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SALE AND SERVICING AGREEMENT
Dated as of June 1, 1997
between
FIRSTPLUS FUNDING TRUST
(Issuer)
FIRSTPLUS FINANCIAL, INC.
(Seller and Servicer)
and
FIRST BANK NATIONAL ASSOCIATION
(Indenture Trustee)
FIRSTPLUS FUNDING TRUST
Asset-Backed Notes
Series 1997A
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS
Section 1.01 Definitions........................................ 1
Section 1.02 Other Definitional Provisions...................... 31
Section 1.03 Determination of LIBOR............................. 32
Section 1.04 Modifying the Minimum Spread Percent............... 32
ARTICLE II
CONVEYANCE OF THE HOME LOANS
Section 2.01 Conveyance of the Initial Home Loans............... 32
Section 2.02 Conveyance of the Subsequent Home Loans;
Additional Note Principal Balances................ 33
Section 2.03 Ownership and Possession of Home Loan Files........ 36
Section 2.04 Books and Records.................................. 36
Section 2.05 Delivery of Home Loan Documents.................... 36
Section 2.06 Acceptance by Indenture Trustee of the Home
Loans; Certification by Custodian................ 38
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 3.01 [RESERVED]......................................... 40
Section 3.02 Representations, Warranties and Covenants of
the Servicer and Seller.......................... 40
Section 3.03 Individual Home Loans.............................. 42
Section 3.04 Subsequent Home Loans.............................. 48
Section 3.05 Purchase and Substitution.......................... 48
ARTICLE IV
ADMINISTRATION AND SERVICING OF THE HOME LOANS
Section 4.01 Duties of the Servicer............................. 51
Section 4.02 Liquidation of Home Loans.......................... 53
Section 4.03 Fidelity Bond; Errors and Omission Insurance....... 54
Section 4.04 Title, Management and Disposition of Foreclosure
Property......................................... 54
Section 4.05 Access to Certain Documentation and Information
Regarding the Home Loans......................... 55
Section 4.06 Superior Liens..................................... 55
Section 4.07 Subservicing....................................... 56
Section 4.08 Successor Servicers................................ 57
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Section 4.09 Rule 144A Information.............................. 57
ARTICLE V
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01 Collection Account, Note Payment Account and Note
Principal Prepayment Account..................... 58
Section 5.02 Claims Under Guaranty Policy....................... 61
Section 5.03 [RESERVED]......................................... 62
Section 5.04 [RESERVED]......................................... 62
Section 5.05 [RESERVED]......................................... 62
Section 5.06 Capitalized Interest Account....................... 62
Section 5.07 Reserve Fund....................................... 63
Section 5.08 Trust Accounts; Trust Account Property............. 63
Section 5.09 Allocation of Losses............................... 65
Section 5.10 Advance Account.................................... 66
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............................... 70
Section 6.03 Specification of Certain Tax Matters............... 70
ARTICLE VII
GENERAL SERVICING PROCEDURES
Section 7.01 Assumption Agreements.............................. 70
Section 7.02 Satisfaction of Mortgages and Release of Home
Loan Files....................................... 71
Section 7.03 Servicing Compensation............................. 73
Section 7.04 Quarterly Statements as to Compliance.............. 73
Section 7.05 Annual Independent Public Accountants' Servicing
Report........................................... 74
Section 7.06 Right to Examine Servicer Records.................. 74
Section 7.07 Reports to the Indenture Trustee; Collection
Account Statements............................... 74
ARTICLE VIII
REPORTS TO BE PROVIDED BY SERVICER
Section 8.01 Financial Statements............................... 75
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ARTICLE IX
CERTAIN MATTERS RELATING TO THE SERVICER AND THE SELLER
Section 9.01 Indemnification; Third Party Claims................ 75
Section 9.02 Merger or Consolidation of the Servicer............ 76
Section 9.03 Limitation on Liability of the Servicer and
Others........................................... 77
Section 9.04 Servicer Not to Resign; Assignment................. 77
Section 9.05 Relationship of Servicer to Issuer and the Seller.. 78
ARTICLE X
DEFAULT
Section 10.01 Events of Default.................................. 78
Section 10.02 Indenture Trustee to Act; Appointment of
Successor........................................ 80
Section 10.03 Waiver of Defaults................................. 82
Section 10.04 Accounting Upon Termination of Servicer............ 82
ARTICLE XI
TERMINATION AND PREPAYMENT
Section 11.01 Termination........................................ 83
Section 11.02 Optional Prepayment................................ 83
ARTICLE XII
CONVERSION EVENT
Section 12.01 Conversion Event................................... 85
Section 12.02 Rights of Majority Noteholders..................... 86
Section 12.03 Payments Upon Sale of Trust Estate following
Conversion Event................................. 87
Section 12.04 Duration of Article XII............................ 88
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.01 Acts of Noteholders................................ 88
Section 13.02 Amendment.......................................... 88
Section 13.03 Recordation of Agreement........................... 89
Section 13.04 Duration of Agreement.............................. 90
Section 13.05 Governing Law...................................... 90
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Section 13.06 Notices............................................ 90
Section 13.07 Severability of Provisions......................... 91
Section 13.08 No Partnership..................................... 91
Section 13.09 Counterparts....................................... 91
Section 13.10 Successors and Assigns............................. 91
Section 13.11 Headings........................................... 91
Section 13.12 Actions of Noteholders............................. 91
Section 13.13 Reports to Rating Agencies......................... 92
Section 13.14 Grant of Noteholder Rights to Note Insurer......... 93
Section 13.15 Third Party Beneficiary............................ 93
Section 13.16 Suspension and Termination of Note Insurer's
Rights........................................... 93
Section 13.17 Certain Notices.................................... 94
Section 13.18 No Petition........................................ 94
EXHIBITS
EXHIBIT A Home Loan Schedule
EXHIBIT B-1 Form of Addition Notice
EXHIBIT B-2 Form of Subsequent Transfer Agreement
EXHIBIT C Form of Conversion Notice
EXHIBIT D Form of Note Principal Prepayment Notice
EXHIBIT E Form of Issuer Request for Release Pursuant to Section 11.02(b)
EXHIBIT F Form of Servicer's Monthly Remittance Report
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This Sale and Servicing Agreement is entered into effective as of June 1,
1997, between FIRSTPLUS FUNDING TRUST, a Delaware business trust (the
"Issuer"), FIRSTPLUS FINANCIAL, INC., a Texas corporation ("FFI"), as Seller
(in such capacity, the "Seller") and Servicer (in such capacity, the
"Servicer") and First Bank National Association, a national banking
association, as Indenture Trustee on behalf of the Noteholders (in such
capacity, the "Indenture Trustee").
PRELIMINARY STATEMENT
WHEREAS, the Issuer desires to purchase Home Loans which have been or will
be originated or purchased by the Seller;
WHEREAS, the Seller is willing to sell 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.
ABS YIELD SPREAD: As of any date of determination, the greater of (i) the
sum of the Composite Public ABS Yield Spread as of such date plus .10% and
(ii) 1.00%.
ACCOUNTING DATE: With respect to any date during a given Regular Interest
Accrual Period on which the Principal Balance of a Home Loan is calculated (for
purposes of this definition, the "Calculation Date"), the last day of the
calendar month immediately preceding the month in which such Regular Interest
Accrual Period began; provided, however, that if the applicable Calculation
Date is on or after the Determination Date in a given month and prior to the
Payment Date in such month, the Accounting Date with respect to such
Calculation Date shall be the last day of the immediately preceding calendar
month; and provided further, however, that if the applicable Home Loan was not
included in the Home Loan Pool as of the Accounting Date described above, the
Accounting Date with respect to the Calculation Date for such Home Loan shall
be the Cut-Off Date with respect to such Home Loan.
SALE AND SERVICING AGREEMENT (IBJ WAREHOUSE) - Page 1
ADDITION NOTICE: With respect to a sale of Subsequent Home Loans to the
Issuer and the related advance of an Additional Note Principal Balance pursuant
to Section 2.02 of this Agreement, a notice from the Seller and the Issuer
substantially in the form of EXHIBIT B-1 hereto.
ADDITIONAL NOTE PRINCIPAL BALANCE: As defined in Section 2.02(a).
ADDITIONAL NOTE PRINCIPAL BALANCE DAILY INTEREST ACCRUAL AMOUNT: With
respect to an Additional Note Principal Balance and a given day in the related
Additional Note Principal Balance Interest Accrual Period, an amount equal to
the product of (i) 1/360, (ii) LIBOR with respect to such Additional Note
Principal Balance Interest Accrual Period plus the Margin and (iii) the unpaid
amount of such Additional Note Principal Balance as of the end of such day.
ADDITIONAL NOTE PRINCIPAL BALANCE INTEREST ACCRUAL PERIOD: With respect
to a Payment Date and any Additional Note Principal Balance for which the
related Advance Date occurred on or after the second preceding Determination
Date and prior to the related Determination Date, the period from such Advance
Date to the day immediately preceding such Payment Date.
ADJUSTED AGGREGATE NOTE PRINCIPAL BALANCE: As of any date of
determination, the Aggregate Note Principal Balance as of such date, reduced,
if such date occurs during the period commencing on the Determination Date in a
given month and ending on the day prior to the Payment Date in such month, by
the Principal Payment Amount to be made on such Payment Date, as reported in
the Servicer's Monthly Remittance Report with respect to such Payment Date.
ADVANCE ACCOUNT: The account established and maintained pursuant to
Section 5.10.
ADVANCE DATE: With respect to an Additional Note Principal Balance, the
date on which the Noteholders advance such Additional Note Principal Balance
pursuant to the Note Purchase Agreement, as described in Section 2.02(a).
ADVANCE PERIOD: The period commencing on the Closing Date and ending on
the Advance Termination Date.
ADVANCE TERMINATION DATE: The earliest to occur of (a) the date on which
a Conversion Event occurs, (b) the Scheduled Advance Termination Date or (c)
the date on which an "event of default" (as defined in the Revolving Credit
Agreement) occurs.
AFFILIATE: With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect
to any Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
AGGREGATE MAXIMUM NOTE PRINCIPAL BALANCE: $500,000,000.
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AGGREGATE NOTE PRINCIPAL BALANCE: As of any date of determination, the
aggregate of the Note Principal Balances as of such date.
AGREEMENT: This Sale and Servicing Agreement and all amendments hereof
and supplements hereto.
ARRANGER: The Industrial Bank of Japan, Limited, New York Branch.
ASSIGNMENT EVENT: With respect to each Home Loan, the fifth Business Day
following the earliest to occur of (i) the Conversion Date; (ii) the Servicer
fails to satisfy the Net Worth Requirement; or (iii) the Note Insurer
delivering a written request to the Seller to record the Assignments of
Mortgage with respect to each Home Loan, with such request specifying that the
Note Insurer is making such request because the Note Insurer has determined, in
its reasonable judgment, that such recordation is necessary to protect the Note
Insurer's interest with respect to the Home Loans because (x) a Material
Adverse Change has occurred with respect to the Seller, (y) the Note Insurer
has been so advised by its counsel as a result of a change that occurred after
the Closing Date in applicable law or the interpretation thereof or (z) the
aggregate of the Principal Balances of all delinquent Home Loans for which all
or any portion of a Monthly Payment is 30 or more days past due exceeds 5% of
the Pool Principal Balance as of the Determination Date, and in any such case
specifying the basis for such determination in reasonable detail. With respect
to a particular Home Loan, the insolvency of the related Obligor.
ASSIGNMENT OF MORTGAGE: With respect to each Home Loan, an assignment,
notice of transfer or equivalent instrument, which, if recorded in the name of
the Indenture Trustee, would be sufficient under the laws of the jurisdiction
wherein the related Mortgaged Property is located to reflect of record the
transfer of the Mortgage with respect to such Home Loan to the Indenture
Trustee for the benefit of the Noteholders and the Note Insurer.
AVAILABLE COLLECTION AMOUNT: With respect to a Payment Date, an amount
equal to all funds on deposit in the Collection Account on the third Business
Day prior to such Payment Date that represent amounts received on the Home
Loans or required to be paid by the Servicer or the Seller during the related
Due Period (exclusive of (i) any interest payments and proceeds therefrom
representing interest received on or after the May 1, 1997 Cut-Off Date and
prior to June 1, 1997 and (ii) any amount to be withdrawn by the Indenture
Trustee from the Collection Account on such date pursuant to Section 5.01(d) of
this Agreement) as reduced by any portion thereof that may not be withdrawn
therefrom pursuant to an order of a United States bankruptcy court of competent
jurisdiction imposing a stay pursuant to ▇▇▇▇▇▇▇ ▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
Bankruptcy Code.
AVAILABLE PAYMENT AMOUNT: With respect to a Payment Date, the amount
deposited in the Note Payment Account with respect to such Payment Date
pursuant to Section 5.01(b)(2).
AVERAGE AGGREGATE NOTE PRINCIPAL BALANCE: With respect to any Regular
Interest Accrual Period, an amount, determined as of the Determination Date in
such Regular Interest Accrual Period, equal to the quotient of (a) the sum of
the Aggregate Note Principal Balances for each day during
SALE AND SERVICING AGREEMENT (IBJ WAREHOUSE) - Page 3
such Regular Interest Accrual Period divided by (b) the number of days in
such Regular Interest Accrual Period.
BASE TREASURY YIELD: As of any date of determination, the greatest of the
yields for the preceding day on U.S. treasury securities with a maturity of
five years. The five-year yield will be equal to the historical closing yield
set forth on Bloomberg Screen "GT5 Govt. HP", under "Generic Government Rate"
as evidenced by a copy of such Bloomberg Screen.
BASIC DOCUMENTS: The Declaration of Trust of the Issuer, the Indenture,
this Agreement, the Insurance Agreement, the Custodial Agreement, the Note
Purchase Agreement, and the Notes.
BLOOMBERG SCREEN: The designated display screen on the Bloomberg Service
(or such other screen or page as may replace that screen on that service for
the purpose of displaying comparable rates); provided, that if such source is
no longer available the Servicer shall obtain a successor source acceptable to
the Majority Noteholders.
BREAKAGE PAYMENT: With respect to a Note Principal Prepayment, an amount
determined by the Servicer equal to the aggregate of the Breakage Payment
Calculation Amounts with respect to each Noteholder and such Note Principal
Prepayment; provided, however, that the Breakage Payment with respect to a Note
Principal Prepayment that is made on a Payment Date shall be zero; and provided
further, however, if the Issuer provides the Indenture Trustee and the
Noteholders with a Note Principal Prepayment Notice with respect to such Note
Principal Prepayment on or before the fourth Business Day prior to the Payment
Date immediately preceding the date that the Principal Prepayment is made, and
such Note Principal Prepayment is made on the Note Principal Prepayment Date
and in the amount specified in such Note Principal Prepayment Notice, the
Breakage Payment with respect to the such Note Principal Prepayment shall be
zero; provided, however, that if such Note Principal Prepayment (or any portion
thereof) is not made on such Note Principal Prepayment Date, the Issuer shall
pay to the Noteholders the amount specified in Section 11.02(c).
BREAKAGE PAYMENT CALCULATION AMOUNT: With respect to a Noteholder and a
Note Principal Prepayment, the sum of (i) with respect to each portion of such
Note Principal Prepayment to be paid to such Noteholder that represents a
prepayment of an Additional Note Principal Balance on which interest is being
accrued as of the related Note Principal Prepayment Date as provided in the
definition of "Interest Payment Amount" (each, an "applicable Additional Note
Principal Balance portion"), an amount equal to (a) the product of (1) the
excess, if any, of LIBOR with respect to the applicable Additional Principal
Balance Interest Accrual Period over the Reinvestment Rate with respect to such
Note Principal Prepayment, (2) the amount of such applicable Additional Note
Principal Balance portion and (3) the number of days from and including the
related Note Principal Prepayment Date through the end of such Additional Note
Principal Balance Interest Accrual Period divided by (b) 360, plus (ii) with
respect to the portion of such Note Principal Prepayment to be paid to such
Noteholder that represents a prepayment of a Prior Payment Date Note Principal
Balance (an "applicable Prior Payment Date Note Principal Balance portion"), an
amount equal to (a) the product of (1) the excess, if any, of LIBOR with
respect to the related Regular Interest Accrual Period over the Reinvestment
Rate with respect to such Note Principal Prepayment, (2) the amount of such
SALE AND SERVICING AGREEMENT (IBJ WAREHOUSE) - Page 4
applicable Prior Payment Date Note Principal Balance portion and (3) the number
of days from and including the related Note Principal Prepayment Date through
the end of such Regular Interest Accrual Period divided by (b) 360.
BUSINESS DAY: Any day other than (i) a Saturday or Sunday or (ii) a day
on which the Note Insurer and banking institutions in New York City or in the
city in which the corporate trust office of the Indenture Trustee is located
are authorized or obligated by law or executive order to be closed.
CAPITALIZED INTEREST ACCOUNT: An account established and maintained
pursuant to Section 5.06.
CAPITALIZED INTEREST ACCOUNT DEPOSIT: Initially, zero, and with respect
to an Additional Note Principal Balance, the product of (a) a fraction the
numerator of which is the number of days from and including the related Advance
Date to but excluding the first Payment Date following such Advance Date and
the denominator of which is 360, (b) the related Additional Note Principal
Balance and (c) LIBOR with respect to the related Additional Note Principal
Balance Interest Accrual Period plus the Margin.
CLOSING DATE: June 16, 1997.
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 Obligor
in combination to finance property improvements and for debt consolidation or
other purposes, and which are marketed by the Seller as "BusterPlus-TM- Loans."
COMPOSITE PUBLIC ABS YIELD SPREAD: The average of the indicative spreads
on a generic single tranche high ltv/debt consolidation loan asset-backed
security that is rated in the highest rating category by a nationally
recognized rating agency with a five year average life and a 25 year maturity,
as computed by the Servicer based on indicative spreads supplied to the
Servicer on each Determination Date, unless requested more frequently by the
Arranger (or, if the ABS Yield Spread exceeds 1.50% on any Determination Date,
on each Business Day thereafter until otherwise consented to by the Arranger)
by at least three Acceptable Dealers. For purposes of this definition, an
"Acceptable Dealer" shall be each of Banc One Capital Corporation, ▇▇▇▇▇▇▇
▇▇▇▇▇ & Co., PaineWebber Incorporated, Bear, ▇▇▇▇▇▇▇ & Co. Inc., Prudential
Securities, ▇.▇. ▇▇▇▇▇▇, CS First Boston, Greenwich Capital Markets and any
other broker dealer approved in writing by the Arranger.
CONVERSION DATE: The Business Day immediately following the day the
Majority Noteholders deliver a Conversion Notice pursuant to Section 12.01,
provided such Conversion Notice is delivered on or after the fifteenth Business
Day following a Conversion Event. If such
SALE AND SERVICING AGREEMENT (IBJ WAREHOUSE) - Page 5
Conversion Notice is delivered prior to the fifteenth Business Day following
a Conversion Event, the Conversion Date shall be the sixteenth Business Day
following such Conversion Event. If no Conversion Notice is delivered by the
Majority Noteholders, the Conversion Date shall be the day that is 180 days
following the Conversion Event or if such day is not a Business Day, the next
succeeding Business Day.
CONVERSION EVENT: The occurrence of any of the following events:
(a) the ABS Yield Spread exceeds 1.50% for five consecutive Business
Days.
(b) on any four consecutive Business Days, the Maximum Note Interest
Rate minus the sum of (i) the Base Treasury Yield and (ii) the ABS Yield
Spread is less than .90%;
(c) on any three consecutive Business Days, the amount by which (i)
the Maximum Note Interest Rate as of the applicable Business Day exceeds
(ii) LIBOR as of such Business Day plus the Margin, is less than .75%;
(d) the failure of the Issuer to pay to the Noteholders, within
three Business Days following any given Payment Date, the Facility Fee with
respect to such Payment Date;
(e) on any Business Day, the fair market price of the Home Loans
(disregarding accrued interest and determined by the Servicer in its
reasonable discretion) is less than 104% of the Pool Principal Balance as
of such Business Day;
(f) on the first Payment Date following the Scheduled Advance
Termination Date, after giving effect to all payments to be made on such
date, the Aggregate Note Principal Balance and all accrued and unpaid
interest thereon has not been paid in full;
(g) on the Business Day that is three Business Days after the
rating on the Notes is decreased below "AAA" by S&P or "Aaa" by ▇▇▇▇▇'▇;
(h) if, at the end of a given Due Period, either (w) the average
age of the Home Loan Pool (weighted by Principal Balance) is greater than
twelve months, (x) any Home Loan was originated more than sixteen months
prior to the end of such Due Period, (y) more than 50% of the Home Loans
(weighted by Principal Balance) have an age of more than 12 months and less
than or equal to 16 months, or (z) more than 1.00% of the Home Loans
(weighted by Principal Balance) have an age of more than 16 months;
(i) the Seller fails to pay when due any amount payable hereunder or
fails to make a deposit as required hereunder and such failure continues
for two Business Days;
(j) failure by the Seller duly to observe or perform, in any
material respect, any covenant, obligation or agreement of the Seller as
set forth in this Agreement (other than a
SALE AND SERVICING AGREEMENT (IBJ WAREHOUSE) - Page 6
covenant, obligation or agreement, a default in the observance or
performance of which is elsewhere in this Section specifically dealt
with), which failure continues unremedied for a period of 60 days after
the earlier of (A) any officer of the Seller first acquiring knowledge
thereof and (B) the Indenture Trustee giving written notice thereof to
the Seller;
(k) any representation or warranty of the Seller or the Servicer
made in this Agreement or in any certificate or other writing delivered
pursuant hereto or in connection herewith or any representation or warranty
of the Issuer made in the Note Purchase Agreement proving to be incorrect
in any material respect as of the time when the same shall have been made
and such default shall continue or not be cured, or the circumstance or
condition in respect of which such representation or warranty was incorrect
shall not have been eliminated or otherwise cured for a period of 60 days
after the earlier of (A) any officer of the Seller or Servicer first
acquiring knowledge thereof and (B) the Indenture Trustee giving written
notice thereof to the Seller or Servicer, as applicable; PROVIDED, HOWEVER,
that the breach of any representation or warranty made by the Seller in
Section 3.03 hereof with respect to any of the Home Loans shall not
constitute a Conversion Event if the Seller repurchases such Home Loans or
substitutes one or more Home Loans subject thereto for such Home Loans in
accordance with Section 3.05;
(l) the entry by a court or supervisory authority having
jurisdiction of (A) a decree or order for relief in respect of the Seller
in an involuntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization, or other similar law or (B) a
decree or order adjudging the Seller as bankrupt or insolvent or approving
as properly filed a petition seeking reorganization, arrangement,
adjustment, or composition of or in respect of the Seller under any
applicable federal or state law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator, or other similar official of
the Seller or of any substantial part of its property, or ordering the
winding up or liquidation of its 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
(m) the commencement by the Seller 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 a bankrupt or insolvent or the consent by the Seller 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
Seller, or the filing by the Seller of a petition or answer or consent
seeking reorganization or relief under any applicable federal or state law,
or the consent by the Seller 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 Seller or of
any substantial part of its property, or the making by the Seller of an
assignment for the benefit of creditors, or the Seller's failure to pay its
debts generally as they become due, or the taking of corporate action by
the Seller in furtherance of any such action; or
SALE AND SERVICING AGREEMENT (IBJ WAREHOUSE) - Page 7
(n) the occurrence and continuance of an Undeclared Event of
Default; or
(o) the occurrence and continuance of an Indenture Event of
Default or an event that, disregarding the grant of the Noteholders'
rights to the Note Insurer pursuant to Section 11.17 of the Indenture,
would be deemed an Indenture Event of Default by the Noteholders.
CONVERSION NOTICE: A written notice in the form of EXHIBIT C hereto
delivered by the Majority Noteholders to the Indenture Trustee, the Servicer,
the Issuer and the Note Insurer whereby the Majority Noteholders set a
Conversion Date.
CREDIT SCORE: A numerical assessment of a default risk with respect to an
Obligor, based on a credit evaluation scoring methodology developed by Fair,
▇▇▇▇▇ and Company.
CREDIT SUPPORT FUNDING EVENT: A Conversion Event or, unless waived in
writing by the Note Insurer and each Rating Agency, the occurrence and
continuation of any of the following events:
(a) the Required Overcollateralization Amount is ever greater than
the Overcollateralization Amount;
(b) on any Business Day, the Servicer fails to satisfy the Net Worth
Requirement; or
(c) if, at the end of a given Due Period (i) a Home Loan is a
delinquent Home Loan with respect to which all or any portion of a Monthly
Payment is 60 or more days past due or (ii) the aggregate of the Principal
Balances of all delinquent Home Loans not referred to in clause (i) for
which all or any portion of a Monthly Payment is 30 or more days past due
exceeds 2% of the Pool Principal Balance as of the Determination Date
following the end of such Due Period, the Issuer fails, on or before such
Determination Date, to obtain a release of the lien of the Indenture or
substitute for, in accordance with Section 2.9(c) of the Indenture (A) the
Home Loans referred to in clause (i), if such Home Loan continues to have
a portion of a Monthly Payment 60 or more days past due on such
Determination Date and (B) Home Loans as referred to in clause (ii), such
that the aggregate of the Principal Balances of all delinquent Home Loans
as referred to in such clause (ii) as of such Determination Date is less
than or equal to 2% of the Pool Principal Balance as of such Determination
Date.
CREDIT SUPPORT REDUCTION DATE: The Payment Date occurring on the later of
(i) the 36th Payment Date following the most recent date on which a Credit
Support Funding Event occurred or (ii) the Payment Date on which the Pool
Principal Balance is equal to or less than 50% of the Pool Principal Balance as
of the most recent date on which a Credit Support Funding Event occurred.
CUMULATIVE DEFAULT PERCENTAGE: With respect to any date of determination,
the ratio of (a) the sum of the Net Defaulted Loan Losses with respect to each
Payment Date on or after the date of
SALE AND SERVICING AGREEMENT (IBJ WAREHOUSE) - Page 8
the most recent occurrence of a Credit Support Funding Event to (b) the Pool
Principal Balance as of the date of the most recent occurrence of a Credit
Support Funding Event.
CUSTODIAL AGREEMENT: The custodial agreement dated June 16, 1997 by and
among FFI, as the Seller and the Servicer, the Issuer, the Indenture Trustee,
and Bank One, Texas, National Association, as the Custodian, and any subsequent
custodial agreement, in similar form and substance, providing for the retention
of the Home Loan Files by the Custodian on behalf of the Indenture Trustee.
CUSTODIAN: Any custodian acceptable to the Note Insurer and appointed by
the Indenture Trustee pursuant to the Custodial Agreement, which shall not be
affiliated with the Servicer, 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 1, 1997, and with respect to each Subsequent Home Loan, the
close of business on the date specified as such in the applicable Subsequent
Transfer Agreement.
DEBT CONSOLIDATION LOAN: A loan, the proceeds of which were primarily
used by the related Obligor for debt consolidation purposes or purposes other
than to finance property improvements and which are marketed by the Seller as
"DebtBuster Loans".
DEBT INSTRUMENT: With respect to a Home Loan, the note or other evidence
of indebtedness evidencing the indebtedness of an Obligor under a Home Loan.
DEBT RATIO: With respect to a Home Loan, the total outstanding
indebtedness of the related Obligor divided by the total income of such
Obligor, as calculated pursuant to the underwriting guidelines of the Seller in
effect at the time of the origination of such Home Loan.
DEFAULT RATE: With respect to a Payment Date, the ratio of (a) 12 times
the Net Defaulted Loan Losses with respect to such Payment Date to (b) the Pool
Principal Balance as of the beginning of the related Due Period.
DEFAULTED HOME LOAN: With respect to the calculation of the Required
Credit Support Multiple or the waiver or modification of a Home Loan pursuant
to Section 4.01(c), during a Due Period, any Home Loan, including without
limitation any Liquidated Home Loan, with respect to which any of the following
occurs: (a) foreclosure or similar proceeding has been commenced; (b) any
portion of a Monthly Payment has become 180 days past due by the related
Obligor; or (c) the Servicer or any Subservicer has determined in good faith
and in accordance with customary servicing practices that such Home Loan is
uncollectible; provided, further, that (i) any Defaulted Home Loan that is
released from the lien of the Indenture or substituted for pursuant to
Section 2.9(c) of the Indenture at any time after the date of the occurrence of
the most recent Credit Support Funding Event, if any, and during the
continuance thereof, and any Defaulted Home Loan that is modified, waived or
varied pursuant to Section 4.01(c), shall continue to be included in the
calculation of the
SALE AND SERVICING AGREEMENT (IBJ WAREHOUSE) - Page 9
Required Credit Support Multiple and (ii) any Defaulted Home Loan that is (A)
repurchased or substituted for at any time pursuant to Section 3.05(a) or (B)
released from the lien of the Indenture or substituted for prior to the date
of the occurrence of a Credit Support Funding Event, if any, pursuant to
Section 2.9(c) of the Indenture, shall not continue to be included in the
calculation of the Required Credit Support Multiple.
DEFECTIVE HOME LOAN: As defined in Section 3.05(a) hereof.
DEFICIENCY AMOUNT: As of any Payment Date, the amount by which (i) the
sum of the Interest Payment Amount with respect to such Payment Date and the
Principal Payment Amount with respect to such Payment Date exceeds (ii) (a) the
amount deposited in the Note Payment Account pursuant to Section 5.01(b)(2)
minus (b) the amount referred to in clause (i) of Section 5.01(c) with respect
to such Payment 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 or
Section 2.9(c) of the Indenture.
DELINQUENCY RATE (30 DAY): With respect to a Payment Date, the ratio of
(a) the aggregate of the Principal Balances for all Home Loans as of the
related Determination Date which were 30 or more days delinquent as of the last
day of the preceding Due Period to (b) the Pool Principal Balance as of the
related Determination Date.
DELINQUENCY RATE (60 DAY): With respect to a Payment Date, the ratio of
(a) the aggregate of the Principal Balances of all Home Loans as of the related
Determination Date which were 60 or more days delinquent as of the last day of
the preceding Due Period, to (b) the Pool Principal Balance as of the related
Determination Date.
DELIVERY: When used with respect to Trust Account Property means:
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that constitute
"instruments" within the meaning of Section 9-105(1)(i) of the UCC and are
susceptible of physical delivery, transfer thereof by physical delivery to
the Indenture Trustee endorsed to, or registered in the name of, the
Indenture Trustee or its nominee or endorsed in blank, and, with respect
to a certificated security (as defined in Section 8-102 of the UCC)
transfer thereof (i) by delivery of such certificated security to the
Indenture Trustee in accordance with the provisions of Section 8-301(a) of
the UCC, and such additional or alternative procedures as may hereafter
become appropriate to effect the complete transfer of ownership of or a
security interest in any such Trust Account Property to the Indenture
Trustee, consistent with changes in applicable law or regulations or the
interpretation thereof;
(b) with respect to any security issued by the U.S. Treasury, the
Federal Home Loan Mortgage Corporation or by the Federal National Mortgage
Association that is a book-entry security held through the Federal Reserve
System pursuant to federal book-entry
SALE AND SERVICING AGREEMENT (IBJ WAREHOUSE) - Page 10
regulations, the following procedures, all in accordance with applicable
law, including applicable federal regulations and Articles 8 and 9 of the
UCC: the crediting of such Trust Account Property to a securities account
maintained with a Federal Reserve Bank by a securities intermediary; the
indication by such securities intermediary that such Trust Account Property
has been credited to the Indenture Trustee's securities account at the
securities intermediary; and such additional or alternative procedures as
may hereafter become appropriate to effect complete transfer of ownership
of or a security interest in any such Trust Account Property to the
Indenture Trustee, consistent with changes in applicable law or regulations
or the interpretation thereof; and
(c) with respect to any Trust Account Property that is an
uncertificated security under Article 8 of the UCC and that is not
governed by clause (b) above, registration on the books and records of the
issuer thereof in the name of the Indenture Trustee or another Person
(other than "securities intermediary" (as defined in Section 8-102 of the
UCC)) acting on behalf of the Indenture Trustee.
DETERMINATION DATE: With respect to a Payment Date in a given month, the
day of such month which is four (4) Business Days prior to such Payment Date.
DUE DATE: The day of the month on which the Monthly Payment is due from
the Obligor on a Home Loan.
DUE PERIOD: With respect to the initial Payment Date, the two calendar
months immediately preceding the month in which such initial Payment Date
occurs, and with respect to each other Payment Date, the one calendar month
immediately preceding the month in which such Payment Date occurs.
ELIGIBLE ACCOUNT: At any time, an account which is any of the following:
(i) an account maintained with a depository institution (A) the long-term debt
obligations of which are at such time rated by each Rating Agency in one of
their two highest long-term rating categories, or (B) the short-term debt
obligations of which are then rated by each Rating Agency in their highest
short-term rating category; (ii) an account or accounts the deposits in which
are fully insured by either the Bank Insurance Fund or the Savings Association
Insurance Fund of the FDIC; (iii) a trust account (which shall be a "segregated
trust account") maintained with the corporate trust department of a federal or
state chartered depository institution or trust company with trust powers and
acting in its fiduciary capacity for the benefit of the Indenture Trustee and
the Issuer, which depository institution or trust company shall have capital
and surplus of not less than $50,000,000; or (iv) an account that will not
cause any Rating Agency to downgrade or withdraw its then-current rating(s)
assigned to the Notes, as evidenced in writing by such Rating Agency. (Each
reference in this definition of "Eligible Account" to the Rating Agency shall
be construed as a reference to Standard & Poor's and Moody's.)
SALE AND SERVICING AGREEMENT (IBJ WAREHOUSE) - Page 11
ELIGIBLE SERVICER: A Person who is qualified to act as Servicer of the
Home Loans under applicable federal and state laws and regulations and who
satisfies the criteria of Section 9.04(b) hereof.
EVENT OF DEFAULT: As described in Section 10.01 hereof.
FACILITY FEE: As defined in the Letter Agreement.
FDIC: The Federal Deposit Insurance Corporation and any successor
thereto.
FFI: FIRSTPLUS FINANCIAL, INC., a Texas corporation, and its successors
and permitted assigns.
FHLMC: The Federal Home Loan Mortgage Corporation and any successor
thereto.
FINAL SCHEDULED PAYMENT DATE: The Payment Date occurring in December
2024.
FNMA: The Federal National Mortgage Association and any successor
thereto.
FORECLOSURE PROPERTY: Any real property or personal property securing a
Home Loan that has been acquired by the Servicer through foreclosure, deed in
lieu of foreclosure or similar proceedings in respect of the related Home Loan.
GUARANTEED PAYMENT: With respect to the Guaranty Policy, the sum of (i)
as of any Payment Date, any Deficiency Amount and (ii) any unpaid Preference
Amount. In no event shall the Guaranteed Payment include (i) any Breakage
Payment or (ii) any shortfall or loss resulting to the Noteholders in
connection with a sale of the Trust Estate in accordance with Section 12.03 of
the Sale and Servicing Agreement.
GUARANTY INSURANCE PREMIUM: With respect to a Payment Date, the premium,
payable monthly, that is specified in the Commitment Letter issued by the Note
Insurer with respect to the Notes.
GUARANTY INSURANCE PREMIUM PERCENTAGE: As specified in the Insurance
Agreement.
GUARANTY POLICY. That certain financial guaranty insurance policy for the
Notes, number 24039 dated June 16, 1997, and issued by the Note Insurer to the
Indenture Trustee and guaranteeing payment of Guaranteed Payments.
HOLDER: A holder of a Note; provided that the exercise of any rights by
such holder shall be subject to Section 13.14 hereof and Section 11.17 of the
Indenture.
SALE AND SERVICING AGREEMENT (IBJ WAREHOUSE) - Page 12
HOME LOAN: A Debt Consolidation Loan or Combination Loan that is included
in the Home Loan Pool. As applicable, a Home Loan shall be deemed to refer to
the related Debt Instrument, Mortgage, and any related Foreclosure Property.
HOME LOAN FILE: As defined in Section 2.05.
HOME LOAN INTEREST RATE: With respect to a Home Loan, the fixed annual
rate of interest borne by a Debt Instrument, as shown on the related Home Loan
Schedule as the same may be modified by the Servicer in accordance with Section
4.01(c) hereof.
HOME LOAN POOL: 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, together with any schedule of Subsequent Home Loans attached to a
Subsequent Transfer Agreement, each as amended from time to time pursuant to
the terms of this Agreement, such schedules identifying each Home Loan by
address of the related Mortgaged Property, if any, and the name(s) of each
Obligor and setting forth as to each Home Loan the following information: (i)
the Principal Balance as of the applicable Cut-Off Date, (ii) the account
number, (iii) the original principal amount, (iv) the Due Date, (v) the Home
Loan Interest Rate, (vi) the first date on which a Monthly Payment is due under
the related Debt Instrument, (vii) the Monthly Payment, (viii) the maturity
date of the related Debt Instrument, and (ix) the remaining number of months to
maturity as of the applicable Cut-Off Date.
INDENTURE: The Indenture, dated as of June 1, 1997, between the Issuer
and the Indenture Trustee.
INDENTURE EVENT OF DEFAULT: The events of default described in Section
5.1 of the Indenture.
INDENTURE TRUSTEE: First Bank National Association, a national banking
association, as Indenture Trustee under the Indenture and this Agreement acting
on behalf of the Noteholders, or any successor indenture trustee under the
Indenture or this Agreement.
INDENTURE TRUSTEE FEE: The monthly fee payable to the Indenture Trustee
on each Payment Date in the amount of $833.33.
INDENTURE TRUSTEE'S CERTIFICATE: A certificate prepared by the Indenture
Trustee and delivered to the Noteholders, the Note Insurer, the Arranger, the
Issuer and the Servicer no later than three (3) Business Days before each
Payment Date, which certificate sets forth the Note Principal Balance with
respect to each Note and the Aggregate Note Principal Balance, each as of the
Determination Date immediately preceding such Payment Date.
INDENTURE TRUSTEE'S HOME LOAN FILE: As defined in Section 2.05(d).
SALE AND SERVICING AGREEMENT (IBJ WAREHOUSE) - Page 13
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 principal payments thereon and proceeds
therefrom representing principal received on or after the May 1, 1997 Cut-Off
Date and interest payments thereon and proceeds therefrom representing interest
received on or after June 1, 1997. The Initial Home Loans subject to this
Agreement being identified on the Home Loan Schedule annexed hereto as EXHIBIT
A.
INSURANCE AGREEMENT: The Insurance and Indemnification Agreement, dated
as of June 1, 1997, among the Note Insurer, the Servicer, the Seller, the
Issuer, FIRSTPLUS FINANCIAL GROUP, INC., as Guarantor, and the Indenture
Trustee.
INSURANCE PROCEEDS: With respect to any Home Loan, the proceeds paid to
the Servicer by any insurer pursuant to any insurance policy covering a Home
Loan, Mortgaged Property or Foreclosure Property or any other insurance policy
that relates to a Home Loan, net of any expenses which are incurred by the
Servicer in connection with the collection of such proceeds and not otherwise
reimbursed to the Servicer, other than Guaranteed Payments and proceeds of any
insurance policy that are to be applied to the restoration or repair of the
Mortgaged Property or released to the Obligor in accordance with customary
mortgage loan servicing procedures applicable to the respective loan type,
including Debt Consolidation Loans and Combination Loans.
INTEREST CARRYOVER SHORTFALL: With respect to the initial Payment Date,
zero; with respect to each subsequent Payment Date, the excess, if any, of (i)
the Monthly Interest Payment Amount with respect to the preceding Payment Date
plus any Interest Carryover Shortfall not previously paid with respect to such
Payment Date over (ii) the amount in respect of interest on the Notes that was
actually paid on the Notes on such preceding Payment Date.
INTEREST PAYMENT AMOUNT: With respect to each Payment Date, the sum of
the Monthly Interest Payment Amount for such Payment Date and the Interest
Carryover Shortfall, if any, for such Payment Date.
ISSUER: FIRSTPLUS FUNDING TRUST, a Delaware business trust, and its
successors and permitted assigns.
ISSUER SPECIAL PURPOSE ACCOUNT: That certain Eligible Account established
by the Issuer and maintained with the Indenture Trustee entitled "Issuer
Special Purpose Account, FIRSTPLUS FUNDING TRUST Asset-Backed Notes, Series
1997A."
LETTER AGREEMENT: That certain Letter Agreement dated as of June 16, 1997
by and between the Arranger, FFI, the Issuer and the Indenture Trustee.
LIBOR: With respect to (i) an Additional Note Principal Balance Interest
Accrual Period or a Regular Interest Accrual Period, as applicable, the
applicable London interbank offered rate for one-month United States dollar
deposits determined on the related LIBOR Determination Date for such Additional
Note Principal Balance Interest Accrual Period or Regular Interest Accrual
Period,
SALE AND SERVICING AGREEMENT (IBJ WAREHOUSE) - Page 14
as applicable, in accordance with the provisions of Section 1.03, provided,
however, that LIBOR with respect to the Regular Interest Accrual Period with
respect to the first Payment Date shall be 5.6875%, and (ii) with respect to
each Business Day, such rate determined on such Business Day in accordance
with the provisions of Section 1.03.
LIBOR DETERMINATION DATE: With respect to (i) an Additional Note
Principal Balance Interest Accrual Period or Regular Interest Accrual Period,
as applicable, the second London Business Day prior to the commencement of such
Additional Note Principal Balance Interest Accrual Period or Regular Interest
Accrual Period, as applicable, or (ii) any other Business Day, such Business
Day or the previous Business Day if such Business Day is not a London Business
Day.
LIQUIDATED HOME LOAN: Any defaulted Home Loan or Foreclosure Property in
respect of a Home Loan on which a Monthly Payment is in excess of 30 days past
due and as to which the Servicer has determined that all amounts which it
reasonably and in good faith expects to collect have been recovered from or on
account of such defaulted Home Loan or the related Foreclosure Property;
provided that, in any event, such defaulted Home Loan or the related
Foreclosure Property shall be deemed uncollectible and therefore deemed a
Liquidated Home Loan upon the earlier of: (a) the liquidation of the related
Foreclosure Property, (b) the determination by the Servicer in accordance with
customary servicing practices that no further amounts are collectible from such
defaulted Home Loan or the related Foreclosure Property, or (c) the date on
which any portion of a Monthly Payment on any Home Loan is in excess of 300
days past due.
LIQUIDATION PROCEEDS: With respect to a Liquidated Home Loan, any cash
amounts received in connection with the liquidation of such Liquidated Home
Loan, whether through trustee's sale, foreclosure sale or other disposition,
and any other amounts required to be deposited in the Collection Account
pursuant to Section 4.02 or 4.04, in each case other than 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, each loan sale agreement entered into by
the Seller, as purchaser, pursuant to which the Seller has acquired any of the
Home Loans and which shall include all of the rights and benefits of the Seller
thereunder with respect to such Home Loans, subject to any limitations
thereunder regarding assignment by the Seller.
LONDON BUSINESS DAY: Any Business Day on which dealings in deposits in
United States dollars are transacted in the London interbank market.
MAJORITY NOTEHOLDERS: Subject to Section 13.14 hereof and Section 11.17
of the Indenture, at any given time, the Holder or Holders of Outstanding Notes
representing more than 50% of the Outstanding Amount.
MARGIN: As defined in the Letter Agreement.
SALE AND SERVICING AGREEMENT (IBJ WAREHOUSE) - Page 15
MATERIAL ADVERSE CHANGE: In respect of any Person, a material adverse
change in (i) the business, financial condition, results of operations or
properties of such Person or (ii) the ability of such Person to perform its
obligations under any of the Basic Documents.
MAXIMUM NOTE PRINCIPAL BALANCE: With respect to each Note, that portion
of the Aggregate Maximum Note Principal Balance represented by such Note, which
may be determined by multiplying the Percentage Interest of such Note by the
Aggregate Maximum Note Principal Balance.
MAXIMUM NOTE INTEREST RATE: As of any date of determination, the average
of the Home Loan Interest Rates (weighted by Principal Balance) of each Home
Loan in the Home Loan Pool minus the sum of (i) the then-applicable Minimum
Spread Percent, (ii) the Guaranty Insurance Premium Percentage, and (iii) the
Servicing Fee Percentage.
MINIMUM SPREAD PERCENT: The percent specified by the Issuer pursuant to
Section 1.04.
MONTHLY INTEREST PAYMENT AMOUNT: With respect to each Payment Date on or
prior to a date on which a Conversion Event occurs, the lesser of (I) the sum
of (A) the product of (i) a fraction, the numerator of which is the number of
days in the related Regular Interest Accrual Period and the denominator of
which is 360, (ii) the Maximum Note Interest Rate as of the related
Determination Date and (iii) the Average Aggregate Note Principal Balance for
such Regular Interest Accrual Period plus (B) for each Additional Note
Principal Balance for which the related Advance Date occurred on or after the
second preceding Determination Date and prior to the Payment Date immediately
following such second preceding Determination Date (the "prior Payment Date"),
interest accrued on such Additional Principal Balance at the Maximum Note
Interest Rate for the period from such Advance Date to the day immediately
preceding such prior Payment Date and (II) the sum of (A) for each Additional
Note Principal Balance for which the related Advance Date occurred on or after
the second preceding Determination Date and prior to the related Determination
Date, (x) the sum of the related Additional Note Principal Balance Daily
Interest Accrual Amounts for each day in such Additional Note Principal Balance
Interest Accrual Period minus (y) the amount of any accrued interest on such
Additional Note Principal Balance which has been paid or deposited in the Note
Principal Prepayment Account in connection with a Note Principal Prepayment
pursuant to Section 11.02 plus (B) (x) the sum of the related Prior Payment
Date Note Principal Balance Daily Interest Accrual Amounts for each day in the
related Regular Interest Accrual Period minus (y) the amount of any accrued
interest on such Prior Payment Date Note Principal Balance which has been paid
or deposited in the Note Principal Prepayment Account in connection with a Note
Principal Prepayment pursuant to Section 11.02. With respect to the first
Payment Date following the date on which a Conversion Event occurs, the sum of
(i) for each Additional Note Principal Balance for which the related Advance
Date occurred on or after the second preceding Determination Date and prior to
the Payment Date immediately following such second preceding Determination
Date, the sum of the related Additional Note Principal Balance Daily Interest
Accrual Amounts for each day from such Advance Date to the day immediately
preceding
SALE AND SERVICING AGREEMENT (IBJ WAREHOUSE) - Page 16
the day on which such Conversion Event occurred, plus (ii) the sum of the
related Prior Payment Date Note Principal Balance Daily Interest Accrual
Amounts for each day from the preceding Payment Date to the day immediately
preceding the day on which such Conversion Event occurred, plus (iii) the
product of (x) a fraction, the numerator of which is the number of days from
and including the date on which such Conversion Event occurred to the day
immediately preceding such Payment Date, and the denominator of which is 30,
(y) the Maximum Note Interest Rate as of the date such Conversion Event
occurred, and (z) the Aggregate Note Principal Balance as of the date such
Conversion Event occurred. With respect to each Payment Date after the first
Payment Date following the date on which a Conversion Event occurs, 1/12 of
the product of (A) the Maximum Note Interest Rate as of the date such
Conversion Event occurred and (B) the Aggregate Note Principal Balance as of
the end of the Payment Date that is the first day of the related Regular
Interest Accrual Period.
MONTHLY PAYMENT: The scheduled monthly payment of principal and/or
interest required to be made by an Obligor on the related Home Loan, as set
forth in the related Debt Instrument.
MOODY'S: ▇▇▇▇▇'▇ 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 Home Loan Schedule.
NET LIQUIDATION PROCEEDS: Liquidation Proceeds net of any reimbursements
to the Servicer made therefrom for any unreimbursed Servicing Advances made and
any other fees and expenses paid in connection with the foreclosure,
conservation and liquidation of the related Home Loan or Foreclosure Property
pursuant to Sections 4.02 and 4.04 hereof.
NET DEFAULTED LOAN LOSSES: With respect to a Payment Date, the sum of (A)
with respect to the Home Loans that became Defaulted 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 Principal Balances of such Defaulted Home Loans as
of the related Determination Date and without the application of any
amounts included in clause (ii) below, minus
(ii) the sum of the aggregate amount of any recoveries attributable to
principal from whatever source received during any Due Period, with
respect to Liquidated Home Loans, including any subsequent Due
Period, and including without limitation any Net Liquidation
Proceeds, any Insurance Proceeds, any Released Mortgaged Property
SALE AND SERVICING AGREEMENT (IBJ WAREHOUSE) - Page 17
Proceeds, any payment from the related Obligor and any payments
made pursuant to Section 3.05 or Section 2.9 of the Indenture 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 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 or Section 2.9 of the Indenture 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 WORTH REQUIREMENT: As reported in each fiscal year end audited
financial statement of the Servicer, prepared in accordance with GAAP, the
Servicer's consolidated Tangible Net Worth shall not be less than $130,000,000
plus 50% of the cumulative after-tax net income since March 31, 1997, such
cumulative amount being calculated without any offset or reduction for net
losses incurred during any period since March 31, 1997.
NOTE INSURER: MBIA Insurance Corporation, as issuer of the Guaranty
Policy, and its successors and assigns.
NOTE INSURER COMMITMENT: As defined in Section 3.04(a) hereof.
NOTE INSURER DEFAULT: The failure of the Note Insurer to make payments
under the Guaranty Policy, if such failure has not been remedied within ten
(10) days of notice thereof, or the entry of an order or decree with respect to
the Note Insurer in any insolvency or bankruptcy proceedings which remain
unstayed or undischarged for 90 days.
SALE AND SERVICING AGREEMENT (IBJ WAREHOUSE) - Page 18
NOTE INSURER REIMBURSEMENT AMOUNT: At any time, an amount owed to the
Note Insurer for any unreimbursed Guaranteed Payments made under the Guaranty
Policy, together with interest thereon at the rate specified in the Insurance
Agreement and any other amounts then owing to the Note Insurer under the
Insurance Agreement, which have not previously been reimbursed.
NOTE PAYMENT ACCOUNT: An account established and maintained pursuant to
clause (i) of Section 5.01(a)(2).
NOTE PRINCIPAL BALANCE: With respect to a Note, as of any date of
determination, the original principal balance of such Note, as increased by any
Additional Note Principal Balances previously allocated to such Note pursuant
to Section 2.02(a), and as reduced by all amounts previously paid on such Note
in reduction of the principal balance of such Note.
NOTE PRINCIPAL PREPAYMENT: A prepayment of all or part of principal of
the Notes made by the Issuer pursuant to Section 11.02.
NOTE PRINCIPAL PREPAYMENT ACCOUNT: An account established and maintained
pursuant to clause (ii) of Section 5.01(a)(2).
NOTE PRINCIPAL PREPAYMENT DATE: Any Business Day on which the Issuer
proposes to make a Note Principal Prepayment as provided in Section 11.02(a),
as specified in the related Note Principal Prepayment Notice; provided,
however, that the Issuer may not make a Note Principal Prepayment on any date
in a given month during the period from and including the Determination Date in
such month to and including the day prior to the related Payment Date.
NOTE PRINCIPAL PREPAYMENT NOTICE: With respect to a Note Principal
Prepayment, a notice from the Issuer in the form of EXHIBIT D hereto.
NOTE PURCHASE AGREEMENT: The Note Purchase Agreement, dated as of
June 16, 1997, among the Issuer, FIRSTPLUS FINANCIAL, INC. and Working Capital
Management Co. L.P.
NOTEHOLDER: A holder of a Note; provided that the exercise of any rights
by such holder shall be subject to Section 13.14 hereof and Section 11.17 of
the Indenture.
NOTES: The Issuer's Asset-Backed Notes, Series 1997A, issued pursuant to
the Indenture.
OBLIGOR: Each obligor on a Debt Instrument.
OFFICER'S CERTIFICATE: A certificate delivered to the Indenture Trustee
or the Issuer signed by the President or a Vice President or an Assistant Vice
President of the Seller, the Servicer or the Issuer, in each case, as required
by this Agreement.
OVERCOLLATERALIZATION AMOUNT: As of any date of determination, the
excess, if any, of (i) the Pool Principal Balance, plus any amount on deposit
in the Note Principal Prepayment Account
SALE AND SERVICING AGREEMENT (IBJ WAREHOUSE) - Page 19
representing a Note Principal Prepayment, plus the Reserve Fund Balance, plus
any amounts on deposit in the Collection Account that represent (a) the
principal portion of the Purchase Price with respect to any Home Loan that
has been purchased by the Seller pursuant to Section 3.05(a) or released from
the lien of the Indenture pursuant to Section 2.9(c) of the Indenture or (b)
the principal portion of the Substitution Adjustment with respect to any
Qualified Substitute Home Loan substituted for a Home Loan by the Seller
pursuant to Section 3.05(a) or by the Issuer pursuant to Section 2.9(c) of
the Indenture, each as of such date, over (ii) the Adjusted Aggregate Note
Principal Balance as of such date.
OVERCOLLATERALIZATION BASE PERCENT REQUIREMENT:
Overcollateralization
Minimum Spread Percent Base Percent Requirement
---------------------- ------------------------
6.00% 3.55%
5.00% 6.15%
4.50% 7.45%
4.25% 8.15%
4.00% 8.80%
3.75% 9.45%
3.55% 10.00%
3.00% 11.50%
OVERCOLLATERALIZATION TARGETED PERCENT REQUIREMENT:
Overcollateralization
Minimum Spread Percent Targeted Percent Requirement
---------------------- ----------------------------
6.00% 9.35%
5.00% 11.40%
4.50% 12.45%
4.25% 12.95%
4.00% 13.50%
3.75% 14.00%
3.55% 14.45%
3.00% 15.65%
PAYMENT DATE: The 15th day of any month or if such 15th day is not a
Business Day, the first Business Day immediately following such day, commencing
in July 1997.
PERCENTAGE INTEREST: With respect to each Note, the percentage rounded to
five decimal places, equivalent to a fraction the numerator of which is the
Note Principal Balance of such Note and the denominator of which is the
Aggregate Note Principal Balance.
SALE AND SERVICING AGREEMENT (IBJ WAREHOUSE) - Page 20
PERMITTED INVESTMENTS: Each of the following:
(1) obligations of, or guarantees as to principal and interest
by, the United States or any agency or instrumentality thereof when such
obligations are backed by the full faith and credit of the United States;
(2) a repurchase agreement that satisfies the following criteria
and is acceptable to the Note Insurer: (1) must be between the Indenture
Trustee and either (a) primary dealers on the Federal Reserve reporting
dealer list which are rated in one of the two highest categories for
long-term unsecured debt obligations by each Rating Agency, or (b) banks
rated in one of the two highest categories for long-term unsecured debt
obligations by each Rating Agency and (2) the written repurchase
agreement must include the following: (a) securities which are
acceptable for the transfer and are either (I) direct U.S. governments
obligations or (II) obligations of a Federal agency that are backed by
the full faith and credit of the U.S. government, FNMA or FHLMC; (b) a
term no greater than 60 days for any repurchase transaction; (c) the
collateral must be delivered to the Indenture Trustee or a third party
custodian acting as agent for the Indenture Trustee by appropriate book
entries and confirmation statements, with a copy to the Note Insurer,
and must have been delivered before or simultaneous with payment (I.E.,
perfection by possession of certificated securities); and (d) the
securities sold thereunder must be valued weekly, marked-to-market at
current market price plus accrued interest and the value of the
collateral must be equal to at least 104% of the amount of cash
transferred by the Indenture Trustee under the repurchase agreement and
if the value of the securities held as collateral declines to an amount
below 104% of the cash transferred by the Indenture Trustee plus accrued
interest (I.E., a margin call), then additional cash and/or acceptable
securities must be transferred to the Indenture Trustee to satisfy such
margin call; provided, however, that if the securities used as
collateral are obligations of FNMA or FHLMC, then the value of the
securities held as collateral must equal at least 105% of the cash
transferred by the Indenture Trustee under such repurchase agreement;
(3) certificates of deposit, time deposits and bankers
acceptances of any United States depository institution or trust company
incorporated under the laws of the United States or any state, including
the Indenture Trustee; provided that the debt obligations of such
depository institution or trust company at the date of the acquisition
thereof have been rated by each Rating Agency in one of its two highest
long-term rating categories;
(4) deposits, including deposits with the Indenture Trustee, which
are fully insured by the Bank Insurance Fund or the Savings Association
Insurance Fund of the FDIC, as the case may be;
(5) commercial paper of any corporation incorporated under the laws
of the United States or any state thereof, including corporate affiliates
of the Indenture Trustee, which at the date of acquisition is rated by each
Rating Agency in its highest short-term rating category and which has an
original maturity of not more than 365 days;
SALE AND SERVICING AGREEMENT (IBJ Warehouse) - Page 21
(6) debt obligations rated by each Rating Agency at the time at
which the investment is made in its highest long-term rating category (or
those investments specified in (3) above with depository institutions
which have debt obligations rated by each Rating Agency in one of its two
highest long-term rating categories);
(7) money market funds which are rated by each Rating Agency at
the time at which the investment is made in its highest long-term rating
category, any such money market funds which provide for demand
withdrawals being conclusively deemed to satisfy any maturity
requirements for Permitted Investments set forth in this Agreement; or
(8) any other demand, money market or time deposit obligation,
security or investment as may be acceptable to each Rating Agency and
the Note Insurer at the time at which the investment is made;
provided that no instrument described in the foregoing subparagraphs shall
evidence either the right to receive (a) only interest with respect to the
obligations underlying such instrument or (b) both principal and interest
payments derived from obligations underlying such instrument where the interest
and principal payments with respect to such instrument provide a yield to
maturity at par greater than 120% of the yield to maturity at par of the
underlying obligations; and provided, further, that no instrument described in
the foregoing subparagraphs may be purchased at a price greater than par if
such instrument may be prepaid or called at a price less than its purchase
price prior to stated maturity.
Each reference in this definition of "Permitted Investments" to the Rating
Agency shall be construed, in the case of each subparagraph above referring to
each Rating Agency, as a reference to Standard & Poor's and Moody's.
PERSON: Any individual, corporation, partnership, joint venture, limited
liability company, association, joint-stock company, trust, national banking
association, unincorporated organization or government or any agency or
political subdivision thereof.
PHYSICAL PROPERTY: As defined in the definition of "Delivery" above.
PLACEMENT AGREEMENT: That certain Placement Agreement dated June 16, 1997
between the Issuer, the Servicer and the Arranger.
POOL PRINCIPAL BALANCE: As of any date of determination, the aggregate of
the Principal Balances of each Home Loan included in the Home Loan Pool as of
such date of determination.
POST-LIQUIDATION PROCEEDS: As defined in Section 4.02(b).
POST-RELEASE COLLECTIONS: With respect to a Deleted Home Loan or a Home
Loan released from the lien of the Indenture pursuant to Section 11.02(b), all
collections received on such Home
SALE AND SERVICING AGREEMENT (IBJ Warehouse) - Page 22
Loan after the Accounting Date applicable to the calculation, as of the
applicable date of repurchase, substitution, or release pursuant to Section
11.02(b), of the Principal Balance of such Home Loan.
PREFERENCE AMOUNT: Any amount previously distributed to the holder of a
Note that is recoverable and sought to be recovered as a voidable preference by
a trustee in bankruptcy pursuant to the United States Bankruptcy Code (11
U.S.C.), as amended from time to time, in accordance with a final, non-
appealable order of a court having competent jurisdiction.
PRINCIPAL BALANCE: With respect to any date of determination, with
respect to any Home Loan or related Foreclosure Property, the outstanding
unpaid principal balance of the Home Loan or the related Home Loan as of the
related Accounting Date (giving effect, through such Accounting Date, to all
payments received thereon and the allocation of any Net Loan Losses with
respect thereto for a Liquidated Home Loan or a Defaulted Home Loan), without
giving effect to amounts received in respect of such Home Loan or related
Foreclosure Property after such Accounting Date. Any Liquidated Home Loan
shall have a Principal Balance of zero.
PRINCIPAL PAYMENT AMOUNT: With respect to a Payment Date, the greater of
(i) the amount, if any, by which the Aggregate Note Principal Balance as of the
related Determination Date (including any Additional Note Principal Balance
advanced on such Determination Date) exceeds the Pool Principal Balance as of
such Determination Date and (ii) the lesser of (x) the Available Payment Amount
less the sum of the amounts referred to in clauses (i) and (ii) of
Section 5.01(c) with respect to such Payment Date and (y) the amount, if any,
by which (1) the Aggregate Note Principal Balance as of such Determination Date
(including any Additional Note Principal Balance advanced on such Determination
Date) exceeds (2) the result of (A) the Pool Principal Balance as of such
Determination Date minus (B) the Required Overcollateralization Amount as of
such Determination Date; provided, however, that with respect to the Payment
Date that is the Final Scheduled Payment Date and with respect to the Payment
Date that is the first Payment Date after the date on which the Notes have been
declared due and payable in connection with an Event of Default, the Principal
Payment Amount shall be the amount necessary to reduce the Aggregate Note
Principal Balance as of such Payment Date to 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.
PRIOR PAYMENT DATE NOTE PRINCIPAL BALANCE: With respect to a given day in
a Regular Interest Accrual Period, the Aggregate Note Principal Balance as of
the end of the Payment Date that is the first day of such Regular Interest
Accrual Period, reduced by any Additional Note Principal Balance for which the
related Advance Date occurred during the period from and including the
Determination Date immediately preceding the commencement of such Regular
Interest Accrual Period through the Payment Date immediately following such
Determination Date.
PRIOR PAYMENT DATE NOTE PRINCIPAL BALANCE DAILY INTEREST ACCRUAL AMOUNT:
With respect to a Prior Payment Date Note Principal Balance and a given day in
the related Regular Interest
SALE AND SERVICING AGREEMENT (IBJ Warehouse) - Page 23
Accrual Period, an amount equal to the product of (i) 1/360, (ii) LIBOR with
respect to such Regular Interest Accrual Period plus the Margin and (iii) the
unpaid amount of such Prior Payment Date Note Principal Balance as of the end
of such day.
PRIVATE PLACEMENT MEMORANDUM: The offering memorandum delivered by the
Issuer to the Arranger pursuant to the Placement Agreement.
PURCHASE PRICE: With respect to a Home Loan, an amount equal to the
Principal Balance of such Home Loan as of the date of purchase, plus all
accrued and unpaid interest on such Home Loan to but not including the Due Date
in the Due Period most recently ended prior to such Determination Date computed
at the applicable Home Loan Interest Rate, plus the amount of any unreimbursed
Servicing Advances made by the Servicer with respect to such Home Loan, which
Purchase Price shall be deposited in the Collection Account or the Note
Principal Prepayment Account, as applicable, (after deducting therefrom any
amounts received in respect of such repurchased 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).
QUALIFIED SUBSTITUTE HOME LOAN: A home loan or home loans substituted for
a Deleted Home Loan pursuant to Section 3.05 or Section 2.9(c) of the
Indenture, which (i) has or have an interest rate or rates of not less than one
percentage point and not more than one percentage point different from the Home
Loan Interest Rate for the Deleted Home Loan, (ii) matures or mature not more
than one year later than and not more than one year earlier than the Deleted
Home Loan, (iii) has or have a principal balance or principal balances (after
application of all payments received on or prior to the date of substitution)
equal to or less than the Principal Balance of the Deleted Home Loan as of such
date, (iv) has or have a lien priority no lower than the Deleted Home Loan, (v)
has a borrower with a comparable credit grade classification to the credit
grade classification of the borrower with respect to the Deleted Mortgage
Loans, including a Credit Score at origination that is no more than 10 points
below that of such Deleted Home Loan; and (vi) complies or comply as of the
date of substitution with each representation and warranty set forth in Section
3.03 and is not more than 29 days delinquent as of the date of substitution for
such loan; and (vii) the related borrower has a Credit Score at origination of
not less than 677. For purposes of determining whether multiple mortgage loans
proposed to be substituted for one or more Deleted Home Loans pursuant to
Section 3.05 or Section 2.9(c) of the Indenture are in fact "Qualified
Substitute Home Loans" as provided above, the criteria specified in clauses
(i), (ii) and (iii) above may be considered on an aggregate or weighted average
basis, rather than on a loan-by-loan basis (E.G., so long as the weighted
average Home Loan Interest Rate of any loans proposed to be substituted is not
less than 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 not more than 10 points below the weighted average
Credit Score of the Deleted Home Loans, the requirements of clause (i) above
would be deemed satisfied).
SALE AND SERVICING AGREEMENT (IBJ Warehouse) - Page 24
RATING AGENCY: Each of Standard & Poor's and Moody's 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 and approved by the Note Insurer, notice of which designation shall have
been given to the Indenture Trustee, the Note Insurer, the Issuer and the
Servicer.
RECORD DATE: With respect to each Payment Date, the close of business on
the last Business Day of the month immediately preceding the month in which
such Payment Date occurs.
REFERENCE BANKS: The Chase Manhattan Bank, Citicorp, Banc One Texas,
First Bank National Association, or such other banks selected by the Servicer
with the consent of the Majority Noteholders.
REGULAR INTEREST ACCRUAL PERIOD: With respect to a Payment Date, the
period from the immediately preceding Payment Date to but not including the
Payment Date, or, in the case of the first Payment Date, the period from the
Closing Date to but not including the first Payment Date.
REINVESTMENT RATE: With respect to a Note Principal Prepayment, the rate,
determined by the Servicer by reference to the Bloomberg Screen "BTMM," as the
lowest of the government repurchase rates for overnight, one week, two week or
one month periods, as of 10:00 a.m. Eastern Time on the Business Day
immediately preceding the related Note Principal Prepayment Date.
RELEASED MORTGAGED PROPERTY PROCEEDS: Proceeds received by the Servicer
in connection with (i) a taking of an entire Mortgaged Property by exercise of
the power of eminent domain or condemnation or (ii) any release of part of the
Mortgaged Property from the lien of the related Mortgage, whether by partial
condemnation, sale or otherwise; which in either case are not released to the
Obligor in accordance with applicable law, customary second mortgage servicing
procedures and this Agreement.
REQUIRED CREDIT SUPPORT MULTIPLE: With respect to a Payment Date the
Required Credit Support Multiple shall be determined as follows: (a) with
respect to such Payment Date, the three-month rolling average (I.E., the
average of the applicable rate for such Payment Date and the two preceding
Payment Dates) Delinquency Rate (30-Day), the Delinquency Rate (60-Day) and the
six-month rolling average Default Rate shall each be located in the applicable
range of percentages set forth in the column applicable to such rate below
(each range in which a rate is so located, an "applicable range"), and the
Required Credit Support Multiple for such Payment Date shall be the highest of
the numbers set forth opposite each applicable range in the column entitled
"Required Credit Support Multiple":
SALE AND SERVICING AGREEMENT (IBJ Warehouse) - Page 25
Three Month Three Month
Rolling Average Rolling Average
Required Credit Delinquency Delinquency Rate Six Month Rolling
Support Multiple Rate (30-Day) (60-Day) Average Default Rate
---------------- --------------- ---------------- --------------------
1.00 Less than 8.00% Less than 5.50% Less than 4.00%
1.25 8.00% to 8.99% 5.50% to 6.49% 4.00% to 4.99%
1.50 9.00% to 11.99% 6.50% to 7.49% 5.00% to 5.99%
2.50 Greater than 11.99% Greater than 7.49% Greater than 5.99%
provided, however, that (b) the Required Credit Support Multiple with respect
to such Payment Date will be 2.5 in the event that the Cumulative Default
Percentage as of such Payment Date is greater than the percentage set forth in
the Cumulative Default Percentage column below on or prior to the respective
anniversary of the date of the occurrence of the most recent Credit Support
Funding Event:
Cumulative Default Percentage
-----------------------------
First Anniversary 2.00%
Second Anniversary 5.00%
Third Anniversary 7.50%
Fourth Anniversary 10.00%
Fifth Anniversary 12.00%
Thereafter 13.00%
provided further, however, (c) that such 2.5 multiple determined pursuant to
clause (b) shall be reduced to an amount equal to 1.25, if 1) the Required
Credit Support Multiple calculated solely pursuant to clause (a) would have
been 1.25 or less for each of the three most recent Payment Dates and 2) the
Cumulative Default Percentage is less than the percentage set forth in the
Cumulative Default Percentage column below or on prior to the respective
anniversary of the date of the occurrence of the most recent Credit Support
Funding Event:
Cumulative Default Percentage
-----------------------------
First Anniversary 2.00%
Second Anniversary 5.00%
Third Anniversary 7.50%
Fourth Anniversary 10.00%
Fifth Anniversary 12.00%
Thereafter 13.00%
Notwithstanding the preceding, the Note Insurer, in its sole discretion
and without the requirement of an amendment of this Agreement but with written
notice to the Seller, the Servicer,
SALE AND SERVICING AGREEMENT (IBJ Warehouse) - Page 26
the Issuer, the Indenture Trustee and the Arranger, may modify the preceding
definition and the definitions relating thereto in accordance with Section
13.02(b).
REQUIRED OC FLOOR: On any date of determination, an amount equal to the
product of (i) 1.00% and (ii) the Pool Principal Balance as of the date of the
occurrence of the most recent Credit Support Funding Event.
REQUIRED OVERCOLLATERALIZATION AMOUNT: As of any date of determination
prior to the occurrence of a Credit Support Funding Event, an amount equal to
the product of (i) the Pool Principal Balance as of such date and (ii) the then-
applicable Overcollateralization Base Percent Requirement. As of any date of
determination on or following the date of the occurrence of a Credit Support
Funding Event, if any, and during the continuance thereof an amount equal to
the lesser of (i) the Aggregate Note Principal Balance as of such date and (ii)
the product of (A) the Pool Principal Balance as of the date of the occurrence
of the most recent Credit Support Funding Event and (B) the then-applicable
Overcollateralization Targeted Percent Requirement; PROVIDED, HOWEVER, that on
any date of determination on or after the Credit Support Reduction Date on
which the multiple calculated in clause (a) of the definition of Required
Credit Support Multiple is equal to 1.00 as of the most recent Payment Date,
the "Required Overcollateralization Amount" shall be an amount equal to the
greater of (1) the Required OC Floor and (2) the product of (x) the Required
Credit Support Multiple and (y) the lesser of (A) the then-applicable
Overcollateralization Targeted Percent Requirement of the Pool Principal
Balance as of the date of the occurrence of the most recent Credit Support
Funding Event and (B) the product of (x) two times the then-applicable
Overcollateralization Targeted Percent Requirement and (y) the Pool Principal
Balance as of such Payment Date; PROVIDED FURTHER, HOWEVER, that the Required
Overcollateralization Amount shall not be reduced pursuant to the preceding
proviso clause if the Required Credit Support Multiple as calculated solely
with respect to clause (a) of the definition of "Required Credit Support
Multiple" is greater than 1.00, or if the Required Credit Support Multiple
calculated solely based on clause (b) of such definition would result in a
number greater than 1.25. Notwithstanding the preceding, the Note Insurer, in
its sole discretion and without the requirement of an amendment of this
Agreement, may modify the preceding definition and the definitions relating
thereto in accordance with Section 13.02(b).
REQUIRED PAYMENT AMOUNT: With respect to a Payment Date, the sum of the
Interest Payment Amount and the Principal Payment Amount, in each case with
respect to such Payment Date.
RESERVE FUND: An account established and maintained pursuant to
Section 5.07.
RESERVE FUND BALANCE: As of any date of determination, an amount equal to
the balance in the Reserve Fund as of such date, adjusted, if such date is on
or after the Determination Date in a given month and on or prior to the related
Payment Date, to reflect any withdrawals to occur on such Payment Date pursuant
to Section 5.01(b)(2) as reported in the related Servicer's Monthly Remittance
Report.
SALE AND SERVICING AGREEMENT (IBJ Warehouse) - Page 27
RESPONSIBLE OFFICER: When used with respect to the Indenture Trustee, any
officer within the Corporate Trust Office of the Indenture Trustee, including
any Managing Director, Vice President, Assistant Vice President, Secretary,
Assistant Secretary or Assistant Treasurer 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 Seller, or the Servicer, the President or any
Vice President, Assistant Vice President, or any Secretary or Assistant
Secretary thereof.
REVOLVING CREDIT AGREEMENT: The Revolving Credit Agreement, dated as of
June 16, 1997, between FIRSTPLUS FINANCIAL, INC. and Working Capital Management
Co. L.P.
SCHEDULED ADVANCE TERMINATION DATE: June 14, 1998, or such later date as
the Issuer, the Seller and the Noteholders shall agree pursuant to the Note
Purchase Agreement and to which the Note Insurer and the Rating Agency shall
consent.
SECURITIES ACT: The Securities Act of 1933, as amended.
SELLER: FFI, in its capacity as the seller hereunder, and its successors
and permitted assigns.
SERVICER: FFI, in its capacity as the servicer hereunder, or any
successor appointed as herein provided.
SERVICER'S FISCAL YEAR: October 1st through September 30th of 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 REMITTANCE REPORT: As defined in Section 6.01(b) and
in the form of Exhibit F hereto.
SERVICING ADVANCES: Subject to Section 4.01(b), all reasonable, customary
and necessary "out of pocket" costs and expenses advanced or paid by the
Servicer with respect to the Home Loans in accordance with the performance by
the Servicer of its servicing obligations hereunder, including, but not limited
to, the costs and expenses for (i) the preservation, restoration and protection
of the Mortgaged Property, including without limitation advances in respect of
real estate taxes and assessments, (ii) any collection, enforcement or judicial
proceedings, including without limitation foreclosures, collections and
liquidations pursuant to Section 4.02, (iii) the conservation, management and
sale or other disposition of an Foreclosure Property pursuant to Section 4.04,
(iv) the preservation of the security for a Home Loan if any lienholder under a
Superior Lien has accelerated or intends to accelerate the obligations secured
by such Superior Lien pursuant to Section 4.06; provided that such Servicing
Advances are reimbursable to the Servicer as provided
SALE AND SERVICING AGREEMENT (IBJ Warehouse) - Page 28
in Section 5.01(c)(v) to the extent not previously reimbursed by being
deducted or retained by the Servicer in calculating Net Liquidation Proceeds
hereunder.
SERVICING ADVANCE REIMBURSEMENT AMOUNT: As defined in Section 5.01(c).
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)(2), 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 Percentage times the
Principal Balance of such Home Loan as of the second preceding Determination
Date divided by (b) 12. The Servicing Fee includes (i) any servicing fees owed
or payable to any Subservicer, (ii) any custodial fees owed or payable to the
Custodian and (iii) any trustee fees owed or payable to the Indenture Trustee,
which fees, in each case, shall be paid from the Servicing Fee.
SERVICING FEE PERCENTAGE: 0.65% (65 basis points).
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 Noteholders and the Note Insurer, as such list may from time to time be
amended.
STANDARD & POOR'S: Standard & Poor's Ratings Services, a division of The
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc., or any successor thereto.
SUBSEQUENT HOME LOAN: An individual Home Loan that is conveyed to the
Issuer and pledged to the Indenture Trustee on an Advance Date, pursuant to a
Subsequent Transfer Agreement, together with the rights and obligations of a
holder thereof and payments thereon and proceeds 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 Advance Date, as of the
applicable Cut-Off Date, the Principal Balance of any Subsequent Home Loans to
be conveyed to the Issuer on such Advance Date.
SUBSEQUENT TRANSFER AGREEMENT: With respect to any Subsequent Home Loan,
the agreement pursuant to which Subsequent Home Loans are transferred to the
Issuer by the Seller, substantially in the form of EXHIBIT B-2 hereto.
SALE AND SERVICING AGREEMENT (IBJ Warehouse) - Page 29
SUBSERVICER: Any Person with whom the Servicer has entered into a
Subservicing Agreement and who is an Eligible Servicer and who satisfies any
requirements set forth in Section 4.07(a) in respect of the qualifications of a
Subservicer.
SUBSERVICING ACCOUNT: An account established by a Subservicer pursuant to
a Subservicing Agreement, which account must be an Eligible Account.
SUBSERVICING AGREEMENT: Any agreement between the Servicer and any
Subservicer relating to subservicing and/or administration of any or all Home
Loans as provided in Section 4.07(a), copies of which shall be made available,
along with any modifications thereto, to the Issuer, the Indenture Trustee, the
Note Insurer and the Arranger.
SUBSTITUTION ADJUSTMENT: As to any date on which a substitution occurs
pursuant to Section 3.05 or Section 2.9 of the Indenture, the amount, if any,
by which (a) the sum of the aggregate principal balance (after application of
principal payments received on or before the date of substitution) of any
Qualified Substitute Home Loans as of the date of substitution plus any accrued
and unpaid interest thereon that is scheduled to be paid after the date of
substitution and during the Due Period in which such substitution occurs, is
less than (b) the sum of the aggregate of the Principal Balances, together with
accrued and unpaid interest thereon to the date of substitution, of the related
Deleted Home Loans.
SUPERIOR LIEN: With respect to any Home Loan which is secured by other
than a first priority lien, the mortgage(s) relating to the corresponding
Mortgaged Property having a superior priority lien.
TANGIBLE NET WORTH: The excess of:
(a) the tangible assets of the Servicer and any Affiliates
calculated in accordance with GAAP, as reduced by adequate reserves in each
case where reserves are proper, over
(b) all indebtedness (including subordinated debt) of the Servicer
and its Affiliates;
provided, however that (i) in no event shall there be included in the above
calculation any intangible assets such as patents, trademarks, trade names,
copyrights, licenses, goodwill, organizational costs, advances or loans to, or
receivables from, directors, officers, employees or affiliates, prepaid assets,
amounts relating to covenants not to compete, pension assets, deferred charges
or treasury stock or any securities of the Servicer or any other securities
unless the same are readily marketable in the United States of America or
entitled to be used as a credit against federal income tax liabilities, (ii)
securities included as such intangible assets shall be taken into account at
their current market price or cost, whichever is lower, and (iii) any write-up
in the book value of any assets shall not be taken into account.
SALE AND SERVICING AGREEMENT (IBJ Warehouse) - Page 30
TRUST ACCOUNT PROPERTY: The Trust Accounts, all amounts and investments
held from time to time in any Trust Account and all proceeds of the foregoing.
TRUST ACCOUNTS: The Collection Account, the Note Payment Account, the
Note Principal Prepayment Account, the Capitalized Interest Account, the
Reserve Fund and the Advance Account.
TRUST ESTATE: The assets subject to this Agreement and the Indenture,
assigned to the Issuer and 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 the following: (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 Home
Loans released from the security interest of the Indenture pursuant Section
11.02(b), 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 principal payments
thereon and proceeds therefrom representing principal received on or with
respect to the Initial Home Loans on or after the May 1, 1997 Cut-Off Date
and all interest payments thereon and proceeds therefrom representing
interest received on or with respect to the Initial Home Loans on or after
June 1, 1997, (iii) all payments thereon and proceeds therefrom received on
or with respect to the Subsequent Home Loans on or after the applicable
Cut-Off Dates, (iv) such assets as from time to time are identified as
Foreclosure Property, (v) 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, (vi) all insurance policies with
respect to the Home Loans and any Insurance Proceeds, (vii) Net Liquidation
Proceeds, Post-Liquidation Proceeds and Released Mortgaged Property Proceeds,
(viii) the obligations of the applicable seller with respect to a Home Loan
pursuant to a Loan Sale Agreement under which the Seller acquired such Home
Loan, (ix) each Subsequent Transfer Agreement, and (x) the rights and
obligations of each Subservicer pursuant to a Subservicing Agreement and (b)
all of the Issuer's right, title and interest in and to the Guaranty Policy.
UNDECLARED EVENT OF DEFAULT: The occurrence and continuance of an Event
of Default or an event that, disregarding the grant of the Noteholders'
rights to the Note Insurer pursuant to Section 13.14, would be deemed an
Event of Default by the Noteholders.
WCMC: Working Capital Management Co. L.P.
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.
(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.
SALE AND SERVICING AGREEMENT (IBJ Warehouse) - Page 31
(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 herein to a Person are also to its permitted successors and
assigns.
Section 1.03 DETERMINATION OF LIBOR.
On each LIBOR Determination Day, the Indenture Trustee will determine
LIBOR on the basis of the rate for deposits in United States dollars for a
one month period which appears on Telerate Page 3750 as of 11:00 a.m., London
time, on such date. If such rate does not appear on Telerate Page 3750, the
rate for such LIBOR Determination Day will be determined by the Indenture
Trustee on the basis of the rates at which deposits in United States dollars
are offered by the Reference Banks at approximately 11:00 a.m., London time,
on that day to prime banks in the London interbank market for a period equal
one month. The Indenture Trustee will determine the Reference Bank's
quotation of its rate. If at least two such quotations are provided, the rate
for that LIBOR Determination Day will be the arithmetic mean of the
quotations. If fewer than two quotations are provided as requested, the rate
for that LIBOR Determination Day will be the arithmetic mean of the rates
quoted by major banks in New York City, selected by the Indenture Trustee, at
approximately 11:00 a.m., New York City time, on that day for loans in United
States dollars to leading European banks for a period equal to one month.
Promptly following its determination of LIBOR with respect to each Regular
Interest Accrual Period and each Additional Principal Balance Interest
Accrual Period, the Indenture Trustee shall notify the Issuer and the
Servicer of the applicable LIBOR.
SALE AND SERVICING AGREEMENT (IBJ Warehouse) - Page 32
Section 1.04 MODIFYING THE MINIMUM SPREAD PERCENT.
On any Business Day that the Issuer elects prior to the occurrence of a
Conversion Event, the Issuer may, upon written notice to the Arranger, the
Note Insurer, the Noteholders, the Indenture Trustee and the Servicer, set
the Minimum Spread Percent to a percent equal to 6.00%, 5.00%, 4.50%, 4.25%,
4.00%, 3.75%, 3.55%, or, with the consent of 100% of the Noteholders, 3.00%,
providing that a Conversion Event or Credit Support Funding Event shall not
occur as a result of such newly reset Minimum Spread Percent.
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 to the Seller or its designee, upon the order of the Seller, the
Seller, as of the Closing Date and concurrently with the execution and
delivery hereof, does hereby sell, transfer, assign, set over and otherwise
convey to the Issuer, without recourse, but subject to the other terms and
provisions of this Agreement, all of the right, title and interest of the
Seller in and to the Trust Estate. The foregoing sale, transfer, assignment,
set over and conveyance does not and is not intended to result in a creation
or an assumption by the Issuer of any obligation of the Seller or any other
Person in connection with the Trust Estate or under any agreement or
instrument relating thereto except as specifically set forth herein.
(b) As of the Closing Date, the Issuer acknowledges the conveyance to
it of the Trust Estate from the Seller, including all right, title and
interest of the Seller in and to the Trust Estate, receipt of which is hereby
acknowledged by the Issuer. Concurrently with such delivery and in exchange
therefor, the Issuer has pledged to the Indenture Trustee the Trust Estate,
and the Issuer has executed and caused to be authenticated and delivered the
Notes to the Seller or its designee, upon the order of the Seller.
Section 2.02 CONVEYANCE OF THE SUBSEQUENT HOME LOANS; ADDITIONAL NOTE
PRINCIPAL BALANCES.
(a) Pursuant to and subject to the Note Purchase Agreement, the Issuer
may, at its sole option, from time to time request that the Noteholders
advance on any Business Day (each an "Advance Date") additional amounts of
not less than $10,000,000 (such amounts, "Additional Note Principal
Balances") and each Noteholder shall remit on such Advance Date to the
Advance Account a percentage of the Additional Note Principal Balance equal
to its respective Percentage Interest multiplied by the Additional Note
Principal Balance; provided however, the Issuer shall not be permitted to
request or receive such an advance on any date on or after the Advance
Termination Date or on any date on which a Credit Support Funding Event
exists. The Seller and the Issuer shall deliver an Addition Notice to the
Indenture Trustee, the Note Insurer and the Arranger not less than
SALE AND SERVICING AGREEMENT (IBJ Warehouse) - Page 33
three Business Days prior to the proposed Advance Date and the Indenture
Trustee shall deliver such Addition Notice to each Noteholder via facsimile
on the same day the Indenture Trustee receives such notice from the Seller
and the Issuer. Notwithstanding the foregoing, in no event shall the
Noteholders be required to advance Additional Note Principal Balances if (i)
with respect to any Note, after giving effect to the portion of the
Additional Note Principal Balance related to such Note, the Note Principal
Balance will exceed the related Maximum Note Principal Balance, (ii) after
giving effect to the Additional Note Principal Balance, the Aggregate Note
Principal Balance will exceed the Aggregate Maximum Note Principal Balance,
or (iii) on or prior to the Advance Date, the conditions precedent to a
transfer of the Home Loans pursuant to (b) and (c) of this Section 2.02 have
not been fulfilled. The Servicer shall appropriately note such Additional
Note Principal Balance (and the increased Aggregate Note Principal Balance)
in the next succeeding Servicer's Monthly Remittance Report; PROVIDED that
failure to make any such notation in the Servicer's Monthly Remittance Report
or any error in such notation shall not adversely affect any Noteholder's
rights with respect to its Note Principal Balance and its right to receive
interest and principal payments in respect of the Note Principal Balance held
by such Noteholder. Each Noteholder shall record on the schedule attached to
such Noteholder's Note, the date and amount of any Additional Principal
Balance advanced by it, and each repayment thereof; provided that failure to
make such recordation on such schedule or any error in such schedule shall
not adversely affect any Noteholder's rights with respect to its Note
Principal Balance and its right to receive interest payments in respect of
the Note Principal Balance held by such Noteholder.
The Indenture Trustee shall appropriately note any Additional Note
Principal Balance (and the increased Aggregate Note Principal Balance) in the
next succeeding Indenture Trustee's Certificate, and the Note Principal
Balance of each Note will be equal to the Note Principal Balance of such Note
stated in such Indenture Trustee's Certificate. Absent manifest error, the
Note Principal Balance of each Note as set forth in the Indenture Trustee's
Certificate shall be binding upon the Noteholders and the Note Insurer,
notwithstanding any notation made by a Noteholder on its Note or by the
Servicer in its Servicer's Monthly Remittance Report pursuant to the
preceding paragraph; provided that failure by the Indenture Trustee to make
such recordation on such Indenture Trustee's Certificate or any error in such
certificate shall not adversely affect any Noteholder's rights with respect
to its Note Principal Balance and its right to receive interest payments in
respect of the Note Principal Balance held by such Noteholder.
(b) Subject to the conditions set forth in this Section 2.02, in
consideration of the Issuer's delivery on the applicable Advance Date to the
Seller or its designee upon the order of the Seller, of the Subsequent
Purchase Price of the related Subsequent Home Loans, the Seller shall, on
such Advance 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, subject to the following sentence,
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 Advance Date and all items in
the related Indenture Trustee's Home Loan File. If an Advance Date occurs
within the first fifteen calendar days of any month, each Subsequent Home
Loan sold to the Issuer and pledged to the Indenture Trustee on such Advance
Date shall have an origination date prior to
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the first calendar day of such month, and the Cut-Off Date with respect to
such Subsequent Home Loans shall be the first calendar day of such month;
provided any amounts collected by the Seller with respect to such Subsequent
Home Loans prior to the Cut-Off Date shall be conveyed to the Issuer and
pledged to the Indenture Trustee if such amounts were prepayments of amounts
due on or after the Cut-Off Date. In connection therewith, the Seller shall
amend the Home Loan Schedule to reflect the inclusion of the applicable
Subsequent Home Loans in the Home Loan Pool. The Seller shall promptly
deliver to the Issuer, the Servicer (if the Seller is not then acting as
such), the Indenture Trustee, the Note Insurer and the Arranger a copy of the
Home Loan Schedule as so amended. The sale, transfer, assignment, set over
and conveyance by the Seller of any 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 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.
(c) If the Subsequent Purchase Price for the Subsequent Home Loans to
be conveyed to the Issuer on an Advance Date is less than the amount required
to obtain the release of the interest of any third party (including any
lienholder therein), then 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 Issuer) and the Issuer, in turn, shall
remit such immediately available funds, together with funds from the
applicable Additional Note Principal Balance equal to the Subsequent Purchase
Price, to the third party designated by the Seller that is releasing its
interest in such Subsequent Home Loans.
On each Advance Date, the Seller shall transfer to the Issuer the
applicable Subsequent Home Loans and the other property and rights related
thereto described in (b) above, each Noteholder shall cause the portion of
the applicable Additional Note Principal Balance to be advanced by it to be
deposited in the Advance Account, and the Indenture Trustee shall, promptly
after such deposit, withdraw the applicable Additional Note Principal Balance
from the Advance Account, and pay such amount to the Issuer, only upon the
satisfaction of each of the following conditions on or prior to the related
Advance Date or as of the time otherwise specified below:
(i) (a) such Additional Note Principal Balance must be at least
$10,000,000 and (b) no Subsequent Home Loan shall be more than 29 days
delinquent as of the related Cut-Off Date;
(ii) the Seller and the Issuer shall have provided to the Indenture
Trustee, the Note Insurer and the Arranger an Addition Notice and shall
have provided any information reasonably requested by the Issuer, the
Indenture Trustee or the Note Insurer with respect to the applicable
Subsequent Home Loans;
(iii) the Indenture Trustee shall have delivered to the Noteholders
the Addition Notice at least three Business Days prior to the related
Advance Date;
SALE AND SERVICING AGREEMENT (IBJ Warehouse) - Page 35
(iv) the Seller and the Issuer shall have delivered to the Indenture
Trustee, the Note Insurer and the Arranger a duly executed Subsequent
Transfer Agreement, including all exhibits listed therein;
(v) the Servicer shall have deposited in the Collection Account all
collections in respect of the Subsequent Home Loans received on or after
the related Cut-Off Date, and the Issuer shall have deposited in the
Capitalized Interest Account the Capitalized Interest Account Deposit with
respect to such Additional Note Principal Balance;
(vi) the Advance Termination Date shall not have occurred and shall
not occur as a result of the conveyance of such Subsequent Home Loans
(vii) a Credit Support Funding Event shall not exist, and neither a
Conversion Event nor a Credit Support Funding Event shall occur as a
result of the advance of such Additional Note Principal Balance;
(viii) the Seller shall have delivered to the Issuer, the Indenture
Trustee, the Note Insurer and the Arranger an Officer's Certificate
confirming the satisfaction of each condition precedent specified in this
Section 2.02 and in the related Subsequent Transfer Agreement;
(ix) the Custodian shall have executed and delivered to the Seller,
the Indenture Trustee, the Issuer, the Note Insurer and the Arranger an
acknowledgment of receipt of the Indenture Trustee's Home Loan Files, in
accordance with the provisions of the Custodial Agreement; and
(x) if the Additional Note Principal Balance is equal to or greater
than $25,000,000, the Note Insurer shall have delivered to the Seller, the
Issuer and the Indenture Trustee a written notice confirming the Note
Insurer's consent and approval to the addition of all Subsequent Home
Loans to be purchased by the Issuer and pledged to the Indenture Trustee
on the related Subsequent Transfer Date.
Section 2.03 OWNERSHIP AND POSSESSION OF HOME LOAN FILES.
Upon the issuance of the Notes, 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 Noteholders and the Note Insurer, although possession of the
Servicer's Home Loan Files (other than items required to be maintained in the
Indenture Trustee's Home Loan Files) on behalf of the Indenture Trustee and
for the benefit of the Noteholders and the Note Insurer shall remain with the
Servicer, and the Custodian shall take possession of the Indenture Trustee's
Home Loan Files as contemplated in Section 2.06.
SALE AND SERVICING AGREEMENT (IBJ Warehouse) - Page 36
Section 2.04 BOOKS AND RECORDS.
The Seller shall record in its books and records and report the transfer
of each Home Loan to the Issuer as a conveyance to the Issuer by sale or
capital contribution, or a combination thereof, pursuant to 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 Noteholders and the
Note Insurer.
Section 2.05 DELIVERY OF HOME LOAN DOCUMENTS.
(a) With respect to each Initial Home Loan, on the Closing Date the
Seller has delivered or caused to be delivered, and with respect to each
Subsequent Home Loan, on the related Advance Date, 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
__________________________________, 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 Seller;
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 Seller 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, an original Assignment of
Mortgage assigned in blank and signed in the name of the Seller by a
Responsible Officer;
(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 Seller 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
SALE AND SERVICING AGREEMENT (IBJ Warehouse) - Page 37
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 Seller
if the original has been transmitted for recording until such time as the
original is returned by the public recording office.
(b) The Seller agrees to deliver or cause to be delivered on or before
the applicable Advance 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 Seller 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 Advance 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 Seller was delivered
to the Custodian; (ii) any original recorded intervening assignments of
Mortgage in those instances where copies thereof certified by the Seller were
delivered to the Custodian; and (iii) 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 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
shall be deemed to have satisfied its obligation 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 intervening assignments of
Mortgage or assumption and modification agreement, respectively.
Notwithstanding the foregoing, the Seller shall not be required to deliver
any document as provided in this paragraph with respect to a Home Loan if, at
the time such document would otherwise be required to be so delivered, such
Home Loan is no longer included in the Home Loan Pool.
(d) Notwithstanding any of the foregoing, upon the occurrence of an
Assignment Event with respect to each Home Loan or with respect to a
particular Home Loan, the Seller, at its own expense, shall, within 10 days
of such Assignment Event, send the original Assignment of Mortgage delivered
pursuant to this Section 2.05 of each applicable Home Loan or the particular
Home Loan to the appropriate recording office for recordation in the name of
the Indenture Trustee. Notwithstanding the foregoing, the Seller shall not
be required to record the Assignment of Mortgage as provided in this
paragraph with respect to a Home Loan if at the time such Assignment of
Mortgage would otherwise be required to be sent to the appropriate recording
office for recordation, such Home Loan is no longer included in the Home Loan
Pool.
SALE AND SERVICING AGREEMENT (IBJ Warehouse) - Page 38
(e) 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 Seller.
Section 2.06 ACCEPTANCE BY INDENTURE TRUSTEE OF THE HOME LOANS;
CERTIFICATION BY CUSTODIAN.
(a) The Indenture Trustee agrees to cause the Custodian to execute and
deliver on the Closing Date, with respect to each Initial Home Loan, and on
the Advance Date, with respect to any Subsequent Home Loans, an
acknowledgment of receipt of the Indenture Trustee's Home Loan File for each
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 Noteholders and the Note Insurer. The
Indenture Trustee agrees, for the benefit of the Noteholders and the Note
Insurer, to cause the Custodian to review each Indenture Trustee's Home Loan
File with respect to each Initial Home Loan within 45 days after the Closing
Date, and 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 Seller, the
Indenture Trustee, the Issuer, the Note Insurer, the Servicer and the
Arranger a certification to the effect that, as to each such Home Loan (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 the Indenture Trustee's 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 to the Custodian
pursuant to Section 2.05 have been reviewed by the Custodian and have not
been mutilated or damaged and appear regular on their face (handwritten
additions, changes or corrections shall not constitute irregularities if
initialed by the Obligor) and relate to such Home Loan, (iii) based on the
examination of the Custodian on behalf of the Indenture Trustee, and only as
to the foregoing documents, the information set forth on the Home Loan
Schedule accurately reflects the information set forth in the Indenture
Trustee's Home Loan File and (iv) each Debt Instrument has been endorsed as
provided in Section 2.05. Neither the Issuer nor the Custodian shall be
under any duty or obligation (i) to inspect, review or examine any such
documents, instruments, certificates or other papers to determine that they
are genuine, enforceable, or appropriate for the represented purpose or that
they are other than what they purport to be on their face or (ii) to
determine whether any Indenture Trustee's Home Loan File should include any
of the documents specified in Section 2.05(a)(v).
(b) If the Custodian, during the process of reviewing the Indenture
Trustee's Home Loan Files, finds any document constituting a part of a
Indenture Trustee's Home Loan File which is not executed, has not been
received, is unrelated to any Home Loan identified in the Home Loan Schedule,
does not conform to the requirements of Section 2.05 or does not conform, in
all material respects, to the description thereof as set forth in the Home
Loan Schedule, then the Custodian shall promptly so notify, in writing, the
Servicer, the Indenture Trustee, the Issuer, the Note Insurer, the Seller and
the Arranger. In performing any such review, the Custodian may conclusively
rely on the
SALE AND SERVICING AGREEMENT (IBJ Warehouse) - Page 39
Seller 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.
None of the Issuer, the Indenture Trustee or 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 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 1997,
the Issuer shall deliver (or cause the Custodian to deliver) to the Seller,
the Note Insurer, the Indenture Trustee, the Servicer and the Arranger a
certification listing all Indenture Trustee's Home Loan Files held by the
Custodian on behalf of the Indenture Trustee, for the benefit of the
Noteholders and the Note Insurer, on such Payment Date.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 3.01 [RESERVED].
Section 3.02 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
SERVICER AND SELLER.
The Servicer as such and in its capacity as the Seller hereby
represents, warrants and covenants with and to the Issuer, the Indenture
Trustee, the Note Insurer and the Noteholders 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. 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
SALE AND SERVICING AGREEMENT (IBJ Warehouse) - Page 40
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, as of the Closing Date, nor the Private
Placement Memorandum, as of the OM Delivery Date (as defined in the Placement
Agreement) 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 or will omit 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
SALE AND SERVICING AGREEMENT (IBJ Warehouse) - Page 41
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, ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, 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 Note Insurer.
(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.
(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.
(j) As of the Closing Date, the Issuer will have good and marketable
title to each Initial Home Loan and the 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.
(k) As of each Advance Date, the Issuer will have good and marketable
title to each Subsequent Home Loan transferred on such Advance Date and the
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.
(l) 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.
(m) As a wholly-owned subsidiary of the Seller, the Issuer is a
non-entity for tax purposes and, as such, all income and expenses for federal
tax purposes will be included in the taxable income of the Seller.
Section 3.03 INDIVIDUAL HOME LOANS.
The Seller hereby represents and warrants to the Issuer, the Indenture
Trustee, the Note Insurer and the Noteholders, with respect to each Initial
Home Loan, as of the Closing Date, with
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respect to each Subsequent Home Loan, as of the related Advance Date, and
with respect to item (ii) below, as of the Closing Date and each Advance 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 Advance Date, as applicable,
pursuant to this Agreement or as otherwise provided in this Agreement has or
will be so delivered.
(c) PAYMENTS CURRENT. As of the applicable Cut-off Date, such Home
Loan is not 30 or more days delinquent, based on the terms under which the
related Mortgages and Debt Instruments have been made. The Seller 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 "▇▇▇▇▇▇
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.
SALE AND SERVICING AGREEMENT (IBJ Warehouse) - Page 43
(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
Issuer, the Seller had good and marketable title to each Home Loan, Debt
Instrument and Mortgage, the Seller was the sole owner thereof and had full
right to sell each Home Loan, Debt Instrument and Mortgage to the Issuer; and
upon the conveyance thereof by the Seller to the Issuer, the Issuer 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,
other than the lien of the Indenture.
(l) OWNERSHIP OF MORTGAGED PROPERTY. With respect to each Home Loan,
the related Servicer's Home Loan File contains a title document reflecting
that title to the related Mortgaged Property is held at least 50% by the
Obligor under such Home Loan.
(m) NO DEFAULTS. Except with respect to any delinquent scheduled
payment referred to in subsection (c) above, there is no default, breach,
violation or event of acceleration existing under any Mortgage or any Debt
Instrument and, to the best of the Seller's knowledge, there is no event
SALE AND SERVICING AGREEMENT (IBJ Warehouse) - Page 44
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 Seller 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
Seller'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 Seller'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 Seller'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 Seller
and to the extent that the Seller 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 Note Insurer or the Indenture Trustee on
behalf of the Noteholders 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 Seller
SALE AND SERVICING AGREEMENT (IBJ Warehouse) - Page 45
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 Obligor has represented to the Seller that a portion of
the proceeds of such Combination Loan will be used to finance property
improvements.
(v) [RESERVED].
(w) FLOOD INSURANCE. If required by federal or state law, each
Mortgaged Property is covered by flood insurance with a standard mortgagee
clause and extended coverage in an amount which is not less than the value of
such Mortgaged Property. All such insurance policies meet the requirements
of the current guidelines of the Federal Insurance Administration, conform to
the requirements of the FNMA Sellers' Guide and the FNMA Servicers' Guide,
and are of standard type and quality for the locale where the related
Mortgaged Property is located. All acts required to be performed to preserve
the rights and remedies of the Indenture Trustee in any such insurance
policies have been performed including, without limitation, any necessary
notifications of insurers and assignments of policies or interests therein.
(x) UNDERWRITING, ORIGINATION AND SERVICING PRACTICES. Each Home Loan
has been underwritten by or re-underwritten by and reviewed for compliance
with the Seller'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 Seller 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 Seller'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 Seller for sale to the Issuer on any basis intended to
adversely affect the Issuer. The sale, transfer, assignment, conveyance and
grant of the Debt Instruments and the Mortgages by the Seller to the Issuer
were not subject to the bulk transfer laws or any similar statutory
provisions in effect in any applicable jurisdiction.
(z) [RESERVED].
(aa) NO FRAUDULENT CONVEYANCE. The Home Loans are not being
transferred with any intent to hinder, delay or defraud any creditors.
(bb) VALUE AND MARKETABILITY. To the best of the Seller's knowledge,
there do not exist any circumstances, conditions or information with respect
to the Home Loan, the related Mortgaged Property, the Obligor or the
Obligor's credit standing that reasonably can be expected to cause private
institutional investors investing in same type of home loan to regard such
Home Loan as an
SALE AND SERVICING AGREEMENT (IBJ Warehouse) - Page 46
unacceptable investment, to increase the likelihood that such Home Loan will
become delinquent, or adversely affect the value or marketability of such
Home Loan.
(cc) TERMS OF HOME LOANS AND INTEREST METHOD. Each Home Loan is a
fixed rate loan. Each Debt Instrument has an original term to maturity of
not less than 24 months nor more than 25 years and three months from the date
of origination. Each Debt Instrument is payable in monthly installments of
principal and interest, with interest payable in arrears, and requires a
monthly payment which is sufficient to amortize the original principal
balance over the original term and to pay interest at the related Home Loan
Interest Rate. No Debt Instrument provides for any extension of the original
term. Interest for each Home Loan is calculated at a rate of interest
computed by the simple interest method or the actuarial method.
(dd) TYPES OF HOME LOANS; RETAIL INSTALLMENT CONTRACTS. Each Home Loan
is either (i) a Debt Consolidation Loan or (ii) a Combination Loan. No Home
Loan was originated for the express purpose of purchasing a manufactured
home. No Home Loan is covered by mortgage insurance provided by the Federal
Housing Administration of the United States Department of Housing and Urban
Development.
(ee) NO BUYDOWN, GRADUATED PAYMENT MORTGAGE 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 Seller, the Obligor or anyone else on
behalf of the Obligor, or paid by any source other than the Obligor. No Home
Loan contains any other similar provision which may constitute a "buydown"
provision. No Home Loan is a graduated payment mortgage loan. No Home Loan
has a shared appreciation or other contingent interest feature.
(ff) NO CHATTEL PAPER. Each Debt Instrument is comprised of one
original promissory note and each such promissory note constitutes an
"instrument" for purposes of Section 9-105(1)(i) of the UCC. No Debt
Instrument constitutes or is comprised of "chattel paper" as such term is
defined in Section 9-105(1)(b) of the UCC. Each Debt Instrument has been
delivered to the Indenture Trustee.
(gg) DESCRIPTION CONFORMS TO PRIVATE PLACEMENT MEMORANDUM. Each
Initial Home Loan conforms, and all Initial Home Loans in the aggregate
conform, in all material respects to the description thereof to be set forth
in the Private Placement Memorandum.
(hh) REVIEW BY SELLER. In light of the Seller's underwriting
guidelines, the Seller 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.
(ii) UNDERWRITING CRITERIA. No more than 45% of the Home Loans
(weighted by Principal Balance) will be secured by Mortgaged Properties
located in the State of California; no more than 20% of the Home Loans
(weighted by Principal Balance) will be secured by Mortgaged Properties
SALE AND SERVICING AGREEMENT (IBJ Warehouse) - Page 47
located in any single state, other than the State of California; the average
of the Credit Scores of the Home Loans (weighted by Principal Balance) will
be a minimum of 675; no more than 5% of the Home Loans (weighted by Principal
Balance) will have a Credit Score below 620; none of the Home Loans will have
a Credit Score below 600; the average Principal Balance of the Home Loans
will not exceed $40,000; the average Debt Ratio of the Home Loans (weighted
by Principal Balance) will not exceed 41%; no more than 2% of the Home Loans
(weighted by Principal Balance) will be Home Loans with a related Debt Ratio
greater than 50%; the average combined loan to value ratio of the Home Loans
(weighted by Principal Balance) will not exceed 115%; and no more than 1% of
the Home Loans (weighted by Principal Balance) will have combined loan to
value ratios in excess of 130%.
(jj) LOCATION OF MORTGAGED PROPERTY. Each Mortgaged Property
securing a Home Loan is located in the United States.
Section 3.04 SUBSEQUENT HOME LOANS.
(a) With respect to the Subsequent Home Loans conveyed by the Seller
to the Issuer on a given Advance Date, the Seller shall represent and warrant
to the Issuer, the Indenture Trustee, the Note Insurer and the Noteholders that
as of each Advance Date:
(i) No such Subsequent Home Loan provides for scheduled payments to
be due on any date after the date which is fifteen months prior to the
Final Scheduled Payment Date.
(ii) To the best of the Seller's knowledge, the acquisition of the
Subsequent Home Loans by the Issuer on such Advance Date will not result
in a downgrading in any rating of the Notes by a Rating Agency.
(iii) 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.
(iv) 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.
(v) To the extent applicable to each Subsequent Home Loan being
transferred to the Issuer, the quantitative criteria set forth in
paragraphs 22 and 23 of that certain Commitment to Issue a Financial
Guaranty Insurance Policy (Application No. 97-06-4394 dated as of June 16,
1997) (the "Note Insurer Commitment") issued by the Note Insurer have
been satisfied.
(b) The Seller shall represent and warrant to the Issuer, the
Indenture Trustee, the Note Insurer and the Noteholders that as of each
Advance Date the Home Loans have satisfied all of the criteria set forth in
paragraphs 22 and 23 of the Note Insurer Commitment.
SALE AND SERVICING AGREEMENT (IBJ Warehouse) - Page 48
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 Notes to the Noteholders. Upon discovery by
the Seller, the Servicer, the Custodian, the Issuer, the Indenture Trustee,
the Note Insurer or any Noteholder 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 Noteholders or the Note Insurer, or which
materially and adversely affects the interests of the Noteholders or the Note
Insurer in the related Home Loan in the case of a representation and warranty
relating to a particular Home Loan (notwithstanding that such representation
and warranty may have been made to the Seller's best knowledge), the party
discovering such breach shall give prompt written notice to the others. The
Seller shall within 45 days of the earlier of its discovery or its receipt of
notice of any breach of such 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 or the applicable
defect, as applicable in all material respects unless such requirement is
waived by the Note Insurer. If, however, within 45 days after 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 Seller or waived by the Note Insurer and such breach or
defective document, as applicable, materially and adversely affects the
interests of the Noteholders or the Note Insurer generally or in the related
Home Loan (the "Defective Home Loan"), the Seller shall, on or before the
Determination Date next succeeding the end of such 45 day period, either (i)
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) purchase such Defective Home Loan at a purchase price
equal to the Purchase Price by depositing such Purchase Price in the
Collection Account. In addition, the Seller shall indemnify the Issuer and
the Note Insurer for any losses incurred in excess of the proceeds received
from the repurchase or substitution of any such Defective Home Loan. In the
event the Seller is notified that any Mortgaged Property is not free of
damage or not in good repair, regardless of the Seller's knowledge, the
Seller shall (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 Seller shall provide the Servicer, the Note Insurer, the
Indenture Trustee and the Issuer with a certification of a Responsible
Officer on the Determination Date next succeeding the end of such 45 day
period indicating whether the Seller is purchasing the Defective Home Loan or
substituting in lieu of such Defective Home Loan a Qualified Substitute Home
Loan.
Any substitution of Home Loans pursuant to this Section 3.05(a) shall be
accompanied by payment by the Seller 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 Seller
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
SALE AND SERVICING AGREEMENT (IBJ Warehouse) - Page 49
Period and shall be transferred to the Note Payment Account to be retained
therein for application on such Payment Date pursuant to Section 5.01(c).
As to any Home Loan for which the Seller substitutes a Qualified
Substitute Home Loan or Loans, the Seller shall effect such substitution by
delivering (i) to the Issuer a certification executed by a Responsible
Officer of the Seller 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.
The Issuer will be entitled to all payments received on the applicable
Deleted Home Loan on or before the Accounting Date applicable to the
calculation, as of the applicable date of repurchase or substitution, of the
Principal Balance of such Deleted Home Loan, and the Seller shall be entitled
to receive all Post-Release Collections with respect to such Deleted Home
Loan. The Seller shall give written notice to the Issuer, the Servicer (if
the Seller is not then acting as such), the Indenture Trustee and the Note
Insurer that a repurchase or substitution has taken place and 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 Qualified Substitute Home Loan. The Seller shall
promptly deliver to the Issuer, the Servicer (if the Seller is not then
acting as such), the Indenture Trustee and the Note Insurer a copy of the
Home Loan Schedule as so amended.
(b) [RESERVED].
(c) The Servicer shall deposit in the Collection Account all payments
received in connection with a Qualified Substitute Home Loan or Loans after
the date of such substitution. All payments received with respect to
Qualified Substitute Home Loans on or before the date of substitution will be
retained by the Seller. Upon such substitution, such Qualified Substitute
Home Loan or Loans shall be subject to the terms of this Agreement in all
respects, and the Seller 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 Seller 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 related 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 Seller set
forth in this Section 3.05 to cure, purchase or substitute for a Defective
Home Loan (and to indemnify the Issuer and the Note Insurer for certain
losses as provided in this Agreement in connection with a Defective
SALE AND SERVICING AGREEMENT (IBJ Warehouse) - Page 50
Home Loan) constitute the sole remedies of the Issuer, the Indenture Trustee,
the Noteholders and the Note Insurer hereunder respecting a breach of the
representations and warranties contained in Sections 3.03 and 3.04 other
than, (i) with respect to the Note Insurer, those remedies set forth in the
Insurance Agreement and (ii) with respect to the Noteholders, those remedies
available under Article XII following a Conversion Event if such breach is
not cured, corrected or eliminated and, as a result, a Conversion Event
within paragraph (l) of the definition of Conversion Event occurs. 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 the last sentence of Section 2.06(b) or against the Seller
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 notice thereof by the Seller to the Issuer and the Note Insurer,
(ii) failure by the Seller to cure such defect or breach or purchase or
substitute such Home Loan as specified above, and (iii) demand upon the
Seller by the Issuer, the Note Insurer or the Majority Noteholders 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.
ARTICLE IV
ADMINISTRATION AND SERVICING OF THE HOME 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, provided that such standards
shall in no event be lower than 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 Noteholders' and the Note Insurer's
reliance on the Servicer. The Servicer has and shall maintain the
facilities, procedures and experienced personnel necessary to comply with the
servicing standard set forth in this subsection (a) and the duties of the
Servicer set forth in this Agreement relating to the servicing and
administration of the Home Loans. Any fees or other amounts due to any
Subservicer shall be solely the responsibility of the Servicer.
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(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 to
Noteholders, 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 Noteholders and the
Note Insurer in excess of the costs, expenses and other deductions to obtain
such recovery, including without limitation any Servicing Advances therefor
and, if applicable, the outstanding indebtedness secured by all Superior
Liens. The Servicer shall only make a Servicing Advance with respect to a
Home Loan to the extent that the Servicer determines in its reasonable, good
faith judgment that such Servicing Advance would likely be recovered as
aforesaid.
(c) WAIVERS, MODIFICATIONS AND EXTENSIONS. Consistent with the terms
of this Agreement, following a Conversion Date, 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 Noteholders or the Note Insurer; provided, however,
unless the Obligor is in default with respect to the Home Loan, or such
default is, in the judgment of the Servicer, reasonably foreseeable, the
Servicer may not permit any modification with respect to any Home Loan that
would change the Home Loan Interest Rate, defer (subject to the following
paragraph) or forgive the payment of any principal or interest (unless in
connection with the liquidation of the related Home Loan) or extend the final
maturity date on the Home Loan. The Servicer may grant a waiver or enter into
a subordination agreement with respect to the refinancing of the indebtedness
secured by a Superior Lien on the related Mortgaged Property, provided that
the Obligor is in a better financial or cash flow position as a result of
such refinancing, which may include a reduction in the Obligor's scheduled
monthly payment on the indebtedness secured by such Superior Lien. The
Servicer shall notify the Issuer, the Note Insurer and the Indenture Trustee
of any modification, waiver or amendment of any provision of any Home Loan
and the date thereof, and shall deliver to the Custodian for deposit in the
related Indenture Trustee's Home Loan File, an original counterpart of the
agreement relating to such modification, waiver or amendment promptly
following the execution thereof. Notwithstanding the preceding provisions of
this subsection (c), (1) if the Principal Balance of the Home Loans that have
been waived, modified or varied, in the aggregate, equal or exceed two
percent (2%) of the aggregate Principal Balances of the Home Loans as of the
Conversion Date, then any waiver, modification or variance thereafter of any
Home Loan which is not a Defaulted Home Loan shall be subject to the prior
written consent of the Note Insurer; and (2) the Servicer may
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modify, vary or waive any Defaulted Home Loan in a manner that in the
reasonable judgment of the Servicer will be likely to maximize the net
proceeds realizable from such Defaulted Home Loan under the circumstances,
including, without limitation, the deferment or forgiveness of any principal
or interest payments due or to become due thereon; provided, however, that
with respect to the preceding clauses (1) and (2), no such modification,
waiver or variation of a Home Loan pursuant to this subsection (c) shall
involve the execution by the related Obligor of a new Debt Instrument or a
new Mortgage.
The Servicer may, in a manner consistent with accepted servicing
practices, permit a borrower who is selling his principal residence and
purchasing a new one (due to relocation for employment reasons) to substitute
the new Mortgaged Property as collateral for the related Home Loan. In such
event, the Servicer will generally require the borrower to make a partial
prepayment in reduction of the principal balance of the Home Loan.
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.
(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
Noteholder and the Note Insurer, all instruments of satisfaction or
cancellation, or of partial or full release, discharge and all other
comparable instruments, with respect to the Home Loans and with respect to
the related Mortgaged Properties. If reasonably required by the Servicer,
the Issuer and the Indenture Trustee shall furnish the Servicer with any
powers of attorney and other documents necessary or appropriate to enable the
Servicer to carry out its servicing and administrative duties under this
Agreement.
Section 4.02 LIQUIDATION OF HOME LOANS.
(a) In the event that any payment due under any Home Loan and not
postponed pursuant to Section 4.01(c) is not paid when the same becomes due
and payable, or in the event the Obligor fails to perform any other covenant
or obligation under the Home Loan and such failure continues beyond any
applicable grace period, the Servicer shall, in accordance with the standard
of care specified in Section 4.01(a), take such action as it shall deem to be
in the best interest of the Noteholders and the Note Insurer to collect or
liquidate such Home Loan in default in a manner that in the reasonable
judgment of the Servicer will be likely to maximize the net proceeds
realizable therefrom under the circumstances (including foreclosing or
otherwise comparably effecting ownership in such Mortgaged Property in the
name of the Indenture Trustee for the benefit of Noteholders and the Note
Insurer). In addition, the Servicer shall have the power and authority,
exercisable in its sole discretion at any time, to sell any defaulted Home
Loan on behalf of the Indenture Trustee for the benefit of the Noteholders
and the Note Insurer to one or more third party
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investors in a manner that, in the reasonable judgment of the Servicer, will
be likely to maximize the net proceeds realizable therefrom. The Servicer
shall promptly deposit the Net Liquidation Proceeds or Post Liquidation
Proceeds, as applicable, from the sale of such defaulted Home Loans into the
Collection Account in accordance with Section 5.01 of this Agreement. The
Servicer shall give the Indenture Trustee notice of the election of remedies
made pursuant to this Section 4.02. The Servicer shall not be required to
satisfy the indebtedness secured by any Superior Liens on the related
Mortgaged Property or to advance funds to keep the indebtedness secured by
such Superior Liens current. In connection with any collection or
liquidation activities, the Servicer shall exercise collection or liquidation
procedures with the same degree of care and skill as it would exercise or use
under the circumstances in the conduct of its own affairs.
(b) During any Due Period occurring after a Home Loan becomes a
Liquidated Home Loan, the Servicer shall deposit into the Collection Account
any proceeds received by it with respect to such Liquidated Home Loan or the
related Foreclosure Property ("Post Liquidation Proceeds").
(c) After a Home Loan has become a Liquidated Home Loan, the Servicer
shall promptly prepare and forward to the Issuer, the Indenture Trustee, the
Note Insurer, the Arranger and, upon request of any Noteholder, to such
Noteholder 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,
FHLMC, with broad coverage on all officers, employees or other persons acting
in any capacity requiring such persons to handle funds, money, documents or
papers relating to the Home Loans ("Servicer Employees"). Any such fidelity
bond and errors and omissions insurance shall protect and insure the Servicer
against losses, including losses resulting from forgery, theft, embezzlement,
fraud, errors and omissions and negligent acts (including acts relating to
the origination and servicing of loans of the same type as the Home Loans) of
such Servicer Employees. Such fidelity bond shall also protect and insure
the Servicer against losses in connection with the release or satisfaction of
a Home Loan without having obtained payment in full of the indebtedness
secured thereby. In the event of any loss of principal or interest on a Home
Loan for which reimbursement is received from the Servicer's fidelity bond or
errors and omissions insurance, the proceeds from any such insurance will be
deposited in the Collection Account. No provision of this Section 4.03
requiring such fidelity bond and errors and omissions insurance shall
diminish or relieve the Servicer from its duties and obligations as set forth
in this Agreement. Upon the request of the Issuer, the Indenture Trustee or
the Note Insurer, the Servicer shall cause to be delivered to requesting
party a certified true copy of such fidelity bond and insurance policy. On
the Closing Date, such fidelity bond and insurance is maintained by the
Servicer with Reliance Insurance Company of Illinois.
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Section 4.04 TITLE, MANAGEMENT AND DISPOSITION OF FORECLOSURE
PROPERTY.
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
Noteholders and the Note Insurer.
The Servicer shall manage, conserve, protect and operate each
Foreclosure Property for the Indenture Trustee, the Noteholders and the Note
Insurer solely for the purpose of its prudent and prompt disposition and
sale. The Servicer shall, either itself or through an agent selected by the
Servicer, manage, conserve, protect and operate the Foreclosure Property in
the same manner that it manages, conserves, protects and operates other
foreclosure property for its own account, and in the same manner that similar
property in the same locality as the Foreclosure Property is managed. The
Servicer shall attempt to sell the same (and may temporarily lease the same)
on such terms and conditions as the Servicer deems to be in the best interest
of the Noteholders and the Note Insurer.
The disposition of Foreclosure Property shall be carried out by the
Servicer at such price, and upon such terms and conditions, as the Servicer
deems to be in the best interest of the Indenture Trustee, the Noteholders
and the Note Insurer and, as soon as practicable thereafter, the expenses of
such sale shall be paid. The Net Liquidation Proceeds or Post Liquidation
Proceeds, as applicable, from the conservation, disposition and sale of the
Foreclosure Property shall be promptly deposited by the Servicer in the
Collection Account in accordance with Section 5.01 of this Agreement and the
Indenture, which Net Liquidation Proceeds or Post Liquidation Proceeds, as
applicable, shall equal all cash amounts received with respect thereto less
the amounts retained and withdrawn by the Servicer for any related
unreimbursed Servicing Advances and any other fees and expenses incurred in
connection with such Foreclosure Property.
Section 4.05 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION
REGARDING THE HOME LOANS.
The Servicer shall provide to the Issuer, the Indenture Trustee, the
Noteholders, the Note Insurer and the supervisory agents and examiners of
each of the foregoing access to the documentation regarding the Home Loans
required by applicable state and federal regulations, such access being
afforded without charge but only upon reasonable request and during normal
business hours at the offices of the Servicer designated by it.
Section 4.06 SUPERIOR LIENS.
(a) The Servicer shall file (or cause to be filed) of record a request
for notice of any action by a lienholder under a Superior Lien for the
protection of the Indenture Trustee's interest, where permitted by local law
and whenever applicable state law does not require that a junior lienholder
be named as a party defendant in foreclosure proceedings in order to
foreclose such junior lienholder's equity of redemption.
(b) If the Servicer is notified that any lienholder under a Superior
Lien has accelerated or intends to accelerate the obligations secured by such
Superior Lien, or has declared or intends to
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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 Noteholders and the Note Insurer, and/or to
preserve the security of the related Home Loan, including making any
Servicing Advances that are necessary to cure the default or reinstate the
Superior Lien. The Servicer shall immediately notify the Issuer and the
Indenture Trustee of any such action or circumstances. Any Servicing Advances
by the Servicer pursuant to its obligations in this Section 4.06 shall comply
with requirements set forth in Section 4.01(b) hereof.
Section 4.07 SUBSERVICING.
(a) The Servicer may, with the prior written consent of the Note
Insurer and the Indenture Trustee, enter into Subservicing Agreements for any
servicing and administration of Home Loans with any institution which is in
compliance with the laws of each state necessary to enable it to perform its
obligations under such Subservicing Agreement and is an Eligible Servicer.
The Servicer shall give prior written notice to the Issuer, the Indenture
Trustee, the Note Insurer and the Arranger of the appointment of any
Subservicer. The Servicer shall be entitled to terminate any Subservicing
Agreement in accordance with the terms and conditions of such Subservicing
Agreement and to either directly service the related Home Loans or enter into
a Subservicing Agreement with a successor subservicer which qualifies
hereunder.
(b) Notwithstanding any Subservicing Agreement, any of the provisions
of this Agreement relating to agreements or arrangements between the Servicer
and a Subservicer or reference to actions taken through a Subservicer or
otherwise, the Servicer shall remain obligated and primarily liable to the
Issuer, the Indenture Trustee, the Note Insurer and Noteholders for the
servicing and administering of the Home Loans in accordance with the
provisions of this Agreement without diminution of such obligation or
liability by virtue of such Subservicing Agreements or arrangements or by
virtue of indemnification from the Subservicer and to the same extent and
under the same terms and conditions as if the Servicer alone were servicing
and administering the Home Loans. For purposes of this Agreement, the
Servicer shall be deemed to have received payments on Home Loans when the
Subservicer has actually received such payments and, unless the context
otherwise requires, references in this Agreement to actions taken or to be
taken by the Servicer in servicing the Home Loans include actions taken or to
be taken by a Subservicer on behalf of the Servicer. The Servicer shall be
entitled to enter into any agreement with a Subservicer for indemnification
of the Servicer by such Subservicer, and nothing contained in this Agreement
shall be deemed to limit or modify such indemnification.
(c) In the event the Servicer shall for any reason no longer be the
Servicer (including by reason of an Event of Default), the successor
Servicer, on behalf of the Issuer, the Indenture Trustee, the Note Insurer
and the Noteholders 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
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Servicer's interest therein and to have replaced the Servicer as a party to
each Subservicing Agreement to the same extent as if the Subservicing
Agreements had been assigned to the assuming party, except that the Servicer
shall not thereby be relieved of any liability or obligations under the
Subservicing Agreements. The Servicer at its expense and without right of
reimbursement therefor, shall, upon request of the successor Servicer,
deliver to the assuming party all documents and records relating to each
Subservicing Agreement and the Home Loans then being serviced and an
accounting of amounts collected and held by it and otherwise use its best
efforts to effect the orderly and efficient transfer of the Subservicing
Agreements to the assuming party.
(d) As part of its servicing activities hereunder, the Servicer, for
the benefit of the Issuer, the Indenture Trustee, the Note Insurer and the
Noteholders, shall enforce the obligations of each Subservicer under the
related Subservicing Agreement. Such enforcement, including, without
limitation, the legal prosecution of claims and the pursuit of other
appropriate remedies, shall be in such form and carried out to such an extent
and at such time as the Servicer, in its good faith business judgment, would
require were it the owner of the related Home Loans. The Servicer shall pay
the costs of such enforcement at its own expense, and shall be reimbursed
therefor only (i) from a general recovery resulting from such enforcement to
the extent, if any, that such recovery exceeds all amounts due in respect of
the related Home Loan or (ii) from a specific recovery of costs, expenses or
attorneys fees against the party against whom such enforcement is directed.
(e) Any Subservicing Agreement that may be entered into and any other
transactions or services relating to the Home Loans involving a Subservicer
in its capacity as such and not as an originator shall be deemed to be
between the Subservicer and the Servicer alone and none of the Issuer, the
Indenture Trustee, the Noteholders or the Note Insurer shall be deemed
parties thereto or shall have any claims, rights, obligations, duties or
liabilities with respect to the Subservicer in its capacity as such except as
set forth in Section 4.07(c) above.
Section 4.08 SUCCESSOR SERVICERS.
In the event that the Servicer is terminated pursuant to Section 10.01
hereof, or resigns pursuant to Section 9.04 hereof or otherwise becomes
unable to perform its obligations under this Agreement, the Indenture Trustee
will become the successor Servicer or will appoint a successor Servicer in
accordance with the provisions of Section 10.02 hereof; provided that any
successor Servicer, including the Indenture Trustee, shall satisfy the
requirements of an Eligible Servicer and shall be approved by each Rating
Agency and the Note Insurer.
Section 4.09 RULE 144A INFORMATION.
Within seven (7) days after its receipt of a request therefor, the
Servicer shall provide to the Indenture Trustee the information required to
be delivered to Holders and prospective owners of the Notes in connection
with resales of the Notes to permit compliance with Rule 144A of the
Securities Act in connection with such resales. The Issuer shall provide to
the Servicer such information as may be requested by the Servicer for the
Servicer to comply with its obligations as set forth in the preceding
sentence.
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ARTICLE V
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01 COLLECTION ACCOUNT, NOTE PAYMENT ACCOUNT AND NOTE
PRINCIPAL PREPAYMENT ACCOUNT.
(a) (1) ESTABLISHMENT OF COLLECTION ACCOUNT. The Servicer, for the
benefit of the Noteholders and the Note Insurer, shall cause to be
established and maintained one or more Collection Accounts, which shall be
separate Eligible Accounts, which may be interest-bearing, entitled
"COLLECTION ACCOUNT, FIRST BANK NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE,
IN TRUST FOR THE FIRSTPLUS FUNDING TRUST ASSET-BACKED NOTES, SERIES 1997A".
Any 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 acceptable to the Note Insurer. A
copy of such letter agreement shall be furnished to the Indenture Trustee,
the Note Insurer and, upon request of any Noteholder, to such Noteholder.
Funds in each Collection Account shall be invested in accordance with Section
5.08.
As of the Closing Date, the Collection Account shall be established with
the Indenture Trustee, and thereafter upon written notice to the Issuer and
the Indenture Trustee, and upon the prior written consent of the Note
Insurer, the Collection Account may be transferred by the Servicer to a
different depository institution so long as such transfer is to an Eligible
Account.
(2) ESTABLISHMENT OF NOTE PAYMENT ACCOUNT AND THE NOTE PRINCIPAL
PREPAYMENT ACCOUNT. No later than the Closing Date, the Issuer, for the
benefit of the Noteholders and the Note Insurer, shall cause to be
established and maintained with the Indenture Trustee (i) one or more Note
Payment Accounts, which shall be separate Eligible Accounts, which may be
interest-bearing and which shall be entitled "NOTE PAYMENT ACCOUNT, FIRST
BANK NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, IN TRUST FOR THE "FIRSTPLUS
FUNDING TRUST ASSET-BACKED NOTES, SERIES 1997A", and (ii) one or more Note
Principal Prepayment Accounts, which shall be separate Eligible Accounts,
which may be interest-bearing and which shall be entitled "NOTE PRINCIPAL
PREPAYMENT ACCOUNT, FIRST BANK NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, IN
TRUST FOR THE "FIRSTPLUS FUNDING TRUST ASSET-BACKED NOTES, SERIES 1997A".
Funds in the Note Payment Account and the Note Principal Prepayment Account
shall be invested in accordance with Section 5.08.
(b) (1) DEPOSITS TO COLLECTION ACCOUNT. The Servicer shall use its
best efforts to deposit or cause to be deposited (without duplication) within
one (1) Business Day, and shall in any event deposit within two (2) Business
Days, of receipt thereof in the Collection Account and retain therein in
trust for the benefit of the Noteholders and the Note Insurer:
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(i) all payments on account of principal on each Home Loan
received on or after its related Cut-Off Date;
(ii) all payments on account of interest on each Initial Home Loan
received on or after June 1, 1997;
(iii) all payments on account of interest on each Subsequent Home
Loan received on or after its related Cut-Off Date;
(iv) all Net Liquidation Proceeds and Post Liquidation Proceeds
pursuant to Sections 4.02 or 4.04;
(v) all Insurance Proceeds;
(vi) all Released Mortgaged Property Proceeds;
(vii) any amounts payable in connection with the repurchase of any
Home Loan and the amount of any Substitution Adjustment pursuant to
Section 3.05 or Section 2.9(c) of the Indenture;
(viii) any amount required to be deposited in the Collection Account
pursuant to the receipt of proceeds from any fidelity bond or errors and
omission insurance under Section 4.03 or the deposit of the Termination
Price under Section 11.02; and
(ix) 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.
(2) DEPOSITS TO NOTE PAYMENT ACCOUNT. On the third Business Day
prior to each Payment Date (for purposes of this Section 5.01(b)(2) the
"Withdrawal 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, 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 deposit the remainder in the Note Payment Account, (ii)
withdraw all funds on deposit in the Capitalized Interest Account (excluding
any portion thereof that was deposited in the Capitalized Interest Account
with respect to an Additional Note Principal Balance for which the related
Advance Date occurred on or after the immediately preceding Determination
Date) and deposit such funds in the Note Payment Account, and (iii) withdraw
all funds on deposit in the Reserve Fund on such Withdrawal Date, pay the
portion thereof
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representing income or gain from investments credited to the Reserve Fund
during the preceding Due Period to the Issuer Special Purpose Account, and
deposit the remainder in the Note Payment Account.
(c) RETENTIONS IN NOTE PAYMENT ACCOUNT. 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 retain funds in the Note Payment Account
for payment on such Payment Date as indicated in the following order of
priority:
(i) to retain in the Note Payment Account for payment on such
Payment Date pursuant to the Indenture in the following order, (a) to the
Servicer, an amount equal to the Servicing Compensation (net of (A) any
amounts retained prior to deposit into the Collection Account pursuant to
subsection (b)(1) above and (B) 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 all unpaid Servicing
Compensation from prior Due Periods and (b) to the Note Insurer, an amount
equal to the Guaranty Insurance Premium and all unpaid Guaranty Insurance
Premiums from prior Due Periods;
(ii) to retain in the Note Payment Account, for payment pursuant to
the Indenture on such Payment Date, from the Available Payment Amount
remaining after the application of clause (i), the Interest Payment Amount
with respect to such Payment Date;
(iii) to retain in the Note Payment Account, for payment pursuant to
the Indenture on such Payment Date, from the Available Payment Amount
remaining after the application of clauses (i) and (ii) above, the
Principal Payment Amount with respect to such Payment Date;
(iv) to retain in the Note Payment Account, for payment pursuant to
the Indenture on such Payment Date to the Note Insurer, from the Available
Payment Amount remaining after application of clauses (i) through (iii)
above, the Note Insurer Reimbursement Amount;
(v) to retain in the Note Payment Account, for payment pursuant to
Section 5.06 on such Payment Date to the Servicer, from the Available
Payment Amount remaining after application of clauses (i) through (iv)
above, an amount equal to any Servicing Advances previously made by the
Servicer and not previously reimbursed (the "Servicing Advance
Reimbursement Amount" with respect to such Payment Date); and
(vi) to retain in the Note Payment Account, for payment on such
Payment Date to the Noteholders, from the Available Payment Amount
remaining after application of clauses (i) through (v) above, an amount
equal to that portion of the Facility Fee, if any, due and unpaid with
respect to such Payment Date;
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(vii) to retain in the Note Payment Account, for payment on such
Payment Date to the Issuer Special Purpose Account from the remaining
Available Payment Amount after application of clauses (i) through (vi)
above, the amounts remaining after payments as described above, free of
the lien of the Indenture.
(d) ADDITIONAL WITHDRAWALS FROM COLLECTION ACCOUNT. The Indenture
Trustee, at the written 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;
(ii) to withdraw and pay as directed by the Servicer any Post-Release
Collections on deposit in the Collection Account; and
(iii) 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.
Section 5.02 CLAIMS UNDER GUARANTY POLICY.
(a) The Notes will be insured by the Guaranty Policy pursuant to the
terms set forth therein, notwithstanding any provisions to the contrary
contained in the Indenture or this Agreement. All amounts received under the
Guaranty Policy shall be used solely for the payment to Noteholders of
principal and interest on the Notes.
(b) (i) If for any Payment Date a Deficiency Amount exists, the
Indenture Trustee shall complete a notice in the form set forth as EXHIBIT
A to the Guaranty Policy (the "Notice") and shall submit such Notice to the
Fiscal Agent designated in the Guaranty Policy no later than 12:00 noon,
New York time, on the second Business Day preceding such Payment Date. The
Notice shall constitute a claim for a Guaranteed Payments pursuant to the
Guaranty Policy for an amount equal to such Deficiency Amount. Upon
receipt of the Guaranteed Payments, at or prior to the latest time payments
of the Guaranteed Payments are to be made by the Note Insurer pursuant to
the Guaranty Policy, on behalf of the Noteholders, the Indenture Trustee
shall distribute such Guaranteed Payments as part of the Required Payment
Amount under the Indenture.
(ii) In addition, the Indenture Trustee shall make a claim upon the
Guaranty Policy for the full amount of any Preference Amount on the first
Business Day following
SALE AND SERVICING AGREEMENT (IBJ) WAREHOUSE - Page 61
receipt by the Indenture Trustee from the applicable Noteholder of the
following: (i) a certified copy of the order requiring the return of such
preference payment, (ii) an opinion of counsel satisfactory to the Note
Insurer that such order is final and not subject to appeal, (iii) an
assignment in such form as is reasonably required by the Note Insurer,
irrevocably assigning to the Note Insurer all rights and claims of such
Noteholder relating to or arising under the related Note against the debtor
which made such preference payment or otherwise with respect to such
preference payment, and (iv) appropriate instruments to effect the
appointment of the Note Insurer as agent for such Noteholder in any legal
proceeding relating to such preference payment, such instruments being in
a form satisfactory to the Note Insurer. Any proceeds of any such
Preference Amount received by the Indenture Trustee shall be paid pursuant
to the terms of the Guaranty Policy.
(c) The Note Insurer is entitled to the benefit of the following
provisions in the event that a Guaranteed Payment has been made.
Notwithstanding any other provision hereof:
(i) The Indenture Trustee shall immediately apply all moneys
constituting a Guaranteed Payment to the payment to Noteholders of
principal and interest on the Notes by depositing such amounts in the
Note Payment Account for Guaranteed Payments payable on the Notes. All
amounts received under the Guaranty Policy shall be used solely for the
payment to Noteholders of principal and interest on Notes. The Note
Insurer's obligations under the Guaranty Policy with respect to a
particular Guaranteed Payment shall be discharged to the extent funds equal
to the applicable Guaranteed Payment are received by the Indenture Trustee,
whether or not such funds are properly applied by the Indenture Trustee.
The parties hereto recognize that the making of the Guaranteed Payment does
not relieve any of the parties hereto of any obligation hereunder or any
of the Basic Documents.
(ii) The parties hereto recognize that, to the extent that the Note
Insurer makes payments, directly or indirectly, on account of principal of
or interest on the Notes, the Note Insurer shall be subrogated to the
rights of the Noteholders to receive payments of principal and interest in
accordance with the terms hereof and of the Indenture.
(iii) To the extent the Note Insurer is owed any Note Insurer
Reimbursement Amount (including, without limitation, any unreimbursed
Guaranteed Payments made under the Guaranty Policy plus interest accrued
thereon as provided in the Insurance Agreement), the Note Insurer shall be
entitled to payments pursuant to the Indenture, and the Indenture Trustee
shall otherwise treat the Note Insurer as the owner of such rights to
payments of any Note Insurer Reimbursement Amount.
(iv) The Note Insurer shall have the right to institute any suit,
action or proceeding at law or in equity under the same terms as a
Noteholder may institute any action.
SALE AND SERVICING AGREEMENT (IBJ) WAREHOUSE - Page 62
Section 5.03 [RESERVED].
Section 5.04 [RESERVED].
Section 5.05 [RESERVED].
Section 5.05 CAPITALIZED INTEREST ACCOUNT.
(a) ESTABLISHMENT. No later than the Closing Date, the Issuer, for the
benefit of the Noteholders and the Note Insurer, shall cause to be
established and maintained with the Indenture Trustee one or more separate
Eligible Accounts entitled "CAPITALIZED INTEREST ACCOUNT, FIRST BANK NATIONAL
ASSOCIATION, AS INDENTURE TRUSTEE, IN TRUST FOR THE FIRSTPLUS FUNDING TRUST
ASSET-BACKED NOTES, SERIES 1997A". Funds in the Capitalized Interest Account
shall be invested in accordance with Section 5.08.
(b) DEPOSITS. The Issuer shall deposit each Capitalized Interest Account
Deposit in the Capitalized Interest Account.
(c) FINAL PAYMENT. Upon the termination of this Agreement as provided
in Section 11.01(a), any amount remaining on deposit in the Capitalized
Interest Account shall be paid to the Issuer and any Permitted Investments in
the Capitalized Interest Account shall be transferred to the Issuer.
(d) WITHDRAWALS. Any funds on deposit in the Capitalized Interest
Account shall be applied as provided in Section 5.01(b)(2).
Section 5.07 RESERVE FUND.
(a) ESTABLISHMENT. No later than the Closing Date, the Issuer, for the
benefit of the Noteholders and the Note Insurer, shall cause to be
established and maintained with the Indenture Trustee one or more separate
Eligible Accounts entitled "RESERVE FUND, FIRST BANK NATIONAL ASSOCIATION, AS
INDENTURE TRUSTEE, IN TRUST FOR THE FIRSTPLUS FUNDING TRUST ASSET-BACKED
NOTES, SERIES 1997A". Funds in the Reserve Fund shall be invested in
accordance with Section 5.08.
(b) DEPOSITS. From time to time, the Issuer may deposit funds in the
Reserve Fund.
(c) FINAL PAYMENT. Upon the termination of this Agreement as provided
in Section 11.01(a), any amount remaining on deposit in the Reserve Fund
shall be paid to the Issuer and any Permitted Investments in the Reserve Fund
shall be transferred to the Issuer.
(d) WITHDRAWALS. Any funds on deposit in the Reserve Fund shall be
applied as provided in Section 5.01(b)(2).
SALE AND SERVICING AGREEMENT (IBJ) WAREHOUSE - Page 63
Section 5.08 TRUST ACCOUNTS; TRUST ACCOUNT PROPERTY.
(a) CONTROL OF TRUST ACCOUNTS. Each of the Trust Accounts established
hereunder has been pledged by the Issuer to the Indenture Trustee under the
Indenture and shall be subject to the lien of the Indenture. In addition to
the provisions hereunder, each of the Trust Accounts shall also be
established and maintained pursuant to the Indenture. Amounts distributed
from each Trust Account in accordance with the Indenture and this Agreement
shall be released from the lien of the Indenture upon such payment 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 Noteholders, the Note Insurer and the Issuer, as the case may be, and the
Indenture Trustee shall have sole signature and withdrawal authority with
respect thereto.
The Servicer shall have the power, revocable by the Indenture Trustee, to
instruct the Indenture Trustee to make withdrawals and payments from the Trust
Accounts for the purpose of permitting the Servicer to carry out its respective
duties hereunder or permitting the Indenture Trustee to carry out its duties
herein or under the Indenture.
(b) (1) INVESTMENT OF FUNDS. So long as no Event of Default shall
have occurred and be continuing, the funds held in any Trust Account may be
invested (to the extent practicable and consistent with any requirements of
the Code) in Permitted Investments, as directed in writing or by telephone or
facsimile transmission by the Servicer, in the case of the Collection
Account, or by the Issuer, in the case of each other Trust Account, and
confirmed in writing by the Servicer or the Issuer, as applicable. In any
case, funds in any Trust Account must be available for withdrawal without
penalty, and any Permitted Investments must mature or otherwise be available
for withdrawal, not later than three (3) Business Days (except with respect
to the Note Payment 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 5.08(b)(2) below. All interest and any other investment
earnings on amounts or investments held in any Trust Account shall be
deposited into such Trust Account immediately upon receipt by the Indenture
Trustee. All Permitted Investments in which funds in any Trust Account are
invested must be held by or registered in the name of "FIRST BANK NATIONAL
ASSOCIATION, AS INDENTURE TRUSTEE, IN TRUST FOR THE FIRSTPLUS FUNDING TRUST
ASSET-BACKED NOTES, SERIES 1997A".
SALE AND SERVICING AGREEMENT (IBJ) WAREHOUSE - Page 64
(2) INSUFFICIENCY AND LOSSES IN TRUST ACCOUNTS. If any amounts
are needed for disbursement from any Trust Account held by or on behalf of
the Indenture Trustee and sufficient uninvested funds are not available to
make such disbursement, the Indenture Trustee shall cause to be sold or
otherwise converted to cash a sufficient amount of the investments in such
Trust Account. The Indenture Trustee 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 to perform in accordance with
this Section 5.08.
If any losses are realized in connection with any investment in any
Trust Account pursuant to this Agreement and the Indenture, then the Servicer,
with respect to the Collection Account, or the Issuer, with respect to each
other Trust Account, shall deposit the amount of such losses (to the extent not
offset by income from other investments in such Trust Account) in such Trust
Account immediately upon the realization of such loss or, to the extent that
the Servicer or the Issuer, as applicable fails to deposit any portion of such
amount, the Issuer or the Servicer, as applicable, shall deposit any
insufficiency from such failure in such Trust Account. All interest and any
other investment earnings on amounts held in any Trust Account shall be taxed
to the Issuer, and for federal and state income tax purposes the Issuer shall
be deemed to be the owner of each Trust Account.
(c) Subject to Section 6.1 of the Indenture, the Indenture Trustee
shall not in any way be held liable by reason of any insufficiency in any
Trust Account held by the Indenture Trustee resulting from any investment
loss on any Permitted Investment included therein (except to the extent that
the Indenture Trustee is the obligor with respect to such Permitted
Investment and has defaulted thereon).
(d) With respect to the Trust Account Property, the Indenture Trustee
acknowledges and agrees that:
(1) the Indenture Trustee shall act as Securities Intermediary
(in such capacity, the "Securities Intermediary") with respect to the
investment of funds in the Reserve Account. The Issuer shall treat
the funds and other assets in the Reserve Account as its own for
federal, state and local income tax and franchise tax purposes and
shall report on its tax returns all income and gain from the Reserve
Account. The Indenture Trustee shall not, without the prior written
consent of the Note Insurer, accept for credit to the Reserve Account
any Trust Account Property as to which the Indenture Trustee has
knowledge of any adverse claim thereto.
(2) any Trust Account Property that is held in deposit accounts
shall be held solely in the Eligible Accounts and, subject to the last
sentence of Section 5.08(a), each such Eligible Account shall be
subject to the exclusive custody and control of the Indenture Trustee,
and the Indenture Trustee shall have sole signature authority with
respect thereto;
SALE AND SERVICING AGREEMENT (IBJ) WAREHOUSE - Page 65
(3) any Trust Account Property that constitutes Physical
Property shall be delivered to the Indenture Trustee in accordance
with paragraph (a) of the definition of "Delivery" and shall be held,
pending maturity or disposition, solely by the Indenture Trustee or
a securities intermediary (as such term is defined in Section
8-102(a)(14) of the UCC) acting solely for the Indenture Trustee;
(4) any Trust Account Property that is a book-entry security
held through the Federal Reserve System pursuant to federal book-entry
regulations shall be delivered in accordance with paragraph (b) of the
definition of "Delivery" and shall be maintained by the Indenture
Trustee, pending maturity or disposition, through continued book-entry
registration of such Trust Account Property as described in such
paragraph; and
(5) any Trust Account Property that is an "uncertificated
security" under Article VIII of the UCC and that is not governed by
clause (3) above shall be delivered to the Indenture Trustee in
accordance with paragraph (c) of the definition of "Delivery" and
shall be maintained by the Indenture Trustee, pending maturity or
disposition, through continued registration of the Indenture Trustee's
(or its nominee's) ownership of such security, directly or through one
or more securities intermediaries.
(6) the Securities Intermediary hereby expressly agrees that:
(i) all matters relating to the Reserve Account shall be governed by
the laws of the State of Minnesota; (ii) all Trust Account Property
held by the Securities Intermediary on behalf of the Indenture Trustee
in the Reserve Account shall be treated as "financial assets" (as
defined in Article 8 of the Minnesota Uniform Commercial Code, it
being understood that the Securities Intermediary will not be
responsible for the determination that any Trust Account Property is
a "financial asset"); (iii) the Securities Intermediary will treat
the Indenture Trustee as entitled to exercise the rights comprising
the financial assets credited to the Reserve Account; (iv) the
financial assets credited to the Reserve Account shall be registered
in the name of, and payable to the order of or specially indorsed to
the Indenture Trustee as Securities Intermediary and shall not be
registered in the name of, payable to the order of, or specially
indorsed to any Person other than the Indenture Trustee; and (v) the
Securities Intermediary will not agree to comply with entitlement
orders originated by any Person with respect to the financial asset
held in the Reserve Account other than the Indenture Trustee.
(7) in the event of any change of law regarding matters
relating to the perfection of security interests in any Trust Account,
the amounts or any Permitted Investments held therein, the Issuer
shall cause to be furnished to the Indenture Trustee, the Note Insurer
and each Rating Agency, an Opinion of Counsel addressing such matters
and if necessary, the Issuer shall cooperate with the Indenture
Trustee in taking all actions necessary to comply with the change in
law.
SALE AND SERVICING AGREEMENT (IBJ) WAREHOUSE - Page 66
Section 5.09 ALLOCATION OF LOSSES.
In the event that Net Liquidation Proceeds, Insurance Proceeds or Released
Mortgaged Property Proceeds on a Liquidated Mortgage Loan are less than the
related Principal Balance plus accrued interest thereon, or any Obligor makes a
partial payment of any Monthly Payment due on a Mortgage Loan, such Net
Liquidation Proceeds, Insurance Proceeds, Released Mortgaged Property Proceeds
or partial payment shall be applied to payment of the related Debt Instrument,
first to interest accrued at the Home Loan Interest Rate and then to principal.
Section 5.10 ADVANCE ACCOUNT.
(a) ESTABLISHMENT. No later than the Closing Date, the Issuer shall
cause to be established and maintained with the Indenture Trustee one or more
separate Eligible Accounts entitled "ADVANCE ACCOUNT, FIRST BANK NATIONAL
ASSOCIATION, AS INDENTURE TRUSTEE, IN TRUST FOR THE FIRSTPLUS FUNDING TRUST
ASSET-BACKED NOTES, SERIES 1997A". Funds in the Advance Account shall not be
invested.
(b) DEPOSITS AND WITHDRAWALS. Additional Note Principal Balances shall
be deposited in and withdrawn from the Advance Account as provided in
Section 2.02(c).
ARTICLE I.
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. Upon a written request from the Arranger following a Conversion
Event, the Servicer shall also deliver such magnetic tape or computer disk to
the Arranger. No later than each Determination Date, the Servicer shall
deliver to the Note Insurer a computer disk containing such information
regarding the servicing of the Home Loans during the related Due Period as
the Note Insurer may reasonably require.
(b) (1) Subject to the modification of the Servicer's Monthly
Remittance Report by the Servicer with the prior written consent of the
Majority Noteholders 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 Remittance Report" with respect to such Payment Date) to the Seller,
the Noteholders, the Note Insurer, the Arranger and each Rating Agency,
stating the date of original issuance of the Notes (day, month and year), the
name of the Issuer (I.E., "FIRSTPLUS FUNDING TRUST"), the series designation
of the Notes (I.E., "Series 1997A"), the date of this Agreement and the
following information:
SALE AND SERVICING AGREEMENT (IBJ) WAREHOUSE - Page 67
(i) the Available Payment Amount, the Interest Payment Amount and
the calculation with respect to such amount, the Principal Payment Amount
and the Required Payment Amount with respect to the related Payment Date;
(ii) the Aggregate Note Principal Balance and the Pool Principal
Balance as of the first day of the related Due Period and after giving
effect to payments made to the Noteholders on such Payment Date;
(iii) the amount of principal and interest received on the Home Loans
during the related Due Period;
(iv) the Servicing Compensation and the Guaranty Insurance Premium
for such Payment Date;
(v) the Overcollateralization Amount with respect to such Payment
Date, the Required Overcollateralization Amount with respect to 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;
(vi) the amount remaining on deposit in the Reserve Fund on such
Payment Date after giving effect to the payments made to Noteholders on
such Payment Date and the amount on deposit in the Capitalized Interest
Account on the related Determination Date;
(vii) the weighted average maturity of the Home Loans and the
weighted average Home Loan Interest Rate of the Home Loans, each as of the
last day of the related Due Period.
(viii) certain performance information, including delinquency and
foreclosure information with respect to the Home Loans;
(ix) the amount of any Guaranteed Payment included in the amounts
paid to the Noteholders on such Payment Date;
(x) the amount of any Note Insurer Reimbursement Amount to be paid
to the Note Insurer on such Payment Date and the amount of any Note Insurer
Reimbursement Amount remaining unsatisfied following such payment;
(xi) 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;
(xii) the number of and aggregate Principal Balance of all Home Loans
in foreclosure proceedings (other than any Home Loans described in clause
(xiv)) and the percent of the aggregate Principal Balances of such Home
Loans to the aggregate Principal
SALE AND SERVICING AGREEMENT (IBJ) WAREHOUSE - Page 68
Balances of all Home Loans, all as of the close of business on the first
day of the related Due Period;
(xiii) the number of and the aggregate Principal Balance of the Home
Loans in bankruptcy proceedings (other than any Home Loans described in
clause (xiii)) and the percent of the aggregate Principal Balances of such
Home Loans to the aggregate Principal Balances of all Home Loans, all as
of the close of business on the first day of the related Due Period;
(xiv) the number of Foreclosure Properties, the aggregate Principal
Balance of the related Home Loans, the book value of such Foreclosure
Properties and the percent of the aggregate Principal Balances of such
Home Loans to the aggregate Principal Balances of all Home Loans, all as
of the close of business on the first day of the related Due Period;
(xv) during the related Due Period, the aggregate Principal Balance
of Home Loans for each of the following: (A) that became Defaulted Home
Loans, (B) that became Liquidated Home Loans, (C) that became Deleted Home
Loans pursuant to Section 3.05(a) as a result of such Deleted Home Loans
being Defective Home Loans, and (D) that became Deleted Home Loans pursuant
to Section 2.9(c) of the Indenture as a result of such Deleted Home Loans
being Defaulted Home Loans or a Home Loan in foreclosure, default or
imminent default, including the foregoing amounts by loan type (I.E.,
Combination Loans or Debt Consolidation Loans);
(xvi) from the Closing Date through the most current Due Period, the
cumulative aggregate Principal Balance of Home Loans for each of the
following: (A) that became Defaulted Home Loans, (B) that became Liquidated
Home Loans and (C) that became Deleted Home Loans pursuant to Section
3.05(a) as a result of such Deleted Home Loans being Defaulted Home Loans
or a Home Loan in foreclosure, default or imminent default, including the
foregoing amounts by loan type (I.E., Combination Loans or Debt
Consolidation Loans);
(xvii) the scheduled principal payments and the principal prepayments
received with respect to the Home Loans during the related Due Period;
(xviii) the number of and aggregate principal balance of all Home
Loans (both during the related Due Period and in aggregate since the
Closing Date) repurchased or substituted pursuant to Sections 3.05 or
4.02 or Section 2.9(c) of the Indenture;
(xix) the ABS Yield Spread, the Base Treasury Yield and the Minimum
Spread Percent, each as of the related Determination Date;
(xx) the then-applicable Overcollateralization Base Percent
Requirement, the then-applicable Overcollateralization Targeted Percent
Requirement, and the then-applicable Required Credit Support Multiple;
SALE AND SERVICING AGREEMENT (IBJ) WAREHOUSE - Page 69
(xxi) the Net Defaulted Loan losses incurred during the related Due
Period and the Default Rate with respect to the related Payment Date;
(xxii) the Delinquency Rate (30 day) and the Delinquency Rate
(60 day), each with respect to the related Payment Date; and
(xxiii) such other information as may be reasonably requested by the
Indenture Trustee or Note Insurer.
(2) No later than seven days following a repurchase or substitution
pursuant to Sections 3.05 or 4.02 or Section 2.9 of the Indenture, the Servicer
shall notify each Rating Agency and the Note Insurer of the aggregate principal
balances of the Home Loans repurchased or substituted and (if applicable) the
relevant Substitution Adjustment.
All reports prepared by the Servicer of the withdrawals from and deposits
in the Collection Account will be based in whole or in part upon the
information provided to the Indenture Trustee by the Servicer, and the
Indenture Trustee may fully rely upon and shall have no liability with respect
to such information provided by the Servicer.
(c) No later than three (3) Business Days before each Payment Date, the
Servicer shall prepare and distribute to the Note Insurer a monthly statement
that includes the cumulative aggregate Principal Balance of Home Loans that
became Deleted Home Loans pursuant to Section 3.05(a) as a result of such
Deleted Home Loans being Defective Home Loans from the Closing Date through
the most current Due Period.
(d) No later than three (3) Business Days following a written request
by the Arranger, the Servicer shall deliver a report to the Arranger setting
forth the ABS Yield Spread as of the date of such request.
(e) On each Advance Date and Note Principal Prepayment Date, the
Servicer shall deliver a report to the Arranger setting forth the weighted
average Home Loan Interest Rate of the Home Loans as of such Advance Date or
Note Principal Prepayment Date, after giving effect to the Advance or the
Note Principal Prepayment, as applicable.
(f) Upon reasonable advance notice in writing, the Indenture Trustee
will provide to each Noteholder which is a savings and loan association, bank
or insurance company access to information and documentation regarding the
Home Loans sufficient to permit such Noteholder to comply with applicable
regulations of the FDIC or other regulatory authorities with respect to such
Noteholder's investment in the Notes.
(g) The Indenture Trustee shall forward to each Noteholder during the
term of this Agreement, such periodic, special, or other reports, including
information tax returns or reports required with respect to the Notes,
including Internal Revenue Service Forms 1099 and other similar reports that
are required to be filed by the Indenture Trustee or its agent, whether or
not provided for
SALE AND SERVICING AGREEMENT (IBJ) WAREHOUSE - Page 70
herein, as shall be necessary, reasonable, or appropriate with respect to the
Noteholders, 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 Noteholders may reasonably
require.
(h) Reports and computer tapes furnished by the Servicer and the
Indenture Trustee pursuant to this Agreement shall be deemed confidential and
of proprietary nature, and shall not be copied or distributed except in
connection with the purposes and requirements of this Agreement. No Person
entitled to receive copies of such reports or tapes shall use the information
therein for the purpose of soliciting the customers of the Seller or the
Servicer or for any other purpose except as set forth in this Agreement.
Section 6.02 REPORTS OF FORECLOSURE AND ABANDONMENT OF MORTGAGED
PROPERTY.
Each year beginning in 1997 the Servicer, at its expense, shall make the
reports of foreclosures and abandonments of any Mortgaged Property required by
Section 6050J of the Code. The reports from the Servicer shall be in form and
substance sufficient to meet the reporting requirements imposed by such Section
6050J of the Code.
Section 6.03 SPECIFICATION OF CERTAIN TAX MATTERS.
Each Noteholder shall provide the Indenture Trustee with a completed and
executed Form W-9 prior to purchasing a Note. 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 made to any Noteholder 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
SALE AND SERVICING AGREEMENT (IBJ Warehouse) - Page 71
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 Noteholders or the Note Insurer may have under the
mortgage instruments. The Servicer shall maintain the fidelity bond and errors
and omissions insurance as provided for in Section 4.03 insuring the Servicer
against any loss it may sustain with respect to any Home Loan not satisfied in
accordance with the procedures set forth herein.
Upon the payment in full of any Home Loan, or the receipt by the Servicer
of a notification that payment in full will be escrowed in a manner customary
for such purposes, the Servicer will immediately notify the Custodian by an
Officers' Certificate (which certificate shall include a statement to the
effect that all amounts received or to be received in connection with such
payment which are required to be deposited in the Collection Account pursuant
to Section 5.01(b) have been or will be so deposited) of a Servicing Officer
and shall request delivery to it of the Indenture Trustee's Home Loan File.
Upon receipt of such certification and request and in accordance with Section
2.9 of the Indenture, the Custodian shall promptly release the related
Indenture Trustee's Home Loan File to the Servicer. Expenses incurred in
connection with any instrument of satisfaction or deed of reconveyance shall be
payable only from and to the extent of Servicing Compensation and shall not be
chargeable to the Collection Account or the Note Payment 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
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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. 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 Substitution or release of a lien
of the Indenture pursuant to Section 2.9(c) of the Indenture 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
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Home Loan and that the form of the transaction is solely to comply with or
facilitate the transaction under such local laws; (iii) that the Home Loan
following the proposed assignment will have a rate of interest at 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 (i) any servicing fees owed or payable to any Subservicer
and any custodial fees owed or payable to the Custodian and (ii) on each
Payment Date, the Indenture Trustee Fee to the Indenture Trustee. 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(c) of the Indenture.
The Servicer shall be required to pay all expenses incurred by it in
connection with its servicing activities hereunder and shall not be entitled to
reimbursement therefor except as specifically provided for herein. The
Servicer also agrees to pay (i) all reasonable costs and expenses incurred by
the Indenture Trustee or the Seller in investigating the Servicer's activities
hereunder when, in the reasonable opinion of the Indenture Trustee or the
Seller, such investigation is warranted on the basis of adverse information
about the Servicer obtained from a reasonably reliable source and (ii) all
reasonable costs and expenses incurred by any successor servicer or the
Indenture Trustee in replacing the Servicer in the event of a default by the
Servicer in the performance of its duties under the terms and conditions of
this Agreement.
The Seller shall pay the annual Rating Agency monitoring fees with respect
to the Notes; provided, that if the Seller fails to pay such fees and is no
longer financially capable of paying such fees, then the Servicer shall pay
such fees at its own expense.
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 August 1997, the Servicer
will deliver to the Indenture Trustee, the Issuer, the Note Insurer and to each
Noteholder, 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
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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 Issuer, the Indenture Trustee, the Noteholders,
the Note Insurer and each Rating Agency (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 Noteholder, the Indenture Trustee, the Issuer, the Note Insurer and
each of their respective agents shall have the right upon reasonable prior
notice, during normal business hours and as often as reasonably required, to
examine, audit and copy, at the expense of the Person making such examination,
any and all of the books, records or other information of the Servicer
(including without limitation any Subservicer to the extent provided in the
related Subservicing Agreement) whether held by the Servicer or by another on
behalf of the Servicer, which may be relevant to the performance or observance
by the Servicer of the terms, covenants or conditions of this Agreement. Each
Noteholder, the Indenture Trustee, the Issuer and the Note Insurer agree that
any information obtained pursuant to the terms of this Agreement shall be held
confidential.
Section 7.07 REPORTS TO THE INDENTURE TRUSTEE; COLLECTION ACCOUNT
STATEMENTS.
If the Collection Account is not maintained with the Indenture Trustee,
then not later than 25 days after each Record Date, the Servicer shall forward
to the Indenture Trustee and the Note Insurer a statement, certified by a
Servicing Officer, setting forth the status of the Collection Account as of the
close of business on the preceding Record Date and showing, for the period
covered by such statement, the aggregate of deposits into the Collection
Account for each category of deposit specified in Section 5.01(b)(1), the
aggregate of withdrawals from the Collection Account for each
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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
Notes, Noteholders may request that the Servicer make available to the
Noteholders and to prospective Noteholders, and the Note Insurer may request to
receive, 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 requests shall not be unreasonably denied.
The Servicer also agrees to make available on a reasonable basis to the
Noteholders, any prospective Noteholder and the Note Insurer a knowledgeable
financial or accounting officer for the purpose of answering reasonable
questions respecting recent developments affecting the Servicer or the
financial statements of the Servicer and to permit the Noteholders, any
prospective Noteholder and the Note Insurer to inspect the Servicer's servicing
facilities during normal business hours for the purpose of satisfying the
Noteholders and such prospective Noteholder and the Note Insurer that the
Servicer has the ability to service the Home Loans in accordance with this
Agreement.
ARTICLE IX
CERTAIN MATTERS RELATING TO THE SERVICER AND THE SELLER
Section 9.01 INDEMNIFICATION; THIRD PARTY CLAIMS.
(a) The Servicer agrees to indemnify and hold the Indenture Trustee,
the Issuer, the Seller (if the Seller is not also acting as Servicer), the Note
Insurer, each Noteholder and the Arranger, together with their respective
directors, officers, employees and agents, harmless from and against any and
all claims, losses, penalties, fines, forfeitures, legal fees and related
costs, judgments, and any other costs, fees and expenses that the Indenture
Trustee, the Issuer, the Seller, the Note Insurer, any Noteholder or the
Arranger 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 (if the Seller is not also
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acting as Servicer), the Note Insurer, each Noteholder and the Arranger 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 (if the Seller is not also acting as Servicer), the
Indenture Trustee, the Issuer, the Seller, the Note Insurer, any Noteholder
and/or the Arranger in respect of such claim.
(b) The Seller agrees to indemnify and hold the Indenture Trustee,
the Issuer, the Servicer (if the Seller is not also acting as Servicer), the
Note Insurer, each Noteholder and the Arranger, together with their respective
directors, officers, employees and agents, harmless from and against any and
all claims, losses, penalties, fines, forfeitures, legal fees and related
costs, judgments, and any other costs, fees and expenses that the Indenture
Trustee, the Issuer, the Servicer, the Note Insurer, any Noteholder or the
Arranger 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 (if the Seller is not
also acting as Servicer), the Note Insurer, each Noteholder and the Arranger 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 (if the Seller is not also acting as Servicer), the Indenture Trustee,
the Issuer, the Note Insurer, any Noteholder and/or the Arranger in respect of
such claim.
(c) The obligations of the Servicer and the Seller under this
Section 9.01 shall survive the termination of this Agreement and the
resignation and removal of the Indenture Trustee.
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
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notwithstanding. The Servicer shall send notice of any such merger,
conversion, consolidation or succession to the Indenture Trustee, the Issuer
and the Note Insurer.
Section 9.03 LIMITATION ON LIABILITY OF THE SERVICER AND OTHERS.
The Servicer and any director, officer, employee or agent of the Servicer
may rely on any document of any kind which it in good faith reasonably believes
to be genuine and to have been adopted or signed by the proper authorities
respecting any matters arising hereunder. Subject to the terms of Section 9.01
herein, the Servicer shall have no obligation to appear with respect to,
prosecute or defend any legal action which is not incidental to the Servicer's
duty to service the Home Loans in accordance with this Agreement or its other
duties hereunder.
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 (if
the Seller is not also acting as Servicer), the Indenture Trustee, the Issuer,
the Note Insurer and the Majority Noteholders, or upon the determination that
the Servicer's duties hereunder are no longer permissible under applicable law
and such incapacity cannot be cured by the Servicer. Any such determination
permitting the resignation of the Servicer shall be evidenced by a written
opinion of counsel (who may be an employee of the Servicer) to such effect
delivered to the Indenture Trustee, the Issuer, the Note Insurer and the Seller
(if the Seller is not also acting as Servicer), which opinion of counsel shall
be in form and substance acceptable to the Indenture Trustee, the Issuer and
the Note Insurer. No such resignation shall become effective until 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 (if the Seller is not also acting as Servicer), the Indenture
Trustee, the Issuer, the Note Insurer and the Majority Noteholders; provided,
however, the Servicer may assign this Agreement without the prior written
consent of the Seller, the Indenture Trustee and the Issuer, but with the prior
written consent of the Note Insurer and the Majority Noteholders to (i) the
Indenture Trustee or (ii) any Person (A) to whom such assignment is consented
to in writing by the Indenture Trustee, the Issuer, the Seller and the Note
Insurer, (B) that services not less than $25,000,000 in aggregate outstanding
principal amount of loans similar in type to the Home Loans, (C) that has a net
worth of not less than $2,500,000, (D) that has a blanket fidelity bond and
errors and omissions insurance coverage satisfying the requirements set forth
in Section 4.03 and (E) that will not cause any rating of the Notes in effect
immediately prior to such assignment to be qualified, downgraded or withdrawn,
as evidenced by a letter from each Rating Agency to such effect. Any such
assignment to a successor Servicer (other than the Indenture Trustee) shall be
effective only upon delivery to the Indenture Trustee, the Issuer, the Seller
and the Note Insurer of an agreement, duly executed by the Servicer and such
successor servicer in a form reasonably satisfactory to the Indenture Trustee
and the Issuer, in which such successor servicer shall assume the due and
punctual performance of each covenant and condition to be performed or observed
by the Servicer hereunder.
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Section 9.05 RELATIONSHIP OF SERVICER TO ISSUER AND THE SELLER.
The relationship of the Servicer (and of any successor to the Servicer as
servicer under this Agreement) to the Issuer and the Seller 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
Seller.
ARTICLE X
DEFAULT
Section 10.01 EVENTS OF DEFAULT.
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, a default in the observance of which is
elsewhere in this Section specifically dealt with), which failure
continues unremedied for a period of 60 days after the earlier to occur
of (x) any Responsible Officer of the Servicer first acquiring actual
knowledge thereof and (y) 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 Noteholder or the Note
Insurer; or
(iii) the entry by a court or supervisory authority having
jurisdiction of (A) 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) appointing 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
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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 Noteholders or the Note Insurer (A) shall
receive notice from the Servicer that the Servicer is no longer able to
discharge its duties under this Agreement or (B) shall determine, in
their reasonable judgment and based upon published reports (including
wire services) or such other information which either the Majority
Noteholders or the Note Insurer may, in good faith, deem reliable, that
the Servicer
a) has experienced a material adverse change in its business,
assets, liabilities, operations, condition (financial or
otherwise) or prospects,
b) has defaulted on any of its material obligations, or
c) has ceased to conduct its business in the ordinary course; or
(vii) following a Conversion Date, as of any Determination Date,
the total Expected Loan Losses (as defined below) exceed (1) commencing
on the Conversion Date up to the fifth (5th) anniversary of the
Conversion Date with respect to the Home Loans in the Home Loan Pool as
of the Conversion Date, 12% of the Pool Principal Balance as of the
Conversion Date, or (2) thereafter up to the tenth (10th) anniversary of
the Conversion Date with respect to the Home Loans in the Home Loan Pool
as of the Conversion Date, 18% of the Pool Principal Balance as of such
Conversion Date (where the "Expected Loan Losses" as of any
Determination Date shall be the sum of (A) the cumulative Net Loan
Losses as of such Determination Date, plus (B) the cumulative accrued
and uncollected interest on the Liquidated Home Loans as of such
Determination Date, plus (C) 25% of the aggregate Principal Balance as
of such Determination Date of the Home Loans which are then more than 30
but less than 60 days delinquent, plus (D) 50% of the aggregate
Principal Balance as of such Determination Date of the Home Loans which
are then more than 60 but less than
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90 days delinquent, plus (E) 100% of the aggregate Principal Balance as of
such Determination Date of the Home Loans which are then more than 90 days
delinquent).
then, and in each and every such case, so long as an Event of Default shall not
have been remedied, the Majority Noteholders, the Indenture Trustee or the
Issuer by notice in writing to the Servicer may, in addition to whatever rights
such Person may have at law or equity to damages, including injunctive relief
and specific performance, and with the consent of the Note Insurer (which
consent shall not be unreasonably withheld), terminate all the rights and
obligations of the Servicer under this Agreement and in and to the Home Loans
and the proceeds thereof, as servicer under this Agreement. Upon receipt by
the Servicer of such written notice, all authority and power of the Servicer
under this Agreement, whether with respect to the Home Loans or otherwise,
shall, subject to Section 10.02, pass to and be vested in a successor servicer
acceptable to the Note Insurer, or the Indenture Trustee if a successor
servicer cannot be retained in a timely manner, and the successor servicer, or
Indenture Trustee, as applicable, is hereby authorized and empowered to execute
and deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, any
and all documents and other instruments and do or cause to be done all other
acts or things necessary or appropriate to effect the purposes of such notice
of termination, including, but not limited to, the transfer and endorsement or
assignment of the Home Loans and related documents. The Servicer agrees to
cooperate with the successor servicer in effecting the termination of the
Servicer's responsibilities and rights hereunder, including, without
limitation, the transfer to the successor servicer for administration by it of
all amounts which shall at the time be credited by the Servicer to each
Collection Account or thereafter received with respect to the Home Loans.
Section 10.02 INDENTURE TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR.
On and after the date the Servicer receives a notice of termination
pursuant to Section 10.01, or the Indenture Trustee receives the resignation of
the Servicer evidenced by an opinion of counsel or accompanied by the consents
required by Section 9.04 then, subject to Section 4.08, the Indenture Trustee,
with the consent of the Majority Noteholders, shall appoint a successor
Servicer 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 the Indenture Trustee assumes the
responsibilities of the Servicer pursuant to this Section 10.02 (a) it shall do
so in its individual capacity and not as Indenture Trustee and (b) 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 for the Indenture Trustee 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
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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 the succession of a successor
Servicer 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 by it 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 hereunder. 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 Noteholder, the Issuer, the
Seller and the Note Insurer 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 Noteholders 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 the Indenture
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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 as
provided in this Agreement.
Section 10.03 WAIVER OF DEFAULTS.
The Majority Noteholders may with the prior consent of the Note Insurer,
on behalf of all Noteholders, waive any events permitting removal of the
Servicer as servicer pursuant to this Article X, provided, however, that the
Majority Noteholders may not waive a default in making a required payment on a
Note without the consent of the related Noteholder. 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 as of the most recent Due Period;
(c) deliver to its successor or, if none shall yet have been appointed,
to the Indenture Trustee, the Issuer, the Note Insurer and the Noteholders 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.
SALE AND SERVICING AGREEMENT (IBJ WAREHOUSE) - Page 83
ARTICLE XI
TERMINATION AND PREPAYMENT
Section 11.01 TERMINATION.
(a) This Agreement shall terminate upon any of the following events:
(i) the satisfaction and discharge of the Indenture pursuant to
clause (II) of Section 4.1 of the Indenture and notice to the Indenture
Trustee of such satisfaction and discharge;
(ii) payment of all amounts due and payable to the Noteholders, the
Servicer, the Indenture Trustee, the Issuer, the Custodian, and the Note
Insurer pursuant to this Agreement, the Indenture, and the Insurance
Agreement and written notice to the Indenture Trustee from the Issuer of
the Issuer's intent to terminate this Agreement; or
(iii) the mutual written consent of the Servicer, the Seller, the Note
Insurer, the Indenture Trustee and all Noteholders.
(b) Notice of termination of this Agreement pursuant to Section
11.01(a)(i) shall be sent by the Indenture Trustee to the Noteholders and the
Note Insurer 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
Noteholders and the Note Insurer on the Business Day immediately following
the day on which the Indenture Trustee receives notice of such termination,
and such notice to the Noteholders shall state that the Noteholders are to
surrender their respective Notes for cancellation and shall specify the place
where such Notes are to be surrendered. A copy of such form of notice shall
be sent to the Note Insurer by the Indenture Trustee in connection with any
prepayment in full of the Notes pursuant to Section 11.02 on or after the
Scheduled Advance Termination Date and on or before the first Payment Date
following the Scheduled Advance Termination Date, the Issuer shall, upon such
prepayment, deliver to the Trustee the notice referred to in Section
11.01(a)(ii).
Section 11.02 OPTIONAL PREPAYMENT.
(a) Prior to the occurrence of a Conversion Event, the Issuer may, at
its option, effect a Note Principal Prepayment on any Note Principal
Prepayment Date, in amounts not less than $1,000,000 with respect to any such
Note Principal Prepayment, by (i) delivering a Note Principal Prepayment
Notice with respect to such Note Principal Prepayment to the Indenture
Trustee, the Note Insurer, the Noteholders and the Arranger at least three
days prior to the Note Principal Prepayment Date and (ii) depositing into the
Note Principal Prepayment Account, on or before the applicable Note Principal
Prepayment Date, an amount equal to the greater of (A) the sum of the
Purchase Price of each Home Loan to be released on the Note Principal
Prepayment Date pursuant to Section 11.02(b) and (B) the sum of (1) the
amount of the applicable Note Principal Prepayment,
SALE AND SERVICING AGREEMENT (IBJ WAREHOUSE) - Page 84
(2) accrued and unpaid interest with respect to such Note Principal
Prepayment to but not including the applicable Note Principal Prepayment
Date, computed in accordance with the following sentence, (3) any amounts
then owing to the Note Insurer under the Insurance Agreement and (4) the
Breakage Payment, if any, with respect to such Note Principal Prepayment. If
on a Note Principal Prepayment Date interest is accruing on any Additional
Note Principal Balance as provided in the definition of "Monthly Interest
Payment Amount," the Issuer shall specify, in the related Note Principal
Prepayment Notice, the application of the applicable Note Principal
Prepayment Amount as between such Additional Note Principal Balance and the
then-applicable Prior Payment Date Note Principal Balance, and the
calculation of accrued and unpaid interest to be paid by the Issuer with
respect to such Note Principal Prepayment Amount shall be made accordingly.
The Issuer may not make any Note Principal Prepayment pursuant to this
Section 11.02 unless (i) such prepayment will not cause the occurrence of a
Conversion Event or Credit Support Funding Event, (ii) after giving effect to
such Note Principal Prepayment and the related release of the lien of the
Indenture pursuant to Section 11.02(b), the Home Loan Pool will continue to
satisfy the underwriting criteria set forth in Section 3.03(ii), and (iii) on
or before the applicable Note Principal Prepayment Date, the Issuer shall
have delivered to the Indenture Trustee an Officer's Certificate to the
effect that the Issuer has complied with all of its obligations in connection
with such Note Principal Prepayment and satisfied all criteria as provided in
this Section 11.02(a). In connection with any Note Principal Prepayment, on
the applicable Note Principal Prepayment Date, if the Issuer has satisfied
its obligations with respect to such Note Principal Prepayment as set forth
in the preceding sentence and the second preceding sentence, the Indenture
Trustee shall, prior to 12:00 noon New York time on the related Note
Principal Prepayment Date, apply the amount deposited in the Note Principal
Prepayment Account in the following order of priority: (1) first, to the
Noteholders entitled thereto in payment of the principal amount being so
repaid together with accrued interest thereon and Breakage Payments, (2)
then, to the Note Insurer in respect of any amounts owing to it under the
Insurance Agreement, and (3) then, to the Issuer Special Purpose Account.
Any Note Principal Prepayment to be made on a date other than a Payment
Date shall be in an amount not less than $10,000,000.
(b) At least three Business Days prior to a Note Principal Prepayment
to be made in accordance with Section 11.02(a), the Issuer may deliver to the
Indenture Trustee with a copy to the Note Insurer an Issuer Request in the
form of EXHIBIT E hereto requesting, in connection with such Note Principal
Prepayment, that the Indenture Trustee release the lien of the Indenture with
respect to the Home Loans specified in Schedule I to such Issuer Request;
provided, however, that the Issuer may not obtain such release with respect
to any Home Loan if such release, giving effect to the related Note Principal
Prepayment, would cause the occurrence of a Conversion Event or a Credit
Support Funding Event. The Home Loans identified on such Schedule I shall be
selected by the Issuer using a selection process which shall not be
materially adverse to the interests of the Noteholders or the Note Insurer.
As of the date the Issuer so requests in such Issuer Request, if the Issuer
has complied with its obligations set forth in Section 11.02(a) with respect
to the applicable Note Principal Prepayment (it being understood that the
Issuer may obtain such release prior to the related Note Principal Prepayment
Date), the Indenture Trustee shall (i) release the applicable Home Loans from
the lien of the Indenture, (ii) release (or cause the Custodian to release)
to or as directed
SALE AND SERVICING AGREEMENT (IBJ WAREHOUSE) - Page 85
by the Issuer the related Indenture Trustee's Home Loan Files and (iii)
execute, without recourse, representation or warranty, and deliver such
instruments of transfer presented to it by the Issuer as shall be necessary
to transfer such Home Loans to or as directed by the Issuer and to evidence
such release. All payments received on the released Home Loans on or before
the Accounting Dates applicable to the calculation, as of the applicable Note
Principal Prepayment Date, of the Principal Balances of such released Home
Loans shall remain subject to the lien of the Indenture, and the Issuer or
its designee shall be entitled to receive all Post-Release Collections with
respect to such released Home Loans, free of the lien of the Indenture. The
Seller shall amend the Home Loan Schedule to reflect the removal of the
applicable Home Loans from the terms of this Agreement and the lien of the
Indenture, and the Seller shall promptly deliver to the Issuer, the Servicer
(if the Seller is not then acting as Servicer), the Indenture Trustee and the
Note Insurer a copy of the Home Loan Schedule as so amended.
(c) If the Issuer delivers a Note Principal Prepayment Notice pursuant
to Section 11.02(a) and the full amount of the Note Principal Prepayment
specified therein is not made on the Note Principal Prepayment Date specified
therein the Issuer shall deposit in the Note Principal Prepayment Account, no
later than the second Business Day following such Note Principal Prepayment
Date, an amount equal to the product of (i) the percentage amount, if any, by
which (x) LIBOR as of such Note Principal Prepayment Date exceeds (y) LIBOR
with respect to the Regular Interest Accrual Period in which such Note
Principal Prepayment Date occurs, (ii) the number of days from the Note
Principal Prepayment Date specified in the applicable Note Principal
Prepayment Notice to the day immediately preceding the following Payment Date
divided by 360, and (iii) the amount of such Note Principal Prepayment so not
made.
(d) During the ten Business Days immediately following a Conversion
Event, the Issuer may, at its option, effect a Note Principal Prepayment in
an amount equal to the aggregate Note Principal Balance as of such date, by
(i) delivering a Note Principal Prepayment Notice with respect to such Note
Principal Prepayment to the Indenture Trustee, the Note Insurer, the
Noteholders and the Arranger on or before the day of such Note Principal
Prepayment and (ii) depositing into the Note Principal Prepayment Account, on
or before the applicable Note Principal Prepayment Date, an amount equal to
the greater of (A) the sum or the Purchase Price of each Home Loan and (B)
the sum of (1) the amount of the Aggregate Note Principal Balance, (2)
accrued and unpaid interest on the Aggregate Note Principal Balance to but
not including the applicable Note Principal Prepayment Date, (3) any amounts
then owing to the Note Insurer under the Insurance Agreement, and (4) the
Breakage Payment, if any, with respect to such Note Principal Prepayment. In
connection with any Note Principal Prepayment, on the applicable Note
Principal Prepayment Date, if the Issuer has deposited the required funds
into the Note Principal Prepayment Account, the Indenture Trustee shall, on
the related Note Principal Prepayment Date, apply the amount deposited in the
Note Principal Prepayment Account in the following order of priority: (1)
first, to the Noteholders entitled thereto in payment of the principal amount
being so repaid together with accrued interest thereon and Breakage Payments,
(2) then, to the Note Insurer in respect of any amounts owing to it under the
Insurance Agreement, and (3) then, to the Issuer Special Purpose Account.
SALE AND SERVICING AGREEMENT (IBJ WAREHOUSE) - Page 86
ARTICLE XII
CONVERSION EVENT
Section 12.01 CONVERSION EVENT.
(a) Upon the occurrence of a Conversion Event, the Majority Noteholders
may deliver a Conversion Notice to the Issuer, the Servicer, the Arranger,
the Indenture Trustee and the Note Insurer, which delivery of the Conversion
Notice will cause a Conversion Date to occur in accordance with the
definition of Conversion Date.
(b) During the period commencing on the sixth Business Day after the
occurrence of a Conversion Event and ending on the tenth Business Day
following such Conversion Event, pursuant to the Note Purchase Agreement, and
provided an Undeclared Event of Default has not occurred, the Noteholders
shall sell their Notes to the Issuer or any assignee of the Issuer upon
payment to such Noteholders of an amount not less than the outstanding
balance of their Notes together with all accrued and unpaid interest thereon
through the day prior to the date of such sale, any Breakage Payments and any
reasonable expenses incurred by such Noteholders in connection with such
sale; PROVIDED, however, the Noteholders are only obligated to sell their
Notes to the Issuer or an assignee of the Issuer if the Issuer or its
assignee either purchases the Notes within such five Business Day period or
provides the Noteholders with a binding commitment to purchase the Notes
within such five Business Day period from (i) a party with a long-term debt
rating of at least "BBB" by Standard & Poor's and "Baa2" by Moody's or a
short-term debt rating of at least "A-2" by Standard & Poor's and "P-2" by
Moody's or (ii) any party acceptable to 100% of the Noteholders, and such
binding commitment specifies that such party will purchase the Notes within
30 days of the issuance of such commitment. If the Issuer exercises the
option to purchase the Notes or assigns such option to an Affiliate of the
Issuer and such Affiliate exercises the option pursuant to this Section
12.01(b), the Notes shall be considered paid in full and shall be cancelled
pursuant to Section 2.7(b) of the Indenture.
(c) Upon the expiration of the five Business Day period referenced in
Section 12.01(b), the Noteholders shall sell their Notes to WCMC or any
assignee of WCMC upon payment to such Noteholders of an amount not less than
the outstanding balance of their Notes together with all accrued and unpaid
interest thereon through the day prior to the date of such sale, any Breakage
Payments and any reasonable expenses incurred by such Noteholders in
connection with such sale; PROVIDED, however, the Noteholders are only
obligated to sell their Notes to WCMC or an assignee of WCMC if (1) WCMC or
its assignee either purchases the Notes within five Business Days of the
expiration of the five Business Day period referenced in Section 12.01(b) or
provides the Noteholders with a binding commitment to purchase the Notes
within five Business Days of the expiration of the five Business Day period
referenced in Section 12.01(b) from (i) a party with a long-term debt rating
of at least "BBB" by Standard & Poor's and "Baa 2" by Moody's or a short-term
debt rating of at least "A-2" by Standard & Poor's and "P-2" by Moody's or
(ii) any party acceptable to 100% of the Noteholders, and such binding
commitment specifies that such party will
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purchase the Notes within 30 days of the issuance of such commitment and (2)
the Issuer or its assignee shall not have exercised the rights to purchase
the Notes pursuant to Section 12.01(b).
Section 12.02 RIGHTS OF MAJORITY NOTEHOLDERS.
In the event that the Notes are not sold pursuant to Section 12.01(b),
on any date more than fifteen Business Days subsequent to the occurrence of a
Conversion Event, notwithstanding anything herein to the contrary, the
Majority Noteholders may instruct the Indenture Trustee prior to the
Conversion Date to do one or more of the following:
(i) sell the Trust Estate or any portion thereof or rights or
interest therein, at one or more public or private sales called and
conducted in any manner permitted by law and in accordance with the
instructions of the Majority Noteholders; provided, however, any
direction to the Indenture Trustee to sell any portion or all of the
Trust Estate shall be by 100% of the Noteholders if the proceeds of
such sale would be less than the sum of all amounts due the Indenture
Trustee under the Indenture and the Aggregate Note Principal Balance
and interest due or to become due thereon on the Payment Date next
succeeding such sale; and provided further, however, if any portion
or all of the Trust Estate is sold pursuant to this Section 12.02,
the Note Insurer will not insure any shortfall in the payment of
principal of or interest on the Notes, as set forth in the Guaranty
Policy;
(ii) file or record all Assignments of Mortgage that have not
previously been recorded;
(iii) pay all amounts on deposit in the Collection Account, the
Note Payment Account or the Reserve Fund as described in Section
12.03(a) below; and
(iv) exercise any remedies of a secured party under the UCC and
take any other appropriate action to protect and enforce the rights
and remedies of the Indenture Trustee as the agent of the Noteholders
hereunder, including, without limitation, any remedies specified under
Article V of the Indenture.
Section 12.03 PAYMENTS UPON SALE OF TRUST ESTATE FOLLOWING CONVERSION
EVENT.
(a) In connection with a sale of all or any portion of the Trust
Estate, the Indenture Trustee shall execute and deliver an appropriate
instrument of conveyance transferring its interest in any portion of the
Trust Estate in connection with a sale thereof. The proceeds of any sale of
the Trust Estate plus any amounts on deposit in the Trust Accounts shall be
applied in the following priority:
FIRST: to the Note Insurer for any amounts then due and payable
under the Insurance Agreement;
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SECOND: to the Note Insurer for the Guaranty Insurance Premium then
due and unpaid;
THIRD: to the Servicer for the Servicing Fee then due and unpaid;
FOURTH: to the Indenture Trustee for any amounts payable to the
Indenture Trustee under Section 6.7 of the Indenture and any costs or
expenses, including attorneys' fees and any expenses of any agent of the
Indenture Trustee, incurred by the Indenture Trustee in connection with
acting as provided above or as otherwise provided in the Indenture with
respect to Indenture Events of Default;
FIFTH: to Noteholders for amounts due and unpaid on the Notes for
interest, PRO RATA, according to the amounts due and payable on the Notes
for interest;
SIXTH: to Holders of the Notes for amounts due and unpaid on the
Notes for principal, PRO RATA, according to the amounts due and payable on
the Notes for principal, until the Outstanding Amount of the Notes is
reduced to zero;
SEVENTH: to the Noteholders, any unpaid Breakage Payments;
EIGHTH: to the Noteholders, any expenses incurred by the Noteholders
as a result of the Conversion Event;
NINTH: to the Servicer for previously unreimbursed Servicing Advance
Reimbursement Amounts; and
TENTH: to the Issuer Special Purpose Account, the balance, if any.
(b) Notwithstanding anything to the contrary in this Article XII, the
Majority Noteholders may not direct the Indenture Trustee to take any of the
actions referred to in Section 12.02, without the consent of the Note
Insurer, if at the time of such action any Note Insurer Reimbursement Amount
or any other amount is due and owing to the Note Insurer pursuant to the
Guaranty Policy.
(c) Following a sale of the entire Trust Estate pursuant to Section
12.02 and application of the proceeds therefrom plus any amounts on deposit
in the Collection Account, the Note Payment Account, the Note Principal
Prepayment Account, the Capitalized Interest Account and the Reserve Fund, in
accordance with Section 12.03(a), the Notes shall be considered paid in full
and shall be cancelled pursuant to Section 2.7(b) of the Indenture.
Section 12.04 DURATION OF ARTICLE XII.
Following a Conversion Date, this Article XII shall be of no further
force or effect on the parties hereto, except with respect to the Noteholders'
obligation sell the Notes based on a binding
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commitment for a period of 30 days after the issuance of such a commitment,
in accordance with Section 12.01(b) and (c).
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.01 ACTS OF NOTEHOLDERS.
Except as otherwise specifically provided herein, whenever Noteholder
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 Noteholders if the Majority Noteholders agree
to take such action or give such consent or approval.
Section 13.02 AMENDMENT.
(a) This Agreement may be amended from time to time by the Issuer, the
Seller, the Servicer and the Indenture Trustee by written agreement with
notice thereof to the Noteholders, without the consent of any of the
Noteholders, but with the consent of the Note Insurer, to cure any error or
ambiguity, to correct or supplement any provisions hereof which may be
defective or inconsistent with any other provisions hereof, to add any other
provisions with respect to matters or questions arising under this Agreement;
provided, however, that such action will not adversely affect in any material
respect the interests of the Noteholders. An amendment described above shall
be deemed not to adversely affect in any material respect the interests of
the Noteholders if either (i) an opinion of counsel is obtained to such
effect, or (ii) the party requesting the amendment obtains a letter from each
Rating Agency confirming that the amendment, if made, would not result in the
downgrading or withdrawal of the rating then assigned by such Rating Agency
to the Notes.
(b) This Agreement may also be amended from time to time by the Issuer,
the Seller, the Servicer, and the Indenture Trustee by written agreement,
with the prior written consent of the Majority Noteholders, for the purpose
of adding any provisions to or changing in any manner or eliminating any of
the provisions of this Agreement, or of modifying in any manner the rights of
the Noteholders; 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 which are required to be made on any Note, without
the consent of the holders of 100% of the Notes affected thereby and the Note
Insurer, (ii) adversely affect in any material respect the interests of any
Noteholder or the Note Insurer in any manner other than as described in (i),
without the consent of the holders of 100% of the Notes or the Note Insurer,
respectively, or (iii) reduce the percentage of Notes, the holders of which
are required to consent to any such amendment, without the consent of the
holders of 100% of the Notes and the Note Insurer. Notwithstanding the
preceding, the Note Insurer, in its sole discretion and without the
requirement of an amendment to this Agreement or the consent of any party
hereto or any Noteholder but with written notice to the Seller, the Servicer,
the Issuer and the Indenture Trustee, shall have the right to modify or
adjust the definitions of "Required Overcollateralization Amount" and
"Required Credit Support Multiple", and the definitions relating
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thereto, if the Note Insurer determines to modify any such definition in a
manner that will result in a reduction of the Required Overcollateralization
Amount or the Required Credit Support Multiple; provided, however, such
modification or adjustment, as the case may be, may not result in the
downgrading or withdrawal of the rating then assigned by each Rating Agency
to the Notes.
(c) It shall not be necessary for the consent of Noteholders 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 13.03 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 Noteholders'
expense on direction of the Majority Noteholders or the Note Insurer, but only
when accompanied by an opinion of counsel to the effect that such recordation
materially and beneficially affects the interests of the Noteholders or is
necessary for the administration or servicing of the Home Loans.
Section 13.04 DURATION OF AGREEMENT.
This Agreement shall continue in existence and effect until terminated as
herein provided.
Section 13.05 GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.
Section 13.06 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 Issuer, FIRSTPLUS FUNDING TRUST, 1600 Viceroy, ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇ ▇. ▇▇▇▇▇▇, or such other address as may
SALE AND SERVICING AGREEMENT (IBJ WAREHOUSE) - Page 91
hereafter be furnished to the Noteholders and the other parties hereto, (ii)
in the case of the Seller and Servicer, FIRSTPLUS FINANCIAL, INC., 1600
Viceroy, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇ ▇. ▇▇▇▇▇▇, or such other address
as may hereafter be furnished to the Noteholders and the other parties hereto
in writing by the Seller or the Servicer, (iii) in the case of a claim under
the Guaranty Policy, State Street Bank and Trust Company, as Fiscal Agent, ▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Municipal
Registrar, or such other address as may be furnished to the Noteholders and
the other parties hereto in writing by such Fiscal Agent or the Note Insurer,
(iv) in the case of the Note Insurer, MBIA Insurance Corporation, ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Insured Portfolio Management -
Structured Finance (IPM-SF), (v) in the case of the Indenture Trustee, First
Bank National Association, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Structured Finance - FIRSTPLUS 97A, (vi) in the
case of the Arranger, The Industrial Bank of Japan, Limited, New York Branch,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, and
(vii) in the case of the Noteholders, as set forth in the applicable Note
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 (vi) 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 Noteholders 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 13.07 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 13.08 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 13.09 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.
SALE AND SERVICING AGREEMENT (IBJ WAREHOUSE) - Page 92
Section 13.10 SUCCESSORS AND ASSIGNS.
This Agreement shall inure to the benefit of and be binding upon the
Servicer, the Seller, the Issuer and the Noteholders and their respective
successors and permitted assigns.
Section 13.11 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 13.12 ACTIONS OF NOTEHOLDERS.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement to be given or taken by
Noteholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Noteholders in person or by 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 Indenture Trustee, 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 Noteholder of any such
instrument or writing may be proved in any reasonable manner which the
Indenture Trustee, the Seller, the Servicer or the Issuer deems sufficient.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other act by a Noteholder shall bind every holder of every Note
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, the Issuer or the Note Insurer
in reliance thereon, whether or not notation of such action is made upon such
Note.
(d) The Seller, the Servicer or the Issuer may require additional proof
of any matter referred to in this Section 13.12 as it shall deem necessary.
Section 13.13 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
Seller, the Servicer or the Issuer hereunder, as follows:
(i) copies of amendments to this Agreement;
(ii) notice of any substitution or repurchase of any Home Loans;
SALE AND SERVICING AGREEMENT (IBJ WAREHOUSE) - Page 93
(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;
(v) notice of the occurrence of any Event of Default, Conversion
Event or Credit Support Funding Event;
(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;
(vii) copies of any Servicer's Monthly Remittance Report pursuant to
Section 6.02(b); and
(viii) copies of any Addition Notices delivered pursuant to Section
2.02(c).
(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 Standard & Poor's, ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: Asset-Backed Monitoring
Department, and (ii) if to Moody's, ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ Department -
▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Residential Mortgage
Monitoring Department.
Section 13.14 GRANT OF NOTEHOLDER RIGHTS TO NOTE INSURER.
In consideration for the guarantee of the Notes by the Note Insurer
pursuant to the Guaranty Policy, the Noteholders hereby grant to the Note
Insurer the right to act as the holder of 100% of the outstanding Notes for
the purpose of exercising the rights of the holders of the Notes under this
Agreement without the consent of any Noteholders, including the voting rights
of such Holders, but excluding (i) rights of the Majority Noteholders under
Sections 12.01, 12.02 and 12.03(a), (ii) those rights requiring the consent
of Noteholders as provided in clauses (i), (ii) and (iii) of Section
13.02(b), (iii) any rights of such holders to payments under Section 8.2 of
the Indenture with respect to the Notes; provided that the preceding grant of
rights to the Note Insurer by the Noteholders shall be subject to Section
13.16, and (iv) the rights of such holders to determine the acceptability of
a successor source to the Bloomberg Screen, as provided in the definition of
Bloomberg Screen.
Section 13.15 THIRD PARTY BENEFICIARY.
The parties hereto acknowledge that the Note Insurer is an express third
party beneficiary hereof entitled to enforce any rights reserved to it
hereunder as if it were actually a party hereto.
SALE AND SERVICING AGREEMENT (IBJ WAREHOUSE) - Page 94
Section 13.16 SUSPENSION AND TERMINATION OF NOTE INSURER'S RIGHTS.
(a) During the continuation of a Note Insurer Default, the grant of
rights to the Note Insurer pursuant to Section 13.14 shall be of no force or
effect, and any other rights granted or reserved to the Note Insurer
hereunder shall vest instead in the Majority Noteholders; provided that the
Note Insurer shall be entitled to any payments in reimbursement of the Note
Insurer Reimbursement Amount, and the Note Insurer shall retain those rights
under Section 11.01 to consent to the termination of this Agreement and those
rights under Section 13.02 to consent to any amendment of this Agreement,
those rights under Section 12.03(b) to consent to any disbursement of funds,
and those rights under Section 13.02 to consent to any amendment of this
Agreement.
(b) At such time as either (i) the Aggregate Principal Balance has been
reduced to zero and all accrued interest has been paid on the Notes or (ii)
the Guaranty Policy has been terminated, and in either case of (i) or (ii)
the Note Insurer has been reimbursed for all Guaranteed Payments and any
other amounts owed under the Guaranty Policy and the Insurance Agreement (and
the Note Insurer no longer has any obligation under the Guaranty Policy,
except for breach thereof by the Note Insurer), then the grant of rights to
the Note Insurer pursuant to Section 13.14 shall be of no further force or
effect and any other rights and benefits granted or reserved to the Note
Insurer hereunder (including the rights to direct certain actions and receive
certain notices) shall terminate and the Noteholders (including in certain
instances the Majority Noteholders) shall be entitled to the exercise of such
rights and to receive such benefits of the Note Insurer following such
termination to the extent that such rights and benefits are applicable to the
Noteholders (including the Majority Noteholders).
Section 13.17 CERTAIN NOTICES.
Upon discovery of the occurrence of an Event of Default, an Indenture
Event of Default, a Conversion Event, a Credit Support Funding Event, or a
failure by the Seller to perform its obligations under this Agreement, in any
such case by the Seller, the Servicer, the Issuer, or the Indenture Trustee,
the party discovering such occurrence shall promptly give written notice
thereof to the others and to the Noteholders, the Note Insurer, each Rating
Agency and the Arranger. If such notice is given by the Issuer with respect
to an Event of Default, such notice shall specify the action, if any, the
Issuer is taking in respect of such Event of Default, and if an Event of
Default shall arise from the failure of the Servicer to perform any of its
duties or obligations under this Agreement with respect to the Home Loans,
the Issuer shall take all reasonable steps available to it to remedy such
failure.
Section 13.18 NO PETITION.
Until the date that is one year and one day after the last day on which
any Note is outstanding, each of the Indenture Trustee, the Seller and the
Servicer by entering into this Agreement, and each Noteholder, by accepting a
Note, hereby covenant and agree that they will not 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 Notes or any of the
Basic Documents.
SALE AND SERVICING AGREEMENT (IBJ WAREHOUSE) - Page 95
IN WITNESS WHEREOF, the Seller, the Servicer, the Issuer and the Indenture
Trustee 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 FUNDING TRUST,
as Issuer
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
FIRSTPLUS FINANCIAL, INC., as Seller and
Servicer
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
FIRST BANK NATIONAL ASSOCIATION, as
Indenture Trustee
By: /s/ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇▇
-----------------------------------
▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇▇
Vice President
SALE AND SERVICING AGREEMENT (IBJ WAREHOUSE) - Page ▇▇
▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇ )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared ▇▇▇ ▇. ▇▇▇▇▇▇, known to me to be a person and officer
whose name is subscribed to the foregoing instrument and acknowledged to me
that the same was the act of the said FIRSTPLUS FUNDING TRUST, a Delaware
business trust, as Issuer, and that he executed the same as the act of such
corporation for the purpose and consideration therein expressed, and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 13th day of June, 1997.
/s/ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇
-----------------------------------
Notary Public, State of Texas
[SEAL]
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 is subscribed to the foregoing instrument and acknowledged to me
that the same was the act of the said FIRSTPLUS FINANCIAL, INC., a Texas
corporation, as the Seller and the Servicer, and that he executed the same as
the act of such corporation for the purposes and consideration therein
expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 13th day of June, 1997.
/s/ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇
-----------------------------------
Notary Public, State of Texas
[SEAL]
SALE AND SERVICING AGREEMENT (IBJ WAREHOUSE) - Page ▇▇
▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇ )
)
COUNTY OF ▇▇▇▇▇▇ )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇▇, known to me to be the person and
officer whose name is subscribed to the foregoing instrument and acknowledged
to me that the same was the act of the said FIRST BANK NATIONAL ASSOCIATION,
a national banking association, as the Indenture Trustee, and that he
executed the same as the act of such entity for the purposes and
consideration therein expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 16th day of June, 1997.
/s/ ▇. ▇▇▇▇▇▇
[SEAL] -----------------------------------
Notary Public, State of Minnesota
SALE AND SERVICING AGREEMENT (IBJ WAREHOUSE) - Page 98
EXHIBIT A
Home Loan Schedule
[Delivered Under Separate Cover]
EXHIBIT B-1
Form of Addition Notice
[Begins on Next Page]
ADDITION NOTICE
FOR SUBSEQUENT HOME LOANS
Pursuant to Section 2.02(a) of the Sale and Servicing Agreement dated as
of June ____, 1997 between FIRSTPLUS FUNDING TRUST, as Issuer (the "Issuer"),
FIRSTPLUS FINANCIAL, INC., as Seller and Servicer (the "Seller"), and First
Bank National Association, as Indenture Trustee (the "Indenture Trustee"), the
Seller and the Issuer hereby provide notice to the Indenture Trustee, MBIA
Insurance Corporation, as Note Insurer, that the Subsequent Home Loans
identified on ATTACHMENT A attached hereto will be sold to the Issuer pursuant
to a Subsequent Transfer Agreement dated as of [DATE] (the "Subsequent Transfer
Agreement") between the Seller, the Issuer and the Indenture Trustee. The
aggregate Principal Balance of such Subsequent Home Loans as of the applicable
Cut-Off Date, set forth on such ATTACHMENT A, with respect to the source of the
Seller is set forth on the Schedule attached hereto as ATTACHMENT B.
FIRSTPLUS FINANCIAL, INC.
as Seller
By:
-----------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
B1-1
ATTACHMENT A
[List of Subsequent Home Loans]
B1-2
ATTACHMENT B
1. TRANSFER SOURCE OF SUBSEQUENT MORTGAGE LOANS: [ ]
Subsequent Transfer Date:
Cut-Off Date:
Aggregate Cut-Off Date Outstanding Principal
Balances of Subsequent Mortgage Loans:
Purchase Price for Subsequent Mortgage Loans: PAR (100%)
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: PAR (100%)
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: PAR (100%)
B1-3
EXHIBIT B-2
Form of Subsequent Transfer Agreement
[Begins on Next Page]
SUBSEQUENT TRANSFER AGREEMENT
This SUBSEQUENT TRANSFER AGREEMENT dated as of _________, 1997 (this
"Agreement") is entered into between FIRSTPLUS FINANCIAL, INC., as Seller and
Servicer (the "Seller" and "Servicer"), FIRSTPLUS FUNDING TRUST, as Issuer
(the "Issuer") and FIRST BANK NATIONAL ASSOCIATION, as Indenture Trustee (the
"Indenture Trustee"). Reference is hereby made to the Sale and Servicing
Agreement dated as of June ___, 1997 (the "Sale and Servicing Agreement")
between the Issuer, the Seller and Servicer, and the Indenture Trustee and
the Indenture dated as of June ___, 1997 (the "Indenture") between the Issuer
and the Indenture Trustee. Capitalized terms used and not defined herein
have the meanings set forth in the Indenture.
RECITALS:
A. Pursuant to the terms of Sale and Servicing Agreement, the Seller,
the Issuer and the Indenture Trustee agreed to the sale by the Seller to the
Issuer of additional Home Loans following the Closing Date.
B. Pursuant to the terms of the Indenture, the Issuer and the
Indenture Trustee agreed to the Grant by the Issuer to the Indenture Trustee
of additional Home Loans following the Closing Date.
C. The Seller, the Issuer and the Indenture Trustee desire to enter
into this Subsequent Transfer Agreement to reflect (i) the sale, transfer,
assignment, set over, and conveyance of certain additional Home Loans to the
Issuer and (ii) the Grant to the Indenture Trustee of all of the Issuer's
right, title and interest in and to such additional Home Loans.
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 Seller, the Issuer and the Indenture
Trustee hereby agree as follows:
Section 1. SUBSEQUENT HOME LOANS. The Seller, the Issuer and the
Indenture Trustee hereby agree to 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 A attached hereto (the "Subsequent Home Loans") and the Home Loan
Schedule attached hereto as ATTACHMENT B (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.
Section 2. SALE BY SELLER TO ISSUER OF SUBSEQUENT HOME LOANS. The
Seller does hereby sell, transfer, assign, set over and convey 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
B2-1
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 Issuer, 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. Additional terms of the sale, including the purchase
price, are set forth on ATTACHMENT A attached hereto.
Section 3. GRANT BY ISSUER TO INDENTURE TRUSTEE OF SUBSEQUENT HOME
LOANS.
Upon and simultaneous with 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.
B2-2
Section 4. REPRESENTATIONS AND WARRANTIES; CONDITIONS PRECEDENT.
(a) The Seller hereby makes the representations, warranties and
covenants set forth in Section 3.04 of the Sale and Servicing Agreement with
respect to the Subsequent Home Loans as of the date hereof and the applicable
Advance Date. In addition, the Seller hereby reconfirms the accuracy of the
representations and warranties set forth in Sections 3.02 and 3.03 of the
Sale and Servicing Agreement with respect to the Subsequent Home Loans as of
the date hereof and the applicable Advance Date.
(b) The Seller and Servicer hereby certify as follows:
(i) The Servicer shall deposit in the Collection Account all
collections in respect of the Subsequent Home Loans received on or after
the related Cut-off Date.
(ii) As of the date hereof, the Seller is not insolvent nor will it
be made insolvent by the transfer that is the subject of the Subsequent
Transfer Agreement nor is it aware of any pending insolvency.
(iii) The transfer of the Subsequent Home Loans to the Issuer will not
result in a material adverse tax consequence to the Issuer.
(c) The Issuer hereby reconfirms the accuracy of the representations
and warranties set forth in Article V of the Note Purchase Agreement as of
the date hereof and as of the applicable Advance Date.
(d) The Issuer hereby certifies that it has deposited in the
Capitalized Interest Account the Capitalized Interest Account Deposit with
respect to such Additional Note Principal Balance.
(e) 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 5. 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 Seller,
at its expense, in the event such recordation materially and beneficially
affects the interests of the Noteholders.
Section 6. 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.
B2-3
Section 7. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the Seller, the Issuer, the Indenture Trustee
and their respective successors and permitted assigns.
Section 8. 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.
B2-4
IN WITNESS WHEREOF, 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
set forth above.
FIRSTPLUS FINANCIAL, INC.,
as Seller and Servicer
By:
----------------------------
▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
FIRSTPLUS FUNDING TRUST,
as Issuer
By:
----------------------------
▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
FIRST BANK NATIONAL ASSOCIATION,
as Indenture Trustee
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
▇▇-▇
▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇ )
)
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 ____, 1997.
-----------------------------------------
Notary Public, State of Texas
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 FUNDING TRUST, 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 ______,
1997.
-----------------------------------------
Notary Public, State of
-----------------
My commission expires:
. -----------------------------------------
---------------------------- (printed name)
B2-6
THE STATE OF _____________ )
)
COUNTY OF ________________ )
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 FIRST BANK NATIONAL
ASSOCIATION, as Indenture Trustee, 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 ____, 1997.
-----------------------------------------
Notary Public, State of
-----------------
My commission expires:
. -----------------------------------------
---------------------------- (printed name)
B2-7
ATTACHMENT A
1. TRANSFER SOURCE OF SUBSEQUENT MORTGAGE LOANS: [ ]
Advance Date:
------------
Cut-Off Date:
------------
Aggregate Outstanding Principal Balances
of Subsequent Mortgage Loans:
------------
Purchase Price for Subsequent
Mortgage Loans: PAR (100%)
------------
2. TRANSFER SOURCE OF SUBSEQUENT MORTGAGE LOANS: [ ]
Advance Date:
------------
Cut-Off Date:
------------
Aggregate Outstanding Principal Balances
of Subsequent Mortgage Loans:
------------
Purchase Price for Subsequent
Mortgage Loans: PAR (100%)
------------
3. TRANSFER SOURCE OF SUBSEQUENT MORTGAGE LOANS: [ ]
Advance Date:
------------
Cut-Off Date:
------------
Aggregate Outstanding Principal Balances
of Subsequent Mortgage Loans:
------------
Purchase Price for Subsequent
Mortgage Loans: PAR (100%)
------------
B2-8
4. TRANSFER SOURCE OF SUBSEQUENT MORTGAGE LOANS: [ ]
Advance Date:
------------
Cut-Off Date:
------------
Aggregate Outstanding Principal Balances
of Subsequent Mortgage Loans:
------------
Purchase Price for Subsequent
Mortgage Loans: PAR (100%)
------------
B2-9
ATTACHMENT B
[Home Loan Schedule]
B2-10
EXHIBIT C
Form of Conversion Notice
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CONVERSION NOTICE
FIRSTPLUS FUNDING TRUST
Asset-Backed Notes, Series 1997A
[DATE]
First Bank National Association FIRSTPLUS FINANCIAL, INC.,
as Indenture Trustee as Servicer
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▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Structured Finance - Attention: ▇▇▇ ▇. ▇▇▇▇▇▇
FIRSTPLUS 97A
FIRSTPLUS FUNDING TRUST,
as Issuer
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇
Reference is made to that certain Sale and Servicing Agreement dated as of
June ___, 1997 (the "Sale and Servicing Agreement") between FIRSTPLUS FUNDING
TRUST, as Issuer, FIRSTPLUS FINANCIAL INC., as Seller and Servicer, and FIRST
BANK NATIONAL ASSOCIATION, as Indenture Trustee.
The undersigned, being the Holder or Holders of Outstanding Notes
representing more than 50% of the Outstanding Amount hereby give notice as
follows:
1. The following Conversion Event occurred on [DATE]: [SPECIFY
CONVERSION EVENT].
2. We hereby deliver a Conversion Notice pursuant to Section 12.01 of
the Sale and Servicing Agreement. In accordance with the definition of
Conversion Date specified in the Sale and Servicing Agreement, the Conversion
Date with respect to this Conversion Notice will be [SPECIFY DATE].
C-1
Capitalized terms used but not defined herein shall have the meanings set
forth in the Sale and Servicing Agreement.
[HOLDER]
By:
---------------------------
Name:
-------------------------
Title:
------------------------
C-2
EXHIBIT D
Form of Note Principal Prepayment Notice
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NOTE PRINCIPAL PREPAYMENT NOTICE
FIRSTPLUS FUNDING TRUST
Asset-Backed Notes, Series 1997A
[DATE]
MBIA Insurance Corporation, as Note Insurer
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▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
First Bank National Association,
as Indenture Trustee
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Structured Finance - FIRSTPLUS 97A
The Noteholders:
Reference is made to that certain Sale and Servicing Agreement dated as of
June ___, 1997 (the "Sale and Servicing Agreement") between FIRSTPLUS FUNDING
TRUST, as Issuer, FIRSTPLUS FINANCIAL, INC., as Seller and Servicer, and
BANKERS TRUST COMPANY, as Indenture Trustee.
Pursuant to Section 11.02(a) of the Sale and Servicing Agreement, the
Issuer hereby gives notice that it will effect a Note Principal Prepayment of
$_________ on [DATE].
The Note Principal Prepayment Amount shall be applied as follows:
$_________ to the Prior Payment Date Note Principal Balance and $_________ to
the Additional Note Principal Balance.
The Issuer hereby certifies that: (i) the Note Principal Prepayment
referred to above will not cause the occurrence of a Conversion Event or a
Credit Support Funding Event and (ii) the Issuer has complied with all its
obligations in connection with such Note Principal Prepayment, as provided in
Section 11.02(a) of the Sale and Servicing Agreement.
Capitalized terms used but not defined herein shall have the meanings set
forth in the Sale and Servicing Agreement.
FIRSTPLUS FUNDING TRUST
By:
---------------------------
Name:
-------------------------
Title:
------------------------
D-1
EXHIBIT E
Form of Issuer Request for Release Pursuant to Section 11.02(b)
[Begins on Next Page]
ISSUER REQUEST FOR RELEASE
FIRSTPLUS FUNDING TRUST
Asset-Backed Notes, Series 1997A
[DATE]
First Bank National Association, MBIA Insurance Corporation,
as Indenture Trustee as Note Insurer
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▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Structured Finance -
FIRSTPLUS 97A
Reference is made to that certain Sale and Servicing Agreement dated as of
June ___, 1997 (the "Sale and Servicing Agreement") between FIRSTPLUS FUNDING
TRUST, as Issuer, FIRSTPLUS FINANCIAL INC., as Seller and Servicer, and FIRST
BANK NATIONAL ASSOCIATION, as Indenture Trustee.
Reference is further made to the Prepayment Notice dated [DATE] and
delivered by us pursuant to Section 11.02 (a) of the Sale and Servicing
Agreement.
Pursuant to Section 11.02(b) of the Sale and Servicing Agreement, we
hereby request the Indenture Trustee to release the lien of the Indenture on
[DATE] with respect to the Home Loans specified in Schedule I to this Request.
We hereby certify that such release, giving effect to the related Note
Principal Prepayment, will not cause the occurrence of a Conversion Event or a
Credit Support Funding Event, and the aggregate of the Principal Balances of
the Home Loans identified in Schedule I as of the Prepayment Date specified in
the Prepayment Notice does not exceed (i) the amount of the applicable Note
Principal Prepayment divided by (ii) 100% minus the current
[Overcollateralization Base Percent Requirement or Overcollateralization Target
Percent Requirement].
Capitalized terms used but not defined herein shall bear the meanings
ascribed to such terms in the Sale and Servicing Agreement.
FIRSTPLUS FUNDING TRUST
By:
---------------------------
Name:
-------------------------
Title:
------------------------
E-1
SCHEDULE I
Home Loans to be Released from Lien of Indenture
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E-2
EXHIBIT F
Form of Servicer's Remittance Report
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E-3