<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, 1997
-------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------------- --------------------
Commission file number 0-27550
-----------------------------------------------------
FIRSTPLUS Financial Group, Inc.
- ---------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 75-2561052
- ------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1600 Viceroy, 8th Floor, Dallas, Texas 75235
- ---------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(214) 599-6400
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
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 34,461,473 shares of voting common stock and 690,905 shares of
non-voting common stock, $.01 par value outstanding as of June 30, 1997.
1
<PAGE>
FIRSTPLUS FINANCIAL GROUP, INC.
INDEX TO FORM 10-Q
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements Page
----
Consolidated Balance Sheets - September 30, 1996
and June 30, 1997 (Unaudited) 3
Consolidated Statements of Income (Unaudited)-
Three Months and Nine Months Ended June 30, 1996 and
June 30, 1997 4
Consolidated Statements of Cash Flows (Unaudited)-
Nine Months Ended June 30, 1996 and June 30, 1997 5
Notes to Consolidated Financial
Statements (Unaudited) 6
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 9
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURE 14
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
ASSETS
<TABLE>
September 30, June 30,
1996 1997
------------- -----------
(Unaudited)
<S> <C> <C>
Cash and cash equivalents . . . . . . . . . . . . . . . . . $ 23,167 $ 40,802
Loans held for sale, net. . . . . . . . . . . . . . . . . . 430,812 1,093,004
Investment in securitized loans available for sale. . . . . - 194,465
Subordinated certificates held for sale . . . . . . . . . . 16,528 17,440
Interest only strips. . . . . . . . . . . . . . . . . . . . 187,230 565,861
Allowance for possible credit losses on loans sold. . . . . (54,257) (207,701)
-------- ----------
132,973 358,160
Servicing assets. . . . . . . . . . . . . . . . . . . . . . - 22,384
Receivable from trusts. . . . . . . . . . . . . . . . . . . 32,105 108,272
Other assets. . . . . . . . . . . . . . . . . . . . . . . . 20,542 50,824
-------- ----------
Total assets . . . . . . . . . . . . . . . . . . . . . . $656,127 $1,885,351
-------- ----------
-------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued liabilities . . . . . . . . $ 19,669 $ 35,907
Warehouse financing facilities with affiliates . . . . . 354,481 986,784
Certificates of deposit. . . . . . . . . . . . . . . . . - 19,237
Bonds. . . . . . . . . . . . . . . . . . . . . . . . . . - 177,375
Term line of credit. . . . . . . . . . . . . . . . . . . 57,465 150,730
Notes payable. . . . . . . . . . . . . . . . . . . . . . 1,967 11,076
Subordinated notes payable to affiliates . . . . . . . . 7,002 7,002
Convertible subordinated notes . . . . . . . . . . . . . 100,000 69,920
Deferred tax liabilities, net. . . . . . . . . . . . . . 20,974 72,041
-------- ----------
Total liabilities. . . . . . . . . . . . . . . . . . . . 561,558 1,530,072
-------- ----------
Commitments
Stockholders' Equity:
Common stock, $0.01 par value:
Authorized shares - 100,000,000
Issued and outstanding shares -22,499,140 as of
September 30, 1996 and 34,461,473 as of June 30,
1997 . . . . . . . . . . . . . . . . . . . . . . . . 225 345
Non-voting common stock, $0.01 par value:
Authorized shares - 25,000,000
Issued and outstanding shares - 4,440,676 as of
September 30, 1996 and 690,905 as of June 30, 1997 . 44 7
Additional capital . . . . . . . . . . . . . . . . . . . 54,696 216,508
Unrealized gain on interest only strips, net . . . . . . - 14,007
Retained earnings. . . . . . . . . . . . . . . . . . . . 39,604 124,412
-------- ----------
Total stockholders' equity . . . . . . . . . . . . . 94,569 355,279
-------- ----------
Total liabilities and stockholders' equity . . . . . $656,127 $1,885,351
-------- ----------
-------- ----------
</TABLE>
See accompanying notes.
3
<PAGE>
FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
<TABLE>
Three Months Ended Nine Months Ended
June 30, June 30,
----------------------- -----------------------
1996 1997 1996 1997
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Revenues:
Gains on securitized loan sales, net of
costs. . . . . . . . . . . . . . . . . . . . . . . . $ 36,730 $142,092 $ 78,462 $ 350,603
Provision for possible credit losses on
securitized loan sales . . . . . . . . . . . . . . . (10,711) (62,531) (20,238) (154,160)
-------- -------- -------- ---------
Net gain on securitized loan sales . . . . . . . . . 26,019 79,561 58,224 196,443
Net gain on other transactions . . . . . . . . . . . . . 4,592 12,590 11,353 28,248
-------- -------- -------- ---------
Total gain on sale of loans. . . . . . . . . . . . . 30,611 92,151 69,577 224,691
Interest income. . . . . . . . . . . . . . . . . . . . . 6,704 48,824 10,761 102,304
Servicing income . . . . . . . . . . . . . . . . . . . . 1,040 5,794 2,674 12,138
Origination income . . . . . . . . . . . . . . . . . . . 1,884 8,941 4,512 22,090
Other income . . . . . . . . . . . . . . . . . . . . . . 426 822 880 3,184
-------- -------- -------- ---------
Total revenues. . . . . . . . . . . . . . . . . . 40,665 156,532 88,404 364,407
Expenses:
Salaries and employee benefits . . . . . . . . . . . . . 9,383 26,980 22,541 62,753
Interest . . . . . . . . . . . . . . . . . . . . . . . . 3,751 25,098 8,610 57,469
Other operating. . . . . . . . . . . . . . . . . . . . . 8,458 29,957 17,319 73,714
Provision for possible credit losses on loans
held for sale and interest only strips . . . . . . . 3,347 12,926 6,324 31,189
-------- -------- -------- ---------
Total expenses. . . . . . . . . . . . . . . . . . 24,939 94,961 54,794 225,125
-------- -------- -------- ---------
Income before income taxes. . . . . . . . . . . . . . . . . 15,726 61,571 33,610 139,282
Provision for income taxes. . . . . . . . . . . . . . . . . (5,976) (23,397) (12,776) (52,927)
-------- -------- -------- ---------
Net income. . . . . . . . . . . . . . . . . . . . $ 9,750 $ 38,174 $ 20,834 $ 86,355
-------- -------- -------- ---------
-------- -------- -------- ---------
Weighted average common shares and common
equivalent shares outstanding . . . . . . . . . . . . 27,680 36,236 24,412 33,334
-------- -------- -------- ---------
-------- -------- -------- ---------
Primary net income per share of common stock. . . . . . . . $ 0.35 $ 1.05 $ 0.85 $ 2.59
-------- -------- -------- ---------
-------- -------- -------- ---------
Weighted average fully diluted common shares and
common equivalent shares outstanding. . . . . . . . . 27,680 40,525 24,412 38,384
-------- -------- -------- ---------
-------- -------- -------- ---------
Fully diluted net income per share of common stock. . . . . $ 0.35 $ 0.96 $ 0.85 $ 2.32
-------- -------- -------- ---------
-------- -------- -------- ---------
</TABLE>
See accompanying notes.
4
<PAGE>
FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in thousands)
<TABLE>
Nine Months Ended
June 30,
------------------
1996 1997
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,834 $ 86,355
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Provision for possible credit losses. . . . . . . . . . . . . . . . . . . 26,562 185,349
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . 522 1,565
Gain on sales of loans. . . . . . . . . . . . . . . . . . . . . . . . . . (94,037) (408,476)
Convertible subordinated subdebt partial conversion . . . . . . . . . . . - 1,805
Changes in operating assets and liabilities:
Interest only strip amortization . . . . . . . . . . . . . . . . . . . . 7,280 36,969
Loans originated or acquired . . . . . . . . . . . . . . . . . . . . . . (909,102) (2,827,463)
Principal collected and proceeds from sale of loans. . . . . . . . . . . 785,069 1,997,637
Accrued interest receivable. . . . . . . . . . . . . . . . . . . . . . . (1,298) (7,952)
Investment in interest only strip. . . . . . . . . . . . . . . . . . . . (180) 6,942
Receivable from trusts . . . . . . . . . . . . . . . . . . . . . . . . . (9,749) (86,990)
Investment in servicing asset, net . . . . . . . . . . . . . . . . . . . - (22,384)
Subordinated certificates held for sale. . . . . . . . . . . . . . . . . (15,215) (913)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,582) (20,131)
Accounts payable and accrued expenses. . . . . . . . . . . . . . . . . . 6,449 12,261
Deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . 9,340 51,032
---------- -----------
NET CASH USED IN OPERATING ACTIVITIES. . . . . . . . . . . . . . . . . . . . (177,107) (994,394)
---------- -----------
INVESTING ACTIVITIES:
Cash from acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . 252 2,629
Purchases of equipment and leasehold improvements, net. . . . . . . . . . (785) (14,779)
---------- -----------
NET CASH USED IN INVESTING ACTIVITIES. . . . . . . . . . . . . . . . . . . . (533) (12,150)
---------- -----------
FINANCING ACTIVITIES:
Borrowings on warehouse financing facilities, net . . . . . . . . . . . . 102,440 622,884
Borrowings on bonds payable, net. . . . . . . . . . . . . . . . . . . . . - 177,375
Borrowings on term line of credit, net. . . . . . . . . . . . . . . . . . 27,820 93,271
Borrowings on notes payable, net. . . . . . . . . . . . . . . . . . . . . (796) 8,114
Borrowings on investment certificate. . . . . . . . . . . . . . . . . . . - (782)
Repayments of subordinated notes payable to affiliates. . . . . . . . . . (1,000) -
Redemption of preferred stock issued. . . . . . . . . . . . . . . . . . . (2,400) -
Common stock issued . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,211 123,317
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . . . . . (265) -
---------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES. . . . . . . . . . . . . . . . . . 177,010 1,024,179
---------- -----------
INCREASE (DECREASE) IN CASH. . . . . . . . . . . . . . . . . . . . . . . . . (630) 17,635
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . 2,967 23,167
---------- -----------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . $ 2,337 $ 40,802
---------- -----------
---------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid during the period . . . . . . . . . . . . . . . . . . . . . $ 8,610 $ 53,546
---------- -----------
---------- -----------
</TABLE>
See accompanying notes.
5
<PAGE>
FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1997
1. BASIS OF PRESENTATION
The accompanying unaudited 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 month and the nine month periods ended June 30, 1997 are not
necessarily indicative of the results that may be expected for the year ended
September 30, 1997. For further information, refer to the consolidated
financial statements and footnotes thereto for the year ended September 30,
1996 included in FIRSTPLUS Financial Group, Inc.'s 1996 Annual Report filed
with the SEC on Form 10-K.
On May 21, 1997, FIRSTPLUS Consumer Finance, Inc., a wholly owned
subsidiary of the Company, acquired The Modern Finance Company ("Modern"),
through an exchange of stock, in a transaction accounted for as a pooling of
interest. However, because of the relative size of the acquisition, the
Company did not restate its historical balance sheets or statements of income
to account for the acquisition. As such, beginning retained earnings was
restated for the effect of all years prior to the year of acquisition. The
Company issued 380,038 shares of its Common Stock to the former shareholders
of Modern. Modern is an originator of small, consumer loans and had a net loan
portfolio of $24.5 million, at the date of acquisition.
6
<PAGE>
All tabular information is presented in thousands.
2. LOANS HELD FOR SALE
Loans held for sale consist of the following:
<TABLE>
As of As of
September 30, 1996 June 30, 1997
------------------ -------------
(Unaudited)
<S> <C> <C>
Conventional loans . . . . . . . . . . . . . . . . . . . $ 386,934 $ 981,137
Title I loans. . . . . . . . . . . . . . . . . . . . . . 34,712 65,913
First lien mortgages . . . . . . . . . . . . . . . . . . 1,714 480
Construction loans . . . . . . . . . . . . . . . . . . . 1,827 95
Consumer finance loans . . . . . . . . . . . . . . . . . - 53,374
---------- -----------
Subtotal. . . . . . . . . . . . . . . . . . . . . . . 425,187 1,100,999
Allowance for possible credit losses . . . . . . . . . . (6,495) (20,351)
Deferred finance charges . . . . . . . . . . . . . . . . - (9,145)
Net purchase premiums. . . . . . . . . . . . . . . . . . 12,120 21,501
---------- -----------
Total . . . . . . . . . . . . . . . . . . . . . . . . $ 430,812 $ 1,093,004
---------- -----------
---------- -----------
</TABLE>
3. ALLOWANCE FOR POSSIBLE CREDIT LOSSES
The activity in the combined allowance for possible credit losses for loans
held for sale and interest only strips (I/O strips) is summarized as follows:
<TABLE>
Year Ended Nine Months Ended
September 30, 1996 June 30, 1997
------------------ -------------
(Unaudited)
<S> <C> <C>
Balance, beginning of period . . . . . . . . . . . . . . $ 4,794 $ 60,752
Provision for possible credit losses . . . . . . . . . . 59,644 185,349
Charge offs, net . . . . . . . . . . . . . . . . . . . . (3,901) (18,890)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . 215 841
---------- -----------
Balance, end of period . . . . . . . . . . . . . . . . . $ 60,752 $ 228,052
---------- -----------
---------- -----------
Components of Allowance:
Allowance for possible credit losses . . . . . . . . . $ 6,495 $ 20,351
Allowance for possible credit losses on loans sold . . 54,257 207,701
---------- -----------
Total. . . . . . . . . . . . . . . . . . . . . . . . . $ 60,752 $ 228,052
---------- -----------
---------- -----------
</TABLE>
4. NET INVESTMENT IN I/O STRIPS
The activity in the Investment in I/O Strips is summarized as follows:
<TABLE>
Year Ended Nine Months Ended
September 30, 1996 June 30, 1997
------------------ -------------
(Unaudited)
<S> <C> <C>
Balance, beginning of period . . . . . . . . . . . . . $ 29,744 $ 187,230
Gain on sale of loans. . . . . . . . . . . . . . . . . 170,679 408,476
Amortization . . . . . . . . . . . . . . . . . . . . . (12,982) (36,969)
Other. . . . . . . . . . . . . . . . . . . . . . . . . (211) 7,124
---------- -----------
Balance, end of period . . . . . . . . . . . . . . . . 187,230 565,861
Allowance for possible credit losses . . . . . . . . . (54, 257) (207,701)
---------- -----------
Balance, net . . . . . . . . . . . . . . . . . . . . . $ 132,973 $ 358,160
---------- -----------
---------- -----------
</TABLE>
7
<PAGE>
FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
5. OTHER ASSETS
Other assets consist of the following:
<TABLE>
As of As of
September 30, 1996 June 30, 1997
------------------ -------------
<S> <C> <C>
Goodwill, net. . . . . . . . . . . . . . . . . . . . . . . $ 424 $ 402
Furniture, equipment and leasehold improvements, net . . . 5,497 20,440
Debt offering costs. . . . . . . . . . . . . . . . . . . . 3,112 1,970
Prepaids and other . . . . . . . . . . . . . . . . . . . . 11,509 28,012
------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $20,542 $50,824
------- -------
------- -------
</TABLE>
6. GAINS ON SALES OF LOANS
The gains on sales of loans and the related costs consist of the following:
<TABLE>
Three Months Ended Nine Months Ended
June 30, June 30,
-------------------- ---------------------
1996 1997 1996 1997
--------- -------- ------ ------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Gain on sale of loans. . . . . . . . . . . . . . . . . . . $ 43,949 $160,765 $ 94,037 $ 408,476
Gain on hedges . . . . . . . . . . . . . . . . . . . . . . 58 3,590 58 3,668
Servicing assets . . . . . . . . . . . . . . . . . . . . . - 11,191 - 21,834
Deferred income. . . . . . . . . . . . . . . . . . . . . . - (11,458) - (22,997)
Premiums, net. . . . . . . . . . . . . . . . . . . . . . . (4,830) (19,421) (10,607) (51,574)
Transaction costs. . . . . . . . . . . . . . . . . . . . . (2,447) (2,575) (5,026) (8,804)
--------- --------- --------- ----------
Net gain (before provision for possible credit losses) . . 36,730 142,092 78,462 350,603
Provision for possible credit losses . . . . . . . . . . . (10,711) (62,531) (20,238) (154,160)
--------- --------- --------- ----------
Net gain on securitized loan sales . . . . . . . . . . . . 26,019 79,561 58,224 196,443
--------- --------- --------- ----------
I/O strip interest income. . . . . . . . . . . . . . . . . 1,577 8,525 2,874 13,942
Recognition of deferred gain . . . . . . . . . . . . . . . - 406 - 406
Due diligence and trustee & administrative costs . . . . . (41) - (41) (192)
Gain on sale of loans not securitized. . . . . . . . . . . 3,056 3,746 8,520 14,179
Provision for possible credit losses on other
loan sales. . . . . . . . . . . . . . . . . . . . . . . . - (87) - (87)
--------- --------- --------- ----------
Net gain on other transactions . . . . . . . . . . . . . . 4,592 12,590 11,353 28,248
--------- --------- --------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,611 $ 92,151 $ 69,577 $ 224,691
--------- --------- --------- ----------
--------- --------- --------- ----------
</TABLE>
8
<PAGE>
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
JUNE 30, 1997
Loans held for sale (including investment in securitized loans) increased
from $430.8 million as of September 30, 1996 to $1.3 billion as of June 30,
1997, an increase of $856.7 million or 198.8%. This increase was primarily
due to an expanded correspondent network, increased direct to consumer
originations and access to funding in the form of repurchase facilities and
warehouse facilities, which allowed for substantial growth in loan
originations.
The Company's net investment in I/O strip increased from $133.0 million
at September 30, 1996 to 358.2 million at June 30, 1997, an increase of
$225.2 million or 169.3%. This increase was due to the $1.6 billion of loans
securitized and sold from October 1, 1996 through June 30, 1997.
The Company's warehouse and repurchase facilities are its primary source
of funding for loan originations. As of September 30, 1996, the Company had
outstanding balances of $354.5 million owed to warehouse and repo lenders at
an approximate 6.6% average rate of interest. As of June 30, 1997, the
Company had outstanding balances of $1.0 billion owed to warehouse and repo
lenders at an approximate 6.7% average rate of interest. This represents a
$651.5 million warehouse and repo line balance increase from September 30,
1996 to the June 30, 1997 balance owing, or a 183.8% increase.
Accounts payable and other accrued liabilities increased from $19.7
million as of September 30, 1996 to $59.3 million as of June 30, 1997.
This represents a $39.6 million increase over the period, or 201.5%. This
increase was primarily a result of accrued advertising expense and an
increase due to the pooling of Modern.
Total shareholders' equity at June 30, 1997 was $355.3 million, as
compared with $94.6 million at September 30, 1996, an increase of $260.7
million or 275.7%. During the nine months ended June 30, 1997, the Company
earned net income of $86.4 million, closed a secondary public offering with
the sale of 4,200,000 shares of voting common stock in an underwritten public
offering which yielded $121.7 million in equity proceeds to the Company,
issued 2,161,385 of common shares for the conversion of certain of the
Company's outstanding subordinated notes and exercise of options and warrants
resulting in a $35.1 million addition to equity and issued 1,986,513 of
voting common shares in conjunction with three acquisitions accounted for as
poolings-of-interests which contributed $2.9 million in equity. In addition,
the Company adopted FASB 125, resulting in a mark to market unrealized gain
on interest only strips classified as available for sale securities and a
corresponding addition to equity of $14.0 million.
RESULTS OF OPERATIONS
The Company's total revenues increased to $156.5 million during its third
fiscal 1997 quarter from $40.7 million for the comparable fiscal 1996
quarter, an increase of $115.9 million or 284.9%. For the nine months ended
June 30, 1997, total revenues increased to $364.4 million from $88.4 million
for the comparable fiscal 1996 period, an increase of $276.0 million or
312.2%.
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 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 increase the volume and efficiency of loans sold in the quarter
and nine months ended June 30, 1997, without reduction due to sharing
arrangements present in the nine months ended June 30, 1996. Interest,
servicing and origination income also increased substantially during the June
30, 1997 quarter and nine months ended June 30, 1997 when compared to the
June 30, 1996 quarter and nine months ended June 30, 1996, respectively,
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 on loans sold
increased by $51.8 million, from $10.7 million for the quarter ended June 30,
1996 to $62.5 million for the quarter ended June 30, 1997, and by $133.9
million from $20.2 million for the nine months ended June 30, 1996 to $154.2
million for the nine months ended June 30, 1997. These increases in the
provision for possible credit losses on loans sold were proportional to the
Company's increase in securitization activity, as adjusted for the increasing
percentage of Conventional loans securitized by the Company and the removal
of the warehouse
9
<PAGE>
lender's sharing arrangement payment (which required the Warehouse Lender
rather than the Company to reserve for certain loans).
Total expenses including provision for income taxes increased from $30.9
million for the three months ended June 30, 1996 to $118.4 million for the
three months ended June 30, 1997, an increase of $87.4 million or 282.8%.
As a percentage of total revenues, total expenses including taxes decreased
from 76.0% in the June 1996 quarter to 75.6% in the June 1997 quarter. For
the nine months ended June 30, 1997, total expenses increased to $278.1
million from $67.6 million for the comparable fiscal 1996 period, an increase
of $210.5 million or 311.5%. As a percentage of total revenues, total
expenses were 76.4% and 76.3%, respectively, for the nine months ended June
30, 1996 and June 30, 1997.
As a result of the above, net income increased from $9.8 million for the
June 1996 quarter to net income of $38.2 million for the June 1997 quarter.
This represents an increase of $28.4 million, or a 291.5% increase. For the
nine months ended June 30, 1997, net income increased to $86.4 million from
$20.8 million for the comparable fiscal 1996 period, an increase of $65.5
million or 314.4%. Such increases were primarily the result of growth in
loan production and sale of loans through securitizations for the respective
comparative periods, as well as the increase in net interest income earned on
loans retained on the balance sheet, loan origination fees and servicing fees.
The Company completed the funding of the 1996-3 securitization by
delivering $44.4 million in loans in October 1996. The Company also
delivered $350.4 million out of $400.0 million in loans to the 1996-4
securitization in November 1996. The remaining $49.6 million in loans of the
1996-4 securitization were delivered in January 1997. The Company closed the
1997-1 securitization of $600.0 million in loans in February 1997 and
delivered $490.5 million of these loans during February and March 1997.
Funding was completed on the 1997-1 securitization with the delivery of
$109.5 million in April 1997. In June 1997, the Company closed the 1997-2
securitization of $750 million and delivered $566.9 million of these loans
prior to June 30, 1997.
The weighted average Fair, Isaac and Company score (a default prediction
model utilized by the Company) for the loans securitized in the Company's
1997-2 securitization was approximately 681 points. The weighted average
Fair, Isaac and Company score for the Conventional Loans securitized in the
Company's 1996-2 securitization (closed during the quarter ended June 30,
1996) was approximately 663 points.
The Company's servicing loan portfolio (including subserviced loans) had
30 day and over delinquencies of 2.2% as of June 30, 1997, and 3.7% as of
June 30, 1996. 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 six months ago), had a weighted average
30 day and over delinquency rate of 3.7% as of June 30, 1997.
Gross defaults (before recoveries and Title I insurance claims received)
as a percentage of the serviced loan portfolio for the three months ended
June 30, 1997 equaled $11.1 million or 0.35% of the June 1997 average
quarterly loan servicing portfolio. Gross defaults for the nine months ended
June 30, 1997 equaled $23.9 million or 0.7% of the June 1997 loan servicing
portfolio. As of June 30, 1997, actual cumulative defaults in the
securitizations to date were less than the projected cumulative defaults.
On a seasoned pool basis, the weighted average prepayment rates for the
Company's seasoned securitizations (those transactions funded more than six
months ago) which were closed in fiscal years 1996 and 1997 were primarily
within the range of 8.8% and 16.5% for the quarter ended June 30, 1997.
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
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, overcollateralization
requirements, fees and expenses incurred in connection with its
securitization transactions, (iii) tax payments due on the Company's taxable
income, (iv) television, radio and direct mail advertising and other
marketing, and (v) administrative and other operating expenses.
10
<PAGE>
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 repaid 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.
In October 1996, the Company increased a warehouse line facility with
Bank One, Texas, N.A. ("Bank One Facility") from $60 million to $110 million
and a repurchase facility with Bear Stearns Home Equity Trust 1996-1 ("Bear
Stearns Facility") from $300 million to $500 million. At June 30, 1997, the
Company had borrowed $97.0 million under the Bank One Facility and $266.3
million under the Bear Stearns Facility.
In November 1996, the Company entered into the $75 million term line with
Bear Stearns and Co. Inc. ("Bear Stearns Term Line"). The Bear Stearns Term
Line may be utilized by the Company with respect to interest only strips
generated by securitizations in which Bear Stearns is the lead manager. At
June 30, 1997, the Company had borrowed $22.9 million under this facility.
In December 1996, the Company entered into the $100 million term line
with PaineWebber Real Estate Securities Inc. (the "PaineWebber Term Line")
and the $400 million repurchase facility with PaineWebber Real Estate
Securities Inc. ("PaineWebber Repurchase Facility"). In June 1997, the
Company increased the repurchase facility to $500 million. The PaineWebber
Term Line bears interest at LIBOR plus 2.1% and the PaineWebber Repurchase
Facility bears interest at LIBOR plus 1.00%. At June 30, 1997, the Company
had borrowed $57.2 million under the Term Line and $285.9 million under the
repurchase facility.
In April 1997, the Company entered into a $300 million repurchase
facility with Merrill Lynch Mortgage Capital ("Merrill Lynch Repurchase
Facility") and a $75 million term line with Merrill Lynch Mortgage Capital,
Inc. In June 1997, the Company increased the repurchase facility to $400
million. At June 30, 1997, the Company had borrowed $214.2 million under the
repurchase facility and $0 under the term line. In April 1997, the Company
entered into a $200 million warehouse line facility with Industrial Bank of
Japan ("IBJ Warehouse Facility"). At June 30, 1997, the Company had borrowed
$194.5 million under this facility.
At June 30, 1997, the Company had borrowed $63.3 million and $54.7
million from a nationally recognized finance company under a warehouse line
facility and term line facility, respectively.
At June 30, 1997, the Company had borrowed a total of $62.2 million under
various other warehouse and repurchase line facilities, term lines,
investment certificates and other facilities.
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 Company's operations used $994.4 million during the nine months ended
June 30, 1997. 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). Cash from financing and
investing activities provided cash in the amount of $1.0 billion for the
nine months ended June 30, 1997. Financing and investing activities
increased primarily due to additional borrowings related to the repurchase
facilities, the term lines and other borrowings, which have been used to fund
loan originations, working capital and securitization costs.
In addition, the Company has begun to implement a strategy of maintaining
a significant quantity of loans on its balance sheet, thus increasing the
length of time that loans are held for sale and materially increasing its
interest rate risk. Because the Company's present loan facilities bear
interest at variable rates, the Company has a need for medium to long term
fixed-rate financing. If the Company is unable to obtain such financing, it
could have a material adverse effect on the Company's results of operations
and financial condition.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share"
("SFAS 128"). SFAS 128 establishes simplified standards for computing and
presenting earnings per share ("EPS"). Under SFAS 128 the presentation of
primary EPS will be replaced with a presentation of basic
11
<PAGE>
EPS. Basic EPS is computed excluding dilution caused by common stock
equivalents such as stock options and, therefore, will tend to be slightly
higher than primary EPS. The presentation of fully diluted EPS is replaced
with a presentation of diluted EPS. Diluted EPS is computed in a similar
fashion to how fully diluted EPS is computed. The Company will adopt this
pronouncement to report results of operations for the first quarter of fiscal
1998 and for the year ended September 30, 1998. Previously reported EPS will
be restated at that time to conform to SFAS 128. This adoption is not
expected to have a material impact on EPS as currently presented by the
Company.
FORWARD LOOKING STATEMENTS
Certain information contained in this Form 10-Q constitutes
"Forward-Looking Statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, which can be identified by the use of
forward-looking terminology such as "may," "will," "expect," "anticipate,"
"estimate" or "continue" or the negative thereof or other variations thereon
or comparable terminology. The statements in "Risk Factors" contained in the
Company's current report on Form 8-K, filed with the Securities and Exchange
Commission on December 19, 1996, constitute cautionary statements
identifying important factors, including certain risks and uncertainties,
with respect to such forward-looking statements that could cause actual
results to differ materially from those reflected in such forward-looking
statements.
12
<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
A vote was submitted to security holders, as follows:
(a) Annual Meeting of Shareholders on March 5, 1997
(b) The following directors were elected: Daniel T. Phillips, Eric C. Green,
John Fitzgerald, Daniel J. Jessee, Paul Seegers, and Sheldon I. Stein.
(c) The following is a brief description of the matters voted upon showing the
voting tabulation:
1. ELECTION OF DIRECTORS
Voting Common Stock
-------------------
Name For Withheld
---- --- --------
Daniel T. Phillips 21,318,602 381,182
Eric C. Green 21,318,602 381,182
John Fitzgerald 21,316,652 383,132
Daniel J. Jessee 21,318,602 381,182
Paul Seegers 21,318,602 381,182
Sheldon I. Stein 21,295,052 404,732
2. AN AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION TO CHANGE THE COMPANY'S NAME TO "FIRSTPLUS FINANCIAL
GROUP, INC."
Voting Common Stock
-------------------
Broker
For Against Abstain Non-Votes
--- ------- ------- ---------
21,276,195 413,439 2,900 7,250
3. AMENDMENTS TO THE COMPANY'S 1995 EMPLOYEE STOCK OPTION PLAN (THE
"PLAN") (THE "plan") TO INCREASE THE NUMBER OF SHARES AUTHORIZED FOR
ISSUANCE UNDER THE PLAN FROM 1,100,000 TO 3,200,000 AND TO RATIFY
CERTAIN GRANTS OF STOCK OPTIONS THEREUNDER.
Broker
For Against Abstain Non-Votes
--- ------- ------- ---------
14,036,567 2,413,165 3,050 5,247,002
Item 5. OTHER INFORMATION
Not Applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits:
10.1 Master Assignment Agreement between FIRSTPLUS FINANCIAL
INC. and Merrill Lynch Mortgage Capital Inc.
10.2 Tri-Party Custodial Agreement among FIRSTPLUS FINANCIAL,
INC., Merrill Lynch Mortgage Capital Inc., Merrill Lynch
Credit Corporation and Bank One, Texas, N.A.
10.3 Annex I Supplemental Terms to Master Repurchase Agreement
Dated as of April 10, 1997, among Merrill Lynch Mortgage
Capital Inc. and Merrill Lynch Credit Corporation and
FIRSTPLUS FINANCIAL, INC.
10.4 Revolving Credit Agreement between FIRSTPLUS FINANCIAL INC.
and Working Capital Management Co. L.P. dated June 16, 1997.
10.5 Sale and Servicing Agreement dated June 1, 1997 between
FIRSTPLUS FUNDING TRUST, FIRSTPLUS FINANCIAL INC. and
FIRSTBANK NATIONAL ASSOCIATION
10.6 INDENTURE between FIRSTPLUS FUNDING TRUST and FIRSTBANK
NATIONAL ASSOCIATION.
11 Statement re: Computation of Per Share Earnings
27 Financial Data Schedule
(B) Reports on Form 8-K
13
<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.
FIRSTPLUS FINANCIAL GROUP, INC.
(Registrant)
by: /s/ Eric C. Green
--------------------------------
Eric C. Green
Chief Financial Officer
(Principal Financial Officer and Duly Authorized Officer)
date: August 14, 1997
14
<PAGE>
INDEX TO EXHIBITS
(A) Exhibits
10.1 Master Assignment Agreement between FIRSTPLUS FINANCIAL
INC. and Merrill Lynch Mortgage Capital Inc.
10.2 Tri-Party Custodial Agreement among FIRSTPLUS FINANCIAL, INC.,
Merrill Lynch Mortgage Capital Inc., Merrill Lynch Credit
Corporation and Bank One, Texas, N.A.
10.3 Annex I Supplemental Terms to Master Repurchase Agreement
Dated as of April 10, 1997, among Merrill Lynch Mortgage
Capital Inc. and Merrill Lynch Credit Corporation and
FIRSTPLUS FINANCIAL, INC.
10.4 Revolving Credit Agreement between FIRSTPLUS FINANCIAL INC.
and Working Capital Management Co. L.P. dated June 16, 1997.
10.5 Sale and Servicing Agreement dated June 1, 1997 between
FIRSTPLUS FUNDING TRUST, FIRSTPLUS FINANCIAL INC. and
FIRSTBANK NATIONAL ASSOCIATION
10.6 INDENTURE between FIRSTPLUS FUNDING TRUST and FIRSTBANK
NATIONAL ASSOCIATION.
11 Statement re: Computation of Per Share Earnings
27 Financial Data Schedule
15
<PAGE>
EXECUTION COPY
================================================================================
MASTER ASSIGNMENT AGREEMENT
BETWEEN
FIRSTPLUS FINANCIAL, INC.
AND
MERRILL LYNCH MORTGAGE CAPITAL INC.
Dated as of April 10, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS; CONSTRUCTION....................................... 1
(a) Definitions............................................ 1
(b) Accounting Terms and Determinations.................... 4
(c) Other Definitional Terms............................... 4
SECTION 2. GRANT OF SECURITY INTEREST; DELIVERY OF
COLLATERAL; LOANS DISCRETIONARY........................ 5
(a) Grant of Security Interest............................. 5
(b) Delivery of Instruments of Transfer.................... 5
(c) Funding of Loans....................................... 5
SECTION 3. EARNINGS ON COLLATERAL.......................................... 6
SECTION 4. CONFIRMATION STATEMENT.......................................... 6
SECTION 5. MARGIN DETERMINATIONS........................................... 7
(a) Margin Requirement..................................... 7
(b) Current Margin......................................... 7
(c) Supplemental Collateral................................ 7
(d) Release of Supplemental Collateral..................... 7
SECTION 6. RELEASE AND SUBSTITUTION OF COLLATERAL.......................... 8
SECTION 7. CONDITIONS TO THE LOANS......................................... 8
(a) Conditions to the Effective Date....................... 8
(b) Conditions Precedent to all Loans and Substitutions.... 9
SECTION 8. REPRESENTATIONS AND WARRANTIES.................................. 10
(a) Due Incorporation...................................... 10
(b) Authorization.......................................... 10
(c) No Conflict............................................ 11
(d) Approvals, etc......................................... 11
(e) Good Title............................................. 11
(f) Tax Liens.............................................. 11
(g) Financial Statements................................... 12
(h) No Litigation.......................................... 12
(i) Disclosure............................................. 12
(j) Permits, Licenses, Approvals, Consents, etc............ 12
(k) The Investment Company Act............................. 12
i
<PAGE>
SECTION 9. AFFIRMATIVE COVENANTS........................................... 12
(a) Financial Statements and Other Information............. 12
(b) Existence, Conduct of Business, etc.................... 13
(c) Taxes.................................................. 14
(d) Laws................................................... 14
(e) Name and Locations..................................... 14
(f) Records................................................ 14
(g) Pay Obligations........................................ 14
(h) Notices................................................ 14
SECTION 10. NEGATIVE COVENANTS............................................. 15
(a) Liens.................................................. 15
(b) Mergers, Sales, Dissolution, etc....................... 15
(c) Corporate Changes...................................... 15
(d) Credit Covenants....................................... 15
(e) Use of Proceeds........................................ 16
(f) Further Covenants...................................... 16
SECTION 11. EVENTS OF DEFAULT.............................................. 16
(a) Nonperformance......................................... 16
(b) Termination of Interest................................ 16
(c) Act of Insolvency...................................... 16
(d) Material Adverse Change................................ 17
(e) Default Under Other Contracts.......................... 17
(f) Merger or Consolidation................................ 17
(g) Anticipated Insolvency................................. 17
(h) Final Judgment......................................... 17
(i) Breach of Representation............................... 17
(j) Breach of Covenant..................................... 17
SECTION 12. REMEDIES....................................................... 17
(a) Action Regarding Collateral............................ 17
(b) Deficiency............................................. 18
(c) Private Sale........................................... 18
(d) Application of Proceeds................................ 19
(e) Default Rate of Interest............................... 19
(f) Attorney-in-Fact....................................... 19
(g) Payments on Collateral to Assignor..................... 19
SECTION 13. MATURITY DATE; INTEREST PAYMENT DATES;
REPAYMENT OF PRINCIPAL................................. 20
(a) Payment on Maturity Date............................... 20
ii
<PAGE>
(b) Extension of Maturity Date............................. 20
(c) Interest Payment....................................... 20
(d) Payment of Principal................................... 20
(e) Event of Default....................................... 20
SECTION 14. PAYMENT OF TAX LIABILITY....................................... 21
SECTION 15. GENERAL PROVISIONS............................................. 21
(a) No Waiver.............................................. 21
(b) Governing Law; Severability............................ 21
(c) Construction........................................... 21
(d) Assignment............................................. 21
(e) Notices, Payments, Deliveries.......................... 21
(f) Termination............................................ 22
(g) Aggregate Amount of Loans; Disbursement of Funds....... 23
(h) Expenses............................................... 23
(i) MLMCI's Right to Pledge................................ 24
(j) Indemnification........................................ 24
(k) Further Assurances..................................... 24
(l) Remedies Cumulative.................................... 24
(m) Litigation............................................. 24
EXHIBIT A..................................................................A-1
LOAN SCHEDULE..............................................................A-4
EXHIBIT B..................................................................B-1
EXHIBIT C..................................................................C-1
EXHIBIT D..................................................................D-1
iii
<PAGE>
THIS AGREEMENT is made as of the 10th day of April, 1997 by and
between FIRSTPLUS FINANCIAL, INC. ("Assignor") and MERRILL LYNCH MORTGAGE
CAPITAL INC. ("MLMCI"). By executing this Agreement, Assignor and MLMCI agree to
be bound by the terms of this Agreement.
WITNESSETH
WHEREAS the parties elect to enter into this Agreement and, at the
request of Assignor, MLMCI may from time to time at its option agree to make one
or more loans (in each instance, a "Loan") to Assignor, which Loans shall be
limited in aggregate outstanding principal amount to the lesser of (i)
$75,000,000 and (ii) 33 1/3% of the average aggregate amount of advances
outstanding under the Master Repurchase Agreement during each calendar quarter,
said Loans to be evidenced by Assignor's Note (the "Note") of even date
herewith, maturing on April 10, 1998 (the "Maturity Date"), a form of which is
attached hereto as Exhibit A; and
WHEREAS, in order to induce MLMCI to make Loans from time to time to
it, Assignor has agreed to assign and pledge to MLMCI and grant to MLMCI a lien
upon and a security interest in the Collateral (as hereinafter defined) for the
purpose of securing its obligations under the Note;
NOW, THEREFORE, in consideration of the foregoing and of the covenants
and agreements hereinafter set forth, Assignor and MLMCI agree as follows:
SECTION 1. DEFINITIONS; CONSTRUCTION
(a) Definitions. As used herein, the following terms shall have the
meaning herein specified (to be equally applicable to be the singular and plural
forms of the terms defined):
"Act of Insolvency" shall have the meaning ascribed to it in Section 11(c)
hereof.
"Agreement" shall mean this Master Assignment Agreement, as amended,
supplemented or otherwise modified from time to time in accordance with its
terms.
"Approvals" shall have the meaning set forth in Section 8(d) hereof.
"Assignor" shall have the meaning set forth in the preamble hereof.
"Book Net Worth" shall refer to the equity of Assignor determined in
accordance with GAAP.
"Business Day" shall mean any day excluding Saturday, Sunday, or any other
day on which banks in New York, New York or Dallas, Texas are authorized or
required by law to close or a day on which trading by and between banks in
Dollars in the London interbank market is not conducted.
<PAGE>
"Closing Date" shall mean with respect to each Loan, the settlement date
set forth in the Confirmation Statement applicable to such Loan.
"Collateral" shall have the meaning ascribed thereto in Section 2 hereof
and shall include any Supplemental Collateral.
"Confirmation Statement" shall have the meaning set forth in Section 4
hereof.
"Current Margin" shall have the meaning ascribed to it in Section 5(b)
hereof.
"Default" shall mean any condition, act or event which, with notice or
lapse of time or both, would constitute an Event of Default.
"Default Rate" shall have the meaning specified in Section 12(e) hereof.
"Dollar" and the sign "$" shall mean lawful money of the United States of
America.
"Effective Date" shall mean the date that all of the conditions set forth
in Section 7 hereof have been met.
"Event of Default" shall have the meaning set forth in Section 11 hereof.
"FFG" shall mean FIRSTPLUS FINANCIAL GROUP, INC. (formerly, RAC Financial
Group, Inc.), the direct or indirect sole shareholder of Assignor.
"GAAP" shall have the meaning specified in Section 1(b) hereof.
"Governmental Authority" shall mean any nation, government, or State, or
any political subdivision of any of them, or any court, entity or agency
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Lien" shall mean any interest in property, or a claim by, a Person other
than the owner of such property, whether such interest is based on the common
law, statute or contract, and including, but not limited to, a security
interest, security title or lien arising from a security agreement, mortgage,
deed of trust, deed to secure debt, encumbrance, pledge, conditional sale,
financing statement or trust receipt or a lease, consignment or bailment for
security purposes.
"Loan" shall have the meaning set forth in the preamble hereof.
"Loan Documents" shall mean and include this Agreement, the Note, each
Confirmation Statement and all instruments and documents now or hereafter
executed and/or delivered pursuant hereto or thereto or in connection herewith
or therewith.
2
<PAGE>
"Margin Stock" shall have the meaning provided in Regulation G of the
Board of Governors of the Federal Reserve System.
"Market Value" shall mean the fair market value of any Pledged MBS as
determined in accordance with MLMCI's valuation model for such type of Pledged
MBS, provided that such fair market value or valuation model may be modified by
MLMCI in its discretion using reasonable business judgment and taking into
consideration relevant market conditions at the time of such determination. The
pricing assumptions used by MLMCI in determining the fair market value of any
Pledged MBS will be set forth in the related Confirmation Statement.
"Master Repurchase Agreement" shall mean the Master Repurchase Agreement,
dated as of April 10, 1997, among MLMCI, Merrill Lynch Credit Corporation and
Assignor, as the same shall be amended from time to time.
"Material Adverse Change" shall mean a material adverse change in (a) the
business, operations, properties, prospects or condition (financial or
otherwise) of the Assignor or (b) the ability of Assignor to perform its
obligations hereunder and under the other Loan Documents.
"Maturity Date" shall mean with respect to each Loan the earlier of (a)
one year from the related Closing Date as specified in the Confirmation
Statement with respect to such Loan, subject to extension under Section 13(b),
and (b) the Termination Date.
"MBS Issuance Agreements" shall mean the agreements pursuant to which the
related Pledged MBS has been issued, including any agreements relating to the
payment or distribution of amounts to the holder of such Pledged MBS, which
agreements have been previously approved by MLMCI or its affiliate.
"MLMCI" shall have the meaning set forth in the preamble hereof.
"Note" shall have the meaning set forth in the preamble hereof.
"Obligations" shall mean the principal of and all interest on the Loans,
all fees, expenses, reimbursements (including, without limitation the reasonable
fees and expenses of attorneys), taxes and indemnities and other amounts payable
by the Assignor under the Loan Documents and under any other documents or
instruments executed and delivered by Assignor in connection therewith to MLMCI
pursuant to Section 2 hereof or any of their respective successors or assigns,
direct or indirect, absolute or contingent, due or to become due, now existing
or hereafter arising and however arising.
"Outstanding Loans" shall mean on the date of determination thereof the
aggregate unpaid principal amount of each Loan made hereunder.
3
<PAGE>
"Person" shall mean any individual, partnership, firm, corporation,
association, joint venture, trust or other entity, or any government or
political subdivision or agency, department or instrumentality thereof.
"Pledged MBS" shall mean any residual, subordinated or interest strip
class of asset backed securities (i) issued in connection with a securitization
involving Assignor and in which MLMCI or an affiliate of MLMCI has acted as the
lead or co-lead underwriter or placement agent and (ii) pledged by Assignor and
accepted by MLMCI in connection with a Loan hereunder.
"Proceeds" shall have the meaning assigned to it under the UCC and, in any
event, shall include, but not be limited to, (i) any and all Proceeds of any
insurance, indemnity, warranty or guaranty payable to the Assignor from time to
time with respect to any of the Collateral, (ii) any and all payments (in any
form whatsoever) made or due and payable to Assignor from time to time in
connection with any reacquisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any Governmental Authority
and any sale, transfer or other disposition of all or any part of the
Collateral, and (iv) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral.
"Substitute Collateral" shall have the meaning set forth in Section 6
hereof.
"Supplemental Collateral" shall mean collateral acceptable to MLMCI in
accordance with the provisions of Section 5(c) hereof.
"Termination Date" shall have the meaning ascribed to it in Section 15(f)
hereof.
"UCC" shall mean the Uniform Commercial Code as in effect from time to
time in the State of New York or in any other applicable jurisdiction.
(b) Accounting Terms and Determinations. Unless otherwise defined or
specified herein, all accounting terms shall be construed herein, all accounting
determinations hereunder shall be made, all financial statements required to be
delivered hereunder shall be prepared and all financial records shall be
maintained in accordance with generally accepted accounting principles ("GAAP")
applied on a basis consistent with the financial statements referred to in
Sections 9(a)(i) and 9(a)(ii) hereof.
(c) Other Definitional Terms. The words "hereof", "herein" and "hereunder"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
article, section, schedule, exhibit and like references are to this Agreement
unless otherwise specified. Any defined term which relates to a document shall
include within its definition any amendments, modifications, renewals,
restatements, extensions, supplements or substitutions which may have been
heretofore or may be hereafter executed in accordance with the terms hereof.
4
<PAGE>
SECTION 2. GRANT OF SECURITY INTEREST; DELIVERY OF COLLATERAL; LOANS
DISCRETIONARY
(a) Grant of Security Interest. Assignor hereby grants, pledges, assigns,
transfers and delivers to MLMCI with respect to each Loan on the Closing Date,
and grants to MLMCI a lien upon and continuing security interest in all of
Assignor's right, title and interest in, to and under all of the following
whether now owned or existing, or at any time hereafter acquired or arising, by
Assignor or in which Assignor now has or at any time in the future may acquire
any right, title or interest (all of which being hereinafter collectively called
the "Collateral"): (i) the Pledged MBS described in the Confirmation Statement
delivered pursuant to Section 4 relating to a Loan, (ii) any Supplemental
Collateral that may be granted to MLMCI pursuant to Section 5(c) hereof
(provided, however, that any representations, warranties or covenants contained
herein, and the grant of a lien and security interest with respect to any
Supplemental Collateral, shall be effective as to any Supplemental Collateral
(or any Proceeds, distributions or other amounts realized in respect of such
Supplemental Collateral) only upon the delivery of such Supplemental Collateral
to MLMCI pursuant to such Section 5(c) hereof), (iii) all Proceeds,
distributions and other amounts realized in respect of any of the foregoing, as
security for the due and punctual payment by Assignor of the Note and any
amounts that may become payable thereunder or hereunder and (iv) with respect to
any Loan, all books and records of Assignor pertaining to any of the foregoing.
(b) Delivery of Instruments of Transfer. Assignor shall, with respect to
each Loan, deliver to MLMCI the Collateral endorsed in the name of MLMCI or its
nominee or with properly endorsed instruments of transfer (including, without
limitation, any necessary assignments, corporate resolutions and opinions of
legal counsel) that will enable MLMCI to cause such Collateral to be so
registered without further action on the part of the Assignor and such
instruments of transfer to the appropriate transfer agent.
(c) Funding of Loans. (i) MLMCI Discretion. MLMCI shall not be required to
make any Loans hereunder and any Loan hereunder shall be made by MLMCI in its
sole discretion.
(ii) Loan Advances. If MLMCI determines to make any Loan hereunder,
then in accordance with the related Confirmation Statement, MLMCI shall advance
such Loan to Assignor at a principal amount equal to 65% of the Market Value of
the Collateral described in such Confirmation Statement. Each Loan advance
hereunder shall be recorded as such by MLMCI and be evidenced by the "Loan
Schedule" attached to the Note, and any repayments of each such Loan shall be
recorded as such by MLMCI and be evidenced by such "Loan Schedule"; provided,
however, that the failure of such recordation by MLMCI shall not affect the
rights of the parties hereunder with respect to such Loan.
(iii) Interest Rate. Each Loan shall bear interest, as calculated on a
monthly basis, on the unpaid principal amount thereof from the related Closing
Date through maturity at a rate
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per annum equal to two hundred and twenty-five (225) basis points over the
prevailing London Interbank Offered Rate for one-month United States Dollar
deposits as set forth on page 4833 of Telerate as of 8:00 a.m. New York City
time on the last Business Day of the month preceding the month in which such
interest is currently accruing.
(d) MLMCI's Duty of Care. Except as herein provided in this Section 2(d),
MLMCI's sole duty with respect to the Collateral shall be to use reasonable care
in the safekeeping, custody, use, operation and preservation of the Collateral
in its possession or control. MLMCI shall incur no liability to Assignor for any
act of government, act of God, or other destruction in whole or in part or
negligence or wrongful act of custodians or agents selected by and supervised by
MLMCI with reasonable care, or MLMCI's failure to provide adequate protection or
insurance for the Collateral. MLMCI shall have no obligation to take any action
to preserve any rights in any of the Collateral against prior parties, and
Assignor hereby agrees to take such action. Assignor shall defend the Collateral
against all such claims and demands of all persons, at all times, as are adverse
to MLMCI. MLMCI shall have no obligation to realize upon any Collateral, except
through proper application of any distributions with respect to the Collateral
made directly to MLMCI or its agent(s). So long as MLMCI shall act in a
commercially reasonable manner, Assignor hereby waives the defense of impairment
of the Collateral.
SECTION 3. EARNINGS ON COLLATERAL
All payments and distributions, whether in cash or in kind, made on or
with respect to the Collateral shall, so long as an Event of Default as defined
in Section 11 hereof shall not have occurred and be continuing, be paid to
Assignor directly by the applicable paying agent by wire transfer in immediately
available funds pursuant to wiring instructions delivered in writing by Assignor
to MLMCI, and upon receipt by Assignor such payments and distributions shall be
released from the lien and security interest granted to MLMCI hereunder. Subject
to compliance with the MBS Issuance Agreements, MLMCI may, in its sole
discretion after the occurrence and during the continuation of an Event of
Default, cause all such payments and distributions to be paid, delivered or
transferred directly to MLMCI.
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SECTION 4. CONFIRMATION STATEMENT
MLMCI shall, with respect to each Loan, deliver a confirmation statement
substantially in the form attached hereto as Exhibit B (in each case, the
"Confirmation Statement") to Assignor confirming the agreement between Assignor
and MLMCI as to the specific terms of the Loan. Each such Confirmation Statement
shall constitute a binding agreement between Assignor and MLMCI, and this
Agreement is hereby incorporated in each such Confirmation Statement and made a
part thereof as if it were set out in full in each such Confirmation Statement.
Each such Confirmation Statement will be binding upon the parties hereto unless
written notice of objection is given by the objecting party to the other party
within two (2) Business Days after the objecting party's receipt of such
Confirmation Statement.
SECTION 5. MARGIN DETERMINATIONS
(a) Margin Requirement. A margin requirement (the "Margin Requirement")
expressed as a percentage shall be established by MLMCI with respect to each
Loan on the related Closing Date and shall be set forth in the related
Confirmation Statement. The Margin Requirement for any Loan shall not be less
than 35%.
(b) Current Margin. MLMCI may, in its reasonable discretion, from time to
time calculate the Current Margin with respect to any Loan, which shall equal
the amount by which (i) 100% exceeds (ii) a fraction (expressed as a percentage)
(A) the numerator of which is the then outstanding principal amount of such Loan
together with accrued and unpaid interest thereon to the date of determination
and (B) the denominator of which shall be the then current Market Value of the
related Collateral (including any Supplemental Collateral delivered pursuant to
this Agreement) then held by MLMCI.
(c) Supplemental Collateral. If MLMCI shall at any time determine with
respect to a Loan that the Current Margin is less than the related Margin
Requirement, MLMCI may in its discretion notify Assignor of such fact, and
Assignor shall, on the day of such notice, if such notice is received prior to
10:00 a.m. New York City time, and on the Business Day next succeeding the day
of such notice, if such notice is received after 10:00 a.m. New York City time,
deliver to MLMCI cash or Supplemental Collateral acceptable to MLMCI in its sole
reasonable judgment as Collateral hereunder, which cash shall be applied to
reduce the principal balance of the related Loan and which Supplemental
Collateral shall, in the aggregate, equal an amount such that, after giving
effect to the application of such cash and the delivery of such Supplemental
Collateral, the Current Margin for such Loan will be at least equal to the
related Margin Requirement. Delivery of Supplemental Collateral pursuant to this
Section 5(c) shall be in such manner as is acceptable to, and under such
additional conditions as may be required by, MLMCI in its sole reasonable
judgment.
(d) Release of Supplemental Collateral. If at any time the Current Margin
for a Loan
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exceeds the Margin Requirement for such Loan and provided that Assignor shall
not have failed to satisfy the requirements of Section 5(c) with respect to any
notice thereunder given by MLMCI relating to any Loan, Assignor may, upon notice
to MLMCI, demand that MLMCI redeliver all or any portion of the Supplemental
Collateral, provided, however, that after giving effect to such redelivery, the
Current Margin would not be less than the Margin Requirement, and MLMCI shall
make good delivery of such Supplemental Collateral, in a manner equivalent to
the manner in which such Supplemental Collateral was delivered to MLMCI, no
later than the Business Day following receipt by MLMCI of such notice. In such
connection, MLMCI shall execute such other documents and take such other actions
as the Assignor may reasonably request in order to evidence and give effect to
the release of such Supplemental Collateral from the security interest granted
by this Agreement.
SECTION 6. RELEASE AND SUBSTITUTION OF COLLATERAL
(a) Assignor may obtain the release from MLMCI of the security interest in
and lien on all or any part of the Collateral at any time, and from time to
time, by paying to MLMCI as a repayment the amount of the Loan outstanding with
respect to such Collateral to be so released; provided, however, that the date
of any such repayment must be acceptable to MLMCI. Any release of the security
interest in and lien on all or any part of the Collateral as a result of a
repayment or a substitution pursuant to this Section shall be evidenced by the
execution and delivery by MLMCI of appropriate documentation to evidence such
release.
(b) MLMCI shall allow Assignor, in Assignor's sole discretion, to provide
collateral acceptable to MLMCI, in MLMCI's sole reasonable discretion, to be
substituted for existing Collateral of equal market value. All certificates or
instruments representing such substituted collateral shall be accompanied by
duly executed instruments of transfer or assignments in blank, all in form and
substance reasonably satisfactory to MLMCI.
SECTION 7. CONDITIONS TO THE LOANS
(a) Conditions to the Effective Date. The obligation of MLMCI to enter
into this Agreement is subject to the satisfaction by Assignor of the following
conditions on the Effective Date:
(i) Loan Documents. MLMCI shall have received the following
documents each in form and substance satisfactory to MLMCI and its counsel:
a. this Agreement, executed and delivered on behalf of Assignor
by a duly authorized officer of Assignor,
b. the Note, executed and delivered on behalf of Assignor by a
duly
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authorized officer of Assignor,
c. the related Collateral, if delivery of the Collateral is
required in order to perfect MLMCI's security interest in such
Collateral, and
d. the Master Repurchase Agreement, executed and delivered on
behalf of Assignor by a duly authorized officer of Assignor.
(ii) Proceedings of Assignor. MLMCI shall have received a copy of
the resolutions in form and substance satisfactory to MLMCI and its counsel, of
Assignor authorizing (i) the execution, delivery and performance of the Loan
Documents and the other documents to be executed and/or delivered by it pursuant
hereto or thereto or in connection herewith or therewith, (ii) the borrowings
contemplated hereunder and (iii) the granting by it of the security interest
contemplated hereby, certified by a duly authorized officer of Assignor as of
the Effective Date, which certificate shall state that the resolutions thereby
certified have not been amended, modified, revoked or rescinded as of the date
of such certificate.
(iii) Corporate Documents. MLMCI shall have received true and complete
copies of the Certificate of Incorporation and By-Laws of Assignor (including
any and all amendments, supplements and modifications thereto) certified to such
effect by a duly authorized officer of Assignor as of the Effective Date.
(iv) No Violation. The consummation of the transactions contemplated
hereby and by the other Loan Documents shall not contravene, violate or conflict
with, nor involve MLMCI in a violation of, any requirement of law.
(v) Permits, Licenses, Approval , Consent, etc. MLMCI shall have
received a certificate of a duly authorized officer of Assignor certifying that
all permits, licenses, approvals and consents required in connection with the
execution, delivery and performance by Assignor and the validity and
enforceability against Assignor of this Agreement and the other Loan Documents
have been obtained and such permits, licenses, approvals and consents are in
full force and effect and have not been amended, modified, revoked or rescinded.
(vi) Additional Matters. All other documents and legal matters in
connection with the transactions contemplated by this Agreement and the other
Loan Documents shall be reasonably satisfactory in form and substance to MLMCI
and its counsel.
(b) Conditions Precedent to all Loans and Substitutions. The making of any
Loan or the permitting of any substitution of Substitute Collateral by MLMCI
hereun er is, except as otherwise provided in this Section 7, subject to
compliance by Assignor with the following conditions precedent and the other
terms and conditions hereof and, the giving of any notice by Assignor with
respect to a Loan pursuant to Section 4 and the acceptance of the Proceeds of
any Loan by Assignor and the substitution of any Substitute Collateral shall be
deemed certification
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by Assignor that the following conditions shall have been met:
(i) Representations and Warranties. Each of the representations and
warranties made by Assignor herein and in the other Loan Documents are true and
correct on and as of the Closing Date, before and after giving effect to the
Loan (and the application of the Proceeds therefrom) or the substitution, as
though made on and as of such date.
(ii) No Default. Before and after giving effect to such Loan (and
the application of Proceeds therefrom) or such substitution, no Default or Event
of Default shall have occurred and is continuing on and as of the Closing Date.
(iii) Financing Statements. The separate financing statement,
instrument or other document, if required by MLMCI to be recorded and/or filed
with respect to the subject Loan or substitution, shall have been so recorded
and/or filed.
(iv) Good Standing Certificates. On or pri r to the initial Closing
Date hereunder and from time to time thereafter as MLMCI may reasonably request
(but not more frequently than quarterly), MLMCI shall have received original
certificates, in form and substance satisfactory to MLMCI and its counsel, from
the Secretary of State or other appropriate authority of such jurisdiction,
evidencing the good standing of Assignor in the States of Delaware and Texas and
in each other jurisdiction where the ownership of its property or the conduct of
its business requires such qualification.
(v) Legal Opinion of Counsel to Assignor. On or prior to the initial
Closing Date hereunder and on each date after the initial Closing Date that a
security interest in Collateral is granted to MLMCI hereunder Assignor shall
cause to be delivered to MLMCI an opinion of counsel to Assignor (which counsel
may be internal counsel for Assignor and shall be satisfactory to MLMCI), in
substantially the form attached hereto as Exh bit C or such other form as MLMCI
and Assignor may mutually agree.
(vi) Recordings and Filings. All material instruments and documents
(including, without limitation, financing statements and continuation
statements) required to be filed hereunder in order to create in favor of MLMCI
a perfected security interest in the Collateral hereunder shall have been
properly filed in each office in each relevant jurisdiction and copies of such
instruments and do uments, stamped to indicate such filing, shall have been
delivered to MLMCI.
SECTION 8. REPRESENTATIONS AND WARRANTIES
In order to induce MLMCI to enter into this Agreement and to make the
Loans hereunder, Assignor hereby represents and warrants to MLMCI, and shall on
and as of the Closing Date of each Loan and each date on which Substitute
Collateral is substituted, be deemed to represent and warrant to MLMCI, that:
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(a) Due Incorporation. Assignor has been duly organized and is validly
existing as a corporation in good standing under the laws of the state of its
incorporation and is duly qualified and in good standing in each other
jurisdiction where the conduct of its business or the ownership, lease or
operation of its property requires such qualification.
(b) Authorization. Assignor has full power and authority to execute and
deliver the Loan Documents and to perform its obligations hereunder and
thereunder; the Loan Documents have each been duly authorized by all necessary
action and neither requires any additional approval of any directors or officers
other than that which has already been obtained, each has been duly executed and
delivered by Assignor and constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization or similar laws of
general applicability relating to or affecting creditors' rights, to the
assumption that enforcement will be undertaken in a commercially reasonable
manner and to general principles of equity and equitable remedies, regardless of
whether enforcement is considered in a proceeding in equity or at law.
(c) No Conflict. Neither the execution and delivery nor the performance by
Assignor of this Agreement or the Note will conflict with the governing
instruments of Assignor or conflict with, result in a breach of or constitute a
default or require any consent under any instrument or agreement to which
Assignor is a party or by which Assignor may be bound, or any law, order or
regulation applicable to Assignor of any court, governmental agency, authority
or body having jurisdiction over Assignor and do not and will not result in or
require the creation of any lien, security interest or other charge or
encumbrance (other than pursuant hereto) upon or with respect to any of
Assignor's properties.
(d) Approvals, etc. Neither the execution and delivery nor the performance
by Assignor of this Agreement requires any authorization, approval, consent,
license, exemption (other than any self-executing exemption), filing,
registration or the taking of any other action in respect of any federal or
state authority except where the failure to comply with such requirement would
not adversely affect the delivery, execution or performance by Assignor of this
Agreement or cause a Material Adverse Change.
(e) Good Title. (i) Subject to the MBS Issuance Agreements, Assignor is
the owner of the Collateral and such Collateral is free and clear of all
security interests, liens, charges, encumbrances and rights of others, except
for the lien and security interest created hereby, and on the related Closing
Date, MLMCI has a first priority lien on and security interest in the Collateral
(including all Proceeds, distributions and other amounts realized in respect
thereof) in favor of MLMCI, subject to no prior security interest, lien, charge,
encumbrance or rights of others, and, MLMCI having taken possession of the
Collateral endorsed in the name of MLMCI or its nominee or delivered with such
instruments of transfer as provided in Section 2(b) hereof, no further action,
including any filing or recordation of any document, is currently required in
order to establish and perfect the liens on and security interests in the
Collateral in favor of MLMCI
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against any third parties in any jurisdiction.
(ii) Assignor's chief executive office and the place where its books and
records concerning the Collateral are kept is set forth on Exhibit D hereto.
Each location of Assignor where any of the Collateral is located is set forth on
Exhibit D.
(f) Tax Liens. There are no delinquent federal, state, city, county or
other taxes relating to Assignor, the Collateral or any arrangement pursuant to
which the Collateral is issued that might, in the reasonable judgment of MLMCI,
materially adversely affect any of the Collateral or cause a Material Adverse
Change in Assignor, and all such delinquent tax liabilities have been satisfied
except those that are being contested by Assignor in good faith and with respect
to which payment has been stayed by a court of competent jurisdiction.
(g) Financial Statements. Since the date of the most recent financial
statement delivered by Assignor to MLMCI, there has been no Material Adverse
Change. Assignor shall provide MLMCI with such financial statements and other
information as is contemplated in Section 9(a) hereof.
(h) No Litigation. There are no actions, suits, investigations, or other
proceedings pending, or, to the best knowledge of Assignor, after due inquiry,
threatened, against or affecting Assignor by or before any court, arbitrator,
Governmental Authority which challenge any of the transactions contemplated
under this Agreement or any other Loan Document or could result in a Material
Adverse Change and there are no preliminary or permanent injunctions or orders
by any court or other Governmental Authority pending affecting this Agreement or
any other Loan Document or any of the transactions contemplated hereby or
thereby.
(i) Disclosure. No certificate, statement, report or other document
furnished and no representation or warranty made or to be furnished or made to
MLMCI by or on behalf of Assignor in or in connection with this Agreement or any
transaction contemplated hereby, or in connection with any other Loan Document
or any transaction contemplated thereby, at the time furnished, contains or will
contain any untrue statement of a material fact or omits or will omit to state
any material fact necessary in order to make the statements contained therein
not misleading.
(j) Permits, Licenses, Approvals, Consents, etc. Assignor has obtained any
and all permits, licenses, approvals and consents of any Governmental Authority
or other Person as may be required in connection with the execution, delivery
and performance by and the validity and enforceability against Assignor of this
Agreement and the other Loan Documents and the consummation of the transactions
contemplated hereby or thereby (all such permits, licenses, approvals and
consents, if any, are in full force and effect and have not been amended,
modified, revoked or rescinded).
(k) The Investment Company Act. Assignor is not an "investment company",
or an
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entity "controlled by an "investment company", within the meaning of the
Investment Com- pany Act of 1940, as amended.
SECTION 9. AFFIRMATIVE COVENANTS
Until the Obligations are paid and satisfied in full and this Agreement
has been terminated, Assignor covenants and agrees that it will:
(a) Financial Statements and Other Information. Furnish to MLMCI:
(i) as soon as available and in any event within sixty (60) days after the
close of each of the first three (3) quarters of each fiscal year of Assignor,
the FFG applicable quarterly Form 10-Q as filed with the Securities and Exchange
Commission, including the consolidating statements for the Assignor, subject to
normal recurring year-end audit adjustments, and as prepared in accordance with
GAAP;
(ii) as soon as available and in any event within one hundred and twenty
(120) days after the close of each fiscal year of Assignor, a balance sheet of
Assignor, a statement of income of Assignor and a statement of changes in
financial position of Assignor as at the end of and for the fiscal year just
closed, setting forth the corresponding figures of the previous fiscal year, if
applicable, in comparative form, all in reasonable detail and certified (without
any qualification or exception deemed material by MLMCI) by independent public
accountants selected by Assignor and reasonably satisfactory to MLMCI and
concurrently with such financial statements, a written statement signed by such
independent public accountants to the effect that, based solely on the
examination necessary for their certification of such financial statements,
Assignor is in compliance with the covenants in Section 10(d) hereof, or if such
independent public accountants shall have obtained from such examination any
knowledge to the contrary, they shall disclose in such written statement the
related Event of Default or Default and the nature thereof;
(iii) concurrently with the delivery of the financial statements required
to be furnished by Section 9(a)(ii) hereof, a certificate signed by the chief
executive or financial officer of Assignor, stating (1) that a review of the
activities of Assignor during such quarter or fiscal year, as the case may be,
has been made under his or her immediate supervision with a view to determining
whether Assignor has observed, performed and fulfilled all of its obligations
under this Agreement and whether Assignor is in compliance with the
representations and warranties in Section 8 hereof and the covenants in Sections
9 and 10 hereof, and (2) that there existed during such quarter or fiscal year,
as the case may be, no Event of Default and no Default or if any such Event of
Default or Default did exist, specifying the nature thereof, the period of
existence thereof and what action Assignor proposes to take, or has taken, with
respect thereto;
(iv) promptly, and in any event no later than five (5) Business Days,
after the commencement thereof, written notice of any material actions, suits or
proceedings (including arbitrations) against Assignor before any court or other
Governmental Authority;
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(v) immediately upon becoming aware of any development or other
information which is reasonably likely to result in a Material Adverse Change,
written notice specifying the nature of such development or information, such
anticipated effect and action, if any, Assignor proposes to take or has taken
with respect thereto;
(vi) with reasonable promptness, such other information respecting any
matter likely to result in a Material Adverse Change as MLMCI may reasonably
request from time to time.
(b) Existence, Conduct of Business, etc. Continue to engage primarily in
the business of the same general type as now conducted by it and preserve, renew
and maintain in full force and effect its existence and all permits, licenses,
approvals, consents, rights, privileges and franchises necessary or desirable in
the conduct or transaction of its business or the ownership or operation of its
properties or the lease of its properties to which it is a lessee.
(c) Taxes. Assignor will pay and discharge all taxes, levies, liens and
other charges on its assets and on the Collateral that, in each case, in any
manner would create any lien or charge upon the Collateral.
(d) Laws. Assignor will at all times comply in all material respects with
all laws, ordinances, rules and regulations of any federal, state, municipal or
other public authority having jurisdiction over Assignor or any of its assets.
(e) Name and Locations. Assignor will immediately advise MLMCI in writing
of the opening of any new chief executive office or the closing of any such
office and of any change in Assignor's name or the places where the books and
records pertaining to the Collateral are kept. MLMCI is hereby advised and
acknowledges that during April and May 1997 Assignor will by opening a new chief
executive office at 1600 Viceroy Drive, Dallas Texas 75235-2306 and closing its
existing chief executive office.
(f) Records. Assignor will maintain records with respect to the Collateral
and the conduct and operation of its business in conformity with general
industry standards and with no less a degree of prudence than if the Collateral
were held by Assignor for its own account and will furnish MLMCI, upon
reasonable request by MLMCI or its designated representative, with reasonable
information with respect to the Collateral and the conduct and operation of its
business. Assignor will permit MLMCI or its designated representative to inspect
Assignor's records with respect to the Collateral and the conduct and operation
of its business upon reasonable notice from MLMCI or its designated
representative, at such reasonable times and with reasonable frequency, and to
make copies or extracts of any and all thereof. MLMCI shall act in a
commercially reasonable manner in requesting and conducting any inspection
relating to the conduct and operation of Assignor's business.
(g) Pay Obligations. Pay, discharge or otherwise satisfy at or before
maturity or before they become delinquent, as the case may be, all its material
obligations of whatever nature,
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except when the amount or validity thereof is currently being contested in good
faith by appropriate proceedings and the Assignor has established adequate
reserves with respect thereto and no Liens have attached to the Collateral or
any portion thereof.
(h) Notices. Promptly, and in any event within one (1) Business Day of the
occurrence thereof, notify MLMCI in writing of (i) the occurrence of any Default
or Event of Default hereunder or under any other Loan Document or (ii) any event
of default by any party thereto under any indenture, mortgage, deed of trust,
agreement or other instrument or contractual obligation to which the Assignor is
a party or by which any of its properties may be bound or affected which could
result in a Material Adverse Change, and specifying in each case the action the
Assignor has taken or proposes to take with respect thereto.
SECTION 10. NEGATIVE COVENANTS
Until the Obligations are paid and satisfied in full and this Agreement
has been terminated, the Assignor covenants and agrees that it will not:
(a) Liens. Create, incur, assume or suffer to exist, any Lien on any of
the Collateral whether now owned or hereafter acquired, other than Liens in
favor of MLMCI hereunder.
(b) Mergers, Sales, Dissolution, etc. (i) Merge into or consolidate with
any other Person without the prior consent of MLMCI, which consent shall not be
unreasonably withheld, or (ii) assign, transfer, sell, lease, or otherwise
dispose of any of the Collateral, or all or substantially all of its other
property or assets to any other Person or (iii) wind up, liquidate or dissolve,
or agree to do any of the foregoing.
(c) Corporate Changes. Change its name, principal place of business, the
location where its books and records are kept with respect to the Collateral or
corporate structure on less than thirty (30) days prior written notice to MLMCI.
MLMCI is hereby notified and acknowledges the prospective change in Assignor's
principal place of business as described in Section 9(e) above.
(d) Credit Covenants. (i) The ratio of Assignor's outstanding indebtedness
(determined in accordance with GAAP but including for this purpose any warehouse
or repurchase facilities accounted for as off balance sheet transactions) to all
lenders (including, without limitation, all indebtedness incurred under any loan
agreement, warehouse finance agreement and repurchase agreement) to its Book Net
Worth shall at any time be more than 8 to 1;
(ii) Assignor shall experience losses or changes in its financial
condition that cause its Book Net Worth for any two consecutive calendar
quarters to be less than or equal to 80% of its Book Net Worth as of the
commencement of such period;
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(iii) Assignor's Book Net Worth shall at any time, from the date of this
Agreement to April 30, 1997, be less than $140,000,000 and shall at any time
thereafter be less than $200,000,000; and
(iv) Assignor shall pay or declare any dividend or other distribution
except (a) dividends payable solely in the form of capital stock, (b) dividends
to RAC to the extent of Assignor's portion of the consolidated federal income
tax liability of RAC and its subsidiaries, (c) dividends to RAC to the extent of
interest on the subordinated debt of Assignor owed by RAC, (d) other dividends
to RAC that do not in any fiscal year of Assignor when added to the dividends
during that year under clauses (b) and (c) preceding exceed 25% of Assignor's
net income for that fiscal year, or (e) dividends otherwise approved in writing
by Buyer; notwithstanding the above, Seller may not pay or declare any dividends
at any time while an Event of Default exists and is continuing or would be
created by such dividends.
(e) Use of Proceeds. The Proceeds of the Loans made pursuant to this
Agreement will not be used by the Assignor, directly or indirectly, for the
purpose of purchasing or carrying any Margin Stock or for the purpose of
reducing or retiring any debt which was originally incurred to purchase or carry
Margin Stock or for any other purpose which might constitute the Loans under
this Agreement as being "purpose credit" within the meaning of Regulation G or X
of the Board of Governors of the Federal Reserve System.
(f) Further Covenants. Without prior written consent of MLMCI, Assignor
will not: (i) assign, sell, transfer, pledge or grant any security interest in
or lien on any of the Collateral to anyone except MLMCI, permit any financing
statement (except any financing statements in favor of MLMCI) or assignment
(except for any assignments in favor of MLMCI) to be on file in any public
office with respect thereto, (ii) permit or suffer to exist any security
interest, lien, charge, encumbrance or right of others to attach to any of the
Collateral, except as contemplated by this Agreement, or (iii) consent to any
amendment or supplement to any MBS Issuance Agreement that is reasonably likely
to result in a material adverse affect on the Market Value of the Pledged MBS,
but excluding in any event any amendment or supplement that effectuates a
letter-of-credit and the limited quarterly substitution into a related reserve
fund for the release of cash as contemplated in such MBS Issuance Agreement.
SECTION 11. EVENTS OF DEFAULT
Each of the following, so long as it shall not have been remedied, shall
constitute an "Event of Default" hereunder:
(a) Nonperformance. Any failure to pay, whether on the acceleration
thereof or otherwise, any amounts due under the Note or any failure to pay any
amount due under this Agreement or to perform any provision of this Agreement in
accordance herewith, or any material breach of any representation, warranty or
covenant set forth herein or in the Note.
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<PAGE>
(b) Termination of Interest. The lapse or termination of Assignor's
interest in any of the Collateral.
(c) Act of Insolvency. The filing by Assignor or any affiliate, of a
petition in bankruptcy, the adjudication of Assignor or any affiliate as
insolvent or bankrupt, the petition or application by Assignor or any affiliate
for any receiver or trustee for itself or any substantial part of its property,
the commencement by Assignor or any affiliate of any proceeding relating to it
under any reorganization, arrangement, dissolution or liquidation law, or the
initiation of any such proceeding against Assignor or any affiliate, if Assignor
or such affiliate indicates by any act its consent thereto or if such proceeding
is not dismissed within thirty (30) days.
(d) Material Adverse Change. In the reasonable judgment of MLMCI, a
Material Adverse Change shall have occurred.
(e) Default Under Other Contracts. Assignor shall be in default with
respect to any normal and customary covenants under any contract or agreement to
which it is a party (which covenants include, but are not limited to, an Act of
Insolvency of Assignor or the failure of Assignor to make required payments
under such contract or agreement as they become due) which default permits
acceleration of the obligations of Assignor under such contract or agreement by
any other party thereto and which default, in the reasonable judgment of MLMCI,
is likely to result in a Material Adverse Change.
(f) Merger or Consolidation. Assignor shall merge or consolidate into any
entity unless MLMCI shall have expressly consented to such merger or
consolidation in writing, which consent shall not be unreasonably withheld.
(g) Anticipated Insolvency. MLMCI shall reasonably determine that Assignor
is or will be unable to meet its commitments hereunder, notifies Assignor of
such determination and Assignor shall not have responded with appropriate
information to the contrary to the satisfaction of MLMCI within thirty-six (36)
hours.
(h) Final Judgment. A final judgment by any competent court in the United
States for the payment of money in an amount of at least $100,000 is rendered
against Assignor, and the same remains undischarged and unpaid for a period of
sixty (60) days during which execution of such judgment is not effectively
stayed.
(i) Breach of Representation. Any representation or warranty made by
Assignor herein shall have been incorrect or untrue in any material respect when
made or repeated or when deemed to have been made or repeated and which breach,
in the reasonable judgment of MLMCI, is likely to result in a Material Adverse
Change.
(j) Breach of Covenant. Assignor shall breach in any material respect any
covenant
17
<PAGE>
made by it herein and MLMCI's interests shall have been materially adversely
affected thereby.
SECTION 12. REMEDIES
(a) Action Regarding Collateral. If an Event of Default shall occur,
MLMCI, without demand of performance or other demand or notice of any kind to
Assignor or any other person, all of which are hereby expressly waived, may
forthwith apply the cash, if any, then held by it as part of the Collateral
relating to any Loan to the payment of any of the Obligations, and, if there
shall be no such cash or the cash so applied shall not be sufficient to pay in
full all such Obligations, may thereafter collect, receive, appropriate, retain
and realize upon the Collateral, or any part thereof, and may forthwith sell,
assign, give an option or options to purchase, contract to sell, or otherwise
dispose of and deliver the Collateral, or any part thereof, in one or more
parcels at such public or private sale or sales, at such place or places, at
such price or prices and upon such other terms and conditions as MLMCI may deem
best (provided, however, that MLMCI shall act in all respects in a commercially
reasonable manner), for cash or on credit or for future delivery without
assumption of any credit risk, with the right of MLMCI upon any such sale or
sales to purchase all or any part of the Collateral so sold. Upon any sale,
transfer or other disposition of the Collateral pursuant hereto MLMCI shall have
the right to deliver, assign and transfer to the transferee thereof the
Collateral so sold. Each transferee upon any such transfer or other disposition
shall hold the property thereby acquired by it absolutely free from any claim or
right of any kind, including any equity or rights of redemption, of Assignor,
who hereby specifically waives all rights of redemption, stay or appraisal which
it has or may have under any rule of law or statute whether now existing or
hereafter adopted (in the latter case, to the extent permitted thereby).
Assignor agrees that MLMCI need give only such notice of the time and place of
any public or private sale (including any adjourned private sale) or other
intended disposition as may be required by market conditions and standards of
commercial reasonableness and that MLMCI need not in any event give more than
five (5) Business Days' notice that such sale or disposition is to take place.
Assignor agrees that the notice provided for in the preceding sentence is
reasonable notification of such matters.
MLMCI shall not be obligated to make any sale pursuant to any such notice.
MLMCI may, without notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at the time and
place fixed for the sale, and such sale may be made at any time or place to
which the same may be so adjourned. In case of any sale of all or any part of
the Collateral on credit or for future delivery, the Collateral so sold may be
retained by MLMCI until the selling price is paid by the purchaser thereof, but
MLMCI shall not incur any liability in case of the failure of such purchaser to
take up and pay for the Collateral so sold and, in case of any such failure,
such Collateral may again be sold upon like notice. MLMCI, however, instead of
exercising the power of sale herein conferred upon it, may proceed by a suit or
suits at law or in equity to foreclose the lien and security interest created
hereby and sell the Collateral, or any portion thereof, under a judgment or
decree of a court or courts of competent jurisdiction.
18
<PAGE>
(b) Deficiency. If the Proceeds of sale, collection, foreclosure or other
realization of or upon the Collateral are insufficient to cover the costs and
expenses of such realization and the payment in full of the Obligations,
Assignor shall remain liable for any deficiency.
(c) Private Sale. MLMCI shall incur no liability as a result of the sale
of the Collateral (provided, however, that MLMCI shall act in a commercially
reasonable manner) or any part thereof, at any private sale. Assignor hereby
waives any claims against MLMCI or any holder or holders of the Note arising by
reason of the fact that the price at which the Collateral may have been sold at
such a private sale was less than the price which might have been obtained at a
public sale or was less than the aggregate amount of the Obligations, even
if MLMCI accepts the first offer received and does not offer the Collateral to
more than one offeree (provided, however, that MLMCI shall act in a commercially
reasonable manner).
(d) Application of Proceeds. The Proceeds of any sale or other realization
of all or any part of the Collateral, and any other cash at the time held by
MLMCI under this Agreement, shall be applied by MLMCI in the following order of
priority:
First, to the payment of the costs and expenses of such sale and all
expenses (including the reasonable fees and expenses of counsel),
liabilities and advances made or incurred by MLMCI in connection
therewith.
Second, to the payment of all accrued interest under the Note due or
past due.
Third, to the payment of principal upon the Note due or past due.
Fourth, to the payment of all other amounts owing under this
Agreement.
Fifth, to the payment to Assignor, or to such other person as a
court of competent jurisdiction may direct, of any surplus then remaining
from such Proceeds and other cash.
(e) Default Rate of Interest. After demand is made with respect to the
Note or upon acceleration thereof, until the balance thereof shall be paid, the
Loan amounts due thereunder, shall bear interest at a per annum rate (based on a
year of 360 days and actual days elapsed) equal to two hundred (200) basis
points in excess of the interest rate for such Loan, but in no event higher than
the maximum rate permitted by law.
(f) Attorney-in-Fact. Effective upon the occurrence of an Event of Default
hereunder, MLMCI is hereby appointed the attorney-in-fact of Assignor for the
purpose of carrying out the provisions of this Agreement and taking any action
and executing any instruments which MLMCI 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, after an Event of Default has occurred, MLMCI shall have the right
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<PAGE>
and power to receive, endorse and collect all checks made payable to the order
of Assignor representing any distribution in respect of the Collateral or any
part thereof and to give full discharge for the same.
(g) Payments on Collateral to Assignor.
(i) All rights of Assignor to receive any payments from the related
Collateral which it would otherwise be authorized to receive shall cease, and
all such rights shall thereupon become vested in MLMCI, which shall thereupon
have the sole right to receive and hold as Collateral such payments.
(ii) All payments which are received by Assignor contrary to the
provisions of the preceding subsection (i) shall be received in trust for the
benefit of MLMCI, shall be segregated from other funds of Assignor and shall be
promptly paid to MLMCI.
SECTION 13. MATURITY DATE; INTEREST PAYMENT DATES; REPAYMENT OF PRINCIPAL
(a) Payment on Maturity Date. Assignor and MLMCI hereby agree that the
Obligations of Assignor hereunder and under the Note are payable on the Maturity
Date unless earlier payment thereof is required pursuant to the terms of this
Agreement.
(b) Extension of Maturity Date. Assignor may, not later than three (3)
months prior to the Maturity Date, request in writing that MLMCI extend such
Maturity Date for a period not exceeding one year. MLMCI will use its best
efforts to respond within two (2) weeks of receiving such written request. Such
response will include whether or not MLMCI would be willing to so extend the
Maturity Date and the terms of any such extension. Nothing contained herein
shall be deemed to limit the right of MLMCI, in its sole discretion, to decline
to enter into such extension or to agree to such extension on terms different
from those set forth herein. Any such extension shall be evidenced only by a
written agreement among the parties amending this Agreement and the Note.
(c) Interest Payment. Interest on each Loan shall be payable on the dates
described in the related Confirmation Statement.
(d) Payment of Principal. The principal portion of each Loan may be repaid
in whole or in part at the discretion of Assignor on any date on which a payment
of interest is to be made thereon by Assignor pursuant to the terms of this
Agreement and the related Confirmation Statement provided that (i) Assignor
shall have provided MLMCI with not less than two (2) Business Days' written
notice of Assignor's intention to effect such repayment and the amount thereof,
(ii) all payments of interest then due and owing on the Loan are paid in full
and (iii) no Event of Default has occurred and is continuing with respect to any
of Assignor's Obligations
20
<PAGE>
hereunder or under the Note.
(e) Event of Default. Nothing in this Section 13 shall be deemed to limit
the right of MLMCI to require, so long as an Event of Default shall have
occurred and is continuing, the payment by Assignor of all Obligations arising
hereunder and under the Note.
SECTION 14. PAYMENT OF TAX LIABILITY
The Assignors and MLMCI agree that any tax or other liability (excluding
any tax liability arising from the receipt by MLMCI of interest income on any
Loan under this Agreement) incurred by the beneficial owner or the registered
holder of any Collateral pledged under the this Agreement shall be borne by
Assignor. So long as any Obligations are outstanding hereunder, Assignor agrees
to indemnify MLMCI for, and to hold MLMCI harmless against, any liability
inuring to MLMCI as a result of the endorsement of the Collateral in MLMCI's
name, or MLMCI's status as the lender hereunder or beneficial holder of such
Collateral, including, without limitation, any tax liability or liability for
the payment of expenses of the trust funds established under the applicable MBS
Issuance Agreements.
SECTION 15. GENERAL PROVISIONS
(a) No Waiver. No waiver or amendment of or forbearance in enforcing any
provision of this Agreement nor consent to any departure by either party
herefrom shall be effective unless expressly granted in writing and shall be
limited to the extent expressed therein.
(b) Governing Law; Severability. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and entirely performed therein. Unless otherwise defined herein,
terms defined in the UCC are used herein as defined therein. Each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be prohibited
by or be invalid under such law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
(c) Construction. The captions in this Agreement are for convenience of
reference only and shall not affect the construction or interpretation of any of
the provisions hereof.
(d) Assignment. This Agreement shall be binding upon and shall inure to
the benefit of each of the parties hereto and their respective successors and
assigns; provided, however, that neither this Agreement nor any rights or other
obligations hereunder may be assigned by Assignor without prior written consent
of MLMCI and any attempted or purported assignment hereof or thereof shall be
void. MLMCI may assign any or all of its rights hereunder without
21
<PAGE>
consent.
(e) Notices, Payments, Deliveries. Unless otherwise provided herein, all
notices and other communications provided for hereunder shall be in writing
(including telegraphic, facsimile or telex communication), 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 MLMCI:
Merrill Lynch Mortgage Capital Inc.
Merrill Lynch World Headquarters
World Financial Center
North Tower - 8th Floor
New York, New York 10281
Attention: James B. Cason
Telephone: (212) 449-1219
Telecopy: (212) 449-6673
With a copy to:
Attention: Michael A. Blum
Telephone: (212) 449-8486
Telecopy: (212) 449-6673
If to Assignor:
FIRSTPLUS FINANCIAL, INC.
1250 Mockingbird Lane
Dallas, Texas 75247-4902
Attention: Barry Tenenholtz
Telephone: (214) 599-6350
Telecopy: (214) 599-7548
With a copy to:
Attention: Chris Gramlich
Telephone: (214) 599-6317
Telecopy: (214) 599-7515
provided, however, that a facsimile or other form of electronic transmission
shall be deemed to be received by the parties hereto when transmitted so long as
the transmitting machine has provided an electronic confirmation of such
transmission and such facsimile or other form of electronic transmission is
confirmed with a printed paper copy thereof by mail or overnight courier
service. All payments on and deliveries of Collateral hereunder shall be made to
the
22
<PAGE>
address or account for payments and deliveries of such Collateral for the party
to whom such payment or delivery is to be made as set forth above. 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.
(f) Termination. When all Obligations shall have been paid in full and
upon the written request of Assignor, this Agreement shall terminate and MLMCI
shall release its lien and security interest hereunder and assign, transfer and
deliver, against receipt, any remaining Collateral and money received in respect
thereof to or on the order of Assignor. Upon the request of Assignor, MLMCI will
then execute termination statements and such other documents as Assignor may
reasonably request as are necessary to make clear upon the public record the
termination of the lien and security interests created hereby with respect to
such assignment. The obligations of Assignor under Section 15(h) below shall,
with respect to each transaction entered into hereunder, survive any termination
hereof.
(g) Aggregate Amount of Loans; Disbursement of Funds.
(i) The aggregate outstanding principal amount of the Loans made by
MLMCI hereunder shall be limited to the lesser of $75,000,000 and (ii)
331/3% of the average aggregate amount of advances outstanding under the
Master Repurchase Agreement during each calendar quarter.
(ii) Assignor may request disbursement of amounts borrowed hereunder
upon not less than two (2) Business Days' written notice to MLMCI.
(iii) MLMCI is not obligated to make any Loan or advance under this
Agreement or pursuant to the Note; provided that MLMCI agrees in good
faith to give reasonable notice to Assignor of its intention not to make
any further Loans or advances hereunder, and if practicable to give such
notice at least ten (10) Business Days prior to any contemplated Loan or
advance hereunder.
(h) Expenses.
(i) Assignor shall pay its own costs and expenses and all reasonable
costs and expenses of MLMCI (including reasonable expenses for legal
services) incident to the preparation and negotiation of this Agreement
and any documents relating hereto, provided that Assignor's liability for
such costs and expenses of MLMCI shall not exceed a total of $13,750.
(ii) Assignor agrees to pay to MLMCI on demand all reasonable costs
and expenses (including reasonable expenses for legal services) of any
subsequent enforcement of any of the provisions hereof, or of the
performance by MLMCI of any Obligations of Assignor in respect of the
Collateral which Assignor has failed or refused to perform, or
23
<PAGE>
any actual or attempted sale, or any exchange, enforcement, collection,
compromise or settlement in respect of any of the Collateral and for the
custody, care or preservation of the Collateral (including insurance
costs) and defending or asserting rights and claims of MLMCI in respect
thereof, by litigation or otherwise, including expenses of insurance. In
addition, Assignor agrees to pay to MLMCI on demand all costs and expenses
(including reasonable expenses for legal services) of the registration of
the Collateral in the name of MLMCI or its nominee. All such expenses
shall be Obligations to MLMCI secured under this Agreement.
(i) MLMCI's Right to Pledge. Nothing in this Agreement shall preclude
MLMCI from engaging in transactions with third parties involving the selling
pursuant to a repurchase arrangement, pledging or hypothecating of the
Collateral, but no such transaction shall relieve MLMCI of its obligations
hereunder. MLMCI hereby grants to Assignor the right to perform in MLMCI's stead
under any repurchase, reverse repurchase, loan or similar transaction in which
MLMCI has sold, pledged or otherwise transferred any Pledged MBS in the event
that MLMCI has defaulted on its obligations to repurchase or accept redelivery
of such Pledged MBS in conformity with the terms of any such transaction and so
long as an Event of Default hereunder by Assignor shall not have occurred and be
continuing. MLMCI further acknowledges that each Pledged MBS identified in a
Confirmation Statement and included as Collateral for a Loan hereunder is unique
and identifiable on the date of such Loan and that an award of money damages
would be insufficient to compensate Assignor for the losses and damages incurred
by Assignor in the event of MLMCI's failure to release and redeliver any Pledged
MBS upon the repayment of the related Loan by Assignor as provided hereunder.
(j) Indemnification. Assignor agrees to indemnify and hold harmless MLMCI
against all liabilities and expenses to which MLMCI may become subject relating
to any fees, taxes or liability to any third party resulting from any action
taken or omitted by or upon instructions of Assignor with respect to the
Collateral.
(k) Further Assurances. Assignor agrees that, from time to time upon the
prior written request of MLMCI, it will (i) execute and deliver such further
documents and do such other acts and things as MLMCI may reasonably request in
order to fully effectuate the purposes of this Agreement and (ii) provide such
opinions of counsel concerning matters relating to this Agreement as MLMCI may
reasonably request.
(l) Remedies Cumulative. All rights, remedies and powers of MLMCI
hereunder and in connection herewith are irrevocable and cumulative, and not
alternative or exclusive, and shall be in addition to all other rights, remedies
and powers of MLMCI whether under law, equity or agreement. In addition to the
rights and remedies granted to it in this Agreement or under the Note, MLMCI
shall have all the rights and remedies of a secured party under the UCC.
(m) Litigation. Notwithstanding any termination hereof, Assignor hereby
agrees that any legal action or proceeding against it in connection herewith may
be brought in the courts of the
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State of New York or of the United States of America located in the City and
State of New York, Borough of Manhattan, as MLMCI may elect, and Assignor hereby
irrevocably submits to the jurisdiction of each of said courts, and waives any
objection on the grounds of venue, forum non conveniens or similar grounds.
25
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
FIRSTPLUS FINANCIAL, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
MERRILL LYNCH MORTGAGE CAPITAL INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
26
<PAGE>
EXHIBIT A
THIS NOTE IS NOT A
NEGOTIABLE INSTRUMENT.
NO TRANSFER OR SALE OF THIS NOTE SHALL BE MADE UNLESS SUCH TRANSFER IS EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
AND ANY APPLICABLE STATE SECURITIES LAWS OR IS MADE IN ACCORDANCE WITH SAID ACT
AND LAWS.
NOTE
$75,000,000 New York, New York April 10, 1997
FOR VALUE RECEIVED, FIRSTPLUS FINANCIAL, INC. (the "Assignor") promises to
pay to MERRILL LYNCH MORTGAGE CAPITAL INC. (the "Payee") the principal sum of
Seventy-Five Million Dollars ($75,000,000) (or so much thereof as shall have
been advanced here against pursuant to the Master Assignment Agreement and shall
be outstanding), in lawful money of the United States of America, in immediately
available funds, with interest on each principal sum advanced here against or
the unpaid balance thereof with such frequency and to such location as is
specified in the related confirmation statement (in each case, the "Confirmation
Statement") for such advance (or on such other day and with such other frequency
and to such other location as may be mutually agreed upon by the Assignor and
the Payee) at said office and in said money and funds from the date of the
related Loan advance until the related Maturity Date for such Loan at the rate
per annum (based on a year of 360 days and actual days elapsed) indicated on the
related Confirmation Statement attached hereto, but in no event higher than the
maximum rate permitted by law, and after such Maturity Date, or upon
acceleration as hereinafter provided, until said balances shall be paid, at the
rate per annum (based on a year of 360 days and actual days elapsed) equal to
two hundred (200) basis points in excess of the interest rate for such advance,
but in no event higher than the maximum rate permitted by law.
Loans here against shall be in minimum amounts of $1,000,000. The Assignor
may request disbursement of amounts borrowed hereunder upon not less than two
(2) Business Days' written notice to the Payee. The Payee is not obligated to
make any advances hereunder. The Payee is hereby authorized by the Assignor to
endorse on the Loan Schedule amounts advanced here against, the rate of interest
relating thereto and any principal prepayments hereunder (as permitted by the
Assignment defined below), it being understood, however, that failure to make
A-1
<PAGE>
any such endorsement shall not affect the obligations of the Assignor hereunder
in respect of the amounts advanced here against.
This Note is the Note referred to in the Master Assignment Agreement (the
"Master Assignment Agreement"), dated as of April 10, 1997, between Assignor and
the Payee, granting to the Payee a first priority perfected security interest in
the Collateral, as described therein. The holder is entitled to the benefits of
the Master Assignment Agreement and may enforce the agreements of the Assignor
contained therein and exercise the remedies provided for thereby or otherwise
available in respect thereof. All capitalized terms used in this Note and not
otherwise defined shall have the respective meanings set forth in the Master
Assignment Agreement except where the context clearly indicates otherwise.
This Note and all other present and future obligations of any and all
kinds of the Assignor in favor of the holder hereof, whether created directly or
acquired by assignment, whether absolute or contingent, shall, unless the holder
shall otherwise elect, forthwith be due and payable without notice or demand of
any kind (except as expressly provided in the Master Assignment Agreement), all
of which are expressly waived upon the occurrence of an Event of Default.
The Assignor hereby agrees that any legal action or proceeding against it
for enforcement of this Note or of any judgment with respect to this Note may be
brought in the courts of the State of New York or of the United States of
America located in the City and State of New York, Borough of Manhattan, as the
holder may elect, and the Assignor hereby irrevocably submits to the
jurisdiction of each of said courts, and waives any objection on the grounds of
venue, forum non conveniens or similar ground. The Assignor irrevocably consents
that service of process in any such action or proceeding may be made upon the
Assignor by the mailing thereof by the holder by United States registered or
certified mail, postage prepaid, to the Assignor at the address set forth herein
below the signature of the Assignor, and the Assignor hereby further agrees that
service of process in such manner shall be full and sufficient notice of any
such action or proceeding.
The Assignor waives diligence, presentment of any instrument, protest and
notice of non-payment or protest and any and all other notices and demands
whatsoever in connection with the delivery, acceptance, performance, default or
enforcement of this Note. The Assignor will pay on demand all costs of
collection (including reasonable attorneys' fees) paid or incurred by the holder
in enforcing this Note on default. As used herein, the world "holder" shall mean
the Payee or any endorsee of this Note who is in possession hereof, if this Note
is at the time payable to the bearer.
A-2
<PAGE>
This Note shall be governed by and construed in accordance with the laws
of the State of New York applicable to agreements made and entirely performed
therein.
FIRSTPLUS FINANCIAL, INC.
By:
-------------------------------------------------------
Name:
-----------------------------------------------------
Title:
----------------------------------------------------
Address until April or May 1997: 1250 Mockingbird Lane
Dallas, Texas 75247-4902
Address thereafter: 1600 Viceroy Drive
Dallas, Texas 75235-2306
A-3
<PAGE>
LOAN SCHEDULE
This Note evidences Loans made by the Payee to the Assignor and the repayment of
principal by the Assignor to the Payee, in the principal amounts and on the
dates and with the related interest rates set forth below as well as the total
amount advanced here against as of each such date:
PRINCIPAL AMOUNT INTEREST PRINCIPAL AMOUNT TOTAL
DATE LOANED RATE REPAID OUTSTANDING
---- ------ ---- ------ -----------
- ---------- -------------------- ----------- -------------------- ---------------
- ---------- -------------------- ----------- -------------------- ---------------
- ---------- -------------------- ----------- -------------------- ---------------
- ---------- -------------------- ----------- -------------------- ---------------
- ---------- -------------------- ----------- -------------------- ---------------
- ---------- -------------------- ----------- -------------------- ---------------
- ---------- -------------------- ----------- -------------------- ---------------
A-4
<PAGE>
EXHIBIT B
CONFIRMATION STATEMENT
MERRILL LYNCH MORTGAGE CAPITAL INC.
Date: __________________________
Assignor: FIRSTPLUS FINANCIAL, INC.
Address:
Attention:
Telephone:
Fax Number:
Re: LOAN PURSUANT TO MASTER ASSIGNMENT AGREEMENT
Gentlemen:
Merrill Lynch Mortgage Capital Inc. ("MLMCI") is pleased to confirm our Loan to
you (the "Assignor") pursuant to the Master Assignment Agreement (the "Master
Assignment Agreement"), dated as of April 10, 1997, between you and MLMCI under
the following terms and conditions:
1. Collateral Description: ________________________
A. Security Issue Date: ______________________
B. Percentage Ownership: _____________________%
C. Face Amount: $_____________________
D. Current Market Value: $_____________________
E. Margin Requirement: _____________________%
2. Loan: _____ New Funds _____ Roll
A. Amount: $______________
B. Closing Date: _______________
C. Interest Payment Date: The last Business Day of each month.
B-1
<PAGE>
MLMCI's Wiring Instructions Assignor's Wiring Instructions
Bankers Trust New York Bank One, Texas, NA
For the Account of Merrill Lynch For the Account of
Mortgage Capital Inc. FIRSTPLUS FINANCIAL, INC.
Account Number: 00812914 Account Number: 1885162956
ABA Number: 021-001-033 ABA Number: 111000614
The Note, dated April 10, 1997, which evidences advances under the
Master Assignment Agreement will be annotated on the schedule attached thereto
to reflect the date, amount and interest rate relating to this advance.
The Master Assignment Agreement is incorporated by reference into
this Confirmation Statement 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 Assignment Agreement.
Very truly yours,
MERRILL LYNCH MORTGAGE CAPITAL INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
AGREED AND ACKNOWLEDGED:
FIRSTPLUS FINANCIAL, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
B-2
<PAGE>
EXHIBIT C
[FORM OF OPINION OF COUNSEL TO THE ASSIGNOR]
Gentlemen:
We have acted as counsel to FIRSTPLUS FINANCIAL, INC., a Delaware
corporation (the "Assignor"), in connection with (i) the execution and delivery
of the Master Assignment Agreement, dated as of April 10, 1997 (the
"Agreement"), between the Assignor and Merrill Lynch Mortgage Capital Inc., a
Delaware corporation ("MLMCI") and (ii) the execution and delivery of the Note,
dated April 10, 1997 in the principal amount of $75,000,000 ("Note") made by the
Assignor to the order of MLMCI. Unless otherwise defined herein, all defined
terms used herein shall have the meanings assigned thereto in the Agreement.
As counsel to the Assignor, we have participated in the preparation and
negotiation of the Agreement, the Note and the other documents and instruments
executed and delivered pursuant thereto and in connection therewith by the
Assignor.
In this connection, we have examined, among other documents, the
Certificate of Incorporation and By-Laws of the Assignor, the minutes of
meetings of the Assignor, and such other documents and records of the Assignor
as we have deemed relevant and necessary as a basis for the conclusions
contained in the opinions hereafter set forth. We have had various conferences
with officers and directors of the Assignor with respect to the provisions of
the Agreement and the Note as to certain matters contemplated by the opinions
expressed below, we have relied upon information as provided by said officers
and directors. In our examination, we have assumed the genuineness of all
signatures and the authenticity of all documents submitted to us as originals
and the conformity to originals of all documents submitted to us photostatic
copies.
Based upon the foregoing, we are of opinion that:
1. Assignor is duly organized and validly existing as a corporation in
good standing under the laws of the State of Texas and has power and authority
to enter into and perform its obligations under this Agreement. Assignor 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 Assignor and
its subsidiaries, considered as a whole.
C-1
<PAGE>
2. This Agreement and the Note have each been duly authorized, executed
and delivered by Assignor, and each constitutes a valid and legally binding
obligation of Assignor enforceable against Assignor 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 Assignor for
the consummation of the transactions contemplated by this Agreement or the Note.
4. The consummation of any of the transactions contemplated by this
Agreement and the Note will not conflict with, result in a breach of, or
constitute a default under the articles of incorporation or bylaws of Assignor
or the terms of any indenture or other agreement or instrument known to us to
which Assignor is party or bound, or any order known to such counsel to be
applicable to Assignor or any regulations applicable to Assignor, of any state
or federal court, regulatory body, administrative agency, governmental body or
arbitrator having jurisdiction over Assignor.
5. There is no pending or threatened action, suit or proceeding before
any court or governmental agency, authority or body or any arbitrator involving
Assignor or relating to the transaction contemplated by this Agreement or the
Note which, if adversely determined, would have a material adverse effect on
MLMCI.
6. Assignor is duly registered as a finance company in each state in
which such registration is required by applicable law.
7. Each Pledged MBS 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 Pledged MBS from Assignor to MLMCI.This Agreement
together with (a) the delivery of such related Pledged MBS to MLMCI and (b) the
endorsement of such Pledged MBS to MLMCI , creates a valid, perfected security
interest in such Pledged MBS in favor of MLMCI. Such security interest will have
the same priority and will be subject to the same security interests and liens
as apply to such Pledged MBS in the hands of Assignor.
Very truly yours,
C-2
<PAGE>
EXHIBIT D
LOCATION OF CHIEF EXECUTIVE OFFICES AND COLLATERAL
Chief Executive Office
Until April or May 1997: 1250 Mockingbird Lane
Dallas, Texas 75247-4902
Thereafter: 1600 Viceroy Drive
Dallas, Texas 75235-2306
Collateral
With respect to any Loan, the Pledged MBS to be delivered to, and
held by, MLMCI or its bailee.
D-1
<PAGE>
TRI-PARTY CUSTODIAL AGREEMENT
among
FIRSTPLUS FINANCIAL, INC.,
Seller
MERRILL LYNCH MORTGAGE CAPITAL INC.,
MLMCI and Buyer
MERRILL LYNCH CREDIT CORPORATION,
MLCC and Buyer
and
BANK ONE, TEXAS, N.A.,
as Custodian
Dated as of April 10, 1997
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<PAGE>
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
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SECTION 20. Titles Not to Affect Interpretation........................... 17
SECTION 21. Provisions Separable.......................................... 17
SECTION 22. Representations and Warranties of the
Custodian................................................ 17
SECTION 23. Appointment of Agent.......................................... 19
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
ii
<PAGE>
THIS TRI-PARTY CUSTODIAL AGREEMENT entered into as of April 10, 1997, by
and among FIRSTPLUS FINANCIAL, INC. (the "Seller" and "Servicer", as applicable)
MERRILL LYNCH MORTGAGE CAPITAL INC. ("MLMCI" and "Buyer"), MERRILL LYNCH CREDIT
CORPORATION ("MLCC" and "Buyer"), and BANK ONE, TEXAS, N.A. (the "Custodian"),
recites and provides:
RECITALS
Seller, MLMCI and MLCC have entered into a Master Repurchase Agreement
dated as of April 10, 1997, as supplemented by Annex I thereto and will enter
into a Confirmation between Seller and the applicable Buyer with respect to each
transaction thereunder. The Master Repurchase Agreement, as supplemented, is
hereinafter referred to as the "Repurchase Agreement."
Seller is obligated to service the Home Improvement Loans pursuant to the
terms and conditions of the Repurchase Agreement.
Seller desires to deposit with the Custodian all Notes and Mortgages
evidencing the Home Improvement Loans, together with the other documents
included in the Mortgage Files related to the Home Improvement Loans, to be held
by the Custodian as custodian for Buyer and its assigns until otherwise
instructed by respective Buyer, all in connection with transactions under the
Repurchase Agreement (each a "Transaction").
Buyer may transfer its interest in the Home Improvement 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.
<PAGE>
"Agreement" shall mean this Tri-Party Custodial Agreement, as supplemented
or amended from time to time.
"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.
"Buyer" shall mean MLCC, in the case of Home Improvement Loans secured by
second or third liens, and MLMCI in all other cases.
"Custodial Register" shall mean the register maintained by Custodian
pursuant to Section 4(f), which reflects as to each Home Improvement Loan the
Person to whom the related Trust Receipt has been issued.
"Custodian" shall mean Bank One, Texas, N.A., or its successor custodian.
"Home Improvement Loan" shall refer to both Insured Home Improvement Loans
and Uninsured Home Improvement Loans.
"Insured Home Improvement Loans" means first, second and third lien or
unsecured home improvement retail installment contracts, and related promissory
notes, insured under the FHA's Title I Program, and including without
limitation, all rights to receive payments which are due pursuant thereto and
all other proceeds thereof (including any recourse rights against third persons)
from and after the related Purchase Date, but excluding any rights to receive
payments which are due prior to the related Purchase Date.
"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 Home Improvement Loans
identifying each Home Improvement Loan by Seller's loan number, Mortgagor's name
and address (including the state and zip code) of the mortgaged property,
whether such Home Improvement Loan is secured by a first or junior lien
(specifying the priority of such junior lien) on the related Mortgaged Property,
the outstanding principal amount as of a specified date, the initial interest
rate borne by such Home Improvement Loan, the original principal balance
thereof, the current scheduled monthly payment of principal and interest, the
maturity of the related
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Note, the property type, the occupancy status, the original term to maturity,
whether the Home Improvement Loan is an Insured Home Improvement Loan or an
Uninsured Home Improvement Loan, whether the Insured Home Improvement Loan is an
unsecured home improvement retail installment contract and whether the Home
Improvement 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.
"Mortgage" means the mortgage, deed of trust or other instrument creating
a first, second or third 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.
"Mortgaged Property" shall mean the real property securing repayment of a
Home Improvement 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 Home Improvement 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 Home Improvement 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
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thereof.
"Seller" shall have the meaning set forth in the first paragraph of this
Agreement.
"Servicer" shall mean FirstPlus Financial, Inc. in its capacity as
servicer of the Home Improvement Loans.
"Third Person" shall mean a Person other than Seller, Buyer or the
Custodian which Person has acquired an interest in any Home Improvement Loans
from Buyer and continues to have an interest in such Home Improvement Loans.
"Trust Receipt" shall mean an instrument substantially in the form of
Exhibit C hereto.
"Uninsured Home Improvement Loans" means first, second and third lien home
improvement retail installment contracts, and related promissory notes (none of
which are insured under the FHA's Title I Program) and including without
limitation, all rights to receive payments which are due pursuant thereto and
all other proceeds thereof (including any recourse rights against third persons)
from and after the related Purchase Date, but excluding any rights to receive
payments which are due prior to the related Purchase Date.
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 Home Improvement 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 Home
Improvement 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 Home
Improvement Loans referred to in such Letter of Transmittal and has in its
possession the other documents with respect to the Home Improvement 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
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<PAGE>
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 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) except in the case of Insured Home Improvement Loans that are
unsecured home improvement retail installment contracts, 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 Home Improvement
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) except in the case of Insured Home Improvement Loans that are
unsecured home improvement retail installment contracts, the original
Mortgage Assignment assigned in blank for each Home Improvement Loan, in
form and substance acceptable for recording (except for the name of the
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<PAGE>
assignee) and signed in the name of the last endorsee by an authorized
officer;
(5) except in the case of Insured Home Improvement Loans that are
unsecured home improvement retail installment contracts, 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 Home Improvement 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 where the original recorded
intervening assignment has been lost, destroyed or retained by the public
recording office;
(6) except in the case of Insured Home Improvement Loans that are
unsecured home improvement retail installment contracts, 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 Home Improvement 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) except in the case of Insured Home Improvement Loans that are
unsecured home improvement retail installment contracts, the original
mortgagee title insurance policy or, 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
6
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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, except in the case of Insured Home Improvement
Loans that are unsecured home improvement retail installment contracts,
the 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, to the extent applicable, 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) except in the case of Insured Home Improvement Loans that
are unsecured home improvement retail installment contracts, the principal
amount of the indebtedness secured by the Mortgage is identical to the
original principal amount of the Note; (b) the original principal amount
of the Note is identical to the original principal amount on the Loan
Schedule; (c) the Note term is the same as set forth on the Loan Schedule;
and (d) 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) except in the case of Insured Home Improvement Loans that are
unsecured home improvement retail installment contracts, 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;
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(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, to the extent applicable, the
mortgagor or grantor of the Mortgage and (B) except in the case of Insured
Home Improvement Loans that are unsecured home improvement retail
installment contracts, 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, to the extent applicable, 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) except in the case of Insured Home Improvement Loans that are
unsecured home improvement retail installment contracts, there exists one
of the documents required by clause (7) of the definition of Mortgage File
for each Home Improvement Loan.
(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)(7) 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 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 Home Improvement 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 Home Improvement 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
8
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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 Home Improvement Loans under the terms of this
Agreement so that the applicable Loan Schedule for any such Trust Receipt shall
always accurately reflect the Home Improvement 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 Home Improvement Loans
to one or more Third Persons. Upon receipt of written notice from Buyer,
substantially in the form of Exhibit B hereto, that Buyer has transferred its
interest in the Home Improvement 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 Home Improvement Loans to such Third Person. The notice sent by Buyer to
the 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 Home Improvement Loans in the Notice Loan Schedule as
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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 Home Improvement 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 Home Improvement 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 Home Improvement Loans designated in the
applicable Trust Receipt, including instructions to withdraw Home Improvement
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 Home Improvement Loans covered by a Trust
Receipt without surrender of the related Trust Receipt.
(e) The Custodian understands that Buyer may need to examine Home
Improvement Loans subject to a Trust Receipt on a periodic basis. Such
examination shall take place on the premises of the 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 Home Improvement 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 Home Improvement
10
<PAGE>
Loan by Seller from Buyer under the Repurchase Agreement, the interest of any
Third Person in any such Home Improvement Loan shall automatically terminate
simultaneously with the payment to Buyer of the Repurchase Price for such Home
Improvement 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 Home Improvement 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 Home Improvement 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 Home Improvement
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 Home Improvement 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 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 Home Improvement Loans.
(a) If, pursuant to the Repurchase Agreement, Seller is required to
deliver additional Home Improvement Loans to the Custodian to cure a Margin
Deficit or if Seller and Buyer agree to cause additional Home Improvement Loans
to become subject to the Repurchase Agreement ("Additional Home Improvement
Loans"), the Custodian shall retain possession and custody of the Mortgage Files
relating thereto pursuant to Section 4 hereof and, upon
11
<PAGE>
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 Home Improvement
Loans, Seller will advise the Custodian whether the Custodian will be required
to review any Additional Home Improvement Loans. Seller undertakes to use its
best efforts to make available for review any such Additional Home Improvement
Loans as soon as is reasonably possible. Upon receipt thereof, the Custodian
shall perform its review of the Mortgage Files relating to any Additional Home
Improvement 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 Home Improvement Loans under this Agreement, and
at the time any Home Improvement Loans are transferred to Seller pursuant to
Section 4(c) hereof, a revised Loan Schedule reflecting current information with
respect to all Home Improvement 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 set-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 Home
Improvement 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
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
12
<PAGE>
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 Home Improvement Loan is repurchased by
Seller from Buyer, the receipt by Buyer of the Repurchase Price for such Home
Improvement Loan under the Repurchase Agreement. If this Agreement terminates
with respect to any Home Improvement 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 Home Improvement
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
Home Improvement Loan and the termination and release of all of Buyer's right,
title and interest in such Home Improvement Loan, and the Custodian upon receipt
of such document shall deliver the related Mortgage File for such Home
Improvement 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, to the extent applicable, 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
13
<PAGE>
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 Home Improvement Loans) any Third Person or Persons
with any interest in the Home Improvement 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 Home Improvement
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 Home Improvement 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 Home Improvement Loans) Third Persons having interests
in the Home Improvement 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 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 Home Improvement Loan in recordable form and shall endorse
the Note without recourse, representation and
14
<PAGE>
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 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
15
<PAGE>
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: Barry Tenenholtz
Telephone: (214) _______
Telecopy: (214) _______
with a copy at the same address to:
Attention: General Counsel
Telephone: (214) 583-3700
Telecopy: (214) 583-3737
If to Buyer:
Merrill Lynch Mortgage Capital, Inc.
Merrill Lynch World Headquarters
World Financial Center
North Tower - 8th Floor
New York, New York 10281
Attention: James Cason
Telephone: (212) 449-1219
Telecopy: (212) 449-6673
Merrill Lynch Credit Corporation
c/o Merrill Lynch Mortgage Capital, Inc.
Merrill Lynch World Headquarters
World Headquarters
World Financial Center
North Tower - 8th Floor
New York, New York 10281
Attention: James Cason
Telephone: (212) 449-1219
16
<PAGE>
Telecopy: (212) 449-6693
If to the Custodian:
Bank One, Texas, N.A.
1717 Main Street, 4th Floor
Dallas, Texas 75201
Attn: [ ]
Telephone: (214) ________
Telecopy: (214) ________
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.
17
<PAGE>
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
18
<PAGE>
any of its property may be bound and will not result in the 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 Home Improvement Loan owned by such owner
and any insurance applicable thereto.
SECTION 23. Appointment of Agent. MLCC hereby appoints MLMCI as its agent
for purposes of accepting any Trust Receipt to be delivered to MLCC or
surrendering any Trust Receipt to the Custodian, transferring any Home
Improvement Loans, issuing instructions with regard to Home Improvement Loans,
examining and inspecting any Home Improvement Loans, accessing the Custodial
Register, consenting to the release of Home Improvement Loans to
19
<PAGE>
the Seller, terminating the Agreement pursuant to Section 10, removing the
Custodian and appointing a successor thereto pursuant to Section 11, executing
and delivering any documentation required under the Agreement, receiving and
giving notice as contemplated in the Agreement and such other purposes as MLCC
may direct. The appointment of such agent shall not relieve MLCC of its
obligations as Buyer hereunder.
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.
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:
MERRILL LYNCH MORTGAGE CAPITAL INC.
By:
-----------------------------------
Name:
Title:
MERRILL LYNCH CREDIT CORPORATION
By:
-----------------------------------
Name:
Title:
21
<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: Attention:
Pursuant to the Tri-Party Custodial Agreement dated as of April 10, 1997
(the "Custody Agreement") among Bank One, Texas, N.A. (the "Custodian"),
FirstPlus Financial, Inc. ("Seller"), Merrill Lynch Mortgage Capital Inc. and
Merrill Lynch Credit Corporation, Seller hereby delivers to you (i) the
documents described below in connection with the Home Improvement Loans
identified on the attached schedule and (ii) an updated Loan Schedule
identifying each Home Improvement Loan in your custody (including the Home
Improvement 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 Home Improvement Loans.
With respect to each of the Home Improvement 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, if any 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, if any
(8) Lender's Title Insurance Policy (except in the case of unsecured Home
Improvement Loans) 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 terms of the
Date:_____________________ 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: [Merrill Lynch Mortgage Capital Inc.]
[Merrill Lynch Credit Corporation]
DATE: ____________________
Pursuant to the Tri-Party Custodial Agreement dated as of April 10, 1997,
among FirstPlus Financial, Inc., Merrill Lynch Mortgage Capital Inc., Merrill
Lynch Credit Corporation 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 Home Improvement 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.
[MERRILL LYNCH MORTGAGE CAPITAL
INC.]
[MERRILL LYNCH CREDIT CORPORATION]
By:
----------------------------------
Name:
Title:
[Name of transferee] hereby acknowledges
that (i) the Home Improvement 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]
[Merrill Lynch Mortgage Capital Inc.]
[Merrill Lynch Credit Corporation]
Re: Tri-Party Custodial Agreement dated as of April
10, 1997, among FirstPlus Financial, Inc., Merrill
Lynch Mortgage Capital Inc., Merrill Lynch Credit
Corporation and Bank One, Texas, N.A., as
Custodian
Gentlemen:
In accordance with the provisions of Paragraph 3 of the above-referenced
Tri-Party Custodial Agreement (the "Custody Agreement"), the undersigned, as
Custodian, hereby certifies that as to each Home Improvement 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
Home Improvement 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)(7) 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 [Merrill Lynch Mortgage Capital Inc.] [Merrill Lynch Credit Corporation] (the
"Buyer") or its transferee pursuant to the terms of the Custody Agreement.
This Trust Receipt is not a negotiable instrument. The Buyer may, however,
transfer this receipt by a special endorsement to one other party. The party
that takes this receipt from the Buyer or its affiliate by special endorsement
may only transfer this receipt by a second endorsement in the Buyer's or its
affiliate's favor.
The Custodian will accept and act on instructions with respect to the Home
Improvement Loans only upon surrender of this receipt at its Corporate Trust
Office, [ADDRESS], Attention:
C-1
<PAGE>
_________________. If the receipt has been endorsed and is held by a Person
other than the Buyer 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 to us stating that an Event of Default has
occurred under a repurchase agreement relating to this Trust Receipt between the
Buyer 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 D
NOTICE OF TERMINATION
[date]
TO: Bank One, Texas, N.A., as Custodian
FROM: [Merrill Lynch Mortgage Capital Inc.]
[Merrill Lynch Credit Corporation]
[and, one or more Third Persons, if applicable]
DATE: ____________________
You are hereby notified that the Tri-Party Custodial Agreement, dated as
of April 10, 1997, among FirstPlus Financial, Inc., Merrill Lynch Mortgage
Capital Inc., Merrill Lynch Credit Corporation, and Bank One, Texas, N.A., as
Custodian, is terminated pursuant to Section 10 of such Agreement and you are
instructed to deliver all property in your possession with respect to such
Agreement to [the undersigned Person or Persons as their interests in the Home
Improvement Loans appear on your records].
[MERRILL LYNCH MORTGAGE CAPITAL
INC.]
[MERRILL LYNCH CREDIT CORPORATION]
By:
------------------------------------
Name:
Title:
[_______________________________________]
By:
------------------------------------
Name:
Title:
cc: FirstPlus Financial, Inc.
D-1
<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 Home Improvement 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 Home Improvement 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: Tri-Party Custodial Agreement dated as of April
10, 1997, among FirstPlus Financial, Inc., Merrill
Lynch Mortgage Capital Inc., Merrill Lynch Credit
Corporation and Bank One, Texas, N.A., as
Custodian (the "Custody Agreement")
Gentlemen:
On [date] you issued a trust receipt in the name of [ ] evidencing
entitlement to the Home Improvement Loans described on Schedule A hereto and
held by you as Custodian. You issued that receipt pursuant to the Custody
Agreement. 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 Home Improvement 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 Home Improvement 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.
[MERRILL LYNCH MORTGAGE
CAPITAL INC.]
[MERRILL LYNCH CREDIT CORPORATION]
By:
------------------------------------
Name:
Title:
F-2
<PAGE>
EXHIBIT G
Bank One, Texas, N.A.,
as Custodian
[ADDRESS]
Re: Tri-Party Custodial Agreement dated as of April
10, 1997, among FirstPlus Financial, Inc., Merrill
Lynch Mortgage Capital Inc., Merrill Lynch Credit
Corporation and Bank One, Texas, N.A., as
Custodian (the "Custody Agreement")
Gentlemen:
On [date] you issued a trust receipt in the name of [ ] (the "Buyer")
evidencing entitlement to the Home Improvement Loans described on Schedule __
hereto and held by you in the name of ____________________, as Custodian. You
issued that receipt pursuant to the Custody Agreement. 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 Home Improvement 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 the Buyer. Accordingly, this letter authorizes you to act
on our instructions regarding such Home Improvement 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 Home Improvement 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.
[MERRILL LYNCH MORTGAGE CAPITAL
INC.]
[MERRILL LYNCH CREDIT CORPORATION]
By:
------------------------------------
Name:
Title:
G-2
<PAGE>
EXHIBIT H
REQUEST FOR RELEASE OF DOCUMENTS
To: Bank One, Texas, N.A.,
as Custodian
[ADDRESS]
Re: Tri-Party Custodial Agreement dated as of April
10, 1997, among FirstPlus Financial, Inc., Merrill
Lynch Mortgage Capital Inc., Merrill Lynch Credit
Corporation and Bank One, Texas, N.A., as
Custodian (the "Custody Agreement")
In connection with the administration of Home Improvement Loans held
by you as Custodian for [Merrill Lynch Mortgage Capital Inc.] [Merrill Lynch
Credit Corporation] (the "Buyer") and Third Persons from time to time pursuant
to the above-referenced Custody Agreement, we hereby request the release, and
acknowledge receipt, of the [specify documents] [related Mortgage Files] for the
Home Improvement Loans described in the attached Loan Schedule, for the reason
indicated.
Mortgagor's Name Address and Zip Code:
Home Improvement Loan Number:
Reason for Requesting Documents (check one):
____1. Home Improvement Loan paid in full. (The Custodian shall delete the
Home Improvement Loan from the applicable Loan Schedule and send the
amended Loan Schedule to Buyer and any related Third Person.)
____2. Repurchase of Home Improvement Loan pursuant to the Repurchase
Agreement. (The Custodian shall delete the Home Improvement Loan
from the applicable Loan Schedule and send the amended Loan Schedule
to Buyer and any related Third Person.)
____3. Delivery of substituted Home Improvement Loan. (The Custodian is
hereby authorized to delete the Home Improvement Loan from the
applicable Loan Schedule attached hereto and send the amended Loan
Schedule to Buyer and any related Third Person.)
____4. Home Improvement Loan liquidated by _______________. (The Custodian
is hereby authorized to delete the Home Improvement Loan from the
applicable Loan Schedule attached hereto and send the amended Loan
Schedule to
H-1
<PAGE>
Buyer and any related Third Person.)
____5. Home Improvement 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
Home Improvement 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:
[MERRILL LYNCH MORTGAGE CAPITAL INC.]
[MERRILL LYNCH CREDIT CORPORATION]
(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: Tri-Party Custodial Agreement, dated as of April 10,
1997, among Merrill Lynch Mortgage Capital Inc.
("MLMCI" [and the "Buyer"]), Merrill Lynch Credit
Corporation ("MLCC" [and 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 April 10, 1997 among MLMCI, MLCC and Seller, for the release by
Buyer of its interest in the Home Improvement 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 Home Improvement Loans listed on Schedule A hereto; and
(d) Confirms that it has not granted or created any interest in the Home
Improvement 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_ [MERRILL LYNCH MORTGAGE CAPITAL INC.]
[MERRILL LYNCH CREDIT CORPORATION]
By:
------------------------------
Name: ____________________________
Title: ___________________________
I-1
<PAGE>
ANNEX I
SUPPLEMENTAL TERMS TO
MASTER REPURCHASE AGREEMENT,
DATED AS OF APRIL 10, 1997, AMONG
MERRILL LYNCH MORTGAGE CAPITAL INC.
AND
MERRILL LYNCH CREDIT CORPORATION
AND
FIRSTPLUS FINANCIAL, INC.
1. APPLICABILITY. These Supplemental Terms (the "Supplemental Terms") to
Master Repurchase Agreement (the "Repurchase Agreement") modify the terms
and conditions of the Repurchase Agreement and the terms under which the
parties hereto may, from time to time, enter into Transactions (the
Repurchase Agreement, together with these Supplemental Terms, the
"Agreement"). The Agreement shall be read, taken and construed as one and
the same instrument. Capitalized terms used in these Supplemental Terms
and not otherwise defined herein shall have the meanings set forth in the
Repurchase Agreement.
2. ADDITIONAL DEFINITIONS.
(a) Notwithstanding the definition set forth in Paragraph 2(h) of the
Repurchase Agreement, with respect to Loans, the "Market Value" of
Loans shall be the price of Loans determined, as of any date of
determination, to be the fair market value thereof as determined
solely by Buyer in good faith; provided, however, that (i) a Market
Value of zero shall be assigned to each Loan that does not at any
time comply with the representation and warranty of Seller set forth
in Paragraph 7(b)(xii) of these Supplemental Terms, (ii) the Market
Value of Loans shall not in any event exceed the outstanding
principal amount thereof, (iii) any Loan that has been subject to
the Agreement for more than 180 days in aggregate shall have a
Market Value of zero and (iv) any Loan with respect to which there
is a breach of a representation, warranty or covenant that is not
cured within any applicable cure period shall have a Market Value of
zero.
(b) "Advance Rate" shall mean a fraction (expressed as a percentage),
the numerator of which is one and the denominator of which is
Buyer's Margin Percentage.
(c) "Book Net Worth" shall refer to the equity of Seller
<PAGE>
determined in accordance with GAAP.
(d) "Borrower" shall refer to the obligor or any Loan.
(e) "Buyer" shall mean MLCC, in the case of Loans secured by second or
third liens, and MLMCI in all other cases.
(f) "Buyer's Margin Percentage" shall refer to the percentage used to
calculate Buyer's Margin Amount, which shall be 97%.
(g) "Code" shall refer to the Internal Revenue Code of 1986, as amended.
(h) "Computer Tape" shall have the meaning set forth in the Custodial
Agreement.
(i) "Custodial Agreement" shall refer to the Custodial Agreement, by and
among Seller, MLCC, MLMCI and the Custodian, providing for the
custody of records relating to Loans, as the same may be amended,
supplemented or otherwise modified from time to time.
(j) "Custodial Confirmation Statement" shall refer to the confirmation
statement issued by the party named as custodian in the Custodial
Agreement that evidences ownership of the Loans indicated thereon.
(k) "Custodian" shall refer to and its permitted successors as custodian
under the Custodial Agreement.
(l) "FHA" means the Federal Housing Administration.
(m) "FHA-Approved Mortgagee" means a lender or other mortgagee approved
by the FHA as a mortgagee for Title I Loans.
(n) "GAAP" shall mean generally accepted accounting principles
consistently applied.
(o) "Loans" shall refer to both Title I Loans and Uninsured Loans.
(p) "LIBOR" shall mean the London Interbank Offered Rate for one-month
United States Dollar deposits as set forth on page 4833 of Telerate
as of 8:00 a.m., New York City time, on the date of determination.
(q) "List of Loans" shall be as defined in Paragraph 3 of these
Supplemental Terms.
2
<PAGE>
(r) "MLCC" shall refer to Merrill Lynch Credit Corporation.
(s) "MLMCI" shall refer to Merrill Lynch Mortgage Capital Inc.
(t) "Monthly Report" shall mean the monthly report, substantially in the
form attached hereto as Exhibit C, submitted by Seller to Buyer
including, with respect to the insurance coverage reserve account of
Seller, (i) the amount of insurance coverage remaining in the
account and (ii) the number and aggregate principal amount of loans
having potential claims to the account.
(u) "Mortgage" shall mean, to the extent applicable to a particular
Loan, the mortgage or other instrument creating a lien on the
property securing a Note.
(v) "Note" shall mean the note or other evidence of indebtedness of a
Borrower secured by a Mortgage.
(w) "Purchase Price" shall mean with respect to each Loan, (i) on the
Purchase Date, in consideration for the transfer of the Loan by
Seller to Buyer, the price equal to the lesser of (A) the product of
the Advance Rate times the Market Value or (B) the outstanding
principal balance of such Loan on the Purchase Date, and (ii)
thereafter, except where Buyer and Seller agree otherwise, such
price increased by the amount of any cash transferred by Buyer to
Seller pursuant to paragraph 4(b) hereof and decreased by the amount
of any cash transferred by Seller to Buyer pursuant to Paragraph
4(a) hereof or applied to reduce Seller's obligations under clause
(ii) of Paragraph 5 hereof;
(x) "RAC" shall mean RAC Financial Group, Inc., the direct or indirect
sole shareholder of Seller.
(y) "Securities" shall be deemed to mean Loans (including the rights to
any FHA Insurance under the Title I Program relating thereto) and,
notwithstanding the use of the term "Securities" in the Master
Repurchase Agreement, in no event shall such Loans be deemed to be
securities for the purposes of any securities or blue sky laws.
(z) "Seller" shall refer to FIRSTPLUS FINANCIAL, INC.
(aa) "Seller's Contract of Insurance" shall refer to Seller's insurance
contract with the FHA under the Title I Program.
3
<PAGE>
(bb) "Seller's Origination Guide" shall refer to the origination guide of
Seller for Loans in the form most recently accepted in writing by
Buyer.
(cc) "Title I Loans" means first and junior lien or, to the extent
permitted hereby, unsecured home improvement loans or retail
installment sales contracts, and related promissory notes, insured
under the FHA's Title I Program, and including without limitation,
all rights to receive payments which are due pursuant thereto and
all other proceeds thereof (including any recourse rights against
third persons) from and after the related Purchase Date, but
excluding any rights to receive payments which are due prior to the
related Purchase Date.
(dd) "Title I Program" shall mean the Title I insurance program of the
FHA.
(ee) "Transaction" shall, in addition to the definition set forth in the
Repurchase Agreement, refer to substitutions pursuant to Paragraph 9
of the Repurchase Agreement.
(ff) "Uninsured Loans" means first, second and third lien home
improvement loans or retail installment sales contracts, and related
promissory notes (none of which are insured under the FHA's Title I
Program) and including without limitation, all rights to receive
payments which are due pursuant thereto and all other proceeds
thereof (including any recourse rights against third persons) from
and after the related Purchase Date, but excluding any rights to
receive payments which are due prior to the related Purchase Date.
3. CONFIRMATIONS. Each 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 the objecting party's
receipt of such Confirmation. The Loans relating to each Transaction shall
be identified on a detailed listing to be provided by Seller to Buyer (a
"List of Loans") and may be identified in the related Confirmation by
reference to such list. Each List of Loans will indicate for each Loan
whether it is insured under the FHA's Title I Program.
4
<PAGE>
4. MARGIN MAINTENANCE.
(a) Paragraph 4(b) of the Repurchase Agreement is hereby modified to
provide that if the notice to be given by Buyer to Seller under such
paragraph is given at or prior to 10:00 a.m., New York City time,
Seller shall transfer the Additional Purchased Securities to Buyer
prior to 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 the Additional Purchased Securities
prior to the close of business in New York City on the business day
immediately following the date of such notice. The Custodial
Agreement shall set forth further terms and provisions relating to
Buyer's and Seller's rights and obligations under Paragraph 4 of the
Repurchase Agreement.
(b) Paragraph 4 of the Repurchase Agreement is hereby modified by adding
the following at the end thereof:
"(f) In the event that Seller fails to comply with the
provisions of this Paragraph 4, Buyer shall not enter into any
additional Transactions hereunder after the date of such
failure."
5. INCOME PAYMENTS. Paragraph 5 of the Repurchase Agreement is hereby
modified to provide that, so long as no Event of Default shall have
occurred and be continuing, Seller shall be entitled to all payments of
principal and interest and principal prepayments payable to the holder of
the Loans. Upon the occurrence of an Event of Default, payment of
principal and interest and principal prepayments shall be paid directly to
Buyer.
6. INTENT OF THE PARTIES; SECURITY INTEREST.
(a) It is the intention of the parties hereto that any Transaction
involving the sale of Loans hereunder shall include all rights to
any related FHA insurance applicable thereto under the Title I
Program, subject to applicable FHA insurance regulations.
(b) In the event, for any reason, any Transaction is construed by any
court as a secured loan rather than a purchase and sale, the parties
intend that Seller shall have granted to Buyer a perfected first
priority security interest in all of the Loans and any related
5
<PAGE>
FHA insurance applicable thereto under the Title I Program.
(c) 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.
(d) In the event that Buyer elects to engage in repurchase transactions
with the Loans (including the rights to any related FHA insurance)
or otherwise elects to pledge or hypothecate such Loans, Seller
shall, at the request of Buyer and at the expense of Seller, provide
Buyer's counterparty in such repurchase transaction with an opinion
of counsel to the effect that such counterparty has a perfected
first priority security interest in such Loans.
(e) Notwithstanding Paragraph 9(b) of the Repurchase Agreement, it is
the intention of the parties that the Custodian, rather than Seller,
shall maintain custody of the Purchased Securities pursuant to the
Custodial Agreement.
7. REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) Each party represents and warrants, and shall on and as of the
Purchase Date of any Transaction be deemed to represent and warrant,
as follows:
(i) The execution, delivery and performance of the Agreement and
the performance of each Transaction do not and will not result
in or require the creation of any lien, security interest or
other charge or encumbrance (other than pursuant to the
Agreement) upon or with respect to any of its properties; and
(ii) The Agreement is, and each Transaction when entered into under
the Agreement will be, a legal, valid and binding obligation
of it enforceable against it in accordance with the terms of
the Agreement.
(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
6
<PAGE>
pursuant to the Agreement are either original documents or
genuine and true copies thereof;
(ii) Seller is a separate and independent corporate entity from the
Custodian named in the Custodial Agreement, Seller does not
own a controlling interest in such Custodian either directly
or through affiliates, such Custodian does not own a
controlling interest in Seller either directly or through
affiliates and no director or officer of Seller is also a
director or officer of such Custodian;
(iii) None of the Purchase Price for any Loans 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 System, and Seller has not
taken any action that might cause any Transaction to violate
any regulation of the Federal Reserve Board;
(iv) Each Loan conforms to the current market standards of
institutional securitization applicable to contracts and loans
similar in nature to the Loans; all Loans will comply with the
applicable representations and warranties attached as Exhibit
B hereto;
(v) Each Loan was originated by Seller or purchased by Seller from
Seller's list of approved originators or acquired in a bulk
sale transaction in the ordinary course of business (which
bulk sale transaction does not constitute a "bulk sale" as
defined in the Uniform Commercial Code);
(vi) Each 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 or on behalf of Seller;
(vii) Since the date of the most recent financial statement of
Seller, delivered by it pursuant to Paragraph 11 of these
Supplemental Terms, there has been no material adverse change
in the financial condition or results of operations of Seller;
7
<PAGE>
(viii) Seller shall be at the time it delivers any Loans for any
Transaction, and shall continue to be, through the Purchase
Date relating to each such Transaction, the legal and
beneficial owner of such Loans, free of any lien, security
interest, option or encumbrance except for the security
interest created by or pursuant to the Agreement;
(ix) Seller and each servicer is an FHA-Approved Mortgagee;
(x) Each Title I Loan is insured under the FHA's Title I Program;
(xi) Seller has taken all action with respect to the Agreement, the
Custodial Agreement and the transactions contemplated hereby
and thereby in order to comply with the provisions of all
applicable law;
(xii) At least 97% of the aggregate outstanding Repurchase Price for
all Transactions relates to Loans that are not more than
fifty-nine (59) days delinquent; not more than 3% of the
aggregate outstanding Repurchase Price for all Transactions
relates to Loans that are more than fifty-nine (59) days
delinquent but not more than (90) days delinquent; and
(xiii) Seller is the direct or indirect wholly owned subsidiary of
RAC.
(c) Seller covenants with Buyer, from and after the date of the
Agreement, as follows:
(i) Seller will take all actions necessary to maintain the FHA
insurance on the Title I Loans;
(ii) Seller will take all actions necessary to maintain its status
as an FHA-Approved Mortgagee;
(iii) Seller will take all actions necessary with respect to the
Agreement, the Custodial Agreement and the transactions
contemplated hereby and thereby in order to maintain
compliance with the provisions of all applicable law;
(iv) Seller shall immediately notify Buyer if an Event of Default
or an event contemplated by Paragraph 9 of these Supplemental
Terms shall have occurred;
8
<PAGE>
(v) Seller shall deliver a Computer Tape relating to the Custodial
Agreement to Buyer with such frequency as Buyer may require
but in no event less frequently than monthly;
(vi) No Loan shall be subject to the Agreement for more than 180
days in aggregate;
(vii) Seller shall deliver to Buyer a Monthly Report on the tenth
business day of each month during the term of the Agreement;
(viii) In the event that Buyer elects to exercise its remedies with
respect to the Loans pursuant to the terms of the Agreement
after an Event of Default by Seller, Seller shall do all
things necessary in order to insure that the rights and
benefits of any FHA insurance applicable to the Title I Loans
are transferred to Buyer or its designee and Seller further
covenants to cooperate with Buyer in realizing the benefits of
such insurance for the benefit of Buyer or its designee,
subject to the compliance by Buyer or its designee with the
applicable HUD rules and regulations;
(ix) Seller shall notify Buyer upon the anticipated sale or
transfer by RAC of any ownership interest in Seller prior to
any such sale or transfer;
(x) The ratio of Seller's outstanding indebtedness (determined in
accordance with GAAP but including for this purpose any
warehouse or repurchase facilities accounted for as off
balance sheet transactions) to all lenders (including, without
limitation, all indebtedness incurred under any loan
agreement, warehouse finance agreement and repurchase
agreement) to its Book Net Worth shall not at any time be more
than 8 to 1;
(xi) Seller shall not experience losses or changes in its financial
condition that cause its Book Net Worth for any two
consecutive calendar quarters to be less than or equal to 80%
of its Book Net Worth as of the commencement of such period;
(xii) Seller's Book Net Worth shall not at any time, from the date
of the Agreement to April 30, 1997, be less than $140,000,000
and shall not at any time thereafter be less than
$200,000,000; and
(xiii) Seller shall not pay or declare any dividend or
9
<PAGE>
other distribution except (a) dividends payable solely in the form of capital
stock, (b) dividends to RAC to the extent of Seller's portion of the
consolidated federal income tax liability of RAC and its subsidiaries, (c)
dividends to RAC to the extent of interest on the subordinated debt of Seller
owed by RAC, (d) other dividends to RAC that do not in any fiscal year of Seller
when added to the dividends during that year under clauses (b) and (c) preceding
exceed 25% of Seller's net income for that fiscal year, or (e) dividends
otherwise approved in writing by Buyer; notwithstanding the above, Seller may
not pay or declare any dividends at any time while an Event of Default exists
and is continuing or would be created by such dividends.
8. EVENTS OF DEFAULT.
(a) The term "Event of Default" shall, in addition to the definition set
forth in the Repurchase Agreement, include the following events:
(i) Any governmental or self-regulatory authority shall take
possession of Buyer or Seller or their property or appoint any
receiver, conservator or other official, or such party shall
take any action to authorize any of the actions set forth in
this clause (i).
(ii) Buyer shall have reasonably determined that Seller is or will
be unable to meet its commitments under the 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 24 hours.
(iii) The Agreement shall for any reason cease to create a valid,
first priority security interest in any of the Loans purported
to be covered thereby.
(iv) 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 the same remains
undischarged for a period of sixty (60) days during which
execution of such judgment is not effectively stayed.
(v) Any representation or warranty made by Seller in the Agreement
or any Custodial Agreement shall
10
<PAGE>
have been incorrect or untrue in any material respect when
made or repeated or when deemed to have been made or repeated;
provided, however, that in the case of representations and
warranties made with respect to the Purchase Securities that
are Loans, such circumstances shall not constitute an Event of
Default if, after determining the Market Value of the Loans
without taking into account the Loans with respect to which
such circumstances have occurred, no other Event of Default
shall have occurred and be continuing.
(vi) Any covenant made by Seller in the Agreement or any Custodial
Agreement shall have been breached in any material respect;
provided, however, that in the case of covenants made with
respect to the Purchased Securities that are Loans such
circumstances shall not constitute an Event of Default if,
after determining the Market Value of the Loans without taking
into account the Loans with respect to which such
circumstances have occurred, no other Event of Default shall
have occurred and be continuing.
(vii) 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 including, without limitation, any
such agreement of Seller to which Buyer is a party.
(b) Upon the occurrence and during the continuance of an Event of
Default by Seller:
(i) All rights of Seller to receive payments which it would
otherwise be authorized to receive pursuant to Paragraph 5 of
these Supplemental Terms shall cease, and all such rights
shall thereupon become vested in Buyer, which shall thereupon
have the sole right to receive such payments and apply them to
the aggregate unpaid Repurchase Prices owed by Seller.
(ii) All payments which are received by Seller contrary to the
provisions of the preceding clause (i) shall be received in
trust for the benefit of Buyer and shall be segregated from
other funds of Seller.
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(iii) Buyer may exercise any self-help remedies permitted by
applicable law.
(iv) Buyer shall be entitled to the right of set off with respect
to any amounts owed by Buyer or any affiliate of Buyer to
Seller or any affiliate of Seller under any contract, margin
account or other arrangement.
(c) The parties hereby agree that sales of Loans under Paragraph
11(d)(i) of the Repurchase Agreement shall be deemed to include and
permit sales of Loans pursuant to a securities offering.
9. EVENTS OF TERMINATION.
(a) At the option of Buyer, exercised by written notice to Seller, the
Repurchase Date for each Transaction under the Agreement shall be
deemed to immediately occur in the event that:
(i) In the judgment of Buyer a material adverse change shall have
occurred in the business, operations, properties, prospects or
condition (financial or otherwise) of Seller;
(ii) Buyer shall request written assurances as to the financial
well-being of Seller and such assurances shall not have been
provided within 24 hours of such request;
(iii) 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);
(iv) The senior debt obligations or short-term debt obligations of
Merrill Lynch & 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;
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(v) Any representation or warranty made by Seller in the Agreement
or any Custodial Agreement shall have been incorrect or untrue
in any material respect when made or repeated or when deemed
to have been made or repeated;
(vi) Seller shall fail to promptly notify Buyer of (i) the
acceleration of any debt obligation or the termination of any
credit facility of Seller by any party other than Seller; (ii)
the amount and maturity of any debt in excess of $20,000,000
assumed after the date hereof; (iii) any adverse developments
with respect to pending or future material litigation
involving Seller; and (iv) any other developments which might
materially and adversely affect the financial condition of
Seller;
(vii) Seller shall have failed to comply in any material respect
with its obligations under the Custodial Agreement;
(viii) The approval of the FHA with respect to Seller or any
servicer as an FHA-Approved Mortgagee shall have been
withdrawn or adversely modified; or
(ix) Either Daniel T. Phillips or Eric Green shall cease to be
employed by Seller in his current capacity (or in an
equivalent capacity) on a full-time basis or as a consultant
devoting sufficient time (in the sole judgment of Buyer) to
the performance of such duties.
(b) The events specified in Paragraph 9(a) of these Supplemental Terms
which may, at the option of Buyer, cause an acceleration of the
Repurchase Date for a Transaction shall be in addition to any other
rights of Buyer to cause such an acceleration under the Agreement.
10. FINANCIAL STATEMENTS. As of the date hereof, Seller shall have provided
Buyer with the audited year-end financial statements of Seller and RAC and
the most recent publicly available interim financial statement of RAC.
Seller shall provide Buyer (i) within one hundred and twenty (120) days
after the end of the fiscal year of Seller and RAC with an audited
year-end consolidated financial statement for such fiscal year, together
with the report of independent certified accountants, (ii) within sixty
(60) days after the end of each of the first three fiscal quarters in each
fiscal year unaudited consolidated statements of financial
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condition and consolidated statement of income of Seller and RAC and (iii)
within thirty (30) days after the last day of each calendar month
consolidated statements of income for such month and balance sheets as of
the end of such month accompanied in each case by a certificate of the
chief financial officer or treasurer of Seller stating (x) that such
financial statements are fairly presented in accordance with generally
accepted accounting principles and (y) that no Event of Default exists
under the Agreement. Each delivery of Loans by Seller to Buyer hereunder
will constitute a representation by Seller that there has been no material
adverse change in Seller's financial condition not disclosed to Buyer
since the date of the most recent financial statement delivered to Buyer
as aforesaid. Seller shall provide Buyer, from time to time at Seller's
expense, with such information of a financial or operational nature
respecting Seller as Buyer may reasonably request promptly upon receipt of
such request.
11. MINIMUM AND MAXIMUM TRANSACTION AMOUNTS; MARGIN. With respect to all
Transactions hereunder:
(a) The minimum amount of any Transaction under the Agreement shall have
an aggregate Repurchase Price of $1,000,000;
(b) The aggregate outstanding Repurchase Price for the Loans subject to
the Agreement at any one time shall not exceed $300,000,000; and
(c) The aggregate outstanding principal amount of all Loans insured
under the Title I Program subject to the Agreement that are not
secured by realty or personalty shall not exceed $5,000,000.
12. REPURCHASE PRICE; PRICE DIFFERENTIAL. The Repurchase Price as of any date
shall include that portion of the Price Differential that has accrued but
has not been paid. The Price Differential shall accrue, be calculated and
be compounded on a daily basis for each Purchased Security (such
calculation to be made on the basis of a 360-day year and the actual
number of days elapsed). The Price Differential shall be payable monthly
in arrears to Buyer with respect to each Transaction. The Price
Differential for any Transaction shall, unless otherwise agreed by the
parties, be equal to the product of (i) the Repurchase Price (which shall
be the Purchase Price increased by the accrued and unpaid Price
Differential) and (ii) a per annum percentage one hundred (100) basis
points (or such other number of basis points as Buyer and Seller shall
mutually agree) in excess of LIBOR. Payment of the Price
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Differential to Buyer shall be made by wire transfer in immediately
available funds.
13. ADDITIONAL INFORMATION.
(a) At any reasonable time, Seller shall permit Buyer, its agents or
attorneys, to inspect and copy any and all documents and data in
their possession pertaining to each Security 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.
(b) Seller agrees to provide Buyer from time to time with such
information concerning Seller of a financial or operational nature
as Buyer may reasonably request.
(c) Seller shall provide Buyer 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.
14. TRANSACTION PROCEDURES; TRANSACTIONS OPTIONAL.
(a) Buyer may, in its sole reasonable discretion, reject any Security
from inclusion in a Transaction hereunder for any reason.
(b) Any provision of the Agreement to the contrary notwithstanding, each
purchase by Buyer hereunder is discretionary on the part of Buyer.
15. OPINIONS OF COUNSEL. Seller shall, on the date of the first Transaction
hereunder and, upon the reasonable request of Buyer, on the date of any
subsequent Transaction, cause to be delivered to Buyer, with reliance
thereon permitted as to any person or entity that purchases the Loans from
Buyer in a repurchase transaction, a favorable opinion of Seller's counsel
with respect to the matters set forth in Exhibit A hereto, in form and
substance reasonably acceptable to Buyer.
16. ADDITIONAL CONDITIONS. Prior to entering into the initial Transaction
under the Agreement, Seller shall cause each of the following conditions
to occur:
(a) A Custodial Agreement in a form satisfactory to Buyer shall have
been executed and delivered by the parties thereto;
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(b) Seller shall have disclosed information reasonably satisfactory to
Buyer with respect to the scheduled maturities and termination
provisions of all outstanding credit facilities and debt of Seller;
(c) Seller shall have delivered to Buyer an undated letter to Seller's
archivist authorizing and directing such archivist to make available
to Buyer and its agents all printouts and all computer software
pertaining to the Loans; and
(d) The Custodian shall have delivered to Buyer a Custodial Confirmation
Statement relating to the Loans subject to the Transaction.
17. REPURCHASE TRANSACTIONS.
(a) Ownership of all Loans shall pass to Buyer and nothing in this
Agreement shall preclude Buyer from engaging in repurchase
transactions with the Loans or otherwise pledging or hypothecating
the Loans, but no such transaction shall relieve Buyer of its
obligations to resell and transfer 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.
(b) 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 Loans, in the event that Buyer has defaulted on its
obligations to repurchase or accept redelivery of such 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
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 Loans as
provided in Paragraph 3(e) or 11 hereof.
18. NEW YORK JURISDICTION; WAIVER OF JURY TRIAL. Seller agrees to submit to
personal jurisdiction in the State of New York in any action or proceeding
arising out of the Agreement. Buyer and Seller each hereby waives the
right of trial by
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jury in any litigation arising hereunder.
19. SERVICING ARRANGEMENTS.
(a) The parties hereto agree and acknowledge that, notwithstanding the
purchase and sale of the Loans contemplated hereby, Seller shall
cause the Loans to continue to be serviced for the benefit of Buyer
and, if Buyer shall exercise its rights to sell the Loans pursuant
to the Agreement prior to the related Repurchase Date, Buyer's
assigns; provided, however, that the obligation of Seller to cause
Loans to be serviced for the benefit of Buyer as aforesaid shall
cease upon the payment to Buyer of the Repurchase Price therefor.
(b) Seller shall cause the Loans to be serviced in accordance with the
servicing standards for similar assets employed by prudent services
in the home improvement loan industry and the home equity loan
industry, as applicable.
(c) Seller shall cause the servicer to enforce the rights of the owner
of the Loans in accordance with the standards of a prudent lender in
the home improvement loan industry and the home equity loan
industry, as applicable.
(d) If an Event of Default shall have occurred and be continuing, Buyer
may, in its sole discretion without payment of any termination fee
or any other amount to Seller or any servicer, (i) sell its right to
the Loans on a servicing released basis or (ii) terminate the
servicer of the Loans with or without cause.
(e) Except with respect to Seller, each servicer of Loans must be
approved by Buyer.
20. FURTHER ASSURANCES. Seller shall promptly provide such further assurances
or agreements as Buyer may reasonably request in order to effect the
purposes of the Agreement.
21. BUYER AS ATTORNEY-IN-FACT. Buyer is hereby appointed to act after the
occurrence and during the continuation of an Event of Default as the
attorney-in-fact of Seller for the purpose of carrying out the provisions
of the 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 after
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the occurrence and during the 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 Securities and to give full discharge for the
same.
22. TERMINATION. Notwithstanding any provisions of Paragraph 15 of the Master
Repurchase Agreement to the contrary, the Agreement and all Transactions
outstanding hereunder shall terminate automatically without any
requirement for notice on the date occurring eleven calendar months and
twenty-nine days after the date as of which the Agreement is entered into;
provided, however, that the 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.
23. APPOINTMENT OF AGENT. MLCC hereby appoints MLMCI as its agent for purposes
of reviewing and executing Confirmations, determining Market Value,
exercising any termination option provided for in Paragraph 9 of these
Supplemental Terms, exercising MLCC's rights under any margin maintenance
provision of the Agreement, exercising MLCC's rights under the default
provisions of the Agreement and such other purposes as MLCC may direct.
The appointment of such agent shall not relieve MLCC of its obligations as
Buyer hereunder.
24. BINDING TERMS. All of the covenants, stipulations, promises and agreements
in the Agreement shall bind the successors and assigns of the parties
hereto, whether expressed or not.
25. NOTICES AND OTHER COMMUNICATIONS. Any provision of Paragraph 13 of the
Repurchase Agreement to the contrary notwithstanding, any notice required
or permitted by the Agreement shall be in writing (including telegraphic,
facsimile or telex communication) and shall be effective and deemed
delivered only when received by the party to which it is sent; provided,
however, that a facsimile transmission shall be deemed to be received when
transmitted so long as the transmitting machine has provided an electronic
confirmation of such transmission. Any such notice shall be sent to a
party at the address or facsimile transmission number set forth in Annex
II attached hereto.
26. INCORPORATION OF TERMS. The Repurchase Agreement as supplemented hereby
shall be read, taken and construed as one and the same instrument.
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27. EXPENSES. Seller shall pay its own expenses and all reasonable
out-of-pocket costs and expenses (including fees and disbursements of
counsel): (1) of Buyer incident to the preparation and negotiation of the
Agreement, the Custodial Agreement and any documents relating thereto,
provided that Seller's liability for such costs and expenses of Buyer
pursuant to this clause 1 shall not exceed a total of $17,500; (2) of
Buyer incident to the preparation and negotiation of any amendments or
waivers thereto, and the protection of the rights of Buyer thereunder; and
(3) of Buyer incident to the enforcement of payment of amounts due under
the Agreement or the Custodial Agreement, whether by judicial proceedings
or otherwise, including, without limitation, in connection with
bankruptcy, insolvency, liquidation, reorganization, moratorium or other
similar proceedings involving Seller. Notwithstanding any provision hereof
to the contrary, the obligations of Seller under this Paragraph 27 shall
be effective and enforceable whether or not any Transaction remains
outstanding and shall survive payment of all other obligations owed by
Seller to Buyer.
28. COUNTERPARTS. The 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.
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EXHIBIT A
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 Texas 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
Loans were originated, to the extent such registration is required by applicable
law.
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7. Each 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 Loan from Seller to Buyer. Each assignment of Mortgage related to
each such 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 Loans to
Custodian, (b) the endorsement of such Loans to Buyer and (c) the delivery of
the assignments of Mortgages related to the Loans to the Custodian in recordable
form assigning such Mortgages to Buyer, creates a valid, perfected security
interest in such 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 Loans in the hands of Seller.
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EXHIBIT B
REPRESENTATIONS AND WARRANTIES
(a) Delivery of Loan Documents. All of the original or certified
documentation required to be delivered to Buyer or the Custodian on or prior to
the Purchase Date, or as otherwise provided in this Agreement has or will be so
delivered.
(b) Payments Current. As of the Purchase Date, no Loan is more than 60
days delinquent, based on the terms of the related Note and Mortgage, if
applicable. Seller has not advanced funds, or induced, solicited or knowingly
received any advance of funds from a party other than the related Borrower,
directly or indirectly, for the payment of any amount required by the Loan.
(c) No Waiver or Modification. The terms of each Note and Mortgage, if
applicable, have not been impaired, waived, altered or modified in any respect,
except by written instruments reflected in the Loan File and no provision of any
Mortgage, if applicable, or Note has been "whited out" or erased unless such
modification has been initialed by each of the parties to the related Loan. No
instrument of waiver, alteration, modification or assumption has been executed
except for the instruments that are part of the Loan File and the terms of which
are reflected in the Loan File.
(d) No Defenses. No Note or Mortgage, if applicable, is subject to any
set-off, counterclaim or defense, including the defense of usury, nor will the
operation of any of the terms of the Note or Mortgage, if applicable, 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 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 Loan was originated.
(e) Compliance with Laws. Any and all requirements of any federal, state
or local law applicable to a 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 such Loan, and with
respect to the Title I Loans, the FHA regulations for the Title I Program; and
such Loan was originated in compliance with all applicable laws and no fraud or
misrepresentation was committed by any Person in connection therewith.
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(f) No Satisfaction or Release of Lien. No Mortgage, if applicable, has
been satisfied, canceled, subordinated or rescinded, in whole or in part. No
Mortgaged Property has been released from the lien of the related Mortgage, if
applicable, in whole or in part, nor has any instrument been executed that would
effect any such release, cancellation, subordination or rescission, other than
the subordination of the lien of such Mortgage securing a Loan (in the case of a
Title I Loan, as permitted by the FHA regulations for the Title I Program) with
respect to a superior lien on such Mortgaged Property in connection with the
refinancing of the mortgage loan relating to such superior lien.
(g) Valid Lien. With respect to a Note that is secured by a Mortgage, if
applicable, such Mortgage is or creates a valid, subsisting and enforceable lien
on the related Mortgaged Property, including, in the case of a Mortgage securing
a Home Improvement Loan, the land and all buildings on the related Mortgaged
Property.
(h) Validity of Loan Documents. Each Note and each Mortgage, if
applicable, is genuine and each is the legal, valid and binding obligation of
the Borrower thereof, enforceable in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
or other similar laws affecting creditors' rights in general and by general
principles of equity. All parties to a Note and the related Mortgage, if
applicable, had legal capacity at the time to enter into the Loan and to execute
and deliver such Note and Mortgage, and such Note and Mortgage have been duly
and properly executed by such parties.
(i) Full Disbursement of Proceeds. As of the applicable Cut-Off Date, the
proceeds of each 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 Loan and the recording of the related Mortgage, if applicable, were
disbursed, the Borrower is not entitled to any refund of any amounts paid or due
under the Note or the related Mortgage, if applicable, and any and all
requirements set forth in the related Loan documents have been complied with.
(j) Ownership. Immediately prior to the transfer thereof to Buyer, Seller
had good and marketable title to each Loan, Note and Mortgage, if applicable,
Seller was the sole owner thereof and Seller had full right to transfer each
such Loan, Note and Mortgage, if applicable, to Buyer; and upon the transfer
thereof by Seller to Buyer, Buyer became the sole transferee of each Loan, Note
and Mortgage, if applicable, free and clear of any encumbrance, equity, lien,
pledge, charge, claim or security interest (other than the interest of Seller
and Buyer therein
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under the Agreement).
(k) Ownership of Mortgaged Property. With respect to a Loan that is
secured by a Mortgaged Property, the related servicing loan file contains a
title document reflecting that title to such Mortgaged Property is held at least
50% by the Borrower under such Loan.
(l) No Defaults. Except with respect to any delinquent scheduled monthly
payment set forth in subsection (ii) above, there is no default, breach,
violation or event of acceleration existing under a Mortgage, if applicable, or
the related 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 related Loan File.
(m) No Condemnation or Damage. To the best of Seller's knowledge, the
physical condition of the related Mortgaged Property, if applicable, has not
deteriorated since the date of origination of the Loan (normal wear and tear
excepted) and there is no proceeding pending for the total or partial
condemnation of such Mortgaged Property.
(n) Mortgage Remedies Adequate. Each Mortgage, if applicable, contains
customary and enforceable provisions such as to render the rights and remedies
of the holder thereof adequate for the realization against the related Mortgaged
Property of the benefits of the security provided thereby, including, (i) in the
case of a Mortgage designated as a deed of trust, by trustee's sale, and (ii)
otherwise, by judicial foreclosure.
(o) Underwriting of Loans. Each Loan has been underwritten by the
originator thereof in accordance with such originator's then current
underwriting guidelines.
(p) Terms of Loans. Each Loan is a fixed rate loan; each Note has an
original term to maturity of not less than 24 months nor more than 25 years and
three months from the date of origination; each 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 interest
rate set forth in related Note; and no Note provides for any extension of the
original term.
(q) Security. No Note is, or has been, secured by any
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collateral except the lien of the related Mortgage, if applicable.
(r) Deed of Trust. If a Mortgage for a Loan constitutes a deed of trust, a
trustee, duly qualified under applicable law to serve as such, has been properly
designated and currently so serves as such and is named in such Mortgage, or a
valid substitution of trustee has been recorded or may be recorded and no
extraordinary fees or expenses are, or will become, payable by 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 Borrower.
(s) Types of Loans. Each Loan is either (i) a Home Improvement Loan, (ii)
a Debt Consolidation Loan, (iii) a Combination Loan, (iv) a Purchase or
Refinance Loan, or (v) subject to the prior approval of Buyer to the inclusion
within the definition of Loan, another type of mortgage or consumer loan. No
Loan was originated for the express purpose of purchasing a manufactured home.
(t) Completion of Improvements and Obligations. With respect to a Home
Improvement Loan or a Combination Loan that has been originated through a home
improvement contractor, all improvements to be made to the related Mortgaged
Property, if applicable, with the proceeds of the Loan have been completed. All
obligations of a seller or contractor under a Debt Consolidation Loan, a
Purchase or Refinance Loan or a Combination Loan have been completed in
accordance with the terms thereof as of the Purchase Date, and no additional
goods or services will be, or are required to be provided by such seller or
contractor after the Purchase Date.
(u) Origination and Servicing Practices. The origination practices used by
each originator of each Loan and the servicing and collection practices used by
Seller with respect to each Loan have been in all material respects legal,
proper, prudent and customary based upon the loan origination and servicing
industry practices applicable to the respective loan type.
(v) Servicing Practices. Each 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.
(w) No Bulk Transfer. The transfer and assignment of each Note and each
related Mortgage, if applicable, by Seller to Buyer was not subject to the bulk
transfer laws or any similar statutory provisions in effect in any applicable
jurisdiction.
(x) Relief Act Matters. No Borrower has notified Seller
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and no relief has been requested or allowed to a Borrower under the Soldiers'
and Sailors' Civil Relief Act of 1940.
(y) Superior Lien Delinquencies. No superior lien on the related Mortgaged
Property, if applicable, was more than 30 days past due at the time of
origination of the Loan.
(z) Good Repair. To the best of Seller's knowledge, the related Mortgaged
Property described in each Mortgage, if applicable, is free of damage and in
good repair or will be free of damage and in good repair following the
completion of any improvements or repairs to be financed by the related Loan.
(aa) Interest Computation Method. Interest for each Loan is calculated at
a rate of interest computed by the simple interest method or the actuarial
method.
(bb) Retail Installment Contracts. Some of the Loans may be retail
installment contracts for goods or services, and some of the Loans may be Home
Improvement Loans for goods or services, which will be either "consumer credit
contracts" or "purchase money loans" as such terms are defined in 16 C.F.R. Part
433.1.
(cc) Inspections of Improvements; and No Encroachment. To the best of
Seller's knowledge, all required inspections, licenses and certificates with
respect to the improvements and the use and occupancy of all occupied portions
of all property securing the related Mortgage, if applicable, have been made,
obtained or issued as applicable. To the best of Seller's knowledge, all
improvements which were considered in determining the appraised value of the
Mortgaged Property securing the related Mortgage, if applicable, lay wholly
within the boundaries and building restrictions lines of such Mortgaged Property
and no improvements on adjoining properties encroach upon such Mortgaged
Property and no improvement located on or being a part of such Mortgaged
Property is in violation of any applicable zoning laws or regulation.
(dd) Remedies Against Originators. In the event that any Loan was
originated by an entity (such entity, the "Originator") other than Seller or an
affiliate of Seller, and to the extent that Seller has failed to fulfill or is
not capable of fulfilling its obligations to cure, substitute or repurchase such
Loan as required hereunder, then Buyer may enforce any remedies for breach of
representations and warranties made by the Originator with respect to such Loan.
(ee) Consent of Senior Lien. With respect to each Loan that is secured by
a Mortgage and such Mortgage is not a first lien on the related Mortgaged
Property, either (i) no consent for the Loan is required by the holder of the
related prior lien or (ii)
B-5
<PAGE>
such consent has been obtained and is included in the servicer's loan file for
such Loan.
(ff) Flood Insurance. If required by federal or state law, the related
Mortgaged Property securing a Loan is covered by flood insurance with a standard
mortgagee clause and extended coverage in an amount which is not less than the
value of such Mortgaged Property. All such insurance policies meet the
requirements of the current guidelines of the Federal Insurance Administration,
conform to the requirements of the FNMA Sellers' Guide and the FNMA Servicers'
Guide, and are of standard type and quality for the locale where the related
Mortgaged Property is located. All acts required to be performed to preserve the
rights and remedies of Seller in any such insurance policies have been performed
including, without limitation, any necessary notifications of insurers and
assignments of policies or interests therein.
(gg) No Fraudulent Conveyance. The Loans are not being transferred by
Seller with any intent to hinder, delay or defraud any creditors.
(hh) Value and Marketability. To the best of Seller's knowledge, there do
not exist any circumstances, conditions or information with respect to the Loan,
the related Mortgaged Property securing same, if applicable, the Borrower or the
Borrower's credit standing that reasonably can be expected to cause private
institutional investors investing in the same type of loan to regard such Loan
as an unacceptable investment, to increase the likelihood that such Loan will
become delinquent, or adversely affect the value or marketability of the Loan.
(ii) Environmental Compliance. To the best of Seller's knowledge, the
Mortgaged Property, if applicable, is free from any and all toxic or hazardous
substances and there exists no violation of any local, state or federal
environmental law, rule or regulation.
(jj) No Buydown, GPM or Shared Appreciation Loans. No Loan contains any
provisions pursuant to which principal and interest payments are paid or
partially paid with funds deposited in any separate account established by
Seller, the Borrower or anyone else on behalf of the Borrower, or paid by any
source other than the Borrower. No Loan contains any other similar provision
which may constitute a "buydown" provision. No Loan is a graduated payment
mortgage loan. No Loan has a shared appreciation or other contingent interest
feature.
(kk) No Chattel Paper. Each Note is comprised of one original promissory
note and each such promissory note constitutes an "instrument" for purposes of
Section 9-105(1)(i)
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<PAGE>
of the Uniform Commercial Code. No Note constitutes or is comprised of "chattel
paper" as such term is defined in Section 9-105(1)(b) of the Uniform Commercial
Code. Each Note has been delivered to Buyer or the Custodian.
(ll) Entire Agreement. The Note and the Mortgage, if applicable, contain
the entire agreement between the related Borrower and the lender and all
obligations of the lender under the related Loan, and no other agreement
defines, modifies, or expands the obligations of the lender under the Loan,
except for any assumptions or modifications included in the related Loan File.
(mm) Title I insurance Coverage. Each Title I 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 as set forth in the FHA
regulations and rules for the Title I Program, and has been or will be reported
to and acknowledged by the FHA for Title I insurance under Seller's Title I
contract of insurance. Further, Seller has no knowledge of any conditions or
circumstances that could reasonably be expected to adversely affect the Title I
insurability or invalidate or cancel the Title I insurance with respect to any
Title I Loan under the Title I Program.
B-7
<PAGE>
EXHIBIT C
MONTHLY ACTIVITY REPORT
Reporting Period (_______________ - _______________)
- --------------------------------------------------------------------------------
ADVANCES INTEREST PRINCIPAL TOTAL
Beginning Pool Principal Balance
Scheduled Monthly Payments
Recovery of Delinquent Scheduled Payments
Principal Prepayments
FHA Claims Paid
Funds Received on Defaulted Loans (FHA)
-------- -------- -------
Total Funds Collected
Non Performing Sale
Non Performing Sale Proceeds (funds sent
previously)
CONVENTIONAL CHARGEOFFS
CONVENTIONAL DEFAULTED (funds received)
PAYMENTS RECEIVED ON FHA DEFAULTS
Repurchases (funds sent previously)
Net Principal Losses on FHA Title 1 Claims
Substitution Adjustment
CONVENTIONAL DEFAULTED LOANS
-------- -------- -------
Ending Pool Principal Balance
- --------------------------------------------------------------------------------
FUNDS DEPOSITED TOTAL
Total Funds Collected
Less: Servicing Fees
Less: Retained Yield
Less: FHA Insurance Premium Deposit
-------
Total Deposited Funds
- --------------------------------------------------------------------------------
DEFAULTED LOAN BALANCES
TITLE 1 CONVENTIONAL COMBINED COMBINED
CURRENT CURRENT PERIOD CUMULATIVE
AMOUNTS AMOUNTS AMOUNTS AMOUNT
-------- --------- --------- ---------
FHA Defaulted Loans
Conventional Defaulted Loans
Total Principal Advances
C-1
<PAGE>
- --------------------------------------------------------------------------------
TITLE 1 CONVENTIONAL COMBINED TOTAL
CHARGEOFFS
Principal
Interest Accrued
Funds Received
Total Loss
- --------------------------------------------------------------------------------
FHA INSURANCE
Beginning FHA Insurance Amount
Less: FHA Claims Paid
Less: Annual Reductions
Plus: Additional HUD Insurance
Ending FHA Insurance Amount
No. Loans Loan Balance 10% Loss Expected Claim
------------ -------- --------------
Less: Claims Filed in Current Period
Less: Previous Unresolved Claims Filed
Available FHA Insurance Amount
Less: Claims Pending
Expected Remaining FHA Insurance Amount
Current Cumulative
------- ----------
Rejected Claims
- --------------------------------------------------------------------------------
PORTFOLIO INFORMATION (Ending Period)
TITLE 1 CONVENTIONAL COMBINED
------- ------------ --------
Weighted Average Remaining Maturity (WARM)
Weighted Average Coupon (WAC)
Remaining Number of Loans (#)
Remaining Number of Loans ($)
C-2
<PAGE>
- --------------------------------------------------------------------------------
DELINQUENCY AND FORECLOSURE INFORMATION
TITLE 1 ONVENTIONAL TITLE 1 CONVENTIONAL COMBINED
# % # % $ % $ % $ %
----------------------------------------------------------
31-60 Days Delinquent
61-90 Days Delinquent
91 Days Plus Delinquent
Real Estate Owned
Loans in Foreclosure
Other
- --------------------------------------------------------------------------------
NET LOSS AND LIQUIDATION
TITLE 1 CONVENTIONAL COMBINED
------- ------------ --------
Liquidated Mortgage Loans
Accrued but Unpaid Interest
Net Liquidation Proceeds
Net Losses (Gains)
C-3
<PAGE>
ANNEX II
Names and Addresses for Communications Between Parties
MERRILL LYNCH MORTGAGE CAPITAL, INC.
Merrill Lynch World Headquarters
World Financial Center
North Tower - 8th Floor
New York, New York 10281
Attention: James B. Cason
Telephone: (212) 449-1219
Telecopy: (212) 449-6673
MERRILL LYNCH CREDIT CORPORATION c/o Merrill Lynch
Mortgage Capital, Inc.
Merrill Lynch World Headquarters
World Headquarters
World Financial Center
North Tower - 8th Floor
New York, New York 10281
Attention: James B. Cason
Telephone: (212) 449-1219
Telecopy: (212) 449-6693
in each case with copies to:
Merrill Lynch Mortgage Capital, Inc.
Merrill Lynch World Headquarters
World Headquarters
World Financial Center
North Tower - 8th Floor
New York, New York 10281
Attention: Michael A. Blum
Telephone: (212) 449-8486
Telecopy: (212) 449-6693
and
Brown & Wood LLP
One World Trade Center
New York, New York 10048
Attention: Michael P. Peck
Telephone: (212) 839-5576
Telecopy: (212) 839-5599
--------------------------------
FIRSTPLUS FINANCIAL, INC.
1250 Mockingbird Lane
Dallas, Texas 75247-4902
Attention: Barry Tenenholtz
Telephone: (214) _______
Telecopy: (214) _______
<PAGE>
- ------------------------------------------------------------------------------
REVOLVING CREDIT AGREEMENT
between
FIRSTPLUS FINANCIAL, INC.
and
WORKING CAPITAL MANAGEMENT CO. L.P.
Dated as of June 16, 1997
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Definitions 1
SECTION 1.2. Accounting Terms 6
SECTION 1.3. Computation of Time Periods 6
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES; SECURITY INTEREST
SECTION 2.1. The Commitment 6
SECTION 2.2. The Advances 7
SECTION 2.3. Optional Prepayments 9
SECTION 2.4. The Revolving Note 9
SECTION 2.5. Facility Fee 9
SECTION 2.6. Security Interest 9
ARTICLE III
CHANGE IN CIRCUMSTANCES
SECTION 3.1. Increased Costs 10
ARTICLE IV
PAYMENTS
SECTION 4.1. Manner and Status of Payments 11
SECTION 4.2. Application of Payments 11
ARTICLE V
CONDITIONS OF LENDING
SECTION 5.1. Conditions Precedent to Initial Advance 12
SECTION 5.2. Continuing Condition, Etc 12
SECTION 5.3. Participations 13
<PAGE>
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.1. Representations and Warranties of the Borrower 13
ARTICLE VII
COVENANTS OF THE BORROWER
SECTION 7.1. Affirmative Covenants 16
SECTION 7.2. Negative Covenants 17
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. Events of Default 18
SECTION 8.2. Rights of Lender Following Event of Default 19
SECTION 8.3. Lender Appointed Borrower's Attorney-In-Fact 21
SECTION 8.4. Borrower's Liability for Consequential Damages 21
SECTION 8.5. Indemnity 21
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1. Successors and Assigns 21
SECTION 9.2. Amendment; Waiver 21
SECTION 9.3. Notice, Etc 22
SECTION 9.4. Counterparts 22
SECTION 9.5. Headings 22
SECTION 9.6. Governing Law 22
SECTION 9.7. Right to Examine Borrower Records 22
SECTION 9.8. Certain Matters Regarding the Issuer 23
SECTION 9.9. No Recourse - Lender 23
SECTION 9.10. No Proceedings 23
<PAGE>
This REVOLVING CREDIT AGREEMENT is made as of the 16th day of June,
1997, between FIRSTPLUS FINANCIAL, INC., a Texas corporation (the
"BORROWER"), and Working Capital Management Co. L.P., a California limited
partnership (the "LENDER").
WITNESSETH:
WHEREAS, the Borrower has requested the Lender to extend to the
Borrower a revolving credit facility, and the Lender has agreed to do so
subject to the terms and conditions set forth herein.
NOW, THEREFORE, the Borrower and the Lender hereby agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. DEFINITIONS. Capitalized terms used herein and not
otherwise defined herein shall have the meanings set forth in the Sale and
Servicing Agreement. As used in this Agreement:
"ADDITIONAL ADVANCE INTEREST ACCRUAL PERIOD" means with respect to
a Payment Date and each Advance made on or after the second preceding
Determination Date and prior to the Payment Date immediately following such
second preceding Determination Date, the period from the date such Advance
was made to the day immediately preceding such Payment Date.
"ADDITIONAL DAILY ADVANCE INTEREST ACCRUAL AMOUNT" means with
respect to a given Payment Date and each Advance made on or after the second
preceding Determination Date and prior to the Payment Date immediately
following such second preceding Determination Date and a given day in the
related Additional Advance Interest Accrual Period, the product of (i) 1/360,
(ii) LIBOR (as determined by the Lender in the manner specified for the
Indenture Trustee in the Sale and Servicing Agreement) as of two London
Business Days prior to the date of such Advance plus the Advance Percentage
and (iii) the amount of such outstanding Advance as of the end of such day.
"ADVANCE" means each advance by the Lender to the Borrower pursuant
to Sections 2.1 and 2.2.
"ADVANCE PERCENTAGE" shall have the meaning set forth in the Side
Letter.
"AGREEMENT" means this agreement, as amended, supplemented or
otherwise modified from time to time.
"AVERAGE OUTSTANDING ADVANCES" means, for any period, the sum of
all Advances outstanding as of each day in such period divided by the number
of days in such period.
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<PAGE>
"COLLATERAL" means (i) the Trust Share and any other securities,
obligations and other property (including cash) which are delivered to and
held by Lender hereunder, (ii) the Trust Estate Liquidation Account and all
amounts on deposit therein and (iii) all collections, income, distributions
and claims in respect of and all proceeds of (i) and (ii).
"COMMITMENT" means, as of any date of determination, the obligation
of the Lender to make Advances to the Borrower in an aggregate principal
amount at any one time outstanding not to exceed the Commitment Amount.
"COMMITMENT AMOUNT" means, at any time, an amount equal to the
lesser of (a) $20,000,000, (b) (1) the Pool Principal Balance (as increased
by the amount set forth in the following sentence) as of such date less the
Pool Reduction Amount as of the preceding Determination Date multiplied by
(2) the lesser of (i) then-applicable Overcollateralization Base Percent
Requirement and (ii) 10%, (c) (1) the Pool Principal Balance as of such date
less (2) the Pool Reduction Amount as of the preceding Determination Date
plus (3) the Reserve Fund Balance as of such date minus (4) the Adjusted
Aggregate Note Principal Balance as of such date, and (d) the Ratio Amount.
For all computations of Commitment Amount during the period from and
including a Determination Date to but excluding a Payment Date, the Pool
Principal Balance indicated in clause (b) shall be increased by the amount on
deposit in the Collection Account respect of collections of principal on the
Home Loans during the previous Due Period.
"COMMITMENT TERMINATION DATE" means the earlier of (a) the Business
Day prior to the Maturity Date and (b) the termination of the Commitment
pursuant to Section 8.2.
"CONSOLIDATED DEBT" means at any date the Debt (exclusive of
subordinated debt) of the Borrower and its Consolidated Subsidiaries
determined on a consolidated basis as of such date.
"CONSOLIDATED NET WORTH" means at any date the consolidated
stockholder's equity of the Borrower and its Consolidated Subsidiaries
determined as of such date.
"CONSOLIDATED SUBSIDIARIES" means with respect to any Person, all
Subsidiaries which are consolidated with such Person in accordance with GAAP,
exclusive of all special purpose entities formed solely to issue or
participate in the issuance of non-recourse obligations, PROVIDED THAT (i)
all such obligations are fully secured by financial assets pledged by such
entity and (ii) such pledged financial assets are currently sufficient to pay
in full the obligations secured thereby. Such entities shall include,
without limitation, FIRSTPLUS INVESTMENT CORPORATION and FIRSTPLUS FUNDING
TRUST.
"DEBT" of any Person means at any date, without duplication, (i)
all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) all obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts payable arising
in the ordinary course of business, (iv) all obligations of such Person as
lessee which are capitalized in accordance with GAAP, (v) all indebtedness
secured by a Lien on any asset of such Person,
-2-
<PAGE>
other than indebtedness arising from the ordinary course of business of such
Person, whether or not such indebtedness is otherwise an obligation of such
Person, and (vi) all indebtedness of others guaranteed by such Person.
"DOLLARS" or "$" means the lawful currency of the United States of
America and, in relation to any amount to be advanced or paid hereunder,
funds having same day value.
"EVENT OF DEFAULT" shall have the meaning set forth in Section 8.1.
"FACILITY FEE" means with respect to any Payment Date, the amount
set forth in the Side Letter.
"FFG" means FIRSTPLUS FINANCIAL GROUP, INC., a Nevada Corporation
and the parent of the Borrower, along with its successors in interest.
"GAAP" means generally accepted accounting principles, as in effect
in the United States as of the applicable time.
"GENERAL DEFAULT RATE" means, with respect to any Payment Date, the
Default Rate as determined with respect to the General Loan Portfolio.
"GENERAL DELINQUENCY RATE (60 DAY)" means, with respect to any
Payment Date, the Delinquency Rate (60 Day) as determined with respect to the
General Loan Portfolio.
"GENERAL LOAN PORTFOLIO" means, collectively, as of any date of
determination, all loans secured by an interest in real property which loans
(i) were originated by the Borrower at any time and (ii) are serviced by the
Borrower as of such date of determination; PROVIDED, HOWEVER, that the
General Loan Portfolio shall not include any Title I Mortgage Loans.
"IBJ" means the Industrial Bank of Japan, Limited, New York Branch.
"LENDER" has the meaning assigned to such term in the Recitals
hereof.
"LIEN" means, with respect to any asset, (a) any mortgage, lien,
pledge, charge, security interest, hypothecation, option or encumbrance of
any kind in respect of such asset or (b) the interest of a vendor or lessor
under any conditional sale agreement, financing lease or other title
retention agreement relating to such asset.
"MANDATORY PREPAYMENT EVENT" means any of the following:
(a) if, as of any Business Day, the weighted average coupon on the
Home Loans minus the Weighted Average Note/Loan Rate on the outstanding
Advances is ever less than 5%;
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<PAGE>
(b) if there occurs a Conversion Event or an event which with the
giving of notice could become a Conversion Event as defined in the Sale and
Servicing Agreement;
(c) if there occurs an "event of default" or an event which with
the giving of notice could become an "event of default" as defined in the
Sale and Servicing Agreement or the Indenture;
(d) if for any consecutive three month period the average General
Delinquency Rate (60 Day) for such period exceeds 2.50%;
(e) if for any consecutive three month period the average General
Default Rate for such period exceeds 2.50%; and
(f) if, on any day, the Consolidated Net Worth of the Borrower
fails to equal or exceed $130,000,000.
"MATURITY DATE" means the Payment Date which occurs in June 1998.
"MAXIMUM COMMITMENT AMOUNT" means $200,000,000.
"NOTE PURCHASE AGREEMENT" means that certain Note Purchase
Agreement, dated as of June 16, 1997, among FIRSTPLUS FUNDING TRUST, the
Borrower and the Lender.
"OFFERING MEMORANDUM" shall have the meaning provided in the Note
Purchase Agreement.
"PLACEMENT AGREEMENT" means that certain Placement Agreement dated
as of June 16, 1997 among FIRSTPLUS FUNDING TRUST, the Borrower and IBJ.
"POOL REDUCTION AMOUNT" means, with respect to each date of
determination, the sum of the Principal Balances of each Home Loan, which as
of the immediately preceding Determination Date (unless such date of
determination is a Determination Date, in which case such sum will be
calculated as of such Determination Date), (i) was a Defaulted Home Loan,
(ii) was 60 or more days delinquent or (iii) with respect to which all or any
portion of a Monthly Payment was 30 or more days past due (provided, however,
that (x) the component of the Pool Reduction Amount comprised of Home Loans
referenced in this clause (iii) shall not include Home Loans included in
clauses (i) and (ii) and (y) shall only be included to the extent that the
Principal Balance of such Home Loans exceed 2.00% of the Pool Principal
Balance as of such Determination Date.
"PRIOR PAYMENT DATE DAILY ADVANCE INTEREST ACCRUAL AMOUNT" means,
with respect to a given day in the related Regular Interest Accrual Period
and the related Prior Payment Date Outstanding Advance, an amount equal to
the product of (i) 1/360, (ii) LIBOR (as determined by the Lender in the
manner specified for the Indenture Trustee in the Sale and Servicing
Agreement) as of two London Business Days prior to the commencement of such
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<PAGE>
Regular Interest Accrual Period plus the Advance Percentage and (iii) the
amount of such outstanding Advance as of the end of such day.
"PRIOR PAYMENT DATE OUTSTANDING ADVANCE" means, with respect to a
given day in a Regular Interest Accrual Period, the outstanding Advances as
of the end of such day, reduced by any additional Advances which were made
during the period from and including the Determination Date immediately
preceding the commencement of such Regular Interest Accrual Period through
the Payment Date immediately following such Determination Date.
"POTENTIAL EVENT OF DEFAULT" shall mean an event which with the
lapse of time or the giving of notice, or both, would constitute an Event of
Default.
"RATIO AMOUNT" means, as of any date of determination, the
Aggregate Note Principal Balance as of such date divided by nine.
"REVOLVING NOTE" shall have the meaning provided in Section 2.4
"SALE AND SERVICING AGREEMENT" means the Sale and Servicing
Agreement dated as of June 1, 1997 among FIRSTPLUS FUNDING TRUST, as Issuer
and FIRSTPLUS FINANCIAL, INC., as Seller and Servicer and First Bank National
Association, as Indenture Trustee, as the same may be amended, modified or
supplemented.
"SECURED OBLIGATIONS" means all amounts due or that may become due
from Borrower to Lender under this Agreement.
"SIDE LETTER" means that certain letter agreement between the
Borrower and the Lender dated as of the date hereof and which sets forth the
Advance Percentage and the Facility Fee.
"SUBSIDIARY" means any corporation or other entity of which
securities or other ownership interests having ordinary voting power to elect
a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by the Borrower.
"TITLE I MORTGAGE LOAN" means a home improvement loan originated
pursuant to the rules and regulations promulgated under the Title I Program
and insured by the Federal Housing Administration or any successor in
interest.
"TRANSACTION DOCUMENTS" means the Custodial Agreement, the
Declaration of Trust of the Issuer, the Guaranty Policy, the Indenture, the
Insurance Agreement, the Note Purchase Agreement, the Notes, the Offering
Memorandum, the Placement Agreement, the Sale and Servicing Agreement and
this Revolving Credit Agreement.
"TRUST ESTATE LIQUIDATION ACCOUNT" means that certain demand
deposit account maintained at First Bank, National Association entitled
"Trust Estate Liquidation Account,
-5-
<PAGE>
Working Capital Management Co. L.P.", established at the direction of the
Lender with withdrawal rights solely held by the Lender.
"TRUST SHARE" means the share representing 100% of the beneficial
interest in the Issuer owned by the Borrower to be delivered as security for it
obligations hereunder.
"UNRESTRICTED CASH" shall mean, with respect to the Borrower and its
Consolidated Subsidiaries, all cash or cash equivalents of the Borrower and its
Consolidated Subsidiaries which are included as current assets on the most
recent consolidated financial statements of the Borrower delivered to the
Lender pursuant to Section 7.1(a) hereof, and which are not subject to any
security interest or any restriction (whether by agreement, regulation or
otherwise) as to use or availability.
"WEIGHTED AVERAGE NOTE/LOAN RATE" shall mean, on each Business Day, a
rate equal to (A) the sum of (i) the product of a) the Aggregate Note Principal
Balance as of such Business Day and b) the historical closing yield set forth
on the Bloomberg Screen "GT5 Govt. HP", under "Generic Government Rate," (as
determined by the Lender and as evidenced by copies of such Bloomberg Screen)
plus the ABS Yield Spread as of such date and (ii) the product of a) the
aggregate Advances outstanding hereunder and b) LIBOR (as determined by the
Lender in the manner specified for the Indenture Trustee in the Sale and
Servicing Agreement) as of such Business Day plus the Advance Percentage,
divided by (B) the sum of the Aggregate Note Principal Balances as of such
Business Day beneficially owned by the Lender or any commercial paper issuer
sponsored by the Lender and the aggregate Advances outstanding hereunder as of
such Business Day.
SECTION 1.2. ACCOUNTING TERMS. All accounting terms used in this
Agreement and not specifically defined herein shall be construed in accordance
with GAAP.
SECTION 1.3. COMPUTATION OF TIME PERIODS. In this Agreement, unless
otherwise specified, in the computation of periods of time from a specified
date to a later specified date, the word "from" means "from and including" and
the words "to" and "until" each means "to but excluding".
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES; SECURITY INTEREST
SECTION 2.1. THE COMMITMENT. The Lender agrees, on the terms and
conditions hereinafter set forth, to make Advances to the Borrower from time to
time during the period from the date hereof to and including the Commitment
Termination Date in an aggregate principal amount, when aggregated with the
aggregate principal amount of all Advances outstanding at such time, not to
exceed the Commitment Amount as in effect from time to time. At no time will
the Lender be obligated to make an Advance if after giving effect to such
Advance, the sum of (i) the Note Principal Balances beneficially owned by the
Lender and IBJ and any commercial paper issuer sponsored by the Lender or IBJ
and (ii) the
-6-
<PAGE>
aggregate Advances outstanding hereunder (after giving effect to such
proposed Advance) would exceed the Maximum Commitment Amount. Within the
limits of the Commitment Amount, the Borrower may borrow, repay and reborrow,
all in accordance with the terms and conditions of this Agreement.
SECTION 2.2. THE ADVANCES.
(a) THE ADVANCES. An Advance may only be made (i) on any Advance
Date, (ii) on any date on which the Issuer decreases the Minimum Spread Percent
and (iii) on any Payment Date, provided that for each Advance:
1. The Borrower shall have delivered to the Lender a written
request for such Advance no less than three Business Days prior to
the date of such requested Advance. Such request shall specify (x)
the requested date of such Advance, (y) the accounts to which the
requested Advance is to be deposited and (z) the requested amount of
such Advance;
2. For each Advance not made on a Payment Date that is an amount less
than $1,000,000, the Borrower shall pay an additional amount in
respect of interest as specified in Section 2.2(b)(2) below; and
3. The conditions set forth in Article V are fulfilled and the
obligations of the Lender shall not have been terminated pursuant to
Section 8.2.
If each of the above conditions are fulfilled, the Lender will on the
requested date make an Advance available to the Borrower no later than 3:00
p.m. (New York City time) on such requested date by depositing the Advance to
the account designated by the Borrower.
(b) PAYMENT OF INTEREST, REPAYMENT OF PRINCIPAL.
1. The Borrower shall pay interest on each Payment Date prior to
the Maturity Date and on the Maturity Date in an amount equal to the
sum of (I) for each Advance made on or after the second preceding
Determination Date and prior to the Payment Date immediately
following such second preceding Determination Date, the sum of the
related Additional Daily Advance Interest Accrual Amounts for each
day in the Additional Advance Interest Accrual Period and (II) the
sum of the related Prior Payment Date Daily Advance Interest Accrual
Amounts for each day in the related Regular Interest Accrual Period;
PROVIDED; that, with respect to Advances outstanding upon and after
the occurrence of an Event of Default, the Borrower shall pay
interest at the rates set forth above plus 2.00%. The amount of any
such interest payment shall be reduced by the portion of interest
actually remitted with respect to any payment made pursuant to
Sections 2.2(c) or 2.3(b).
-7-
<PAGE>
2. If the amount of any such Advance is less than $1,000,000, the
amount payable on the next Payment Date in respect to interest shall
be increased by an amount equal to the product of (I) (x) LIBOR
determined for such Advance (in the manner specified in the
definition of Additional Daily Advance Interest Accrual Amount) minus
(y) the Reinvestment Rate as of the date of such Advance (as
determined by the Lender in the manner specified for the Indenture
Trustee in the Sale and Servicing Agreement) and (II) (x) $1,000,000
less (y) the amount of such Advance and (III) (x) the number of days
in the period commencing on the date such Advance was made to and
including the next Payment Date divided by (y) 360. The amount of
such interest increase pursuant to this Section 2.2(b)(2) shall in no
event be less than $1,000.
(c) MANDATORY PRINCIPAL PAYMENTS.
The Borrower shall make principal payments at such times and in such amounts as
follows:
(i) The Borrower shall repay the principal amount of each Advance, plus any
accrued and unpaid interest, on the Maturity Date.
(ii) On any Business Day on which the sum of (i) the Note Principal Balances
beneficially owned by the Lender and IBJ and any commercial paper issuer
sponsored by the Lender or by IBJ and (ii) the aggregate Advances outstanding
hereunder as of such Business Day exceeds the Maximum Commitment Amount, the
Borrower shall pay such excess. Any such payments shall include accrued and
unpaid interest on the prepaid amount to and including the date of such
prepayment.
(iii) The Borrower shall repay the principal amount of each Advance, plus any
accrued and unpaid interest, within five Business Days after the occurrence of
a Mandatory Prepayment Event.
(iv) On any Business Day on which the amount of outstanding Advances is
greater than the Commitment Amount, the Borrower shall pay such excess to the
Lender. Any such payments shall include accrued and unpaid interest on the
prepaid amount to and including the date of such prepayment.
The amount of such principal payment required to be paid on a date
other than a Payment Date pursuant to this Section 2.2(c) shall, to the extent
permitted by law, be accompanied by a Breakage Payment Calculation Amount with
respect thereto calculated as if such principal payment was an optional
prepayment under Section 2.3.
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SECTION 2.3. OPTIONAL PREPAYMENTS.
(a) The Borrower may prepay an outstanding Advance, in whole or in part,
to the Lender on any Payment Date, PROVIDED THAT any such prepayment shall have
been preceded by written notice thereof to the Lender delivered no later than
three Business Days preceding such Payment Date.
(b) The Borrower may prepay an outstanding Advance, in whole or in part,
to the Lender on any day other than a Payment Date, PROVIDED THAT any such
prepayment shall (i) be made upon not less than three Business Day's written
notice thereof to the Lender and (ii) be accompanied by a Breakage Payment
Calculation Amount with respect thereto calculated as if such Advance was a
Note Principal Prepayment. Any such payments shall include accrued and unpaid
interest on the prepaid amount to and including the date of such prepayment.
SECTION 2.4. THE REVOLVING NOTE. The Advances shall be evidenced by
a single Note (the "REVOLVING NOTE") payable to the order of the Lender, which
Revolving Note shall be substantially in the form of Exhibit A attached hereto.
Any borrowing, repayment and reborrowing hereunder shall be recorded by the
Lender on the grid sheet attached thereto; provided, however, that any failure
to make such notation shall not in any way modify the obligation of the
Borrower to repay any of its obligations under this Agreement and the Revolving
Note.
SECTION 2.5. FACILITY FEE. On each Payment Date, the Borrower shall
pay the Lender the Facility Fee, if any, for such Payment Date.
SECTION 2.6. SECURITY INTEREST.
(a) PLEDGE. As security for the payment of the Secured Obligations,
Borrower hereby pledges, assigns, transfers and grants to Lender a first lien
on, and a security interest in, the Collateral.
(b) FORM OF COLLATERAl. With respect to any of the Collateral
available in definitive certificated form, the Borrower shall deliver to the
Lender or to such other entity as Lender shall designate, as agent for Lender,
on or prior to the date of the first Advance, the certificates for such
Collateral in suitable form for transfer accompanied by duly executed
instruments of transfer or appropriate undated powers of assignment thereof
duly executed in blank.
(c) CREATION AND MAINTENANCE OF SECURITY INTEREST. With respect to
all types of Collateral, (i) Borrower shall take all actions necessary to
create a first priority lien and perfected security interest in such Collateral
in favor of Lender and (ii) all actions required or authorized to be taken by
Lender under this Agreement may be taken by any agent or affiliate of Lender.
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ARTICLE III
CHANGE IN CIRCUMSTANCES
SECTION 3.1. INCREASED COSTS. (a) If, after the date of this
Agreement, the introduction of, or any change in, any applicable law, rule or
regulation or in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof or compliance by the Lender or any
liquidity provider of the Lender with any request or directive of such
authority, central bank or comparable agency (whether or not having the force
of law):
(i) shall subject the Lender to any tax, duty or other charge or
shall change the basis of taxation of payments to the Lender of the
principal of or interest on the Revolving Note or in respect of any other
amounts due under this Agreement (except for changes in the rate of tax on
the overall net income of the Lender imposed by the jurisdiction in which
the Lender's principal executive office is located); or
(ii) shall impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for the
account of, or credit extended by, the Lender or any liquidity provider of
the Lender (including, without limitation, any imposed by, the Board of
Governors of the Federal Reserve System); or
(iii) shall impose on the Lender or any liquidity provider of the
Lender any other condition affecting the Commitment, the Advances, this
Agreement or the Revolving Note;
and the result of any of the foregoing is to increase the cost to the Lender of
making or maintaining an Advance, or to reduce the amount of any sum received
or receivable by the Lender under this Agreement or under the Revolving Note in
respect of any Advance, then the Borrower shall pay to the Lender upon its
demand such additional amount or amounts as will, on an after tax basis,
compensate the Lender for such increased cost or reduction.
(b) If, after the date of this Agreement, the Lender shall have
reasonably determined that the adoption of any applicable law, rule or
regulation regarding capital adequacy of general applicability, or any change
therein, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Lender with any
request or directive regarding capital adequacy of general applicability
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on the Lender's capital as a consequence of the Commitment, the Advances or the
Revolving Note to a level below that which the Lender could have achieved but
for the adoption, change or compliance (taking into consideration the Lender's
policies with respect to capital adequacy) by an amount reasonably deemed by
the Lender to be material, then from time to time, within 30 days after demand
by the Lender, the Borrower shall pay, to the Lender such additional amount or
amounts as will compensate the Lender for such reduction.
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(c) The Lender will promptly notify the Borrower of any event of
which the Lender has knowledge which will entitle it to compensation pursuant
to this Section 3.1 provided that the failure of the Lender so to notify the
Borrower will not discharge the Borrower of its obligations under this Section
3.1. A certificate of the Lender claiming compensation under this Section 3.1
and setting forth the basis for determining the additional amount or amounts to
be paid to it hereunder shall, to the extent permitted by law, be conclusive
and binding, absent manifest error.
(d) If any of the events requiring payments of additional amounts by
the Borrower under paragraphs (a) and (b) above occurs, the Lender shall
consult with the Borrower in good faith with a view to agreeing to alternative
arrangements whereby any such requirement can be avoided or mitigated.
ARTICLE IV
PAYMENTS
SECTION 4.1. MANNER AND STATUS OF PAYMENTS. (a) Each payment by the
Borrower to the Lender under this Agreement shall be made by transferring the
amount thereof by 1:00 p.m. (New York City time), PROVIDED that any payments
made pursuant to Sections 2.2(c)(ii), (iii) and (iv) and 2.3(b) shall be made
by 12:00 noon (New York City time) in same day funds to the account of the New
York Branch of the Lender at the Federal Reserve Bank of New York,
ABA 026008345, or such other account as the Lender may specify from time to
time upon prior written notification to the Borrower. Any payment received
pursuant to this Section 4.1 after 1:00 p.m. or 12:00 noon, as the case may be,
(New York City time) shall be deemed received on the next succeeding Business
Day.
(b) Each payment made under this Section 4.1 shall be made without setoff or
counterclaim and free and clear of, and without deduction for, any taxes,
duties, levies, imposts or other charges of a similar nature.
SECTION 4.2. APPLICATION OF PAYMENTS. The Lender shall apply all
payments with respect to any Advance first to the payment of accrued interest
with respect thereto and, after such interest has been paid, to the repayment
of the principal balance of such Advance. With respect to the application of
payments to the principal balances of outstanding Advances, such payments shall
be deemed to be applied to outstanding Advances as directed by the Borrower.
ARTICLE V
CONDITIONS OF LENDING
SECTION 5.1. CONDITIONS PRECEDENT TO INITIAL ADVANCE. The
obligation of the Lender to make the initial Advance is subject to the
following conditions:
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(a) The Lender shall have received, on or before the date of this
Agreement, the following items in form and substance satisfactory to it (and,
in each case, dated the date hereof):
1. NOTE. The Revolving Note, duly executed by the Borrower,
2. SECRETARY'S CERTIFICATE. A certificate from the Secretary or an
Assistant Secretary of the Borrower certifying (i) as to the incumbency
and signature of each officer of the Borrower authorized to execute and
deliver this Agreement or any certificate to be furnished pursuant hereto
and (ii) that attached to such certificate are true and complete copies of
(A) the Articles of Incorporation and By-Laws of the Borrower and (B) the
resolutions of the Board of Directors of the Borrower authorizing the
execution, delivery and performance of this Agreement and the Revolving
Note, together with a certification by another officer of the Borrower as
to the incumbency and signature of such Secretary or Assistant Secretary
and
3. LEGAL OPINIONS. A Legal opinion in form acceptable to the Lender
from Andrews & Kurth L.L.P.;
(b) All conditions precedent to the purchase by the Lender of the
Notes under the Note Purchase Agreement shall have been satisfied and such
purchase shall have occurred; and
(c) The Borrower shall have established the Trust Estate Liquidation
Account and shall have provided the Lender with evidence thereof.
SECTION 5.2. CONTINUING CONDITION, ETC. The obligation of the
Lender to make each Advance, including the initial Advance, is subject to the
following conditions:
(a) on the date of such Advance no action or proceeding shall have
been instituted by or against the Borrower (i) seeking to adjudicate it
bankrupt or insolvent, or (ii) seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or (iii) seeking the entry of an order for relief or the appointment
of receiver, trustee, or other similar official for it or for any substantial
part of its property, and, in the case of any such proceeding instituted
against the Borrower, such proceeding shall not have been dismissed within 60
days;
(b) the representations and warranties of the Borrower contained in
the Transaction Documents shall be accurate and complete in all material
respects as if made on and as of the date of such Advance (except where any
such representation or warranty expressly relates to an earlier date);
(c) there shall not have occurred an Event of Default or any
Potential Event of Default;
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(d) following the making of such Advance, the sum of (i) the Note
Principal Balances beneficially owned by the Lender and IBJ and any commercial
paper issuer sponsored by the Lender or IBJ and (ii) the aggregate Advances
outstanding hereunder (after giving effect to such proposed Advance) shall not
exceed the Maximum Commitment Amount; and
(e) the aggregate principal amount of such proposed Advance, when
aggregated with the aggregate principal amount of all Advances outstanding at
such time shall not exceed the Commitment Amount.
SECTION 5.3. PARTICIPATIONS. The Lender may, in the ordinary course
of its business and in accordance with applicable law, at any time sell to one
or more Persons (each, a "PARTICIPANT"), participating interests in all or a
portion of its rights and obligations under this Agreement. Notwithstanding
any such sale by the Lender of participating interests to a Participant, such
Lender's rights and obligations under this Agreement shall remain unchanged,
the Lender shall remain solely responsible for the performance thereof, and the
Borrower shall continue to deal solely and directly with the Lender in
connection with the Lender's rights and obligations under this Agreement. The
Borrower also agrees that each Participant shall be entitled to the benefits of
Sections 3.1 and 8.5 hereof; PROVIDED, however, that all amounts payable by the
Borrower to any such Participant shall be limited to the amounts which would
have been payable directly to the Lender with respect to such participating
interest had the Lender, rather than the participant, held such participating
interest.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.1. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The
Borrower represents and warrants as of the date hereof and as of the date of
each Advance hereunder as follows:
(a) ORGANIZATION OF BORROWER. The Borrower is a corporation duly
incorporated, validity existing and in good standing under the laws of the
State of Texas and has the corporate power and authority to own its assets
and to carry on its business as it is now being conducted or as it is
proposed to be conducted. The Borrower is duly qualified to do business
and is in good standing in all jurisdictions in which the ownership of its
property or the conduct of its business makes such qualification
necessary, except where the failure to be so qualified would not have a
material adverse effect on the business, operations, property or financial
or other condition of the Borrower, taken as a whole or on the ability of
the Borrower to perform any of its obligations under this Agreement or the
Revolving Note.
(b) AUTHORIZATION. The execution, delivery and performance of this
Agreement and the Revolving Note by the Borrower are within the corporate
power
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and corporate authority of the Borrower and have been duly authorized
by all necessary corporate action.
(c) VALIDITY. This Agreement and the Revolving Note constitute
legal, valid and binding obligations of the Borrower enforceable against
the Borrower in accordance with their respective terms, except as the
enforceability hereof and thereof may be limited by bankruptcy,
insolvency, or other similar laws affecting creditors' rights generally.
(d) CONSENTS. All consents, licenses, authorizations, approvals,
exemptions of or registrations or filings with any commission, board,
agency, court or other governmental authority necessary in connection with
the valid execution, delivery and performance of this Agreement and the
Revolving Note by the Borrower have been obtained or effected, except for
such routine registrations and filings which will be obtained in the
ordinary course of business of the Borrower.
(e) NO CONFLICT. The execution and delivery by the Borrower of this
Agreement and the Revolving Note do not, and the performance by it of this
Agreement and the Revolving Note will not, (i) violate any provision of
the Articles of Incorporation or Bylaws of the Borrower or any material
law, rule, regulation, order, writ, judgment, decree, determination or
award applicable to it, (ii) result in a breach of or constitute a default
under any indenture, lease or loan agreement or any other material
agreement or instrument to which the Borrower is a party or by which it or
its properties may be bound or affected or (iii) except for the Lien of
the Lender created by this Agreement, result in, or require the creation
or imposition of, any Lien upon or with respect to any of the properties
now owned or hereafter acquired by the Borrower.
(f) NO DEFAULT. The Borrower is not in violation of any material
law, rule, regulation, order, writ, judgment, decree, determination or
award applicable to it or any indenture, lease, loan or other material
agreement to which it is a party or by which it or its properties may be
bound or affected, the violation of which may reasonably be expected to
have a material adverse effect upon the ability of the Borrower to perform
any of its obligations under this Agreement or the Revolving Note.
(g) FINANCIAL CONDITION. The consolidated financial statements of
the Borrower for the applicable fiscal period, copies of which have been
furnished to the Lender, present fairly in all material respects, in
accordance with GAAP, the financial condition of the Borrower at such
dates and the consolidated results of its operations and cash flows, for
the fiscal period then ended.
(h) NO CHANGE. As of the date hereof there has been no material
adverse change in the business, operations, assets or financial or other
conditions of the Borrower from that shown on the financial statements as
of the statement date referred to in Section 5(a) above.
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(i) NO MATERIAL LITIGATION. No litigation, investigation or
proceeding of or before any court, arbitrator or Governmental Authority is
pending or, to the knowledge of the Borrower, threatened by or against the
Borrower or against any of the properties or revenues of the Borrower
which is reasonably likely to have a material adverse effect on the
business, operations, property or financial or other condition of the
Borrower, taken as a whole or on the ability of the Borrower to perform
any of its obligations under this Agreement or the Revolving Note.
(j) TAXES. All tax returns that are required to be filed by or on
behalf of the Borrower have been filed and all taxes shown to be due and
payable on said returns or on any assessments made against the Borrower or
any of its property (other than taxes which are being contested in good
faith by appropriate proceedings and as to which the Borrower has
established adequate reserves in conformity with GAAP) have been paid or
provided for.
(k) INVESTMENT COMPANY ACT. The Borrower is not an "investment
company" or a company "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(l) FEDERAL RESERVE BOARD REGULATIONS. The Borrower is not engaged
or will engage, principally or as one of its important activities, in the
business of extending credit for the purpose of "purchasing" or "carrying"
any "margin stock" as so defined or for any purpose which violates, or
which would be inconsistent with, the provisions of the Regulations of the
Board of Governors of the Federal Reserve System pertaining to the
foregoing.
(m) ASSETS. The Borrower and its Consolidated Subsidiaries are
the legal and beneficial owners of all property and assets represented as
owned by them in the financial statements delivered by the Borrower to the
Lender in accordance with Section 7.1(a), except property and assets sold
or otherwise disposed of in the ordinary course of business subsequent to
the date thereof.
(n) OWNERSHIP OF THE COLLATERAL. Borrower is and will be the legal
and beneficial owner of, and has good and marketable title to, the
Collateral.
(o) COLLATERAL FREE OF LIENS. The Collateral (and any proceeds) are
not and will not be subject to a Lien or any agreement purporting to grant
such a Lien in the Collateral or other property or assets of Borrower
which would include any Collateral, except the Lien in favor of Lender
created by this Agreement.
(p) AGREEMENT CREATES VALID FIRST LIEN. This Agreement will create
a first priority perfected security interest in the Collateral for so long
as the Lender or a successor to the Lender or an agent of the Lender or of
the Lender's successor (other than the Borrower) maintains physical
possession of the Collateral, or in the case of the Trust Estate
Liquidation Account and the contents thereof, so long as such account is
held in the name of the Lender.
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ARTICLE VII
COVENANTS OF THE BORROWER
SECTION 7.1. AFFIRMATIVE COVENANTS. So long as any amount is owing
hereunder or the Lender shall have any Commitment hereunder, the Borrower will,
unless the Lender otherwise consents in writing:
(a) REPORTING REQUIREMENTS. Furnish to the Lender:
(i) QUARTERLY STATEMENTS. (A) As soon as available and in no
event later than 105 days after the end of each fiscal quarter of
FFG, a "Form 10-Q" filed by FFG with the Securities and Exchange
Commission and (B) as soon as available and in any event within 105
days after the end of each fiscal quarter of the Borrower, a
quarterly balance sheet prepared in accordance with GAAP consistently
applied, which presents the financial condition of the Borrower and
its Subsidiaries as of the end of such quarter, together with a
certificate of a Responsible Officer of the Borrower certifying the
same;
(ii) ANNUAL STATEMENTS. (A) As soon as available and in no event
later than 135 days after the end of each fiscal year of FFG, a "Form
10-K" filed by FFG with the Securities and Exchange Commission and
(B) as soon as available and in any event within 135 days after the
end of each fiscal year of the Borrower, a balance sheet prepared in
accordance with GAAP consistently applied, which presents the
financial condition of the Borrower and its Subsidiaries as of the
end of such year, together with a certificate of a Responsible
Officer of the Borrower certifying the same; and
(iii) ANNUAL REPORT TO SHAREHOLDERS. As soon as available and
in any event within 135 days after the end of each fiscal year of FFG,
the annual report that is delivered to its shareholders.
(b) COMPLIANCE WITH LAWS. Comply with all applicable laws, rules
and regulations and orders of any governmental authority, the
noncompliance with which could have a material adverse effect on the
business, financial condition or results of operations of the Borrower or
on the ability of the Borrower to repay any Advance or perform any of its
other obligations under this Agreement or the Revolving Note.
(c) NOTICES. Promptly give written notice to the Lender of:
(i) the occurrence of any Event of Default or Potential Event
of Default known to any officer of the Borrower and the proposed
method of cure thereof;
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(ii) any litigation or proceeding affecting the Borrower which
is reasonably likely to have a material adverse effect on the
business, operations, property, or financial or other condition of
the Borrower taken as a whole; and
(iii) a material adverse change known to any officer of the
Borrower in the business, operations, property or financial or other
condition of the Borrower taken as a whole; and
(iv) any changes in the following senior management positions of
FFG: Chairman, Chief Executive Officer, President and Chief
Financial Officer.
SECTION 7.2. NEGATIVE COVENANTS. So long as any amount is owing
hereunder or the Lender shall have any Commitment hereunder, the Borrower will
not, without the written consent of the Lender:
(a) NEGATIVE PLEDGE. Except for Liens created by operation of any
Transaction Document, incur, create or assume any Lien of any kind upon
any of its assets, now owned or hereafter acquired, except as may be
incidental to the conduct of the business or the ownership of the property
of the Borrower, which were not incurred in connection with the borrowing
of money or the obtaining of credit and which do not, either individually,
or in the aggregate, materially detract from the value of its assets or
materially impair the use of such assets in the operation of its business.
(b) CONSOLIDATIONS AND MERGERS. Consolidate or merge with or into
any entity.
(c) RESTRICTION ON LIENS. The Borrower will not create or incur any
Lien, other than the Lien created by this Agreement, with respect to the
Collateral.
(d) LEVERAGE RATIO. In no event will Consolidated Debt exceed 6
times Consolidated Net Worth for more than 45 consecutive days, and at no
time will Consolidated Debt exceed 8 times Consolidated Net Worth.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. EVENTS OF DEFAULT. Each of the following events shall
constitute an "Event of Default":
(a) the Borrower shall fail to pay when due any principal, interest,
fees or other amount payable hereunder (except for the Facility Fee);
(b) the Borrower shall fail to pay when due any part of the Facility
Fee and such failure shall continue for three Business Days thereafter;
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(c) the Borrower shall fail to observe or perform any of the
covenants contained in Section 7.1 or 7.2 for 15 days after the earlier of
the discovery of such failure or written notice thereof has been given to
the Borrower by the Lender;
(d) the Borrower shall fail to observe or perform any material
covenant or material agreement contained in this Agreement (other than
those covered by clause (a) or (b) above) for 30 days after the earlier of
the discovery of such failure or written notice thereof has been given to
the Borrower by the Lender;
(e) any material representation, warranty, certification or
statement made (or deemed made) by the Borrower in this Agreement or in
any certificate, financial statement or other document delivered pursuant
to this Agreement shall prove to have been incorrect in any material
respect when made (or deemed made) and such deficiency is not cured within
the earlier of 15 days after the discovery thereof by the Borrower or 15
days after written notice thereof has been given to the Borrower by the
Lender;
(f) the Borrower, FFG or a Consolidated Subsidiary of either of them
shall fail to make any payment in respect of any Debt with an outstanding
principal amount of $5,000,000 or more when due or within any applicable
grace period;
(g) any event or condition shall occur which results in the
involuntary acceleration of the maturity of any Debt with an outstanding
principal amount of $5,000,000 or more of the Borrower, FFG or a
Consolidated Subsidiary of either of them or enables (or, if such event or
condition does not otherwise give rise to such an acceleration, which with
the giving of notice or lapse of time or both would enable) the holder of
such Debt or any Person acting on such holder's behalf to accelerate the
maturity thereof;
(h) the Borrower, FFG or any of their respective Subsidiaries shall
commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its Debt under
any bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official of it or any substantial part of its property,
or shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against it, or shall make a general assignment for the benefit
of creditors, or shall fail generally to pay its debts as they become due,
or shall take any corporate action to authorize any of the foregoing;
(i) an involuntary case or other proceeding shall be commenced
against the Borrower, FFG or any of their respective Subsidiaries seeking
liquidation, reorganization or other relief with respect to it or its
debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver
liquidator, custodian or other similar official of it or any substantial
part of its property, and such involuntary case or other reprocessing
shall remain
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undismissed and unstayed for a period of 60 days; or an order for relief
shall be entered against the Borrower, FFG or any of their respective
Subsidiaries under the federal bankruptcy laws as now or hereafter in
effect;
(j) a judgment or order for the payment of money in excess of
$5,000,000 shall be rendered against the Borrower, FFG or any of their
respective Subsidiaries and such judgment or order shall not have been
reversed for a period of 30 days after the entry thereof; and
(k) a judgment or order for the payment of money in excess of 20% of
the Consolidated Net Worth of the Borrower shall be rendered against the
Borrower or any of its Subsidiaries and such judgment or order shall not
have been reversed for a period of 15 days after the entry thereof.
SECTION 8.2. RIGHTS OF LENDER FOLLOWING EVENT OF DEFAULT. If any
one or more Events of Default shall occur and be continuing, the Lender may,
without prior written notice to or demand upon the Borrower, take any one or
more of the following actions:
(a) Terminate the Commitment and it shall thereupon terminate, and
declare the Revolving Note (together with accrued interest thereon) to be,
and the Revolving Note (together with accrued interest thereon) shall
thereupon become, immediately due and payable without presentment, demand
protest or other notice of any kind, all of which are hereby waived by the
Borrower; provided that in the case of any of the Event of Default
specified in Section 8.1(h) or (i) with respect to the Borrower, without
any notice to the Borrower or any other act by the Lender, the Commitment
shall, to the extent permitted by law, thereupon terminate and the
Revolving Note (together with accrued interest thereon) shall become
immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are, to the extent permitted by law,
hereby waived by the Borrower;
(b) So long as any amounts are payable by the Borrower to the Lender
hereunder or the Commitment remains an obligation of the Lender, suspend
any delivery or payment or return of Collateral required to be made to the
Borrower, and otherwise not permit the Borrower to take any new action
with respect to any Collateral; and
(c) In addition, in furtherance of and not in limitation of the
foregoing, in the event that an Event of Default occurs and is continuing, the
Lender may exercise, in addition to all other rights and remedies granted in
this Agreement, the Revolving Note and any other instrument or agreement
securing, evidencing or relating to the Secured Obligations, all rights and
remedies of a secured party under the New York UCC. Without limiting the
generality of the foregoing, the Lender, without demand of performance or other
demand, presentment, protest, advertisement or notice of any kind (except any
notice required by law referred to below) to or upon any person (all and each
of which demands, defenses, advertisements and notices are hereby, to the
extent permitted by law, waived), may in such
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<PAGE>
circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, assign, give
option or options to purchase or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing), in
one or more parcels at public or private sale or sales, in the
over-the-counter market, at any exchange, broker's board or office of the
Lender or elsewhere upon such terms and conditions as it may reasonably deem
advisable and at such prices as it may reasonably deem best, for cash or on
credit or for future delivery without assumption of any credit risk. The
Lender, shall have the right upon any such public sale or sales, and, to the
extent permitted by law, upon any such private sale or sales, to purchase the
whole or any part of the Collateral so sold, free of any right or equity of
redemption of the Borrower, which right or equity is hereby waived or
released The Lender shall apply any collections on or in respect of the
Collateral from time to time held by it and the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, after
deducting all reasonable costs and expenses of every kind incurred therein or
incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Lender hereunder, including,
without limitation, reasonable attorneys' fees and disbursements, to the
payment in whole or in part of the Secured Obligations, as the Lender may
elect, and only after such application and after the payment by the Lender of
any other amount required by any provision of law, including, without
limitation, Section 9-504(1)(c) of the New York UCC, need the Lender account
for the surplus, if any, to the Borrower. To the extent permitted by
applicable law, the Borrower waives all claims, damages and demands it may
acquire against the Lender arising out of the exercise by the Lender of any
of its rights hereunder. If any notice of a proposed sale or other
disposition of Collateral shall be required by law, such notice shall, to the
extent permitted by law, be deemed reasonable and proper if given on the day
of such sale or other disposition. The Borrower shall, to the extent
permitted by law, remain liable for any deficiency if the proceeds of any
sale or other disposition of Collateral are insufficient to pay the Secured
Obligations and the fees and disbursements of any attorneys employed by the
Lender to collect such deficiency.
SECTION 8.3. LENDER APPOINTED BORROWER'S ATTORNEY-IN-FACT. The
Lender is authorized and empowered by this Agreement to execute and deliver, on
behalf of the Borrower, as attorney-in-fact or otherwise, any and all documents
and other instruments and to do or accomplish all other acts or things
necessary or appropriate to effect its rights, powers and remedies under this
Agreement and under the Revolving Note.
SECTION 8.4. BORROWER'S LIABILITY FOR CONSEQUENTIAL DAMAGES. In
addition to any other amounts it may owe or be liable for hereunder, if an
Event of Default occurs, the Borrower shall be liable for all costs, expenses,
damages and losses incurred by the Lender in taking any of the actions
described in Section 8.2, including without limitation all costs of collection
and reasonable attorneys' fees incurred in connection therewith.
SECTION 8.5. INDEMNITY. The Borrower shall be liable as primary
obligor for and shall indemnify the Lender and its successors, assigns, agents
and servants (collectively, the "INDEMNIFIED PARTIES") from and against, any
and all liabilities, obligations, losses, damages, taxes, claims, actions and
suits, and any and all reasonable costs, expenses and
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<PAGE>
disbursements (including reasonable legal fees and expenses) of any kind and
nature whatsoever which may at any time be imposed on, incurred by, or
asserted against the Lender or any Indemnified Party arising out of or
resulting from this Agreement, except to the extent arising out of or
resulting from the gross negligence or willful misconduct or unlawful conduct
of such Indemnified Party.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and, shall inure to the benefit of the Borrower, the Lender and
their respective successors and assigns except that the Borrower may not assign
or transfer any of its rights or obligations hereunder without the prior
written consent of the Lender. The Lender may assign its obligations and
rights hereunder to (i) any entity whose long-term unsecured debt, as of the
date of the proposed assignment, is rated at least "Baa" by Moody's or "BBB" by
Standard & Poor's, (ii) any entity whose short-term debt, as of the date of the
proposed assignment, is rated at least "P-2" by Moody's or at least "A-2" by
Standard & Poor's or (iii) with the prior written consent of the Borrower, any
other entity. The Lender shall provide the Borrower with notice prior to such
an assignment. This Agreement shall remain in full force and effect until such
time as one party shall receive a notice of termination from the other party.
SECTION 9.2. AMENDMENT; WAIVER. To the extent permitted by law, no
amendment, modification or waiver of any provision of this Agreement, and no
consent to any departure by the Borrower therefrom, shall in any event be
effective unless the same shall be in writing and signed by the parties hereto.
In the event that either party hereto makes a written request to the other
party hereto to amend or modify this Agreement, such other party hereto shall
give or refuse its consent to such amendment or modification within five
Business Days of such request. Any waiver of any provision of this Agreement,
and any consent to any departure by the Borrower therefrom, shall be effective
only in the specific instance and for the specific purpose for which given. To
the extent permitted by law, neither failure nor delay on the part of the
Lender to exercise any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, power or
remedy hereunder preclude any other or future exercise thereof or the exercise
of any other right, power or remedy. To the extent permitted by law, no notice
to or demand on the Borrower in any case shall entitle the Borrower to any
other or further notice or demand in similar or other circumstances. The
rights herein provided are cumulative and not exclusive of any rights provided
by law.
SECTION 9.3. NOTICE, ETC. Except as otherwise provided herein, all
notices and other communications provided for hereunder shall be in writing
(including telegraphic or telex communication) and mailed or telegraphed or
delivered, (a) if to the Borrower, at its address set forth on the signature
page hereof, and (b) if to the Lender, at its address set forth on the
signature page hereof; or, as to each party, at such other address as shall be
specified by
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such party in written notice to the other party. Any such notice, demand or
other communication shall not be effective until actually received.
SECTION 9.4. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when executed and delivered shall be deemed to be
an original and all of which taken together shall constitute one and the same
instrument.
SECTION 9.5. HEADINGS. The headings contained in this Agreement are
for convenience of reference only and shall not affect the construction hereof.
SECTION 9.6. GOVERNING LAW. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York.
SECTION 9.7. RIGHT TO EXAMINE BORROWER RECORDS. The Lender and its
agents shall have the right upon reasonable prior notice, during normal
business hours and as often as reasonably required, to examine, audit and copy,
at the expense of the Lender, any and all of the books, records or other
information of the Borrower whether held by the Borrower or by another on
behalf of the Borrower, which may be relevant to the performance or observance
by the Borrower of the terms, covenants or conditions of this Agreement. The
Lender and the Borrower agree that any information obtained pursuant to the
terms of this Agreement shall be held confidential.
SECTION 9.8. CERTAIN MATTERS REGARDING THE ISSUER.
(a) Until the date that is one year and one day after the last day
on which any amount is outstanding under this Agreement, each of the Lender and
the Borrower hereby covenants and agrees that they will not institute against
the Issuer, or join in any institution against the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States federal or state bankruptcy or similar law.
(b) Each of the Lender and Borrower hereby recognizes and
acknowledges the separate legal existence of the Issuer from the Borrower and
the Consolidated Subsidiaries.
(c) Each of the Lender and the Borrower hereby acknowledges and
agrees that the Issuer has no obligation, liability or duty for or on behalf of
the Borrower under this Agreement, directly or indirectly, as guarantor or
otherwise, and except as specifically provided in the Transaction Documents
that the Lender's sole recourse under this Agreement is to the Borrower, the
Collateral and the other assets of the Borrower from time to time. Solely with
respect to this Section 9.8, the parties further agree that the Issuer and its
creditors are third party beneficiaries and are entitled to rely on this
Section 9.8 whether or not they are parties to this Agreement.
SECTION 9.9. NO RECOURSE - LENDER. The obligations of the Lender
under this Agreement, or any other agreement, instrument, document or
certificate executed and
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<PAGE>
delivered by or issued by the Lender or any officer thereof are solely the
partnership or corporate obligations of the Lender, as the case may be. No
recourse shall be had for payment of any fee or other obligation or claim
arising out of or relating to this Agreement or any other agreement,
instrument, document or certificate executed and delivered or issued by the
Lender or any officer thereof in connection therewith, against any
stockholder, limited partner, employee, officer, director or incorporator of
the Lender.
SECTION 9.10. NO PROCEEDINGS. The Borrower agrees that so long as
any rated indebtedness of the Lender shall be outstanding or there shall not
have elapsed one year plus one day since the last day on which any rated
indebtedness of the Lender shall have been outstanding, it shall not file, or
join in the filing of, a petition against the Lender under the Federal
Bankruptcy Code, or join in the commencement of any bankruptcy, reorganization,
arrangement, insolvency, liquidation or other similar proceeding against the
Lender
[SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Revolving
Credit Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
FIRSTPLUS FINANCIAL, INC.
By:
------------------------------
Name:
Title:
Address: 1600 Viceroy
Dallas, Texas 75235
WORKING CAPITAL MANAGEMENT CO. L.P.
By:
------------------------------
Name:
Title:
Address:
c/o The Industrial Bank
of Japan, Limited
New York Branch
1251 Avenue of the Americas,
33rd Floor
New York, New York 10020-1104
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<PAGE>
EXHIBIT A
[FORM OF PROMISSORY NOTE]
June 16, 1997
FOR VALUE RECEIVED, the undersigned, FIRSTPLUS FINANCIAL, INC. (the
"BORROWER"), hereby unconditionally promises to pay to the order of WORKING
CAPITAL MANAGEMENT CO. L.P. (the "LENDER") the Payment Date that occurs in
June, 1998, (the "MATURITY DATE") the principal sum of all outstanding Advances
in lawful currency of the United States of America as the principal amount of
each such Advance made by the Lender hereunder is denoted on the Schedule
attached hereto.
1. Capitalized terms not otherwise defined herein shall have the
meanings ascribed to such terms in that certain Revolving Credit Agreement (the
"AGREEMENT"), dated as of June 16, 1997 between the Borrower and the Lender.
2. The Borrower further promises to pay interest on the Advances as
follows:
A. The Borrower shall pay interest on each Payment Date prior to
the Maturity Date and on the Maturity Date in an amount equal to the
sum of (I) for each Advance made on or after the second preceding
Determination Date and prior to the Payment Date immediately
following such second preceding Determination Date, the sum of the
related Additional Daily Advance Interest Accrual Amounts for each
day in the Additional Advance Interest Accrual Period and (II) the
sum of the related Prior Payment Date Daily Advance Interest Accrual
Amounts for each day in the related Regular Interest Accrual Period;
PROVIDED; that, with respect to Advances outstanding upon and after
the occurrence of an Event of Default, the Borrower shall pay
interest at the rates set forth above plus 2.00%. The amount of any
such interest payment shall be reduced by the portion of interest
actually remitted with respect to any payment made pursuant to
Sections 2.2(c) or 2.3(b) of the Agreement.
B. If the amount of any such Advance is less than $1,000,000, the
amount payable on the next Payment Date in respect to interest shall
be increased by an amount equal to the product of (I) (x) LIBOR
determined for such Advance (in the manner specified in the
definition of Additional Daily Advance Interest Accrual Amount) minus
(y) the Reinvestment Rate as of the date of such Advance (as
determined by the Lender in the manner specified for the Indenture
Trustee in the Sale and Servicing Agreement) and (II) (x) $1,000,000
less (y) the amount of such Advance and (III) (x) the number of days
in the period commencing on the date of such Advance was made to and
including the next Payment Date divided by (y) 360. The amount of
such interest increase shall in no event be less than $1,000.
<PAGE>
3. The Lender is exclusively authorized to make notations on the
schedule attached hereto to denote each Advance made by the Lender to the
Borrower pursuant to this promissory note, the maturity date of each such
Advance and all payments of the outstanding principal amount of and accrued
interest on such Advance. Such notations, if made, will be presumed correct
unless the contrary is established.
4. The Borrower shall repay in full the principal amount of each
Advance, plus any accrued and unpaid interest, on the Maturity Date or within
five Business Days of the occurrence of a Mandatory Prepayment Event.
5. The Borrower may prepay an outstanding Advance to the Lender on
any date in whole or in part, provided that certain conditions set forth in the
Agreement are fulfilled.
6. All payments of principal and of interest on this promissory note
shall be made by the Borrower by transferring the amount thereof not later than
1:00 p.m. (New York City time), PROVIDED that any payments made pursuant to
Sections 2.2(c)(ii), (iii) and (iv) and 2.3(b) of the Agreement shall be made
by 12:00 noon (New York City time) on the date when due to the Lender at the
Federal Reserve Bank of New York, ABA 026008345, or such other account as the
lender may designate upon prior written notification to the Borrower, in lawful
money of the United States of America, in same day funds without setoff,
deduction of counterclaim and free and clear of any present or future taxes,
levies, imposts, duties, fees, assessments or other charges of a similar
nature. Any payment received pursuant to this Paragraph 6 after 1:00 p.m. or
12:00 noon, as the case may be, (New York City time) shall be deemed received
on the next succeeding Business Day.
7. Upon the occurrence of an Event of Default, the outstanding
principal amount of this promissory note and accrued interest thereon shall, at
the option of the Lender, forthwith become due and payable without presentment,
demand, protest or further notice, provided, however, that upon the occurrence
of any Event of Default consisting of certain bankruptcy events with respect to
the Borrower or any of its Subsidiaries, this promissory note and all accrued
interest thereon shall automatically become and be due and payable, without
presentment, demand, protest or notice of any kind.
8. The Borrower agrees to pay costs of collection (including
reasonable legal fees and disbursements of counsel) if default is made in the
payment of the principal of or interest on this promissory note.
9. Presentment, demand, protest and notices of any kind with respect
to this promissory note are hereby expressly waived by the Borrower.
10. This promissory note is entitled to certain security as set
forth in the Revolving Credit Agreement dated as of June 16, 1997 between the
Borrower and the Lender.
<PAGE>
11. This promissory note shall be governed by and construed in
accordance with the laws of the State of New York.
FIRSTPLUS FINANCIAL, INC.
By:
----------------------------------
Name:
Title:
<PAGE>
Schedule to Promissory Note of FIRSTPLUS FINANCIAL, INC.
dated June 16, 1997
Date of Amount of Amount of Outstanding
Advance Advance Payment Date Payment Advances
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<PAGE>
==========================================================================
SALE AND SERVICING AGREEMENT
Dated as of June 1, 1997
between
FIRSTPLUS FUNDING TRUST
(Issuer)
FIRSTPLUS FINANCIAL, INC.
(Seller and Servicer)
and
FIRST BANK NATIONAL ASSOCIATION
(Indenture Trustee)
FIRSTPLUS FUNDING TRUST
Asset-Backed Notes
Series 1997A
==========================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINITIONS
Section 1.01 Definitions........................................ 1
Section 1.02 Other Definitional Provisions...................... 31
Section 1.03 Determination of LIBOR............................. 32
Section 1.04 Modifying the Minimum Spread Percent............... 32
ARTICLE II
CONVEYANCE OF THE HOME LOANS
Section 2.01 Conveyance of the Initial Home Loans............... 32
Section 2.02 Conveyance of the Subsequent Home Loans;
Additional Note Principal Balances................ 33
Section 2.03 Ownership and Possession of Home Loan Files........ 36
Section 2.04 Books and Records.................................. 36
Section 2.05 Delivery of Home Loan Documents.................... 36
Section 2.06 Acceptance by Indenture Trustee of the Home
Loans; Certification by Custodian................ 38
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 3.01 [RESERVED]......................................... 40
Section 3.02 Representations, Warranties and Covenants of
the Servicer and Seller.......................... 40
Section 3.03 Individual Home Loans.............................. 42
Section 3.04 Subsequent Home Loans.............................. 48
Section 3.05 Purchase and Substitution.......................... 48
ARTICLE IV
ADMINISTRATION AND SERVICING OF THE HOME LOANS
Section 4.01 Duties of the Servicer............................. 51
Section 4.02 Liquidation of Home Loans.......................... 53
Section 4.03 Fidelity Bond; Errors and Omission Insurance....... 54
Section 4.04 Title, Management and Disposition of Foreclosure
Property......................................... 54
Section 4.05 Access to Certain Documentation and Information
Regarding the Home Loans......................... 55
Section 4.06 Superior Liens..................................... 55
Section 4.07 Subservicing....................................... 56
Section 4.08 Successor Servicers................................ 57
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TABLE OF CONTENTS
(continued)
PAGE
----
Section 4.09 Rule 144A Information.............................. 57
ARTICLE V
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01 Collection Account, Note Payment Account and Note
Principal Prepayment Account..................... 58
Section 5.02 Claims Under Guaranty Policy....................... 61
Section 5.03 [RESERVED]......................................... 62
Section 5.04 [RESERVED]......................................... 62
Section 5.05 [RESERVED]......................................... 62
Section 5.06 Capitalized Interest Account....................... 62
Section 5.07 Reserve Fund....................................... 63
Section 5.08 Trust Accounts; Trust Account Property............. 63
Section 5.09 Allocation of Losses............................... 65
Section 5.10 Advance Account.................................... 66
ARTICLE VI
STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS
Section 6.01 Statements......................................... 66
Section 6.02 Reports of Foreclosure and Abandonment of
Mortgaged Property............................... 70
Section 6.03 Specification of Certain Tax Matters............... 70
ARTICLE VII
GENERAL SERVICING PROCEDURES
Section 7.01 Assumption Agreements.............................. 70
Section 7.02 Satisfaction of Mortgages and Release of Home
Loan Files....................................... 71
Section 7.03 Servicing Compensation............................. 73
Section 7.04 Quarterly Statements as to Compliance.............. 73
Section 7.05 Annual Independent Public Accountants' Servicing
Report........................................... 74
Section 7.06 Right to Examine Servicer Records.................. 74
Section 7.07 Reports to the Indenture Trustee; Collection
Account Statements............................... 74
ARTICLE VIII
REPORTS TO BE PROVIDED BY SERVICER
Section 8.01 Financial Statements............................... 75
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<PAGE>
TABLE OF CONTENTS
(continued)
PAGE
----
ARTICLE IX
CERTAIN MATTERS RELATING TO THE SERVICER AND THE SELLER
Section 9.01 Indemnification; Third Party Claims................ 75
Section 9.02 Merger or Consolidation of the Servicer............ 76
Section 9.03 Limitation on Liability of the Servicer and
Others........................................... 77
Section 9.04 Servicer Not to Resign; Assignment................. 77
Section 9.05 Relationship of Servicer to Issuer and the Seller.. 78
ARTICLE X
DEFAULT
Section 10.01 Events of Default.................................. 78
Section 10.02 Indenture Trustee to Act; Appointment of
Successor........................................ 80
Section 10.03 Waiver of Defaults................................. 82
Section 10.04 Accounting Upon Termination of Servicer............ 82
ARTICLE XI
TERMINATION AND PREPAYMENT
Section 11.01 Termination........................................ 83
Section 11.02 Optional Prepayment................................ 83
ARTICLE XII
CONVERSION EVENT
Section 12.01 Conversion Event................................... 85
Section 12.02 Rights of Majority Noteholders..................... 86
Section 12.03 Payments Upon Sale of Trust Estate following
Conversion Event................................. 87
Section 12.04 Duration of Article XII............................ 88
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.01 Acts of Noteholders................................ 88
Section 13.02 Amendment.......................................... 88
Section 13.03 Recordation of Agreement........................... 89
Section 13.04 Duration of Agreement.............................. 90
Section 13.05 Governing Law...................................... 90
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<PAGE>
TABLE OF CONTENTS
(continued)
PAGE
----
Section 13.06 Notices............................................ 90
Section 13.07 Severability of Provisions......................... 91
Section 13.08 No Partnership..................................... 91
Section 13.09 Counterparts....................................... 91
Section 13.10 Successors and Assigns............................. 91
Section 13.11 Headings........................................... 91
Section 13.12 Actions of Noteholders............................. 91
Section 13.13 Reports to Rating Agencies......................... 92
Section 13.14 Grant of Noteholder Rights to Note Insurer......... 93
Section 13.15 Third Party Beneficiary............................ 93
Section 13.16 Suspension and Termination of Note Insurer's
Rights........................................... 93
Section 13.17 Certain Notices.................................... 94
Section 13.18 No Petition........................................ 94
EXHIBITS
EXHIBIT A Home Loan Schedule
EXHIBIT B-1 Form of Addition Notice
EXHIBIT B-2 Form of Subsequent Transfer Agreement
EXHIBIT C Form of Conversion Notice
EXHIBIT D Form of Note Principal Prepayment Notice
EXHIBIT E Form of Issuer Request for Release Pursuant to Section 11.02(b)
EXHIBIT F Form of Servicer's Monthly Remittance Report
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<PAGE>
This Sale and Servicing Agreement is entered into effective as of June 1,
1997, between FIRSTPLUS FUNDING TRUST, a Delaware business trust (the
"Issuer"), FIRSTPLUS FINANCIAL, INC., a Texas corporation ("FFI"), as Seller
(in such capacity, the "Seller") and Servicer (in such capacity, the
"Servicer") and First Bank National Association, a national banking
association, as Indenture Trustee on behalf of the Noteholders (in such
capacity, the "Indenture Trustee").
PRELIMINARY STATEMENT
WHEREAS, the Issuer desires to purchase Home Loans which have been or will
be originated or purchased by the Seller;
WHEREAS, the Seller is willing to sell Home Loans to the Issuer; and
WHEREAS, the Servicer is willing to service such Home Loans in accordance
with the terms of this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.01 DEFINITIONS.
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the meanings specified in this
Article.
ABS YIELD SPREAD: As of any date of determination, the greater of (i) the
sum of the Composite Public ABS Yield Spread as of such date plus .10% and
(ii) 1.00%.
ACCOUNTING DATE: With respect to any date during a given Regular Interest
Accrual Period on which the Principal Balance of a Home Loan is calculated (for
purposes of this definition, the "Calculation Date"), the last day of the
calendar month immediately preceding the month in which such Regular Interest
Accrual Period began; provided, however, that if the applicable Calculation
Date is on or after the Determination Date in a given month and prior to the
Payment Date in such month, the Accounting Date with respect to such
Calculation Date shall be the last day of the immediately preceding calendar
month; and provided further, however, that if the applicable Home Loan was not
included in the Home Loan Pool as of the Accounting Date described above, the
Accounting Date with respect to the Calculation Date for such Home Loan shall
be the Cut-Off Date with respect to such Home Loan.
SALE AND SERVICING AGREEMENT (IBJ WAREHOUSE) - Page 1
<PAGE>
ADDITION NOTICE: With respect to a sale of Subsequent Home Loans to the
Issuer and the related advance of an Additional Note Principal Balance pursuant
to Section 2.02 of this Agreement, a notice from the Seller and the Issuer
substantially in the form of EXHIBIT B-1 hereto.
ADDITIONAL NOTE PRINCIPAL BALANCE: As defined in Section 2.02(a).
ADDITIONAL NOTE PRINCIPAL BALANCE DAILY INTEREST ACCRUAL AMOUNT: With
respect to an Additional Note Principal Balance and a given day in the related
Additional Note Principal Balance Interest Accrual Period, an amount equal to
the product of (i) 1/360, (ii) LIBOR with respect to such Additional Note
Principal Balance Interest Accrual Period plus the Margin and (iii) the unpaid
amount of such Additional Note Principal Balance as of the end of such day.
ADDITIONAL NOTE PRINCIPAL BALANCE INTEREST ACCRUAL PERIOD: With respect
to a Payment Date and any Additional Note Principal Balance for which the
related Advance Date occurred on or after the second preceding Determination
Date and prior to the related Determination Date, the period from such Advance
Date to the day immediately preceding such Payment Date.
ADJUSTED AGGREGATE NOTE PRINCIPAL BALANCE: As of any date of
determination, the Aggregate Note Principal Balance as of such date, reduced,
if such date occurs during the period commencing on the Determination Date in a
given month and ending on the day prior to the Payment Date in such month, by
the Principal Payment Amount to be made on such Payment Date, as reported in
the Servicer's Monthly Remittance Report with respect to such Payment Date.
ADVANCE ACCOUNT: The account established and maintained pursuant to
Section 5.10.
ADVANCE DATE: With respect to an Additional Note Principal Balance, the
date on which the Noteholders advance such Additional Note Principal Balance
pursuant to the Note Purchase Agreement, as described in Section 2.02(a).
ADVANCE PERIOD: The period commencing on the Closing Date and ending on
the Advance Termination Date.
ADVANCE TERMINATION DATE: The earliest to occur of (a) the date on which
a Conversion Event occurs, (b) the Scheduled Advance Termination Date or (c)
the date on which an "event of default" (as defined in the Revolving Credit
Agreement) occurs.
AFFILIATE: With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect
to any Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
AGGREGATE MAXIMUM NOTE PRINCIPAL BALANCE: $500,000,000.
SALE AND SERVICING AGREEMENT (IBJ WAREHOUSE) - Page 2
<PAGE>
AGGREGATE NOTE PRINCIPAL BALANCE: As of any date of determination, the
aggregate of the Note Principal Balances as of such date.
AGREEMENT: This Sale and Servicing Agreement and all amendments hereof
and supplements hereto.
ARRANGER: The Industrial Bank of Japan, Limited, New York Branch.
ASSIGNMENT EVENT: With respect to each Home Loan, the fifth Business Day
following the earliest to occur of (i) the Conversion Date; (ii) the Servicer
fails to satisfy the Net Worth Requirement; or (iii) the Note Insurer
delivering a written request to the Seller to record the Assignments of
Mortgage with respect to each Home Loan, with such request specifying that the
Note Insurer is making such request because the Note Insurer has determined, in
its reasonable judgment, that such recordation is necessary to protect the Note
Insurer's interest with respect to the Home Loans because (x) a Material
Adverse Change has occurred with respect to the Seller, (y) the Note Insurer
has been so advised by its counsel as a result of a change that occurred after
the Closing Date in applicable law or the interpretation thereof or (z) the
aggregate of the Principal Balances of all delinquent Home Loans for which all
or any portion of a Monthly Payment is 30 or more days past due exceeds 5% of
the Pool Principal Balance as of the Determination Date, and in any such case
specifying the basis for such determination in reasonable detail. With respect
to a particular Home Loan, the insolvency of the related Obligor.
ASSIGNMENT OF MORTGAGE: With respect to each Home Loan, an assignment,
notice of transfer or equivalent instrument, which, if recorded in the name of
the Indenture Trustee, would be sufficient under the laws of the jurisdiction
wherein the related Mortgaged Property is located to reflect of record the
transfer of the Mortgage with respect to such Home Loan to the Indenture
Trustee for the benefit of the Noteholders and the Note Insurer.
AVAILABLE COLLECTION AMOUNT: With respect to a Payment Date, an amount
equal to all funds on deposit in the Collection Account on the third Business
Day prior to such Payment Date that represent amounts received on the Home
Loans or required to be paid by the Servicer or the Seller during the related
Due Period (exclusive of (i) any interest payments and proceeds therefrom
representing interest received on or after the May 1, 1997 Cut-Off Date and
prior to June 1, 1997 and (ii) any amount to be withdrawn by the Indenture
Trustee from the Collection Account on such date pursuant to Section 5.01(d) of
this Agreement) as reduced by any portion thereof that may not be withdrawn
therefrom pursuant to an order of a United States bankruptcy court of competent
jurisdiction imposing a stay pursuant to Section 362 of the United States
Bankruptcy Code.
AVAILABLE PAYMENT AMOUNT: With respect to a Payment Date, the amount
deposited in the Note Payment Account with respect to such Payment Date
pursuant to Section 5.01(b)(2).
AVERAGE AGGREGATE NOTE PRINCIPAL BALANCE: With respect to any Regular
Interest Accrual Period, an amount, determined as of the Determination Date in
such Regular Interest Accrual Period, equal to the quotient of (a) the sum of
the Aggregate Note Principal Balances for each day during
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such Regular Interest Accrual Period divided by (b) the number of days in
such Regular Interest Accrual Period.
BASE TREASURY YIELD: As of any date of determination, the greatest of the
yields for the preceding day on U.S. treasury securities with a maturity of
five years. The five-year yield will be equal to the historical closing yield
set forth on Bloomberg Screen "GT5 Govt. HP", under "Generic Government Rate"
as evidenced by a copy of such Bloomberg Screen.
BASIC DOCUMENTS: The Declaration of Trust of the Issuer, the Indenture,
this Agreement, the Insurance Agreement, the Custodial Agreement, the Note
Purchase Agreement, and the Notes.
BLOOMBERG SCREEN: The designated display screen on the Bloomberg Service
(or such other screen or page as may replace that screen on that service for
the purpose of displaying comparable rates); provided, that if such source is
no longer available the Servicer shall obtain a successor source acceptable to
the Majority Noteholders.
BREAKAGE PAYMENT: With respect to a Note Principal Prepayment, an amount
determined by the Servicer equal to the aggregate of the Breakage Payment
Calculation Amounts with respect to each Noteholder and such Note Principal
Prepayment; provided, however, that the Breakage Payment with respect to a Note
Principal Prepayment that is made on a Payment Date shall be zero; and provided
further, however, if the Issuer provides the Indenture Trustee and the
Noteholders with a Note Principal Prepayment Notice with respect to such Note
Principal Prepayment on or before the fourth Business Day prior to the Payment
Date immediately preceding the date that the Principal Prepayment is made, and
such Note Principal Prepayment is made on the Note Principal Prepayment Date
and in the amount specified in such Note Principal Prepayment Notice, the
Breakage Payment with respect to the such Note Principal Prepayment shall be
zero; provided, however, that if such Note Principal Prepayment (or any portion
thereof) is not made on such Note Principal Prepayment Date, the Issuer shall
pay to the Noteholders the amount specified in Section 11.02(c).
BREAKAGE PAYMENT CALCULATION AMOUNT: With respect to a Noteholder and a
Note Principal Prepayment, the sum of (i) with respect to each portion of such
Note Principal Prepayment to be paid to such Noteholder that represents a
prepayment of an Additional Note Principal Balance on which interest is being
accrued as of the related Note Principal Prepayment Date as provided in the
definition of "Interest Payment Amount" (each, an "applicable Additional Note
Principal Balance portion"), an amount equal to (a) the product of (1) the
excess, if any, of LIBOR with respect to the applicable Additional Principal
Balance Interest Accrual Period over the Reinvestment Rate with respect to such
Note Principal Prepayment, (2) the amount of such applicable Additional Note
Principal Balance portion and (3) the number of days from and including the
related Note Principal Prepayment Date through the end of such Additional Note
Principal Balance Interest Accrual Period divided by (b) 360, plus (ii) with
respect to the portion of such Note Principal Prepayment to be paid to such
Noteholder that represents a prepayment of a Prior Payment Date Note Principal
Balance (an "applicable Prior Payment Date Note Principal Balance portion"), an
amount equal to (a) the product of (1) the excess, if any, of LIBOR with
respect to the related Regular Interest Accrual Period over the Reinvestment
Rate with respect to such Note Principal Prepayment, (2) the amount of such
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applicable Prior Payment Date Note Principal Balance portion and (3) the number
of days from and including the related Note Principal Prepayment Date through
the end of such Regular Interest Accrual Period divided by (b) 360.
BUSINESS DAY: Any day other than (i) a Saturday or Sunday or (ii) a day
on which the Note Insurer and banking institutions in New York City or in the
city in which the corporate trust office of the Indenture Trustee is located
are authorized or obligated by law or executive order to be closed.
CAPITALIZED INTEREST ACCOUNT: An account established and maintained
pursuant to Section 5.06.
CAPITALIZED INTEREST ACCOUNT DEPOSIT: Initially, zero, and with respect
to an Additional Note Principal Balance, the product of (a) a fraction the
numerator of which is the number of days from and including the related Advance
Date to but excluding the first Payment Date following such Advance Date and
the denominator of which is 360, (b) the related Additional Note Principal
Balance and (c) LIBOR with respect to the related Additional Note Principal
Balance Interest Accrual Period plus the Margin.
CLOSING DATE: June 16, 1997.
CODE: The Internal Revenue Code of 1986, as amended from time to time,
and Treasury Regulations promulgated thereunder.
COLLECTION ACCOUNT: An account established and maintained by the Servicer
in accordance with Section 5.01(a)(1).
COMBINATION LOAN: A loan, the proceeds of which were used by the Obligor
in combination to finance property improvements and for debt consolidation or
other purposes, and which are marketed by the Seller as "BusterPlus-TM- Loans."
COMPOSITE PUBLIC ABS YIELD SPREAD: The average of the indicative spreads
on a generic single tranche high ltv/debt consolidation loan asset-backed
security that is rated in the highest rating category by a nationally
recognized rating agency with a five year average life and a 25 year maturity,
as computed by the Servicer based on indicative spreads supplied to the
Servicer on each Determination Date, unless requested more frequently by the
Arranger (or, if the ABS Yield Spread exceeds 1.50% on any Determination Date,
on each Business Day thereafter until otherwise consented to by the Arranger)
by at least three Acceptable Dealers. For purposes of this definition, an
"Acceptable Dealer" shall be each of Banc One Capital Corporation, Merrill
Lynch & Co., PaineWebber Incorporated, Bear, Stearns & Co. Inc., Prudential
Securities, J.P. Morgan, CS First Boston, Greenwich Capital Markets and any
other broker dealer approved in writing by the Arranger.
CONVERSION DATE: The Business Day immediately following the day the
Majority Noteholders deliver a Conversion Notice pursuant to Section 12.01,
provided such Conversion Notice is delivered on or after the fifteenth Business
Day following a Conversion Event. If such
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Conversion Notice is delivered prior to the fifteenth Business Day following
a Conversion Event, the Conversion Date shall be the sixteenth Business Day
following such Conversion Event. If no Conversion Notice is delivered by the
Majority Noteholders, the Conversion Date shall be the day that is 180 days
following the Conversion Event or if such day is not a Business Day, the next
succeeding Business Day.
CONVERSION EVENT: The occurrence of any of the following events:
(a) the ABS Yield Spread exceeds 1.50% for five consecutive Business
Days.
(b) on any four consecutive Business Days, the Maximum Note Interest
Rate minus the sum of (i) the Base Treasury Yield and (ii) the ABS Yield
Spread is less than .90%;
(c) on any three consecutive Business Days, the amount by which (i)
the Maximum Note Interest Rate as of the applicable Business Day exceeds
(ii) LIBOR as of such Business Day plus the Margin, is less than .75%;
(d) the failure of the Issuer to pay to the Noteholders, within
three Business Days following any given Payment Date, the Facility Fee with
respect to such Payment Date;
(e) on any Business Day, the fair market price of the Home Loans
(disregarding accrued interest and determined by the Servicer in its
reasonable discretion) is less than 104% of the Pool Principal Balance as
of such Business Day;
(f) on the first Payment Date following the Scheduled Advance
Termination Date, after giving effect to all payments to be made on such
date, the Aggregate Note Principal Balance and all accrued and unpaid
interest thereon has not been paid in full;
(g) on the Business Day that is three Business Days after the
rating on the Notes is decreased below "AAA" by S&P or "Aaa" by Moody's;
(h) if, at the end of a given Due Period, either (w) the average
age of the Home Loan Pool (weighted by Principal Balance) is greater than
twelve months, (x) any Home Loan was originated more than sixteen months
prior to the end of such Due Period, (y) more than 50% of the Home Loans
(weighted by Principal Balance) have an age of more than 12 months and less
than or equal to 16 months, or (z) more than 1.00% of the Home Loans
(weighted by Principal Balance) have an age of more than 16 months;
(i) the Seller fails to pay when due any amount payable hereunder or
fails to make a deposit as required hereunder and such failure continues
for two Business Days;
(j) failure by the Seller duly to observe or perform, in any
material respect, any covenant, obligation or agreement of the Seller as
set forth in this Agreement (other than a
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covenant, obligation or agreement, a default in the observance or
performance of which is elsewhere in this Section specifically dealt
with), which failure continues unremedied for a period of 60 days after
the earlier of (A) any officer of the Seller first acquiring knowledge
thereof and (B) the Indenture Trustee giving written notice thereof to
the Seller;
(k) any representation or warranty of the Seller or the Servicer
made in this Agreement or in any certificate or other writing delivered
pursuant hereto or in connection herewith or any representation or warranty
of the Issuer made in the Note Purchase Agreement proving to be incorrect
in any material respect as of the time when the same shall have been made
and such default shall continue or not be cured, or the circumstance or
condition in respect of which such representation or warranty was incorrect
shall not have been eliminated or otherwise cured for a period of 60 days
after the earlier of (A) any officer of the Seller or Servicer first
acquiring knowledge thereof and (B) the Indenture Trustee giving written
notice thereof to the Seller or Servicer, as applicable; PROVIDED, HOWEVER,
that the breach of any representation or warranty made by the Seller in
Section 3.03 hereof with respect to any of the Home Loans shall not
constitute a Conversion Event if the Seller repurchases such Home Loans or
substitutes one or more Home Loans subject thereto for such Home Loans in
accordance with Section 3.05;
(l) the entry by a court or supervisory authority having
jurisdiction of (A) a decree or order for relief in respect of the Seller
in an involuntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization, or other similar law or (B) a
decree or order adjudging the Seller as bankrupt or insolvent or approving
as properly filed a petition seeking reorganization, arrangement,
adjustment, or composition of or in respect of the Seller under any
applicable federal or state law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator, or other similar official of
the Seller or of any substantial part of its property, or ordering the
winding up or liquidation of its affairs, and the continuance of any such
decree or order for relief or any such other decree or order unstayed and
in effect for a period of 60 consecutive days; or
(m) the commencement by the Seller of a voluntary case or proceeding
under any applicable federal or state bankruptcy, insolvency,
reorganization, or other similar law or of any other case or proceeding to
be adjudicated a bankrupt or insolvent or the consent by the Seller to the
entry of a decree or order for relief in respect of itself in an
involuntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization, or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against the
Seller, or the filing by the Seller of a petition or answer or consent
seeking reorganization or relief under any applicable federal or state law,
or the consent by the Seller to the filing of such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator, or similar official of the Seller or of
any substantial part of its property, or the making by the Seller of an
assignment for the benefit of creditors, or the Seller's failure to pay its
debts generally as they become due, or the taking of corporate action by
the Seller in furtherance of any such action; or
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(n) the occurrence and continuance of an Undeclared Event of
Default; or
(o) the occurrence and continuance of an Indenture Event of
Default or an event that, disregarding the grant of the Noteholders'
rights to the Note Insurer pursuant to Section 11.17 of the Indenture,
would be deemed an Indenture Event of Default by the Noteholders.
CONVERSION NOTICE: A written notice in the form of EXHIBIT C hereto
delivered by the Majority Noteholders to the Indenture Trustee, the Servicer,
the Issuer and the Note Insurer whereby the Majority Noteholders set a
Conversion Date.
CREDIT SCORE: A numerical assessment of a default risk with respect to an
Obligor, based on a credit evaluation scoring methodology developed by Fair,
Issac and Company.
CREDIT SUPPORT FUNDING EVENT: A Conversion Event or, unless waived in
writing by the Note Insurer and each Rating Agency, the occurrence and
continuation of any of the following events:
(a) the Required Overcollateralization Amount is ever greater than
the Overcollateralization Amount;
(b) on any Business Day, the Servicer fails to satisfy the Net Worth
Requirement; or
(c) if, at the end of a given Due Period (i) a Home Loan is a
delinquent Home Loan with respect to which all or any portion of a Monthly
Payment is 60 or more days past due or (ii) the aggregate of the Principal
Balances of all delinquent Home Loans not referred to in clause (i) for
which all or any portion of a Monthly Payment is 30 or more days past due
exceeds 2% of the Pool Principal Balance as of the Determination Date
following the end of such Due Period, the Issuer fails, on or before such
Determination Date, to obtain a release of the lien of the Indenture or
substitute for, in accordance with Section 2.9(c) of the Indenture (A) the
Home Loans referred to in clause (i), if such Home Loan continues to have
a portion of a Monthly Payment 60 or more days past due on such
Determination Date and (B) Home Loans as referred to in clause (ii), such
that the aggregate of the Principal Balances of all delinquent Home Loans
as referred to in such clause (ii) as of such Determination Date is less
than or equal to 2% of the Pool Principal Balance as of such Determination
Date.
CREDIT SUPPORT REDUCTION DATE: The Payment Date occurring on the later of
(i) the 36th Payment Date following the most recent date on which a Credit
Support Funding Event occurred or (ii) the Payment Date on which the Pool
Principal Balance is equal to or less than 50% of the Pool Principal Balance as
of the most recent date on which a Credit Support Funding Event occurred.
CUMULATIVE DEFAULT PERCENTAGE: With respect to any date of determination,
the ratio of (a) the sum of the Net Defaulted Loan Losses with respect to each
Payment Date on or after the date of
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the most recent occurrence of a Credit Support Funding Event to (b) the Pool
Principal Balance as of the date of the most recent occurrence of a Credit
Support Funding Event.
CUSTODIAL AGREEMENT: The custodial agreement dated June 16, 1997 by and
among FFI, as the Seller and the Servicer, the Issuer, the Indenture Trustee,
and Bank One, Texas, National Association, as the Custodian, and any subsequent
custodial agreement, in similar form and substance, providing for the retention
of the Home Loan Files by the Custodian on behalf of the Indenture Trustee.
CUSTODIAN: Any custodian acceptable to the Note Insurer and appointed by
the Indenture Trustee pursuant to the Custodial Agreement, which shall not be
affiliated with the Servicer, any Subservicer or the Seller. Bank One, Texas,
National Association, shall be the initial Custodian pursuant to the terms of
the Custodial Agreement.
CUT-OFF DATE: With respect to the Initial Home Loans, the close of
business on May 1, 1997, and with respect to each Subsequent Home Loan, the
close of business on the date specified as such in the applicable Subsequent
Transfer Agreement.
DEBT CONSOLIDATION LOAN: A loan, the proceeds of which were primarily
used by the related Obligor for debt consolidation purposes or purposes other
than to finance property improvements and which are marketed by the Seller as
"DebtBuster Loans".
DEBT INSTRUMENT: With respect to a Home Loan, the note or other evidence
of indebtedness evidencing the indebtedness of an Obligor under a Home Loan.
DEBT RATIO: With respect to a Home Loan, the total outstanding
indebtedness of the related Obligor divided by the total income of such
Obligor, as calculated pursuant to the underwriting guidelines of the Seller in
effect at the time of the origination of such Home Loan.
DEFAULT RATE: With respect to a Payment Date, the ratio of (a) 12 times
the Net Defaulted Loan Losses with respect to such Payment Date to (b) the Pool
Principal Balance as of the beginning of the related Due Period.
DEFAULTED HOME LOAN: With respect to the calculation of the Required
Credit Support Multiple or the waiver or modification of a Home Loan pursuant
to Section 4.01(c), during a Due Period, any Home Loan, including without
limitation any Liquidated Home Loan, with respect to which any of the following
occurs: (a) foreclosure or similar proceeding has been commenced; (b) any
portion of a Monthly Payment has become 180 days past due by the related
Obligor; or (c) the Servicer or any Subservicer has determined in good faith
and in accordance with customary servicing practices that such Home Loan is
uncollectible; provided, further, that (i) any Defaulted Home Loan that is
released from the lien of the Indenture or substituted for pursuant to
Section 2.9(c) of the Indenture at any time after the date of the occurrence of
the most recent Credit Support Funding Event, if any, and during the
continuance thereof, and any Defaulted Home Loan that is modified, waived or
varied pursuant to Section 4.01(c), shall continue to be included in the
calculation of the
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Required Credit Support Multiple and (ii) any Defaulted Home Loan that is (A)
repurchased or substituted for at any time pursuant to Section 3.05(a) or (B)
released from the lien of the Indenture or substituted for prior to the date
of the occurrence of a Credit Support Funding Event, if any, pursuant to
Section 2.9(c) of the Indenture, shall not continue to be included in the
calculation of the Required Credit Support Multiple.
DEFECTIVE HOME LOAN: As defined in Section 3.05(a) hereof.
DEFICIENCY AMOUNT: As of any Payment Date, the amount by which (i) the
sum of the Interest Payment Amount with respect to such Payment Date and the
Principal Payment Amount with respect to such Payment Date exceeds (ii) (a) the
amount deposited in the Note Payment Account pursuant to Section 5.01(b)(2)
minus (b) the amount referred to in clause (i) of Section 5.01(c) with respect
to such Payment Date.
DELETED HOME LOAN: A Home Loan replaced by or to be replaced by a
Qualified Substitute Home Loan pursuant to Section 3.05 hereof or
Section 2.9(c) of the Indenture.
DELINQUENCY RATE (30 DAY): With respect to a Payment Date, the ratio of
(a) the aggregate of the Principal Balances for all Home Loans as of the
related Determination Date which were 30 or more days delinquent as of the last
day of the preceding Due Period to (b) the Pool Principal Balance as of the
related Determination Date.
DELINQUENCY RATE (60 DAY): With respect to a Payment Date, the ratio of
(a) the aggregate of the Principal Balances of all Home Loans as of the related
Determination Date which were 60 or more days delinquent as of the last day of
the preceding Due Period, to (b) the Pool Principal Balance as of the related
Determination Date.
DELIVERY: When used with respect to Trust Account Property means:
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that constitute
"instruments" within the meaning of Section 9-105(1)(i) of the UCC and are
susceptible of physical delivery, transfer thereof by physical delivery to
the Indenture Trustee endorsed to, or registered in the name of, the
Indenture Trustee or its nominee or endorsed in blank, and, with respect
to a certificated security (as defined in Section 8-102 of the UCC)
transfer thereof (i) by delivery of such certificated security to the
Indenture Trustee in accordance with the provisions of Section 8-301(a) of
the UCC, and such additional or alternative procedures as may hereafter
become appropriate to effect the complete transfer of ownership of or a
security interest in any such Trust Account Property to the Indenture
Trustee, consistent with changes in applicable law or regulations or the
interpretation thereof;
(b) with respect to any security issued by the U.S. Treasury, the
Federal Home Loan Mortgage Corporation or by the Federal National Mortgage
Association that is a book-entry security held through the Federal Reserve
System pursuant to federal book-entry
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regulations, the following procedures, all in accordance with applicable
law, including applicable federal regulations and Articles 8 and 9 of the
UCC: the crediting of such Trust Account Property to a securities account
maintained with a Federal Reserve Bank by a securities intermediary; the
indication by such securities intermediary that such Trust Account Property
has been credited to the Indenture Trustee's securities account at the
securities intermediary; and such additional or alternative procedures as
may hereafter become appropriate to effect complete transfer of ownership
of or a security interest in any such Trust Account Property to the
Indenture Trustee, consistent with changes in applicable law or regulations
or the interpretation thereof; and
(c) with respect to any Trust Account Property that is an
uncertificated security under Article 8 of the UCC and that is not
governed by clause (b) above, registration on the books and records of the
issuer thereof in the name of the Indenture Trustee or another Person
(other than "securities intermediary" (as defined in Section 8-102 of the
UCC)) acting on behalf of the Indenture Trustee.
DETERMINATION DATE: With respect to a Payment Date in a given month, the
day of such month which is four (4) Business Days prior to such Payment Date.
DUE DATE: The day of the month on which the Monthly Payment is due from
the Obligor on a Home Loan.
DUE PERIOD: With respect to the initial Payment Date, the two calendar
months immediately preceding the month in which such initial Payment Date
occurs, and with respect to each other Payment Date, the one calendar month
immediately preceding the month in which such Payment Date occurs.
ELIGIBLE ACCOUNT: At any time, an account which is any of the following:
(i) an account maintained with a depository institution (A) the long-term debt
obligations of which are at such time rated by each Rating Agency in one of
their two highest long-term rating categories, or (B) the short-term debt
obligations of which are then rated by each Rating Agency in their highest
short-term rating category; (ii) an account or accounts the deposits in which
are fully insured by either the Bank Insurance Fund or the Savings Association
Insurance Fund of the FDIC; (iii) a trust account (which shall be a "segregated
trust account") maintained with the corporate trust department of a federal or
state chartered depository institution or trust company with trust powers and
acting in its fiduciary capacity for the benefit of the Indenture Trustee and
the Issuer, which depository institution or trust company shall have capital
and surplus of not less than $50,000,000; or (iv) an account that will not
cause any Rating Agency to downgrade or withdraw its then-current rating(s)
assigned to the Notes, as evidenced in writing by such Rating Agency. (Each
reference in this definition of "Eligible Account" to the Rating Agency shall
be construed as a reference to Standard & Poor's and Moody's.)
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ELIGIBLE SERVICER: A Person who is qualified to act as Servicer of the
Home Loans under applicable federal and state laws and regulations and who
satisfies the criteria of Section 9.04(b) hereof.
EVENT OF DEFAULT: As described in Section 10.01 hereof.
FACILITY FEE: As defined in the Letter Agreement.
FDIC: The Federal Deposit Insurance Corporation and any successor
thereto.
FFI: FIRSTPLUS FINANCIAL, INC., a Texas corporation, and its successors
and permitted assigns.
FHLMC: The Federal Home Loan Mortgage Corporation and any successor
thereto.
FINAL SCHEDULED PAYMENT DATE: The Payment Date occurring in December
2024.
FNMA: The Federal National Mortgage Association and any successor
thereto.
FORECLOSURE PROPERTY: Any real property or personal property securing a
Home Loan that has been acquired by the Servicer through foreclosure, deed in
lieu of foreclosure or similar proceedings in respect of the related Home Loan.
GUARANTEED PAYMENT: With respect to the Guaranty Policy, the sum of (i)
as of any Payment Date, any Deficiency Amount and (ii) any unpaid Preference
Amount. In no event shall the Guaranteed Payment include (i) any Breakage
Payment or (ii) any shortfall or loss resulting to the Noteholders in
connection with a sale of the Trust Estate in accordance with Section 12.03 of
the Sale and Servicing Agreement.
GUARANTY INSURANCE PREMIUM: With respect to a Payment Date, the premium,
payable monthly, that is specified in the Commitment Letter issued by the Note
Insurer with respect to the Notes.
GUARANTY INSURANCE PREMIUM PERCENTAGE: As specified in the Insurance
Agreement.
GUARANTY POLICY. That certain financial guaranty insurance policy for the
Notes, number 24039 dated June 16, 1997, and issued by the Note Insurer to the
Indenture Trustee and guaranteeing payment of Guaranteed Payments.
HOLDER: A holder of a Note; provided that the exercise of any rights by
such holder shall be subject to Section 13.14 hereof and Section 11.17 of the
Indenture.
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HOME LOAN: A Debt Consolidation Loan or Combination Loan that is included
in the Home Loan Pool. As applicable, a Home Loan shall be deemed to refer to
the related Debt Instrument, Mortgage, and any related Foreclosure Property.
HOME LOAN FILE: As defined in Section 2.05.
HOME LOAN INTEREST RATE: With respect to a Home Loan, the fixed annual
rate of interest borne by a Debt Instrument, as shown on the related Home Loan
Schedule as the same may be modified by the Servicer in accordance with Section
4.01(c) hereof.
HOME LOAN POOL: Initially, the Initial Home Loans, and thereafter, as of
any date, all of the Home Loans that are subject to the lien of the Indenture
as of such date, as identified in the Home Loan Schedule.
HOME LOAN SCHEDULE: The schedule of Initial Home Loans attached hereto as
EXHIBIT A, together with any schedule of Subsequent Home Loans attached to a
Subsequent Transfer Agreement, each as amended from time to time pursuant to
the terms of this Agreement, such schedules identifying each Home Loan by
address of the related Mortgaged Property, if any, and the name(s) of each
Obligor and setting forth as to each Home Loan the following information: (i)
the Principal Balance as of the applicable Cut-Off Date, (ii) the account
number, (iii) the original principal amount, (iv) the Due Date, (v) the Home
Loan Interest Rate, (vi) the first date on which a Monthly Payment is due under
the related Debt Instrument, (vii) the Monthly Payment, (viii) the maturity
date of the related Debt Instrument, and (ix) the remaining number of months to
maturity as of the applicable Cut-Off Date.
INDENTURE: The Indenture, dated as of June 1, 1997, between the Issuer
and the Indenture Trustee.
INDENTURE EVENT OF DEFAULT: The events of default described in Section
5.1 of the Indenture.
INDENTURE TRUSTEE: First Bank National Association, a national banking
association, as Indenture Trustee under the Indenture and this Agreement acting
on behalf of the Noteholders, or any successor indenture trustee under the
Indenture or this Agreement.
INDENTURE TRUSTEE FEE: The monthly fee payable to the Indenture Trustee
on each Payment Date in the amount of $833.33.
INDENTURE TRUSTEE'S CERTIFICATE: A certificate prepared by the Indenture
Trustee and delivered to the Noteholders, the Note Insurer, the Arranger, the
Issuer and the Servicer no later than three (3) Business Days before each
Payment Date, which certificate sets forth the Note Principal Balance with
respect to each Note and the Aggregate Note Principal Balance, each as of the
Determination Date immediately preceding such Payment Date.
INDENTURE TRUSTEE'S HOME LOAN FILE: As defined in Section 2.05(d).
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INITIAL HOME LOAN: An individual Home Loan that is conveyed to the Issuer
pursuant to this Agreement on the Closing Date, together with the rights and
obligations of a holder thereof and principal payments thereon and proceeds
therefrom representing principal received on or after the May 1, 1997 Cut-Off
Date and interest payments thereon and proceeds therefrom representing interest
received on or after June 1, 1997. The Initial Home Loans subject to this
Agreement being identified on the Home Loan Schedule annexed hereto as EXHIBIT
A.
INSURANCE AGREEMENT: The Insurance and Indemnification Agreement, dated
as of June 1, 1997, among the Note Insurer, the Servicer, the Seller, the
Issuer, FIRSTPLUS FINANCIAL GROUP, INC., as Guarantor, and the Indenture
Trustee.
INSURANCE PROCEEDS: With respect to any Home Loan, the proceeds paid to
the Servicer by any insurer pursuant to any insurance policy covering a Home
Loan, Mortgaged Property or Foreclosure Property or any other insurance policy
that relates to a Home Loan, net of any expenses which are incurred by the
Servicer in connection with the collection of such proceeds and not otherwise
reimbursed to the Servicer, other than Guaranteed Payments and proceeds of any
insurance policy that are to be applied to the restoration or repair of the
Mortgaged Property or released to the Obligor in accordance with customary
mortgage loan servicing procedures applicable to the respective loan type,
including Debt Consolidation Loans and Combination Loans.
INTEREST CARRYOVER SHORTFALL: With respect to the initial Payment Date,
zero; with respect to each subsequent Payment Date, the excess, if any, of (i)
the Monthly Interest Payment Amount with respect to the preceding Payment Date
plus any Interest Carryover Shortfall not previously paid with respect to such
Payment Date over (ii) the amount in respect of interest on the Notes that was
actually paid on the Notes on such preceding Payment Date.
INTEREST PAYMENT AMOUNT: With respect to each Payment Date, the sum of
the Monthly Interest Payment Amount for such Payment Date and the Interest
Carryover Shortfall, if any, for such Payment Date.
ISSUER: FIRSTPLUS FUNDING TRUST, a Delaware business trust, and its
successors and permitted assigns.
ISSUER SPECIAL PURPOSE ACCOUNT: That certain Eligible Account established
by the Issuer and maintained with the Indenture Trustee entitled "Issuer
Special Purpose Account, FIRSTPLUS FUNDING TRUST Asset-Backed Notes, Series
1997A."
LETTER AGREEMENT: That certain Letter Agreement dated as of June 16, 1997
by and between the Arranger, FFI, the Issuer and the Indenture Trustee.
LIBOR: With respect to (i) an Additional Note Principal Balance Interest
Accrual Period or a Regular Interest Accrual Period, as applicable, the
applicable London interbank offered rate for one-month United States dollar
deposits determined on the related LIBOR Determination Date for such Additional
Note Principal Balance Interest Accrual Period or Regular Interest Accrual
Period,
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as applicable, in accordance with the provisions of Section 1.03, provided,
however, that LIBOR with respect to the Regular Interest Accrual Period with
respect to the first Payment Date shall be 5.6875%, and (ii) with respect to
each Business Day, such rate determined on such Business Day in accordance
with the provisions of Section 1.03.
LIBOR DETERMINATION DATE: With respect to (i) an Additional Note
Principal Balance Interest Accrual Period or Regular Interest Accrual Period,
as applicable, the second London Business Day prior to the commencement of such
Additional Note Principal Balance Interest Accrual Period or Regular Interest
Accrual Period, as applicable, or (ii) any other Business Day, such Business
Day or the previous Business Day if such Business Day is not a London Business
Day.
LIQUIDATED HOME LOAN: Any defaulted Home Loan or Foreclosure Property in
respect of a Home Loan on which a Monthly Payment is in excess of 30 days past
due and as to which the Servicer has determined that all amounts which it
reasonably and in good faith expects to collect have been recovered from or on
account of such defaulted Home Loan or the related Foreclosure Property;
provided that, in any event, such defaulted Home Loan or the related
Foreclosure Property shall be deemed uncollectible and therefore deemed a
Liquidated Home Loan upon the earlier of: (a) the liquidation of the related
Foreclosure Property, (b) the determination by the Servicer in accordance with
customary servicing practices that no further amounts are collectible from such
defaulted Home Loan or the related Foreclosure Property, or (c) the date on
which any portion of a Monthly Payment on any Home Loan is in excess of 300
days past due.
LIQUIDATION PROCEEDS: With respect to a Liquidated Home Loan, any cash
amounts received in connection with the liquidation of such Liquidated Home
Loan, whether through trustee's sale, foreclosure sale or other disposition,
and any other amounts required to be deposited in the Collection Account
pursuant to Section 4.02 or 4.04, in each case other than Post-Liquidation
Proceeds, Insurance Proceeds and Released Mortgaged Property Proceeds.
LOAN SALE AGREEMENT: Individually or collectively, as the context in
which this term is used may require, each loan sale agreement entered into by
the Seller, as purchaser, pursuant to which the Seller has acquired any of the
Home Loans and which shall include all of the rights and benefits of the Seller
thereunder with respect to such Home Loans, subject to any limitations
thereunder regarding assignment by the Seller.
LONDON BUSINESS DAY: Any Business Day on which dealings in deposits in
United States dollars are transacted in the London interbank market.
MAJORITY NOTEHOLDERS: Subject to Section 13.14 hereof and Section 11.17
of the Indenture, at any given time, the Holder or Holders of Outstanding Notes
representing more than 50% of the Outstanding Amount.
MARGIN: As defined in the Letter Agreement.
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MATERIAL ADVERSE CHANGE: In respect of any Person, a material adverse
change in (i) the business, financial condition, results of operations or
properties of such Person or (ii) the ability of such Person to perform its
obligations under any of the Basic Documents.
MAXIMUM NOTE PRINCIPAL BALANCE: With respect to each Note, that portion
of the Aggregate Maximum Note Principal Balance represented by such Note, which
may be determined by multiplying the Percentage Interest of such Note by the
Aggregate Maximum Note Principal Balance.
MAXIMUM NOTE INTEREST RATE: As of any date of determination, the average
of the Home Loan Interest Rates (weighted by Principal Balance) of each Home
Loan in the Home Loan Pool minus the sum of (i) the then-applicable Minimum
Spread Percent, (ii) the Guaranty Insurance Premium Percentage, and (iii) the
Servicing Fee Percentage.
MINIMUM SPREAD PERCENT: The percent specified by the Issuer pursuant to
Section 1.04.
MONTHLY INTEREST PAYMENT AMOUNT: With respect to each Payment Date on or
prior to a date on which a Conversion Event occurs, the lesser of (I) the sum
of (A) the product of (i) a fraction, the numerator of which is the number of
days in the related Regular Interest Accrual Period and the denominator of
which is 360, (ii) the Maximum Note Interest Rate as of the related
Determination Date and (iii) the Average Aggregate Note Principal Balance for
such Regular Interest Accrual Period plus (B) for each Additional Note
Principal Balance for which the related Advance Date occurred on or after the
second preceding Determination Date and prior to the Payment Date immediately
following such second preceding Determination Date (the "prior Payment Date"),
interest accrued on such Additional Principal Balance at the Maximum Note
Interest Rate for the period from such Advance Date to the day immediately
preceding such prior Payment Date and (II) the sum of (A) for each Additional
Note Principal Balance for which the related Advance Date occurred on or after
the second preceding Determination Date and prior to the related Determination
Date, (x) the sum of the related Additional Note Principal Balance Daily
Interest Accrual Amounts for each day in such Additional Note Principal Balance
Interest Accrual Period minus (y) the amount of any accrued interest on such
Additional Note Principal Balance which has been paid or deposited in the Note
Principal Prepayment Account in connection with a Note Principal Prepayment
pursuant to Section 11.02 plus (B) (x) the sum of the related Prior Payment
Date Note Principal Balance Daily Interest Accrual Amounts for each day in the
related Regular Interest Accrual Period minus (y) the amount of any accrued
interest on such Prior Payment Date Note Principal Balance which has been paid
or deposited in the Note Principal Prepayment Account in connection with a Note
Principal Prepayment pursuant to Section 11.02. With respect to the first
Payment Date following the date on which a Conversion Event occurs, the sum of
(i) for each Additional Note Principal Balance for which the related Advance
Date occurred on or after the second preceding Determination Date and prior to
the Payment Date immediately following such second preceding Determination
Date, the sum of the related Additional Note Principal Balance Daily Interest
Accrual Amounts for each day from such Advance Date to the day immediately
preceding
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the day on which such Conversion Event occurred, plus (ii) the sum of the
related Prior Payment Date Note Principal Balance Daily Interest Accrual
Amounts for each day from the preceding Payment Date to the day immediately
preceding the day on which such Conversion Event occurred, plus (iii) the
product of (x) a fraction, the numerator of which is the number of days from
and including the date on which such Conversion Event occurred to the day
immediately preceding such Payment Date, and the denominator of which is 30,
(y) the Maximum Note Interest Rate as of the date such Conversion Event
occurred, and (z) the Aggregate Note Principal Balance as of the date such
Conversion Event occurred. With respect to each Payment Date after the first
Payment Date following the date on which a Conversion Event occurs, 1/12 of
the product of (A) the Maximum Note Interest Rate as of the date such
Conversion Event occurred and (B) the Aggregate Note Principal Balance as of
the end of the Payment Date that is the first day of the related Regular
Interest Accrual Period.
MONTHLY PAYMENT: The scheduled monthly payment of principal and/or
interest required to be made by an Obligor on the related Home Loan, as set
forth in the related Debt Instrument.
MOODY'S: Moody's Investors Service, Inc. or any successor thereto.
MORTGAGE: The mortgage, deed of trust or other security instrument
creating a lien in accordance with applicable law on a Mortgaged Property to
secure the Debt Instrument which evidences a Home Loan.
MORTGAGED PROPERTY: The property (real, personal or mixed) encumbered by
the Mortgage which secures the Debt Instrument evidencing a Home Loan.
MORTGAGED PROPERTY STATES: Each state in which any Mortgaged Property
securing an Initial Home Loan is located as set forth in the Home Loan
Schedule, and any other state wherein a Mortgaged Property securing any
Subsequent Home Loan may be located as set forth in the Home Loan Schedule.
NET LIQUIDATION PROCEEDS: Liquidation Proceeds net of any reimbursements
to the Servicer made therefrom for any unreimbursed Servicing Advances made and
any other fees and expenses paid in connection with the foreclosure,
conservation and liquidation of the related Home Loan or Foreclosure Property
pursuant to Sections 4.02 and 4.04 hereof.
NET DEFAULTED LOAN LOSSES: With respect to a Payment Date, the sum of (A)
with respect to the Home Loans that became Defaulted Home Loans during the
immediately preceding Due Period, an amount (but not less than zero) determined
as of the related Determination Date equal to:
(i) the aggregate Principal Balances of such Defaulted Home Loans as
of the related Determination Date and without the application of any
amounts included in clause (ii) below, minus
(ii) the sum of the aggregate amount of any recoveries attributable to
principal from whatever source received during any Due Period, with
respect to Liquidated Home Loans, including any subsequent Due
Period, and including without limitation any Net Liquidation
Proceeds, any Insurance Proceeds, any Released Mortgaged Property
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Proceeds, any payment from the related Obligor and any payments
made pursuant to Section 3.05 or Section 2.9 of the Indenture less
the amount of any expenses incurred in connection with such
recoveries; and
(B) with respect to any Defaulted Home Loan that is subject to a modification
by the Servicer, an amount equal to the portion of the Principal Balance, if
any, released in connection with such modification.
NET LOAN LOSSES: With respect to a Payment Date, the sum of (A) with
respect to the Home Loans that became Liquidated Home Loans during the
immediately preceding Due Period, an amount (but not less than zero) determined
as of the related Determination Date equal to:
(i) the aggregate uncollected Principal Balances of such Liquidated
Home Loans as of the related Determination Date and without the
application of any amounts included in clause (ii) below, minus
(ii) the aggregate amount of any recoveries attributable to principal
from whatever source received during any Due Period, with respect to
such Liquidated Home Loans, including any subsequent Due Period, and
including without limitation any Net Liquidation Proceeds, any
Insurance Proceeds, any Released Mortgaged Property Proceeds, any
payments from the related Obligor and any payments made pursuant to
Section 3.05 or Section 2.9 of the Indenture less the amount of any
expenses incurred in connection with such recoveries; and
(B) with respect to any Defaulted Home Loan that is subject to a modification
by the Servicer, an amount equal to the portion of the Principal Balance, if
any, released in connection with such modification.
NET WORTH REQUIREMENT: As reported in each fiscal year end audited
financial statement of the Servicer, prepared in accordance with GAAP, the
Servicer's consolidated Tangible Net Worth shall not be less than $130,000,000
plus 50% of the cumulative after-tax net income since March 31, 1997, such
cumulative amount being calculated without any offset or reduction for net
losses incurred during any period since March 31, 1997.
NOTE INSURER: MBIA Insurance Corporation, as issuer of the Guaranty
Policy, and its successors and assigns.
NOTE INSURER COMMITMENT: As defined in Section 3.04(a) hereof.
NOTE INSURER DEFAULT: The failure of the Note Insurer to make payments
under the Guaranty Policy, if such failure has not been remedied within ten
(10) days of notice thereof, or the entry of an order or decree with respect to
the Note Insurer in any insolvency or bankruptcy proceedings which remain
unstayed or undischarged for 90 days.
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NOTE INSURER REIMBURSEMENT AMOUNT: At any time, an amount owed to the
Note Insurer for any unreimbursed Guaranteed Payments made under the Guaranty
Policy, together with interest thereon at the rate specified in the Insurance
Agreement and any other amounts then owing to the Note Insurer under the
Insurance Agreement, which have not previously been reimbursed.
NOTE PAYMENT ACCOUNT: An account established and maintained pursuant to
clause (i) of Section 5.01(a)(2).
NOTE PRINCIPAL BALANCE: With respect to a Note, as of any date of
determination, the original principal balance of such Note, as increased by any
Additional Note Principal Balances previously allocated to such Note pursuant
to Section 2.02(a), and as reduced by all amounts previously paid on such Note
in reduction of the principal balance of such Note.
NOTE PRINCIPAL PREPAYMENT: A prepayment of all or part of principal of
the Notes made by the Issuer pursuant to Section 11.02.
NOTE PRINCIPAL PREPAYMENT ACCOUNT: An account established and maintained
pursuant to clause (ii) of Section 5.01(a)(2).
NOTE PRINCIPAL PREPAYMENT DATE: Any Business Day on which the Issuer
proposes to make a Note Principal Prepayment as provided in Section 11.02(a),
as specified in the related Note Principal Prepayment Notice; provided,
however, that the Issuer may not make a Note Principal Prepayment on any date
in a given month during the period from and including the Determination Date in
such month to and including the day prior to the related Payment Date.
NOTE PRINCIPAL PREPAYMENT NOTICE: With respect to a Note Principal
Prepayment, a notice from the Issuer in the form of EXHIBIT D hereto.
NOTE PURCHASE AGREEMENT: The Note Purchase Agreement, dated as of
June 16, 1997, among the Issuer, FIRSTPLUS FINANCIAL, INC. and Working Capital
Management Co. L.P.
NOTEHOLDER: A holder of a Note; provided that the exercise of any rights
by such holder shall be subject to Section 13.14 hereof and Section 11.17 of
the Indenture.
NOTES: The Issuer's Asset-Backed Notes, Series 1997A, issued pursuant to
the Indenture.
OBLIGOR: Each obligor on a Debt Instrument.
OFFICER'S CERTIFICATE: A certificate delivered to the Indenture Trustee
or the Issuer signed by the President or a Vice President or an Assistant Vice
President of the Seller, the Servicer or the Issuer, in each case, as required
by this Agreement.
OVERCOLLATERALIZATION AMOUNT: As of any date of determination, the
excess, if any, of (i) the Pool Principal Balance, plus any amount on deposit
in the Note Principal Prepayment Account
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representing a Note Principal Prepayment, plus the Reserve Fund Balance, plus
any amounts on deposit in the Collection Account that represent (a) the
principal portion of the Purchase Price with respect to any Home Loan that
has been purchased by the Seller pursuant to Section 3.05(a) or released from
the lien of the Indenture pursuant to Section 2.9(c) of the Indenture or (b)
the principal portion of the Substitution Adjustment with respect to any
Qualified Substitute Home Loan substituted for a Home Loan by the Seller
pursuant to Section 3.05(a) or by the Issuer pursuant to Section 2.9(c) of
the Indenture, each as of such date, over (ii) the Adjusted Aggregate Note
Principal Balance as of such date.
OVERCOLLATERALIZATION BASE PERCENT REQUIREMENT:
Overcollateralization
Minimum Spread Percent Base Percent Requirement
---------------------- ------------------------
6.00% 3.55%
5.00% 6.15%
4.50% 7.45%
4.25% 8.15%
4.00% 8.80%
3.75% 9.45%
3.55% 10.00%
3.00% 11.50%
OVERCOLLATERALIZATION TARGETED PERCENT REQUIREMENT:
Overcollateralization
Minimum Spread Percent Targeted Percent Requirement
---------------------- ----------------------------
6.00% 9.35%
5.00% 11.40%
4.50% 12.45%
4.25% 12.95%
4.00% 13.50%
3.75% 14.00%
3.55% 14.45%
3.00% 15.65%
PAYMENT DATE: The 15th day of any month or if such 15th day is not a
Business Day, the first Business Day immediately following such day, commencing
in July 1997.
PERCENTAGE INTEREST: With respect to each Note, the percentage rounded to
five decimal places, equivalent to a fraction the numerator of which is the
Note Principal Balance of such Note and the denominator of which is the
Aggregate Note Principal Balance.
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PERMITTED INVESTMENTS: Each of the following:
(1) obligations of, or guarantees as to principal and interest
by, the United States or any agency or instrumentality thereof when such
obligations are backed by the full faith and credit of the United States;
(2) a repurchase agreement that satisfies the following criteria
and is acceptable to the Note Insurer: (1) must be between the Indenture
Trustee and either (a) primary dealers on the Federal Reserve reporting
dealer list which are rated in one of the two highest categories for
long-term unsecured debt obligations by each Rating Agency, or (b) banks
rated in one of the two highest categories for long-term unsecured debt
obligations by each Rating Agency and (2) the written repurchase
agreement must include the following: (a) securities which are
acceptable for the transfer and are either (I) direct U.S. governments
obligations or (II) obligations of a Federal agency that are backed by
the full faith and credit of the U.S. government, FNMA or FHLMC; (b) a
term no greater than 60 days for any repurchase transaction; (c) the
collateral must be delivered to the Indenture Trustee or a third party
custodian acting as agent for the Indenture Trustee by appropriate book
entries and confirmation statements, with a copy to the Note Insurer,
and must have been delivered before or simultaneous with payment (I.E.,
perfection by possession of certificated securities); and (d) the
securities sold thereunder must be valued weekly, marked-to-market at
current market price plus accrued interest and the value of the
collateral must be equal to at least 104% of the amount of cash
transferred by the Indenture Trustee under the repurchase agreement and
if the value of the securities held as collateral declines to an amount
below 104% of the cash transferred by the Indenture Trustee plus accrued
interest (I.E., a margin call), then additional cash and/or acceptable
securities must be transferred to the Indenture Trustee to satisfy such
margin call; provided, however, that if the securities used as
collateral are obligations of FNMA or FHLMC, then the value of the
securities held as collateral must equal at least 105% of the cash
transferred by the Indenture Trustee under such repurchase agreement;
(3) certificates of deposit, time deposits and bankers
acceptances of any United States depository institution or trust company
incorporated under the laws of the United States or any state, including
the Indenture Trustee; provided that the debt obligations of such
depository institution or trust company at the date of the acquisition
thereof have been rated by each Rating Agency in one of its two highest
long-term rating categories;
(4) deposits, including deposits with the Indenture Trustee, which
are fully insured by the Bank Insurance Fund or the Savings Association
Insurance Fund of the FDIC, as the case may be;
(5) commercial paper of any corporation incorporated under the laws
of the United States or any state thereof, including corporate affiliates
of the Indenture Trustee, which at the date of acquisition is rated by each
Rating Agency in its highest short-term rating category and which has an
original maturity of not more than 365 days;
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(6) debt obligations rated by each Rating Agency at the time at
which the investment is made in its highest long-term rating category (or
those investments specified in (3) above with depository institutions
which have debt obligations rated by each Rating Agency in one of its two
highest long-term rating categories);
(7) money market funds which are rated by each Rating Agency at
the time at which the investment is made in its highest long-term rating
category, any such money market funds which provide for demand
withdrawals being conclusively deemed to satisfy any maturity
requirements for Permitted Investments set forth in this Agreement; or
(8) any other demand, money market or time deposit obligation,
security or investment as may be acceptable to each Rating Agency and
the Note Insurer at the time at which the investment is made;
provided that no instrument described in the foregoing subparagraphs shall
evidence either the right to receive (a) only interest with respect to the
obligations underlying such instrument or (b) both principal and interest
payments derived from obligations underlying such instrument where the interest
and principal payments with respect to such instrument provide a yield to
maturity at par greater than 120% of the yield to maturity at par of the
underlying obligations; and provided, further, that no instrument described in
the foregoing subparagraphs may be purchased at a price greater than par if
such instrument may be prepaid or called at a price less than its purchase
price prior to stated maturity.
Each reference in this definition of "Permitted Investments" to the Rating
Agency shall be construed, in the case of each subparagraph above referring to
each Rating Agency, as a reference to Standard & Poor's and Moody's.
PERSON: Any individual, corporation, partnership, joint venture, limited
liability company, association, joint-stock company, trust, national banking
association, unincorporated organization or government or any agency or
political subdivision thereof.
PHYSICAL PROPERTY: As defined in the definition of "Delivery" above.
PLACEMENT AGREEMENT: That certain Placement Agreement dated June 16, 1997
between the Issuer, the Servicer and the Arranger.
POOL PRINCIPAL BALANCE: As of any date of determination, the aggregate of
the Principal Balances of each Home Loan included in the Home Loan Pool as of
such date of determination.
POST-LIQUIDATION PROCEEDS: As defined in Section 4.02(b).
POST-RELEASE COLLECTIONS: With respect to a Deleted Home Loan or a Home
Loan released from the lien of the Indenture pursuant to Section 11.02(b), all
collections received on such Home
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Loan after the Accounting Date applicable to the calculation, as of the
applicable date of repurchase, substitution, or release pursuant to Section
11.02(b), of the Principal Balance of such Home Loan.
PREFERENCE AMOUNT: Any amount previously distributed to the holder of a
Note that is recoverable and sought to be recovered as a voidable preference by
a trustee in bankruptcy pursuant to the United States Bankruptcy Code (11
U.S.C.), as amended from time to time, in accordance with a final, non-
appealable order of a court having competent jurisdiction.
PRINCIPAL BALANCE: With respect to any date of determination, with
respect to any Home Loan or related Foreclosure Property, the outstanding
unpaid principal balance of the Home Loan or the related Home Loan as of the
related Accounting Date (giving effect, through such Accounting Date, to all
payments received thereon and the allocation of any Net Loan Losses with
respect thereto for a Liquidated Home Loan or a Defaulted Home Loan), without
giving effect to amounts received in respect of such Home Loan or related
Foreclosure Property after such Accounting Date. Any Liquidated Home Loan
shall have a Principal Balance of zero.
PRINCIPAL PAYMENT AMOUNT: With respect to a Payment Date, the greater of
(i) the amount, if any, by which the Aggregate Note Principal Balance as of the
related Determination Date (including any Additional Note Principal Balance
advanced on such Determination Date) exceeds the Pool Principal Balance as of
such Determination Date and (ii) the lesser of (x) the Available Payment Amount
less the sum of the amounts referred to in clauses (i) and (ii) of
Section 5.01(c) with respect to such Payment Date and (y) the amount, if any,
by which (1) the Aggregate Note Principal Balance as of such Determination Date
(including any Additional Note Principal Balance advanced on such Determination
Date) exceeds (2) the result of (A) the Pool Principal Balance as of such
Determination Date minus (B) the Required Overcollateralization Amount as of
such Determination Date; provided, however, that with respect to the Payment
Date that is the Final Scheduled Payment Date and with respect to the Payment
Date that is the first Payment Date after the date on which the Notes have been
declared due and payable in connection with an Event of Default, the Principal
Payment Amount shall be the amount necessary to reduce the Aggregate Note
Principal Balance as of such Payment Date to zero.
PRINCIPAL PREPAYMENT: With respect to any Home Loan and with respect to
any Due Period, any principal amount received on a Home Loan in excess of the
scheduled principal amount included in the Monthly Payment due on the Due Date
in such Due Period.
PRIOR PAYMENT DATE NOTE PRINCIPAL BALANCE: With respect to a given day in
a Regular Interest Accrual Period, the Aggregate Note Principal Balance as of
the end of the Payment Date that is the first day of such Regular Interest
Accrual Period, reduced by any Additional Note Principal Balance for which the
related Advance Date occurred during the period from and including the
Determination Date immediately preceding the commencement of such Regular
Interest Accrual Period through the Payment Date immediately following such
Determination Date.
PRIOR PAYMENT DATE NOTE PRINCIPAL BALANCE DAILY INTEREST ACCRUAL AMOUNT:
With respect to a Prior Payment Date Note Principal Balance and a given day in
the related Regular Interest
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Accrual Period, an amount equal to the product of (i) 1/360, (ii) LIBOR with
respect to such Regular Interest Accrual Period plus the Margin and (iii) the
unpaid amount of such Prior Payment Date Note Principal Balance as of the end
of such day.
PRIVATE PLACEMENT MEMORANDUM: The offering memorandum delivered by the
Issuer to the Arranger pursuant to the Placement Agreement.
PURCHASE PRICE: With respect to a Home Loan, an amount equal to the
Principal Balance of such Home Loan as of the date of purchase, plus all
accrued and unpaid interest on such Home Loan to but not including the Due Date
in the Due Period most recently ended prior to such Determination Date computed
at the applicable Home Loan Interest Rate, plus the amount of any unreimbursed
Servicing Advances made by the Servicer with respect to such Home Loan, which
Purchase Price shall be deposited in the Collection Account or the Note
Principal Prepayment Account, as applicable, (after deducting therefrom any
amounts received in respect of such repurchased Home Loan and being held in the
Collection Account for future payment to the extent such amounts represent
recoveries of principal not yet applied to reduce the related Principal Balance
or interest (net of the Servicing Fee) for the period from and after the Due
Date in the Due Period most recently ended prior to such Determination Date).
QUALIFIED SUBSTITUTE HOME LOAN: A home loan or home loans substituted for
a Deleted Home Loan pursuant to Section 3.05 or Section 2.9(c) of the
Indenture, which (i) has or have an interest rate or rates of not less than one
percentage point and not more than one percentage point different from the Home
Loan Interest Rate for the Deleted Home Loan, (ii) matures or mature not more
than one year later than and not more than one year earlier than the Deleted
Home Loan, (iii) has or have a principal balance or principal balances (after
application of all payments received on or prior to the date of substitution)
equal to or less than the Principal Balance of the Deleted Home Loan as of such
date, (iv) has or have a lien priority no lower than the Deleted Home Loan, (v)
has a borrower with a comparable credit grade classification to the credit
grade classification of the borrower with respect to the Deleted Mortgage
Loans, including a Credit Score at origination that is no more than 10 points
below that of such Deleted Home Loan; and (vi) complies or comply as of the
date of substitution with each representation and warranty set forth in Section
3.03 and is not more than 29 days delinquent as of the date of substitution for
such loan; and (vii) the related borrower has a Credit Score at origination of
not less than 677. For purposes of determining whether multiple mortgage loans
proposed to be substituted for one or more Deleted Home Loans pursuant to
Section 3.05 or Section 2.9(c) of the Indenture are in fact "Qualified
Substitute Home Loans" as provided above, the criteria specified in clauses
(i), (ii) and (iii) above may be considered on an aggregate or weighted average
basis, rather than on a loan-by-loan basis (E.G., so long as the weighted
average Home Loan Interest Rate of any loans proposed to be substituted is not
less than nor more than one percentage point different from the Home Loan
Interest Rate for the designated Deleted Home Loan or Home Loans and the
weighted average Credit Score of any Qualified Substitute Home Loans
cumulatively substituted is not more than 10 points below the weighted average
Credit Score of the Deleted Home Loans, the requirements of clause (i) above
would be deemed satisfied).
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RATING AGENCY: Each of Standard & Poor's and Moody's and their respective
successors; provided, however, that if no such organization or successor is any
longer in existence, "Rating Agency" shall be a nationally recognized
statistical rating organization or other comparable person designated by the
Issuer and approved by the Note Insurer, notice of which designation shall have
been given to the Indenture Trustee, the Note Insurer, the Issuer and the
Servicer.
RECORD DATE: With respect to each Payment Date, the close of business on
the last Business Day of the month immediately preceding the month in which
such Payment Date occurs.
REFERENCE BANKS: The Chase Manhattan Bank, Citicorp, Banc One Texas,
First Bank National Association, or such other banks selected by the Servicer
with the consent of the Majority Noteholders.
REGULAR INTEREST ACCRUAL PERIOD: With respect to a Payment Date, the
period from the immediately preceding Payment Date to but not including the
Payment Date, or, in the case of the first Payment Date, the period from the
Closing Date to but not including the first Payment Date.
REINVESTMENT RATE: With respect to a Note Principal Prepayment, the rate,
determined by the Servicer by reference to the Bloomberg Screen "BTMM," as the
lowest of the government repurchase rates for overnight, one week, two week or
one month periods, as of 10:00 a.m. Eastern Time on the Business Day
immediately preceding the related Note Principal Prepayment Date.
RELEASED MORTGAGED PROPERTY PROCEEDS: Proceeds received by the Servicer
in connection with (i) a taking of an entire Mortgaged Property by exercise of
the power of eminent domain or condemnation or (ii) any release of part of the
Mortgaged Property from the lien of the related Mortgage, whether by partial
condemnation, sale or otherwise; which in either case are not released to the
Obligor in accordance with applicable law, customary second mortgage servicing
procedures and this Agreement.
REQUIRED CREDIT SUPPORT MULTIPLE: With respect to a Payment Date the
Required Credit Support Multiple shall be determined as follows: (a) with
respect to such Payment Date, the three-month rolling average (I.E., the
average of the applicable rate for such Payment Date and the two preceding
Payment Dates) Delinquency Rate (30-Day), the Delinquency Rate (60-Day) and the
six-month rolling average Default Rate shall each be located in the applicable
range of percentages set forth in the column applicable to such rate below
(each range in which a rate is so located, an "applicable range"), and the
Required Credit Support Multiple for such Payment Date shall be the highest of
the numbers set forth opposite each applicable range in the column entitled
"Required Credit Support Multiple":
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Three Month Three Month
Rolling Average Rolling Average
Required Credit Delinquency Delinquency Rate Six Month Rolling
Support Multiple Rate (30-Day) (60-Day) Average Default Rate
- ---------------- --------------- ---------------- --------------------
1.00 Less than 8.00% Less than 5.50% Less than 4.00%
1.25 8.00% to 8.99% 5.50% to 6.49% 4.00% to 4.99%
1.50 9.00% to 11.99% 6.50% to 7.49% 5.00% to 5.99%
2.50 Greater than 11.99% Greater than 7.49% Greater than 5.99%
provided, however, that (b) the Required Credit Support Multiple with respect
to such Payment Date will be 2.5 in the event that the Cumulative Default
Percentage as of such Payment Date is greater than the percentage set forth in
the Cumulative Default Percentage column below on or prior to the respective
anniversary of the date of the occurrence of the most recent Credit Support
Funding Event:
Cumulative Default Percentage
-----------------------------
First Anniversary 2.00%
Second Anniversary 5.00%
Third Anniversary 7.50%
Fourth Anniversary 10.00%
Fifth Anniversary 12.00%
Thereafter 13.00%
provided further, however, (c) that such 2.5 multiple determined pursuant to
clause (b) shall be reduced to an amount equal to 1.25, if 1) the Required
Credit Support Multiple calculated solely pursuant to clause (a) would have
been 1.25 or less for each of the three most recent Payment Dates and 2) the
Cumulative Default Percentage is less than the percentage set forth in the
Cumulative Default Percentage column below or on prior to the respective
anniversary of the date of the occurrence of the most recent Credit Support
Funding Event:
Cumulative Default Percentage
-----------------------------
First Anniversary 2.00%
Second Anniversary 5.00%
Third Anniversary 7.50%
Fourth Anniversary 10.00%
Fifth Anniversary 12.00%
Thereafter 13.00%
Notwithstanding the preceding, the Note Insurer, in its sole discretion
and without the requirement of an amendment of this Agreement but with written
notice to the Seller, the Servicer,
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the Issuer, the Indenture Trustee and the Arranger, may modify the preceding
definition and the definitions relating thereto in accordance with Section
13.02(b).
REQUIRED OC FLOOR: On any date of determination, an amount equal to the
product of (i) 1.00% and (ii) the Pool Principal Balance as of the date of the
occurrence of the most recent Credit Support Funding Event.
REQUIRED OVERCOLLATERALIZATION AMOUNT: As of any date of determination
prior to the occurrence of a Credit Support Funding Event, an amount equal to
the product of (i) the Pool Principal Balance as of such date and (ii) the then-
applicable Overcollateralization Base Percent Requirement. As of any date of
determination on or following the date of the occurrence of a Credit Support
Funding Event, if any, and during the continuance thereof an amount equal to
the lesser of (i) the Aggregate Note Principal Balance as of such date and (ii)
the product of (A) the Pool Principal Balance as of the date of the occurrence
of the most recent Credit Support Funding Event and (B) the then-applicable
Overcollateralization Targeted Percent Requirement; PROVIDED, HOWEVER, that on
any date of determination on or after the Credit Support Reduction Date on
which the multiple calculated in clause (a) of the definition of Required
Credit Support Multiple is equal to 1.00 as of the most recent Payment Date,
the "Required Overcollateralization Amount" shall be an amount equal to the
greater of (1) the Required OC Floor and (2) the product of (x) the Required
Credit Support Multiple and (y) the lesser of (A) the then-applicable
Overcollateralization Targeted Percent Requirement of the Pool Principal
Balance as of the date of the occurrence of the most recent Credit Support
Funding Event and (B) the product of (x) two times the then-applicable
Overcollateralization Targeted Percent Requirement and (y) the Pool Principal
Balance as of such Payment Date; PROVIDED FURTHER, HOWEVER, that the Required
Overcollateralization Amount shall not be reduced pursuant to the preceding
proviso clause if the Required Credit Support Multiple as calculated solely
with respect to clause (a) of the definition of "Required Credit Support
Multiple" is greater than 1.00, or if the Required Credit Support Multiple
calculated solely based on clause (b) of such definition would result in a
number greater than 1.25. Notwithstanding the preceding, the Note Insurer, in
its sole discretion and without the requirement of an amendment of this
Agreement, may modify the preceding definition and the definitions relating
thereto in accordance with Section 13.02(b).
REQUIRED PAYMENT AMOUNT: With respect to a Payment Date, the sum of the
Interest Payment Amount and the Principal Payment Amount, in each case with
respect to such Payment Date.
RESERVE FUND: An account established and maintained pursuant to
Section 5.07.
RESERVE FUND BALANCE: As of any date of determination, an amount equal to
the balance in the Reserve Fund as of such date, adjusted, if such date is on
or after the Determination Date in a given month and on or prior to the related
Payment Date, to reflect any withdrawals to occur on such Payment Date pursuant
to Section 5.01(b)(2) as reported in the related Servicer's Monthly Remittance
Report.
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RESPONSIBLE OFFICER: When used with respect to the Indenture Trustee, any
officer within the Corporate Trust Office of the Indenture Trustee, including
any Managing Director, Vice President, Assistant Vice President, Secretary,
Assistant Secretary or Assistant Treasurer or any other officer of the
Indenture Trustee customarily performing functions similar to those performed
by any of the above designated officers and also, with respect to a particular
matter, any other officer to whom such matter is referred because of such
officer's knowledge of and familiarity with the particular subject. When used
with respect to the Issuer, the Seller, or the Servicer, the President or any
Vice President, Assistant Vice President, or any Secretary or Assistant
Secretary thereof.
REVOLVING CREDIT AGREEMENT: The Revolving Credit Agreement, dated as of
June 16, 1997, between FIRSTPLUS FINANCIAL, INC. and Working Capital Management
Co. L.P.
SCHEDULED ADVANCE TERMINATION DATE: June 14, 1998, or such later date as
the Issuer, the Seller and the Noteholders shall agree pursuant to the Note
Purchase Agreement and to which the Note Insurer and the Rating Agency shall
consent.
SECURITIES ACT: The Securities Act of 1933, as amended.
SELLER: FFI, in its capacity as the seller hereunder, and its successors
and permitted assigns.
SERVICER: FFI, in its capacity as the servicer hereunder, or any
successor appointed as herein provided.
SERVICER'S FISCAL YEAR: October 1st through September 30th of the
following year.
SERVICER'S HOME LOAN FILES: In respect of each Home Loan, all documents
customarily included in the servicer's loan file for the related type of Home
Loan in accordance with the servicing standard set forth in Section 4.01.
SERVICER'S MONTHLY REMITTANCE REPORT: As defined in Section 6.01(b) and
in the form of Exhibit F hereto.
SERVICING ADVANCES: Subject to Section 4.01(b), all reasonable, customary
and necessary "out of pocket" costs and expenses advanced or paid by the
Servicer with respect to the Home Loans in accordance with the performance by
the Servicer of its servicing obligations hereunder, including, but not limited
to, the costs and expenses for (i) the preservation, restoration and protection
of the Mortgaged Property, including without limitation advances in respect of
real estate taxes and assessments, (ii) any collection, enforcement or judicial
proceedings, including without limitation foreclosures, collections and
liquidations pursuant to Section 4.02, (iii) the conservation, management and
sale or other disposition of an Foreclosure Property pursuant to Section 4.04,
(iv) the preservation of the security for a Home Loan if any lienholder under a
Superior Lien has accelerated or intends to accelerate the obligations secured
by such Superior Lien pursuant to Section 4.06; provided that such Servicing
Advances are reimbursable to the Servicer as provided
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in Section 5.01(c)(v) to the extent not previously reimbursed by being
deducted or retained by the Servicer in calculating Net Liquidation Proceeds
hereunder.
SERVICING ADVANCE REIMBURSEMENT AMOUNT: As defined in Section 5.01(c).
SERVICING COMPENSATION: With respect to a Payment Date, the Servicing Fee
and other amounts to which the Servicer is entitled pursuant to
Sections 5.01(b)(2), 7.01 and 7.03.
SERVICING FEE: As to each Home Loan (including any Home Loan that has
been foreclosed and has become a Foreclosure Property, but excluding any
Liquidated Home Loan), the fee payable monthly to the Servicer on each Payment
Date, which shall be (a) the product of the Servicing Fee Percentage times the
Principal Balance of such Home Loan as of the second preceding Determination
Date divided by (b) 12. The Servicing Fee includes (i) any servicing fees owed
or payable to any Subservicer, (ii) any custodial fees owed or payable to the
Custodian and (iii) any trustee fees owed or payable to the Indenture Trustee,
which fees, in each case, shall be paid from the Servicing Fee.
SERVICING FEE PERCENTAGE: 0.65% (65 basis points).
SERVICING OFFICER: Any officer of the Servicer or Subservicer involved
in, or responsible for, the administration and servicing of the Home Loans
whose name and specimen signature appears on a list of servicing officers
annexed to an Officer's Certificate furnished by the Servicer or the
Subservicer, respectively, to the Issuer and the Indenture Trustee, on behalf
of the Noteholders and the Note Insurer, as such list may from time to time be
amended.
STANDARD & POOR'S: Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., or any successor thereto.
SUBSEQUENT HOME LOAN: An individual Home Loan that is conveyed to the
Issuer and pledged to the Indenture Trustee on an Advance Date, pursuant to a
Subsequent Transfer Agreement, together with the rights and obligations of a
holder thereof and payments thereon and proceeds received on or after the
applicable Cut-Off Date, which Subsequent Home Loans shall be identified on a
schedule attached as an exhibit to the related Subsequent Transfer Agreement.
SUBSEQUENT PURCHASE PRICE: With respect to each Advance Date, as of the
applicable Cut-Off Date, the Principal Balance of any Subsequent Home Loans to
be conveyed to the Issuer on such Advance Date.
SUBSEQUENT TRANSFER AGREEMENT: With respect to any Subsequent Home Loan,
the agreement pursuant to which Subsequent Home Loans are transferred to the
Issuer by the Seller, substantially in the form of EXHIBIT B-2 hereto.
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SUBSERVICER: Any Person with whom the Servicer has entered into a
Subservicing Agreement and who is an Eligible Servicer and who satisfies any
requirements set forth in Section 4.07(a) in respect of the qualifications of a
Subservicer.
SUBSERVICING ACCOUNT: An account established by a Subservicer pursuant to
a Subservicing Agreement, which account must be an Eligible Account.
SUBSERVICING AGREEMENT: Any agreement between the Servicer and any
Subservicer relating to subservicing and/or administration of any or all Home
Loans as provided in Section 4.07(a), copies of which shall be made available,
along with any modifications thereto, to the Issuer, the Indenture Trustee, the
Note Insurer and the Arranger.
SUBSTITUTION ADJUSTMENT: As to any date on which a substitution occurs
pursuant to Section 3.05 or Section 2.9 of the Indenture, the amount, if any,
by which (a) the sum of the aggregate principal balance (after application of
principal payments received on or before the date of substitution) of any
Qualified Substitute Home Loans as of the date of substitution plus any accrued
and unpaid interest thereon that is scheduled to be paid after the date of
substitution and during the Due Period in which such substitution occurs, is
less than (b) the sum of the aggregate of the Principal Balances, together with
accrued and unpaid interest thereon to the date of substitution, of the related
Deleted Home Loans.
SUPERIOR LIEN: With respect to any Home Loan which is secured by other
than a first priority lien, the mortgage(s) relating to the corresponding
Mortgaged Property having a superior priority lien.
TANGIBLE NET WORTH: The excess of:
(a) the tangible assets of the Servicer and any Affiliates
calculated in accordance with GAAP, as reduced by adequate reserves in each
case where reserves are proper, over
(b) all indebtedness (including subordinated debt) of the Servicer
and its Affiliates;
provided, however that (i) in no event shall there be included in the above
calculation any intangible assets such as patents, trademarks, trade names,
copyrights, licenses, goodwill, organizational costs, advances or loans to, or
receivables from, directors, officers, employees or affiliates, prepaid assets,
amounts relating to covenants not to compete, pension assets, deferred charges
or treasury stock or any securities of the Servicer or any other securities
unless the same are readily marketable in the United States of America or
entitled to be used as a credit against federal income tax liabilities, (ii)
securities included as such intangible assets shall be taken into account at
their current market price or cost, whichever is lower, and (iii) any write-up
in the book value of any assets shall not be taken into account.
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TRUST ACCOUNT PROPERTY: The Trust Accounts, all amounts and investments
held from time to time in any Trust Account and all proceeds of the foregoing.
TRUST ACCOUNTS: The Collection Account, the Note Payment Account, the
Note Principal Prepayment Account, the Capitalized Interest Account, the
Reserve Fund and the Advance Account.
TRUST ESTATE: The assets subject to this Agreement and the Indenture,
assigned to the Issuer and pledged by the Issuer to the Indenture Trustee,
which assets consist of (a) all of the Seller's right, title and interest in
and to the following: (i) such Home Loans as from time to time are subject to
this Agreement, including both the Initial Home Loans and any Subsequent Home
Loans conveyed to the Issuer as provided in this Agreement and as listed in
the Home Loan Schedule, as the same may be amended or supplemented from time
to time (including to reflect the removal of Deleted Home Loans and Home
Loans released from the security interest of the Indenture pursuant Section
11.02(b), and the addition of Qualified Substitute Home Loans), together with
the Servicer's Home Loan Files and the Indenture Trustee's Home Loan Files
relating thereto and all proceeds thereof, (ii) all principal payments
thereon and proceeds therefrom representing principal received on or with
respect to the Initial Home Loans on or after the May 1, 1997 Cut-Off Date
and all interest payments thereon and proceeds therefrom representing
interest received on or with respect to the Initial Home Loans on or after
June 1, 1997, (iii) all payments thereon and proceeds therefrom received on
or with respect to the Subsequent Home Loans on or after the applicable
Cut-Off Dates, (iv) such assets as from time to time are identified as
Foreclosure Property, (v) all assets and funds as are from time to time
deposited in any Trust Account, including amounts on deposit in such accounts
which are invested in Permitted Investments, (vi) all insurance policies with
respect to the Home Loans and any Insurance Proceeds, (vii) Net Liquidation
Proceeds, Post-Liquidation Proceeds and Released Mortgaged Property Proceeds,
(viii) the obligations of the applicable seller with respect to a Home Loan
pursuant to a Loan Sale Agreement under which the Seller acquired such Home
Loan, (ix) each Subsequent Transfer Agreement, and (x) the rights and
obligations of each Subservicer pursuant to a Subservicing Agreement and (b)
all of the Issuer's right, title and interest in and to the Guaranty Policy.
UNDECLARED EVENT OF DEFAULT: The occurrence and continuance of an Event
of Default or an event that, disregarding the grant of the Noteholders'
rights to the Note Insurer pursuant to Section 13.14, would be deemed an
Event of Default by the Noteholders.
WCMC: Working Capital Management Co. L.P.
Section 1.02 OTHER DEFINITIONAL PROVISIONS.
(a) Capitalized terms used herein and not otherwise defined herein have
the meanings assigned to them in the Indenture.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant
hereto unless otherwise defined therein.
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(c) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
this Agreement or in any such certificate or other document, and accounting
terms partly defined in this Agreement or in any such certificate or other
document to the extent not defined, shall have the respective meanings given
to them under generally accepted accounting principles. To the extent that
the definitions of accounting terms in this Agreement or in any such
certificate or other document are inconsistent with the meanings of such
terms under generally accepted accounting principles, the definitions
contained in this Agreement or in any such certificate or other document
shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement; Article, Section,
Schedule and Exhibit references contained in this Agreement are references to
Articles, Sections, Schedules and Exhibits in or to this Agreement unless
otherwise specified; and the term "including" shall mean "including without
limitation."
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means
such agreement, instrument or statute as from time to time amended, modified
or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein.
References herein to a Person are also to its permitted successors and
assigns.
Section 1.03 DETERMINATION OF LIBOR.
On each LIBOR Determination Day, the Indenture Trustee will determine
LIBOR on the basis of the rate for deposits in United States dollars for a
one month period which appears on Telerate Page 3750 as of 11:00 a.m., London
time, on such date. If such rate does not appear on Telerate Page 3750, the
rate for such LIBOR Determination Day will be determined by the Indenture
Trustee on the basis of the rates at which deposits in United States dollars
are offered by the Reference Banks at approximately 11:00 a.m., London time,
on that day to prime banks in the London interbank market for a period equal
one month. The Indenture Trustee will determine the Reference Bank's
quotation of its rate. If at least two such quotations are provided, the rate
for that LIBOR Determination Day will be the arithmetic mean of the
quotations. If fewer than two quotations are provided as requested, the rate
for that LIBOR Determination Day will be the arithmetic mean of the rates
quoted by major banks in New York City, selected by the Indenture Trustee, at
approximately 11:00 a.m., New York City time, on that day for loans in United
States dollars to leading European banks for a period equal to one month.
Promptly following its determination of LIBOR with respect to each Regular
Interest Accrual Period and each Additional Principal Balance Interest
Accrual Period, the Indenture Trustee shall notify the Issuer and the
Servicer of the applicable LIBOR.
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Section 1.04 MODIFYING THE MINIMUM SPREAD PERCENT.
On any Business Day that the Issuer elects prior to the occurrence of a
Conversion Event, the Issuer may, upon written notice to the Arranger, the
Note Insurer, the Noteholders, the Indenture Trustee and the Servicer, set
the Minimum Spread Percent to a percent equal to 6.00%, 5.00%, 4.50%, 4.25%,
4.00%, 3.75%, 3.55%, or, with the consent of 100% of the Noteholders, 3.00%,
providing that a Conversion Event or Credit Support Funding Event shall not
occur as a result of such newly reset Minimum Spread Percent.
ARTICLE II
CONVEYANCE OF THE HOME LOANS
Section 2.01 CONVEYANCE OF THE INITIAL HOME LOANS.
(a) As of the Closing Date, in consideration of the Issuer's delivery
of the Notes to the Seller or its designee, upon the order of the Seller, the
Seller, as of the Closing Date and concurrently with the execution and
delivery hereof, does hereby sell, transfer, assign, set over and otherwise
convey to the Issuer, without recourse, but subject to the other terms and
provisions of this Agreement, all of the right, title and interest of the
Seller in and to the Trust Estate. The foregoing sale, transfer, assignment,
set over and conveyance does not and is not intended to result in a creation
or an assumption by the Issuer of any obligation of the Seller or any other
Person in connection with the Trust Estate or under any agreement or
instrument relating thereto except as specifically set forth herein.
(b) As of the Closing Date, the Issuer acknowledges the conveyance to
it of the Trust Estate from the Seller, including all right, title and
interest of the Seller in and to the Trust Estate, receipt of which is hereby
acknowledged by the Issuer. Concurrently with such delivery and in exchange
therefor, the Issuer has pledged to the Indenture Trustee the Trust Estate,
and the Issuer has executed and caused to be authenticated and delivered the
Notes to the Seller or its designee, upon the order of the Seller.
Section 2.02 CONVEYANCE OF THE SUBSEQUENT HOME LOANS; ADDITIONAL NOTE
PRINCIPAL BALANCES.
(a) Pursuant to and subject to the Note Purchase Agreement, the Issuer
may, at its sole option, from time to time request that the Noteholders
advance on any Business Day (each an "Advance Date") additional amounts of
not less than $10,000,000 (such amounts, "Additional Note Principal
Balances") and each Noteholder shall remit on such Advance Date to the
Advance Account a percentage of the Additional Note Principal Balance equal
to its respective Percentage Interest multiplied by the Additional Note
Principal Balance; provided however, the Issuer shall not be permitted to
request or receive such an advance on any date on or after the Advance
Termination Date or on any date on which a Credit Support Funding Event
exists. The Seller and the Issuer shall deliver an Addition Notice to the
Indenture Trustee, the Note Insurer and the Arranger not less than
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three Business Days prior to the proposed Advance Date and the Indenture
Trustee shall deliver such Addition Notice to each Noteholder via facsimile
on the same day the Indenture Trustee receives such notice from the Seller
and the Issuer. Notwithstanding the foregoing, in no event shall the
Noteholders be required to advance Additional Note Principal Balances if (i)
with respect to any Note, after giving effect to the portion of the
Additional Note Principal Balance related to such Note, the Note Principal
Balance will exceed the related Maximum Note Principal Balance, (ii) after
giving effect to the Additional Note Principal Balance, the Aggregate Note
Principal Balance will exceed the Aggregate Maximum Note Principal Balance,
or (iii) on or prior to the Advance Date, the conditions precedent to a
transfer of the Home Loans pursuant to (b) and (c) of this Section 2.02 have
not been fulfilled. The Servicer shall appropriately note such Additional
Note Principal Balance (and the increased Aggregate Note Principal Balance)
in the next succeeding Servicer's Monthly Remittance Report; PROVIDED that
failure to make any such notation in the Servicer's Monthly Remittance Report
or any error in such notation shall not adversely affect any Noteholder's
rights with respect to its Note Principal Balance and its right to receive
interest and principal payments in respect of the Note Principal Balance held
by such Noteholder. Each Noteholder shall record on the schedule attached to
such Noteholder's Note, the date and amount of any Additional Principal
Balance advanced by it, and each repayment thereof; provided that failure to
make such recordation on such schedule or any error in such schedule shall
not adversely affect any Noteholder's rights with respect to its Note
Principal Balance and its right to receive interest payments in respect of
the Note Principal Balance held by such Noteholder.
The Indenture Trustee shall appropriately note any Additional Note
Principal Balance (and the increased Aggregate Note Principal Balance) in the
next succeeding Indenture Trustee's Certificate, and the Note Principal
Balance of each Note will be equal to the Note Principal Balance of such Note
stated in such Indenture Trustee's Certificate. Absent manifest error, the
Note Principal Balance of each Note as set forth in the Indenture Trustee's
Certificate shall be binding upon the Noteholders and the Note Insurer,
notwithstanding any notation made by a Noteholder on its Note or by the
Servicer in its Servicer's Monthly Remittance Report pursuant to the
preceding paragraph; provided that failure by the Indenture Trustee to make
such recordation on such Indenture Trustee's Certificate or any error in such
certificate shall not adversely affect any Noteholder's rights with respect
to its Note Principal Balance and its right to receive interest payments in
respect of the Note Principal Balance held by such Noteholder.
(b) Subject to the conditions set forth in this Section 2.02, in
consideration of the Issuer's delivery on the applicable Advance Date to the
Seller or its designee upon the order of the Seller, of the Subsequent
Purchase Price of the related Subsequent Home Loans, the Seller shall, on
such Advance Date, sell, transfer, assign, set over and otherwise convey to
the Issuer, without recourse, but subject to the other terms and provisions
of this Agreement, all of the right, title and interest of the Seller in and
to each Subsequent Home Loan (including, subject to the following sentence,
all interest and principal thereon received after the related Cut-Off Date)
identified on the schedule attached to the related Subsequent Transfer
Agreement and delivered by the Seller on such Advance Date and all items in
the related Indenture Trustee's Home Loan File. If an Advance Date occurs
within the first fifteen calendar days of any month, each Subsequent Home
Loan sold to the Issuer and pledged to the Indenture Trustee on such Advance
Date shall have an origination date prior to
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the first calendar day of such month, and the Cut-Off Date with respect to
such Subsequent Home Loans shall be the first calendar day of such month;
provided any amounts collected by the Seller with respect to such Subsequent
Home Loans prior to the Cut-Off Date shall be conveyed to the Issuer and
pledged to the Indenture Trustee if such amounts were prepayments of amounts
due on or after the Cut-Off Date. In connection therewith, the Seller shall
amend the Home Loan Schedule to reflect the inclusion of the applicable
Subsequent Home Loans in the Home Loan Pool. The Seller shall promptly
deliver to the Issuer, the Servicer (if the Seller is not then acting as
such), the Indenture Trustee, the Note Insurer and the Arranger a copy of the
Home Loan Schedule as so amended. The sale, transfer, assignment, set over
and conveyance by the Seller of any Subsequent Home Loans to the Issuer does
not and is not intended to result in a creation or an assumption by the
Issuer of any obligation of the Seller or any other Person in connection with
such Subsequent Home Loans or under any agreement or instrument relating
thereto except as specifically set forth herein.
(c) If the Subsequent Purchase Price for the Subsequent Home Loans to
be conveyed to the Issuer on an Advance Date is less than the amount required
to obtain the release of the interest of any third party (including any
lienholder therein), then the Seller shall cause the delivery of immediately
available funds equal to such insufficiency to the Issuer in escrow (which
funds shall not be property of the Issuer) and the Issuer, in turn, shall
remit such immediately available funds, together with funds from the
applicable Additional Note Principal Balance equal to the Subsequent Purchase
Price, to the third party designated by the Seller that is releasing its
interest in such Subsequent Home Loans.
On each Advance Date, the Seller shall transfer to the Issuer the
applicable Subsequent Home Loans and the other property and rights related
thereto described in (b) above, each Noteholder shall cause the portion of
the applicable Additional Note Principal Balance to be advanced by it to be
deposited in the Advance Account, and the Indenture Trustee shall, promptly
after such deposit, withdraw the applicable Additional Note Principal Balance
from the Advance Account, and pay such amount to the Issuer, only upon the
satisfaction of each of the following conditions on or prior to the related
Advance Date or as of the time otherwise specified below:
(i) (a) such Additional Note Principal Balance must be at least
$10,000,000 and (b) no Subsequent Home Loan shall be more than 29 days
delinquent as of the related Cut-Off Date;
(ii) the Seller and the Issuer shall have provided to the Indenture
Trustee, the Note Insurer and the Arranger an Addition Notice and shall
have provided any information reasonably requested by the Issuer, the
Indenture Trustee or the Note Insurer with respect to the applicable
Subsequent Home Loans;
(iii) the Indenture Trustee shall have delivered to the Noteholders
the Addition Notice at least three Business Days prior to the related
Advance Date;
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(iv) the Seller and the Issuer shall have delivered to the Indenture
Trustee, the Note Insurer and the Arranger a duly executed Subsequent
Transfer Agreement, including all exhibits listed therein;
(v) the Servicer shall have deposited in the Collection Account all
collections in respect of the Subsequent Home Loans received on or after
the related Cut-Off Date, and the Issuer shall have deposited in the
Capitalized Interest Account the Capitalized Interest Account Deposit with
respect to such Additional Note Principal Balance;
(vi) the Advance Termination Date shall not have occurred and shall
not occur as a result of the conveyance of such Subsequent Home Loans
(vii) a Credit Support Funding Event shall not exist, and neither a
Conversion Event nor a Credit Support Funding Event shall occur as a
result of the advance of such Additional Note Principal Balance;
(viii) the Seller shall have delivered to the Issuer, the Indenture
Trustee, the Note Insurer and the Arranger an Officer's Certificate
confirming the satisfaction of each condition precedent specified in this
Section 2.02 and in the related Subsequent Transfer Agreement;
(ix) the Custodian shall have executed and delivered to the Seller,
the Indenture Trustee, the Issuer, the Note Insurer and the Arranger an
acknowledgment of receipt of the Indenture Trustee's Home Loan Files, in
accordance with the provisions of the Custodial Agreement; and
(x) if the Additional Note Principal Balance is equal to or greater
than $25,000,000, the Note Insurer shall have delivered to the Seller, the
Issuer and the Indenture Trustee a written notice confirming the Note
Insurer's consent and approval to the addition of all Subsequent Home
Loans to be purchased by the Issuer and pledged to the Indenture Trustee
on the related Subsequent Transfer Date.
Section 2.03 OWNERSHIP AND POSSESSION OF HOME LOAN FILES.
Upon the issuance of the Notes, with respect to the Initial Home Loans,
and upon payment of the related Subsequent Purchase Price, with respect to
the Subsequent Home Loans, the ownership of each Debt Instrument, the related
Mortgage and the contents of the related Servicer's Home Loan File and the
Indenture Trustee's Home Loan File shall be vested in the Issuer, subject to
the lien created by the Indenture in favor of the Indenture Trustee for the
benefit of the Noteholders and the Note Insurer, although possession of the
Servicer's Home Loan Files (other than items required to be maintained in the
Indenture Trustee's Home Loan Files) on behalf of the Indenture Trustee and
for the benefit of the Noteholders and the Note Insurer shall remain with the
Servicer, and the Custodian shall take possession of the Indenture Trustee's
Home Loan Files as contemplated in Section 2.06.
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Section 2.04 BOOKS AND RECORDS.
The Seller shall record in its books and records and report the transfer
of each Home Loan to the Issuer as a conveyance to the Issuer by sale or
capital contribution, or a combination thereof, pursuant to generally
accepted accounting principles ("GAAP"). The Servicer shall be responsible
for maintaining, and shall maintain, a complete set of books and records for
each Home Loan which shall be clearly marked to reflect the record ownership
of each Home Loan by the Issuer, subject to the lien created by the Indenture
in favor of the Indenture Trustee for the benefit of the Noteholders and the
Note Insurer.
Section 2.05 DELIVERY OF HOME LOAN DOCUMENTS.
(a) With respect to each Initial Home Loan, on the Closing Date the
Seller has delivered or caused to be delivered, and with respect to each
Subsequent Home Loan, on the related Advance Date, the Seller will deliver or
will cause to be delivered, to the Custodian as the designated agent of the
Indenture Trustee, each of the following documents (collectively, the "Home
Loan Files"):
(i) The original Debt Instrument, endorsed "PAY TO THE ORDER OF
__________________________________, WITHOUT RECOURSE" and signed, by
facsimile or manual signature, in the name of the Seller by a Responsible
Officer thereof, together with all intervening endorsements that evidence
a complete chain of title from the originator thereof to the Seller;
provided that any of the foregoing endorsements may be contained on an
allonge which shall be firmly affixed to such Debt Instrument;
(ii) With respect to each Debt Instrument, either: (A) the original
Mortgage, with evidence of recording thereon, (B) a copy of the Mortgage
certified as a true copy by a Responsible Officer of the Seller or by the
closing attorney, if the original has been transmitted for recording but
has not, at the time of delivery of this Agreement, been returned or (C) a
copy of the Mortgage certified by the public recording office in those
instances where the original recorded Mortgage has been lost or has been
retained by the public recording office;
(iii) With respect to each Debt Instrument, an original Assignment of
Mortgage assigned in blank and signed in the name of the Seller by a
Responsible Officer;
(iv) With respect to each Debt Instrument, either: (A) originals of
all intervening assignments of the Mortgage, with evidence of recording
thereon, (B) if the original intervening assignments have not yet been
returned from the recording office, a copy of the originals of such
intervening assignments together with a certificate of a Responsible
Officer of the Seller or the closing attorney certifying that the copy is
a true copy of the original of such intervening assignments or (C) a copy
of the intervening assignment certified by the public recording office in
those instances where the original recorded intervening assignment has
been lost or has been retained by the public recording office; provided
that the chain of intervening recorded assignments shall not be required
to match the chain of intervening
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endorsements of the Debt Instrument, so long as the chain of intervening
recorded assignments, if applicable, evidences one or more assignments of
the Mortgage from the original mortgagee ultimately to the person who has
executed the Assignment of Mortgage referred to in clause (iii) above; and
(v) Originals of all assumption and modification agreements, if any,
or a copy certified as a true copy by a Responsible Officer of the Seller
if the original has been transmitted for recording until such time as the
original is returned by the public recording office.
(b) The Seller agrees to deliver or cause to be delivered on or before
the applicable Advance Date to the Custodian each of the documents identified
in paragraphs (i) through (v) of subsection (a) above with respect to any
Subsequent Home Loans.
(c) With respect to each Home Loan, the Seller shall, within five
Business Days after the receipt thereof, and in any event, within nine (9)
months of the Closing Date (in the case of the Initial Home Loans) or the
related Advance Date (in the case of the Subsequent Home Loans), deliver or
cause to be delivered to the Custodian: (i) the original recorded Mortgage
in those instances where a copy thereof certified by the Seller was delivered
to the Custodian; (ii) any original recorded intervening assignments of
Mortgage in those instances where copies thereof certified by the Seller were
delivered to the Custodian; and (iii) the original recorded assumption and
modification agreement in those instances in which a copy was delivered.
Notwithstanding anything to the contrary contained in this Section 2.05, in
those instances where the public recording office retains the original
Mortgage, or, if applicable, the intervening assignments of the Mortgage or
the original recorded assumption and modification agreement after it has been
recorded, or where any such original has been lost or destroyed, the Seller
shall be deemed to have satisfied its obligation hereunder with respect to
the delivery of any such document upon delivery to the Custodian of a copy,
as certified by the public recording office to be a true copy of the recorded
original of such Mortgage, or, if applicable, the intervening assignments of
Mortgage or assumption and modification agreement, respectively.
Notwithstanding the foregoing, the Seller shall not be required to deliver
any document as provided in this paragraph with respect to a Home Loan if, at
the time such document would otherwise be required to be so delivered, such
Home Loan is no longer included in the Home Loan Pool.
(d) Notwithstanding any of the foregoing, upon the occurrence of an
Assignment Event with respect to each Home Loan or with respect to a
particular Home Loan, the Seller, at its own expense, shall, within 10 days
of such Assignment Event, send the original Assignment of Mortgage delivered
pursuant to this Section 2.05 of each applicable Home Loan or the particular
Home Loan to the appropriate recording office for recordation in the name of
the Indenture Trustee. Notwithstanding the foregoing, the Seller shall not
be required to record the Assignment of Mortgage as provided in this
paragraph with respect to a Home Loan if at the time such Assignment of
Mortgage would otherwise be required to be sent to the appropriate recording
office for recordation, such Home Loan is no longer included in the Home Loan
Pool.
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(e) All Home Loan documents held by the Custodian on behalf of the
Indenture Trustee are referred to herein as the "Indenture Trustee's Home
Loan File." All recordings required pursuant to this Section 2.05 shall be
accomplished by and at the expense of the Seller.
Section 2.06 ACCEPTANCE BY INDENTURE TRUSTEE OF THE HOME LOANS;
CERTIFICATION BY CUSTODIAN.
(a) The Indenture Trustee agrees to cause the Custodian to execute and
deliver on the Closing Date, with respect to each Initial Home Loan, and on
the Advance Date, with respect to any Subsequent Home Loans, an
acknowledgment of receipt of the Indenture Trustee's Home Loan File for each
Home Loan. The Indenture Trustee declares that it will cause the Custodian
to hold such documents and any amendments, replacements or supplements
thereto, as well as any other assets included in the Trust Estate and
delivered to the Custodian in trust, upon and subject to the conditions set
forth herein for the benefit of the Noteholders and the Note Insurer. The
Indenture Trustee agrees, for the benefit of the Noteholders and the Note
Insurer, to cause the Custodian to review each Indenture Trustee's Home Loan
File with respect to each Initial Home Loan within 45 days after the Closing
Date, and with respect to any Qualified Substitute Home Loan or Subsequent
Home Loan, within 45 days after the conveyance of the related Home Loan to
the Issuer, and to cause the Custodian to deliver to the Seller, the
Indenture Trustee, the Issuer, the Note Insurer, the Servicer and the
Arranger a certification to the effect that, as to each such Home Loan (other
than any Home Loan paid in full or any Home Loan specifically identified in
such certification as not covered by such certification), (i) all documents
required to be delivered to the Indenture Trustee pursuant to this Agreement
are in the Indenture Trustee's possession or in the possession of the
Custodian on its behalf (other than as expressly permitted by Section
2.05(c)), (ii) all documents delivered by the Seller to the Custodian
pursuant to Section 2.05 have been reviewed by the Custodian and have not
been mutilated or damaged and appear regular on their face (handwritten
additions, changes or corrections shall not constitute irregularities if
initialed by the Obligor) and relate to such Home Loan, (iii) based on the
examination of the Custodian on behalf of the Indenture Trustee, and only as
to the foregoing documents, the information set forth on the Home Loan
Schedule accurately reflects the information set forth in the Indenture
Trustee's Home Loan File and (iv) each Debt Instrument has been endorsed as
provided in Section 2.05. Neither the Issuer nor the Custodian shall be
under any duty or obligation (i) to inspect, review or examine any such
documents, instruments, certificates or other papers to determine that they
are genuine, enforceable, or appropriate for the represented purpose or that
they are other than what they purport to be on their face or (ii) to
determine whether any Indenture Trustee's Home Loan File should include any
of the documents specified in Section 2.05(a)(v).
(b) If the Custodian, during the process of reviewing the Indenture
Trustee's Home Loan Files, finds any document constituting a part of a
Indenture Trustee's Home Loan File which is not executed, has not been
received, is unrelated to any Home Loan identified in the Home Loan Schedule,
does not conform to the requirements of Section 2.05 or does not conform, in
all material respects, to the description thereof as set forth in the Home
Loan Schedule, then the Custodian shall promptly so notify, in writing, the
Servicer, the Indenture Trustee, the Issuer, the Note Insurer, the Seller and
the Arranger. In performing any such review, the Custodian may conclusively
rely on the
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Seller as to the purported genuineness of any such document and any signature
thereon. It is understood that the scope of the Custodian's review of the
Indenture Trustee's Home Loan Files is limited solely to confirming that the
documents listed in Section 2.05 have been received and further confirming
that any and all documents delivered pursuant to Section 2.05 have been
executed and relate to the Home Loans identified in the Home Loan Schedule.
None of the Issuer, the Indenture Trustee or the Custodian shall have any
responsibility for determining whether any document is valid and binding,
whether the text of any assignment or endorsement is in proper or recordable
form, whether any document has been recorded in accordance with the
requirements of any applicable jurisdiction, or whether a blanket assignment
is permitted in any applicable jurisdiction. If a material defect in a
document constituting part of a Indenture Trustee's Home Loan File is
discovered, then the Seller shall comply with the cure, substitution and
repurchase provisions of Section 3.05 hereof.
(c) On the Payment Date in December of each year commencing in 1997,
the Issuer shall deliver (or cause the Custodian to deliver) to the Seller,
the Note Insurer, the Indenture Trustee, the Servicer and the Arranger a
certification listing all Indenture Trustee's Home Loan Files held by the
Custodian on behalf of the Indenture Trustee, for the benefit of the
Noteholders and the Note Insurer, on such Payment Date.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 3.01 [RESERVED].
Section 3.02 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
SERVICER AND SELLER.
The Servicer as such and in its capacity as the Seller hereby
represents, warrants and covenants with and to the Issuer, the Indenture
Trustee, the Note Insurer and the Noteholders as of the Closing Date:
(a) The Servicer is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Texas and has all
licenses necessary to carry on its business as now being conducted and is
licensed, qualified and in good standing in each Mortgaged Property State if
the laws of such state require licensing or qualification in order to conduct
business of the type conducted by the Servicer and perform its obligations as
Servicer hereunder, except where the failure to be so licensed, qualified or
in good standing, either singularly or in the aggregate, would not have a
material adverse effect on its business or its ability to perform its
obligations hereunder. The Servicer has the power and authority to execute
and deliver this Agreement and to perform in accordance herewith; the
execution, delivery and performance of this Agreement (including all
instruments of transfer to be delivered pursuant to this Agreement) by the
Servicer and the consummation of the transactions contemplated hereby have
been duly and validly authorized by all necessary action of the Servicer.
This Agreement evidences the valid, binding and enforceable obligation of the
Servicer. All requisite action has been taken by the Servicer to make this
Agreement valid, binding and enforceable upon the Servicer in accordance with
its terms, subject
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to the effect of bankruptcy, insolvency, reorganization, moratorium and
other, similar laws relating to or affecting creditors' rights generally or
the application of equitable principles in any proceeding, whether at law or
in equity.
(b) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required to
be taken, given or obtained, as the case may be, by or from any federal,
state or other governmental authority or agency (other than any such actions,
approvals, etc. under any state securities laws, real estate syndication or
"Blue Sky" statutes, as to which the Servicer makes no such representation or
warranty) that are necessary in connection with the execution and delivery by
the Servicer of this Agreement and the other related documents to which it is
a party, have been duly taken, given or obtained, as the case may be, are in
full force and effect, are not subject to any pending proceedings or appeals
(administrative, judicial or otherwise) and either the time within which any
appeal therefrom may be taken or review thereof may be obtained has expired
or no review thereof may be obtained or appeal therefrom taken, and are
adequate to authorize the consummation of the transactions contemplated by
this Agreement and such other documents on the part of the Servicer and the
performance by the Servicer of its obligations as Servicer under this
Agreement and such other documents to which it is a party.
(c) The consummation of the transactions contemplated by this
Agreement will not result in (i) the breach of any terms or provisions of the
charter or by-laws of the Servicer, (ii) the breach of any term or provision
of, or conflict with or constitute a default under or result in the
acceleration of any obligation under, any material agreement, indenture or
loan or credit agreement or other material instrument to which the Servicer
or its property is subject, or (iii) the violation of any law, rule,
regulation, order, judgment or decree to which the Servicer or its property
is subject.
(d) Neither this Agreement, as of the Closing Date, nor the Private
Placement Memorandum, as of the OM Delivery Date (as defined in the Placement
Agreement) nor any statement, report or other document prepared by the
Servicer and furnished or to be furnished pursuant to this Agreement or in
connection with the transactions contemplated hereby contains any untrue
statement of material fact or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not misleading.
(e) There is no action, suit, proceeding or investigation pending or,
to the best of the Servicer's knowledge, threatened against the Servicer
which, either in any one instance or in the aggregate, may result in any
material adverse change in the business, operations, financial condition,
properties or assets of the Servicer or in any material impairment of the
right or ability of the Servicer to carry on its business substantially as
now conducted, or in any material liability on the part of the Servicer or
which would draw into question the validity of this Agreement or the Home
Loans or of any action taken or to be taken in connection with the
obligations of the Servicer contemplated herein, or which would be likely to
impair materially the ability of the Servicer to perform under the terms of
this Agreement.
(f) The Servicer is not in default with respect to any order or decree
of any court or any order, regulation or demand of any federal, state,
municipal or other governmental agency, which
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default might have consequences that would materially and adversely affect
the condition (financial or otherwise) or operations of the Servicer or its
properties or might have consequences that would materially and adversely
affect its performance hereunder.
(g) So long as FFI is the Servicer of the Home Loans hereunder, the
Servicer's Home Loan Files will be maintained at 1600 Viceroy, Dallas, Texas
75235, or, if FFI is no longer the Servicer hereunder or if FFI changes the
location of the Servicer's Home Loan Files, the Servicer's Home Loan Files
shall be maintained at such address as may be indicated on an Officer's
Certificate executed by a Servicing Officer and delivered to the Issuer, the
Indenture Trustee and the Note Insurer.
(h) The Servicer shall not solicit any refinancing of any of the Home
Loans; provided, that this covenant shall not prevent or restrict either (1)
the Servicer from making general solicitations, by mail, advertisement or
otherwise of the general public or persons on a targeted list, so long as the
list was not generated from the Home Loan Schedule or (2) any refinancing in
connection with an Obligor's unsolicited request for refinancing.
(i) The Servicer shall not sell, transfer, assign or otherwise dispose
of a customer or similar list comprised of the names of the Obligors under
the Home Loans to any third party.
(j) As of the Closing Date, the Issuer will have good and marketable
title to each Initial Home Loan and the other assets included in the Trust
Estate as of such date free and clear of any lien, mortgage, pledge, charge,
security interest or other encumbrance, other than the lien of the Indenture.
(k) As of each Advance Date, the Issuer will have good and marketable
title to each Subsequent Home Loan transferred on such Advance Date and the
other assets included in the Trust Estate as of such date free and clear of
any lien, mortgage, pledge, charge, security interest or other encumbrance,
other than the lien of the Indenture.
(l) The transfer, assignment and conveyance of the Home Loans, the
Debt Instruments and the Mortgages by the Seller pursuant to this Agreement
or any Subsequent Transfer Agreement are not subject to the bulk transfer
laws or any similar statutory provisions in effect in any applicable
jurisdiction.
(m) As a wholly-owned subsidiary of the Seller, the Issuer is a
non-entity for tax purposes and, as such, all income and expenses for federal
tax purposes will be included in the taxable income of the Seller.
Section 3.03 INDIVIDUAL HOME LOANS.
The Seller hereby represents and warrants to the Issuer, the Indenture
Trustee, the Note Insurer and the Noteholders, with respect to each Initial
Home Loan, as of the Closing Date, with
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respect to each Subsequent Home Loan, as of the related Advance Date, and
with respect to item (ii) below, as of the Closing Date and each Advance Date:
(a) HOME LOAN INFORMATION. The information with respect to each Home
Loan set forth in the Home Loan Schedule is true and correct in all material
respects as of the applicable Cut-Off Date.
(b) DELIVERY OF HOME LOAN DOCUMENTS. All of the original or certified
documentation required to be delivered to the Indenture Trustee or to the
Custodian on or prior to the Closing Date or the Advance Date, as applicable,
pursuant to this Agreement or as otherwise provided in this Agreement has or
will be so delivered.
(c) PAYMENTS CURRENT. As of the applicable Cut-off Date, such Home
Loan is not 30 or more days delinquent, based on the terms under which the
related Mortgages and Debt Instruments have been made. The Seller has not
advanced funds, or induced, solicited or knowingly received any advance of
funds from a party other than the related Obligor, directly or indirectly,
for the payment of any amount required by any Home Loan.
(d) NO WAIVER OR MODIFICATION. The terms of each Debt Instrument and
Mortgage, have not been impaired, waived, altered or modified in any respect,
except by written instruments reflected in the Indenture Trustee's Home Loan
File and no provision of any Mortgage or Debt Instrument has been "whited
out" or erased unless such modification has been initialed by each of the
parties to the related Home Loan. No instrument of waiver, alteration,
modification or assumption has been executed except for the instruments that
are part of the Indenture Trustee's Home Loan File and the terms of which are
reflected in the Indenture Trustee's Home Loan File.
(e) NO DEFENSES. No Debt Instrument or Mortgage is subject to any
claim, set-off, counterclaim or defense, including the defense of usury, nor
will the operation of any of the terms of any Debt Instrument or Mortgage or
the exercise of any right thereunder, render such Debt Instrument or Mortgage
unenforceable, in whole or in part, or subject to any claim, right of
rescission, set-off, counterclaim or defense, including the defense of usury,
and no such claim, right of rescission, set-off, counterclaim or defense has
been asserted in any proceeding or was asserted in any state or federal
bankruptcy or insolvency proceeding at the time the related Home Loan was
originated.
(f) COMPLIANCE WITH LAWS; RELIEF ACT MATTERS. Any and all
requirements of any federal, state or local law applicable to each Home Loan
have been complied with including, without limitation, all licensing, real
estate settlement procedures act, consumer, usury, truth-in-lending, consumer
credit protection, equal credit opportunity or disclosure laws applicable to
each Home Loan. Each Home Loan was originated in compliance with all
applicable laws and no fraud or misrepresentation was committed by any Person
in connection therewith. No relief has been requested by or allowed to an
Obligor under the Soldiers' and Sailors' Civil Relief Act of 1940.
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(g) NO SATISFACTION OR RELEASE OF LIEN. No Mortgage has been
satisfied, canceled, subordinated or rescinded, in whole or in part. No
Mortgaged Property has been released from the lien of the related Mortgage in
whole or in part, nor has any instrument been executed that would effect any
such release, cancellation, subordination or rescission, other than the
subordination of the lien of such Mortgage securing a Home Loan with respect
to a Superior Lien on such Mortgaged Property in connection with the
refinancing of the mortgage loan relating to such Superior Lien.
(h) VALID LIEN. With respect to each Debt Instrument, the related
Mortgage is or creates a valid, subsisting and enforceable lien on the
related Mortgaged Property.
(i) VALIDITY OF HOME LOAN DOCUMENTS; ENTIRE AGREEMENT. Each Debt
Instrument and each Mortgage is genuine and each is the legal, valid and
binding obligation of the Obligor thereof, enforceable in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting creditors' rights
in general and by general principles of equity. All parties to each Debt
Instrument and each Mortgage had legal capacity at the time to enter into the
related Home Loan and to execute and deliver such Debt Instrument and
Mortgage, and such Debt Instrument and Mortgage have been duly and properly
executed by such parties. The Debt Instrument and the Mortgage contain the
entire agreement between the related Obligor and the lender and all
obligations of the lender under the related Home Loan, and no other agreement
defines, modifies, or expands the obligations of the lender under the Home
Loan, except for any assumptions or modifications included in the Indenture
Trustee's Home Loan File pursuant to Section 2.05(a)(v) or referred to in
Section 3.03(m).
(j) FULL DISBURSEMENT OF PROCEEDS. The proceeds of each Home Loan
have been fully disbursed and there is no requirement for future advances
thereunder. All costs, fees and expenses incurred in making or closing each
Home Loan and the recording of the Mortgage have been disbursed. The Obligor
is not entitled to any refund of any amounts paid or due under the Debt
Instrument or any related Mortgage, and any and all requirements set forth in
the related Home Loan documents have been complied with.
(k) OWNERSHIP. Immediately prior to the conveyance thereof to the
Issuer, the Seller had good and marketable title to each Home Loan, Debt
Instrument and Mortgage, the Seller was the sole owner thereof and had full
right to sell each Home Loan, Debt Instrument and Mortgage to the Issuer; and
upon the conveyance thereof by the Seller to the Issuer, the Issuer became
the sole owner of each Home Loan, Debt Instrument and Mortgage free and clear
of any encumbrance, equity, lien, pledge, charge, claim or security interest,
other than the lien of the Indenture.
(l) OWNERSHIP OF MORTGAGED PROPERTY. With respect to each Home Loan,
the related Servicer's Home Loan File contains a title document reflecting
that title to the related Mortgaged Property is held at least 50% by the
Obligor under such Home Loan.
(m) NO DEFAULTS. Except with respect to any delinquent scheduled
payment referred to in subsection (c) above, there is no default, breach,
violation or event of acceleration existing under any Mortgage or any Debt
Instrument and, to the best of the Seller's knowledge, there is no event
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which, with the passage of time or with notice and/or the expiration of any
grace or cure period, would constitute such a default, breach, violation or
event of acceleration and neither the Seller nor its predecessors have waived
any such default, breach, violation or event of acceleration, except as set
forth in an instrument of waiver, alteration, modification or assumption that
is included in the Indenture Trustee's Home Loan File.
(n) CONSENT AND DELINQUENCY OF SUPERIOR LIEN. No obligation secured
by a Superior Lien was more than 30 days past due at the time of origination
of the related Home Loan. With respect to each Home Loan that is not a first
mortgage loan, either (i) no consent for the Home Loan is required by the
holder of the related prior lien or (ii) such consent has been obtained and
has been delivered to the Indenture Trustee.
(o) NO CONDEMNATION OR DAMAGE; GOOD REPAIR. To the best of the
Seller's knowledge, the physical condition of each Mortgaged Property has not
deteriorated since the date of origination of the related Home Loan (normal
wear and tear excepted) and there is no proceeding pending for the total or
partial condemnation of any Mortgaged Property. To the best of the Seller's
knowledge, the related Mortgaged Property described in each Mortgage is free
of damage and in good repair or will be free of damage and in good repair
following the completion of any improvements or repairs to be financed by the
related Home Loan.
(p) ENVIRONMENTAL COMPLIANCE. To the best of the Seller's knowledge,
the Mortgaged Property is free from any and all toxic or hazardous substances
and there exists no violation of any local, state or federal environmental
law, rule or regulation.
(q) MORTGAGE REMEDIES ADEQUATE. Each Mortgage contains customary and
enforceable provisions such as to render the rights and remedies of the
holder thereof adequate for the realization against the related Mortgaged
Property of the benefits of the security provided thereby, including, (i) in
the case of a Mortgage designated as a deed of trust, by trustee's sale, and
(ii) otherwise, by judicial foreclosure.
(r) REMEDIES AGAINST ORIGINATORS. In the event that any Home Loan was
originated by an entity (such entity, the "Originator") other than the Seller
and to the extent that the Seller has failed to fulfill or is not capable of
fulfilling its obligations to cure, substitute or repurchase such Home Loan
as required hereunder, then the Note Insurer or the Indenture Trustee on
behalf of the Noteholders may enforce any remedies for breach of
representations and warranties made by the Originator with respect to such
Home Loan.
(s) SECURITY. No Debt Instrument is, or has been, secured by any
collateral except the lien of the related Mortgage.
(t) DEED OF TRUST. If a Mortgage for a Home Loan constitutes a deed
of trust, a trustee, duly qualified under applicable law to serve as such,
has been properly designated and currently so serves as such and is named in
such Mortgage, or a valid substitution of trustee has been recorded or may be
recorded and no extraordinary fees or expenses are, or will become, payable
by the Seller
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to the trustee under the deed of trust, except in connection
with default proceedings and a trustee's sale after default by the related
Obligor.
(u) USE OF PROCEEDS OF COMBINATION LOAN. With respect to each
Combination Loan, the Obligor has represented to the Seller that a portion of
the proceeds of such Combination Loan will be used to finance property
improvements.
(v) [RESERVED].
(w) FLOOD INSURANCE. If required by federal or state law, each
Mortgaged Property is covered by flood insurance with a standard mortgagee
clause and extended coverage in an amount which is not less than the value of
such Mortgaged Property. All such insurance policies meet the requirements
of the current guidelines of the Federal Insurance Administration, conform to
the requirements of the FNMA Sellers' Guide and the FNMA Servicers' Guide,
and are of standard type and quality for the locale where the related
Mortgaged Property is located. All acts required to be performed to preserve
the rights and remedies of the Indenture Trustee in any such insurance
policies have been performed including, without limitation, any necessary
notifications of insurers and assignments of policies or interests therein.
(x) UNDERWRITING, ORIGINATION AND SERVICING PRACTICES. Each Home Loan
has been underwritten by or re-underwritten by and reviewed for compliance
with the Seller's then current underwriting guidelines. The origination
practices used by each originator of the Home Loans and the servicing and
collection practices used by the Seller with respect to each Home Loan have
been in all material respects legal, proper, prudent and customary with
respect to the loan origination and servicing business as applicable to the
respective loan type. To the best of the Seller's knowledge, no fraud or
misrepresentation was committed by any Person in connection with the
origination or servicing of each Home Loan.
(y) SELECTION CRITERIA; NO BULK TRANSFER. The Home Loans were not
selected by the Seller for sale to the Issuer on any basis intended to
adversely affect the Issuer. The sale, transfer, assignment, conveyance and
grant of the Debt Instruments and the Mortgages by the Seller to the Issuer
were not subject to the bulk transfer laws or any similar statutory
provisions in effect in any applicable jurisdiction.
(z) [RESERVED].
(aa) NO FRAUDULENT CONVEYANCE. The Home Loans are not being
transferred with any intent to hinder, delay or defraud any creditors.
(bb) VALUE AND MARKETABILITY. To the best of the Seller's knowledge,
there do not exist any circumstances, conditions or information with respect
to the Home Loan, the related Mortgaged Property, the Obligor or the
Obligor's credit standing that reasonably can be expected to cause private
institutional investors investing in same type of home loan to regard such
Home Loan as an
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unacceptable investment, to increase the likelihood that such Home Loan will
become delinquent, or adversely affect the value or marketability of such
Home Loan.
(cc) TERMS OF HOME LOANS AND INTEREST METHOD. Each Home Loan is a
fixed rate loan. Each Debt Instrument has an original term to maturity of
not less than 24 months nor more than 25 years and three months from the date
of origination. Each Debt Instrument is payable in monthly installments of
principal and interest, with interest payable in arrears, and requires a
monthly payment which is sufficient to amortize the original principal
balance over the original term and to pay interest at the related Home Loan
Interest Rate. No Debt Instrument provides for any extension of the original
term. Interest for each Home Loan is calculated at a rate of interest
computed by the simple interest method or the actuarial method.
(dd) TYPES OF HOME LOANS; RETAIL INSTALLMENT CONTRACTS. Each Home Loan
is either (i) a Debt Consolidation Loan or (ii) a Combination Loan. No Home
Loan was originated for the express purpose of purchasing a manufactured
home. No Home Loan is covered by mortgage insurance provided by the Federal
Housing Administration of the United States Department of Housing and Urban
Development.
(ee) NO BUYDOWN, GRADUATED PAYMENT MORTGAGE OR SHARED APPRECIATION
LOANS. No Home Loan contains any provisions pursuant to which principal and
interest payments are paid or partially paid with funds deposited in any
separate account established by the Seller, the Obligor or anyone else on
behalf of the Obligor, or paid by any source other than the Obligor. No Home
Loan contains any other similar provision which may constitute a "buydown"
provision. No Home Loan is a graduated payment mortgage loan. No Home Loan
has a shared appreciation or other contingent interest feature.
(ff) NO CHATTEL PAPER. Each Debt Instrument is comprised of one
original promissory note and each such promissory note constitutes an
"instrument" for purposes of Section 9-105(1)(i) of the UCC. No Debt
Instrument constitutes or is comprised of "chattel paper" as such term is
defined in Section 9-105(1)(b) of the UCC. Each Debt Instrument has been
delivered to the Indenture Trustee.
(gg) DESCRIPTION CONFORMS TO PRIVATE PLACEMENT MEMORANDUM. Each
Initial Home Loan conforms, and all Initial Home Loans in the aggregate
conform, in all material respects to the description thereof to be set forth
in the Private Placement Memorandum.
(hh) REVIEW BY SELLER. In light of the Seller's underwriting
guidelines, the Seller has reviewed all of the documents constituting each
Servicer's Home Loan File and each Indenture Trustee's Home Loan File and has
made such inquiries as it deems reasonable under the circumstances to make
and confirm the accuracy of the representations set forth herein.
(ii) UNDERWRITING CRITERIA. No more than 45% of the Home Loans
(weighted by Principal Balance) will be secured by Mortgaged Properties
located in the State of California; no more than 20% of the Home Loans
(weighted by Principal Balance) will be secured by Mortgaged Properties
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located in any single state, other than the State of California; the average
of the Credit Scores of the Home Loans (weighted by Principal Balance) will
be a minimum of 675; no more than 5% of the Home Loans (weighted by Principal
Balance) will have a Credit Score below 620; none of the Home Loans will have
a Credit Score below 600; the average Principal Balance of the Home Loans
will not exceed $40,000; the average Debt Ratio of the Home Loans (weighted
by Principal Balance) will not exceed 41%; no more than 2% of the Home Loans
(weighted by Principal Balance) will be Home Loans with a related Debt Ratio
greater than 50%; the average combined loan to value ratio of the Home Loans
(weighted by Principal Balance) will not exceed 115%; and no more than 1% of
the Home Loans (weighted by Principal Balance) will have combined loan to
value ratios in excess of 130%.
(jj) LOCATION OF MORTGAGED PROPERTY. Each Mortgaged Property
securing a Home Loan is located in the United States.
Section 3.04 SUBSEQUENT HOME LOANS.
(a) With respect to the Subsequent Home Loans conveyed by the Seller
to the Issuer on a given Advance Date, the Seller shall represent and warrant
to the Issuer, the Indenture Trustee, the Note Insurer and the Noteholders that
as of each Advance Date:
(i) No such Subsequent Home Loan provides for scheduled payments to
be due on any date after the date which is fifteen months prior to the
Final Scheduled Payment Date.
(ii) To the best of the Seller's knowledge, the acquisition of the
Subsequent Home Loans by the Issuer on such Advance Date will not result
in a downgrading in any rating of the Notes by a Rating Agency.
(iii) The Subsequent Home Loans have not been acquired by the Issuer
for the primary purpose of recognizing gains or decreasing losses resulting
from market value changes in such Subsequent Home Loans.
(iv) Each of the representations and warranties set forth in
Section 3.03 is true and correct with respect to each of the Subsequent
Home Loans being transferred to the Issuer.
(v) To the extent applicable to each Subsequent Home Loan being
transferred to the Issuer, the quantitative criteria set forth in
paragraphs 22 and 23 of that certain Commitment to Issue a Financial
Guaranty Insurance Policy (Application No. 97-06-4394 dated as of June 16,
1997) (the "Note Insurer Commitment") issued by the Note Insurer have
been satisfied.
(b) The Seller shall represent and warrant to the Issuer, the
Indenture Trustee, the Note Insurer and the Noteholders that as of each
Advance Date the Home Loans have satisfied all of the criteria set forth in
paragraphs 22 and 23 of the Note Insurer Commitment.
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Section 3.05 PURCHASE AND SUBSTITUTION.
(a) It is understood and agreed that the representations and
warranties set forth in Sections 3.03 and 3.04, shall survive the conveyance
of the Home Loans to the Issuer, the Grant of the Home Loans to the Indenture
Trustee and the delivery of the Notes to the Noteholders. Upon discovery by
the Seller, the Servicer, the Custodian, the Issuer, the Indenture Trustee,
the Note Insurer or any Noteholder of a breach of any of such representations
and warranties which materially and adversely affects the value of the Home
Loans or the interest of the Noteholders or the Note Insurer, or which
materially and adversely affects the interests of the Noteholders or the Note
Insurer in the related Home Loan in the case of a representation and warranty
relating to a particular Home Loan (notwithstanding that such representation
and warranty may have been made to the Seller's best knowledge), the party
discovering such breach shall give prompt written notice to the others. The
Seller shall within 45 days of the earlier of its discovery or its receipt of
notice of any breach of such a representation or warranty, or of its
discovery or its receipt of notice of a material defect in a document
contained in an Indenture Trustee's Home Loan File as referred to in the last
sentence of Section 2.06(b) promptly cure such breach or the applicable
defect, as applicable in all material respects unless such requirement is
waived by the Note Insurer. If, however, within 45 days after Seller's
discovery of or receipt of notice of such a breach or defective document, as
applicable, such breach or defective document, as applicable, has not been
remedied by the Seller or waived by the Note Insurer and such breach or
defective document, as applicable, materially and adversely affects the
interests of the Noteholders or the Note Insurer generally or in the related
Home Loan (the "Defective Home Loan"), the Seller shall, on or before the
Determination Date next succeeding the end of such 45 day period, either (i)
remove such Defective Home Loan from the Trust Estate (in which case it shall
become a Deleted Home Loan) and substitute one or more Qualified Substitute
Home Loans in the manner and subject to the conditions set forth in this
Section 3.05 or (ii) purchase such Defective Home Loan at a purchase price
equal to the Purchase Price by depositing such Purchase Price in the
Collection Account. In addition, the Seller shall indemnify the Issuer and
the Note Insurer for any losses incurred in excess of the proceeds received
from the repurchase or substitution of any such Defective Home Loan. In the
event the Seller is notified that any Mortgaged Property is not free of
damage or not in good repair, regardless of the Seller's knowledge, the
Seller shall (x) substitute or purchase the related Home Loan in accordance
with clauses (i) and (ii), respectively, above or (y) repair any such
Mortgaged Property such that such Mortgaged Property is free of damage and in
good repair. The Seller shall provide the Servicer, the Note Insurer, the
Indenture Trustee and the Issuer with a certification of a Responsible
Officer on the Determination Date next succeeding the end of such 45 day
period indicating whether the Seller is purchasing the Defective Home Loan or
substituting in lieu of such Defective Home Loan a Qualified Substitute Home
Loan.
Any substitution of Home Loans pursuant to this Section 3.05(a) shall be
accompanied by payment by the Seller of the Substitution Adjustment, if any,
to be deposited in the Collection Account. For purposes of calculating the
Available Collection Amount for any Payment Date, amounts paid by the Seller
pursuant to this Section 3.05 in connection with the repurchase or
substitution of any Defective Home Loan that are on deposit in the Collection
Account as of the Determination Date for such Payment Date shall be deemed to
have been paid during the related Due
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Period and shall be transferred to the Note Payment Account to be retained
therein for application on such Payment Date pursuant to Section 5.01(c).
As to any Home Loan for which the Seller substitutes a Qualified
Substitute Home Loan or Loans, the Seller shall effect such substitution by
delivering (i) to the Issuer a certification executed by a Responsible
Officer of the Seller to the effect that the Substitution Adjustment has been
credited to the Collection Account and (ii) to the Custodian on behalf of the
Indenture Trustee, the documents constituting the Indenture Trustee's Loan
File for such Qualified Substitute Home Loan or Loans.
The Issuer will be entitled to all payments received on the applicable
Deleted Home Loan on or before the Accounting Date applicable to the
calculation, as of the applicable date of repurchase or substitution, of the
Principal Balance of such Deleted Home Loan, and the Seller shall be entitled
to receive all Post-Release Collections with respect to such Deleted Home
Loan. The Seller shall give written notice to the Issuer, the Servicer (if
the Seller is not then acting as such), the Indenture Trustee and the Note
Insurer that a repurchase or substitution has taken place and shall amend the
Home Loan Schedule to reflect (i) the removal of the applicable Deleted Home
Loan from the terms of this Agreement and (ii) if applicable, the
substitution of the Qualified Substitute Home Loan. The Seller shall
promptly deliver to the Issuer, the Servicer (if the Seller is not then
acting as such), the Indenture Trustee and the Note Insurer a copy of the
Home Loan Schedule as so amended.
(b) [RESERVED].
(c) The Servicer shall deposit in the Collection Account all payments
received in connection with a Qualified Substitute Home Loan or Loans after
the date of such substitution. All payments received with respect to
Qualified Substitute Home Loans on or before the date of substitution will be
retained by the Seller. Upon such substitution, such Qualified Substitute
Home Loan or Loans shall be subject to the terms of this Agreement in all
respects, and the Seller shall be deemed to have made with respect to such
Qualified Substitute Home Loan or Loans, as of the date of substitution, the
covenants, representations and warranties set forth in Section 3.03. On the
date of such substitution, the Seller will deposit into the Collection
Account an amount equal to the related Substitution Adjustment, if any. In
addition, on the date of such substitution, (i) the Issuer shall cause such
Qualified Substitute Home Loan to be pledged to the Indenture Trustee under
the Indenture as part of the Trust Estate and (ii) the Indenture Trustee
shall (A) release the applicable Deleted Home Loan from the lien of the
Indenture, (B) release (or cause the Custodian to release) to the Servicer
for release to the Seller the related Indenture Trustee's Home Loan File for
such Deleted Home Loan and (C) execute, without recourse, representation or
warranty, and deliver such instruments of transfer and release presented to
it by the Servicer as shall be necessary to transfer such Deleted Home Loan
to the Seller and to evidence such release.
(d) It is understood and agreed that the obligations of the Seller set
forth in this Section 3.05 to cure, purchase or substitute for a Defective
Home Loan (and to indemnify the Issuer and the Note Insurer for certain
losses as provided in this Agreement in connection with a Defective
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Home Loan) constitute the sole remedies of the Issuer, the Indenture Trustee,
the Noteholders and the Note Insurer hereunder respecting a breach of the
representations and warranties contained in Sections 3.03 and 3.04 other
than, (i) with respect to the Note Insurer, those remedies set forth in the
Insurance Agreement and (ii) with respect to the Noteholders, those remedies
available under Article XII following a Conversion Event if such breach is
not cured, corrected or eliminated and, as a result, a Conversion Event
within paragraph (l) of the definition of Conversion Event occurs. Any cause
of action against the Seller relating to or arising out of a material defect
in a document contained in an Indenture Trustee's Home Loan File as
contemplated by the last sentence of Section 2.06(b) or against the Seller
relating to or arising out of a breach of any representations and warranties
made in Sections 3.03 or 3.04 shall accrue as to any Home Loan upon (i)
discovery of such defect or breach by any party and notice thereof to the
Seller, or notice thereof by the Seller to the Issuer and the Note Insurer,
(ii) failure by the Seller to cure such defect or breach or purchase or
substitute such Home Loan as specified above, and (iii) demand upon the
Seller by the Issuer, the Note Insurer or the Majority Noteholders for all
amounts payable in respect of such Home Loan.
(e) Neither the Issuer nor the Indenture Trustee shall have any duty
to conduct any affirmative investigation other than as specifically set forth
in this Agreement as to the occurrence of any condition requiring the
repurchase or substitution of any Home Loan pursuant to this Section or the
eligibility of any Home Loan for purposes of this Agreement.
ARTICLE IV
ADMINISTRATION AND SERVICING OF THE HOME LOANS
Section 4.01 DUTIES OF THE SERVICER.
(a) SERVICING STANDARD. The Servicer, as an independent contractor,
shall service and administer the Home Loans and shall have full power and
authority, acting alone, to do any and all things in connection with such
servicing and administration which the Servicer may deem necessary or
desirable and consistent with the terms of this Agreement. Notwithstanding
anything to the contrary contained herein, the Servicer, in servicing and
administering the Home Loans, shall employ or cause to be employed procedures
(including collection, foreclosure, liquidation and Foreclosure Property
management and liquidation procedures) and exercise the same care that it
customarily employs and exercises in servicing and administering loans of the
same type as the Home Loans for its own account, provided that such standards
shall in no event be lower than accepted servicing practices of prudent
lending institutions and servicers of loans of the same type as the Home
Loans and giving due consideration to the Noteholders' and the Note Insurer's
reliance on the Servicer. The Servicer has and shall maintain the
facilities, procedures and experienced personnel necessary to comply with the
servicing standard set forth in this subsection (a) and the duties of the
Servicer set forth in this Agreement relating to the servicing and
administration of the Home Loans. Any fees or other amounts due to any
Subservicer shall be solely the responsibility of the Servicer.
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(b) SERVICING ADVANCES. In accordance with the preceding general
servicing standard, the Servicer, or any Subservicer on behalf of the
Servicer, shall make all Servicing Advances in connection with the servicing
of each Home Loan hereunder. Notwithstanding any provision to the contrary
herein, neither the Servicer, nor any Subservicer on behalf of the Servicer,
shall have any obligation to advance its own funds for any delinquent
scheduled payments of principal and interest on any Home Loan or to satisfy
or keep current the indebtedness secured by any Superior Liens on the related
Mortgaged Property. No costs incurred by the Servicer or any Subservicer in
respect of Servicing Advances shall, for the purposes of payments to
Noteholders, be added to the amount owing under the related Home Loan.
Notwithstanding any obligation by the Servicer to make a Servicing Advance
hereunder with respect to a Home Loan, before making any Servicing Advance
that is material in relation to the outstanding principal balance thereof,
the Servicer shall assess the reasonable likelihood of (i) recovering such
Servicing Advance and any prior Servicing Advances for such Home Loan, and
(ii) recovering any amounts attributable to outstanding interest and
principal owing on such Home Loan for the benefit of the Noteholders and the
Note Insurer in excess of the costs, expenses and other deductions to obtain
such recovery, including without limitation any Servicing Advances therefor
and, if applicable, the outstanding indebtedness secured by all Superior
Liens. The Servicer shall only make a Servicing Advance with respect to a
Home Loan to the extent that the Servicer determines in its reasonable, good
faith judgment that such Servicing Advance would likely be recovered as
aforesaid.
(c) WAIVERS, MODIFICATIONS AND EXTENSIONS. Consistent with the terms
of this Agreement, following a Conversion Date, the Servicer may waive,
modify or vary any provision of any Home Loan or consent to the postponement
of strict compliance with any such provision or in any manner grant
indulgence to any Obligor if in the Servicer's reasonable determination such
waiver, modification, postponement or indulgence is not materially adverse to
the interests of the Noteholders or the Note Insurer; provided, however,
unless the Obligor is in default with respect to the Home Loan, or such
default is, in the judgment of the Servicer, reasonably foreseeable, the
Servicer may not permit any modification with respect to any Home Loan that
would change the Home Loan Interest Rate, defer (subject to the following
paragraph) or forgive the payment of any principal or interest (unless in
connection with the liquidation of the related Home Loan) or extend the final
maturity date on the Home Loan. The Servicer may grant a waiver or enter into
a subordination agreement with respect to the refinancing of the indebtedness
secured by a Superior Lien on the related Mortgaged Property, provided that
the Obligor is in a better financial or cash flow position as a result of
such refinancing, which may include a reduction in the Obligor's scheduled
monthly payment on the indebtedness secured by such Superior Lien. The
Servicer shall notify the Issuer, the Note Insurer and the Indenture Trustee
of any modification, waiver or amendment of any provision of any Home Loan
and the date thereof, and shall deliver to the Custodian for deposit in the
related Indenture Trustee's Home Loan File, an original counterpart of the
agreement relating to such modification, waiver or amendment promptly
following the execution thereof. Notwithstanding the preceding provisions of
this subsection (c), (1) if the Principal Balance of the Home Loans that have
been waived, modified or varied, in the aggregate, equal or exceed two
percent (2%) of the aggregate Principal Balances of the Home Loans as of the
Conversion Date, then any waiver, modification or variance thereafter of any
Home Loan which is not a Defaulted Home Loan shall be subject to the prior
written consent of the Note Insurer; and (2) the Servicer may
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modify, vary or waive any Defaulted Home Loan in a manner that in the
reasonable judgment of the Servicer will be likely to maximize the net
proceeds realizable from such Defaulted Home Loan under the circumstances,
including, without limitation, the deferment or forgiveness of any principal
or interest payments due or to become due thereon; provided, however, that
with respect to the preceding clauses (1) and (2), no such modification,
waiver or variation of a Home Loan pursuant to this subsection (c) shall
involve the execution by the related Obligor of a new Debt Instrument or a
new Mortgage.
The Servicer may, in a manner consistent with accepted servicing
practices, permit a borrower who is selling his principal residence and
purchasing a new one (due to relocation for employment reasons) to substitute
the new Mortgaged Property as collateral for the related Home Loan. In such
event, the Servicer will generally require the borrower to make a partial
prepayment in reduction of the principal balance of the Home Loan.
The Servicer shall make reasonable efforts to collect all payments
called for under the terms and provisions of each Home Loan and the related
Debt Instrument and Mortgage. Consistent with the foregoing, the Servicer
may in its discretion waive or permit to be waived any late payment charge,
prepayment charge or assumption fee or any other fee or charge which the
Servicer would be entitled to retain hereunder as Servicing Compensation and
extend the due date for payments due on a Debt Instrument for a period.
(d) INSTRUMENTS OF SATISFACTION OR RELEASE. Without limiting the
generality of the foregoing, the Servicer is hereby authorized and empowered
to execute and deliver on behalf of the Issuer, the Indenture Trustee, each
Noteholder and the Note Insurer, all instruments of satisfaction or
cancellation, or of partial or full release, discharge and all other
comparable instruments, with respect to the Home Loans and with respect to
the related Mortgaged Properties. If reasonably required by the Servicer,
the Issuer and the Indenture Trustee shall furnish the Servicer with any
powers of attorney and other documents necessary or appropriate to enable the
Servicer to carry out its servicing and administrative duties under this
Agreement.
Section 4.02 LIQUIDATION OF HOME LOANS.
(a) In the event that any payment due under any Home Loan and not
postponed pursuant to Section 4.01(c) is not paid when the same becomes due
and payable, or in the event the Obligor fails to perform any other covenant
or obligation under the Home Loan and such failure continues beyond any
applicable grace period, the Servicer shall, in accordance with the standard
of care specified in Section 4.01(a), take such action as it shall deem to be
in the best interest of the Noteholders and the Note Insurer to collect or
liquidate such Home Loan in default in a manner that in the reasonable
judgment of the Servicer will be likely to maximize the net proceeds
realizable therefrom under the circumstances (including foreclosing or
otherwise comparably effecting ownership in such Mortgaged Property in the
name of the Indenture Trustee for the benefit of Noteholders and the Note
Insurer). In addition, the Servicer shall have the power and authority,
exercisable in its sole discretion at any time, to sell any defaulted Home
Loan on behalf of the Indenture Trustee for the benefit of the Noteholders
and the Note Insurer to one or more third party
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investors in a manner that, in the reasonable judgment of the Servicer, will
be likely to maximize the net proceeds realizable therefrom. The Servicer
shall promptly deposit the Net Liquidation Proceeds or Post Liquidation
Proceeds, as applicable, from the sale of such defaulted Home Loans into the
Collection Account in accordance with Section 5.01 of this Agreement. The
Servicer shall give the Indenture Trustee notice of the election of remedies
made pursuant to this Section 4.02. The Servicer shall not be required to
satisfy the indebtedness secured by any Superior Liens on the related
Mortgaged Property or to advance funds to keep the indebtedness secured by
such Superior Liens current. In connection with any collection or
liquidation activities, the Servicer shall exercise collection or liquidation
procedures with the same degree of care and skill as it would exercise or use
under the circumstances in the conduct of its own affairs.
(b) During any Due Period occurring after a Home Loan becomes a
Liquidated Home Loan, the Servicer shall deposit into the Collection Account
any proceeds received by it with respect to such Liquidated Home Loan or the
related Foreclosure Property ("Post Liquidation Proceeds").
(c) After a Home Loan has become a Liquidated Home Loan, the Servicer
shall promptly prepare and forward to the Issuer, the Indenture Trustee, the
Note Insurer, the Arranger and, upon request of any Noteholder, to such
Noteholder a liquidation report detailing the following: (i) the Net
Liquidation Proceeds, Insurance Proceeds or Released Mortgaged Property
Proceeds received in respect of such Liquidated Home Loan; (ii) expenses
incurred with respect thereto; (iii) any Net Loan Losses incurred in
connection therewith; and (iv) any Post Liquidation Proceeds.
Section 4.03 FIDELITY BOND; ERRORS AND OMISSION INSURANCE.
The Servicer shall maintain with a responsible company, and at its own
expense, a blanket fidelity bond and an errors and omissions insurance policy
in such amounts as required by, and satisfying any other requirements of,
FHLMC, with broad coverage on all officers, employees or other persons acting
in any capacity requiring such persons to handle funds, money, documents or
papers relating to the Home Loans ("Servicer Employees"). Any such fidelity
bond and errors and omissions insurance shall protect and insure the Servicer
against losses, including losses resulting from forgery, theft, embezzlement,
fraud, errors and omissions and negligent acts (including acts relating to
the origination and servicing of loans of the same type as the Home Loans) of
such Servicer Employees. Such fidelity bond shall also protect and insure
the Servicer against losses in connection with the release or satisfaction of
a Home Loan without having obtained payment in full of the indebtedness
secured thereby. In the event of any loss of principal or interest on a Home
Loan for which reimbursement is received from the Servicer's fidelity bond or
errors and omissions insurance, the proceeds from any such insurance will be
deposited in the Collection Account. No provision of this Section 4.03
requiring such fidelity bond and errors and omissions insurance shall
diminish or relieve the Servicer from its duties and obligations as set forth
in this Agreement. Upon the request of the Issuer, the Indenture Trustee or
the Note Insurer, the Servicer shall cause to be delivered to requesting
party a certified true copy of such fidelity bond and insurance policy. On
the Closing Date, such fidelity bond and insurance is maintained by the
Servicer with Reliance Insurance Company of Illinois.
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Section 4.04 TITLE, MANAGEMENT AND DISPOSITION OF FORECLOSURE
PROPERTY.
The deed or certificate of sale in respect of each Foreclosure Property
shall be taken in the name of the Indenture Trustee for the benefit of the
Noteholders and the Note Insurer.
The Servicer shall manage, conserve, protect and operate each
Foreclosure Property for the Indenture Trustee, the Noteholders and the Note
Insurer solely for the purpose of its prudent and prompt disposition and
sale. The Servicer shall, either itself or through an agent selected by the
Servicer, manage, conserve, protect and operate the Foreclosure Property in
the same manner that it manages, conserves, protects and operates other
foreclosure property for its own account, and in the same manner that similar
property in the same locality as the Foreclosure Property is managed. The
Servicer shall attempt to sell the same (and may temporarily lease the same)
on such terms and conditions as the Servicer deems to be in the best interest
of the Noteholders and the Note Insurer.
The disposition of Foreclosure Property shall be carried out by the
Servicer at such price, and upon such terms and conditions, as the Servicer
deems to be in the best interest of the Indenture Trustee, the Noteholders
and the Note Insurer and, as soon as practicable thereafter, the expenses of
such sale shall be paid. The Net Liquidation Proceeds or Post Liquidation
Proceeds, as applicable, from the conservation, disposition and sale of the
Foreclosure Property shall be promptly deposited by the Servicer in the
Collection Account in accordance with Section 5.01 of this Agreement and the
Indenture, which Net Liquidation Proceeds or Post Liquidation Proceeds, as
applicable, shall equal all cash amounts received with respect thereto less
the amounts retained and withdrawn by the Servicer for any related
unreimbursed Servicing Advances and any other fees and expenses incurred in
connection with such Foreclosure Property.
Section 4.05 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION
REGARDING THE HOME LOANS.
The Servicer shall provide to the Issuer, the Indenture Trustee, the
Noteholders, the Note Insurer and the supervisory agents and examiners of
each of the foregoing access to the documentation regarding the Home Loans
required by applicable state and federal regulations, such access being
afforded without charge but only upon reasonable request and during normal
business hours at the offices of the Servicer designated by it.
Section 4.06 SUPERIOR LIENS.
(a) The Servicer shall file (or cause to be filed) of record a request
for notice of any action by a lienholder under a Superior Lien for the
protection of the Indenture Trustee's interest, where permitted by local law
and whenever applicable state law does not require that a junior lienholder
be named as a party defendant in foreclosure proceedings in order to
foreclose such junior lienholder's equity of redemption.
(b) If the Servicer is notified that any lienholder under a Superior
Lien has accelerated or intends to accelerate the obligations secured by such
Superior Lien, or has declared or intends to
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declare a default under the related mortgage or promissory note secured
thereby, or has filed or intends to file an election to have any Mortgaged
Property sold or foreclosed, the Servicer shall take, on behalf of the Issuer
and the Indenture Trustee, all reasonable actions that are necessary to
protect the interests of the Noteholders and the Note Insurer, and/or to
preserve the security of the related Home Loan, including making any
Servicing Advances that are necessary to cure the default or reinstate the
Superior Lien. The Servicer shall immediately notify the Issuer and the
Indenture Trustee of any such action or circumstances. Any Servicing Advances
by the Servicer pursuant to its obligations in this Section 4.06 shall comply
with requirements set forth in Section 4.01(b) hereof.
Section 4.07 SUBSERVICING.
(a) The Servicer may, with the prior written consent of the Note
Insurer and the Indenture Trustee, enter into Subservicing Agreements for any
servicing and administration of Home Loans with any institution which is in
compliance with the laws of each state necessary to enable it to perform its
obligations under such Subservicing Agreement and is an Eligible Servicer.
The Servicer shall give prior written notice to the Issuer, the Indenture
Trustee, the Note Insurer and the Arranger of the appointment of any
Subservicer. The Servicer shall be entitled to terminate any Subservicing
Agreement in accordance with the terms and conditions of such Subservicing
Agreement and to either directly service the related Home Loans or enter into
a Subservicing Agreement with a successor subservicer which qualifies
hereunder.
(b) Notwithstanding any Subservicing Agreement, any of the provisions
of this Agreement relating to agreements or arrangements between the Servicer
and a Subservicer or reference to actions taken through a Subservicer or
otherwise, the Servicer shall remain obligated and primarily liable to the
Issuer, the Indenture Trustee, the Note Insurer and Noteholders for the
servicing and administering of the Home Loans in accordance with the
provisions of this Agreement without diminution of such obligation or
liability by virtue of such Subservicing Agreements or arrangements or by
virtue of indemnification from the Subservicer and to the same extent and
under the same terms and conditions as if the Servicer alone were servicing
and administering the Home Loans. For purposes of this Agreement, the
Servicer shall be deemed to have received payments on Home Loans when the
Subservicer has actually received such payments and, unless the context
otherwise requires, references in this Agreement to actions taken or to be
taken by the Servicer in servicing the Home Loans include actions taken or to
be taken by a Subservicer on behalf of the Servicer. The Servicer shall be
entitled to enter into any agreement with a Subservicer for indemnification
of the Servicer by such Subservicer, and nothing contained in this Agreement
shall be deemed to limit or modify such indemnification.
(c) In the event the Servicer shall for any reason no longer be the
Servicer (including by reason of an Event of Default), the successor
Servicer, on behalf of the Issuer, the Indenture Trustee, the Note Insurer
and the Noteholders pursuant to Section 4.08, shall thereupon assume all of
the rights and obligations of the Servicer under each Subservicing Agreement
that the Servicer may have entered into, unless the successor Servicer elects
to terminate any Subservicing Agreement in accordance with its terms. The
successor Servicer shall be deemed to have assumed all of the
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Servicer's interest therein and to have replaced the Servicer as a party to
each Subservicing Agreement to the same extent as if the Subservicing
Agreements had been assigned to the assuming party, except that the Servicer
shall not thereby be relieved of any liability or obligations under the
Subservicing Agreements. The Servicer at its expense and without right of
reimbursement therefor, shall, upon request of the successor Servicer,
deliver to the assuming party all documents and records relating to each
Subservicing Agreement and the Home Loans then being serviced and an
accounting of amounts collected and held by it and otherwise use its best
efforts to effect the orderly and efficient transfer of the Subservicing
Agreements to the assuming party.
(d) As part of its servicing activities hereunder, the Servicer, for
the benefit of the Issuer, the Indenture Trustee, the Note Insurer and the
Noteholders, shall enforce the obligations of each Subservicer under the
related Subservicing Agreement. Such enforcement, including, without
limitation, the legal prosecution of claims and the pursuit of other
appropriate remedies, shall be in such form and carried out to such an extent
and at such time as the Servicer, in its good faith business judgment, would
require were it the owner of the related Home Loans. The Servicer shall pay
the costs of such enforcement at its own expense, and shall be reimbursed
therefor only (i) from a general recovery resulting from such enforcement to
the extent, if any, that such recovery exceeds all amounts due in respect of
the related Home Loan or (ii) from a specific recovery of costs, expenses or
attorneys fees against the party against whom such enforcement is directed.
(e) Any Subservicing Agreement that may be entered into and any other
transactions or services relating to the Home Loans involving a Subservicer
in its capacity as such and not as an originator shall be deemed to be
between the Subservicer and the Servicer alone and none of the Issuer, the
Indenture Trustee, the Noteholders or the Note Insurer shall be deemed
parties thereto or shall have any claims, rights, obligations, duties or
liabilities with respect to the Subservicer in its capacity as such except as
set forth in Section 4.07(c) above.
Section 4.08 SUCCESSOR SERVICERS.
In the event that the Servicer is terminated pursuant to Section 10.01
hereof, or resigns pursuant to Section 9.04 hereof or otherwise becomes
unable to perform its obligations under this Agreement, the Indenture Trustee
will become the successor Servicer or will appoint a successor Servicer in
accordance with the provisions of Section 10.02 hereof; provided that any
successor Servicer, including the Indenture Trustee, shall satisfy the
requirements of an Eligible Servicer and shall be approved by each Rating
Agency and the Note Insurer.
Section 4.09 RULE 144A INFORMATION.
Within seven (7) days after its receipt of a request therefor, the
Servicer shall provide to the Indenture Trustee the information required to
be delivered to Holders and prospective owners of the Notes in connection
with resales of the Notes to permit compliance with Rule 144A of the
Securities Act in connection with such resales. The Issuer shall provide to
the Servicer such information as may be requested by the Servicer for the
Servicer to comply with its obligations as set forth in the preceding
sentence.
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ARTICLE V
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01 COLLECTION ACCOUNT, NOTE PAYMENT ACCOUNT AND NOTE
PRINCIPAL PREPAYMENT ACCOUNT.
(a) (1) ESTABLISHMENT OF COLLECTION ACCOUNT. The Servicer, for the
benefit of the Noteholders and the Note Insurer, shall cause to be
established and maintained one or more Collection Accounts, which shall be
separate Eligible Accounts, which may be interest-bearing, entitled
"COLLECTION ACCOUNT, FIRST BANK NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE,
IN TRUST FOR THE FIRSTPLUS FUNDING TRUST ASSET-BACKED NOTES, SERIES 1997A".
Any Collection Account may be maintained with the Indenture Trustee or,
subject to the following paragraph, any other depository institution which
satisfies the requirements set forth in the definition of Eligible Account.
The creation of any Collection Account other than one maintained with the
Indenture Trustee shall be evidenced by a letter agreement between the
Servicer and the depository institution acceptable to the Note Insurer. A
copy of such letter agreement shall be furnished to the Indenture Trustee,
the Note Insurer and, upon request of any Noteholder, to such Noteholder.
Funds in each Collection Account shall be invested in accordance with Section
5.08.
As of the Closing Date, the Collection Account shall be established with
the Indenture Trustee, and thereafter upon written notice to the Issuer and
the Indenture Trustee, and upon the prior written consent of the Note
Insurer, the Collection Account may be transferred by the Servicer to a
different depository institution so long as such transfer is to an Eligible
Account.
(2) ESTABLISHMENT OF NOTE PAYMENT ACCOUNT AND THE NOTE PRINCIPAL
PREPAYMENT ACCOUNT. No later than the Closing Date, the Issuer, for the
benefit of the Noteholders and the Note Insurer, shall cause to be
established and maintained with the Indenture Trustee (i) one or more Note
Payment Accounts, which shall be separate Eligible Accounts, which may be
interest-bearing and which shall be entitled "NOTE PAYMENT ACCOUNT, FIRST
BANK NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, IN TRUST FOR THE "FIRSTPLUS
FUNDING TRUST ASSET-BACKED NOTES, SERIES 1997A", and (ii) one or more Note
Principal Prepayment Accounts, which shall be separate Eligible Accounts,
which may be interest-bearing and which shall be entitled "NOTE PRINCIPAL
PREPAYMENT ACCOUNT, FIRST BANK NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, IN
TRUST FOR THE "FIRSTPLUS FUNDING TRUST ASSET-BACKED NOTES, SERIES 1997A".
Funds in the Note Payment Account and the Note Principal Prepayment Account
shall be invested in accordance with Section 5.08.
(b) (1) DEPOSITS TO COLLECTION ACCOUNT. The Servicer shall use its
best efforts to deposit or cause to be deposited (without duplication) within
one (1) Business Day, and shall in any event deposit within two (2) Business
Days, of receipt thereof in the Collection Account and retain therein in
trust for the benefit of the Noteholders and the Note Insurer:
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(i) all payments on account of principal on each Home Loan
received on or after its related Cut-Off Date;
(ii) all payments on account of interest on each Initial Home Loan
received on or after June 1, 1997;
(iii) all payments on account of interest on each Subsequent Home
Loan received on or after its related Cut-Off Date;
(iv) all Net Liquidation Proceeds and Post Liquidation Proceeds
pursuant to Sections 4.02 or 4.04;
(v) all Insurance Proceeds;
(vi) all Released Mortgaged Property Proceeds;
(vii) any amounts payable in connection with the repurchase of any
Home Loan and the amount of any Substitution Adjustment pursuant to
Section 3.05 or Section 2.9(c) of the Indenture;
(viii) any amount required to be deposited in the Collection Account
pursuant to the receipt of proceeds from any fidelity bond or errors and
omission insurance under Section 4.03 or the deposit of the Termination
Price under Section 11.02; and
(ix) interest and gains on funds held in the Collection Account.
The Servicer shall be entitled to retain and not deposit into the
Collection Account any amounts received with respect to a Home Loan that
constitute additional servicing compensation pursuant to Section 7.03, and
such amounts retained by the Servicer during a Due Period shall be excluded
from the calculation of the Servicing Compensation that is distributable to
the Servicer from the Note Payment Account on the next Payment Date following
such Due Period.
(2) DEPOSITS TO NOTE PAYMENT ACCOUNT. On the third Business Day
prior to each Payment Date (for purposes of this Section 5.01(b)(2) the
"Withdrawal Date"), the Indenture Trustee (based on information contained in
the Servicer's Monthly Remittance Report for such Payment Date) shall (i)
withdraw the Available Collection Amount with respect to such Payment Date
from the Collection Account, pay the portion thereof representing income or
gain from investments credited to the Collection Account during the preceding
Due Period to the Servicer as Servicing Compensation with respect to such
Payment Date, and deposit the remainder in the Note Payment Account, (ii)
withdraw all funds on deposit in the Capitalized Interest Account (excluding
any portion thereof that was deposited in the Capitalized Interest Account
with respect to an Additional Note Principal Balance for which the related
Advance Date occurred on or after the immediately preceding Determination
Date) and deposit such funds in the Note Payment Account, and (iii) withdraw
all funds on deposit in the Reserve Fund on such Withdrawal Date, pay the
portion thereof
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representing income or gain from investments credited to the Reserve Fund
during the preceding Due Period to the Issuer Special Purpose Account, and
deposit the remainder in the Note Payment Account.
(c) RETENTIONS IN NOTE PAYMENT ACCOUNT. No later than 11:00 a.m. (New
York City time) on the second Business Day prior to each Payment Date, to the
extent funds are available in the Note Payment Account, the Indenture Trustee
(based on the information contained in the Servicer's Monthly Remittance
Report for such Payment Date) shall retain funds in the Note Payment Account
for payment on such Payment Date as indicated in the following order of
priority:
(i) to retain in the Note Payment Account for payment on such
Payment Date pursuant to the Indenture in the following order, (a) to the
Servicer, an amount equal to the Servicing Compensation (net of (A) any
amounts retained prior to deposit into the Collection Account pursuant to
subsection (b)(1) above and (B) any amounts representing income or gain
from investments credited to the Collection Account and paid to the
Servicer pursuant to subsection (b)(2) above) and all unpaid Servicing
Compensation from prior Due Periods and (b) to the Note Insurer, an amount
equal to the Guaranty Insurance Premium and all unpaid Guaranty Insurance
Premiums from prior Due Periods;
(ii) to retain in the Note Payment Account, for payment pursuant to
the Indenture on such Payment Date, from the Available Payment Amount
remaining after the application of clause (i), the Interest Payment Amount
with respect to such Payment Date;
(iii) to retain in the Note Payment Account, for payment pursuant to
the Indenture on such Payment Date, from the Available Payment Amount
remaining after the application of clauses (i) and (ii) above, the
Principal Payment Amount with respect to such Payment Date;
(iv) to retain in the Note Payment Account, for payment pursuant to
the Indenture on such Payment Date to the Note Insurer, from the Available
Payment Amount remaining after application of clauses (i) through (iii)
above, the Note Insurer Reimbursement Amount;
(v) to retain in the Note Payment Account, for payment pursuant to
Section 5.06 on such Payment Date to the Servicer, from the Available
Payment Amount remaining after application of clauses (i) through (iv)
above, an amount equal to any Servicing Advances previously made by the
Servicer and not previously reimbursed (the "Servicing Advance
Reimbursement Amount" with respect to such Payment Date); and
(vi) to retain in the Note Payment Account, for payment on such
Payment Date to the Noteholders, from the Available Payment Amount
remaining after application of clauses (i) through (v) above, an amount
equal to that portion of the Facility Fee, if any, due and unpaid with
respect to such Payment Date;
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(vii) to retain in the Note Payment Account, for payment on such
Payment Date to the Issuer Special Purpose Account from the remaining
Available Payment Amount after application of clauses (i) through (vi)
above, the amounts remaining after payments as described above, free of
the lien of the Indenture.
(d) ADDITIONAL WITHDRAWALS FROM COLLECTION ACCOUNT. The Indenture
Trustee, at the written direction of the Servicer shall also make the following
withdrawals from the Collection Account, in no particular order of priority:
(i) to withdraw and pay as directed by the Servicer any amount not
required to be deposited in the Collection Account, including without
limitation any payments on or proceeds from a Home Loan received on or
prior to its related Cut-Off Date, or deposited therein in error;
(ii) to withdraw and pay as directed by the Servicer any Post-Release
Collections on deposit in the Collection Account; and
(iii) to clear and terminate the Collection Account in connection with
the termination of this Agreement.
The Servicer shall not retain any cash or investment in the Collection
Account for a period in excess of 12 months and cash therein shall be
considered transferred to the Note Payment Account on a first-in, first-out
basis.
Section 5.02 CLAIMS UNDER GUARANTY POLICY.
(a) The Notes will be insured by the Guaranty Policy pursuant to the
terms set forth therein, notwithstanding any provisions to the contrary
contained in the Indenture or this Agreement. All amounts received under the
Guaranty Policy shall be used solely for the payment to Noteholders of
principal and interest on the Notes.
(b) (i) If for any Payment Date a Deficiency Amount exists, the
Indenture Trustee shall complete a notice in the form set forth as EXHIBIT
A to the Guaranty Policy (the "Notice") and shall submit such Notice to the
Fiscal Agent designated in the Guaranty Policy no later than 12:00 noon,
New York time, on the second Business Day preceding such Payment Date. The
Notice shall constitute a claim for a Guaranteed Payments pursuant to the
Guaranty Policy for an amount equal to such Deficiency Amount. Upon
receipt of the Guaranteed Payments, at or prior to the latest time payments
of the Guaranteed Payments are to be made by the Note Insurer pursuant to
the Guaranty Policy, on behalf of the Noteholders, the Indenture Trustee
shall distribute such Guaranteed Payments as part of the Required Payment
Amount under the Indenture.
(ii) In addition, the Indenture Trustee shall make a claim upon the
Guaranty Policy for the full amount of any Preference Amount on the first
Business Day following
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receipt by the Indenture Trustee from the applicable Noteholder of the
following: (i) a certified copy of the order requiring the return of such
preference payment, (ii) an opinion of counsel satisfactory to the Note
Insurer that such order is final and not subject to appeal, (iii) an
assignment in such form as is reasonably required by the Note Insurer,
irrevocably assigning to the Note Insurer all rights and claims of such
Noteholder relating to or arising under the related Note against the debtor
which made such preference payment or otherwise with respect to such
preference payment, and (iv) appropriate instruments to effect the
appointment of the Note Insurer as agent for such Noteholder in any legal
proceeding relating to such preference payment, such instruments being in
a form satisfactory to the Note Insurer. Any proceeds of any such
Preference Amount received by the Indenture Trustee shall be paid pursuant
to the terms of the Guaranty Policy.
(c) The Note Insurer is entitled to the benefit of the following
provisions in the event that a Guaranteed Payment has been made.
Notwithstanding any other provision hereof:
(i) The Indenture Trustee shall immediately apply all moneys
constituting a Guaranteed Payment to the payment to Noteholders of
principal and interest on the Notes by depositing such amounts in the
Note Payment Account for Guaranteed Payments payable on the Notes. All
amounts received under the Guaranty Policy shall be used solely for the
payment to Noteholders of principal and interest on Notes. The Note
Insurer's obligations under the Guaranty Policy with respect to a
particular Guaranteed Payment shall be discharged to the extent funds equal
to the applicable Guaranteed Payment are received by the Indenture Trustee,
whether or not such funds are properly applied by the Indenture Trustee.
The parties hereto recognize that the making of the Guaranteed Payment does
not relieve any of the parties hereto of any obligation hereunder or any
of the Basic Documents.
(ii) The parties hereto recognize that, to the extent that the Note
Insurer makes payments, directly or indirectly, on account of principal of
or interest on the Notes, the Note Insurer shall be subrogated to the
rights of the Noteholders to receive payments of principal and interest in
accordance with the terms hereof and of the Indenture.
(iii) To the extent the Note Insurer is owed any Note Insurer
Reimbursement Amount (including, without limitation, any unreimbursed
Guaranteed Payments made under the Guaranty Policy plus interest accrued
thereon as provided in the Insurance Agreement), the Note Insurer shall be
entitled to payments pursuant to the Indenture, and the Indenture Trustee
shall otherwise treat the Note Insurer as the owner of such rights to
payments of any Note Insurer Reimbursement Amount.
(iv) The Note Insurer shall have the right to institute any suit,
action or proceeding at law or in equity under the same terms as a
Noteholder may institute any action.
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Section 5.03 [RESERVED].
Section 5.04 [RESERVED].
Section 5.05 [RESERVED].
Section 5.05 CAPITALIZED INTEREST ACCOUNT.
(a) ESTABLISHMENT. No later than the Closing Date, the Issuer, for the
benefit of the Noteholders and the Note Insurer, shall cause to be
established and maintained with the Indenture Trustee one or more separate
Eligible Accounts entitled "CAPITALIZED INTEREST ACCOUNT, FIRST BANK NATIONAL
ASSOCIATION, AS INDENTURE TRUSTEE, IN TRUST FOR THE FIRSTPLUS FUNDING TRUST
ASSET-BACKED NOTES, SERIES 1997A". Funds in the Capitalized Interest Account
shall be invested in accordance with Section 5.08.
(b) DEPOSITS. The Issuer shall deposit each Capitalized Interest Account
Deposit in the Capitalized Interest Account.
(c) FINAL PAYMENT. Upon the termination of this Agreement as provided
in Section 11.01(a), any amount remaining on deposit in the Capitalized
Interest Account shall be paid to the Issuer and any Permitted Investments in
the Capitalized Interest Account shall be transferred to the Issuer.
(d) WITHDRAWALS. Any funds on deposit in the Capitalized Interest
Account shall be applied as provided in Section 5.01(b)(2).
Section 5.07 RESERVE FUND.
(a) ESTABLISHMENT. No later than the Closing Date, the Issuer, for the
benefit of the Noteholders and the Note Insurer, shall cause to be
established and maintained with the Indenture Trustee one or more separate
Eligible Accounts entitled "RESERVE FUND, FIRST BANK NATIONAL ASSOCIATION, AS
INDENTURE TRUSTEE, IN TRUST FOR THE FIRSTPLUS FUNDING TRUST ASSET-BACKED
NOTES, SERIES 1997A". Funds in the Reserve Fund shall be invested in
accordance with Section 5.08.
(b) DEPOSITS. From time to time, the Issuer may deposit funds in the
Reserve Fund.
(c) FINAL PAYMENT. Upon the termination of this Agreement as provided
in Section 11.01(a), any amount remaining on deposit in the Reserve Fund
shall be paid to the Issuer and any Permitted Investments in the Reserve Fund
shall be transferred to the Issuer.
(d) WITHDRAWALS. Any funds on deposit in the Reserve Fund shall be
applied as provided in Section 5.01(b)(2).
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Section 5.08 TRUST ACCOUNTS; TRUST ACCOUNT PROPERTY.
(a) CONTROL OF TRUST ACCOUNTS. Each of the Trust Accounts established
hereunder has been pledged by the Issuer to the Indenture Trustee under the
Indenture and shall be subject to the lien of the Indenture. In addition to
the provisions hereunder, each of the Trust Accounts shall also be
established and maintained pursuant to the Indenture. Amounts distributed
from each Trust Account in accordance with the Indenture and this Agreement
shall be released from the lien of the Indenture upon such payment thereunder
or hereunder. The Indenture Trustee shall possess all right, title and
interest in all funds on deposit from time to time in the Trust Accounts and
in all proceeds thereof (including all income thereon) and all such funds,
investments, proceeds and income shall be part of the Trust Account Property
and the Trust Estate. If, at any time, any Trust Account ceases to be an
Eligible Account, the Indenture Trustee (or the Servicer on its behalf) shall
within 10 Business Days (or such longer period, not to exceed 30 calendar
days, as to which each Rating Agency may consent) (i) establish a new Trust
Account as an Eligible Account, (ii) terminate the ineligible Trust Account,
and (iii) transfer any cash and investments from such ineligible Trust
Account to such new Trust Account.
With respect to the Trust Accounts, the Indenture Trustee agrees, by its
acceptance hereof, that each such Trust Account shall be subject to the sole
and exclusive custody and control of the Indenture Trustee for the benefit of
the Noteholders, the Note Insurer and the Issuer, as the case may be, and the
Indenture Trustee shall have sole signature and withdrawal authority with
respect thereto.
The Servicer shall have the power, revocable by the Indenture Trustee, to
instruct the Indenture Trustee to make withdrawals and payments from the Trust
Accounts for the purpose of permitting the Servicer to carry out its respective
duties hereunder or permitting the Indenture Trustee to carry out its duties
herein or under the Indenture.
(b) (1) INVESTMENT OF FUNDS. So long as no Event of Default shall
have occurred and be continuing, the funds held in any Trust Account may be
invested (to the extent practicable and consistent with any requirements of
the Code) in Permitted Investments, as directed in writing or by telephone or
facsimile transmission by the Servicer, in the case of the Collection
Account, or by the Issuer, in the case of each other Trust Account, and
confirmed in writing by the Servicer or the Issuer, as applicable. In any
case, funds in any Trust Account must be available for withdrawal without
penalty, and any Permitted Investments must mature or otherwise be available
for withdrawal, not later than three (3) Business Days (except with respect
to the Note Payment Account, which shall be invested on a one (1) Business
Day basis) immediately preceding the Payment Date next following the date of
such investment and shall not be sold or disposed of prior to its maturity
subject to Section 5.08(b)(2) below. All interest and any other investment
earnings on amounts or investments held in any Trust Account shall be
deposited into such Trust Account immediately upon receipt by the Indenture
Trustee. All Permitted Investments in which funds in any Trust Account are
invested must be held by or registered in the name of "FIRST BANK NATIONAL
ASSOCIATION, AS INDENTURE TRUSTEE, IN TRUST FOR THE FIRSTPLUS FUNDING TRUST
ASSET-BACKED NOTES, SERIES 1997A".
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(2) INSUFFICIENCY AND LOSSES IN TRUST ACCOUNTS. If any amounts
are needed for disbursement from any Trust Account held by or on behalf of
the Indenture Trustee and sufficient uninvested funds are not available to
make such disbursement, the Indenture Trustee shall cause to be sold or
otherwise converted to cash a sufficient amount of the investments in such
Trust Account. The Indenture Trustee shall not be liable for any investment
loss or other charge resulting therefrom, unless such loss or charge is
caused by the failure of the Indenture Trustee to perform in accordance with
this Section 5.08.
If any losses are realized in connection with any investment in any
Trust Account pursuant to this Agreement and the Indenture, then the Servicer,
with respect to the Collection Account, or the Issuer, with respect to each
other Trust Account, shall deposit the amount of such losses (to the extent not
offset by income from other investments in such Trust Account) in such Trust
Account immediately upon the realization of such loss or, to the extent that
the Servicer or the Issuer, as applicable fails to deposit any portion of such
amount, the Issuer or the Servicer, as applicable, shall deposit any
insufficiency from such failure in such Trust Account. All interest and any
other investment earnings on amounts held in any Trust Account shall be taxed
to the Issuer, and for federal and state income tax purposes the Issuer shall
be deemed to be the owner of each Trust Account.
(c) Subject to Section 6.1 of the Indenture, the Indenture Trustee
shall not in any way be held liable by reason of any insufficiency in any
Trust Account held by the Indenture Trustee resulting from any investment
loss on any Permitted Investment included therein (except to the extent that
the Indenture Trustee is the obligor with respect to such Permitted
Investment and has defaulted thereon).
(d) With respect to the Trust Account Property, the Indenture Trustee
acknowledges and agrees that:
(1) the Indenture Trustee shall act as Securities Intermediary
(in such capacity, the "Securities Intermediary") with respect to the
investment of funds in the Reserve Account. The Issuer shall treat
the funds and other assets in the Reserve Account as its own for
federal, state and local income tax and franchise tax purposes and
shall report on its tax returns all income and gain from the Reserve
Account. The Indenture Trustee shall not, without the prior written
consent of the Note Insurer, accept for credit to the Reserve Account
any Trust Account Property as to which the Indenture Trustee has
knowledge of any adverse claim thereto.
(2) any Trust Account Property that is held in deposit accounts
shall be held solely in the Eligible Accounts and, subject to the last
sentence of Section 5.08(a), each such Eligible Account shall be
subject to the exclusive custody and control of the Indenture Trustee,
and the Indenture Trustee shall have sole signature authority with
respect thereto;
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(3) any Trust Account Property that constitutes Physical
Property shall be delivered to the Indenture Trustee in accordance
with paragraph (a) of the definition of "Delivery" and shall be held,
pending maturity or disposition, solely by the Indenture Trustee or
a securities intermediary (as such term is defined in Section
8-102(a)(14) of the UCC) acting solely for the Indenture Trustee;
(4) any Trust Account Property that is a book-entry security
held through the Federal Reserve System pursuant to federal book-entry
regulations shall be delivered in accordance with paragraph (b) of the
definition of "Delivery" and shall be maintained by the Indenture
Trustee, pending maturity or disposition, through continued book-entry
registration of such Trust Account Property as described in such
paragraph; and
(5) any Trust Account Property that is an "uncertificated
security" under Article VIII of the UCC and that is not governed by
clause (3) above shall be delivered to the Indenture Trustee in
accordance with paragraph (c) of the definition of "Delivery" and
shall be maintained by the Indenture Trustee, pending maturity or
disposition, through continued registration of the Indenture Trustee's
(or its nominee's) ownership of such security, directly or through one
or more securities intermediaries.
(6) the Securities Intermediary hereby expressly agrees that:
(i) all matters relating to the Reserve Account shall be governed by
the laws of the State of Minnesota; (ii) all Trust Account Property
held by the Securities Intermediary on behalf of the Indenture Trustee
in the Reserve Account shall be treated as "financial assets" (as
defined in Article 8 of the Minnesota Uniform Commercial Code, it
being understood that the Securities Intermediary will not be
responsible for the determination that any Trust Account Property is
a "financial asset"); (iii) the Securities Intermediary will treat
the Indenture Trustee as entitled to exercise the rights comprising
the financial assets credited to the Reserve Account; (iv) the
financial assets credited to the Reserve Account shall be registered
in the name of, and payable to the order of or specially indorsed to
the Indenture Trustee as Securities Intermediary and shall not be
registered in the name of, payable to the order of, or specially
indorsed to any Person other than the Indenture Trustee; and (v) the
Securities Intermediary will not agree to comply with entitlement
orders originated by any Person with respect to the financial asset
held in the Reserve Account other than the Indenture Trustee.
(7) in the event of any change of law regarding matters
relating to the perfection of security interests in any Trust Account,
the amounts or any Permitted Investments held therein, the Issuer
shall cause to be furnished to the Indenture Trustee, the Note Insurer
and each Rating Agency, an Opinion of Counsel addressing such matters
and if necessary, the Issuer shall cooperate with the Indenture
Trustee in taking all actions necessary to comply with the change in
law.
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Section 5.09 ALLOCATION OF LOSSES.
In the event that Net Liquidation Proceeds, Insurance Proceeds or Released
Mortgaged Property Proceeds on a Liquidated Mortgage Loan are less than the
related Principal Balance plus accrued interest thereon, or any Obligor makes a
partial payment of any Monthly Payment due on a Mortgage Loan, such Net
Liquidation Proceeds, Insurance Proceeds, Released Mortgaged Property Proceeds
or partial payment shall be applied to payment of the related Debt Instrument,
first to interest accrued at the Home Loan Interest Rate and then to principal.
Section 5.10 ADVANCE ACCOUNT.
(a) ESTABLISHMENT. No later than the Closing Date, the Issuer shall
cause to be established and maintained with the Indenture Trustee one or more
separate Eligible Accounts entitled "ADVANCE ACCOUNT, FIRST BANK NATIONAL
ASSOCIATION, AS INDENTURE TRUSTEE, IN TRUST FOR THE FIRSTPLUS FUNDING TRUST
ASSET-BACKED NOTES, SERIES 1997A". Funds in the Advance Account shall not be
invested.
(b) DEPOSITS AND WITHDRAWALS. Additional Note Principal Balances shall
be deposited in and withdrawn from the Advance Account as provided in
Section 2.02(c).
ARTICLE I.
STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS
Section 6.01 STATEMENTS.
(a) No later than each Determination Date, the Servicer shall deliver
to the Indenture Trustee a magnetic tape or computer disk providing such
information regarding the Servicer's activities in servicing the Home Loans
during the related Due Period as the Indenture Trustee may reasonably
require. Upon a written request from the Arranger following a Conversion
Event, the Servicer shall also deliver such magnetic tape or computer disk to
the Arranger. No later than each Determination Date, the Servicer shall
deliver to the Note Insurer a computer disk containing such information
regarding the servicing of the Home Loans during the related Due Period as
the Note Insurer may reasonably require.
(b) (1) Subject to the modification of the Servicer's Monthly
Remittance Report by the Servicer with the prior written consent of the
Majority Noteholders and the Indenture Trustee, no later than three (3)
Business Days before each Payment Date, the Servicer shall prepare and the
Indenture Trustee shall distribute a monthly statement (the "Servicer's
Monthly Remittance Report" with respect to such Payment Date) to the Seller,
the Noteholders, the Note Insurer, the Arranger and each Rating Agency,
stating the date of original issuance of the Notes (day, month and year), the
name of the Issuer (I.E., "FIRSTPLUS FUNDING TRUST"), the series designation
of the Notes (I.E., "Series 1997A"), the date of this Agreement and the
following information:
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(i) the Available Payment Amount, the Interest Payment Amount and
the calculation with respect to such amount, the Principal Payment Amount
and the Required Payment Amount with respect to the related Payment Date;
(ii) the Aggregate Note Principal Balance and the Pool Principal
Balance as of the first day of the related Due Period and after giving
effect to payments made to the Noteholders on such Payment Date;
(iii) the amount of principal and interest received on the Home Loans
during the related Due Period;
(iv) the Servicing Compensation and the Guaranty Insurance Premium
for such Payment Date;
(v) the Overcollateralization Amount with respect to such Payment
Date, the Required Overcollateralization Amount with respect to such
Payment Date, the Net Loan Losses incurred during the related Due Period
and the cumulative Net Loan Losses with respect to such Payment Date;
(vi) the amount remaining on deposit in the Reserve Fund on such
Payment Date after giving effect to the payments made to Noteholders on
such Payment Date and the amount on deposit in the Capitalized Interest
Account on the related Determination Date;
(vii) the weighted average maturity of the Home Loans and the
weighted average Home Loan Interest Rate of the Home Loans, each as of the
last day of the related Due Period.
(viii) certain performance information, including delinquency and
foreclosure information with respect to the Home Loans;
(ix) the amount of any Guaranteed Payment included in the amounts
paid to the Noteholders on such Payment Date;
(x) the amount of any Note Insurer Reimbursement Amount to be paid
to the Note Insurer on such Payment Date and the amount of any Note Insurer
Reimbursement Amount remaining unsatisfied following such payment;
(xi) the amount of any Servicing Advance Reimbursement Amount to be
paid to the Servicer on such Payment Date and the amount of any Servicing
Advance Reimbursement Amount remaining unpaid following such payment;
(xii) the number of and aggregate Principal Balance of all Home Loans
in foreclosure proceedings (other than any Home Loans described in clause
(xiv)) and the percent of the aggregate Principal Balances of such Home
Loans to the aggregate Principal
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Balances of all Home Loans, all as of the close of business on the first
day of the related Due Period;
(xiii) the number of and the aggregate Principal Balance of the Home
Loans in bankruptcy proceedings (other than any Home Loans described in
clause (xiii)) and the percent of the aggregate Principal Balances of such
Home Loans to the aggregate Principal Balances of all Home Loans, all as
of the close of business on the first day of the related Due Period;
(xiv) the number of Foreclosure Properties, the aggregate Principal
Balance of the related Home Loans, the book value of such Foreclosure
Properties and the percent of the aggregate Principal Balances of such
Home Loans to the aggregate Principal Balances of all Home Loans, all as
of the close of business on the first day of the related Due Period;
(xv) during the related Due Period, the aggregate Principal Balance
of Home Loans for each of the following: (A) that became Defaulted Home
Loans, (B) that became Liquidated Home Loans, (C) that became Deleted Home
Loans pursuant to Section 3.05(a) as a result of such Deleted Home Loans
being Defective Home Loans, and (D) that became Deleted Home Loans pursuant
to Section 2.9(c) of the Indenture as a result of such Deleted Home Loans
being Defaulted Home Loans or a Home Loan in foreclosure, default or
imminent default, including the foregoing amounts by loan type (I.E.,
Combination Loans or Debt Consolidation Loans);
(xvi) from the Closing Date through the most current Due Period, the
cumulative aggregate Principal Balance of Home Loans for each of the
following: (A) that became Defaulted Home Loans, (B) that became Liquidated
Home Loans and (C) that became Deleted Home Loans pursuant to Section
3.05(a) as a result of such Deleted Home Loans being Defaulted Home Loans
or a Home Loan in foreclosure, default or imminent default, including the
foregoing amounts by loan type (I.E., Combination Loans or Debt
Consolidation Loans);
(xvii) the scheduled principal payments and the principal prepayments
received with respect to the Home Loans during the related Due Period;
(xviii) the number of and aggregate principal balance of all Home
Loans (both during the related Due Period and in aggregate since the
Closing Date) repurchased or substituted pursuant to Sections 3.05 or
4.02 or Section 2.9(c) of the Indenture;
(xix) the ABS Yield Spread, the Base Treasury Yield and the Minimum
Spread Percent, each as of the related Determination Date;
(xx) the then-applicable Overcollateralization Base Percent
Requirement, the then-applicable Overcollateralization Targeted Percent
Requirement, and the then-applicable Required Credit Support Multiple;
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(xxi) the Net Defaulted Loan losses incurred during the related Due
Period and the Default Rate with respect to the related Payment Date;
(xxii) the Delinquency Rate (30 day) and the Delinquency Rate
(60 day), each with respect to the related Payment Date; and
(xxiii) such other information as may be reasonably requested by the
Indenture Trustee or Note Insurer.
(2) No later than seven days following a repurchase or substitution
pursuant to Sections 3.05 or 4.02 or Section 2.9 of the Indenture, the Servicer
shall notify each Rating Agency and the Note Insurer of the aggregate principal
balances of the Home Loans repurchased or substituted and (if applicable) the
relevant Substitution Adjustment.
All reports prepared by the Servicer of the withdrawals from and deposits
in the Collection Account will be based in whole or in part upon the
information provided to the Indenture Trustee by the Servicer, and the
Indenture Trustee may fully rely upon and shall have no liability with respect
to such information provided by the Servicer.
(c) No later than three (3) Business Days before each Payment Date, the
Servicer shall prepare and distribute to the Note Insurer a monthly statement
that includes the cumulative aggregate Principal Balance of Home Loans that
became Deleted Home Loans pursuant to Section 3.05(a) as a result of such
Deleted Home Loans being Defective Home Loans from the Closing Date through
the most current Due Period.
(d) No later than three (3) Business Days following a written request
by the Arranger, the Servicer shall deliver a report to the Arranger setting
forth the ABS Yield Spread as of the date of such request.
(e) On each Advance Date and Note Principal Prepayment Date, the
Servicer shall deliver a report to the Arranger setting forth the weighted
average Home Loan Interest Rate of the Home Loans as of such Advance Date or
Note Principal Prepayment Date, after giving effect to the Advance or the
Note Principal Prepayment, as applicable.
(f) Upon reasonable advance notice in writing, the Indenture Trustee
will provide to each Noteholder which is a savings and loan association, bank
or insurance company access to information and documentation regarding the
Home Loans sufficient to permit such Noteholder to comply with applicable
regulations of the FDIC or other regulatory authorities with respect to such
Noteholder's investment in the Notes.
(g) The Indenture Trustee shall forward to each Noteholder during the
term of this Agreement, such periodic, special, or other reports, including
information tax returns or reports required with respect to the Notes,
including Internal Revenue Service Forms 1099 and other similar reports that
are required to be filed by the Indenture Trustee or its agent, whether or
not provided for
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herein, as shall be necessary, reasonable, or appropriate with respect to the
Noteholders, or otherwise with respect to the purposes of this Agreement, all
such reports or information to be provided by and in accordance with such
applicable instructions and directions as the Noteholders may reasonably
require.
(h) Reports and computer tapes furnished by the Servicer and the
Indenture Trustee pursuant to this Agreement shall be deemed confidential and
of proprietary nature, and shall not be copied or distributed except in
connection with the purposes and requirements of this Agreement. No Person
entitled to receive copies of such reports or tapes shall use the information
therein for the purpose of soliciting the customers of the Seller or the
Servicer or for any other purpose except as set forth in this Agreement.
Section 6.02 REPORTS OF FORECLOSURE AND ABANDONMENT OF MORTGAGED
PROPERTY.
Each year beginning in 1997 the Servicer, at its expense, shall make the
reports of foreclosures and abandonments of any Mortgaged Property required by
Section 6050J of the Code. The reports from the Servicer shall be in form and
substance sufficient to meet the reporting requirements imposed by such Section
6050J of the Code.
Section 6.03 SPECIFICATION OF CERTAIN TAX MATTERS.
Each Noteholder shall provide the Indenture Trustee with a completed and
executed Form W-9 prior to purchasing a Note. The Indenture Trustee shall
comply with all requirements of the Code, and applicable state and local law,
with respect to the withholding from any payments made to any Noteholder of any
applicable withholding taxes imposed thereon and with respect to any applicable
reporting requirements in connection therewith.
ARTICLE VII
GENERAL SERVICING PROCEDURES
Section 7.01 ASSUMPTION AGREEMENTS.
When a Mortgaged Property has been or is about to be conveyed by the
Obligor, the Servicer shall, to the extent it has knowledge of such conveyance
or prospective conveyance, exercise its rights to accelerate the maturity of
the related Home Loan under any "due-on-sale" clause contained in the related
Mortgage or Debt Instrument; provided, however, that the Servicer shall not
exercise any such right if the "due-on-sale" clause, in the reasonable belief
of the Servicer, is not enforceable under applicable law. In such event or in
the event the related Mortgage and Debt Instrument do not contain a "due-on-
sale" clause, the Servicer shall enter into an assumption and modification
agreement with the person to whom such property has been or is about to be
conveyed, pursuant to which such person becomes liable under the Debt
Instrument and, unless prohibited by applicable law or the Home Loan documents,
the Obligor remains liable thereon. The Servicer is also
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authorized to enter into a substitution of liability agreement with such
person, pursuant to which the original Obligor is released from liability and
such person is substituted as Obligor and becomes liable under the Debt
Instrument. The Servicer shall notify the Custodian that any such
substitution or assumption agreement has been completed by forwarding to the
Custodian the original of such substitution or assumption agreement, which
original shall be added by the Custodian to the related Indenture Trustee's
Home Loan File and shall, for all purposes, be considered a part of such
Indenture Trustee's Home Loan File to the same extent as all other documents
and instruments constituting a part thereof. In connection with any
assumption or substitution agreement entered into pursuant to this Section
7.01, the Servicer shall not change the Home Loan Interest Rate or the
Monthly Payment, defer or forgive the payment of principal or interest,
reduce the outstanding principal amount or extend the final maturity date on
such Home Loan. Any fee collected by the Servicer for consenting to any such
conveyance or entering into an assumption or substitution agreement shall be
retained by or paid to the Servicer as additional Servicing Compensation.
Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Home Loan by operation of law or any assumption which the Servicer may be
restricted by law from preventing, for any reason whatsoever.
Section 7.02 SATISFACTION OF MORTGAGES AND RELEASE OF HOME LOAN FILES.
Subject to the provisions of Sections 4.01 and 4.02, the Servicer shall
not grant a satisfaction or release of a Mortgage without having obtained
payment in full of the indebtedness secured by the Mortgage or otherwise
prejudice any right the Noteholders or the Note Insurer may have under the
mortgage instruments. The Servicer shall maintain the fidelity bond and errors
and omissions insurance as provided for in Section 4.03 insuring the Servicer
against any loss it may sustain with respect to any Home Loan not satisfied in
accordance with the procedures set forth herein.
Upon the payment in full of any Home Loan, or the receipt by the Servicer
of a notification that payment in full will be escrowed in a manner customary
for such purposes, the Servicer will immediately notify the Custodian by an
Officers' Certificate (which certificate shall include a statement to the
effect that all amounts received or to be received in connection with such
payment which are required to be deposited in the Collection Account pursuant
to Section 5.01(b) have been or will be so deposited) of a Servicing Officer
and shall request delivery to it of the Indenture Trustee's Home Loan File.
Upon receipt of such certification and request and in accordance with Section
2.9 of the Indenture, the Custodian shall promptly release the related
Indenture Trustee's Home Loan File to the Servicer. Expenses incurred in
connection with any instrument of satisfaction or deed of reconveyance shall be
payable only from and to the extent of Servicing Compensation and shall not be
chargeable to the Collection Account or the Note Payment Account. Upon receipt
by the Custodian of the certification of a Servicing Officer with respect to
the release of the Indenture Trustee's Home Loan File for any Home Loan or any
documents included therein, the Custodian shall release to the Servicer such
Indenture Trustee's Home Loan File and shall deliver such instruments of
transfer presented to it by the Servicer as shall be necessary or appropriate
for the release of such Indenture Trustee's Home Loan File in accordance with
such certification of the
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Servicing Officer. The release to the Servicer of an Indenture Trustee's
Home Loan File pursuant to such certification shall not require or be subject
to the prior approval of the Indenture Trustee in the case of a release in
connection with the following: (1) the satisfaction or release of a Mortgage
upon the payment in full of the Home Loan or upon such Home Loan becoming a
Liquidated Home Loan; (2) a Home Loan in default for which the Servicer is or
will be pursuing foreclosure or another method of liquidation pursuant to
Section 4.02; or (3) the correction of documentation in the Indenture
Trustee's Home Loan File for errors and ambiguities, provided that such
corrections shall be performed and returned to the Custodian in a prompt
manner. In the case of a release of the related Indenture Trustee's Home
Loan File to the Servicer in connection with a substitution or repurchase of
any Home Loan pursuant to Section 3.05 or Substitution or release of a lien
of the Indenture pursuant to Section 2.9(c) of the Indenture or a release for
other servicing reasons, such release of the Indenture Trustee's Home Loan
File by the Custodian shall be subject to the prior approval of the Indenture
Trustee.
The Indenture Trustee shall execute and deliver to the Servicer any court
pleadings, requests for trustee's sale or other documents necessary to the
foreclosure or trustee's sale in respect of a Mortgaged Property or to any
legal action brought to obtain judgment against any Obligor on the Debt
Instrument or Mortgage or to obtain a deficiency judgment, or to enforce any
other remedies or rights provided by the Debt Instrument or Mortgage or
otherwise available at law or in equity. Together with such documents or
pleadings, the Servicer shall deliver to the Indenture Trustee a certificate of
a Servicing Officer requesting that such pleadings or documents be executed by
the Indenture Trustee and certifying as to the reason such documents or
pleadings are required and that the execution and delivery thereof by the
Indenture Trustee will not invalidate or otherwise affect the lien of the
Mortgage, except for the termination of such a lien upon completion of the
foreclosure or trustee's sale. The Indenture Trustee shall, upon receipt of a
written request from a Servicing Officer, execute any document provided to the
Indenture Trustee by the Servicer or take any other action requested in such
request that is, in the opinion of the Servicer as evidenced by such request,
required by any state or other jurisdiction to discharge the lien of a Mortgage
upon the satisfaction thereof and the Indenture Trustee will sign and post, but
will not guarantee receipt of, any such documents to the Servicer, or such
other party as the Servicer may direct, within five Business Days, or more
promptly if needed, of the Indenture Trustee's receipt of such certificate or
documents. Such certificate or documents shall establish to the Indenture
Trustee's satisfaction that the related Home Loan has been paid in full by or
on behalf of the Obligor and that such payment has been deposited in the
Collection Account.
Subject to any other applicable terms and conditions of this Agreement,
the Indenture Trustee and Servicer shall be entitled to approve an assignment
in lieu of satisfaction with respect to any Home Loan, provided the obligee
with respect to such Home Loan following such proposed assignment provides the
Indenture Trustee and Servicer with a "Certification for Assignment of Home
Loan" in form and substance satisfactory to the Indenture Trustee and Servicer,
providing the following: (i) that the Home Loan is secured by Mortgaged
Property located in a jurisdiction in which an assignment in lieu of
satisfaction is required to preserve lien priority, minimize or avoid mortgage
recording taxes or otherwise comply with or facilitate a refinancing under the
laws of such jurisdiction; (ii) that the substance of the assignment is, and is
intended to be, a refinancing of such
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Home Loan and that the form of the transaction is solely to comply with or
facilitate the transaction under such local laws; (iii) that the Home Loan
following the proposed assignment will have a rate of interest at not more
than 0.25 percent below or above the rate of interest on such Home Loan prior
to such proposed assignment; and (iv) that such assignment is at the request
of the related Obligor. Upon approval of an assignment in lieu of
satisfaction with respect to any Home Loan, the Servicer shall receive cash
in an amount equal to the unpaid principal balance of and accrued interest on
such Home Loan and the Servicer shall treat such amount as a Principal
Prepayment with respect to such Home Loan for all purposes hereof.
Section 7.03 SERVICING COMPENSATION.
As compensation for its services hereunder, the Servicer shall be entitled
to receive from the Collection Account, the Servicing Fee, out of which the
Servicer shall pay (i) any servicing fees owed or payable to any Subservicer
and any custodial fees owed or payable to the Custodian and (ii) on each
Payment Date, the Indenture Trustee Fee to the Indenture Trustee. Additional
servicing compensation in the form of assumption and other administrative fees,
amounts remitted pursuant to Section 7.01, prepayment penalties and late
payment charges shall be part of the Servicing Compensation payable to the
Servicer hereunder and shall be paid either by the Servicer retaining such
additional servicing compensation prior to deposit in the Collection Account
pursuant to Section 5.01(b)(1) or if deposited into the Collection Account as
part of the Servicing Compensation withdrawn from the Note Payment Account
pursuant to Section 8.2(c) of the Indenture.
The Servicer shall be required to pay all expenses incurred by it in
connection with its servicing activities hereunder and shall not be entitled to
reimbursement therefor except as specifically provided for herein. The
Servicer also agrees to pay (i) all reasonable costs and expenses incurred by
the Indenture Trustee or the Seller in investigating the Servicer's activities
hereunder when, in the reasonable opinion of the Indenture Trustee or the
Seller, such investigation is warranted on the basis of adverse information
about the Servicer obtained from a reasonably reliable source and (ii) all
reasonable costs and expenses incurred by any successor servicer or the
Indenture Trustee in replacing the Servicer in the event of a default by the
Servicer in the performance of its duties under the terms and conditions of
this Agreement.
The Seller shall pay the annual Rating Agency monitoring fees with respect
to the Notes; provided, that if the Seller fails to pay such fees and is no
longer financially capable of paying such fees, then the Servicer shall pay
such fees at its own expense.
Section 7.04 QUARTERLY STATEMENTS AS TO COMPLIANCE.
Not later than the last day of the second month following the end of each
quarter of the Servicer's Fiscal Year, beginning in August 1997, the Servicer
will deliver to the Indenture Trustee, the Issuer, the Note Insurer and to each
Noteholder, an Officer's Certificate stating that (i) the Servicer has fully
complied with the provisions of Articles V and VII, (ii) a review of the
activities of the Servicer during the preceding quarter and of performance
under this Agreement has been made under such officer's supervision, and (iii)
to the best of such officers' knowledge, based on such
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review, the Servicer has fulfilled all its obligations under this Agreement
throughout such quarter, or, if there has been a default in the fulfillment
of any such obligation, specifying each such default known to such officer
and the nature and status thereof and the action being taken by the Servicer
to cure such default.
Section 7.05 ANNUAL INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING REPORT.
On or before 120 days after the end of each of the Servicer's Fiscal Years
elapsing during the term of its appointment under this Agreement, beginning
with the first fiscal year ending after the Closing Date, the Servicer, at its
expense, shall furnish to the Issuer, the Indenture Trustee, the Noteholders,
the Note Insurer and each Rating Agency (i) an opinion by a firm of independent
certified public accountants on the financial position of the Servicer at the
end of the relevant fiscal year and the results of operations and changes in
financial position of the Servicer for such year then ended on the basis of an
examination conducted in accordance with generally accepted auditing standards,
and (ii) if the Servicer is then servicing any Home Loans, a statement from
such independent certified public accountants to the effect that based on an
examination of certain specified documents and records relating to the
servicing of the Servicer's loan portfolio conducted substantially in
compliance with the audit program for mortgages serviced for the United States
Department of Housing and Urban Development Mortgage Audit Standards, or the
Uniform Single Attestation Program for Mortgage Bankers (the "Applicable
Accounting Standards"), such firm is of the opinion that such servicing has
been conducted in compliance with the Applicable Accounting Standards except
for (a) such exceptions as such firm shall believe to be immaterial and
(b) such other exceptions as shall be set forth in such statement.
Section 7.06 RIGHT TO EXAMINE SERVICER RECORDS.
Each Noteholder, the Indenture Trustee, the Issuer, the Note Insurer and
each of their respective agents shall have the right upon reasonable prior
notice, during normal business hours and as often as reasonably required, to
examine, audit and copy, at the expense of the Person making such examination,
any and all of the books, records or other information of the Servicer
(including without limitation any Subservicer to the extent provided in the
related Subservicing Agreement) whether held by the Servicer or by another on
behalf of the Servicer, which may be relevant to the performance or observance
by the Servicer of the terms, covenants or conditions of this Agreement. Each
Noteholder, the Indenture Trustee, the Issuer and the Note Insurer agree that
any information obtained pursuant to the terms of this Agreement shall be held
confidential.
Section 7.07 REPORTS TO THE INDENTURE TRUSTEE; COLLECTION ACCOUNT
STATEMENTS.
If the Collection Account is not maintained with the Indenture Trustee,
then not later than 25 days after each Record Date, the Servicer shall forward
to the Indenture Trustee and the Note Insurer a statement, certified by a
Servicing Officer, setting forth the status of the Collection Account as of the
close of business on the preceding Record Date and showing, for the period
covered by such statement, the aggregate of deposits into the Collection
Account for each category of deposit specified in Section 5.01(b)(1), the
aggregate of withdrawals from the Collection Account for each
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category of withdrawal specified in Section 5.01(b)(2) and (d) and the
aggregate amount of permitted withdrawals not made in the related Due Period
in each case, for the related Due Period.
ARTICLE VIII
REPORTS TO BE PROVIDED BY SERVICER
Section 8.01 FINANCIAL STATEMENTS.
The Servicer understands that, in connection with the transfer of the
Notes, Noteholders may request that the Servicer make available to the
Noteholders and to prospective Noteholders, and the Note Insurer may request to
receive, annual audited financial statements of the Servicer for one or more of
the most recently completed five fiscal years for which such statements are
available, which requests shall not be unreasonably denied.
The Servicer also agrees to make available on a reasonable basis to the
Noteholders, any prospective Noteholder and the Note Insurer a knowledgeable
financial or accounting officer for the purpose of answering reasonable
questions respecting recent developments affecting the Servicer or the
financial statements of the Servicer and to permit the Noteholders, any
prospective Noteholder and the Note Insurer to inspect the Servicer's servicing
facilities during normal business hours for the purpose of satisfying the
Noteholders and such prospective Noteholder and the Note Insurer that the
Servicer has the ability to service the Home Loans in accordance with this
Agreement.
ARTICLE IX
CERTAIN MATTERS RELATING TO THE SERVICER AND THE SELLER
Section 9.01 INDEMNIFICATION; THIRD PARTY CLAIMS.
(a) The Servicer agrees to indemnify and hold the Indenture Trustee,
the Issuer, the Seller (if the Seller is not also acting as Servicer), the Note
Insurer, each Noteholder and the Arranger, together with their respective
directors, officers, employees and agents, harmless from and against any and
all claims, losses, penalties, fines, forfeitures, legal fees and related
costs, judgments, and any other costs, fees and expenses that the Indenture
Trustee, the Issuer, the Seller, the Note Insurer, any Noteholder or the
Arranger may sustain directly resulting from the negligence or willful
misconduct of the Servicer in the performance of its duties hereunder or in the
servicing of the Home Loans in compliance with the terms of this Agreement. IT
IS THE EXPRESS INTENTION OF THE PARTIES TO THIS AGREEMENT THAT THE
INDEMNIFICATION AND HOLD HARMLESS OBLIGATIONS OF THE SERVICER SET FORTH IN THE
PRECEDING SENTENCE SHALL APPLY FULLY TO CLAIMS, LOSSES, ETC. RESULTING FROM
ACTS OR OMISSIONS THAT MAY CONSTITUTE ORDINARY NEGLIGENCE ON THE PART OF THE
SERVICER. The Servicer shall not be liable or responsible for any of the
representations, covenants, warranties, responsibilities, duties or liabilities
of any prior Servicer. The Servicer shall immediately notify the Indenture
Trustee, the Issuer, the Seller (if the Seller is not also
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acting as Servicer), the Note Insurer, each Noteholder and the Arranger if a
claim is made by a third party with respect to this Agreement, and the
Servicer shall assume (with the consent of the Indenture Trustee and the
Issuer) the defense of any such claim and advance all expenses in connection
therewith, including reasonable counsel fees, and promptly advance funds to
pay, discharge and satisfy any judgment or decree which may be entered
against the Servicer (if the Seller is not also acting as Servicer), the
Indenture Trustee, the Issuer, the Seller, the Note Insurer, any Noteholder
and/or the Arranger in respect of such claim.
(b) The Seller agrees to indemnify and hold the Indenture Trustee,
the Issuer, the Servicer (if the Seller is not also acting as Servicer), the
Note Insurer, each Noteholder and the Arranger, together with their respective
directors, officers, employees and agents, harmless from and against any and
all claims, losses, penalties, fines, forfeitures, legal fees and related
costs, judgments, and any other costs, fees and expenses that the Indenture
Trustee, the Issuer, the Servicer, the Note Insurer, any Noteholder or the
Arranger may sustain directly resulting from the negligence or willful
misconduct of the Seller in the performance of its duties hereunder or in
compliance with the terms of this Agreement. IT IS THE EXPRESS INTENTION OF
THE PARTIES TO THIS AGREEMENT THAT THE INDEMNIFICATION AND HOLD HARMLESS
OBLIGATIONS OF THE SELLER SET FORTH IN THE PRECEDING SENTENCE SHALL APPLY FULLY
TO CLAIMS, LOSSES, ETC. RESULTING FROM ACTS OR OMISSIONS THAT MAY CONSTITUTE
ORDINARY NEGLIGENCE ON THE PART OF THE SELLER. The Seller shall immediately
notify the Indenture Trustee, the Issuer, the Servicer (if the Seller is not
also acting as Servicer), the Note Insurer, each Noteholder and the Arranger if
a claim is made by a third party with respect to this Agreement, and the Seller
shall assume (with the consent of the Indenture Trustee and the Issuer) the
defense of any such claim and advance all expenses in connection therewith,
including reasonable counsel fees, and promptly advance funds to pay, discharge
and satisfy any judgment or decree which may be entered against the Seller, the
Servicer (if the Seller is not also acting as Servicer), the Indenture Trustee,
the Issuer, the Note Insurer, any Noteholder and/or the Arranger in respect of
such claim.
(c) The obligations of the Servicer and the Seller under this
Section 9.01 shall survive the termination of this Agreement and the
resignation and removal of the Indenture Trustee.
Section 9.02 MERGER OR CONSOLIDATION OF THE SERVICER.
The Servicer shall keep in full effect its existence, rights and
franchises as a corporation, and will obtain and preserve its qualification to
do business as a foreign corporation and maintain such other licenses and
permits, in each jurisdiction necessary to protect the validity and
enforceability of this Agreement or any of the Home Loans and to perform its
duties under this Agreement.
Any Person into which the Servicer may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Servicer shall be a party, or any Person succeeding to the business of the
Servicer, shall be an Eligible Servicer and shall be the successor of the
Servicer, as applicable hereunder, without the execution or filing of any paper
or any further act on the part of any of the parties hereto, anything herein to
the contrary
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notwithstanding. The Servicer shall send notice of any such merger,
conversion, consolidation or succession to the Indenture Trustee, the Issuer
and the Note Insurer.
Section 9.03 LIMITATION ON LIABILITY OF THE SERVICER AND OTHERS.
The Servicer and any director, officer, employee or agent of the Servicer
may rely on any document of any kind which it in good faith reasonably believes
to be genuine and to have been adopted or signed by the proper authorities
respecting any matters arising hereunder. Subject to the terms of Section 9.01
herein, the Servicer shall have no obligation to appear with respect to,
prosecute or defend any legal action which is not incidental to the Servicer's
duty to service the Home Loans in accordance with this Agreement or its other
duties hereunder.
Section 9.04 SERVICER NOT TO RESIGN; ASSIGNMENT.
(a) The Servicer shall not resign from the obligations and duties
hereby imposed on it except by mutual consent of the Servicer, the Seller (if
the Seller is not also acting as Servicer), the Indenture Trustee, the Issuer,
the Note Insurer and the Majority Noteholders, or upon the determination that
the Servicer's duties hereunder are no longer permissible under applicable law
and such incapacity cannot be cured by the Servicer. Any such determination
permitting the resignation of the Servicer shall be evidenced by a written
opinion of counsel (who may be an employee of the Servicer) to such effect
delivered to the Indenture Trustee, the Issuer, the Note Insurer and the Seller
(if the Seller is not also acting as Servicer), which opinion of counsel shall
be in form and substance acceptable to the Indenture Trustee, the Issuer and
the Note Insurer. No such resignation shall become effective until a successor
Servicer has assumed the Servicer's responsibilities and obligations hereunder
in accordance with Section 10.02.
(b) The Servicer shall not assign this Agreement or any of its
obligations, rights and duties hereunder without the prior written consent of
the Seller (if the Seller is not also acting as Servicer), the Indenture
Trustee, the Issuer, the Note Insurer and the Majority Noteholders; provided,
however, the Servicer may assign this Agreement without the prior written
consent of the Seller, the Indenture Trustee and the Issuer, but with the prior
written consent of the Note Insurer and the Majority Noteholders to (i) the
Indenture Trustee or (ii) any Person (A) to whom such assignment is consented
to in writing by the Indenture Trustee, the Issuer, the Seller and the Note
Insurer, (B) that services not less than $25,000,000 in aggregate outstanding
principal amount of loans similar in type to the Home Loans, (C) that has a net
worth of not less than $2,500,000, (D) that has a blanket fidelity bond and
errors and omissions insurance coverage satisfying the requirements set forth
in Section 4.03 and (E) that will not cause any rating of the Notes in effect
immediately prior to such assignment to be qualified, downgraded or withdrawn,
as evidenced by a letter from each Rating Agency to such effect. Any such
assignment to a successor Servicer (other than the Indenture Trustee) shall be
effective only upon delivery to the Indenture Trustee, the Issuer, the Seller
and the Note Insurer of an agreement, duly executed by the Servicer and such
successor servicer in a form reasonably satisfactory to the Indenture Trustee
and the Issuer, in which such successor servicer shall assume the due and
punctual performance of each covenant and condition to be performed or observed
by the Servicer hereunder.
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Section 9.05 RELATIONSHIP OF SERVICER TO ISSUER AND THE SELLER.
The relationship of the Servicer (and of any successor to the Servicer as
servicer under this Agreement) to the Issuer and the Seller under this
Agreement is intended by the parties hereto to be that of an independent
contractor and not of a joint venturer, agent or partner of the Issuer or the
Seller.
ARTICLE X
DEFAULT
Section 10.01 EVENTS OF DEFAULT.
In case one or more of the following Events of Default by the Servicer
shall occur and be continuing, that is to say:
(i) any failure by the Servicer to deposit in the Collection
Account in accordance with Section 5.01(b) any payments in respect of
the Home Loans received by the Servicer no later than the second
Business Day following the day on which such payments were received; or
(ii) any failure by the Servicer duly to observe or perform, in
any material respect, any other covenants, obligations or agreements of
the Servicer as set forth in this Agreement (other than a covenant,
obligation or agreement, a default in the observance of which is
elsewhere in this Section specifically dealt with), which failure
continues unremedied for a period of 60 days after the earlier to occur
of (x) any Responsible Officer of the Servicer first acquiring actual
knowledge thereof and (y) the date on which written notice of such
failure, requiring the same to be remedied and stating that such notice
is a "Notice of Default" hereunder, shall have been given (a) to the
Servicer by the Indenture Trustee or the Issuer, or (b) to the Servicer,
the Indenture Trustee or the Issuer by any Noteholder or the Note
Insurer; or
(iii) the entry by a court or supervisory authority having
jurisdiction of (A) a decree or order for relief in respect of the
Servicer in an involuntary case or proceeding under any applicable
federal or state bankruptcy, insolvency, reorganization, or other
similar law or (B) appointing a custodian, receiver, liquidator,
assignee, trustee, sequestrator, or other similar official of such
member or of any substantial part of its property, or ordering the
winding up or liquidation of the Servicer's affairs, and the continuance
of any such decree or order for relief or any such other decree or order
unstayed and in effect for a period of 60 consecutive days; or
(iv) the commencement by the Servicer of a voluntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization, or other similar law or of any other case or proceeding
to be adjudicated bankrupt or insolvent or the consent by
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the Servicer to the entry of a decree or order for relief in respect of
itself in an involuntary case or proceeding under any applicable federal
or state bankruptcy, insolvency, reorganization, or other similar law or
to the commencement of any bankruptcy or insolvency case or proceeding
against the Servicer, or the filing by the Servicer of a petition or
answer or consent seeking reorganization or relief under any applicable
federal or state law, or the consent by the Servicer to the filing of
such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator, or
similar official of the Servicer or of any substantial part of its
property, or the making by the Servicer of an assignment for the benefit
of creditors, or the Servicer's failure to pay its debts generally as
they become due, or the taking of corporate action by the Servicer in
furtherance of any such action; or
(v) the Servicer shall admit in writing its inability to pay its
debts as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for
the benefit of its creditors, or voluntarily suspend payment of its
obligations; or
(vi) the Majority Noteholders or the Note Insurer (A) shall
receive notice from the Servicer that the Servicer is no longer able to
discharge its duties under this Agreement or (B) shall determine, in
their reasonable judgment and based upon published reports (including
wire services) or such other information which either the Majority
Noteholders or the Note Insurer may, in good faith, deem reliable, that
the Servicer
a) has experienced a material adverse change in its business,
assets, liabilities, operations, condition (financial or
otherwise) or prospects,
b) has defaulted on any of its material obligations, or
c) has ceased to conduct its business in the ordinary course; or
(vii) following a Conversion Date, as of any Determination Date,
the total Expected Loan Losses (as defined below) exceed (1) commencing
on the Conversion Date up to the fifth (5th) anniversary of the
Conversion Date with respect to the Home Loans in the Home Loan Pool as
of the Conversion Date, 12% of the Pool Principal Balance as of the
Conversion Date, or (2) thereafter up to the tenth (10th) anniversary of
the Conversion Date with respect to the Home Loans in the Home Loan Pool
as of the Conversion Date, 18% of the Pool Principal Balance as of such
Conversion Date (where the "Expected Loan Losses" as of any
Determination Date shall be the sum of (A) the cumulative Net Loan
Losses as of such Determination Date, plus (B) the cumulative accrued
and uncollected interest on the Liquidated Home Loans as of such
Determination Date, plus (C) 25% of the aggregate Principal Balance as
of such Determination Date of the Home Loans which are then more than 30
but less than 60 days delinquent, plus (D) 50% of the aggregate
Principal Balance as of such Determination Date of the Home Loans which
are then more than 60 but less than
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90 days delinquent, plus (E) 100% of the aggregate Principal Balance as of
such Determination Date of the Home Loans which are then more than 90 days
delinquent).
then, and in each and every such case, so long as an Event of Default shall not
have been remedied, the Majority Noteholders, the Indenture Trustee or the
Issuer by notice in writing to the Servicer may, in addition to whatever rights
such Person may have at law or equity to damages, including injunctive relief
and specific performance, and with the consent of the Note Insurer (which
consent shall not be unreasonably withheld), terminate all the rights and
obligations of the Servicer under this Agreement and in and to the Home Loans
and the proceeds thereof, as servicer under this Agreement. Upon receipt by
the Servicer of such written notice, all authority and power of the Servicer
under this Agreement, whether with respect to the Home Loans or otherwise,
shall, subject to Section 10.02, pass to and be vested in a successor servicer
acceptable to the Note Insurer, or the Indenture Trustee if a successor
servicer cannot be retained in a timely manner, and the successor servicer, or
Indenture Trustee, as applicable, is hereby authorized and empowered to execute
and deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, any
and all documents and other instruments and do or cause to be done all other
acts or things necessary or appropriate to effect the purposes of such notice
of termination, including, but not limited to, the transfer and endorsement or
assignment of the Home Loans and related documents. The Servicer agrees to
cooperate with the successor servicer in effecting the termination of the
Servicer's responsibilities and rights hereunder, including, without
limitation, the transfer to the successor servicer for administration by it of
all amounts which shall at the time be credited by the Servicer to each
Collection Account or thereafter received with respect to the Home Loans.
Section 10.02 INDENTURE TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR.
On and after the date the Servicer receives a notice of termination
pursuant to Section 10.01, or the Indenture Trustee receives the resignation of
the Servicer evidenced by an opinion of counsel or accompanied by the consents
required by Section 9.04 then, subject to Section 4.08, the Indenture Trustee,
with the consent of the Majority Noteholders, shall appoint a successor
Servicer to be the successor in all respects to the Servicer in its capacity as
servicer under this Agreement and the transactions set forth or provided for
herein and shall be subject to all the responsibilities, duties and liabilities
relating thereto placed on the Servicer by the terms and provisions hereof;
provided, however, that the successor Servicer shall not be liable for any
actions of any Servicer prior to it; provided further, however, that if a
successor Servicer cannot be retained in a timely manner, the Indenture Trustee
shall act as successor Servicer and shall assume the responsibilities of the
Servicer hereunder. In the event the Indenture Trustee assumes the
responsibilities of the Servicer pursuant to this Section 10.02 (a) it shall do
so in its individual capacity and not as Indenture Trustee and (b) the
Indenture Trustee will become licensed, qualified and in good standing in each
Mortgaged Property state the laws of which require licensing or qualification,
in order for the Indenture Trustee to perform its obligations as Servicer
hereunder or, alternatively, shall retain an agent who is so licensed,
qualified and in good standing in any such Mortgaged Property state. The
successor Servicer shall be obligated to make Servicing Advances hereunder. As
compensation therefor, the successor Servicer appointed pursuant to this
Section 10.02, shall be entitled to all Servicing Compensation as provided in
this Agreement. The Servicer shall not be entitled to any termination
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fee if it is terminated pursuant to Section 10.01, but shall be entitled to
any accrued and unpaid Servicing Fee to the date of termination. Any
collections received by the prior Servicer after its removal or resignation
shall be endorsed by it to the Indenture Trustee and remitted directly to the
Indenture Trustee or, at the direction of the Indenture Trustee, to the
successor Servicer.
The compensation of any successor Servicer (including, without limitation,
the Indenture Trustee) so appointed shall be the Servicing Fee, together with
other Servicing Compensation provided for herein. In the event the Indenture
Trustee is required to solicit bids to appoint a successor Servicer, the
Indenture Trustee shall solicit, by public announcement, bids from housing and
home finance institutions, banks and mortgage servicing institutions meeting
the qualifications set forth in Section 9.04(b)(ii) above. Such public
announcement shall specify that the successor servicer shall be entitled to the
full amount of the Servicing Fee and Servicing Compensation provided for
herein. Within thirty days after any such public announcement, the Indenture
Trustee shall negotiate and effect the sale, transfer and assignment of the
servicing rights and responsibilities hereunder to the qualified party
submitting the highest qualifying bid. The Indenture Trustee shall deduct from
any sum received by the Indenture Trustee from the successor Servicer in
respect of such sale, transfer and assignment all costs and expenses of any
public announcement and of any sale, transfer and assignment of the servicing
rights and responsibilities hereunder and the amount of any unreimbursed
Servicing Advances made by the Indenture Trustee. After such deductions, the
remainder of such sum shall be paid by the Indenture Trustee to the Servicer at
the time of such sale, transfer and assignment to the successor Servicer.
The Indenture Trustee, the Issuer, any Custodian, the Servicer and any
such successor Servicer shall take such action, consistent with this Agreement,
as shall be necessary to effectuate any such succession of a successor
Servicer. The Servicer agrees to cooperate with the Indenture Trustee and any
successor Servicer in effecting the termination of the Servicer's servicing
responsibilities and rights hereunder and the succession of a successor
Servicer and shall promptly provide the Indenture Trustee or such successor
Servicer, as applicable, all documents and records reasonably requested by the
applicable party to enable it to assume the Servicer's functions hereunder and
shall promptly also transfer to the Indenture Trustee or such successor
Servicer, as applicable, all amounts which then have been or should have been
deposited in the Collection Account by the Servicer or which are thereafter
received by it with respect to the Home Loans. Neither the Indenture Trustee
nor any other successor Servicer shall be held liable by reason of any failure
to make, or any delay in making, any payment hereunder or any portion thereof
caused by (i) the failure of the prior Servicer to deliver, or any delay in
delivering, cash, documents or records to it, or (ii) restrictions relating to
the prior Servicer imposed by any regulatory authority having jurisdiction over
the prior Servicer hereunder. No appointment of a successor Servicer hereunder
shall be effective until written notice of such proposed appointment shall have
been provided by the Indenture Trustee to each Noteholder, the Issuer, the
Seller and the Note Insurer and, except in the case of the appointment of the
Indenture Trustee as successor Servicer (when no consent shall be required),
the Seller, the Majority Noteholders and the Issuer shall have consented
thereto.
Pending appointment of a successor Servicer hereunder, the Indenture
Trustee shall act as Servicer hereunder as hereinabove provided. In connection
with such appointment the Indenture
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Trustee may make such arrangements for the compensation of such successor
Servicer as it and such successor Servicer shall agree; provided, however,
that no such compensation shall be in excess of the Servicing Compensation as
provided in this Agreement.
Section 10.03 WAIVER OF DEFAULTS.
The Majority Noteholders may with the prior consent of the Note Insurer,
on behalf of all Noteholders, waive any events permitting removal of the
Servicer as servicer pursuant to this Article X, provided, however, that the
Majority Noteholders may not waive a default in making a required payment on a
Note without the consent of the related Noteholder. Upon any waiver of a past
default, such default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been remedied for every purpose of this
Agreement. No such waiver shall extend to any subsequent or other default or
impair any right consequent thereto except to the extent expressly so waived.
Section 10.04 ACCOUNTING UPON TERMINATION OF SERVICER.
Upon termination of the Servicer under this Article X, the Servicer shall,
at its own expense:
(a) deliver to its successor or, if none shall yet have been appointed,
to the Indenture Trustee, the funds in any Collection Account;
(b) deliver to its successor or, if none shall yet have been appointed,
to the Indenture Trustee, all of the Servicer's files, documents and
statements relating to the Home Loans held by it hereunder, and a Home Loan
portfolio computer tape as of the most recent Due Period;
(c) deliver to its successor or, if none shall yet have been appointed,
to the Indenture Trustee, the Issuer, the Note Insurer and the Noteholders a
full accounting of all funds, including a statement showing the Monthly
Payments collected by it and a statement of monies held in trust by it for
payments or charges with respect to the Home Loans; and
(d) execute and deliver such instruments and perform all acts reasonably
requested in order to effect the orderly and efficient transfer of servicing of
the Home Loans to its successor and to more fully and definitively vest in such
successor all rights, powers, duties, responsibilities, obligations and
liabilities of the Servicer under this Agreement.
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ARTICLE XI
TERMINATION AND PREPAYMENT
Section 11.01 TERMINATION.
(a) This Agreement shall terminate upon any of the following events:
(i) the satisfaction and discharge of the Indenture pursuant to
clause (II) of Section 4.1 of the Indenture and notice to the Indenture
Trustee of such satisfaction and discharge;
(ii) payment of all amounts due and payable to the Noteholders, the
Servicer, the Indenture Trustee, the Issuer, the Custodian, and the Note
Insurer pursuant to this Agreement, the Indenture, and the Insurance
Agreement and written notice to the Indenture Trustee from the Issuer of
the Issuer's intent to terminate this Agreement; or
(iii) the mutual written consent of the Servicer, the Seller, the Note
Insurer, the Indenture Trustee and all Noteholders.
(b) Notice of termination of this Agreement pursuant to Section
11.01(a)(i) shall be sent by the Indenture Trustee to the Noteholders and the
Note Insurer in accordance with Section 2.6(b) of the Indenture. Notice of
termination of this Agreement pursuant to Section 11.01(a)(ii) or (iii) shall
be mailed or transmitted by facsimile by the Indenture Trustee to the
Noteholders and the Note Insurer on the Business Day immediately following
the day on which the Indenture Trustee receives notice of such termination,
and such notice to the Noteholders shall state that the Noteholders are to
surrender their respective Notes for cancellation and shall specify the place
where such Notes are to be surrendered. A copy of such form of notice shall
be sent to the Note Insurer by the Indenture Trustee in connection with any
prepayment in full of the Notes pursuant to Section 11.02 on or after the
Scheduled Advance Termination Date and on or before the first Payment Date
following the Scheduled Advance Termination Date, the Issuer shall, upon such
prepayment, deliver to the Trustee the notice referred to in Section
11.01(a)(ii).
Section 11.02 OPTIONAL PREPAYMENT.
(a) Prior to the occurrence of a Conversion Event, the Issuer may, at
its option, effect a Note Principal Prepayment on any Note Principal
Prepayment Date, in amounts not less than $1,000,000 with respect to any such
Note Principal Prepayment, by (i) delivering a Note Principal Prepayment
Notice with respect to such Note Principal Prepayment to the Indenture
Trustee, the Note Insurer, the Noteholders and the Arranger at least three
days prior to the Note Principal Prepayment Date and (ii) depositing into the
Note Principal Prepayment Account, on or before the applicable Note Principal
Prepayment Date, an amount equal to the greater of (A) the sum of the
Purchase Price of each Home Loan to be released on the Note Principal
Prepayment Date pursuant to Section 11.02(b) and (B) the sum of (1) the
amount of the applicable Note Principal Prepayment,
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(2) accrued and unpaid interest with respect to such Note Principal
Prepayment to but not including the applicable Note Principal Prepayment
Date, computed in accordance with the following sentence, (3) any amounts
then owing to the Note Insurer under the Insurance Agreement and (4) the
Breakage Payment, if any, with respect to such Note Principal Prepayment. If
on a Note Principal Prepayment Date interest is accruing on any Additional
Note Principal Balance as provided in the definition of "Monthly Interest
Payment Amount," the Issuer shall specify, in the related Note Principal
Prepayment Notice, the application of the applicable Note Principal
Prepayment Amount as between such Additional Note Principal Balance and the
then-applicable Prior Payment Date Note Principal Balance, and the
calculation of accrued and unpaid interest to be paid by the Issuer with
respect to such Note Principal Prepayment Amount shall be made accordingly.
The Issuer may not make any Note Principal Prepayment pursuant to this
Section 11.02 unless (i) such prepayment will not cause the occurrence of a
Conversion Event or Credit Support Funding Event, (ii) after giving effect to
such Note Principal Prepayment and the related release of the lien of the
Indenture pursuant to Section 11.02(b), the Home Loan Pool will continue to
satisfy the underwriting criteria set forth in Section 3.03(ii), and (iii) on
or before the applicable Note Principal Prepayment Date, the Issuer shall
have delivered to the Indenture Trustee an Officer's Certificate to the
effect that the Issuer has complied with all of its obligations in connection
with such Note Principal Prepayment and satisfied all criteria as provided in
this Section 11.02(a). In connection with any Note Principal Prepayment, on
the applicable Note Principal Prepayment Date, if the Issuer has satisfied
its obligations with respect to such Note Principal Prepayment as set forth
in the preceding sentence and the second preceding sentence, the Indenture
Trustee shall, prior to 12:00 noon New York time on the related Note
Principal Prepayment Date, apply the amount deposited in the Note Principal
Prepayment Account in the following order of priority: (1) first, to the
Noteholders entitled thereto in payment of the principal amount being so
repaid together with accrued interest thereon and Breakage Payments, (2)
then, to the Note Insurer in respect of any amounts owing to it under the
Insurance Agreement, and (3) then, to the Issuer Special Purpose Account.
Any Note Principal Prepayment to be made on a date other than a Payment
Date shall be in an amount not less than $10,000,000.
(b) At least three Business Days prior to a Note Principal Prepayment
to be made in accordance with Section 11.02(a), the Issuer may deliver to the
Indenture Trustee with a copy to the Note Insurer an Issuer Request in the
form of EXHIBIT E hereto requesting, in connection with such Note Principal
Prepayment, that the Indenture Trustee release the lien of the Indenture with
respect to the Home Loans specified in Schedule I to such Issuer Request;
provided, however, that the Issuer may not obtain such release with respect
to any Home Loan if such release, giving effect to the related Note Principal
Prepayment, would cause the occurrence of a Conversion Event or a Credit
Support Funding Event. The Home Loans identified on such Schedule I shall be
selected by the Issuer using a selection process which shall not be
materially adverse to the interests of the Noteholders or the Note Insurer.
As of the date the Issuer so requests in such Issuer Request, if the Issuer
has complied with its obligations set forth in Section 11.02(a) with respect
to the applicable Note Principal Prepayment (it being understood that the
Issuer may obtain such release prior to the related Note Principal Prepayment
Date), the Indenture Trustee shall (i) release the applicable Home Loans from
the lien of the Indenture, (ii) release (or cause the Custodian to release)
to or as directed
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by the Issuer the related Indenture Trustee's Home Loan Files and (iii)
execute, without recourse, representation or warranty, and deliver such
instruments of transfer presented to it by the Issuer as shall be necessary
to transfer such Home Loans to or as directed by the Issuer and to evidence
such release. All payments received on the released Home Loans on or before
the Accounting Dates applicable to the calculation, as of the applicable Note
Principal Prepayment Date, of the Principal Balances of such released Home
Loans shall remain subject to the lien of the Indenture, and the Issuer or
its designee shall be entitled to receive all Post-Release Collections with
respect to such released Home Loans, free of the lien of the Indenture. The
Seller shall amend the Home Loan Schedule to reflect the removal of the
applicable Home Loans from the terms of this Agreement and the lien of the
Indenture, and the Seller shall promptly deliver to the Issuer, the Servicer
(if the Seller is not then acting as Servicer), the Indenture Trustee and the
Note Insurer a copy of the Home Loan Schedule as so amended.
(c) If the Issuer delivers a Note Principal Prepayment Notice pursuant
to Section 11.02(a) and the full amount of the Note Principal Prepayment
specified therein is not made on the Note Principal Prepayment Date specified
therein the Issuer shall deposit in the Note Principal Prepayment Account, no
later than the second Business Day following such Note Principal Prepayment
Date, an amount equal to the product of (i) the percentage amount, if any, by
which (x) LIBOR as of such Note Principal Prepayment Date exceeds (y) LIBOR
with respect to the Regular Interest Accrual Period in which such Note
Principal Prepayment Date occurs, (ii) the number of days from the Note
Principal Prepayment Date specified in the applicable Note Principal
Prepayment Notice to the day immediately preceding the following Payment Date
divided by 360, and (iii) the amount of such Note Principal Prepayment so not
made.
(d) During the ten Business Days immediately following a Conversion
Event, the Issuer may, at its option, effect a Note Principal Prepayment in
an amount equal to the aggregate Note Principal Balance as of such date, by
(i) delivering a Note Principal Prepayment Notice with respect to such Note
Principal Prepayment to the Indenture Trustee, the Note Insurer, the
Noteholders and the Arranger on or before the day of such Note Principal
Prepayment and (ii) depositing into the Note Principal Prepayment Account, on
or before the applicable Note Principal Prepayment Date, an amount equal to
the greater of (A) the sum or the Purchase Price of each Home Loan and (B)
the sum of (1) the amount of the Aggregate Note Principal Balance, (2)
accrued and unpaid interest on the Aggregate Note Principal Balance to but
not including the applicable Note Principal Prepayment Date, (3) any amounts
then owing to the Note Insurer under the Insurance Agreement, and (4) the
Breakage Payment, if any, with respect to such Note Principal Prepayment. In
connection with any Note Principal Prepayment, on the applicable Note
Principal Prepayment Date, if the Issuer has deposited the required funds
into the Note Principal Prepayment Account, the Indenture Trustee shall, on
the related Note Principal Prepayment Date, apply the amount deposited in the
Note Principal Prepayment Account in the following order of priority: (1)
first, to the Noteholders entitled thereto in payment of the principal amount
being so repaid together with accrued interest thereon and Breakage Payments,
(2) then, to the Note Insurer in respect of any amounts owing to it under the
Insurance Agreement, and (3) then, to the Issuer Special Purpose Account.
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ARTICLE XII
CONVERSION EVENT
Section 12.01 CONVERSION EVENT.
(a) Upon the occurrence of a Conversion Event, the Majority Noteholders
may deliver a Conversion Notice to the Issuer, the Servicer, the Arranger,
the Indenture Trustee and the Note Insurer, which delivery of the Conversion
Notice will cause a Conversion Date to occur in accordance with the
definition of Conversion Date.
(b) During the period commencing on the sixth Business Day after the
occurrence of a Conversion Event and ending on the tenth Business Day
following such Conversion Event, pursuant to the Note Purchase Agreement, and
provided an Undeclared Event of Default has not occurred, the Noteholders
shall sell their Notes to the Issuer or any assignee of the Issuer upon
payment to such Noteholders of an amount not less than the outstanding
balance of their Notes together with all accrued and unpaid interest thereon
through the day prior to the date of such sale, any Breakage Payments and any
reasonable expenses incurred by such Noteholders in connection with such
sale; PROVIDED, however, the Noteholders are only obligated to sell their
Notes to the Issuer or an assignee of the Issuer if the Issuer or its
assignee either purchases the Notes within such five Business Day period or
provides the Noteholders with a binding commitment to purchase the Notes
within such five Business Day period from (i) a party with a long-term debt
rating of at least "BBB" by Standard & Poor's and "Baa2" by Moody's or a
short-term debt rating of at least "A-2" by Standard & Poor's and "P-2" by
Moody's or (ii) any party acceptable to 100% of the Noteholders, and such
binding commitment specifies that such party will purchase the Notes within
30 days of the issuance of such commitment. If the Issuer exercises the
option to purchase the Notes or assigns such option to an Affiliate of the
Issuer and such Affiliate exercises the option pursuant to this Section
12.01(b), the Notes shall be considered paid in full and shall be cancelled
pursuant to Section 2.7(b) of the Indenture.
(c) Upon the expiration of the five Business Day period referenced in
Section 12.01(b), the Noteholders shall sell their Notes to WCMC or any
assignee of WCMC upon payment to such Noteholders of an amount not less than
the outstanding balance of their Notes together with all accrued and unpaid
interest thereon through the day prior to the date of such sale, any Breakage
Payments and any reasonable expenses incurred by such Noteholders in
connection with such sale; PROVIDED, however, the Noteholders are only
obligated to sell their Notes to WCMC or an assignee of WCMC if (1) WCMC or
its assignee either purchases the Notes within five Business Days of the
expiration of the five Business Day period referenced in Section 12.01(b) or
provides the Noteholders with a binding commitment to purchase the Notes
within five Business Days of the expiration of the five Business Day period
referenced in Section 12.01(b) from (i) a party with a long-term debt rating
of at least "BBB" by Standard & Poor's and "Baa 2" by Moody's or a short-term
debt rating of at least "A-2" by Standard & Poor's and "P-2" by Moody's or
(ii) any party acceptable to 100% of the Noteholders, and such binding
commitment specifies that such party will
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purchase the Notes within 30 days of the issuance of such commitment and (2)
the Issuer or its assignee shall not have exercised the rights to purchase
the Notes pursuant to Section 12.01(b).
Section 12.02 RIGHTS OF MAJORITY NOTEHOLDERS.
In the event that the Notes are not sold pursuant to Section 12.01(b),
on any date more than fifteen Business Days subsequent to the occurrence of a
Conversion Event, notwithstanding anything herein to the contrary, the
Majority Noteholders may instruct the Indenture Trustee prior to the
Conversion Date to do one or more of the following:
(i) sell the Trust Estate or any portion thereof or rights or
interest therein, at one or more public or private sales called and
conducted in any manner permitted by law and in accordance with the
instructions of the Majority Noteholders; provided, however, any
direction to the Indenture Trustee to sell any portion or all of the
Trust Estate shall be by 100% of the Noteholders if the proceeds of
such sale would be less than the sum of all amounts due the Indenture
Trustee under the Indenture and the Aggregate Note Principal Balance
and interest due or to become due thereon on the Payment Date next
succeeding such sale; and provided further, however, if any portion
or all of the Trust Estate is sold pursuant to this Section 12.02,
the Note Insurer will not insure any shortfall in the payment of
principal of or interest on the Notes, as set forth in the Guaranty
Policy;
(ii) file or record all Assignments of Mortgage that have not
previously been recorded;
(iii) pay all amounts on deposit in the Collection Account, the
Note Payment Account or the Reserve Fund as described in Section
12.03(a) below; and
(iv) exercise any remedies of a secured party under the UCC and
take any other appropriate action to protect and enforce the rights
and remedies of the Indenture Trustee as the agent of the Noteholders
hereunder, including, without limitation, any remedies specified under
Article V of the Indenture.
Section 12.03 PAYMENTS UPON SALE OF TRUST ESTATE FOLLOWING CONVERSION
EVENT.
(a) In connection with a sale of all or any portion of the Trust
Estate, the Indenture Trustee shall execute and deliver an appropriate
instrument of conveyance transferring its interest in any portion of the
Trust Estate in connection with a sale thereof. The proceeds of any sale of
the Trust Estate plus any amounts on deposit in the Trust Accounts shall be
applied in the following priority:
FIRST: to the Note Insurer for any amounts then due and payable
under the Insurance Agreement;
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SECOND: to the Note Insurer for the Guaranty Insurance Premium then
due and unpaid;
THIRD: to the Servicer for the Servicing Fee then due and unpaid;
FOURTH: to the Indenture Trustee for any amounts payable to the
Indenture Trustee under Section 6.7 of the Indenture and any costs or
expenses, including attorneys' fees and any expenses of any agent of the
Indenture Trustee, incurred by the Indenture Trustee in connection with
acting as provided above or as otherwise provided in the Indenture with
respect to Indenture Events of Default;
FIFTH: to Noteholders for amounts due and unpaid on the Notes for
interest, PRO RATA, according to the amounts due and payable on the Notes
for interest;
SIXTH: to Holders of the Notes for amounts due and unpaid on the
Notes for principal, PRO RATA, according to the amounts due and payable on
the Notes for principal, until the Outstanding Amount of the Notes is
reduced to zero;
SEVENTH: to the Noteholders, any unpaid Breakage Payments;
EIGHTH: to the Noteholders, any expenses incurred by the Noteholders
as a result of the Conversion Event;
NINTH: to the Servicer for previously unreimbursed Servicing Advance
Reimbursement Amounts; and
TENTH: to the Issuer Special Purpose Account, the balance, if any.
(b) Notwithstanding anything to the contrary in this Article XII, the
Majority Noteholders may not direct the Indenture Trustee to take any of the
actions referred to in Section 12.02, without the consent of the Note
Insurer, if at the time of such action any Note Insurer Reimbursement Amount
or any other amount is due and owing to the Note Insurer pursuant to the
Guaranty Policy.
(c) Following a sale of the entire Trust Estate pursuant to Section
12.02 and application of the proceeds therefrom plus any amounts on deposit
in the Collection Account, the Note Payment Account, the Note Principal
Prepayment Account, the Capitalized Interest Account and the Reserve Fund, in
accordance with Section 12.03(a), the Notes shall be considered paid in full
and shall be cancelled pursuant to Section 2.7(b) of the Indenture.
Section 12.04 DURATION OF ARTICLE XII.
Following a Conversion Date, this Article XII shall be of no further
force or effect on the parties hereto, except with respect to the Noteholders'
obligation sell the Notes based on a binding
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commitment for a period of 30 days after the issuance of such a commitment,
in accordance with Section 12.01(b) and (c).
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.01 ACTS OF NOTEHOLDERS.
Except as otherwise specifically provided herein, whenever Noteholder
action, consent or approval is required under this Agreement, such action,
consent or approval shall be deemed to have been taken or given on behalf of,
and shall be binding upon, all Noteholders if the Majority Noteholders agree
to take such action or give such consent or approval.
Section 13.02 AMENDMENT.
(a) This Agreement may be amended from time to time by the Issuer, the
Seller, the Servicer and the Indenture Trustee by written agreement with
notice thereof to the Noteholders, without the consent of any of the
Noteholders, but with the consent of the Note Insurer, to cure any error or
ambiguity, to correct or supplement any provisions hereof which may be
defective or inconsistent with any other provisions hereof, to add any other
provisions with respect to matters or questions arising under this Agreement;
provided, however, that such action will not adversely affect in any material
respect the interests of the Noteholders. An amendment described above shall
be deemed not to adversely affect in any material respect the interests of
the Noteholders if either (i) an opinion of counsel is obtained to such
effect, or (ii) the party requesting the amendment obtains a letter from each
Rating Agency confirming that the amendment, if made, would not result in the
downgrading or withdrawal of the rating then assigned by such Rating Agency
to the Notes.
(b) This Agreement may also be amended from time to time by the Issuer,
the Seller, the Servicer, and the Indenture Trustee by written agreement,
with the prior written consent of the Majority Noteholders, for the purpose
of adding any provisions to or changing in any manner or eliminating any of
the provisions of this Agreement, or of modifying in any manner the rights of
the Noteholders; provided, however, that no such amendment shall (i) reduce
in any manner the amount of, or delay the timing of, collections of payments
on Home Loans or payments which are required to be made on any Note, without
the consent of the holders of 100% of the Notes affected thereby and the Note
Insurer, (ii) adversely affect in any material respect the interests of any
Noteholder or the Note Insurer in any manner other than as described in (i),
without the consent of the holders of 100% of the Notes or the Note Insurer,
respectively, or (iii) reduce the percentage of Notes, the holders of which
are required to consent to any such amendment, without the consent of the
holders of 100% of the Notes and the Note Insurer. Notwithstanding the
preceding, the Note Insurer, in its sole discretion and without the
requirement of an amendment to this Agreement or the consent of any party
hereto or any Noteholder but with written notice to the Seller, the Servicer,
the Issuer and the Indenture Trustee, shall have the right to modify or
adjust the definitions of "Required Overcollateralization Amount" and
"Required Credit Support Multiple", and the definitions relating
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thereto, if the Note Insurer determines to modify any such definition in a
manner that will result in a reduction of the Required Overcollateralization
Amount or the Required Credit Support Multiple; provided, however, such
modification or adjustment, as the case may be, may not result in the
downgrading or withdrawal of the rating then assigned by each Rating Agency
to the Notes.
(c) It shall not be necessary for the consent of Noteholders under this
Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent shall approve the substance thereof.
(d) Prior to the execution of any amendment to this Agreement, the
Issuer shall be entitled to receive and rely upon an opinion of counsel
stating that the execution of such amendment is authorized or permitted by
this Agreement. The Issuer and the Indenture Trustee may, but shall not be
obligated to, enter into any such amendment which affects such Person's own
rights, duties or immunities under this Agreement.
Section 13.03 RECORDATION OF AGREEMENT.
To the extent permitted by applicable law, this Agreement, or a memorandum
thereof if permitted under applicable law, is subject to recordation in all
appropriate public offices for real property records in all of the counties or
other comparable jurisdictions in which any or all of the Mortgaged Properties
are situated, and in any other appropriate public recording office or
elsewhere, such recordation to be effected by the Servicer at the Noteholders'
expense on direction of the Majority Noteholders or the Note Insurer, but only
when accompanied by an opinion of counsel to the effect that such recordation
materially and beneficially affects the interests of the Noteholders or is
necessary for the administration or servicing of the Home Loans.
Section 13.04 DURATION OF AGREEMENT.
This Agreement shall continue in existence and effect until terminated as
herein provided.
Section 13.05 GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.
Section 13.06 NOTICES.
All demands, notices and communications hereunder shall be in writing and
shall be deemed to have been duly given if personally delivered at or mailed by
overnight mail, certified mail or registered mail, postage prepaid, to: (i) in
the case of the Issuer, FIRSTPLUS FUNDING TRUST, 1600 Viceroy, Dallas, Texas
75235, Attention: Lee F. Reddin, or such other address as may
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hereafter be furnished to the Noteholders and the other parties hereto, (ii)
in the case of the Seller and Servicer, FIRSTPLUS FINANCIAL, INC., 1600
Viceroy, Dallas, Texas 75235, Attention: Lee F. Reddin, or such other address
as may hereafter be furnished to the Noteholders and the other parties hereto
in writing by the Seller or the Servicer, (iii) in the case of a claim under
the Guaranty Policy, State Street Bank and Trust Company, as Fiscal Agent, 61
Broadway, 15th Floor, New York, New York 10006, Attention: Municipal
Registrar, or such other address as may be furnished to the Noteholders and
the other parties hereto in writing by such Fiscal Agent or the Note Insurer,
(iv) in the case of the Note Insurer, MBIA Insurance Corporation, 113 King
Street, Armonk, New York 10504, Attention: Insured Portfolio Management -
Structured Finance (IPM-SF), (v) in the case of the Indenture Trustee, First
Bank National Association, 180 East Fifth Street, SPFT0210, St. Paul,
Minnesota 55101, Attention: Structured Finance - FIRSTPLUS 97A, (vi) in the
case of the Arranger, The Industrial Bank of Japan, Limited, New York Branch,
245 Park Avenue, New York, New York 10167, Attention: Warren Kornfeld, and
(vii) in the case of the Noteholders, as set forth in the applicable Note
Register. Any such notices shall be deemed to be effective with respect to
any party hereto upon the receipt of such notice by such party, PROVIDED,
HOWEVER, that a facsimile or other form of electronic transmission shall be
deemed to be received by the parties referred to in (i) to (vi) above when
transmitted so long as the transmitting machine has provided an electronic
confirmation of such transmission and such facsimile or other form of
electronic transmission is confirmed with a printed paper copy thereof by mail
or overnight courier service; and provided, further, that any delivery of
computer readable format hereunder shall be accompanied or confirmed by the
delivery of a printed paper copy thereof. Notices to the Noteholders shall be
effective upon mailing or personal delivery. Each party may, by notice,
designate any further or different address to which subsequent notices,
certificates or other communications to such party shall be sent.
Section 13.07 SEVERABILITY OF PROVISIONS.
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be held invalid for any reason whatsoever, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other covenants,
agreements, provisions or terms of this Agreement.
Section 13.08 NO PARTNERSHIP.
Nothing herein contained shall be deemed or construed to create any
partnership or joint venture between the parties hereto and the services of the
Servicer shall be rendered as an independent contractor.
Section 13.09 COUNTERPARTS.
This Agreement may be executed in one or more counterparts and by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same Agreement.
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Section 13.10 SUCCESSORS AND ASSIGNS.
This Agreement shall inure to the benefit of and be binding upon the
Servicer, the Seller, the Issuer and the Noteholders and their respective
successors and permitted assigns.
Section 13.11 HEADINGS.
The headings of the various sections of this Agreement have been inserted
for convenience of reference only and shall not be deemed to be part of this
Agreement.
Section 13.12 ACTIONS OF NOTEHOLDERS.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement to be given or taken by
Noteholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Noteholders in person or by agent
duly appointed in writing; and except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Indenture Trustee, the Seller, the Servicer or the Issuer.
Proof of execution of any such instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Agreement and conclusive in
favor of the Indenture Trustee, the Seller, the Servicer and the Issuer if
made in the manner provided in this Section.
(b) The fact and date of the execution by any Noteholder of any such
instrument or writing may be proved in any reasonable manner which the
Indenture Trustee, the Seller, the Servicer or the Issuer deems sufficient.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other act by a Noteholder shall bind every holder of every Note
issued upon the registration of transfer thereof or in exchange therefor or
in lieu thereof, in respect of anything done, or omitted to be done, by the
Indenture Trustee, the Seller, the Servicer, the Issuer or the Note Insurer
in reliance thereon, whether or not notation of such action is made upon such
Note.
(d) The Seller, the Servicer or the Issuer may require additional proof
of any matter referred to in this Section 13.12 as it shall deem necessary.
Section 13.13 REPORTS TO RATING AGENCIES.
(a) The Indenture Trustee shall provide to each Rating Agency copies of
statements, reports and notices, to the extent received by it from the
Seller, the Servicer or the Issuer hereunder, as follows:
(i) copies of amendments to this Agreement;
(ii) notice of any substitution or repurchase of any Home Loans;
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(iii) notice of any termination, replacement, succession, merger or
consolidation of either the Servicer, any Custodian or the Issuer;
(iv) notice of final payment on the Notes;
(v) notice of the occurrence of any Event of Default, Conversion
Event or Credit Support Funding Event;
(vi) copies of the annual independent auditor's report delivered
pursuant to Section 7.05, and copies of any compliance reports delivered
by the Servicer hereunder including Section 7.04;
(vii) copies of any Servicer's Monthly Remittance Report pursuant to
Section 6.02(b); and
(viii) copies of any Addition Notices delivered pursuant to Section
2.02(c).
(b) With respect to the requirement of the Indenture Trustee to provide
statements, reports and notices to the Rating Agencies such statements,
reports and notices shall be delivered to the Rating Agencies at the
following addresses: (i) if to Standard & Poor's, 26 Broadway, 15th Floor,
New York, New York 10004-1064, Attention: Asset-Backed Monitoring
Department, and (ii) if to Moody's, 99 Church Street, Corporate Department -
4th Floor, New York, New York 10007, Attention: Residential Mortgage
Monitoring Department.
Section 13.14 GRANT OF NOTEHOLDER RIGHTS TO NOTE INSURER.
In consideration for the guarantee of the Notes by the Note Insurer
pursuant to the Guaranty Policy, the Noteholders hereby grant to the Note
Insurer the right to act as the holder of 100% of the outstanding Notes for
the purpose of exercising the rights of the holders of the Notes under this
Agreement without the consent of any Noteholders, including the voting rights
of such Holders, but excluding (i) rights of the Majority Noteholders under
Sections 12.01, 12.02 and 12.03(a), (ii) those rights requiring the consent
of Noteholders as provided in clauses (i), (ii) and (iii) of Section
13.02(b), (iii) any rights of such holders to payments under Section 8.2 of
the Indenture with respect to the Notes; provided that the preceding grant of
rights to the Note Insurer by the Noteholders shall be subject to Section
13.16, and (iv) the rights of such holders to determine the acceptability of
a successor source to the Bloomberg Screen, as provided in the definition of
Bloomberg Screen.
Section 13.15 THIRD PARTY BENEFICIARY.
The parties hereto acknowledge that the Note Insurer is an express third
party beneficiary hereof entitled to enforce any rights reserved to it
hereunder as if it were actually a party hereto.
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Section 13.16 SUSPENSION AND TERMINATION OF NOTE INSURER'S RIGHTS.
(a) During the continuation of a Note Insurer Default, the grant of
rights to the Note Insurer pursuant to Section 13.14 shall be of no force or
effect, and any other rights granted or reserved to the Note Insurer
hereunder shall vest instead in the Majority Noteholders; provided that the
Note Insurer shall be entitled to any payments in reimbursement of the Note
Insurer Reimbursement Amount, and the Note Insurer shall retain those rights
under Section 11.01 to consent to the termination of this Agreement and those
rights under Section 13.02 to consent to any amendment of this Agreement,
those rights under Section 12.03(b) to consent to any disbursement of funds,
and those rights under Section 13.02 to consent to any amendment of this
Agreement.
(b) At such time as either (i) the Aggregate Principal Balance has been
reduced to zero and all accrued interest has been paid on the Notes or (ii)
the Guaranty Policy has been terminated, and in either case of (i) or (ii)
the Note Insurer has been reimbursed for all Guaranteed Payments and any
other amounts owed under the Guaranty Policy and the Insurance Agreement (and
the Note Insurer no longer has any obligation under the Guaranty Policy,
except for breach thereof by the Note Insurer), then the grant of rights to
the Note Insurer pursuant to Section 13.14 shall be of no further force or
effect and any other rights and benefits granted or reserved to the Note
Insurer hereunder (including the rights to direct certain actions and receive
certain notices) shall terminate and the Noteholders (including in certain
instances the Majority Noteholders) shall be entitled to the exercise of such
rights and to receive such benefits of the Note Insurer following such
termination to the extent that such rights and benefits are applicable to the
Noteholders (including the Majority Noteholders).
Section 13.17 CERTAIN NOTICES.
Upon discovery of the occurrence of an Event of Default, an Indenture
Event of Default, a Conversion Event, a Credit Support Funding Event, or a
failure by the Seller to perform its obligations under this Agreement, in any
such case by the Seller, the Servicer, the Issuer, or the Indenture Trustee,
the party discovering such occurrence shall promptly give written notice
thereof to the others and to the Noteholders, the Note Insurer, each Rating
Agency and the Arranger. If such notice is given by the Issuer with respect
to an Event of Default, such notice shall specify the action, if any, the
Issuer is taking in respect of such Event of Default, and if an Event of
Default shall arise from the failure of the Servicer to perform any of its
duties or obligations under this Agreement with respect to the Home Loans,
the Issuer shall take all reasonable steps available to it to remedy such
failure.
Section 13.18 NO PETITION.
Until the date that is one year and one day after the last day on which
any Note is outstanding, each of the Indenture Trustee, the Seller and the
Servicer by entering into this Agreement, and each Noteholder, by accepting a
Note, hereby covenant and agree that they will not institute against the
Issuer, or join in any institution against the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States federal or state bankruptcy or similar
law in connection with any obligations relating to the Notes or any of the
Basic Documents.
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IN WITNESS WHEREOF, the Seller, the Servicer, the Issuer and the Indenture
Trustee have caused their names to be signed by their respective officers
thereunto duly authorized, as of the day and year first above written, to this
SALE AND SERVICING AGREEMENT.
FIRSTPLUS FUNDING TRUST,
as Issuer
By: /s/ LEE F. REDDIN
-----------------------------------
Lee F. Reddin
Vice President
FIRSTPLUS FINANCIAL, INC., as Seller and
Servicer
By: /s/ LEE F. REDDIN
-----------------------------------
Lee F. Reddin
Vice President
FIRST BANK NATIONAL ASSOCIATION, as
Indenture Trustee
By: /s/ S. CHRISTOPHERSON
-----------------------------------
S. Christopherson
Vice President
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THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared Lee F. Reddin, known to me to be a person and officer
whose name is subscribed to the foregoing instrument and acknowledged to me
that the same was the act of the said FIRSTPLUS FUNDING TRUST, a Delaware
business trust, as Issuer, and that he executed the same as the act of such
corporation for the purpose and consideration therein expressed, and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 13th day of June, 1997.
/s/ ROBIN De VELLIS
-----------------------------------
Notary Public, State of Texas
[SEAL]
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared Lee F. Reddin, known to me to be the person and officer
whose name is subscribed to the foregoing instrument and acknowledged to me
that the same was the act of the said FIRSTPLUS FINANCIAL, INC., a Texas
corporation, as the Seller and the Servicer, and that he executed the same as
the act of such corporation for the purposes and consideration therein
expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 13th day of June, 1997.
/s/ ROBIN De VELLIS
-----------------------------------
Notary Public, State of Texas
[SEAL]
SALE AND SERVICING AGREEMENT (IBJ WAREHOUSE) - Page 97
<PAGE>
THE STATE OF MINNESOTA )
)
COUNTY OF RAMSEY )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared S. Christopherson, known to me to be the person and
officer whose name is subscribed to the foregoing instrument and acknowledged
to me that the same was the act of the said FIRST BANK NATIONAL ASSOCIATION,
a national banking association, as the Indenture Trustee, and that he
executed the same as the act of such entity for the purposes and
consideration therein expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 16th day of June, 1997.
/s/ S. DIGNAN
[SEAL] -----------------------------------
Notary Public, State of Minnesota
SALE AND SERVICING AGREEMENT (IBJ WAREHOUSE) - Page 98
<PAGE>
EXHIBIT A
Home Loan Schedule
[Delivered Under Separate Cover]
<PAGE>
EXHIBIT B-1
Form of Addition Notice
[Begins on Next Page]
<PAGE>
ADDITION NOTICE
FOR SUBSEQUENT HOME LOANS
Pursuant to Section 2.02(a) of the Sale and Servicing Agreement dated as
of June ____, 1997 between FIRSTPLUS FUNDING TRUST, as Issuer (the "Issuer"),
FIRSTPLUS FINANCIAL, INC., as Seller and Servicer (the "Seller"), and First
Bank National Association, as Indenture Trustee (the "Indenture Trustee"), the
Seller and the Issuer hereby provide notice to the Indenture Trustee, MBIA
Insurance Corporation, as Note Insurer, that the Subsequent Home Loans
identified on ATTACHMENT A attached hereto will be sold to the Issuer pursuant
to a Subsequent Transfer Agreement dated as of [DATE] (the "Subsequent Transfer
Agreement") between the Seller, the Issuer and the Indenture Trustee. The
aggregate Principal Balance of such Subsequent Home Loans as of the applicable
Cut-Off Date, set forth on such ATTACHMENT A, with respect to the source of the
Seller is set forth on the Schedule attached hereto as ATTACHMENT B.
FIRSTPLUS FINANCIAL, INC.
as Seller
By:
-----------------------------------
Lee F. Reddin
Vice President
B1-1
<PAGE>
ATTACHMENT A
[List of Subsequent Home Loans]
B1-2
<PAGE>
ATTACHMENT B
1. TRANSFER SOURCE OF SUBSEQUENT MORTGAGE LOANS: [ ]
Subsequent Transfer Date:
Cut-Off Date:
Aggregate Cut-Off Date Outstanding Principal
Balances of Subsequent Mortgage Loans:
Purchase Price for Subsequent Mortgage Loans: PAR (100%)
2. TRANSFER SOURCE OF SUBSEQUENT MORTGAGE LOANS: [ ]
Subsequent Transfer Date:
Cut-Off Date:
Aggregate Outstanding Principal Balances
of Subsequent Mortgage Loans:
Purchase Price for Subsequent Mortgage Loans: PAR (100%)
3. TRANSFER SOURCE OF SUBSEQUENT MORTGAGE LOANS: [ ]
Subsequent Transfer Date:
Cut-Off Date:
Aggregate Outstanding Principal Balances
of Subsequent Mortgage Loans:
Purchase Price for Subsequent Mortgage Loans: PAR (100%)
B1-3
<PAGE>
EXHIBIT B-2
Form of Subsequent Transfer Agreement
[Begins on Next Page]
<PAGE>
SUBSEQUENT TRANSFER AGREEMENT
This SUBSEQUENT TRANSFER AGREEMENT dated as of _________, 1997 (this
"Agreement") is entered into between FIRSTPLUS FINANCIAL, INC., as Seller and
Servicer (the "Seller" and "Servicer"), FIRSTPLUS FUNDING TRUST, as Issuer
(the "Issuer") and FIRST BANK NATIONAL ASSOCIATION, as Indenture Trustee (the
"Indenture Trustee"). Reference is hereby made to the Sale and Servicing
Agreement dated as of June ___, 1997 (the "Sale and Servicing Agreement")
between the Issuer, the Seller and Servicer, and the Indenture Trustee and
the Indenture dated as of June ___, 1997 (the "Indenture") between the Issuer
and the Indenture Trustee. Capitalized terms used and not defined herein
have the meanings set forth in the Indenture.
RECITALS:
A. Pursuant to the terms of Sale and Servicing Agreement, the Seller,
the Issuer and the Indenture Trustee agreed to the sale by the Seller to the
Issuer of additional Home Loans following the Closing Date.
B. Pursuant to the terms of the Indenture, the Issuer and the
Indenture Trustee agreed to the Grant by the Issuer to the Indenture Trustee
of additional Home Loans following the Closing Date.
C. The Seller, the Issuer and the Indenture Trustee desire to enter
into this Subsequent Transfer Agreement to reflect (i) the sale, transfer,
assignment, set over, and conveyance of certain additional Home Loans to the
Issuer and (ii) the Grant to the Indenture Trustee of all of the Issuer's
right, title and interest in and to such additional Home Loans.
NOW, THEREFORE, in consideration of the premises herein contained and
for other good and valuable consideration, the receipt and sufficiency of
which are mutually acknowledged, the Seller, the Issuer and the Indenture
Trustee hereby agree as follows:
Section 1. SUBSEQUENT HOME LOANS. The Seller, the Issuer and the
Indenture Trustee hereby agree to the sale, transfer, assignment, set over,
conveyance and grant by the Seller to the Issuer and the Grant by the Issuer
to the Indenture Trustee of the additional home loans as described on
ATTACHMENT A attached hereto (the "Subsequent Home Loans") and the Home Loan
Schedule attached hereto as ATTACHMENT B (the "Home Loan Schedule"). The
Home Loan Schedule shall supersede any Addition Notices for any Subsequent
Transfer Agreement insofar as the Home Loan Schedule relates to the
identification of Subsequent Home Loans transferred to the Issuer.
Section 2. SALE BY SELLER TO ISSUER OF SUBSEQUENT HOME LOANS. The
Seller does hereby sell, transfer, assign, set over and convey to the Issuer:
(i) all of the right, title and interest of the Seller in and to
each Subsequent Home Loan identified on the Home Loan Schedule, including
without limitation, the Home Loans, the Servicer's Home Loan Files and the
related Debt Instruments, and all payments on, and
B2-1
<PAGE>
proceeds with respect to, such Subsequent Home Loans received on and after
the applicable Cut-Off Date;
(ii) all right, title and interest of the Seller in the Mortgages on
the properties securing the Subsequent Home Loans, if any, including any
Mortgaged Property acquired by or on behalf of the Issuer by foreclosure or
deed in lieu of foreclosure or otherwise;
(iii) all right, title and interest of the Seller in and to any rights
in or proceeds from any insurance policies (including title insurance
policies) covering the Subsequent Home Loans, the related Mortgaged
Properties or the related Obligors and any amounts recovered from third
parties in respect of any Liquidated Home Loans; and
(iv) all the proceeds of each of the foregoing.
With respect to each Subsequent Home Loan, the Seller has delivered or
caused to be delivered to the Issuer, each item set forth in Section 2.02 of
the Sale and Servicing Agreement. The transfer to the Issuer by the Seller
of the Subsequent Home Loans identified on the Mortgage Loan Schedule shall
be absolute and is intended by the Seller, the Issuer, and the Noteholders to
constitute and to be treated as an absolute conveyance and sale by the
Seller. The expenses and costs relating to the delivery of the Subsequent
Home Loans, this Agreement and the Sale and Servicing Agreement shall be
borne by the Seller. Additional terms of the sale, including the purchase
price, are set forth on ATTACHMENT A attached hereto.
Section 3. GRANT BY ISSUER TO INDENTURE TRUSTEE OF SUBSEQUENT HOME
LOANS.
Upon and simultaneous with the purchase by the Issuer from the Seller of
the Subsequent Home Loans, and pursuant to the terms of the Indenture, the
Issuer does hereby Grant to the Indenture Trustee:
(i) all of the right, title and interest of the Issuer in and to
each Subsequent Home Loan identified on the Home Loan Schedule, including
without limitation, the Home Loans, the Servicer's Home Loan Files and
the Debt Instruments, and all payments on, and proceeds with respect to,
such Subsequent Home Loans received on and after the applicable Cut-Off
Date;
(ii) all right, title and interest of the Issuer in the Mortgages on
the properties securing the Subsequent Home Loans, if any, including any
Mortgaged Property acquired by or on behalf of the Issuer by foreclosure or
deed in lieu of foreclosure or otherwise;
(iii) all right, title and interest of the Issuer in and to any
rights in or proceeds from any insurance policies (including title
insurance policies) covering the Subsequent Home Loans, the related
Mortgaged Properties or the related Obligors and any amounts recovered
from third parties in respect of any Liquidated Home Loans; and
(iv) all the proceeds of each of the foregoing.
B2-2
<PAGE>
Section 4. REPRESENTATIONS AND WARRANTIES; CONDITIONS PRECEDENT.
(a) The Seller hereby makes the representations, warranties and
covenants set forth in Section 3.04 of the Sale and Servicing Agreement with
respect to the Subsequent Home Loans as of the date hereof and the applicable
Advance Date. In addition, the Seller hereby reconfirms the accuracy of the
representations and warranties set forth in Sections 3.02 and 3.03 of the
Sale and Servicing Agreement with respect to the Subsequent Home Loans as of
the date hereof and the applicable Advance Date.
(b) The Seller and Servicer hereby certify as follows:
(i) The Servicer shall deposit in the Collection Account all
collections in respect of the Subsequent Home Loans received on or after
the related Cut-off Date.
(ii) As of the date hereof, the Seller is not insolvent nor will it
be made insolvent by the transfer that is the subject of the Subsequent
Transfer Agreement nor is it aware of any pending insolvency.
(iii) The transfer of the Subsequent Home Loans to the Issuer will not
result in a material adverse tax consequence to the Issuer.
(c) The Issuer hereby reconfirms the accuracy of the representations
and warranties set forth in Article V of the Note Purchase Agreement as of
the date hereof and as of the applicable Advance Date.
(d) The Issuer hereby certifies that it has deposited in the
Capitalized Interest Account the Capitalized Interest Account Deposit with
respect to such Additional Note Principal Balance.
(e) All terms and conditions of the Sale and Servicing Agreement are
hereby ratified and confirmed; provided however, that in the event of any
conflict, the provisions of this Agreement shall control over the conflicting
provisions of the Sale and Servicing Agreement.
Section 5. RECORDATION OF AGREEMENT. This Agreement is subject to
recordation in all appropriate public offices for real property records in
all the counties or other comparable jurisdictions in which any or all of the
Mortgaged Properties are situated, and in any other appropriate public
recording office or elsewhere, such recordation to be effected by the Seller,
at its expense, in the event such recordation materially and beneficially
affects the interests of the Noteholders.
Section 6. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
B2-3
<PAGE>
Section 7. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the Seller, the Issuer, the Indenture Trustee
and their respective successors and permitted assigns.
Section 8. COUNTERPARTS. This Agreement may be executed in one or
more counterparts and by the different parties hereto on separate
counterparts, each of which, when so executed, shall be deemed to be an
original; such counterparts, together, shall constitute one and the same
Agreement.
B2-4
<PAGE>
IN WITNESS WHEREOF, the Seller, the Issuer and the Indenture Trustee
have caused this SUBSEQUENT TRANSFER AGREEMENT to be signed by their
respective officers thereunto duly authorized, as of the day and year first
set forth above.
FIRSTPLUS FINANCIAL, INC.,
as Seller and Servicer
By:
----------------------------
Lee F. Reddin
Vice President
FIRSTPLUS FUNDING TRUST,
as Issuer
By:
----------------------------
Lee F. Reddin
Vice President
FIRST BANK NATIONAL ASSOCIATION,
as Indenture Trustee
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
B2-5
<PAGE>
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared LEE F. REDDIN, known to me to be the person and officer
whose name subscribed to the foregoing instrument and acknowledged to me that
the same was the act of the said FIRSTPLUS FINANCIAL, INC., a Texas
corporation, and that he executed the same as the act of such corporation for
the purposes and consideration therein expressed, and in the capacity therein
stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ____ day of ____, 1997.
-----------------------------------------
Notary Public, State of Texas
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared LEE F. REDDIN, known to me to be the person and officer
whose name subscribed to the foregoing instrument and acknowledged to me that
the same was the act of the said FIRSTPLUS FUNDING TRUST, as Issuer, and that
he executed the same as the act of such association for the purposes and
consideration therein expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the _____ day of ______,
1997.
-----------------------------------------
Notary Public, State of
-----------------
My commission expires:
. -----------------------------------------
- ---------------------------- (printed name)
B2-6
<PAGE>
THE STATE OF _____________ )
)
COUNTY OF ________________ )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared ________________________, known to me to be the person
and officer whose name subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said FIRST BANK NATIONAL
ASSOCIATION, as Indenture Trustee, and that he executed the same as the act
of such association for the purposes and consideration therein expressed, and
in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ____ day of ____, 1997.
-----------------------------------------
Notary Public, State of
-----------------
My commission expires:
. -----------------------------------------
- ---------------------------- (printed name)
B2-7
<PAGE>
ATTACHMENT A
1. TRANSFER SOURCE OF SUBSEQUENT MORTGAGE LOANS: [ ]
Advance Date:
------------
Cut-Off Date:
------------
Aggregate Outstanding Principal Balances
of Subsequent Mortgage Loans:
------------
Purchase Price for Subsequent
Mortgage Loans: PAR (100%)
------------
2. TRANSFER SOURCE OF SUBSEQUENT MORTGAGE LOANS: [ ]
Advance Date:
------------
Cut-Off Date:
------------
Aggregate Outstanding Principal Balances
of Subsequent Mortgage Loans:
------------
Purchase Price for Subsequent
Mortgage Loans: PAR (100%)
------------
3. TRANSFER SOURCE OF SUBSEQUENT MORTGAGE LOANS: [ ]
Advance Date:
------------
Cut-Off Date:
------------
Aggregate Outstanding Principal Balances
of Subsequent Mortgage Loans:
------------
Purchase Price for Subsequent
Mortgage Loans: PAR (100%)
------------
B2-8
<PAGE>
4. TRANSFER SOURCE OF SUBSEQUENT MORTGAGE LOANS: [ ]
Advance Date:
------------
Cut-Off Date:
------------
Aggregate Outstanding Principal Balances
of Subsequent Mortgage Loans:
------------
Purchase Price for Subsequent
Mortgage Loans: PAR (100%)
------------
B2-9
<PAGE>
ATTACHMENT B
[Home Loan Schedule]
B2-10
<PAGE>
EXHIBIT C
Form of Conversion Notice
[Begins on Next Page]
<PAGE>
CONVERSION NOTICE
FIRSTPLUS FUNDING TRUST
Asset-Backed Notes, Series 1997A
[DATE]
First Bank National Association FIRSTPLUS FINANCIAL, INC.,
as Indenture Trustee as Servicer
180 E. First Street, SPFT0210 1600 Viceroy
St. Paul, Minnesota 55101 Dallas, Texas 75235
Attention: Structured Finance - Attention: Lee F. Reddin
FIRSTPLUS 97A
FIRSTPLUS FUNDING TRUST,
as Issuer
1600 Viceroy
Dallas, Texas 75235
Attention: Lee F. Reddin
Reference is made to that certain Sale and Servicing Agreement dated as of
June ___, 1997 (the "Sale and Servicing Agreement") between FIRSTPLUS FUNDING
TRUST, as Issuer, FIRSTPLUS FINANCIAL INC., as Seller and Servicer, and FIRST
BANK NATIONAL ASSOCIATION, as Indenture Trustee.
The undersigned, being the Holder or Holders of Outstanding Notes
representing more than 50% of the Outstanding Amount hereby give notice as
follows:
1. The following Conversion Event occurred on [DATE]: [SPECIFY
CONVERSION EVENT].
2. We hereby deliver a Conversion Notice pursuant to Section 12.01 of
the Sale and Servicing Agreement. In accordance with the definition of
Conversion Date specified in the Sale and Servicing Agreement, the Conversion
Date with respect to this Conversion Notice will be [SPECIFY DATE].
C-1
<PAGE>
Capitalized terms used but not defined herein shall have the meanings set
forth in the Sale and Servicing Agreement.
[HOLDER]
By:
---------------------------
Name:
-------------------------
Title:
------------------------
C-2
<PAGE>
EXHIBIT D
Form of Note Principal Prepayment Notice
[Begins on Next Page]
<PAGE>
NOTE PRINCIPAL PREPAYMENT NOTICE
FIRSTPLUS FUNDING TRUST
Asset-Backed Notes, Series 1997A
[DATE]
MBIA Insurance Corporation, as Note Insurer
113 King Street
Armonk, New York 10504
First Bank National Association,
as Indenture Trustee
180 E. Fifth Street, SPFT0210
St. Paul, Minnesota 55101
Attention: Structured Finance - FIRSTPLUS 97A
The Noteholders:
Reference is made to that certain Sale and Servicing Agreement dated as of
June ___, 1997 (the "Sale and Servicing Agreement") between FIRSTPLUS FUNDING
TRUST, as Issuer, FIRSTPLUS FINANCIAL, INC., as Seller and Servicer, and
BANKERS TRUST COMPANY, as Indenture Trustee.
Pursuant to Section 11.02(a) of the Sale and Servicing Agreement, the
Issuer hereby gives notice that it will effect a Note Principal Prepayment of
$_________ on [DATE].
The Note Principal Prepayment Amount shall be applied as follows:
$_________ to the Prior Payment Date Note Principal Balance and $_________ to
the Additional Note Principal Balance.
The Issuer hereby certifies that: (i) the Note Principal Prepayment
referred to above will not cause the occurrence of a Conversion Event or a
Credit Support Funding Event and (ii) the Issuer has complied with all its
obligations in connection with such Note Principal Prepayment, as provided in
Section 11.02(a) of the Sale and Servicing Agreement.
Capitalized terms used but not defined herein shall have the meanings set
forth in the Sale and Servicing Agreement.
FIRSTPLUS FUNDING TRUST
By:
---------------------------
Name:
-------------------------
Title:
------------------------
D-1
<PAGE>
EXHIBIT E
Form of Issuer Request for Release Pursuant to Section 11.02(b)
[Begins on Next Page]
<PAGE>
ISSUER REQUEST FOR RELEASE
FIRSTPLUS FUNDING TRUST
Asset-Backed Notes, Series 1997A
[DATE]
First Bank National Association, MBIA Insurance Corporation,
as Indenture Trustee as Note Insurer
180 E. Fifth Street, SPFT0210 113 King Street
St. Paul, Minnesota 55101 Armonk, New York 10504
Attention: Structured Finance -
FIRSTPLUS 97A
Reference is made to that certain Sale and Servicing Agreement dated as of
June ___, 1997 (the "Sale and Servicing Agreement") between FIRSTPLUS FUNDING
TRUST, as Issuer, FIRSTPLUS FINANCIAL INC., as Seller and Servicer, and FIRST
BANK NATIONAL ASSOCIATION, as Indenture Trustee.
Reference is further made to the Prepayment Notice dated [DATE] and
delivered by us pursuant to Section 11.02 (a) of the Sale and Servicing
Agreement.
Pursuant to Section 11.02(b) of the Sale and Servicing Agreement, we
hereby request the Indenture Trustee to release the lien of the Indenture on
[DATE] with respect to the Home Loans specified in Schedule I to this Request.
We hereby certify that such release, giving effect to the related Note
Principal Prepayment, will not cause the occurrence of a Conversion Event or a
Credit Support Funding Event, and the aggregate of the Principal Balances of
the Home Loans identified in Schedule I as of the Prepayment Date specified in
the Prepayment Notice does not exceed (i) the amount of the applicable Note
Principal Prepayment divided by (ii) 100% minus the current
[Overcollateralization Base Percent Requirement or Overcollateralization Target
Percent Requirement].
Capitalized terms used but not defined herein shall bear the meanings
ascribed to such terms in the Sale and Servicing Agreement.
FIRSTPLUS FUNDING TRUST
By:
---------------------------
Name:
-------------------------
Title:
------------------------
E-1
<PAGE>
SCHEDULE I
Home Loans to be Released from Lien of Indenture
[Begins on Next Page]
E-2
<PAGE>
EXHIBIT F
Form of Servicer's Remittance Report
[Begins on Next Page]
E-3
<PAGE>
INDENTURE
between
FIRSTPLUS FUNDING TRUST
as Issuer
and
FIRST BANK NATIONAL ASSOCIATION
as Indenture Trustee
Dated as of June 1, 1997
FIRSTPLUS FUNDING TRUST
Asset-Backed Notes
Series 1997A
<PAGE>
TABLE OF CONTENTS
<TABLE>
Page
----
<S> <C> <C>
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE 2
Section 1.1 Definitions 2
Section 1.2 Rules of Construction 5
ARTICLE II THE NOTES 6
Section 2.1 Form 6
Section 2.2 Execution, Authentication, Delivery and Dating 6
Section 2.3 Registration; Registration of Transfer and Exchange 7
Section 2.4 Mutilated, Destroyed, Lost or Stolen Notes 8
Section 2.5 Persons Deemed Owner 9
Section 2.6 Payment of Principal and Interest; Defaulted Interest 9
Section 2.7 Cancellation 10
Section 2.8 Authentication of Notes 11
Section 2.9 Release of Collateral 14
Section 2.10 Definitive Notes 15
Section 2.11 Tax Treatment 16
ARTICLE III COVENANTS 17
Section 3.1 Payment of Principal and Interest 17
Section 3.2 Maintenance of Office or Agency 17
Section 3.3 Money for Payments To Be Held in Trust 17
Section 3.4 Existence 19
Section 3.5 Protection of Collateral 19
Section 3.6 Annual Opinions as to Collateral 20
Section 3.7 Performance of Obligations; Servicing of Home Loans 20
Section 3.8 Negative Covenants 21
Section 3.9 Annual Statement as to Compliance 22
Section 3.10 [RESERVED] 23
Section 3.11 Servicer's Obligations 23
Section 3.12 [RESERVED] 23
Section 3.13 Further Instruments and Acts 23
ARTICLE IV SATISFACTION AND DISCHARGE 23
Section 4.1 Satisfaction and Discharge of Indenture 23
Section 4.2 Application of Trust Money 24
Section 4.3 Repayment of Moneys Held by Paying Agent 24
ARTICLE V REMEDIES 24
Section 5.1 Events of Default 24
Section 5.2 Acceleration of Maturity; Rescission and
Annulment 26
Section 5.3 Collection of Indebtedness and
</TABLE>
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<PAGE>
TABLE OF CONTENTS
(Continued)
<TABLE>
Page
----
<S> <C> <C>
Suits for Enforcement by Indenture Trustee 26
Section 5.4 Remedies; Priorities 28
Section 5.5 Optional Preservation of the Collateral 29
Section 5.6 Limitation of Suits 30
Section 5.7 Unconditional Rights of Noteholders To
Receive Principal and Interest 30
Section 5.8 Restoration of Rights and Remedies 30
Section 5.9 Rights and Remedies Cumulative 31
Section 5.10 Delay or Omission Not a Waiver 31
Section 5.11 Control by Noteholders 31
Section 5.12 Waiver of Past Defaults 32
Section 5.13 Undertaking for Costs 32
Section 5.14 Waiver of Stay or Extension Laws 32
Section 5.15 Action on Notes 33
Section 5.16 Performance and Enforcement of Certain Obligations 33
ARTICLE VI THE INDENTURE TRUSTEE 34
Section 6.1 Duties of Indenture Trustee 34
Section 6.2 Rights of Indenture Trustee 35
Section 6.3 Individual Rights of Indenture Trustee 35
Section 6.4 Indenture Trustee's Disclaimer 36
Section 6.5 Notice of Defaults 36
Section 6.6 Reports by Indenture Trustee to Holders 36
Section 6.7 Compensation and Indemnity 36
Section 6.8 Replacement of Indenture Trustee 37
Section 6.9 Successor Indenture Trustee by Merger 38
Section 6.10 Appointment of Co-Indenture Trustee or
Separate Indenture Trustee 38
Section 6.11 Eligibility; Disqualification 39
ARTICLE VII NOTEHOLDERS' LISTS AND REPORTS 40
Section 7.1 Issuer To Furnish Indenture Trustee Names
and Addresses of Noteholders 40
Section 7.2 Preservation of Information; Communications
to Noteholders 40
Section 7.3 Indenture Trustee Certificate 40
ARTICLE VIII ACCOUNTS, DISBURSEMENTS AND RELEASES 40
Section 8.1 Collection of Money 40
Section 8.2 Payments 41
Section 8.3 [RESERVED] 42
Section 8.4 Servicer's Remittance Reports 42
</TABLE>
-ii-
<PAGE>
TABLE OF CONTENTS
(Continued)
<TABLE>
Page
----
<S> <C> <C>
Section 8.5 Release of Collateral 42
ARTICLE IX SUPPLEMENTAL INDENTURES 42
Section 9.1 Supplemental Indentures Without Consent
of Noteholders 42
Section 9.2 Supplemental Indentures with Consent of Noteholders 44
Section 9.3 Execution of Supplemental Indentures 45
Section 9.4 Effect of Supplemental Indenture 45
Section 9.5 [RESERVED] 45
Section 9.6 Reference in Notes to Supplemental Indentures 45
Section 9.7 [RESERVED] 45
ARTICLE X RETIREMENT OF NOTES 46
Section 10.1 Retirement 46
Section 10.2 Form of Retirement Notice 47
Section 10.3 Notes Payable on Redemption Date 47
ARTICLE XI MISCELLANEOUS 47
Section 11.1 Compliance Certificates and Opinions, etc. 47
Section 11.2 Form of Documents Delivered to Indenture Trustee 48
Section 11.3 Acts of Noteholders 49
Section 11.4 Notices, etc., to Indenture Trustee, Issuer,
Rating Agencies, Note Insurer and Arranger 49
Section 11.5 Notices to Noteholders; Waiver 50
Section 11.6 Effect of Headings and Table of Contents 51
Section 11.7 Successors and Assigns 51
Section 11.8 Separability 51
Section 11.9 Benefits of Indenture 51
Section 11.10 Legal Holidays 51
Section 11.11 GOVERNING LAW 51
Section 11.12 Counterparts 51
Section 11.13 Recording of Indenture 51
Section 11.14 Issuer Obligation 52
Section 11.15 No Petition 52
Section 11.16 Inspection 52
Section 11.17 Grant of Noteholder Rights to Note Insurer 52
Section 11.18 Third Party Beneficiary 53
Section 11.19 Suspension and Termination of Note Insurer's Rights 53
</TABLE>
-iii-
<PAGE>
EXHIBITS
--------
EXHIBIT A Form of Note
EXHIBIT B-1 Form of Transferor Representation Letter (without QIB
representation)
EXHIBIT B-2 Form of Transferee Representation Letter (with QIB
representation)
EXHIBIT B-3 Form of Transferee Representation Letter (for Transferees that
are not QIBs)
-iv-
<PAGE>
INDENTURE dated as of June 1, 1997, between FIRSTPLUS FUNDING
TRUST, a Delaware business trust (the "Issuer"), and FIRST BANK NATIONAL
ASSOCIATION, a national banking association, as trustee and not in its
individual capacity (the "Indenture Trustee").
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the holders of the Issuer's Asset-Backed
Notes (the "Notes"):
GRANTING CLAUSE
Subject to the terms of this Indenture, the Issuer hereby Grants to the
Indenture Trustee at the Closing Date, as Indenture Trustee for the benefit
of the Noteholders and the Note Insurer, all of the Issuer's right, title and
interest in and to: (i) the Trust Estate; (ii) all right, title and interest
of the Issuer in the Sale and Servicing Agreement (including the Issuer's
right to cause the Seller to repurchase Home Loans from the Issuer under
certain circumstances described therein); (iii) all present and future
claims, demands, causes of action and choses in action in respect of any or
all of the foregoing and all payments on or under and all proceeds of every
kind and nature whatsoever in respect of any or all of the foregoing,
including all proceeds of the conversion thereof, voluntary or involuntary,
into cash or other liquid property, all cash proceeds, accounts, accounts
receivable, notes, drafts, acceptances, chattel paper, checks, deposit
accounts, insurance proceeds, condemnation awards, rights to payment of any
and every kind and other forms of obligations and receivables, instruments
and other property which at any time constitute all or part of or are
included in the proceeds of any of the foregoing; and (iv) all funds on
deposit from time to time in the Trust Accounts (collectively, the
"Collateral").
The foregoing Grant is made in trust to secure the payment of principal
of and interest on, and any other amounts owing in respect of, the Notes,
equally and ratably without prejudice, priority or distinction, and to secure
compliance with the provisions of this Indenture, all as provided in this
Indenture.
The Indenture Trustee, as Indenture Trustee on behalf of the Noteholders and
the Note Insurer, acknowledges such Grant, accepts the trusts hereunder and
agrees to perform its duties required in this Indenture to the best of its
ability to the end that the interests of the Noteholders and the Note Insurer
may be adequately and effectively protected. The Indenture Trustee agrees
and acknowledges that the Indenture Trustee's Home Loan Files will be held by
the Custodian for the benefit of the Indenture Trustee in Dallas, Texas. The
Indenture Trustee further agrees and acknowledges that each other item of
Collateral that is physically delivered to the Indenture Trustee will be held
by the Indenture Trustee in New York, New York.
Subject to the conditions set forth in this Indenture and the Note Purchase
Agreement, on each Advance Date and pursuant to a Subsequent Transfer
Agreement, the Issuer shall grant to the Indenture Trustee all of the right,
title and interest of the Issuer in and to each Subsequent Home Loan
(including all interest and principal thereon received after the related
Cut-Off Date) identified
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on the schedule attached to the related Subsequent Transfer Agreement and all
items in the related Indenture Trustee's Home Loan File.
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1 DEFINITIONS. Except as otherwise specified herein or as
the context may otherwise require, (i) capitalized terms used but not
otherwise defined herein have the respective meanings set forth in the Sale
and Servicing Agreement for all purposes of this Indenture and (ii) the
following terms have the respective meanings set forth below for all purposes
of this Indenture.
ACT: As specified in Section 11.3(a).
AUTHORIZED OFFICER: With respect to the Issuer, any officer of the
Issuer who is authorized to act for the Issuer in matters relating to the
Issuer and who is identified on the list of Authorized Officers delivered by
the Issuer to the Indenture Trustee on the Closing Date (as such list may be
modified or supplemented from time to time thereafter).
COLLATERAL: As specified in the Granting Clause of this Indenture.
CORPORATE TRUST OFFICE: The principal office of the Indenture Trustee
at which at any particular time its corporate trust business shall be
administered, which office at date of execution of this Agreement is located
at 180 E. Fifth Street, St. Paul, Minnesota 55101; Attention: Corporate Trust
Department, or at such other address as the Indenture Trustee may designate
from time to time by notice to the Noteholders, the Note Insurer and the
Issuer, or the principal corporate trust office of any successor Indenture
Trustee at the address designated by such successor Indenture Trustee by
notice to the Noteholders, the Note Insurer and the Issuer.
DECLARATION OF TRUST: The Declaration of Trust of the Issuer, dated as
of June 12, 1997, as amended from time to time as provided therein.
DEFAULT: Any occurrence that is, or with notice or the lapse of time or
both would become, an Event of Default.
DEPOSITORY INSTITUTION: Any depository institution or trust company,
including the Indenture Trustee, that (i) is incorporated under the laws of
the United States of America or any State thereof, (ii) is subject to
supervision and examination by federal or state banking authorities and (iii)
has outstanding unsecured commercial paper or other short-term unsecured debt
obligations that are rated A-1 by Standard & Poor's and P-1 by Moody's (or
comparable ratings if Standard & Poor's and Moody's are not the Rating
Agencies).
EVENT OF DEFAULT: As specified in Section 5.1.
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EXECUTIVE OFFICER: With respect to any corporation, the Chief Executive
Officer, Chief Operating Officer, Chief Financial Officer, President,
Executive Vice President, any Vice President, the Secretary or the Treasurer
of such corporation; and with respect to any partnership, any general partner
thereof.
GRANT: Mortgage, pledge, bargain, sell, warrant, alienate, remise,
release, convey, assign, transfer, create, and grant a lien upon and a
security interest in and right of set-off against, deposit, set over and
confirm pursuant to this Indenture. A Grant of the Collateral or of any
other agreement or instrument shall include all rights, powers and options
(but none of the obligations) of the granting party thereunder, including the
immediate and continuing right to claim for, collect, receive and give
receipt for principal and interest payments in respect of the Collateral and
all other moneys payable thereunder, to give and receive notices and other
communications, to make waivers or other agreements, to exercise all rights
and options, to bring Proceedings in the name of the granting party or
otherwise, and generally to do and receive anything that the granting party
is or may be entitled to do or receive thereunder or with respect thereto.
INDENTURE TRUSTEE: First Bank National Association, a national banking
association, as Indenture Trustee under this Indenture acting on behalf of
the Noteholders and the Note Insurer, or any successor indenture trustee
under this Indenture.
INDEPENDENT: When used with respect to any specified Person, that the
Person (a) is in fact independent of the Issuer, any other obligor on the
Notes, the Seller, and any Affiliate of any of the foregoing Persons, (b)
does not have any direct financial interest or any material indirect
financial interest in the Issuer, any such other obligor, the Seller, or any
Affiliate of any of the foregoing Persons, and (c) is not connected with the
Issuer, any such other obligor, the Seller, or any Affiliate of any of the
foregoing Persons as an officer, employee, promoter, underwriter, trustee,
partner, director, or person performing similar functions.
ISSUER: FIRSTPLUS FUNDING TRUST until a successor replaces it and,
thereafter, means any successor obligor on the Notes.
ISSUER ORDER and ISSUER REQUEST: A written order or request signed in
the name of the Issuer by any one of its Authorized Officers and delivered to
the Indenture Trustee.
NOTE REGISTER and NOTE REGISTRAR: The respective meanings specified in
Section 2.3.
OFFICER'S CERTIFICATE: A certificate signed by any Authorized Officer
of the Issuer, under the circumstances described in, and otherwise complying
with, the applicable requirements of Section 11.1, and delivered to the
Indenture Trustee.
OPINION OF COUNSEL: One or more written opinions of counsel who may,
except as otherwise expressly provided in this Indenture, be employees of or
counsel to the Issuer and who shall be satisfactory to the Indenture Trustee
and, so long as a Note Insurer Default has not occurred and is continuing,
the Note Insurer, and which opinion or opinions (i) shall be addressed to the
Indenture
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Trustee, as Indenture Trustee, and, so long as a Note Insurer Default has not
occurred and is continuing, the Note Insurer, (ii) shall comply with any
applicable requirements of Section 11.1, and (iii) shall be in form and
substance satisfactory to the Indenture Trustee and, so long as a Note
Insurer Default has not occurred and is continuing, the Note Insurer.
OUTSTANDING: With respect to any Note and as of the date of
determination, any Note theretofore authenticated and delivered under this
Indenture except:
(i) Notes theretofore canceled by the Note Registrar or delivered to
the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in the
necessary amount has been theretofore deposited with the
Indenture Trustee or any Paying Agent in trust for the related
Noteholders (provided, however, that if such Notes are to be
redeemed, notice of such redemption has been duly given pursuant
to this Indenture or provision for such notice has been made,
satisfactory to the Indenture Trustee); and
(iii) Notes in exchange for or in lieu of which other Notes have been
authenticated and delivered pursuant to this Indenture unless
proof satisfactory to the Indenture Trustee is presented that
any such Notes are held by a bona fide purchaser;
provided, that in determining whether the Holders of the requisite
Outstanding Amount of the Notes have given any request, demand,
authorization, direction, notice, consent, or waiver hereunder or
under any Basic Document, Notes owned by the Issuer, any other
obligor upon the Notes, the Seller or any Affiliate of any of the
foregoing Persons shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Indenture
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent, or waiver, only Notes that
the Indenture Trustee knows to be so owned shall be so disregarded;
Notes so owned that have been pledged in good faith may be regarded
as Outstanding if the pledgee establishes to the satisfaction of the
Indenture Trustee the pledgee's right so to act with respect to such
Notes and that the pledgee is not the Issuer, any other obligor upon
the Notes, the Seller or any Affiliate of any of the foregoing
Persons.
OUTSTANDING AMOUNT: The aggregate of the Note Principal Balances of all
Notes Outstanding at the date of determination.
PAYING AGENT: The Indenture Trustee or any other Person that meets the
eligibility standards for the Indenture Trustee specified in Section 6.11 and
is authorized by the Issuer to make payments from the Note Payment Account
and the Note Principal Prepayment Account, including payment of principal of
or interest on the Notes on behalf of the Issuer.
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PERSON: Any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated organization, or government or any agency or
political subdivision thereof.
PREDECESSOR NOTE: With respect to any particular Note, every previous
Note evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.4 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
PROCEEDING: Any suit in equity, action at law or other judicial or
administrative proceeding.
REDEMPTION DATE: In the case of a redemption of the Notes pursuant to
Section 10.1 or a payment to Noteholders pursuant to Section 10.3, the
Payment Date specified by the Note Insurer pursuant to Section 10.2.
REDEMPTION PRICE: In the case of a redemption of the Notes pursuant to
Section 10.1, an amount equal to the unpaid principal amount of the Notes
redeemed plus accrued and unpaid interest thereon to but excluding the
Redemption Date.
SALE AND SERVICING AGREEMENT: The Sale and Servicing Agreement dated as
of June 1, 1997, between the Issuer, FIRSTPLUS FINANCIAL, INC., as Seller
and Servicer, and the Indenture Trustee, as Indenture Trustee.
SECURITIES ACT: The Securities Act of 1933, as amended.
SELLER: FIRSTPLUS FINANCIAL, INC., in its capacity as seller under the
Sale and Servicing Agreement, and any successor in interest.
SERVICER: FIRSTPLUS FINANCIAL, INC. in its capacity as servicer under
the Sale and Servicing Agreement, and any successor Servicer thereunder.
UCC: Unless the context otherwise requires, the Uniform Commercial
Code, as in effect in the relevant jurisdiction, as amended from time to time.
Section 1.2 RULES OF CONSTRUCTION. Unless the context otherwise
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted
accounting principles as in effect from time to time;
(iii) "or" is not exclusive;
INDENTURE (IBJ Warehouse) - Page 5
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(iv) "including" means including without limitation;
(v) words in the singular include the plural and words in the
plural include the singular; and
(vi) any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in
connection herewith means such agreement, instrument or
statute as from time to time amended, modified or
supplemented (as provided in such agreements) and
includes (in the case of agreements or instruments)
references to all attachments thereto and instruments
incorporated therein; references to a Person are also to
its permitted successors and assigns.
ARTICLE II
THE NOTES
Section 2.1 FORM. The Notes shall be designated as the "FIRSTPLUS
FUNDING TRUST Asset-Backed Notes, Series 1997A". The Notes, together with
the Indenture Trustee's certificate of authentication, shall be in
substantially the form set forth in EXHIBIT A, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other
marks of identification and such legends or endorsements placed thereon as
may, consistently herewith, be determined by the officers executing such
Notes, as evidenced by their execution thereof. Any portion of the text of
any Note may be set forth on the reverse thereof, with an appropriate
reference thereto on the face of the Note.
The Notes shall be typewritten, printed, lithographed or engraved or
produced by any combination of these methods, all as determined by the
officers executing such Notes, as evidenced by their execution of such Notes.
Each Note shall be dated the date of its authentication. The terms of
the Notes set forth in EXHIBIT A are part of the terms of this Indenture.
Section 2.2 EXECUTION, AUTHENTICATION, DELIVERY AND DATING. The Notes
shall be executed on behalf of the Issuer by an Authorized Officer of the
Issuer. The signature of any such Authorized Officer on the Notes may be
manual or facsimile.
Notes bearing the manual or facsimile signature of individuals who were
at any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not
hold such offices at the date of such Notes.
INDENTURE (IBJ Warehouse) - Page 6
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Subject to the satisfaction of the conditions set forth in Section 2.8,
the Indenture Trustee shall authenticate and deliver the Notes for original
issue with an Aggregate Maximum Principal Balance of $500,000,000. The
aggregate Note Principal Balance Outstanding at any time may not exceed the
Aggregate Maximum Note Principal Balance.
In the event of an advance of Additional Principal Balances by the
Noteholders as provided in Section 2.02 of the Sale and Servicing Agreement,
each Noteholder shall, and is hereby authorized to, record on the schedule
attached to its Note the date and amount of any Additional Principal Balance
advanced by it, and each repayment thereof; provided that failure to make any
such recordation on such schedule or any error in such schedule shall not
adversely affect any Noteholder's rights with respect to its Note Principal
Balance and its right to receive interest payments in respect of the Note
Principal Balance held by such Noteholder.
The Notes that are authenticated and delivered by the Indenture Trustee
to or upon the order of the Issuer on the Closing Date shall be dated the
Closing Date. All other Notes that are authenticated after the Closing Date
for any other purpose under the Indenture shall be dated the date of their
authentication. The Notes shall be issuable as registered Notes in the
related denomination of the Maximum Note Principal Balance.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Indenture Trustee by the manual signature of one of its
authorized signatories, and such certificate upon any Note shall be
conclusive evidence, and the only evidence, that such Note has been duly
authenticated and delivered hereunder.
Section 2.3 REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE. The
Issuer shall cause to be kept a register (the "Note Register") in which,
subject to such reasonable regulations as it may prescribe, the Issuer shall
provide for the registration of Notes and the registration of transfers of
Notes. The Indenture Trustee initially shall be the "Note Registrar" for the
purpose of registering Notes and transfers of Notes as herein provided. Upon
any resignation of any Note Registrar, the Issuer shall promptly appoint a
successor or, if it elects not to make such an appointment, assume the duties
of Note Registrar. The Note Registrar shall make the Note Register available
for inspection by any Noteholder and the Note Insurer upon reasonable notice
from such Noteholder.
If a Person other than the Indenture Trustee is appointed by the Issuer
as Note Registrar, the Issuer will give the Indenture Trustee prompt written
notice of the appointment of such Note Registrar and of the location, and any
change in the location, of the Note Register, and the Indenture Trustee shall
have the right to inspect the Note Register at all reasonable times and to
obtain copies thereof, and the Indenture Trustee shall have the right to rely
upon a certificate executed on behalf of the Note Registrar by an Executive
Officer thereof as to the names and addresses of the Noteholders and the
principal amounts and number of such Notes.
Subject to Section 2.12, upon surrender for registration of transfer of
any Note at the office or agency of the Issuer to be maintained as provided
in Section 3.2, the Issuer shall execute, the
INDENTURE (IBJ Warehouse) - Page 7
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Indenture Trustee shall authenticate, and the Noteholder shall be entitled to
obtain from the Indenture Trustee, in the name of the designated transferee
or transferees, one or more new Notes in any authorized denominations, of a
like Maximum Note Principal Amount.
At the option of the Noteholder, Notes may be exchanged for other Notes
in any authorized denominations, of a like aggregate principal amount, upon
surrender of the Notes to be exchanged at such office or agency. Whenever any
Notes are so surrendered for exchange, the Issuer shall execute, and the
Indenture Trustee shall authenticate and the Noteholder shall be entitled to
obtain from the Indenture Trustee, the Notes which the Noteholder making the
exchange is entitled to receive.
Any Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument
of transfer in form satisfactory to the Indenture Trustee duly executed by,
the Holder thereof or such Holder's attorney duly authorized in writing, with
such signature guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in the Securities Transfer Agent's Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the Note
Registrar in addition to, or in substitution for, STAMP, all in accordance
with the Securities Exchange Act of 1934, as amended.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
No service charge shall be made to a Noteholder for any registration of
transfer or exchange of Notes, but the Issuer may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration of transfer or exchange of Notes, other
than exchanges pursuant to Section 2.4 or Section 9.6 not involving any
transfer.
The preceding provisions of this Section notwithstanding, the Issuer
shall not be required to make and the Note Registrar need not register
transfers or exchanges of Notes selected for redemption or of any Note for a
period of 15 days preceding the due date for any payment with respect to such
Note.
Section 2.4 MUTILATED, DESTROYED, LOST OR STOLEN NOTES. If (i) any
mutilated Note is surrendered to the Indenture Trustee, or the Indenture
Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Note, and (ii) there is delivered to the Indenture Trustee such
security or indemnity as may be required by it to hold the Issuer and the
Indenture Trustee harmless, then, in the absence of notice to the Issuer, the
Note Registrar or the Indenture Trustee that such Note has been acquired by a
bona fide purchaser, the Issuer shall execute, and upon its request the
Indenture Trustee shall authenticate and deliver, in exchange for or in lieu
of any such mutilated, destroyed, lost or stolen Note, a replacement Note of
a like principal amount; provided, however, that if any such destroyed, lost
or stolen Note, but not a mutilated Note, shall have become or within
INDENTURE (IBJ Warehouse) - Page 8
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seven days shall be due and payable, or shall have been called for
redemption, instead of issuing a replacement Note, the Issuer may pay such
destroyed, lost or stolen Note when so due or payable or upon the Redemption
Date without surrender thereof. If, after the delivery of such replacement
Note or payment of a destroyed, lost or stolen Note pursuant to the proviso
to the preceding sentence, a bona fide purchaser of the original Note in lieu
of which such replacement Note was issued presents for payment such original
Note, the Issuer and the Indenture Trustee shall be entitled to recover such
replacement Note (or such payment) from the Person to whom it was delivered
or any Person taking such replacement Note from such Person to whom such
replacement Note was delivered or any assignee of such Person, except a bona
fide purchaser, and shall be entitled to recover upon the security or
indemnity provided therefor to the extent of any loss, damage, cost or
expense incurred by the Issuer or the Indenture Trustee in connection
therewith.
Upon the issuance of any replacement Note under this Section, the Issuer
may require the payment by the Holder of such Note, other than the Note
Insurer, of a sum sufficient to cover any tax or other governmental charge
that may be imposed in relation thereto and any other reasonable expenses
(including the fees and expenses of the Indenture Trustee) connected
therewith.
Every replacement Note issued pursuant to this Section in replacement of
any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the
mutilated, destroyed, lost or stolen Note shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally
and proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
Section 2.5 PERSONS DEEMED OWNER. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Note Insurer, the
Indenture Trustee and any agent of the Issuer, the Note Insurer or the
Indenture Trustee may treat the Person in whose name any Note is registered
(as of the day of determination) as the owner of such Note for the purpose of
receiving payments of principal of and interest, if any, on such Note and for
all other purposes whatsoever, whether or not such Note be overdue, and none
of the Issuer, the Note Insurer, the Indenture Trustee or any agent of the
Issuer, the Note Insurer or the Indenture Trustee shall be affected by notice
to the contrary.
Section 2.6 PAYMENT OF PRINCIPAL AND INTEREST; DEFAULTED INTEREST.
(a) The Notes shall accrue interest as provided in the Sale and
Servicing Agreement, and such interest shall be payable on each Payment Date
as specified therein, subject to Section 3.1. Any installment of interest or
principal payable on any Note shall be paid on the applicable Payment Date to
the Person in whose name such Note (or one or more Predecessor Notes) is
registered in the Note Register as of the close of business on the related
Record Date by wire transfer in immediately available funds to the account
specified in writing by the related Noteholder, except for the final
installment of principal payable with respect to such Note on a Payment Date
following a
INDENTURE (IBJ Warehouse) - Page 9
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Conversion Date or on the Final Scheduled Payment Date for such Notes and
except for the Redemption Price for any Note called for redemption pursuant
to Section 10.1, which shall be payable as provided below.
(b) The principal of each Note shall be payable in installments on each
Payment Date as provided in the Sale and Servicing Agreement.
Notwithstanding the foregoing, the entire unpaid principal amount of the
Notes shall be due and payable, if not previously paid, on the earlier of (i)
the Final Scheduled Payment Date or (ii) the date on which an Event of
Default shall have occurred and be continuing, if the Indenture Trustee or
the Majority Noteholders have declared the Notes to be immediately due and
payable in the manner provided in Section 5.2. All principal payments on the
Notes shall be made pro rata to the Noteholders entitled thereto. If a
Conversion Date has occurred, the Indenture Trustee shall notify the Person
in whose name a Note is registered at the close of business on the Record
Date preceding the Payment Date on which the Issuer expects that the final
installment of principal of and interest on such Note will be paid. Such
notice shall be mailed or transmitted by facsimile prior to such final
Payment Date and shall specify that such final installment will be payable
only upon presentation and surrender of such Note and shall specify the place
where such Note may be presented and surrendered for payment of such
installment. A copy of such form of notice shall be sent to the Note Insurer
by the Indenture Trustee. No such notice shall be sent to the Noteholders or
the Note Insurer unless a Conversion Date has occurred. Notices in
connection with redemptions of Notes shall be mailed to Noteholders as
provided in Section 10.2.
(c) Any reduction in the principal amount of any Notes (or any one or
more Predecessor Notes) effected by any payments made on any Payment Date
shall be binding upon all future Holders of such Note and of any Note issued
upon the registration of transfer of such Note or in exchange thereof or in
lieu thereof, whether or not noted thereon. Any increase in the principal
amount of any Note (or any one or more Predecessor Notes) effected by
payments to the Issuer of Additional Note Principal Balances shall be binding
upon the Issuer and shall inure to the benefit of all future holders of such
Note and of any Note issued upon the registration of transfer thereof or in
exchange thereof or in lieu thereof, whether or not noted thereon.
Section 2.7 CANCELLATION.
(a) All Notes surrendered for payment, registration of transfer,
exchange or redemption shall, if surrendered to any Person other than the
Indenture Trustee, be delivered to the Indenture Trustee and shall be
promptly canceled by the Indenture Trustee. The Issuer shall deliver to the
Indenture Trustee for cancellation any Notes previously authenticated and
delivered hereunder which the Issuer may have acquired in any manner
whatsoever, and all Notes so delivered shall be promptly canceled by the
Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange
for any Notes canceled as provided in this Section, except as expressly
permitted by this Indenture. All canceled Notes may be held or disposed of
by the Indenture Trustee in accordance with its standard retention or
disposal policy as in effect at the time unless the Issuer shall direct by an
Issuer Order that they be destroyed or returned to it; provided, that such
Issuer Order is timely and the Notes have not been previously disposed of by
the Indenture Trustee.
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(b) On any date, prior to a Conversion Date, on which (i) the Aggregate
Note Principal Balance has been reduced to zero, (ii) the Notes have been
purchased by the Issuer or its assignee, if such assignee is an Affiliate of
the Issuer pursuant to Section 12.01(a) of the Sale and Servicing Agreement,
or (iii) the entire Trust Estate has been sold pursuant to Section 12.02 of
the Sale and Servicing Agreement and the proceeds of such sale plus any
amounts on deposit in the Trust Accounts have been applied in accordance with
Section 12.03(a) of the Sale and Servicing Agreement, the Issuer shall have
the right to request the Noteholders to surrender the Notes to the Indenture
Trustee, and the Indenture Trustee shall cancel such Notes upon receipt of an
Issuer Order requesting such cancellation.
Section 2.8 AUTHENTICATION OF NOTES.
(a) The Notes shall be authenticated by the Indenture Trustee, upon
receipt by the Indenture Trustee of the following:
(i) An Issuer Order authorizing the execution and authentication
of such Notes by the Issuer.
(ii) All of the items of Collateral shall have been delivered to
the Indenture Trustee or its designee.
(iii) Except to the extent provided in subsection (b) below, Opinions
of Counsel addressed to the Indenture Trustee and the Note
Insurer to the effect that:
(A) the Issuer has been duly formed and is validly existing
as a business trust under the laws of the State of Delaware, and has
power, authority and legal right to execute and deliver this
Indenture, the Insurance Agreement and the Sale and Servicing
Agreement;
(B) the issuance of the Notes has been duly and
validly authorized by the Issuer;
(C) the Notes, when executed and authenticated in
accordance with the provisions of this Indenture and delivered
against payment therefor, will be the legal, valid and binding
obligations of the Issuer pursuant to the terms of this Indenture
and will be entitled to the benefits of this Indenture, and will be
enforceable in accordance with their terms, subject to bankruptcy,
insolvency, reorganization, arrangement, moratorium, fraudulent or
preferential conveyance and other similar laws of general
application affecting the rights of creditors generally and to
general principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law);
(D) all instruments furnished to the Indenture Trustee as
conditions precedent to the authentication of the Notes by the
Indenture Trustee pursuant to the
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Indenture conform to the requirements of this Indenture and
constitute all the documents required to be delivered hereunder for
the Indenture Trustee to authenticate the Notes;
(E) all conditions precedent provided for in this
Indenture relating to the authentication of the Notes have been
complied with;
(F) assuming due authorization, execution and delivery
thereof by the Indenture Trustee, this Indenture has been duly
executed and delivered by Issuer and constitutes the legal, valid
and binding obligation of the Issuer, enforceable against the
Issuer in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, arrangement, moratorium, fraudulent or
preferential conveyance and other similar laws of general
application affecting the rights of creditors generally and to
general principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law);
(G) Neither the Issuer nor the Seller is or will, as a
result of the sale of the Notes as contemplated in the Note
Purchase Agreement, become an "investment company" or under the
"control" of an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended, which would be
required to register under such act.
(H) The Notes will be treated as indebtedness for
federal income tax purposes and not as an ownership interest in the
assets of the Issuer or as an equity interest in the Issuer or in a
separate association taxable as a corporation.
(I) As long as the Issuer has only a single owner, the
Issuer will be disregarded as an entity separate from such owner
for federal income tax purposes.
(J) Upon creation of the Trust Estate under the
Indenture and delivery of the Notes by the Indenture Trustee for
value in accordance with the instructions of the Issuer and, in the
case of Subsequent Home Loans, upon the Grant for value thereof by
the Issuer to the Indenture Trustee pursuant to the applicable
Subsequent Transfer Agreement, the Indenture will be effective to
create in favor of the Indenture Trustee a security interest under
the Uniform Commercial Code as currently in effect in the State of
New York (the "New York UCC") in all right, title and interest of
the Issuer in those portions of the Trust Estate in which a
security interest may be created pursuant to Article 9 of the New
York UCC; and
(K) The security interest referred to in paragraph (J)
above in the items of the Trust Estate described below will be
perfected as described below:
(1) The delivery by the Issuer to the Custodian, on
behalf of the Indenture Trustee, in the State of Texas of the
Debt Instruments pursuant to
INDENTURE - (IBJ Warehouse) - Page 12
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the Indenture will perfect such security interest in favor of
the Indenture Trustee under the Texas UCC in all right, title
and interest of the Issuer in such Debt Instruments and,
assuming the Indenture Trustee acquires its interest in such
Debt Instruments without knowledge that the same are subject
to a security interest (other than the security interest
created by the Indenture), the Indenture Trustee will acquire
such security interest in such Debt Instruments free and clear
of any prior lien of a kind which may be perfected under
Article 9 of the Texas UCC. The Debt Instruments constitute
"instruments" under Article 9 of the New York UCC and Article
9 of the Texas UCC.
(2) The security interest in the portion of the
Trust Estate constituting "proceeds" (as defined in Section
9.306(a) of the Texas UCC) from the Debt Instruments will be
perfected as and to the extent provided in Section 9.306 of
the Texas UCC and, assuming that none of such proceeds
represent proceeds (as defined in the Texas UCC) of collateral
in which another party has a prior perfected security
interest, the Indenture Trustee will acquire such security
interest in such proceeds free and clear of any prior lien of
a kind which may be perfected under Article 9 of the Texas UCC.
(3) The filing of the UCC-1 Financing Statement with
respect to the other assets comprising the Trust Estate which
constitute "general intangibles" under Article 9 of the New
York UCC and Article 9 of the Texas UCC (as used in this
Section, the "Filing Collateral") with the Secretary of the
State of the State of Texas will perfect such security
interest in favor of the Indenture Trustee under the Texas UCC
in all right, title and interest of the Issuer in the Filing
Collateral in which a security interest may be perfected under
Article 9 of the Texas UCC and, assuming that the Filing
Collateral does not represent proceeds (as defined in the
Texas UCC) of collateral in which another secured party has a
prior perfected security interest, the Indenture Trustee will
acquire such security interest in the Filing Collateral free
and clear of any prior lien of a kind which may be perfected
under Article 9 of the Texas UCC.
(4) The security interest in the portion of the
Trust Estate constituting "proceeds" (as defined in Section
9.306(1) of the Texas UCC) from the Filing Collateral will be
perfected as and to the extent provided in Section 9.306 of
the Texas UCC and, assuming that none of such proceeds
represents proceeds (as defined in the Texas UCC) of
collateral in which another party has a prior perfected
security interest, the Indenture Trustee will acquire such
security interest in such proceeds free and clear of any prior
lien of a kind which may be perfected under Article 9 of the
Texas UCC.
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(iv) An Officer's Certificate of the Issuer complying with
the requirements of Section 11.1 and stating that:
(A) the Issuer is not in Default under this
Indenture and the issuance of the Notes applied for will not
result in any breach of any of the terms, conditions or
provisions of, or constitute a default under, any indenture,
mortgage, deed of trust or other agreement or instrument to
which the Issuer is a party or by which it is bound, or any
order of any court or administrative agency entered in any
proceeding to which the Issuer is a party or by which it may
be bound or to which it may be subject;
(B) the Issuer is the owner of all of the Home
Loans, has not assigned any interest or participation in the
Home Loans (or, if any such interest or participation has been
assigned, it has been released) and has the right to Grant all
of the Home Loans to the Indenture Trustee;
(C) the Issuer has Granted to the Indenture Trustee
all of its right, title, and interest in the Collateral, and
has delivered or caused the same to be delivered to the
Indenture Trustee;
(D) attached thereto are true and correct copies of
letters signed by Moody's and Standard & Poor's confirming
that the Notes have been rated "Aaa" and "AAA" by Moody's and
Standard & Poor's, respectively; and
(E) all conditions precedent provided for in this
Indenture relating to the authentication and delivery of the
Notes have been complied with.
(b) The Opinions of Counsel to be delivered pursuant to subsection
(a)(iii) above may differ from the Opinions of Counsel described in such
subsection so long as the Opinions of Counsel so delivered are acceptable
to each Rating Agency, the Note Insurer, and the Indenture Trustee, which
shall be conclusively evidenced by the delivery on the Closing Date of
each such Rating Agency's rating letter, by delivery on the Closing Date
of the related Note Insurance Policy, and by the Indenture Trustee's
authentication and delivery of the Notes, respectively; and in such case
such acceptable opinions of counsel shall be deemed to be the Opinions of
Counsel required to be received by the Indenture Trustee in connection
with the authentication of the Notes by the Indenture Trustee.
Section 2.9 RELEASE OF COLLATERAL.
(a) Subject to the provisions of this Section 2.9, Section 11.1 hereof,
and the terms of the Basic Documents, the Indenture Trustee shall release
property from the lien of this Indenture only upon receipt of an Issuer
Request accompanied by an Officer's Certificate.
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(b) The Issuer or the Servicer, on behalf of the Issuer, shall be
entitled to obtain a release from the lien of this Indenture for any Home
Loan and the related Mortgaged Property at any time (i) after a payment by
the Seller or the Servicer pursuant to Section 3.05 of the Sale and Servicing
Agreement or by the Issuer pursuant to Section 2.9(c) of this Indenture of
the Purchase Price of the Home Loan, (ii) after a Qualified Substitute Home
Loan is substituted for such Home Loan and payment of the Substitution
Adjustment, if any, (iii) after liquidation of the Home Loan in accordance
with Section 4.02 of the Sale and Servicing Agreement and the deposit of all
Insurance Proceeds and Liquidation Proceeds received with respect thereto in
the Collection Account, (iv) upon the payment in full of the Home Loan or the
sale or other disposition of the related Mortgaged Property), or (v) as
contemplated by Section 11.02(b) of the Sale and Servicing Agreement. Any
such release other than as contemplated by Section 11.02(b) of the Sale and
Servicing Agreement or pursuant to clause (iv) of the preceding sentence
shall be subject to the condition that the Issuer shall have delivered to the
Indenture Trustee and the Note Insurer an Issuer Request (A) identifying the
Home Loan and the related Mortgaged Property to be released, (B) requesting
the release thereof, (C) setting forth the amount deposited in the Collection
Account with respect thereto, (D) certifying that the amount deposited in the
Collection Account (x) equals the Purchase Price of the applicable Home Loan,
in the case of a release pursuant to clause (i) above, (y) equals the
Substitution Adjustment related to the Qualified Substitute Home Loan and the
Deleted Home Loan released pursuant to clause (ii) above, or (z) equals the
entire amount of Insurance Proceeds and Liquidation Proceeds received with
respect to such Home Loan and the related Mortgaged Property in the case of a
release pursuant to clause (iii) above. Any such release as contemplated by
Section 11.02(b) of the Sale and Servicing Agreement shall be subject to the
Issuer's compliance with the provisions of such Section. Any such release
pursuant to clause (iv) of the second preceding sentence shall be subject to
the Servicer's compliance with the provisions of Section 7.02 of the Sale and
Servicing Agreement.
(c) The Issuer shall have the option, exercisable in its sole
discretion at any time, to obtain the release of the lien of the Indenture or
to substitute one or more Qualified Substitute Home Loans for any Home Loan
provided that (x) any release of the lien of the Indenture or substitution
pursuant to this Section 2.09(c) is conducted in the same manner as a
repurchase or substitution of a Defective Home Loan by the Seller pursuant to
Section 3.05 of the Sale and Servicing Agreement and (y) after giving effect
to such release of the lien of the Indenture or substitution, the Home Loan
Pool will satisfy the underwriting criteria set forth in Section 3.03(ii) of
the Sale and Servicing Agreement and the Issuer shall have delivered an
Officer's Certificate to such effect to the Indenture Trustee, the Note
Insurer and the Noteholders. The foregoing clause (y) shall not apply to a
prepayment of 100% of the Notes in accordance with Section 11.02(d) of the
Sale and Servicing Agreement.
(d) The Indenture Trustee shall, if requested by the Servicer,
temporarily release or cause the Custodian to temporarily release to the
Servicer the Indenture Trustee's Home Loan File pursuant to the provisions of
Section 7.02 of the Sale and Servicing Agreement upon compliance by the
Servicer of the provisions thereof provided that the Indenture Trustee's Home
Loan File shall have been stamped to signify the Issuer's pledge to the
Indenture Trustee under the Indenture.
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Section 2.10 DEFINITIVE NOTES. The Notes, upon original issuance, will
be issued in the form of typewritten Notes in the name of the initial
Noteholders, executed by the Issuer and authenticated by the Indenture
Trustee.
Section 2.11 TAX TREATMENT. The Issuer has entered into this
Indenture, and the Notes will be issued, with the intention that, for
federal, State and local income, single business and franchise tax purposes,
the Notes will qualify as indebtedness of the Issuer secured by the
Collateral. The Issuer, by entering into this Indenture, and each
Noteholder, by its acceptance of a Note, agree to treat the Notes for
federal, state and local income, single business and franchise tax purposes
as indebtedness of the Issuer.
Section 2.12 RESTRICTIONS ON TRANSFER.
(a) The Notes have not been registered or qualified under the
Securities Act or the securities laws of any state. No Note may be
transferred unless such Note is resold (i) pursuant to a valid registration
statement under the Securities Act and any applicable state securities or
"Blue Sky" laws, (ii) pursuant to Rule 144A under the Securities Act or (iii)
pursuant to another exemption available under the Securities Act and, in each
case, in compliance with any applicable state securities or "Blue Sky" laws.
(b) Prior to a transfer of a Note pursuant to Rule 144A under the
Securities Act, the Indenture Trustee shall require a transferor's
representation letter AND a transferee's letter in the forms attached hereto
as EXHIBIT B-1 and EXHIBIT B-2, respectively. Prior to a transfer of a Note
pursuant to another exemption available under the Securities Act, the
Indenture Trustee shall require a transferee's representation letter in the
form attached hereto as EXHIBIT B-3, or such other representations (or an
acceptable opinion of counsel obtained at no expense to the Issuer) as may be
approved by the Issuer.
(c) The Indenture Trustee shall have no liability to the Trust Estate,
any Noteholder, or any other Person arising from a transfer of any Note in
reliance upon a certification or representations, or an opinion described in
this Section 2.12. Neither the Issuer nor the Indenture Trustee is obligated
to register or qualify the Notes under the Securities Act or any other
securities law.
(d) Promptly after receipt, the Indenture Trustee shall furnish to a
requesting Holder, or any prospective owner designated by such Holder, the
information required to be delivered to Holders and prospective owners of
Notes in connection with resales of the Notes to permit compliance with Rule
144A of the Securities Act in connection with such resales. Such information
with respect to the Notes shall be provided to the Indenture Trustee as
provided in the related Sale and Servicing Agreement.
INDENTURE - (IBJ Warehouse) - Page 16
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ARTICLE III
COVENANTS
Section 3.1 PAYMENT OF PRINCIPAL AND INTEREST. The Issuer will duly
and punctually pay (or will cause to be duly and punctually paid) the
principal of and interest, if any, on the Notes in accordance with the terms
of the Notes and this Indenture. Without limiting the foregoing (i) unless
the Notes have been declared due and payable pursuant to Section 5.2 hereof
and moneys collected by the Indenture Trustee are being applied in accordance
with Section 5.4(b) hereof, subject to and in accordance with Section 8.2(c),
the Issuer will cause all amounts on deposit in the Note Payment Account on a
Payment Date deposited therein to be paid to the Noteholders pursuant to the
Sale and Servicing Agreement and this Indenture and (ii) the Issuer will
cause all amounts deposited in the Note Principal Prepayment Account pursuant
to Section 11.02(b) of the Sale and Servicing Agreement to be paid to the
Noteholders in accordance therewith, and the Indenture Trustee agrees to make
such distributions in accordance therewith. Amounts properly withheld under
the Code by any Person from a payment to any Noteholder of interest and/or
principal shall be considered as having been paid by the Issuer to such
Noteholder for all purposes of this Indenture.
The Notes shall be non-recourse obligations of the Issuer and shall be
limited in right of payment to amounts available from the Collateral and any
amounts received by the Indenture Trustee under the Guaranty Policy in
respect of the Notes, as provided in this Indenture. The Issuer shall not
otherwise be liable for payments on the Notes, and none of the owners,
agents, officers, directors, employees, or successors or assigns of the
Issuer shall be personally liable for any amounts payable, or performance
due, under the Notes or this Indenture. If any other provision of this
Indenture shall be deemed to conflict with the provisions of this Section
3.1, the provisions of this Section 3.1 shall control.
Section 3.2 MAINTENANCE OF OFFICE OR AGENCY. The Issuer will maintain
in the Borough of Manhattan, The City of New York, an office or agency where
Notes may be surrendered for registration of transfer or exchange, and where
notices and demands to or upon the Issuer in respect of the Notes and this
Indenture may be served. The Issuer hereby initially appoints the Indenture
Trustee to serve as its agent for the foregoing purposes and to serve as
Paying Agent with respect to the Certificates. The Issuer will give prompt
written notice to the Indenture Trustee of the location, and of any change in
the location, of any such office or agency. If at any time the Issuer shall
fail to maintain any such office or agency or shall fail to furnish the
Indenture Trustee with the address thereof, such surrenders, notices and
demands may be made or served at the Corporate Trust Office, and the Issuer
hereby appoints the Indenture Trustee as its agent to receive all such
surrenders, notices and demands.
Section 3.3 MONEY FOR PAYMENTS TO BE HELD IN TRUST. All payments of
amounts due and payable with respect to the Notes that are to be made
pursuant to Section 8.2(c) shall be made on behalf of the Issuer by the
Indenture Trustee or by the Paying Agent, and no amounts withdrawn from the
Collection Account and deposited in the Note Payment Account for payment on
the Notes shall be paid over to the Issuer except as provided in Section
8.02(c).
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Any Paying Agent shall be appointed by Issuer Order with written notice
thereof to the Indenture Trustee and the Note Insurer. Any Paying Agent
appointed by the Issuer shall be a Person who would be eligible to be
Indenture Trustee hereunder as provided in Section 6.11. The Issuer shall
not appoint any Paying Agent (other than the Indenture Trustee) which is not,
at the time of such appointment, a Depository Institution.
The Issuer will cause each Paying Agent (unless the Indenture Trustee is
the Paying Agent) to execute and deliver to the Indenture Trustee an
instrument in which such Paying Agent shall agree with the Indenture Trustee
(and if the Indenture Trustee acts as Paying Agent, it hereby so agrees),
subject to the provisions of this Section, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons
or otherwise disposed of as herein provided and pay such sums
to such Persons as herein provided;
(ii) give the Indenture Trustee and the Note Insurer notice of any
default by the Issuer (or any other obligor upon the Notes) of
which it has actual knowledge in the making of any payment
required to be made with respect to the Notes;
(iii) at any time during the continuance of any such default,
upon the written request of the Indenture Trustee, forthwith
pay to the Indenture Trustee all sums so held in trust by such
Paying Agent;
(iv) immediately resign as a Paying Agent and forthwith pay to the
Indenture Trustee all sums held by it in trust for the payment
of Notes if at any time it ceases to meet the standards
required to be met by a Paying Agent at the time of its
appointment; and
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any
applicable withholding taxes imposed thereon and with respect
to any applicable reporting requirements in connection
therewith; provided, however, that with respect to withholding
and reporting requirements applicable to original issue
discount (if any) on the Notes, the Issuer shall have first
provided the calculations pertaining thereto to the Indenture
Trustee.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by
Issuer Order direct any Paying Agent to pay to the Indenture Trustee all sums
held in trust by such Paying Agent, such sums to be held by the Indenture
Trustee upon the same trusts as those upon which the sums were held by such
Paying Agent; and upon such payment by any Paying Agent to the Indenture
Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
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<PAGE>
Subject to applicable laws with respect to escheat of funds or abandoned
property, any money held by the Indenture Trustee or any Paying Agent in
trust for the payment of any amount due with respect to any Note and
remaining unclaimed for two years after such amount has become due and
payable shall be discharged from such trust and be paid to the Issuer on
Issuer Request; and the Holder of such Note shall thereafter, as an unsecured
general creditor, look only to the Issuer for payment thereof (but only to
the extent of the amounts so paid to the Issuer), and all liability of the
Indenture Trustee or such Paying Agent with respect to such trust money shall
thereupon cease; provided, however, that the Indenture Trustee or such Paying
Agent, before being required to make any such repayment, shall at the expense
and direction of the Issuer cause to be published once, in a newspaper
published in the English language, customarily published on each Business Day
and of general circulation in the City of New York, notice that such money
remains unclaimed and that, after a date specified therein, which shall not
be less than 30 days from the date of such publication, any unclaimed balance
of such money then remaining will be repaid to the Issuer. The Indenture
Trustee shall also adopt and employ, at the expense and direction of the
Issuer, any other reasonable means of notification of such repayment
(including, but not limited to, mailing notice of such repayment to Holders
whose Notes have been called but have not been surrendered for redemption or
whose right to or interest in moneys due and payable but not claimed is
determinable from the records of the Indenture Trustee or of any Paying
Agent, at the last address of record for each such Holder).
Section 3.4 EXISTENCE.
(a) Subject to Section 3.4(b), the Issuer will keep in full effect its
existence, rights and franchises as a business trust under the laws of the
State of Delaware (unless it becomes, or any successor Issuer hereunder is or
becomes, organized under the laws of any other State or of the United States
of America, in which case the Issuer will keep in full effect its existence,
rights and franchises under the laws of such other jurisdiction) and will
obtain and preserve its qualification to do business in each jurisdiction in
which such qualification is or shall be necessary to protect the validity and
enforceability of this Indenture, the Notes and the Collateral.
(b) Upon any consolidation or merger of or other succession to the
Issuer, the Person succeeding to the Issuer may exercise every right and
power of the Issuer under this Indenture with the same effect as if such
Person had been named as the Issuer herein.
Section 3.5 PROTECTION OF COLLATERAL. The Issuer will from time to
time and upon the direction of the Majority Noteholders execute and deliver
all such supplements and amendments hereto and all such financing statements,
continuation statements, instruments of further assurance and other
instruments, and will take such other action necessary or advisable to:
(i) provide further assurance with respect to the Grant of all or
any portion of the Collateral;
(ii) maintain or preserve the lien and security interest (and the
priority thereof) of this Indenture or carry out more
effectively the purposes hereof;
INDENTURE - (IBJ Warehouse) - Page 19
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(iii) perfect, publish notice of or protect the validity of any
Grant made or to be made by this Indenture;
(iv) enforce any rights with respect to the Collateral; or
(v) preserve and defend title to the Collateral and the rights of
the Indenture Trustee, the Noteholders and the Note Insurer in
such Collateral against the claims of all persons and parties.
The Issuer hereby designates the Servicer, its agent and
attorney-in-fact to execute any financing statement, continuation statement
or other instrument required to be executed pursuant to this Section 3.5.
Section 3.6 ANNUAL OPINIONS AS TO COLLATERAL.
On or before February 15 in each calendar year, beginning in 1998, the
Issuer shall furnish to the Indenture Trustee, the Note Insurer and the
Arranger an Opinion of Counsel either stating that, in the opinion of such
counsel, such action has been taken with respect to the recording, filing,
re-recording and refiling of this Indenture, any indentures supplemental
hereto and any other requisite documents and with respect to the execution
and filing of any financing statements and continuation statements as is
necessary to maintain the lien and security interest created by this
Indenture and reciting the details of such action or stating that in the
opinion of such counsel no such action is necessary to maintain such lien and
security interest. Such Opinion of Counsel shall also describe the
recording, filing, re-recording and refiling of this Indenture, any
indentures supplemental hereto and any other requisite documents and the
execution and filing of any financing statements and continuation statements
that will, in the opinion of such counsel, be required to maintain the lien
and security interest of this Indenture until February 15th of the following
calendar year.
Section 3.7 PERFORMANCE OF OBLIGATIONS; SERVICING OF HOME LOANS.
(a) The Issuer will not take any action and will use its best efforts
not to permit any action to be taken by others that would release any Person
from any of such Person's material covenants or obligations under any
instrument or agreement included in the Collateral or that would result in
the amendment, hypothecation, subordination, termination or discharge of, or
impair the validity or effectiveness of, any such instrument or agreement,
except as expressly provided in this Indenture, the Sale and Servicing
Agreement or such other instrument or agreement.
(b) The Issuer may contract with or otherwise obtain the assistance of
other Persons (including, without limitation, the Servicer to assist it in
performing its duties under this Indenture, and any performance of such
duties by a Person identified to the Indenture Trustee and the Note Insurer
in an Officer's Certificate of the Issuer shall be deemed to be action taken
by the Issuer.
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Initially, the Issuer has contracted with the Servicer to assist the Issuer
in performing its duties under this Indenture.
(c) The Issuer will punctually perform and observe all of its obligations
and agreements contained in this Indenture, the Basic Documents and in the
instruments and agreements included in the Collateral, including but not
limited to (i) filing or causing to be filed all UCC financing statements and
continuation statements required to be filed by the terms of this Indenture and
the Sale and Servicing Agreement and (ii) recording or causing to be recorded
all Mortgages, Assignments of Mortgage, all intervening assignments of Mortgage
and all assumption and modification agreements to the extent such documents are
required to be recorded by the terms of the Sale and Servicing Agreement, in
each case in accordance with and within the time periods provided for in this
Indenture and/or the Sale and Servicing Agreement, as applicable.
(d) If the Servicer is terminated or resigns in accordance with the Sale
and Servicing Agreement, a successor Servicer shall be appointed as provided in
Section 10.02 of the Sale and Servicing Agreement.
(e) Without derogating from the absolute nature of the assignment granted
to the Indenture Trustee under this Indenture or the rights of the Indenture
Trustee hereunder, the Issuer agrees that it will not, without the prior
written consent of the Majority Noteholders (i) amend, modify, waive,
supplement, terminate or surrender, or agree to any amendment, modification,
supplement, termination, waiver or surrender of, the terms of any Collateral
(except to the extent otherwise provided in the Sale and Servicing Agreement)
or (ii) waive timely performance or observance by the Servicer or the Seller
under the Sale and Servicing Agreement. If any such amendment, modification,
supplement or waiver shall be so consented to by the Majority Noteholders, the
Issuer agrees, promptly following a request by the Indenture Trustee, to
execute and deliver, in its own name and at its own expense, such agreements,
instruments, consents and other documents as the Indenture Trustee may deem
necessary or appropriate in the circumstances.
Section 3.8 NEGATIVE COVENANTS. So long as any Notes are Outstanding,
the Issuer shall not:
(i) except as expressly permitted by this Indenture or the Sale
and Servicing Agreement, sell, transfer, exchange or otherwise
dispose of any of the properties or assets of the Issuer,
including those included in the Collateral, unless directed to
do so by the Indenture Trustee or the Majority Noteholders;
(ii) claim any credit on, or make any deduction from the principal
or interest payable in respect of, the Notes (other than
amounts properly withheld from such payments under the Code)
or assert any claim against any present or former Noteholder
by reason of the payment of the taxes levied or assessed upon
any part of the Collateral;
INDENTURE (IBJ Wharehouse) -- Page 21
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(iii) engage in any business or activity other than as permitted by
the Declaration of Trust or other than in connection with, or
relating to, the issuance of Notes pursuant to this Indenture,
or amend the Declaration of Trust as in effect on the Closing
Date other than in accordance with Section 7.1 thereof,
(iv) issue debt obligations under any other indenture;
(v) incur or assume any indebtedness or guaranty any indebtedness
of any Person, except for such indebtedness as may be incurred
by the Issuer in connection with the issuance of the Notes
pursuant to this Indenture;
(vi) dissolve or liquidate in whole or in part or merge or
consolidate with any other Person;
(vii) (A) permit the validity or effectiveness of this Indenture to
be impaired, or permit the lien of this Indenture to be
amended, hypothecated, subordinated, terminated or discharged,
or permit any Person to be released from any covenants or
obligations with respect to the Notes under this Indenture
except as may be expressly permitted hereby, (B) permit any
lien, charge, excise, claim, security interest, mortgage or
other encumbrance (other than the lien of this Indenture) to
be created on or extend to or otherwise arise upon or burden
the Collateral or any part thereof or any interest therein or
the proceeds thereof (other than tax liens, mechanics' liens
and other liens that arise by operation of law, in each case
on any of the Mortgaged Properties and arising solely as a
result of an action or omission of the related Obligor) or (C)
permit the lien of this Indenture not to constitute a valid
first priority (other than with respect to any such tax,
mechanics' or other lien) security interest in the Collateral;
(viii) take any action or fail to take any action which may cause the
Issuer to be taxable as a taxable mortgage pool pursuant to
Section 7701(i) of the Code and the corresponding regulations.
Section 3.9 ANNUAL STATEMENT AS TO COMPLIANCE. The Issuer will deliver
to the Indenture Trustee, the Note Insurer and the Arranger, within 120 days
after the end of each fiscal year of the Issuer (commencing with the fiscal
year 1997), an Officer's Certificate stating, as to the Authorized Officer
signing such Officer's Certificate, that:
(i) a review of the activities of the Issuer during such year and
of its performance under this Indenture has been made under
such Authorized Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge, based on
such review, the Issuer has complied with all conditions and
covenants under this
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Indenture throughout such year, or, if there has been a
default in its compliance with any such condition or covenant,
specifying each such default known to such Authorized Officer
and the nature and status thereof.
Section 3.10 [RESERVED].
Section 3.11 SERVICER'S OBLIGATIONS. The Issuer shall cause the Servicer
to comply with the Servicer's obligations under Sections 5.01, 6.01, 7.07 and
Article IX of the Sale and Servicing Agreement.
Section 3.12 [RESERVED].
Section 3.13 FURTHER INSTRUMENTS AND ACTS. Upon request of the Indenture
Trustee or the Note Insurer, the Issuer will execute and deliver such further
instruments and do such further acts as may be reasonably necessary or proper
to carry out more effectively the purpose of this Indenture.
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.1 SATISFACTION AND DISCHARGE OF INDENTURE. When either (I) the
Sale and Servicing Agreement has been terminated pursuant to Section 11.01(a)
thereof or (II) all of the following have occurred:
(a) all Notes theretofore authenticated and delivered (other than (i)
Notes that have been destroyed, lost or stolen and that have been replaced or
paid as provided in Section 2.4 and (ii) Notes for whose payment money has
theretofore been deposited in trust or segregated and held in trust by the
Issuer and thereafter repaid to the Issuer or discharged from such trust, as
provided in Section 3.3) have been delivered to the Indenture Trustee for
cancellation; or
(b) the Issuer has paid or caused to be paid all amounts payable (i) to
the Note Insurer under this Indenture, the Sale and Servicing Agreement, and
the Insurance Agreement, (ii) to the Indenture Trustee under this Indenture and
the Sale and Servicing Agreement, and (iii) to the Servicer under the Sale and
Servicing Agreement; and
(c) the Issuer has delivered to the Indenture Trustee an Officer's
Certificate stating that all conditions precedent herein provided for relating
to the satisfaction and discharge of this Indenture with respect to the Notes
have been complied with;
then, upon Issuer Request, this Indenture and the lien, rights, and
interests created hereby, shall cease to be of further effect with respect to
the Notes (except as to (i) rights of registration of transfer and exchange,
(ii) substitution of mutilated, destroyed, lost or stolen Notes, (iii) rights
of Noteholders to receive payments of principal thereof and interest thereon,
(iv) Sections 3.3, 3.4, 3.5, 3.8 and 3.10 hereof, (v) the rights, obligations
and immunities of the Indenture Trustee hereunder
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(including the rights of the Indenture Trustee under Section 6.7 and the
obligations of the Indenture Trustee under Section 4.2) and (vi) the rights
of Noteholders as beneficiaries hereof with respect to the property so
deposited with the Indenture Trustee payable to all or any of them), and the
Indenture Trustee, on demand of and at the expense of the Issuer, shall
execute and deliver proper instruments acknowledging satisfaction and
discharge of this Indenture with respect to the Notes, and shall pay, or
assign or transfer and deliver, to or at the direction of the Issuer, all
Collateral held by it as part of the Trust Estate after satisfaction of the
conditions specified in clauses (b) and (c) above.
Section 4.2 APPLICATION OF TRUST MONEY. All moneys deposited with the
Indenture Trustee pursuant to Sections 3.3 and 4.1 hereof shall be held in
trust and applied by it, in accordance with the provisions of the Notes and
this Indenture, to the payment, either directly or through any Paying Agent, as
the Indenture Trustee may determine, to the Holders of the particular Notes for
the payment or redemption of which such moneys have been deposited with the
Indenture Trustee, of all sums due and to become due thereon for principal and
interest; but such moneys need not be segregated from other funds except to the
extent required herein or in the Sale and Servicing Agreement or required by
law.
Section 4.3 REPAYMENT OF MONEYS HELD BY PAYING AGENT. In connection with
the satisfaction and discharge of this Indenture with respect to the Notes, all
moneys then held by any Paying Agent other than the Indenture Trustee under the
provisions of this Indenture with respect to such Notes shall, upon demand of
the Issuer, be paid to the Indenture Trustee to be held and applied according
to Section 3.3 and thereupon such Paying Agent shall be released from all
further liability with respect to such moneys.
ARTICLE V
REMEDIES
Section 5.1 EVENTS OF DEFAULT. "Event of Default," wherever used herein,
means any one of the following events (whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(a) default in the payment of any Interest Payment Amount when the same
becomes due and payable; or
(b) default in the payment of any Principal Payment Amount when the same
becomes due and payable; or
(c) failure by the Issuer duly to observe and perform, in any material
respect, any covenant, obligation or agreement of the Issuer made in this
Indenture (other than a covenant, obligation or agreement, a default in the
observance or performance of which is elsewhere in this Section specifically
dealt with), which failure continues unremedied for a period of 30 days after
there shall have been given, by registered or certified mail, to the Issuer by
the Indenture Trustee or
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to the Issuer and the Indenture Trustee by the Holders of Outstanding Notes
representing at least 25% of the Outstanding Amount, a written notice
specifying such default or incorrect representation or warranty and requiring
it to be remedied and stating that such notice is a notice of Default
hereunder; or
(d) any representation or warranty of the Issuer made in this Indenture,
the Insurance Agreement, the Sale and Servicing Agreement or in any certificate
or other writing delivered pursuant hereto or in connection herewith proving to
have been incorrect in any material respect as of the time when the same shall
have been made, and such default shall continue or not be cured, or the
circumstance or condition in respect of which such misrepresentation or
warranty was incorrect shall not have been eliminated or otherwise cured, for a
period of 30 days after there shall have been given, by registered or certified
mail, to the Issuer by the Indenture Trustee or to the Issuer and the Indenture
Trustee by the Holders of Outstanding Notes representing at least 25% of the
Outstanding Amount, a written notice specifying such default or incorrect
representation or warranty and requiring it to be remedied and stating that
such notice is a notice of Default hereunder; or
(e) the entry by a court or supervisory authority having jurisdiction of
(A) a decree or order for relief in respect of the Issuer or any substantial
part of the Collateral in an involuntary case or proceeding under any
applicable federal or state bankruptcy, insolvency, reorganization, or other
similar law or (B) appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator, or other similar official of the Issuer or any
substantial part of the Collateral, or ordering the winding up or liquidation
of the Issuer's affairs, and the continuance of any such decree or order for
relief or any such other decree or order unstayed and in effect for a period of
60 consecutive days; or
(f) the commencement by the Issuer of a voluntary case or proceeding
under any applicable federal or state bankruptcy, insolvency, reorganization,
or other similar law or of any other case or proceeding to be adjudicated
bankrupt or insolvent or the consent by the Issuer to the entry of a decree or
order for relief in respect of itself or any substantial part of the Collateral
in an involuntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization, or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against the
Issuer or any substantial part of the Collateral, or the filing by the Issuer
of a petition or answer or consent seeking reorganization or relief under any
applicable federal or state law, or the consent by the Issuer to the filing of
such petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator, or similar official of
the Issuer or of any substantial part of the Collateral, or the making by the
Issuer of an assignment for the benefit of creditors, or the Issuer's failure
to pay its debts generally as they become due, or the taking of corporate
action by the Issuer in furtherance of any such action; or
(g) the Issuer shall admit in writing its inability to pay its debts as
they become due, file a petition to take advantage of any applicable insolvency
or reorganization statute, make an assignment for the benefit of its creditors,
or voluntarily suspend payment of its obligations.
The Issuer shall deliver to the Indenture Trustee and the Note Insurer,
within five days after the occurrence thereof, written notice in the form of an
Officer's Certificate of any event which with
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the giving of notice and the lapse of time would become an Event of Default
under clause (c) above, its status and what action the Issuer is taking or
proposes to take with respect thereto.
Section 5.2 ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If an
Event of Default should occur and be continuing, then and in every such case
the Indenture Trustee, at the direction or upon the prior written consent of
the Majority Noteholders may declare all the Notes to be immediately due and
payable, by a notice in writing to the Issuer (and to the Indenture Trustee if
given by Noteholders), and upon any such declaration the unpaid principal
amount of such Notes, together with accrued and unpaid interest thereon through
the date of acceleration, shall become immediately due and payable.
At any time after such declaration of acceleration of maturity has been
made and before a judgment or decree for payment of the money due has been
obtained by the Indenture Trustee as hereinafter in this Article V provided,
the Majority Noteholders, by written notice to the Issuer and the Indenture
Trustee, may rescind and annul such declaration and its consequences if (a) the
Issuer has paid or deposited with the Indenture Trustee a sum sufficient to pay
(i) all payments of principal of and interest on all Notes and all other
amounts that would then be due hereunder or upon such Notes if the Event of
Default giving rise to such acceleration had not occurred and (ii) all sums
paid or advanced by the Indenture Trustee hereunder, if any, and the reasonable
compensation, expenses, disbursements and advances of the Indenture Trustee and
its agents and counsel and (b) all Events of Default, other than the nonpayment
of the principal of the Notes that has become due solely by such acceleration,
have been cured or waived as provided in Section 5.12.
No such rescission shall affect any subsequent default or impair any right
consequent thereto.
Section 5.3 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
INDENTURE TRUSTEE.
(a) The Issuer covenants that if (i) default is made in the payment of
any interest on any Note when the same becomes due and payable, and such
default continues for a period of five days, or (ii) default is made in the
payment of the principal of or any installment of the principal of any Note
when the same becomes due and payable, the Issuer will, upon demand of the
Indenture Trustee and at the direction of the Majority Noteholders, pay to the
Indenture Trustee, for the benefit of the Holders of the Notes and the Note
Insurer, the whole amount then due and payable on such Notes for principal and
interest, with interest upon the overdue principal and, to the extent payment
at such rate of interest shall be legally enforceable, upon overdue
installments of interest at the rate borne by the Notes and in addition thereto
such further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances, if any, of the Indenture Trustee and the Note Insurer and their
respective agents and counsel.
(b) In case the Issuer shall fail forthwith to pay such amounts upon such
demand, the Indenture Trustee, in its own name and as trustee of an express
trust, shall at the written direction of the Majority Noteholders institute a
Proceeding for the collection of the sums so due and unpaid, and may prosecute
such Proceeding to judgment or final decree, and may enforce the same against
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the Issuer or other obligor upon such Notes and collect in the manner provided
by law out of the property of the Issuer or other obligor upon such Notes,
wherever situated, the moneys adjudged or decreed to be payable.
(c) If an Event of Default occurs and is continuing, the Indenture
Trustee shall, at the written direction of the Majority Noteholders, as more
particularly provided in Section 5.4, proceed to protect and enforce its rights
and the rights of the Note Insurer and the Noteholders, by such appropriate
Proceedings as the Indenture Trustee shall deem most effective to protect and
enforce any such rights, whether for the specific enforcement of any covenant
or agreement in this Indenture or in aid of the exercise of any power granted
herein, or to enforce any other proper remedy or legal or equitable right
vested in the Indenture Trustee by this Indenture or by law.
(d) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest
in the Collateral, Proceedings under Title 11 of the United States Code or any
other applicable federal or State bankruptcy, insolvency or other similar law,
or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor or Person,
or in case of any other comparable judicial Proceedings relative to the Issuer
or other obligor upon the Notes, or to the creditors or property of the Issuer
or such other obligor, the Indenture Trustee, irrespective of whether the
principal of any Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Indenture Trustee
shall have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, upon the direction of the Majority Noteholders, by
intervention in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the Notes and to
file such other papers or documents as may be necessary or advisable in
order to have the claims of the Indenture Trustee (including any claim
for reasonable compensation to the Indenture Trustee, each predecessor
Indenture Trustee and the Note Insurer, and their respective agents,
attorneys and counsel, and for reimbursement of all expenses and
liabilities incurred, and all advances made, by the Indenture Trustee
and each predecessor Indenture Trustee (except as a result of negligence
or bad faith), the Note Insurer and the Noteholders allowed in such
Proceedings;
(ii) unless prohibited by applicable law and regulations, to vote on
behalf of the Holders of Notes in any election of a trustee, a standby
trustee or Person performing similar functions in any such Proceedings;
(iii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute all amounts received with
respect to the claims of the Noteholders, the Note Insurer and the
Indenture Trustee on their behalf; and
(iv) to file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the Indenture
Trustee, the Note Insurer
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or the Holders of Notes allowed in any judicial proceedings relative to
the Issuer, its creditors and its property; and any trustee, receiver,
liquidator, custodian or other similar official in any such Proceeding
is hereby authorized by each of such Noteholders and the Note Insurer to
make payments to the Indenture Trustee and, in the event that the
Indenture Trustee shall consent to the making of payments directly to
such Noteholders and the Note Insurer, to pay to the Indenture Trustee
such amounts as shall be sufficient to cover reasonable compensation to
the Indenture Trustee, each predecessor Indenture Trustee and their
respective agents, attorneys and counsel, and all other expenses and
liabilities incurred, and all advances, if any, made, by the Indenture
Trustee and each predecessor Indenture Trustee except as a result of
negligence or bad faith.
(e) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Noteholder or the Note Insurer any plan of reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of any Holder
thereof or the Note Insurer or to authorize the Indenture Trustee to vote in
respect of the claim of any Noteholder in any such proceeding except, as
aforesaid, to vote for the election of a trustee in bankruptcy or similar
Person.
(f) All rights of action and of asserting claims under this Indenture, or
under any of the Notes, may be enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any trial or other
Proceedings relative thereto, and any such action or Proceedings instituted by
the Indenture Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of the expenses,
disbursements and compensation of the Indenture Trustee, each predecessor
Indenture Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Holders of the Notes and the Note Insurer.
(g) In any Proceedings brought by the Indenture Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture to
which the Indenture Trustee shall be a party), the Indenture Trustee shall be
held to represent all the Noteholders, and it shall not be necessary to make
any Noteholder a party to any such Proceedings.
Section 5.4 REMEDIES; PRIORITIES.
If an Event of Default shall have occurred and be continuing, the
Indenture Trustee shall, at the written direction of the Majority Noteholders,
do one or more of the following (subject to Section 5.5):
(i) institute Proceedings in its own name and as trustee of an
express trust for the collection of all amounts then payable on the Notes
or under this Indenture with respect thereto, whether by declaration or
otherwise, enforce any judgment obtained, and collect from the Issuer and
any other obligor upon such Notes moneys adjudged due;
(ii) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Collateral;
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(iii) exercise any remedies of a secured party under the UCC and
take any other appropriate action to protect and enforce the rights and
remedies of the Indenture Trustee, the Note Insurer or the Noteholders;
(iv) prior to a Conversion Date, sell the Collateral or any portion
thereof or rights or interest therein pursuant to Section 12.02 of the
Sale and Servicing Agreement; or
(v) on any date on or after a Conversion Date, sell the Collateral
or any portion thereof or rights or interest therein in a commercially
reasonable manner, at one or more public or private sales called and
conducted in any manner permitted by law; provided, however, that the
Indenture Trustee may not sell or otherwise liquidate the Collateral
following an Event of Default, unless (A) the Holders of 100% of the
Outstanding Amount of the Notes consent thereto, (B) the proceeds of
such sale or liquidation distributable to the Noteholders are sufficient
to discharge in full all amounts then due and unpaid upon such Notes for
principal and interest or (C) the Indenture Trustee determines that the
Collateral will not continue to provide sufficient funds for the payment
of principal of and interest on the Notes as they would have become due
if the Notes had not been declared due and payable, and the Indenture
Trustee obtains the consent of Holders of 66-2/3% of the Outstanding
Amount of the Notes. In determining such sufficiency or insufficiency
with respect to clause (B) and (C), the Indenture Trustee may, but need
not, obtain and rely upon an opinion of an Independent investment
banking or accounting firm of national reputation as to the feasibility
of such proposed action and as to the sufficiency of the Collateral for
such purpose.
If the Indenture Trustee collects any money or property pursuant to this
Article V, it shall pay out the money or property in the order set forth in
Article 12.03 of the Sale and Servicing Agreement.
The Indenture Trustee may fix a record date and payment date for any
payment to be made to the Noteholders pursuant to this Section. At least 15
days before such record date, the Indenture Trustee shall mail to each
Noteholder, the Note Insurer and the Issuer a notice that states the record
date, the payment date and the amount to be paid.
Section 5.5 OPTIONAL PRESERVATION OF THE COLLATERAL. If the Notes have
been declared to be due and payable under Section 5.2 following an Event of
Default and such declaration and its consequences have not been rescinded and
annulled, the Indenture Trustee may, but need not, elect to maintain possession
of the Collateral. It is the desire of the parties hereto and the Noteholders
that there be at all times sufficient funds for the payment of principal of and
interest on the Notes, and the Indenture Trustee shall take such desire into
account when determining whether or not to maintain possession of the
Collateral. In determining whether to maintain possession of the Collateral,
the Indenture Trustee may, but need not, obtain and rely upon an opinion of an
Independent investment banking or accounting firm of national reputation as to
the feasibility of such proposed action and as to the sufficiency of the
Collateral for such purpose.
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Section 5.6 LIMITATION OF SUITS. No Holder of any Note shall have any
right to institute any Proceeding, judicial or otherwise, with respect to this
Indenture or for the appointment of a receiver or trustee, or for any other
remedy hereunder for so long as a Note Insurer Default has not occurred or is
not continuing and if a Note Insurer Default has occurred and is continuing,
unless:
(a) such Holder has previously given written notice to the Indenture
Trustee of a continuing Event of Default;
(b) the Holders of Outstanding Notes representing at least 25% of the
Outstanding Amount have made written request to the Indenture Trustee to
institute such Proceeding in respect of such Event of Default in its own name
as Indenture Trustee hereunder;
(c) such Holder or Holders have offered to the Indenture Trustee
reasonable indemnity against the costs, expenses and liabilities to be incurred
in complying with such request;
(d) the Indenture Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute such Proceedings; and
(e) no direction inconsistent with such written request has been given to
the Indenture Trustee during such 60-day period by the Majority Noteholders.
It is understood and intended that no one or more Holders of Notes shall
have any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Notes or to obtain or to seek to obtain priority or preference
over any other Holders or to enforce any right under this Indenture, except in
the manner herein provided.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of
Notes, each representing less than a majority of the Outstanding Amount of the
Notes, the Indenture Trustee in its sole discretion may determine what action,
if any, shall be taken, notwithstanding any other provisions of this Indenture.
Section 5.7 UNCONDITIONAL RIGHTS OF NOTEHOLDERS TO RECEIVE PRINCIPAL AND
INTEREST. Notwithstanding any other provisions in this Indenture, the Holder
of any Note shall have the right, which is absolute and unconditional, to
receive payment of the principal of and interest, if any, on such Note on or
after the Final Scheduled Payment Date thereof expressed in such Note or in
this Indenture (or, in the case of redemption, on or after the Redemption Date)
and to institute suit for the enforcement of any such payment, and such right
shall not be impaired without the consent of such Holder.
Section 5.8 RESTORATION OF RIGHTS AND REMEDIES. If the Indenture
Trustee, the Note Insurer or any Noteholder has instituted any Proceeding to
enforce any right or remedy under this Indenture and such Proceeding has been
discontinued or abandoned for any reason or has been determined adversely to
the Indenture Trustee, the Note Insurer or to such Noteholder, then and in
every such
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case the Issuer, the Indenture Trustee, the Note Insurer and the Noteholders
shall, subject to any determination in such Proceeding, be restored severally
and respectively to their former positions hereunder, and thereafter all
rights and remedies of the Indenture Trustee and the Noteholders shall
continue as though no such Proceeding had been instituted.
Section 5.9 RIGHTS AND REMEDIES CUMULATIVE. No right or remedy herein
conferred upon or reserved to the Indenture Trustee, the Note Insurer or to the
Noteholders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
Section 5.10 DELAY OR OMISSION NOT A WAIVER. No delay or omission of the
Indenture Trustee, the Note Insurer or any Holder of any Note to exercise any
right or remedy accruing upon any Default or Event of Default shall impair any
such right or remedy or constitute a waiver of any such Default or Event of
Default or an acquiescence therein. Every right and remedy given by this
Article V or by law to the Indenture Trustee, the Note Insurer or to the
Noteholders may be exercised from time to time, and as often as may be deemed
expedient, by the Indenture Trustee, the Note Insurer or by the Noteholders, as
the case may be, subject, in each case, however, to the right of the Note
Insurer to control any such right and remedy, except as provided in
Section 11.19.
Section 5.11 CONTROL BY NOTEHOLDERS. The Majority Noteholders shall have
the right to direct the time, method and place of conducting any Proceeding for
any remedy available to the Indenture Trustee with respect to the Notes or
exercising any trust or power conferred on the Indenture Trustee; provided
that:
(a) such direction shall not be in conflict with any rule of law or with
this Indenture;
(b) subject to the express terms of Section 5.4, any direction to the
Indenture Trustee to sell or liquidate the Collateral shall be by Holders of
Outstanding Notes representing not less than 100% of the Outstanding Amount if
the proceeds of such sale would be less than the sum of all amounts due the
Indenture Trustee hereunder and the Aggregate Note Principal Balance and
interest due or to become due thereon on the Payment Date next succeeding such
sale, together with any amounts owing to the Note Insurer under the Guaranty
Policy and the Insurance Agreement;
(c) if the conditions set forth in Section 5.5 have been satisfied and
the Indenture Trustee elects to retain the Collateral pursuant to such Section,
then any direction to the Indenture Trustee by Holders of Outstanding Notes
representing less than 100% of the Outstanding Amount to sell or liquidate the
Collateral shall be of no force and effect; and
(d) the Indenture Trustee may take any other action deemed proper by the
Indenture Trustee that is not inconsistent with such direction.
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Notwithstanding the rights of the Note Insurer and the Noteholders set
forth in this Section, subject to Section 6.1, the Indenture Trustee need not
take any action that it determines might involve it in liability or might
materially adversely affect the rights of any Noteholders not consenting to
such action.
Notwithstanding anything to the contrary in this Article V, the
Noteholders may not direct the Indenture Trustee to take any of the actions set
forth in Section 5.4(a) without the consent of the Note Insurer, if at the time
of such action any Guaranty Insurance Premium, any Note Insurer Reimbursement
Amount or any other amount is due and owing to the Note Insurer pursuant to the
Guaranty Policy or the Insurance Agreement.
Section 5.12 WAIVER OF PAST DEFAULTS. Prior to the declaration of the
acceleration of the maturity of the Notes as provided in Section 5.2, the
Majority Noteholders may waive any past Default or Event of Default and its
consequences except a Default (a) in the payment of principal of or interest on
any of the Notes or (b) in respect of a covenant or provision hereof that
cannot be modified or amended without the consent of the Note Insurer or the
Holder of each Note, as applicable. In the case of any such waiver, the
Issuer, the Indenture Trustee, the Note Insurer and the Holders of the Notes
shall be restored to their former positions and rights hereunder, respectively;
but no such waiver shall extend to any subsequent or other Default or impair
any right consequent thereto.
Upon any such waiver, such Default shall cease to exist and be deemed to
have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereto.
Section 5.13 UNDERTAKING FOR COSTS. All parties to this Indenture agree,
and each Holder of any Note by such Holder's acceptance thereof shall be deemed
to have agreed, that any court may in its discretion require, in any suit for
the enforcement of any right or remedy under this Indenture, or in any suit
against the Indenture Trustee for any action taken, suffered or omitted by it
as Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to (a) any suit instituted by the
Indenture Trustee or the Note Insurer, (b) any suit instituted by any
Noteholder, or group of Noteholders, in each case holding Outstanding Notes
representing in the aggregate more than 10% of the Outstanding Amount or (c)
any suit instituted by any Noteholder for the enforcement of the payment of
principal of or interest on any Note on or after the respective due dates
expressed in such Note and in this Indenture (or, in the case of redemption, on
or after the Redemption Date).
Section 5.14 WAIVER OF STAY OR EXTENSION LAWS. The Issuer covenants (to
the extent that it may lawfully do so) that it will not at any time insist
upon, or plead or in any manner whatsoever, claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any
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time hereafter in force, that may affect the covenants or the performance of
this Indenture; and the Issuer (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not hinder, delay or impede the execution of any power
herein granted to the Indenture Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
Section 5.15 ACTION ON NOTES. The Indenture Trustee's right to seek and
recover judgment on the Notes or under this Indenture shall not be affected by
the seeking, obtaining or application of any other relief under or with respect
to this Indenture. Neither the lien of this Indenture nor any rights or
remedies of the Indenture Trustee or the Noteholders shall be impaired by the
recovery of any judgment by the Indenture Trustee against the Issuer or by the
levy of any execution under such judgment upon any portion of the Collateral or
upon any of the assets of the Issuer. Any money or property collected by the
Indenture Trustee shall be applied in accordance with Section 5.4(b).
Section 5.16 PERFORMANCE AND ENFORCEMENT OF CERTAIN OBLIGATIONS.
(a) Promptly following a request from the Indenture Trustee to do so and
at the Servicer's expense, the Issuer shall take all such lawful action as the
Indenture Trustee may request to compel or secure the performance and
observance by the Seller and the Servicer, as applicable, of each of their
obligations to the Issuer under or in connection with the Sale and Servicing
Agreement, and to exercise any and all rights, remedies, powers and privileges
lawfully available to the Issuer under or in connection with the Sale and
Servicing Agreement to the extent and in the manner directed by the Indenture
Trustee, including the transmission of notices of default on the part of the
Seller or the Servicer thereunder and the institution of legal or
administrative actions or proceedings to compel or secure performance by the
Seller or the Servicer of each of their obligations under the Sale and
Servicing Agreement.
(b) If an Event of Default has occurred and is continuing, the Indenture
Trustee may, and at the direction (which direction shall be in writing) of the
Holders of Outstanding Notes representing at least 66-2/3% of the Outstanding
Amount shall, exercise all rights, remedies, powers, privileges and claims of
the Issuer against the Seller or the Servicer under or in connection with the
Sale and Servicing Agreement, including the right or power to take any action
to compel or secure performance or observance by the Seller or the Servicer, as
the case may be, of each of their obligations to the Issuer thereunder and to
give any consent, request, notice, direction, approval, extension, or waiver
under the Sale and Servicing Agreement, and any right of the Issuer to take
such action shall be suspended.
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ARTICLE VI
THE INDENTURE TRUSTEE
Section 6.1 DUTIES OF INDENTURE TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Indenture
Trustee shall exercise the rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise as a prudent person
would exercise or use under the circumstances in the conduct of such person's
own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Indenture Trustee and conforming to the
requirements of this Indenture; however, the Indenture Trustee shall
examine the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture.
(c) The Indenture Trustee shall not be liable for the action or inaction
of the Custodian, but the Indenture Trustee may not be relieved from liability
for its own negligent action, its own negligent failure to act or its own
willful misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer unless it is proved
that the Indenture Trustee was negligent in ascertaining the pertinent
facts; and
(iii) the Indenture Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 5.11.
(d) Every provision of this Indenture that in any way relates to the
Indenture Trustee is subject to PARAGRAPHS (a), (b), (c), (e) AND (g) of this
Section.
(e) The Indenture Trustee shall not be liable for interest on any money
received by it except as the Indenture Trustee may agree in writing with the
Issuer.
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(f) Money held in trust by the Indenture Trustee shall be segregated
from other funds except to the extent permitted by law or the terms of this
Indenture or the Sale and Servicing Agreement.
(g) No provision of this Indenture shall require the Indenture Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it; PROVIDED, HOWEVER, that the Indenture Trustee shall
not refuse or fail to perform any of its duties hereunder solely as a result of
nonpayment of its normal fees and expenses and further provided that nothing in
this Section 6.1(g) shall be construed to limit the exercise by the Indenture
Trustee of any right or remedy permitted under this Indenture or otherwise in
the event of the Issuer's failure to pay the Indenture Trustee's fees and
expenses pursuant to Section 6.7. In determining that such repayment or
indemnity is not reasonably assured to it, the Indenture Trustee must consider
not only the likelihood of repayment or indemnity by or on behalf of the Issuer
but also the likelihood of repayment or indemnity from amounts payable to it
from the Collateral pursuant to Section 6.7.
Section 6.2 RIGHTS OF INDENTURE TRUSTEE.
(a) The Indenture Trustee may conclusively rely on any document believed
by it to be genuine and to have been signed or presented by the proper person.
The Indenture Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel. The Indenture
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on an Officer's Certificate or an Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee.
(d) The Indenture Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that such action or omission by the
Indenture Trustee does not constitute willful misconduct, negligence or bad
faith.
(e) The Indenture Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Notes shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder
in good faith and in accordance with the advice or opinion of such counsel.
Section 6.3 INDIVIDUAL RIGHTS OF INDENTURE TRUSTEE. The Indenture
Trustee in its individual capacity or in any capacity other than as Indenture
Trustee may, and in its capacity as Indenture Trustee may not, become the owner
or pledgee of Notes and may otherwise deal with the Issuer or
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its Affiliates with the same rights it would have if it were not Indenture
Trustee. Any Paying Agent, Note Registrar, co-registrar or co-paying agent
may do the same with like rights. However, the Indenture Trustee must comply
with Section 6.11.
Section 6.4 INDENTURE TRUSTEE'S DISCLAIMER. The Indenture Trustee shall
not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Notes, shall not be accountable for the
Issuer's use of the proceeds from the Notes, or responsible for any statement
of the Issuer in the Indenture or in any document issued in connection with the
sale of the Notes or in the Notes other than the Indenture Trustee's
certificate of authentication.
Section 6.5 NOTICE OF DEFAULTS. If a Default occurs and is continuing
and if it is known to a Responsible Officer of the Indenture Trustee, the
Indenture Trustee shall mail to the Note Insurer and each Noteholder notice of
the Default within 90 days after it occurs. Except in the case of a Default in
payment of principal of or interest on any Note (including payments pursuant to
the mandatory redemption provisions of such Note), the Indenture Trustee may
withhold the notice to the Noteholders if and so long as a committee of its
Responsible Officers in good faith determines that withholding the notice is in
the interests of Noteholders.
Section 6.6 REPORTS BY INDENTURE TRUSTEE TO HOLDERS. The Indenture
Trustee shall deliver to each Noteholder such information as may be required to
enable such holder to prepare its federal and State income tax returns.
Section 6.7 COMPENSATION AND INDEMNITY. As compensation for its services
hereunder, the Indenture Trustee shall be entitled to receive, on each Payment
Date, the Indenture Trustee's Fee pursuant to Section 7.03 of the Sale and
Servicing Agreement (which compensation shall not be limited by any law on
compensation of a trustee of an express trust) and shall be entitled to
reimbursement from the Servicer for all reasonable out-of-pocket expenses
incurred or made by it, including costs of collection, in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation and expenses, disbursements and advances, if any, of the Indenture
Trustee's agents, counsel, accountants and experts. The Issuer agrees to cause
the Servicer to indemnify the Indenture Trustee, its directors, officers,
employees and agents against any and all loss, liability or expense (including
attorneys' fees) incurred by it in connection with the administration of this
trust and the performance of its duties hereunder and under the Sale and
Servicing Agreement. The Indenture Trustee shall notify the Issuer and the
Servicer promptly of any claim for which it may seek indemnity. Failure by the
Indenture Trustee to so notify the Issuer and the Servicer shall not relieve
the Issuer of its obligations hereunder. The Issuer shall or shall cause the
Servicer to defend any such claim, and the Indenture Trustee may have separate
counsel and the Issuer shall or shall cause the Servicer to pay the fees and
expenses of such counsel. Neither the Issuer nor the Servicer need reimburse
any expense or indemnify against any loss, liability or expense incurred by the
Indenture Trustee that is attributable to the Indenture Trustee's own willful
misconduct, negligence or bad faith.
The Issuer's payment obligations to the Indenture Trustee pursuant to this
Section shall survive the discharge of this Indenture. When the Indenture
Trustee incurs expenses after the
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occurrence of a Default specified in Section 5.1(e) or (f) with respect to
the Issuer, the expenses are intended to constitute expenses of
administration under Title 11 of the United States Code or any other
applicable federal or State bankruptcy, insolvency or similar law.
Section 6.8 REPLACEMENT OF INDENTURE TRUSTEE. No resignation or removal
of the Indenture Trustee and no appointment of a successor Indenture Trustee
shall become effective until the acceptance of appointment by the successor
Indenture Trustee pursuant to this Section. The Indenture Trustee may resign
at any time by so notifying the Issuer and the Note Insurer. The Majority
Noteholders may remove the Indenture Trustee by so notifying the Indenture
Trustee and may appoint a successor Indenture Trustee. The Issuer shall remove
the Indenture Trustee upon the prior written consent of the Note Insurer if:
(a) the Indenture Trustee fails to comply with Section 6.11;
(b) the Indenture Trustee is adjudged a bankrupt or insolvent;
(c) a receiver or other public officer takes charge of the Indenture
Trustee or its property; or
(d) the Indenture Trustee otherwise becomes incapable of acting.
If the Indenture Trustee resigns or is removed or if a vacancy exists in
the office of Indenture Trustee for any reason, other than by reason of a
removal by the Majority Noteholders as provided above, (the Indenture Trustee
in such event being referred to herein as the retiring Indenture Trustee), the
Issuer shall promptly appoint a successor Indenture Trustee acceptable to the
Note Insurer and that satisfies the eligibility requirements of Section 6.11.
The retiring or removed Indenture Trustee agrees to cooperate with the
Servicer and any successor Indenture Trustee in effecting the termination of
the retiring or removed Indenture Trustee's responsibilities and rights
hereunder and shall promptly provide such successor Indenture Trustee all
documents and records reasonably requested by it to enable it to assume the
Indenture Trustee's functions hereunder. Any successor Indenture Trustee shall
have all the rights, powers and duties of the Indenture Trustee under this
Indenture.
The retiring or removed Indenture Trustee shall grant to the successor
Indenture Trustee the Collateral, including, without limitation, all of the
Indenture Trustee's Home Loan Files, the related documents and statements held
by it hereunder, and the Seller, the Servicer, the Issuer and the retiring or
removed Indenture Trustee shall execute and deliver such instruments and do
such other things as may reasonably be required for more fully and certainly
vesting and confirming in the successor Indenture Trustee all such rights,
powers, duties and obligations.
The successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring or removed Indenture Trustee, the Note Insurer, the
Servicer, the Seller and the Issuer. The successor Indenture Trustee shall
mail a notice of its succession to Noteholders. The retiring
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Indenture Trustee shall promptly transfer all property held by it as Indenture
Trustee to the successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days after
the retiring Indenture Trustee resigns or is removed, the retiring Indenture
Trustee, the Issuer or the Holders of at least a majority of the Outstanding
Amount of the Notes may petition any court of competent jurisdiction for the
appointment of a successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11, any Noteholder
may petition any court of competent jurisdiction for the removal of the
Indenture Trustee and the appointment of a successor Indenture Trustee.
Notwithstanding the replacement of the Indenture Trustee pursuant to this
Section, the Issuer's obligations under Section 6.7 shall continue for the
benefit of the retiring Indenture Trustee.
Section 6.9 SUCCESSOR INDENTURE TRUSTEE BY MERGER. If the Indenture
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another
corporation or banking association, the resulting, surviving or transferee
corporation without any further act shall be the successor Indenture Trustee;
provided, that such corporation or banking association shall be otherwise
qualified and eligible under Section 6.11. The Indenture Trustee shall provide
the Note Insurer and the Rating Agencies prior written notice of any such
transaction.
In case at the time such successor or successors by merger, conversion or
consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture and any of the Notes shall have been authenticated but not
delivered, any such successor to the Indenture Trustee may adopt the
certificate of authentication of any predecessor trustee, and deliver such
Notes so authenticated; and in case at that time any of the Notes shall not
have been authenticated, any successor to the Indenture Trustee may
authenticate such Notes either in the name of any predecessor hereunder or in
the name of the successor to the Indenture Trustee; and in all such cases such
certificates shall have the full force which it is anywhere in the Notes or in
this Indenture provided that the certificate of the Indenture Trustee shall
have.
Section 6.10 APPOINTMENT OF CO-INDENTURE TRUSTEE OR SEPARATE INDENTURE
TRUSTEE.
(a) Notwithstanding any other provisions of this Indenture, at any time,
for the purpose of meeting any legal requirement of any jurisdiction in which
any part of the Collateral may at the time be located, the Indenture Trustee
shall have the power and may execute and deliver all instruments to appoint one
or more Persons to act as a co-trustee or co-trustees, or separate trustee or
separate trustees, of all or any part of the Trust Estate, and to vest in such
Person or Persons, in such capacity and for the benefit of the Noteholders,
such title to the Collateral, or any part thereof, and, subject to the other
provisions of this Section, such powers, duties, obligations, rights and trusts
as the Indenture Trustee may consider necessary or desirable. No co-trustee or
separate trustee hereunder shall be required to meet the terms of eligibility
as a successor trustee under Section 6.11
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and no notice to Noteholders of the appointment of any co-trustee or separate
trustee shall be required under Section 6.8 hereof; provided that the
Indenture Trustee shall deliver notice of any such co-trustee or separate
trustee to the Note Insurer.
(b) Every separate trustee and co-trustee shall, to the extent permitted
by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Indenture Trustee shall be conferred or imposed upon and
exercised or performed by the Indenture Trustee and such separate trustee
or co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Indenture
Trustee joining in such act), except to the extent that under any law of
any jurisdiction in which any particular act or acts are to be performed
the Indenture Trustee shall be incompetent or unqualified to perform such
act or acts, in which event such rights, powers, duties and obligations
(including the holding of title to the Collateral or any portion thereof
in any such jurisdiction) shall be exercised and performed singly by such
separate trustee or co-trustee, but solely at the direction of the
Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by reason of any
act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the resignation of
or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Indenture and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, jointly with the Indenture
Trustee, subject to all the provisions of this Indenture, specifically
including every provision of this Indenture relating to the conduct of,
affecting the liability of, or affording protection to, the Indenture Trustee.
Every such instrument shall be filed with the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect
of this Indenture on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
Section 6.11 ELIGIBILITY; DISQUALIFICATION. There shall at all times be
a trustee hereunder (i) which shall be a corporation or association organized
and doing business under the laws of the United States of America or of any
State, authorized under such laws to exercise corporate trust
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powers, having a combined capital and surplus of at least $50,000,000 as set
forth in its most recent published report of condition, subject to supervision
or examination by federal or state authority and having an office within the
United States of America, and (ii) which shall have (or whose parent shall have)
a long-term unsecured debt rating of "A-" or better by Standard & Poor's and
"A3" or better by Moody's, or shall otherwise be acceptable to each Rating
Agency. If such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If
at any time the Indenture Trustee shall cease to be eligible in accordance with
the provisions of this Section, it shall resign immediately in the manner and
with the effect specified in this Article.
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
Section 7.1 ISSUER TO FURNISH INDENTURE TRUSTEE NAMES AND ADDRESSES OF
NOTEHOLDERS. The Issuer will furnish or cause to be furnished to the Indenture
Trustee (a) not more than five days after each Record Date, a list, in such
form as the Indenture Trustee may reasonably require, of the names and
addresses of the Holders of Notes as of such Record Date, (b) at such other
times as the Indenture Trustee may request in writing, within 30 days after
receipt by the Issuer of any such request, a list of similar form and content
as of a date not more than 10 days prior to the time such list is furnished;
provided, however, that so long as the Indenture Trustee is the Note Registrar,
no such list shall be required to be furnished.
Section 7.2 PRESERVATION OF INFORMATION; COMMUNICATIONS TO NOTEHOLDERS.
The Indenture Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of the Holders of Notes contained in the
most recent list furnished to the Indenture Trustee as provided in Section 7.1
and the names and addresses of Holders of Notes received by the Indenture
Trustee in its capacity as Note Registrar. The Indenture Trustee may destroy
any list furnished to it as provided in such Section 7.1 upon receipt of a new
list so furnished.
Section 7.3 INDENTURE TRUSTEE CERTIFICATE. The Indenture Trustee shall
prepare and distribute an Indenture Trustee Certificate in accordance with the
Sale and Servicing Agreement.
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 8.1 COLLECTION OF MONEY.
(a) GENERAL. Except as otherwise expressly provided herein, the
Indenture Trustee may demand payment or delivery of, and shall receive and
collect, directly and without intervention or assistance of any fiscal agent or
other intermediary, all money and other property payable to or
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receivable by the Indenture Trustee pursuant to this Indenture. The
Indenture Trustee shall apply all such money received by it as provided in
this Indenture. Except as otherwise expressly provided in this Indenture, if
any default occurs in the making of any payment or performance under any
agreement or instrument that is part of the Collateral, the Indenture Trustee
may, and upon written request of the Note Insurer shall, take such action as
may be appropriate to enforce such payment or performance, including the
institution and prosecution of appropriate Proceedings. Any such action
shall be without prejudice to any right to claim a Default or Event of
Default under this Indenture and any right to proceed thereafter as provided
in Article V.
(b) CLAIMS UNDER GUARANTY POLICY. The Notes will be insured by the
Guaranty Policy pursuant to the terms set forth therein, notwithstanding any
provisions to the contrary contained in this Indenture or the Sale and
Servicing Agreement. All amounts received under the Guaranty Policy shall be
used solely for the payment to Noteholders of principal and interest on the
Notes.
Section 8.2 PAYMENTS.
(a) On each Payment Date and Redemption Date, to the extent funds are
available in the Note Payment Account, the Indenture Trustee shall make the
following payments pursuant to the Servicer's Monthly Remittance Report from
the amounts on deposit in the Note Payment Account in the following order of
priority:
(i) (A) to the Servicer, an amount equal to the Servicing
Compensation (net of (1) any amounts retained prior to deposit
into the Collection Account pursuant to Section 5.01(b)(1) of
the Sale and Servicing Agreement, (2) any amount representing
income or gain from investments credited to the Collection
Account and paid to the Servicer pursuant to Section
5.01(b)(2) of the Sale and Servicing Agreement and (3) the
Indenture Trustee Fee with respect to such Payment Date) and
all unpaid Servicing Compensation from prior Due Periods, and
(B) to the Note Insurer, an amount equal to the Guaranty
Insurance Premium and all unpaid Guaranty Insurance Premiums
from prior Due Periods;
(ii) to the Holders of the Notes, the Interest Payment Amount with
respect to such Payment Date; provided, that if there are not
sufficient funds in the Note Payment Account to pay the entire
amount of accrued and unpaid interest then due on the Notes,
the amount in the Note Payment Account shall be applied to the
payment of such interest on the Notes PRO RATA on the basis of
the total such interest due on the Notes;
(iii) to the Holders of the Notes, the Principal Payment Amount
until the Outstanding Amount of the Notes is reduced to zero;
(iv) to the Note Insurer, the Note Insurer Reimbursement Amount;
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(v) to the Servicer, the Servicing Advance Reimbursement Amount
with respect to such Payment Date;
(vi) to the Noteholders, that portion of the Facility Fee, if any,
due and unpaid on such Payment Date;
(vii) to the Issuer Special Purpose Account, the amounts remaining
after payments as described above, free of the lien of the
Indenture.
(b) The Indenture Trustee shall make claims under the Guaranty Policy
pursuant to Section 5.02 of the Sale and Servicing Agreement and in accordance
with the Guaranty Policy. The Indenture Trustee shall deposit any Guaranteed
Payment received from the Note Insurer in the Note Payment Account. For claims
under the Guaranty Policy for a Deficiency Amount, on the related Payment Date,
the Indenture Trustee shall pay such amount based upon the portion of the
related Interest Payment Amount and the portion of the related Principal
Payment Amount payable on the related Notes to the Holders of such Notes in
accordance with the terms of the Sale and Servicing Agreement. For claims
under the Guaranty Policy for a Preference Amount, the Indenture Trustee shall
distribute such amount in accordance with the terms of the Guaranty Policy.
All amounts received under the Guaranty Policy shall be used solely for the
payment to Noteholders of principal and interest on the related Notes.
Section 8.3 [RESERVED].
Section 8.4 SERVICER'S REMITTANCE REPORTS. On each Payment Date, the
Indenture Trustee shall deliver the Servicer's Remittance Report with respect
to such Payment Date to the Seller, the Noteholders, the Note Insurer and the
Rating Agencies.
Section 8.5 RELEASE OF COLLATERAL. Subject to the payment of its fees
and expenses pursuant to Section 6.7, the Indenture Trustee may, and when
required by the provisions of this Indenture or the Sale and Servicing
Agreement shall, execute instruments to release property from the lien of this
Indenture, or convey the Indenture Trustee's interest in the same, in a manner
and under circumstances that are not inconsistent with the provisions of this
Indenture and the Sale and Servicing Agreement. No party relying upon an
instrument executed by the Indenture Trustee as provided in this Article VIII
shall be bound to ascertain the Indenture Trustee's authority, inquire into the
satisfaction of any conditions precedent or see to the application of any
moneys.
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF NOTEHOLDERS.
(a) Without the consent of the Holders of any Notes but with prior notice
to the Rating Agencies and with the prior written consent of the Note Insurer,
the Issuer and the Indenture Trustee,
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when authorized by an Issuer Order, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Indenture Trustee, for any of the following purposes:
(i) to correct or amplify the description of any property at any time
subject to the lien of this Indenture, or better to assure, convey and
confirm unto the Indenture Trustee any property subject or required to be
subjected to the lien of this Indenture, or to subject to the lien of this
Indenture additional property;
(ii) to evidence the succession, in compliance with the applicable
provisions hereof, of another person to the Issuer, and the assumption by
any such successor of the covenants of the Issuer herein and in the Notes
contained;
(iii) to add to the covenants of the Issuer, for the benefit of
the Holders of the Notes, or to surrender any right or power herein
conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property to
or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any provision
herein or in any supplemental indenture that may be inconsistent with any
other provision herein or in any supplemental indenture or to make any
other provisions with respect to matters or questions arising under this
Indenture or in any supplemental indenture; provided, that such action
shall not adversely affect the interests of the Holders of the Notes; or
(vi) to evidence and provide for the acceptance of the appointment
hereunder by a successor trustee with respect to the Notes and to add to
or change any of the provisions of this Indenture as shall be necessary to
facilitate the administration of the trusts hereunder by more than one
trustee, pursuant to the requirements of Article VI.
The Indenture Trustee is hereby authorized to join in the execution of any
such supplemental indenture and to make any further appropriate agreements and
stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, with the prior written consent
of the Note Insurer, when authorized by an Issuer Order, may, also without the
consent of any Noteholder but with prior consent of each Rating Agency, enter
into an indenture or indentures supplemental hereto for the purpose of adding
any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture or of modifying in any manner the rights of the
Noteholders under this Indenture; provided, however, that such action shall
not, as evidenced by (i) an Opinion of Counsel or (ii) written confirmation
from each Rating Agency that such action will not result in a reduction or
withdrawal of its respective then-current rating of the Notes.
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Section 9.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS. The
Issuer and the Indenture Trustee, when authorized by an Issuer Order, also may,
with prior consent of the Rating Agencies and the Majority Noteholders, enter
into an indenture or indentures supplemental hereto for the purpose of adding
any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture or of modifying in any manner the rights of the
Holders of the Notes under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Note affected thereby:
(a) change the date of payment of any installment of principal of or
interest on any Note, or reduce the principal amount thereof, the interest rate
thereon or the Redemption Price with respect thereto, change the provisions of
this Indenture relating to the application of collections on, or the proceeds
of the sale of, the Collateral to payment of principal of or interest on the
Notes, or change any place of payment where, or the coin or currency in which,
any Note or the interest thereon is payable, or impair the right to institute
suit for the enforcement of the provisions of this Indenture requiring the
application of funds available therefor, as provided in Article V, to the
payment of any such amount due on the Notes on or after the respective due
dates thereof (or, in the case of redemption, on or after the Redemption Date);
(b) reduce the percentage of the Outstanding Amount of the Notes, the
consent of the Holders of which is required for any such supplemental
indenture, or the consent of the Holders of which is required for any waiver of
compliance with certain provisions of this Indenture or certain defaults
hereunder and their consequences provided for in this Indenture;
(c) modify or alter the provisions of the proviso to the definition of
the term "Outstanding";
(d) reduce the percentage of the Outstanding Amount of the Notes required
to direct the Indenture Trustee to direct the Issuer to sell or liquidate the
Collateral pursuant to Section 5.4;
(e) modify any provision of this Section except to increase any
percentage specified herein or to provide that certain additional provisions of
this Indenture or the Basic Documents cannot be modified or waived without the
consent of the Holder of each Outstanding Note affected thereby;
(f) modify any of the provisions of this Indenture in such manner as to
affect the calculation of the amount of any payment of interest or principal
due on any Note on any Payment Date (including the calculation of any of the
individual components of such calculation) or to affect the rights of the
Holders of Notes to the benefit of any provisions for the mandatory redemption
of the Notes contained herein; or
(g) permit the creation of any lien ranking prior to or on a parity with
the lien of this Indenture with respect to any part of the Collateral or,
except as otherwise permitted or contemplated herein, terminate the lien of
this Indenture on any property at any time subject hereto or deprive the Holder
of any Note of the security provided by the lien of this Indenture.
INDENTURE (IBJ Warehouse) -- Page 44
<PAGE>
The Indenture Trustee may in its discretion determine whether or not any
Notes would be affected by any supplemental indenture and any such
determination shall be conclusive upon the Holders of all Notes, whether
theretofore or thereafter authenticated and delivered hereunder. The Indenture
Trustee shall not be liable for any such determination made in good faith.
In connection with requesting the consent of the Noteholders pursuant to
this Section, the Indenture Trustee shall mail to the Holders of the Notes to
which such amendment or supplemental indenture relates a notice setting forth
in general terms the substance of such supplemental indenture. It shall not be
necessary for any Act of Noteholders under this Section to approve the
particular form of any proposed supplemental indenture, but it shall be
sufficient if such Act shall approve the substance thereof.
Section 9.3 EXECUTION OF SUPPLEMENTAL INDENTURES. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modification thereby of the trusts created
by this Indenture, the Indenture Trustee shall be entitled to receive, and
subject to Sections 6.1 and 6.2, shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Indenture Trustee may, but
shall not be obligated to, enter into any such supplemental indenture that
affects the Indenture Trustee's own rights, duties, liabilities or immunities
under this Indenture or otherwise.
Section 9.4 EFFECT OF SUPPLEMENTAL INDENTURE. Upon the execution of any
supplemental indenture pursuant to the provisions hereof, this Indenture shall
be and shall be deemed to be modified and amended in accordance therewith with
respect to the Notes affected thereby, and the respective rights, limitations
of rights, obligations, duties, liabilities and immunities under this Indenture
of the Indenture Trustee, the Issuer and the Holders of the Notes shall
thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments, and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
Section 9.5 [RESERVED]
Section 9.6 REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee
shall, bear a notation in form approved by the Indenture Trustee as to any
matter provided for in such supplemental indenture. If the Issuer or the
Indenture Trustee shall so determine, new Notes so modified as to conform, in
the opinion of the Indenture Trustee and the Issuer, to any such supplemental
indenture may be prepared and executed by the Issuer and authenticated and
delivered by the Indenture Trustee in exchange for Outstanding Notes.
Section 9.7 [RESERVED]
INDENTURE (IBJ Warehouse) -- Page 45
<PAGE>
ARTICLE X
RETIREMENT OF NOTES
Section 10.1 RETIREMENT.
(a) On any date on or after a Conversion Date, the Issuer may, at its
option, effect an early retirement of the Notes on or after any Payment Date on
which the Aggregate Note Principal Balance declines to 15% or less of the Pool
Principal Balance of the Home Loans pledged to the Trust Estate as of the
Conversion Date. The Issuer shall effect such early retirement by directing
the Indenture Trustee to arrange for the sale of all of the Home Loans to a
person that is not an Affiliate of the Issuer, the Seller, or the Servicer at a
price not less than the Redemption Price plus an amount equal to any unpaid
Servicing Compensation, Guaranty Insurance Premium, Facility Fee and Note
Insurer Reimbursement Amounts. In connection with any such early retirement,
to the extent that sufficient proceeds are not available from the sale of the
Home Loans, the Issuer shall be required to pay the outstanding fees and
expenses, if any, of the Indenture Trustee, the Note Insurer, and the Servicer.
(b) Subject to Section 11.17, on any date on or after a Conversion Date
and on or after which (i) 17.5% or more (based on Net Loan Losses) of the Home
Loans have become Defaulted Home Loans on a cumulative basis and (ii) the
Overcollateralization Amount has been reduced to zero or an amount less than
zero, then the Note Insurer may, at its option, effect an early retirement of
the Notes and termination of this Agreement.
Any such early retirement of the Notes by the Note Insurer shall be
accomplished by the Note Insurer (i) sending notice to the Indenture Trustee of
all information described in Section 10.2 and (ii) depositing or causing to be
deposited into the Collection Account by 10:00 A.M. New York City time on the
third Business Day prior to the Redemption Date the amount of the Redemption
Price plus an amount equal to any unpaid Servicing Compensation, Guaranty
Insurance Premium, Facility Fee and Note Insurer Reimbursement Amounts. On the
same day that such amounts are deposited into the Collection Account, such
amounts and any amounts then on deposit in the Collection Account (other than
any amounts not required to have been deposited therein pursuant to
Section 5.01(b)(1) of the Sale and Servicing Agreement) shall be transferred to
the Note Payment Account for payment to the Noteholders on the Redemption Date;
and any amounts received with respect to the Home Loans and Foreclosure
Properties subsequent to such transfer shall belong to the Note Insurer. For
purposes of calculating the Required Payment Amount for the Redemption Date,
amounts transferred to the Note Payment Account pursuant to the immediately
preceding sentence on the Determination Date immediately preceding such final
Payment Date shall in all cases be deemed to have been received during the
related Due Period, and such transfer shall be made pursuant to Section 5.01(c)
of the Sale and Servicing Agreement.
(c) The Servicer or the Issuer shall furnish each Rating Agency, the Note
Insurer and the Arranger notice of any such early retirement in accordance with
Section 10.2.
INDENTURE (IBJ Warehouse) -- Page 46
<PAGE>
Section 10.2 FORM OF RETIREMENT NOTICE. Notice of early retirement under
Section 10.1 shall be given by the Indenture Trustee by first-class mail,
postage prepaid, or by facsimile mailed or transmitted not later than 10 days
prior to the applicable Redemption Date to each Noteholder, as of the close of
business on the Record Date preceding the applicable Redemption Date, at such
Noteholder's address or facsimile number appearing in the Note Register.
All notices of early retirement shall state:
(i) the Redemption Date;
(ii) the Redemption Price; and
(iii) the place where such Notes are to be surrendered for payment of
the Redemption Price (which shall be the office or agency of the Issuer to
be maintained as provided in Section 3.2).
Notice of early retirement of the Notes shall be given by the Indenture
Trustee in the name of the [ISSUER] and at the expense of the [SERVICER].
Failure to give notice of early retirement, or any defect therein, to any
Noteholder shall not impair or affect the validity of the early retirement of
any other Note.
Section 10.3 NOTES PAYABLE ON REDEMPTION DATE; PROVISION FOR PAYMENT OF
INDENTURE TRUSTEE AND NOTE INSURER. The Notes or portions thereof to be
redeemed shall, following notice of early retirement as required by Section
10.2 (in the case of redemption pursuant to Section 10.1), on the Redemption
Date become due and payable at the Redemption Price and (unless the Issuer or
the Note Insurer, as applicable, shall default in the payment of the Redemption
Price) no interest shall accrue on the Redemption Price for any period after
the date to which accrued interest is calculated for purposes of calculating
the Redemption Price.
ARTICLE XI
MISCELLANEOUS
Section 11.1 COMPLIANCE CERTIFICATES AND OPINIONS, ETC. Upon any
application or request by the Issuer to the Indenture Trustee to take any
action under any provision of this Indenture, the Issuer shall furnish to the
Indenture Trustee (i) an Officer's Certificate stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with and (ii) an Opinion of Counsel stating that in
the opinion of such counsel all such conditions precedent, if any, have been
complied with, except that, in the case of any such application or request as
to which the furnishing of such documents is specifically required by any
provision of this Indenture, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
INDENTURE (IBJ Warehouse) -- Page 47
<PAGE>
(i) a statement that each signatory of such certificate or opinion
has read or has caused to be read such covenant or condition
and the definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of each such signatory, such
signatory has made such examination or investigation as is
necessary to enable such signatory to express an informed
opinion as to whether or not such covenant or condition has
been complied with; and
(iv) a statement as to whether, in the opinion of each such
signatory, such condition or covenant has been complied with.
Section 11.2 FORM OF DOCUMENTS DELIVERED TO INDENTURE TRUSTEE. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may
certify or give an opinion with respect to some matters and one or more other
such Persons as to other matters, and any such Person may certify or give an
opinion as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which such Officer's
Certificate or opinion is based are erroneous. Any such certificate of an
Authorized Officer or Opinion of Counsel may be based, insofar as it relates to
factual matters, upon a certificate or opinion of, or representations by, an
officer or officers of the Servicer, the Seller, or the Issuer stating that the
information with respect to such factual matters is in the possession of the
Servicer, the Seller, or the Issuer unless such counsel knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of
the facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such
INDENTURE (IBJ Warehouse) -- Page 48
<PAGE>
application granted or to the sufficiency of such certificate or report. The
foregoing shall not, however, be construed to affect the Indenture Trustee's
right to rely upon the truth and accuracy of any statement or opinion
contained in any such document as provided in Article VI.
Section 11.3 ACTS OF NOTEHOLDERS.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Noteholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Noteholders in person or by agents
duly appointed in writing; and except as herein otherwise expressly provided
such action shall become effective when such instrument or instruments are
delivered to the Indenture Trustee, and, where it is hereby expressly required,
to the Issuer. Such instrument or instruments (and the action embodied therein
and evidenced thereby) are herein sometimes referred to as the "Act" of the
Noteholders signing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Indenture and (subject to Section 6.1) conclusive in
favor of the Indenture Trustee and the Issuer, if made in the manner provided
in this Section.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Indenture Trustee
deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes (or any one or more
Predecessor Notes) shall bind the Holder of every Note issued upon the
registration thereof or in exchange therefor or in lieu thereof, in respect of
anything done, omitted or suffered to be done by the Indenture Trustee or the
Issuer in reliance thereon, whether or not notation of such action is made upon
such Note.
Section 11.4 NOTICES, ETC., TO INDENTURE TRUSTEE, ISSUER, RATING
AGENCIES, NOTE INSURER AND ARRANGER. Any request, demand, authorization,
direction, notice, consent, waiver or Act of Noteholders or other documents
provided or permitted by this Indenture shall be in writing and if such
request, demand, authorization, direction, notice, consent, waiver or act of
Noteholders is to be made upon, given or furnished to or filed with:
(a) the Indenture Trustee by any Noteholder or by the Issuer shall be
sufficient for every purpose hereunder if made, given, furnished or filed in
writing to or with the Indenture Trustee at its Corporate Trust Office, or
(b) the Issuer by the Indenture Trustee or by any Noteholder shall be
sufficient for every purpose hereunder if in writing and mailed first-class,
postage prepaid to the Issuer addressed to: FIRSTPLUS FUNDING TRUST, 1600
Viceroy Drive, Dallas, Texas 75235, Attention: Lee F. Reddin, or at any other
address previously furnished in writing to the Indenture Trustee by the Issuer.
INDENTURE (IBJ Warehouse) -- Page 49
<PAGE>
The Issuer shall promptly transmit any notice received by it from the
Noteholders to the Indenture Trustee.
Notices required to be given to the Rating Agencies by the Issuer or the
Indenture Trustee shall be in writing, personally delivered or mailed by
certified mail, return receipt requested, to (i) in the case of Moody's, at the
following address: Moody's Investors Service, Inc., Residential Mortgage
Monitoring Department, 99 Church Street, New York, New York 10007, and (ii) in
the case of Standard & Poor's, at the following address: Standard & Poor's
Ratings Group, 26 Broadway (15th Floor), New York, New York 10004, Attention of
Asset Backed Surveillance Department; or as to each of the foregoing, at such
other address as shall be designated by written notice to the other parties.
Notices required to be given to the Note Insurer or the Arranger by the
Issuer or the Indenture Trustee shall be in writing, personally delivered or
mailed by certified mail, return receipt requested, to (i) in the case of the
Note Insurer, at the following address:MBIA Insurance Corporation, 113 King
Street, Armonk, New York 10504, Attention:Insured Portfolio Management -
Structured Finance (IPM-SF) and (ii) in the case of the Arranger, at the
following address:The Industrial Bank of Japan, Limited, New York Branch, 245
Park Avenue, New York, New York 10167, Attention:Warren Kornfeld, or at such
other address as shall be designated by written notice to the other parties.
Section 11.5 NOTICES TO NOTEHOLDERS; WAIVER. Where this Indenture
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner
herein provided shall conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by any Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Noteholders shall be filed with the Indenture Trustee but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a result
of a strike, work stoppage or similar activity, it shall be impractical to mail
notice of any event to Noteholders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Indenture Trustee shall be deemed to be
a sufficient giving of such notice.
INDENTURE (IBJ Warehouse) -- Page 50
<PAGE>
Where this Indenture provides for notice to the Rating Agencies, failure
to give such notice shall not affect any other rights or obligations created
hereunder, and shall not under any circumstance constitute a Default or Event
of Default.
Section 11.6 EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
Section 11.7 SUCCESSORS AND ASSIGNS. All covenants and agreements in
this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not. All agreements of the Indenture Trustee
in this Indenture shall bind its successors, co-trustees and agents.
Section 11.8 SEPARABILITY. In case any provision in this Indenture or in
the Notes shall be invalid, illegal or unenforceable, the validity, legality,
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
Section 11.9 BENEFITS OF INDENTURE. Nothing in this Indenture or in the
Notes, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, and the Noteholders, and any other party
secured hereunder, and any other Person with an ownership interest in any part
of the Collateral, any benefit or any legal or equitable right, remedy or claim
under this Indenture, except that the Note Insurer is an express third party
beneficiary to this Indenture as provided in Section 11.18.
Section 11.10 LEGAL HOLIDAYS. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
Section 11.11 GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 11.12 COUNTERPARTS. This Indenture may be executed in any number
of counterparts, each of which so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.
Section 11.13 RECORDING OF INDENTURE. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which Opinion of Counsel shall be reasonably acceptable to the Indenture
Trustee) to the effect that such recording is necessary either for the
protection of the
INDENTURE (IBJ WAREHOUSE) - Page 51
<PAGE>
Noteholders or any other Person secured hereunder or for the enforcement of
any right or remedy granted to the Indenture Trustee under this Indenture.
Section 11.14 ISSUER OBLIGATION. Each Noteholder by its acceptance of a
Note, covenants and agrees that no recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer or the Indenture
Trustee on the Notes or under this Indenture or any certificate or other
writing delivered in connection herewith or therewith, against (i) the
Indenture Trustee in its individual capacity, (ii) any owner of a beneficial
interest in the Issuer or (iii) any partner, owner, beneficiary, agent,
officer, director, employee or agent of the Indenture Trustee in its individual
capacity, any holder of a beneficial interest in the Issuer or the Indenture
Trustee or of any successor or assign of the Indenture Trustee in its
individual capacity, except as any such Person may have expressly agreed (it
being understood that the Indenture Trustee has no such obligations in its
individual capacity) and except that any such partner, owner or beneficiary
shall be fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Section 11.15 NO PETITION. Until the date that is one year and one day
after the last day on which any Note is Outstanding, the Indenture Trustee, by
entering into this Indenture, and each Noteholder, by its acceptance of a Note,
hereby covenant and agree that they will not at any time institute against the
Seller, the Servicer or the Issuer, or join in any institution against the
Seller, the Servicer or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings under
any United States federal or state bankruptcy or similar law in connection with
any obligations relating to the Notes, this Indenture or any of the Basic
Documents.
Section 11.16 INSPECTION. The Issuer agrees that, on reasonable prior
notice, it will permit any representative of the Indenture Trustee or the Note
Insurer, during the Issuer's normal business hours, to examine all the books of
account, records, reports and other papers of the Issuer, to make copies and
extracts therefrom, to cause such books to be audited by Independent certified
public accountants, and to discuss the Issuer's affairs, finances and accounts
with the Issuer's officers, employees, and Independent certified public
accountants, all at such reasonable times and as often as may be reasonably
requested. The Indenture Trustee shall and shall cause its representatives to
hold in confidence all such information except to the extent disclosure may be
required by law (and all reasonable applications for confidential treatment are
unavailing) and except to the extent that the Indenture Trustee may reasonably
determine that such disclosure is consistent with its obligations hereunder.
Section 11.17 GRANT OF NOTEHOLDER RIGHTS TO NOTE INSURER. In
consideration for the guarantee of the Notes by the Note Insurer pursuant to
the Guaranty Policy, the Noteholders hereby grant to the Note Insurer the right
to act as the holder of 100% of the outstanding Notes for the purpose of
exercising the rights of the Holders of the Notes hereunder without the consent
of any Noteholders, including the voting rights of such Holders, but excluding
(i) the rights of the Majority Noteholders to exercise remedies following an
Event of Default pursuant to Section 5.4, but only during the period following
a Conversion Event and prior to a Conversion Date, (ii) those rights requiring
the
INDENTURE (IBJ WAREHOUSE) - Page 52
<PAGE>
consent of each affected Noteholder as provided in paragraphs (a) through (g)
of Section 9.2 and (iii) any rights of such Holders to distributions under
Section 8.2; provided that the preceding grant of rights to the Note Insurer
by the Noteholders shall be subject to Section 11.19.
Section 11.18 THIRD PARTY BENEFICIARY. The parties hereto acknowledge
that the Note Insurer is an express third party beneficiary hereof entitled to
enforce any rights reserved to it hereunder as if it were actually a party
hereto.
Section 11.19 SUSPENSION AND TERMINATION OF NOTE INSURER'S RIGHTS.
(a) During the continuation of a Note Insurer Default, the grant of
rights to the Note Insurer pursuant to Section 11.17 shall be of no force or
effect, and any other rights granted or reserved to the Note Insurer hereunder
shall vest instead in the Majority Noteholders; provided that the Note Insurer
shall be entitled to any distributions in reimbursement of the Note Insurer
Reimbursement Amount, and the Note Insurer shall retain those rights under
Section 9.2 hereof to consent to any supplement to this Indenture.
(b) At such time as either (i) the Aggregate Note Principal Balance has
been reduced to zero and all accrued interest has been paid on the Notes or
(ii) the Guaranty Policy has been terminated and in either case of (i) or (ii)
the Note Insurer has been reimbursed for all Guaranteed Payments and any other
amounts owed under the Guaranty Policy and the Insurance Agreement (and the
Note Insurer no longer has any obligation under the Guaranty Policy, except for
breach thereof by the Note Insurer), then the grant of rights to the Note
Insurer pursuant to Section 11.17 shall be of no further force or effect and
any other rights and benefits granted or reserved to the Note Insurer hereunder
(including the rights to direct certain actions and receive certain notices)
shall terminate and the Noteholders shall be entitled to the exercise of such
rights and to receive such benefits of the Note Insurer following such
termination to the extent that such rights and benefits are applicable to the
Noteholders.
INDENTURE (IBJ WAREHOUSE) - Page 53
<PAGE>
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused
this Indenture to be duly executed by their respective officers, thereunto
duly authorized and duly attested, all as of the day and year first above
written.
FIRSTPLUS FUNDING TRUST
By: /s/ LEE F. REDDIN
-----------------------------------
Lee F. Reddin
Vice President
FIRST BANK NATIONAL ASSOCIATION,
as Indenture Trustee
By: /s/ SHERI CHRISTOPHERSON
-----------------------------------
Sheri Christopherson
Vice President
INDENTURE (IBJ WAREHOUSE) - SIGNATURE PAGE
<PAGE>
STATE OF TEXAS
-----------------
COUNTY OF DALLAS
----------------
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared Lee F. Reddin, known to me
to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of the said
FIRSTPLUS FUNDING TRUST, a Delaware business trust, and that such person
executed the same as the act of said entity for the purpose and consideration
therein expressed, and in the capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 12th day of June, 1997.
/s/ CHRIS T. KRECEK
-------------------------------------------
Notary Public in and for the State of Texas
(Seal)
My commission expires:
- ----------------------
CHRIS T. KRECEK
NOTARY PUBLIC, STATE OF TEXAS
COMMISSION EXPIRES: 09-26-2000
<PAGE>
STATE OF TEXAS
-----------------
COUNTY OF DALLAS
----------------
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared Sheri Christopherson, known
to me to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of FIRST BANK
NATIONAL ASSOCIATION, a national banking association, and that such person
executed the same as the act of said corporation for the purpose and
consideration therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 12th day of June, 1997.
/s/ CHRIS T. KRECEK
-------------------------------------------
Notary Public in and for the State of Texas
(Seal)
My commission expires:
- ----------------------
CHRIS T. KRECEK
NOTARY PUBLIC, STATE OF TEXAS
COMMISSION EXPIRES: 09-26-2000
<PAGE>
SCHEDULE A
(To be Provided at the Closing and Amended as Provided in the Sale and
Servicing Agreement)
<PAGE>
EXHIBIT A
Form of Note
<PAGE>
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share data)
<TABLE>
For the Quarter For the Nine Months
Ended June 30, Ended June 30,
---------------------- ----------------------
1996 1997 1996 1997
------- -------- ------- -------
<S> <C> <C> <C> <C>
Net income . . . . . . . . . . . . . . . . . $ 9,750 $ 38,174 $20,834 $86,355
Less: Accrual of preferred stock dividends . - - (66) -
------- -------- ------- -------
Net income applicable to common stock. . . . $ 9,750 $ 38,174 $20,768 $86,355
-------- -------- ------- -------
-------- -------- ------- -------
Average common shares outstanding. . . . . . 26,887 34,926 23,925 31,994
Common stock equivalents:
Warrants and options . . . . . . . . . . . . 793 1,310 487 1,340
-------- -------- ------- -------
Weighted average common and common
equivalent shares outstanding. . . . . . . 27,680 36,236 24,412 33,334
-------- -------- ------- -------
-------- -------- ------- -------
Primary net income per share of common
stock. . . . . . . . . . . . . . . . . . . $ 0.35 $ 1.05 $ 0.85 $ 2.59
-------- -------- ------- -------
-------- -------- ------- -------
Net income . . . . . . . . . . . . . . . . . $ 9,750 $ 38,174 $20,834 $86,355
Add: Interest from convertible debt. . . . . - 1,286 - 4,321
Less: Accrual of preferred stock dividends . - - (66) -
Tax effect on convertible debt
interest . . . . . . . . . . . . . . - (488) - (1,642)
-------- -------- ------- -------
Net income applicable to common stock. . . . $ 9,750 $ 38,972 $20,768 $89,034
-------- -------- ------- -------
-------- -------- ------- -------
Average common shares outstanding. . . . . . 26,887 34,926 23,925 31,994
Common stock equivalents:
Warrants and options . . . . . . . . . . . . 793 1,310 487 1,557
Convertible subordinated debts . . . . . . . - 4,289 - 4,833
-------- -------- ------- -------
Weighted average fully diluted common and
common equivalent shares outstanding . . . 27,680 40,525 24,412 38,384
-------- -------- ------- -------
-------- -------- ------- -------
Fully diluted net income per share of
common stock . . . . . . . . . . . . . . . $ 0.35 $ 0.96 $ 0.85 $ 2.32
-------- -------- ------- -------
-------- -------- ------- -------
</TABLE>
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 40,801,870
<SECURITIES> 17,440,125
<RECEIVABLES> 1,985,839,405
<ALLOWANCES> 207,700,644
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 24,873,747
<DEPRECIATION> 4,434,101
<TOTAL-ASSETS> 1,885,350,885
<CURRENT-LIABILITIES> 0
<BONDS> 177,375,128
0
0
<COMMON> 351,218
<OTHER-SE> 354,928,103
<TOTAL-LIABILITY-AND-EQUITY> 1,885,350,885
<SALES> 0
<TOTAL-REVENUES> 364,406,787
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 136,466,414
<LOSS-PROVISION> 31,188,870
<INTEREST-EXPENSE> 57,469,158
<INCOME-PRETAX> 139,282,345
<INCOME-TAX> 52,927,291
<INCOME-CONTINUING> 86,355,054
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 86,355,054
<EPS-PRIMARY> 2.59
<EPS-DILUTED> 2.32
</TABLE>
