect to each Combination
-----------------------------------
Loan the related Obligor has represented to Seller that a portion of the
proceeds of such Combination Loan will be used to finance property
improvements.
(v) Inspections of Improvements; and No Encroachment. To the best of the
------------------------------------------------
Transferor's knowledge, all inspections, licenses and certificates required to
be made, obtained and issued as of the Closing Date with respect to the
improvements and the use and occupancy of all occupied portions of all
Mortgaged Property have been made, obtained or issued as applicable. To the
best of the Transferor's knowledge, all improvements which were considered in
determining the appraised value of the Mortgaged Property lay wholly within
the boundaries and building restrictions lines of the related property and no
improvements on adjoining properties encroach upon such property and no
improvement located on or being a part of such property is in violation of any
applicable zoning laws or regulation.
(w) Flood Insurance. If required by federal or state law, each Mortgaged
---------------
Property is covered by flood insurance with a standard mortgagee clause and
extended coverage in an amount which is not less than the value of such
Mortgaged Property. All such insurance policies meet the requirements of the
current guidelines of the Federal Insurance Administration, conform to the
requirements of the FNMA Sellers' Guide and the FNMA Servicers' Guide, and are
of standard type and quality for the locale where the related Mortgaged
Property is located. All acts required to be performed to preserve the rights
and remedies of the Indenture Trustee in any such insurance policies have been
performed including, without limitation, any necessary notifications of
insurers and assignments of policies or interests therein.
(x) Underwriting Origination and Servicing Practices. Each Home Loan,
------------------------------------------------
other than the Home Loans identified on Exhibit D hereto, has been
underwritten or re-underwritten in accordance with the Transferor's
then-current underwriting guidelines. The origination practices used by each
originator of the Home Loans and the servicing and collection practices used
by the Transferor with respect to each Home Loan have been in all material
respects legal, proper, prudent and customary with respect to the loan
origination and servicing business as applicable to the respective loan type.
To the best of the Transferor's knowledge, no fraud or misrepresentation was
committed by any Person in connection with the origination or servicing of
each Home Loan.
(y) Selection Criteria; No Bulk Transfer. The Home Loans were not
------------------------------------
selected by the Transferor for sale to the Seller or the Issuer on any basis
intended to adversely affect the Seller or the Issuer. The sale, transfer,
assignment, conveyance and grant of the Debt Instruments and the Mortgages by
the Transferor to the Seller were not subject to the bulk transfer laws or any
similar statutory provisions in effect in any applicable jurisdiction.
(z) Treasury Regulation Section 301.7701. On the Closing Date, each
------------------------------------
Subsequent Transfer Date and each date of substitution of a Qualified
Substitute Home Loan, 55% or more (by aggregate principal balance) of the Home
Loans do not constitute "real estate mortgages" for the purpose of Treasury
Regulation ss.301.7701 under the Code. For this purpose a Home Loan does not
constitute a "real estate mortgage" if:
(i) The Home Loan is not secured by an interest in real property, or
(ii) The Home Loan is not an "obligation principally secured by an
interest in real property." For this purpose an obligation is
"principally secured by an interest in real property" if it satisfies
either the test set out in paragraph (1) or the test set out in paragraph
(2) below.
(1) THE 80-PERCENT TEST. An obligation is principally secured
by an interest in real property if the fair market value of the
interest in real property securing the obligation.
(A) was at least equal to 80 percent of the adjusted issue
price of the obligation at the time the obligation was
originated (or, if later, the time the obligation was
significantly modified); or
(B) is at least equal to 80 percent of the adjusted issue
price of the obligation on the Closing Date or Subsequent
Transfer Date, as applicable.
For purposes of this paragraph (1), the fair market value of
the real property interest must be first reduced by the amount of
any lien on the real property interest that is senior to the
obligation being tested, and must be further reduced by a
proportionate amount of any lien that is in parity with the
obligation being tested, in each case before the percentages set
forth in (1)(A) and (1)(B) are determined. The adjusted issue price
of an obligation is its issue price plus the amount of accrued
original issue discount, if any, as of the date of determination.
(2) ALTERNATIVE TEST. An obligation is principally secured by
an interest in real property if substantially all of the proceeds of
the obligation were used to acquire or to improve or protect an
interest in real property that, at the origination date, is the only
security for the obligation. For purposes of this test, loan
guarantees made by the United States or any state (or any political
subdivision, agency, or instrumentality of the United States or of
any state), or other third party credit enhancement are not viewed
as additional security for a loan. An obligation is not considered
to be secured by property other than real property solely because
the obligor is personally liable on the obligation. For this purpose
only substantially all of the proceeds of the obligation means more
than 66-2/3% of the gross proceeds.
(aa) No Fraudulent Conveyance. The Home Loans are not being transferred
------------------------
with any intent to hinder, delay or defraud any creditors.
(ab) [Reserved].
(ac) Terms of Home Loans and Interest Method. Each Home Loan is a fixed
---------------------------------------
rate loan. Each Debt Instrument has an original term to maturity of not less
than 24 months nor more than 25 years and three months from the date of
origination. Each Debt Instrument is payable in monthly installments of
principal and interest, with interest payable in arrears, and requires a
monthly payment which is sufficient to amortize the original principal balance
over the original term and to pay interest at the related Home Loan Interest
Rate. No Debt Instrument provides for any extension of the original term.
Interest for each Home Loan is calculated at a rate of interest computed by
the simple interest method or the actuarial method.
(ad) Types of Home Loans; Retail Installment Contracts. Each Home Loan is
-------------------------------------------------
either (i) a Home Improvement Loan, (ii) a Debt Consolidation Loan, or (iii) a
Combination Loan. No Home Loan was originated for the express purpose of
purchasing a manufactured home. Some of the Home Loans are retail installment
contracts for goods or services, and some of the Home Loans are home
improvement loans for goods or services, which are either "consumer credit
contracts" or "purchase money loans" as such terms are defined in 16 C.F.R.
Part 433.1.
(ae) 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.
(af) 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 Relevant UCC. No Debt Instrument
constitutes or is comprised of "chattel paper" as such term is defined in
Section 9-105(1)(b) of the Relevant UCC. Each Debt Instrument has been
delivered to the Indenture Trustee.
(ag) 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.
(ah) Review by Transferor. In light of the Transferor's underwriting
--------------------
guidelines, the Transferor has reviewed all of the documents constituting each
Servicer's Home Loan File and each Indenture Trustee's Home Loan File and has
made such inquiries as it deems reasonable under the circumstances to make and
confirm the accuracy of the representations set forth herein.
(ai) Fraud in Origination. Each Obligor has not commenced, and will not
--------------------
commence within six months following origination of the related Home Loan, any
bankruptcy or similar insolvency proceeding.
Section 3.04. Subsequent Home Loans. With respect to the Subsequent Home
---------------------
Loans conveyed by the Transferor to the Seller on a given Subsequent Transfer
Date, the Transferor, as of such Subsequent Transfer Date, represents and
warrants to the Seller, the Issuer, the Indenture Trustee and the
Securityholders that:
(i) No such Subsequent Home Loan is more than 30 days contractually
delinquent as of the related Cut-Off Date;
(ii) The original term to stated maturity of each such Subsequent
Home Loan does not exceed 25 years, and the scheduled maturity of each
such Subsequent Home Loan is not later than August 21, 2023;
(iii) Each such Subsequent Home Loan has a Home Loan Interest Rate
of not less than 9.99%;
(iv) Following the purchase of such Subsequent Home Loans by the
Trust, the Home Loans included in the Home Loan Pool (including the
Subsequent Home Loans) will have a weighted average interest rate as of
each respective Cut-Off Date not more than 0.15% lower than the weighted
average interest rate of the Initial Home Loans included in the initial
Home Loan Pool and a weighted average remaining term to maturity as of
each respective Cut-Off Date comparable to the weighted average remaining
maturity of the Initial Home Loans included in the initial Home Loan
Pool;
(v) 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;
(vii) The weighted average of the Credit Scores of the Obligors with
respect to such Subsequent Home Loans is not less than 684.
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 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 which materially and adversely affects the interests of
the Securityholders 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 may have been 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, or of its discovery or its receipt of notice of a material defect in
a document contained in an Indenture Trustee's Home Loan File as referred to
in the last sentence of Section 2.06(b), promptly cure such breach in all
material respects. If, however, within 60 days after the Seller's discovery of
or receipt of notice of such a breach or defective document, as applicable,
such breach or defective document, as applicable, has not been remedied by the
Transferor and such breach or defective document, as applicable, materially
and adversely affects the interests of the Securityholders 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
Estate (in which case it shall become a Deleted Home Loan) and substitute one
or more Qualified Substitute Home Loans in the manner and subject to the
conditions set forth in this Section 3.05 or (ii) to purchase such Defective
Home Loan at a purchase price equal to the Purchase Price (as defined below)
by depositing such Purchase Price in the Collection Account. In the event the
Seller or the Transferor is notified that any Mortgaged Property was, as of
the Closing Date, 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 Indenture Trustee and the Issuer
with a certification of a Responsible Officer on the Determination Date next
succeeding the end of such 60 day period indicating whether the Transferor is
purchasing the Defective Home Loan or substituting in lieu of such Defective
Home Loan a Qualified Substitute Home Loan. With respect to the purchase of a
Defective Home Loan pursuant to this Section, the "Purchase Price" shall be
equal to the Principal Balance of such Defective Home Loan as of the date of
purchase, plus all accrued and unpaid interest on such Defective Home Loan to
but not including the Due Date in the Due Period in which such repurchase
occurs 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 payment 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).
If a loss has been incurred with respect to any Home Loan and such loss
is attributable to the failure of the Seller or the Transferor to deliver to
the Indenture Trustee (or its Custodian) the related original Debt Instrument,
the Seller shall cause the Transferor to (i) remove such Home Loan from the
Trust Estate and substitute one or more Qualified Substitute Home Loans
therefor or (ii) purchase such Home Loan, in each case in accordance with the
provisions of the immediately preceding paragraph.
Any substitution of Home Loans pursuant to this Section 3.05(a) 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 Payment 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 Payment Date shall be deemed to
have been paid during the related Due Period and shall be transferred to the
Note Payment Account to be retained therein or transferred to the Certificate
Distribution Account pursuant to Section 5.01(c).
As to any Home Loan for which the Transferor substitutes a Qualified
Substitute Home Loan or Loans, the Transferor shall effect such substitution
by delivering (i) to the Issuer a certification executed by a Responsible
Officer of the Transferor to the effect that the Substitution Adjustment has
been credited to the Collection Account, and (ii) to the Custodian on behalf
of the Indenture Trustee, the documents constituting the Indenture Trustee's
Loan File for such Qualified Substitute Home Loan or Loans.
(b) In addition to the preceding repurchase obligations, each of the
Transferor and Servicer shall have the option, exercisable in its sole
discretion at any time, to repurchase from the Issuer any Home Loan that is
delinquent or is in foreclosure or default or as to which default is imminent;
provided that any repurchase pursuant to this paragraph is conducted in the
same manner as the repurchase of a Defective Home Loan pursuant to this
Section 3.05.
(c) The Servicer shall deposit in the Collection Account all payments
received in connection with such Qualified Substitute Home Loan or Loans on or
after the beginning of the Due Period in which such substitution occurs. All
payments received with respect to Qualified Substitute Home Loans on or before
the beginning of the Due Period in which such substitution occurs will be
retained by the Transferor. The Issuer will be entitled to all payments
received on the Deleted Home Loan on or before the beginning of the Due Period
in which such substitution occurs, 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) and the Indenture
Trustee that such substitution has taken place. Upon such substitution, such
Qualified Substitute Home Loan or Loans shall be subject to the terms of this
Agreement in all respects, and the Transferor shall be deemed to have made
with respect to such Qualified Substitute Home Loan or Loans, as of the date
of substitution, the covenants, representations and warranties set forth in
Section 3.03. On the date of such substitution, the Transferor will deposit
into the Collection Account an amount equal to the related Substitution
Adjustment, if any. In addition, on the date of such substitution, (i) the
Issuer shall cause such Qualified Substitute Home Loan to be pledged to the
Indenture Trustee under the Indenture as part of the Trust Estate and (ii) the
Indenture Trustee shall (A) release the applicable Deleted Home Loan from the
lien of the Indenture, (B) release (or cause the Custodian to release) to the
Servicer for release to the Seller the Indenture Trustee's Home Loan File for
such Deleted Home Loan and (C) execute, without recourse, representation or
warranty, and deliver such instruments of transfer and release presented to it
by the Servicer as shall be necessary to transfer such Deleted Home Loan to
the Seller and to evidence such release.
(d) 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 constitute the sole remedies of the Issuer, the Indenture Trustee
and the Securityholders 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 material defect in a
document contained in an Indenture Trustee's Home Loan File as contemplated by
Section 2.06(b) 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, (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 or the Majority Securityholders for all amounts
payable in respect of such Home Loan.
(e) 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.
(f) In connection with a repurchase of or substitution for a Home Loan
pursuant to this Section 3.05, the Transferor shall amend the Home Loan
Schedule to reflect (i) the removal of the applicable Deleted Home Loan from
the terms of this Agreement and (ii) if applicable, the substitution of the
applicable Qualified Substitute Home Loan. The Transferor shall promptly
deliver to the Issuer, the Servicer (if the Transferor is not then acting as
such) and the Indenture Trustee a copy of the Home Loan Schedule as so
amended.
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' reliance on the Servicer. The
Servicer has and shall maintain the facilities, procedures and experienced
personnel necessary to comply with the servicing standard set forth in this
subsection (a) and the duties of the Servicer set forth in this Agreement
relating to the servicing and administration of the Home Loans.
(b) Servicing Advances. In accordance with the preceding general
------------------
servicing standard, the Servicer, or any Subservicer on behalf of the
Servicer, shall make all Servicing Advances in connection with the servicing
of each Home Loan hereunder. Notwithstanding any provision to the contrary
herein, neither the Servicer, nor any Subservicer on behalf of the Servicer,
shall have any obligation to advance its own funds for any delinquent
scheduled payments of principal and interest on any Home Loan or to satisfy or
keep current the indebtedness secured by any Superior Liens on the related
Mortgaged Property. No costs incurred by the Servicer or any Subservicer in
respect of Servicing Advances shall, for the purposes of payments or
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 in excess of the costs, expenses and other deductions to
obtain such recovery, including without limitation any Servicing Advances
therefor and, if applicable, the outstanding indebtedness secured by all
Superior Liens. The Servicer shall only make a Servicing Advance with respect
to a Home Loan to the extent that the Servicer determines in its reasonable,
good faith judgment that such Servicing Advance would likely be recovered as
aforesaid.
(c) Waivers, Modifications and Extensions. Consistent with the terms of
-------------------------------------
this Agreement, the Servicer may waive, modify or vary any provision of any
Home Loan or consent to the postponement of strict compliance with any such
provision or in any manner grant indulgence to any Obligor if in the
Servicer's reasonable determination such waiver, modification, postponement or
indulgence is not materially adverse to the interests of the Securityholders;
provided, however, unless the Obligor is in default with respect to the Home
Loan, or such default is, in the judgment of the Servicer, reasonably
foreseeable, the Servicer may not permit any modification with respect to any
Home Loan that would change the Home Loan Interest Rate, defer (subject to the
following paragraph) or forgive the payment of any principal or interest
(unless in connection with the liquidation of the related Home Loan) or extend
the final maturity date on the Home Loan. The Servicer may grant a waiver or
enter into a subordination agreement with respect to the refinancing of the
indebtedness secured by a Superior Lien on the related Mortgaged Property,
provided that the Obligor is in a better financial or cash flow position as a
result of such refinancing, which may include a reduction in the Obligor's
scheduled monthly payment on the indebtedness secured by such Superior Lien.
The Servicer shall notify the Issuer 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), the Servicer may modify, vary or waive any defaulted Home Loan in a
manner that in the reasonable judgment of the Servicer will be likely to
maximize the net proceeds realizable from such defaulted Home Loan under the
circumstances, including, without limitation, the deferment or forgiveness of
any principal or interest payments due or to become due thereon; provided,
however, that 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.
The Servicer shall make reasonable efforts to collect all payments called
for under the terms and provisions of each Home Loan and the related Debt
Instrument and Mortgage. Consistent with the foregoing, the Servicer may in
its discretion waive or permit to be waived any late payment charge,
prepayment charge or assumption fee or any other fee or charge which the
Servicer would be entitled to retain hereunder as Servicing Compensation and
extend the due date for payments due on a Debt Instrument for a period. In
connection with any partial prepayment, the Servicer may recalculate the
amortization schedule of the related Home Loan to provide for reduced monthly
payments over the remaining term to maturity.
The Servicer may, in a manner consistent with its servicing practices,
permit an Obligor who is selling his principal residence and purchasing a new
residence to substitute the new Mortgaged Property as collateral for the
related Home Loan. In such circumstances, the Servicer acknowledges that it
intends to, consistent with its servicing practices, generally require such
Obligor to make a partial prepayment in reduction of the principal balance of
the Home Loan to the extent that such Obligor has received proceeds from the
sale of the prior residence that will not be applied to the purchase of the
new residence.
(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, 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 to
collect or liquidate such Home Loan in default in a manner that in the
reasonable judgment of the Servicer will be likely to maximize the net
proceeds realizable therefrom under the circumstances (including, but without
limitation, the purchase or substitution of such Home Loan pursuant to Section
3.05, or, if no Superior Liens exist on the related Mortgaged Property,
foreclose or otherwise comparably effect ownership in such Mortgaged Property
in the name of the Indenture Trustee for the benefit of Securityholders). In
addition, the Servicer shall have the power and authority, exercisable in its
sole discretion at any time, to sell any Liquidated Home Loan on behalf of the
Indenture Trustee for the benefit of the Securityholders to one or more third
party purchasers in a manner that, in the reasonable judgment of the Servicer,
will be likely to maximize the net proceeds realizable therefrom. The Servicer
shall have the power and authority, exercisable in its sole discretion at any
time, to reach a negotiated settlement with a borrower. The purchase price
paid for any Liquidated Loan sold to an affiliate of the Servicer shall not be
less than the price that would have been paid for such Liquidated Loan by an
unaffiliated third party. The Servicer shall promptly deposit the Net
Liquidation Proceeds or Post-Liquidation Proceeds, as applicable, from the
sale of such Liquidated Home Loans into the Collection Account in accordance
with Section 5.01 of this Agreement. The Servicer shall give the Indenture
Trustee notice of the election of remedies made pursuant to this Section 4.02.
The Servicer shall not be required to satisfy the indebtedness secured by any
Superior Liens on the related Mortgaged Property or to advance funds to keep
the indebtedness secured by such Superior Liens current. In connection with
any collection or liquidation activities, the Servicer shall exercise
collection or liquidation procedures with the same degree of care and skill as
it would exercise or use under the circumstances in the conduct of its own
affairs.
(b) During any Due Period occurring after a Home Loan becomes a
Liquidated Home Loan, the Servicer shall deposit into the Collection Account
any proceeds received by it with respect to such Liquidated Home Loan or the
related Foreclosure Property ("Post-Liquidation Proceeds").
(c) After a Home Loan has become a Liquidated Home Loan, the Servicer
shall promptly prepare and forward to the Issuer, the Indenture Trustee 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, the Servicer
shall cause to be delivered to requesting party a certified true copy of such
fidelity bond and insurance policy. On the Closing Date, such fidelity bond
and insurance is maintained by the Servicer with Reliance Insurance Company of
Illinois.
Section 4.04. Title, Management and Disposition of Foreclosure Property.
---------------------------------------------------------
The deed or certificate of sale in respect of each Foreclosure Property shall
be taken in the name of the Indenture Trustee for the benefit of the
Securityholders.
The Servicer shall manage, conserve, protect and operate each Foreclosure
Property for the Indenture Trustee and the Securityholders 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. 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 and the Securityholders and, as
soon as practicable thereafter, the expenses of such sale shall be paid. The
Net Liquidation Proceeds or Post-Liquidation Proceeds, as applicable, from the
conservation, disposition and sale of the Foreclosure Property shall be
promptly deposited by the Servicer in the Collection Account in accordance
with Section 5.01 of this Agreement and the Indenture, which Net Liquidation
Proceeds or Post-Liquidation Proceeds, as applicable, shall equal all cash
amounts received with respect thereto less the amounts retained and withdrawn
by the Servicer for any related unreimbursed Servicing Advances and any other
fees and expenses incurred in connection with such Foreclosure Property.
Section 4.05. Access to Certain Documentation and Information Regarding
---------------------------------------------------------
the Home Loans. The Servicer shall provide to the Issuer, the Indenture
- --------------
Trustee, the Securityholders and the supervisory agents and examiners of each
of the foregoing access to the documentation regarding the Home Loans required
by applicable state and federal regulations, such access being afforded
without charge but only upon reasonable request and during normal business
hours at the offices of the Servicer designated by it.
Section 4.06. Superior Liens. (a) The Servicer shall file (or cause to be
--------------
filed) of record a request for notice of any action by a lienholder under a
Superior Lien for the protection of the Indenture Trustee's interest, where
permitted by local law and whenever applicable state law does not require that
a junior lienholder be named as a party defendant in foreclosure proceedings
in order to foreclose such junior lienholder's equity of redemption.
(b) If the Servicer is notified that any lienholder under a Superior Lien
has accelerated or intends to accelerate the obligations secured by such
Superior Lien, or has declared or intends to declare a default under the
related mortgage or promissory note secured thereby, or has filed or intends
to file an election to have any Mortgaged Property sold or foreclosed, the
Servicer shall take, on behalf of the Issuer and the Indenture Trustee, all
reasonable actions that are necessary to protect the interests of the
Securityholders, and/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 Indenture Trustee and each Rating Agency, 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 of the appointment of any
Subservicer. The Servicer shall be entitled to terminate any Subservicing
Agreement in accordance with the terms and conditions of such Subservicing
Agreement and to either directly service the related Home Loans or enter into
a Subservicing Agreement with a successor subservicer which qualifies
hereunder.
(b) Notwithstanding any Subservicing Agreement, any of the provisions of
this Agreement relating to agreements or arrangements between the Servicer and
a Subservicer or reference to actions taken through a Subservicer or
otherwise, the Servicer shall remain obligated and primarily liable to the
Issuer, the Indenture Trustee 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, 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 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 or the Securityholders shall be deemed parties thereto or shall have
any claims, rights, obligations, duties or liabilities with respect to the
Subservicer in its capacity as such except as set forth in Section 4.07(c)
above.
Section 4.08. Successor Servicers. In the event that the Servicer is
-------------------
terminated pursuant to Section 10.01 hereof, or resigns pursuant to Section
9.04 hereof or otherwise becomes unable to perform its obligations under this
Agreement, the Indenture Trustee will become the successor Servicer or will
appoint a successor Servicer in accordance with the provisions of Section
10.02 hereof; provided that any successor Servicer, including the Indenture
Trustee, shall satisfy the requirements of an Eligible Servicer and shall be
approved by each Rating Agency.
ARTICLE V
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01. Collection Account and Note Payment Account.
-------------------------------------------
(a)(1) Establishment of Collection Account. The Servicer shall cause to
-----------------------------------
be established and maintained in the name of the Securities Intermediary one
or more Collection Accounts which shall be pledged to the Indenture Trustee
for the benefit of Securityholders, which shall be separate Eligible Accounts,
which may be interest-bearing, entitled "Collection Account, U.S. Bank
National Association, as Indenture Trustee, in trust for the FIRSTPLUS Asset
Backed Securities, Series 1998-4". The Collection Account may be maintained
with the Indenture Trustee or, subject to the following paragraph, 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. A copy of such
letter agreement shall be furnished to the Indenture Trustee and, upon request
of any Securityholder, to such Securityholder. Funds in the Collection Account
shall be invested in accordance with Section 5.06.
As of the Closing Date, the Collection Account shall be established with
the Indenture Trustee, and thereafter upon written notice to the Issuer and
the Indenture Trustee, and the Collection Account may be transferred by the
Servicer to a different depository institution so long as such transfer is to
an Eligible Account.
(a)(2) Establishment of Note Payment Account. No later than the Closing
-------------------------------------
Date, the Servicer shall cause to be established and maintained in the name of
the Securities Intermediary one or more Note Payment Accounts which shall be
pledged to the Indenture Trustee for the benefit of Securityholders, which
shall be separate Eligible Accounts, which may be interest-bearing and which
shall be entitled "Note Payment Account, U.S. Bank National Association, as
Indenture Trustee, in trust for the "FIRSTPLUS Asset Backed Securities, Series
1998-4." Funds in the Note Payment Account shall be invested in accordance
with Section 5.06.
(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 (or within two Business Days
following the Closing Date, in the case of amounts received prior to such
date) and retain therein in trust for the benefit of the Securityholders:
(i) all payments on account of principal on each Home Loan received
after its related Cut-Off Date;
(ii) all payments on account of interest on each Home Loan received
after its related 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
Section 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 and any other proceeds of the sale of the Home Loans 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 Payment Account on the next Payment Date following
such Due Period.
(b)(2) Deposits to Note Payment Account. On the Withdrawal Date with
--------------------------------
respect to each Payment Date, the Indenture Trustee (based on information
contained in the Servicer's Monthly Remittance Report for such Payment Date)
shall (i) withdraw the Available Collection Amount with respect to such
Payment Date from the Collection Account, (x) pay the portion thereof
representing 76.67% of amounts attributable to interest collected during the
initial Due Period to the Transferor, (y) pay the portion thereof representing
income or gain from investments credited to the Collection Account during the
preceding Due Period to the Servicer as Servicing Compensation with respect to
such Payment Date, and (z) deposit the remainder in the Note Payment Account
and (ii) make withdrawals from the Pre-Funding Account of amounts required to
be deposited in the Note Payment Account from such accounts on such Withdrawal
Date and deposit into the Note Payment Account the amounts so withdrawn.
(c) Withdrawals from Note Payment Account. Subject to Section 5.01(e), no
-------------------------------------
later than 11:00 a.m. (New York City time) on the second Business Day prior to
each Payment Date, to the extent funds are available in the Note Payment
Account, the Indenture Trustee (based on the information contained in the
Servicer's Monthly Remittance Report for such Payment Date) shall either (1)
retain funds in the Note Payment Account for payment or distribution on such
Payment Date or (2) make withdrawals from the Note Payment Account and
deposits into the other Trust Accounts as indicated, in each case as specified
below and in the following order of priority:
(1) to retain in the Note Payment Account for payment on such
Payment Date pursuant to the Indenture, to the Servicer, an amount equal to
the Servicing Compensation (net of (i) any amounts retained prior to deposit
into the Collection Account pursuant to subsection (b)(1) above, (ii) any
amounts representing income or gain from investments credited to the
Collection Account and paid to the Servicer pursuant to subsection (b)(2)
above and (iii) the Indenture Trustee Fee, which shall be paid to the
Indenture Trustee) and all unpaid Servicing Compensation from prior Due
Periods;
(2) to retain in the Note Payment Account for payment pursuant to
the Indenture on such Payment Date and to deposit in the Certificate
Distribution Account for distribution pursuant to Section 5.02, any amount
remaining from the Pre-Funding Account Deposit at the end of the Funding
Period, which will be paid (x) if no Indenture Event of Default has occurred
and such amount remaining is greater than $50,000, in reduction, on a PRO RATA
basis, of the Class Principal Balances (and Component Principal Balance) of
each Class of Securities (and the B-2 Component) as provided in Section
8.2(a)(ii) of the Indenture and Section 5.05(c)(i) hereof, (y) if no Indenture
Event of Default has occurred and such amount remaining is less than or equal
to $50,000, such remaining amount will be retained in the Note Payment Account
and be paid on the Pre-Funding Termination Payment Date sequentially to the
Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6, Class A-7
and Class A-8 Notes, in that order, in reduction of the Class Principal
Balances thereof, or (z) if an Indenture Event of Default has occurred, such
remaining amount will be retained in the Note Payment Account and be paid in
reduction of the Class Principal Balances of each Class of Notes, PRO RATA
based on the Class Principal Balances thereof;
(3) to retain in the Note Payment Account with respect to the Notes,
or to deposit in the Certificate Distribution Account with respect to the
Residual Interest Certificate, as applicable, to the extent of the Regular
Payment Amount for such Payment Date, in the following order of priority:
(i) for payment pursuant to the Indenture to the holders of the
Senior Notes, the Senior Noteholders' Interest Payment Amount for such
Payment Date, allocated to each Class of Senior Notes, PRO RATA, based on
the amount of interest payable in respect of each such Class based on the
applicable Interest Rate;
(ii) for payment pursuant to the Indenture to the holders of the
Class M-1 Notes, the Class M-1 Noteholders' Interest Payment Amount for
such Payment Date;
(iii) for payment pursuant to the Indenture to the holders of the
Class M-2 Notes, the Class M-2 Noteholders' Interest Payment for such
Payment Date;
(iv) for payment pursuant to the Indenture to the holders of the
Class B-1 Notes, the Class B-1 Noteholders' Interest Payable Amount for
such Payment Date;
(v) for distribution pursuant to Section 5.05 to the holder of the
Residual Interest Certificate, in respect of the A IO Component, the A IO
Component's Interest Distributable Amount for such Payment Date;
(vi) for distribution pursuant to Section 5.05 to the holder of the
Residual Interest Certificate, in respect of the B-2 Component, the B-2
Component's Interest Distributable Amount for such Payment Date;
(vii) for payment pursuant to the Indenture to the holders of the
Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6, Class
A-7 and Class A-8 Notes, in that order, until the respective Class
Principal Balances thereof are reduced to zero, the amount necessary to
reduce the aggregate of the Class Principal Balances of the Senior Notes
to the Senior Optimal Principal Balance for such Payment Date;
(viii) for payment pursuant to the Indenture to the holders of the
Class M-1 Notes, the amount necessary to reduce the Class Principal
Balance thereof to the Class M-1 Optimal Principal Balance for such
Payment Date;
(ix) for payment pursuant to the Indenture to the holders of the
Class M-2 Notes, the amount necessary to reduce the Class Principal
Balance thereof to the Class M-2 Optimal Principal Balance for such
Payment Date;
(x) for payment pursuant to the Indenture to the holders of the
Class B-1 Notes, the amount necessary to reduce the Class Principal
Balance thereof to the Class B-1 Optimal Principal Balance for such
Payment Date;
(xi) for distribution pursuant to Section 5.05 to the holder of the
Residual Interest Certificate, in respect of the B-2 Component, the
amount necessary to reduce the Component Principal Balance thereof to the
B-2 Component Optimal Principal Balance for such Payment Date;
(xii) for payment pursuant to the Indenture to the holders of the
Class M-1 Notes, the applicable Deferred Amount, if any, until such
Deferred Amount has been paid in full;
(xiii) for payment pursuant to the Indenture to the holders of the
Class M-2 Notes, the applicable Deferred Amount, if any, until such
Deferred Amount has been paid in full;
(xiv) for payment pursuant to the Indenture to the holders of the
Class B-1 Notes, the applicable Deferred Amount, if any, until such
Deferred Amount has been paid in full;
(xv) for distribution pursuant to Section 5.05 to the holder of the
Residual Interest Certificate, in respect of the B-2 Component, the
applicable Deferred Amount, if any, until such Deferred Amount has been
paid in full;
(xvi) for distribution pursuant to Section 5.05 to the Servicer, an
amount equal to any Servicing Advances previously made by the Servicer
and not previously reimbursed (the "Servicing Advance Reimbursement
Amount"); and
(xvii) to deposit any remaining amount in the Certificate
Distribution Account for distribution pursuant to Section 5.05 to the
holder of the Residual Interest Certificate, in respect of the Excess
Component.
(4) to retain in the Note Payment Account with respect to the Notes, or
to deposit in the Certificate Distribution Account with respect to the
Residual Interest Certificate, as applicable, to the extent of the Excess
Spread, if any, in the following order of priority:
(i) in an amount equal to the Overcollateralization Shortfall, if
any, as follows:
(A) for payment pursuant to the Indenture to the holders of the
Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6,
Class A-7 and Class A-8 Notes, in that order, until the respective
Class Principal Balances thereof are reduced to zero, the amount
necessary to reduce the aggregate of the Class Principal Balances of
the Senior Notes to the Senior Optimal Principal Balance for such
Payment Date;
(B) for payment pursuant to the Indenture to the holders of the
Class M-1 Notes, the amount necessary to reduce the Class Principal
Balance thereof to the Class M-1 Optimal Principal Balance for such
Payment Date;
(C) for payment pursuant to the Indenture to the holders of the
Class M-2 Notes, the amount necessary to reduce the Class Principal
Balance thereof to the Class M-2 Optimal Principal Balance for such
Payment Date;
(D) for payment pursuant to the Indenture to the holders of the
Class B-1 Notes, the amount necessary to reduce the Class Principal
Balance thereof to the Class B-1 Optimal Principal Balance for such
Payment Date, and
(E) for distribution pursuant to Section 5.05 to the holder of
the Residual Interest Certificate, in respect of the B-2 Component,
the amount necessary to reduce the Component Principal Balance
thereof to the B-2 Component Optimal Principal Balance for such
Payment Date;
(ii) for payment pursuant to the Indenture to the holders of the
Class M-1 Notes, the applicable Deferred Amount, if any, until such
Deferred Amount has been paid in full;
(iii) for payment pursuant to the Indenture to the holders of the
Class M-2 Notes, the applicable Deferred Amount, if any, until such
Deferred Amount has been paid in full;
(iv) for payment pursuant to the Indenture to the holders of the
Class B-1 Notes, the applicable Deferred Amount, if any, until such
Deferred Amount has been paid in full;
(v) for distribution pursuant to Section 5.05 to the holder of the
Residual Interest Certificate, in respect of the B-2 Component, the
applicable Deferred Amount, if any, until such Deferred Amount has been
paid in full; and
(vi) for distribution pursuant to Section 5.05 to the holder of the
Residual Interest Certificate, in respect of the Excess Component, any
amount remaining in the Certificate Distribution Account.
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 Payment Account hereunder until the Class Principal Balance of each
Class of Securities has been 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 and pay as directed by the Servicer any amount not
required to be deposited in the Collection Account, including, without
limitation, any payments on or proceeds from a Home Loan received on or
prior to its related Cut-Off Date, 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 Payment Account on a first-in, first-out
basis.
(e) Additional Withdrawals from Note Payment Account Following Early
----------------------------------------------------------------
Redemption or Termination. No later than 11:00 a.m. (New York City time) on
- -------------------------
the second Business Day prior to the Payment Date on which an early redemption
or termination pursuant to Section 11.02(a) or Section 11.02(b) is to occur,
to the extent funds are available in the Note Payment Account, the Indenture
Trustee (based on the information contained in the Servicer's Monthly
Remittance Report for such Payment Date) shall either (x) retain funds in the
Note Payment Account for payment on such Payment Date or (y) make withdrawals
from the Note Payment Account and deposits into the other Trust Accounts as
indicated, in each case as specified below and in the following order of
priority: (1) to deposit in the Certificate Distribution Account for
distribution pursuant to Section 5.05 to the Servicer, the Servicing Advance
Reimbursement Amount, and (2) to retain in the Note Payment Account or to
deposit in the Certificate Distribution Account, as specified in each
succeeding clause: (i) to retain in the Note Payment Account for payment
pursuant to the Indenture to the holders of the Notes, all accrued and unpaid
interest on each Class of Notes and an amount equal to the aggregate of the
then outstanding Class Principal Balances of each Class of Notes; (ii) to
deposit in the Certificate Distribution Account for distribution pursuant to
Section 5.05 to the Certificateholder, all accrued and unpaid interest on the
Residual Interest Certificate and an amount equal to the aggregate of the then
outstanding Class Principal Balance of the Residual Interest Certificate;
(iii) to retain in the Note Payment Account for payment pursuant to the
Indenture to the holders of the Class M-1, Class M-2 and Class B-1 Notes, in
that order, the applicable Deferred Amounts, if any, until each such Deferred
Amount has been paid in full; (iv) to deposit in the Certificate Distribution
Account for distribution pursuant to Section 5.05 to the Residual Interest
Certificate, in respect of the B-2 Component, in that order, the applicable
Deferred Amounts, if any, until each such Deferred Amount has been paid in
full; and (v) to deposit any remaining amount in the Certificate Distribution
Account for distribution pursuant to Section 5.05 to the Residual Interest
Certificate, in respect of the Excess Component.
Section 5.02. Pre-Funding Account. (a) Establishment and Withdrawals. No
-------------------
later than the Closing Date, the Servicer shall establish and maintain with
the Indenture Trustee in the name of the Securities Intermediary one or more
separate Eligible Accounts which shall be pledged to the Indenture Trustee for
the benefit of Securityholders, entitled "Pre-Funding Account, U.S. Bank
National Association, as Indenture Trustee, in trust for the FIRSTPLUS Asset
Backed Securities, Series 1998-4." On the Closing Date, the Pre-Funding
Account Deposit shall be deposited into the Pre-Funding Account from the
proceeds of the sale of the Securities. On any Subsequent Transfer Date, the
Servicer shall instruct the Indenture Trustee to 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 pay such withdrawn amount to or upon the
order of the Seller upon satisfaction of the conditions set forth in Section
2.02 of this Agreement with respect to such transfer. Funds in the Pre-Funding
Account shall be invested in accordance with Section 5.06. On each Payment
Date, all interest and any other investment earnings on funds held in the
Pre-Funding Account shall be deposited into the Note Payment 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 into the Note Payment Account, on the
Withdrawal Date with respect to the Pre-Funding Termination Payment Date, for
payment or distribution of such remaining amount (net of reinvestment
earnings) on the Pre-Funding Termination Payment Date as follows:
(i) if no Indenture Event of Default has occurred and such remaining
amount is greater than $50,000, to the Securityholders in reduction of
the Class Principal Balances (and Component Principal Balance) of the
Securities (and the B-2 Component), PRO RATA on the basis of their
respective Class Principal Balances (or Component Principal Balance);
(ii) if no Indenture Event of Default has occurred and such
remaining amount is less than or equal to $50,000, sequentially to each
Class of Senior Notes in ascending order of their respective Class
designations in reduction of the respective Class Principal Balances
thereof; or
(iii) if an Indenture Event of Default has occurred, to the
Noteholders in reduction of the Class Principal Balance of each Class of
Notes, PRO RATA on the basis of the Class Principal Balance of each Class
of Notes.
Section 5.03. [Reserved].
Section 5.04. [Reserved].
Section 5.05. Certificate Distribution Account. (a) Establishment. No
--------------------------------
later than the Closing Date, the Servicer, for the benefit of the
Certificateholder, will establish and maintain in the name of the Securities
Intermediary with U.S. Bank National Association for the benefit of the Owner
Trustee or Co-Owner Trustee on behalf of the Certificateholder one or more
separate Eligible Accounts, which while the Co-Owner Trustee holds such Trust
Account shall be entitled "Certificate Distribution Account, U.S. Bank
National Association, as Co-Owner Trustee, in trust for the FIRSTPLUS Asset
Backed Securities, Series 1998-4." Funds in the Certificate Distribution
Account shall be invested in accordance with Section 5.06.
(b) [Reserved].
(c) Distributions. Subject to Section 5.05(f), no later than the second
-------------
Business Day before each Payment Date, the Indenture Trustee shall withdraw
from the Note Payment 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 remit such amount to the Owner Trustee or the
Co-Owner Trustee for deposit into the Certificate Distribution Account. On
each Payment Date, the Owner Trustee or the Co-Owner Trustee shall distribute
all amounts on deposit in the Certificate Distribution Account to the
Certificateholder in respect of the Residual Interest Certificate to the
extent of amounts due and unpaid on the Residual Interest Certificate for
principal and interest and to the other parties specified below the following
amounts:
(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)(2) to the Residual Interest Certificate, in respect of
the B-2 Component;
(ii) to the Residual Interest Certificate, in respect of the A IO
and B-2 Components, the amounts, if any, deposited in the Certificate
Distribution Account pursuant to Sections 5.01(c)(3) and 5.01(c)(4), in
the order of priority provided therein;
(iii) to the Servicer, the amount, if any, in respect of the
Servicing Advance Reimbursement Amount deposited in the Certificate
Distribution Account pursuant to Section 5.01(c)(3)(xvi); and
(iv) to the Residual Interest Certificate, in respect of the Excess
Component, the amounts deposited in the Certificate Distribution Account
pursuant to Sections 5.01(c)(3)(xvii) and 5.01(c)(4)(vi).
(d) All distributions made on the Residual Interest Certificate shall be
made by wire transfer of immediately available funds to the account of such
Certificateholder. 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 the Certificateholder of such final
distribution.
(e) Distributions Following Early Redemption or Termination. No later
-------------------------------------------------------
than the second Business Day before the Payment Date on which an early
redemption or termination pursuant to Section 11.02(a) or 11.02(b) is to
occur, the Indenture Trustee shall withdraw from the Note Payment Account all
amounts required to be deposited in the Certificate Distribution Account with
respect to the preceding Due Period pursuant to Section 5.01(e) and remit such
amount to the Owner Trustee or the Co-Owner Trustee for deposit into the
Certificate Distribution Account. On such Payment Date, the Owner Trustee or
the Co-Owner Trustee shall distribute all amounts on deposit in the
Certificate Distribution Account to the Certificateholder in respect of the
Residual Interest Certificate to the extent of amounts due and unpaid on the
Residual Interest Certificate for principal and interest and to the other
parties specified below the following amounts:
(i) to the Residual Interest Certificate, in respect of the A IO
Component, all accrued and unpaid interest thereon;
(ii) to the Residual Interest Certificate, in respect of the B-2
Component, an amount equal to the Component Principal Balance of the B-2
Component and all accrued and unpaid interest thereon;
(iii) to the Residual Interest Certificate, in respect of the B-2
Component, the amount, if any, deposited in the Certificate Distribution
Account pursuant to Section 5.01(e)(2)(iv); and
(iv) to the Residual Interest Certificate, in respect of the Excess
Component, the amount, if any, deposited in the Certificate Distribution
Account pursuant to Section 5.01(e)(2)(v).
Section 5.06. 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 paid or distributed from each Trust Account
in accordance with the Indenture and this Agreement shall be released from the
lien of the Indenture upon such payment or 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 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, 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 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, the Certificate Distribution Account
established hereunder also shall be subject to and established and maintained
in accordance with the Trust Agreement. The Owner Trustee or Co-Owner Trustee
shall possess all right, title and interest for the benefit of the
Certificateholders 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. If, at any time, the Certificate
Distribution Account ceases to be an Eligible Account, the Issuer (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 Certificate Distribution Account as an Eligible Account,
(ii) terminate the ineligible Certificate Distribution Account, and (iii)
transfer any cash and investments from such ineligible Certificate
Distribution Account to such new Certificate Distribution Account. 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 the Owner Trustee and the
Co-Owner Trustee shall have sole signature and withdrawal authority with
respect to the Certificate Distribution Account.
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 and the
Certificate Distribution Account for the purpose of permitting the Servicer to
carry out its 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 or in the
Certificate Distribution Account may be invested (to the extent practicable
and consistent with any requirements of the Code) in Permitted Investments, as
directed by the Servicer, in the case of the Collection Account, or by the
Transferor, in the case of each other Trust Account and the Certificate
Distribution Account, in each case in writing or by telephone or facsimile
transmission confirmed in writing by the Servicer or the Transferor, as
applicable. In any case, funds in any Trust Account or in the Certificate
Distribution 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
Payment Account, Pre-Funding Account and Certificate Distribution Account,
which shall be invested on a one (1) Business Day basis) immediately preceding
the Payment Date next following the date of such investment and shall not be
sold or disposed of prior to its maturity subject to Section 5.06(b)(2) below.
All interest and any other investment earnings on amounts or investments held
in any Trust Account or in the Certificate Distribution Account shall be
deposited into such 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 are invested must be held by or registered in the name of
"U.S. Bank National Association, as Indenture Trustee, in trust for the
FIRSTPLUS Asset Backed Securities, Series 1998-4". While the Co-Owner Trustee
holds the Certificate Distribution Account, all Permitted Investments in which
funds in the Certificate Distribution Account are invested shall be held by or
registered in the name of "U.S. Bank National Association, as Co-Owner
Trustee, in trust for the FIRSTPLUS Asset Backed Securities, Series 1998-4".
(b)(2) Insufficiency and Losses in Trust Accounts. If any amounts are
------------------------------------------
needed for disbursement from any Trust Account or the Certificate Distribution
Account 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
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
5.06.
If any losses are realized in connection with any investment in any Trust
Account or in the Certificate Distribution Account pursuant to this Agreement
and the Indenture, then the Servicer, with respect to the Collection Account,
and the Transferor, with respect to each other such account, shall deposit the
amount of such losses (to the extent not offset by income from other
investments in such account) in such account immediately upon the realization
of such loss or, to the extent that the Servicer or the Transferor, as
applicable, fails to deposit any portion of such amount, the Transferor or the
Servicer, as applicable, shall deposit any insufficiency from such failure in
such account. All interest and any other investment earnings on amounts held
in any Trust Account or in the Certificate Distribution 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 and of the Certificate
Distribution Account.
(c) Subject to Section 6.1 of the Indenture, the Indenture Trustee shall
not in any way be held liable by reason of any insufficiency in any Trust
Account held by the Indenture Trustee resulting from any investment loss on
any Permitted Investment included therein (except to the extent that the
Indenture Trustee, with respect to such Permitted Investment, is the obligor
and has defaulted thereon).
(d) The Issuer and the Indenture Trustee hereby appoint U.S. Bank
National Association as Securities Intermediary with respect to the Trust
Accounts and the Certificate Distribution Account. The Issuer has, pursuant to
the Indenture, granted to the Indenture Trustee, as collateral agent for the
benefit of the Securityholders, a security interest to secure all amounts due
Noteholders hereunder in and to the Trust Accounts and the Security
Entitlements to all Financial Assets credited to the Trust Accounts, and the
Seller hereby grants to the Issuer, as collateral agent for the benefit of
Certificateholders, a security interest to secure all mounts due
Certificateholders hereunder in and to the Certificate Distribution Account
and the Security Entitlements and all Financial Assets credited to the
Certificate Distribution Account, including in each case without limitation
all amounts, securities, investments, Financial Assets, investment property
and other property from time to time deposited in or credited to such accounts
and all proceeds thereof. Amounts held from time to time in the Trust Accounts
will continue to be held by the Securities Intermediary for the benefit of the
Indenture Trustee, as collateral agent, for the benefit of the
Securityholders, and amounts held from time to time in the Certificate
Distribution Account will continue to be held by the Securities Intermediary
for the benefit of the Issuer, as collateral agent, for the benefit of the
Certificateholders. Upon the termination of the Trust or the discharge of the
Indenture, the Indenture Trustee shall inform the Securities Intermediary of
such termination. By acceptance of their Securities or interests therein, the
Securityholders shall be deemed to have appointed U.S. Bank National
Association as Securities Intermediary. U.S. Bank National Association hereby
accepts such appointment as Securities Intermediary.
(1) With respect to the Trust Account Property credited to the Trust
Accounts and the Certificate Distribution Account, the Securities
Intermediary agrees that:
(i) with respect to any Trust Account Property that is held in
deposit accounts, each such deposit account shall be subject to the
exclusive custody and control of the Securities Intermediary, and
the Securities Intermediary shall have sole signature authority with
respect thereto;
(ii) the sole assets permitted in the Trust Accounts and the
Certificate Distribution Account shall be those as the Securities
Intermediary agrees to treat as Financial Assets; and
(iii) any such Trust Account Property that is, or is treated
as, a Financial Asset shall be physically delivered (accompanied by
any required endorsements) to, or credited to an account in the name
of, the Securities Intermediary or other eligible institution
maintaining any Trust Account or the Certificate Distribution
Account in accordance with the Securities Intermediary's customary
procedures such that the Securities Intermediary or such other
institution establishes a Security Entitlement in favor of the
Indenture Trustee (or the Issuer, in the case of the Certificate
Distribution Account) with respect thereto over which the Securities
Intermediary or such other institution has Control;
(2) The Securities Intermediary hereby confirms that (A) each Trust
Account and the Certificate Distribution Account is an account to which
Financial Assets are or may be credited, and the Securities Intermediary
shall, subject to the terms of this Agreement, treat the Indenture
Trustee, as collateral agent, as entitled to exercise the rights that
comprise any Financial Asset credited to any Trust Account, and the
Issuer, as collateral agent, as entitled to exercise the rights that
comprise any Financial Asset credited to the Certificate Distribution
Account, (B) all Trust Account Property in respect of any Trust Account
or the Certificate Distribution Account will be promptly credited by the
Securities Intermediary to such account, and (C) all securities or other
property underlying any Financial Assets credited to any Trust Account or
the Certificate Distribution Account shall be registered in the name of
the Securities Intermediary, endorsed to the Securities Intermediary or
in blank or credited to another securities account maintained in the name
of the Securities Intermediary and in no case (x) will any Financial
Asset credited to any Trust Account be registered in the name of the
Seller or the Issuer, payable to the order of the Seller or the Issuer or
specially endorsed to the Seller or the Issuer, or (y) will any Financial
Asset credited to the Certificate Distribution Account be registered in
the name of the Seller, payable to the order of the Seller or specially
endorsed to the Seller, except to the extent the foregoing have been
specially endorsed to the Securities Intermediary or in blank;
(3) The Securities Intermediary hereby agrees that each item of
property (whether investment property, Financial Asset, security,
instrument or cash) credited to any Trust Account or the Certificate
Distribution Account shall be treated as a Financial Asset;
(4) If at any time the Securities Intermediary shall receive any
order from the Indenture Trustee directing transfer or redemption of any
Financial Asset relating to any Trust Account, the Securities
Intermediary shall comply with such entitlement order without further
consent by the Seller, the Issuer or any other Person. If at any time the
Indenture Trustee notifies the Securities Intermediary in writing that
the Trust has been terminated or the Indenture discharged in accordance
herewith and with the Trust Agreement or the Indenture, as applicable,
and the security interest granted pursuant to the Indenture has been
released, then thereafter if the Securities Intermediary shall receive
any order from the Seller or the Issuer directing transfer or redemption
of any Financial Asset relating to any Trust Account, the Securities
Intermediary shall comply with such entitlement order without further
consent by the Indenture Trustee or any other Person;
If at any time the Securities Intermediary shall receive any order
from the Issuer directing transfer or redemption of any Financial Asset
relating to the Certificate Distribution Account, the Securities
Intermediary shall comply with such entitlement order without further
consent by the Seller or any other Person. If at any time the Issuer
notifies the Securities Intermediary in writing that the Trust has been
terminated in accordance herewith and with the Trust Agreement and the
security interest granted above has been released, then thereafter if the
Securities Intermediary shall receive any order from the Seller directing
transfer or redemption of any Financial Asset relating to the Certificate
Distribution Account, the Securities Intermediary shall comply with such
entitlement order without further consent by the Issuer or any other
Person;
(5) In the event that the Securities Intermediary has or
subsequently obtains by agreement, operation of law or otherwise a
security interest in any Trust Account or the Certificate Distribution
Account or any Financial Asset credited thereto, the Securities
Intermediary hereby agrees that such security interest shall be
subordinate to the security interest of the Indenture Trustee, in the
case of the Trust Accounts, or of the Issuer, in the case of the
Certificate Distribution Account. The Financial Assets credited to the
Trust Accounts or the Certificate Distribution Account will not be
subject to deduction, set-off, banker's lien, or any other right in favor
of any Person other than the Indenture Trustee, in the case of the Trust
Accounts, or the Issuer, in the case of the Certificate Distribution
Account (except that the Securities Intermediary may set off (i) all
amounts due to it in respect of its customary fees and expenses for the
routine maintenance and operation of the Trust Accounts and the
Certificate Distribution Account, and (ii) the face amount of any checks
which have been credited to any Trust Account or the Certificate
Distribution Account but are subsequently returned unpaid because of
uncollected or insufficient funds);
(6) There are no other agreements entered into between the
Securities Intermediary in such capacity and the Seller or the Issuer
with respect to any Trust Account, or the Seller with respect to the
Certificate Distribution Account. In the event of any conflict between
this Agreement (or any provision of this Agreement) and any other
agreement now existing or hereafter entered into, the terms of this
Agreement shall prevail;
(7) The rights and powers granted under the Indenture and herein to
(x) the Indenture Trustee have been granted in order to perfect its
security interest in the Trust Accounts and the Security Entitlements to
the Financial Assets credited thereto, and (y) the Issuer have been
granted in order to perfect its security interest in the Certificate
Distribution Account and the Security Entitlements to the Financial
Assets credited thereto, and are powers coupled with an interest and will
neither be affected by the bankruptcy of the Seller (or the Issuer, in
the case of the Trust Accounts) nor by the lapse of time. The obligations
of the Securities Intermediary hereunder shall continue in effect until
the security interest of the Indenture Trustee in the Trust Accounts or
of the Issuer in the Certificate Distribution Account, and in such
Security Entitlements, has been terminated pursuant to the terms of this
Agreement and the Indenture Trustee or the Issuer, as applicable, has
notified the Securities Intermediary of such termination in writing; and
(8) Notwithstanding anything else contained herein, the Seller and
the Issuer agree that the Trust Accounts and the Certificate Distribution
Account will be established only with the Securities Intermediary or
another institution meeting the requirements of this Section, which by
acceptance of its appointment as Securities Intermediary agrees
substantially as follows: (1) it will comply with Entitlement Orders
related to the Trust Accounts issued by the Indenture Trustee, as
collateral agent, without further consent by the Seller or the Issuer,
and with Entitlement Orders related to the Certificate Distribution
Account issued by the Issuer, as collateral agent, without further
consent by the Seller; (2) until termination of the Trust or discharge of
the Indenture, it will not enter into any other agreement related to such
accounts pursuant to which it agrees to comply with Entitlement Orders of
any Person other than the Indenture Trustee, as collateral agent with
respect to the Trust Accounts, or the Issuer, as collateral agent with
respect to the Certificate Distribution Account; and (3) all assets
delivered or credited to it in connection with such accounts and all
investments thereof will be promptly credited to the applicable account.
(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 5.07. Allocation of Losses. (a) In the event that Net Liquidation
--------------------
Proceeds, Insurance Proceeds or Released Mortgaged Property Proceeds on a
Liquidated Home 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 Home Loan, such Net Liquidation Proceeds, Insurance Proceeds,
Released Mortgaged Property Proceeds or partial payment shall be applied to
payment of the related Debt Instrument in respect of principal and interest
FIRST, to payment of delinquent Monthly Payments thereon, in chronological
order by Due Date (and as to each such Monthly Payment, first to accrued
interest and second to principal), SECOND, to interest accrued at the
applicable Home Loan Interest Rate on the remaining unpaid balance of such
Home Loan, and THIRD, to payment of the remaining unpaid principal thereof.
(b) On any Payment Date, any Allocable Loss Amount shall be applied,
after giving effect to all payments and distributions made on such Payment
Date, to the reduction of the Class Principal Balances of the Subordinate
Securities in accordance with the Allocable Loss Amount Priority. Any
Allocable Loss Amount allocated to a Class of Securities pursuant to this
Section 5.07(b) shall be allocated among the Securities of such Class in
proportion to their respective outstanding principal balances.
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 a magnetic tape or computer
disk providing such information regarding the Servicer's activities in
servicing the Home Loans during the related Due Period as the Indenture
Trustee may reasonably require.
(b) (1) Subject to the modification of the Servicer's Monthly Statement
by the Servicer with the prior written consent of the Majority Securityholders
and the Indenture Trustee, no later than three (3) Business Days before each
Payment Date, the Servicer shall prepare and the Indenture Trustee shall
distribute a monthly statement (the "Servicer's Monthly Statement", with
respect to such Payment Date) to the Seller, the Securityholders and each
Rating Agency, 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 1998-4"), the series designation of the Securities (I.E., "Series
1998-4"), the date of this Agreement and the following information:
(i) the Available Collection Amount, the Regular Payment Amount and
the Excess Spread for the related Payment Date;
(ii) the amount, if any, on deposit in the Pre-Funding Account on
such Payment Date;
(iii) the Class Principal Balance of each Class of Securities (and
the Component Principal Balance or Component Notional Balance, as
applicable, of the Components of the Residual Interest Certificate), and
the Pool Principal Balance as of the first day of the related Due Period
and after giving effect to payments and distributions made to the holders
of such Securities on such Payment Date;
(iv) the Class Pool Factor with respect to each Class of Securities
then outstanding, carried to seven decimal places;
(v) the amount of principal and interest received on the Home Loans
during the related Due Period;
(vi) the amount, if any, of the Overcollateralization Surplus;
(vii) the Servicing Compensation for such Payment Date;
(viii) the Overcollateralization Amount with respect to such Payment
Date, the Required Overcollateralization Amount as of such Payment Date,
the Net Loan Losses incurred during the related Due Period and the
cumulative Net Loan Losses with respect to such Payment Date;
(ix) the amount, if any, paid on such Payment Date to each Class of
Subordinate Securities in respect of Deferred Amounts;
(x) with respect to each Class of Subordinate Securities and the B-2
Component of the Residual Interest Certificate, the amount of any
applicable Deferred Amounts remaining unreimbursed after giving effect to
payments made on such Payment Date;
(xi) the weighted average remaining term to maturity of the Home
Loans and the weighted average Home Loan Interest Rate of the Home Loans
each as of such Payment Date;
(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 Servicing Advance Reimbursement Amount to
be paid to the Servicer on such Payment Date, and the amount of any
Servicing Advance Reimbursement Amount remaining unpaid following such
payment;
(xiv) 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 last day of the related Due Period;
(xv) 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 last day of the related Due
Period;
(xvi) 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 last day of the related Due Period;
(xvii) during the related Due Period, the aggregate Principal
Balance of Home Loans for each of the following: (A) that became
Liquidated Home Loans and (B) that became Deleted Home Loans pursuant to
Section 3.05 as a result of such Deleted Home Loans being Liquidated Home
Loans or a Home Loan in foreclosure, default or imminent default,
including the foregoing amounts by loan type;
(xviii) from the Closing Date through the most current Due Period,
the cumulative aggregate Principal Balance of Home Loans for each of the
following: (A) that became Liquidated Home Loans, and (B) that became
Deleted Home Loans pursuant to Section 3.05 as a result of such Deleted
Home Loans being in foreclosure, default or imminent default;
(xix) the scheduled principal payments and the principal prepayments
received with respect to the Home Loans during the related Due Period;
(xx) the number of Home Loans remaining in the Home Loan Pool; and
(xxi) such other information as may be reasonably requested by the
Indenture Trustee.
(2) No later than three (3) Business Days before each Payment Date,
the Servicer shall prepare and distribute to the Seller and each Rating Agency
a monthly statement that includes the cumulative aggregate Principal Balance
of Home Loans that became Deleted Home Loans pursuant to Section 3.05(c) as a
result of such Deleted Home Loans being Defective Home Loans, from the Closing
Date through the most current Due Period.
(3) No later than seven days following a repurchase or substitution
pursuant to Sections 2.06, 3.05 or 4.02, the Servicer shall notify each Rating
Agency of the aggregate principal balances of the Home Loans repurchased or
substituted and (if applicable) the relevant Substitution Adjustment.
All reports prepared by the Servicer of the withdrawals from and deposits
in the Collection Account will be based in whole or in part upon the
information provided to the Indenture Trustee by the Servicer, and the
Indenture Trustee may fully rely upon and shall have no liability with respect
to such information provided by the Servicer.
(c) Within a reasonable period of time after the end of each calendar
year, the Servicer shall prepare and direct the Indenture Trustee to
distribute to each Person who at any time during the calendar year was a
Securityholder, such information as is reasonably necessary to provide to such
Person a statement containing the information set forth in subclauses (b)(iv)
and (v) above, aggregated for such calendar year or applicable portion thereof
during which such Person was a Securityholder. Such obligation of the
Indenture Trustee shall be deemed to have been satisfied to the extent that
substantially comparable information shall be provided by the Servicer to the
Securityholders pursuant to any requirements of the Code as are in force from
time to time.
(d) On each Payment Date, the Indenture Trustee shall forward to DTC and
to the holder of the Residual Interest Certificate a copy of the Servicer's
Monthly Statement in respect of such Payment Date and a statement setting
forth the amounts actually distributed to the holder of the Residual Interest
Certificate on such Payment 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 the
holder of the Residual Interest Certificate, 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 the holder of the Residual Interest Certificate.
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 the Residual Interest Certificate
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, during the term of this
Agreement, such periodic, special, or other reports, including information tax
returns or reports required with respect to the Securities, including Internal
Revenue Service Forms 1099 and (if instructed in writing by the Seller on the
basis of the advice of legal counsel) and other similar reports that are
required to be filed by the Servicer or its agent and the holder of Residual
Interest Certificate, whether or not provided for herein, as shall be
necessary, reasonable, or appropriate with respect to the Securityholders or
the holders of the Residual Interest Certificate, 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 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 1998 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 payments or 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 PROCEDURES
Section 7.01. Assumption Agreements. When a Mortgaged Property has been
---------------------
or is about to be conveyed by the Obligor, the Servicer shall, to the extent
it has knowledge of such conveyance or prospective conveyance, exercise its
rights to accelerate the maturity of the related Home Loan under any
"due-on-sale" clause contained in the related Mortgage or Debt Instrument;
provided, however, that the Servicer shall not exercise any such right if the
"due-on-sale" clause, in the reasonable belief of the Servicer, is not
enforceable under applicable law. In such event or in the event the related
Mortgage and Debt Instrument do not contain a "due-on-sale" clause, the
Servicer shall enter into an assumption and modification agreement with the
person to whom such property has been or is about to be conveyed, pursuant to
which such person becomes liable under the Debt Instrument and, unless
prohibited by applicable law or the Home Loan documents, the Obligor remains
liable thereon. The Servicer is also authorized to enter into a substitution
of liability agreement with such person, pursuant to which the original
Obligor is released from liability and such person is substituted as Obligor
and becomes liable under the Debt Instrument. The Servicer shall notify the
Custodian that any such substitution or assumption agreement has been
completed by forwarding to the Custodian the original of such substitution or
assumption agreement, which original shall be added by the Custodian to the
related Indenture Trustee's Home Loan File and shall, for all purposes, be
considered a part of such Indenture Trustee's Home Loan File to the same
extent as all other documents and instruments constituting a part thereof. In
connection with any assumption or substitution agreement entered into pursuant
to this Section 7.01, the Servicer shall not change the Home Loan Interest
Rate or the Monthly Payment, defer or forgive the payment of principal or
interest, reduce the outstanding principal amount or extend the final maturity
date on such Home Loan. Any fee collected by the Servicer for consenting to
any such conveyance or entering into an assumption or substitution agreement
shall be retained by or paid to the Servicer as additional Servicing
Compensation.
Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Home Loan by operation of law or any assumption which the Servicer may be
restricted by law from preventing, for any reason whatsoever.
Section 7.02. Satisfaction of Mortgages and Release of Home Loan Files.
--------------------------------------------------------
Subject to the provisions of Sections 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 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 Payment Account, or the
Certificate Distribution Account. Upon receipt by the Custodian of the
certification of a Servicing Officer with respect to the release of the
Indenture Trustee's Home Loan File for any Home Loan or any documents included
therein, the Custodian shall release to the Servicer such Indenture Trustee's
Home Loan File and shall deliver such instruments of transfer presented to it
by the Servicer as shall be necessary or appropriate for the release of such
Indenture Trustee's Home Loan File in accordance with such certification of
the Servicing Officer. The release to the Servicer of an Indenture Trustee's
Home Loan File pursuant to such certification shall not require or be subject
to the prior approval of the Indenture Trustee in the case of a release in
connection with the following: (1) the satisfaction or release of a Mortgage
upon the payment in full of the Home Loan or upon such Home Loan becoming a
Liquidated Home Loan; (2) a Home Loan in default for which the Servicer is or
will be pursuing foreclosure or another method of liquidation pursuant to
Section 4.02; or (3) the correction of documentation in the Indenture
Trustee's Home Loan File for errors and ambiguities, provided that such
corrections shall be performed and returned to the Custodian in a prompt
manner, and provided further that no more than 100 Indenture Trustee's Home
Loan Files shall be released and held by the Servicer at any one time. In the
case of a release of the related Indenture Trustee's Home Loan File to the
Servicer in connection with a substitution or repurchase of any Home Loan
pursuant to Section 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 not more than 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 related Obligor. Upon approval of an
assignment in lieu of satisfaction with respect to any Home Loan, the Servicer
shall receive cash in an amount equal to the unpaid principal balance of and
accrued interest on such Home Loan and the Servicer shall treat such amount as
a Principal Prepayment with respect to such Home Loan for all purposes hereof.
Section 7.03. Servicing Compensation. As compensation for its services
----------------------
hereunder, the Servicer shall be entitled to receive from the Collection
Account, the Servicing Fee out of which the Servicer shall pay any servicing
fees owed or payable to any Subservicer and any custodial fees owed or payable
to the Custodian. Additional servicing compensation in the form of assumption
and other administrative fees, amounts remitted pursuant to Section 7.01,
prepayment penalties and late payment charges shall be part of the Servicing
Compensation payable to the Servicer hereunder and shall be paid either by the
Servicer retaining such additional servicing compensation prior to deposit in
the Collection Account pursuant to Section 5.01(b)(1) or if deposited into the
Collection Account as part of the Servicing Compensation withdrawn from the
Note Payment Account pursuant to Section 8.2(a) 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) the Owner Trustee Fee and the Indenture
Trustee Fee, and the fees of the Co-Owner Trustee and the Custodian, (ii) 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,
(iii) 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 (iv) 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 November, 1998, the Servicer will deliver
to the Indenture Trustee, the Issuer and to each Securityholder, an Officer's
Certificate stating that (i) the Servicer has fully complied with the
provisions of Articles V and VII, (ii) a review of the activities of the
Servicer during the preceding quarter and of performance under this Agreement
has been made under such officer's supervision, and (iii) to the best of such
officers' knowledge, based on such review, the Servicer has fulfilled all its
obligations under this Agreement throughout such quarter, or, if there has
been a default in the fulfillment of any such obligation, specifying each such
default known to such officer and the nature and status thereof and the action
being taken by the Servicer to cure such default.
Section 7.05. Annual Independent Public Accountants' Servicing Report. On
-------------------------------------------------------
or before 120 days after the end of each of the Servicer's fiscal years
elapsing during the term of its appointment under this Agreement, beginning
with the first fiscal year ending after the Closing Date, the Servicer, at its
expense, shall furnish to the Seller, the Indenture Trustee, the Issuer, the
Securityholders and the Rating Agencies (i) an opinion by a firm of
independent certified public accountants on the financial position of the
Servicer at the end of the relevant fiscal year and the results of operations
and changes in financial position of the Servicer for such year then ended on
the basis of an examination conducted in accordance with generally accepted
auditing standards, and (ii) if the Servicer is then servicing any Home Loans,
a statement from such independent certified public accountants to the effect
that based on an examination of certain specified documents and records
relating to the servicing of the Servicer's loan portfolio conducted
substantially in compliance with the audit program for mortgages serviced for
the United States Department of Housing and Urban Development Mortgage Audit
Standards, or the Uniform Single Attestation Program for Mortgage Bankers (the
"Applicable Accounting Standards"), such firm is of the opinion that such
servicing has been conducted in compliance with the Applicable Accounting
Standards except for (a) such exceptions as such firm shall believe to be
immaterial and (b) such other exceptions as shall be set forth in such
statement.
Section 7.06. Right to Examine Servicer Records. Each Securityholder, the
---------------------------------
Indenture Trustee, the Issuer 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 and
the Issuer 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 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 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 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 to inspect the Servicer's servicing facilities during normal
business hours for the purpose of satisfying the Securityholders and such
prospective Securityholder that the Servicer has the ability to service the
Home Loans in accordance with this Agreement.
ARTICLE IX
THE SERVICER
Section 9.01. Indemnification; Third Party Claims. (a) The Servicer
-----------------------------------
agrees to indemnify and hold the Indenture Trustee, the Co-Owner Trustee, the
Issuer, the Seller 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 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 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 and/or any Securityholder in respect of such claim.
(b) The Seller agrees to indemnify and hold the Indenture Trustee, the
Issuer, the Servicer 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 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 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 and/or any Securityholder in respect of such claim.
(c) The Transferor agrees to indemnify and hold the Indenture Trustee,
the Issuer, the Servicer 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 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 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 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
and the Issuer.
Section 9.03. Limitation on Liability of the Servicer and Others. The
--------------------------------------------------
Servicer and any director, officer, employee or agent of the Servicer may rely
on any document of any kind which it in good faith reasonably believes to be
genuine and to have been adopted or signed by the proper authorities
respecting any matters arising hereunder. Subject to the terms of Section 9.01
herein, the Servicer shall have no obligation to appear with respect to,
prosecute or defend any legal action which is not incidental to the Servicer's
duty to service the Home Loans in accordance with this Agreement.
Section 9.04. Servicer Not to Resign; Assignment. (a) The Servicer shall
----------------------------------
not resign from the obligations and duties hereby imposed on it except by
mutual consent of the Servicer, the Seller, the Indenture Trustee, the Issuer
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 and the Seller, which opinion
of counsel shall be in form and substance acceptable to the Indenture Trustee
and the Issuer. 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 of
the Seller, the Indenture Trustee, the Issuer and the Majority
Securityholders; provided, however, the Servicer may assign this Agreement (i)
without the prior written consent of the Seller, the Indenture Trustee and the
Issuer, but with the prior written consent of the Majority Securityholders to
the Indenture Trustee or (ii) without the prior written consent of the Seller,
but with the prior written consent of the Indenture Trustee, the Issuer and
the Majority Securityholders, to any Person that (A) services not less than
$25,000,000 in aggregate outstanding principal amount of loans similar in type
to the Home Loans, (B) has a net worth of not less than $2,500,000, (C) has a
blanket fidelity bond and errors and omissions insurance coverage satisfying
the requirements set forth in Section 4.03 and (D) 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 and the Issuer 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 the Issuer and the Indenture
--------------------------------------------------------
Trustee. The relationship of the Servicer (and of any successor to the
- -------
Servicer as servicer under this Agreement) to the Issuer and the Indenture
Trustee under this Agreement is intended by the parties hereto to be that of
an independent contractor and not of a joint venturer, agent or partner of the
Issuer or the Indenture Trustee.
ARTICLE X
DEFAULT
Section 10.01. Events of Default. (a) In case one or more of the
-----------------
following Events of Default by the Servicer shall occur and be continuing,
that is to say:
(i) any failure by the Servicer to deposit in the Collection Account
in accordance with Section 5.01(b) any payments in respect of the Home
Loans received by the Servicer no later than the second Business Day
following the day on which such payments were received; or
(ii) any 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 (other than a covenant,
obligation or agreement, or default in the observance of which, that is
elsewhere in this Section 10.01 specifically dealt with), 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
(iii) (A) the entry by a court or supervisory authority having
jurisdiction of a decree or order for relief in respect of the Servicer
in an involuntary case or proceeding under any applicable federal or
state bankruptcy, insolvency, reorganization, or other similar law or (B)
the appointment a custodian, receiver, liquidator, assignee, trustee,
sequestrator, or other similar official of such member or of any
substantial part of its property, or ordering the winding up or
liquidation of the Servicer's affairs, and the continuance of any such
decree or order for relief or any such other decree or order unstayed and
in effect for a period of 60 consecutive days; or
(iv) the commencement by the Servicer of a voluntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization, or other similar law or of any other case or proceeding
to be adjudicated bankrupt or insolvent or the consent by the Servicer to
the entry of a decree or order for relief in respect of itself in an
involuntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization, or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against
the Servicer, or the filing by the Servicer of a petition or answer or
consent seeking reorganization or relief under any applicable federal or
state law, or the consent by the Servicer to the filing of such petition
or to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator, or similar official of the
Servicer or of any substantial part of its property, or the making by the
Servicer of an assignment for the benefit of creditors, or the Servicer's
failure to pay its debts generally as they become due, or the taking of
corporate action by the Servicer in furtherance of any such action; 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 (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 Loss
Percentage (as defined below) exceeds (1) up to the fifth (5th)
anniversary of the May 31, 1998 Cut-Off Date, 20.5%, or (2) thereafter,
30.75% (where the "Expected Loan Loss Percentage" shall be the sum of (A)
the cumulative Net Loan Losses divided by the Assumed Pool Principal
Balance, plus (B) 25% of the aggregate Principal Balance of the Home
Loans which are then more than 30 but less than 61 days delinquent
divided by the Assumed Pool Principal Balance, plus (C) 50% of the
aggregate Principal Balance of the Home Loans which are then 61 or more
but less than 91 days delinquent divided by the Assumed Pool Principal
Balance, plus (D) 100% of the aggregate Principal Balance of the Home
Loans which are then more than 90 days delinquent divided by the Assumed
Pool Principal Balance).
(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 Indenture
Trustee or the Issuer by notice in writing to the Servicer and each Rating
Agency may, in addition to whatever rights such Person may have at law or
equity to damages, including injunctive relief and specific performance
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 Rating Agencies, 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, with the
consent of the Majority Securityholders, shall appoint a successor Servicer
acceptable to the Rating Agencies 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 and shall assume the responsibilities of the Servicer hereunder. In
the event that the Indenture Trustee assumed the responsibilities of Servicer
pursuant to this Section 10.02, the Indenture Trustee will become licensed,
qualified and in good standing in each Mortgaged Property State the laws of
which require licensing or qualification, in order to perform its obligations
as Servicer hereunder or, alternatively, shall retain an agent who is so
licensed, qualified and in good standing in any such Mortgaged Property State.
The successor Servicer shall be obligated to make Servicing Advances
hereunder. As compensation therefor, the successor Servicer appointed pursuant
to this Section 10.02, shall be entitled to all Servicing Compensation as
provided in this Agreement. 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 prior Servicer after its removal or
resignation shall be endorsed by it to the Indenture Trustee and remitted
directly to the Indenture Trustee or, at the direction of the Indenture
Trustee, to the successor Servicer.
The compensation of any successor Servicer (including, without
limitation, the Indenture Trustee) so appointed shall be the Servicing Fee,
together with other Servicing Compensation provided for herein. In the event
the Indenture Trustee is required to solicit bids to appoint a successor
Servicer, the Indenture Trustee shall solicit, by public announcement, bids
from housing and home finance institutions, banks and mortgage servicing
institutions meeting the qualifications set forth in Section 9.04(b)(ii)
above. Such public announcement shall specify that the successor Servicer
shall be entitled to the full amount of the Servicing Fee and Servicing
Compensation provided for herein. Within thirty days after any such public
announcement, the Indenture Trustee shall negotiate and effect the sale,
transfer and assignment of the servicing rights and responsibilities hereunder
to the qualified party submitting the highest qualifying bid. The Indenture
Trustee shall deduct from any sum received by the Indenture Trustee from the
successor Servicer in respect of such sale, transfer and assignment all costs
and expenses of any public announcement and of any sale, transfer and
assignment of the servicing rights and responsibilities hereunder and the
amount of any unreimbursed Servicing Advances made by the Indenture Trustee.
After such deductions, the remainder of such sum shall be paid by the
Indenture Trustee to the Servicer at the time of such sale, transfer and
assignment to the successor Servicer.
The Indenture Trustee, the Issuer, any Custodian, the Servicer and any
such successor Servicer shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession of a
successor Servicer. 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 the applicable party 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 payment hereunder or any portion thereof caused by
(i) the failure of the prior Servicer to deliver, or any delay in delivering,
cash, documents or records to it, or (ii) restrictions relating to the prior
Servicer imposed by any regulatory authority having jurisdiction over the
prior Servicer. No appointment of a successor 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 and the
Seller and, except in the case of the appointment of the Indenture Trustee as
successor Servicer (when no consent shall be required), the Seller, the
Majority Securityholders and the Issuer shall have consented thereto.
Pending appointment of a successor Servicer hereunder, the Indenture
Trustee shall act as Servicer hereunder as hereinabove provided. In connection
with such appointment and assumption, the Indenture Trustee may make such
arrangements for the compensation of such successor Servicer as it and such
successor Servicer shall agree; provided, however, that no such compensation
shall be in excess of the 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, 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 payment
or distribution on a Security or Residual Interest without the consent of the
related Securityholder or holders of the Residual Interest. Upon any waiver of
a past default, such default shall cease to exist, and any Event of Default
arising therefrom shall be deemed to have been remedied for every purpose of
this Agreement. No such waiver shall extend to any subsequent or other default
or impair any right consequent thereto except to the extent expressly so
waived.
Section 10.04. Accounting Upon Termination of Servicer. Upon termination
---------------------------------------
of the Servicer under this Article X, the Servicer shall, at its own expense:
(a) deliver to its successor or, if none shall yet have been appointed,
to the Indenture Trustee, the funds in any Collection Account;
(b) deliver to its successor or, if none shall yet have been appointed,
to the Indenture Trustee, all of the Servicer's files, documents and
statements relating to the Home Loans 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 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. (a) This Agreement shall terminate upon any
-----------
of the following events: (i) the later of (a) the satisfaction and discharge
of the Indenture pursuant to Section 4.1 of the Indenture and Notice to the
Indenture Trustee of such discharge and (b) the disposition of all funds with
respect to the last Home Loan and the remittance of all funds due hereunder;
(ii) payment of all amounts due and payable to the Securityholders, the
Servicer, the Indenture Trustee, the Owner Trustee, the Co-Owner Trustee and
the Issuer pursuant to this Agreement and the Indenture and written notice to
the Indenture Trustee from the Issuer of the Issuer's intent to terminate this
Agreement; or (iii) mutual written consent of the Servicer, the Seller, the
Transferor and all Securityholders in writing.
(b) Notice of termination of this Agreement pursuant to Section
11.01(a)(i) shall be sent by the Indenture Trustee to the Securityholders in
accordance with Section 2.6(b) of the Indenture. Notice of termination of this
Agreement pursuant to Section 11.01(a)(ii) or (iii) shall be mailed or
transmitted by facsimile by the Indenture Trustee to the Securityholders on
the Business Day immediately following the day on which the Indenture Trustee
receives notice of such termination, and such notice to the Securityholders
shall state that the Securityholders are to surrender their respective
Securities for cancellation and shall specify the place where such Securities
are to be surrendered.
Section 11.O2. Optional Termination by Seller.
------------------------------
(a) [Reserved].
(b) The Seller may, at its option, effect an early redemption or
termination of the Securities on or after any Payment Date on which the Pool
Principal Balance declines to 10% or less of the Assumed Pool Principal
Balance as of the Closing Date. The Seller shall effect such early redemption
or termination by providing notice thereof to the Indenture Trustee and Owner
Trustee and by paying into the Collection Account in the manner described
below an amount equal to the Termination Price.
(c) Any early redemption and termination by the Seller pursuant to
Section 11.02(b) shall be accomplished by depositing the Termination Price
into the Collection Account on the Determination Date immediately preceding
the Payment Date on which the early redemption or termination is to occur. The
amount so deposited and any other 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) and any amounts withdrawable therefrom by the
Indenture Trustee pursuant to Section 5.01(d)) shall be transferred to the
Note Payment Account pursuant to Section 5.01(b)(2) for payment or
distribution to Securityholders on the final Payment Date; and any amounts
received with respect to the Home Loans and Foreclosure Properties subsequent
to the Due Period immediately preceding such final Payment Date shall belong
to the Seller. For purposes of calculating the payments and distributions to
be made on the final Payment Date, amounts transferred to the Note Payment
Account immediately preceding such final Payment 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(d).
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 in accordance with
Section 10.2 of the Indenture and (ii) by the Owner Trustee to the
Certificateholder 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 Issuer, the Seller, the Servicer, the Transferor and the Indenture
Trustee by written agreement with notice thereof to the Securityholders,
without the consent of any of the Securityholders, 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;
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, or (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.
(b) This Agreement may also be amended from time to time by the Issuer,
the Seller, the Servicer, the Transferor and the Indenture Trustee by written
agreement, with the prior written consent of the Majority Securityholders, 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 payments or distributions which
are required to be made on any Security, without the consent of the holders of
100% of each Class of Securities affected thereby, (ii) adversely affect in
any material respect the interests of the holders of any Class of Securities
in any manner other than as described in (i), without the consent of the
holders of 100% of such Class of Securities, or (iii) reduce the percentage of
any Class of Securities, the holders of which are required to consent to any
such amendment, without the consent of the holders of 100% of such Class of
Securities.
(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.
(d) 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 and the Indenture Trustee may, but shall not be obligated to, enter
into any such amendment which affects such Person'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, 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, AND, TO THE EXTENT PERMITTED BY LAW, 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: Russ Ungerman, 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
1998-4, c/o Wilmington Trust Company, Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890, Attention: James P. Lawler, or such other
address as may hereafter be furnished to the Securityholders and the other
parties hereto, (iii) in the case of the Transferor and the Servicer,
FIRSTPLUS FINANCIAL, INC., 1600 Viceroy, 7th Floor, Dallas, Texas 75235,
Attention: Lee Reddin, 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 the Indenture Trustee or Co-Owner Trustee,
U.S. Bank National Association, 180 East Fifth Street, St. Paul, Minnesota
55101, Attention: Structured Finance, FIRSTPLUS 1998-4, and (v) in the case of
the Securityholders, as set forth in the applicable Note Register and
Certificate Register. Any such notices shall be deemed to be effective with
respect to any party hereto upon the receipt of such notice by such party,
provided, however, that a facsimile or other form of electronic transmission
shall be deemed to be received by the parties referred to in (i) to (v) above
when transmitted so long as the transmitting machine has provided an
electronic confirmation of such transmission and such facsimile or other form
of electronic transmission is confirmed with a printed paper copy thereof by
mail or overnight courier service; and provided, further, that any delivery of
computer readable format hereunder shall be accompanied or confirmed by the
delivery of a printed paper copy thereof. Notices to the Securityholders shall
be effective upon mailing or personal delivery. Each party may, by notice,
designate any further or different address to which subsequent notices,
certificates or other communications to such party shall be sent.
Section 12.07. Severability of Provisions. If any one or more of the
--------------------------
covenants, agreements, provisions or terms of this Agreement shall be held
invalid for any reason whatsoever, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity
or enforceability of the other covenants, agreements, provisions or terms of
this Agreement.
Section 12.08. No Partnership. Nothing herein contained shall be deemed
--------------
or construed to create any partnership or joint venture between the parties
hereto and the services of the Servicer shall be rendered as an independent
contractor.
Section 12.09. Counterparts. This Agreement may be executed in one or
------------
more counterparts and by the different parties hereto on separate
counterparts, each of which, when so executed, shall be deemed to be an
original; such counterparts, together, shall constitute one and the same
Agreement.
Section 12.10. Successors and Assigns. This Agreement shall inure
----------------------
to the benefit of and be binding upon the Servicer, the Transferor, the
Seller, the Issuer and the Securityholders and their respective successors and
permitted assigns.
Section 12.11. Headings. The headings of the various sections of this
--------
Agreement have been inserted for convenience of reference only and shall not
be deemed to be part of this Agreement.
Section 12.12. Actions of Securityholders. (a) Any request, demand,
--------------------------
authorization, direction, notice, consent, waiver or other action provided by
this Agreement to be given or taken by Securityholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Securityholders in person or by agent duly appointed in writing; and
except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Indenture
Trustee, 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 Indenture Trustee, the Seller, the Servicer or the Issuer 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 Indenture Trustee
--------------------------
shall provide to each Rating Agency copies of statements, reports and notices,
to the extent received by it from the Servicer, the Transferor or the Issuer
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 final distribution
with respect to the Residual Interest Certificate;
(v) notice of the occurrence 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 Indenture Trustee to provide
statements, reports and notices to the Rating Agencies such statements,
reports and notices shall be delivered to the Rating Agencies at the following
addresses: (i) if to Moody's, 99 Church Street, 4th Floor, New York, New York
10007, (ii) if to Fitch, One State Street Plaza, New York, New York 10004,
(iii) if to DCR, 55 East Monroe Street, 38th Floor, Chicago, Illinois 60603,
Attention: RMBS Monitoring and (iv) if to S&P, 26 Broadway, 15th Floor, New
York, New York 10004-1064, Attention: Asset-Backed Monitoring Department.
Section 12.14. [Reserved].
Section 12.15. No Petition. Each of the Indenture Trustee, the Seller and
-----------
the Servicer by entering into this Agreement, hereby covenants and agrees that
it will not at any time institute against the Issuer, or join in any
institution against 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 Securities or any of the Basic Documents.
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 1998-4,
By: Wilmington Trust Company, as Owner Trustee
By:
------------------------------------------------
Name:
Title:
FIRSTPLUS INVESTMENT CORPORATION, as Seller
By:
------------------------------------------------
Name: Lee F. Reddin
Title: Vice President
FIRSTPLUS FINANCIAL, INC., as Transferor and
Servicer
By:
------------------------------------------------
Name: Lee F. Reddin
Title: Vice President
U.S. BANK NATIONAL ASSOCIATION, as Indenture
Trustee and Co-Owner Trustee
By:
------------------------------------------------
Name:
Title:
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared , known to me to be
------------------------------------
the person and officer whose name subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said FIRSTPLUS FINANCIAL,
INC., a Texas corporation, and that he executed the same as the act of such
corporation for the purposes and consideration therein expressed, and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the day of June, 1998.
-----
------------------------------------
Notary Public, State of Texas
My commission expires:
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared , known to me to be
------------------------------------
the person and officer whose name subscribed to the foregoing instrument and
acknowledged to that the same was the act of the said FIRSTPLUS INVESTMENT
CORPORATION, a Nevada corporation, and that he executed the same as the act of
such corporation for the purposes and consideration therein expressed, and in
the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the day of June, 1998.
----
------------------------------------
Notary Public, State of Texas
My commission expires:
THE STATE OF DELAWARE )
)
COUNTY OF NEWCASTLE )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared , known to me to be the
-----------------------------
person and officer whose name subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said FIRSTPLUS HOME LOAN
OWNER TRUST 1998-4, as Issuer, and that he executed the same as the act of
such association for the purposes and consideration therein expressed, and in
the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the day of June, 1998.
----
-----------------------------------
Notary Public, State of Delaware
My commission expires:
. (printed name)
- --------------------
THE STATE OF MINNESOTA )
)
COUNTY OF RAMSEY )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared , known to me to be
---------------------------------------
the person and officer whose name subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said U.S. BANK NATIONAL
ASSOCIATION, as Indenture Trustee, and that she executed the same as the act
of such association for the purposes and consideration therein expressed, and
in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the day of June, 1998.
-----
-------------------------------------
Notary Public, State of Minnesota
My commission expires:
. (printed name)
- ------------------------
EXHIBIT A
Home Loan Schedule
[Delivered under Separate Cover]
EXHIBIT B
Form Of Subsequent Transfer Agreement
This SUBSEQUENT TRANSFER AGREEMENT dated as of , 199 (this
------------- -
"Agreement") is entered into between FIRSTPLUS FINANCIAL, INC., as Transferor
and Servicer (the "Transferor" and "Servicer"), FIRSTPLUS Investment
Corporation, as Seller (the "Seller"), and FIRSTPLUS Home Loan Owner Trust
1998-4, as Issuer (the "Issuer") and U.S. Bank National Association, as
Indenture Trustee and Co-Owner Trustee (the "Indenture Trustee" and "Co-Owner
Trustee"), with respect to that certain Loan Sale Agreement dated as of June
1, 1998 (the "Loan Sale Agreement") by and between the Transferor and the
Seller, and that certain Sale and Servicing Agreement dated as of June 1, 1998
(the "Sale and Servicing Agreement") among the Issuer, the Seller, the
Transferor and Servicer, the Indenture Trustee and the Co-Owner Trustee;
WHEREAS, pursuant to the Loan Sale Agreement and the Sale and Servicing
Agreement, the Transferor, the Seller, the Issuer and the Indenture Trustee
agreed to the sale by the Transferor to the Seller, the sale by the Seller to
the Issuer and the pledge by the Issuer to Indenture Trustee of additional
Home Loans following the Closing Date; and
WHEREAS, the Transferor, the Seller, the Issuer and the Indenture Trustee
desire to enter into this Subsequent Transfer Agreement to reflect the sale,
transfer, assignment, set over, conveyance and grant of certain additional
Home Loans to the Issuer and their pledge to the Indenture Trustee.
NOW, THEREFORE, in consideration of the premises herein contained and for
other good and valuable consideration, the receipt and sufficiency of which
are mutually acknowledged, the Transferor, the Seller, the Issuer and the
Indenture Trustee hereby agree as follows:
Section 1. Subsequent Home Loans. The Transferor, the Seller, the Issuer
---------------------
and the Indenture Trustee hereby agree to the sale, transfer, assignment, set
over, conveyance and grant by the Transferor to the Seller, the sale,
transfer, assignment, set over, conveyance and grant by the Seller to the
Issuer and the Grant by the Issuer to the Indenture Trustee of the additional
home loans as described on Attachment 1 attached hereto (the "Subsequent Home
Loans") and the Home Loan Schedule attached hereto as Attachment 2 (the "Home
Loan Schedule"). The Home Loan Schedule shall supersede any Addition Notices
for any Subsequent Transfer Agreement insofar as the Home Loan Schedule
relates to the identification of Subsequent Home Loans transferred to the
Issuer. Capitalized terms used and not defined herein have the meanings
assigned to them in the Sale and Servicing Agreement.
Section 2. Sale by Transferor to Seller of Subsequent Home Loans. The
-----------------------------------------------------
Transferor does hereby sell, transfer, assign, set over, convey and Grant to
the Seller:
(i) all of the right, title and interest of the Transferor in and to
each Subsequent Home Loan identified on the Home Loan Schedule, including
without limitation, the Home Loans, the Servicer's Home Loan Files and
the Debt Instruments, and all payments on, and proceeds with respect to,
such Subsequent Home Loans received on and after the applicable Cut-Off
Date;
(ii) all right, title and interest of the Transferor in the
Mortgages on the properties securing the Subsequent Home Loans, if any,
including any Mortgaged Property acquired by or on behalf of the Seller
or its successor by foreclosure or deed in lieu of foreclosure or
otherwise;
(iii) all right, title and interest of the Transferor in and to any
rights in or proceeds from any insurance policies (including title
insurance policies) covering the Subsequent Home Loans, the related
Mortgaged Properties or the related Obligors and any amounts recovered
from third parties in respect of any Liquidated Home Loans; and (iv) all
the proceeds of each of the foregoing.
With respect to each Subsequent Home Loan, the Transferor has delivered
or caused to be delivered to the Seller, each item set forth in Section 2.02
of the Sale and Servicing Agreement. The transfer to the Seller by the
Transferor of the Subsequent Home Loans identified on the Mortgage Loan
Schedule shall be absolute and is intended by the Transferor and the Seller to
constitute and to be treated as an absolute conveyance and sale by the
Transferor. The expenses and costs relating to the delivery of the Subsequent
Home Loans, this Agreement and the Sale and Servicing Agreement shall be borne
by the Transferor. Additional terms of the sale, including the purchase price,
are set forth on Attachment 1 attached hereto.
Section 3. Sale by Seller to Issuer of Subsequent Home Loans. Upon and
-------------------------------------------------
simultaneous with the purchase by the Seller from the Transferor of the
Subsequent Home Loans, the Seller does hereby sell, transfer, assign, set
over, convey and Grant to the Issuer:
(i) all of the right, title and interest of the Seller in and to
each Subsequent Home Loan identified on the Home Loan Schedule, including
without limitation, the Home Loans, the Servicer's Home Loan Files and
the related Debt Instruments, and all payments on, and proceeds with
respect to, such Subsequent Home Loans received on and after the
applicable Cut-off Date;
(ii) all right, title and interest of the Seller in the Mortgages on
the properties securing the Subsequent Home Loans, if any, including any
Mortgaged Property acquired by or on behalf of the Issuer by foreclosure
or deed in lieu of foreclosure or otherwise;
(iii) all right, title and interest of the Seller in and to any
rights in or proceeds from any insurance policies (including title
insurance policies) covering the Subsequent Home Loans, the related
Mortgaged Properties or the related Obligors and any amounts recovered
from third parties in respect of any Liquidated Home Loans; and
(iv) all the proceeds of each of the foregoing.
With respect to each Subsequent Home Loan, the Seller has delivered or
caused to be delivered to the Issuer, each item set forth in Section 2.02 of
the Sale and Servicing Agreement. The transfer to the Issuer by the Seller of
the Subsequent Home Loans identified on the Mortgage Loan Schedule shall be
absolute and is intended by the Seller, the Transferor, the Issuer, the
Certificateholders and the Noteholders to constitute and to be treated as an
absolute conveyance and sale by the Seller. The expenses and costs relating to
the delivery of the Subsequent Home Loans, this Agreement and the Sale and
Servicing Agreement shall be borne by the Seller to the extent that the same
are not paid by the Transferor. Additional terms of the sale, including the
purchase price, are set forth on Attachment 1 attached hereto.
Section 4. Grant by Issuer to Indenture Trustee of Subsequent Home Loans.
-------------------------------------------------------------
Upon and simultaneous with the purchase by the Seller from the Transferor
of the Subsequent Home Loans and the purchase by the Issuer from the Seller of
the Subsequent Home Loans, and pursuant to the terms of the Indenture, the
Issuer does hereby Grant to the Indenture Trustee:
(i) all of the right, title and interest of the Issuer in and to
each Subsequent Home Loan identified on the Home Loan Schedule, including
without limitation, the Home Loans, the Servicer's Home Loan Files and
the Debt Instruments, and all payments on, and proceeds with respect to,
such Subsequent Home Loans received on and after the applicable Cut-off
Date;
(ii) all right, title and interest of the Issuer in the Mortgages on
the properties securing the Subsequent Home Loans, if any, including any
Mortgaged Property acquired by or on behalf of the Issuer by foreclosure
or deed in lieu of foreclosure or otherwise;
(iii) all right, title and interest of the Issuer in and to any
rights in or proceeds from any insurance policies (including title
insurance policies) covering the Subsequent Home Loans, the related
Mortgaged Properties or the related Obligors and any amounts recovered
from third parties in respect of any Liquidated Home Loans; and
(iv) all the proceeds of each of the foregoing.
Section 5. Representations and Warranties; Conditions Precedent.
----------------------------------------------------
(a) The Transferor hereby makes the representations, warranties and
covenants set forth in Sections 3.02 and 3.04 of the Sale and Servicing
Agreement with respect to the Subsequent Home Loans as of the date hereof and
the applicable Subsequent Transfer Date, and the Transferor hereby confirms
that with respect to the sale by the Transferor to the Seller of the
Subsequent Home Loans each of the conditions set forth in Sections 2.02 of the
Sale and Servicing Agreement for such sale have been satisfied as of the date
hereof and the applicable Subsequent Transfer Date. In addition, the
Transferor hereby reconfirms the accuracy of the representations and
warranties set forth in Section 3.03 of the Sale and Servicing Agreement with
respect to the Subsequent Home Loans as of the date hereof and the applicable
Subsequent Transfer Date.
(b) In reliance upon the representations, warranties and covenants made
by the Transferor in the preceding subsection (a) and in the Officer's
Certificate of the Transferor dated as of the date hereof, the Seller hereby
affirms the representations, warranties and covenants set forth in Section
3.01 of the Sale and Servicing Agreement with respect to the Subsequent Home
Loans as of the date hereof and the applicable Subsequent Transfer Date, and
the Seller hereby confirms that each of the conditions set forth in Sections
2.02 and 3.04 of the Sale and Servicing Agreement are satisfied as of the date
hereof and the applicable Subsequent Transfer Date.
(c) All terms and conditions of the Sale and Servicing Agreement are
hereby ratified and confirmed; provided however, that in the event of any
conflict the provisions of this Agreement shall control over the conflicting
provisions of the Sale and Servicing Agreement.
Section 6. Recordation of Agreement. This Agreement is subject to
------------------------
recordation in all appropriate public offices for real property records in all
the counties or other comparable jurisdictions in which any or all of the
Mortgaged Properties are situated, and in any other appropriate public
recording office or elsewhere, such recordation to be effected by the
Transferor, at its expense, in the event such recordation materially and
beneficially affects the interests of the Noteholders or the
Certificateholders.
Section 7. 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 8. Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the Transferor, the Seller, the Issuer, the
Indenture Trustee and their respective successors and permitted assigns.
Section 9. 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.
IN WITNESS WHEREOF, the Transferor, the Seller, the Issuer and the
Indenture Trustee have caused this SUBSEQUENT TRANSFER AGREEMENT to be signed
by their respective officers thereunto duly authorized, as of the day and year
first above written.
FIRSTPLUS FINANCIAL, INC.,
as Transferor
By:
------------------------------------------
Name:
Title:
FIRSTPLUS INVESTMENT CORPORATION,
as Seller
By:
------------------------------------------
Name:
Title:
FIRSTPLUS HOME LOAN OWNER TRUST 1998-4
By: Wilmington Trustee Company as Owner Trustee
By:
------------------------------------------
Name:
Title:
U.S. BANK NATIONAL ASSOCIATION
as Indenture Trustee
By:
------------------------------------------
Name:
Title:
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared , known to me to be
------------------------------------
the person and officer whose name subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said FIRSTPLUS FINANCIAL,
INC., a Texas corporation, and that he executed the same as the act of such
corporation for the purposes and consideration therein expressed, and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the day of
-----
, 199 .
- ------------------- -
------------------------------------------
Notary Public, State of Texas
My commission expires:
. (printed name)
- ------------------------
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared , known to me to be
------------------------------------
the person and officer whose name subscribed to the fore going instrument and
acknowledged to me that the same was the act of the said FIRSTPLUS INVESTMENT
CORPORATION, a Nevada corporation, and that he executed the same as the act of
such corporation for the purposes and consideration therein expressed, and in
the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the day of
-----
, 199 .
- ------------------- -
------------------------------------------
Notary Public, State of Texas
My commission expires:
. (printed name)
- ------------------------
THE STATE OF DELAWARE )
)
COUNTY OF NEWCASTLE )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared , known to me to be
---------------------------------------
the person and officer whose name subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said FIRSTPLUS Home Loan
Owner Trust 1998-4, as Issuer, and that he executed the same as the act of
such association for the purposes and consideration therein expressed, and in
the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the day of
-----
, 199 .
- ------------------- -
------------------------------------------
Notary Public, State of Delaware
My commission expires:
. (printed name)
- --------------------
THE STATE OF MINNESOTA )
)
COUNTY OF RAMSEY )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared , known to me to be
---------------------------------------
the person and officer whose name subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said U.S. BANK NATIONAL
ASSOCIATION, as Indenture Trustee, and that she executed the same as the act
of such association for the purposes and consideration therein expressed, and
in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the day of
-----
, 199 .
- ------------------ -
------------------------------------------
Notary Public, State of Minnesota
My commission expires:
. (printed name)
- ------------------------
ATTACHMENT 1
1. Transfer Source of Subsequent Mortgage Loans:
----------------------------
Subsequent Transfer Date:
----------------------------
Cut-Off Date:
----------------------------
Aggregate Outstanding Principal Balances
of Subsequent Mortgage Loans:
----------------------------
Purchase Price for Subsequent
Mortgage Loans:
----------------------------
2. Transfer Source of Subsequent Mortgage Loans:
----------------------------
Subsequent Transfer Date:
----------------------------
Cut-Off Date:
----------------------------
Aggregate Outstanding Principal Balances
of Subsequent Mortgage Loans:
----------------------------
Purchase Price for Subsequent
Mortgage Loans:
----------------------------
3. Transfer Source of Subsequent Mortgage Loans:
----------------------------
Subsequent Transfer Date:
----------------------------
Cut-Off Date:
----------------------------
Aggregate Outstanding Principal Balances
of Subsequent Mortgage Loans:
----------------------------
Purchase Price for Subsequent
Mortgage Loans:
----------------------------
ATTACHMENT 2
Home Loan Schedule
EXHIBIT C
Form of Addition Notice
Pursuant to Section 2.02 of the Sale and Servicing Agreement dated as of
June 1, 1998 among FIRSTPLUS Home Loan Owner Trust 1998-4, as Issuer (the
"Issuer"), FIRSTPLUS Investment Corporation, as Seller (the "Seller"),
FIRSTPLUS FINANCIAL, INC., as Servicer and Transferor (the "Transferor" and
"Servicer"), and U.S. Bank National Association, as Indenture Trustee and
Co-Owner Trustee (the "Indenture Trustee" and "Co-Owner Trustee"), the
Transferor and the Seller hereby provide notice to the Issuer and the
Indenture Trustee that the Subsequent Home Loans identified on Attachment 1
attached hereto will be sold to the Issuer pursuant to a Subsequent Transfer
Agreement dated as of , 199 (the "Subsequent Transfer
------------- -
Agreement") between the Transferor and Servicer, the Seller, the Issuer and
the Indenture Trustee and Co-Owner Trustee. The aggregate Principal Balance of
such Subsequent Home Loans as of the applicable Cut-Off Date, set forth on
such Attachment 1, with respect to the source of the Seller is set forth on
the Schedules attached hereto as Attachment 2.
FIRSTPLUS INVESTMENT CORPORATION,
as Seller
By:
------------------------------------
Name:
Title:
FIRSTPLUS FINANCIAL, INC.,
as Transferor
By:
------------------------------------
Name:
Title:
EXHIBIT D
Schedule of Specified Home Loans
EXHIBIT E
Form of Lost Note Affidavit