<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-27550
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RAC Financial Group, Inc.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Texas 75-2561052
- ------------------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1250 West Mockingbird Lane, Dallas, Texas 75247
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(Address of principal executive offices)
(Zip Code)
(214) 630-6006
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16901 Dallas Parkway, Suite 200, Dallas, TX 75248
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Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
There were 11,249,570 shares of voting common stock and 2,220,338 shares of
non-voting common stock, $.01 par value outstanding as of June 30, 1996.
1
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RAC FINANCIAL GROUP, INC.
INDEX TO FORM 10-Q
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) Page
-----
Condensed Consolidated Balance Sheets -
September 30, 1995 and June 30, 1996................. 3
Condensed Consolidated Statements of Income-
Three Months and Nine Months Ended
June 30, 1995 and June 30, 1996...................... 4
Condensed Consolidated Statements of
Cash Flows - Nine Months Ended
June 30, 1995 and June 30, 1996...................... 5
Notes to Condensed Consolidated Financial
Statements........................................... 6
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations....................... 9
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................ 15
SIGNATURE ............................................. 17
2
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PART I - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
RAC FINANCIAL GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
September 30,1995 June 30, 1996
----------------- -------------
Cash and cash equivalents. . . . . . . $ 2,486 $ 2,337
Loans held for sale, net . . . . . . . 19,435 165,740
Excess servicing receivable. . . . . . 29,744 116,753
Subordinated certificates held
for sale. . . . . . . . . . . . . . . 1,313 16,527
Receivable from trusts . . . . . . . . 2,572 10,970
Other assets . . . . . . . . . . . . . 5,792 10,526
-------- --------
Total assets . . . . . . . . . . . . $ 61,342 $322,853
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and
accrued liabilities . . . . . . . . $ 6,937 $ 14,804
Warehouse financing facilities
with affiliates . . . . . . . . . . 18,530 142,830
Term line of credit. . . . . . . . . 9,249 37,069
Notes payable. . . . . . . . . . . . 872 1,120
Subordinated notes payable to
affiliates. . . . . . . . . . . . . 8,002 7,003
Allowance for possible credit
losses on loans sold. . . . . . . . 3,907 27,382
Deferred tax liabilities, net. . . . 2,111 11,451
------- -------
Total liabilities. . . . . . . . . . 49,608 241,659
------- -------
------- -------
Commitments
Stockholders' Equity:
Preferred stock Series A, non-voting,
$1 par value, 8% cumulative dividend:
Authorized - 300,000
Issued and outstanding shares - 100,000
as of September 30, 1995 and 0 as of
June 30, 1996 . . . . . . . . . . 100 --
Preferred stock Series B, non-voting,
$1 par value, 8% cumulative dividend:
Authorized, issued, and outstanding shares -
2,300,000 as of September 30, 1995 and 0 as of
June 30, 1996 . . . . . . . . . . 2,300 --
Common stock, $0.01 par value:
Authorized shares - 100,000,000
Issued and outstanding shares -6,700,000
as of September 30, 1995 and 11,249,570 as of
June 30, 1996 . . . . . . . . . . 75 112
Non-voting common stock, $0.01 par value:
Authorized shares - 25,000,000
Issued and outstanding shares - 1,474,402 as
of September 30, 1995 and 2,220,338 as of
June 30, 1996 . . . . . . . . . . 15 22
Additional capital. . . . . . . . . . 3,627 54,831
Retained earnings . . . . . . . . . . 5,617 26,229
------- -------
Total stockholders' equity. . . . . 11,734 81,194
------- -------
Total liabilities and stockholders'
equity . . . . . . . . . . . . . $ 61,342 $322,853
--------- -------
--------- -------
See accompanying notes.
3
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RAC FINANCIAL GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
------------------- -------------------
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Gains on sales of loans, net of costs but
before provision for possible credit losses . . . . . . $12,092 $41,322 $18,184 $89,815
Interest . . . . . . . . . . . . . . . . . . . . . . . . 893 6,704 1,673 $10,761
Servicing income . . . . . . . . . . . . . . . . . . . . 297 1,040 698 2,674
Other income . . . . . . . . . . . . . . . . . . . . . . 322 2,310 923 5,392
--- ----- ---- ------
Total revenues . . . . . . . . . . . . . . . . . . . . . 13,604 51,376 21,478 108,642
Expenses:
Salaries and employee benefits . . . . . . . . . . . . . 2,578 9,383 5,984 22,542
Interest . . . . . . . . . . . . . . . . . . . . . . . . 879 3,751 1,462 8,610
Other operating. . . . . . . . . . . . . . . . . . . . . 2,226 8,458 4,986 17,320
Provision for possible credit losses . . . . . . . . . . 1,606 14,058 2,256 26,561
----- ------ ----- ------
Total expenses . . . . . . . . . . . . . . . . . . . . . 7,289 35,650 14,688 75,033
----- ------- ------ ------
Income before income taxes . . . . . . . . . . . . . . . . . . . . . 6,315 15,726 6,790 33,609
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . (2,345) (5,976) (2,660) (12,771)
------ ------ ------ -------
Net income . . . . . . . . . . . . . . . . . . . . . . . $3,970 $9,750 $4,130 $20,838
------ ------ ------ -------
------ ------ ------ -------
Net income per share of common stock . . . . . . . . . . . . . . . . $ 0.39 $ 0.70 $ 0.39 $ 1.70
------ ------ ------- --------
------ ------ ------- --------
Weighted average common shares and common equivalent shares
outstanding . . . . . . . . . . . . . . . . . . . . . . 10,148 13,840 10,148 12,206
------ ------ ------- --------
------ ------ ------- --------
</TABLE>
See accompanying notes.
4
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RAC FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in thousands)
Nine Months
Ended June 30,
---------------------
1995 1996
---- ----
OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . $ 4,130 20,838
Adjustments to reconcile net income to net cash
provided by (used in)operating activities:
Provision for possible credit losses . . . . . 2,256 26,561
Depreciation and amortization. . . . . . . . . 280 522
Gain on sales of loans . . . . . . . . . . . . (19,149) (94,037)
Changes in operating assets and liabilities:
Excess servicing receivable amortization . . 294 7,280
Loans originated or acquired . . . . . . . . (196,891) (909,102)
Principal collected and proceeds from
sale of loans. . . . . . . . . . . . . . . 186,201 785,069
Accrued interest receivable. . . . . . . . . 233 (1,298)
Excess servicing receivable, net . . . . . . (2,670) (180)
Receivable from trusts . . . . . . . . . . . (3,564) (9,749)
Subordinated Certificate held for sale . . . - (15,215)
Other assets . . . . . . . . . . . . . . . . (34) (3,582)
Accounts payable and accrued expenses. . . . 982 6,446
Deferred tax liability . . . . . . . . . . . 1,894 9,340
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES. . . . . (26,038) 177,107)
--------- ---------
INVESTING ACTIVITIES:
Cash from acquisition. . . . . . . . . . . . 525 252
Purchases of equipment and leasehold
improvements. . . . . . . . . . . . . (325) (785)
--------- ---------
NET CASH PROVIDED BY INVESTING ACTIVITIES. . . 200 (533)
--------- ---------
FINANCING ACTIVITIES:
Borrowings on warehouse financing
facilities, net. . . . . . . . . . . . . . 8,635 102,440
Borrowings on term line of credit. . . . . . 5,135 27,820
Borrowings (repayments) on notes
payable, net . . . . . . . . . . . . . . . 5,713 (796)
Proceeds from repayments of subordinated
notes payable to affiliates. . . . . . . . 7,175 (1,000)
Preferred stock issued (redeemed). . . . . . (200) (2,400)
Common stock issued. . . . . . . . . . . . . 450 51,211
Distributions. . . . . . . . . . . . . . . . (2,167) -
Preferred stock dividends. . . . . . . . . . (27) ( 265)
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES. . . 24,714 117,010
INCREASE (DECREASE) IN CASH. . . . . . . . . . (1,124) (630)
Cash and cash equivalents at
beginning of period . . . . . . . . . . . . . 3,433 2,967
--------- ---------
Cash and cash equivalents at end
of period. . . . . . . . . . . . . . . . . $ 2,309 $ 2,337
--------- ---------
--------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Interest paid during the period . . . . . . $ 1,441 $ 8,610
--------- ---------
--------- ---------
See accompanying notes.
5
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RAC FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1996
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine month periods ended
June 30, 1996 are not necessarily indicative of the results that may be expected
for the year ended September 30, 1996. For further information, refer to the
consolidated financial statements and footnotes thereto for the year ended
September 30, 1995 included in RAC Financial Group, Inc.'s registration
statement on Form S-1 for its initial public offering of common stock.
In May 1996, 800,000 common shares of the Company were issued in exchange
for all of the outstanding common stock of Mortgage Plus, Incorporated (MPI),
in a transaction accounted for as a pooling of interests. MPI was
subsequently renamed FIRSTPLUS Financial West, Inc. (FIRSTPLUS West). As
such, the consolidated financial information of the Company has been restated
to include the accounts of FIRSTPLUS West for all periods presented. As
FIRSTPLUS West was a Subchapter S corporation prior to the pooling with RAC,
its retained earnings activity (net income (loss) and distributions) on a
separate company basis has been reclassified to additional capital. Prior to
the acquisition, FIRSTPLUS West operated on a fiscal year end of April 30.
FIRSTPLUS West's prior years financial statements have been combined with the
Company's financial statements without recasting the periods presented,
except for the financial information as of and for the nine months ended
June 30, 1996 and 1995.
All tabular information is presented in thousands.
2. LOANS HELD FOR SALE
Loans held for sale consist of the following:
As of As of
------------------ ---------------
September 30, 1995 June 30, 1996
------------------ ----------------
First lien mortgages . . . . . . . . $ 28 $ 17,535
Construction Loans . . . . . . . . . --- 2,448
Second Lien Title I Loans. . . . . . 7,203 9,701
Second Lien Conventional Loans . . . 14,066 133,581
--------- ----------
Subtotal. . . . . . . . . . . . . 21,297 163,265
Participations sold. . . . . . . . . (902) (30)
Allowance for possible
credit losses . . . . . . . . . . . (888) (1,616)
Net purchase premiums (discounts) on
Conventional loans . . . . . . . (72) 4,121
--------- ----------
Total . . . . . . . . . . . . . . $ 19,435 $165,740
--------- ----------
--------- ----------
6
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RAC FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
JUNE 30, 1996
3 ALLOWANCE FOR POSSIBLE CREDIT LOSSES
The activity in the allowance for possible credit losses is summarized as
follows:
Year Ended Nine Months Ended
------------------ -----------------
September 30, 1995 June 30, 1996
------------------ -----------------
Balance, beginning of period . . . . $ 325 $ 4,794
Allowance from FIRSTPLUS
Financial acquisition . . . . . . . 160 -
Provision for possible credit losses 4,452 26,561
Charge offs, net . . . . . . . . . . (143) (2,357)
--------- ----------
Balance, end of period. . . . . . . $ 4,794 $ 28,998
--------- ----------
--------- ----------
Components of Allowance:
Allowance for possible
credit losses . . . . . . . . . $ 888 $ 1,616
Allowance for possible
credit losses on loans sold . . 3,907 27,382
--------- ----------
Total . . . . . . . . . . . $ 4,795 $ 28,998
--------- ----------
--------- ----------
4. EXCESS SERVICING RECEIVABLE
The activity in the Excess Servicing Receivable is summarized as follows:
Year Ended Nine Months Ended
------------------ -----------------
September 30, 1995 June 30, 1996
------------------ -----------------
Balance, beginning of period . . . . $ - $29,744
Acquired in acquisitions . . . . . . 1,686 198
Excess servicing gains . . . . . . . 30,065 94,037
Excess servicing write-off . . . . . (969) (409)
Amortization . . . . . . . . . . . (488) (6,817)
Receivable reclassified to
Receivable from Trust . . . . . . . (550) --
--------- ----------
Balance, end of period . . . . . . . $ 29,744 $ 116,753
--------- ----------
--------- ----------
7
<PAGE>
RAC FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
JUNE 30, 1996
5. OTHER ASSETS
Other assets consist of the following:
As of As of
------------------ -------------
September 30, 1995 June 30, 1996
------------------ -------------
Goodwill, net . . . . . . . . . . . $ 477 $ 431
Furniture, equipment and leasehold
improvements, net . . . . . . . . . 1,278 3,797
Prepaids and other . . . . . . . . . 4,037 6,298
--------- ----------
Total . . . . . . . . . . . $ 5,792 $ 10,526
--------- ----------
--------- ----------
6. GAINS ON SALES OF LOANS
The gains on sales of loans and the related cost is as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------- --------------------------
June 30 June 30
----------------------- --------------------------
1995 1996 1995 1996
------- ------- ---------- --------
<S> <C> <C> <C> <C>
Excess servicing gain. . . . . . . . . . . . . . . . . $18,600 $43,949 $25,873 $94,573
Gain sharing on loan sales . . . . . . . . . . . . . . (4,631) - (7,201) (536)
-------- ------- -------- --------
Subtotal . . . . . . . . . . . . . . . . . . . . . . . 13,969 43,949 18,672 94,037
Gain on whole loan and bulk sales. . . . . . . . . . . 1,325 4,369 3,298 10,682
-------- ------- -------- --------
Total. . . . . . . . . . . . . . . . . . . . . . . . . 15,294 48,318 $21,970 $104,719
Residual Interest Income . . . . . . . . . . . . . . . - 1,577 - 2,874
(Premium) discount, net. . . . . . . . . . . . . . . . (1,933) (6,050) (919) (12,899)
Transaction costs. . . . . . . . . . . . . . . . . . . (1,269) (2,523) (2,867) (4,879)
-------- ------- -------- --------
Gains on sales of loans (before provision for possible
credit losses) . . . . . . . . . . . . . . . . . $12,092 $41,322 $18,184 $ 89,815
-------- ------- -------- --------
-------- ------- -------- --------
</TABLE>
8
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
JUNE 30, 1996
Loans held for sale increased from $19.4 million as of September 30, 1995
to $165.7 million as of June 30, 1996, an increase of $146.3 million or 752.8%.
This increase was primarily due to the increased utilization of larger warehouse
facilities (executed in June, 1995), which allowed for substantial growth in
loan originations. The growth in volume was also due, in part, to the expansion
of loan products offered by the Company since September 30, 1995.
In May 1996, 800,000 common shares of the Company were issued in exchange for
all of the outstanding common stock of Mortgage Plus, Incorporated (MPI), in a
transaction accounted for as a pooling of interests. MPI was subsequently
renamed FIRSTPLUS Financial West, Inc. (FIRSTPLUS West). As such, the
consolidated financial information of the Company has been restated to include
the accounts of FIRSTPLUS West for all periods presented. As FIRSTPLUS West was
a Subchapter S corporation prior to the pooling with RAC, its retained earnings
activity (net income (loss) and distributions) on a separate company basis has
been reclassified to additional capital. Prior to the acquisition, FIRSTPLUS
West operated on a fiscal year end of April 30. FIRSTPLUS West's prior years
financial statements have been combined with the Company's financial statements
without recasting the periods presented, except for the financial information as
of and for the nine months ended June 30, 1996 and 1995.
The Company's excess servicing asset increased from $29.7 million on
September 30, 1995 to $116.8 million at June 30, 1996, an increase of $87.0
million or 292.5%. This increase was due to the significant increase in the
amount of loans securitized from October 1, 1995 through June 30, 1996 ($427.2
million), and the elimination of sharing arrangements for securitizations which
closed subsequent to September 30, 1995.
The Company's warehouse facilities are its primary source of funding for
loan originations. As of September 30, 1995, the Company had outstanding
balances of $18.5 million owed to warehouse lenders at an approximate 9.25% rate
of interest. As of June 30, 1996 the Company had outstanding balances of $142.8
million owed to warehouse lenders at an approximate 6.6% rate of interest. This
represents a $124.3 million warehouse line balance increase from September 1995
to the June 1996 balance owing, or a 670.8%. The Company renegotiated the
interest rate on its warehouse lines of credit in April 1996, effective February
1, 1996. Currently, the rates are approximately 1.25%, over the thirty-day U.S.
Federal Funds Rate or 1.25% over the Company's warehouse lender's parent's
thirty-day commercial paper rate.
Accounts payable and other accrued liabilities increased from $6.9 million
as of September 30, 1995 to $14.8 million as of June 30, 1996. This represents
a $7.9 million increase over the period, or 113.4%. This increase was
primarily a result of increased payables for federal and state income taxes,
securitization costs (which will be subsequently refinanced with the Company's
term line lender) and increased liabilities for salary and infrastructure costs
associated with the significant increases in loan volume during the quarter
ended June 30, 1996.
9
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Total shareholders' equity at June 30, 1996 was $81.2 million, as
compared with $11.7 million at September 30, 1995, an increase of $69.5
million or 592.0%. During the nine months ended June 30, 1996, the Company
earned net income of $20.8 million and paid preferred stock dividends of
$264,842.
RESULTS OF OPERATIONS
The Company's total revenues increased to $51.4 million during its third
fiscal quarter ended June 30, 1996, from $13.6 million for the comparable
quarter ended June 30, 1995, an increase of $37.8 million or 277.7 %. For the
first nine months of the fiscal year 1996, the Company's total revenues
increased to $108.6 million from $21.5 million during the same period in 1995,
an increase of $87.2 million or 405.8%.
The increase in the volume of loans originated and purchased by the Company
and the increase in the size and scope of the Company's securitization program
throughout fiscal 1995 and continuing into fiscal 1996 was primarily responsible
for this increase in revenues. The Company's securitization transactions
resulted in increased Gain on Sale of Loans. Gain on Sale of Loans increased
because the Company was able to sell a larger volume of loans more efficiently
without reduction for any sharing arrangements in the quarter ended June 30,
1996, when compared to the quarter ended June 30, 1995, as well as for the
associated nine month periods. Interest, servicing and other income also
increased substantially during the June 30, 1996 quarter when compared to the
June 30, 1995 quarter, primarily as a result of the increased quantity of loans
originated, held for sale and serviced by the Company.
The Company's provision for possible credit losses increased by $12.4
million from $1.6 million, (0.6% of loans sold), for the quarter ended June 30,
1995 to $14.1 million (2.1% of loans sold) for the quarter ended June 30, 1996.
The Company's provision for possible credit losses was $26.6 million for the
nine month period ended June 30, 1996, compared to $2.3 million for the same
period in 1995, an increase of $24.3 million. These increases in the provision
for possible credit losses were proportional to the Company's increase in
securitization activity, as adjusted for the increasing percentage of
Conventional loans securitized by the Company throughout the 1995 calendar year,
the removal of the Warehouse Lender's sharing arrangement payment (which
required the Warehouse Lender rather than the Company to reserve for certain
loans), and shifts in the quality of the loans being securitized.
Total expenses including income taxes increased from $9.6 million for the
three months ended June 30, 1995 to $41.6 million for the three months ended
June 30, 1996, an increase of $32.0 million or 332.1%. On a nine-month
basis, the Company's expenses including taxes increased from $17.3 million
for the nine month period ended June 30, 1995, compared to $87.8 million for
the comparable period ended June 30, 1996, an increase of $70.5 million or
406.1%. As a percentage of total revenues, however, total expenses
including taxes increased from 70.8% in the June 1995 quarter to 81.0% in
the June 1996 quarter. Total expenses including income taxes for the
nine-month periods ended June 30, 1996 and 1995 remained constant at 80.8% of
total revenues.
As a result of the above, net income increased from $4.0 million for the
June 1995 quarter to net income of $9.8 million for the June 1996 quarter. This
represents an increase of $5.8 million, or a 145.6% increase. Net income, on a
nine-month basis, increased to $20.8 million for the first nine-month
10
<PAGE>
period of Fiscal Year 1996 from $4.1 million for the nine months of Fiscal Year
1995, an increase of $16.7 million or 404.6%. These increases wer primarily the
result of growth in loan production and sale of loans through securitizations
for the respective comparitive periods.
The Company delivered $205.1 million out of $258.5 million in loans in June
30, 1996. During the time period between the securitization's closing and the
last delivery of the $40 million of prefunded loans to the securitizations, the
Five Year Treasury Yield increased from 5.3% to 6.1%.
Weighted Average Fair, Isaac and Company scores (a default prediction model
utilized by the Company) for the Conventional loans securitized in the Company's
1996-1 securitization were approximately 656 points, with a standard deviation
of 45 points. Weighted Average Fair, Isaac and Company scores for the
Conventional Loans securitized in the Company's 1995-1 securitization (closed
during the quarter ended June 30, 1995) were approximately 605 points, with a
standard deviation of approximately 67 points. This improvement in loan quality
and consistency reflects the Company's effort to produce a well received and
reliable securitization product. Title One loans securitized in both
securitizations had Weighted Average Fair, Isaac and Company scores of
approximately 625 points and a standard deviation of approximately 67 points.
The Company's servicing (including subserviced loans) loan portfolio had 30
day and over delinquencies of 3.7% of its loans as of June 30, 1996, and 6.6% of
its loans as of June 30, 1995. This decrease was primarily due to increased
loan origination volumes. On a static pool basis, the Company's seasoned
securitizations (those transactions funded more than nine months ago), had a
weighted average 30 day and over delinquency rate of 6.7%.
Gross defaults (before recoveries and Title I insurance claims paid) as
a percentage of the serviced loan portfolio declined from the June 1995
quarter to the June 1996 quarter. Gross defaults for the nine months ended
June 30, 1995 equaled $385,000, or 0.6% of the June 1995 quarterly loan
portfolio. Gross defaults for the nine months ended June 30, 1996 equaled
$4.9 million or 0.7% of the June 1996 loan servicing portfolio. Gross
defaults experienced in the three months and nine months ended June 30, 1996
were primarily the result of lower quality loans defaulting in the 1994-1,
1995-1,1995-2, 1996-1, 1996-2 and 1996-A securitizations. As of June 30,
1996, reserves exceed cumulative defaults in these six securitizations, and
with respect to all other loans in the Company's servicing portfolio. On a
static pool basis, the Company's seasoned securitizations (those transactions
funded more than nine months ago) had a weighted average default rate for the
quarter ended June 30, 1996 of .4%.
On a seasoned pool basis the weighted average prepayment rate for the
Company's seasoned securitizations (those transactions funded more than nine
months ago) was approximately 8.63% for the quarter ended June 30, 1996.
Prepayment rates for newer securitizations and for non-securitized loans on the
Company's balance sheet are not yet sufficient to provide meaningful data
regarding future loan performance.
LIQUIDITY AND CAPITAL RESOURCES
11
<PAGE>
The Company's operations require continued access to financing sources.
The Company's primary operating cash requirements include the funding of (i)
loan originations and purchases, (ii) reserve accounts, over collateralization
requirements, fees and expenses incurred in connection with its securitization
transactions, (iii) tax payments due on the Company's reported net income, which
is based in large part on the Company's recognition of Gain on Sale of Loans,
and (iv) ongoing administrative and other operating expenses.
Adequate credit facilities and other sources of funding, which permit the
Company to fund its operating cash requirements and to securitize or sell loans
in the secondary market, are essential to the continuation of the Company's
ability to originate and purchase loans. After utilizing available working
capital, the Company borrows money to fund its loan originations and purchases,
and repays these borrowings as the loans are securitized or sold. Upon the
securitization or sale of loans and the subsequent repayment of the borrowings,
the Company's working capital and warehouse lines of credit again become
available to fund additional loan originations and purchases.
The Company, and its two subsidiaries, First Security Mortgage Corp. and
Mortgage Plus, Inc. (now known as FIRSTPLUS Financial East and FIRSTPLUS
Financial West, Inc., respectively) currently have four major warehouse
financing facilities. These facilities are described below:
1). The Company's largest and most significant facility (the "Warehouse
Lender" facility) is secured by loans originated or purchased by the
Company and bears interest payable monthly at the rate of 1.25% over
the commercial paper rate of the Warehouse Lender's parent (5.4% as of
June 30, 1996). This facility generally has a loan advance rate of
par. This facility was executed in April 1996 and was effective on
February 1, 1996. This facility matures on March 1, 1997.
The Company also has a $70 million term line (maturing in February
1999), with the Warehouse Lender, which is secured by the Company's
servicing rights and excess servicing receivable. This line of credit
bears interest at the rate of 2.5% over the commercial paper rate of
the Warehouse Lender's parent with principal advances amortized over
60 months. The Term Line may be utilized for any working capital
need; to date, the Term Line has been primarily used to finance the
Company's share of premium costs, cost of issuance and initial reserve
deposits for credit enhancement with respect to its securitization
activities. Up to 65% of the value of the Company's excess servicing
receivable (as calculated by the Warehouse Lender) may be borrowed by
the Company under the terms of the facility.
2.) The Company has a $60 million warehouse facility with Bank One, Texas
(the "Bank One" warehouse facility). This facility was executed in
April 1996, was effective on February 1, 1996 and expires on March 31,
1997. This facility is secured by loans originated or purchased by
the Company. Interest is payable monthly and accrues at 1.25% over
the thirty-day Federal Funds Rate. This warehouse facility has a loan
advance rate generally equal to the lesser of 90% of loan value or 97%
of loan cost, not to exceed par.
3). At June 30, 1996, FIRSTPLUS Financial East, the Company's direct-to-
consumer originator, had $13.7 million outstanding under its $22.5
million in warehouse facilities primarily with Leader Federal Bank of
Bartlett, Tennessee. The facilities bear interest at Leader
12
<PAGE>
Federal Bank's prime rate plus 1%. The Company guarantees the
repayment of advances made to First Security under this facility.
4). At June 30, 1996, FIRSTPLUS Financial West, Inc., had $14.4 million
outstanding under its $40 million in warehouse facilities primarily
with Bank United of Texas.
As of June 30, 1996, the Company owed an aggregate of $7.0 million in
Subordinated Notes to BOCP II, BOCP V and Farm Bureau. The Subordinated Notes
were issued with detachable warrants, which were exercised for shares of
Non-Voting Common Stock in February 1996. The Subordinated Notes are secured by
certain assets of the Company, but are subordinated to the Warehouse Lender
facility and the Bank One warehouse facility. Interest is payable quarterly on
the notes. In February 1996, a portion of the proceeds from the Company's
initial public offering were used to pay off $5.5 million of subordinated notes
payable to Farm Bureau. At June 30, 1996, the Company also had certain other
notes payable totaling approximately $1.1 million with various maturities in
excess of one year.
As indicated above, the Company's ability to continue to originate and
purchase loans is dependent, in large part, upon its ability to securitize or
sell its loans in the secondary market in order to generate cash proceeds for
new originations and purchases. The value of and market for the Company's loans
are dependent upon a number of factors, including general economic conditions,
interest rates and governmental regulations. Adverse changes in such factors
may affect the Company's ability to purchase, securitize or sell loans for
acceptable prices within a reasonable period of time. A prolonged, substantial
reduction in the size of the secondary market for loans of the type originated
or purchased by the Company may adversely affect the Company's ability to
securitize or sell loans in the secondary market, with a consequent adverse
impact on the Company's profitability and ability to fund future originations
and purchases.
As a result of the Company's increasing volume of loan originations and
purchases, and its expanding securitization activities, the Company has
operated, and expects to continue to operate, on a negative operating cash
flow basis, which is expected to increase as the volume of the Company's loan
purchases and originations increase and its securitization program grows.
The used $26.0 million of cash in the nine months ended June 30, 1995 and
used $177.1 million of cash in the nine months ended June 30, 1996. The
increase in the use of cash in operations is primarily related to the cost of
an enlarged infrastructure, employee base and the costs that accompany the
Company's securitization strategy (which increases the Gain on Sale of Loans
but reduces the amount of cash received on the sale of loans as compared to
whole-loan sales). The Company completed total securitizations in the amount
of $235.0 million for the year ended September 30, 1995 and $427.2 million
for the nine months ended June 30, 1996. In connection with securitizations,
the Company is required to provide credit enhancements in the form of reserve
accounts. The accumulated amounts of such cash reserves are included on the
Company's balance sheet as "receivable from trusts" and equaled $7.8 million
as of June 30, 1996. These accounts cannot be used by the Company for
operating purposes. The Company's financings and investing activities
provided cash in the amount of $116.5 million for the nine months ended June
30, 1996 and used cash of $24.9 million for the nine months ended June 30,
1995. Cash from financing and investing activities increased primarily due
to additional borrowings related to
13
<PAGE>
the Subordinated Notes, the Term Line and other borrowings, which have been used
to fund loan originations, working capital and securitization costs.
The increased use of securitization transactions as a funding source by
the Company has resulted in a significant increase in the amount of Gain on
Sale of Loans recognized by the Company. For the nine months ended June 30,
1996, the Company recognized Gain on Sale of Loans in the amount of
approximately $63.2 million (net of provision for possible credit losses of
$26.6 million) compared to $15.9 million (net of provision for possible credit
losses of $2.3 million) for the same period in 1995. During the nine months
ended June 30, 1996, the Company recognized Gain on Sale of Loans in the
amount of approximately $27.2 million (net of provision for possible credit
losses of $14.1 million) compared to $3.9 million (net allowance for possible
credit losses of $1.6 million) for the same period ended June 30, 1995. This
Gain on Sale has a negative impact on the cash flow of the Company since the
Company will be required to pay state and federal income taxes on a portion
of such gains and must currently pay securitization costs in the period the
income is recognized, although the Company does not receive the cash
representing the gain until later periods as the related loans are repaid or
otherwise collected. The Company has funded these cash requirements through
the Warehouse Lender's term line facility.
14
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Not Applicable
Item 2. CHANGES IN SECURITIES
Not Applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
Item 5. OTHER INFORMATION
Not Applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits:
10.1 Master Purchase Agreement Between Bear Stearns
Home Equity Trust 1996-1 and FirstPlus Financial,
Inc. dated May 10, 1996
10.2 Custody Agreement among FIRSTPLUS Financial,
Inc., seller and Bear Stearns Home Equity Trust 1996-
1, buyer and Bank One, Texas, N.A., custodian dated May
10, 1996
10.3 Fifth Amendment to Credit Agreement dated June 20,
1996 by and among FIRSTPLUS Financial, Inc., RAC
Financial Group, Inc. and Bank One, Texas, National
Association
10.4 Promissory Note dated June 30, 1996 between
FIRSTPLUS Financial, Inc. and Bank One, Texas,
National Association
15
<PAGE>
*10.5 Agreement and Plan of Merger dated May 22, 1996,
among RAC Financial Group, Inc., FIRSTPLUS
Financial West, Inc., Mortgage Plus Incorporated and
the Shareholders
11 Statement re: Computation of Per Share Earnings
27 Financial Data Schedule
* Incorporated by reference from the Company's Current Report on Form 8-K
dated June 14, 1996.
(B)Reports on Form 8-K
On June 14, 1996, the Company filed a Current Report on Form 8-K
reporting the acquisition of Mortgage Plus Incorporated. The financial
statements required by such Form 8-K will be filed by amendment.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RAC Financial Group, Inc.
(Registrant)
by: /s/ Eric C. Green
-------------------------------------------
Eric C. Green
Chief Financial Officer
(Principal Financial Officer and Duly Authorized Officer)
date: 8/6/96
----------------------
17
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. EXHIBIT
----------- ---------
10.1 Master Purchase Agreement Between Bear Stearns
Home Equity Trust 1996-1 and FirstPlus Financial,
Inc. dated May 10, 1996
10.2 Custody Agreement among FIRSTPLUS Financial,
Inc., seller and Bear Stearns Home Equity Trust 1996
-1, buyer and Bank One, Texas, N.A., custodian dated
May 10, 1996
10.3 Fifth Amendment to Credit Agreement dated June 20,
1996 by and among FIRSTPLUS Financial, Inc., RAC
Financial Group, Inc. and Bank One, Texas, National
Association
10.4 Promissory Note dated June 30, 1996 between
FIRSTPLUS Financial, Inc. and Bank One, Texas,
National Association
*10.5 Agreement and Plan of Merger dated May 22, 1996,
among RAC Financial Group, Inc., FIRSTPLUS
Financial West, Inc., Mortgage Plus Incorporated and
the Shareholders
11 Statement re: Computation of Per Share Earnings
27 Financial Data Schedule
* Incorporated by reference from the Company's Current Report on Form 8-K
dated June 14, 1996.
18
<PAGE>
EXHIBIT 10.1
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
MASTER REPURCHASE AGREEMENT
BETWEEN
BEAR STEARNS HOME EQUITY TRUST 1996-1
AND
FIRSTPLUS FINANCIAL, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Dated as of May 10, 1996
<PAGE>
TABLE OF CONTENTS
DOCUMENT ITEM NO.
-------- --------
Master Repurchase Agreement.................................... 1
Custody Agreement.............................................. 2
Opinion of Ronald M. Bendalin, Esq. ........................... 3
<PAGE>
[EXECUTION COPY]
MASTER REPURCHASE AGREEMENT
Dated as of May 10, 1996
Between:
BEAR STEARNS HOME EQUITY TRUST 1996-1
and
FIRSTPLUS FINANCIAL, INC.
1. APPLICABILITY
From time to time the parties hereto may enter into transactions in
which FirstPlus Financial, Inc. (a/k/a Remodelers National Funding and herein
referred to as "Seller") agrees to transfer to Bear Stearns Home Equity Trust
1996-1 ("Buyer") Mortgage Loans (as defined herein) against the transfer of
funds by Buyer, with a simultaneous agreement by Buyer to transfer to Seller
such Mortgage Loans at a date certain or on demand, against the transfer of
funds by Seller. Each such transaction shall be referred to herein as a
"Transaction" and shall be governed by this Agreement, as the same shall be
amended from time to time.
2. DEFINITIONS
(a) "Act of Insolvency", with respect to either Buyer or Seller, (i)
the commencement by such party as debtor of any case or proceeding under any
bankruptcy, insolvency, reorganization, liquidation, dissolution or similar
law, or such party seeking the appointment of a receiver, trustee, custodian
or similar official for such party or any substantial part of its property,
or (ii) the commencement of any such case or proceeding against such party,
or another seeking such an appointment, or the filing against a party of an
application for a protective decree under the provisions of the Securities
Investor Protection Act of 1970, which (A) is consented to or not timely
contested by such party, (B) results in the entry of an order for relief,
such an appointment, the issuance of such a protective decree or the entry of
an order having a similar effect, or (C) is not dismissed within 15 days;
(iii) the making by a party of a
<PAGE>
general assignment for the benefit of creditors, or (iv) the admission in
writing by a party of such party's inability to pay such party's debts as
they become due;
(b) "Additional Purchased Mortgage Loans", Mortgage Loans provided by
Seller to Buyer pursuant to Paragraph 4(a) hereof;
(c) "Business Day", any day other than a Saturday, Sunday and any day
on which banks located in the State of New York are authorized or required to
close for business;
(d) "Buyer's Margin Amount", with respect to any Transaction as of any
date, the amount obtained by application of a percentage, agreed to by Buyer
and Seller prior to entering into the Transaction and specified in the
related Request/Confirmation, to the Repurchase Price for such Transaction as
of such date;
(e) "Conventional Mortgage Loan", a Mortgage Loan which is not covered
by FHA Insurance;
(f) "Custodian", the custodian named in the Custody Agreement and any
permitted successor thereto;
(g) "Custody Agreement", the Custody Agreement among Buyer, Seller and
the Custodian providing for the custody of records relating to the Purchased
Mortgage Loans;
(h) "Delayed Document Mortgage Loan", the meaning specified in
Paragraph 7(b) hereof;
(i) "FHA", The Federal Housing Administration of HUD and any successor
thereto;
(j) "FHA Insurance", with respect to the Title I Mortgage Loans, the
mortgage insurance provided by the FHA pursuant to Title I of the National
Housing Act of 1934, as amended;
(k) "FHA Regulations", the rules, regulations and procedures
promulgated by HUD under the National Housing Act of 1934, as amended,
relating to Title I property improvement loans and loans pertaining to
manufactured homes and related real property, currently found at 24 C.F.R.
Parts 201 and 202, together with the "TI Letters" and HUD Handbook 4700.2, as
the same may be amended or supplemented from time to time; provided that with
respect to the origination or servicing of a Title I Mortgage Loan, such
rules and regulations that were in effect at the time the relevant
origination or servicing actions occurred;
(l) "FNMA", the Federal National Mortgage Association;
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<PAGE>
(m) "HEL", a home equity loan consisting of a Note secured by a
Mortgage;
(n) "HIL", a home improvement loan consisting of a Note secured by a
Mortgage;
(o) "HUD", the Department of Housing and Urban Development;
(p) "Income", with respect to any Mortgage Loan at any time, any
principal thereof then due and payable and all payments of interest and other
distributions thereon or proceeds thereof then due and payable;
(q) "Loan Schedule", a schedule of Mortgage Loans identifying each
Mortgage Loan by Seller's loan number, Mortgagor's name and address
(including the state and zip code) of the mortgaged property, whether such
Mortgage Loan is secured by a first or junior lien (specifying the priority
of such junior lien) on the related Mortgaged Property, the loan-to-value
ratio if such Mortgage Loan is a HEL, the outstanding principal amount as of
a specified date, the initial interest rate borne by such Mortgage Loan, the
original principal balance thereof, the current scheduled monthly payment of
principal and interest, the maturity of the related Note, the property type,
the occupancy status, the appraised value if such Mortgage Loan is a HEL
having an original principal balance in excess of $10,000, the original term
to maturity, whether the Mortgage Loan is a HEL or a HIL, whether the
Mortgage Loan is a Title I Mortgage Loan or a Conventional Mortgage Loan and
whether or not the Mortgage Loan (including the related Note) has been
modified; PROVIDED, HOWEVER, that the items of information set forth on the
Loan Schedule may be expanded or contracted by mutual agreement of Buyer and
Seller; and PROVIDED, FURTHER, HOWEVER, that the appraised value for any HEL
may be determined from a real estate broker's price opinion or a drive-by
appraisal;
(r) "Margin Deficit", the meaning specified in Paragraph 4(a) hereof;
(s) "Market Value", with respect to any Mortgage Loans as of any date,
the fair market value of such Mortgage Loans on such date as reasonably
determined in good faith by Buyer in accordance with its current practices
for determining the fair market value of similar residential loans from time
to time and at such times as it may elect in its sole discretion; PROVIDED,
HOWEVER, that a Market Value of zero shall be assigned to (i) any Mortgage
Loan that has been delinquent for at least eighty-nine (89) days, (ii) any
Mortgage Loan that has been subject to this Agreement for more than one
hundred and eighty (180) days in aggregate, (iii) any Mortgage Loan with
respect to which there is a breach of a representation or warranty made by
Seller in this Agreement or the Custody Agreement that materially adversely
3
<PAGE>
affects Buyer's interests hereunder or (iv) any Delayed Document Mortgage
Loan with respect to which documentation required to be delivered to the
Custodian by the Custody Agreement has not been delivered to the Custodian
within three (3) Business Days after the related Purchase Date;
(t) "Mortgage", the mortgage, deed of trust or other instrument
creating a first or junior lien on an estate in fee simple interest in real
property securing a Note;
(u) "Mortgage File", the meaning specified in the Custody Agreement;
(v) "Mortgage Loan", a HEL or a HIL, as applicable;
(w) "Mortgaged Property", the property (real, personal or mixed)
encumbered by the Mortgage which secures the Note evidencing a secured
Mortgage Loan;
(x) "Mortgagor", the obligor on a Note;
(y) "Note", the Note or other evidence of indebtedness evidencing the
indebtedness of a Mortgagor under a Mortgage Loan;
(z) "Price Differential", with respect to any Transaction hereunder as
of any date, the aggregate amount obtained by daily application of the
Pricing Rate for such Transaction to the Purchase Price for such Transaction
on a 360 day per year basis for the actual number of days during the period
commencing on (and including) the Purchase Date for such Transaction and
ending on (but excluding) the date of determination (reduced by any amount of
such Price Differential previously paid by Seller to Buyer with respect to
such Transaction);
(aa) "Pricing Rate", the per annum percentage rate for determination of
the Price Differential, which rate shall be specified in the related
Request/Confirmation;
(ab) "Prime Rate", the prime rate of U.S. money center commercial banks
as published in THE WALL STREET JOURNAL;
(ac) "Purchase Date", the date with respect to each Transaction on
which Purchased Mortgaged Loans are sold by Seller to Buyer hereunder;
(ad) "Purchase Price", (i) on the Purchase Date, the price at which
Purchased Mortgage Loans are sold by Seller to Buyer hereunder, and (ii)
thereafter, such price decreased by the amount of any cash transferred by
Seller to Buyer pursuant to Paragraph 4(a) hereof;
4
<PAGE>
(ae) "Purchased Mortgage Loans", the Mortgage Loans sold by Seller to
Buyer in a Transaction hereunder, and any Mortgage Loans substituted therefor
in accordance with Paragraph 9 hereof. The term "Purchased Mortgage Loans"
with respect to any Transaction at any time also shall include Additional
Purchased Mortgage Loans delivered pursuant to Paragraph 4(a);
(af) "Replacement Mortgage Loans", the meaning specified in Paragraph
11(e)(ii) hereof;
(ag) "Repurchase Date", the date on which Seller is to repurchase the
Purchased Mortgage Loans from Buyer, including any date determined by
application of the provisions of Paragraphs 3(e) or 11 hereof;
(ah) "Repurchase Price", the price at which Purchased Mortgage Loans
are to be resold by Buyer to Seller upon termination of a Transaction, which
will be determined in each case (including Transactions terminable upon
demand) as the sum of the Purchase Price and the Price Differential as of the
date of such determination, increased by any amount determined by the
application of the provisions of Paragraph 11 hereof;
(ai) "Request/Confirmation", the request and confirmation substantially
in the form of Exhibit A hereto delivered pursuant to Paragraph 3 hereof;
(aj) "Title I Mortgage Loan", a Mortgage Loan that has been or will be
registered by FHA for FHA Insurance under the Title I Program; and
(ak) "Title I Program", the mortgage insurance program authorized
pursuant to the National Housing Act of 1934, as amended.
3. INITIATION; REQUEST/CONFIRMATION; TERMINATION; TRANSACTIONS OPTIONAL
(a) Any agreement to enter into a Transaction shall be made in writing
at the initiation of Seller. In the event that Seller desires to enter into
a Transaction hereunder, Seller shall deliver to Buyer prior to 5:00 p.m.,
New York City time, on the Business Day prior to the proposed Purchase Date,
a Request/Confirmation complete in every respect except for any terms to be
completed by Buyer and the signature of an authorized representative of
Buyer. Buyer shall, upon its receipt and approval thereof, promptly execute
and return the signed Request/Confirmation to Seller.
(b) The Request/Confirmation shall describe the Purchased Mortgage
Loans in a manner satisfactory to Buyer (which may be by attaching a Loan
Schedule thereto), identify Buyer and Seller and
5
<PAGE>
set forth (i) the Purchase Date, (ii) the Purchase Price, (iii) the
Repurchase Date, unless the Transaction is to be terminable on demand, (iv)
the Pricing Rate or Repurchase Price applicable to the Transaction, and (v)
any additional terms or conditions of the Transaction mutually agreeable to
Buyer and Seller.
(c) Each Request/Confirmation shall be binding upon the parties hereto
unless written notice of objection is given by the objecting party to the
other party within one (1) Business Day after Buyer has delivered the
completed Request/Confirmation to Seller.
(d) In the event of any conflict between the terms of a
Request/Confirmation and this Agreement, such Request/Confirmation shall
prevail.
(e) In the case of Transactions terminable upon demand, such demand
shall be made by Buyer or Seller, not later than such time as is customary in
accordance with market practice, by telephone or otherwise on or prior to the
Business Day immediately preceding the day on which such termination will be
effective. On the date specified in such demand, or on the date fixed for
termination in the case of Transactions having a fixed term, termination of
the Transaction will be effected by resale by Buyer to Seller or its agent of
the Purchased Mortgage Loans and any Income in respect thereof received by
Buyer (and not previously credited or transferred to, or applied to the
obligations of, Seller hereunder) against the transfer of the Repurchase
Price to an account of Buyer.
(f) Notwithstanding any provision of this Agreement or the Custody
Agreement to the contrary, the initiation of each Transaction is subject to
the approval of Buyer in its sole discretion. Buyer may, in its sole
discretion, reject any Mortgage Loan from inclusion in a Transaction
hereunder for any reason.
4. MARGIN MAINTENANCE
(a) If at any time the aggregate Market Value of all Purchased Mortgage
Loans subject to all Transactions hereunder is less than the aggregate
Buyer's Margin Amount for all such Transactions (a "Margin Deficit"), then
Buyer may by notice to Seller require Seller in such Transactions, at
Seller's option, to transfer to Buyer cash or additional Mortgage Loans
reasonably acceptable to Buyer ("Additional Purchased Mortgage Loans"), so
that the cash and aggregate Market Value of the Purchased Mortgage Loans,
including any such Additional Purchased Mortgage Loans, will thereupon equal
or exceed such aggregate Buyer's Margin Amount.
6
<PAGE>
(b) If the notice to be given by Buyer to Seller under subparagraph
(a) above is given at or prior to 10:00 a.m. New York city time on a
Business Day, Seller shall transfer cash or Additional Purchased Mortgage
Loans to Buyer prior the close of business in New York City on the date of
such notice, and if such notice is given after 10:00 a.m. New York City time,
Seller shall transfer cash or Additional Purchased Mortgage Loans prior to
the close of business in New York City on the Business Day following the date
of such notice.
(c) Any cash transferred pursuant to this Paragraph shall be held by
Buyer as though it were Additional Purchased Mortgage Loans and, unless Buyer
shall otherwise consent, shall not reduce the Repurchase Price of the related
Transaction.
5. INCOME PAYMENTS
Where a particular Transaction's term extends over an Income payment
date on the Mortgage Loans subject to that Transaction, all payments and
distributions, whether in cash or in kind, made on or with resect to the
Purchased Mortgage Loans shall, unless otherwise mutually agreed by Buyer and
Seller and so long as an Event of Default on the part of Seller shall not
have occurred and be continuing, be paid directly to Seller by the related
Mortgagor. Buyer shall not be obligated to take any action pursuant to the
preceding sentence to the extent that such action would result in the
creation of a Margin Deficit, unless prior thereto or simultaneously
therewith Seller transfers to Buyer at Buyer's option, cash or Additional
Purchased Mortgage Loans sufficient to eliminate such Margin Deficit.
6. SECURITY INTEREST
Although the parties intend that all Transactions hereunder be sales
and purchases and not loans, in the event any such Transactions are deemed to
be loans, Seller shall be deemed to have pledged to Buyer as security for the
performance by Seller of its obligations under each such Transaction, and
shall be deemed to have granted to Buyer a security interest in, all of the
Purchased Mortgage Loans with respect to all Transactions hereunder and all
proceeds thereof. Seller shall pay all fees and expenses associated with
perfecting such security interest including, without limitation, the cost of
filing financing statements under the Uniform Commercial Code and recording
assignments of mortgage as and when required by Buyer in its sole discretion.
7. PAYMENT AND TRANSFER
(a) Unless otherwise mutually agreed, all transfers of funds
hereunder shall be in immediately available funds. All Mortgage Loans
transferred by one party hereto to the other party
7
<PAGE>
shall, except as provided in (b) below, be transferred by notice to the
Custodian to the effect that the Custodian is now holding for the benefit of
the transferee the related documents and assignment forms delivered to it
under the Custody Agreement.
(b) The parties agree that, with respect to certain Purchased
Mortgage Loans (the "Delayed Document Mortgage Loans"), the delivery to the
Custodian of documents and assignment forms required by the Custody Agreement
may be delayed for a period of not more than three (3) Business Days after
the related Purchase Date.
8. SEGREGATION OF DOCUMENTS RELATING TO PURCHASED MORTGAGE LOANS
All documents relating to Purchased Mortgage Loans in the possession of
Seller shall be segregated on its books and records from other documents and
securities in its possession and shall be identified as being subject to
this Agreement. Ownership of all Purchased Mortgage Loans shall pass to Buyer
and nothing in this Agreement shall preclude Buyer from engaging in
repurchase transactions with the Purchased Mortgage Loans or otherwise
pledging or hypothecating the Purchased Mortgage Loans, but no such
transaction shall relieve Buyer of its obligations to resell and transfer
Purchased Mortgage Loans to Seller pursuant to the terms hereof and no such
transaction shall have a maturity date later than the Repurchase Date unless
such transaction permits the substitution of collateral.
Buyer hereby grants to Seller the right to perform in Buyer's stead
under any repurchase, reverse repurchase, loan or similar transaction in
which Buyer has sold, pledged or otherwise transferred the Mortgage Loans, in
the event that Buyer has defaulted on its obligations to repurchase or accept
redelivery of such Mortgage Loans in conformity with the terms of any such
transaction and so long as an Event of Default under this Agreement by Seller
shall not have occurred and be continuing. Buyer further acknowledges that
each Mortgage Loan identified on a Loan Schedule and included in a
Transaction hereunder is unique and identifiable on the date of the related
Transaction and that an award of money damages would be insufficient to
compensate Seller for the losses and damages incurred by Seller in the event
of Buyer's failure to transfer and deliver the Mortgage Loans as provided in
Paragraphs 3(e) or 11 hereof.
9. SUBSTITUTION
Seller may, subject to agreement with and acceptance by Buyer,
substitute other Mortgage Loans for any Purchased Mortgage Loans. Such
substitution shall be made by transfer to Buyer of such other Mortgage Loans
and transfer to Seller of such
8
<PAGE>
Purchased Mortgage Loans. After substitution, the substituted Mortgage Loans
shall be deemed to be Purchased Mortgage Loans.
10. REPRESENTATIONS, WARRANTIES AND COVENANTS
(a) Buyer and Seller each represents and warrants, and shall on and
as of the Purchase Date of any Transaction be deemed to represent and
warrant, to the other that:
(i) it is duly authorized to execute and deliver this
Agreement, to enter into the Transactions contemplated hereunder and to
perform its obligations hereunder and has taken all necessary action to
authorize such execution, delivery and performance;
(ii) it will engage in such Transactions as principal (or, if
agreed in writing in advance of any Transaction by the other party
hereto, as agent for a disclosed principal);
(iii) the person signing this Agreement on its behalf is duly
authorized to do so on its behalf (or on behalf of any such disclosed
principal);
(iv) it has obtained all authorizations of any governmental body
required in connection with this Agreement and the Transactions
hereunder and such authorizations are in full force and effect; and
(v) the execution, delivery and performance of this Agreement
and the Transactions hereunder will not violate any law, ordinance,
charter, by-law or rule applicable to it or any agreement by which it
is bound or by which any of its assets are affected.
(b) Seller represents and warrants to Buyer, and shall on and as of
the Purchase Date of any Transaction be deemed to represent and warrant, as
follows:
(i) The documents disclosed by Seller to Buyer pursuant to this
Agreement are either original documents or genuine and true copies
thereof;
(ii) Seller is a separate and independent corporate entity from
the Custodian, Seller does not own a controlling interest in the
Custodian either directly or through affiliates and no director or
officer of Seller is also a director or officer of the Custodian;
(iii) None of the Purchase Price for any Mortgage Loan will be
used either directly or indirectly to acquire any security, as that
term is defined in Regulation T of the Regulations of the Board of
Governors of the Federal Reserve
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System, and Seller has not taken any action that might cause any
Transaction to violate any regulation of the Federal Reserve Board;
(iv) Each Mortgage Loan was underwritten in accordance with the
written underwriting standards of Seller furnished by Seller to Buyer,
and no change to such underwriting standards has occurred since the
date of the last written revision to such standards was furnished to
Buyer by Seller;
(v) Seller shall be at the time it transfers to Buyer any
Mortgage Loans for any Transaction the legal and beneficial owner of
such Mortgage Loans, free of any lien, security interest, option or
encumbrance; and
(vi) Seller used no selection procedures that identified the
Mortgage Loans relating to a Transaction as being less desirable or
valuable than other comparable assets in Seller's portfolio on the
related Purchase Date.
(c) Seller makes the representations and warranties set forth at
Exhibit B with respect to the Mortgage Loans as of the related Purchase Date.
(d) Seller covenants with Buyer, from and after the date hereof, as
follows:
(i) Seller shall immediately notify Buyer if an Event of
Default shall have occurred;
(ii) Seller shall deliver to Buyer a current Loan Schedule with
respect to all Mortgage Loans subject to this Agreement with such
frequency as Buyer may reasonably require;
(iii) No Mortgage Loan shall be subject to this Agreement for
more than one hundred and eighty (180) days in aggregate;
(iv) The documents required to be delivered to the Custodian for
each Purchased Mortgage Loan under the Custody Agreement shall, with
respect to any Delayed document Mortgage Loan, be so delivered not
later than three (3) Business Days after the related Purchase Date; and
(v) The aggregate Purchase Price paid for all Delayed Document
Mortgage Loans subject to this Agreement for which the documents
required to be delivered to the Custodian under the Custody Agreement
have not been so delivered shall not exceed 10% of the aggregate
Purchase Price for all Purchased Mortgage Loans subject to this
Agreement.
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11. EVENTS OF DEFAULT; EVENT OF TERMINATION
(a) The following events shall constitute events of default (each an
"Event of Default") hereunder with respect to Buyer or Seller, as applicable:
(i) Seller fails to repurchase or Buyer fails to transfer Purchased
Mortgage Loans upon the applicable Repurchase Date pursuant to the terms
hereof;
(ii) Seller or Buyer fails, after one (1) Business Day's notice, to
comply with Paragraph 4 hereof;
(iii) An Act of Insolvency occurs with respect to Seller or Buyer or
any controlling entity thereof;
(iv) Any representation or warranty made by Seller or Buyer shall
have been incorrect or untrue in any material respect when made or repeated
or deemed to have been made or repeated; PROVIDED, HOWEVER, that in the
case of representations and warranties made with respect to the Purchased
Mortgage Loans, such circumstance shall not constitute an Event of Default
if, after determining the Market Value of the Purchased Mortgage Loans
without taking into account the Purchased Mortgage Loans with respect to
which such circumstance has occurred, no other Event of Default shall have
occurred and be continuing;
(v) Any covenant shall have been breached in any material respect;
PROVIDED, HOWEVER, that in the case of covenants made with respect to
the Purchased Mortgage Loans, such circumstance shall not constitute an
Event of Default if, after determining the Market Value of the Purchased
Mortgage Loans without taking into account the Purchased Mortgage Loans
with respect to which such circumstance has occurred, no other Event of
Default shall have occurred and be continuing;
(vi) Buyer shall have reasonably determined that Seller is or will be
unable to meet its commitments under this Agreement, shall have notified
Seller of such determination and Seller shall not have responded with
appropriate information to the contrary to the satisfaction of Buyer within
twenty-four (24) hours;
(vii) This Agreement shall for any reason cease to create a valid,
first priority security interest in any of the Purchased Mortgage Loans
purported to be covered hereby;
(viii) A final judgment by any competent court in the United States
of America for the payment of money in an amount of at least $100,000 is
rendered against Seller, and
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the same remains undischarged for a period of sixty (60) days during which
execution of such judgment is not effectively stayed;
(ix) Any event of default or any event which with notice, the passage
of time or both shall constitute an event of default shall occur and be
continuing under any repurchase or other financing agreement for borrowed
funds or indenture for borrowed funds by which Seller is bound or affected
shall occur and be continuing;
(x) In the reasonable judgment of Buyer a material adverse change
shall have occurred in the business, operations, properties, prospects or
condition (financial or otherwise) of Seller;
(xi) Seller shall be in default with respect to any normal and
customary covenants under any debt contract or agreement, any servicing
agreement or any lease to which it is a party, which default could
materially adversely affect the financial condition of Seller (which
covenants include, but are not limited to, an Act of Insolvency of Seller
or the failure of Seller to make required payments under such contract or
agreement as they become due);
(xii) Seller shall fail to promptly notify Buyer of (i) the
acceleration of any debt obligation or the termination of any credit
facility with respect to which Seller is the debtor and involving an amount
in excess of $1,000,000 (each a "Debt Obligation"); (ii) the amount and
maturity of any such Debt Obligation assumed after the date hereof; (iii)
the filing of any class action law suit naming Seller as a defendant or
respondent; (iv) the filing of any law suit with an amount in controversy
in excess of $1,000,000 naming Seller as a defendant or respondent; (v) the
occurrence adverse developments with respect to existing litigation
involving Seller; and (vi) any other developments which might materially
and adversely affect the financial condition of Seller; or
(xiii) Seller shall have failed to comply in any material respect
with its obligations under the Custody Agreement.
(b) If an Event of Default shall have occurred and be continuing, then,
at the option of the nondefaulting party, exercised by written notice to the
defaulting party (which option shall be deemed to have been exercised, even
if no notice is given, immediately upon the occurrence of an Act of
Insolvency), the Repurchase Date for each Transaction hereunder shall be
deemed immediately to occur.
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(c) In all Transactions in which the defaulting party is Seller, if
Buyer is deemed to have exercised the option referred to in subparagraph (b)
of this Paragraph, (i) Seller's obligations hereunder to repurchase all
Purchased Mortgage Loans in such Transactions shall thereupon become
immediately due and payable, (ii) to the extent permitted by applicable law,
the Repurchase Price with respect to each such Transaction shall be increased
by the aggregate amount obtained by daily application of (x) the greater of
the Pricing Rate for such Transaction and the Prime Rate to (y) the
Repurchase Price for such Transaction as of the Repurchase Date as determined
pursuant to subparagraph (b) of this Paragraph (decreased as of any day by
(A) any amounts retained by Buyer with respect to such Repurchase Price
pursuant to clause (iii) of this subparagraph, (B) any proceeds from the sale
of Purchased Mortgage Loans pursuant to subparagraph (e)(i) of this
Paragraph, and (C) any amounts credited to the account of Seller pursuant to
subparagraph (f) of this Paragraph) on a 360 day per year basis for the
actual number of days during the period from and including the date of the
Event of Default giving rise to such option to but excluding the date of
payment of the Repurchase Price as so increased, (iii) all Income paid after
such exercise or deemed exercise shall be payable to and retained by Buyer
applied to the aggregate unpaid Repurchase Prices owed by Seller, and (iv)
Seller shall immediately deliver or cause the Custodian to deliver to Buyer
any documents relating to Purchased Mortgage Loans subject to such
Transactions then in Seller's possession.
(d) In all Transactions in which the defaulting party is Buyer, upon
tender by Seller of payment of the aggregate Repurchase Prices for all such
Transactions, Buyer's right, title and interest in all Purchased Mortgage
Loans subject to such Transactions shall be deemed transferred to Seller, and
Buyer shall deliver or cause the Custodian to deliver all documents relating
to such Purchased Mortgage Loans to Seller.
(e) After one (1) Business Day's notice to the defaulting party (which
notice need not be given if an Act of Insolvency shall have occurred, and
which may be the notice given under subparagraph (b) of this Paragraph or the
notice referred to in clause (ii) of the first sentence of subparagraph (a)
of this Paragraph), the nondefaulting party may:
(i) as to Transactions in which the defaulting party is Seller,
(A) immediately sell on a servicing released or servicing retained basis as
Buyer deems desirable, in a recognized market at such price or prices as
Buyer may in its sole discretion deem satisfactory, and or all Purchased
Mortgage Loans subject to such Transactions and apply the proceeds thereof
to the aggregate unpaid Repurchase Prices and any other amounts owing by
Seller hereunder or (B) in its sole discretion elect, in lieu of selling
all or a
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portion of such Purchased Mortgage Loans, to give Seller credit for such
Purchased Mortgage Loans in an amount equal to the Market Value therefor
on such date against the aggregate unpaid Repurchase Prices and any other
amounts owing by Seller hereunder; and
(ii) as to Transactions in which the defaulting party is Buyer,
(A) purchase mortgage loans of substantially the same type
("Replacement Mortgage Loans") having substantially the same
outstanding principal amount, maturity and interest rate as any
Purchased Mortgage Loans that are not transferred by Buyer to Seller as
required hereunder or (B) in its sole discretion elect, in lieu of
purchasing Replacement Mortgage Loans, to be deemed to have purchased
Replacement Mortgage Loans at the price therefor on such date,
calculated as the average of the prices obtained from three (3)
nationally recognized registered broker/dealers that buy and sell
mortgage loans of substantially the same type in the secondary market.
(f) As to Transactions in which the defaulting party is Buyer, Buyer
shall be liable to Seller (i) with respect to Purchased Mortgage Loans (other
than Additional Purchased Mortgage Loans), for any excess of the price paid
(or deemed paid) by Seller for Replacement Mortgage Loans therefor over the
Repurchase Price for such Purchased Mortgage Loans and (ii) with respect to
Additional Purchased Mortgage Loans, for the price paid (or deemed paid) by
Seller for the Replacement Mortgage Loans therefor. In addition, Buyer shall
be liable to Seller for interest on such remaining liability with respect to
each such purchase (or deemed purchase) of Replacement Mortgage Loans from
the date of such purchase (or deemed purchase) until paid in full by Buyer.
Such interest shall be at a rate equal to the greater of the Pricing Rate for
such Transaction or the Prime Rate.
(g) For purposes of this Paragraph 11, the Repurchase Price for each
Transaction hereunder in respect of which the defaulting party is Buyer shall
not increase above the amount of such Repurchase Price for such Transaction
determined as of the date of the exercise or deemed exercise by Seller of its
option under subparagraph (b) of this Paragraph.
(h) The defaulting party shall be liable to the nondefaulting party for
the amount of all reasonable legal or other expenses incurred by the
nondefaulting party in connection with or as a consequence of an Event of
Default, together with interest thereon at a rate equal to the greater of the
Pricing Rate for the relevant Transaction or the Prime Rate. Expenses
incurred in connection with an Event of Default shall include without
limitation those costs and expenses incurred by the nondefaulting party as a
result of the early termination of any repurchase agreement or reverse
repurchase agreement entered into
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by the nondefaulting party in connection with the Transaction then in default.
(i) The nondefaulting party shall have, in addition to its rights
hereunder, any rights otherwise available to it under any other agreement or
applicable law.
(j) At the option of Buyer, exercised by one (1) Business Day's prior
written notice to Seller, the Repurchase Date for any or all Transactions
shall be deemed to immediately occur in the event that the senior debt
obligations or short-term debt obligations of Bear Stearns & Co. Inc. shall
be rated below the four highest generic grades (without regard to any pluses
or minuses reflecting gradations within such generic grades) by any
nationally recognized statistical rating organization.
(k) The exercise by any party of remedies after the occurrence of an
Event of Default shall be conducted in a commercially reasonable manner.
12. SERVICING OF THE PURCHASED MORTGAGE LOANS
(a) The parties hereto agree and acknowledge that, notwithstanding the
purchase and sale of the Purchased Mortgage Loans contemplated hereby, Seller
shall service the Purchased Mortgage Loans for the benefit of Buyer and, if
Buyer shall exercise its rights to sell the Purchased Mortgage Loans pursuant
to this Agreement prior to the related Repurchase Date, Buyer's assigns;
PROVIDED, HOWEVER, that the obligation of Seller to service Purchased
Mortgage Loans for the benefit of Buyer as aforesaid shall cease upon the
payment to Buyer of the Repurchase Price therefor.
(b) Seller shall service and administer the Purchased Mortgage Loans
and shall have full power and authority, acting alone, to do any and all
things in connection with such servicing which Seller may deem necessary or
desirable and consistent with the terms of this Agreement, and shall retain
all principal prepayments and Income received by Seller with respect to such
Purchased Mortgage Loans pursuant to the terms hereof. Seller shall act as
the administrator of the FHA Insurance relating to the Title I Mortgage Loans
and any insurance claims made under the Title I Program. Seller, in
administering and servicing the Purchased Mortgage Loans, shall employ
procedures (including collection procedures) and exercise the same
care it customarily employs and exercises in servicing and administering the
same type of mortgage loans for its own account, in accordance with accepted
residential mortgage loan servicing practices of prudent lending institutions
and giving due consideration to Buyer's reliance on Seller. Seller will
provide Buyer with monthly reports, in a form substantially similar to FNMA's
standard form or remittance report and reasonably acceptable to Buyer, with
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respect to all Purchased Mortgage Loans then involved in any Transaction
hereunder.
(c) Buyer may, in its sole discretion if an Event of Default shall
have occurred and be continuing, without payment of any termination fee or
any other amount to Seller, (i) sell the Mortgage Loans on a servicing
released basis or (ii) terminate Seller as the servicer of the Purchased
Mortgage Loans with or without cause.
13. SINGLE AGREEMENT
Buyer and Seller acknowledge that, and have entered hereinto and will
enter into each Transaction hereunder in consideration of and in reliance
upon the fact that, all Transactions hereunder constitute a single business
and contractual relationship and have been made in consideration of each
other. Accordingly, each of Buyer and Seller agrees (i) to perform all of
its obligations in respect of each Transaction hereunder, and that a default
in the performance of any such obligations shall constitute a default by it in
respect of all Transactions hereunder, (ii) that each of them shall be
entitled to set off claims and apply property held by them in respect of any
Transaction against obligations owing to them in respect of any other
Transactions hereunder and (iii) that payments, deliveries and other
transfers made by either of them in respect of any Transaction shall be
deemed to have been made in consideration of payments, deliveries and other
transfers in respect of any other Transactions hereunder, and the obligations
to make any such payments, deliveries and other transfers may be applied
against each other and netted.
14. NOTICES AND OTHER COMMUNICATIONS
Except as otherwise expressly provided herein, all such notices or
communications shall be in writing (including, without limitation,
telegraphic, facsimile or telex communication) or confirmed in writing and
such notices and other communications shall, when mailed, telegraphed,
communicated by facsimile transmission or telexed, be effective when received
at the address for notices for the party to whom such notice or
communications is to be given as follows:
if to Seller:
FirstPlus Financial, Inc.
1250 Mockingbird Lane
Dallas, Texas 75247-4902
Attention: Eric Green
Chief Financial Officer
Telephone: (214) 583-4503
Telecopy: (214) 583-4901
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with a copy at the same address to:
Attention: General Counsel
Telephone: (214) 583-3700
Telecopy: (214) 583-3737
if to Buyer:
Bear Stearns Home Equity Trust 1996-1
c/o Bear Stearns Mortgage Capital Corporation
245 Park Avenue
New York, New York 10167
Attn: John Garzone
Telephone: (212) 272-3853
Telecopy: (212) 272-7803
Notwithstanding the foregoing, however, any notice sent by facsimile
transmission shall be deemed to be received when transmitted so long as the
transmitting machine has provided an electronic confirmation of such
transmission, and PROVIDED FURTHER, HOWEVER, that all financial statements
delivered shall be hand-delivered or sent by first-class mail. Either party
may revise any information relating to it by notice in writing to the other
party, which notice shall be effective on the third business day following
receipt thereof.
15. PAYMENT OF EXPENSES
Seller shall pay on demand all reasonable fees and expenses (including,
without limitation, the fees and expenses for legal services of any kind
whatsoever) incurred by Buyer or the Custodian in connection with this
Agreement and the Custody Agreement and the transactions contemplated hereby
and thereby, whether or not any Transactions are entered into hereunder,
including, by way of illustration and not by way of limitation, the fees and
expenses incurred in connection with (i) the preparation, reproduction and
distribution of this Agreement and the Custody Agreement and any opinions of
counsel, certificates of officers or other documents contemplated by the
aforementioned agreements and (ii) any Transaction under this Agreement;
PROVIDED, HOWEVER, that Seller shall not be required to pay the fees and
expenses of Buyer incurred as a result of Buyer's default under this
Agreement. The obligation of Seller to pay such fees and expenses incurred
prior to or in connection with the termination of this Agreement shall survive
the termination of this Agreement.
16. OPINIONS OF COUNSEL
Seller shall, on the Purchase Date of the first Transaction hereunder
and, upon the request of Buyer, on the Purchase Date of any subsequent
Transaction, cause to be delivered to Buyer, with reliance thereon permitted
as to any person or entity that
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purchases the Mortgage Loans from Buyer in a repurchase transaction, a
favorable opinion of counsel with respect to the matters set forth in Exhibit C
hereto, in form and substance acceptable to Buyer and its counsel.
17. FURTHER ASSURANCES; ADDITIONAL INFORMATION
(a) Seller shall promptly provide such further assurances or agreements
as Buyer may request in order to effect the purposes of this Agreement.
(b) At any reasonable time, Seller shall permit Buyer, its agents or
attorneys, to inspect and copy any and all documents and data in its
possession pertaining to each Purchased Mortgage Loan that is the subject of
such Transaction. Such inspection shall occur upon the request of Buyer at a
mutually agreeable location during regular business hours and on a date not
more than two (2) Business Days after the date of such request.
(c) Seller agrees to provide Buyer or its agents, from time to time,
with such information concerning Seller of a financial or operational nature
as Buyer may reasonably request.
(d) Seller shall provide Buyer or its agents, with copies of all filings
made by or on behalf of Seller or any entity that controls Seller, with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended, promptly upon making such filings.
18. BUYER AS ATTORNEY-IN-FACT
Buyer is hereby appointed the attorney-in-fact of Seller for the purpose
of carrying out the provisions of this Agreement and taking any action and
executing any instruments that Buyer may deem necessary or advisable to
accomplish the purposes hereof, which appointment as attorney-in-fact is
irrevocable and coupled with an interest. Without limiting the generality of
the foregoing, Buyer shall have the right and power during the occurrence and
continuation of any Event of Default to receive, endorse and collect all
checks made payable to the order of Seller representing any payment on
account of the principal of or interest on any of the Purchased Mortgage
Loans and to give full discharge for the same.
19. APPOINTMENT OF AGENT
Buyer hereby appoints Bear Stearns Mortgage Capital Corporation as its
agent for purposes of issuing Requests/Confirmations, determining Market
Value, exercising Buyer's rights under any margin maintenance provision of
this Agreement and such other purposes as Buyer may direct. The
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appointment of such agent shall not relieve Buyer of its obligations
hereunder.
20. WIRE INSTRUCTIONS
(a) Any amounts to be transferred by Buyer to Seller hereunder shall
be sent by wire transfer in immediately available funds to the account of
Seller identified in the Request/Confirmation for the related Transaction.
(b) Any amounts to be transferred by Seller to Buyer hereunder shall
be sent by wire transfer in immediately available funds to the account of
Buyer at:
FNB Chicago/Bear Stearns MBS
ABA #: 071-000-013
Attn.: John Garzone
Acct.: 5801230
(c) Amounts received after 3:00 p.m., New York City time, on any
Business Day shall be deemed to have been paid and received on the next
succeeding Business Day.
21. ENTIRE AGREEMENT; SEVERABILITY
This Agreement shall supersede any existing agreements between the
parties containing general terms and conditions for repurchase transactions.
Each provision and agreement herein shall be treated as separate and
independent from any other provision or agreement herein and shall be
enforceable notwithstanding the unenforceability of any such other provision
or agreement.
22. NON-ASSIGNABILITY; TERMINATION
(a) The rights and obligations of the parties under this Agreement and
under any Transaction shall not be assigned by either party without the prior
written consent of the other party. Subject to the foregoing, this Agreement
any any Transactions shall be binding upon and shall inure to the benefit of
the parties and their respective successors and assigns.
(b) This Agreement and all Transactions outstanding hereunder shall
terminate automatically without any requirement for notice on the date
occurring three hundred and sixty-four (364) days after the date as of which
this Agreement is entered into; provided, however, that this agreement and
any Transaction outstanding hereunder may be extended by mutual agreement of
Buyer and Seller; and provided further, however, that no such party shall be
obligated to agree to such an extension.
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23. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which counterparts shall be deemed to be an original, and such counterparts
shall constitute but one and the same instrument.
24. GOVERNING LAW
This Agreement shall be governed by the laws of the State of New York
without giving effect to the conflict of law principles thereof.
25. NO WAIVERS, ETC.
No express or implied waiver of any Event of Devault by either party
shall constitute a waiver of any other Event of Default and no exercise of
any remedy hereunder by any party shall constitute a waiver of its right to
exercise any other remedy hereunder. No modification or waiver of any
provision of this Agreement and no consent by any party to a departure
herefrom shall be effective unless and until such shall be in writing and
duly executed by both of the parties hereto. Without limitation on any of the
foregoing, the failure to give a notice pursuant to subparagraph 4(a) hereof
will not constitute a waiver of any right to do so at a later date.
26. USE OF EMPLOYEE PLAN ASSETS
(a) If assets of an employee benefit plan subject to any provision of
the Employee Retirement Income Security Act of 1974 ("ERISA") are intended to
be used by either party hereto (the "Plan Party") in a Transaction, the Plan
Party shall so notify the other party prior to the Transaction. The Plan
Party shall represent in writing to the other party that the Transaction does
not constitute a prohibited transaction under ERISA or is otherwise exempt
therefrom, and the other party may proceed in reliance thereon but shall not
be required so to proceed.
(b) Subject to the last sentence of subparagraph (a) of this
Paragraph, any such Transaction shall proceed only if Seller furnishes or has
furnished to Buyer its most recent available audited statement of its financial
condition and its most recent subsequent unaudited statement of its financial
condition.
(c) By entering into a Transaction pursuant to this Paragraph, Seller
shall be deemed (i) to represent to Buyer that since the date of Seller's
latest such financial statements, there has been no material adverse change
in Seller's financial condition which Seller has not disclosed to Buyer, and
(ii) to agree to provide Buyer with future audited and unaudited statements
of its financial condition as they are issued, so long
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as it is a Seller in any outstanding Transaction involving a Plan Party.
23. INTENT
(a) The parties intend and acknowledge that each Transaction is a
"repurchase agreement" as that term is defined in Section 101 of Title 11 of
the United States Code, as amended (except insofar as the type of Mortgage
Loans subject to such Transaction or the term of such Transaction would
render such definition inapplicable), and a "securities contract" as that
term is defined in Section 741 of Title 11 of the United States Code, as
amended.
(b) It is understood that either party's right to liquidate Mortgage
Loans delivered to it in connection with Transactions hereunder or to
exercise any other remedies pursuant to Paragraph 11 hereof, is a contractual
right to liquidate such Transaction as described in Sections 555 and 559 of
Title 11 of the United States Code, as amended.
28. LIMITED ROLE OF TRUSTEE; SUCCESSOR TRUSTEE
(a) The execution and delivery of this Agreement by the undersigned
Trustee is solely and strictly in its capacity as Trustee under that certain
Trust Agreement dated as of March 29, 1996 (the "Trust Agreement") by and
between State Street Bank and Trust Company of California, N.A., as Trustee
(the "Trustee") and Bear Stearns Mortgage Capital Corporation, as Depositor
(the "Depositor"), and not individually, and has been undertaken at the
direction of the Depositor pursuant to the terms of the Trust Agreement. It
is hereby expressly acknowledged that any obligations, liabilities,
covenants, duties, representations and warranties hereunder are those of
Buyer only and not of the Trustee. There shall be no individual or corporate
liability against or on the part of the Trustee (or any of its officers,
directors or employees) under this Agreement, and there shall be no recourse
against the Trustee in its individual or corporate capacity (or any of its
directors, officers or employees) or against any of its properties or assets,
for recovery of or as a result of any claim, debt, liability or obligation
(whether of payment or performance) of or against Buyer under or pursuant to
this Agreement (whether arising out of or relating to any covenant,
agreement, representation or warranty, or otherwise). Recourse against Buyer
for any claims, liabilities, debts or obligations under this Agreement is
limited to the assets and properties of the trust established by the Trust
Agreement.
(b) With regard to Section 22(a) hereof, FirstPlus Financial, Inc.
hereby acknowledges and consents that any and all rights and remedies of
Buyer under this Agreement shall automatically transfer to and vest in any
successor trustee under
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the Trust Agreement in the event of the removal or resignation of the Trustee
as trustee thereunder.
29. DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS
The parties acknowledge that they have been advised that:
(a) in the case of Transactions in which one of the parties is
a broker or dealer registered with the Securities and Exchange
Commission ("SEC") under Section 15 of the Securities Exchange Act of
1934 ("1934 Act"), the Securities Investor Protection Corporation has
taken the position that the provisions of the Securities Investor
Protection Act of 1970 ("SAPPY") do not protect the other party with
respect to any Transaction hereunder;
(b) in the case of Transactions in which one of the parties is
a government securities broker or a government securities dealer
registered with the SEC under Section 15C of the 1934 Act, SAPPY will
not provide protection to the other party with respect to any
Transaction hereunder; and
(c) in the case of Transactions in which one of the parties is
a financial institution, funds held by the financial institution
pursuant to a Transaction hereunder are not a deposit and therefore are
not insured by the Federal Deposit Insurance Corporation, the Federal
Savings and Loan Insurance Corporation or the National Credit Union
Share Insurance Fund, as applicable.
BEAR STEARNS HOME EQUITY TRUST 1996-1 FIRSTPLUS FINANCIAL, INC.
By: State Street Bank and Trust
Company of California, N.A.,
as Trustee solely and not
individually
By /s/ B. Bateman By
---------------------------------- --------------------------------
Title Vice President Title
------------------------------- -----------------------------
Date 5/13/96 Date
-------------------------------- ------------------------------
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the Trust Agreement in the event of the removal or resignation of the Trustee
as trustee thereunder.
29. DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS
The parties acknowledge that they have been advised that:
(a) in the case of Transactions in which one of the parties is a
broker or dealer registered with the Securities and Exchange Commission
("SEC") under Section 15 of the Securities Exchange Act of 1934 ("1934
Act"), the Securities Investor Protection Corporation has taken the
position that the provisions of the Securities Investor Protection Act of
1970 ("SAPPY") do not protect the other party with respect to any
Transaction hereunder;
(b) in the case of Transactions in which one of the parties is a
government securities broker or a government securities dealer registered
with the SEC under Section 15C of the 1934 Act, SAPPY will not provide
protection to the other party with respect to any Transaction hereunder;
and
(c) in the case of Transactions in which one of the parties is a
financial institution, funds held by the financial institution pursuant to
a Transaction hereunder are not a deposit and therefore are not insured by
the Federal Deposit Insurance Corporation, the Federal Savings and Loan
Insurance Corporation or the National Credit Union Share Insurance Fund, as
applicable.
BEAR STEARNS HOME EQUITY TRUST 1996-1 FIRSTPLUS FINANCIAL, INC.
By: State Street Bank and Trust Company
of California, N.A., as Trustee
solely and not individually
By By /s/ Eric Green
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Title Title CFO
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Date Date 5/10/96
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EXHIBIT A
REQUEST/CONFIRMATION
TO: FirstPlus Financial, Inc.
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Attention:
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FROM: Bear Stearns Home Equity Trust 1996-1
RE: Request/Confirmation under Master Repurchase Agreement,
dated as of May 10, 1996, between Bear Stearns Home
Equity Trust 1996-1 and FirstPlus Financial, Inc.
Bear Stearns Home Equity Trust 1996-1 ("Buyer") is pleased to confirm your
sale and its purchase of the Mortgage Loans described below and listed on the
attached Loan Schedule pursuant to the above-referenced Master Repurchase
Agreement under the following terms and conditions:
Additional
ORIG. PRINCIPAL AMOUNT OF MORTGAGE LOANS: __________
CURRENT PRINCIPAL AMOUNT OF MORTGAGE LOANS: __________
PURCHASE DATE: __________
REPURCHASE DATE: __________
PURCHASE PRICE: __________
PRICING RATE: __________
MINIMUM REQUIRED MARGIN PERCENTAGE: __________
PRICE DIFFERENTIAL DUE DATE: __________
Wire transfer instructions of Seller:
Bank Name:___________________
ABA No.:_____________________
Account No.:_________________
Attention:___________________
Reference:___________________
A-1
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The Master Repurchase Agreement is incorporated by reference into this
Request/Confirmation and made a part hereof as if it were fully set forth
herein. All capitalized terms used herein but not otherwise defined shall
have the meanings specified in the Master Repurchase Agreement.
BEAR STEARNS HOME EQUITY TRUST 1996-1
By: Bear Stearns Mortgage Capital
Corporation, as Agent
BY:
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NAME:
--------------------------------
TITLE:
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A-2
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EXHIBIT B
REPRESENTATIONS AND WARRANTIES
RELATING TO THE PURCHASED MORTGAGE LOANS
(a) MORTGAGE LOAN INFORMATION. The information with respect to each
Mortgage Loan set forth in the Loan Schedule is true and correct in all
material respects as of the date specified in such Loan Schedule.
(b) DELIVERY OF MORTGAGE LOAN DOCUMENTS. All of the original or certified
documentation required to be delivered to the Custodian on or prior to the
related Purchase Date or as otherwise provided in this Agreement has or
will be so delivered.
(c) PAYMENTS CURRENT. No scheduled payments on the Mortgage Loans are
delinquent eighty-nine (89) days or more based on the terms under which the
related Mortgage Loans have been made. Seller has not advanced funds, or
induced, solicited or knowingly received any advance of funds from a party
other than Buyer, directly or indirectly, for the payment of any amount
required by any Mortgage Loan.
(d) NO WAIVER OR MODIFICATION. The terms of each Note and Mortgage have
not been impaired, waived, altered or modified in any respect, except by
written instruments reflected in the Custodian's Mortgage Loan File and no
provision of any Mortgage or Note has been "whited out" or erased unless
such modification has been initialed by each of the parties to the related
Mortgage Loan. No instrument of waiver, alteration, modification or
assumption has been executed except for the instruments that are part of
the Mortgage File and the terms of which are reflected in the Mortgage
File.
(e) NO DEFENSES. No Note or Mortgage is subject to any set-off,
counterclaim or defense, including the defense of usury, nor will the
operation of any of the terms of any Note or Mortgage, or the exercise of
any right thereunder, render such Note or Mortgage unenforceable, in whole
or in part, or subject to any right of rescission, set-off, counterclaim or
defense, including the defense of usury, and to the best of Seller's
knowledge, no such right of rescission, set-off, counterclaim or defense
has been asserted in any proceeding or was asserted in any state or federal
bankruptcy or insolvency proceeding at the time the related Mortgage Loan
was originated.
B-1
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(f) COMPLIANCE WITH LAWS. Any and all requirements of any federal, state
or local law applicable to each Mortgage Loan have been complied with
including, without limitation, all consumer, usury, truth-in-lending,
consumer credit protection, equal credit opportunity or disclosure laws
applicable to each Mortgage Loan, and with respect to the Title I Mortgage
Loans, the FHA Regulations; each Mortgage Loan was originated in compliance
with all applicable laws and no fraud or misrepresentation was committed by
any Person in connection therewith; any Mortgage Loan originated in the
State of Texas, was originated pursuant to Chapter 6 of the Texas Consumer
Credit Code.
(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 a Mortgage securing a Mortgage Loan (in the
case of a Title I Mortgage Loan, as permitted by FHA Regulations), with
respect to which a related superior lien was released in connection with
the refinancing of the mortgage loan relating to such superior lien.
(h) VALID LIEN. Each Note is secured by a Mortgage and each Mortgage is
or creates a valid, subsisting and enforceable lien on the related
Mortgaged Property, including, in the case of a Mortgage securing a
property improvement loan, the land and all buildings on the Mortgaged
Property.
(i) VALIDITY OF MORTGAGE LOAN DOCUMENTS. Each Note and each Mortgage is
genuine and each is the legal, valid and binding obligation of the related
Mortgagor, enforceable in accordance with its terms, except as
enforceability 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 Note and each Mortgage had legal
capacity at the time to enter into the related Mortgage Loan and to execute
and deliver such Note and Mortgage, and such Note and Mortgage have been
duly and properly executed by such parties.
(j) FULL DISBURSEMENT OF PROCEEDS. The proceeds of each Mortgage 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
Mortgage Loan and the recording of the Mortgage were disbursed, the
Mortgagor is not entitled to any refund of any amounts paid or due under
the Note or any related Mortgage and any and
B-2
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all requirements set forth in the related Mortgage Loan documents have
been complied with.
(k) OWNERSHIP. Immediately prior to the conveyance thereof to Buyer,
Seller had good and marketable title to each Mortgage Loan, Note and
Mortgage, was the sole owner thereof and had full right to sell each
Mortgage Loan, Note and Mortgage to Buyer and upon the conveyance thereof
by Seller to Buyer, Buyer became the sole owner of each Mortgage Loan, Note
and Mortgage free and clear of any encumbrance, equity, lien, pledge,
charge, claim or security interest.
(l) OWNERSHIP OF MORTGAGED PROPERTY. The related servicer has in its
possession a title document with respect to each Mortgage Loan reflecting
that title to the related Mortgaged Property is held at least 50% by the
Mortgagor under such Mortgage Loan.
(m) NO DEFAULTS. Except with respect to any delinquent scheduled payment
which is not more than eighty-nine (89) days delinquent as of the
applicable Purchase Date, there is no default, breach, violation or event
of acceleration existing under any Mortgage or any Note and, to the best of
Seller's knowledge, there is no event which, with the passage of time or
with notice and/or the expiration of any grace or cure period, would
constitute such a default, breach, violation or event of acceleration and
neither 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
Mortgage File.
(n) NO CONDEMNATION OR DAMAGE. To the best of Seller's knowledge, the
physical condition of each Mortgaged Property has not deteriorated since
the date of origination of the related Mortgage Loan (normal wear and tear
excepted) and there is no proceeding pending for the total or partial
condemnation of any Mortgaged Property.
(o) MORTGAGE REMEDIES ADEQUATE. Each Mortgage contains customary and
enforceable provisions such as to render the rights and remedies of the
holder thereof adequate for the realization against the related Mortgaged
Property of the benefits of the security provided thereby, including, (i)
in the case of a Mortgage designated as a deed of trust, by trustee's sale,
and (ii) otherwise, by judicial foreclosure.
(p) FHA INSURANCE COVERAGE. Each Title I Mortgage Loan is an "FHA Title I
property improvement loan" (as such term is defined in 24 C.F.R. Part
201.2) underwritten by the originator thereof in accordance with such
originator's then current underwriting guidelines and all FHA requirements
for
B-3
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the Title I Program as set forth in the FHA Regulations, and has been or
will be reported to and acknowledged by the FHA for FHA Insurance under
Seller's Title I contract of insurance. Seller has no knowledge of any
event which would invalidate or cancel the FHA Insurance for such Title I
Mortgage Loan.
(q) UNDERWRITING OF CONVENTIONAL MORTGAGE LOANS. Each Conventional
Mortgage Loan is either a property improvement and/or debt consolidation
loan or a first or junior lien purchase money loan, and has been
underwritten by the originator thereof in accordance with such originator's
then current underwriting guidelines.
(r) TERMS OF MORTGAGE LOANS. Each Mortgage Loan is a fixed rate loan;
each Note has an original term to maturity of not less than 24 months nor
more than 20 years and 32 days from the date of origination; each Note 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 interest rate borne by the Note; and no Note
provides for any extension of the original term.
(s) SECURITY. No Note is, or has been, secured by any collateral except
the lien of the related Mortgage.
(t) DEED OF TRUST. If a Mortgage 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 the 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 Seller to
the trustee under the deed of trust, except in connection with default
proceedings and a trustee's sale after default by the related Mortgagor.
(u) VALUE AND TITLE I INSURABILITY. Except with respect to conditions and
circumstances expressly permitted pursuant to the applicable underwriting
guidelines, Seller has no knowledge of any conditions or circumstances
(that are not reflected in the Mortgage File or in the files of the related
servicer) that could reasonably be expected to materially and adversely
affect the value of the related Mortgaged Property with respect to any
Conventional Mortgage Loan. Further, Seller has no knowledge of any
conditions or circumstances that could reasonably be expected to affect the
FHA insurability with respect to any Title I Mortgage Loan under the Title
I Program.
B-4
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(v) TYPES OF MORTGAGE LOANS. Each Mortgage Loan is (i) in respect of (1)
a property improvement and/or debt consolidation loan, or (2) a first or
junior lien purchase money loan, and (ii) not a loan in respect of the
purchase of a manufactured home; provided that each Title I Mortgage Loan
is only in respect of a property improvement loan.
(w) COMPLETION OF IMPROVEMENTS. With respect to all Mortgage Loans
(except for such Mortgage Loans as are (i) HELs or (ii) first lien or
junior lien purchase money loans, the proceeds of which have been used in
part to acquire the related Mortgaged Property), all improvements to be
made to each Mortgaged Property with the proceeds of the related Mortgage
Loan have been completed and, except as to Mortgage Loans that are such
purchase money loans or that were made by the originator thereof directly
to the owner of the property being improved, the servicer's file with
respect to such Mortgage Loan contains a completion certificate.
(x) ORIGINATION PRACTICES. The origination practices used by each
originator of the Mortgage Loans and servicing and collection practices
used by Seller with respect to each Mortgage Loan, and with respect to
each Title I Mortgage Loan the refinancing practices, if applicable, 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, including property improvement, home equity and/or
debt consolidation loans and, in the case of Title I Mortgage Loans, in
compliance with all FHA Regulations.
(y) SERVICING PRACTICES. Each Mortgage Loan has been serviced in
accordance with all applicable laws and, to the best of Seller's knowledge,
no fraud or misrepresentation was committed by any Person in connection
therewith.
(z) NO BULK TRANSFER. The sale, transfer, assignment, conveyance and
grant of the Notes and the Mortgages by Seller to Buyer were not subject to
the bulk transfer laws or any similar statutory provisions in effect in any
applicable jurisdiction.
(aa) RELIEF ACT MATTERS. No Mortgagor has notified Seller, and Seller
has no knowledge of any relief requested or allowed to a Mortgagor under
the Soldiers' and Sailors' Civil Relief Act of 1940.
(bb) SELECTION CRITERIA. The Mortgage Loans were not selected by Seller
for sale to Buyer on any basis intended to adversely affect Buyer.
B-5
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(cc) REMIC QUALIFICATION. With respect to each Mortgage Loan, either:
(i) the original principal balance of the Mortgage Loan as of the date of
origination thereof was less than 125% of the value of the Mortgaged
Property attributable to only the real property securing such Mortgage Loan
less the amount of all indebtedness secured by such Mortgaged Property
which is senior or pari passu with the lien of such Mortgage Loan; or (ii)
substantially all of the proceeds of such Mortgage Loan were used to
acquire or to improve or protect an interest in real property that, at the
date of origination of such Mortgage Loan, was the only security therefor.
(dd) APPRAISED MORTGAGE LOAN-TO-VALUE. At origination, each Title I
Mortgage Loan in excess of $15,000 secured by a Mortgaged Property that was
not owner-occupied, had an appraised loan-to-value ratio not in excess of
100%; provided that the FHA Regulations in effect at the time of such
origination required an appraisal of the Mortgaged Property.
(ee) TYPE OF MORTGAGED PROPERTIES. At the time of origination, each Title
I Mortgage Loan with a principal balance of $7,500 or greater was secured
by a lien on an owner-occupied one- to-four family dwelling.
(ff) SENIOR LIEN DELINQUENCIES. No lien senior to the lien created by a
Mortgage at the time of origination of the related Mortgage Loan was more
than 30 days past due.
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EXHIBIT C
OPINION OF COUNSEL TO SELLER
1. Seller is duly organized and validly existing as a corporation in
good standing under the laws of the State of and has power and
authority to enter into and perform its obligations under this Agreement and
the Custody Agreement. Seller is duly qualified to do business and is in good
standing in each jurisdiction in which the character of the business
transacted by it requires such qualification and in which the failure so to
qualify would have a material adverse effect on the business, properties,
assets or condition (financial or other) of Seller and its subsidiaries,
considered as a whole.
2. This Agreement and the Custody Agreement have each been duly
authorized, executed and delivered by Seller, and each constitutes a valid
and legally binding obligation of Seller enforceable against Seller in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability relating
to or affecting creditors' rights generally and to general equity principles.
3. No consent, approval, authorization or order of any state or federal
court or government agency or body is required to be obtained by Seller for
the consummation of the transactions contemplated by this Agreement or the
Custody Agreement.
4. The consummation of any of the transactions contemplated by this
Agreement and the Custody Agreement will not conflict with, result in a
breach of, or constitute a default under the articles of incorporation or
bylaws of Seller or the terms of any indenture or other agreement or
instrument known to us to which Seller is party or bound, or any order known
to such counsel to be applicable to Seller or any regulations applicable to
Seller, of any state or federal court, regulatory body, administrative
agency, governmental body or arbitrator having jurisdiction over Seller.
5. There is no pending or threatened action, suit or proceeding before
any court or governmental agency, authority or body or any arbitrator
involving Seller or relating to the transaction contemplated by this
Agreement or the Custody Agreement which, if adversely determined, would have
a material adverse effect on Buyer.
6. Seller is duly registered as a finance company in each state in
which Mortgage Loans were originated, to the extent such registration is
required by applicable law.
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7. Each Mortgage Loan will have been endorsed in a manner which
satisfies any requirement of endorsement in order to transfer all right,
title and interest in and to that Mortgage Loan from Seller to Buyer. Each
assignment of Mortgage related to each such Mortgage Loan is in recordable
form and is sufficient under applicable law to validly and effectively
transfer all right, title and interest of Seller to Buyer. This Agreement
together with (a) the delivery of such related Mortgage Loans to Custodian,
(b) the endorsement of such Mortgage Loans to Buyer and (c) the delivery of
the assignments of Mortgages related to the Mortgage Loans to the Custodian
in recordable form assigning such Mortgages to Buyer, creates a valid,
perfected security interest in such Mortgage Loans in favor of Buyer. Such
security interest will have the same priority and will be subject to the same
security interests and liens as apply to such Mortgage Loans in the hands of
Seller.
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[EXECUTION COPY]
CUSTODY AGREEMENT
among
FIRSTPLUS FINANCIAL, INC.,
Seller
BEAR STEARNS HOME EQUITY TRUST 1996-1,
Buyer
and
BANK ONE, TEXAS, N.A.,
as Custodian
Dated as of May 10, 1996
______________________________________________________________________________
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TABLE OF CONTENTS
Page
RECITALS ........................................................... 1
SECTION 1. Definitions.............................................. 1
SECTION 2. Delivery of Mortgage Files to Custodian.................. 4
SECTION 3. The Custodian's Receipt, Examination and
Certification of Mortgage Files and Issuance
of Trust Receipt....................................... 6
SECTION 4. Possession of Mortgage Files............................. 8
SECTION 5. Release of Custodian's Mortgage Files for
Servicing.............................................. 10
SECTION 6. Review and Deposit of Additional Mortgage
Loans.................................................. 11
SECTION 7. Waiver by the Custodian.................................. 11
SECTION 8. Right of Inspection by Buyer and Third
Persons................................................ 11
SECTION 9. Custodian's Fees and Expenses............................ 12
SECTION 10. Termination of Agreement................................. 12
SECTION 11. Resignation and Removal of Custodian..................... 13
SECTION 12. Limitation on Obligations of the Custodian............... 14
SECTION 13. Notices.................................................. 15
SECTION 14. No Assignment or Delegation by the Custodian............. 16
SECTION 15. Controlling Law.......................................... 16
SECTION 16. Agreement for the Exclusive Benefit of Parties........... 16
SECTION 17. Entire Agreement......................................... 16
SECTION 18. Exhibits................................................. 16
SECTION 19. Indulgences, Not Waivers................................. 17
SECTION 20. Titles Not to Affect Interpretation...................... 17
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SECTION 21. Provisions Separable..................................... 17
SECTION 22. Representations and Warranties of the
Custodian.............................................. 17
SECTION 23. Limited Role of Trustee; Successor
Trustee................................................ 18
SECTION 24. Counterparts............................................. 19
EXHIBITS
EXHIBIT A - LETTER OF TRANSMITTAL.................................... A-1
EXHIBIT B - NOTICE TO THE CUSTODIAN.................................. B-1
EXHIBIT C - TRUST RECEIPT............................................ C-1
EXHIBIT D - NOTICE OF TERMINATION.................................... D-1
EXHIBIT E - NOTICE OF DEFAULT CERTIFICATE............................ E-1
EXHIBIT F - LETTER TO CUSTODIAN RE: BUYER'S TRUST
RECEIPT................................................ F-1
EXHIBIT G - LETTER TO CUSTODIAN RE: ENDORSEE'S TRUST
RECEIPT................................................ G-1
EXHIBIT H - REQUEST FOR RELEASE OF DOCUMENTS......................... H-1
EXHIBIT I - CONFIRMATION OF RESALE AND RECEIPT....................... I-1
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THIS CUSTODY AGREEMENT entered into as of May 10, 1996, by
and among FIRSTPLUS FINANCIAL, INC. (a/k/a Remodelers National
Funding and herein referred to as "Seller"), BEAR STEARNS HOME
EQUITY TRUST 1996-1 ("Buyer"), and BANK ONE, TEXAS, N.A. (the
"Custodian"), recites and provides:
RECITALS
Seller and Buyer have entered into a Master Repurchase
Agreement dated as of May 10, 1996 and a Request/Confirmation
between Seller and Buyer with respect to each transaction
thereunder. The Master Repurchase Agreement and the Request/
Confirmations are hereinafter referred to collectively as the
"Repurchase Agreement."
Seller is obligated to service the Mortgage Loans pursuant
to the terms and conditions of the Repurchase Agreement.
Seller desires to deposit with the Custodian all Notes and
Mortgages evidencing the Mortgage Loans, together with the other
documents included in the Mortgage Files related to the Mortgage
Loans, to be held by the Custodian as custodian for Buyer and its
assigns until otherwise instructed by Buyer, all in connection
with transactions under the Repurchase Agreement (each a
"Transaction").
Buyer may transfer its interest in the Mortgage Loans to one
or more Third Persons and the Custodian shall act as custodian
for such Third Persons.
Custodian desires and is able to perform the duties and
obligations as custodian for Buyer as set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and
covenants hereinafter set forth, and for good and valuable
consideration the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. For the purposes of this
Agreement, the following terms shall have the indicated meanings
unless the context or use indicates another or different meaning
and intent, the definitions of such terms are equally applicable
to the singular and the plural forms of such terms, the words
"herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any
particular section or other subdivision, and section references
refer to sections of this Agreement. All terms used herein and
not defined shall have the respective meanings set forth in the
Repurchase Agreement.
"AGREEMENT" shall mean this Custody Agreement, as
supplemented or amended from time to time.
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"BUSINESS DAY" shall mean any day excluding Saturday, Sunday
and any day which is a legal holiday under the laws of the States
of New York or Texas or the Commonwealth of Massachusetts or any
day on which a bank located in the State of New York or the
Commonwealth of Massachusetts or the New York Stock Exchange is
authorized or permitted to close for business.
"CONVENTIONAL MORTGAGE LOAN" shall mean a Mortgage Loan
which is not covered by FHA Insurance.
"CUSTODIAL REGISTER" shall mean the register maintained by
Custodian pursuant to Section 4 (f), which reflects as to each
Mortgage Loan the Person to whom the related Trust Receipt has
been issued.
"CUSTODIAN" shall mean Bank One, Texas, N.A., or its
successor custodian.
"HEL" shall mean a home equity loan consisting of a Note
secured by a Mortgage.
"HIL" shall mean a home improvement loan consisting of a
Note secured.by a Mortgage.
"LENDER" shall mean the original lender as set forth in the
Note, or any successor or assignee under such Note.
"LOAN NUMBER" shall have the meaning set forth in Section
2(a) of this Agreement.
"LOAN SCHEDULE" shall mean a schedule of Mortgage Loans
identifying each Mortgage Loan by Seller's loan number,
Mortgagor's name and address (including the state and zip code)
of the mortgaged property, whether such Mortgage Loan is secured
by a first or junior lien (specifying the priority of such junior
lien) on the related Mortgaged Property, the loan-to-value ratio
if such Mortgage Loan is a HEL, the outstanding principal amount
as of a specified date, the initial interest rate borne by such
Mortgage Loan, the original principal balance thereof, the
current scheduled monthly payment of principal and interest, the
maturity of the related Note, the property type, the occupancy
status, the appraised value if such Mortgage Loan is a HEL having
an original principal balance in excess of $10,000, the original
term to maturity, whether the Mortgage Loan is a HEL or a HIL,
whether the Mortgage Loan is a Title I Mortgage Loan or a
Conventional Mortgage Loan and whether or not the Mortgage Loan
(including the related Note) has been modified; PROVIDED,
HOWEVER, that the items of information set forth on the Loan
Schedule may be expanded or contracted by mutual agreement of
Buyer and Seller; and PROVIDED FURTHER, HOWEVER, that the
appraised value for any HEL may be determined from a real estate
broker's price opinion or a drive-by appraisal.
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"MORTGAGE" means the mortgage, deed of trust or other
instrument creating a first or second lien on an estate in fee
simple interest in real property securing the Note.
"MORTGAGE ASSIGNMENT" shall mean an assignment of the
Mortgage in recordable form, sufficient under the laws of the
jurisdiction wherein the related Mortgaged Property is located to
reflect the sale of the Mortgage.
"MORTGAGE FILE" shall have the meaning set forth in Section
2(b) hereof.
"MORTGAGE LOAN" shall mean a HEL or a HIL, as applicable.
"MORTGAGED PROPERTY" shall mean the real property securing
repayment of a Mortgage Loan.
"MORTGAGOR" shall mean the obligor on a Note.
"NOTE" shall mean any promissory note or other evidence of
indebtedness evidencing the indebtedness of a Mortgagor under a
Mortgage Loan.
"NOTICE LOAN SCHEDULE" shall have the meaning set forth in
Section 4(b) of this Agreement.
"NOTICE OF TERMINATION" shall mean the notice substantially
in the form of Exhibit D hereto.
"OFFICER'S CERTIFICATE" shall mean a certificate signed by
(i) an officer or an employee, authorized to sign an officer's
certificate, of Seller or other Person having officers,
submitting a Mortgage File to the Custodian or (ii) the closing
attorney for the Mortgage Loan. (The text of any particular
Officer's Certificate may be stamped upon a document constituting
a portion of a Mortgage File so long as such stamped text is
signed by manual or facsimile signature by an officer or an
employee authorized to sign an Officer's Certificate.)
"PERSON" shall mean any individual, corporation,
partnership, joint venture, association, joint stock company,
trust (including any beneficiary thereof), unincorporated
organization or government or any agency or political subdivision
thereof.
"REQUEST/CONFIRMATION" shall mean a written confirmation of
a Transaction substantially in the form attached as an exhibit to
the Repurchase Agreement.
"SELLER" shall have the meaning set forth in the first
paragraph of this Agreement.
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"SERVICER" shall mean FirstPlus Financial, Inc. in its
capacity as servicer of the Mortgage Loans.
"THIRD PERSON" shall mean a Person other than Seller, Buyer
or the Custodian which Person has acquired an interest in any
Mortgage Loans from Buyer and continues to have an interest in
such Mortgage Loans.
"TITLE I MORTGAGE LOAN" shall mean a Mortgage Loan that has
been or will be registered by FHA for FHA Insurance under the
Title I Program.
"TITLE I PROGRAM" shall mean the mortgage insurance program
authorized pursuant to the National Housing Act of 1934, as
amended.
"TRUST RECEIPT" shall mean an instrument substantially in
the form of Exhibit C hereto.
SECTION 2. DELIVERY OF MORTGAGE FILES TO CUSTODIAN.
(a) REPRESENTATIONS OF SELLER. With respect to each
Transaction, Seller represents that it has, prior to the sale of
any Mortgage Loans to Buyer pursuant to the Repurchase Agreement,
delivered to the Custodian those documents designated in items 1-
7 below (to the extent applicable to such Mortgage Loans) . All
documents delivered to the Custodian shall have been placed by
Seller or its representative in an appropriate file folder,
properly secured, and clearly marked with the name of the
Mortgaged Property and the loan number (the "Loan Number")
(b) By delivery of a Letter of Transmittal, substantially in
the form of Exhibit A hereto, Seller will from time to time
certify that it has delivered and released to the Custodian the
related Mortgage Files for the Mortgage Loans referred to in such
Letter of Transmittal and has in its possession the other
documents with respect to the Mortgage Loans identified in the
mortgage loan schedule attached to the Letter of Transmittal as
Schedule 1 (the "Loan Schedule"). The Loan Schedule is the Loan
Schedule referred to in the Repurchase Agreement.
"MORTGAGE FILE" means the following documents (all of which
together constitute an original mortgage file):
(1) the original Note, endorsed, "Pay to the order of
___________, without recourse" and signed, by facsimile or
manual signature, in the name of Seller by an authorized
officer. If the Note has been signed by a Person on behalf
of the Mortgagor, the original power of attorney or other
instrument that authorized and empowered such Person to sign
or a copy of such power of attorney together with an
Officer's Certificate certifying that such copy represents a
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true and correct copy and that such original has been duly
recorded in the appropriate records depository for the
jurisdiction in which the Mortgaged Property is located. To
the extent that there is no room on the face of the Note for
endorsements, the endorsement may be contained on an
allonge, if the law by which such Note is governed so
permits. Such allonge shall be firmly affixed to the Note
so as to become a part thereof;
(2) the original of any loan agreement and guarantee(s)
executed in connection with the Note;
(3) the original Mortgage, with evidence of recording
thereon, or, if the original Mortgage has not yet been returned
from the recording office, a copy of the original Mortgage
together with an Officer's Certificate (which may be a blanket
Officer's Certificate of Seller covering all such Mortgage Loans)
certifying that the copy is a true copy of the original of the
Mortgage which has been delivered for recording in the
appropriate recording office of the jurisdiction in which the
Mortgaged Property is located, or a copy of the Mortgage
certified by the public recording office in those instances where
the original Mortgage has been lost, destroyed or retained by the
public recording office; and if the Note has been signed by a
Person on behalf of the Mortgagor, the original power of attorney
or other instrument that authorized and empowered such Person to
sign or a copy of such power of attorney together with an
Officer's Certificate certifying that such copy represents a true
and correct copy and that such original has been duly recorded in
the appropriate records depository for the jurisdiction in which
the Mortgaged Property is located;
(4) the original Mortgage Assignment assigned in blank for
each Mortgage Loan, in form and substance acceptable for
recording (except for the name of the assignee) and signed in the
name of the last endorsee by an authorized officer;
(5) the originals of all intervening assignments of
mortgage, if any, with evidence of recording thereon or copies
thereof certified by the related recording office or, if the
original of any such assignment has not yet been returned from
the recording office, a copy of the original of any such
assignment without evidence of recording thereon together with an
Officer's Certificate (which may be a blanket Officer's
Certificate of Seller covering all such Mortgage Loans)
certifying that the copy is a true copy of the original of any
such assignment which has been delivered by such attorney or
officer for recording in the appropriate recording office of the
jurisdiction in which the Mortgaged Property is located, or a
copy of the intervening assignment certified by the public
recording office in those instances
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where the original recorded intervening assignment has been lost,
destroyed or retained by the public recording office;
(6) the originals of all assumption, modification,
consolidation or extension agreements, if any, with evidence
of recording thereon or, if the original of any such
agreement has not yet been returned from the recording
office, a copy of the original of any such agreement without
evidence of recording thereon together with an Officer's
Certificate (which may be a blanket Officer's Certificate of
Seller covering all such Mortgage Loans) certifying that the
copy is a true copy of the original of any such agreement
which has been delivered by such attorney or officer for
recording in the appropriate recording office of the
jurisdiction in which the Mortgaged Property is located, or
a copy of such agreement certified by the public recording
office in those instances where the original recorded
agreement has been lost, destroyed or retained by the public
recording office; and
(7) as to each Mortgage Loan that is a HEL having an
original principal balance in excess of $25,000 that became
subject to a Transaction after June 1, 1996, (i) the
original mortgagee title insurance policy or (ii) if such
policy has not been issued, (a) a written commitment or
binder for such policy issued by a title insurer and an
officer's certificate of the title insurer certifying that
all of the requirements specified in such commitment have
been satisfied or (b) a preliminary title report issued by a
title insurer in anticipation of issuing a title insurance
policy which evidences existing liens and gives a
preliminary opinion as to the absence of any encumbrance on
title to the Mortgaged Property except liens to be removed
on or before purchase by the Mortgagor or which constitute
customary exceptions acceptable to lenders generally.
SECTION 3. THE CUSTODIAN'S RECEIPT, EXAMINATION AND CERTIFICATION OF
MORTGAGE FILES AND ISSUANCE OF TRUST RECEIPT.
(a) The Custodian shall examine the documents received by it and
confirm, as of the date of the Trust Receipt, that on their faces:
(1) the Note and Mortgage each bears an original
signature or signatures purporting to be the signature or
signatures of the Person or Persons named as the maker and
mortgagor or grantor or, in the case of copies of the
Mortgage permitted under Section 2, that such copies bear a
reproduction of such signature or signatures;
(2) (a) the principal amount of the indebtedness
secured by the Mortgage is identical to the original
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principal amount of the Note and the original principal
amount on the Loan Schedule; (b) the Note term is the same
as set forth on the Loan Schedule; and (c) the Note coupon
is the same as set forth on the Loan Schedule;
(3) the Note bears original endorsements, by either
manual or facsimile signature, which complete the chain of
ownership from the original holder or payee to the owner of
the related Trust Receipt;
(4) the original of the Mortgage Assignment and any
intervening mortgage assignment bears the original signature
purporting to be the signature of the named mortgagee or
beneficiary (and any other necessary party, including
subsequent assignors) or in the case of copies permitted
under Section 2, that such copies bear a reproduction of
such signature or signatures and that the Mortgage
Assignment and any intervening mortgage assignment complete
the chain of title from the originator to Seller and from
Seller in blank;
(5) the power of attorney (if any), as specified in
Sections 2 (b) (1) and 2 (b) (3), (A) bears an original
signature purporting to be the signature of the maker of the
Note and the mortgagor or grantor of the Mortgage and (B)
bears evidence that such power of attorney was recorded in
the appropriate records depository for the jurisdiction
where the Mortgaged Property is located or, in case of
copies permitted under Sections 2 (b) (1) and (2) (b) (3) ,
that such copies bear a reproduction of such signatures and
such evidence of recordation;
(6) if a Note or a Mortgage was executed by an
attorney-in-fact, the power of attorney specified in
Sections 2(b) (1) and 2(b) (3) is included and conforms to
the requirements of such section; and
(7) there exists one of the documents required-by
clause (7) of the definition of Mortgage File for each
Mortgage Loan that is a HEL having an original principal
balance in excess of $25,000 that became subject to a
Transaction after June 1, 1996.
(b) If the Custodian has determined that all the required
documents are included in the Mortgage Files delivered to it and
that such related documents on their faces satisfy the
requirements enumerated in Sections 3 (a) (1) through 3 (a) (6)
hereof, the Custodian shall (i) sign a copy of the related Letter
of Transmittal and return the Letter of Transmittal to Seller,
and (ii) remit to Buyer or its designee a Trust Receipt with
respect to such Mortgage Files signed by the Custodian. If upon
examination of the documents included in any Mortgage File, the
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Custodian determines that such documents do not satisfy the above
requirements, or is unable to confirm that such documents satisfy such
requirements, the Custodian shall mark such Mortgage Loan as an exception on
its Trust Receipt. Except as set forth in the preceding sentence, the Trust
Receipt of the Custodian with respect to each Mortgage File shall be deemed
to include a certification that the documents reviewed by the Custodian
appear regular on their face and relate to the Mortgage Loan described in the
Mortgage File and are in the possession and control of the Custodian.
(c) Under no circumstances shall the Custodian be obligated to verify
the authenticity of any signature on any of the documents received or
examined by it in connection with this Agreement or the authority or capacity
of any person to execute or issue any such document, nor shall the Custodian
be responsible for the value, form, substance, validity, perfection,
priority, effectiveness or enforceability of any of such documents.
(d) Any provision of this Agreement to the contrary notwithstanding,
Seller shall notify the Custodian of the need to examine a Mortgage File and
deliver a related Trust Receipt not less than forty-eight (48) hours prior to
the date on which such Trust Receipt is required to be delivered.
(e) With respect to any Trust Receipt delivered to Buyer hereunder, the
Custodian shall revise its own internal books and records from time to time
to reflect its receipt or release of Mortgage Loans under the terms of this
Agreement so that the applicable Loan Schedule for any such Trust Receipt
shall always accurately reflect the Mortgage Loans held by the Custodian
under this Agreement.
SECTION 4. POSSESSION OF MORTGAGE FILES.
(a) POSSESSION OF MORTGAGE FILES ON BEHALF OF BUYER. The Custodian
shall segregate and retain possession and custody of the Mortgage Files for
the exclusive use and benefit of Buyer and as agent and bailee of and
custodian for Buyer for all purposes until otherwise notified by Buyer
pursuant to subsection (b) hereof. The Custodian shall also make appropriate
notations in the Custodian's books and records reflecting that the Mortgage
Files are owned by Buyer unless otherwise notified by Buyer -pursuant to
subsection (b) hereof. The Custodian shall not release any portion of the
Mortgage Files to Seller or to any other party without the prior written
authorization of the owner of the Trust Receipt.
(b) POSSESSION OF MORTGAGE FILES ON BEHALF OF THIRD PERSONS. The
Custodian acknowledges that Buyer may transfer its interest in the Mortgage
Loans to one or more Third Persons.
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Upon receipt of written notice from Buyer, substantially in the form of
Exhibit B hereto, that Buyer has transferred its interest in the Mortgage
Loans identified on a schedule to such notice (the "Notice Loan Schedule") to
a Third Person together with the Trust Receipt for amendment of the Schedule
attached thereto, the Custodian will promptly issue a Trust Receipt to such
Third Person and shall issue an amended Trust Receipt to Buyer, each of which
will reflect the transfer of Buyer's interest in certain Mortgage Loans to
such Third Person. The notice sent by Buyer to she Custodian shall be in
substantially the form of Exhibit B hereto and shall (i) specify the name of
the Third Person, (ii) specify the address of the Third Person, which may be
an address in care of Buyer and (iii) have attached the Notice Loan Schedule.
Upon receipt of any such notice from Buyer, the Custodian shall (a)
segregate and retain possession and custody of the Mortgage Files with
respect to the Mortgage Loans in the Notice Loan Schedule as agent and bailee
of and custodian for such Third Person, and (b) make appropriate notations in
the Custodian's books and records reflecting that the Mortgage Files
identified in the Notice Loan Schedule are owned by such Third Person. The
Custodian shall segregate and maintain continuous custody of all Mortgage
Files for the benefit of the Person to whom it has issued a Trust Receipt.
Buyer's agreements with each holder of a Trust Receipt other than an
affiliate of Buyer (each such holder, a "Transferee") will specify that the
Transferee cannot issue instructions regarding the Mortgage Loans or Mortgage
Files unless Buyer has defaulted on Buyer's obligations to such Transferee.
Accordingly, the Custodian may not act on requests from a Transferee to
withdraw or otherwise dispose of Mortgage Loans unless the Transferee
delivers to the Custodian an executed Notice of Default Certificate in the
form of Exhibit E hereto. The Custodian shall be entitled to presume
conclusively -that the Notice of Default Certificate is properly executed and
that when delivered to the Custodian an Event of Default exists under Buyer's
agreement with its Transferee.
(c) Upon surrender of the Trust Receipt by Buyer to the Custodian,
Buyer may issue instructions regarding the Mortgage Loans designated in the
applicable Trust Receipt, including instructions to withdraw Mortgage Loans.
(d) In the event a Trust Receipt is lost, destroyed or otherwise
unavailable for surrender to the Custodian, Buyer will present to the
Custodian documentation in the form attached as Exhibit F or Exhibit G
hereto. Upon receipt by the Custodian of such documentation, Buyer will have
the right to issue instructions regarding the Mortgage Loans covered by a
Trust Receipt without surrender of the related Trust Receipt.
(e) The Custodian understands that Buyer may need to examine Mortgage
Loans subject to a Trust Receipt on a periodic basis. Such examination shall
take place on the premises of the
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Custodian. Buyer will give the Custodian two (2) Business Days' notice
before Buyer makes an examination. Buyer's agreements with each Transferee
will grant Buyer the right to make such examinations.
(f) The Custodian shall cause to be kept at its corporate trust office
records in the form, scope and substance of a register (the "Custodial
Register") in which, subject to such reasonable regulations as it may
prescribe, the Custodian shall reflect the ownership of Mortgage Loans as
confirmed by Trust Receipts as herein provided. The Custodial Register shall
be deemed to contain proprietary information and only Custodian and Buyer
shall have access to such information.
(g) With respect to the repurchase of any Mortgage Loan by Seller from
Buyer under the Repurchase Agreement, the interest of any Third Person in any
such Mortgage Loan shall automatically terminate simultaneously with the
payment to Buyer of the Repurchase Price for such Mortgage Loan under the
Repurchase Agreement and any such interest shall be deemed to have been
transferred to Buyer as of such time, except with respect to any Mortgage
Loans delivered to a Third Person pursuant to the Notice of Default
Certificate attached hereto as Exhibit E. Pursuant to the preceding
sentence, the interest of any Third Person shall automatically terminate
irrespective of whether such Third Person receives the appropriate payment
for such Mortgage Loan.
SECTION 5. RELEASE OF CUSTODIAN'S MORTGAGE FILES FOR SERVICING. From
time to time and as appropriate for the servicing of any of the Mortgage
Loans by Seller, the Custodian is hereby authorized, upon written request and
receipt of Seller and consent and acknowledgement of Buyer (to the extent
required by Exhibit H) in the form of Exhibit H, to release to Seller or its
designee the related Mortgage File, or any documents contained therein, set
forth in such receipt to Seller. All documents so released to Seller or its
designee shall be held by it in trust for the benefit of Buyer and Third
Persons from time to time. Seller or its designee shall return to the
Custodian the Mortgage File or such documents when Seller's need therefor in
connection with servicing no longer exists but in no event later than ten
(10) Business Days after their release by the Custodian as provided herein.
Upon the payment in full of any Mortgage Loan by the mortgagor, and upon
receipt by the Custodian of Seller's request for release and acknowledgement
by Buyer in the form of Exhibit H, the Custodian shall promptly release the
related Mortgage File to Seller.
Seller agrees that, at the time any request for release of Mortgage
Files is made to the Custodian under this Agreement, Buyer shall be so
notified and a copy of any written request for
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release shall be furnished to Buyer. Upon its receipt of any released
Mortgage Files, Seller shall so notify Buyer.
SECTION 6. REVIEW AND DEPOSIT OF ADDITIONAL MORTGAGE LOANS.
(a) If, pursuant to the Repurchase Agreement, Seller is required to
deliver additional Mortgage Loans to the Custodian to cure a Margin Deficit
or if Seller and Buyer agree to cause additional Mortgage Loans to become
subject to the Repurchase Agreement ("Additional Mortgage Loans"), the
Custodian shall retain possession and custody of the Mortgage Files relating
thereto pursuant to Section 4 hereof and, upon receipt and review thereof,
shall transmit to Buyer a Trust Receipt that shall supersede any Trust
Receipt bearing an earlier date and have attached thereto a complete Loan
Schedule revised so as to give effect to the transaction contemplated by such
Trust Receipt.
(b) Two (2) days prior to the delivery of any Additional Mortgage Loans,
Seller will advise the Custodian whether the Custodian will be required to
review any Additional Mortgage Loans. Seller undertakes to use its best
efforts to make available for review any such Additional Mortgage Loans as
soon as is reasonably possible. Upon receipt thereof, the Custodian shall
perform its review of the Mortgage Files relating to any Additional Mortgage
Loans in the manner contemplated by Section 3 hereof.
(c) Seller covenants and agrees to provide to the Custodian at the time
Seller delivers any Additional Mortgage Loans under this Agreement, and at
the time any Mortgage Loans are transferred to Seller pursuant to Section
4(c) hereof, a revised Loan Schedule reflecting current information with
respect to all Mortgage Loans subject to the applicable Trust Receipt, after
giving effect to the related delivery or transfer.
SECTION 7. WAIVER BY THE CUSTODIAN. Notwithstanding any other
provisions of this Agreement, the Custodian shall not at any time exercise or
seek to enforce any claim, right or remedy, including any statutory or common
law rights of se$-off, if any, that the Custodian might otherwise have
against all or any part of a Mortgage File or the proceeds thereof. The
Custodian warrants that it currently holds, and during the existence of this
Agreement shall hold, no adverse interest, by way of a security interest or
otherwise, in any Mortgage Loan.
SECTION 8. RIGHT OF INSPECTION BY BUYER AND THIRD PERSONS. Upon
reasonable notice to the Custodian (which in no event shall be less than two
(2) Business Days notice), the Person or Persons for whom the Custodian is
acting as custodian, or their duly authorized representatives, may at any
time, during ordinary business hours, inspect and examine the Mortgage Files
in the
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possession and custody of the Custodian at such place or places
where such Mortgage Files are deposited.
SECTION 9. CUSTODIAN'S FEES AND EXPENSES. The Custodian
hereby acknowledges that Seller has agreed to pay all fees due
and owing to, and except as otherwise provided herein, any
expenses incurred by the Custodian under this Agreement. The
fees due to the Custodian for its services hereunder shall be as
set forth in a separate letter agreement between the Custodian
and Seller. In addition to the fees referred to in the two
foregoing sentences, Seller has agreed to pay all out-of-pocket
expenses incurred by the Custodian in connection with the review
of each Mortgage File by it or its agent and its issuance of a
Trust Receipt relating thereto. Neither Buyer nor any Third
Person shall have any liability or obligation to pay any such
fees or expenses, and the duties of the Custodian hereunder shall
be independent of Seller's performance of its obligations to the
Custodian in respect of such fees and expenses.
SECTION 10. TERMINATION OF AGREEMENT. This Agreement shall
become effective on and as of the date hereof and shall terminate
upon the earlier of (i) the Custodian's receipt of written Notice
of Termination signed by the Person or all of the Persons to whom
the Custodian has issued Trust Receipts and on whose behalf the
Custodian is acting as agent, bailee and custodian, (ii) the
removal of all Mortgage Files from the possession of the
Custodian pursuant to the instructions of the Person or Persons
entitled to request such removal pursuant to this Agreement. The
Custodian shall be entitled to rely, and shall be protected in
relying, on any such Notice of Termination delivered to it by
such Person or Persons and (iii) if such Mortgage Loan is
repurchased by Seller from Buyer, the receipt by Buyer of the
Repurchase Price for such Mortgage Loan under the Repurchase
Agreement. If this Agreement terminates with respect to any
Mortgage Loan by operation of clause (i) above, the Custodian
shall deliver the related Mortgage File then subject to this
Agreement to the Person indicated in the Notice of Termination.
If any Mortgage Loan is repurchased by Seller from Buyer
pursuant to clause (iii) above, then Buyer shall execute and
deliver to the Custodian a document in substantially the form of
Exhibit I which confirms the receipt of the Repurchase Price for
such Mortgage Loan and the termination and release of all of
Buyer's right, title and interest in such Mortgage Loan, and the
Custodian upon receipt of such document shall deliver the related
Mortgage File for such Mortgage Loan to Seller or such other
Person as Seller so directs. Upon such termination the Custodian
shall deliver all Mortgage Files then subject to this Agreement
to the Person indicated in such Notice of Termination or if no
such Person is indicated, then to the Person or Persons to whom
the Custodian has issued Trust Receipts and for whom the
Custodian is acting on such date and the Custodian shall endorse
the Notes without recourse, representation and warranties and
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execute mortgage assignments pursuant to any instruction by the
Person on whose behalf the Custodian is acting as agent and
bailee pursuant to this Agreement.
SECTION 11. RESIGNATION AND REMOVAL OF CUSTODIAN.
(a) RESIGNATION. The Custodian shall have the right, with
or without cause, to resign as the Custodian under this Agreement
upon sixty (60) days' prior written notice to Seller, Buyer and,
to the extent of its interest, any Third Person. Following any
such resignation, the Custodian shall continue to act as the
"Custodian" under this Agreement until it delivers the Mortgage
Files to a duly appointed successor Custodian as provided in (c)
below, if any, or to any designee specified by Buyer or any Third
Person, as applicable.
(b) REMOVAL. Buyer and, to the extent of its interest, any
Third Persons may remove and discharge the Custodian from the
performance of its duties under this Agreement, by providing five
(5) days' written notice to the Custodian, signed jointly by
Buyer and a majority in interest of (calculated with reference to
the face value of the Mortgage Loans) any Third Person or Persons
with any interest in the Mortgage Loans, as evidenced by the
holding of a Trust Receipt, with a copy to Seller. Following any
such removal, the Custodian shall continue to act as the
"Custodian" under this Agreement until it delivers the Mortgage
Files to a duly appointed successor Custodian as provided in (c)
below, if any, or to any designee specified by Buyer or any Third
Person, as applicable.
(c) APPOINTMENT OF SUCCESSOR CUSTODIAN; TRANSFER OF
MORTGAGE LOANS. Upon resignation or removal of the Custodian,
Buyer and, to the extent of its interest and if permitted by
Section 4 hereof, any Third Person shall have 60 days in which to
appoint and designate a successor to take possession of their
respective Mortgage Files or select one or more designees to take
possession thereof. Upon receipt of written direction regarding
the foregoing from Buyer and any Third Person with respect to the
Mortgage Loans in which they have an interest, as applicable, the
Custodian shall deliver all Mortgage Files to the person so
designated within 10 days following delivery to the Custodian of
such written notice. If a successor Custodian is appointed, the
Custodian shall deliver the Mortgage Files in accordance with the
written instructions of Buyer and a majority in interest of
(calculated with reference to the face value of the Mortgage
Loans) Third Persons having interests in the Mortgage Loans to
the extent such Third Persons are permitted to take action with
respect thereto under Section 4 hereof setting forth the name and
address of the successor Custodian. If Buyer and, to the extent
of its interest, any such Third Person, fail to jointly designate
a successor Custodian or specify one or more designees within
such 60-day period, then the Custodian shall deliver possession
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and custody to Buyer and, if otherwise permitted under Section 4
hereof, any Third Person, of their respective Mortgage Files, as
applicable, at the address specified in the Custodian's records.
The Custodian shall, as part of the transfer of the Mortgage
Files, deliver the Mortgage Assignment for each Mortgage Loan in
recordable form and shall endorse the Note without recourse,
representation and warranties in accordance with Buyer's or the
applicable Third Person's instructions. Any successor Custodian
hereunder shall be a financial institution whose deposits are
insured by FDIC, have a net worth of not less than $10,000,000
and shall have secure vault storage facilities located in the
State of New York or such other State as Buyer and Seller may
agree, in which the Mortgage Files are to be retained.
SECTION 12. LIMITATION ON OBLIGATIONS OF THE CUSTODIAN. The
Custodian shall have no duties or obligations other than those
specifically set forth herein, and no further duties or
obligations shall arise by implication or otherwise. The
Custodian agrees to use its best judgment and good faith in the
performance of such obligations and duties and shall incur no
liability to Seller for its acts or omissions hereunder, except
as may result from its gross negligence or willful misconduct.
The Custodian shall also be entitled to rely (and shall be
protected in relying) upon written advice of its legal counsel
and to rely upon any written notice, document, correspondence,
request or directive received by it from Buyer, any Third Person
(if applicable), or Seller, as the case may be, that the
Custodian believes to be genuine and to have been signed or
presented by the proper and duly authorized officer or
representative thereof, and shall not be obligated to inquire as
to the authority or power of any Person so executing or
presenting such documents or as to the truthfulness of any
statements set forth therein. No provision of this Agreement
shall require the Custodian to expend or risk its own funds or
otherwise incur financial liability in the performance of its
duties hereunder if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity is
not reasonably assured to it. Seller agrees to indemnify, defend
and hold the Custodian harmless from and against any claim, legal
action, liability or loss that is initiated against or incurred
by the Custodian, including court costs and reasonable attorney's
fees and disbursements, and all of the Custodian's other cost,
damage or expense incurred in connection with the Custodian's
performance of its duties under this Agreement, but excluding any
such claim, legal action, liability, loss, cost, damage or
expense caused by Custodian's gross negligence or willful
misconduct.
The Custodian shall at its own expense maintain at all times
during the existence of this Agreement and keep in full force and
effect (a) fidelity insurance, (b) theft and loss of documents
insurance, (c) forgery insurance, and (d) errors and omissions
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insurance. All such insurance shall be in amounts, with standard
coverage and subject to deductibles, as are customary for
insurance typically maintained by banks which act as the
Custodian in similar transactions. The Custodian shall, upon
written request, provide to Seller, or to any other Person as
Seller shall direct, a certificate signed by an authorized
officer of the Custodian certifying that the foregoing insurance
policies are in full force and effect. The Custodian shall use
its best efforts to ensure that such insurance shall not
terminate prior to receipt by Buyer by registered mail of 30
days' prior written notice thereof.
SECTION 13. NOTICES. Any notice, demand or consent
required or permitted by this Agreement shall be in writing and
shall be effective and deemed delivered only when received by the
party to which it is sent. Any such notice, demand or consent
shall be delivered in person or transmitted by a recognized
private courier service or deposited with the United States
Postal Service, certified mail, postage prepaid, return receipt
requested, addressed as follows, unless such address is changed
by written notice hereunder:
If to Seller:
FirstPlus Financial, Inc.
1250 Mockingbird Lane
Dallas, Texas 75247-4902
Attention: Eric Green
Chief Financial Officer
Telephone: (214) 583-4503
Telecopy: (214) 583-4901
with a copy at the same address to:
Attention: General Counsel
Telephone: (214) 583-3700
Telecopy: (214) 583-3737
If to Buyer:
Bear Stearns Home Equity Trust 1996-1
c/o Bear Stearns Mortgage Capital Corporation
245 Park Avenue
New York, New York 10167
Attn: John Garzone
Telephone: (212) 272-3853
Telecopy: (212) 272-7803
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If to the Custodian:
Bank One, Texas, N.A.
1717 Main Street, 4th Floor
Dallas, Texas 75201
Attn: Mark L. Freeman
Mortgage Finance Group
Telephone: (214) 290-2780
Telecopy: (214) 290-2054
SECTION 14. NO ASSIGNMENT OR DELEGATION BY THE CUSTODIAN.
The Custodian shall not assign, transfer, pledge or grant a
security interest in any of its rights, benefits or privileges
hereunder nor delegate or appoint any other person to perform or
carry out any of its duties, responsibilities or obligations
under this Agreement; any act or instrument purporting to effect
any such assignment, transfer, pledge, grant, delegation or
appointment shall be void.
SECTION 15. CONTROLLING LAW. This Agreement and all
questions relating to validity, interpretation, performance and
enforcement shall be governed by and construed, interpreted and
enforced in accordance with the laws of the State of New York,
without regard to any New York or other conflict-of-law
provisions.
SECTION 16. AGREEMENT FOR THE EXCLUSIVE BENEFIT OF PARTIES.
This Agreement is for the exclusive benefit of the parties
hereto, and their respective successors and permitted assigns,
and shall not be deemed to create or confer any legal or
equitable right, remedy or claim upon any other person whatsoever
except a Third Person to the extent rights are explicitly
conferred on any one or more Third Persons pursuant to this
Agreement.
SECTION 17. ENTIRE AGREEMENT. This Agreement contains the
entire agreement among the parties hereto with respect to the
subject matter hereof, and supersedes all prior and
contemporaneous agreements, understandings, inducements and
conditions, express or implied, oral or written, of any nature
whatsoever with respect to the subject matter hereof, including
any prior custody agreements. The express terms hereof control
and supersede any course of performance and/or usage of the trade
inconsistent with any of the terms hereof. This Agreement may
not be modified or amended other than by an agreement in writing
signed by Buyer, Seller and the Custodian.
SECTION 18. EXHIBITS. All Exhibits referred to herein or
attached hereto are hereby incorporated by reference into, and
made a part of, this Agreement.
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SECTION 19. INDULGENCES, NOT WAIVERS. Neither the failure
nor any delay on the part of a party hereto to exercise any
right, remedy, power or privilege under this Agreement shall
operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege preclude any
other or further exercise of the same or of any other right,
remedy, power or privilege, nor shall any waiver of any right,
remedy, power or privilege with respect to any occurrence be
construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver shall be
effective unless it is in writing and is signed by the parties
asserted to have granted such waiver.
SECTION 20. TITLES NOT TO AFFECT INTERPRETATION. The
titles of sections and subsections contained in this Agreement
are for convenience only, and they neither form a part of this
Agreement nor are they to be used in the construction or
interpretation hereof.
SECTION 21. PROVISIONS SEPARABLE. The provisions of this
Agreement are independent of and separable from each other, and
no provision shall be affected or rendered invalid or
unenforceable by virtue of the fact that for any reason any other
provision or provisions may be invalid or unenforceable in whole
or in part.
SECTION 22. REPRESENTATIONS AND WARRANTIES OF THE
CUSTODIAN. The Custodian represents, warrants to, and covenants
with Buyer that on the date hereof, and on the date of the
issuance of any Trust Receipt by the Custodian:
(1) The Custodian is (i) a national banking
association duly organized, validly existing
and in good standing under the laws of the
United States of America and (ii) duly
qualified and in good standing and in
possession of all requisite authority, power,
licenses, permits and franchises in order to
execute, deliver and comply with its
obligations under the terms of this Agreement;
(2) The execution, delivery and performance
of this Agreement have been duly authorized by
all necessary corporate action and the
execution and delivery of this Agreement by the
Custodian in the manner contemplated herein and
the performance of and compliance with the
terms hereof by it will not (i) violate,
contravene or create a default under any
applicable laws, licenses or permits to the
best of its knowledge, or (ii) violate,
contravene or create a default under any
charter document or bylaw of the Custodian or
to the best of the Custodian's knowledge any
contract, agreement, or instrument to which the
Custodian or by which any of its property may
be bound and will not result in the
17
<PAGE>
creation of any lien, security interest or
other charge or encumbrance upon or with
respect to any of its property;
(3) The execution and delivery of this
Agreement by the Custodian and the performance
of and compliance with its obligations and
covenants hereunder do not require the consent
or approval of any governmental authority or,
if such consent or approval is required, it has
been obtained;
(4) This Agreement, and the original Trust
Receipt issued hereunder, when executed and
delivered by the Custodian will constitute
valid, legal and binding obligations of the
Custodian, enforceable against the Custodian in
accordance with their respective terms, except
as the enforcement thereof may be limited by
applicable debtor relief laws and that certain
equitable remedies may not be available
regardless of whether enforcement is sought in
equity or at law;
(5) Custodian does not believe, nor does it
have any reason or cause to believe, that it
cannot perform each and every covenant
contained in this Agreement;
(6) To Custodian's knowledge after due
inquiry, there is no litigation pending or
threatened which, if determined adversely to
Custodian, would adversely affect the
execution, delivery or enforceability of this
Agreement, or any of the duties or obligations
of Custodian thereunder, or which would have a
material adverse effect on the financial
condition of Custodian;
(7) Upon written request of a Buyer or any
Third Person, and assurance reasonably
satisfactory to Custodian that its costs of
doing so will be timely reimbursed and that
Custodian will receive reasonable compensation
(in addition to the compensation provided for
elsewhere in this Agreement) for doing so,
Custodian shall take such steps as may be
reasonably requested by Buyer or any Third
Person (consistent with Custodian's
undertakings hereunder) to protect or maintain
any interest in any real property securing the
Mortgage Loan owned by such owner and any
insurance applicable thereto.
SECTION 23. LIMITED ROLE OF TRUSTEE; SUCCESSOR TRUSTEE.
(a) The execution and delivery of this Agreement by
the undersigned Trustee is solely and strictly in its capacity as
Trustee under that certain Trust Agreement dated as of March 29,
1996 (the "Trust Agreement") by and between State Street Bank and
Trust Company of California, N.A., as Trustee (the "Trustee") and
Bear Stearns Mortgage Capital Corporation, as Depositor (the
"Depositor") , and not individually, and has been undertaken at
18
<PAGE>
the direction of the Depositor. It is hereby expressly
acknowledged that any obligations, liabilities, covenants,
duties, representations and warranties hereunder are those of
Buyer only and not of the Trustee. There shall be no individual
or corporate liability against or on the part of the Trustee (or
any of its officers, directors or employees) under this
Agreement, and there shall be no recourse against the Trustee in
its individual or corporate capacity (or any of its directors,
officers or employees) , or against any of its properties or
assets, for recovery of or as a result of any claim, debt,
liability or obligation (whether of payment or performance) of or
against Buyer under or pursuant to this Agreement (whether
arising out of or relating to any covenant, agreement,
representation or warranty, or otherwise) . Recourse against
Buyer for any claims, liabilities, debts or obligations under
this Agreement is limited to the assets and properties of the
trust established by the Trust Agreement.
(b) It is hereby acknowledged that the rights and
remedies of Buyer under or pursuant to this Agreement shall
automatically be transferred to and vest in any successor trustee
under the Trust Agreement, in the event of the resignation or
removal of the Trustee as trustee thereunder.
SECTION 24. COUNTERPARTS. For the purpose of facilitating
the execution of this Agreement as herein provided and for other
purposes, this Agreement may be executed simultaneously in any
number of counterparts, each of which counterpart shall be deemed
to be an original, and such counterparts shall constitute and be
one and the same instrument.
19
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
date set forth above.
FIRSTPLUS FINANCIAL, INC.
By: /s/ Eric Green
------------------------------
Name: Eric Green
Title: CFO
BANK ONE, TEXAS, N.A.,
as Custodian
By:
------------------------------
Name:
Title:
BEAR STEARNS HOME EQUITY TRUST
1996-1
By: State Street Bank and Trust
Company of California, N.A.,
as Trustee solely and not
individually
By:
------------------------------
Name:
Title:
20
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
date set forth above.
FIRSTPLUS FINANCIAL, INC.
By:
------------------------------
Name:
Title:
BANK ONE, TEXAS, N.A.,
as Custodian
By: /s/ Mark Freeman
------------------------------
Name: Mark Freeman
Title: VP
BEAR STEARNS HOME EQUITY TRUST
1996-1
By: State Street Bank and Trust
Company of California, N.A.,
as Trustee solely and not
individually
By:
------------------------------
Name:
Title:
20
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
date set forth above.
FIRSTPLUS FINANCIAL, INC.
By:
------------------------------
Name:
Title:
BANK ONE, TEXAS, N.A.,
as Custodian
By:
------------------------------
Name:
Title:
BEAR STEARNS HOME EQUITY TRUST
1996-1
By: State Street Bank and Trust
Company of California, N.A.,
as Trustee solely and not
individually
By: /s/ Barbara Bateman
------------------------------
Name: Barbara Bateman
Title: Vice President
20
<PAGE>
EXHIBIT A
LETTER OF TRANSMITTAL
To: Bank One, Texas, N.A. From: FirstPlus Financial, Inc.
1717 Main Street, 4th Floor 1250 Mockingbird Lane
Dallas, Texas 75201 Dallas, Texas 75247
Attention: Mark L. Freeman Attention: Eric Green
Mortgage Finance Group Chief Financial
Officer
Pursuant to the Custody Agreement dated as of May 10, 1996 (the
"Custody Agreement") among Bank One, Texas, N.A. (the "Custodian"),
FirstPlus Financial, Inc. ("Seller"), and Bear Stearns Home Equity Trust
1996-1, Seller hereby delivers to you (i) the documents described below
in connection with the Mortgage Loans identified on the attached
schedule and (ii) an updated Loan Schedule identifying each Mortgage
Loan in your custody (including the Mortgage Loans referred to in clause
(i) above).
We understand that the list set forth below indicates in summary
fashion the materials for transmittal; it is not intended to describe
fully all the required characteristics of each item. We further
understand that each item sent to the Custodian must comply with the
applicable requirements of the Custody Agreement, and that all required
documents must be delivered together before the Custodian will accept
the Mortgage Loans.
With respect to each of the Mortgage Loans referred to in clause (i)
above, Seller has delivered, to the extent required by the Custody
Agreement, the following documents:
SECTION 2
(1) Letter of Transmittal (original and one copy)
(2) Original Note (endorsed in blank), including all intervening endorsements
Power of Attorney (if applicable)
(3) Original of any loan agreement and guarantee executed in connection with
the Notes, if applicable
(4) Mortgage
original, or
conformed Copy, together with the appropriate certificate
(5) Assignment of Mortgage in blank
original, or
Conformed Copy, together with the appropriate certificate
(6) Intervening Mortgage Assignment, if any
original, or
Conformed Copy, together with the appropriate certificate
(7) originals of all assumption, modification, consolidation or extension
agreements
(8) Lender's Title Insurance Policy
original, or
Written commitment issued by the title insurance
company, together with the appropriate certificate, or
Preliminary Title Report
(9) other.
A-1
<PAGE>
Submitted The Custodian acknowledges receipt of the
By: _________________________ documents referred to and agrees to hold and
retain possession thereof pursuant to the
Date: _______________________ terms of the Custody Agreement.
Telephone Number: ___________ BANK ONE, TEXAS, N.A., as Custodian
By: _______________________________
Name:
Title:
A-2
<PAGE>
EXHIBIT B
NOTICE TO THE CUSTODIAN
TO: Bank One, Texas, N.A., as Custodian
FROM: Bear Stearns Home Equity Trust 1996-1
DATE: _____________________
Pursuant to the Custody Agreement dated as of May 10, 1996,
among FirstPlus Financial, Inc., Bear Stearns Home Equity Trust
1996-1 and Bank One, Texas, N.A., as Custodian ("Custody
Agreement"), the undersigned hereby notifies you that it has
transferred its interest in the Mortgage Files with respect to
the Mortgage Loans identified in the mortgage loan schedule
attached hereto (the "Notice Loan Schedule") to [TRANSFEREE NAME
AND ADDRESS].
Included with this notice is the original Trust Receipt for
amendment of the Loan Schedule attached thereto. Capitalized
terms used herein without definition are as defined in the
Custody Agreement.
BEAR STEARNS HOME EQUITY TRUST
1996-1
By: State Street Bank and Trust
Company of California, N.A.,
as Trustee
By:
------------------------------
Name:
Title:
[Name of transferee] hereby acknowledges that (i) the Mortgage
Loans listed on the Notice Loan Schedule are being held for it by
the Custodian pursuant to the terms of the Custody Agreement,
(ii) it agrees to be bound by the Custody Agreement, (iii) the
Custodian shall not comply with the request of a Third Person to
deliver Mortgage Files unless such Third Person has delivered to
the Custodian an executed Notice of
<PAGE>
Default Certificate and (iv) it is responsible for payment of any fees
and expenses of the Custodian incurred in connection with the issuance
of periodic reports to it or in complying with its requests.
[NAME OF TRANSFEREE]
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
cc: FirstPlus Financial, Inc.
B-2
<PAGE>
EXHIBIT C
TRUST RECEIPT
[Date]
Bear Stearns Home Equity Trust 1996-1
Re: Custody Agreement dated as of May 10, 1996, among
FirstPlus Financial, Inc., Bear Stearns Home Equity
Trust 1996-1 and Bank One, Texas, N.A., as Custodian
----------------------------------------------------
Gentlemen:
In accordance with the provisions of Paragraph 3 of the above-referenced
Custody Agreement (the "Custody Agreement"), the undersigned, as Custodian,
hereby certifies that as to each Mortgage Loan described in the Loan
Schedule, a copy of which is attached hereto, it has reviewed the Mortgage
File and has determined that, except as set forth on the Exception Report
attached hereto, (i) all documents required to be delivered to it pursuant to
the Custody Agreement are in its possession, (ii) such documents have been
reviewed by it and appear regular on their face and relate to such Mortgage
Loan, and (iii) based on its examination of the foregoing documents, such
documents on their face satisfy the requirements set forth in Sections 3 (a)
(1) through 3(a) (6) of the Custody Agreement.
The Custodian hereby confirms that it is holding each such Mortgage File
as agent and bailee of and custodian for and for the exclusive use and
benefit of Bear Stearns Home Equity Trust 1996-1 ("BS Trust") or its
transferee pursuant to the terms of the Custody Agreement.
This Trust Receipt is not a negotiable instrument. BS Trust may,
however, transfer this receipt by a special endorsement to one other party.
The party that takes this receipt from BS Trust or its affiliate by special
endorsement may only transfer this receipt by a second endorsement in BS
Trust's or its affiliate's favor.
The Custodian will accept and act on instructions with respect to the
Mortgage Loans only upon surrender of this receipt at its Corporate Trust
Office, [ADDRESS], Attention: _________________. If the receipt has been
endorsed and is held by a Person other than BS Trust or one of its
affiliates, we will accept and act on instructions from the endorsee only if
the attached Notice of Default Certificate is executed and delivered
C-1
<PAGE>
to us stating that an Event of Default has occurred under a repurchase
agreement relating to this Trust Receipt between BS Trust and the endorsee.
All initially capitalized terms used herein shall have the meanings
ascribed to them in the above-referenced Custody Agreement.
BANK ONE, TEXAS, N.A.,
as Custodian
By:
-------------------------------
Name:
Title:
C-2
<PAGE>
EXHIBIT E
NOTICE OF DEFAULT CERTIFICATE
_______________, 199__
Bank One, Texas, N.A.,
as Custodian
[ADDRESS]
Gentlemen:
As the transferee of a Trust Receipt for certain Mortgage Loans, which
Trust Receipt is attached hereto, we hereby notify you that an event of
default has occurred under our agreement with ________________________ and we
are entitled to receive the Mortgage Loans subject to the aforementioned
Trust Receipt.
[ ]
-----------------------------------------
By:
--------------------------------------
Name:
Title:
Notice Received by Custodian
on [Date]
By:
--------------------------------------
Title:
Date:
E-1
<PAGE>
EXHIBIT F
Bank One, Texas, N.A.,
as Custodian
[ADDRESS]
Re: Custody Agreement dated as of May 10, 1996, among
FirstPlus Financial, Inc., Bear Stearns Home
Equity Trust 1996-1 and Bank One, Texas, N.A., as
Custodian
--------------------------------------------------
Gentlemen:
On [date] you issued a trust receipt in the name of BS Trust evidencing
entitlement to the Mortgage Loans described on Schedule A hereto and held by
you as Custodian. You issued that receipt pursuant to our agreement with
FirstPlus Financial, Inc. dated as of May 10, 1996. The trust receipt has
been [lost, destroyed, etc.]. Every effort was made to recover the receipt;
those efforts were unsuccessful. It is, therefore, now unavailable for
surrender to you.
At the time of its [loss, destruction, etc.], the receipt was held by us
under [the terms of original issue, special endorsement]. Since its
[issuance, endorsement] to us, we have not sold, assigned, transferred,
pledged or otherwise granted an interest in the trust receipt that has not
been released prior to the date hereof. Accordingly, this letter authorizes
you to act on our instructions regarding such Mortgage Loans without
surrender of the receipt to you.
We hereby agree to indemnify and hold you harmless against any loss,
liability or expense that you may incur as a result of acting on our
instructions regarding such Mortgage Loans without our surrender of the
receipt to you, excluding, however, any such loss, liability or expense
caused by your gross negligence or willful misconduct.
F-1
<PAGE>
If the trust receipt is ever recovered by us, we will immediately notify
you, cancel the receipt and surrender the receipt to you.
BEAR STEARNS HOME EQUITY TRUST
1996-1
By: State Street Bank and Trust
Company of California, N.A.,
as Trustee
By:
----------------------------------
Name:
Title:
F-2
<PAGE>
EXHIBIT G
Bank One, Texas, N.A.,
as Custodian
[ADDRESS]
Re: Custody Agreement dated as of May 10, 1996, among
FirstPlus Financial, Inc., Bear Stearns Home
Equity Trust 1996-1 and Bank One, Texas, N.A., as
Custodian
--------------------------------------------------
Gentlemen:
On [date] you issued a trust receipt in the name of Bear Stearns Home
Equity Trust 1996-1 ("BS Trust") evidencing entitlement to the Mortgage Loans
described on Schedule __ hereto and held by you in the name of
________________________, as Custodian. You issued that receipt pursuant to
our agreement with FirstPlus Financial, Inc. dated as of May 10, 1996. The
trust receipt has been [lost, destroyed, etc.]. Every effort was made to
recover the receipt; those efforts were unsuccessful. It is, therefore, now
unavailable for surrender to you.
At the time of its [loss, destruction, etc.], the receipt was held by
[name of transferee) under a special endorsement by us. We have attached to
this letter a special endorsement, from [name of transferee] conveying to us
its interest in the trust receipt and authorizing us to issue instructions
regarding the Mortgage Loans subject thereto without surrender of the receipt.
[name of transferee] has represented to us that it has not sold, assigned,
transferred, pledged or otherwise granted an interest in the trust receipt
to any party other than BS Trust. Accordingly, this letter authorizes you to
act on our instructions regarding such Mortgage Loans without surrender of
the receipt to you.
We hereby agree to indemnify and hold you harmless against any loss,
liability or expense that you may incur as a result of acting on our
instructions regarding such Mortgage Loans without our surrender of the
receipt to you, excluding, however, any such loss, liability or expense
caused by your gross negligence or willful misconduct.
G-1
<PAGE>
If the trust receipt is ever recovered by us, we will immediately notify
you, cancel the receipt and surrender the receipt to you.
BEAR STEARNS HOME EQUITY TRUST
1996-1
By: State Street Bank and Trust
Company of California, N.A.,
as Trustee
By:
---------------------------------
Name:
Title:
G-2
<PAGE>
EXHIBIT H
REQUEST FOR RELEASE OF DOCUMENTS
To: Bank One, Texas, N.A.,
as Custodian
[ADDRESS]
Re: Custody Agreement dated as of May 10, 1996, among
FirstPlus Financial, Inc., Bear Stearns Home Equity
Trust 1996-1 and Bank One, Texas, N.A., as Custodian
----------------------------------------------------
In connection with the administration of Mortgage Loans held by you as
Custodian for Buyer and Third Persons from time to time pursuant to the
above-referenced Custodial Agreement, we hereby request the release, and
acknowledge receipt, of the [specify documents] [related Mortgage Files] for
the Mortgage Loans described in the attached Loan Schedule, for the reason
indicated.
MORTGAGOR'S NAME ADDRESS AND ZIP CODE:
MORTGAGE LOAN NUMBER:
REASON FOR REQUESTING DOCUMENTS (check one):
___1. Mortgage Loan paid in full. (The Custodian shall
delete the Mortgage Loan from the applicable Loan
Schedule and send the amended Loan Schedule to Buyer
and any related Third Person.)
___2. Repurchase of Mortgage Loan pursuant to the Repurchase
Agreement. (The Custodian shall delete the Mortgage
Loan from the applicable Loan Schedule and send the
amended Loan Schedule to Buyer and any related Third
Person.)
___3. Delivery of substituted Mortgage Loan. (The Custodian
is hereby authorized to delete the Mortgage Loan from
the applicable Loan Schedule attached hereto and send
the amended Loan Schedule to Buyer and any related
Third Person.)
___4. Mortgage Loan liquidated by ______________. (The
Custodian is hereby authorized to delete the Mortgage
Loan from the applicable Loan Schedule attached hereto
and send the amended Loan Schedule to Buyer and any
related Third Person.)
H-1
<PAGE>
___5. Mortgage Loan in foreclosure or otherwise released for
servicing.
If box 1, 2, 3 or 4 above is checked, and if all or part of the
Mortgage Files were previously released to FirstPlus Financial, Inc., please
release to FirstPlus Financial, Inc. its previous request and receipt on file
with you, as well as any additional documents in your possession relating to
the specified Mortgage Loan.
If box 5 above is checked, upon the return of all of the above documents
to you as the Custodian, please acknowledge your receipt by signing in the
space indicated below, and returning this form.
FirstPlus Financial, Inc. understands and agrees that all documents
delivered to FirstPlus Financial, Inc. or its subservicer pursuant to this
request for release (other than with respect to Items 1-4) shall be returned
to the Custodian no later than twenty-one (21) days from the date hereof.
Capitalized terms used and not otherwise defined herein shall have the
meanings set forth in the Custody Agreement.
FIRSTPLUS FINANCIAL, INC.
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
Date:
-------------------------
Acknowledged and Agreed:
BEAR STEARNS HOME EQUITY TRUST
1996-1
By: State Street Bank and Trust
Company of California, N.A.,
as Trustee
(Required if documentation relating to more than three (3)
Mortgage Files are outstanding or the release of a Note or
Mortgage Assignment is requested.)
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
Date:
-------------------------
H-2
<PAGE>
Acknowledgement of documents returned to the Custodian, for the reasons
listed in item 5:
BANK ONE, TEXAS, N.A.
Custodian
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
Date:
-------------------------
H-3
<PAGE>
EXHIBIT I
CONFIRMATION OF RESALE AND RECEIPT
To: Bank One, Texas, N.A., as Custodian
FirstPlus Financial, Inc.
Date: ___ _, 199
Re: Custody Agreement, dated as of May 10, 1996, among Bear
Stearns Home Equity Trust 1996-1 (the "Buyer"),
FirstPlus Financial, Inc. (the "Seller") and Bank One,
Texas, N.A., as custodian thereunder
Buyer hereby:
(a) Acknowledges receipt of $_______________ in immediately available
funds on behalf of Seller;
(b) Acknowledges that the funds referred to in clause (a) above
constitute sufficient consideration under the terms of the Master Repurchase
Agreement, dated as of May 10, 1996 among Buyer and Seller, for the release
by Buyer of its interest in the Mortgage Loans listed on Schedule A hereto;
(c) Confirms that it has released to Seller all of its right, title and
interest in and to the Mortgage Loans listed on Schedule A hereto; and
(d) Confirms that it has not granted or created any interest in the
Mortgage Loans listed on Schedule A hereto other than interests that have
been fully discharged or satisfied on or prior to the date hereof.
Dated: ________ ___, 199__ BEAR STEARNS HOME EQUITY TRUST
1996-1
By: Bear Stearns Mortgage Capital
Corporation, as agent
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
I-1
<PAGE>
FIFTH AMENDMENT TO CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO CREDIT AGREEMENT (herein called this "Amendment")
made as of the 20th day of June, 1996 by and among FirstPlus Financial, Inc.,
a Texas corporation formerly known as Remodelers National Funding Corp.
("Borrower"), RAC Financial Group, Inc., a Nevada corporation formerly known
as Remodelers Acceptance Corp. ("Guarantor"), and Bank One, Texas, National
Association ("Bank One"),
W I T N E S S E T H:
WHEREAS, Borrower, Guarantor and Bank One have entered into that certain
Credit Agreement dated as of March 17, 1995, as amended by that certain First
Amendment to Credit Agreement dated as of May 12, 1995, that certain Second
Amendment to Credit Agreement dated as of June 6, 1995, that certain Third
Amendment to Credit Agreement dated as of June 22, 1995, and that certain
Fourth Amendment to Credit Agreement dated as of March 26, 1996 (as so
amended and as otherwise modified to the date hereof, the "Original
Agreement") for the purposes and consideration therein expressed, pursuant to
which Bank One became obligated to make loans to Borrower as therein
provided; and
WHEREAS, Borrower, Guarantor and Bank One desire to amend the Original
Agreement as provided herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein and in the Original Agreement, in
consideration of the loans which may hereafter be made by Bank One to
Borrower, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto do hereby
agree as follows:
ARTICLE I.
DEFINITIONS AND REFERENCES
SECTION 1. 1. TERMS DEFINED IN THE ORIGINAL AGREEMENT. Unless the
context otherwise requires or unless otherwise expressly defined
herein, the terms defined in the Original Agreement shall have
the same meanings whenever used in this Amendment.
SECTION 1.2. OTHER DEFINED TERMS. Unless the context otherwise
requires, the following terms when used in this Amendment shall
have the meanings assigned to them in this Section 1.2.
"AMENDMENT" means this Fifth Amendment to Credit Agreement.
"AMENDMENT DOCUMENTS" means this Amendment and the Renewal Note.
<PAGE>
"CREDIT AGREEMENT" means the Original Agreement as amended hereby.
"ORIGINAL NOTE" means the "Note" referred to and defined as such in the
Original Agreement.
ARTICLE II.
AMENDMENTS TO ORIGINAL AGREEMENT
SECTION 2.1. DEFINED TERMS. The definition of "Commitment" in
Section 1.01 of the Original Agreement is hereby amended in its
entirety to read as follows:
"COMMITMENT" shall mean the obligation of Bank One to make Advances to
Borrower pursuant to SECTION 2.01 hereof in an aggregate amount not to exceed
at any one time $60,000,000."
SECTION 2.2. AMENDMENT TO REPRESENTATIONS AND WARRANTIES. Section 5.22(n)
of the Original Agreement is hereby amended in its entirety to read as
follows:
"(n) Each Mortgage Loan is a fixed rate loan; each Mortgage Note has
an original term to maturity of not less than 24 months nor more than 30
years from the date of origination; each Mortgage Note 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 Mortgage Interest Rate; and no Mortgage Note
provides for any extension of the original term;"
SECTION 2.3. AMENDMENT TO EXHIBITS. Exhibit A to the Original
Agreement is hereby amended in its entirety to read as set forth
in Exhibit A attached hereto.
Exhibit C to the Original Agreement is hereby amended in its entirety
to read as set forth in Exhibit C attached hereto.
SECTION 2.4. NAME CHANGE OF BORROWER. Borrower has changed its
name from Remodelers National Funding Corp. to FirstPlus
Financial, Inc. Therefore, effective as of the date hereof, any
and all references in the Loan Documents to Remodelers National
Funding Corp. shall also be deemed to refer to FirstPlus
Financial, Inc.
ARTICLE III.
CONDITIONS OF EFFECTIVENESS
SECTION 3. 1. EFFECTIVE DATE. This Amendment shall become effective
as of the date first above written when and only when
2
<PAGE>
(a) Bank One shall have received, at Bank One's office, a counterpart
of this Amendment executed and delivered by Borrower and Guarantor;
(b) Borrower shall have issued and delivered to Bank One a promissory
note with appropriate insertions in the form attached hereto as Exhibit
A payable to the order of Bank One on or before March 31, 1997 (such
note being herein called the "Renewal Note"), duly executed on behalf of
Borrower, dated the date hereof, and expressly renewing the Original
Note;
(c) Bank One shall have additionally received all of the following
documents, each document (unless otherwise indicated) being dated the
date of receipt thereof by Bank One, duly authorized, executed and
delivered, and in form and substance satisfactory to Bank One:
(i) OPINION OF COUNSEL FOR BORROWER. A written opinion
of Borrower's counsel, dated as of the date of this
Amendment, addressed to Bank One, to the effect that this
Amendment and the Renewal Note have been duly authorized,
executed and delivered by Borrower and Guarantor (to the
extent each is a party thereto) and that the Credit
Agreement and the Renewal Note constitute the legal, valid
and binding obligations of Borrower and Guarantor (to the
extent each is a party thereto), enforceable in accordance
with their terms (subject, as to enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency and
similar laws and to general principles of equity).
(ii) OFFICER'S CERTIFICATE. A certificate of a duly
authorized officer of Borrower and Guarantor to the effect
that all of the representations and warranties set forth in
Article IV hereof are true and correct at and as of the time
of such effectiveness.
(iii) SUPPORTING DOCUMENTS. (A) A certificate of the
Secretary of Borrower dated the date of this Amendment
certifying that: (1) attached thereto is a true and complete
copy of resolutions adopted by the Board of Directors of
Borrower authorizing-the execution, delivery and performance
of this Amendment and the Amendment Documents, (2) attached
as Exhibit A to the Omnibus Certificate of Borrower dated as
of March 17, 1995 (the "Borrower's Original Certificate") is
a true and complete copy of the names and true signatures of
the officers of Borrower authorized to sign this Amendment
and the Amendment Documents and such document has not been
amended and continues in full force and effect, and (3)
attached as Exhibits C. and D to Borrower's Original
Certificate are copies of the certified charter documents of
Borrower (including Bylaws) and all such documents have not
been amended - or revoked since the date of Borrower's
Original Certificate, and continue in full force and effect;
(B) a certificate of the Secretary of Guarantor dated the
date of this Amendment certifying that: (1) attached thereto
is a true and complete copy of resolutions adopted by the
Board of Directors of Guarantor
3
<PAGE>
authorizing the execution, delivery and performance of this Amendment
and the Amendment Documents, (2) attached thereto is a true and complete
certified copy of the Articles of Incorporation of Guarantor as in
effect on the date hereof, (3) attached as Exhibit A to the Omnibus
Certificate of Guarantor dated as of March 17, 1995 (the "Guarantor's
Original Certificate") is a true and complete copy of the names and true
signatures of the officers of Guarantor authorized to sign this
Amendment and the Amendment Documents and such document has not been
amended and continues in full force and effect, and (4) attached as
Exhibit D to Guarantor's Original Certificate is a copy of the Bylaws of
Guarantor and such Bylaws have not been amended or revoked since the
date of Guarantor's Original Certificate, and continue in full force and
effect and (C) such supporting documents as Bank One may reasonably
request.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. REPRESENTATIONS AND WARRANTIES. In order to induce Bank One
to enter into this Amendment, each of Borrower and Guarantor represents and
warrants to Bank One that:
(a) The representations and warranties contained in
Sections 5.0 through 5.22 of the Original Agreement are true
and correct at and as of the time of the effectiveness
hereof.
(b) Each of Borrower and Guarantor is duly authorized
to execute and deliver this Amendment and the Renewal Note
(to the extent that each is a party thereto) and is and will
continue to be duly authorized to borrow and to perform its
obligations under the Credit Agreement. Each Related Person
has duly taken all corporate action necessary to authorize
the execution and delivery of this Amendment and the Renewal
Note and to authorize the performance of the obligations of
each Related Person hereunder and thereunder.
(c) The execution and delivery by each of Borrower and
Guarantor of this Amendment and the Renewal Note (to the
extent that each is a party thereto), the performance by
each of Borrower and Guarantor of its obligations hereunder
and thereunder and the consummation of the transactions
contemplated hereby and thereby do not and will not conflict
with any provision of law, statute, rule or regulation or of
the articles of incorporation and bylaws of any Related
Person, or of any material agreement, judgment, license,
order or permit applicable to or binding upon any Related
Person, or result in the creation of any lien, charge or
encumbrance upon any assets or properties of any Related
Person. Except for those which have been duly obtained, no
consent, approval, authorization or order of any court or
governmental authority or third party is required in
connection with the execution and delivery by each of
Borrower and Guarantor of this Amendment and the Renewal
Note or to consummate the transactions contemplated hereby
and thereby.
4
<PAGE>
(d) When duly executed and delivered, each of this
Amendment, the Credit Agreement and the Renewal Note will be
a legal and binding instrument and agreement of Borrower and
Guarantor (to the extent each is a party hereto),
enforceable in accordance with its terms, except as limited
by bankruptcy, insolvency and similar laws applying to
creditors' rights generally and by principles of equity
applying to creditors' rights generally.
(e) The audited annual Consolidated financial
statements of Guarantor dated as of December 31, 1995 and
the Consolidated and consolidating balance sheets of
Guarantor dated as of April 30, 1996 fairly present the
Consolidated financial position at such dates and the
Consolidated statement of operations and the changes in
Consolidated financial position for the periods ending on
such dates for Guarantor. Copies of such financial
statements have heretofore been delivered to Bank One. Since
April 30, 1996, no material adverse change has occurred in
the financial condition or businesses or in the Consolidated
financial condition or businesses of Guarantor.
ARTICLE V.
MISCELLANEOUS
SECTION 5.1. RATIFICATION OF AGREEMENTS. The Original Agreement as hereby
amended is hereby ratified and confirmed in all respects. The Loan Documents,
as they may be amended or affected by the various Amendment Documents, are
hereby ratified and confirmed in all respects. Any reference to the Credit
Agreement in any Loan Document shall be deemed to refer to this Amendment
also, and any reference in any Loan Document to any other document or
instrument amended, renewed, extended or otherwise affected by any Amendment
Document shall also refer to such Amendment Document. The execution, delivery
and effectiveness of this Amendment and the Renewal Note shall not, except as
expressly provided herein or therein, operate as a waiver of any right, power
or remedy of Bank One under the Credit Agreement or any other Loan Document
nor constitute a waiver of any provision of the Credit Agreement or any other
Loan Document.
SECTION 5.2. SURVIVAL OF AGREEMENTS. All representations, warranties,
covenants and agreements of Borrower herein shall survive the execution and
delivery of this Amendment and the performance hereof, including without
limitation the making or granting of the Loan and the issuance and delivery
of the Renewal Note, and shall further survive until all of the Obligations
are paid in full. All statements and agreements contained in any certificate
or instrument delivered by any Related Person hereunder or under the Credit
Agreement to Bank One shall be deemed to constitute representations and
warranties by, or agreements and covenants of, Borrower and Guarantor under
this Amendment and under the Credit Agreement.
SECTION 5.3. MARKING OF ORIGINAL NOTE. Bank One shall promptly mark the
Original Note either "renewed and extended" or "ineffective" and shall
deliver a photocopy thereof to Borrower.
5
<PAGE>
SECTION 5.4. LOAN DOCUMENTS. This Amendment and the Renewal Note are each
a Loan Document, and all provisions in the Credit Agreement pertaining to
Loan Documents apply hereto and thereto.
SECTION 5.5. GOVERNING LAW. This Amendment shall be governed by and
construed in accordance with the laws of the State of Texas and any
applicable laws of the United States of America in all respects, including
construction, validity and performance.
SECTION 5.6. COUNTERPARTS. This Amendment may be separately
executed in counterparts and by the different parties hereto in
separate counterparts, each of which when so executed shall be
deemed to constitute one and the same Amendment.
THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, this Amendment is executed as of the date first above
written.
FIRSTPLUS FINANCIAL, INC.,
formerly known as REMODELERS
NATIONAL FUNDING CORP.
By: /s/ Barry Tenenholtz
---------------------------------------
Name: Barry Tenenholtz
Title: Senior Vice President/Treasurer
RAC FINANCIAL GROUP, INC.,
formerly known as REMODELERS
ACCEPTANCE CORP.
By: /s/ Ronald M. Mankoff
---------------------------------------
Name: Ronald M. Mankoff
Title:
6
<PAGE>
BANK ONE, TEXAS, NATIONAL
ASSOCIATION
By: /s/ Mark L. Freeman
---------------------------------------
Name: Mark L. Freeman
Title: Vice President
7
<PAGE>
CONSENT AND AGREEMENT
RAC Financial Group, Inc., a Nevada corporation formerly known as
Remodelers Acceptance Corp., hereby consents to the provisions of this
Amendment and the transactions contemplated herein (including without
limitation the execution and delivery of the Renewal Note), and hereby
ratifies and confirms the Guaranty dated as of March 17, 1995 made by it for
the benefit of Bank One, and agrees that its obligations and covenants
thereunder are unimpaired hereby and shall remain in full force and effect.
RAC FINANCIAL GROUP, INC.
By: /s/ Ronald M. Mankoff
---------------------------------------
Name: Ronald M. Mankoff
Title:
8
<PAGE>
Exhibit A
PROMISSORY NOTE
$60,000,000 Dallas, Texas June 20, 1996
FOR VALUE RECEIVED, the undersigned, FirstPlus Financial, Inc., formerly
known as Remodelers National Funding Corp. (herein called "Borrower"), hereby
promises to pay to the order of Bank One, Texas, National Association (herein
called "Bank One"), the principal sum of Sixty Million Dollars ($60,000,000)
or, if less, the aggregate unpaid principal amount of the Loan made under
this Note by Bank One to Borrower pursuant to the terms of the Credit
Agreement (as hereinafter defined), together with interest on the unpaid
principal balance thereof as hereinafter set forth, both principal and
interest payable as herein provided in lawful money of the United States of
America at the offices of Bank One, 1717 Main Street, Dallas, Texas or at
such other place within Dallas County, Texas, as from time to time may be
designated by the holder of this Note.
This Note (a) is issued and delivered under that certain Credit Agreement
dated as of March 17, 1995, among Borrower, Remodelers Acceptance Corp. and
Bank One, as amended by that certain First Amendment to Credit Agreement
dated as of May 12, 1995, that certain Second Amendment to Credit Agreement
dated as of June 6, 1995, that certain Third Amendment to Credit Agreement
dated as of June 22, 1995, that certain Fourth Amendment to Credit Agreement
dated as of March 26, 1996, and that certain Fifth Amendment to Credit
Agreement dated of even date herewith (herein, as so amended and from time to
time supplemented, amended or restated, called the "Credit Agreement"), and
is the Note as defined therein, (b) is subject to the terms and provisions of
the Credit Agreement, which contains provisions for payments and prepayments
hereunder and acceleration of the maturity hereof upon the happening of
certain stated events; and (c) is secured by and entitled to the benefits of
certain Security Instruments (as identified and defined in the Credit
Agreement). Payments on this Note shall be made and applied as provided
herein and in the Credit Agreement. Reference is hereby made to the Credit
Agreement for a description of certain rights, limitations of rights,
obligations and duties of the parties hereto and for the meanings assigned to
terms used and not defined herein and to the Security Instruments for a
description of the nature and extent of the security thereby provided and the
rights of the parties thereto. This Note is given in renewal, increase and
restatement of (but not. in extinguishment or novation of) that certain
promissory note dated March 26, 1996, made by Borrower payable to the order
of Bank One in the stated principal amount of $40,000,000.
For the purposes of this Note, the following terms have the meanings
assigned to them below:
"PAYMENT DATE" means (i) the fifteenth day of each calendar month,
beginning July 15, 1996, and (ii) any day on which past due interest or
principal is owed hereunder and is unpaid. If the terms hereof or of the
Credit Agreement provide that
<PAGE>
payments of interest or principal hereon shall be deferred from one Payment
Date to another day, such other day shall also be a Payment Date.
"LATE PAYMENT RATE" means, at the time in question, four percent
(4.0%) per annum plus the Applicable Rate then in effect. The Late
Payment Rate shall in no event, however, exceed the Maximum Rate.
"MAXIMUM RATE" means at the particular time in question the maximum
rate of interest which, under applicable law, may then be charged on
this Note. If such maximum rate of interest changes after the date
hereof, the Maximum Rate shall be automatically increased or decreased,
as the case may be, without notice to Borrower from time to time as of
the effective time of each change in such maximum rate. If applicable
law ceases to provide for such a maximum rate of interest, the Maximum
Rate shall be a per annum rate of interest equal to twenty-five percent
(25.0%) plus the Applicable Rate from time to time in effect.
"RESERVE-ADJUSTED BALANCES": for any calendar month, an amount
obtained by multiplying (a) the average net daily collected noninterest
bearing balances of Borrower on deposit with Bank One during such
calendar month over and above any balances required to compensate Bank
One for services provided by Bank One for said calendar month (unless
Borrower has agreed to pay for such services directly) and assessments
payable with respect to such balances by Bank One to the Federal Deposit
Insurance Corporation (or any successor thereto) for such Corporation's
insuring of deposits in dollars made at Bank One for such calendar month
by (b) a percentage equal to 100% MINUS the average daily Reserve
Percentage in effect for said calendar month. For purposes of the
foregoing, with respect to the balances maintained by Borrower with Bank
One, "RESERVE PERCENTAGE" shall mean, on any date of determination, the
full reserve requirement percentage as imposed for such day by
Regulation D that Bank One determines will be applicable to such
balances (including, without limitation, any marginal, emergency,
supplemental, special or other reserves if Bank One, in its sole
discretion, determines that it is required to maintain at such time).
The principal amount of this Note, together with all interest accrued
hereon, shall be due and payable in full on March 31, 1997.
The unpaid principal balance of this Note (exclusive of any past due
principal or interest) from time to time outstanding during any calendar
month shall bear interest on each day during such calendar month at the
Applicable Rate (as defined in the Credit Agreement) in effect for such
calendar month; provided, however, that interest on the part of the unpaid
principal balance of this Note equal to the Average Equivalent Amount shall
bear interest on each day outstanding at the rate of one and one-fourth
percent (1.25%) per annum. On each Payment Date Borrower shall pay to the
holder hereof all unpaid interest which has accrued on this Note to but not
including such Payment Date. All past due principal of and past due interest
on this Note shall bear interest on each day outstanding at the Late Payment
Rate in effect on such day, and such interest shall be due and payable
immediately as it accrues.
2
<PAGE>
Notwithstanding the foregoing provisions of this paragraph, if at any time
the rate at which interest is payable on this Note (considering together all
portions of the Loan and the interest payable thereon) exceeds the Maximum
Rate, this Note shall bear interest at the Maximum Rate only but shall
continue to bear interest at the Maximum Rate until such time as the total
amount of interest accrued hereon equals (but does not exceed) the total
amount of interest which would have accrued hereon had there been no Maximum
Rate applicable hereto.
Notwithstanding the foregoing paragraph and all other provisions of this
Note, in no event shall the interest payable hereon, whether before or after
maturity, exceed the maximum interest which, under applicable law, may be
charged on this Note, and this Note is expressly made subject to the
provisions of the Credit Agreement which more fully set out the limitations
on how interest accrues hereon.
If this Note is placed in the hands of an attorney for collection after
default, or if all or any part of the indebtedness represented hereby is
proved, established or collected in any court or in any bankruptcy,
receivership, debtor relief, probate or other court proceedings, Borrower and
all endorsers, sureties and guarantors of this Note jointly and severally
agree to pay reasonable attorneys' fees and collection costs to the holder
hereof in addition to the principal and interest payable hereunder.
Borrower and all endorsers, sureties and guarantors of this Note hereby
severally waive demand, presentment, notice of demand and of dishonor and
nonpayment of this Note, protest, notice of protest, notice of intention to
accelerate the maturity of this Note, declaration or notice of acceleration
of the maturity of this Note, diligence in collecting, the bringing of any
suit against any party and any notice of or defense on account of any
extensions, renewals, partial payments or changes in any manner of or in this
Note or in any of its terms, provisions and covenants, or any releases or
substitutions of any security, or any delay, indulgence or other act of any
trustee or any holder hereof, whether before or after maturity.
No waiver by Bank One of any of its rights or remedies hereunder or
under any other document evidencing or securing this Note or otherwise shall
be considered a waiver of any other subsequent right or remedy of Bank One;
no delay or omission in the exercise or enforcement by Bank One of any rights
or remedies shall ever by construed as a waiver of any right or remedy of
Bank One; and no exercise or enforcement of any such rights or remedies shall
ever be held to exhaust any right or remedy of Bank One.
Borrower reserves the right to prepay the outstanding principal balance
of this Note, in whole or in part at any time and from time to time without
premium or penalty, in accordance with the terms of the Credit Agreement.
3
<PAGE>
THIS NOTE AND THE RIGHTS AND DUTIES OF THE PARTIES HERETO SHALL BE
CONSTRUED, INTERPRETED AND ENFORCED UNDER AND GOVERNED BY THE LAWS OF THE
STATE OF TEXAS (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS), EXCEPT TO
THE EXTENT THE SAME ARE GOVERNED BY APPLICABLE FEDERAL LAW.
FIRSTPLUS FINANCIAL, INC., formerly
known as REMODELERS NATIONAL
FUNDING CORP.
By: /s/ RONALD M. MANKOFF
----------------------------------
Name: Ronald M. Mankoff
Title: Chairman
4
<PAGE>
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share data)
<TABLE>
<CAPTION>
For the Quarter For the Nine Months
------------------ --------------------
Ended June 30 Ended June 30
------------------ --------------------
1995 1996 1995 1996
---- ----- ---- ----
<S> <C> <C> <C> <C>
Net income . . . . . . . . . . . . . . . . . . . . . . $ 303 $ 9,750 $ 4,130 $20,838
------- --------- -------- -------
Less: Accrual of preferred stock dividends . . . . . . (51) - (151) (66)
------- --------- -------- -------
Net income applicable to common stock. . . . . . . . . $ 252 $ 9,750 $ 3,979 $20,772
------- --------- -------- -------
------- --------- -------- -------
Average common shares outstanding. . . . . . . . . . . 8,948 13,443 8,948 11,963
Common stock equivalents:
Warrants . . . . . . . . . . . . . . . . . . . . . . . 1,200 396 1,200 243
------- --------- -------- -------
Weighted average common and common
equivalent shares outstanding. . . . . . . . . . . 10,148 13,839 10,148 12,206
------- --------- -------- -------
------- --------- -------- -------
Net income per share . . . . . . . . . . . . . . . . . $ 0.39 $ 0.70 $ .39 $ .70
------- --------- -------- -------
------- --------- -------- -------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> SEP-30-1995
<PERIOD-END> JUN-30-1996
<CASH> 2,337
<SECURITIES> 0
<RECEIVABLES> 309,990
<ALLOWANCES> 28,998
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 322,853
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 134
<OTHER-SE> 81,060
<TOTAL-LIABILITY-AND-EQUITY> 322,853
<SALES> 0
<TOTAL-REVENUES> 108,642
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 75,033
<LOSS-PROVISION> 26,561
<INTEREST-EXPENSE> 8,610
<INCOME-PRETAX> 33,609
<INCOME-TAX> 12,771
<INCOME-CONTINUING> 20,838
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,838
<EPS-PRIMARY> 1.70
<EPS-DILUTED> 0
</TABLE>
