<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended
OR
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from October 1, 1997 to December 31, 1997
Commission file number 0-27550
FIRSTPLUS Financial Group, Inc.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 75-2561085
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1600 Viceroy, Dallas, Texas 75235
- -------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(214) 599-6400
- -------------------------------------------------------------------------------
Former fiscal year end September 30, 1997; New fiscal year end December 31, 1998
- -------------------------------------------------------------------------------
(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 37,165,147 shares of voting common stock and 690,990 shares of non-
voting common stock, $.01 par value outstanding as of January 31, 1998.
<PAGE>
FIRSTPLUS FINANCIAL GROUP, INC.
INDEX TO FORM 10-Q
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements Page
----
Consolidated Balance Sheets -
September 30, 1997 and December 31, 1997 (Unaudited)- 3
Consolidated Statements of Income-(Unaudited)
Three Months Ended December 31, 1996 and
December 31, 1997 4
Consolidated Statements of Cash Flows-(Unaudited)
Three Months Ended December 31, 1996 and
December 31, 1997 5
Notes to Consolidated Financial Statements-(Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURE 12
2
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FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ASSETS
<TABLE>
September 30, December 31,
1997 1997
------------- ------------
(Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 94,978 $ 59,524
Securities, available for sale 40,995 30,172
Loans held for sale, net 1,400,446 1,577,847
Investment in securitized loans 190,861 182,842
Subordinated certificates held for sale 18,047 18,047
Interest only strips, net 456,123 487,555
Servicing assets 40,516 53,480
Receivable from trusts 138,816 171,606
Other assets 66,424 73,309
---------- ----------
Total assets $2,447,206 $2,654,382
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued liabilities $ 44,445 $ 30,919
Warehouse financing 1,238,156 1,361,967
Term lines 211,751 275,692
Time deposits 120,025 133,146
Bonds 174,088 168,646
Convertible subordinated notes 69,920 69,920
Notes payable and other borrowings 39,321 39,714
Deferred tax liabilities, net 119,355 127,516
---------- ----------
Total liabilities 2,017,061 2,207,520
Commitments and contingencies
Stockholders' equity:
Preferred stock Series A, non-voting, $1.00 par value
8% cumulative dividend:
Authorized shares-300
Issued and outstanding shares-none -- --
Preferred stock Series B, non-voting, $1.00 par value
8% cumulative dividend:
Authorized shares-2,300
Issued and outstanding shares-none -- --
Common stock, $0.01 par value:
Authorized shares-100,000
Issued and outstanding shares
36,580 at September 30, 1997 and 37,140 at
December 31, 1997 366 371
Common stock, non-voting, $0.01 par value:
Authorized shares-25,000
Issued and outstanding shares
691 at September 30, 1997 and December 31, 1997 7 7
Additional capital 216,881 219,329
Unrealized gains on available for sale
securities, net 20,253 25,900
Retained earnings 192,638 201,255
---------- ----------
Total stockholders' equity 430,145 446,862
---------- ----------
Total liabilities and stockholders' equity $2,447,406 $2,654,382
---------- ----------
---------- ----------
</TABLE>
See accompanying notes
3
<PAGE>
FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
Three Months Ended
December 31,
-----------------------
1996 1997
---- ----
(Unaudited)
<S> <C> <C>
Revenues:
Gain on securitized loan sales, net $ 49,941 $ 18,931
Interest income 22,412 64,353
Interest only strips interest income 2,717 23,288
Origination income 3,738 23,480
Servicing income 3,283 9,392
Gain on whole loan sales 6,296 4,521
Insurance income -- 2,004
Other income 2,468 1,392
---------- ----------
Total revenues 90,855 147,361
Expenses:
Salaries and employee benefits 16,586 36,909
Interest 14,713 33,996
Other operating 22,612 48,511
Provision for possible credit losses 5,272 14,047
---------- ----------
Total expenses 59,183 133,463
---------- ----------
Income before income taxes 31,672 13,898
Provision for income taxes (12,036) (5,281)
---------- ----------
Net income $ 19,636 $ 8,617
---------- ----------
---------- ----------
Weighted average common shares 28,278 37,487
---------- ----------
---------- ----------
Basic earnings per share $ 0.69 $ 0.23
---------- ----------
---------- ----------
Weighted average common shares - assuming dilution 35,547 43,570
---------- ----------
---------- ----------
Diluted earnings per share $ 0.58 $ 0.22
---------- ----------
---------- ----------
</TABLE>
See accompanying notes
4
<PAGE>
FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
<TABLE>
Three Months Ended
December 31,
-------------------------
1996 1997
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 19,636 $ 8,617
Operating activities:
Provision for possible credit losses 5,272 14,047
Depreciation and amortization 342 1,770
Gain on sales of loans (56,237) (23,452)
Changes in operating assets and liabilities:
Interest only strip and servicing asset amortization 5,161 35,947
Loans originated or acquired (824,099) (1,322,947)
Principal collected and proceeds from sale of loans 585,968 1,147,817
Interest only strips, net (19,041) (60,923)
Receivable from trusts (18,107) (32,790)
Other assets (16,315) (1,687)
Accounts payable and accrued expenses (665) (13,526)
Deferred tax liability 11,469 8,161
Other 415 1,380
--------- -----------
NET CASH USED IN OPERATING ACTIVITIES (306,201) (237,586)
INVESTING ACTIVITIES:
Cash from acquisition 11,962 -
Purchases of available for sale securities (10,924) (6,844)
Proceeds from sale of available for sale securities -- 17,667
Purchases of equipment and leasehold improvements (565) (6,968)
--------- -----------
NET CASH PROVIDED BY INVESTING ACTIVITIES 473 3,855
FINANCING ACTIVITIES:
Borrowings on warehouse financing facilities, net 274,114 123,811
Borrowings on term line of credit 27,160 63,941
Repayment on notes payable, net (768) 393
Payments on bonds payable -- (5,442)
Net change in deposits 1,376 13,121
Issuance of common stock 718 2,453
--------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 302,600 198,277
--------- -----------
DECREASE IN CASH (3,128) (35,454)
Cash and cash equivalents at beginning of period 23,167 94,978
--------- -----------
Cash and cash equivalents at end of period $ 20,039 $ 59,524
--------- -----------
--------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid during the period $ 11,723 $ 30,750
--------- -----------
--------- -----------
</TABLE>
See accompanying notes
5
<PAGE>
FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three-month period ended December 31, 1997 are not
necessarily indicative of the results that may be expected for a full year.
For further information, refer to the consolidated financial statements and
footnotes thereto for the year ended September 30, 1997 included in FIRSTPLUS
Financial Group, Inc.'s 1997 Annual Report filed with the Securities and
Exchange Commission on Form 10-K.
On December 15, 1997, the Board of Directors of FIRSTPLUS Financial
Group, Inc. (the "Company") approved a change in the Company's fiscal year
end from September 30 to December 31, to be effective beginning January 1,
1998. Accordingly, the Company is filing this Transition Report on Form 10-Q
for the transition period ended December 31, 1997.
2. LOANS HELD FOR SALE
Loans held for sale consist of the following:
<TABLE>
September 30, December 31,
1997 1997
---------- ----------
(Unaudited)
<S> <C> <C>
High LTV Loans $1,310,576 $1,445,725
Personal consumer 93,172 107,118
Conforming first lien mortgages 16,488 16,801
Other 14,581 41,938
---------- ----------
Subtotal 1,434,817 1,611,582
Allowance for possible credit losses (31,539) (19,753)
Deferred finance charges (16,568) (19,559)
Net purchase premiums 13,736 5,577
---------- ----------
Total $1,400,446 $1,577,847
---------- ----------
---------- ----------
</TABLE>
6
<PAGE>
FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. INTEREST ONLY STRIPS, NET
The activity in the Interest Only Strips (net of allowance for loan losses)
is summarized as follows:
<TABLE>
Three months
Year ended ended
September 30, December 31,
1997 1997
--------- ----------
(Unaudited)
<S> <C> <C>
Balance, beginning of period $ 132,973 $ 456,123
Interest only strips from securizations 608,548 164,965
Provision for possible losses (245,796) (116,463)
Amortization (61,707) (34,314)
Charge-offs, net 23,866 17,581
Other (1,761) (337)
--------- ---------
Balance, end of period $ 456,123 $ 487,555
--------- ---------
--------- ---------
</TABLE>
4. EARNINGS PER SHARE
The table below sets forth the computation of basic and diluted earnings per
share:
<TABLE>
Three Months Ended
December 31
------------------
(unaudited)
1996 1997
-------- -------
<S> <C> <C>
Numerator:
Numberator for basic earnings per share-income $19,636 $ 8,617
availabe to common stockholders (net income)
Effect of dilutive securities:
Additional interest on convertible
subordinated notes, net of tax 1,096 792
------- -------
Numerator for diluted earnings per share-income
available to common stockholders after assumed
conversions $20,732 $ 9,409
------- -------
------- -------
Denominator:
Denominator for basic earnings per share-weighted
average shares 28,278 37,487
Effect of dilutive securities:
Employee stock options 1,345 1,793
Convertible subordinated notes 5,924 4,290
------- -------
Dilutive potential common shares 7,269 6,083
------- -------
Denominator for diluted earnings per share-adjusted
weighted average shares and assumed conversions 35,547 43,570
------- -------
------- -------
Basic earnings per share $ 0.69 $ 0.23
------- -------
------- -------
Diluted earnings per share $ 0.58 $ 0.22
------- -------
------- -------
</TABLE>
7
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FIRSTPLUS Financial Group, Inc. (together with its subsidiaries, the
"Company" or "FIRSTPLUS") is a specialized consumer finance company that
originates, purchases, services and sells consumer finance receivables. The
Company's loan products are debt consolidation or home improvement loans
secured by second liens on residential real property ("High LTV Loans"),
non-conforming home equity loans ("Home Equity"), conforming first lien
loans, and personal consumer loans. The Company sells substantially all of
its High LTV Loans through its securitization program and retains rights to
service these loans.
The following analysis of the financial condition and results of
operations of the Company should be read in conjunction with the Company's
Annual Report filed with the Securities and Exchange Commission on Form 10-K,
including the consolidated financial statements and notes thereto.
FINANCIAL CONDITION
DECEMBER 31, 1997
Loans held for sale and investment in securitized loans increased to
$1.8 billion as of December 31, 1997, compared with $1.6 billion as of
September 30, 1997, an increase of $0.2 billion or 12.5%. This increase
was due to loan originations of $1.3 billion offset by loans securitized of
$900 million, whole loan sales and loan paydowns.
The Company's interest only strips ("I/O Strips") increased to $487.6
million at December 31, 1997, compared with $456.1 million at September 30,
1997, an increase of $31.5 million or 6.9%. The increase in the I/O Strips
was the result of the recognition of the fair value of the I/O Strips
associated with the current period securitizations, offset by the
amortization of the I/O Strips and offset by the provision for losses on
loans sold. I/O Strips are amortized through periodic charges to the income
statement on an accelerated basis. This amortization rate is approximately
131% of the 2.9% (11.6% annualized) loan run-off rate (including scheduled
amortization, prepayments and defaults) experienced in the related
securitization pools during the December 31, 1997 quarter. As of December
31, 1997, the carrying value of previously recorded I/O Strips reflects the
estimated fair value.
Total stockholders' equity at December 31, 1997 was $446.9 million,
compared with $430.1 million at September 30, 1997, an increase of $16.8
million or 3.9%. During the three months ended December 31, 1997, the
Company earned net income of $8.6 million and had a $5.6 million net
increase in its unrealized gains on securities related to its I/O Strips.
RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1997 VERSUS THREE MONTHS ENDED
DECEMBER 31, 1996
The Company's total revenues increased to $147.4 million during its
December 1997 quarter, compared with $90.9 million in the December 1996
quarter, an increase of $56.5 million or 62.2%. During the December 1997
quarter, the Company's percentage of non-securitization revenue to total
revenue increased to 87.2%, compared with 45.0% in the December 1996 quarter.
Gain on securitized loan sales decreased to $18.9 million in the
December 1997 quarter, compared with $49.9 million in the December 1996
quarter, a decrease of $31.0 million or 62.1%. Gain on securitized loan sales
in each quarter was affected by both the size of the securitizations and the
assumptions used in the gain on securitized loan sales. During the December
1997 quarter, the Company securitized $900 million of High LTV Loans,
compared with $395 million in the December 1996 quarter. This increase in
volume was due to increased loan originations.
During the quarter, the Company used more conservative assumptions to
record the gain on securitized loan sales, primarily an increased discount
rate assumption. The more conservative assumptions used for the 1997-4 I/O
Strip were determined based on management's assessment of several factors,
including but not limited to differences in the transaction structure of
1997-4 versus previous securitization structures and changes in conditions
8
<PAGE>
of the asset backed High LTV Loan market. Accordingly, management has
determined that the level of uncertainty regarding the fair value of the
1997-4 I/O Strip has increased. Below is a comparison of discount rates used
in securitizations:
<TABLE>
Prior
Approximate discount rate used for securitizations 1997-4
---------------------------------- --------------- ------
<S> <C> <C>
Expected pro forma gross cash flows 10-11% 17.6%
Anticipated losses 6.5% 5.8%
Overall effective discount rate 12.5% 33.0%
Three months ended
December 31
---------------------
1996 1997
----- ----
Gain on securitized loan sales
as a percentage of loans securitized 12.6% 2.1%
</TABLE>
Other assumptions used in assessing the fair value of the 1997-4 I/O
Strip were a proprietary prepayment curve (reaching a maximum constant
prepayment rate of approximately 17%) and a proprietary default curve
(resulting in an equivalent 12-month ramp to an average annual default rate
of 3.4%).
Interest income increased to $64.4 million in the December 1997 quarter,
compared with $22.4 million in the December 1996 quarter, an increase of
$42.0 million or 187.5%. The increase in interest income was mostly
attributable to an increase in the volume of loans originated and loans held
for sale. Loans held for sale as of December 31, 1997 were $1.6 billion,
compared with $734.4 million as of December 31, 1996.
Interest income on the Company's I/O Strips increased to $23.3 million
in the quarter ended December 31, 1997, compared with $2.7 million in the
quarter ended December 31, 1996, an increase of $20.6 million or 763%. This
increase was primarily the result of the Company's larger average I/O Strip
balance during the December 31, 1997 quarter. I/O Strips as of December 31,
1997 were $487.6 million compared with $196.8 million as of December 31, 1996.
Origination income increased to $23.5 million in the quarter ended
December 31, 1997, compared with $3.7 million in the quarter ended December
31, 1996, an increase of $19.8 million or 535.1%. The increase was the
result of the Company's continuing shift toward direct to consumer
originations. Origination fees are deferred when collected and subsequently
recognized when the loans are sold. The Company collected and deferred
approximately $34.1 million of loan origination fees during the December 1997
quarter.
Servicing income increased to $9.4 million in the quarter ended December
31, 1997, compared with $3.3 million in the quarter ended December 31, 1996,
an increase of $6.1 million or 184.8%. This increase was a result of the
increase in the Company's securitized loan portfolio which increased to $3.9
billion at December 31, 1997, compared with $1.2 billion at December 31, 1996.
Total pre-tax operating expenses, which include salaries, employee
benefits, advertising, marketing, servicing and other operating expenses,
increased to $96.8 million (before deferring $11.4 million of direct origination
costs) in the quarter ended December 31, 1997, compared with $39.2 million in
the quarter ended December 31, 1996, an increase of $57.6 million or 146.9%.
The increase in operating expenses during the quarter ended December 31, 1997
was due to the Company's decision to significantly increase its High LTV and
Home Equity direct to consumer lending platforms (including its Texas Home
Equity direct to consumer lending division). In addition, the Company
continued to increase marketing and advertising to build brand name awareness
and attract new customers.
Interest expense for the quarter ended December 31, 1997 increased to
$34.0 million, compared with $14.7 million for the quarter ended December 31,
1996, an increase of $19.3 million or 131.3%. The increase primarily
9
<PAGE>
related to the Company's overall increase in the warehouse and repurchase
facilities and term line borrowings, which supported both loan volume growth
and expanding operations in the quarter.
The Company's provision for possible credit losses on loans held for
sale increased to $14.0 million for the quarter ended December 31, 1997,
compared with $5.3 million for the quarter ended December 31, 1996, an
increase of $8.7 million or 164.1%. The 30 day and over delinquency rate for
the managed loans portfolio decreased to 2.6% as of December 31, 1997,
compared with 2.7% as of December 31, 1996. Gross servicing portfolio
defaults, before recoveries and insurance recoveries received on Title I
loans, equaled $22.6 million or 0.44% of the December 31, 1997 average
quarterly loan portfolio. Of the $22.6 million, approximately $5.3 million
were Title I defaults, which are subject to recoveries under the Title I
insurance program.
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, (ii) reserve accounts, overcollateralization requirements,
fees and expenses incurred in connection with its securitization
transactions, (iii) tax payments due on the Company's taxable net income,
(iv) television, radio and direct mail advertising and other marketing, and
(v) administrative and other operating expenses. The Company has been able
to utilize a new securitization structure whereby the Company issues the
bonds in excess of loans delivered. Overcollateralization requirements are
met by future excess cash flows of the specific securitizations. The Company
expects to continue to utilize this structure in future securitization
transactions.
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 facilities again
become available to fund additional loan originations and purchases.
The Company currently has approximately $3.6 billion in capacity in its
warehouse and repurchase facilities. These facilities carry variable
interest rates, primarily based on LIBOR, ranging from 0.50% to 1.5%. On
December 15, 1997, the Company entered into a new $1.5 billion committed
repurchase agreement with an affiliate of Deutsche Bank A.G. that bears interest
at LIBOR + 0.50%. As of December 31, 1997, the Company had $1.4 billion
outstanding under these facilities. The borrowings under the warehouse and
repurchase facilities had a weighted average interest rate of 6.8% and 6.6%
as of December 31, 1997 and September 30, 1997, respectively.
In addition, the Company had approximately $420 million in term line
facilities that are secured by I/O Strips generated from the related
securitizations. As of December 31, 1997, the Company had $275.7 million
outstanding under these facilities. These facilities are with the same
institution as the warehouse and repurchase facility and bear interest rates
at LIBOR + between 2.1% and 2.25%.
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 $237.6 million during the quarter ended
December 31, 1997, compared with $306.2 million used during the quarter ended
December 31, 1996. The cash used in operations is primarily related to the
cost of an enlarged infrastructure, employee base and the costs that
accompany the Company's securitization strategy. Cash from financing and
investing activities provided cash in the amount of $202.1 million for the
quarter ended December 31, 1997, compared with $303.1 million in the quarter
ended December 31, 1996. Financing and investing activities increased
primarily due to additional borrowings related to the warehouse, repurchase,
and term line facilities along with other borrowings, which have been used to
fund loan originations, working capital and securitization costs.
In addition, the Company has 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
10
<PAGE>
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.
IMPACT OF YEAR 2000
The "Year 2000" issue refers to the phenomenon whereby computer
programs, having been written using two digits rather than four to define the
applicable year, may erroneously recognize a date using "00" as the year 1900
rather than the year 2000. This error could potentially result in a system
failure or miscalculations causing disruptions of operations, including,
among other things, a temporary inability to process transactions or engage
in similar normal business activities.
The Company is in the process of upgrading its mission critical systems
as part of its strategic initiatives to accommodate its growth and need for
increased capacity. As part of this process, the Company is ensuring that
these new systems are Year 2000 compliant.
To a degree, the Company relies on outside software vendors, significant
suppliers and large customers for the operation of its systems. The Company
is initiating formal communications with these parties to determine the
extent to which the Company's upgraded systems are vulnerable to those third
parties' failure to remedy their own Year 2000 issues. The Company presently
believes that with modifications to existing software and conversions to new
software, the Year 2000 issue will not pose significant operational problems
for its systems. However, if such modifications and conversions are not made,
or are not completed timely, the Year 2000 issue could have a material impact
on the operations of the Company.
The Company will utilize both internal and external resources to
reprogram, or replace, and test the software for Year 2000 modifications.
The Company anticipates completing the Year 2000 project prior to any
anticipated impact on its operating systems. The total cost of the Year 2000
project, although not formally assessed at this time, is not expected to be
material and is being funded through operating cash flows.
FORWARD LOOKING STATEMENTS
Certain information contained in the transition report on Form 10-Q and
contained herein 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, and reference is made to such Form 8-K.
11
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Not Applicable
Item 2. CHANGES IN SECURITIES
Not Applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
Item 5. OTHER INFORMATION
Not Applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits:
10.1 - Loan and Security Agreement, dated December 13, 1997,
between FIRSTPLUS Special Funding Corp. and German
American Capital Corporation
10.2 - Loan and Security Agreement, dated December 13, 1997,
between FIRSTPLUS Special Funding Corp. and Aspen
Funding Corp.
27 - Financial Data Schedule
(B) Reports on Form 8-K
On December 23, 1997, the Company filed a Current Report on Form
8-K (amended on February 5, 1998) with respect to a change in
fiscal year end.
On December 22, 1997, the Company filed a Current Report on Form
8-K with respect to the press release dated December 19, 1997 on
gain-on-sale.
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/ William P. Benac
---------------------------------------------------------
William P. Benac
Chief Financial Officer
(Principal Financial Officer and Duly Authorized Officer)
date: February 13, 1998
-----------------
12
<PAGE>
Exhibit 10.1
LOAN AND SECURITY AGREEMENT
December 13, 1997
FIRSTPLUS Special Funding Corp.
1600 Viceroy Drive
Dallas, TX 75235-2306
Ladies and Gentlemen:
We are pleased to make available to you an uncommitted credit
facility for general corporate purposes on the terms set forth in this Loan
and Security Agreement. This Loan and Security Agreement is being entered
into simultaneously with the Committed Facility Transaction Documents, as
defined herein.
1. ADVANCES. We agree to consider from time to time, in our sole
discretion, your requests that we make advances to you, on an interest
bearing basis ("ADVANCES"), in an aggregate amount not to exceed at any one
time outstanding the amount set forth on SCHEDULE 1 hereto as the "FACILITY
AMOUNT", on the terms and conditions set forth below. This Loan and Security
Agreement is not a commitment to lend but rather sets forth the procedures to
be used in connection with your requests for our making of Advances to you
from time to time on or prior to the termination hereof and, in the event
that we make Advances to you hereunder, your obligations to us with respect
thereto. The Advances shall be evidenced by the "grid" promissory note
executed by you in substantially the form of EXHIBIT A hereto (the "NOTE").
The date, amount and interest rate of each Advance made by us to you, and
each payment made on account of the principal thereof, shall be recorded by
us on our books and, prior to any transfer of the Note, endorsed by us on the
schedule attached to the Note or any continuation thereof; PROVIDED that the
failure of us to make any such recordation or endorsement shall not affect
your obligation to make a payment when due of any amount owing hereunder or
under the Note in respect of the Advances. Subject to the terms and
conditions of this Loan and Security Agreement, during the period of this
Loan and Security Agreement, you may borrow, repay and reborrow hereunder.
2. PROCEDURE FOR BORROWING. (a) The net amount of each Advance
shall be in an amount at least equal to the amount set forth on SCHEDULE 1
hereto as the "MINIMUM ADVANCE AMOUNT" and shall be made, in our sole
discretion, upon (i) your irrevocable request to any of the persons listed on
EXHIBIT B-1 hereto or otherwise designated by us in writing ("LENDER'S
DESIGNATED PERSONS"), by telephone (if such request is given by telephone, a
hard copy of such request shall be subsequently delivered), telecopy or
letter, in the form of EXHIBIT E hereto (such request, a "REQUEST FOR
BORROWING"), given by any of the persons listed on EXHIBIT B-2 hereto or
otherwise designated by you in writing ("BORROWER'S DESIGNATED PERSONS"),
that you wish to borrow money on a specified date (the "FUNDING DATE"), in a
specified amount and for a specified term which in no event shall be longer
than 270 days; (ii) our mutual agreement as to such date, amount, term and as
to the interest rate per annum; and (iii) the posting of Collateral by you in
an amount sufficient to cause the
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aggregate Collateral Value of all Collateral to equal at least the sum of (a)
the Advance and (b) all amounts outstanding under previously made Advances.
(b) Such Request for Borrowing must be received by us prior to the
requesting deadline, as set forth in SCHEDULE 1 hereto (the "REQUESTING
DEADLINE"). Such Request for Borrowing shall (i) attach a schedule
identifying the Collateral that you propose to pledge to us in connection
with such borrowing, (ii) specify the requested Funding Date, (iii) include a
Collateral Tape containing information with respect to the Collateral that
you propose to pledge to us and to be included in the Borrowing Base in
connection with such borrowing, and (iv) attach an officer's certificate
signed by one of your Responsible Officers as required by SCHEDULE 3 hereof.
Each Advance shall be secured solely by Mortgage Loans or solely by Pledged
Securities.
(c) You shall deliver to the Custodian no later than 12:00 p.m.,
New York City time, two (2) Business Days prior to the requested Funding
Date, the Collateral File pertaining to each item of Collateral to be pledged
to us and included in the Borrowing Base on such requested Funding Date, in
accordance with the terms and conditions of the Custodial Agreement. You
shall release and deliver to us no later than 9:00 a.m. New York City time on
a Funding Date, the original Pledged Securities accompanied by a stock power
as more particularly described in Section 10.
(d) Pursuant to the Custodial Agreement, the Custodian shall
deliver to you and us, no later than 11:00 a.m. New York City time on a
Funding Date, a Trust Receipt (as defined in the Custodial Agreement) in
respect of all Collateral pledged to us on such Funding Date, and a
Collateral Schedule and Exception Report.
(e) If we have agreed to make an Advance, then on the date of such
Advance, we will make such Advance available to you in same day funds by
directing our administrative agent to transfer or wire the net proceeds of
such Advance pursuant to your wiring instructions set forth on SCHEDULE 1
hereto.
(f) A request for Borrowing shall be deemed to be made to us,
provided however, that if we shall choose, in our sole discretion, not to
make such Advance, such Request for Borrowing shall be deemed to have been
made to GACC, a subsidiary of Deutsche Bank North America Holding Corp. An
Advance made to you shall be deemed made by us, unless we indicate to you
that such Advance has been made by GACC.
(g) In the event that Collateral to be delivered to us does not
have a Collateral Value at least equal to the amount of the Advance requested
by you in a Request for Borrowing (such shortfall, a "COLLATERAL SHORTFALL"),
then we may, at our option with prior written notice to you, withhold from
the proceeds remitted to you in connection with any Advance an amount equal
to the Collateral Shortfall. Such amount shall be deposited in the Cash
Collateral Account and held as Collateral hereunder. Notwithstanding the
foregoing, the full amount of such requested Advance shall be deemed to have
been made for all purposes hereunder.
3. CONDITIONS PRECEDENT. Our obligation to consider making
Advances to you hereunder is subject to the satisfaction, immediately prior
to or concurrently with the making of any such Advance, of the conditions
precedent, listed on SCHEDULE 3 hereto. Each request for a
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borrowing by you under this Loan and Security Agreement shall constitute a
certification by you that all the conditions set forth in this SCHEDULE 3
have been satisfied (both as of the date of such notice, request or
confirmation and as of the date of such borrowing).
4. REPAYMENT OF ADVANCES; PAYMENT OF INTEREST. (a) You shall
repay each Advance, and shall pay interest on such Advance, in accordance
with the terms hereof and of the Note.
(b)(i) You hereby promise to repay in full the then outstanding
principal amount of each Advance on the earlier to occur of (A) the
applicable Loan Maturity Date or (B) the Termination Date. However, upon the
occurrence of a Loan Maturity Date, if you have not specified a new Loan
Maturity Date and you have not notified us at least two (2) Business Days
prior to the then current Loan Maturity Date that you will repay the related
Advance on such current Loan Maturity Date, then upon said Loan Maturity Date
such Advance shall (provided that no Default shall have occurred and be
continuing and provided further that all conditions precedent set forth on
SCHEDULE 3 have been satisfied) automatically be refinanced by us hereunder,
or, in the event we decline to refinance such Advance, such Advance shall be
refinanced under the Committed Facility Transaction Documents (subject to the
satisfaction by you of the conditions precedent thereunder) with a Loan
Maturity Date of the third Business Day following the date of such refinancing.
At the end of each successive Loan Maturity Date, the Advance shall continue
to be refinanced as provided in the previous sentence, provided that the
resulting Loan Maturity Date shall not occur on a date after the Termination
Date. Under the method of establishing the Loan Maturity Date set forth in
this Section 4, you may, subject to clause (ii) below, prepay all or a
portion of such Advance.
(ii) Any Advances are prepayable at any time, in whole or in part;
provided however, if you elect to prepay all or a portion of an Advance prior
to your specified Loan Maturity Date or if you give us notice of your
intention to make a prepayment of any Advance and fail to make such prepayment,
you shall pay us, on the date such Advance is prepaid, a Breakage Fee. We
shall determine the amount of the applicable Breakage Fee and notify you at
least 1 (one) Business Day prior to the date such Breakage Fee is due. Any
amounts prepaid shall be applied to repay the outstanding principal amount of
any Advances (together with interest thereon) until paid in full. If you
intend to prepay an Advance pursuant to this Section 4(b)(ii) in whole or in
part, you shall give at least two (2) Business Days prior written notice
thereof to us. If such notice is given, the amount specified in such notice
shall be due and payable on the date specified therein, together with accrued
interest to such date on the amount prepaid. Your failure to prepay as
specified in such notice shall not constitute an Event of Default, provided
that in the event of such failure, you shall pay the Breakage Fee to us
pursuant to this Section 4(b)(ii). Partial prepayments shall be in an
aggregate principal amount of at least $1,000,000.
(c) You hereby promise to pay to us interest on the unpaid
principal amount of each Advance for the period from and including the date
of such Advance up to but excluding the date such Advance shall be paid in
full, at a rate per annum equal to the applicable LIBOR Rate PLUS the
Applicable Spread. Notwithstanding the foregoing, you hereby promise to pay
to us interest at the applicable Post-Default Rate on any principal of any
Advance and on any other amount payable by you hereunder or under the Note
that shall not be paid in full when due (whether at stated maturity, by
acceleration or by mandatory prepayment or otherwise) for the period from and
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including the due date thereof to but excluding the date the same is paid in
full. Interest shall accrue daily at the applicable LIBOR Rate plus the
Applicable Spread for each applicable Interest Period. Accrued interest on
each Advance shall be payable monthly on each Payment Date and if not
refinanced pursuant to Section 4(b)(i) above, the applicable Loan Maturity
Date, and for the last month of the Loan and Security Agreement on the
Payment Date of such last month and on the Termination Date, except that
interest payable at the Post-Default Rate shall accrue daily and shall be
payable upon such accrual.
(d) It is understood and agreed that, unless and until a Default
shall have occurred and be continuing, you shall be entitled to the proceeds
of the Collateral pledged to us hereunder subject to the distribution
provisions set forth in the FIRSTPLUS Servicing Agreement. Provided that no
Default shall have occurred and be continuing, any cash that we receive that
is not due and payable to us pursuant to this Agreement, we shall remit to
you, within one (1) Business Day following receipt thereof in accordance with
your wire transfer instructions.
5. PAYMENTS. (a) You shall make each payment hereunder and under
the Note on or before 12:00 noon (New York City time) on the day when due in
lawful money of the United States of America, without deduction, set-off or
counterclaim, to our account, as indicated in our wire transfer instructions
set forth on SCHEDULE 1 hereto in same day funds (and each such payment made
after such time on such due date shall be deemed to have been made on the
next succeeding Business Day). All computations of interest shall be made on
the basis of a year of 360 days, for the actual number of days (including the
first day but excluding the last day) elapsed.
(b) Whenever any payment to be made hereunder shall be otherwise
due on a Saturday, a Sunday or other day of the year on which banks are
required or authorized to close in New York, New York or Dallas, Texas (any
other day being a "BUSINESS DAY"), such payment date shall be extended to the
next succeeding Business Day, and interest shall be payable for any principal
so extended for the period of such extension.
6. RELIANCE ON DESIGNATED PERSONS. Neither party shall incur
liability to the other in acting upon any telephone, telecopy, telex or
letter request or communication which such party believes in good faith to
have been given by a Lender's Designated Person or a Borrower's Designated
Person or in otherwise acting in good faith under this Loan and Security
Agreement. Further, all documents required to be executed in conjunction
with Advances under this Loan and Security Agreement may be signed by any
Lender's Designated Person or any Borrower's Designated Person.
7. MARGIN DEFICIT; MARGIN EXCESS; CASH COLLATERAL ACCOUNT. (a)
If at any time the aggregate Market Value of all Collateral securing any
related Advance is less than the Lender's Margin Amount for such Advance at
such time (a "MARGIN DEFICIT"), then we may by notice to you (a "MARGIN
NOTICE") require you, at your option, to transfer to us cash or additional
Collateral reasonably acceptable to us ("ADDITIONAL COLLATERAL"), so that the
cash and Market Value of the Collateral securing such related Advance,
including any such Additional Collateral, will thereupon equal or exceed such
Lender's Margin Amount for such Advance. If at any time the aggregate
Collateral Value of all Collateral securing any related Advance exceeds such
Advance at such time (a "MARGIN EXCESS"), then you may by written notice to
us, and provided that no Default shall have
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occurred and be continuing, require us to transfer Collateral to you, so that
the Collateral Value of the Collateral securing such related Advance, after
deduction of any Collateral so transferred, will thereupon not exceed such
Advance. Each of us agrees that (i) the amount of the Secured Obligations
will not be increased or decreased by the amount of any cash transferred by
one party to the other pursuant to this Section 7; (ii) transfer of such cash
shall be treated as if it constituted a transfer of Collateral (with a Market
Value equal to the U.S. Dollar amount of such cash) pursuant to this Section 7
(including for purposes of the definition of "ADDITIONAL COLLATERAL" above)
unless (A) you request that such cash be used to prepay any Advance, in which
case you shall be responsible for any applicable Breakage Fee attributable
thereto, or (B) we require that such cash be used to prepay any Advance, in
which case we shall waive any Breakage Fee attributable thereto.
(b) If a Margin Notice is given as described in paragraph (a)
above at or before the closest Margin Notice Deadline (as defined in SCHEDULE
1 hereto) on any Business Day, the party receiving such notice shall transfer
cash or Additional Collateral as provided therein no later than the related
Margin Call Deadline (as set forth on SCHEDULE 1 hereto).
8. SECURITY INTEREST. By agreeing to and accepting this Loan and
Security Agreement, you hereby assign, pledge and grant a security interest
in all of your right (including the power to convey title thereto), title and
interest in and to the Collateral (defined below), including but not limited
to the right to payments of dividends, principal and interest and the right
to enforce such payments arising from or under any of the Collateral, the
contractual right to service the Collateral, any servicing agreements
governing the Collateral, all records and insurance relating to the
Collateral, any other contract rights, general intangibles, other assets
relating to the Collateral, or any interest in the Collateral, securities
backed by or representing an interest in such Collateral, all documents
related to such Collateral and all income, payments, products and proceeds
thereof (all as more particularly described in Section 9 hereof) to us to
secure the repayment of principal of and interest on all Advances and all
other amounts owing to us hereunder and under the Note (collectively, the
"SECURED OBLIGATIONS"). You agree that we intend this Loan and Security
Agreement to create for our benefit, as secured party, a legally valid and
enforceable first priority perfected security interest in the Collateral. You
agree that you shall, at our request, take all action necessary to ensure
that we will have a first priority security interest in the Collateral,
including, among other things, using your best efforts to obtain necessary
signatures and file such UCC financing statements as we may reasonably
request. You agree to mark your computer records and tapes to evidence the
interests granted to us hereunder.
9. COLLATERAL. All of your right, title and interest in, to and
under each of the following items of property, whether now owned or hereafter
acquired, now existing or hereafter created and wherever located, are
hereinafter referred to as the "COLLATERAL":
a. all Assets;
b. all Collateral Documents, including without limitation all
promissory notes relating to or evidencing the Assets, and all Servicing
Records, servicing agreements and any other collateral pledged or otherwise
relating to such Collateral, together with all files, documents,
instruments, surveys, certificates, correspondence, appraisals, computer
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programs, computer storage media, accounting records and other books and
records relating thereto;
c. all securities, monies or property representing dividends or
interest on any of the foregoing, or representing a distribution in respect
of the foregoing, or resulting from a split-up, revision, reclassification
or other like change of the foregoing or otherwise received in exchange
therefor, and any subscription warrants, rights or options issued to the
holders of, or otherwise in respect of, the foregoing.
d. all Pooling and Servicing Agreements;
e. all Collection Accounts and amounts on deposit therein;
f. all Cash Collateral Accounts and amounts on deposit therein;
g. all guaranties and insurance (issued by governmental agencies or
otherwise) and any insurance certificate or other document evidencing such
guaranties or insurance relating to any item of Collateral and all claims
and payments thereunder;
h. all other insurance policies and insurance proceeds relating to
any item of Collateral;
i. all Interest Rate Protection Agreements;
j. all Additional Collateral provided to us as described herein;
k. all of your rights, but not your obligations under any purchase
agreements and servicing agreements covering or relating to any item of the
Collateral, including without limitation the FIRSTPLUS Purchase Agreement
and the FIRSTPLUS Servicing Agreement to which you are a party;
l. all "general intangibles" as defined in the Uniform Commercial
Code relating to or constituting any and all of the foregoing; and
m. any and all replacements, substitutions, distributions on or
proceeds of any and all of the foregoing.
10. POSSESSION AND PERFECTION. (a) CUSTODIAN. Pursuant to the
Custodial Agreement to be executed in the form attached hereto as EXHIBIT C
on or before the date of the first Advance hereunder, the Custodian (as
defined therein) shall hold the Collateral Documents (as defined therein) as
exclusive bailee and as our agent pursuant to terms of the Custodial
Agreement and shall deliver to us Trust Receipts (as defined in the Custodial
Agreement) each to the effect that it has reviewed such Collateral Documents
in the manner and to the extent required by the Custodial Agreement and
identifying any deficiencies in such Collateral Documents as so reviewed.
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(b) STOCK POWERS; RE-REGISTRATION. (i) Concurrently with the
delivery to us of each certificate representing one or more shares of Pledged
Securities pursuant to Section 8 above, you shall deliver an undated stock
power covering such certificate, duly executed in blank by you with, if we so
request, signature guaranteed, along with any other documents necessary to
re-register the Pledged Securities or the Pledged Securities shall be
otherwise registered in a form satisfactory to us.
(ii) You agree and acknowledge that we may at our sole discretion
re-register any Pledged Securities delivered as Collateral hereunder into our
name.
(c) NOTIFICATION TO TRUSTEE. Concurrently with the delivery to us
of each certificate representing one or more shares of Pledged Securities
pursuant to Section 2 above, (i) you shall have (A) notified the Trustee, in
the form of the Instruction Letter attached hereto as EXHIBIT I, in connection
with the related Pooling and Servicing Agreement, of the pledge of the
related Pledged Securities hereunder, and (B) instructed the Trustee to pay
all amounts payable to the holders of the Pledged Securities to the Cash
Collateral Account, and (ii) the Trustee shall have acknowledged in writing
the instructions set forth in clause (i) above, and a copy of the fully
executed Instruction Letter, shall be delivered to us.
(d) CASH DIVIDENDS; VOTING RIGHTS. We shall be permitted to
receive all cash dividends and distributions paid in respect of the Pledged
Securities and shall apply same in accordance with Section 4 hereof. Without
the prior written consent of us, you will not (i) vote to enable, or take any
other action to permit, any rights afforded you under any Pooling and
Servicing Agreement, as holder of the Pledged Securities, or (ii) sell,
assign, transfer, exchange or otherwise dispose of, or grant an option with
respect to, the Collateral, or (iii) create, incur or permit to exist any
Lien or option in favor of, or any adverse claim of any Person with respect
to, any of the Collateral, or any interest therein, except for the security
interests created by this Agreement.
(e) RIGHTS OF THE LENDER AS PLEDGEE. All the Pledged Securities
shall, at our election, be registered in our name or in the name of our
nominee, and we or our nominee may thereafter exercise (A) all voting,
corporate and other rights pertaining to such Pledged Securities and (B) any
and all rights of conversion, exchange, subscription and any other rights,
privileges or options pertaining to such Pledged Securities as if it were the
absolute owner thereof (including, without limitation, upon the exercise by
us of any right, privilege or option pertaining to such Pledged Securities),
and in connection therewith, the right to deposit and deliver any and all of
the Pledged Securities with any committee, depository, transfer agent,
registrar or other designated agency upon such terms and conditions as we may
determine.
11. FURTHER DOCUMENTATION. You agree that at any time and from
time to time, upon our written request, and at your sole expense, you will
promptly and duly execute and deliver, or will promptly cause to be executed
and delivered, such further instruments and documents and take such further
action as we may reasonably request for the purpose of obtaining or
preserving the full benefits of this Loan and Security Agreement and of the
rights and powers herein granted, including, without limitation, the filing
of any financing or continuation statements under the Uniform Commercial Code
in effect in any jurisdiction with respect to the mortgages, liens, pledges,
charges, security interests or similar encumbrances (each, a "LIEN") created
hereby. You also hereby
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authorize us to file any such financing or continuation statement without
your signature to the extent permitted by applicable law. A carbon,
photographic or other reproduction of this Loan and Security Agreement shall
be sufficient as a financing statement for filing in any jurisdiction. You
agree that you will not change your name, identity or corporate structure (or
the equivalent) or change the location where you maintain your records with
respect to the Collateral unless you shall have given us at least 30 days'
prior written notice thereof and shall have delivered to us all Uniform
Commercial Code financing statements and amendments thereto as we shall request
and shall have taken all other actions we will have deemed necessary to continue
our perfected status in the Collateral with the same or better priority.
12. POWER OF ATTORNEY. You hereby irrevocably constitute and
appoint us and any of our officers or agents, with full power of substitution,
as your true and lawful attorney-in-fact with full irrevocable power and
authority in your place and stead and in your name or in our own name, from
time to time in our discretion, for the purpose of carrying out the terms of
this Loan and Security Agreement, to take any and all appropriate action and
to execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Loan and Security Agreement, and,
without limiting the generality of the foregoing, you hereby give us the power
and right, on your behalf, without assent by you, but with notice to you, if,
while any Secured Obligations are outstanding hereunder, an Event of Default
(as defined below) shall have occurred and be continuing, to do the following:
(i) in your name or in our name, or otherwise, to take possession
of and endorse and collect any checks, drafts, notes, acceptances or other
instruments for the payment of moneys due under any mortgage, deed of
trust, assignment of leases and rents or other instrument or security
agreement securing obligations with respect to the Collateral, which
creates a Lien on the Collateral (each, a "COLLATERAL SECURITY AGREEMENT"),
insurance or other amounts payable with respect to the Collateral and to
file any claim or to take any other action or proceeding in any court of
law or equity or otherwise deemed appropriate by us for the purpose of
collecting any and all such moneys due us under any such Collateral
Security Agreement, insurance or with respect to any other Collateral
whenever payable;
(ii) to pay or discharge, at your expense, taxes and Liens levied
or placed on or threatened against the Collateral; and
(iii) (A) to direct any party liable for any payment under any
Collateral to make payment of any and all moneys due or to become due
thereunder directly to us or as we shall direct; (B) to ask for or demand,
collect, receive payment of and receipt for, any and all moneys, claims and
other amounts due or to become due at any time in respect of or arising out
of any Collateral; (C) to sign and endorse any invoices, assignments,
verifications, notices and other documents in connection with any of the
Collateral; (D) to commence and prosecute any suits, actions or proceedings
at law or in equity in any court of competent jurisdiction to collect the
Collateral or any thereof and to enforce any other right in respect of any
Collateral; (E) to defend any suit, action or proceeding brought against
you with respect to any Collateral; (F) to settle, compromise or adjust any
suit, action or proceeding described in clause (E) above and, in connection
therewith, to give such discharges or releases as we may deem appropriate;
and (G) generally, to sell, transfer, pledge and make
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any agreement with respect to or otherwise deal with any of the Collateral
as fully and completely as though we were the absolute owner thereof for
all purposes, and to do, at our option and your expense, at any time, and
from time to time, all acts and things which we deem necessary to protect,
preserve or realize upon the Collateral and our Liens thereon and to
effect the intent of this Loan and Security Agreement, all as fully and
effectively as you might do.
You hereby ratify all that said attorneys shall lawfully do or cause to be
done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
You also authorize us, at any time and from time to time, to
execute, in connection with any sale provided for in this Section 12, any
endorsements, assignments or other instruments of conveyance or transfer with
respect to the Collateral.
The powers conferred on us pursuant to this Loan and Security
Agreement are solely to protect our interests in the Collateral and shall not
impose any duty upon us to exercise any such powers. We shall be accountable
only for amounts that we actually receive as a result of the exercise of such
powers, and neither we nor any of our officers, directors, or employees shall
be responsible to you for any act or failure to act hereunder, except for our
or their own gross negligence or willful misconduct.
13. OUR PERFORMANCE OF YOUR OBLIGATIONS. If you fail to perform
or comply with any of your agreements contained herein and we may ourselves
perform or comply, or otherwise cause performance or compliance, with such
agreement, our expenses incurred in connection with such performance or
compliance, together with interest thereon at a rate per annum equal to the
Post-Default Rate, shall be payable by you to us on demand.
14. PROCEEDS. If an Event of Default shall occur and be
continuing, (a) all proceeds of Collateral received by you consisting of
cash, checks and other near-cash items shall be held by you in trust for us,
segregated from other of your funds, and shall forthwith upon receipt by you
be turned over to us in the exact form received by you (duly endorsed by you
to us, if required) and (b) any and all such proceeds received by us (whether
from you or otherwise) may, in our sole discretion, be held by us as
collateral security for, and/or then or at any time thereafter may be applied
by us against, the Secured Obligations (whether matured or unmatured), such
application to be in such order as we shall elect. Any balance of such
proceeds remaining after the Secured Obligations shall have been paid in full
and this Loan and Security Agreement shall have been terminated shall be paid
over to you or to whomsoever may be lawfully entitled to receive the same.
For purposes hereof, proceeds shall include, but not be limited to, all
principal and interest payments, all prepayments and payoffs, insurance
claims, condemnation awards, sale proceeds, real estate owned rents and any
other income and all other amounts received with respect to the Collateral.
15. REMEDIES. If an Event of Default shall occur and be
continuing, we may exercise, in addition to all other rights and remedies
granted to us in this Loan and Security Agreement and in any other instrument
or agreement securing, evidencing or relating to the Secured Obligations, all
rights and remedies of a secured party under the Uniform Commercial Code.
Without limiting the generality of the foregoing, we, without demand of
performance or other
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demand, presentment, protest, advertisement or notice of any kind (except any
notice required by law referred to below) to or upon you or any other Person
(each and all of which demands, presentments, protests, advertisements and
notices are hereby waived), may in such circumstances forthwith collect,
receive, appropriate and realize upon the Collateral, or any part thereof,
and/or may forthwith sell, lease, 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 or as an
entirety at public or private sale or sales, at any exchange, broker's board
or our offices or elsewhere upon such terms and conditions as we may deem
advisable and at such prices as we may deem best, for cash or on credit or
for future delivery without assumption of any credit risk. We 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 in you,
which right or equity is hereby waived or released. You further agree, at
our request, to assemble the Collateral and make it available to us at places
which we shall reasonably select, whether at your premises or elsewhere. We
shall apply 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 our rights hereunder, including without limitation reasonable attorneys'
fees and disbursements, to the payment in whole or in part of the Secured
Obligations, in such order as we may elect, and only after such application
and after the payment by us of any other amount required or permitted by any
provision of law, including without limitation Section 9-504(1)(c) of the
Uniform Commercial Code, need we account for the surplus, if any, to you. To
the extent permitted by applicable law, you waive all claims, damages and
demands you may acquire against us arising out of our exercise of any of our
rights hereunder, other than those claims, damages and demands arising from
our gross negligence or willful misconduct. If any notice of a proposed sale
or other disposition of Collateral shall be required by law, such notice
shall be deemed reasonable and proper if given at least 10 days before such
sale or other disposition. You shall remain liable for any deficiency (plus
accrued interest thereon as contemplated pursuant to Section 4 hereof) if the
proceeds of any sale or other disposition of the Collateral are insufficient
to pay the Secured Obligations, other amounts due under the Note and this
Loan and Security Agreement and the fees and disbursements of any attorneys
employed by us to collect such deficiency.
16. LIMITATION ON DUTIES REGARDING PRESENTATION OF COLLATERAL.
Our duty with respect to the custody, safekeeping and physical preservation
of the Collateral in our possession, under Section 9-207 of the Uniform
Commercial Code or otherwise, shall be to deal with it in the same manner as
we deal with similar property for our own account. Neither we nor any of our
directors, officers or employees shall be liable for failure to demand,
collect or realize upon all or any part of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon your request or otherwise.
17. POWERS COUPLED WITH AN INTEREST. All authorizations and
agencies herein contained with respect to the Collateral are irrevocable and
powers coupled with an interest.
18. RELEASE OF SECURITY INTEREST. Upon termination of this Loan
and Security Agreement and repayment to us of all Secured Obligations and the
performance of all obligations hereunder, we shall release our security
interest in any remaining Collateral and shall provide such
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notices and execute such documents in connection therewith as you may
reasonably request; PROVIDED that if any payment, or any part thereof, of any
of the Secured Obligations is rescinded or must otherwise be restored or
returned by us upon your insolvency, bankruptcy, dissolution, liquidation or
reorganization, or upon or as a result of the appointment of a receiver,
intervenor or conservator of, or a trustee or similar officer for, you or any
substantial part of your property, or otherwise, this Loan and Security
Agreement, all rights hereunder and the Liens created hereby shall continue
to be effective, or be reinstated, as though such payments had not been made.
19. OUR REPRESENTATIONS AND WARRANTIES. We represent and warrant
to you that throughout the term of this Loan and Security Agreement:
(a) DUE AUTHORIZATION. We are duly authorized to execute and
deliver this Loan and Security Agreement and to perform our obligations
hereunder and have taken all necessary action to authorize such execution,
delivery and performance and this Loan and Security Agreement constitutes our
legal, valid and binding obligation, enforceable against us in accordance
with its terms.
(b) AUTHORIZED SIGNATORIES. The person signing this Loan and
Security Agreement on our behalf is duly authorized to do so on our behalf.
(c) APPROVALS. No consent or authorization of, approval by,
notice to, filing with or other act by or in respect of, any governmental
authority or securities exchange or any other person is required or necessary
in connection with the borrowings hereunder or with the execution, delivery,
performance, validity or enforceability of this Loan and Security Agreement,
except as previously obtained and currently in full force and effect.
(d) NO VIOLATIONS. The execution, delivery and performance of
this Loan and Security Agreement will not violate any law, ordinance,
charter, by-law or rule applicable to us or any agreement or instrument by
which we were bound or by which any of our assets are affected.
20. YOUR REPRESENTATIONS AND WARRANTIES. You represent and
warrant to us that throughout the term of this Loan and Security Agreement:
a. ACTION. You are duly authorized and have all necessary
corporate or other power, authority and legal right to execute, deliver and
perform your obligations under each of the Loan and Security Agreement, the
Custodial Agreement and the Note; to execute and deliver this Loan and
Security Agreement, and have taken all necessary action to authorize such
execution, delivery and performance, and this Loan and Security Agreement
constitutes your legal, valid and binding obligation, enforceable against you
in accordance with its terms.
b. AUTHORIZED SIGNATORY. The person signing this Loan and
Security Agreement on your behalf is duly authorized to do so on your behalf.
c. NO BREACH. Neither (i) the execution and delivery of the Loan
and Security Agreement, the Note or the Custodial Agreement nor (ii) the
consummation of the transactions therein contemplated in compliance with the
terms and provisions thereof will violate any law,
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ordinance, charter, by-law or rule or regulation, or any order, writ,
injunction or decree of any Governmental Authority, applicable to you or any
agreement or instrument by which you were bound or by which any of your
assets are affected, or constitute a default under any such agreement or
instrument or result in the creation or imposition of any Lien (except for
the Liens created pursuant to this Loan and Security Agreement) upon any of
your property pursuant to the terms of any such agreement or instrument.
d. EXISTENCE. You (i) are a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of your
organization, (ii) have all requisite corporate power, and have all
governmental licenses, authorizations, consents and approvals necessary to
own your assets and carry on your business as now being or as proposed to be
conducted, except where the lack of such licenses, authorizations, consents
and approvals would not be reasonably likely to have a material adverse
effect on your business, operations, financial condition, properties or
assets; and (iii) are qualified to do business and are in good standing in
all other jurisdictions in which the nature of the business conducted by you
makes such qualification necessary, except where failure so to qualify would
not be reasonably likely (either individually or in the aggregate) to have a
material adverse effect on your business, prospects, operations, financial
condition, properties or assets.
e. FINANCIAL CONDITION. You have heretofore furnished to us a
copy of FIRSTPLUS FINANCIAL GROUP INC.'s (i) consolidated balance sheets and
the consolidated balance sheets of its consolidated Subsidiaries for the
first three quarterly fiscal periods of such entity's fiscal year ended
September 30, 1997 and the related consolidated statements of such entity's
income and retained earnings and of such entity's cash flows and such
entity's consolidated Subsidiaries for such quarterly fiscal periods, setting
forth in each case in comparative form the figures for the previous year,
(ii) consolidated balance sheets and the consolidated balance sheets of such
entity's consolidated Subsidiaries for such fiscal year and the related
consolidated statements of such entity's income and retained earnings and of
such entity's cash flows and such entity's consolidated Subsidiaries for such
fiscal year, setting forth in each case in comparative form the figures for
the previous year, with the opinion thereon of Ernst & Young LLP and (iii)
consolidated balance sheets and the consolidated balance sheets of such
entity's consolidated Subsidiaries for its quarterly fiscal periods ended
December 31, 1996, March 31, 1997 and June 30, 1997 and the related
consolidated statements of such entity's income and retained earnings and of
its cash flows and such entity's consolidated Subsidiaries for such quarterly
fiscal periods, setting forth in each case in comparative form the figures
for the previous year. All such financial statements are complete and
correct and fairly present, in all material respects, the consolidated
financial condition of such entity and such entity's Subsidiaries and the
consolidated results of such entity's operations as at such dates and for
such fiscal periods, all in accordance with GAAP applied on a consistent
basis. Since September 30, 1997, there has been no material adverse change
in such entity's consolidated business, operations or financial condition and
such entity's consolidated Subsidiaries taken as a whole from that set forth
in said financial statements.
f. LITIGATION. There are no actions, suits, arbitrations,
investigations or proceedings pending or, to your knowledge, threatened
against you, the Seller or FIRSTPLUS FINANCIAL GROUP, INC. or affecting any
of your Property, the Seller's Property or FIRSTPLUS FINANCIAL GROUP, INC.'s
Property before any governmental authority (i) as to which
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individually or in the aggregate there is a reasonable likelihood of an
adverse decision which would be reasonably likely to have a material adverse
effect on your, the Seller's or FIRSTPLUS FINANCIAL GROUP, INC.'s business,
operations, financial condition, prospects, properties or assets or (ii)
which questions the validity or enforceability of this Loan and Security
Agreement or any action to be taken in connection with the transactions
contemplated hereby.
g. APPROVALS. No consent or authorization of, approval by,
notice to, filing with or other act by or in respect of, any governmental
authority or securities exchange or any other person is required or necessary
in connection with the borrowings hereunder or with the execution, delivery,
performance, validity or enforceability of this Loan and Security Agreement
or the Note, except (i) for filings and recordings in respect of the Liens
created pursuant to this Loan and Security Agreement, and (ii) as previously
obtained and currently in full force and effect.
h. MARGIN REGULATIONS. Neither the making of any Advance
hereunder, nor the use of the proceeds thereof, will violate or be
inconsistent with the provisions of Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System (or any successor) as the same may be
modified and supplemented and in effect from time to time.
i. TAXES. You, the Seller and FIRSTPLUS FINANCIAL GROUP, INC.
have had filed all Federal income tax returns and all other material tax
returns that are required to be filed by you, the Seller and FIRSTPLUS
FINANCIAL GROUP, INC. and have paid all taxes due pursuant to such returns or
pursuant to any assessment received by you, the Seller or FIRSTPLUS FINANCIAL
GROUP, INC., except for any such taxes as are being appropriately contested
in good faith by appropriate proceedings diligently conducted and with
respect to which adequate reserves in accordance with GAAP have been
provided. The charges, accruals and reserves on your books, the Seller's
books and FIRSTPLUS FINANCIAL GROUP, INC.'s books in respect of taxes and
other governmental charges are, in your opinion, adequate.
j. INVESTMENT COMPANY ACT. You are not an "investment company",
or a company "controlled" by an "investment company," within the meaning of
the Investment Company Act of 1940, as amended.
k. CHIEF EXECUTIVE OFFICE. Your chief executive office on the
date hereof is located at Nevada Corporate Management, Inc., 3773 Howard
Hughes Parkway, Suite 300 North, Las Vegas, Nevada 89109.
l. LOCATION OF BOOKS AND RECORDS. The location where you keep
your books and records, including all computer tapes and records relating to
the Collateral is your chief executive office.
m. TRUE AND COMPLETE DISCLOSURE. The information, reports,
financial statements, exhibits and schedules furnished in writing by you or
on your behalf in connection with or pursuant to this Loan and Security
Agreement or included herein or therein or delivered pursuant hereto or
thereto, when taken as a whole, do not contain any untrue statement of
material fact or omit to state any material fact necessary to make the
statements herein or therein, in light of the circumstances under which they
were made, not misleading. All written information furnished to us after the
date
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hereof by you or on your behalf in connection with this Loan and Security
Agreement and the transactions contemplated hereby and thereby will be true,
complete and accurate in every material respect, or (in the case of
projections) based on reasonable estimates, on the date as of which such
information is stated or certified. There is no fact known to any of your
responsible officers, after due inquiry, that could reasonably be expected to
have a material adverse effect on your financial condition that has not been
disclosed herein, or in a report, financial statement, exhibit, schedule,
disclosure letter or other writing furnished to us for use in connection with
the transactions contemplated hereby.
n. TANGIBLE NET WORTH. As of the date hereof, your Tangible Net
Worth is not less than $2,000.
o. SOLVENCY. You are solvent and will not be rendered insolvent
by any obligation to repay an Advance and, after giving effect to any such
Advance, you will not be left with an unreasonably small amount of capital
with which to engage in your business. You do not intend to incur, or
believe that you have incurred, debts beyond your ability to pay such debts
as they mature. You are not contemplating the commencement of insolvency,
bankruptcy, liquidation or consolidation proceedings or the appointment of a
receiver, liquidator, conservator, trustee or similar official with respect
to you or any of your assets. You are not transferring any Collateral with
any intent to hinder, delay or defraud any of your creditors.
p. NO ADDITIONAL OBLIGATION OF OURS. We will not be required as
a result of taking a pledge of Collateral to be licensed, registered or
approved or to obtain permits or otherwise qualify (i) to do business in any
state in which we currently are not so required or (ii) under any state
consumer lending, fair debt collection or other applicable state statute or
regulation.
q. COLLATERAL SECURITY. You have not assigned, pledged, or
otherwise conveyed or encumbered any Collateral to any other Person, and
immediately prior to any transfer of Collateral to us, you were the sole
owner of such Collateral, had good and marketable title thereto and owned
such Collateral free and clear of all pledges, liens, security interests,
encumbrances, charges and other adverse claims and upon transfer of each
Mortgage Note, endorsed in blank by one of your duly authorized officers, to
us or to our Custodian, we shall obtain a valid, first priority security
interest in such Collateral. Upon the filing of financing statements on Form
UCC-1 naming us as "Secured Party" and you as "Debtor", and describing the
Collateral, in the jurisdictions and recording offices listed on SCHEDULE 5
attached hereto, the security interests granted hereunder in the Collateral
will constitute fully perfected first priority security interests under the
Uniform Commercial Code in all of your right, title and interest in, to and
under such Collateral which can be perfected by filing under the Uniform
Commercial Code. The provisions of this Loan and Security Agreement are
effective to create in our favor a valid first priority perfected security
interest in all your right, title and interest in, to and under the
Collateral.
r. NO OTHER BROKERS. Other than as disclosed in writing to us,
you have not dealt with any broker, investment banker, agent or other person,
except for us or our authorized representatives, who may be entitled to any
commission or compensation in connection with the Advance.
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s. ERISA. Neither you nor any Subsidiary shall maintain,
sponsor, form or contribute to any Plan or Multiemployer Plan under the
applicable provisions of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), the Internal Revenue Code of 1986, as amended and any
other Federal or state law.
t. ORDINARY COURSE. All Advances are incurred and will be repaid
at maturity, in the ordinary course of your business out of the cash flow
generated in the normal day-to-day conduct and operations of your business
which includes sales of the Assets in the ordinary course of your business.
u. NO ADVERSE SELECTION. You have not selected the Collateral in
a manner so as to affect adversely our interests.
21. CUSTODIAL AGREEMENT REPRESENTATIONS AND WARRANTIES. As of the
date hereof, the date of any Advance hereunder and as of the date of each
delivery of Additional Collateral pursuant to Section 7 hereof, you represent
and warrant to us:
(a) All representations and warranties set forth in the Custodial
Agreement are true and correct. Such representations and warranties set
forth in the Custodial Agreement shall survive delivery of the respective
Collateral to us.
(b) The representations and warranties set forth on SCHEDULE 4
hereto are true and correct as of each date Market Value is determined by us.
22. YOUR COVENANTS. You covenant and agree with us that, so long
as any Advance is outstanding and until payment in full of all Secured
Obligations:
a. FINANCIAL STATEMENTS. You shall deliver to us:
(i) all financial statements as soon as available and in any event
within 45 days after the end of each of the first three quarterly fiscal
periods of each of FIRSTPLUS FINANCIAL GROUP, INC.'s fiscal years, the
unaudited consolidated balance sheets of FIRSTPLUS FINANCIAL GROUP, INC. as
at the end of such period and the related unaudited consolidated statements
of income and retained earnings and of cash flows for FIRSTPLUS FINANCIAL
GROUP, INC. for such period and the portion of the fiscal year through the
end of such period, setting forth in each case in comparative form the
figures for the previous year, accompanied by a certificate of one of its
Responsible Officers, which certificate shall state that said consolidated
financial statements fairly present the consolidated financial condition and
results of the operations of FIRSTPLUS FINANCIAL GROUP, INC. in accordance
with GAAP, consistently applied, as at the end of, and for, such period
(subject to normal year-end audit adjustments);
(ii) as soon as available and in any event within 90 days after the
end of each of FIRSTPLUS FINANCIAL GROUP, INC.'s fiscal years, its
consolidated balance sheets as at the end of such fiscal year and the related
consolidated statements of income and retained earnings and of cash flows for
FIRSTPLUS FINANCIAL GROUP, INC. for such year, setting forth in each case in
comparative form the figures for the previous year, accompanied by an opinion
thereon of
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independent certified public accountants of recognized national standing,
which opinion shall not be qualified as to scope of audit or going concern
and shall state that said consolidated financial statements fairly present
the consolidated financial condition and results of the operations of
FIRSTPLUS FINANCIAL GROUP, INC. as at the end of, and for, such fiscal year
in accordance with GAAP, and a certificate of such accountants stating that,
in making the examination necessary for their opinion, they obtained no
knowledge, except as specifically stated, of any Default or Event of Default;
(iii) from time to time such other information regarding your
financial condition, operations, or business or that of FIRSTPLUS FINANCIAL
GROUP, INC. as we may reasonably request.
(iv) any public Securities and Exchange Commission filings made in
respect of you or FIRSTPLUS FINANCIAL GROUP, INC.
You will furnish to us, at the time you furnishes each set of financial
statements pursuant to paragraphs (i) and (ii) above, a certificate of one of
your Responsible Officers and one of FIRSTPLUS FINANCIAL GROUP, INC.'s
Responsible Officers to the effect that, to the best of such Responsible
Officer's knowledge, during such fiscal period or year the applicable entity
has observed or performed all of the covenants applicable to such entity and
other agreements, and satisfied every condition, contained in this Loan and
Security Agreement and the other Loan Documents to be observed, performed or
satisfied by it, and that such Responsible Officer has obtained no knowledge
of any Default or Event of Default except as specified in such certificate
(and, if any Default or Event of Default has occurred and is continuing,
describing the same in reasonable detail and describing the action you have
taken or proposes to take with respect thereto).
a. LITIGATION. You will promptly, and in any event within 10
days after service of process on any of the following, give us notice of all
legal or arbitrable proceedings affecting you, the Seller or FIRSTPLUS
FINANCIAL GROUP, INC., or any Subsidiary thereof that questions or challenges
the validity or enforceability of any of the Loan Documents or as to which
there is a reasonable likelihood of adverse determination which would result
in a Material Adverse Effect.
b. EXISTENCE, ETC. You will:
(i) preserve and maintain your legal existence and all of your
material rights, privileges, licenses and franchises (provided that nothing
in this Section 22(c) shall prohibit any transaction expressly permitted
under Section 22(d) hereof);
(ii) comply with the requirements of all applicable laws, rules,
regulations and orders of Governmental Authorities (including, without
limitation, all environmental laws) if failure to comply with such
requirements would be reasonably likely (either individually or in the
aggregate) to have a material adverse effect on your Property, business or
financial condition, or prospects;
(iii) keep adequate records and books of account, in which complete
entries will be made in accordance with GAAP consistently applied;
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(iv) not move your chief executive office from the address
referred to in Section 20(k) unless you shall have provided us 30 days' prior
written notice of such change;
(v) pay and discharge all taxes, assessments and governmental
charges or levies imposed on you or on your income or profits or on any of
your Property prior to the date on which penalties attach thereto, except for
any such tax, assessment, charge or levy the payment of which is being
contested in good faith and by proper proceedings and against which adequate
reserves are being maintained; and
(vi) permit our representatives, during normal business hours, to
examine, copy and make extracts from your books and records, to inspect any
of your Properties, and to discuss your business and affairs with your
officers, all to the extent reasonably requested by us pursuant to Section 35
hereof.
a. PROHIBITION OF FUNDAMENTAL CHANGES. Unless previously agreed
in writing by us, you shall not enter into any transaction of merger or
consolidation or amalgamation, or liquidate, wind up or dissolve yourself (or
suffer any liquidation, winding up or dissolution) or sell all or
substantially all of your assets; PROVIDED, that you may merge or consolidate
with (i) any wholly owned subsidiary of yours, or (ii) any other Person if
you are the surviving corporation; and PROVIDED FURTHER, that if after
giving effect thereto, no Default would exist hereunder.
b. MARGIN DEFICIT. If at any time there exists a Margin Deficit,
you shall cure same in accordance with Section 7 hereof.
c. NOTICES. You shall give notice to us:
(i) promptly upon receipt of notice or knowledge of the
occurrence of any Default or Event of Default;
(ii) with respect to any Collateral pledged to us hereunder,
promptly upon receipt of any principal prepayment (in full or partial) of
such pledged Collateral;
(iii) with respect to any Collateral pledged to us hereunder,
promptly upon receipt of notice or knowledge that the underlying Property has
been damaged by waste, fire, earthquake or earth movement, windstorm, flood,
tornado or other casualty, or otherwise damaged so as to affect adversely the
Market Value of such pledged Collateral; and
(iv) promptly upon receipt of notice or knowledge of (i) any
default related to any Collateral, (ii) any Lien or security interest (other
than security interests created hereby or by the other Loan Documents) on, or
claim asserted against, any of the Collateral or (iii) any event or change in
circumstances which could reasonably be expected to have a material adverse
effect on your Property, business or financial condition or prospects.
(v) promptly upon receipt or notice or knowledge of any default
by the Servicer or the Seller under the FIRSTPLUS Purchase Agreement, the
FIRSTPLUS Servicing Agreement or
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any other material agreement to which the Seller or FIRSTPLUS FINANCIAL
GROUP, INC. is a party.
Each notice pursuant to this Section shall be accompanied by a
statement of one of your Responsible Officers setting forth details of the
occurrence referred to therein and stating what action you have taken or
propose to take with respect thereto.
a. REPORTS. You shall provide us with a quarterly report, which
report shall include, among other items, a summary of your delinquency and
loss experience with respect to all residential mortgage loans serviced by
you, the Seller or FIRSTPLUS FINANCIAL GROUP, INC., any Servicer or any
designee of either, plus any such additional reports as we may reasonably
request with respect to you. All reports shall be delivered in electronic
format. You also agree to provide us, on a monthly basis, detailed investor
remittance reports as it relates to the Pledged Securities.
b. UNDERWRITING GUIDELINES. You shall provide us promptly with
any modification or amendment to the Underwriting Guidelines.
c. TRANSACTIONS WITH AFFILIATES. You will not enter into any
transaction, including without limitation any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate
unless such transaction is (i) otherwise permitted under the FIRSTPLUS
Purchase Agreement, the FIRSTPLUS Servicing Agreement and this Loan and
Security Agreement, (ii) in the ordinary course of your business, and (iii)
upon fair and reasonable terms no less favorable to you than you would obtain
in a comparable arm's length transaction with a Person which is not an
Affiliate, or make a payment that is not otherwise permitted by this Section
22(i) to any Affiliate. In no event shall you pledge to us hereunder any
Collateral acquired by you from an Affiliate of yours, other than Collateral
acquired pursuant to the FIRSTPLUS Purchase Agreement.
d. LIMITATION ON LIENS. You will defend the Collateral against,
and will take such other action as is necessary to remove, any Lien, security
interest or claim on or to the Collateral, other than the security interests
created under this Loan and Security Agreement, and you will defend our
right, title and interest in and to any of the Collateral against the claims
and demands of all persons whomsoever.
e. LIMITATION ON GUARANTEES. You shall not create, incur, assume
or suffer to exist any Guarantees.
f. LIMITATIONS ON DISTRIBUTIONS. (i) To the extent such action
shall result in a Default or (ii) after the occurrence and during the
continuation of any Event of Default, you shall not make any payment on
account of, or set apart assets for, a dividend, a sinking or other analogous
fund for the purchase, redemption, defeasance, retirement or other
acquisition of any equity or partnership interest of yours, whether now or
hereafter outstanding, or make any other distribution in respect thereof,
either directly or indirectly, whether in cash or property or in your
obligations.
g. MAINTENANCE OF TANGIBLE NET WORTH. You shall not permit your
Tangible Net Worth at any time to be less than $2,000.
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h. MAINTENANCE OF PROFITABILITY. You shall not permit, for any
period of three consecutive fiscal quarters (each such period, a "TEST
PERIOD"), Net Income for such Test Period, before income taxes for such Test
Period and distributions made during such Test Period, to be less than $1.00.
i. SERVICING TAPE. You shall provide to us on a monthly basis a
computer readable magnetic tape containing servicing information, including
without limitation those fields specified by us from time to time, on a
loan-by-loan basis and in the aggregate, with respect to the Collateral
serviced by you or any Servicer.
j. SPECIAL PURPOSE ENTITY. You shall (a) own no assets, and will
not engage in any business, other than the assets and transactions
specifically contemplated by this Loan and Security Agreement and the Loan
Documents; (b) not incur any indebtedness or obligation, secured or
unsecured, direct or indirect, absolute or contingent (including guaranteeing
any obligation), other than pursuant hereto; (c) not make any loans or
advances to any third party, and shall not acquire obligations or securities
of your Affiliates; (d) pay your debts and liabilities (including, as
applicable, shared personnel and overhead expenses) only from your own
assets; (e) comply with the provisions of your organizational documents; (f)
do all things necessary to observe organizational formalities and to preserve
your existence, and will not amend, modify or otherwise change your
organizational documents, or suffer same to be amended, modified or otherwise
changed, without our prior written consent which shall not be unreasonably
withheld; (g) maintain all of your books, records, financial statements and
bank accounts separate from those of your Affiliates; (h) be, and at all
times will hold yourself out to the public as, a legal entity separate and
distinct from any other entity (including any Affiliate), shall correct any
known misunderstanding regarding your status as a separate entity, shall
conduct business in your own name, shall not identify yourself or any of your
Affiliates as a division or part of the other and shall maintain and utilize
a separate telephone number and separate stationery, invoices and checks; (i)
maintain adequate capital for the normal obligations reasonably foreseeable
in a business of your size and character and in light of your contemplated
business operations; (j) not engage in or suffer any change of ownership,
dissolution, winding up, liquidation, consolidation or merger in whole or in
part; (k) not commingle your funds or other assets with those of any
Affiliate or any other Person; (l) maintain your assets in such a manner that
it will not be costly or difficult to segregate, ascertain or identify your
individual assets from those of any Affiliate or any other Person; (m) not
and will not hold yourself out to be responsible for the debts or obligations
of any other Person; and (n) cause each of your direct and indirect owners to
agree not to (i) file or consent to the filing of any bankruptcy, insolvency
or reorganization case or proceeding with respect to you; institute any
proceedings under any applicable insolvency law or otherwise seek any relief
under any laws relating to the relief from debts or the protection of debtors
generally with respect to you; (ii) seek or consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator, custodian or any
similar official for you or a substantial portion of your Properties; or
(iii) make any assignment for the benefit of your creditors.
k. MONITORING OF COLLATERAL COMPOSITION. You shall use your best
efforts to monitor the composition of all Mortgage Loans posted by you as
Collateral hereunder so that such Mortgage Loans shall have characteristics
that, in the aggregate, are consistent with the Seller's or FIRSTPLUS
FINANCIAL GROUP, INC.'s recent Securitization Transactions for residential
mortgage loans.
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l. ORDINARY COURSE OF BUSINESS. You shall incur all Advances and
repay on the applicable Loan Maturity Date each Advance in the ordinary
course of your business out of the cash flow generated in the normal
day-to-day conduct and operations of your business which includes sales of
the Assets in the ordinary course of your business.
m. ERISA. Neither you nor any Subsidiary shall maintain,
sponsor, form or contribute to any Plan or Multiemployer Plan under the
applicable provisions of the ERISA and any other federal or state law.
23. NOTICES. All communications hereunder shall be in writing and
mailed, telecopied or delivered to the address specified on SCHEDULE 1 hereto
for you and for us, or as to each party, to such other address as may be
designated by such party in a written notice to the other party. Written
communication shall be effective upon receipt unless such communication is
mailed in which case it shall be effective three Business Days after deposit
in first class mail.
24. ASSIGNMENT. (a) We may assign to one or more banks or other
entities all or any part of, our rights and obligations hereunder, or may
grant participations to one or more banks or other entities in or to all or
any part of, any Advance or Advances hereunder and under the Note. You may
not assign your rights or obligations hereunder or any interest herein.
(b) We may, in accordance with applicable law, at any time sell to
one or more lenders or other entities ("PARTICIPANTS") participating
interests in (i) any Advance, the Note, or any other interest of our
hereunder and under the other Loan Documents or (ii) our right to make
Advances, provided that for purposes of this subclause (ii), the Participant
is given an Investment Grade Rating by both Standard & Poor's Ratings
Services, a division of the McGraw Hill Companies, Inc. or Moody's Investor's
Service, Inc. In the event of any such sale by us of participating interests
to a Participant, our obligations under this Loan and Security Agreement to
you shall remain unchanged, we shall remain solely responsible for the
performance thereof, we shall remain the holder of the Note for all purposes
under this Loan and Security Agreement and the other Loan Documents, and we
and you shall continue to deal solely and directly with us in connection with
our rights and obligations under this Loan and Security Agreement and the
other Loan Documents. You agree that if amounts outstanding under this Loan
and Security Agreement and the Note are due or unpaid, or shall have been
declared or shall have become due and payable upon the occurrence of an Event
of Default, each Participant shall be deemed to have the right of set-off in
respect of its participating interest in amounts owing under this Loan and
Security Agreement and the Note to the same extent as if the amount of its
participating interest were owing directly to it as a lender under this Loan
and Security Agreement or the Note; PROVIDED, that such Participant shall
only be entitled to such right of set-off if it shall have agreed in the
agreement pursuant to which it shall have acquired its participating interest
to share with us the proceeds thereof. We agree that each Participant shall
be entitled to the benefits of Section 25 with respect to its participation
in the Advances outstanding from time to time; PROVIDED, that we and all
Participants shall be entitled to receive no greater amount in the aggregate
pursuant to such Section 25 than we would have been entitled to receive had
no such transfer occurred.
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(c) We may furnish any information concerning you or any of your
Affiliates in our possession from time to time to assignees and participants
(including prospective assignees and participants).
(d) You agree to cooperate with us in connection with any such
assignment and/or participation, to execute and deliver such replacement
notes, and to enter into such restatements of, and amendments, supplements
and other modifications to, this Loan and Security Agreement and the other
Loan Documents in order to give effect to such assignment and/or
participation.
25. INDEMNIFICATION AND EXPENSES.
(a) You agree to hold us harmless from and indemnify us against
all liabilities, losses, damages, judgments, costs and expenses of any kind
which may be imposed on, incurred by or asserted against us (collectively,
the "COSTS") relating to or arising out of this Loan and Security Agreement,
the Note, any other Loan Document or any transaction contemplated hereby or
thereby, or any amendment, supplement or modification of, or any waiver or
consent under or in respect of, this Loan and Security Agreement, the Note,
any other Loan Document or any transaction contemplated hereby or thereby,
that, in each case, results from anything other than our gross negligence or
willful misconduct. Without limiting the generality of the foregoing, you
agree to hold us harmless from and indemnify us against all Costs with
respect to all Collateral relating to or arising out of any violation or
alleged violation of any environmental law, any consumer credit laws,
including without limitation the Truth in Lending Act and/or the Real Estate
Settlement Procedures Act, or any other rule or regulation that, in each
case, results from anything other than our gross negligence or willful
misconduct. In any suit, proceeding or action brought by us in connection
with any item of Collateral for any sum owing thereunder, or to enforce any
provisions of any item of Collateral, you will save, indemnify and hold us
harmless from and against all expense, loss or damage suffered by reason of
any defense, set-off, counterclaim, recoupment or reduction or liability
whatsoever of the account debtor or obligor thereunder, arising out of a
breach by us of any obligation thereunder or arising out of any other
agreement, indebtedness or liability at any time owing to or in favor of such
account debtor or obligor or its successors from you. You also agree to
reimburse us as promptly after being billed by us for all of our costs and
expenses incurred in connection with the enforcement or the preservation of
our rights under this Loan and Security Agreement, the Note, any other Loan
Document or any transaction contemplated hereby or thereby, including without
limitation the reasonable fees and disbursements of our counsel. You hereby
acknowledge that, notwithstanding the fact that the Note is secured by the
Collateral, your obligation under the Note is a recourse obligation. We will
use reasonable efforts to give you notice of any counsel hired in connection
with the enforcement of this Section 25(a).
(b) You agree to pay promptly after being billed by us all of the
out-of-pocket costs and expenses incurred by us in connection with the
development, preparation and execution of, and any amendment, supplement or
modification to, this Loan and Security Agreement, the Note, any other Loan
Document or any other documents prepared in connection herewith or therewith.
You agree to pay as and when billed by us all of the out-of-pocket costs and
expenses incurred in connection with the consummation and administration of
the transactions contemplated hereby and thereby including without limitation
(i) all the reasonable fees, disbursements and expenses of our counsel, not
to exceed $50,000, and (ii) all the due diligence, inspection, testing and
review costs
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and expenses incurred by us with respect to Collateral under this Loan and
Security Agreement, including, but not limited to, those costs and expenses
incurred by us pursuant to Sections 25(a), 34 and 35 hereof.
26. EVENTS OF DEFAULT. If any of the following events ("EVENTS OF
DEFAULT") shall occur and be continuing:
a. you shall fail to pay any amount due hereunder or under the
Note when the same becomes due and payable (whether at stated maturity, upon
acceleration or at mandatory or optional prepayment), or shall fail to
provide to us Additional Collateral pursuant to Section 7 hereof; or
b. any representation or warranty or certification made or deemed
made herein or in any other Loan Document by you (or any of your officers),
the Seller or FIRSTPLUS FINANCIAL GROUP, INC. in connection with any Advance
or otherwise in connection with the Note shall prove to have been incorrect,
false or misleading in any material respect when made (other than the
representations and warranties set forth in SCHEDULE 4, which shall be
considered solely for the purpose of determining the Market Value of the
Collateral; unless you shall have made any such representations and
warranties with knowledge that they were materially false or misleading at
the time made); or
c. you shall, without our prior written consent, convey,
transfer, lease or dispose of (whether in one transaction or in a series of
transactions) all or substantially all of your assets to, any person or
entity; or
d. you shall fail to perform or observe, admit your inability to
perform or observe or state your intention not to perform or observe any
other material term, covenant or agreement in connection with any Advance or
otherwise in connection with the Note on your part to be performed or
observed; or
e. a judgment by a court of competent jurisdiction for the
payment of money (i) in excess of $200,000 is rendered against any of your
Affiliates or (ii) of any amount is rendered against you, and the same
remains undischarged, unpaid or unbonded for a period of thirty (30) days
during which execution of such judgment is not effectively stayed; or
f. this Loan and Security Agreement shall for any reason not
create, or shall cease to create, a valid, perfected first priority security
interest in our favor in any of the Collateral (other than the Mortgages on
the Mortgaged Property), or you shall grant, or suffer to exist, any Lien on
any Collateral except the Liens contemplated hereby; or
g. the Custodial Agreement, any Loan Document, the FIRSTPLUS
Purchase Agreement or the FIRSTPLUS Servicing Agreement shall for whatever
reason be terminated (and, with respect to termination of the Custodial
Agreement, no other custodial agreement or arrangement reasonably acceptable
to the Lender for the physical possession of the Collateral shall have been
made) or cease to be in full force and effect, or the enforceability thereof
shall be contested by you; or
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h. you, the Seller or FIRSTPLUS FINANCIAL GROUP, INC. shall be in
default under any material note, indenture, loan agreement, guaranty, swap
agreement or any other contract to which it is a party, which default (i)
involves the failure to pay a matured obligation, or (ii) permits the
acceleration of the maturity of obligations by any other party to or
beneficiary of such note, indenture, loan agreement, guaranty, swap agreement
or other contract; or
i. either (A) the Seller or FIRSTPLUS FINANCIAL GROUP, INC. shall
merge or consolidate into any entity unless (i) the surviving or resulting
entity shall be a corporation or partnership organized under the laws of the
United States or any state thereof, (ii) such entity expressly assumes by
written agreement, in form and substance satisfactory to us in our sole
discretion, the performance of all of their respective duties and obligations
under the Loan Documents, the FIRSTPLUS Purchase Agreement or the FIRSTPLUS
Servicing Agreement, to which it is a party, and (iii) such entity is at
least as creditworthy as you, as determined by us in our sole and absolute
discretion; or (B) you shall merge or consolidate into any entity; or
j. any act, event, or circumstance shall occur which, in our
reasonable judgment, would have a (i) material adverse effect on (A) your
creditworthiness or the creditworthiness of the Seller or FIRSTPLUS FINANCIAL
GROUP, INC., (B) your ability to perform your obligations under this Loan and
Security Agreement in a prompt and timely manner, (C) the characterization,
convertibility, marketability, liquidity or value of any Collateral; or
k. any change or development involving a prospective change in
taxation or other applicable law or regulation or interpretation thereof in
the United States directly affecting the Collateral or the consequences of
our holding a security interest in, the Collateral; the imposition of
exchange controls by the United States, that directly affects the Collateral
or the consequences of our holding a security interest in the Collateral; or
the imposition of exchange controls by the United States, that directly
affects the financial markets of the United States, and makes it, in our sole
judgment, inadvisable or impracticable to enter into the transactions
contemplated by this Loan and Security Agreement; or
l. you, the Seller or FIRSTPLUS FINANCIAL GROUP, INC. shall
generally not pay your debts as such debts become due, or shall admit in
writing its inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding shall be
instituted by or against it seeking to adjudicate it as bankrupt or
insolvent, or 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 seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for it or any
substantial part of its property; or it shall take any corporate action to
authorize any of the actions set forth above in this subsection (l); or
m. you, the Seller or FIRSTPLUS FINANCIAL GROUP, INC.(i) apply
for or consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee, examiner or liquidator or the like of itself or
of all or a substantial part of its property, (ii) make a general assignment
for the benefit of your or their creditors, (iii) commence a voluntary case
under the Bankruptcy Code, (iv) file a petition seeking to take advantage of
any other law relating to bankruptcy, insolvency, reorganization,
liquidation, dissolution, arrangement or winding-up, or
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composition or readjustment of debts, (v) fail to controvert in a timely and
appropriate manner, or acquiesce in writing to, any petition filed against it
in an involuntary case under the Bankruptcy Code or (vi) take any corporate
or other action for the purpose of effecting any of the foregoing; or
n. a proceeding or case shall be commenced against you, the
Seller or FIRSTPLUS FINANCIAL GROUP, INC., without application or consent of
you or such entity, in any court of competent jurisdiction, seeking (i) its
reorganization, liquidation, dissolution, arrangement or winding-up, or the
composition or readjustment of its debts, (ii) the appointment of, or the
taking of possession by, a receiver, custodian, trustee, examiner, liquidator
or the like of it or of all or any substantial part of its property, or (iii)
similar relief in respect of you or any such entity under any law relating to
bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement
or winding-up or composition or adjustment of debts, and such proceeding or
case shall continue undismissed, or an order, judgment or decree approving or
ordering any of the foregoing shall be entered and continue unstayed and in
effect, for a period of 60 or more days; or an order for relief against you
or any such Subsidiary shall be entered in any involuntary case under the
Bankruptcy Code; or
o. FIRSTPLUS FINANCIAL GROUP, INC. shall permit either: (i) its
Tangible Net Worth at any time to be less than $150,000,000 or (ii) its
Market Capitalization at any time to be less than $750,000,000 or (iii) its
Debt-to-Equity Ratio at any time to be greater than 8:1 as adjusted or
replaced in accordance with the formula set forth on Schedule 6.
p. the Servicer shall fail to service the Mortgage Loans in
accordance with Accepted Servicing Practices or shall fail to comply with the
terms of the FIRSTPLUS Servicing Agreement in any material respect or the
Seller or FIRSTPLUS FINANCIAL GROUP, INC. shall fail to comply with the terms
of the FIRSTPLUS Purchase Agreement in any material respect; or
q. you shall fail to comply with the requirements of Section
22(c)(i), Section 22(d), Section 22(e), Section 22(f), or Sections 22(h)
through (s) hereof; or you shall otherwise fail to comply with the
requirements of Section 22(c) hereof and such default shall continue
unremedied for a period of five Business Days; or you shall fail to observe
or perform any other covenant or agreement contained in this Loan and
Security Agreement or any other Loan Document and such failure to observe or
perform shall continue unremedied for a period of seven Business Days; or
r. any of the facts, assumptions, representations or
certifications referenced or set forth, or otherwise relied upon, in that
certain opinion of Jenkens & Gilchrist regarding the non-consolidation of you
with any of your shareholders in the event of an insolvency of any
shareholder, dated December 13, 1997 and addressed to us, shall be materially
false or untrue; then in any such event:
a) (i) We may declare the Note, and all amounts payable thereunder to
be forthwith due and payable, together with all interest thereon and fees
and expenses accruing under this Loan and Security Agreement, whereupon
the Note and all such amounts shall become and be forthwith due and
payable, without presentment, demand, protest or further notice of any
kind all of which you hereby expressly waive; PROVIDED, HOWEVER, that in
the event of an actual or deemed entry of an order for relief with respect
to you under the Bankruptcy Code,
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the Note and all such other amounts shall automatically become and be due
and payable, without presentment, demand, protest or any notice of any
kind, all of which are hereby expressly waived by you.
b) (ii) After one Business Day's notice to you (which notice need not
be given if an actual or deemed order of relief has occurred with respect
to you under the Bankruptcy Code or if you fail to meet your obligations
under Section 7 hereof), we may to the extent permitted by applicable law,
immediately sell, without notice or demand of any kind, at a public or
private sale and at such price or prices as we may reasonably deem
satisfactory any or all Collateral.
c) (iii) we shall have the right to obtain physical possession of the
Servicing Records and all other of your files relating to the Collateral
and all documents relating to the Collateral which are then or may
thereafter come into your possession or any third party acting for you
and you shall deliver to us such assignments as we shall request.
d) (iv) Because you recognize that it may not be possible to purchase
or sell all of the Collateral on a particular Business Day, or in a
transaction with the same purchaser, or in the same manner because the
market for such Collateral may not be liquid, you agree that liquidation
of the Collateral does not require a public purchase or sale and that a
good faith private purchase or sale shall be deemed to have been made in
a commercially reasonable manner. Accordingly, we may elect, in our sole
discretion, the time and manner of liquidating any Collateral and nothing
contained herein shall (A) obligate us to liquidate any Collateral on the
occurrence of an Event of Default or to liquidate all Collateral in the
same manner or on the same Business Day or (B) constitute a waiver of any
of our rights or remedies. However, in recognition of our agreement that
the transactions hereunder have been entered into in consideration of and
in reliance upon the fact that all Advances hereunder constitute a single
business and contractual relationship and that each Advance has been
entered into in consideration of the other Advances, we agree that we
shall use our best efforts to liquidate all Collateral hereunder upon the
occurrence of an Event of Default as quickly as is prudently possible in
our reasonable judgment.
e) (v) We shall, without regard to the adequacy of the security for
your obligations under this Loan and Security Agreement, be entitled to the
appointment of a receiver by any court having jurisdiction, without notice,
to take possession of and protect, collect, manage, liquidate, and sell the
Collateral or any portion thereof, and collect the payments due with
respect to the Collateral or any portion thereof. You shall pay all costs
and expenses incurred by us in connection with the appointment and
activities of such receiver.
f) (vi) We may obtain an injunction or an order of specific performance
to compel you to fulfill your obligations, if you fail or refuse to
perform your obligations as set forth therein.
g) (vii) You shall be liable to us for the amount of all damages and
expenses, including reasonable legal or other expenses incurred by us in
connection with or as a consequence of an Event of Default.
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h) (viii) We shall have all the rights and remedies provided herein,
provided by applicable federal, state, foreign, and local laws (including,
without limitation, the rights and remedies of a secured party under the
Uniform Commercial Code of the State of New York, to the extent that the
Uniform Commercial Code is applicable, and the right to offset any mutual
debt and claim), in equity, and under any other agreement between us.
27. NO RELIANCE. Each of us hereby represents and warrants to the
other that in connection with the negotiation of, the entering into, and the
performance under, this Loan and Security Agreement:
(a) It is not relying (for purposes of making any investment
decision or otherwise) upon any advice, counsel or representations (whether
written or oral) of the other party hereto, other than the representations
expressly set forth herein;
(b) It has consulted with its own legal, regulatory, tax,
business, investment, financial and accounting advisors to the extent that it
has deemed necessary, and it has made its own investment, hedging and trading
decisions (including decisions regarding the suitability of any Advance)
based upon its own judgment and upon any advice from such advisors as it has
deemed necessary and not upon any view expressed by the other party hereto;
(c) It is a sophisticated and informed institution that has a full
understanding of all the terms, conditions and risks (economic and otherwise)
here and is capable of assuming and willing to assume (financially and
otherwise) those risks;
(d) It is not acting as a fiduciary or financial, investment or
commodity trading advisor for the other party hereto, and has not given the
other party hereto (directly or indirectly through any other person) any
assurance, guaranty or representation whatsoever as to the merits (either
legal, regulatory, tax, business, investment, financial accounting or
otherwise) of this Loan and Security Agreement or any Advance.
28. NEW YORK LAW. THIS LOAN AND SECURITY AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK (WITHOUT REGARD TO CHOICE OF LAW PRINCIPLES).
29. NO BANKRUPTCY SUITS. You agree that you will not institute
against or join any other person in instituting against us any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceeding, or other
proceeding under any federal or state bankruptcy or similar law, for one year
and a day after the latest maturing commercial paper note issued by us is
paid in full.
30. RATINGS. At our option, we may, upon notice that either
Standard & Poor's Ratings Services, a division of The McGraw Hill Companies,
Inc. or Moody's Investor's Service, Inc. has (i) lowered or downgraded your
short term commercial paper or corporate bond or other short term rating from
its level as of the date hereof, or such rating of the Seller and/or
FIRSTPLUS FINANCIAL GROUP, INC. or (ii) placed your securities or those of
the Seller and/or FIRSTPLUS FINANCIAL GROUP, INC. on a watch list of
securities singled out for surveillance, with either negative or developing
implications in a Ratings Category, amend SCHEDULE 1 hereof to provide for
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an amended "FACILITY AMOUNT" and/or "APPLICABLE SPREADS" and/or amend Section
7 hereof to provide for an increased Margin Percentage.
31. CORPORATE OBLIGATIONS. The obligations under this Loan and
Security Agreement are solely our corporate obligations. No recourse shall
be had for the payment of any amount owing by us hereunder or any other
obligation or claim of or against us arising out of or based upon this Loan
and Security Agreement against any of our stockholders, employees, officers,
directors, incorporators or agents.
32. CORPORATE OBLIGATIONS OF BORROWER. Your obligations under
this Loan and Security Agreement are solely your corporate obligations. No
recourse shall be had for the payment of any amount owing by you hereunder or
any other obligation or claim of or against you arising out of or based upon
this Loan and Security Agreement against any of your stockholders, employees,
officers, directors, incorporators or agents.
33. JURISDICTION. You irrevocably agree that any legal action,
suit or proceeding against us arising out of this Loan and Security Agreement
may be brought in the United States District Court located in the City of New
York, New York or in the courts of the State of New York and hereby
irrevocably accept and submit to the non-exclusive jurisdiction of each of
the aforesaid courts in personam, generally and unconditionally with respect
to any action, suit or proceeding for you and in respect of your properties,
assets and revenues. You further irrevocably agree to the service of any
legal process, summons, notices and documents out of any of the aforesaid
courts by mailing copies thereof by registered or certified air mail, postage
prepaid, to you at your address designated pursuant to this Agreement.
Nothing herein shall in any way be deemed to limit our ability to serve any
such legal process, summons, notices and documents in any other manner, as
may be permitted by applicable law or to obtain jurisdiction over you, or
bring actions, suits or proceedings against you in such other jurisdictions,
and in such manner, as may be permitted by applicable law.
34. SERVICING.
(a) You covenant to maintain or cause the servicing of the
Collateral to be maintained in conformity with accepted and prudent servicing
practices in the industry for the same type of mortgage loans as the
Collateral and in a manner at least equal in quality to the servicing you
provide for Collateral which you own. In the event that the preceding
language is interpreted as constituting one or more servicing contracts, each
such servicing contract shall terminate automatically upon the earliest of
(i) an Event of Default, (ii) the date on which all the Secured Obligations
have been paid in full or (iii) the transfer of servicing approved by us.
(b) If the Collateral is serviced by you, (i) you agree that we
are the collateral assignee of all servicing records, including but not
limited to any and all servicing agreements, files, documents, records, data
bases, computer tapes, copies of computer tapes, proof of insurance coverage,
insurance policies, appraisals, other closing documentation, payment history
records, and any other records relating to or evidencing the servicing of
Collateral (the "SERVICING RECORDS"), and (ii) you grant us a security
interest in all servicing fees and rights relating to the Collateral and all
Servicing Records to secure your obligation or your designee to service in
conformity with this
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Section and any other of your obligations to us. You covenant to safeguard
such Servicing Records and to deliver them promptly to us or our designee
(including the Custodian) at our request.
(c) The Collateral consisting of Mortgage Loans may be serviced by
a third-party servicer (such third-party servicer, the "SERVICER"), provided
that, (i) you provide a copy of the servicing agreement to us, which shall be
in form and substance acceptable to us (the "SERVICING AGREEMENT"); (ii) you
hereby irrevocably assign to us and our successors and assigns all of your
right, title, interest in, to and under, and the benefits of, any Servicing
Agreement with respect to the Collateral; (iii) such Servicer is acceptable
to us; (iv) the servicing fee is no greater than 1.00%, per annum, accrued on
the outstanding Eligible Mortgage Loan balance; and (v) upon an Event of
Default, we reserve the sole right to terminate the Servicer and appoint a
successor Servicer.
(d) Upon the occurrence of an Event of Default and to the extent
that you have the right to assign a successor servicer under any Pooling and
Servicing Agreement, you hereby grant and assign to us such rights.
(e) You shall provide to us a letter from you or the Servicer, to
the effect that upon the occurrence of an Event of Default, we may terminate
any Servicing Agreement and transfer servicing to our designee, at no cost or
expense to us, it being agreed that you will pay any and all fees required to
terminate the Servicing Agreement and to effectuate the transfer of servicing
to our designee.
(f) After the Funding Date, until the pledge of any Collateral is
relinquished by us or the Custodian, as applicable, you will have no right to
modify or alter the terms of such item of Collateral and you will have no
obligation or right to repossess such Collateral or substitute another item
of Collateral, except as expressly provided herein or in the Custodial
Agreement.
(g) In the event you or your Affiliate is servicing the
Collateral, you shall permit us to inspect you or your Affiliate's servicing
facilities, as the case may be, for the purpose of satisfying us that you or
your Affiliate, as the case may be, has the ability to service the Collateral
as provided in this Loan and Security Agreement.
(h) You shall indemnify and hold us harmless from any liability
resulting from any failure on your part to comply with your obligations under
this section.
35. PERIODIC DUE DILIGENCE REVIEW. We and/or a third-party
contractor will periodically (i) perform due diligence of your and Seller's
origination and underwriting standards and facilities, (ii) perform due
diligence of the Servicer's facilities and servicing procedures, (iii)
underwrite a portion of the Mortgage Loans on a sample basis and (iv) perform
any other due diligence we may deem necessary, in our sole discretion. You
will reimburse us for all costs associated with such reviews. You
acknowledge that we have the right to perform continuing due diligence
reviews with respect to the Collateral, for purposes of verifying compliance
with the representations, warranties and specifications made hereunder, or
otherwise, and you agree that upon reasonable (but no less than three (3)
Business Days', but if a Default shall have occurred and be continuing then
one (1) Business Day's) prior notice to you, we or our authorized
representatives will be permitted during normal business hours to examine,
inspect, and make copies and extracts
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of, the Collateral Files and any and all documents, records, agreements,
instruments or information relating to such Collateral in the possession or
under your control and/or the control of the Custodian. You also shall make
available to us and our authorized representatives a knowledgeable financial,
credit or accounting officer for the purpose of answering questions
respecting the Collateral Files and the Collateral. Without limiting the
generality of the foregoing, you acknowledge that we may make Advances to you
based solely upon the information provided by you to us in the Collateral
Tape and the representations, warranties and covenants contained herein, and
that we, at our option, have the right at any time to conduct a partial or
complete due diligence review on some or all of the Collateral securing such
Advance, including without limitation ordering new credit reports and new
appraisals on the related Properties and otherwise re-generating the
information used to originate such Collateral. We may underwrite such
Collateral ourselves or engage a third party underwriter to perform such
underwriting. You agree to cooperate with us and any third-party underwriter
in connection with such underwriting, including, but not limited to,
providing us and any third-party underwriter with access to any and all
documents, records, agreements, instruments or information relating to such
Collateral in your possession, or under your control. You further agree that
you shall reimburse us for any and all out of pocket costs and expenses
incurred by us and our authorized representatives in connection with our
activities pursuant to this Section 35. You further agree that you shall
reimburse us for any and all out-of-pocket costs and expenses incurred by us
in connection with our activities pursuant to this Section 35 up to an amount
equal to $75,000 per annum (the "DUE DILIGENCE CAP"); provided that, in the
event that a Default shall have occurred, you shall reimburse us for all Due
Diligence Costs and no such Due Diligence Cap shall apply.
36. WAIVER. No failure on our part to exercise and no delay in
exercising, and no course of dealing with respect to, any right, power or
privilege under any Loan Document shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege under
any Loan Document preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The remedies provided
herein are cumulative and not exclusive of any remedies provided by law.
37. AMENDMENTS. Except as otherwise expressly provided in this
Loan and Security Agreement, any provision of this Loan and Security
Agreement may be modified or supplemented only by an instrument in writing
signed by you and us and any provision of this Loan and Security Agreement
may be waived by us in our sole discretion.
38. SURVIVAL. Your obligations under Sections 25 and 29 hereof
shall survive the repayment of the Advances and the termination of this Loan
and Security Agreement. In addition, each representation and warranty made or
deemed to be made by a request for a borrowing, herein or pursuant hereto
shall survive the making of such representation and warranty, and we shall
not be deemed to have waived, by reason of making any Advance, any Default
that may arise because any such representation or warranty shall have proved
to be false or misleading, notwithstanding that we may have had notice or
knowledge or reason to believe that such representation or warranty was false
or misleading at the time such Advance was made.
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39. CAPTIONS. The table of contents and captions and section
headings appearing herein are included solely for convenience of reference
and are not intended to affect the interpretation of any provision of this
Loan and Security Agreement.
40. COUNTERPARTS. This Loan and Security Agreement may be
executed in any number of counterparts, all of which taken together shall
constitute one and the same instrument, and any of the parties hereto may
execute this Loan and Security Agreement by signing any such counterpart.
41. LOAN AND SECURITY AGREEMENT CONSTITUTES SECURITY AGREEMENT.
This Loan and Security Agreement shall constitute a security agreement within
the meaning of the Uniform Commercial Code.
42. WAIVER OF JURY TRIAL. EACH OF YOU AND US HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
LOAN AND SECURITY AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
43. HYPOTHECATION OR PLEDGE OF LOANS. We shall have free and
unrestricted use of all Collateral and nothing in this Loan and Security
Agreement shall preclude us from engaging in repurchase transactions with the
Collateral or otherwise pledging, repledging, transferring, hypothecating, or
rehypothecating the Collateral; provided, however, that the Collateral is
unique and we agree to return it in accordance with the provisions of this
Loan Agreement. Nothing contained in this Loan and Security Agreement shall
obligate us to segregate any Collateral delivered to us by you.
30
<PAGE>
If the terms of this Loan and Security Agreement are satisfactory
to you, please indicate your agreement and acceptance thereof by signing a
counterpart of this Loan and Security Agreement and returning it to us.
Very truly yours,
GERMAN AMERICAN CAPITAL CORPORATION
By: /s/
------------------------------------
Name: John Shane
Title: Vice President
Agreed and Accepted:
FIRSTPLUS Special Funding Corp.
By: /s/
-----------------------------
Name: Barry Tenenholtz
Title: Senior Vice-President
31
<PAGE>
SCHEDULE 1
to
Loan and Security Agreement
dated as of December 13, 1997
between FIRSTPLUS Special Funding Corp. and German American Capital
Corporation
(i) For the purpose of this Loan and Security Agreement:
The "FACILITY AMOUNT" secured by the following Collateral is:
(a) Eligible Mortgage Loans:
$1,500,000,000 minus the aggregate Advances secured by such
Collateral outstanding under the Uncommitted Facility
Transaction Documents,
(b) Eligible Subordinated Securities:
$100,000,000 minus the aggregate Advances secured by such
Collateral outstanding under the Uncommitted Facility
Transaction Documents
The "MINIMUM ADVANCE AMOUNT" is $10,000,000.
The "REQUESTING DEADLINE" is 12:00 p.m., New York City time, one (1)
Business Day prior to the requested Funding Date.
The "APPLICABLE SPREAD" secured by the following Collateral is:
(a) Eligible Mortgage Loans:
0.50%; provided that in the event that any Securitization
Transaction fails to satisfy the DMG Underwriting Mandate,
such Applicable Spread shall be increased retroactively with
respect to Advances secured by Assets covered by such
Securitization Transaction for the period of time during
which such Assets secured such Advances such Applicable
Spread shall increase by 1.25% to equal 1.75%;
(b) Eligible Subordinated Securities:
1.75%; provided that in the event that any Securitization
Transaction fails to satisfy the DMG Underwriting Mandate,
such Applicable Spread shall be increased retroactively with
respect to Advances secured by Assets covered by such
Securitization Transaction for the
S1-1
<PAGE>
period of time during which such Assets secured such
Advances such Applicable Spread shall increase by 2.25% to
equal 4.00%;
The "MARGIN PERCENTAGE", as of any date secured by the following
Collateral is:
(a) Eligible Mortgage Loans:
105.25%
(b) Eligible Subordinated Securities:
154%
(such percentages in no case to be less than 100%).
(ii) For the purpose of Section 12 of this Loan and Security
Agreement:
The address for written communications to you is:
1600 Viceroy Drive
8th Floor
Dallas, Texas 75235-2306
Attention: Ronald M Bendalin
Telephone: (214) 599-6501
Fax: (214) 599-7575
cc: Barry Tenenholtz
The address for written communications to us is:
German American Capital Corporation
31 West 52nd Street
New York, New York 10019
Attention:
Telephone:
Fax:
cc: Deutsche Bank A.G., as agent
31 West 52nd Street
New York, New York 10019
Attention: Gregg Amoroso/Richard Uhlig
Telephone: (212) 469-3987/(212) 469-6940
Fax: (212) 469-7571/(212) 469-6933
S1-2
<PAGE>
(iii) For the purpose of Section 7 of this Loan and Security
Agreement:
The address for written communications to you is:
1600 Viceroy Drive
8th Floor
Dallas, Texas 75235-2306
Attention: Ronald M Bendalin
Telephone: (214) 599-6501
Fax: (214) 599-7575
cc: Barry Tenenholtz
The address for written communications to us is:
German American Capital Corporation
31 West 52nd Street
New York, New York 10019
Attention:
Telephone:
Fax:
cc: Deutsche Bank A.G., as agent
31 West 52nd Street
New York, New York 10019
Attention: Gregg Amoroso/Richard Uhlig
Telephone: (212) 469-3987/(212) 469-6940
Fax: (212) 469-7571/(212) 469-6933
(iv) For purposes of this Loan and Security Agreement, if the
Margin Notice Deadline is:
(a) 10:00 A.M. New York City time, then the Margin Call
Deadline is 3:00 P.M., New York City time on such Business Day.
(b) 3:00 P.M. New York City time, then the Margin Call
Deadline is 2:00 P.M., New York City time on the Business Day following such
Margin Notice.
S1-3
<PAGE>
(v) For purposes of this Loan and Security Agreement, instructions
for wire transfer of funds to you shall be as set forth in the Request for
Borrowing.
For purposes of this Loan and Security Agreement, instructions for
wire transfer of funds to us are:
Name of Bank: Bank of NYC
Bank ABA Number: 021000018
Borrower Number: IOC-569,GSCS,DBC
Attention: Philip Hancock
Reference: FirstPlus
S1-4
<PAGE>
SCHEDULE 2
to
Loan and Security Agreement
DEFINITIONS
As used in the Loan and Security Agreement, the following terms
shall have the following meanings (all terms defined in this SCHEDULE 2 or in
other provisions of the Loan and Security Agreement in the singular to have
the same meanings when used in the plural and VICE VERSA):
"ACCEPTED SERVICING PRACTICES" shall mean with respect to any
Mortgage Loan, those mortgage servicing practices of prudent mortgage lending
institutions which service mortgage loans of the same type as such Mortgage
Loan in the jurisdiction where the related Mortgaged Property is located.
"ADDITIONAL COLLATERAL" shall have the meaning provided in Section
7 of the Loan and Security Agreement.
"ADJUSTED DEBT" for any Person, as of any date, shall mean the
aggregate amount outstanding of all Indebtedness of such Person, as
determined in accordance with GAAP, provided that such amounts shall be
reduced by Convertible Subordinated Debt of such Person.
"ADJUSTED EQUITY" for any Person, as of any date, shall mean the
sum of (a) shareholders' equity of such Person determined in accordance with
GAAP and (b) Convertible Subordinated Debt of such Person.
"ADVANCE" shall have the meaning provided in Section 1 of the Loan
and Security Agreement.
"AFFILIATE" shall mean any "affiliate" of you or us as such term is
defined in the Bankruptcy Code.
"APPLICABLE SPREAD" shall have the meaning provided on SCHEDULE 1
to the Loan and Security Agreement.
"ASPEN" shall mean Aspen Funding Corp.
"ASSETS" shall be the collective reference to Mortgage Loans and
Pledged Securities.
"ASSIGNMENT OF MORTGAGE" means, with respect to any mortgage, an
assignment of the mortgage, notice of transfer or equivalent instrument in
recordable form, sufficient under the laws of the jurisdiction wherein the
related property is located to reflect the assignment and pledge of the
Mortgage.
S2-1
<PAGE>
"BANKRUPTCY CODE" shall mean the United States Bankruptcy Code of
1978, as amended from time to time.
"BORROWER" shall mean FIRSTPLUS Special Funding Corp.
"BORROWER'S DESIGNATED PERSONS" shall have the meaning provided on
EXHIBIT B-2 to the Loan and Security Agreement.
"BORROWING BASE" shall mean the aggregate Market Value of all
Eligible Assets. "BREAKAGE FEE" shall mean an amount equal to the sum of (a)
the interest accrued on an "actual/360" basis, on the principal balance of
any Advance (or portion thereof) prepaid, for the period commencing on the
date such Advance is prepaid through your specified Loan Maturity Date, at a
rate equal to the excess, if any of: (1) the rate of the applicable LIBOR
Rate, determined as of the date such Loan Maturity Date was specified by you
and (2) the rate of the LIBOR Rate as of the date such Advance is prepaid and
(b) all reasonable losses, expenses and liabilities that arise from
prepayment of such Advance, including without limitation, any loss and
expense on liabilities incurred by reason of liquidating or reemployment of
deposits or other funds required by us to fund your Advances.
"BUSINESS DAY" shall have the meaning provided in Section 5(b) of
the Loan and Security Agreement.
"CALCULATION AGENT" shall be an independent certified public
accountant of recognized national standing or a credit worthy and reputable
investment banking firm that shall be acceptable to Lender, in its sole
discretion.
"CAPITAL LEASE OBLIGATIONS" shall mean, for any Person, all
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) Property to the extent such
obligations are required to be classified and accounted for as a capital
lease on a balance sheet of such Person under GAAP, and, for purposes of this
Loan and Security Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP.
"CASH COLLATERAL ACCOUNT" shall have the meaning assigned thereto
in the Custodial Agreement.
"CODE" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
"COLLATERAL" shall have the meaning provided in Section 9 of the
Loan and Security Agreement.
"COLLATERAL DOCUMENTS" shall mean, with respect to the items of
Collateral, the documents comprising the Collateral File for such Collateral.
S2-2
<PAGE>
"COLLATERAL FILE" shall have the meaning assigned thereto in the
Custodial Agreement.
"COLLATERAL SCHEDULE" shall have the meaning assigned thereto in
the Custodial Agreement.
"COLLATERAL SCHEDULE AND EXCEPTION REPORT" shall mean the
collateral schedule and exception report prepared by the Custodian pursuant
to the Custodial Agreement.
"COLLATERAL SECURITY AGREEMENT" shall have the meaning provided in
Section 12 of the Loan and Security Agreement.
"COLLATERAL TAPE" shall mean a computer-readable magnetic tape
containing the information with respect to each item of Collateral, to be
delivered by you to us pursuant to the Loan and Security Agreement, with tape
fields as set forth in Annex 1 of the Custodial Agreement.
"COLLATERAL VALUE" shall mean for any Collateral, the lesser of (a)
the Market Value of such Collateral divided by the applicable Margin
Percentage and (b) with respect to Collateral consisting of Mortgage Loans,
102% of the outstanding principal balance of such Collateral.
"COLLECTION ACCOUNT" shall have the meaning assigned thereto in the
Custodial Agreement.
"CONVERTIBLE SUBORDINATED DEBT" for any Person, as of any date,
shall mean certain unsecured subordinated obligations with conversion rights
into securities of such Person that, in our sole good faith discretion, are
deemed substantially similar to preferred or common stock.
"COSTS" shall have the meaning provided in Section 25 of the Loan
and Security Agreement.
"CUSTODIAL AGREEMENT" shall mean the Custodial Agreement, dated as
of the date hereof, among you, the Custodian and us, substantially in the
form of EXHIBIT C hereto, as the same shall be modified and supplemented and
in effect from time to time.
"CUSTODIAN" shall mean Bank One, Texas, N.A., as custodian under
the Custodial Agreement, and its successors and permitted assigns thereunder.
"DAILY RESET LOANS" shall mean Advances for which you have failed
to specify a Loan Maturity Date (pursuant to clause (b) of the definition
thereof) and which shall bear interest at rates based on the rate referred to
as the rate for Daily Reset Loans in the definition of LIBOR Base Rate.
"DEBT-TO-EQUITY RATIO" for any Person, as of any date, shall be
determined as Adjusted Debt of such Person divided by Adjusted Equity of such
Person.
S2-3
<PAGE>
"DEFAULT" shall mean an Event of Default or an event that with
notice or lapse of time or both would become an Event of Default.
"DELINQUENT MORTGAGE LOAN" shall mean an Eligible Mortgage Loan in
respect of which the scheduled payment of principal and/or interest is past
due for a period in excess of 29 days, but not in excess of 59 days (without
regard to grace periods).
"DMG" shall mean Deutsche Morgan Grenfell Inc., or any successor in
interest thereto.
"DMG UNDERWRITING MANDATE" shall mean the agreement with respect to
DMG's right to underwrite or privately place certain securitization and other
collateralized term financing transactions as more particularly set forth in
the Side Letter.
"DOLLARS" and "$" shall mean lawful money of the United States of
America.
"DUE DILIGENCE REVIEW" shall mean our performance of any or all of
the reviews permitted under Section 35 hereof with respect to any or all of
the Collateral, the Seller or the Servicer as we desire from time to time.
"EFFECTIVE DATE" shall mean the date upon which the conditions
precedent set forth in SCHEDULE 3 shall have been satisfied.
"ELIGIBLE ASSETS" shall be the collective reference to Eligible
Mortgage Loans and Eligible Subordinated Securities.
"ELIGIBLE MORTGAGE LOAN" shall mean a Mortgage Loan not previously
pledged hereunder and subsequently released from our Lien hereunder or
pledged under the Uncommitted Facility Transaction Documents and subsequently
released to the lender's Lien thereof unless transferred under the
Uncommitted Facility Transaction Documents pursuant to Section 4(b)(i) of the
Loan and Security Agreement, originated in accordance with the Underwriting
Guidelines and secured by a first or second lien on a one-to-four family
residential property, as to which the representations and warranties in
Section 20(q) and Part I of Schedule 4 hereof are correct, and which, when
aggregated with other such Mortgage Loans, has characteristics that, as of
any date of determination, are consistent with Seller's recent residential
mortgage loan Securitization Transactions.
"ELIGIBLE SUBORDINATED SECURITIES" shall mean Subordinated
Securities which arise from Seller's Securitization Transactions, which as of
the securitization cut-off date, are secured by mortgage loans which would
meet the requirements of Eligible Mortgage Loans, and where DMG, as lead
manager or co-manager, has participated in the offering or placement of the
related securities.
"ERISA" shall have the meaning provided in Section 20(s) of the
Loan and Security Agreement.
S2-4
<PAGE>
"ERISA AFFILIATE" shall mean any corporation or trade or business
that is a member of any group of organizations (i) described in Section
414(b) or (c) of the Code of which you are a member and (ii) solely for
purposes of potential liability under Section 302(c)(11) of ERISA and Section
412(c)(11) of the Code and the lien created under Section 302(f) of ERISA and
Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of
which you are a member.
"EUROCURRENCY RESERVE REQUIREMENTS" shall mean, for any day as
applied to a Daily Reset Loan, and for any Interest Period for any Advance
other than a Daily Reset Loan, the aggregate (without duplication) of the
rates (expressed as a decimal fraction) of reserve requirements in effect on
such day or during such Interest Period, as applicable (including without
limitation basic, supplemental, marginal and emergency reserves under any
regulations of the Board of Governors of the Federal Reserve System or other
Governmental Authority having jurisdiction with respect thereto), dealing
with reserve requirements prescribed for eurocurrency funding (currently
referred to as "Eurocurrency Liabilities" in Regulation D of such Board)
maintained by a member bank of such Governmental Authority.
"EVENT OF DEFAULT" shall have the meaning provided in Section 26 of
the Loan and Security Agreement.
"FACILITY AMOUNT" shall have the meaning provided in Section 1 of
the Loan and Security Agreement.
"FIRST LIEN MORTGAGE LOAN" shall mean an Eligible Mortgage Loan
secured by the lien on the Mortgaged Property, subject to no prior liens on
such Mortgaged Property.
"FIRSTPLUS PURCHASE AGREEMENT" shall mean that certain Purchase and
Sale Agreement between you, the Seller and FIRSTPLUS FINANCIAL GROUP, INC.
dated December 12, 1997.
"FIRSTPLUS SERVICING AGREEMENT" shall mean that certain servicing
Agreement between you and the Seller dated December 12, 1997.
"FUNDING DATE" shall mean the date on which an Advance is made
hereunder.
"GACC" shall mean German American Capital Corporation or any
successor thereto.
"GAAP" shall mean generally accepted accounting principles as in
effect from time to time in the United States.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any
state or other political subdivision thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government and any court or arbitrator having jurisdiction
over you, any of your Subsidiaries or any of your properties.
S2-5
<PAGE>
"GUARANTEE" shall mean, as to any Person, any obligation of such
Person directly or indirectly guaranteeing any Indebtedness of any other
Person or in any manner providing for the payment of any Indebtedness of any
other Person or otherwise protecting the holder of such Indebtedness against
loss (whether by virtue of partnership arrangements, by agreement to
keep-well, to purchase assets, goods, securities or services, or to
take-or-pay or otherwise); provided that the term "Guarantee" shall not
include (i) endorsements for collection or deposit in the ordinary course of
business, or (ii) obligations to make servicing advances for delinquent taxes
and insurance, other recoverable advances that are customary in accordance
with Accepted Serving Practices or other obligations in respect of a
Mortgaged Property, to the extent required by us. The amount of any
Guarantee of a Person shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Guarantee is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith. The terms "GUARANTEE" and "GUARANTEED" used as verbs shall have
correlative meanings.
"INCOME" shall mean, with respect to any Collateral at any time,
any principal thereof and all interest, dividends or other distributions
thereon.
"INCOMPLETE DOCUMENTATION MORTGAGE LOAN" shall mean an Eligible
Mortgage Loan for which the Custodian has not received an assignment in blank
(an "Assignment") or endorsement in blank (an "Endorsement), provided however
that for such Eligible Mortgage Loan (1) the related principal balance of
such Mortgage Loan will have been fully disbursed to each Mortgagor prior to
pledging such Mortgage Loan to us, (2) the Custodian shall have certified to
its possession of the original Mortgage, Mortgage Note and all other original
mortgage loan documentation as more particularly described in the Custodial
Agreements except for an Assignment or Endorsement to us and (3) you shall
deliver all remaining mortgage loan documentation to the Custodian within 7
Business Days subsequent to the date that such Mortgage Loan is pledged under
the Loan and Security Agreement.
"INDEBTEDNESS" shall mean, for any Person: (a) obligations
created, issued or incurred by such Person for borrowed money (whether by
loan, the issuance and sale of debt securities or the sale of Property to
another Person subject to an understanding or agreement, contingent or
otherwise, to repurchase such Property from such Person); (b) obligations of
such Person to pay the deferred purchase or acquisition price of Property or
services, other than trade accounts payable (other than for borrowed money)
arising, and accrued expenses incurred, in the ordinary course of business so
long as such trade accounts payable are payable within 90 days of the date
the respective goods are delivered or the respective services are rendered;
(c) Indebtedness of others secured by a Lien on the Property of such Person,
whether or not the respective Indebtedness so secured has been assumed by
such Person; (d) obligations (contingent or otherwise) of such Person in
respect of letters of credit or similar instruments issued or accepted by
banks and other financial institutions for account of such Person; (e)
Capital Lease Obligations of such Person; (f) obligations of such Person
under repurchase agreements or like arrangements; (g) Indebtedness of others
Guaranteed by such Person; (h) all obligations of such Person incurred in
connection with the acquisition or carrying of fixed assets by such Person;
and (i) Indebtedness of general partnerships of which such Person is a
general partner.
S2-6
<PAGE>
"INTEREST PERIOD" shall mean, with respect to any Advance, the
period commencing on the Funding Date to but excluding the related Loan
Maturity Date. No Interest Period may end after the Termination Date.
"INTEREST RATE PROTECTION AGREEMENT" shall mean, with respect to
any or all of the Mortgage Loans, any short sale of US Treasury Security, or
futures contract, or mortgage related security, or Eurodollar futures
contract, or options related contract, or interest rate swap, cap or collar
agreement or similar arrangements providing for protection against
fluctuations in interest rates or the exchange of nominal interest
obligations, either generally or under specific contingencies, entered into
by you and an Affiliate of ours, and acceptable to us.
"INVESTMENT GRADE RATING" shall mean, with respect to any Person's
long term public senior debt securities, a rating of at least BBB- by
Standard & Poor's Ratings Group or Baa3 by Moody's Investors Service, Inc.
"LENDER" shall mean German American Capital Corporation, unless
otherwise indicated.
"LENDER'S DESIGNATED PERSONS" shall have the meaning provided on
EXHIBIT B-1 to the Loan and Security Agreement.
"LENDER'S MARGIN AMOUNT" shall mean the product of (a) the
applicable Margin Percentage and (b) the related Advance.
"LIBOR BASE RATE" shall mean, (a) for any Daily Reset Loan, with
respect to each day such Advance is outstanding (or if such day is not a
Business Day, the next succeeding Business Day), the rate per annum equal to
the rate appearing at page 3750 of the Telerate Screen as one-month LIBOR on
such DATE, and if such rate shall not be so quoted, the rate per annum at
which we are offered Dollar deposits at or about 10:00 A.M., New York City
time, on such date by prime banks in the interbank eurodollar market where
the eurodollar and foreign currency and exchange operations in respect of our
Advances are then being conducted for delivery on such day for a period of
one month and in an amount comparable to the amount of the Advances to be
outstanding on such day; or
(b) for any Advance other than a Daily Reset Loan, with respect to
each day during each Interest Period an Advance is outstanding (or if such
day is not a Business Day, the next succeeding Business Day), the rate per
annum equal to the rate appearing at page 3750 of the Telerate Screen as
LIBOR Rate for the number of months closest to the duration of such Interest
Period, rounded up, on the first day of such Interest Period, and if such
rate shall not be so quoted, the rate per annum at which we are offered
Dollar deposits for the aforementioned duration at or about 10:00 A.M., New
York City time, on such date by prime banks in the interbank eurodollar
market where the eurodollar and foreign currency exchange operations in
respect of our Advances are then being conducted for delivery on such day for
a comparable Interest Period and in an amount comparable to the amount of the
Advances to be outstanding on such day.
S2-7
<PAGE>
"LIBOR RATE" shall mean, (a) with respect to each day a Daily Reset
Loan is outstanding, and (b) with respect to each day during each Interest
Period pertaining to an Advance other than a Daily Reset Loan, a rate per
annum determined by us in our sole discretion in accordance with the
following formula (rounded upwards to the nearest 1/100th of one percent),
which rate as we determine shall be conclusive absent manifest error by us:
LIBOR BASE RATE
1.00 - Eurocurrency Reserve Requirements
"LIEN" shall have the meaning provided in Section 11 of the Loan
and Security Agreement.
"LOAN AND SECURITY AGREEMENT" shall mean this Loan and Security
Agreement, as the same may be amended, supplemented or otherwise modified
from time to time.
"LOAN DOCUMENTS" shall mean, collectively, this Loan and Security
Agreement, the Note and the Custodial Agreement.
"LOAN MATURITY DATE" shall mean either (a) a date specified by you
in your Request for Borrowing which shall be no later than the 270th day
following the Funding Date or (b) if no such Loan Maturity Date is specified
therein, the third Business Day following such Funding Date.
"MARGIN AMOUNT" shall mean, with respect to any date, the Market
Value of the Collateral on such date minus the amount of Advances hereunder.
"MARGIN DEFICIT" shall have the meaning provided in Section 7 of
the Loan and Security Agreement.
"MARGIN EXCESS" shall have the meaning provided in Section 7 of the
Loan and Security Agreement.
"MARGIN PERCENTAGE" shall have the meaning provided in SCHEDULE 1
hereto.
"MARKET CAPITALIZATION" for any Person, as of any date, shall be
determined as the product of (a) the then outstanding shares of common stock
of such Person multiplied by (b) the closing common stock price (per share)
of such Person as such date of determination.
"MARKET VALUE" shall mean with respect to any Collateral as of any
date, the dollar amount ascribed to such Collateral on that date by us in our
sole good faith discretion; provided that:
(a) the Market Value shall be deemed to be zero with respect to
any item of Collateral:
1) which fails to meet the definition of Eligible Assets; or
S2-8
<PAGE>
2) in respect of which there is a breach of a representation and
warranty set forth on SCHEDULE 4 hereto (assuming each
representation and warranty is made as of the date the Market
Value is determined); or
3) in respect of which there is a delinquency in the payment of
principal and/or interest which continues for a period in excess
of 59 days (without regard to grace periods); or
4) which is an Eligible Mortgage Loan and remains pledged to us
under the Loan and Security Agreement later than 330 days after
the date on which it is first included in the Collateral; or
5) which is a Pledged Security and remains pledged to us under the
Loan and Security Agreement later than 540 days after the date on
which it is first included in the Collateral; or
6) delivered to the Custodian and which has been released from the
possession of the Custodian under the Custodial Agreement for a
period in excess of 14 calendar days; or
7) which is an Incomplete Documentation Mortgage Loan in respect of
which the Custodian has failed to receive a complete Collateral
File within seven (7) Business Days following the Applicable
Funding Date;
(b) the aggregate Market Value of Eligible Mortgage Loans that are
Incomplete Documentation Mortgage Loans in excess of the lesser of (1) 5% of
the aggregate outstanding principal balance of all Eligible Mortgage Loans
and (2) $50,000,000, in either case, as of any date that Market Value is
determined, shall be deemed to be zero;
(c) the aggregate Market Value of Eligible Mortgage Loans that are
Delinquent Mortgage Loans in excess of 3% of the aggregate Market Value of
all Mortgage Loans, as of any date that Market Value is determined, shall be
deemed to be zero; and
(d) unless otherwise expressly agreed by us, the Market Value of
any Collateral shall be zero if at any time such Collateral has been assigned
a Market Value of zero.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on
(a) your Property, business, operations, financial condition or prospects,
(b) your ability to perform your obligations under any of the Loan Documents
to which you are a party, (c) the validity or enforceability of any of the
Loan Documents, (d) our rights and remedies under any of the Loan Documents,
(e) the timely payment of the principal of or interest on the Advances or
other amounts payable in connection therewith or (f) the Collateral.
"MINIMUM ADVANCE AMOUNT" shall have the meaning provided in Section
2 of the Loan and Security Agreement.
S2-9
<PAGE>
"MORTGAGE" shall mean the mortgage, deed of trust or other
instrument securing a Mortgage Note, which creates a first or second lien on
the fee in real property securing the Mortgage Note.
"MORTGAGE LOAN" shall mean a mortgage loan which the Custodian has
been instructed to hold for us pursuant to the Custodial Agreement, and which
Mortgage Loan includes, without limitation, (i) a Mortgage Note and related
Mortgage and (ii) all of your right, title and interest in and to the
Mortgaged Property covered by such Mortgage.
"MORTGAGE NOTE" shall mean the original executed promissory note or
other evidence of the indebtedness of a mortgagor/borrower with respect to a
Mortgage Loan.
"MORTGAGED PROPERTY" shall mean the real property (including all
improvements, buildings, fixtures, building equipment and personal property
thereon and all additions, alterations and replacements made at any time with
respect to the foregoing) and all other collateral securing repayment of the
debt evidenced by a Mortgage Note.
"MORTGAGOR" shall mean the obligor on a Mortgage Note.
"MULTIEMPLOYER PLAN" shall mean a Plan which is a Multiemployer
plan as defined in Section 4001(a)(3) of ERISA.
"NET INCOME" shall mean, for any period, your net income for such
period as determined in accordance with GAAP.
"NOTE" shall have the meaning provided in Section 1 of the Loan and
Security Agreement.
"PAYMENT DATE" shall mean (a) the 15th day of each calendar month
(or if the 15th day is not a Business Day, than the next Business Day),
commencing with the 15th day of the month following the month in which the
first Funding Date occurs, and (b) the Termination Date. "PBGC" shall mean
the Pension Benefit Guaranty Corporation or any entity succeeding to any or
all of its functions under ERISA.
"PERSON" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, limited liability company, trust,
unincorporated association or government (or any agency, instrumentality or
political subdivision thereof).
"PLAN" shall mean at a particular time, any employee benefit plan
which is covered by ERISA and in respect of which you or a commonly
controlled entity is (or, if such plan were terminated at such time, would
under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"PLEDGED SECURITIES" shall mean the Subordinated Securities pledged
to us hereunder from time to time and held by us as Collateral under the Loan
and Security Agreement.
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<PAGE>
"POOLING AND SERVICING AGREEMENT" shall mean any pooling and
servicing agreement, sale and servicing agreement, trust agreement or other
agreement pursuant to which the Mortgage Loans ultimately underlying any of
the Pledged Securities are serviced or administered or the Pledged Securities
are issued or exchanged.
"POST-DEFAULT RATE" shall mean, in respect of the payment of any
principal of any Advance or any other amount under this Loan and Security
Agreement, the Note or any other Loan Document that is not paid when due to
us (whether at stated maturity, by acceleration, by optional or mandatory
prepayment or otherwise), a rate per annum during the period from and
including the due date to but excluding the date on which such amount is paid
in full equal to 3% per annum PLUS the applicable LIBOR Rate for Daily Reset
Loans for each day such Post-Default Rate shall apply.
"PROPERTY" shall mean any right or interest in or to property of
any kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"REQUEST FOR BORROWING" shall have the meaning provided in Section
2 of the Loan and Security Agreement.
"REQUESTING DEADLINE" shall have the meaning provided in Section 2
of the Loan and Security Agreement.
"RESPONSIBLE OFFICER" shall mean, as to any Person, the chief
executive officer or senior vice president or, with respect to financial
matters, the chief financial officer or treasurer of such Person.
"SECOND LIEN MORTGAGE LOAN" shall mean an Eligible Mortgage Loan
secured by the lien on the Mortgaged Property, subject to one prior lien on
such Mortgaged Property.
"SECURED OBLIGATIONS" shall have the meaning provided in Section 8
of the Loan and Security Agreement.
"SECURITIZATION TRANSACTION" shall mean a securitization
transaction backed by Mortgage Loans underwritten or placed on behalf of your
Affiliate which transaction has received an investment grade rating from any
nationally-recognized rating agency and otherwise conforms to the current
standards of institutional securitization applicable to mortgage loans
substantially similar in nature to the Mortgage Loans.
"SELLER" shall mean FIRSTPLUS FINANCIAL, INC. or any successor
thereto.
"SERVICER" shall have the meaning provided in Section 34 of the
Loan and Security Agreement.
"SERVICING AGREEMENT" shall have the meaning provided in Section 34
of the Loan and Security Agreement.
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"SERVICING RECORDS" shall have the meaning provided in Section 34
of the Loan and Security Agreement.
"SIDE LETTER" shall mean that certain letter agreement between DMG,
the Seller and the Borrower setting forth the parties' understanding with
respect to the DMG Underwriting Mandate.
"SUBORDINATED SECURITIES" shall mean interest-only strips, residual
interests, subordinated interests or reserve certificates issued and
transferred to you in connection with any Securitization Transaction or any
other collateral as we may deem appropriate.
"SUBSIDIARY" shall mean, with respect to any Person, any
corporation, partnership or other entity of which at least a majority of the
securities or other ownership interests having by the terms thereof ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions of such corporation, partnership or other entity
(irrespective of whether or not at the time securities or other ownership
interests of any other class or classes of such corporation, partnership or
other entity shall have or might have voting power by reason of the happening
of any contingency) is at the time directly or indirectly owned or controlled
by such Person or one or more Subsidiaries of such Person or by such Person
and one or more Subsidiaries of such Person.
"TANGIBLE NET WORTH" shall mean, as to any Person as of a
particular date,
(a) all amounts which would be included under capital on a balance
sheet of such Person at such date, determined in accordance with GAAP, LESS
(b) (i) amounts owing to such Person from Affiliates and (ii)
intangible assets determined in accordance with GAAP.
"TERMINATION DATE" shall mean December 12, 1998 or such earlier
date on which this Loan and Security Agreement shall terminate in accordance
with the provisions hereof or by operation of law.
"TEST PERIOD" shall have the meaning provided in Section 22(n) of
the Loan and Security Agreement.
"TOTAL INDEBTEDNESS" shall mean, for any period, your aggregate
Indebtedness of during such period LESS the amount of any nonspecific balance
sheet reserves maintained in accordance with GAAP.
"TRUSTEE" shall mean, with respect to any Pooling and Servicing
Agreement, the trustee thereunder.
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<PAGE>
"UNCOMMITTED FACILITY TRANSACTION DOCUMENTS" shall mean the Loan
and Security Agreement, the Custodial Agreement and the Promissory Note,
entered into on the date hereof between you and Aspen.
"UNDERWRITING GUIDELINES" shall mean the underwriting guidelines
used in connection with the organization of the Mortgage Loans attached as
EXHIBIT H hereto.
"UNIFORM COMMERCIAL CODE" shall mean the Uniform Commercial Code as
in effect on the date hereof in the State of New York; provided that if by
reason of mandatory provisions of law, the perfection or the effect of
perfection or non-perfection of the security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than New York, "Uniform Commercial Code" shall mean the Uniform Commercial
Code as in effect in such other jurisdiction for purposes of the provisions
hereof relating to such perfection or effect of perfection or non-perfection.
S2-13
<PAGE>
SCHEDULE 3
to
Loan and Security Agreement
CONDITIONS PRECEDENT
I. INITIAL ADVANCE. Our obligation to make the initial Advance
hereunder is subject to the satisfaction, immediately prior to or concurrently
with the making of such Advance, of the condition precedent that we shall have
received all of the following documents, each of which shall be satisfactory to
us and our counsel in form and substance:
(a) LOAN DOCUMENTS. The Loan Documents, duly completed and executed.
(i) NOTE. The Note, duly completed and executed;
(ii) CUSTODIAL AGREEMENT. The Custodial Agreement, duly executed
and delivered by you and the Custodian. In addition, you shall have taken
such other action as we shall have requested in order to perfect the
security interests created pursuant to the Loan and Security Agreement;
(b) ORGANIZATIONAL DOCUMENTS. A good standing certificate and
certified copies of (i) the Seller's and your charter and by-laws (or equivalent
documents), along with (ii) certified copies of resolutions of the Seller's and
your board of directors authorizing a Designated Person to execute the
agreements to which it and you are a party and any documents delivered pursuant
hereto, together with specimen signatures of such Borrower's Designated Persons;
(c) LEGAL OPINION. A legal opinion of your counsel, substantially in
the form attached to the Loan and Security Agreement as EXHIBIT D;
(d) TRUE SALE NON-CONSOLIDATION OPINION. A true sale and
non-consolidation legal opinion of your counsel in form and substance
acceptable to us;
(e) COLLATERAL SCHEDULE AND EXCEPTION REPORT. A Collateral Schedule
and Exception Report, dated the Effective Date, from the Custodian, duly
completed;
(f) SERVICING AGREEMENT(S). Any Servicing Agreement, including the
FIRSTPLUS Servicing Agreement, in form and substance satisfactory to us in our
discretion certified as a true, correct and complete copy of the original, with
the letter of the applicable Servicer consenting to termination of such
Servicing Agreement upon the occurrence of an Event of Default attached. We
shall have reviewed and approved such Servicer of the Collateral;
(g) BLOCKED ACCOUNT AGREEMENT. A Blocked Account Agreement,
substantially in the form of Exhibit F to the Loan and Security Agreement, duly
completed;
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(h) RELATED AGREEMENTS. The Uncommitted Facility Transaction
Documents, duly executed and delivered by you;
(i) SIDE LETTER. The Side Letter, duly executed and delivered by
you;
(j) REQUEST FOR BORROWING. A Request for Borrowing delivered by you;
(k) PURCHASE AGREEMENT. The FIRSTPLUS Purchase Agreement, in form
and substance satisfactory to us in our discretion certified as a true, correct
and complete copy of the original; and
(l) DISTRIBUTION WORKSHEET. The form of Distribution Worksheet to be
delivered pursuant to the Servicing Agreement shall have been approved by us;
(m) COLLATERAL TAPE. Additional information fields not set forth on
Annex 1 to the Custodial Agreement but reasonably requested by us shall be set
forth on the Collateral Tape delivered to us;
(n) OTHER DOCUMENTS. Such other documents as we may reasonably
request.
S3-2
<PAGE>
II. INITIAL AND SUBSEQUENT ADVANCES. The making of each Advance to you
(including the initial Advance) on any Business Day is subject to the
satisfaction of the following further conditions precedent, both immediately
prior to the making of such Advance and also after giving effect thereto and to
the intended use thereof:
(a) no Default or Event of Default shall have occurred and be
continuing;
(b) both immediately prior to the making of such Advance and also
after giving effect thereto and to the intended use thereof, the representations
and warranties made by you in the Loan and Security Agreement and SCHEDULE 4
thereto, and elsewhere in any other document related thereto, shall be true and
complete on and as of the date of the making of such Advance in all material
respects (in the case of the representations and warranties in Section 20(q) and
SCHEDULE 4, solely with respect to Mortgage Loans included in the Borrowing
Base) with the same force and effect as if made on and as of such date (or, if
any such representation or warranty is expressly stated to have been made as of
a specific date, as of such specific date). We shall have received an officer's
certificate signed by one of your Responsible Officers certifying as to the
truth and accuracy of the above, which certificate shall specifically include a
statement that you are in compliance in all material respects with all
governmental licenses and authorizations and are qualified to do business and in
good standing in all required jurisdictions;
(c) the aggregate outstanding principal amount of the Advances shall
not exceed the Borrowing Base;
(d) subject to our right to perform one or more Due Diligence Reviews
pursuant to Section 35 of the Loan and Security Agreement, we shall have
completed our due diligence review of the Mortgage Loan Documents for each
Advance and such other documents, records, agreements, instruments, mortgaged
properties or information relating to such Advances as we, in our sole
discretion, deem appropriate to review and such review shall be satisfactory to
us in our sole discretion;
(e) we shall have received from the Custodian a Trust Receipt with
exceptions as are acceptable to us in our sole discretion in respect of Eligible
Assets to be pledged hereunder on such Business Day and a Collateral Schedule
and Exception Report, in each case dated such Business Day and duly completed;
(f) we shall have received from you a Warehouse Lender's Release
Letter substantially in the form of EXHIBIT G-2 hereto (or such other form
acceptable to us) or a
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Borrower's Release Letter substantially in the form of EXHIBIT G-1 hereto (or
such other form acceptable to us) covering each Mortgage Loan to be pledged
to us;
(g) none of the following shall have occurred and/or be continuing:
(i) an event or events shall have occurred resulting in the
effective absence of a public or private market for mortgage- and
asset-backed securities, that (a) are secured by single-family residential
mortgages and (b) as of the date hereof, can be readily securitized in the
domestic capital markets (the "U.S. Mortgage Securities Market"); or
(ii) the long-term rating of Deutsche Bank AG by Moody's
Investors Service, Inc. and Standard and Poor's, Ratings Group shall be
downgraded to Baa or lower or BBB or lower by each such agency,
respectively;
(h) we shall have received from you a Request for Borrowing; and
(i) we shall have reviewed (no later than 20 Business Days following
receipt of same) and approved in our sole discretion any modifications or
amendments to the Underwriting Guidelines.
S3-4
<PAGE>
SCHEDULE 4
to
Loan and Security Agreement
REPRESENTATIONS AND WARRANTIES RE: MORTGAGE LOANS
Part I. ELIGIBLE MORTGAGE LOANS
As to each Mortgage Loan included in the Borrowing Base on a Funding
Date (and the related Mortgage, Mortgage Note, Assignment of Mortgage and
Mortgaged Property), you shall be deemed to make the following representations
and warranties to us as of such date and as of each date Market Value is
determined (certain defined terms used herein and not otherwise defined in the
Loan and Security Agreement appearing in Part III to this Schedule 4). With
respect to any representations and warranties made to the best of your
knowledge, in the event that it is discovered that the circumstances with
respect to the related Mortgage Loan are not accurately reflected in such
representation and warranty notwithstanding your knowledge or lack of knowledge,
then, notwithstanding that such representation and warranty is made to the best
of your knowledge, such Mortgage Loan shall be assigned a Collateral Value of
zero.
a. MORTGAGE LOAN INFORMATION. The information with respect to each
Mortgage Loan set forth in the Mortgage Loan Schedule is true and correct
in all material respects as of the applicable Funding Date.
b. DELIVERY OF MORTGAGE LOAN DOCUMENTS. All of the original or
certified documentation required to be delivered to the Custodian on or
prior to the Funding Date, or as otherwise provided in this Loan and
Security Agreement has or will be so delivered.
c. PAYMENTS CURRENT. As of the applicable Funding Date, none of the
Initial Mortgage Loans are more than 59 days contractually delinquent,
based on the terms under which the related Mortgages and Mortgage Notes
have been made. You have not advanced funds, or induced, solicited or
knowingly received any advance of funds from a party other than the related
Mortgagor, directly or indirectly, for the payment of any amount required
by any Mortgage Loan.
d. NO OUTSTANDING CHARGES. There are no defaults in complying with
the terms of the Mortgage securing the Mortgage Loan, and all taxes,
governmental assessments, insurance premiums, water, sewer and municipal
charges, leasehold payments or ground rents which previously became due and
owing have been paid, or an escrow of funds has
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<PAGE>
been established in an amount sufficient to pay for every such item which
remains unpaid and which has been assessed but is not yet due and payable.
Neither you nor the Qualified Originator from which you acquired the
Mortgage Loan has advanced funds, or induced, solicited or knowingly
received any advance of funds by a party other than the Mortgagor,
directly or indirectly, for the payment of any amount required under the
Mortgage Loan, except for interest accruing from the date of the Mortgage
Note or date of disbursement of the proceeds of the Mortgage Loan,
whichever is earlier, to the day which precedes by one month the Due Date
of the first installment of principal and interest thereunder.
e. NO WAIVER OR MODIFICATION. The terms of each Mortgage Note and
Mortgage, have not been impaired, waived, altered or modified in any
respect, except by written instruments reflected in the Collateral File and
no provision of any Mortgage or Mortgage Note has been "whited out" or
erased unless such modification has been initialed by each of the parties
to the related Mortgage Loan. No instrument of waiver, alteration,
modification or assumption has been executed except for the instruments
that are part of the Collateral File and the terms of which are reflected
in the Collateral File.
f. NO DEFENSES. No Mortgage Note or Mortgage is subject to any
right of rescission, claim, setoff, counterclaim or defense, including the
defense of usury, nor will the operation of any of the terms of any
Mortgage Note or Mortgage or the exercise of any right thereunder, render
such Mortgage Note 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 Mortgage Loan was originated. You have
no knowledge nor have you received any notice that any Mortgagor in respect
of the Mortgage Loan is a debtor in any state or federal bankruptcy or
insolvency proceeding.
g. COMPLIANCE WITH LAWS; RELIEF ACT MATTERS. Any and all
requirements of any federal, state or local law applicable to each Mortgage
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 Mortgage Loan. Each Mortgage 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 Mortgagor under the Soldiers' and Sailors'
Civil Relief Act of 1940.
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<PAGE>
h. 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 Mortgage 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.
i. VALID LIEN. With respect to each Mortgage Note, the related
Mortgage is or creates a valid, subsisting and enforceable lien on the
related Mortgaged Property.
j. VALIDITY OF MORTGAGE LOAN DOCUMENTS; ENTIRE AGREEMENT. Each
Mortgage Note and each Mortgage is genuine and each is the legal, valid and
binding obligation of the Mortgagor 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 Mortgage Note and each Mortgage had legal capacity at the
time to enter into the related Mortgage Loan and to execute and deliver
such Mortgage Note and Mortgage, and such Mortgage Note and Mortgage have
been duty and property executed by such parties. The Mortgage Note and the
Mortgage contain the entire agreement between the related Mortgagor and the
lender and all obligations of the lender under the related Mortgage Loan,
and no other agreement defines, modifies, or expands the obligations of the
lender under the Mortgage Loan, except for any assumptions or modifications
included in the Collateral File.
k. FULL DISBURSEMENT OF PROCEEDS. The proceeds of each Mortgage
Loan have been fully disbursed and there is no requirement for future
advances thereunder. All costs, fees and expenses incurred in making or
closing each Mortgage Loan and the recording of the Mortgage have been
disbursed. The Mortgagor is not entitled to any refund of any amounts paid
or due under the Mortgage Note or any related Mortgage and any and all
requirements set forth in the related Mortgage Loan Documents have been
complied with.
l. OWNERSHIP. Immediately prior to the pledge thereof to us, you
had good and marketable title to each Mortgage Loan, Mortgage Note and
Mortgage, you were the sole owner thereof and had full right to sell each
Mortgage Loan, Mortgage Note and Mortgage free and clear of any
Encumbrance, equity, lien, pledge, charge, claim or security interest.
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<PAGE>
m. OWNERSHIP OF MORTGAGED PROPERTY. With respect to each Mortgage
Loan, the related Collateral File contains a title document reflecting that
title to the related Mortgaged Property is held by the Mortgagor under such
Mortgage Loan.
n. NO DEFAULTS. There is no default, breach, violation or event of
acceleration existing under any Mortgage or any Mortgage Note and, to the
best of your 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 you nor your 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
Collateral File. With respect to each Mortgage Loan which is indicated by
you to be a Second Lien Mortgage Loan (as reflected on the Mortgage Loan
Schedule) (i) the prior mortgage is in full force and effect, (ii) there is
no default, breach, violation or event of acceleration existing under such
prior mortgage or the related mortgage note, (iii) no event which, with the
passage of time or with notice and the expiration of any grace or cure
period, would constitute a default, breach, violation or event of
acceleration thereunder, and either (A) the prior mortgage contains a
provision which allows or (B) applicable law requires, the Mortgagee under
the Second Lien Mortgage Loan to receive notice of, and affords such
Mortgagee an opportunity to cure any default by payment in full or
otherwise under the prior mortgage.
o. 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 Mortgage Loan. With respect to each Mortgage
Loan that is not a first mortgage loan, either (i) no consent for the
Mortgage Loan is required by the holder of the related prior lien or (ii)
such consent has been obtained and has been delivered to the Custodian.
p. NO CONDEMNATION OR DAMAGE; GOOD REPAIR. To the best of your
knowledge, the physical condition of each Mortgaged Property has not
deteriorated since the date of origination of the related Mortgage Loan
(normal wear and tear excepted) and there is no proceeding pending for the
total or partial condemnation of any Mortgaged Property. To the best of
your 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 Mortgage Loan.
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<PAGE>
q. ENVIRONMENTAL COMPLIANCE. To the best of your 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.
r. 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.
s. SECURITY. No Mortgage Note is, or has been, secured by any
collateral except the lien of the related Mortgage.
t. DEED OF TRUST. If a Mortgage for a Mortgage 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 you to the trustee under the deed of trust, except
in connection with default proceedings and a trustee's sale after default
by the related Mortgagor.
u. INSPECTIONS OF IMPROVEMENTS; AND NO ENCROACHMENT. To the best of
your knowledge, all inspections, licenses and certificates required to be
made, obtained and issued as of the Funding Date with respect to the
improvements and the use and occupancy of all occupied portions of all
Mortgaged Property have been made, obtained or issued as applicable. To
the best of your knowledge, all improvements which were considered in
determining the Appraised Value of the Mortgaged Property lay wholly within
the boundaries and building restrictions lines of the related property and
no improvements on adjoining properties encroach upon such property and no
improvement located on or being a part of such property is in violation of
any applicable zoning laws or regulation.
v. HAZARD INSURANCE. The Mortgaged Property is insured by a fire
and extended perils insurance policy, issued by a Qualified Insurer, and
such other hazards as are customary in the area where the Mortgaged
Property is located, and to the extent required by you as of the date of
origination consistent with the Underwriting Guidelines, against earthquake
and other risks insured against by Persons operating like properties in the
locality of the Mortgaged Property with respect to First Lien Mortgage
Loans, in an amount not less than the greatest of (i) 100% of the
replacement cost of all improvements
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<PAGE>
to the Mortgaged Property, (ii) the outstanding principal balance of the
Mortgage Loan, or (iii) the amount necessary to avoid the operation of
any co-insurance provisions with respect to the Mortgaged Property, and
consistent with the amount that would have been required as of the date
of origination in accordance with the Underwriting Guidelines. All such
insurance policies (collectively, the "hazard insurance policy") contain
a standard mortgagee clause naming you, your successors and assigns
(including without limitation, subsequent owners of the Mortgage Loan),
as Mortgagee, and may not be reduced, terminated or canceled without 30
days' prior written notice to the Mortgagee. No such notice has been
received by you. All premiums on such insurance policy have been paid.
The related Mortgage obligates the Mortgagor to maintain all such
insurance and, at such Mortgagor's failure to do so, authorizes the
Mortgagee to maintain such insurance at the Mortgagor's cost and expense
and to seek reimbursement therefor from such Mortgagor. Where required
by state law or regulation, the Mortgagor has been given an opportunity
to choose the carrier of the required hazard insurance, provided the
policy is not a "master" or "blanket" hazard insurance policy covering a
condominium, or any hazard insurance policy covering the common facilities
of a planned unit development. The hazard insurance policy is the valid
and binding obligation of the insurer and is in full force and effect.
You have not engaged in, and have no knowledge of the Mortgagor's having
engaged in, any act or omission which would impair the coverage of any
such policy, the benefits of the endorsement provided for herein, or the
validity and binding effect of either including, without limitation, no
unlawful fee, commission, kickback or other unlawful compensation or value
of any kind has been or will be received, retained or realized by any
attorney, firm or other Person, and no such unlawful items have been
received, retained or realized by you.
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 our rights and remedies 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 ORIGINATOR AND SERVICING PRACTICES. Each Mortgage
Loan has been underwritten or re-underwritten in accordance with your
then-current underwriting
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<PAGE>
guidelines. The origination practices used by each originator of the
Mortgage Loans and the servicing and collection practices used by you with
respect to each Mortgage 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 your knowledge, no fraud or misrepresentation was committed by any
Person in connection with the origination or servicing of each Mortgage
Loan.
y. SELECTION CRITERIA; NO BULK TRANSFER. The Mortgage Loans were
not selected by you for pledge to us on any basis intended to adversely
affect us. The pledge of the Mortgage Note and the Mortgages by you to us
was not subject to the bulk transfer laws or any similar statutory
provisions in effect in any applicable jurisdiction.
z. NO FRAUDULENT CONVEYANCE. The Mortgage Loans are not being
transferred with any intent to hinder, delay or defraud any creditors.
aa. VALUE AND MARKETABILITY. To the best of your knowledge, there do
not exist any circumstances, conditions or information with respect to the
Mortgage Loan, the related Mortgaged Property, the Mortgagor or the
Mortgagor's credit standing that reasonably can be expected to cause
private institutional investors investing in same type of Mortgage Loan to
regard such Mortgage Loan as an unacceptable investment, to increase the
likelihood that such Mortgage Loan will become delinquent, or adversely
affect the value or marketability of such Mortgage Loan.
bb. TERMS OF MORTGAGE LOANS AND INTEREST METHOD. Each Mortgage Loan
is a fixed rate loan. Each Mortgage Note has an original term to maturity
of not less than 24 months nor more than 25 years and three months from the
date of origination. Each Mortgage Note is payable in monthly installments
of principal and interest, with interest payable in arrears, and requires a
monthly payment which is sufficient to amortize the original principal
balance over the original term and to pay interest at the related Mortgage
Loan Interest Rate. No Mortgage Note provides for any extension of the
original term. Interest for each Mortgage Loan is calculated at a rate of
interest computed by the simple interest method or the actuarial method.
cc. TYPES OF MORTGAGE LOANS; RETAIL INSTALLMENT CONTRACTS. Each
Mortgage Loan is either (i) a Home Improvement Loan, (ii) a Debt
Consolidation Loan, or (iii) a Combination Loan. No Mortgage Loan was
originated for the express purpose of purchasing a manufactured home.
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<PAGE>
dd. NO BUYDOWN, GPM OR SHARED APPRECIATION LOANS. No Mortgage 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 you, the Mortgagor or anyone else on behalf of the
Mortgagor, or paid by any source other than the Mortgagor. No Mortgage
Loan contains any other similar provision which may constitute a "buydown"
provision. No Mortgage Loan is a graduated payment mortgage loan. No
Mortgage Loan has a shared appreciation or other contingent interest
feature.
ee. CLTV. No Mortgage Loan has a CLTV greater than 130%.
ff. TITLE INSURANCE. The Mortgaged Property is covered by either
(i) an attorney's opinion of title and abstract of title, the form and
substance of which is acceptable to prudent mortgage lending institutions
making mortgage loans in the area wherein the Mortgaged Property is located
or (ii) an ALTA lender's title insurance policy or other generally
acceptable form of policy or insurance acceptable to FNMA or FHLMC and each
such title insurance policy is issued by a title insurer acceptable to FNMA
or FHLMC and qualified to do business in the jurisdiction where the
Mortgaged Property is located, insuring you, your successors and assigns,
(A) with respect to First Lien Mortgage Loans, as to the priority lien of
the Mortgage in the original principal amount of the Mortgage Loan (or to
the extent a Mortgage Note provides for negative amortization, the maximum
amount of negative amortization in accordance with the Mortgage), and in
the case of adjustable rate Mortgage Loans, against any loss by reason of
the invalidity or unenforceability of the lien resulting from the
provisions of the Mortgage providing for adjustment to the Mortgage
Interest Rate and Monthly Payment, and (B) with respect to Second Lien
Mortgage Loans, naming you as loss payee under such policy. Where required
by state law or regulation, the Mortgagor has been given the opportunity to
choose the carrier of the required mortgage title insurance. Additionally,
such lender's title insurance policy affirmatively insures ingress and
egress and against encroachments by or upon the Mortgaged Property or any
interest therein. The title policy does not contain any special exceptions
(other than the standard exclusions) for zoning and uses and has been
marked to delete the standard survey exception or to replace the standard
survey exception with a specific survey reading. You and your successors
and assigns, are the sole insureds of such lender's title insurance policy,
and such lender's title insurance policy is valid and remains in full force
and effect and will be in force and effect upon the consummation of the
transactions contemplated by this Loan and Security Agreement. No claims
have been made under such lender's title insurance policy, and no prior
holder or servicer of the related Mortgage, yourself included, has done, by
act or omission, anything which would impair the coverage of such lender's
title insurance policy, including, without
S4/I-8
<PAGE>
limitation, no unlawful fee, commission, kickback or other unlawful
compensation or value of any kind has been or will be received, retained
or realized by any attorney, firm or other Person, and you have not
received, retained or realized any such unlawful items.
gg. NO CHATTEL PAPER. Each Mortgage Note is comprised of one
original promissory note and each such promissory note constitutes an
"instrument" for purposes of Section 9-105(l)(i) of the UCC. No Mortgage
Note constitutes or is comprised of "chattel paper" as such term is defined
in Section 9-105(l)(b) of the UCC. Each Mortgage Note has been delivered
to the Custodian.
hh. REVIEW BY YOU. In light of your Underwriting Guidelines, you
have reviewed all of the documents constituting each Collateral File and
have made such inquiries as you deem reasonable under the circumstances to
make and confirm the accuracy of the representations set forth herein.
ii. NO MECHANICS' LIENS. There are no mechanics' or similar liens or
claims which have been filed for work, labor or material (and no rights are
outstanding that under the law could give rise to such liens) affecting the
Mortgaged Property which are or may be liens prior to, or equal or
coordinate with, the lien of the Mortgage.
jj. TRANSFER OF MORTGAGE LOANS. The Assignment of Mortgage is in
recordable form and is acceptable for recording under the laws of the
jurisdiction in which the Mortgaged Property is located.
kk. DUE-ON-SALE. The Mortgage contains an enforceable provision for
the acceleration of the payment of the unpaid principal balance of the
Mortgage Loan in the event that the Mortgaged Property is sold or
transferred without the prior written consent of the Mortgagee thereunder.
S4/I-9
<PAGE>
Part II. REPRESENTATIONS OF THE BORROWER WITH RESPECT
TO THE PLEDGED SECURITIES.
As to the Pledged Securities including in the Borrowing Base on a
Funding Date, you shall be deemed to make the following representations and
warranties to us as of such date and as of each date Market Value is determined
(certain defined terms used herein and not otherwise defined in the Loan and
Security Agreement appearing in Part III to this SCHEDULE 4). With respect to
any representations and warranties made to the best of your knowledge, in the
event that it is discovered that the circumstances with respect to the related
Pledged Securities are not accurately reflected in such representation and
warranty notwithstanding your knowledge or lack of knowledge, then,
notwithstanding that such representation and warranty is made to the best of
your knowledge, such Pledged Securities shall be assigned a Collateral Value of
zero.
(a) All of the Pledged Securities have been validly issued, and are
fully paid and non-assessable, and the Pledged Securities have been offered,
issued and sold in compliance with all applicable laws and (A) there are no
outstanding rights, options, warrants or agreements for the purchase from, or
sale or issuance, in connection with the Pledged Securities; (B) there are no
agreements on the part of you to issue, sell or distribute the Pledged
Securities; and (C) you have no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any securities or any interest therein or
to pay any dividend or make any distribution in respect of the Pledged
Securities.
(b) You are, or will be upon issuance of the Pledged Securities, the
record and beneficial owner of, and have been, or will have been, issued good
title to, the Pledged Securities, free of any and all Liens or options in favor
of, or claims of, any other Person, except the security interest created by the
Loan and Security Agreement.
(c) Upon delivery of the Pledged Securities to us, we shall have a
valid first priority perfected security interest in the Pledged Securities under
the Uniform Commercial Code.
(d) You have obtained from any and all concerned creditors, any
waivers, amendments, releases or acknowledgments necessary to create and perfect
in our favor the first priority security interests provided herein.
S4/II-1
<PAGE>
Part III DEFINED TERMS
In addition to terms defined elsewhere in the Loan and Security
Agreement, the following terms shall have the following meanings when used in
this Schedule 4:
"ACCEPTED SERVICING PRACTICES" shall mean, with respect to any
Mortgage Loan, those mortgage servicing practices of prudent mortgage lending
institutions which service mortgage loans of the same type as such Mortgage
Loans in the jurisdiction where the related Mortgaged Property is located.
"ALTA" means the American Land Title Association.
"APPRAISED VALUE" shall be determined as set forth in the Underwriting
Guidelines.
"BEST'S" means Best's Key Rating Guide, as the same shall be amended
from time to time.
"CUT-OFF DATE" means the first day of the month in which the related
Funding Date occurs.
"COMBINATION LOAN" shall mean a loan, the proceeds of which were used
by the related obligor in combination to finance property improvements, debt
consolidation, cash-out, or other consumer purposes.
"COMBINED LTV" or "CLTV" shall mean with respect to any Mortgage Loan,
the ratio of (a) the outstanding principal balance as of the related Cut-off
Date of (i) the Mortgage Loan plus (ii) the mortgage loan constituting superior
liens to (b) the Appraised Value of the Mortgaged Property.
"DEBT CONSOLIDATION LOAN" shall mean a loan, the proceeds of which
were primarily used by the related obligor for debt consolidation purposes other
than to finance property improvements.
"DUE DATE" means the day of the month on which the Monthly Payment is
due on a Mortgage Loan, exclusive of any days of grace.
"FHLMC" means the Federal Home Loan Mortgage Corporation, or any
successor thereto.
S4/III-1
<PAGE>
"FNMA" means the Federal National Mortgage Association, or any
successor thereto.
"HOME IMPROVEMENT LOAN" shall mean a loan, the net proceeds of which
were or will be used by the obligor to finance property improvements.
"LOAN-TO-VALUE RATIO" or "LTV" means with respect to any Mortgage
Loan, the ratio of the original outstanding principal amount of the Mortgage
Loan to the lesser of (a) the Appraised Value of the Mortgaged Property at
origination or (b) if the Mortgaged Property was purchased within 12 months of
the origination of the Mortgage Loan, the purchase price of the Mortgaged
Property.
"MONTHLY PAYMENT" means the scheduled monthly payment of principal and
interest on a Mortgage Loan as adjusted in accordance with changes in the
Mortgage Interest Rate pursuant to the provisions of the Mortgage Note for an
adjustable rate Mortgage Loan.
"MORTGAGE INTEREST RATE" means the annual rate of interest borne on a
Mortgage Note, which shall be adjusted from time to time with respect to
adjustable rate Mortgage Loans.
"MORTGAGEE" means you or any subsequent holder of a Mortgage Loan.
"ORIGINATION DATE" shall mean, with respect to each Mortgage Loan, the
date of the Mortgage Note relating to such Mortgage Loan, unless such
information is not provided by you with respect to such Mortgage Loan, in which
case the Origination Date shall be deemed to be the date that is 40 days prior
to the date of the first payment under the Mortgage Note relating to such
Mortgage Loan.
"QUALIFIED INSURER" means an insurance company duly qualified as such
under the laws of the states in which the Mortgaged Property is located, duly
authorized and licensed in such states to transact the applicable insurance
business and to write the insurance provided, and approved as an insurer by FNMA
and FHLMC and whose claims paying ability is rated in the two highest rating
categories by any of the rating agencies with respect to primary mortgage
insurance and in the two highest rating categories by Best's with respect to
hazard and flood insurance.
"QUALIFIED ORIGINATOR" means an originator of Mortgage Loans
reasonably acceptable to us.
S4/III-2
<PAGE>
Schedule 5
to
Loan and Security Agreement
FILING JURISDICTIONS AND OFFICES
Secretary of State of the State of Texas
Secretary of State of the State of Nevada
S5/-1
<PAGE>
Schedule 6 to
Loan and Security Agreement
FORMULA ADJUSTMENT
In the event that FIRSTPLUS FINANCIAL GROUP, INC. elects to change its
accounting methods, including without limitation, those methods relating to the
recognition of "gain on sale" in a manner which would have a material effect
upon shareholders' equity determined in accordance with GAAP, both FIRSTPLUS
FINANCIAL GROUP, INC. and we shall mutually agree upon an alternative financial
ratio or measure, and in the event that, and during any time in which, FIRSTPLUS
FINANCIAL GROUP, INC. and we fail to so agree, then the Debt-to-Equity Ratio
shall be determined and certified by a Calculation Agent based upon FIRSTPLUS
FINANCIAL GROUP, INC.'s accounting methods that were in effect prior to such
change; PROVIDED THAT we may, in our sole and good faith discretion, modify the
respective values of each of the prepayment rate, default rate, discount rate
and all other assumptions we deem material in making such calculation of each
component of the Debt-to-Equity Ratio, including without limitation, to
determine "gain on sale" accounting in accordance with GAAP.
S6/-1
<PAGE>
EXHIBIT A
to
The Loan and Security Agreement
FORM OF PROMISSORY GRID NOTE
$__________ Dated _______________, 19__
FOR VALUE RECEIVED, the undersigned (hereinafter called the
"BORROWER"), HEREBY PROMISES TO PAY to the order of German American Capital
Corporation (hereinafter called the "LENDER") with respect to each Advance (as
defined below):
(a) the principal amount of such Advance made by the Lender to the
Borrower, on the date specified in the Loan and Security Agreement unless
such other date is mutually agreed to by the Lender and the Borrower at the
time of such Advance as the maturity date thereof, together with interest
(computed on the basis of a year of 360 days for the actual number of days,
including the first day but excluding the last day, elapsed) on the
principal amount of each Advance outstanding from time to time from and
including the date on which such Advance is made until the maturity date of
such Advance, at an interest rate per annum as provided in the Loan and
Security Agreement, payable on the maturity date of such Advance; and
(b) such Advance in the ordinary course of the Borrower's business
out of the cash flow generated in the normal day-to-day conduct and
operations of the Borrower's business which includes sales of Assets in the
ordinary course of your business.
Any overdue principal amount and overdue amount of interest, fees or other
amounts payable hereunder or under the Loan and Security Agreement referred to
below shall bear interest, payable on demand the Post-Default Rate.
The Borrower shall have the right to prepay any unpaid principal
amount of any Advance in accordance with the Loan and Security Agreement.
The Borrower shall make each payment of principal and interest
hereunder prior to 12:00 noon (New York City time) on the day when due in lawful
money of the United States of America to the Lender's account, as set forth in
Schedule 1 of the Loan and Security
Ex. A-1
<PAGE>
Agreement, in same day funds. Whenever any payment to be made hereunder shall
be otherwise due on a day other than a Business Day (as defined in the Loan
and Security Agreement), such payment shall be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of payment of interest.
The Borrower hereby authorizes the Lender to endorse on the grid
attached hereto the date and amount of each Advance made by the Lender to the
Borrower hereunder, the maturity date thereof, all payments made on account of
principal thereof and the interest rate applicable thereto, PROVIDED that the
failure to do so shall not affect the obligations of the Borrower to the Lender.
The Borrower also agrees to pay on demand all costs and expenses
(including fees and expenses of counsel) incurred by the Lender in enforcing
this Promissory Note.
THIS PROMISSORY NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
This Promissory Note is the "grid" promissory note referred to in, and
is entitled to the benefits of, the Loan and Security Agreement dated December
13, 1997 (the "LOAN AND SECURITY AGREEMENT"), between the Borrower and the
Lender, which Loan and Security Agreement, among other things, sets forth
procedures to be used in connection with the Borrower's periodic requests that
the Lender make advances (the "ADVANCES") to the Borrower from time to time in
an aggregate amount not to exceed at any time outstanding the amount first above
mentioned.
FIRSTPLUS Special Funding Corp.
By:
--------------------------------
Name and Title:
Ex. A-2
<PAGE>
GRID
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Amount Maturity Interest Rate Date
Date of of of on Payment
Advance Advance Advance Advance Received
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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Ex. A-3
<PAGE>
EXHIBIT B-1
to
the Loan and Security Agreement
For the purpose of Section 2 of this Loan and Security Agreement, the
"LENDER'S DESIGNATED PERSONS" are:
Name Title
---- -----
Ex. B-1
<PAGE>
EXHIBIT B-2
to
the Loan and Security Agreement
For the purpose of Section 2 of this Loan and Security Agreement, the
"BORROWER'S DESIGNATED PERSONS" are:
Name Title
---- -----
Ex. B-2
<PAGE>
EXHIBIT C
to
the Loan and Security Agreement
FORM OF CUSTODIAL AGREEMENT
Ex. C-1
<PAGE>
EXHIBIT D
to
the Loan and Security Agreement
FORM OF OPINION OF COUNSEL
Ex. D-1
<PAGE>
EXHIBIT E
to
the Loan and Security Agreement
FORM OF REQUEST FOR BORROWING
Loan and Security Agreement, dated as of December 13, 1997 (the "LOAN
AND SECURITY AGREEMENT"), by and between the Borrower and German American
Capital Corporation (the "LENDER"), and Loan and Security Agreement, dated as of
December 13, 1997, by and between the Borrower and Aspen Funding Corp.
Agent for Lenders: Deutsche Morgan Grenfell, Inc.
Borrower: FIRSTPLUS Special Funding Corp.
Requested Funding Date:
-----------------------
Transmission Date:
-----------------------
Transmission Time:
-----------------------
Loan Maturity Date:
(If any) -----------------------
Collateral to be Pledged:
-----------------------
UPB: $
-----------------------
Requested Wire Amount: $
-----------------------
Wire Instructions:
Requested by:
FIRSTPLUS Special Funding Corp.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
Ex. E-1
<PAGE>
EXHIBIT F
to
the Loan and Security Agreement
FORM OF BLOCKED ACCOUNT AGREEMENT
December __, 1997
Bank One, Texas, N.A.
- -------------------
- -------------------
- -------------------
Attn:
--------------
Re: (1) Collection Account Established by Bank One, Texas, N.A. (the
"CUSTODIAN") Pursuant to the Custodial Agreement (the "GACC CUSTODIAL
AGREEMENT"), dated as of December 13, 1997, among the Custodian,
German American Capital Corporation ("GACC") and FirstPlus Special
Funding Corp. (the "BORROWER"), (2) Cash Collateral Account
Established by Aspen Pursuant to the Loan and Security Agreement dated
as of December 13, 1997 ("GACC LOAN AGREEMENT") between the Lender and
the Borrower and the GACC Custodial Agreement, (3) Collection Account
Established by the Custodian Pursuant to the Custodial Agreement
(together with the GACC Custodial Agreement, the "CUSTODIAL
AGREEMENTS"), dated as of December 13, 1997, among the Custodian,
Aspen Funding Corp. ("ASPEN") and, together with Aspen (the
"LENDERS"), and (4) Cash Collateral Account Established by Aspen
Pursuant to the Loan and Security Agreement dated as of December 13,
1997, between Aspen and the Borrower and the Aspen Custodial
Agreement.
Ladies and Gentlemen:
We refer to the account established by the Custodian pursuant to
the Custodial Agreement, at _______________, Account No._____________, ABA#
____________ (the "BLOCKED ACCOUNT"), which Custodian maintains in the name
of the Custodian and the Lenders in trust for the Lenders.
The Custodian will, from time to time, deposit funds received in
accordance with the Custodial Agreements into the Blocked Account. The
Lenders have established secured loan arrangements with the Borrower. By its
execution of this letter, the Custodian acknowledges that
Ex. F-1
<PAGE>
the Borrower has granted in favor of the Lenders a security interests in all
of the Borrower's right, title and interest in and to the Blocked Account and
any funds from time to time on deposit therein, that such funds are received
by the Custodian in trust for the benefit of Lenders and, except as provided
below, are for application against the Borrower's liabilities to the Lenders.
By the Custodian's execution of this letter, it agrees: (a) that
all funds from time to time hereafter in the Blocked Account are the property
of the Borrower held in trust for the benefit of the Lenders and that, unless
and until the Custodian receives notice from a Lender that an event of
default has occurred and is continuing under such Lender's secured lending
arrangement with the Borrower (a "NOTICE OF EVENT OF DEFAULT"), the Custodian
shall transfer funds from the Blocked Account only in accordance with the
Lenders' and the Borrower's joint instructions; (b) that Custodian will not
exercise any right of set-off, banker's lien or any similar right in
connection with such funds; PROVIDED, that in the event any check is returned
to the Custodian because of insufficient funds (or is otherwise unpaid) the
Custodian shall be entitled to set off the amount of any such returned check;
(c) that until the Custodian receives written notification from the Lenders
to the contrary, the Custodian will not withdraw (other than as expressly set
forth in the Loan Agreement or herein) or permit any person or entity to
withdraw or transfer funds from the Blocked Account; (d) that if the
Custodian receives a Notice of Event of Default from a Lender, the Custodian
shall not withdraw or permit the Borrower to withdraw or transfer funds from
the Blocked Account and shall cause or permit withdrawals from the Blocked
Account in any manner as the Lenders in their exclusive discretion may
instruct; and (e) without limitation on the foregoing, the Lenders, jointly,
shall have sole dominion and control over the Blocked Account.
The Lenders agree that their rights with respect to amounts held in
the Blocked Account shall be governed by the Intercreditor Agreement, dated
as of December 13, 1997, between the Lenders.
All bank statements in respect to the Blocked Account shall be sent
to the Borrower with copies to:
German American Capital Corporation
31 West 52nd Street
New York, New York 10019
Attention:
Ex. F-2
<PAGE>
Aspen Funding Corp.
c/o Amacar Group, L.L.C.
6707-D Fairview Road
Charlotte, North Carolina 28210
Attention: Douglas Johnson
Kindly acknowledge your agreement with the terms of this agreement
by signing the enclosed copy of this letter and returning it to the
undersigned.
Very truly yours,
GERMAN AMERICAN CAPITAL CORPORATION
By:
---------------------------------------
Title:
By:
---------------------------------------
Title:
Agreed and acknowledged:
BANK ONE, TEXAS, N.A.
By:
--------------------------------------
Title:
ASPEN FUNDING CORP.
By:
--------------------------------------
Title:
FIRSTPLUS FINANCIAL, INC.
By:
--------------------------------------
Title:
Ex. F-3
<PAGE>
EXHIBIT G-1
to
the Loan and Security Agreement
FORM OF BORROWER'S RELEASE LETTER
[Date]
German American Capital Corporation
31 West 52nd Street
New York, New York 10019
Attention:
Facsimile:
Re: Loan and Security Agreement, dated as of December 13, 1997 (the "LOAN
AND SECURITY AGREEMENT"), by and between FIRSTPLUS Special Funding
Corp. (the "BORROWER") and German American Capital Corporation (the
"LENDER")
Ladies and Gentlemen:
With respect to the mortgage loans described in the attached
SCHEDULE A (the "MORTGAGE LOANS") (a) we hereby certify to you that the
Mortgage Loans are not subject to a lien of any third party and (b) we hereby
release all right, interest or claim of any kind with respect to such
Mortgage Loans, such release to be effective automatically without further
action by any party upon payment from German American Capital Corporation, of
the amount of the Advance contemplated under the Loan and Security Agreement
(calculated in accordance with the terms thereof) in accordance with the
wiring instructions set forth in the Loan and Security Agreement.
Very truly yours,
FIRSTPLUS Special Funding Corp.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Ex. G-1
<PAGE>
EXHIBIT G-2
to
the Loan and Security Agreement
FORM OF WAREHOUSE LENDER'S RELEASE LETTER
(Date)
German American Capital Corporation
31 West 52nd Street
New York, New York 10019
Attention:
Facsimile:
Re: Certain Mortgage Loans Identified on SCHEDULE A hereto and owned by
FIRSTPLUS Special Funding Group.
The undersigned hereby releases all right, interest, lien or claim
of any kind with respect to the mortgage loan(s) described in the attached
SCHEDULE A, such release to be effective automatically without any further
action by any party upon payment in one or more installments, in immediately
available funds of $__________________, in accordance with the following wire
instructions:
------------------------
------------------------
Very truly yours,
[WAREHOUSE LENDER]
By:
---------------------
Name:
-------------------
Title:
------------------
Ex. G2-1
<PAGE>
EXHIBIT H
to
the Loan and Security Agreement
UNDERWRITING GUIDELINES
Ex. H-1
<PAGE>
EXHIBIT I
to
the Loan and Security Agreement
FORM OF TRUSTEE INSTRUCTION LETTER
__________ __, 1997
, as Trustee
- --------------------
- --------------------
- --------------------
Attention:
----------------
Re: Loan and Security Agreement, dated as of December 13, 1997, by
and between German American Capital Corporation, as Lender and
Pledgee, and FIRSTPLUS Special Funding Corp., as Borrower and
Pledgor
Ladies and Gentlemen:
Pursuant to Section 10 of the Loan and Security Agreement, dated as
of December 13, 1997 (the "LOAN AND SECURITY AGREEMENT"), between German
American Capital Corporation, (the "LENDER") and FIRSTPLUS Special Funding
Corp., (the "BORROWER"), you are hereby notified that: (i) the Borrower has
pledged to the Lender the residual securities described on SCHEDULE 1 hereto
(the "RESIDUAL SECURITIES"), (ii) each of the Residual Securities is subject
to a security interest in favor of the Lender, (iii) the Trustee shall
promptly send to the Lender a copy of the remittance statement issued with
respect to the securitization transaction in which the Residual Securities
were created and (iv) unless otherwise notified by the Lender in writing, any
payments or distributions made with respect to such Residual Securities
should be remitted immediately by the Trustee directly to the Lender through
the Federal Reserve Fedwire System, in accordance with the following wire
instructions:
Account No.:
ABA No.:
Reference:
Please acknowledge receipt of this instruction letter by signing in
the signature block below and forwarding an executed copy to the Lender
promptly upon receipt. Any notices to the Lender should be delivered to the
following address: Aspen Funding Corp., c/o Amacar
Ex. I-1
<PAGE>
Group L.L.C., 6707-D Fairview Road, Charlotte, North Carolina 28210,
Attention: Douglas Johnson, Telephone: (704) 365-0569, Facsimile: (704)
365-1362, with a carbon copy to: Deutsche Bank A.G., as agent, 31 West 52nd
Street, New York, New York 10019, Attention: Gregg Amoroso/Richard Uhlig,
Telephone: (212) 469-3987/(212) 469-6940, Facsimile (212) 469-7571/(212)
469-6933.
Very truly yours,
FIRSTPLUS SPECIAL FUNDING CORP.
By:
--------------------------------------
Name:
Title:
ACKNOWLEDGED:
, as Trustee
- -----------------------------------
By:
------------------------------------
Name:
Title:
Ex. I-2
<PAGE>
LOAN AND SECURITY AGREEMENT
December 13, 1997
FIRSTPLUS Special Funding Corp.
1600 Viceroy Drive
Dallas, TX 75235-2306
Ladies and Gentlemen:
We are pleased to make available to you an uncommitted credit facility
for general corporate purposes on the terms set forth in this Loan and Security
Agreement. This Loan and Security Agreement is being entered into
simultaneously with the Committed Facility Transaction Documents, as defined
herein.
1. ADVANCES. We agree to consider from time to time, in our sole
discretion, your requests that we make advances to you, on an interest bearing
basis ("ADVANCES"), in an aggregate amount not to exceed at any one time
outstanding the amount set forth on SCHEDULE 1 hereto as the "FACILITY AMOUNT",
on the terms and conditions set forth below. This Loan and Security Agreement
is not a commitment to lend but rather sets forth the procedures to be used in
connection with your requests for our making of Advances to you from time to
time on or prior to the termination hereof and, in the event that we make
Advances to you hereunder, your obligations to us with respect thereto. The
Advances shall be evidenced by the "grid" promissory note executed by you in
substantially the form of EXHIBIT A hereto (the "NOTE"). The date, amount and
interest rate of each Advance made by us to you, and each payment made on
account of the principal thereof, shall be recorded by us on our books and,
prior to any transfer of the Note, endorsed by us on the schedule attached to
the Note or any continuation thereof; PROVIDED that the failure of us to make
any such recordation or endorsement shall not affect your obligation to make a
payment when due of any amount owing hereunder or under the Note in respect of
the Advances. Subject to the terms and conditions of this Loan and Security
Agreement, during the period of this Loan and Security Agreement, you may
borrow, repay and reborrow hereunder.
2. PROCEDURE FOR BORROWING. (a) The net amount of each Advance
shall be in an amount at least equal to the amount set forth on SCHEDULE 1
hereto as the "MINIMUM ADVANCE AMOUNT" and shall be made, in our sole
discretion, upon (i) your irrevocable request to any of the persons listed on
EXHIBIT B-1 hereto or otherwise designated by us in writing ("LENDER'S
DESIGNATED PERSONS"), by telephone (if such request is given by telephone, a
hard copy of such request shall be subsequently delivered), telecopy or letter,
in the form of EXHIBIT E hereto (such request, a "REQUEST FOR BORROWING"), given
by any of the persons listed on EXHIBIT B-2 hereto or otherwise designated by
you in writing ("BORROWER'S DESIGNATED PERSONS"), that you wish to borrow money
on a specified date (the "FUNDING DATE"), in a specified amount and for a
specified term which in no event shall be longer than 270 days; (ii) our mutual
agreement as to such date, amount, term and as to the interest rate per annum;
and (iii) the posting of Collateral by you in
<PAGE>
an amount sufficient to cause the aggregate Collateral Value of all
Collateral to equal at least the sum of (a) the Advance and (b) all amounts
outstanding under previously made Advances.
(b) Such Request for Borrowing must be received by us prior to the
requesting deadline, as set forth in SCHEDULE 1 hereto (the "REQUESTING
DEADLINE"). Such Request for Borrowing shall (i) attach a schedule identifying
the Collateral that you propose to pledge to us in connection with such
borrowing, (ii) specify the requested Funding Date, (iii) include a Collateral
Tape containing information with respect to the Collateral that you propose to
pledge to us and to be included in the Borrowing Base in connection with such
borrowing, and (iv) attach an officer's certificate signed by one of your
Responsible Officers as required by SCHEDULE 3 hereof. Each Advance shall be
secured solely by Mortgage Loans or solely by Pledged Securities.
(c) You shall deliver to the Custodian no later than 12:00 p.m., New
York City time, two (2) Business Days prior to the requested Funding Date, the
Collateral File pertaining to each item of Collateral to be pledged to us and
included in the Borrowing Base on such requested Funding Date, in accordance
with the terms and conditions of the Custodial Agreement. You shall release and
deliver to us no later than 9:00 a.m. New York City time on a Funding Date, the
original Pledged Securities accompanied by a stock power as more particularly
described in Section 10.
(d) Pursuant to the Custodial Agreement, the Custodian shall deliver
to you and us, no later than 11:00 a.m. New York City time on a Funding Date, a
Trust Receipt (as defined in the Custodial Agreement) in respect of all
Collateral pledged to us on such Funding Date, and a Collateral Schedule and
Exception Report.
(e) If we have agreed to make an Advance, then on the date of such
Advance, we will make such Advance available to you in same day funds by
directing our administrative agent to transfer or wire the net proceeds of such
Advance pursuant to your wiring instructions set forth on SCHEDULE 1 hereto.
(f) A request for Borrowing shall be deemed to be made to us,
provided however, that if we shall choose, in our sole discretion, not to make
such Advance, such Request for Borrowing shall be deemed to have been made to
GACC, a subsidiary of Deutsche Bank North America Holding Corp. An Advance made
to you shall be deemed made by us, unless we indicate to you that such Advance
has been made by GACC.
(g) In the event that Collateral to be delivered to us does not have
a Collateral Value at least equal to the amount of the Advance requested by you
in a Request for Borrowing (such shortfall, a "COLLATERAL SHORTFALL"), then we
may, at our option with prior written notice to you, withhold from the proceeds
remitted to you in connection with any Advance an amount equal to the Collateral
Shortfall. Such amount shall be deposited in the Cash Collateral Account and
held as Collateral hereunder. Notwithstanding the foregoing, the full amount of
such requested Advance shall be deemed to have been made for all purposes
hereunder.
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3. CONDITIONS PRECEDENT. Our obligation to consider making Advances
to you hereunder is subject to the satisfaction, immediately prior to or
concurrently with the making of any such Advance, of the conditions precedent,
listed on SCHEDULE 3 hereto. Each request for a borrowing by you under this
Loan and Security Agreement shall constitute a certification by you that all the
conditions set forth in this SCHEDULE 3 have been satisfied (both as of the date
of such notice, request or confirmation and as of the date of such borrowing).
4. REPAYMENT OF ADVANCES; PAYMENT OF INTEREST. (a) You shall repay
each Advance, and shall pay interest on such Advance, in accordance with the
terms hereof and of the Note.
(b)(i) You hereby promise to repay in full the then outstanding
principal amount of each Advance on the earlier to occur of (A) the applicable
Loan Maturity Date or (B) the Termination Date. However, upon the occurrence of
a Loan Maturity Date, if you have not specified a new Loan Maturity Date and you
have not notified us at least two (2) Business Days prior to the then current
Loan Maturity Date that you will repay the related Advance on such current Loan
Maturity Date, then upon said Loan Maturity Date such Advance shall (provided
that no Default shall have occurred and be continuing and provided further that
all conditions precedent set forth on SCHEDULE 3 have been satisfied)
automatically be refinanced by us hereunder, or, in the event we decline to
refinance such Advance, such Advance shall be refinanced under the Committed
Facility Transaction Documents (subject to the satisfaction by you of the
conditions precedent thereunder) with a Loan Maturity Date of the third Business
Day following the date of such refinancing. At the end of each successive Loan
Maturity Date, the Advance shall continue to be refinanced as provided in the
previous sentence, provided that the resulting Loan Maturity Date shall not
occur on a date after the Termination Date. Under the method of establishing
the Loan Maturity Date set forth in this Section 4, you may, subject to clause
(ii) below, prepay all or a portion of such Advance.
(ii) Any Advances are prepayable at any time, in whole or in part;
provided however, if you elect to prepay all or a portion of an Advance prior to
your specified Loan Maturity Date or if you give us notice of your intention to
make a prepayment of any Advance and fail to make such prepayment, you shall pay
us, on the date such Advance is prepaid, a Breakage Fee. We shall determine the
amount of the applicable Breakage Fee and notify you at least 1 (one) Business
Day prior to the date such Breakage Fee is due. Any amounts prepaid shall be
applied to repay the outstanding principal amount of any Advances (together with
interest thereon) until paid in full. If you intend to prepay an Advance
pursuant to this Section 4(b)(ii) in whole or in part, you shall give at least
two (2) Business Days prior written notice thereof to us. If such notice is
given, the amount specified in such notice shall be due and payable on the date
specified therein, together with accrued interest to such date on the amount
prepaid. Your failure to prepay as specified in such notice shall not
constitute an Event of Default, provided that in the event of such failure, you
shall pay the Breakage Fee to us pursuant to this Section 4(b)(ii). Partial
prepayments shall be in an aggregate principal amount of at least $1,000,000.
(c) You hereby promise to pay to us interest on the unpaid principal
amount of each Advance for the period from and including the date of such
Advance up to but excluding the
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date such Advance shall be paid in full, at a rate per annum equal to the
applicable LIBOR Rate PLUS the Applicable Spread. Notwithstanding the
foregoing, you hereby promise to pay to us interest at the applicable
Post-Default Rate on any principal of any Advance and on any other amount
payable by you hereunder or under the Note that shall not be paid in full
when due (whether at stated maturity, by acceleration or by mandatory
prepayment or otherwise) for the period from and including the due date
thereof to but excluding the date the same is paid in full. Interest shall
accrue daily at the applicable LIBOR Rate plus the Applicable Spread for each
applicable Interest Period. Accrued interest on each Advance shall be
payable monthly on each Payment Date and if not refinanced pursuant to
Section 4(b)(i) above, the applicable Loan Maturity Date, and for the last
month of the Loan and Security Agreement on the Payment Date of such last
month and on the Termination Date, except that interest payable at the
Post-Default Rate shall accrue daily and shall be payable upon such accrual.
(d) It is understood and agreed that, unless and until a Default
shall have occurred and be continuing, you shall be entitled to the proceeds of
the Collateral pledged to us hereunder subject to the distribution provisions
set forth in the FIRSTPLUS Servicing Agreement. Provided that no Default shall
have occurred and be continuing, any cash that we receive that is not due and
payable to us pursuant to this Agreement, we shall remit to you, within one (1)
Business Day following receipt thereof in accordance with your wire transfer
instructions.
5. PAYMENTS. (a) You shall make each payment hereunder and under
the Note on or before 12:00 noon (New York City time) on the day when due in
lawful money of the United States of America, without deduction, set-off or
counterclaim, to our account, as indicated in our wire transfer instructions set
forth on SCHEDULE 1 hereto in same day funds (and each such payment made after
such time on such due date shall be deemed to have been made on the next
succeeding Business Day). All computations of interest shall be made on the
basis of a year of 360 days, for the actual number of days (including the first
day but excluding the last day) elapsed.
(b) Whenever any payment to be made hereunder shall be otherwise due
on a Saturday, a Sunday or other day of the year on which banks are required or
authorized to close in New York, New York or Dallas, Texas (any other day being
a "BUSINESS DAY"), such payment date shall be extended to the next succeeding
Business Day, and interest shall be payable for any principal so extended for
the period of such extension.
6. RELIANCE ON DESIGNATED PERSONS. Neither party shall incur
liability to the other in acting upon any telephone, telecopy, telex or letter
request or communication which such party believes in good faith to have been
given by a Lender's Designated Person or a Borrower's Designated Person or in
otherwise acting in good faith under this Loan and Security Agreement. Further,
all documents required to be executed in conjunction with Advances under this
Loan and Security Agreement may be signed by any Lender's Designated Person or
any Borrower's Designated Person.
7. MARGIN DEFICIT; MARGIN EXCESS; CASH COLLATERAL ACCOUNT. (a) If
at any time the aggregate Market Value of all Collateral securing any related
Advance is less than the Lender's Margin Amount for such Advance at such time (a
"MARGIN DEFICIT"), then we may by notice to
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you (a "MARGIN NOTICE") require you, at your option, to transfer to us cash
or additional Collateral reasonably acceptable to us ("ADDITIONAL
COLLATERAL"), so that the cash and Market Value of the Collateral securing
such related Advance, including any such Additional Collateral, will
thereupon equal or exceed such Lender's Margin Amount for such Advance. If
at any time the aggregate Collateral Value of all Collateral securing any
related Advance exceeds such Advance at such time (a "MARGIN EXCESS"), then
you may by written notice to us, and provided that no Default shall have
occurred and be continuing, require us to transfer Collateral to you, so that
the Collateral Value of the Collateral securing such related Advance, after
deduction of any Collateral so transferred, will thereupon not exceed such
Advance. Each of us agrees that (i) the amount of the Secured Obligations
will not be increased or decreased by the amount of any cash transferred by
one party to the other pursuant to this Section 7; (ii) transfer of such cash
shall be treated as if it constituted a transfer of Collateral (with a Market
Value equal to the U.S. Dollar amount of such cash) pursuant to this Section 7
(including for purposes of the definition of "ADDITIONAL COLLATERAL" above)
unless (A) you request that such cash be used to prepay any Advance, in which
case you shall be responsible for any applicable Breakage Fee attributable
thereto, or (B) we require that such cash be used to prepay any Advance, in
which case we shall waive any Breakage Fee attributable thereto.
(b) If a Margin Notice is given as described in paragraph (a) above
at or before the closest Margin Notice Deadline (as defined in SCHEDULE 1
hereto) on any Business Day, the party receiving such notice shall transfer cash
or Additional Collateral as provided therein no later than the related Margin
Call Deadline (as set forth on SCHEDULE 1 hereto).
8. SECURITY INTEREST. By agreeing to and accepting this Loan and
Security Agreement, you hereby assign, pledge and grant a security interest in
all of your right (including the power to convey title thereto), title and
interest in and to the Collateral (defined below), including but not limited to
the right to payments of dividends, principal and interest and the right to
enforce such payments arising from or under any of the Collateral, the
contractual right to service the Collateral, any servicing agreements governing
the Collateral, all records and insurance relating to the Collateral, any other
contract rights, general intangibles, other assets relating to the Collateral,
or any interest in the Collateral, securities backed by or representing an
interest in such Collateral, all documents related to such Collateral and all
income, payments, products and proceeds thereof (all as more particularly
described in Section 9 hereof) to us to secure the repayment of principal of and
interest on all Advances and all other amounts owing to us hereunder and under
the Note (collectively, the "SECURED OBLIGATIONS"). You agree that we intend
this Loan and Security Agreement to create for our benefit, as secured party, a
legally valid and enforceable first priority perfected security interest in the
Collateral. You agree that you shall, at our request, take all action necessary
to ensure that we will have a first priority security interest in the
Collateral, including, among other things, using your best efforts to obtain
necessary signatures and file such UCC financing statements as we may reasonably
request. You agree to mark your computer records and tapes to evidence the
interests granted to us hereunder.
9. COLLATERAL. All of your right, title and interest in, to and
under each of the following items of property, whether now owned or hereafter
acquired, now existing or hereafter created and wherever located, are
hereinafter referred to as the "COLLATERAL":
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a. all Assets;
b. all Collateral Documents, including without limitation all
promissory notes relating to or evidencing the Assets, and all Servicing
Records, servicing agreements and any other collateral pledged or otherwise
relating to such Collateral, together with all files, documents,
instruments, surveys, certificates, correspondence, appraisals, computer
programs, computer storage media, accounting records and other books and
records relating thereto;
c. all securities, monies or property representing dividends or
interest on any of the foregoing, or representing a distribution in respect
of the foregoing, or resulting from a split-up, revision, reclassification
or other like change of the foregoing or otherwise received in exchange
therefor, and any subscription warrants, rights or options issued to the
holders of, or otherwise in respect of, the foregoing.
d. all Pooling and Servicing Agreements;
e. all Collection Accounts and amounts on deposit therein;
f. all Cash Collateral Accounts and amounts on deposit therein;
g. all guaranties and insurance (issued by governmental agencies or
otherwise) and any insurance certificate or other document evidencing such
guaranties or insurance relating to any item of Collateral and all claims
and payments thereunder;
h. all other insurance policies and insurance proceeds relating to
any item of Collateral;
i. all Interest Rate Protection Agreements;
j. all Additional Collateral provided to us as described herein;
k. all of your rights, but not your obligations under any purchase
agreements and servicing agreements covering or relating to any item of the
Collateral, including without limitation the FIRSTPLUS Purchase Agreement
and the FIRSTPLUS Servicing Agreement to which you are a party;
l. all "general intangibles" as defined in the Uniform Commercial
Code relating to or constituting any and all of the foregoing; and
m. any and all replacements, substitutions, distributions on or
proceeds of any and all of the foregoing.
10. POSSESSION AND PERFECTION. (a) CUSTODIAN. Pursuant to the
Custodial Agreement to be executed in the form attached hereto as EXHIBIT C on
or before the date of the
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first Advance hereunder, the Custodian (as defined therein) shall hold the
Collateral Documents (as defined therein) as exclusive bailee and as our
agent pursuant to terms of the Custodial Agreement and shall deliver to us
Trust Receipts (as defined in the Custodial Agreement) each to the effect
that it has reviewed such Collateral Documents in the manner and to the
extent required by the Custodial Agreement and identifying any deficiencies
in such Collateral Documents as so reviewed.
(b) STOCK POWERS; RE-REGISTRATION. (i) Concurrently with the
delivery to us of each certificate representing one or more shares of Pledged
Securities pursuant to Section 8 above, you shall deliver an undated stock power
covering such certificate, duly executed in blank by you with, if we so request,
signature guaranteed, along with any other documents necessary to re-register
the Pledged Securities or the Pledged Securities shall be otherwise registered
in a form satisfactory to us.
(ii) You agree and acknowledge that we may at our sole discretion
re-register any Pledged Securities delivered as Collateral hereunder into our
name.
(c) NOTIFICATION TO TRUSTEE. Concurrently with the delivery to us of
each certificate representing one or more shares of Pledged Securities pursuant
to Section 2 above, (i) you shall have (A) notified the Trustee, in the form of
the Instruction Letter attached hereto as EXHIBIT I, in connection with the
related Pooling and Servicing Agreement, of the pledge of the related Pledged
Securities hereunder, and (B) instructed the Trustee to pay all amounts payable
to the holders of the Pledged Securities to the Cash Collateral Account, and
(ii) the Trustee shall have acknowledged in writing the instructions set forth
in clause (i) above, and a copy of the fully executed Instruction Letter, shall
be delivered to us.
(d) CASH DIVIDENDS; VOTING RIGHTS. We shall be permitted to receive
all cash dividends and distributions paid in respect of the Pledged Securities
and shall apply same in accordance with Section 4 hereof. Without the prior
written consent of us, you will not (i) vote to enable, or take any other action
to permit, any rights afforded you under any Pooling and Servicing Agreement, as
holder of the Pledged Securities, or (ii) sell, assign, transfer, exchange or
otherwise dispose of, or grant an option with respect to, the Collateral, or
(iii) create, incur or permit to exist any Lien or option in favor of, or any
adverse claim of any Person with respect to, any of the Collateral, or any
interest therein, except for the security interests created by this Agreement.
(e) RIGHTS OF THE LENDER AS PLEDGEE. All the Pledged Securities
shall, at our election, be registered in our name or in the name of our nominee,
and we or our nominee may thereafter exercise (A) all voting, corporate and
other rights pertaining to such Pledged Securities and (B) any and all rights of
conversion, exchange, subscription and any other rights, privileges or options
pertaining to such Pledged Securities as if it were the absolute owner thereof
(including, without limitation, upon the exercise by us of any right, privilege
or option pertaining to such Pledged Securities), and in connection therewith,
the right to deposit and deliver any and all of the Pledged Securities with any
committee, depository, transfer agent, registrar or other designated agency upon
such terms and conditions as we may determine.
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11. FURTHER DOCUMENTATION. You agree that at any time and from time
to time, upon our written request, and at your sole expense, you will promptly
and duly execute and deliver, or will promptly cause to be executed and
delivered, such further instruments and documents and take such further action
as we may reasonably request for the purpose of obtaining or preserving the full
benefits of this Loan and Security Agreement and of the rights and powers herein
granted, including, without limitation, the filing of any financing or
continuation statements under the Uniform Commercial Code in effect in any
jurisdiction with respect to the mortgages, liens, pledges, charges, security
interests or similar encumbrances (each, a "LIEN") created hereby. You also
hereby authorize us to file any such financing or continuation statement without
your signature to the extent permitted by applicable law. A carbon,
photographic or other reproduction of this Loan and Security Agreement shall be
sufficient as a financing statement for filing in any jurisdiction. You agree
that you will not change your name, identity or corporate structure (or the
equivalent) or change the location where you maintain your records with respect
to the Collateral unless you shall have given us at least 30 days' prior written
notice thereof and shall have delivered to us all Uniform Commercial Code
financing statements and amendments thereto as we shall request and shall have
taken all other actions we will have deemed necessary to continue our perfected
status in the Collateral with the same or better priority.
12. POWER OF ATTORNEY. You hereby irrevocably constitute and appoint
us and any of our officers or agents, with full power of substitution, as your
true and lawful attorney-in-fact with full irrevocable power and authority in
your place and stead and in your name or in our own name, from time to time in
our discretion, for the purpose of carrying out the terms of this Loan and
Security Agreement, to take any and all appropriate action and to execute any
and all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Loan and Security Agreement, and, without
limiting the generality of the foregoing, you hereby give us the power and
right, on your behalf, without assent by you, but with notice to you, if, while
any Secured Obligations are outstanding hereunder, an Event of Default (as
defined below) shall have occurred and be continuing, to do the following:
(i) in your name or in our name, or otherwise, to take possession
of and endorse and collect any checks, drafts, notes, acceptances or other
instruments for the payment of moneys due under any mortgage, deed of
trust, assignment of leases and rents or other instrument or security
agreement securing obligations with respect to the Collateral, which
creates a Lien on the Collateral (each, a "COLLATERAL SECURITY AGREEMENT"),
insurance or other amounts payable with respect to the Collateral and to
file any claim or to take any other action or proceeding in any court of
law or equity or otherwise deemed appropriate by us for the purpose of
collecting any and all such moneys due us under any such Collateral
Security Agreement, insurance or with respect to any other Collateral
whenever payable;
(ii) to pay or discharge, at your expense, taxes and Liens levied or
placed on or threatened against the Collateral; and
(iii) (A) to direct any party liable for any payment under any
Collateral to make payment of any and all moneys due or to become due
thereunder directly to us or as we
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shall direct; (B) to ask for or demand, collect, receive payment of and
receipt for, any and all moneys, claims and other amounts due or to become
due at any time in respect of or arising out of any Collateral; (C) to sign
and endorse any invoices, assignments, verifications, notices and other
documents in connection with any of the Collateral; (D) to commence and
prosecute any suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect the Collateral or any thereof
and to enforce any other right in respect of any Collateral; (E) to defend
any suit, action or proceeding brought against you with respect to any
Collateral; (F) to settle, compromise or adjust any suit, action or
proceeding described in clause (E) above and, in connection therewith, to
give such discharges or releases as we may deem appropriate; and (G)
generally, to sell, transfer, pledge and make any agreement with respect to
or otherwise deal with any of the Collateral as fully and completely as
though we were the absolute owner thereof for all purposes, and to do, at
our option and your expense, at any time, and from time to time, all acts
and things which we deem necessary to protect, preserve or realize upon the
Collateral and our Liens thereon and to effect the intent of this Loan and
Security Agreement, all as fully and effectively as you might do.
You hereby ratify all that said attorneys shall lawfully do or cause to be done
by virtue hereof. This power of attorney is a power coupled with an interest
and shall be irrevocable.
You also authorize us, at any time and from time to time, to execute,
in connection with any sale provided for in this Section 12, any endorsements,
assignments or other instruments of conveyance or transfer with respect to the
Collateral.
The powers conferred on us pursuant to this Loan and Security
Agreement are solely to protect our interests in the Collateral and shall not
impose any duty upon us to exercise any such powers. We shall be accountable
only for amounts that we actually receive as a result of the exercise of such
powers, and neither we nor any of our officers, directors, or employees shall be
responsible to you for any act or failure to act hereunder, except for our or
their own gross negligence or willful misconduct.
13. OUR PERFORMANCE OF YOUR OBLIGATIONS. If you fail to perform or
comply with any of your agreements contained herein and we may ourselves perform
or comply, or otherwise cause performance or compliance, with such agreement,
our expenses incurred in connection with such performance or compliance,
together with interest thereon at a rate per annum equal to the Post-Default
Rate, shall be payable by you to us on demand.
14. PROCEEDS. If an Event of Default shall occur and be continuing,
(a) all proceeds of Collateral received by you consisting of cash, checks and
other near-cash items shall be held by you in trust for us, segregated from
other of your funds, and shall forthwith upon receipt by you be turned over to
us in the exact form received by you (duly endorsed by you to us, if required)
and (b) any and all such proceeds received by us (whether from you or otherwise)
may, in our sole discretion, be held by us as collateral security for, and/or
then or at any time thereafter may be applied by us against, the Secured
Obligations (whether matured or unmatured), such application to be in such order
as we shall elect. Any balance of such proceeds remaining
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after the Secured Obligations shall have been paid in full and this Loan and
Security Agreement shall have been terminated shall be paid over to you or to
whomsoever may be lawfully entitled to receive the same. For purposes
hereof, proceeds shall include, but not be limited to, all principal and
interest payments, all prepayments and payoffs, insurance claims,
condemnation awards, sale proceeds, real estate owned rents and any other
income and all other amounts received with respect to the Collateral.
15. REMEDIES. If an Event of Default shall occur and be continuing,
we may exercise, in addition to all other rights and remedies granted to us in
this Loan and Security Agreement and in any other instrument or agreement
securing, evidencing or relating to the Secured Obligations, all rights and
remedies of a secured party under the Uniform Commercial Code. Without limiting
the generality of the foregoing, we, 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 you or any other Person
(each and all of which demands, presentments, protests, advertisements and
notices are hereby waived), may in such circumstances forthwith collect,
receive, appropriate and realize upon the Collateral, or any part thereof,
and/or may forthwith sell, lease, 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 or as an entirety at public
or private sale or sales, at any exchange, broker's board or our offices or
elsewhere upon such terms and conditions as we may deem advisable and at such
prices as we may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. We 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 in you, which right or equity is hereby waived
or released. You further agree, at our request, to assemble the Collateral and
make it available to us at places which we shall reasonably select, whether at
your premises or elsewhere. We shall apply 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 our rights hereunder, including without limitation
reasonable attorneys' fees and disbursements, to the payment in whole or in part
of the Secured Obligations, in such order as we may elect, and only after such
application and after the payment by us of any other amount required or
permitted by any provision of law, including without limitation Section
9-504(1)(c) of the Uniform Commercial Code, need we account for the surplus,
if any, to you. To the extent permitted by applicable law, you waive all
claims, damages and demands you may acquire against us arising out of our
exercise of any of our rights hereunder, other than those claims, damages and
demands arising from our gross negligence or willful misconduct. If any
notice of a proposed sale or other disposition of Collateral shall be
required by law, such notice shall be deemed reasonable and proper if given
at least 10 days before such sale or other disposition. You shall remain
liable for any deficiency (plus accrued interest thereon as contemplated
pursuant to Section 4 hereof) if the proceeds of any sale or other
disposition of the Collateral are insufficient to pay the Secured
Obligations, other amounts due under the Note and this Loan and Security
Agreement and the fees and disbursements of any attorneys employed by us to
collect such deficiency.
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16. LIMITATION ON DUTIES REGARDING PRESENTATION OF COLLATERAL. Our
duty with respect to the custody, safekeeping and physical preservation of the
Collateral in our possession, under Section 9-207 of the Uniform Commercial Code
or otherwise, shall be to deal with it in the same manner as we deal with
similar property for our own account. Neither we nor any of our directors,
officers or employees shall be liable for failure to demand, collect or realize
upon all or any part of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon your
request or otherwise.
17. POWERS COUPLED WITH AN INTEREST. All authorizations and agencies
herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest.
18. RELEASE OF SECURITY INTEREST. Upon termination of this Loan and
Security Agreement and repayment to us of all Secured Obligations and the
performance of all obligations hereunder, we shall release our security interest
in any remaining Collateral and shall provide such notices and execute such
documents in connection therewith as you may reasonably request; PROVIDED that
if any payment, or any part thereof, of any of the Secured Obligations is
rescinded or must otherwise be restored or returned by us upon your insolvency,
bankruptcy, dissolution, liquidation or reorganization, or upon or as a result
of the appointment of a receiver, intervenor or conservator of, or a trustee or
similar officer for, you or any substantial part of your property, or otherwise,
this Loan and Security Agreement, all rights hereunder and the Liens created
hereby shall continue to be effective, or be reinstated, as though such payments
had not been made.
19. OUR REPRESENTATIONS AND WARRANTIES. We represent and warrant to
you that throughout the term of this Loan and Security Agreement:
(a) DUE AUTHORIZATION. We are duly authorized to execute and deliver
this Loan and Security Agreement and to perform our obligations hereunder and
have taken all necessary action to authorize such execution, delivery and
performance and this Loan and Security Agreement constitutes our legal, valid
and binding obligation, enforceable against us in accordance with its terms.
(b) AUTHORIZED SIGNATORIES. The person signing this Loan and
Security Agreement on our behalf is duly authorized to do so on our behalf.
(c) APPROVALS. No consent or authorization of, approval by, notice
to, filing with or other act by or in respect of, any governmental authority or
securities exchange or any other person is required or necessary in connection
with the borrowings hereunder or with the execution, delivery, performance,
validity or enforceability of this Loan and Security Agreement, except as
previously obtained and currently in full force and effect.
(d) NO VIOLATIONS. The execution, delivery and performance of this
Loan and Security Agreement will not violate any law, ordinance, charter, by-law
or rule applicable to us or any agreement or instrument by which we were bound
or by which any of our assets are affected.
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20. YOUR REPRESENTATIONS AND WARRANTIES. You represent and warrant
to us that throughout the term of this Loan and Security Agreement:
a. ACTION. You are duly authorized and have all necessary corporate
or other power, authority and legal right to execute, deliver and perform your
obligations under each of the Loan and Security Agreement, the Custodial
Agreement and the Note; to execute and deliver this Loan and Security Agreement,
and have taken all necessary action to authorize such execution, delivery and
performance, and this Loan and Security Agreement constitutes your legal, valid
and binding obligation, enforceable against you in accordance with its terms.
b. AUTHORIZED SIGNATORY. The person signing this Loan and Security
Agreement on your behalf is duly authorized to do so on your behalf.
c. NO BREACH. Neither (i) the execution and delivery of the Loan
and Security Agreement, the Note or the Custodial Agreement nor (ii) the
consummation of the transactions therein contemplated in compliance with the
terms and provisions thereof will violate any law, ordinance, charter, by-law or
rule or regulation, or any order, writ, injunction or decree of any Governmental
Authority, applicable to you or any agreement or instrument by which you were
bound or by which any of your assets are affected, or constitute a default under
any such agreement or instrument or result in the creation or imposition of any
Lien (except for the Liens created pursuant to this Loan and Security Agreement)
upon any of your property pursuant to the terms of any such agreement or
instrument.
d. EXISTENCE. You (i) are a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of your
organization, (ii) have all requisite corporate power, and have all governmental
licenses, authorizations, consents and approvals necessary to own your assets
and carry on your business as now being or as proposed to be conducted, except
where the lack of such licenses, authorizations, consents and approvals would
not be reasonably likely to have a material adverse effect on your business,
operations, financial condition, properties or assets; and (iii) are qualified
to do business and are in good standing in all other jurisdictions in which the
nature of the business conducted by you makes such qualification necessary,
except where failure so to qualify would not be reasonably likely (either
individually or in the aggregate) to have a material adverse effect on your
business, prospects, operations, financial condition, properties or assets.
e. FINANCIAL CONDITION. You have heretofore furnished to us a copy
of FIRSTPLUS FINANCIAL GROUP INC.'s (i) consolidated balance sheets and the
consolidated balance sheets of its consolidated Subsidiaries for the first three
quarterly fiscal periods of such entity's fiscal year ended September 30, 1997
and the related consolidated statements of such entity's income and retained
earnings and of such entity's cash flows and such entity's consolidated
Subsidiaries for such quarterly fiscal periods, setting forth in each case in
comparative
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form the figures for the previous year, (ii) consolidated balance sheets and
the consolidated balance sheets of such entity's consolidated Subsidiaries
for such fiscal year and the related consolidated statements of such entity's
income and retained earnings and of such entity's cash flows and such
entity's consolidated Subsidiaries for such fiscal year, setting forth in
each case in comparative form the figures for the previous year, with the
opinion thereon of Ernst & Young LLP and (iii) consolidated balance sheets and
the consolidated balance sheets of such entity's consolidated Subsidiaries for
its quarterly fiscal periods ended December 31, 1996, March 31, 1997 and
June 30, 1997 and the related consolidated statements of such entity's income
and retained earnings and of its cash flows and such entity's consolidated
Subsidiaries for such quarterly fiscal periods, setting forth in each case in
comparative form the figures for the previous year. All such financial
statements are complete and correct and fairly present, in all material
respects, the consolidated financial condition of such entity and such entity's
Subsidiaries and the consolidated results of such entity's operations as at such
dates and for such fiscal periods, all in accordance with GAAP applied on a
consistent basis. Since September 30, 1997, there has been no material adverse
change in such entity's consolidated business, operations or financial condition
and such entity's consolidated Subsidiaries taken as a whole from that set
forth in said financial statements.
f. LITIGATION. There are no actions, suits, arbitrations,
investigations or proceedings pending or, to your knowledge, threatened against
you, the Seller or FIRSTPLUS FINANCIAL GROUP, INC. or affecting any of your
Property, the Seller's Property or FIRSTPLUS FINANCIAL GROUP, INC.'s Property
before any governmental authority (i) as to which individually or in the
aggregate there is a reasonable likelihood of an adverse decision which would be
reasonably likely to have a material adverse effect on your, the Seller's or
FIRSTPLUS FINANCIAL GROUP, INC.'s business, operations, financial condition,
prospects, properties or assets or (ii) which questions the validity or
enforceability of this Loan and Security Agreement or any action to be taken in
connection with the transactions contemplated hereby.
g. APPROVALS. No consent or authorization of, approval by, notice
to, filing with or other act by or in respect of, any governmental authority or
securities exchange or any other person is required or necessary in connection
with the borrowings hereunder or with the execution, delivery, performance,
validity or enforceability of this Loan and Security Agreement or the Note,
except (i) for filings and recordings in respect of the Liens created pursuant
to this Loan and Security Agreement, and (ii) as previously obtained and
currently in full force and effect.
h. MARGIN REGULATIONS. Neither the making of any Advance hereunder,
nor the use of the proceeds thereof, will violate or be inconsistent with the
provisions of Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System (or any successor) as the same may be modified and supplemented
and in effect from time to time.
i. TAXES. You, the Seller and FIRSTPLUS FINANCIAL GROUP, INC. have
had filed all Federal income tax returns and all other material tax returns that
are required to be filed by you, the Seller and FIRSTPLUS FINANCIAL GROUP, INC.
and have paid all taxes due pursuant to such returns or pursuant to any
assessment received by you, the Seller or FIRSTPLUS FINANCIAL GROUP, INC.,
except for any such taxes as are being appropriately contested in good faith by
appropriate proceedings diligently conducted and with respect to which adequate
reserves in accordance with GAAP have been provided. The charges, accruals and
reserves on your books, the Seller's books and FIRSTPLUS FINANCIAL GROUP, INC.'s
books in respect of taxes and other governmental charges are, in your opinion,
adequate.
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j. INVESTMENT COMPANY ACT. You are not an "investment company", or
a company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.
k. CHIEF EXECUTIVE OFFICE. Your chief executive office on the date
hereof is located at Nevada Corporate Management, Inc., 3773 Howard Hughes
Parkway, Suite 300 North, Las Vegas, Nevada 89109.
l. LOCATION OF BOOKS AND RECORDS. The location where you keep your
books and records, including all computer tapes and records relating to the
Collateral is your chief executive office.
m. TRUE AND COMPLETE DISCLOSURE. The information, reports,
financial statements, exhibits and schedules furnished in writing by you or on
your behalf in connection with or pursuant to this Loan and Security Agreement
or included herein or therein or delivered pursuant hereto or thereto, when
taken as a whole, do not contain any untrue statement of material fact or omit
to state any material fact necessary to make the statements herein or therein,
in light of the circumstances under which they were made, not misleading. All
written information furnished to us after the date hereof by you or on your
behalf in connection with this Loan and Security Agreement and the transactions
contemplated hereby and thereby will be true, complete and accurate in every
material respect, or (in the case of projections) based on reasonable estimates,
on the date as of which such information is stated or certified. There is no
fact known to any of your responsible officers, after due inquiry, that could
reasonably be expected to have a material adverse effect on your financial
condition that has not been disclosed herein, or in a report, financial
statement, exhibit, schedule, disclosure letter or other writing furnished to us
for use in connection with the transactions contemplated hereby.
n. TANGIBLE NET WORTH. As of the date hereof, your Tangible Net
Worth is not less than $2,000.
o. SOLVENCY. You are solvent and will not be rendered insolvent by
any obligation to repay an Advance and, after giving effect to any such Advance,
you will not be left with an unreasonably small amount of capital with which to
engage in your business. You do not intend to incur, or believe that you have
incurred, debts beyond your ability to pay such debts as they mature. You are
not contemplating the commencement of insolvency, bankruptcy, liquidation or
consolidation proceedings or the appointment of a receiver, liquidator,
conservator, trustee or similar official with respect to you or any of your
assets. You are not transferring any Collateral with any intent to hinder,
delay or defraud any of your creditors.
p. NO ADDITIONAL OBLIGATION OF OURS. We will not be required as a
result of taking a pledge of Collateral to be licensed, registered or approved
or to obtain permits or otherwise qualify (i) to do business in any state in
which we currently are not so required or (ii) under any state consumer lending,
fair debt collection or other applicable state statute or regulation.
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q. COLLATERAL SECURITY. You have not assigned, pledged, or
otherwise conveyed or encumbered any Collateral to any other Person, and
immediately prior to any transfer of Collateral to us, you were the sole owner
of such Collateral, had good and marketable title thereto and owned such
Collateral free and clear of all pledges, liens, security interests,
encumbrances, charges and other adverse claims and upon transfer of each
Mortgage Note, endorsed in blank by one of your duly authorized officers, to us
or to our Custodian, we shall obtain a valid, first priority security interest
in such Collateral. Upon the filing of financing statements on Form UCC-1
naming us as "Secured Party" and you as "Debtor", and describing the Collateral,
in the jurisdictions and recording offices listed on SCHEDULE 5 attached hereto,
the security interests granted hereunder in the Collateral will constitute fully
perfected first priority security interests under the Uniform Commercial Code in
all of your right, title and interest in, to and under such Collateral which can
be perfected by filing under the Uniform Commercial Code. The provisions of
this Loan and Security Agreement are effective to create in our favor a valid
first priority perfected security interest in all your right, title and interest
in, to and under the Collateral.
r. NO OTHER BROKERS. Other than as disclosed in writing to us, you
have not dealt with any broker, investment banker, agent or other person, except
for us or our authorized representatives, who may be entitled to any commission
or compensation in connection with the Advance.
s. ERISA. Neither you nor any Subsidiary shall maintain, sponsor,
form or contribute to any Plan or Multiemployer Plan under the applicable
provisions of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), the Internal Revenue Code of 1986, as amended and any other Federal
or state law.
t. ORDINARY COURSE. All Advances are incurred and will be repaid at
maturity, in the ordinary course of your business out of the cash flow generated
in the normal day-to-day conduct and operations of your business which includes
sales of the Assets in the ordinary course of your business.
u. NO ADVERSE SELECTION. You have not selected the Collateral in a
manner so as to affect adversely our interests.
21. CUSTODIAL AGREEMENT REPRESENTATIONS AND WARRANTIES. As of the
date hereof, the date of any Advance hereunder and as of the date of each
delivery of Additional Collateral pursuant to Section 7 hereof, you represent
and warrant to us:
(a) All representations and warranties set forth in the Custodial
Agreement are true and correct. Such representations and warranties set forth
in the Custodial Agreement shall survive delivery of the respective Collateral
to us.
(b) The representations and warranties set forth on SCHEDULE 4 hereto
are true and correct as of each date Market Value is determined by us.
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22. YOUR COVENANTS. You covenant and agree with us that, so long as
any Advance is outstanding and until payment in full of all Secured Obligations:
a. FINANCIAL STATEMENTS. You shall deliver to us:
(i) all financial statements as soon as available and in any event
within 45 days after the end of each of the first three quarterly fiscal periods
of each of FIRSTPLUS FINANCIAL GROUP, INC.'s fiscal years, the unaudited
consolidated balance sheets of FIRSTPLUS FINANCIAL GROUP, INC. as at the end of
such period and the related unaudited consolidated statements of income and
retained earnings and of cash flows for FIRSTPLUS FINANCIAL GROUP, INC. for such
period and the portion of the fiscal year through the end of such period,
setting forth in each case in comparative form the figures for the previous
year, accompanied by a certificate of one of its Responsible Officers, which
certificate shall state that said consolidated financial statements fairly
present the consolidated financial condition and results of the operations of
FIRSTPLUS FINANCIAL GROUP, INC. in accordance with GAAP, consistently applied,
as at the end of, and for, such period (subject to normal year-end audit
adjustments);
(ii) as soon as available and in any event within 90 days after the
end of each of FIRSTPLUS FINANCIAL GROUP, INC.'s fiscal years, its consolidated
balance sheets as at the end of such fiscal year and the related consolidated
statements of income and retained earnings and of cash flows for FIRSTPLUS
FINANCIAL GROUP, INC. for such year, setting forth in each case in comparative
form the figures for the previous year, accompanied by an opinion thereon of
independent certified public accountants of recognized national standing, which
opinion shall not be qualified as to scope of audit or going concern and shall
state that said consolidated financial statements fairly present the
consolidated financial condition and results of the operations of FIRSTPLUS
FINANCIAL GROUP, INC. as at the end of, and for, such fiscal year in accordance
with GAAP, and a certificate of such accountants stating that, in making the
examination necessary for their opinion, they obtained no knowledge, except as
specifically stated, of any Default or Event of Default;
(iii) from time to time such other information regarding your
financial condition, operations, or business or that of FIRSTPLUS FINANCIAL
GROUP, INC. as we may reasonably request.
(iv) any public Securities and Exchange Commission filings made in
respect of you or FIRSTPLUS FINANCIAL GROUP, INC.
You will furnish to us, at the time you furnishes each set of financial
statements pursuant to paragraphs (i) and (ii) above, a certificate of one of
your Responsible Officers and one of FIRSTPLUS FINANCIAL GROUP, INC.'s
Responsible Officers to the effect that, to the best of such Responsible
Officer's knowledge, during such fiscal period or year the applicable entity has
observed or performed all of the covenants applicable to such entity and other
agreements, and satisfied every condition, contained in this Loan and Security
Agreement and the other Loan Documents to be observed, performed or satisfied by
it, and that such Responsible Officer has
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obtained no knowledge of any Default or Event of Default except as specified
in such certificate (and, if any Default or Event of Default has occurred and
is continuing, describing the same in reasonable detail and describing the
action you have taken or proposes to take with respect thereto).
a. LITIGATION. You will promptly, and in any event within 10 days
after service of process on any of the following, give us notice of all legal or
arbitrable proceedings affecting you, the Seller or FIRSTPLUS FINANCIAL GROUP,
INC., or any Subsidiary thereof that questions or challenges the validity or
enforceability of any of the Loan Documents or as to which there is a reasonable
likelihood of adverse determination which would result in a Material Adverse
Effect.
b. EXISTENCE, ETC. You will:
(i) preserve and maintain your legal existence and all of your
material rights, privileges, licenses and franchises (provided that nothing in
this Section 22(c) shall prohibit any transaction expressly permitted under
Section 22(d) hereof);
(ii) comply with the requirements of all applicable laws, rules,
regulations and orders of Governmental Authorities (including, without
limitation, all environmental laws) if failure to comply with such requirements
would be reasonably likely (either individually or in the aggregate) to have a
material adverse effect on your Property, business or financial condition, or
prospects;
(iii) keep adequate records and books of account, in which
complete entries will be made in accordance with GAAP consistently applied;
(iv) not move your chief executive office from the address referred
to in Section 20(k) unless you shall have provided us 30 days' prior written
notice of such change;
(v) pay and discharge all taxes, assessments and governmental
charges or levies imposed on you or on your income or profits or on any of
your Property prior to the date on which penalties attach thereto, except for
any such tax, assessment, charge or levy the payment of which is being
contested in good faith and by proper proceedings and against which adequate
reserves are being maintained; and
(vi) permit our representatives, during normal business hours, to
examine, copy and make extracts from your books and records, to inspect any of
your Properties, and to discuss your business and affairs with your officers,
all to the extent reasonably requested by us pursuant to Section 35 hereof.
a. PROHIBITION OF FUNDAMENTAL CHANGES. Unless previously agreed in
writing by us, you shall not enter into any transaction of merger or
consolidation or amalgamation, or liquidate, wind up or dissolve yourself (or
suffer any liquidation, winding up or dissolution) or sell all or substantially
all of your assets; PROVIDED, that you may merge or consolidate with (i) any
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wholly owned subsidiary of yours, or (ii) any other Person if you are the
surviving corporation; and PROVIDED FURTHER, that if after giving effect
thereto, no Default would exist hereunder.
b. MARGIN DEFICIT. If at any time there exists a Margin Deficit,
you shall cure same in accordance with Section 7 hereof.
c. NOTICES. You shall give notice to us:
(i) promptly upon receipt of notice or knowledge of the occurrence
of any Default or Event of Default;
(ii) with respect to any Collateral pledged to us hereunder, promptly
upon receipt of any principal prepayment (in full or partial) of such pledged
Collateral;
(iii) with respect to any Collateral pledged to us hereunder,
promptly upon receipt of notice or knowledge that the underlying Property has
been damaged by waste, fire, earthquake or earth movement, windstorm, flood,
tornado or other casualty, or otherwise damaged so as to affect adversely the
Market Value of such pledged Collateral; and
(iv) promptly upon receipt of notice or knowledge of (i) any default
related to any Collateral, (ii) any Lien or security interest (other than
security interests created hereby or by the other Loan Documents) on, or claim
asserted against, any of the Collateral or (iii) any event or change in
circumstances which could reasonably be expected to have a material adverse
effect on your Property, business or financial condition or prospects.
(v) promptly upon receipt or notice or knowledge of any default by
the Servicer or the Seller under the FIRSTPLUS Purchase Agreement, the FIRSTPLUS
Servicing Agreement or any other material agreement to which the Seller or
FIRSTPLUS FINANCIAL GROUP, INC. is a party.
Each notice pursuant to this Section shall be accompanied by a
statement of one of your Responsible Officers setting forth details of the
occurrence referred to therein and stating what action you have taken or propose
to take with respect thereto.
a. REPORTS. You shall provide us with a quarterly report, which
report shall include, among other items, a summary of your delinquency and loss
experience with respect to all residential mortgage loans serviced by you, the
Seller or FIRSTPLUS FINANCIAL GROUP, INC., any Servicer or any designee of
either, plus any such additional reports as we may reasonably request with
respect to you. All reports shall be delivered in electronic format. You also
agree to provide us, on a monthly basis, detailed investor remittance reports as
it relates to the Pledged Securities.
b. UNDERWRITING GUIDELINES. You shall provide us promptly with any
modification or amendment to the Underwriting Guidelines.
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c. TRANSACTIONS WITH AFFILIATES. You will not enter into any
transaction, including without limitation any purchase, sale, lease or exchange
of property or the rendering of any service, with any Affiliate unless such
transaction is (i) otherwise permitted under the FIRSTPLUS Purchase Agreement,
the FIRSTPLUS Servicing Agreement and this Loan and Security Agreement, (ii) in
the ordinary course of your business, and (iii) upon fair and reasonable terms
no less favorable to you than you would obtain in a comparable arm's length
transaction with a Person which is not an Affiliate, or make a payment that is
not otherwise permitted by this Section 22(i) to any Affiliate. In no event
shall you pledge to us hereunder any Collateral acquired by you from an
Affiliate of yours, other than Collateral acquired pursuant to the FIRSTPLUS
Purchase Agreement.
d. LIMITATION ON LIENS. You will defend the Collateral against, and
will take such other action as is necessary to remove, any Lien, security
interest or claim on or to the Collateral, other than the security interests
created under this Loan and Security Agreement, and you will defend our right,
title and interest in and to any of the Collateral against the claims and
demands of all persons whomsoever.
e. LIMITATION ON GUARANTEES. You shall not create, incur, assume or
suffer to exist any Guarantees.
f. LIMITATIONS ON DISTRIBUTIONS. (i) To the extent such action
shall result in a Default or (ii) after the occurrence and during the
continuation of any Event of Default, you shall not make any payment on account
of, or set apart assets for, a dividend, a sinking or other analogous fund for
the purchase, redemption, defeasance, retirement or other acquisition of any
equity or partnership interest of yours, whether now or hereafter outstanding,
or make any other distribution in respect thereof, either directly or
indirectly, whether in cash or property or in your obligations.
g. MAINTENANCE OF TANGIBLE NET WORTH. You shall not permit your
Tangible Net Worth at any time to be less than $2,000.
h. MAINTENANCE OF PROFITABILITY. You shall not permit, for any
period of three consecutive fiscal quarters (each such period, a "TEST PERIOD"),
Net Income for such Test Period, before income taxes for such Test Period and
distributions made during such Test Period, to be less than $1.00.
i. SERVICING TAPE. You shall provide to us on a monthly basis a
computer readable magnetic tape containing servicing information, including
without limitation those fields specified by us from time to time, on a
loan-by-loan basis and in the aggregate, with respect to the Collateral
serviced by you or any Servicer.
j. SPECIAL PURPOSE ENTITY. You shall (a) own no assets, and will
not engage in any business, other than the assets and transactions specifically
contemplated by this Loan and Security Agreement and the Loan Documents; (b) not
incur any indebtedness or obligation, secured or unsecured, direct or indirect,
absolute or contingent (including guaranteeing any
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obligation), other than pursuant hereto; (c) not make any loans or advances
to any third party, and shall not acquire obligations or securities of your
Affiliates; (d) pay your debts and liabilities (including, as applicable,
shared personnel and overhead expenses) only from your own assets; (e) comply
with the provisions of your organizational documents; (f) do all things
necessary to observe organizational formalities and to preserve your
existence, and will not amend, modify or otherwise change your organizational
documents, or suffer same to be amended, modified or otherwise changed,
without our prior written consent which shall not be unreasonably withheld;
(g) maintain all of your books, records, financial statements and bank
accounts separate from those of your Affiliates; (h) be, and at all times
will hold yourself out to the public as, a legal entity separate and distinct
from any other entity (including any Affiliate), shall correct any known
misunderstanding regarding your status as a separate entity, shall conduct
business in your own name, shall not identify yourself or any of your
Affiliates as a division or part of the other and shall maintain and utilize
a separate telephone number and separate stationery, invoices and checks; (i)
maintain adequate capital for the normal obligations reasonably foreseeable
in a business of your size and character and in light of your contemplated
business operations; (j) not engage in or suffer any change of ownership,
dissolution, winding up, liquidation, consolidation or merger in whole or in
part; (k) not commingle your funds or other assets with those of any
Affiliate or any other Person; (l) maintain your assets in such a manner that
it will not be costly or difficult to segregate, ascertain or identify your
individual assets from those of any Affiliate or any other Person; (m) not
and will not hold yourself out to be responsible for the debts or obligations
of any other Person; and (n) cause each of your direct and indirect owners to
agree not to (i) file or consent to the filing of any bankruptcy, insolvency
or reorganization case or proceeding with respect to you; institute any
proceedings under any applicable insolvency law or otherwise seek any relief
under any laws relating to the relief from debts or the protection of debtors
generally with respect to you; (ii) seek or consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator, custodian or any
similar official for you or a substantial portion of your Properties; or
(iii) make any assignment for the benefit of your creditors.
k. MONITORING OF COLLATERAL COMPOSITION. You shall use your best
efforts to monitor the composition of all Mortgage Loans posted by you as
Collateral hereunder so that such Mortgage Loans shall have characteristics
that, in the aggregate, are consistent with the Seller's or FIRSTPLUS FINANCIAL
GROUP, INC.'s recent Securitization Transactions for residential mortgage loans.
l. ORDINARY COURSE OF BUSINESS. You shall incur all Advances and
repay on the applicable Loan Maturity Date each Advance in the ordinary course
of your business out of the cash flow generated in the normal day-to-day conduct
and operations of your business which includes sales of the Assets in the
ordinary course of your business.
m. ERISA. Neither you nor any Subsidiary shall maintain, sponsor,
form or contribute to any Plan or Multiemployer Plan under the applicable
provisions of the ERISA and any other federal or state law.
23. NOTICES. All communications hereunder shall be in writing and
mailed, telecopied or delivered to the address specified on SCHEDULE 1 hereto
for you and for us, or as to
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each party, to such other address as may be designated by such party in a
written notice to the other party. Written communication shall be effective
upon receipt unless such communication is mailed in which case it shall be
effective three Business Days after deposit in first class mail.
24. ASSIGNMENT. (a) We may assign to one or more banks or other
entities all or any part of, our rights and obligations hereunder, or may grant
participations to one or more banks or other entities in or to all or any part
of, any Advance or Advances hereunder and under the Note. You may not assign
your rights or obligations hereunder or any interest herein.
(b) We may, in accordance with applicable law, at any time sell to
one or more lenders or other entities ("PARTICIPANTS") participating interests
in (i) any Advance, the Note, or any other interest of our hereunder and under
the other Loan Documents or (ii) our right to make Advances, provided that for
purposes of this subclause (ii), the Participant is given an Investment Grade
Rating by both Standard & Poor's Ratings Services, a division of the McGraw Hill
Companies, Inc. or Moody's Investor's Service, Inc. In the event of any such
sale by us of participating interests to a Participant, our obligations under
this Loan and Security Agreement to you shall remain unchanged, we shall remain
solely responsible for the performance thereof, we shall remain the holder of
the Note for all purposes under this Loan and Security Agreement and the other
Loan Documents, and we and you shall continue to deal solely and directly with
us in connection with our rights and obligations under this Loan and Security
Agreement and the other Loan Documents. You agree that if amounts outstanding
under this Loan and Security Agreement and the Note are due or unpaid, or shall
have been declared or shall have become due and payable upon the occurrence of
an Event of Default, each Participant shall be deemed to have the right of
set-off in respect of its participating interest in amounts owing under this
Loan and Security Agreement and the Note to the same extent as if the amount
of its participating interest were owing directly to it as a lender under
this Loan and Security Agreement or the Note; PROVIDED, that such Participant
shall only be entitled to such right of set-off if it shall have agreed in
the agreement pursuant to which it shall have acquired its participating
interest to share with us the proceeds thereof. We agree that each
Participant shall be entitled to the benefits of Section 25 with respect to
its participation in the Advances outstanding from time to time; PROVIDED,
that we and all Participants shall be entitled to receive no greater amount
in the aggregate pursuant to such Section 25 than we would have been entitled
to receive had no such transfer occurred.
(c) We may furnish any information concerning you or any of your
Affiliates in our possession from time to time to assignees and participants
(including prospective assignees and participants).
(d) You agree to cooperate with us in connection with any such
assignment and/or participation, to execute and deliver such replacement notes,
and to enter into such restatements of, and amendments, supplements and other
modifications to, this Loan and Security Agreement and the other Loan Documents
in order to give effect to such assignment and/or participation.
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25. INDEMNIFICATION AND EXPENSES.
(a) You agree to hold us harmless from and indemnify us against all
liabilities, losses, damages, judgments, costs and expenses of any kind which
may be imposed on, incurred by or asserted against us (collectively, the
"COSTS") relating to or arising out of this Loan and Security Agreement, the
Note, any other Loan Document or any transaction contemplated hereby or thereby,
or any amendment, supplement or modification of, or any waiver or consent under
or in respect of, this Loan and Security Agreement, the Note, any other Loan
Document or any transaction contemplated hereby or thereby, that, in each case,
results from anything other than our gross negligence or willful misconduct.
Without limiting the generality of the foregoing, you agree to hold us harmless
from and indemnify us against all Costs with respect to all Collateral relating
to or arising out of any violation or alleged violation of any environmental
law, any consumer credit laws, including without limitation the Truth in Lending
Act and/or the Real Estate Settlement Procedures Act, or any other rule or
regulation that, in each case, results from anything other than our gross
negligence or willful misconduct. In any suit, proceeding or action brought by
us in connection with any item of Collateral for any sum owing thereunder, or to
enforce any provisions of any item of Collateral, you will save, indemnify and
hold us harmless from and against all expense, loss or damage suffered by reason
of any defense, set-off, counterclaim, recoupment or reduction or liability
whatsoever of the account debtor or obligor thereunder, arising out of a breach
by us of any obligation thereunder or arising out of any other agreement,
indebtedness or liability at any time owing to or in favor of such account
debtor or obligor or its successors from you. You also agree to reimburse us as
promptly after being billed by us for all of our costs and expenses incurred in
connection with the enforcement or the preservation of our rights under this
Loan and Security Agreement, the Note, any other Loan Document or any
transaction contemplated hereby or thereby, including without limitation the
reasonable fees and disbursements of our counsel. You hereby acknowledge that,
notwithstanding the fact that the Note is secured by the Collateral, your
obligation under the Note is a recourse obligation. We will use reasonable
efforts to give you notice of any counsel hired in connection with the
enforcement of this Section 25(a).
(b) You agree to pay promptly after being billed by us all of the
out-of-pocket costs and expenses incurred by us in connection with the
development, preparation and execution of, and any amendment, supplement or
modification to, this Loan and Security Agreement, the Note, any other Loan
Document or any other documents prepared in connection herewith or therewith.
You agree to pay as and when billed by us all of the out-of-pocket costs and
expenses incurred in connection with the consummation and administration of the
transactions contemplated hereby and thereby including without limitation (i)
all the reasonable fees, disbursements and expenses of our counsel, not to
exceed $50,000, and (ii) all the due diligence, inspection, testing and review
costs and expenses incurred by us with respect to Collateral under this Loan and
Security Agreement, including, but not limited to, those costs and expenses
incurred by us pursuant to Sections 25(a), 34 and 35 hereof.
26. EVENTS OF DEFAULT. If any of the following events ("EVENTS OF
DEFAULT") shall occur and be continuing:
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a. you shall fail to pay any amount due hereunder or under the Note
when the same becomes due and payable (whether at stated maturity, upon
acceleration or at mandatory or optional prepayment), or shall fail to provide
to us Additional Collateral pursuant to Section 7 hereof; or
b. any representation or warranty or certification made or deemed
made herein or in any other Loan Document by you (or any of your officers), the
Seller or FIRSTPLUS FINANCIAL GROUP, INC. in connection with any Advance or
otherwise in connection with the Note shall prove to have been incorrect, false
or misleading in any material respect when made (other than the representations
and warranties set forth in SCHEDULE 4, which shall be considered solely for the
purpose of determining the Market Value of the Collateral; unless you shall have
made any such representations and warranties with knowledge that they were
materially false or misleading at the time made); or
c. you shall, without our prior written consent, convey, transfer,
lease or dispose of (whether in one transaction or in a series of transactions)
all or substantially all of your assets to, any person or entity; or
d. you shall fail to perform or observe, admit your inability to
perform or observe or state your intention not to perform or observe any other
material term, covenant or agreement in connection with any Advance or otherwise
in connection with the Note on your part to be performed or observed; or
e. a judgment by a court of competent jurisdiction for the payment
of money (i) in excess of $200,000 is rendered against any of your Affiliates or
(ii) of any amount is rendered against you, and the same remains undischarged,
unpaid or unbonded for a period of thirty (30) days during which execution of
such judgment is not effectively stayed; or
f. this Loan and Security Agreement shall for any reason not create,
or shall cease to create, a valid, perfected first priority security interest in
our favor in any of the Collateral (other than the Mortgages on the Mortgaged
Property), or you shall grant, or suffer to exist, any Lien on any Collateral
except the Liens contemplated hereby; or
g. the Custodial Agreement, any Loan Document, the FIRSTPLUS
Purchase Agreement or the FIRSTPLUS Servicing Agreement shall for whatever
reason be terminated (and, with respect to termination of the Custodial
Agreement, no other custodial agreement or arrangement reasonably acceptable to
the Lender for the physical possession of the Collateral shall have been made)
or cease to be in full force and effect, or the enforceability thereof shall be
contested by you; or
h. you, the Seller or FIRSTPLUS FINANCIAL GROUP, INC. shall be in
default under any material note, indenture, loan agreement, guaranty, swap
agreement or any other contract to which it is a party, which default (i)
involves the failure to pay a matured obligation, or (ii) permits the
acceleration of the maturity of obligations by any other party to or beneficiary
of such note, indenture, loan agreement, guaranty, swap agreement or other
contract; or
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i. either (A) the Seller or FIRSTPLUS FINANCIAL GROUP, INC. shall
merge or consolidate into any entity unless (i) the surviving or resulting
entity shall be a corporation or partnership organized under the laws of the
United States or any state thereof, (ii) such entity expressly assumes by
written agreement, in form and substance satisfactory to us in our sole
discretion, the performance of all of their respective duties and obligations
under the Loan Documents, the FIRSTPLUS Purchase Agreement or the FIRSTPLUS
Servicing Agreement, to which it is a party, and (iii) such entity is at least
as creditworthy as you, as determined by us in our sole and absolute discretion;
or (B) you shall merge or consolidate into any entity; or
j. any act, event, or circumstance shall occur which, in our
reasonable judgment, would have a (i) material adverse effect on (A) your
creditworthiness or the creditworthiness of the Seller or FIRSTPLUS FINANCIAL
GROUP, INC., (B) your ability to perform your obligations under this Loan and
Security Agreement in a prompt and timely manner, (C) the characterization,
convertibility, marketability, liquidity or value of any Collateral; or
k. any change or development involving a prospective change in
taxation or other applicable law or regulation or interpretation thereof in the
United States directly affecting the Collateral or the consequences of our
holding a security interest in, the Collateral; the imposition of exchange
controls by the United States, that directly affects the Collateral or the
consequences of our holding a security interest in the Collateral; or the
imposition of exchange controls by the United States, that directly affects the
financial markets of the United States, and makes it, in our sole judgment,
inadvisable or impracticable to enter into the transactions contemplated by this
Loan and Security Agreement; or
l. you, the Seller or FIRSTPLUS FINANCIAL GROUP, INC. shall
generally not pay your debts as such debts become due, or shall admit in writing
its inability to pay its debts generally, or shall make a general assignment for
the benefit of creditors; or any proceeding shall be instituted by or against it
seeking to adjudicate it as bankrupt or insolvent, or 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 seeking the entry of an order for
relief or the appointment of a receiver, trustee, custodian or other similar
official for it or any substantial part of its property; or it shall take any
corporate action to authorize any of the actions set forth above in this
subsection (l); or
m. you, the Seller or FIRSTPLUS FINANCIAL GROUP, INC.(i) apply for
or consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee, examiner or liquidator or the like of itself or of all or a
substantial part of its property, (ii) make a general assignment for the benefit
of your or their creditors, (iii) commence a voluntary case under the Bankruptcy
Code, (iv) file a petition seeking to take advantage of any other law relating
to bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement
or winding-up, or composition or readjustment of debts, (v) fail to controvert
in a timely and appropriate manner, or acquiesce in writing to, any petition
filed against it in an involuntary case under the Bankruptcy Code or (vi) take
any corporate or other action for the purpose of effecting any of the foregoing;
or
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n. a proceeding or case shall be commenced against you, the Seller
or FIRSTPLUS FINANCIAL GROUP, INC., without application or consent of you or
such entity, in any court of competent jurisdiction, seeking (i) its
reorganization, liquidation, dissolution, arrangement or winding-up, or the
composition or readjustment of its debts, (ii) the appointment of, or the taking
of possession by, a receiver, custodian, trustee, examiner, liquidator or the
like of it or of all or any substantial part of its property, or (iii) similar
relief in respect of you or any such entity under any law relating to
bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement or
winding-up or composition or adjustment of debts, and such proceeding or case
shall continue undismissed, or an order, judgment or decree approving or
ordering any of the foregoing shall be entered and continue unstayed and in
effect, for a period of 60 or more days; or an order for relief against you or
any such Subsidiary shall be entered in any involuntary case under the
Bankruptcy Code; or
o. FIRSTPLUS FINANCIAL GROUP, INC. shall permit either: (i) its
Tangible Net Worth at any time to be less than $150,000,000 or (ii) its Market
Capitalization at any time to be less than $750,000,000 or (iii) its
Debt-to-Equity Ratio at any time to be greater than 8:1 as adjusted or
replaced in accordance with the formula set forth on Schedule 6.
p. the Servicer shall fail to service the Mortgage Loans in
accordance with Accepted Servicing Practices or shall fail to comply with the
terms of the FIRSTPLUS Servicing Agreement in any material respect or the Seller
or FIRSTPLUS FINANCIAL GROUP, INC. shall fail to comply with the terms of the
FIRSTPLUS Purchase Agreement in any material respect; or
q. you shall fail to comply with the requirements of Section
22(c)(i), Section 22(d), Section 22(e), Section 22(f), or Sections 22(h) through
(s) hereof; or you shall otherwise fail to comply with the requirements of
Section 22(c) hereof and such default shall continue unremedied for a period of
five Business Days; or you shall fail to observe or perform any other covenant
or agreement contained in this Loan and Security Agreement or any other Loan
Document and such failure to observe or perform shall continue unremedied for a
period of seven Business Days; or
r. any of the facts, assumptions, representations or certifications
referenced or set forth, or otherwise relied upon, in that certain opinion of
Jenkens & Gilchrist regarding the non-consolidation of you with any of your
shareholders in the event of an insolvency of any shareholder, dated December
13, 1997 and addressed to us, shall be materially false or untrue; then in any
such event:
a) (i) We may declare the Note, and all amounts payable thereunder to be
forthwith due and payable, together with all interest thereon and fees and
expenses accruing under this Loan and Security Agreement, whereupon the
Note and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind all of
which you hereby expressly waive; PROVIDED, HOWEVER, that in the event of
an actual or deemed entry of an order for relief with respect to you under
the Bankruptcy Code, the Note and all such other amounts shall
automatically
25
<PAGE>
become and be due and payable, without presentment, demand, protest or any
notice of any kind, all of which are hereby expressly waived by you.
b) (ii) After one Business Day's notice to you (which notice need not be
given if an actual or deemed order of relief has occurred with respect to
you under the Bankruptcy Code or if you fail to meet your obligations under
Section 7 hereof), we may to the extent permitted by applicable law,
immediately sell, without notice or demand of any kind, at a public or
private sale and at such price or prices as we may reasonably deem
satisfactory any or all Collateral.
c) (iii) we shall have the right to obtain physical possession of the
Servicing Records and all other of your files relating to the Collateral
and all documents relating to the Collateral which are then or may
thereafter come into your possession or any third party acting for you and
you shall deliver to us such assignments as we shall request.
d) (iv) Because you recognize that it may not be possible to purchase
or sell all of the Collateral on a particular Business Day, or in a
transaction with the same purchaser, or in the same manner because the
market for such Collateral may not be liquid, you agree that liquidation of
the Collateral does not require a public purchase or sale and that a good
faith private purchase or sale shall be deemed to have been made in a
commercially reasonable manner. Accordingly, we may elect, in our sole
discretion, the time and manner of liquidating any Collateral and nothing
contained herein shall (A) obligate us to liquidate any Collateral on the
occurrence of an Event of Default or to liquidate all Collateral in the
same manner or on the same Business Day or (B) constitute a waiver of any
of our rights or remedies. However, in recognition of our agreement that
the transactions hereunder have been entered into in consideration of and
in reliance upon the fact that all Advances hereunder constitute a single
business and contractual relationship and that each Advance has been
entered into in consideration of the other Advances, we agree that we shall
use our best efforts to liquidate all Collateral hereunder upon the
occurrence of an Event of Default as quickly as is prudently possible in
our reasonable judgment.
e) (v) We shall, without regard to the adequacy of the security for
your obligations under this Loan and Security Agreement, be entitled to the
appointment of a receiver by any court having jurisdiction, without notice,
to take possession of and protect, collect, manage, liquidate, and sell the
Collateral or any portion thereof, and collect the payments due with
respect to the Collateral or any portion thereof. You shall pay all costs
and expenses incurred by us in connection with the appointment and
activities of such receiver.
f) (vi) We may obtain an injunction or an order of specific performance
to compel you to fulfill your obligations, if you fail or refuse to perform
your obligations as set forth therein.
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g) (vii) You shall be liable to us for the amount of all damages and
expenses, including reasonable legal or other expenses incurred by us in
connection with or as a consequence of an Event of Default.
h) (viii) We shall have all the rights and remedies provided herein,
provided by applicable federal, state, foreign, and local laws (including,
without limitation, the rights and remedies of a secured party under the
Uniform Commercial Code of the State of New York, to the extent that the
Uniform Commercial Code is applicable, and the right to offset any mutual
debt and claim), in equity, and under any other agreement between us.
27. NO RELIANCE. Each of us hereby represents and warrants to the
other that in connection with the negotiation of, the entering into, and the
performance under, this Loan and Security Agreement:
(a) It is not relying (for purposes of making any investment decision
or otherwise) upon any advice, counsel or representations (whether written or
oral) of the other party hereto, other than the representations expressly set
forth herein;
(b) It has consulted with its own legal, regulatory, tax, business,
investment, financial and accounting advisors to the extent that it has deemed
necessary, and it has made its own investment, hedging and trading decisions
(including decisions regarding the suitability of any Advance) based upon its
own judgment and upon any advice from such advisors as it has deemed necessary
and not upon any view expressed by the other party hereto;
(c) It is a sophisticated and informed institution that has a full
understanding of all the terms, conditions and risks (economic and otherwise)
here and is capable of assuming and willing to assume (financially and
otherwise) those risks;
(d) It is not acting as a fiduciary or financial, investment or
commodity trading advisor for the other party hereto, and has not given the
other party hereto (directly or indirectly through any other person) any
assurance, guaranty or representation whatsoever as to the merits (either legal,
regulatory, tax, business, investment, financial accounting or otherwise) of
this Loan and Security Agreement or any Advance.
28. NEW YORK LAW. THIS LOAN AND SECURITY AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT
REGARD TO CHOICE OF LAW PRINCIPLES).
29. NO BANKRUPTCY SUITS. You agree that you will not institute
against or join any other person in instituting against us any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceeding, or other
proceeding under any federal or state bankruptcy or similar law, for one year
and a day after the latest maturing commercial paper note issued by us is paid
in full.
27
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30. RATINGS. At our option, we may, upon notice that either Standard
& Poor's Ratings Services, a division of The McGraw Hill Companies, Inc. or
Moody's Investor's Service, Inc. has (i) lowered or downgraded your short term
commercial paper or corporate bond or other short term rating from its level as
of the date hereof, or such rating of the Seller and/or FIRSTPLUS FINANCIAL
GROUP, INC. or (ii) placed your securities or those of the Seller and/or
FIRSTPLUS FINANCIAL GROUP, INC. on a watch list of securities singled out for
surveillance, with either negative or developing implications in a Ratings
Category, amend SCHEDULE 1 hereof to provide for an amended "FACILITY AMOUNT"
and/or "APPLICABLE SPREADS" and/or amend Section 7 hereof to provide for an
increased Margin Percentage.
31. CORPORATE OBLIGATIONS. The obligations under this Loan and
Security Agreement are solely our corporate obligations. No recourse shall be
had for the payment of any amount owing by us hereunder or any other obligation
or claim of or against us arising out of or based upon this Loan and Security
Agreement against any of our stockholders, employees, officers, directors,
incorporators or agents.
32. CORPORATE OBLIGATIONS OF BORROWER. Your obligations under this
Loan and Security Agreement are solely your corporate obligations. No recourse
shall be had for the payment of any amount owing by you hereunder or any other
obligation or claim of or against you arising out of or based upon this Loan and
Security Agreement against any of your stockholders, employees, officers,
directors, incorporators or agents.
33. JURISDICTION. You irrevocably agree that any legal action, suit
or proceeding against us arising out of this Loan and Security Agreement may be
brought in the United States District Court located in the City of New York, New
York or in the courts of the State of New York and hereby irrevocably accept and
submit to the non-exclusive jurisdiction of each of the aforesaid courts in
personam, generally and unconditionally with respect to any action, suit or
proceeding for you and in respect of your properties, assets and revenues. You
further irrevocably agree to the service of any legal process, summons, notices
and documents out of any of the aforesaid courts by mailing copies thereof by
registered or certified air mail, postage prepaid, to you at your address
designated pursuant to this Agreement. Nothing herein shall in any way be
deemed to limit our ability to serve any such legal process, summons, notices
and documents in any other manner, as may be permitted by applicable law or to
obtain jurisdiction over you, or bring actions, suits or proceedings against you
in such other jurisdictions, and in such manner, as may be permitted by
applicable law.
34. SERVICING.
(a) You covenant to maintain or cause the servicing of the Collateral
to be maintained in conformity with accepted and prudent servicing practices in
the industry for the same type of mortgage loans as the Collateral and in a
manner at least equal in quality to the servicing you provide for Collateral
which you own. In the event that the preceding language is interpreted as
constituting one or more servicing contracts, each such servicing contract shall
terminate automatically upon the earliest of (i) an Event of Default, (ii) the
date on which all the Secured Obligations have been paid in full or (iii) the
transfer of servicing approved by us.
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(b) If the Collateral is serviced by you, (i) you agree that we are
the collateral assignee of all servicing records, including but not limited to
any and all servicing agreements, files, documents, records, data bases,
computer tapes, copies of computer tapes, proof of insurance coverage, insurance
policies, appraisals, other closing documentation, payment history records, and
any other records relating to or evidencing the servicing of Collateral (the
"SERVICING RECORDS"), and (ii) you grant us a security interest in all servicing
fees and rights relating to the Collateral and all Servicing Records to secure
your obligation or your designee to service in conformity with this Section and
any other of your obligations to us. You covenant to safeguard such Servicing
Records and to deliver them promptly to us or our designee (including the
Custodian) at our request.
(c) The Collateral consisting of Mortgage Loans may be serviced by a
third-party servicer (such third-party servicer, the "SERVICER"), provided that,
(i) you provide a copy of the servicing agreement to us, which shall be in form
and substance acceptable to us (the "SERVICING AGREEMENT"); (ii) you hereby
irrevocably assign to us and our successors and assigns all of your right,
title, interest in, to and under, and the benefits of, any Servicing Agreement
with respect to the Collateral; (iii) such Servicer is acceptable to us; (iv)
the servicing fee is no greater than 1.00%, per annum, accrued on the
outstanding Eligible Mortgage Loan balance; and (v) upon an Event of Default, we
reserve the sole right to terminate the Servicer and appoint a successor
Servicer.
(d) Upon the occurrence of an Event of Default and to the extent that
you have the right to assign a successor servicer under any Pooling and
Servicing Agreement, you hereby grant and assign to us such rights.
(e) You shall provide to us a letter from you or the Servicer, to the
effect that upon the occurrence of an Event of Default, we may terminate any
Servicing Agreement and transfer servicing to our designee, at no cost or
expense to us, it being agreed that you will pay any and all fees required to
terminate the Servicing Agreement and to effectuate the transfer of servicing to
our designee.
(f) After the Funding Date, until the pledge of any Collateral is
relinquished by us or the Custodian, as applicable, you will have no right to
modify or alter the terms of such item of Collateral and you will have no
obligation or right to repossess such Collateral or substitute another item of
Collateral, except as expressly provided herein or in the Custodial Agreement.
(g) In the event you or your Affiliate is servicing the Collateral,
you shall permit us to inspect you or your Affiliate's servicing facilities, as
the case may be, for the purpose of satisfying us that you or your Affiliate, as
the case may be, has the ability to service the Collateral as provided in this
Loan and Security Agreement.
(h) You shall indemnify and hold us harmless from any liability
resulting from any failure on your part to comply with your obligations under
this section.
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35. PERIODIC DUE DILIGENCE REVIEW. We and/or a third-party
contractor will periodically (i) perform due diligence of your and Seller's
origination and underwriting standards and facilities, (ii) perform due
diligence of the Servicer's facilities and servicing procedures,
(iii) underwrite a portion of the Mortgage Loans on a sample basis and
(iv) perform any other due diligence we may deem necessary, in our sole
discretion. You will reimburse us for all costs associated with such reviews.
You acknowledge that we have the right to perform continuing due diligence
reviews with respect to the Collateral, for purposes of verifying compliance
with the representations, warranties and specifications made hereunder, or
otherwise, and you agree that upon reasonable (but no less than three (3)
Business Days', but if a Default shall have occurred and be continuing then one
(1) Business Day's) prior notice to you, we or our authorized representatives
will be permitted during normal business hours to examine, inspect, and make
copies and extracts of, the Collateral Files and any and all documents, records,
agreements, instruments or information relating to such Collateral in the
possession or under your control and/or the control of the Custodian. You also
shall make available to us and our authorized representatives a knowledgeable
financial, credit or accounting officer for the purpose of answering questions
respecting the Collateral Files and the Collateral. Without limiting the
generality of the foregoing, you acknowledge that we may make Advances to you
based solely upon the information provided by you to us in the Collateral Tape
and the representations, warranties and covenants contained herein, and that we,
at our option, have the right at any time to conduct a partial or complete due
diligence review on some or all of the Collateral securing such Advance,
including without limitation ordering new credit reports and new appraisals on
the related Properties and otherwise re-generating the information used to
originate such Collateral. We may underwrite such Collateral ourselves or
engage a third party underwriter to perform such underwriting. You agree to
cooperate with us and any third-party underwriter in connection with such
underwriting, including, but not limited to, providing us and any third-party
underwriter with access to any and all documents, records, agreements,
instruments or information relating to such Collateral in your possession, or
under your control. You further agree that you shall reimburse us for any and
all out of pocket costs and expenses incurred by us and our authorized
representatives in connection with our activities pursuant to this Section 35.
You further agree that you shall reimburse us for any and all out-of-pocket
costs and expenses incurred by us in connection with our activities pursuant to
this Section 35 up to an amount equal to $75,000 per annum (the "DUE DILIGENCE
CAP"); provided that, in the event that a Default shall have occurred, you shall
reimburse us for all Due Diligence Costs and no such Due Diligence Cap shall
apply.
36. WAIVER. No failure on our part to exercise and no delay in
exercising, and no course of dealing with respect to, any right, power or
privilege under any Loan Document shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, power or privilege under any Loan
Document preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
37. AMENDMENTS. Except as otherwise expressly provided in this Loan
and Security Agreement, any provision of this Loan and Security Agreement may be
modified or supplemented only by an instrument in writing signed by you and us
and any provision of this Loan and Security Agreement may be waived by us in our
sole discretion.
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38. SURVIVAL. Your obligations under Sections 25 and 29 hereof shall
survive the repayment of the Advances and the termination of this Loan and
Security Agreement. In addition, each representation and warranty made or deemed
to be made by a request for a borrowing, herein or pursuant hereto shall survive
the making of such representation and warranty, and we shall not be deemed to
have waived, by reason of making any Advance, any Default that may arise because
any such representation or warranty shall have proved to be false or misleading,
notwithstanding that we may have had notice or knowledge or reason to believe
that such representation or warranty was false or misleading at the time such
Advance was made.
39. CAPTIONS. The table of contents and captions and section
headings appearing herein are included solely for convenience of reference and
are not intended to affect the interpretation of any provision of this Loan and
Security Agreement.
40. COUNTERPARTS. This Loan and Security Agreement may be executed
in any number of counterparts, all of which taken together shall constitute one
and the same instrument, and any of the parties hereto may execute this Loan and
Security Agreement by signing any such counterpart.
41. LOAN AND SECURITY AGREEMENT CONSTITUTES SECURITY AGREEMENT. This
Loan and Security Agreement shall constitute a security agreement within the
meaning of the Uniform Commercial Code.
42. WAIVER OF JURY TRIAL. EACH OF YOU AND US HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS LOAN
AND SECURITY AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.
43. HYPOTHECATION OR PLEDGE OF LOANS. We shall have free and
unrestricted use of all Collateral and nothing in this Loan and Security
Agreement shall preclude us from engaging in repurchase transactions with the
Collateral or otherwise pledging, repledging, transferring, hypothecating, or
rehypothecating the Collateral; provided, however, that the Collateral is unique
and we agree to return it in accordance with the provisions of this Loan
Agreement. Nothing contained in this Loan and Security Agreement shall obligate
us to segregate any Collateral delivered to us by you.
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If the terms of this Loan and Security Agreement are satisfactory to
you, please indicate your agreement and acceptance thereof by signing a
counterpart of this Loan and Security Agreement and returning it to us.
Very truly yours,
ASPEN FUNDING CORP.
By: /s/
---------------------------------
Name: Douglas K. Johnson
Title: President
Agreed and Accepted:
FIRSTPLUS Special Funding Corp.
By: /s/
-------------------------------
Name: Barry Tenenholtz
Title: Senior Vice-President
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SCHEDULE 1
to
Loan and Security Agreement
dated as of December 13, 1997
between FIRSTPLUS Special Funding Corp. and Aspen Funding Corp.
(i) For the purpose of this Loan and Security Agreement:
The "FACILITY AMOUNT" secured by the following Collateral is:
(a) Eligible Mortgage Loans:
$1,500,000,000
(b) Eligible Subordinated Securities:
$100,000,000
The "MINIMUM ADVANCE AMOUNT" is $10,000,000.
The "REQUESTING DEADLINE" is 12:00 p.m., New York City time, one (1)
Business Day prior to the requested Funding Date.
The "APPLICABLE SPREAD" secured by the following Collateral is:
(a) Eligible Mortgage Loans:
0.50%; provided that in the event that any Securitization
Transaction fails to satisfy the DMG Underwriting Mandate, such
Applicable Spread shall be increased retroactively with respect
to Advances secured by Assets covered by such Securitization
Transaction for the period of time during which such Assets
secured such Advances such Applicable Spread shall increase by
1.25% to equal 1.75%;
(b) Eligible Subordinated Securities:
1.75%; provided that in the event that any Securitization
Transaction fails to satisfy the DMG Underwriting Mandate, such
Applicable Spread shall be increased retroactively with respect
to Advances secured by Assets covered by such Securitization
Transaction for the period of time during which such Assets
secured such Advances such Applicable Spread shall increase by
2.25% to equal 4.00%;
S1-1
<PAGE>
The "MARGIN PERCENTAGE", as of any date secured by the following
Collateral is:
(a) Eligible Mortgage Loans:
105.26%
(b) Eligible Subordinated Securities:
154%
(such percentages in no case to be less than 100%).
(ii) For the purpose of Section 12 of this Loan and Security Agreement:
The address for written communications to you is:
1600 Viceroy Drive
8th Floor
Dallas, Texas 75235-2306
Attention: Ronald M. Bendalin
Telephone: (214) 599-6501
Fax: (214) 599-7575
cc: Barry Tenenholtz
The address for written communications to us is:
Aspen Funding Corp.
c/o Amacar Group L.L.C.
6707-D Fairview Road
Charlotte, North Carolina 28210
Attention: Douglas Johnson
Telephone: (704) 365-0569
Fax: (704) 365-1362
cc: Deutsche Bank A.G., as agent
31 West 52nd Street
New York, New York 10019
Attention: Gregg Amoroso/Richard Uhlig
Telephone: (212) 469-3987/(212) 469-6940
Fax: (212) 469-7571/(212) 469-6933
S1-2
<PAGE>
(iii) For the purpose of Section 7 of this Loan and Security Agreement:
The address for written communications to you is:
1600 Viceroy Drive
8th Floor
Dallas, Texas 75235-2306
Attention: Ronald M. Bendalin
Telephone: (214) 599-6501
Fax: (214) 599-7575
cc: Barry Tenenholtz
The address for written communications to us is:
Aspen Funding Corp.
c/o Amacar Group L.L.C.
6707-D Fairview Road
Charlotte, North Carolina 28210
Attention: Douglas Johnson
Telephone: (704) 365-0569
Fax: (704) 365-1362
cc: Deutsche Bank A.G., as agent
31 West 52nd Street
New York, New York 10019
Attention: Gregg Amoroso/Richard Uhlig
Telephone: (212) 469-3987/(212) 469-6940
Fax: (212) 469-7571/(212) 469-6933
(iv) For purposes of this Loan and Security Agreement, if the Margin Notice
Deadline is:
(a) 10:00 A.M. New York City time, then the Margin Call Deadline is 3:00
P.M., New York City time on such Business Day.
(b) 3:00 P.M. New York City time, then the Margin Call Deadline is 2:00
P.M., New York City time on the Business Day following such Margin Notice.
(v) For purposes of this Loan and Security Agreement, instructions for
wire transfer of funds to you shall be as set forth in the Request for
Borrowing.
S1-3
<PAGE>
For purposes of this Loan and Security Agreement, instructions for wire
transfer of funds to us are:
Name of Bank: FRB, NY
Deutsche Bank New York
Bank ABA Number: 0260-03780
Borrower Number: 105366800008
Reference: Aspen Funding Corp.
S1-4
<PAGE>
SCHEDULE 2
to
Loan and Security Agreement
DEFINITIONS
As used in the Loan and Security Agreement, the following terms shall
have the following meanings (all terms defined in this SCHEDULE 2 or in other
provisions of the Loan and Security Agreement in the singular to have the same
meanings when used in the plural and VICE VERSA):
"ACCEPTED SERVICING PRACTICES" shall mean with respect to any Mortgage
Loan, those mortgage servicing practices of prudent mortgage lending
institutions which service mortgage loans of the same type as such Mortgage Loan
in the jurisdiction where the related Mortgaged Property is located.
"ADDITIONAL COLLATERAL" shall have the meaning provided in Section 7
of the Loan and Security Agreement.
"ADJUSTED DEBT" for any Person, as of any date, shall mean the
aggregate amount outstanding of all Indebtedness of such Person, as determined
in accordance with GAAP, provided that such amounts shall be reduced by
Convertible Subordinated Debt of such Person.
"ADJUSTED EQUITY" for any Person, as of any date, shall mean the sum
of (a) shareholders' equity of such Person determined in accordance with GAAP
and (b) Convertible Subordinated Debt of such Person.
"ADVANCE" shall have the meaning provided in Section 1 of the Loan and
Security Agreement.
"AFFILIATE" shall mean any "affiliate" of you or us as such term is
defined in the Bankruptcy Code.
"APPLICABLE SPREAD" shall have the meaning provided on SCHEDULE 1 to
the Loan and Security Agreement.
"ASSETS" shall be the collective reference to Mortgage Loans and
Pledged Securities.
"ASSIGNMENT OF MORTGAGE" means, with respect to any mortgage, an
assignment of the mortgage, notice of transfer or equivalent instrument in
recordable form, sufficient under the laws of the jurisdiction wherein the
related property is located to reflect the assignment and pledge of the
Mortgage.
S2-1
<PAGE>
"BANKRUPTCY CODE" shall mean the United States Bankruptcy Code of
1978, as amended from time to time.
"BORROWER" shall mean FIRSTPLUS Special Funding Corp.
"BORROWER'S DESIGNATED PERSONS" shall have the meaning provided on
EXHIBIT B-2 to the Loan and Security Agreement.
"BORROWING BASE" shall mean the aggregate Market Value of all Eligible
Assets.
"BREAKAGE FEE" shall mean an amount equal to the sum of (a) the
interest accrued on an "actual/360" basis, on the principal balance of any
Advance (or portion thereof) prepaid, for the period commencing on the date such
Advance is prepaid through your specified Loan Maturity Date, at a rate equal to
the excess, if any of: (1) the rate of the applicable LIBOR Rate, determined as
of the date such Loan Maturity Date was specified by you and (2) the rate of the
LIBOR Rate as of the date such Advance is prepaid and (b) all reasonable losses,
expenses and liabilities that arise from prepayment of such Advance, including
without limitation, any loss and expense on liabilities incurred by reason of
liquidating or reemployment of deposits or other funds required by us to fund
your Advances.
"BUSINESS DAY" shall have the meaning provided in Section 5(b) of the
Loan and Security Agreement.
"CALCULATION AGENT" shall be an independent certified public
accountant of recognized national standing or a credit worthy and reputable
investment banking firm that shall be acceptable to Lender, in its sole
discretion.
"CAPITAL LEASE OBLIGATIONS" shall mean, for any Person, all
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) Property to the extent such
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP, and, for purposes of this Loan and
Security Agreement, the amount of such obligations shall be the capitalized
amount thereof, determined in accordance with GAAP.
"CASH COLLATERAL ACCOUNT" shall have the meaning assigned thereto in
the Custodial Agreement.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"COLLATERAL" shall have the meaning provided in Section 9 of the Loan
and Security Agreement.
S2-2
<PAGE>
"COLLATERAL DOCUMENTS" shall mean, with respect to the items of
Collateral, the documents comprising the Collateral File for such Collateral.
"COLLATERAL FILE" shall have the meaning assigned thereto in the
Custodial Agreement.
"COLLATERAL SCHEDULE" shall have the meaning assigned thereto in the
Custodial Agreement.
"COLLATERAL SCHEDULE AND EXCEPTION REPORT" shall mean the collateral
schedule and exception report prepared by the Custodian pursuant to the
Custodial Agreement.
"COLLATERAL SECURITY AGREEMENT" shall have the meaning provided in
Section 12 of the Loan and Security Agreement.
"COLLATERAL TAPE" shall mean a computer-readable magnetic tape
containing the information with respect to each item of Collateral, to be
delivered by you to us pursuant to the Loan and Security Agreement, with tape
fields as set forth in Annex 1 of the Custodial Agreement.
"COLLATERAL VALUE" shall mean for any Collateral, the lesser of
(a) the Market Value of such Collateral divided by the applicable Margin
Percentage and (b) with respect to Collateral consisting of Mortgage Loans, 102%
of the outstanding principal balance of such Collateral.
"COLLECTION ACCOUNT" shall have the meaning assigned thereto in the
Custodial Agreement.
"COMMITTED FACILITY TRANSACTION DOCUMENTS" shall mean the Loan and
Security Agreement, the Custodial Agreement and the Promissory Note, entered
into on the date hereof between you and GACC.
"CONVERTIBLE SUBORDINATED DEBT" for any Person, as of any date, shall
mean certain unsecured subordinated obligations with conversion rights into
securities of such Person that, in our sole good faith discretion, are deemed
substantially similar to preferred or common stock.
"COSTS" shall have the meaning provided in Section 25 of the Loan and
Security Agreement.
"CUSTODIAL AGREEMENT" shall mean the Custodial Agreement, dated as of
the date hereof, among you, the Custodian and us, substantially in the form of
EXHIBIT C hereto, as the same shall be modified and supplemented and in effect
from time to time.
"CUSTODIAN" shall mean Bank One, Texas, N.A., as custodian under the
Custodial Agreement, and its successors and permitted assigns thereunder.
S2-3
<PAGE>
"DAILY RESET LOANS" shall mean Advances for which you have failed to
specify a Loan Maturity Date (pursuant to clause (b) of the definition thereof)
and which shall bear interest at rates based on the rate referred to as the rate
for Daily Reset Loans in the definition of LIBOR Base Rate.
"DEBT-TO-EQUITY RATIO" for any Person, as of any date, shall be
determined as Adjusted Debt of such Person divided by Adjusted Equity of such
Person.
"DEFAULT" shall mean an Event of Default or an event that with notice
or lapse of time or both would become an Event of Default.
"DELINQUENT MORTGAGE LOAN" shall mean an Eligible Mortgage Loan in
respect of which the scheduled payment of principal and/or interest is past due
for a period in excess of 29 days, but not in excess of 59 days (without regard
to grace periods).
"DMG" shall mean Deutsche Morgan Grenfell Inc., or any successor in
interest thereto.
"DMG UNDERWRITING MANDATE" shall mean the agreement with respect to
DMG's right to underwrite or privately place certain securitization and other
collateralized term financing transactions as more particularly set forth in the
Side Letter.
"DOLLARS" and "$" shall mean lawful money of the United States of
America.
"DUE DILIGENCE REVIEW" shall mean our performance of any or all of the
reviews permitted under Section 35 hereof with respect to any or all of the
Collateral, the Seller or the Servicer as we desire from time to time.
"EFFECTIVE DATE" shall mean the date upon which the conditions
precedent set forth in SCHEDULE 3 shall have been satisfied.
"ELIGIBLE ASSETS" shall be the collective reference to Eligible
Mortgage Loans and Eligible Subordinated Securities.
"ELIGIBLE MORTGAGE LOAN" shall mean a Mortgage Loan not previously
pledged hereunder and subsequently released from our Lien hereunder or pledged
under the Committed Facility Transaction Documents and subsequently released to
the lender's Lien thereof unless transferred under the Committed Facility
Transaction Documents pursuant to Section 4(b)(i) of the Loan and Security
Agreement, originated in accordance with the Underwriting Guidelines and secured
by a first or second lien on a one-to-four family residential property, as to
which the representations and warranties in Section 20(q) and Part I of Schedule
4 hereof are correct, and which, when aggregated with other such Mortgage Loans,
has characteristics that, as of any date of determination, are consistent with
Seller's recent residential mortgage loan Securitization Transactions.
S2-4
<PAGE>
"ELIGIBLE SUBORDINATED SECURITIES" shall mean Subordinated Securities
which arise from Seller's Securitization Transactions, which as of the
securitization cut-off date, are secured by mortgage loans which would meet the
requirements of Eligible Mortgage Loans, and where DMG, as lead manager or co-
manager, has participated in the offering or placement of the related
securities.
"ERISA" shall have the meaning provided in Section 20(s) of the Loan
and Security Agreement.
"ERISA AFFILIATE" shall mean any corporation or trade or business that
is a member of any group of organizations (i) described in Section 414(b) or (c)
of the Code of which you are a member and (ii) solely for purposes of potential
liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of the Code
and the lien created under Section 302(f) of ERISA and Section 412(n) of the
Code, described in Section 414(m) or (o) of the Code of which you are a member.
"EUROCURRENCY RESERVE REQUIREMENTS" shall mean, for any day as applied
to a Daily Reset Loan, and for any Interest Period for any Advance other than a
Daily Reset Loan, the aggregate (without duplication) of the rates (expressed as
a decimal fraction) of reserve requirements in effect on such day or during such
Interest Period, as applicable (including without limitation basic,
supplemental, marginal and emergency reserves under any regulations of the Board
of Governors of the Federal Reserve System or other Governmental Authority
having jurisdiction with respect thereto), dealing with reserve requirements
prescribed for eurocurrency funding (currently referred to as "Eurocurrency
Liabilities" in Regulation D of such Board) maintained by a member bank of such
Governmental Authority.
"EVENT OF DEFAULT" shall have the meaning provided in Section 26 of
the Loan and Security Agreement.
"FACILITY AMOUNT" shall have the meaning provided in Section 1 of the
Loan and Security Agreement.
"FIRST LIEN MORTGAGE LOAN" shall mean an Eligible Mortgage Loan
secured by the lien on the Mortgaged Property, subject to no prior liens on such
Mortgaged Property.
"FIRSTPLUS PURCHASE AGREEMENT" shall mean that certain Purchase and
Sale Agreement between you, the Seller and FIRSTPLUS FINANCIAL GROUP, INC. dated
December 12, 1997.
"FIRSTPLUS SERVICING AGREEMENT" shall mean that certain servicing
Agreement between you and the Seller dated December 12, 1997.
"FUNDING DATE" shall mean the date on which an Advance is made
hereunder.
S2-5
<PAGE>
"GACC" shall mean German American Capital Corporation or any successor
thereto.
"GAAP" shall mean generally accepted accounting principles as in
effect from time to time in the United States.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any
state or other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government and any court or arbitrator having jurisdiction over you, any of
your Subsidiaries or any of your properties.
"GUARANTEE" shall mean, as to any Person, any obligation of such
Person directly or indirectly guaranteeing any Indebtedness of any other Person
or in any manner providing for the payment of any Indebtedness of any other
Person or otherwise protecting the holder of such Indebtedness against loss
(whether by virtue of partnership arrangements, by agreement to keep-well, to
purchase assets, goods, securities or services, or to take-or-pay or otherwise);
provided that the term "Guarantee" shall not include (i) endorsements for
collection or deposit in the ordinary course of business, or (ii) obligations to
make servicing advances for delinquent taxes and insurance, other recoverable
advances that are customary in accordance with Accepted Serving Practices or
other obligations in respect of a Mortgaged Property, to the extent required by
us. The amount of any Guarantee of a Person shall be deemed to be an amount
equal to the stated or determinable amount of the primary obligation in respect
of which such Guarantee is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as determined by such Person
in good faith. The terms "GUARANTEE" and "GUARANTEED" used as verbs shall have
correlative meanings.
"INCOME" shall mean, with respect to any Collateral at any time, any
principal thereof and all interest, dividends or other distributions thereon.
"INCOMPLETE DOCUMENTATION MORTGAGE LOAN" shall mean an Eligible
Mortgage Loan for which the Custodian has not received an assignment in blank
(an "Assignment") or endorsement in blank (an "Endorsement), provided however
that for such Eligible Mortgage Loan (1) the related principal balance of such
Mortgage Loan will have been fully disbursed to each Mortgagor prior to pledging
such Mortgage Loan to us, (2) the Custodian shall have certified to its
possession of the original Mortgage, Mortgage Note and all other original
mortgage loan documentation as more particularly described in the Custodial
Agreements except for an Assignment or Endorsement to us and (3) you shall
deliver all remaining mortgage loan documentation to the Custodian within 7
Business Days subsequent to the date that such Mortgage Loan is pledged under
the Loan and Security Agreement.
"INDEBTEDNESS" shall mean, for any Person: (a) obligations created,
issued or incurred by such Person for borrowed money (whether by loan, the
issuance and sale of debt securities or the sale of Property to another Person
subject to an understanding or agreement, contingent or otherwise, to repurchase
such Property from such Person); (b) obligations of such
S2-6
<PAGE>
Person to pay the deferred purchase or acquisition price of Property or
services, other than trade accounts payable (other than for borrowed money)
arising, and accrued expenses incurred, in the ordinary course of business so
long as such trade accounts payable are payable within 90 days of the date the
respective goods are delivered or the respective services are rendered; (c)
Indebtedness of others secured by a Lien on the Property of such Person,
whether or not the respective Indebtedness so secured has been assumed by such
Person; (d) obligations (contingent or otherwise) of such Person in respect of
letters of credit or similar instruments issued or accepted by banks and other
financial institutions for account of such Person; (e) Capital Lease
Obligations of such Person; (f) obligations of such Person under repurchase
agreements or like arrangements; (g) Indebtedness of others Guaranteed by such
Person; (h) all obligations of such Person incurred in connection with the
acquisition or carrying of fixed assets by such Person; and (i) Indebtedness
of general partnerships of which such Person is a general partner.
"INTEREST PERIOD" shall mean, with respect to any Advance, the period
commencing on the Funding Date to but excluding the related Loan Maturity Date.
No Interest Period may end after the Termination Date.
"INTEREST RATE PROTECTION AGREEMENT" shall mean, with respect to any
or all of the Mortgage Loans, any short sale of US Treasury Security, or futures
contract, or mortgage related security, or Eurodollar futures contract, or
options related contract, or interest rate swap, cap or collar agreement or
similar arrangements providing for protection against fluctuations in interest
rates or the exchange of nominal interest obligations, either generally or under
specific contingencies, entered into by you and an Affiliate of ours, and
acceptable to us.
"INVESTMENT GRADE RATING" shall mean, with respect to any Person's
long term public senior debt securities, a rating of at least BBB- by Standard &
Poor's Ratings Group or Baa3 by Moody's Investors Service, Inc.
"LENDER" shall mean Aspen Funding Corp., unless otherwise indicated.
"LENDER'S DESIGNATED PERSONS" shall have the meaning provided on
EXHIBIT B-1 to the Loan and Security Agreement.
"LENDER'S MARGIN AMOUNT" shall mean the product of (a) the applicable
Margin Percentage and (b) the related Advance.
"LIBOR BASE RATE" shall mean, (a) for any Daily Reset Loan, with
respect to each day such Advance is outstanding (or if such day is not a
Business Day, the next succeeding Business Day), the rate per annum equal to the
rate appearing at page 3750 of the Telerate Screen as one-month LIBOR on such
DATE, and if such rate shall not be so quoted, the rate per annum at which we
are offered Dollar deposits at or about 10:00 A.M., New York City time, on such
date by prime banks in the interbank eurodollar market where the eurodollar and
foreign currency and exchange operations in respect of our Advances are then
being conducted for delivery on such day
S2-7
<PAGE>
for a period of one month and in an amount comparable to the amount of the
Advances to be outstanding on such day; or
(b) for any Advance other than a Daily Reset Loan, with respect to
each day during each Interest Period an Advance is outstanding (or if such day
is not a Business Day, the next succeeding Business Day), the rate per annum
equal to the rate appearing at page 3750 of the Telerate Screen as LIBOR Rate
for the number of months closest to the duration of such Interest Period,
rounded up, on the first day of such Interest Period, and if such rate shall not
be so quoted, the rate per annum at which we are offered Dollar deposits for the
aforementioned duration at or about 10:00 A.M., New York City time, on such date
by prime banks in the interbank eurodollar market where the eurodollar and
foreign currency exchange operations in respect of our Advances are then being
conducted for delivery on such day for a comparable Interest Period and in an
amount comparable to the amount of the Advances to be outstanding on such day.
"LIBOR RATE" shall mean, (a) with respect to each day a Daily Reset
Loan is outstanding, and (b) with respect to each day during each Interest
Period pertaining to an Advance other than a Daily Reset Loan, a rate per annum
determined by us in our sole discretion in accordance with the following formula
(rounded upwards to the nearest 1/100th of one percent), which rate as we
determine shall be conclusive absent manifest error by us:
LIBOR BASE RATE
1.00 - Eurocurrency Reserve Requirements
"LIEN" shall have the meaning provided in Section 11 of the Loan and
Security Agreement.
"LOAN AND SECURITY AGREEMENT" shall mean this Loan and Security
Agreement, as the same may be amended, supplemented or otherwise modified from
time to time.
"LOAN DOCUMENTS" shall mean, collectively, this Loan and Security
Agreement, the Note and the Custodial Agreement.
"LOAN MATURITY DATE" shall mean either (a) a date specified by you in
your Request for Borrowing which shall be no later than the 270th day following
the Funding Date or (b) if no such Loan Maturity Date is specified therein, the
third Business Day following such Funding Date.
"MARGIN AMOUNT" shall mean, with respect to any date, the Market Value
of the Collateral on such date minus the amount of Advances hereunder.
"MARGIN DEFICIT" shall have the meaning provided in Section 7 of the
Loan and Security Agreement.
S2-8
<PAGE>
"MARGIN EXCESS" shall have the meaning provided in Section 7 of the
Loan and Security Agreement.
"MARGIN PERCENTAGE" shall have the meaning provided in SCHEDULE 1
hereto.
"MARKET CAPITALIZATION" for any Person, as of any date, shall be
determined as the product of (a) the then outstanding shares of common stock of
such Person multiplied by (b) the closing common stock price (per share) of such
Person as such date of determination.
"MARKET VALUE" shall mean with respect to any Collateral as of any
date, the dollar amount ascribed to such Collateral on that date by us in our
sole good faith discretion; provided that:
(a) the Market Value shall be deemed to be zero with respect to any
item of Collateral:
1) which fails to meet the definition of Eligible Assets; or
2) in respect of which there is a breach of a representation and
warranty set forth on SCHEDULE 4 hereto (assuming each
representation and warranty is made as of the date the Market
Value is determined); or
3) in respect of which there is a delinquency in the payment of
principal and/or interest which continues for a period in excess
of 59 days (without regard to grace periods); or
4) which is an Eligible Mortgage Loan and remains pledged to us
under the Loan and Security Agreement later than 330 days after
the date on which it is first included in the Collateral; or
5) which is a Pledged Security and remains pledged to us under the
Loan and Security Agreement later than 540 days after the date on
which it is first included in the Collateral; or
6) delivered to the Custodian and which has been released from the
possession of the Custodian under the Custodial Agreement for a
period in excess of 14 calendar days; or
7) which is an Incomplete Documentation Mortgage Loan in respect of
which the Custodian has failed to receive a complete Collateral
File within seven (7) Business Days following the Applicable
Funding Date;
(b) the aggregate Market Value of Eligible Mortgage Loans that are
Incomplete Documentation Mortgage Loans in excess of the lesser of (1) 5% of the
aggregate outstanding
S2-9
<PAGE>
principal balance of all Eligible Mortgage Loans and (2) $50,000,000, in
either case, as of any date that Market Value is determined, shall be deemed
to be zero;
(c) the aggregate Market Value of Eligible Mortgage Loans that are
Delinquent Mortgage Loans in excess of 3% of the aggregate Market Value of all
Mortgage Loans, as of any date that Market Value is determined, shall be deemed
to be zero; and
(d) unless otherwise expressly agreed by us, the Market Value of any
Collateral shall be zero if at any time such Collateral has been assigned a
Market Value of zero.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on
(a) your Property, business, operations, financial condition or prospects,
(b) your ability to perform your obligations under any of the Loan Documents to
which you are a party, (c) the validity or enforceability of any of the Loan
Documents, (d) our rights and remedies under any of the Loan Documents, (e) the
timely payment of the principal of or interest on the Advances or other amounts
payable in connection therewith or (f) the Collateral.
"MINIMUM ADVANCE AMOUNT" shall have the meaning provided in Section 2
of the Loan and Security Agreement.
"MORTGAGE" shall mean the mortgage, deed of trust or other instrument
securing a Mortgage Note, which creates a first or second lien on the fee in
real property securing the Mortgage Note.
"MORTGAGE LOAN" shall mean a mortgage loan which the Custodian has
been instructed to hold for us pursuant to the Custodial Agreement, and which
Mortgage Loan includes, without limitation, (i) a Mortgage Note and related
Mortgage and (ii) all of your right, title and interest in and to the Mortgaged
Property covered by such Mortgage.
"MORTGAGE NOTE" shall mean the original executed promissory note or
other evidence of the indebtedness of a mortgagor/borrower with respect to a
Mortgage Loan.
"MORTGAGED PROPERTY" shall mean the real property (including all
improvements, buildings, fixtures, building equipment and personal property
thereon and all additions, alterations and replacements made at any time with
respect to the foregoing) and all other collateral securing repayment of the
debt evidenced by a Mortgage Note.
"MORTGAGOR" shall mean the obligor on a Mortgage Note.
"MULTIEMPLOYER PLAN" shall mean a Plan which is a Multiemployer plan
as defined in Section 4001(a)(3) of ERISA.
"NET INCOME" shall mean, for any period, your net income for such
period as determined in accordance with GAAP.
S2-10
<PAGE>
"NOTE" shall have the meaning provided in Section 1 of the Loan and
Security Agreement.
"PAYMENT DATE" shall mean (a) the 15th day of each calendar month (or
if the 15th day is not a Business Day, than the next Business Day), commencing
with the 15th day of the month following the month in which the first Funding
Date occurs, and (b) the Termination Date.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"PERSON" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, limited liability company, trust,
unincorporated association or government (or any agency, instrumentality or
political subdivision thereof).
"PLAN" shall mean at a particular time, any employee benefit plan
which is covered by ERISA and in respect of which you or a commonly controlled
entity is (or, if such plan were terminated at such time, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"PLEDGED SECURITIES" shall mean the Subordinated Securities pledged to
us hereunder from time to time and held by us as Collateral under the Loan and
Security Agreement.
"POOLING AND SERVICING AGREEMENT" shall mean any pooling and servicing
agreement, sale and servicing agreement, trust agreement or other agreement
pursuant to which the Mortgage Loans ultimately underlying any of the Pledged
Securities are serviced or administered or the Pledged Securities are issued or
exchanged.
"POST-DEFAULT RATE" shall mean, in respect of the payment of any
principal of any Advance or any other amount under this Loan and Security
Agreement, the Note or any other Loan Document that is not paid when due to us
(whether at stated maturity, by acceleration, by optional or mandatory
prepayment or otherwise), a rate per annum during the period from and including
the due date to but excluding the date on which such amount is paid in full
equal to 3% per annum PLUS the applicable LIBOR Rate for Daily Reset Loans for
each day such Post-Default Rate shall apply.
"PROPERTY" shall mean any right or interest in or to property of any
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"REQUEST FOR BORROWING" shall have the meaning provided in Section 2
of the Loan and Security Agreement.
"REQUESTING DEADLINE" shall have the meaning provided in Section 2 of
the Loan and Security Agreement.
S2-11
<PAGE>
"RESPONSIBLE OFFICER" shall mean, as to any Person, the chief
executive officer or senior vice president or, with respect to financial
matters, the chief financial officer or treasurer of such Person.
"SECOND LIEN MORTGAGE LOAN" shall mean an Eligible Mortgage Loan
secured by the lien on the Mortgaged Property, subject to one prior lien on such
Mortgaged Property.
"SECURED OBLIGATIONS" shall have the meaning provided in Section 8 of
the Loan and Security Agreement.
"SECURITIZATION TRANSACTION" shall mean a securitization transaction
backed by Mortgage Loans underwritten or placed on behalf of your Affiliate
which transaction has received an investment grade rating from any nationally-
recognized rating agency and otherwise conforms to the current standards of
institutional securitization applicable to mortgage loans substantially similar
in nature to the Mortgage Loans.
"SELLER" shall mean FIRSTPLUS FINANCIAL, INC. or any successor
thereto.
"SERVICER" shall have the meaning provided in Section 34 of the Loan
and Security Agreement.
"SERVICING AGREEMENT" shall have the meaning provided in Section 34 of
the Loan and Security Agreement.
"SERVICING RECORDS" shall have the meaning provided in Section 34 of
the Loan and Security Agreement.
"SIDE LETTER" shall mean that certain letter agreement between DMG,
the Seller and the Borrower setting forth the parties' understanding with
respect to the DMG Underwriting Mandate.
"SUBORDINATED SECURITIES" shall mean interest-only strips, residual
interests, subordinated interests or reserve certificates issued and transferred
to you in connection with any Securitization Transaction or any other collateral
as we may deem appropriate.
"SUBSIDIARY" shall mean, with respect to any Person, any corporation,
partnership or other entity of which at least a majority of the securities or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions of such corporation, partnership or other entity (irrespective of
whether or not at the time securities or other ownership interests of any other
class or classes of such corporation, partnership or other entity shall have or
might have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person.
S2-12
<PAGE>
"TANGIBLE NET WORTH" shall mean, as to any Person as of a particular
date,
(a) all amounts which would be included under capital on a balance
sheet of such Person at such date, determined in accordance with GAAP, LESS
(b) (i) amounts owing to such Person from Affiliates and (ii)
intangible assets determined in accordance with GAAP.
"TERMINATION DATE" shall mean December 12, 1998 or such earlier date
on which this Loan and Security Agreement shall terminate in accordance with the
provisions hereof or by operation of law.
"TEST PERIOD" shall have the meaning provided in Section 22(n) of the
Loan and Security Agreement.
"TOTAL INDEBTEDNESS" shall mean, for any period, your aggregate
Indebtedness of during such period LESS the amount of any nonspecific balance
sheet reserves maintained in accordance with GAAP.
"TRUSTEE" shall mean, with respect to any Pooling and Servicing
Agreement, the trustee thereunder.
"UNDERWRITING GUIDELINES" shall mean the underwriting guidelines used
in connection with the organization of the Mortgage Loans attached as EXHIBIT H
hereto.
"UNIFORM COMMERCIAL CODE" shall mean the Uniform Commercial Code as in
effect on the date hereof in the State of New York; provided that if by reason
of mandatory provisions of law, the perfection or the effect of perfection or
non-perfection of the security interest in any Collateral is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than New York,
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in effect in
such other jurisdiction for purposes of the provisions hereof relating to such
perfection or effect of perfection or non-perfection.
S2-13
<PAGE>
SCHEDULE 3
to
Loan and Security Agreement
CONDITIONS PRECEDENT
I. INITIAL ADVANCE. Our obligation to make the initial Advance
hereunder is subject to the satisfaction, immediately prior to or concurrently
with the making of such Advance, of the condition precedent that we shall have
received all of the following documents, each of which shall be satisfactory to
us and our counsel in form and substance:
(a) LOAN DOCUMENTS. The Loan Documents, duly completed and executed.
(i) NOTE. The Note, duly completed and executed;
(ii) CUSTODIAL AGREEMENT. The Custodial Agreement, duly executed and
delivered by you and the Custodian. In addition, you shall have taken such
other action as we shall have requested in order to perfect the security
interests created pursuant to the Loan and Security Agreement;
(b) ORGANIZATIONAL DOCUMENTS. A good standing certificate and
certified copies of (i) the Seller's and your charter and by-laws (or equivalent
documents), along with (ii) certified copies of resolutions of the Seller's and
your board of directors authorizing a Designated Person to execute the
agreements to which it and you are a party and any documents delivered pursuant
hereto, together with specimen signatures of such Borrower's Designated Persons;
(c) LEGAL OPINION. A legal opinion of your counsel, substantially in
the form attached to the Loan and Security Agreement as EXHIBIT D;
(d) TRUE SALE NON-CONSOLIDATION OPINION. A true sale and non-
consolidation legal opinion of your counsel in form and substance acceptable to
us;
(e) COLLATERAL SCHEDULE AND EXCEPTION REPORT. A Collateral Schedule
and Exception Report, dated the Effective Date, from the Custodian, duly
completed;
(f) SERVICING AGREEMENT(S). Any Servicing Agreement, including the
FIRSTPLUS Servicing Agreement, in form and substance satisfactory to us in our
discretion certified as a true, correct and complete copy of the original, with
the letter of the applicable Servicer consenting to termination of such
Servicing Agreement upon the occurrence of an Event of Default attached. We
shall have reviewed and approved such Servicer of the Collateral;
(g) BLOCKED ACCOUNT AGREEMENT. A Blocked Account Agreement,
substantially in the form of Exhibit F to the Loan and Security Agreement, duly
completed;
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(h) RELATED AGREEMENTS. The Committed Facility Transaction
Documents, duly executed and delivered by you;
(i) SIDE LETTER. The Side Letter, duly executed and delivered by
you;
(j) REQUEST FOR BORROWING. A Request for Borrowing delivered by you;
(k) PURCHASE AGREEMENT. The FIRSTPLUS Purchase Agreement, in form
and substance satisfactory to us in our discretion certified as a true, correct
and complete copy of the original;
(l) DISTRIBUTION WORKSHEET. The form of Distribution Worksheet to be
delivered pursuant to the Servicing Agreement shall have been approved by us;
(m) COLLATERAL TAPE. Additional information fields not set forth on
Annex 1 to the Custodial Agreement but reasonably requested by us shall be set
forth on the Collateral Tape delivered to us;
(n) OTHER DOCUMENTS. Such other documents as we may reasonably
request.
II. INITIAL AND SUBSEQUENT ADVANCES. The making of each Advance to you
(including the initial Advance) on any Business Day is subject to the
satisfaction of the following further conditions precedent, both immediately
prior to the making of such Advance and also after giving effect thereto and to
the intended use thereof:
(a) no Default or Event of Default shall have occurred and be
continuing;
(b) both immediately prior to the making of such Advance and also
after giving effect thereto and to the intended use thereof, the representations
and warranties made by you in the Loan and Security Agreement and SCHEDULE 4
thereto, and elsewhere in any other document related thereto, shall be true and
complete on and as of the date of the making of such Advance in all material
respects (in the case of the representations and warranties in Section 20(q) and
SCHEDULE 4, solely with respect to Mortgage Loans included in the Borrowing
Base) with the same force and effect as if made on and as of such date (or, if
any such representation or warranty is expressly stated to have been made as of
a specific date, as of such specific date). We shall have received an officer's
certificate signed by one of your Responsible Officers certifying as to the
truth and accuracy of the above, which certificate shall specifically include a
statement that you are in compliance in all material respects with all
governmental licenses and authorizations and are qualified to do business and in
good standing in all required jurisdictions;
(c) the aggregate outstanding principal amount of the Advances shall
not exceed the Borrowing Base;
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(d) subject to our right to perform one or more Due Diligence Reviews
pursuant to Section 35 of the Loan and Security Agreement, we shall have
completed our due diligence review of the Mortgage Loan Documents for each
Advance and such other documents, records, agreements, instruments, mortgaged
properties or information relating to such Advances as we, in our sole
discretion, deem appropriate to review and such review shall be satisfactory to
us in our sole discretion;
(e) we shall have received from the Custodian a Trust Receipt with
exceptions as are acceptable to us in our sole discretion in respect of Eligible
Assets to be pledged hereunder on such Business Day and a Collateral Schedule
and Exception Report, in each case dated such Business Day and duly completed;
(f) we shall have received from you a Warehouse Lender's Release
Letter substantially in the form of EXHIBIT G-2 hereto (or such other form
acceptable to us) or a Borrower's Release Letter substantially in the form of
EXHIBIT G-1 hereto (or such other form acceptable to us) covering each Mortgage
Loan to be pledged to us;
(g) none of the following shall have occurred and/or be continuing:
(i) an event or events shall have occurred resulting in the effective
absence of a public or private market for mortgage- and asset-backed securities,
that (a) are secured by single-family residential mortgages and (b) as of the
date hereof, can be readily securitized in the domestic capital markets (the
"U.S. Mortgage Securities Market"); or
(ii) the long-term rating of Deutsche Bank AG by Moody's Investors
Service, Inc. and Standard and Poor's, Ratings Group shall be downgraded to Baa
or lower or BBB or lower by each such agency, respectively;
(h) we shall have received from you a Request for Borrowing; and
(i) we shall have reviewed (no later than 20 Business Days following
receipt of same) and approved in our sole discretion any modifications or
amendments to the Underwriting Guidelines.
S3-3
<PAGE>
SCHEDULE 4
to
Loan and Security Agreement
REPRESENTATIONS AND WARRANTIES RE: MORTGAGE LOANS
Part I. ELIGIBLE MORTGAGE LOANS
As to each Mortgage Loan included in the Borrowing Base on a Funding
Date (and the related Mortgage, Mortgage Note, Assignment of Mortgage and
Mortgaged Property), you shall be deemed to make the following representations
and warranties to us as of such date and as of each date Market Value is
determined (certain defined terms used herein and not otherwise defined in the
Loan and Security Agreement appearing in Part III to this Schedule 4). With
respect to any representations and warranties made to the best of your
knowledge, in the event that it is discovered that the circumstances with
respect to the related Mortgage Loan are not accurately reflected in such
representation and warranty notwithstanding your knowledge or lack of knowledge,
then, notwithstanding that such representation and warranty is made to the best
of your knowledge, such Mortgage Loan shall be assigned a Collateral Value of
zero.
(a) MORTGAGE LOAN INFORMATION. The information with respect to each
Mortgage Loan set forth in the Mortgage Loan Schedule is true and correct in all
material respects as of the applicable Funding Date.
(b) DELIVERY OF MORTGAGE LOAN DOCUMENTS. All of the original or
certified documentation required to be delivered to the Custodian on or prior to
the Funding Date, or as otherwise provided in this Loan and Security Agreement
has or will be so delivered.
(c) PAYMENTS CURRENT. As of the applicable Funding Date, none of the
Initial Mortgage Loans are more than 59 days contractually delinquent, based on
the terms under which the related Mortgages and Mortgage Notes have been made.
You have not advanced funds, or induced, solicited or knowingly received any
advance of funds from a party other than the related Mortgagor, directly or
indirectly, for the payment of any amount required by any Mortgage Loan.
(d) NO OUTSTANDING CHARGES. There are no defaults in complying with
the terms of the Mortgage securing the Mortgage Loan, and all taxes,
governmental assessments, insurance premiums, water, sewer and municipal
charges, leasehold payments or ground rents which previously became due and
owing have been paid, or an escrow of funds has been established in an amount
sufficient to pay for every such item which remains unpaid and which has been
assessed but is not yet due and payable. Neither you nor the Qualified
Originator from which you acquired the Mortgage Loan has advanced funds, or
induced, solicited or knowingly received any advance of funds by a party other
than the Mortgagor, directly or indirectly, for the payment of any amount
required under the Mortgage Loan, except for interest accruing from the date of
the Mortgage Note or date of disbursement of the proceeds of the Mortgage Loan,
whichever is earlier, to the
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day which precedes by one month the Due Date of the first installment of
principal and interest thereunder.
(e) NO WAIVER OR MODIFICATION. The terms of each Mortgage Note and
Mortgage, have not been impaired, waived, altered or modified in any respect,
except by written instruments reflected in the Collateral File and no provision
of any Mortgage or Mortgage Note has been "whited out" or erased unless such
modification has been initialed by each of the parties to the related Mortgage
Loan. No instrument of waiver, alteration, modification or assumption has been
executed except for the instruments that are part of the Collateral File and the
terms of which are reflected in the Collateral File.
(f) NO DEFENSES. No Mortgage Note or Mortgage is subject to any
right of rescission, claim, setoff, counterclaim or defense, including the
defense of usury, nor will the operation of any of the terms of any Mortgage
Note or Mortgage or the exercise of any right thereunder, render such Mortgage
Note 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 Mortgage Loan was
originated. You have no knowledge nor have you received any notice that any
Mortgagor in respect of the Mortgage Loan is a debtor in any state or federal
bankruptcy or insolvency proceeding.
(g) COMPLIANCE WITH LAWS; RELIEF ACT MATTERS. Any and all
requirements of any federal, state or local law applicable to each Mortgage 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 Mortgage Loan. Each Mortgage 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
Mortgagor under the Soldiers' and Sailors' Civil Relief Act of 1940.
(h) 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 Mortgage 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.
(i) VALID LIEN. With respect to each Mortgage Note, the related
Mortgage is or creates a valid, subsisting and enforceable lien on the related
Mortgaged Property.
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<PAGE>
(j) VALIDITY OF MORTGAGE LOAN DOCUMENTS; ENTIRE AGREEMENT. Each
Mortgage Note and each Mortgage is genuine and each is the legal, valid and
binding obligation of the Mortgagor 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 Mortgage Note
and each Mortgage had legal capacity at the time to enter into the related
Mortgage Loan and to execute and deliver such Mortgage Note and Mortgage, and
such Mortgage Note and Mortgage have been duty and property executed by such
parties. The Mortgage Note and the Mortgage contain the entire agreement
between the related Mortgagor and the lender and all obligations of the lender
under the related Mortgage Loan, and no other agreement defines, modifies, or
expands the obligations of the lender under the Mortgage Loan, except for any
assumptions or modifications included in the Collateral File.
(k) FULL DISBURSEMENT OF PROCEEDS. The proceeds of each Mortgage
Loan have been fully disbursed and there is no requirement for future advances
thereunder. All costs, fees and expenses incurred in making or closing each
Mortgage Loan and the recording of the Mortgage have been disbursed. The
Mortgagor is not entitled to any refund of any amounts paid or due under the
Mortgage Note or any related Mortgage and any and all requirements set forth in
the related Mortgage Loan Documents have been complied with.
(l) OWNERSHIP. Immediately prior to the pledge thereof to us, you
had good and marketable title to each Mortgage Loan, Mortgage Note and Mortgage,
you were the sole owner thereof and had full right to sell each Mortgage Loan,
Mortgage Note and Mortgage free and clear of any Encumbrance, equity, lien,
pledge, charge, claim or security interest.
(m) OWNERSHIP OF MORTGAGED PROPERTY. With respect to each Mortgage
Loan, the related Collateral File contains a title document reflecting that
title to the related Mortgaged Property is held by the Mortgagor under such
Mortgage Loan.
(n) NO DEFAULTS. There is no default, breach, violation or event of
acceleration existing under any Mortgage or any Mortgage Note and, to the best
of your 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 you nor your
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 Collateral File. With respect
to each Mortgage Loan which is indicated by you to be a Second Lien Mortgage
Loan (as reflected on the Mortgage Loan Schedule) (i) the prior mortgage is in
full force and effect, (ii) there is no default, breach, violation or event of
acceleration existing under such prior mortgage or the related mortgage note,
(iii) no event which, with the passage of time or with notice and the expiration
of any grace or cure period, would constitute a default, breach, violation or
event of acceleration thereunder, and either (A) the prior mortgage contains a
provision which allows or (B) applicable law requires, the Mortgagee under the
Second Lien Mortgage Loan to receive notice of, and affords such Mortgagee an
opportunity to cure any default by payment in full or otherwise under the prior
mortgage.
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<PAGE>
(o) 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 Mortgage Loan. With respect to each Mortgage Loan that is not a
first mortgage loan, either (i) no consent for the Mortgage Loan is required by
the holder of the related prior lien or (ii) such consent has been obtained and
has been delivered to the Custodian.
(p) NO CONDEMNATION OR DAMAGE; GOOD REPAIR. To the best of your
knowledge, the physical condition of each Mortgaged Property has not
deteriorated since the date of origination of the related Mortgage Loan (normal
wear and tear excepted) and there is no proceeding pending for the total or
partial condemnation of any Mortgaged Property. To the best of your 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 Mortgage
Loan.
(q) ENVIRONMENTAL COMPLIANCE. To the best of your 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.
(r) 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.
(s) SECURITY. No Mortgage Note is, or has been, secured by any
collateral except the lien of the related Mortgage.
(t) DEED OF TRUST. If a Mortgage for a Mortgage 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
you to the trustee under the deed of trust, except in connection with default
proceedings and a trustee's sale after default by the related Mortgagor.
(u) INSPECTIONS OF IMPROVEMENTS; AND NO ENCROACHMENT. To the best of
your knowledge, all inspections, licenses and certificates required to be made,
obtained and issued as of the Funding Date with respect to the improvements and
the use and occupancy of all occupied portions of all Mortgaged Property have
been made, obtained or issued as applicable. To the best of your knowledge, all
improvements which were considered in determining the Appraised Value of the
Mortgaged Property lay wholly within the boundaries and building restrictions
lines of the related property and no improvements on adjoining properties
encroach upon such property and no improvement located on or being a part of
such property is in violation of any applicable zoning laws or regulation.
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<PAGE>
(v) HAZARD INSURANCE. The Mortgaged Property is insured by a fire
and extended perils insurance policy, issued by a Qualified Insurer, and such
other hazards as are customary in the area where the Mortgaged Property is
located, and to the extent required by you as of the date of origination
consistent with the Underwriting Guidelines, against earthquake and other risks
insured against by Persons operating like properties in the locality of the
Mortgaged Property with respect to First Lien Mortgage Loans, in an amount not
less than the greatest of (i) 100% of the replacement cost of all improvements
to the Mortgaged Property, (ii) the outstanding principal balance of the
Mortgage Loan, or (iii) the amount necessary to avoid the operation of any co-
insurance provisions with respect to the Mortgaged Property, and consistent with
the amount that would have been required as of the date of origination in
accordance with the Underwriting Guidelines. All such insurance policies
(collectively, the "hazard insurance policy") contain a standard mortgagee
clause naming you, your successors and assigns (including without limitation,
subsequent owners of the Mortgage Loan), as Mortgagee, and may not be reduced,
terminated or canceled without 30 days' prior written notice to the Mortgagee.
No such notice has been received by you. All premiums on such insurance policy
have been paid. The related Mortgage obligates the Mortgagor to maintain all
such insurance and, at such Mortgagor's failure to do so, authorizes the
Mortgagee to maintain such insurance at the Mortgagor's cost and expense and to
seek reimbursement therefor from such Mortgagor. Where required by state law or
regulation, the Mortgagor has been given an opportunity to choose the carrier of
the required hazard insurance, provided the policy is not a "master" or
"blanket" hazard insurance policy covering a condominium, or any hazard
insurance policy covering the common facilities of a planned unit development.
The hazard insurance policy is the valid and binding obligation of the insurer
and is in full force and effect. You have not engaged in, and have no knowledge
of the Mortgagor's having engaged in, any act or omission which would impair the
coverage of any such policy, the benefits of the endorsement provided for
herein, or the validity and binding effect of either including, without
limitation, no unlawful fee, commission, kickback or other unlawful compensation
or value of any kind has been or will be received, retained or realized by any
attorney, firm or other Person, and no such unlawful items have been received,
retained or realized by you.
(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 our rights and
remedies 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 ORIGINATOR AND SERVICING PRACTICES. Each Mortgage
Loan has been underwritten or re-underwritten in accordance with your then-
current underwriting guidelines. The origination practices used by each
originator of the Mortgage Loans and the servicing and collection practices used
by you with respect to each Mortgage Loan have been in
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<PAGE>
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 your knowledge, no fraud or misrepresentation was
committed by any Person in connection with the origination or servicing of
each Mortgage Loan.
(y) SELECTION CRITERIA; NO BULK TRANSFER. The Mortgage Loans were
not selected by you for pledge to us on any basis intended to adversely affect
us. The pledge of the Mortgage Note and the Mortgages by you to us was not
subject to the bulk transfer laws or any similar statutory provisions in effect
in any applicable jurisdiction.
(z) NO FRAUDULENT CONVEYANCE. The Mortgage Loans are not being
transferred with any intent to hinder, delay or defraud any creditors.
(aa) VALUE AND MARKETABILITY. To the best of your knowledge, there do
not exist any circumstances, conditions or information with respect to the
Mortgage Loan, the related Mortgaged Property, the Mortgagor or the Mortgagor's
credit standing that reasonably can be expected to cause private institutional
investors investing in same type of Mortgage Loan to regard such Mortgage Loan
as an unacceptable investment, to increase the likelihood that such Mortgage
Loan will become delinquent, or adversely affect the value or marketability of
such Mortgage Loan.
(bb) TERMS OF MORTGAGE LOANS AND INTEREST METHOD. Each Mortgage Loan
is a fixed rate loan. Each Mortgage Note has an original term to maturity of
not less than 24 months nor more than 25 years and three months from the date of
origination. Each Mortgage Note is payable in monthly installments of principal
and interest, with interest payable in arrears, and requires a monthly payment
which is sufficient to amortize the original principal balance over the original
term and to pay interest at the related Mortgage Loan Interest Rate. No
Mortgage Note provides for any extension of the original term. Interest for
each Mortgage Loan is calculated at a rate of interest computed by the simple
interest method or the actuarial method.
(cc) TYPES OF MORTGAGE LOANS; RETAIL INSTALLMENT CONTRACTS. Each
Mortgage Loan is either (i) a Home Improvement Loan, (ii) a Debt Consolidation
Loan, or (iii) a Combination Loan. No Mortgage Loan was originated for the
express purpose of purchasing a manufactured home.
(dd) NO BUYDOWN, GPM OR SHARED APPRECIATION LOANS. No Mortgage 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 you, the Mortgagor or anyone else on behalf of the Mortgagor, or paid by any
source other than the Mortgagor. No Mortgage Loan contains any other similar
provision which may constitute a "buydown" provision. No Mortgage Loan is a
graduated payment mortgage loan. No Mortgage Loan has a shared appreciation or
other contingent interest feature.
(ee) CLTV. No Mortgage Loan has a CLTV greater than 130%.
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<PAGE>
(ff) TITLE INSURANCE. The Mortgaged Property is covered by either
(i) an attorney's opinion of title and abstract of title, the form and substance
of which is acceptable to prudent mortgage lending institutions making mortgage
loans in the area wherein the Mortgaged Property is located or (ii) an ALTA
lender's title insurance policy or other generally acceptable form of policy or
insurance acceptable to FNMA or FHLMC and each such title insurance policy is
issued by a title insurer acceptable to FNMA or FHLMC and qualified to do
business in the jurisdiction where the Mortgaged Property is located, insuring
you, your successors and assigns, (A) with respect to First Lien Mortgage Loans,
as to the priority lien of the Mortgage in the original principal amount of the
Mortgage Loan (or to the extent a Mortgage Note provides for negative
amortization, the maximum amount of negative amortization in accordance with the
Mortgage), and in the case of adjustable rate Mortgage Loans, against any loss
by reason of the invalidity or unenforceability of the lien resulting from the
provisions of the Mortgage providing for adjustment to the Mortgage Interest
Rate and Monthly Payment, and (B) with respect to Second Lien Mortgage Loans,
naming you as loss payee under such policy. Where required by state law or
regulation, the Mortgagor has been given the opportunity to choose the carrier
of the required mortgage title insurance. Additionally, such lender's title
insurance policy affirmatively insures ingress and egress and against
encroachments by or upon the Mortgaged Property or any interest therein. The
title policy does not contain any special exceptions (other than the standard
exclusions) for zoning and uses and has been marked to delete the standard
survey exception or to replace the standard survey exception with a specific
survey reading. You and your successors and assigns, are the sole insureds of
such lender's title insurance policy, and such lender's title insurance policy
is valid and remains in full force and effect and will be in force and effect
upon the consummation of the transactions contemplated by this Loan and Security
Agreement. No claims have been made under such lender's title insurance policy,
and no prior holder or servicer of the related Mortgage, yourself included, has
done, by act or omission, anything which would impair the coverage of such
lender's title insurance policy, including, without limitation, no unlawful fee,
commission, kickback or other unlawful compensation or value of any kind has
been or will be received, retained or realized by any attorney, firm or other
Person, and you have not received, retained or realized any such unlawful items.
(gg) NO CHATTEL PAPER. Each Mortgage Note is comprised of one
original promissory note and each such promissory note constitutes an
"instrument" for purposes of Section 9-105(l)(i) of the UCC. No Mortgage Note
constitutes or is comprised of "chattel paper" as such term is defined in
Section 9-105(l)(b) of the UCC. Each Mortgage Note has been delivered to the
Custodian.
(hh) REVIEW BY YOU. In light of your Underwriting Guidelines, you
have reviewed all of the documents constituting each Collateral File and have
made such inquiries as you deem reasonable under the circumstances to make and
confirm the accuracy of the representations set forth herein.
(ii) NO MECHANICS' LIENS. There are no mechanics' or similar liens or
claims which have been filed for work, labor or material (and no rights are
outstanding that under the law
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<PAGE>
could give rise to such liens) affecting the Mortgaged Property which are or
may be liens prior to, or equal or coordinate with, the lien of the Mortgage.
(jj) TRANSFER OF MORTGAGE LOANS. The Assignment of Mortgage is in
recordable form and is acceptable for recording under the laws of the
jurisdiction in which the Mortgaged Property is located.
(kk) DUE-ON-SALE. The Mortgage contains an enforceable provision for
the acceleration of the payment of the unpaid principal balance of the Mortgage
Loan in the event that the Mortgaged Property is sold or transferred without the
prior written consent of the Mortgagee thereunder.
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<PAGE>
Part II. REPRESENTATIONS OF THE BORROWER WITH RESPECT TO THE PLEDGED
SECURITIES.
As to the Pledged Securities including in the Borrowing Base on a
Funding Date, you shall be deemed to make the following representations and
warranties to us as of such date and as of each date Market Value is determined
(certain defined terms used herein and not otherwise defined in the Loan and
Security Agreement appearing in Part III to this SCHEDULE 4). With respect to
any representations and warranties made to the best of your knowledge, in the
event that it is discovered that the circumstances with respect to the related
Pledged Securities are not accurately reflected in such representation and
warranty notwithstanding your knowledge or lack of knowledge, then,
notwithstanding that such representation and warranty is made to the best of
your knowledge, such Pledged Securities shall be assigned a Collateral Value of
zero.
(a) All of the Pledged Securities have been validly issued, and are
fully paid and non-assessable, and the Pledged Securities have been offered,
issued and sold in compliance with all applicable laws and (A) there are no
outstanding rights, options, warrants or agreements for the purchase from, or
sale or issuance, in connection with the Pledged Securities; (B) there are no
agreements on the part of you to issue, sell or distribute the Pledged
Securities; and (C) you have no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any securities or any interest therein or
to pay any dividend or make any distribution in respect of the Pledged
Securities.
(b) You are, or will be upon issuance of the Pledged Securities, the
record and beneficial owner of, and have been, or will have been, issued good
title to, the Pledged Securities, free of any and all Liens or options in favor
of, or claims of, any other Person, except the security interest created by the
Loan and Security Agreement.
(c) Upon delivery of the Pledged Securities to us, we shall have a
valid first priority perfected security interest in the Pledged Securities under
the Uniform Commercial Code.
(d) You have obtained from any and all concerned creditors, any
waivers, amendments, releases or acknowledgments necessary to create and perfect
in our favor the first priority security interests provided herein.
S4/II-1
<PAGE>
Part III. DEFINED TERMS
In addition to terms defined elsewhere in the Loan and Security
Agreement, the following terms shall have the following meanings when used in
this Schedule 4:
"ACCEPTED SERVICING PRACTICES" shall mean, with respect to any
Mortgage Loan, those mortgage servicing practices of prudent mortgage lending
institutions which service mortgage loans of the same type as such Mortgage
Loans in the jurisdiction where the related Mortgaged Property is located.
"ALTA" means the American Land Title Association.
"APPRAISED VALUE" shall be determined as set forth in the Underwriting
Guidelines.
"BEST'S" means Best's Key Rating Guide, as the same shall be amended
from time to time.
"CUT-OFF DATE" means the first day of the month in which the related
Funding Date occurs.
"COMBINATION LOAN" shall mean a loan, the proceeds of which were used
by the related obligor in combination to finance property improvements, debt
consolidation, cash-out, or other consumer purposes.
"COMBINED LTV" or "CLTV" shall mean with respect to any Mortgage Loan,
the ratio of (a) the outstanding principal balance as of the related Cut-off
Date of (i) the Mortgage Loan plus (ii) the mortgage loan constituting superior
liens to (b) the Appraised Value of the Mortgaged Property.
"DEBT CONSOLIDATION LOAN" shall mean a loan, the proceeds of which
were primarily used by the related obligor for debt consolidation purposes other
than to finance property improvements.
"DUE DATE" means the day of the month on which the Monthly Payment is
due on a Mortgage Loan, exclusive of any days of grace.
"FHLMC" means the Federal Home Loan Mortgage Corporation, or any
successor thereto.
"FNMA" means the Federal National Mortgage Association, or any
successor thereto.
"HOME IMPROVEMENT LOAN" shall mean a loan, the net proceeds of which
were or will be used by the obligor to finance property improvements.
S4/III-1
<PAGE>
"LOAN-TO-VALUE RATIO" or "LTV" means with respect to any Mortgage
Loan, the ratio of the original outstanding principal amount of the Mortgage
Loan to the lesser of (a) the Appraised Value of the Mortgaged Property at
origination or (b) if the Mortgaged Property was purchased within 12 months of
the origination of the Mortgage Loan, the purchase price of the Mortgaged
Property.
"MONTHLY PAYMENT" means the scheduled monthly payment of principal and
interest on a Mortgage Loan as adjusted in accordance with changes in the
Mortgage Interest Rate pursuant to the provisions of the Mortgage Note for an
adjustable rate Mortgage Loan.
"MORTGAGE INTEREST RATE" means the annual rate of interest borne on a
Mortgage Note, which shall be adjusted from time to time with respect to
adjustable rate Mortgage Loans.
"MORTGAGEE" means you or any subsequent holder of a Mortgage Loan.
"ORIGINATION DATE" shall mean, with respect to each Mortgage Loan, the
date of the Mortgage Note relating to such Mortgage Loan, unless such
information is not provided by you with respect to such Mortgage Loan, in which
case the Origination Date shall be deemed to be the date that is 40 days prior
to the date of the first payment under the Mortgage Note relating to such
Mortgage Loan.
"QUALIFIED INSURER" means an insurance company duly qualified as such
under the laws of the states in which the Mortgaged Property is located, duly
authorized and licensed in such states to transact the applicable insurance
business and to write the insurance provided, and approved as an insurer by FNMA
and FHLMC and whose claims paying ability is rated in the two highest rating
categories by any of the rating agencies with respect to primary mortgage
insurance and in the two highest rating categories by Best's with respect to
hazard and flood insurance.
"QUALIFIED ORIGINATOR" means an originator of Mortgage Loans
reasonably acceptable to us.
S4/III-2
<PAGE>
Schedule 5
to
Loan and Security Agreement
FILING JURISDICTIONS AND OFFICES
Secretary of State of the State of Texas
Secretary of State of the State of Nevada
S5/-1
<PAGE>
Schedule 6
to
Loan and Security Agreement
FORMULA ADJUSTMENT
In the event that FIRSTPLUS FINANCIAL GROUP, INC. elects to change its
accounting methods, including without limitation, those methods relating to the
recognition of "gain on sale" in a manner which would have a material effect
upon shareholders' equity determined in accordance with GAAP, both FIRSTPLUS
FINANCIAL GROUP, INC. and we shall mutually agree upon an alternative financial
ratio or measure, and in the event that, and during any time in which, FIRSTPLUS
FINANCIAL GROUP, INC. and we fail to so agree, then the Debt-to-Equity Ratio
shall be determined and certified by a Calculation Agent based upon FIRSTPLUS
FINANCIAL GROUP, INC.'s accounting methods that were in effect prior to such
change; PROVIDED THAT we may, in our sole and good faith discretion, modify the
respective values of each of the prepayment rate, default rate, discount rate
and all other assumptions we deem material in making such calculation of each
component of the Debt-to-Equity Ratio, including without limitation, to
determine "gain on sale" accounting in accordance with GAAP.
S6-1
<PAGE>
EXHIBIT A
to
The Loan and Security Agreement
FORM OF PROMISSORY GRID NOTE
$__________ Dated _______________, 19__
FOR VALUE RECEIVED, the undersigned (hereinafter called the
"BORROWER"), HEREBY PROMISES TO PAY to the order of Aspen Funding Corp.
(hereinafter called the "LENDER") with respect to each Advance (as defined
below):
(a) the principal amount of such Advance made by the Lender to the
Borrower, on the date specified in the Loan and Security Agreement unless
such other date is mutually agreed to by the Lender and the Borrower at the
time of such Advance as the maturity date thereof, together with interest
(computed on the basis of a year of 360 days for the actual number of days,
including the first day but excluding the last day, elapsed) on the
principal amount of each Advance outstanding from time to time from and
including the date on which such Advance is made until the maturity date of
such Advance, at an interest rate per annum as provided in the Loan and
Security Agreement, payable on the maturity date of such Advance; and
(b) such Advance in the ordinary course of the Borrower's business
out of the cash flow generated in the normal day-to-day conduct and
operations of the Borrower's business which includes sales of Assets in the
ordinary course of your business.
Any overdue principal amount and overdue amount of interest, fees or other
amounts payable hereunder or under the Loan and Security Agreement referred to
below shall bear interest, payable on demand the Post-Default Rate.
The Borrower shall have the right to prepay any unpaid principal
amount of any Advance in accordance with the Loan and Security Agreement.
The Borrower shall make each payment of principal and interest
hereunder prior to 12:00 noon (New York City time) on the day when due in lawful
money of the United States of America to the Lender's account, as set forth in
Schedule 1 of the Loan and Security Agreement, in same day funds. Whenever any
payment to be made hereunder shall be otherwise due on a day other than a
Business Day (as defined in the Loan and Security Agreement), such payment shall
be made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of payment of interest.
The Borrower hereby authorizes the Lender to endorse on the grid
attached hereto the date and amount of each Advance made by the Lender to the
Borrower hereunder, the maturity
Ex. A-1
<PAGE>
date thereof, all payments made on account of principal thereof and the
interest rate applicable thereto, PROVIDED that the failure to do so shall
not affect the obligations of the Borrower to the Lender.
The Borrower also agrees to pay on demand all costs and expenses
(including fees and expenses of counsel) incurred by the Lender in enforcing
this Promissory Note.
THIS PROMISSORY NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
This Promissory Note is the "grid" promissory note referred to in, and
is entitled to the benefits of, the Loan and Security Agreement dated
December 13, 1997 (the "LOAN AND SECURITY AGREEMENT"), between the Borrower and
the Lender, which Loan and Security Agreement, among other things, sets forth
procedures to be used in connection with the Borrower's periodic requests that
the Lender make advances (the "ADVANCES") to the Borrower from time to time in
an aggregate amount not to exceed at any time outstanding the amount first above
mentioned.
FIRSTPLUS Special Funding Corp.
By:
------------------------------------
Name and Title:
------------------------
Ex. A-2
<PAGE>
GRID
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Amount Maturity Interest Rate Date
Date of of of on Payment
Advance Advance Advance Advance Received
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Ex. A-3
<PAGE>
EXHIBIT B-1
to
the Loan and Security Agreement
For the purpose of Section 2 of this Loan and Security Agreement, the
"LENDER'S DESIGNATED PERSONS" are:
Name Title
---- -----
Ex. B-1
<PAGE>
EXHIBIT B-2
to
the Loan and Security Agreement
For the purpose of Section 2 of this Loan and Security Agreement, the
"BORROWER'S DESIGNATED PERSONS" are:
Name Title
---- -----
Ex. B-2
<PAGE>
EXHIBIT C
to
the Loan and Security Agreement
FORM OF CUSTODIAL AGREEMENT
Ex. C-1
<PAGE>
EXHIBIT D
to
the Loan and Security Agreement
FORM OF OPINION OF COUNSEL
Ex. D-1
<PAGE>
EXHIBIT E
to
the Loan and Security Agreement
FORM OF REQUEST FOR BORROWING
Loan and Security Agreement, dated as of December 13, 1997 (the "LOAN
AND SECURITY AGREEMENT"), by and between the Borrower and Aspen Funding Corp.
(the "LENDER"), and Loan and Security Agreement, dated as of December 13, 1997,
by and between the Borrower and German American Capital Corporation.
Agent for Lenders: Deutsche Morgan Grenfell, Inc.
Borrower: FIRSTPLUS Special Funding Corp.
Requested Funding Date:
--------------------------------
Transmission Date:
--------------------------------
Transmission Time:
--------------------------------
Loan Maturity Date:
(If any)
--------------------------------
Collateral to be Pledged:
--------------------------------
UPB: $
-------------------------------
Requested Wire Amount: $
-------------------------------
Wire Instructions:
Requested by:
FIRSTPLUS Special Funding Corp.
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
Ex. E-1
<PAGE>
EXHIBIT F
to
the Loan and Security Agreement
FORM OF BLOCKED ACCOUNT AGREEMENT
December __, 1997
Bank One, Texas, N.A.
- ---------------------
- ---------------------
Attn:
----------------
Re: (1) Collection Account Established by Bank One, Texas, N.A. (the
"CUSTODIAN") Pursuant to the Custodial Agreement (the "ASPEN CUSTODIAL
AGREEMENT"), dated as of December 13, 1997, among the Custodian, Aspen
Funding Corporation ("ASPEN") and FIRSTPLUS SPECIAL FUNDING CORP. (the
"BORROWER"), (2) Cash Collateral Account Established by Aspen Pursuant
to the Loan and Security Agreement dated as of December 13, 1997
("ASPEN LOAN AGREEMENT") between the Lender and the Borrower and the
Aspen Custodial Agreement, (3) Collection Account Established by the
Custodian Pursuant to the Custodial Agreement (together with the Aspen
Custodial Agreement, the "CUSTODIAL AGREEMENTS"), dated as of December
13, 1997, among the Custodian, German American Capital Corporation
("GACC") and, together with Aspen (the "LENDERS"), and (4) Cash
Collateral Account Established by GACC Pursuant to the Loan and
Security Agreement dated as of December 13, 1997, between GACC and the
Borrower and the GACC Custodial Agreement.
Ladies and Gentlemen:
We refer to the account established by the Custodian pursuant to the
Custodial Agreement, at _______________, Account No._____________, ABA#
____________ (the "BLOCKED ACCOUNT"), which Custodian maintains in the name of
the Custodian and the Lenders in trust for the Lenders.
The Custodian will, from time to time, deposit funds received in
accordance with the Custodial Agreements into the Blocked Account. The Lenders
have established secured loan arrangements with the Borrower. By its execution
of this letter, the Custodian acknowledges that the Borrower has granted in
favor of the Lenders a security interests in all of the Borrower's right, title
and interest in and to the Blocked Account and any funds from time to time on
deposit therein, that such funds are received by the Custodian in trust for the
benefit of Lenders and, except as provided below, are for application against
the Borrower's liabilities to the Lenders.
Ex. F-1
<PAGE>
By the Custodian's execution of this letter, it agrees: (a) that all
funds from time to time hereafter in the Blocked Account are the property of the
Borrower held in trust for the benefit of the Lenders and that, unless and until
the Custodian receives notice from a Lender that an event of default has
occurred and is continuing under such Lender's secured lending arrangement with
the Borrower (a "NOTICE OF EVENT OF DEFAULT"), the Custodian shall transfer
funds from the Blocked Account only in accordance with the Lenders' and the
Borrower's joint instructions; (b) that Custodian will not exercise any right of
set-off, banker's lien or any similar right in connection with such funds;
PROVIDED, that in the event any check is returned to the Custodian because of
insufficient funds (or is otherwise unpaid) the Custodian shall be entitled to
set off the amount of any such returned check; (c) that until the Custodian
receives written notification from the Lenders to the contrary, the Custodian
will not withdraw (other than as expressly set forth in the Loan Agreement or
herein) or permit any person or entity to withdraw or transfer funds from the
Blocked Account; (d) that if the Custodian receives a Notice of Event of Default
from a Lender, the Custodian shall not withdraw or permit the Borrower to
withdraw or transfer funds from the Blocked Account and shall cause or permit
withdrawals from the Blocked Account in any manner as the Lenders in their
exclusive discretion may instruct; and (e) without limitation on the foregoing,
the Lenders, jointly, shall have sole dominion and control over the Blocked
Account.
The Lenders agree that their rights with respect to amounts held in
the Blocked Account shall be governed by the Intercreditor Agreement, dated as
of December 13, 1997, between the Lenders.
All bank statements in respect to the Blocked Account shall be sent to
the Borrower with copies to:
Aspen Funding Corp.
c/o Amacar Group, L.L.C.
6707-D Fairview Road
Charlotte, North Carolina 28210
Attention: Douglas Johnson
German American Capital Corporation
31 West 52nd Street
New York, New York 10019
Attention:
Ex. F-2
<PAGE>
Kindly acknowledge your agreement with the terms of this agreement by
signing the enclosed copy of this letter and returning it to the undersigned.
Very truly yours,
ASPEN FUNDING CORP.
By:
-----------------------------------
Title:
Agreed and acknowledged:
BANK ONE, TEXAS, N.A.
By:
-----------------------------------
Title:
GERMAN AMERICAN CAPITAL CORPORATION
By:
-----------------------------------
Title:
By:
-----------------------------------
Title:
FIRSTPLUS FINANCIAL, INC.
By:
-----------------------------------
Title:
Ex. F-3
<PAGE>
EXHIBIT G-1
to
the Loan and Security Agreement
FORM OF BORROWER'S RELEASE LETTER
[Date]
Aspen Funding Corp.
c/o Amacar Group, L.L.C.
6707-D Fairview Road
Charlotte, North Carolina 28210
Attention: Douglas Johnson
Facsimile: (704) 365-1362
Re: Loan and Security Agreement, dated as of December 13, 1997 (the "LOAN
AND SECURITY AGREEMENT"), by and between FIRSTPLUS Special Funding
Corp. (the "BORROWER") and Aspen Funding Corp. (the "LENDER")
Ladies and Gentlemen:
With respect to the mortgage loans described in the attached SCHEDULE
A (the "MORTGAGE LOANS") (a) we hereby certify to you that the Mortgage Loans
are not subject to a lien of any third party and (b) we hereby release all
right, interest or claim of any kind with respect to such Mortgage Loans, such
release to be effective automatically without further action by any party upon
payment from Aspen Funding Corp., of the amount of the Advance contemplated
under the Loan and Security Agreement (calculated in accordance with the terms
thereof) in accordance with the wiring instructions set forth in the Loan and
Security Agreement.
Very truly yours,
FIRSTPLUS Special Funding Corp.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Ex. G1-1
<PAGE>
EXHIBIT G-2
to
the Loan and Security Agreement
FORM OF WAREHOUSE LENDER'S RELEASE LETTER
(Date)
Aspen Funding Corp.
c/o Amacar Group, L.L.C.
6707-D Fairview Road
Charlotte, North Carolina 28210
Attention: Douglas Johnson
Facsimile: (704) 365-1362
Re: Certain Mortgage Loans Identified on SCHEDULE A hereto and owned by
FIRSTPLUS Special Funding Group.
The undersigned hereby releases all right, interest, lien or claim of
any kind with respect to the mortgage loan(s) described in the attached SCHEDULE
A, such release to be effective automatically without any further action by any
party upon payment in one or more installments, in immediately available funds
of $__________________, in accordance with the following wire instructions:
-----------------------------
-----------------------------
Very truly yours,
[WAREHOUSE LENDER]
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Ex. G2-1
<PAGE>
EXHIBIT H
to
the Loan and Security Agreement
UNDERWRITING GUIDELINES
Ex. H-1
<PAGE>
EXHIBIT I
to
the Loan and Security Agreement
FORM OF TRUSTEE INSTRUCTION LETTER
__________ __, 1997
- --------------------, as Trustee
- --------------------
- --------------------
Attention:
-----------------
Re: Loan and Security Agreement, dated as of December 13, 1997, by and
between Aspen Funding Corp., as Lender and Pledgee, and FIRSTPLUS
Special Funding Corp., as Borrower and Pledgor
Ladies and Gentlemen:
Pursuant to Section 10 of the Loan and Security Agreement, dated as of
December 13, 1997 (the "LOAN AND SECURITY AGREEMENT"), between Aspen Funding
Corp., (the "LENDER") and FIRSTPLUS Special Funding Corp., (the "BORROWER"), you
are hereby notified that: (i) the Borrower has pledged to the Lender the
residual securities described on SCHEDULE 1 hereto (the "RESIDUAL SECURITIES"),
(ii) each of the Residual Securities is subject to a security interest in favor
of the Lender, (iii) the Trustee shall promptly send to the Lender a copy of the
remittance statement issued with respect to the securitization transaction in
which the Residual Securities were created and (iv) unless otherwise notified by
the Lender in writing, any payments or distributions made with respect to such
Residual Securities should be remitted immediately by the Trustee directly to
the Lender through the Federal Reserve Fedwire System, in accordance with the
following wire instructions:
Account No.: 105366800008
ABA No.: 0260-03780
FRB, NY
Deutsche Bank New York
Reference: Aspen Funding Corp.
Please acknowledge receipt of this instruction letter by signing in the
signature block below and forwarding an executed copy to the Lender promptly
upon receipt. Any notices to the Lender should be delivered to the following
address: Aspen Funding Corp., c/o Amacar Group L.L.C., 6707-D Fairview Road,
Charlotte, North Carolina 28210, Attention: Douglas Johnson, Telephone: (704)
365-0569, Facsimile: (704) 365-1362, with a carbon copy to: Deutsche Bank A.G.,
as agent, 31 West 52nd Street, New York, New York 10019, Attention: Gregg
Ex. I-1
<PAGE>
Amoroso/Richard Uhlig, Telephone: (212) 469-3987/(212) 469-6940, Facsimile
(212) 469-7571/(212) 469-6933.
Very truly yours,
FIRSTPLUS SPECIAL FUNDING CORP.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
ACKNOWLEDGED:
- -------------
- -----------------------------------, as Trustee
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Ex. I-2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 59,524,000
<SECURITIES> 535,774,000
<RECEIVABLES> 1,780,442,000
<ALLOWANCES> 19,753,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 44,963,000
<DEPRECIATION> 11,983,000
<TOTAL-ASSETS> 2,654,382,000
<CURRENT-LIABILITIES> 38,971,000
<BONDS> 168,646,000
0
0
<COMMON> 378,000
<OTHER-SE> 446,484,000
<TOTAL-LIABILITY-AND-EQUITY> 2,654,382,000
<SALES> 0
<TOTAL-REVENUES> 147,361,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 85,420,000
<LOSS-PROVISION> 14,047,000
<INTEREST-EXPENSE> 33,996,000
<INCOME-PRETAX> 13,898,000
<INCOME-TAX> 5,281,000
<INCOME-CONTINUING> 8,617
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,617
<EPS-PRIMARY> 0.23
<EPS-DILUTED> 0.23
</TABLE>
