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EXHIBIT 10.2
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MORTGAGE LOAN PURCHASE AND WARRANTIES AGREEMENT
FRANKLIN FINANCE CORPORATION
PURCHASER
FRANKLIN BANK, N.A.
SELLER
DATED AS OF [__________], 1997
CONVENTIONAL COMMERCIAL MORTGAGE LOANS
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TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS 1
SECTION 2. AGREEMENT TO PURCHASE 8
SECTION 3. RESERVED.] 8
SECTION 4. PURCHASE PRICE 8
SECTION 5. EXAMINATION OF MORTGAGE FILES 9
SECTION 6. CONVEYANCE FROM SELLER TO PURCHASER 9
Subsection 6.01. Conveyance of Mortgage Loans; Possession of Servicing Files 9
Subsection 6.02. Books and Records 10
Subsection 6.03. Delivery of Mortgage Loan Documents 10
SECTION 7. SERVICING OF THE MORTGAGE LOANS 11
SECTION 8. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
SELLER; REMEDIES FOR BREACH 11
Subsection 8.01. Representations and Warranties Regarding the Seller 11
Subsection 8.02. Representations and Warranties Regarding Individual
Mortgage Loans 14
Subsection 8.03. Remedies for Breach of Representations and Warranties 24
SECTION 9. CLOSING 26
SECTION 10. CLOSING DOCUMENTS 26
SECTION 11. COSTS 27
SECTION 12. MERGER OR CONSOLIDATION OF THE SELLER 27
SECTION 13. MANDATORY DELIVERY; GRANT OF SECURITY INTEREST 28
SECTION 14. NOTICES 28
SECTION 15. SEVERABILITY CLAUSE 29
SECTION 16. COUNTERPARTS 29
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SECTION 17. GOVERNING LAW 29
SECTION 18. INTENTION OF THE PARTIES 29
SECTION 19. SUCCESSORS AND ASSIGNS; ASSIGNMENT OF PURCHASE AGREEMENT 30
SECTION 20. WAIVERS 30
SECTION 21. EXHIBITS 30
SECTION 22. GENERAL INTERPRETIVE PRINCIPLES 30
SECTION 23. REPRODUCTION OF DOCUMENTS 31
SECTION 24. FURTHER AGREEMENTS 31
SECTION 25. RECORDATION OF ASSIGNMENTS OF MORTGAGE 31
EXHIBITS
EXHIBIT A CONTENTS OF EACH MORTGAGE FILE
EXHIBIT B FORM OF SERVICING AGREEMENT
EXHIBIT C FORM OF SELLER'S/SERVICER'S OFFICER'S CERTIFICATE
EXHIBIT D FORM OF OPINION OF COUNSEL TO THE SELLER/SERVICER
EXHIBIT E FORM OF SECURITY RELEASE CERTIFICATION
EXHIBIT F FORM OF SECURITY RELEASE CERTIFICATION
EXHIBIT G FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
EXHIBIT H MORTGAGE LOAN SCHEDULE
EXHIBIT I THE UNDERWRITING GUIDELINES OF THE SELLER
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MORTGAGE LOAN PURCHASE AND WARRANTIES AGREEMENT
This MORTGAGE LOAN PURCHASE AND WARRANTIES AGREEMENT (the "Agreement"),
dated as of [__________,] 1997, by and between Franklin Finance Corporation, a
Michigan corporation, having an office at ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Purchaser") and Franklin Bank, N.A., a
national bank, having an office at ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Seller").
WITNESSETH:
WHEREAS, the Seller desires to sell to the Purchaser, and the Purchaser
desires to purchase from the Seller, certain conventional commercial mortgage
loans (the "Mortgage Loans") on a servicing retained basis as described herein,
and which shall be delivered as whole loans on the Closing Date, as defined
below;
WHEREAS, each Mortgage Loan is secured by a mortgage, deed of trust or
other security instrument creating a first lien on a commercial property
located in the jurisdiction indicated on the Mortgage Loan Schedule; and
WHEREAS, the Purchaser and the Seller wish to prescribe the manner of the
conveyance, servicing and control of the Mortgage Loans.
NOW, THEREFORE, in consideration of the promises and mutual agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Purchaser and the Seller
agree as follows:
SECTION 1. DEFINITIONS.
For purposes of this Agreement the following capitalized terms shall have
the respective meanings set forth below. Other capitalized terms used in this
Agreement and not defined herein shall have the respective meanings set forth
in the Servicing Agreement attached as Exhibit B hereto.
"Accepted Servicing Practices" means, 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.
"Affiliate" means, with respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect
to any specified Person means the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
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"Agreement" means this Mortgage Loan Purchase and Warranties Agreement and
all amendments hereof and supplements hereto.
"ALTA" means The American Land Title Association or any successor thereto.
"Ancillary Income" means all late charges, escrow account benefits,
reinstatement fees, and similar types of fees arising from or in connection
with any Mortgage, to the extent not otherwise payable to the Mortgagor under
applicable law or pursuant to the terms of the related Mortgage Note.
"Appraised Value" means the value set forth in an appraisal made in
connection with the origination of the related Mortgage Loan as the value of
the Mortgaged Property.
"Assignment and Assumption Agreement" has the meaning set forth in Section
19.
"Assignment of Mortgage" means an assignment of the Mortgage delivered in
blank, notice of transfer or equivalent instrument in recordable form,
sufficient under the laws of the jurisdiction wherein the related Mortgaged
Property is located to reflect the sale of the Mortgage to the Purchaser.
"Business Day" means any day other than (i) a Saturday or Sunday, or (ii)
a day on which banking and savings and loan institutions, in the State of
Michigan, are authorized or obligated by law or executive order to be closed.
"Closing Date" means [_________,] 1997, or such other date as is mutually
agreed upon by the parties.
"Code" means Internal Revenue Code of 1986, as amended.
"Condemnation Proceeds" means all awards or settlements in respect of a
Mortgaged Property, whether permanent or temporary, partial or entire, by
exercise of the power of eminent domain or condemnation, to the extent not
required to be released to a Mortgagor in accordance with the terms of the
related Mortgage Loan Documents.
"Conventional Loan" means a conventional commercial mortgage loan which is
a Mortgage Loan.
"Convertible Mortgage Loan" means any individual Mortgage Loan purchased
pursuant to this Agreement which contains a provision whereby the Mortgagor is
permitted to convert the Mortgage Loan to a fixed rate Mortgage Loan in
accordance with the terms of the related Mortgage Note.
"Custodial Account" means the separate trust account created and
maintained pursuant to Section 2.04 of the Servicing Agreement.
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"Cut-off Date" means [__________, 1997.]
"Deleted Mortgage Loan" means a Mortgage Loan that is repurchased or
replaced with a Qualified Substitute Mortgage Loan by the Seller in accordance
with the terms of this Agreement.
"Determination Date" means the earlier of two (2) Business Days prior to
the related Remittance Date or the 15th day of the month in which the related
Remittance Date occurs.
"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.
"Escrow Account" means the separate account created and maintained
pursuant to Section 2.06 of the Servicing Agreement with respect to each
Mortgage Loan, as specified in the Servicing Agreement.
"Escrow Payments" means, with respect to any Mortgage Loan, any payments
required to be escrowed by the Mortgagor with the mortgagee pursuant to the
Mortgage or any other document, including without limitation the amounts
constituting ground rents, taxes, assessments, water rates, sewer rents,
municipal charges, mortgage insurance premiums, fire and hazard insurance
premiums.
"Insurance Proceeds" means, with respect to each Mortgage Loan, proceeds
of insurance policies insuring the Mortgage Loan or the related Mortgaged
Property.
"Interest Rate Adjustment Date" means, with respect to each Variable Rate
Mortgage Loan, the date, specified in the related Mortgage Note and the
Mortgage Loan Schedule, on which the Mortgage Interest Rate is adjusted.
"Liquidation Proceeds" means cash received in connection with the
liquidation of a defaulted Mortgage Loan, whether through the sale or
assignment of such Mortgage Loan, trustee's sale, foreclosure sale or
otherwise, or the sale of the related Mortgaged Property if the Mortgaged
Property is acquired in satisfaction of the Mortgage Loan.
"Loan-to-Value Ratio" or "LTV" means, with respect to any Mortgage Loan,
the ratio (expressed as a percentage) of the original principal amount of the
Mortgage Loan to the lesser of (a) the Appraised Value of the Mortgaged
Property at origination and (b) if the Mortgage Loan was made to finance the
acquisition of the related Mortgaged Property, the purchase price of the
Mortgaged Property.
"Monthly Payment" means the scheduled monthly payment of principal and
interest on a Mortgage Loan.
"Mortgage" means the mortgage, deed of trust or other instrument securing
a Mortgage Note, which creates a first lien on an unsubordinated estate in fee
simple in real property securing the Mortgage Note; except that with respect to
real property located in jurisdictions in which the
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use of leasehold estates for commercial properties is a widely accepted
practice, the mortgage, deed of trust or other instrument securing the Mortgage
Note may secure and create a first lien upon a leasehold estate of the
Mortgagor.
"Mortgage File" means the items pertaining to a particular Mortgage Loan
referred to in Exhibit A annexed hereto, and any additional documents required
to be added to the Mortgage File pursuant to this Agreement.
"Mortgage Interest Rate" means the annual rate of interest borne on a
Mortgage Note, which, in the case of an Variable Rate Mortgage Loan, shall be
adjusted from time to time, with respect to each Mortgage Loan.
"Mortgage Loan" means an individual Mortgage Loan which is the subject of
this Agreement, each Mortgage Loan originally sold and subject to this
Agreement being identified on the applicable Mortgage Loan Schedule, which
Mortgage Loan includes without limitation the Mortgage File, the Monthly
Payments, Principal Prepayments, Liquidation Proceeds, Condemnation Proceeds,
Insurance Proceeds, and all other rights, benefits, proceeds and obligations
arising from or in connection with such Mortgage Loan, excluding replaced or
repurchased mortgage loans.
"Mortgage Loan Documents" means, with respect to each Mortgage Loan, the
following documents pertaining to such Mortgage Loan:
a. The original Mortgage Note bearing all intervening
endorsements, endorsed "Pay to the order of Franklin Finance
Corporation, without recourse" and signed in the name of the Seller
by an authorized officer. To the extent that there is no room on the
face of the Mortgage Notes for endorsements, the endorsement may be
contained on an allonge, if state law so allows. If the Mortgage
Loan was acquired by the Seller in a merger, the endorsement must be
by "[Seller], successor by merger to [name of predecessor]". If the
Mortgage Loan was acquired or originated by the Seller while doing
business under another name, the endorsement must be by "[Seller],
formerly known as [previous name]"; and
b. The original Assignment of Mortgage for each Mortgage Loan in
form and substance acceptable for recording endorsed "Pay to the
order of Franklin Finance Corporation" and signed in the name of the
Seller. If the Mortgage Loan was acquired by the Seller in a merger,
the Assignment of Mortgage must be made by "[Seller], successor by
merger to [name of predecessor]". If the Mortgage Loan was acquired
or originated by the Seller while doing business under another name,
the Assignment of Mortgage must be by "[Seller], formerly known as
[previous name]".
c. The original of any guarantee executed in connection with the
Mortgage Note.
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d. The original Mortgage, with evidence of recording thereon. If
in connection with any Mortgage Loan, the Seller cannot deliver or
cause to be delivered the original Mortgage with evidence of
recording thereon on or prior to the Closing Date because of a delay
caused by the public recording office where such Mortgage has been
delivered for recordation, a photocopy of such Mortgage certified by
the Seller to be true and correct will be delivered; if such
Mortgage has been lost or if such public recording office retains
the original recorded Mortgage, the Seller shall deliver or cause to
be delivered to the Purchaser, a photocopy of such Mortgage,
certified by such public recording office to be a true and complete
copy of the original recorded Mortgage.
e. The originals of all assumption, modification, consolidation
or extension agreements, if any, with evidence of recording thereon
or certified copies of such documents if the originals are
unavailable.
f. Originals of all intervening Assignments of the Mortgage with
evidence of recording thereon, or if any such intervening assignment
has not been returned from the applicable recording office, a
photocopy of each such assignment certified by the Seller to be true
and correct will be delivered, or if such assignment has been lost
or if such public recording office retains the original recorded
assignments of mortgage, the Seller shall deliver or cause to be
delivered to the Purchaser, a photocopy of such intervening
assignment, certified by such public recording office to be a true
and complete copy of the original recorded intervening assignment.
g. The original mortgagee policy of title insurance or, in the
event such original title policy is unavailable, a certified true
copy of the related policy binder or commitment for title certified
to be true and complete by the title insurance company; provided
that the original mortgagee policy of title insurance shall be
delivered promptly after receipt by the Seller thereof but in no
event later than one hundred twenty (120) days from and after the
Closing Date.
h. Any security agreement, chattel mortgage or equivalent
executed in connection with the Mortgage.
"Mortgage Loan Schedule" means the schedule of Mortgage Loans attached
hereto as Exhibit J setting forth at least the following information with
respect to each Mortgage Loan: (1) the Seller's Mortgage Loan identifying
number; (2) the Mortgagor's name; (3) the street address of the Mortgaged
Property including the state; (4) a code indicating whether the Mortgaged
Property is owner-occupied; (5) the type of commercial property constituting
the Mortgaged Property; (6) the type of Mortgage Loan (i.e., whether the
Mortgage Loan bears interest at a fixed or variable rate); (7) the original
months to maturity or the remaining months to maturity from the Cut-off Date,
in any case based on the original amortization schedule and, if different, the
maturity expressed in the same manner but based on the actual amortization
schedule; (8) the Loan-to-Value Ratio at origination; (9) the Mortgage Interest
Rate as of the Cut-off Date; (10) the
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stated maturity date; (11) the amount of the Monthly Payment as of the Cut-off
Date; (12) the original principal amount of the Mortgage Loan; (13) the
principal balance of the Mortgage Loan as of the close of business on the
Cut-off Date, after deduction of payments of principal due on or before the
Cut-off Date whether or not collected; (14) a code indicating the purpose of the
loan (i.e., purchase, rate and term refinance, equity take-out refinance); (15)
the Interest Rate Adjustment Date with respect to any Variable Rate Mortgage
Loan; (16) a code indicating whether the Mortgage Loan is a Convertible Mortgage
Loan; (17) the Servicing Fee Rate; (18) with respect to any Variable Rate
Mortgage Loan, the index pursuant to which the Mortgage Interest Rate is
determined and (19) the number of times during the 12 month period preceding the
Closing Date that any Monthly Payment has been received thirty or more days
after its Due Date. With respect to the Mortgage Loans in the aggregate, the
Mortgage Loan Schedule shall set forth the following information, as of the
Cut-off Date: (1) the number of Mortgage Loans; and (2) the current aggregate
outstanding principal balance of the Mortgage Loans.
"Mortgage Note" means the note or other evidence of the indebtedness of a
Mortgagor secured by a Mortgage.
"Mortgaged Property" means the real property securing repayment of the
debt evidenced by a Mortgage Note.
"Mortgagor" means the obligor on a Mortgage Note.
"Officer's Certificate" means a certificate signed by the Chairman of the
Board or the Vice Chairman of the Board or a President or a Vice President and
by the Treasurer or the Secretary or one of the Assistant Treasurers or
Assistant Secretaries of the Seller, and delivered to the Purchaser as required
by this Agreement.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Seller, reasonably acceptable to the Purchaser.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, limited liability company,
unincorporated organization, government or any agency or political subdivision
thereof.
"Prime Rate" means the prime rate announced to be in effect from time to
time, as published as the average rate in The Wall Street Journal (Chicago
edition).
"Principal Prepayment" means any payment or other recovery of principal on
a Mortgage Loan which is received in advance of its scheduled Due Date,
including any prepayment penalty or premium thereon and which is not
accompanied by an amount of interest representing scheduled interest due on any
date or dates in any month or months subsequent to the month of prepayment.
"Purchase Price" means the price paid on the Closing Date by the Purchaser
to the Seller in exchange for the Mortgage Loans purchased on the Closing Date
as set forth in Section 4 of this Agreement.
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"Purchaser" means Franklin Finance Corporation or its successor in
interest or assigns or any successor to the Purchaser under this Agreement as
herein provided.
"Qualified Appraiser" means an appraiser who had no interest, direct or
indirect in the Mortgaged Property or in any loan made on the security thereof,
and whose compensation is not affected by the approval or disapproval of the
Mortgage Loan, and such appraiser and the appraisal made by such appraiser both
satisfy the requirements of Title XI of the Federal Institutions Reform,
Recovery, and Enforcement Act of 1989 and the regulations promulgated
thereunder, all as in effect on the date the Mortgage Loan was originated.
"Qualified Insurer" means an insurance company duly qualified as such
under the laws of the states in which the Mortgaged Properties are located,
duly authorized and licensed in such states to transact the applicable
insurance business and to write the insurance provided, and in the two highest
rating categories by Best's with respect to hazard and flood insurance.
"Qualified Substitute Mortgage Loan" means a mortgage loan eligible to be
substituted by the Seller for a Deleted Mortgage Loan which must, on the date
of such substitution, (i) have an outstanding principal balance, after
deduction of all scheduled payments due in the month of substitution (or in the
case of a substitution of more than one mortgage loan for a Deleted Mortgage
Loan, an aggregate principal balance), not in excess of the outstanding
principal balance of the Deleted Mortgage Loan (the amount of any shortfall
will be deposited in the Custodial Account by the Seller in the month of
substitution); (ii) have a Mortgage Interest Rate not less than and not more
than 1.00% greater than the Mortgage Interest Rate of the Deleted Mortgage
Loan; (iii) have a remaining term to maturity not greater than and not more
than one year less than that of the Deleted Mortgage Loan (iv) be of the same
type as the Deleted Mortgage Loan; and (v) comply with each representation and
warranty (respecting individual Mortgage Loans) set forth in Section 8.02
hereof.
"Remittance Date" means the date specified in the Servicing Agreement
(with respect to each Mortgage Loan, as specified therein).
"Repurchase Price" means, with respect to any Mortgage Loan, a price equal
to (i) the unpaid principal balance of such Mortgage Loan plus (ii) interest on
such unpaid principal balance of such Mortgage Loan at the Mortgage Interest
Rate from the last date through which interest has been paid and distributed to
the Purchaser to the date of repurchase, less amounts received or advanced, if
any, by the Seller in respect of such repurchased Mortgage Loan.
"RESPA" means Real Estate Settlement Procedures Act, as amended from time
to time.
"Seller" means Franklin Bank, N.A., its successors in interest and
assigns.
"Servicing Agreement" means the agreement, attached as Exhibit B hereto,
to be entered into by the Purchaser and the Seller, as servicer, providing for
the Seller to service the Mortgage Loans as specified by the Servicing
Agreement.
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"Servicing Fee" means, with respect to each Mortgage Loan, subject to the
Servicing Agreement, the amount of the annual fee the Purchaser shall pay to
the Seller, which shall for a period of one full month be equal to one-twelfth
of the product of (a) the Servicing Fee Rate and (b) the outstanding principal
balance of such Mortgage Loan. Such fee shall be payable monthly, and shall be
pro-rated for any portion of a month during which the Mortgage Loan is serviced
by the Seller under the Servicing Agreement. The obligation of the Purchaser to
pay the Servicing Fee is limited to, and the Servicing Fee is payable solely
from, the interest portion (including recoveries with respect to interest from
Liquidation Proceeds, to the extent permitted by this Agreement) of such
Monthly Payment collected by the Seller, or as otherwise provided under this
Agreement. In addition to the Servicing Fee, the Seller shall be entitled to
retain Ancillary Income.
"Servicing Fee Rate" means, with respect to each Mortgage Loan, the rate
specified in the Mortgage Loan Schedule with respect to such Mortgage Loan.
"Servicing File" means with respect to each Mortgage Loan, the file
retained by the Seller during the period in which the Seller is acting as
servicer pursuant to the Servicing Agreement consisting of originals of all
documents in the Mortgage File which are not delivered to the Purchaser or its
designee and copies of the Mortgage Loan Documents.
"Stated Principal Balance" means as to each Mortgage Loan, (i) the
principal balance of the Mortgage Loan at the Cut-off Date after giving effect
to payments of principal due on or before such date, whether or not received,
minus (ii) all amounts previously distributed to the Purchaser with respect to
the related Mortgage Loan representing payments or recoveries of principal or
advances in lieu thereof.
"Variable Rate Mortgage Loan" means any individual Mortgage Loan purchased
pursuant to this Agreement the interest rate of which adjusts periodically
based on the index identified in the Mortgage Loan Schedule.
SECTION 2. AGREEMENT TO PURCHASE.
The Seller agrees to sell and the Purchaser agrees to purchase Mortgage
Loans having an aggregate principal balance on the Cut-off Date in an amount
equal to $[__________,] or in such other amount as agreed by the Purchaser and
the Seller as evidenced by the actual aggregate principal balance of the
Mortgage Loans accepted by the Purchaser on the Closing Date.
[SECTION 3. RESERVED.]
SECTION 4. PURCHASE PRICE.
The Purchase Price for the Mortgage Loans listed on the Mortgage Loan
Schedule shall be $[__________,] or in such other amount as agreed by the
Purchaser and the Seller as evidenced by the actual aggregate principal balance
of the Mortgage Loans accepted by the Purchaser on the Closing Date. The
initial principal amount of the Mortgage Loans shall be the aggregate principal
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balance of the Mortgage Loans, so computed as of the Cut-off Date, after
application of scheduled payments of principal due on or before the Cut-off
Date whether or not collected.
In addition to the Purchase Price as described above, the Purchaser shall
pay to the Seller, at closing, accrued interest on the initial principal amount
of the related Mortgage Loans at the weighted average Mortgage Interest Rate of
those Mortgage Loans, minus any amounts attributable to Servicing Fees as
provided in the Servicing Agreement from the Cut-off Date through the day prior
to the Closing Date, inclusive.
The Purchase Price plus accrued interest as set forth in the preceding
paragraph shall be paid on the Closing Date by wire transfer of immediately
available funds.
The Purchaser shall be entitled to (l) all scheduled principal due after
the Cut-off Date, (2) all other recoveries of principal collected on or after
the Cut-off Date (provided, however, that all scheduled payments of principal
due on or before the Cut-off Date and collected after the Cut-off Date shall
belong to the Seller), and (3) all payments of interest on the Mortgage Loans
net of applicable Servicing Fees collected on or after the Cut-off Date (minus
that portion of any such payment which is allocable to the period prior to the
Cut-off Date). The outstanding principal balance of each Mortgage Loan as of
the Cut-off Date is determined after application of payments of principal due
on or before the Cut-off Date whether or not collected, together with any
unscheduled principal prepayments collected prior to the Cut-off Date;
provided, however, that payments of scheduled principal and interest prepaid
for a Due Date beyond the Cut-off Date shall not be applied to the principal
balance as of the Cut-off Date. Such prepaid amounts shall be the property of
the Purchaser. Any such prepaid amounts shall be deposited into the Custodial
Account, which account is established for the benefit of the Purchaser for
subsequent remittance to the Purchaser.
SECTION 5. EXAMINATION OF MORTGAGE FILES.
Prior to the date hereof, the Seller has (a) delivered to the Purchaser or
its designee in escrow, for examination with respect to each Mortgage Loan to
be purchased, the related Mortgage File, including a copy of the Assignment of
Mortgage, pertaining to each Mortgage Loan, or (b) made the related Mortgage
File available to the Purchaser for examination at the Seller's offices or such
other location as shall otherwise be agreed upon by the Purchaser and the
Seller. The fact that the Purchaser or its designee has conducted or has failed
to conduct any partial or complete examination of the Mortgage Files shall not
affect the Purchaser's (or any of its successor's) rights to demand repurchase,
substitution or other relief as provided herein.
SECTION 6. CONVEYANCE FROM SELLER TO PURCHASER.
SUBSECTION 6.01. CONVEYANCE OF MORTGAGE LOANS; POSSESSION OF SERVICING
FILES.
The Seller hereby agrees to sell, transfer, assign, set over and convey to
the Purchaser on the Closing Date, without recourse, but subject to the terms
of this Agreement, all right, title and interest of the Seller in and to the
Mortgage Loans and the Mortgage Files and all rights and
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obligations arising under the documents contained therein. The Servicing File
shall be retained by the Seller in accordance with the terms of the Servicing
Agreement and, as provided therein, shall be appropriately identified in the
Seller's computer system and/or books and records, as appropriate, to clearly
reflect the sale of the related Mortgage Loan to the Purchaser.
SUBSECTION 6.02. BOOKS AND RECORDS.
Record title to each Mortgage Loan as of the Closing Date shall be in the
name of the Seller. Notwithstanding the foregoing, each Mortgage and related
Mortgage Note shall be possessed solely by the Purchaser or the appropriate
designee of the Purchaser, as the case may be. All rights arising out of the
Mortgage Loans including, but not limited to, all funds received by the Seller
after the Cut-off Date on or in connection with a Mortgage Loan shall be vested
in the Purchaser or one or more of its designees; provided, however, that all
funds received on or in connection with a Mortgage Loan shall be received and
held by the Seller in trust for the benefit of the Purchaser or its designee,
as the case may be, as the owner of the Mortgage Loans pursuant to the terms of
this Agreement.
The sale of each Mortgage Loan shall be reflected on the Seller's balance
sheet and other financial statements as a sale of assets by the Seller.
SUBSECTION 6.03. DELIVERY OF MORTGAGE LOAN DOCUMENTS.
The Seller shall deliver and release to the Purchaser or its designee on
the Closing Date the Mortgage Loan Documents with respect to each Mortgage Loan
set forth on the Mortgage Loan Schedule.
The Seller shall forward to the Purchaser or its designee original
documents evidencing an assumption, modification, consolidation, conversion or
extension of any Mortgage Loan entered into in accordance with this Agreement
within two (2) weeks of their execution, provided, however, that the Seller
shall provide the Purchaser or its designee with a certified true copy of any
such document submitted for recordation within two (2) weeks of its execution,
and shall promptly provide the original of any document submitted for
recordation or a copy of such document certified by the appropriate public
recording office to be a true and complete copy of the original within ninety
(90) days of its submission for recordation.
In the event that such original or copy of any document submitted for
recordation to the appropriate public recording office is not so delivered to
the Purchaser or its designee within 90 days following the Closing Date (other
than with respect to the Assignments of Mortgage which shall be delivered to
the Purchaser or its designee in blank), and in the event that the Seller does
not cure such failure within 30 days of discovery or receipt of written
notification of such failure from the Purchaser, the related Mortgage Loan
shall, upon the request of the Purchaser, be repurchased by the Seller at the
price and in the manner specified in Subsection 8.03. The foregoing repurchase
obligation shall not apply in the event that the Seller cannot deliver, or
cause to be delivered, such original or copy of any document submitted for
recordation to the appropriate public recording office within the specified
period due to a delay caused by the
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recording office in the applicable jurisdiction; provided that the Seller shall
instead deliver, or cause to be delivered, a recording receipt of such recording
office or, if such recording receipt is not available, an officer's certificate
of a servicing officer of the Seller, confirming that such documents have been
accepted for recording; provided that, upon request of the Purchaser and
delivery by the Purchaser to the Seller of a schedule of the related Mortgage
Loans, the Seller shall reissue and deliver to the Purchaser or its designee
said officer's certificate relating to the related Mortgage Loans.
The Seller shall pay all fees or costs in transferring all original
documents to the Purchaser or its designee. The Purchaser or its designee shall
be responsible for recording the Assignments of Mortgage and shall be
reimbursed by the Seller for the reasonable costs associated therewith pursuant
to the preceding sentence.
SECTION 7. SERVICING OF THE MORTGAGE LOANS.
The Mortgage Loans have been sold by the Seller to the Purchaser on a
servicing retained basis. The Purchaser shall retain the Seller as independent
contract servicer of the Mortgage Loans pursuant to and in accordance with the
terms and conditions contained in the Servicing Agreement. The Purchaser and
the Seller shall execute the Servicing Agreement on the Closing Date in the
form attached hereto as Exhibit B.
Pursuant to the Servicing Agreement, the Seller shall begin servicing the
Mortgage Loans on behalf of the Purchaser and shall be entitled to the
Servicing Fee and any Ancillary Income with respect to such Mortgage Loans from
the Closing Date until the termination of the Servicing Agreement with respect
to any of the Mortgage Loans as set forth in the Servicing Agreement. The
Seller shall conduct such servicing in accordance with the terms of the
Servicing Agreement.
SECTION 8. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
SELLER; REMEDIES FOR BREACH.
SUBSECTION 8.01. REPRESENTATIONS AND WARRANTIES REGARDING THE SELLER.
The Seller represents, warrants and covenants to the Purchaser that as of
the date hereof and as of the Closing Date:
(a) Due Organization and Authority; Enforceability. The Seller is
a national bank duly organized and validly existing under the laws
of the United States and has all licenses necessary to carry on its
business as now being conducted and is licensed, qualified and in
good standing in each state wherein it owns or leases any material
properties or where a Mortgaged Property is located, if the laws of
such state require licensing or qualification in order to conduct
business of the type conducted by the Seller, and in any event the
Seller is in compliance with the laws of any such state to the
extent necessary to ensure the enforceability of the related
Mortgage Loan in accordance with the terms of this Agreement; the
Seller has the full corporate power, authority and legal right to
hold, transfer and convey the
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Mortgage Loans and to execute and deliver this Agreement and to
perform its obligations hereunder; the execution, delivery and
performance of this Agreement (including all instruments of transfer
to be delivered pursuant to this Agreement) by the Seller and the
consummation of the transactions contemplated hereby have been duly
and validly authorized; this Agreement and all agreements
contemplated hereby have been duly executed and delivered and
constitute the valid, legal, binding and enforceable obligations of
the Seller subject to bankruptcy laws and other similar laws of
general application affecting rights of creditors and subject to the
application of the rules of equity, including those respecting the
availability of specific performance, none of which will materially
interfere with the realization of the benefits provided thereunder,
regardless of whether such enforcement is sought in a proceeding in
equity or at law; and all requisite corporate action has been taken
by the Seller to make this Agreement and all agreements contemplated
hereby valid and binding upon the Seller in accordance with their
terms;
(b) Ordinary Course of Business. The consummation of the
transactions contemplated by this Agreement are in the ordinary
course of business of the Seller, and the transfer, assignment and
conveyance of the Mortgage Notes and the Mortgages by the Seller
pursuant to this Agreement are not subject to the bulk transfer or
any similar statutory provisions in effect in any applicable
jurisdiction;
(c) No Conflicts. Neither the execution and delivery of this
Agreement, the sale of the Mortgage Loans to the Purchaser, the
consummation of the transactions contemplated hereby, nor the
fulfillment of or compliance with the terms and conditions of this
Agreement, will conflict with or result in a breach of any of the
terms, conditions or provisions of the Seller's Articles of
Association or by-laws or any legal restriction or any agreement or
instrument to which the Seller is now a party or by which it is
bound, or constitute a default or result in an acceleration under
any of the foregoing, or result in the violation of any law, rule,
regulation, order, judgment or decree to which the Seller or its
property is subject, or result in the creation or imposition of any
lien, charge or encumbrance that would have an adverse effect upon
any of its properties pursuant to the terms of any mortgage,
contract, deed of trust or other instrument, or impair the ability
of the Purchaser to realize on the Mortgage Loans, impair the value
of the Mortgage Loans, or impair the ability of the Purchaser to
realize the full amount of any mortgage insurance benefits accruing
pursuant to this Agreement;
(d) Ability to Perform: Solvency. The Seller does not believe,
nor does it have any reason or cause to believe, that it cannot
perform each and every covenant contained in this Agreement. The
Seller is solvent and the sale of the Mortgage Loans will not cause
the Seller to become insolvent. The sale of the Mortgage Loans is
not undertaken with the intent to hinder, delay or defraud any of
the Seller's creditors;
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(e) No Litigation Pending. There is no action, suit, proceeding
or investigation pending or threatened against the Seller, before
any court, administrative agency or other tribunal asserting the
invalidity of this Agreement, seeking to prevent the consummation of
any of the transactions contemplated by this Agreement or which,
either in any one instance or in the aggregate, could result in any
material adverse change in the business, operations, financial
condition, properties or assets of the Seller, or in any material
impairment of the right or ability of the Seller to carry on its
business substantially as now conducted, or in any material
liability on the part of the Seller, or which would draw into
question the validity of this Agreement or the Mortgage Loans or of
any action taken or to be taken in connection with the obligations
of the Seller contemplated herein, or which would be likely to
impair materially the ability of the Seller to perform under the
terms of this Agreement;
(f) No Consent Required. No consent, approval, authorization or
order of, or registration or filing with, or notice to any court or
governmental agency or body is required for the execution, delivery
and performance by the Seller of or compliance by the Seller with
this Agreement or the Mortgage Loans, the delivery of a portion of
the Mortgage Files to the Purchaser or its designee or the sale of
the Mortgage Loans or the consummation of the transactions
contemplated by this Agreement, or if required, such approval has
been obtained prior to the Closing Date;
(g) Selection Process. The Mortgage Loans were selected from
among the outstanding commercial loans in the Seller's portfolio at
the Closing Date as to which the representations and warranties set
forth in Subsection 8.02 could be made and such selection was not
made in a manner so as to affect adversely the interests of the
Purchaser;
(h) Initial Portfolio. The aggregate characteristics of the
Mortgage Loans are as set forth under the heading "Business and
Strategy--Description of Initial Portfolio" in the Prospectus of the
Purchaser dated [___________,] 1997;
(i) No Untrue Information. Neither this Agreement nor any
information, statement, tape, diskette, report, form, or other
document furnished or to be furnished pursuant to this Agreement or
in connection with the transactions contemplated hereby contains or
will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements
contained herein or therein not misleading; and
(j) No Brokers. The Seller has not dealt with any broker,
investment banker, agent or other person that may be entitled to any
commission or compensation in connection with the sale of the
Mortgage Loans.
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SUBSECTION 8.02. REPRESENTATIONS AND WARRANTIES REGARDING INDIVIDUAL
MORTGAGE LOANS.
The Seller hereby represents and warrants to the Purchaser that, as to
each Mortgage Loan, as of the Closing Date for such Mortgage Loan:
(a) Mortgage Loans as Described. The information set forth in the
Mortgage Loan Schedule is complete, true and correct in all material
respects;
(b) Payments Current; Status. All payments required to be made up
to, but not including, the Cut-off Date for the Mortgage Loan under
the terms of the Mortgage Note have been made and credited. No
payment required under the Mortgage Loan is delinquent nor has any
payment under the Mortgage Loan been 30 days or more delinquent more
than once within the period falling twelve (12) months prior to the
Cut-off Date. The Mortgage Loan is not, and has not been at any time
in the preceding twelve months, (i) classified, (ii) in nonaccrual
status or (iii) renegotiated due to the financial deterioration of
the Mortgagor;
(c) No Outstanding Charges. There are no defaults in complying
with the terms of the Mortgage, 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. The
Seller has not 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 Mortgage Loan proceeds,
whichever is earlier, to the day which precedes by one month the Due
Date of the first installment of principal and interest;
(d) Original Terms Unmodified. The terms of the Mortgage Note
and Mortgage have not been impaired, waived, altered or modified in
any respect, from the date of origination except by a written
instrument which has been recorded, if necessary to protect the
interests of the Purchaser, and which has been delivered to the
Purchaser or its designee and the terms of which are reflected in
the Mortgage Loan Schedule, if applicable. The substance of any
such waiver, alteration or modification has been approved by the
title insurer, if any, to the extent required by the policy, and its
terms are reflected on the Mortgage Loan Schedule, if applicable. No
Mortgagor has been released, in whole or in part, except in
connection with an assumption agreement, which assumption agreement
is part of the Mortgage Loan File delivered to the Purchaser or its
designee and the terms of which are reflected in the Mortgage Loan
Schedule;
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(e) No Defenses. The Mortgage Loan is not subject to any right
of rescission, set-off, counterclaim or defense, including without
limitation the defense of usury, nor will the operation of any of
the terms of the Mortgage Note or the Mortgage, or the exercise of
any right thereunder, render either the Mortgage Note or the
Mortgage unenforceable, in whole or in part and no such right of
rescission, set-off, counterclaim or defense has been asserted with
respect thereto, and no Mortgagor is now or was, at the time of
origination of the related Mortgage Loan, a debtor in any state or
Federal bankruptcy or insolvency proceeding;
(f) Hazard Insurance. Pursuant to the terms of the Mortgage, all
buildings or other improvements upon the Mortgaged Property are
insured by a generally acceptable insurer against loss by fire,
hazards of extended coverage. If required by the Flood Disaster
Protection Act of 1973, as amended, the Mortgage Loan is covered by
a flood insurance policy, meeting the requirements of the Federal
Insurance Administration, as well as all additional requirements set
forth in Section 2.10 of the Servicing Agreement attached hereto as
Exhibit B. All individual insurance policies contain a standard
mortgagee clause naming the Seller and its successors and assigns as
mortgagee, and all premiums thereon have been paid. The Mortgage
obligates the Mortgagor thereunder to maintain the hazard insurance
policy at the Mortgagor's cost and expense, and on the Mortgagor's
failure to do so, authorizes the holder of the Mortgage to obtain
and maintain such insurance at such Mortgagor's cost and expense,
and to seek reimbursement therefor from the Mortgagor. Where
required by state law or regulation, the Mortgagor has been given an
opportunity to choose the carrier of the required hazard insurance.
The hazard insurance policy is the valid and binding obligation of
the insurer, is in full force and effect, and will be in full force
and effect and inure to the benefit of the Purchaser upon the
consummation of the transactions contemplated by this Agreement. The
Seller has not engaged in, and has 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 or entity, and no such unlawful items have been received,
retained or realized by the Seller;
(g) Compliance with Applicable Laws. Any and all requirements of
any federal, state or local law including, without limitation,
usury, truth-in-lending, real estate settlement procedures, consumer
credit protection, fair housing, equal credit opportunity and
disclosure laws applicable to the Mortgage Loan have been complied
with, the consummation of the transactions contemplated hereby will
not involve the violation of any such laws or regulations, and the
Seller shall maintain in its possession, available for the
Purchaser's inspection, and shall deliver to the Purchaser upon
demand, evidence of compliance with all such requirements;
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(h) No Satisfaction of Mortgage. The Mortgage has not been
satisfied, canceled, subordinated or rescinded, in whole or in part,
and the Mortgaged Property has not been released from the lien of
the Mortgage, in whole or in part, nor has any instrument been
executed that would effect any such release, cancellation,
subordination or rescission. The Seller has not waived the
performance by the Mortgagor of any action, if the Mortgagor's
failure to perform such action would cause the Mortgage Loan to be
in default, nor has the Seller waived any default resulting from any
action or in action by the Mortgagor;
(i) Location and Type of Mortgaged Property. The Mortgaged
Property is located in the state identified in the Mortgage Loan
Schedule and consists of a single parcel of real property improved
by a commercial facility erected thereon.
(j) Valid First Lien. The Mortgage is a valid, subsisting,
enforceable and perfected first lien on the Mortgaged Property,
including all buildings and improvements on the Mortgaged Property
and all installations and mechanical, electrical, plumbing, heating
and air conditioning systems located in or annexed to such
buildings, and all additions, alterations and replacements made at
any time with respect to the foregoing. The lien of the Mortgage is
subject only to:
(1) the lien of current real property taxes and
assessments not yet due and payable;
(2) covenants, conditions and restrictions, rights of
way, easements and other matters of the public record as of
the date of recording acceptable to prudent mortgage lending
institutions generally and specifically referred to in the
lender's title insurance policy delivered to the originator of
the Mortgage Loan and (a) specifically referred to or
otherwise considered in the appraisal made for the originator
of the Mortgage Loan or (b) which do not adversely affect the
Appraised Value of the Mortgaged Property set forth in such
appraisal; and
(3) other matters to which like properties are
commonly subject which do not materially interfere with the
benefits of the security intended to be provided by the
Mortgage or the use, enjoyment, value or marketability of the
related Mortgaged Property.
Any security agreement, chattel mortgage or equivalent document related to
and delivered in connection with the Mortgage Loan establishes and creates a
valid, subsisting, enforceable and perfected first lien and first priority
security interest on the property described therein and the Seller has full
right to sell and assign the same to the Purchaser. The Mortgaged Property was
not, as of the date of origination of the Mortgage Loan, subject to a mortgage,
deed of trust, deed to secure debt or other security instrument creating a lien
subordinate to the lien of the Mortgage (except any such subordinate loan which
was created in connection with the origination of the related Mortgage Loan
details of which are contained in the related Mortgage File);
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(k) Validity of Mortgage Documents. The Mortgage Note and the
Mortgage and any other agreement executed and delivered by a
Mortgagor in connection with a Mortgage Loan are genuine, and each
is the legal, valid and binding obligation of the maker thereof
enforceable in accordance with its terms. All parties to the
Mortgage Note, the Mortgage and any other such related agreement had
legal capacity to enter into the Mortgage Loan and to execute and
deliver the Mortgage Note, the Mortgage and any such agreement, and
the Mortgage Note, the Mortgage and any other such related agreement
have been duly and properly executed by such parties. No fraud,
error, omission, misrepresentation, negligence or similar occurrence
with respect to a Mortgage Loan has taken place on the part of any
Person, including without limitation, the Mortgagor, any appraiser,
any builder or developer, or any other party involved in the
origination of the Mortgage Loan. The Seller has reviewed all of the
documents constituting the Servicing File and has made such
inquiries as it deems necessary to make and confirm the accuracy of
the representations set forth herein;
(l) Full Disbursement of Proceeds. The Mortgage Loan has been
closed and the proceeds of the Mortgage Loan have been fully
disbursed and there is no requirement for future advances
thereunder, and any and all requirements as to completion of any
on-site or off-site improvement and as to disbursements of any
escrow funds therefor have been complied with. All costs, fees and
expenses incurred in making or closing the Mortgage Loan and the
recording of the Mortgage were paid, and the Mortgagor is not
entitled to any refund of any amounts paid or due under the Mortgage
Note or Mortgage;
(m) Ownership. The Seller is the sole owner of record and holder
of the Mortgage Loan and the indebtedness evidenced by each Mortgage
Note, except for the assignments of mortgage which have been sent
for recording, and upon recordation the Seller will be the owner of
record of each Mortgage and the indebtedness evidenced by each
Mortgage Note, and upon the sale of the Mortgage Loans to the
Purchaser, the Seller will retain the Mortgage Files or any part
thereof with respect thereto not delivered to the Purchaser or its
designee in trust only for the purpose of servicing and supervising
the servicing of each Mortgage Loan. The Mortgage Loan is not
assigned or pledged, and the Seller has good, indefeasible and
marketable title thereto, and has full right to transfer and sell
the Mortgage Loan to the Purchaser free and clear of any
encumbrance, equity, participation interest, lien, pledge, charge,
claim or security interest, and has full right and authority subject
to no interest or participation of, or agreement with, any other
party, to sell and assign each Mortgage Loan pursuant to this
Agreement and following the sale of each Mortgage Loan, the
Purchaser will own such Mortgage Loan free and clear of any
encumbrance, equity, participation interest, lien, pledge, charge,
claim or security interest. The Seller intends to relinquish all
rights to possess, control and monitor the Mortgage Loan, except
indirectly for purposes of servicing the Mortgage Loan as set forth
in the Servicing Agreement. After the Closing Date, the Seller will
have no right to modify or alter the terms of the sale of
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the Mortgage Loan and the Seller will have no obligation or right to
repurchase the Mortgage Loan or substitute another Mortgage Loan,
except as provided in this Agreement;
(n) Doing Business. All parties which have had any interest in
the Mortgage Loan, whether as mortgagee, assignee, pledgee or
otherwise, are (or, during the period in which they held and
disposed of such interest, were) (1) in compliance with any and all
applicable licensing requirements of the laws of the state wherein
the Mortgaged Property is located, and (2) either (i) organized
under the laws of such state, or (ii) qualified to do business in
such state, or (iii) a federal savings and loan association, a
savings bank or a national bank having a principal office in such
state, or (3) not doing business in such state;
(o) LTV. No Conventional Loan has an LTV greater than 95%. The
original LTV of each Conventional Loan was not more than 80%;
(p) Title Insurance. The Mortgage Loan is covered by an ALTA
lender's title insurance policy or other generally acceptable form
of policy or insurance and each such title insurance policy is
issued by a title insurer qualified to do business in the
jurisdiction where the Mortgaged Property is located, insuring the
Seller, its successors and assigns, as to the first priority lien of
the Mortgage in the original principal amount of the Mortgage Loan,
subject only to the exceptions contained in clauses (1), (2) and
(3) of paragraph (j) of this Subsection 8.02, and 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. 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
Seller, its successor and assigns, are the sole insurers 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 Agreement. No claims have been made under such
lender's title insurance policy, and no prior holder of the related
Mortgage, including the Seller, 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 or entity, and no such unlawful items
have been received, retained or realized by the Seller;
(q) No Defaults. There is no default, breach, violation or event
which would permit acceleration existing under the Mortgage or the
Mortgage Note and 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 which would
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permit acceleration, and neither the Seller nor its predecessors have
waived any default, breach, violation or event which would permit
acceleration;
(r) 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 law could give rise to such liens)
affecting the related Mortgaged Property which are or may be liens
prior to, or equal or coordinate with, the lien of the related
Mortgage;
(s) Location of Improvements; No Encroachments. All improvements
which were considered in determining the Appraised Value of the
Mortgaged Property lay wholly within the boundaries and building
restriction lines of the Mortgaged Property, and no improvements on
adjoining properties encroach upon the Mortgaged Property. No
improvement located on or being part of the Mortgaged Property is in
violation of any applicable zoning law or regulation;
(t) Origination; Payment Terms. The Mortgage Loan was originated
by a savings and loan association, a savings bank, a commercial
bank, credit union, insurance company or similar institution which
is supervised and examined by a federal or state authority. The
documents, instruments and agreements submitted for loan
underwriting were not falsified and contain no untrue statement of
material fact or omit to state a material fact required to be stated
therein or necessary to make the information and statements therein
not misleading. Principal payments on the Mortgage Loan commenced no
more than sixty (60) days after funds were disbursed in connection
with the Mortgage Loan. The Mortgage Interest Rate for each Mortgage
Loan is as set forth on Exhibit J hereto. The Mortgage Note is
payable in equal monthly installments of principal and interest,
which installments of interest are subject to change if the Mortgage
Loan is an Variable Rate Mortgage Loan due to the adjustments to the
Mortgage Interest Rate on each Interest Rate Adjustment Date, with
interest calculated and payable in arrears, sufficient to amortize
the Mortgage Loan fully by the stated maturity date, over an
original term of not more than thirty years from commencement of
amortization. There is no negative amortization with respect to any
Mortgage Loan. Each Convertible Mortgage Loan contains a provision
allowing the Mortgagor to convert the Mortgage Note from an
adjustable interest rate Mortgage Note to a fixed interest rate
Mortgage Note in accordance with the terms of the Mortgage Note or a
rider to the related Mortgage Note;
(u) Customary Provisions. The Mortgage contains customary and
enforceable provisions such as to render the rights and remedies of
the holder thereof adequate for the realization against the
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. Upon default by a Mortgagor on a Mortgage Loan and
foreclosure on, or trustee's sale of, the Mortgaged Property
pursuant to the proper procedures, the holder of the Mortgage
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Loan will be able to deliver good and merchantable title to the
Mortgaged Property. There is no homestead or other exemption
available to a Mortgagor which would interfere with the right to
sell the Mortgaged Property at a trustee's sale or the right to
foreclose the Mortgage, subject to applicable federal and state laws
and judicial precedent with respect to bankruptcy and right of
redemption or similar law;
(v) Conformance with Agency and Underwriting Standards. The
Mortgage Loan was underwritten in accordance with the underwriting
standards of the Seller (a copy of each of which is attached hereto
as Exhibit L), in effect at the time the Mortgage Loan was
originated. The Mortgage Note and Mortgage are on forms acceptable
to the Purchaser, in the Purchaser's sole discretion, as evidenced
by the Purchaser's purchase of the related Mortgage Loans, and, the
Seller has not made any representations to a Mortgagor that are
inconsistent with the mortgage instruments used. All Mortgage Loans
have full asset verification;
(w) Occupancy of the Mortgaged Property. As of the Closing Date,
the Mortgaged Property is lawfully occupied under applicable law.
All inspections, licenses and certificates required to be made or
issued with respect to all occupied portions of the Mortgaged
Property and, with respect to the use and occupancy of the same,
including but not limited to certificates of occupancy and fire
underwriting certificates, have been made or obtained from the
appropriate authorities;
(x) No Additional Collateral. The Mortgage Note is not and has
not been secured by any collateral except the lien of the
corresponding Mortgage and the security interest of any applicable
security agreement or chattel mortgage referred to in clause (j)
above;
(y) Deeds of Trust. In the event the Mortgage constitutes a deed
of trust, a trustee, authorized and duly qualified under applicable
law to serve as such, has been properly designated and currently so
serves and is named in the Mortgage, and no fees or expenses are or
will become payable by the Purchaser to the trustee under the deed
of trust, except in connection with a trustee's sale after default
by the Mortgagor;
(z) Acceptable Investment. There are no circumstances or
conditions with respect to the Mortgage, the Mortgaged Property, the
Mortgagor, the Mortgage File or the Mortgagor's credit standing that
can reasonably be expected to cause the Mortgage Loan to become
delinquent, or adversely affect the value or marketability of the
Mortgage Loan;
(aa) Delivery of Mortgage Documents. The Mortgage Note, the
Mortgage, the Assignment of Mortgage and any other Mortgage Loan
Documents for each Mortgage Loan have been delivered to the
Purchaser or its designee. The Seller is in possession of a
complete, true and accurate Mortgage File in compliance with
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Exhibit A hereto, except for such documents the originals of which
have been delivered to the Purchaser or its designee;
(bb) Transfer of Mortgage Loans. The Assignment of Mortgage with
respect to each Mortgage Loan is in recordable form and is
acceptable for recording under the laws of the jurisdiction in which
the Mortgaged Property is located;
(cc) Assumability. The Mortgage Loan Documents provide that a
related Mortgage Loan may only be assumed if the party assuming such
Mortgage Loan meets certain credit requirements stated in the
Mortgage Loan Documents.
(dd) No Buydown Provisions; No Graduated Payments or Contingent
Interests. The Mortgage Loan does not contain provisions pursuant to
which Monthly Payments are paid or partially paid with funds
deposited in any separate account established by the Seller, the
Mortgagor, or anyone on behalf of the Mortgagor, or paid by any
source other than the Mortgagor nor does it contain any other
similar provisions which may constitute a "buydown" provision. The
Mortgage Loan is not a graduated payment mortgage loan and the
Mortgage Loan does not have a shared appreciation or other
contingent interest feature;
(ee) RESERVED
(ff) Mortgaged Property Undamaged; No Condemnation Proceedings.
There is no proceeding pending or threatened for the total or
partial condemnation of the Mortgaged Property. The Mortgaged
Property is undamaged by waste, fire, earthquake or earth movement,
windstorm, flood, tornado or other casualty so as to affect
adversely the value of the Mortgaged Property as security for the
Mortgage Loan or the use for which the premises were intended and
each Mortgaged Property is in good repair. There have not been any
condemnation proceedings with respect to the Mortgaged Property and
the Seller has no knowledge of any such proceedings in the future;
(gg) Collection Practices; Escrow Deposits; Interest Rate
Adjustments. The origination and collection practices used by the
Seller with respect to the Mortgage Loan have been in all respects
in compliance with Accepted Servicing Practices, applicable laws and
regulations, and have been in all respects legal and proper. With
respect to escrow deposits and Escrow Payments, all such payments
are in the possession of, or under the control of, the Seller or the
Seller and there exist no deficiencies in connection therewith for
which customary arrangements for repayment thereof have not been
made. All Escrow Payments have been collected in full compliance
with state and federal law and the provisions of the related
Mortgage Note and Mortgage. An escrow of funds is not prohibited by
applicable law and has been established in an amount sufficient to
pay for every item that remains unpaid and has been assessed but is
not yet due and payable. No escrow deposits or Escrow
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Payments or other charges or payments due the Seller have been
capitalized under the Mortgage or the Mortgage Note. All Mortgage
Interest Rate adjustments to the Monthly Payment, if the Mortgage
Loan is an Variable Rate Mortgage Loan, have been made in strict
compliance with state and federal law and the terms of the related
Mortgage and Mortgage Note on the related Interest Rate Adjustment
Date. With respect to each Variable Rate Mortgage Loan, the Mortgage
Interest Rate adjusts annually as set forth herein. If, pursuant to
the terms of the Mortgage Note, another index was selected for
determining the Mortgage Interest Rate, the same index was used with
respect to each Mortgage Note which required a new index to be
selected, and such selection did not conflict with the terms of the
related Mortgage Note. The Seller executed and delivered any and all
notices required under applicable law and the terms of the related
Mortgage Note and Mortgage regarding the Mortgage Interest Rate and
the Monthly Payment adjustments. Any interest required to be paid
pursuant to state, federal and local law has been properly paid and
credited;
(hh) Other Insurance Policies. No action, inaction or event has
occurred and no state of facts exists or has existed that has
resulted or could result in the exclusion from, denial of, or
defense to coverage under any hazard insurance policy. In connection
with the placement of any such insurance, no commission, fee, or
other compensation has been or will be received by the Seller or by
any officer, director, or employee of the Seller or any designee of
the Seller or any corporation in which the Seller or any officer,
director, or employee had a financial interest at the time of
placement of such insurance;
(ii) No Violation of Environmental Laws. There is no pending
action or proceeding directly involving the Mortgaged Property in
which compliance with any environmental law, rule or regulation is
an issue; there is no violation of any environmental law, rule or
regulation with respect to the Mortgaged Property; and nothing
further remains to be done to satisfy in full all requirements of
each such law, rule or regulation constituting a prerequisite to use
and enjoyment of said property;
(jj) Appraisal. The Mortgage File contains an appraisal of the
related Mortgaged Property signed prior to the approval of the
Mortgage Loan application by a Qualified Appraiser (or approval is
subject to receipt of an appropriate appraisal) who had no interest,
direct or indirect in the Mortgaged Property or in any loan made on
the security thereof, and whose compensation is not affected by the
approval or disapproval of the Mortgage Loan, and the appraisal and
appraiser both satisfy the requirements of Title XI of the Federal
Institutions Reform, Recovery, and Enforcement Act of 1989 and the
regulations promulgated thereunder, all as in effect on the date the
Mortgage Loan was originated;
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(kk) Disclosure Materials. The Mortgagor has received all
disclosure materials required by and the Seller complied with all
applicable law with respect to the making of the Mortgage Loans;
(ll) Construction or Rehabilitation of Mortgaged Property. No
Mortgage Loan was made in connection with the construction or
rehabilitation of a Mortgaged Property or facilitating the trade-in
or exchange of a Mortgaged Property;
(mm) Value of Mortgaged Property. The Seller has no knowledge of
any circumstances existing that could reasonably be expected to
adversely affect the value or the marketability of any Mortgaged
Property or Mortgage Loan or to cause the Mortgage Loan to prepay
during any period materially faster or slower than mortgage loans
originated by the Seller generally;
(nn) No Defense to Insurance Coverage. No action has been taken or
failed to be taken, no event has occurred and no state of facts
exists or has existed on or prior to the Closing Date (whether or
not known to the Seller on or prior to such date) which has resulted
or will result in an exclusion from, denial of, or defense to
coverage under any primary mortgage insurance policy (including,
without limitation, any exclusions, denials or defenses which would
limit or reduce the availability of the timely payment of the full
amount of the loss otherwise due thereunder to the insured) whether
arising out of actions, representations, errors, omissions,
negligence, or fraud of the Seller, the related Mortgagor or any
party involved in the application for such coverage, including the
appraisal, plans and specifications and other exhibits or documents
submitted therewith to the insurer under such insurance policy, or
for any other reason under such coverage, but not including the
failure of such insurer to pay by reason of such insurer's breach of
such insurance policy or such insurer's financial inability to pay;
(oo) Escrow Analysis. With respect to each Mortgage, Seller has
within the last twelve months (unless such Mortgage was originated
within such twelve month period) analyzed the required Escrow
Payments for each Mortgage and adjusted the amount of such payments
so that, assuming all required payments are timely made, any
deficiency will be eliminated on or before the first anniversary of
such analysis, or any overage will be refunded to the Mortgagor, in
accordance with RESPA and any other applicable law; and
(pp) Prior Servicing. Each Mortgage Loan has been serviced in all
material respects in compliance with Accepted Servicing Practices;
provided that, in the event of any breach of the representation and
warranty set forth in this Subsection (pp), the Seller shall not be
required to repurchase any such Mortgage Loan unless such breach
had, and continues to have, a material and adverse effect on the
value of the related Mortgage Loan or the interest of the Purchaser
therein.
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SUBSECTION 8.03. REMEDIES FOR BREACH OF REPRESENTATIONS AND WARRANTIES.
It is understood and agreed that the representations and warranties set
forth in Subsections 8.01 and 8.02 shall survive the sale of the Mortgage Loans
to the Purchaser and shall inure to the benefit of the Purchaser,
notwithstanding any restrictive or qualified endorsement on any Mortgage Note
or Assignment of Mortgage or the examination or failure to examine any Mortgage
File. Upon discovery by either the Seller or the Purchaser of a breach of any
of the foregoing representations and warranties which materially and adversely
affects the value of the Mortgage Loans or the interest of the Purchaser (or
which materially and adversely affects the interests of the Purchaser in the
related Mortgage Loan in the case of a representation and warranty relating to
a particular Mortgage Loan), the party discovering such breach shall give
prompt written notice to the other.
The Seller, promptly after discovery of a breach of any representation or
warranty, shall notify the Purchaser of such breach and the details thereof.
Within sixty (60) days of the earlier of (i) notice by the Seller pursuant to
the immediately preceding sentence or (ii) notice by the Purchaser to the
Seller of any breach of a representation or warranty with respect to a Mortgage
Loan, the Seller shall use its best efforts promptly to cure such breach in all
material respects and, if such breach cannot be cured, the Seller shall, at the
Purchaser's option and subject to Subsection 8.04, repurchase such Mortgage
Loan at the Repurchase Price, unless the Seller elects to substitute a
Qualified Substitute Mortgage Loan for such Mortgage Loan pursuant to this
Subsection. In the event that a breach shall involve any representation or
warranty set forth in Subsection 8.01, and such breach cannot be cured within
sixty (60) days of the earlier of either discovery by or notice to the Seller
of such breach, all of the Mortgage Loans shall, at the Purchaser's option and
subject to Subsection 8.04, be repurchased by the Seller at the Repurchase
Price. However, if the breach shall involve a representation or warranty set
forth in Subsection 8.02 and the Seller discovers or receives notice of any
such breach within two (2) years of the Closing Date, the Seller may, at the
Seller's option and provided that the Seller has a Qualified Substitute
Mortgage Loan, rather than repurchase the Mortgage Loan as provided above,
remove such Mortgage Loan (a "Deleted Mortgage Loan") and substitute in its
place a Qualified Substitute Mortgage Loan or Loans, provided that any such
substitution shall be effected not later than two (2) years after the Closing
Date. If the Seller has no Qualified Substitute Mortgage Loan, it shall
repurchase the deficient Mortgage Loan. Any repurchase of a Mortgage Loan or
Loans pursuant to the foregoing provisions of this Subsection 8.03 shall be
accomplished by either (a) if the Servicing Agreement is in effect, deposit in
the Custodial Account of the amount of the Repurchase Price for distribution to
the Purchaser on the next scheduled Remittance Date, after deducting therefrom
any amount received in respect of such repurchased Mortgage Loan or Loans and
being held in the Custodial Account for future distribution or (b) if the
Servicing Agreement is no longer in effect, by direct remittance of the
Repurchase Price to the Purchaser or its designee in accordance with the
Purchaser's instructions.
At the time of repurchase or substitution, the Purchaser and the Seller
shall arrange for the reassignment of the Deleted Mortgage Loan to the Seller
and the delivery to the Seller of any documents held by the Purchaser or its
designee relating to the Deleted Mortgage Loan. In addition, upon any such
repurchase, all funds maintained in the Escrow Account with respect to
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such Deleted Mortgage Loan shall be transferred to the Seller. In the event of a
repurchase or substitution, the Seller shall, simultaneously with such
reassignment, give written notice to the Purchaser that such repurchase or
substitution has taken place, amend the Mortgage Loan Schedule to reflect the
withdrawal of the Deleted Mortgage Loan from this Agreement, and, in the case of
substitution, identify a Qualified Substitute Mortgage Loan and amend the
Mortgage Loan Schedule to reflect the addition of such Qualified Substitute
Mortgage Loan to this Agreement. In connection with any such substitution, the
Seller shall be deemed to have made as to such Qualified Substitute Mortgage
Loan the representations and warranties set forth in this Agreement except that
all such representations and warranties set forth in this Agreement shall be
deemed made as of the date of such substitution. The Seller shall effect such
substitution by delivering to the Purchaser or its designee for such Qualified
Substitute Mortgage Loan the documents required by Subsection 6.03, with the
Mortgage Note endorsed as required by Subsection 6.03. No substitution will be
made in any calendar month after the Determination Date for such month. The
Seller shall deposit in the Custodial Account the Monthly Payment, or in the
event that the Servicing Agreement is no longer in effect remit directly to the
Purchaser or its designee in accordance with the Purchaser's instructions the
Monthly Payment less the Servicing Fee due, if any, on such Qualified Substitute
Mortgage Loan or Loans in the month following the date of such substitution.
Monthly Payments due with respect to Qualified Substitute Mortgage Loans in the
month of substitution shall be retained by the Seller. For the month of
substitution, payments to the Purchaser shall include the Monthly Payment due on
any Deleted Mortgage Loan in the month of substitution, and the Seller shall
thereafter be entitled to retain all amounts subsequently received by the Seller
in respect of such Deleted Mortgage Loan.
For any month in which the Seller substitutes a Qualified Substitute
Mortgage Loan for a Deleted Mortgage Loan, the Seller shall determine the
amount (if any) by which the aggregate principal balance of all Qualified
Substitute Mortgage Loans as of the date of substitution is less than the
aggregate Stated Principal Balance of all Deleted Mortgage Loans (after
application of scheduled principal payments due in the month of substitution).
The amount of such shortfall shall be distributed by the Seller directly to the
Purchaser or its designee in accordance with the Purchaser's instructions
within two (2) Business Days of such substitution.
In addition to such repurchase or substitution obligation, the Seller
shall indemnify the Purchaser and hold it harmless against any losses, damages,
penalties, fines, forfeitures, reasonable and necessary legal fees and related
costs, judgments, and other costs and expenses resulting from any claim,
demand, defense or assertion based on or grounded upon, or resulting from, a
breach of the Seller representations and warranties contained in this
Agreement. It is understood and agreed that the obligations of the Seller set
forth in this Subsection 8.03 to cure, substitute for or repurchase a defective
Mortgage Loan and to indemnify the Purchaser as provided in this Subsection
8.03 constitute the sole remedies of the Purchaser respecting a breach of the
foregoing representations and warranties.
Any cause of action against the Seller relating to or arising out of the
breach of any representations and warranties made in Subsections 8.01 and 8.02
shall accrue as to any Mortgage Loan upon (i) discovery of such breach by the
Purchaser or notice thereof by the Seller to the Purchaser, (ii) failure by the
Seller to cure such breach or repurchase such Mortgage Loan as
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specified above, and (iii) demand upon the Seller by the Purchaser for
compliance with this Agreement.
SECTION 9. CLOSING.
The closing for the purchase and sale of the Mortgage Loans shall take
place on the Closing Date. At the Purchaser's option, the closing shall be
either: by telephone, confirmed by letter or wire as the parties shall agree,
or conducted in person, at such place as the parties shall agree.
The closing for the Mortgage Loans to be purchased on the Closing Date
shall be subject to each of the following conditions:
(a) all of the representations and warranties of the
Seller under this Agreement and under the Servicing Agreement
(with respect to each Mortgage Loan, as specified therein)
shall be true and correct as of the Closing Date and no event
shall have occurred which, with notice or the passage of time,
would constitute a default under this Agreement or an Event of
Default under the Servicing Agreement;
(b) the Purchaser shall have received, or the
Purchaser's attorneys shall have received in escrow, all
closing documents as specified in Section 10 of this
Agreement, in such forms as are agreed upon and acceptable to
the Purchaser, duly executed by all signatories other than the
Purchaser as required pursuant to the terms hereof;
(c) the Seller shall have delivered and released to
the Purchaser or its designee all Mortgage Loan Documents with
respect to each Mortgage Loan; and
(d) all other terms and conditions of this Agreement
shall have been complied with.
Subject to the foregoing conditions, the Purchaser shall pay to the Seller
on the Closing Date the Purchase Price, plus accrued interest pursuant to
Section 4 of this Agreement, by wire transfer of immediately available funds to
the account designated by the Seller.
SECTION 10. CLOSING DOCUMENTS.
The closing documents for the Mortgage Loans to be purchased on the
Closing Date shall consist of fully executed originals of the following
documents:
1. this Agreement;
2. the Servicing Agreement in the form of Exhibit B hereto;
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3. a Custodial Account Letter Agreement or a Custodial Account
Certification, as applicable, as required under the Servicing
Agreement;
4. an Escrow Account Letter Agreement or an Escrow Account
Certification, as applicable, as required under the Servicing
Agreement;
5. an Officer's Certificate, in the form of Exhibit C hereto,
including all attachments thereto;
6. an Opinion of Counsel of the Seller/Servicer (who may be an
employee of the Seller/Servicer), in the form of Exhibit D hereto;
7. a Security Release Certification, in the form of Exhibit E or
Exhibit F, if applicable, hereto executed by any person, as
requested by the Purchaser, if any of the Mortgage Loans have at any
time been subject to any security interest, pledge or hypothecation
for the benefit of such person;
8. a certificate or other evidence of merger or change of name,
signed or stamped by the applicable regulatory authority, if any, if
the Mortgage Loans were acquired by the Seller by merger or acquired
or originated by the Seller while conducting business under a name
other than its present name, if applicable; and
9. the underwriting guidelines of the Seller to be attached
hereto as Exhibit I.
The Seller shall bear the risk of loss of the closing documents until such
time as they are received by the Purchaser or its attorneys.
SECTION 11. COSTS.
The Purchaser shall pay the legal fees and expenses of its attorneys. All
other costs and expenses incurred in connection with the transfer and delivery
of the Mortgage Loans including recording fees, fees for recording Assignments
of Mortgage, fees for title policy endorsements and continuations, if
applicable, the Seller's attorney's fees, shall be paid by the Seller.
SECTION 12. MERGER OR CONSOLIDATION OF THE SELLER.
The Seller will keep in full effect its existence, rights and franchises
as a national bank, and will obtain and preserve its qualification to do
business as a foreign corporation in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, or any of the Mortgage Loans and to perform
its duties under this Agreement.
Any Person into which the Seller may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Seller shall be a party, or any Person succeeding to the business of the
Seller, shall be the successor of the Seller hereunder,
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without the execution or filing of any paper or any further act on the part of
any of the parties hereto, anything herein to the contrary notwithstanding;
provided, however, that the successor or surviving Person shall have a tangible
net worth of at least $30,000,000.
SECTION 13. MANDATORY DELIVERY; GRANT OF SECURITY INTEREST.
The sale and delivery on the Closing Date of the Mortgage Loans described
on the Mortgage Loan Schedule is mandatory from and after the date of the
execution of this Agreement, it being specifically understood and agreed that
each Mortgage Loan is unique and identifiable on the date hereof and that an
award of money damages would be insufficient to compensate the Purchaser for
the losses and damages incurred by the Purchaser (including damages to
prospective purchasers of the Mortgage Loans) in the event of the Seller's
failure to deliver (i) each of the Mortgage Loans or (ii) one or more Qualified
Substitute Mortgage Loans or (iii) one or more Mortgage Loans otherwise
acceptable to the Purchaser on or before the Closing Date. The Seller hereby
grants to the Purchaser a lien on and a continuing security interest in each
Mortgage Loan and each document and instrument evidencing each such Mortgage
Loan to secure the performance by the Seller of its obligations under this
Agreement, and the Seller agrees that it shall hold such Mortgage Loans in
custody for the Purchaser subject to the Purchaser's (i) right to reject any
Mortgage Loan (or Qualified Substitute Mortgage Loan) under the terms of this
Agreement and to require another Mortgage Loan (or Qualified Substitute
Mortgage Loan) to be substituted therefor, and (ii) obligation to pay the
Purchase Price plus accrued interest as set forth in Section 4 hereof for the
Mortgage Loans. All rights and remedies of the Purchaser under this Agreement
are distinct from, and cumulative with, any other rights or remedies under this
Agreement or afforded by law or equity and all such rights and remedies may be
exercised concurrently, independently or successively.
SECTION 14. NOTICES.
All demands, notices and communications hereunder shall be in writing and
shall be deemed to have been duly given if mailed, by registered or certified
mail, return receipt requested, or, if by other means, when received by the
other party at the address as follows:
(i) if to the Seller:
Franklin Bank, N.A.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
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(ii) if to the Purchaser:
Franklin Finance Corporation
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
or such other address as may hereafter be furnished to the other party by like
notice. Any such demand, notice or communication hereunder shall be deemed to
have been received on the date delivered to or received at the premises of the
addressee (as evidenced, in the case of registered or certified mail, by the
date noted on the return receipt).
SECTION 15. SEVERABILITY CLAUSE.
Any part, provision, representation or warranty of this Agreement which is
prohibited or unenforceable or is held to be void or unenforceable in any
jurisdiction shall be ineffective, as to such jurisdiction, to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction as to any Mortgage Loan shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties hereto waive any provision of law which
prohibits or renders void or unenforceable any provision hereof. If the
invalidity of any part, provision, representation or warranty of this Agreement
shall deprive any party of the economic benefit intended to be conferred by
this Agreement, the parties shall negotiate, in good faith, to develop a
structure the economic effect of which is nearly as possible the same as the
economic effect of this Agreement without regard to such invalidity.
SECTION 16. COUNTERPARTS.
This Agreement may be executed simultaneously in any number of
counterparts. Each counterpart shall be deemed to be an original, and all such
counterparts shall constitute one and the same instrument.
SECTION 17. GOVERNING LAW.
The Agreement shall be construed in accordance with the laws of the State
of Michigan and the obligations, rights and remedies of the parties hereunder
shall be determined-in accordance with the substantive laws of the Michigan
(without regard to conflicts of laws principles), except to the extent
preempted by Federal law.
SECTION 18. INTENTION OF THE PARTIES.
It is the intention of the parties that the Purchaser is purchasing, and
the Seller is selling the Mortgage Loans and not a debt instrument of the
Seller or another security. Accordingly, the parties hereto each intend to
treat the transaction for Federal income tax purposes as a sale by the Seller,
and a purchase by the Purchaser, of the Mortgage Loans.
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SECTION 19. SUCCESSORS AND ASSIGNS; ASSIGNMENT OF
PURCHASE AGREEMENT.
This Agreement shall bind and inure to the benefit of and be enforceable
by the Seller and the Purchaser and the respective permitted successors and
assigns of the Seller and the successors and assigns of the Purchaser. This
Agreement shall not be assigned, pledged or hypothecated by the Seller to a
third party without the consent of the Purchaser. This Agreement may be
assigned, pledged or hypothecated by the Purchaser without the prior consent of
the Seller. If the Purchaser assigns all or any of its rights as Purchaser
hereunder, the assignee of the Purchaser will become the "Purchaser" hereunder
to the extent of such assignment, provided that at no time shall there be more
than fifteen (15) persons having the status of "Purchaser" hereunder. Any
assignment by the Purchaser shall be accompanied by the delivery and execution
of an Assignment and Assumption Agreement (the "Assignment and Assumption
Agreement") substantially in the form attached hereto as Exhibit G. The Seller
shall be required to remit all amounts required to be remitted to the Purchaser
hereunder to said assignee commencing with the first Remittance Date falling
after receipt of said copy of the related Assignment and Assumption Agreement
provided that the Seller receives said copy no later than three (3) Business
Days immediately prior to the first day of the month of the related Remittance
Date.
SECTION 20. WAIVERS.
No term or provision of this Agreement may be waived or modified unless
such waiver or modification is in writing and signed by the party against whom
such waiver or modification is sought to be enforced.
SECTION 21. EXHIBITS.
The exhibits to this Agreement are hereby incorporated and made a part
hereof and are an integral part of this Agreement.
SECTION 22. GENERAL INTERPRETIVE PRINCIPLES.
For purposes of this Agreement, except as otherwise expressly provided or
unless the context otherwise requires:
(a) the terms defined in this Agreement have the meanings
assigned to them in this Agreement and include the plural as well as
the singular, and the use of any gender herein shall be deemed to
include the other gender;
(b) accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles;
(c) references herein to "Articles," "Sections," "Subsections,"
"Paragraphs," and other subdivisions without reference to a document
are to designated Articles, Sections, Subsections, Paragraphs and
other subdivisions of this Agreement;
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(d) reference to a Subsection without further reference to a
Section is a reference to such Subsection as contained in the same
Section in which the reference appears, and this rule shall also
apply to Paragraphs and other subdivisions;
(e) the words "herein," "hereof," "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any
particular provision; and
(f) the term "include" or "including" shall mean without
limitation by reason of enumeration.
SECTION 23. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications which may hereafter be
executed, (b) documents received by any party at the closing, and (c) financial
statements, certificates and other information previously or hereafter
furnished, may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The parties agree
that any such reproduction shall be admissible in evidence as the original
itself in any judicial or administrative proceeding, whether or not the
original is in existence and whether or not such reproduction was made by a
party in the regular course of business, and that any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible in
evidence.
SECTION 24. FURTHER AGREEMENTS.
The Seller and the Purchaser each agree to execute and deliver to the
other such reasonable and appropriate additional documents, instruments or
agreements as may be necessary or appropriate to effectuate the purposes of
this Agreement.
SECTION 25. RECORDATION OF ASSIGNMENTS OF MORTGAGE.
To the extent permitted by applicable law, each of the Assignments of
Mortgage is subject to recordation in all appropriate public offices for real
property records in all the counties or their comparable jurisdictions in which
any or all of the Mortgaged Properties are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected at the Seller's expense for a single recordation with respect to each
Assignment of Mortgage in the event recordation is either necessary under
applicable law or requested by the Purchaser at its sole option.
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IN WITNESS WHEREOF, the parties have executed this Agreement under seal as
of the date and year first above written.
FRANKLIN FINANCE CORPORATION
(the Purchaser)
By:_________________________________
Name:_______________________________
Title:________________________________
FRANKLIN BANK, N.A.
(the Seller)
By:_________________________________
Name:_______________________________
Title:________________________________
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EXHIBIT A
CONTENTS OF EACH MORTGAGE FILE
With respect to each Mortgage Loan, the Mortgage File shall include each
of the following items, which shall be available for inspection by the
Purchaser and any prospective Purchaser, and which shall be delivered to the
Purchaser or its designee pursuant to Section 6.03 of the Mortgage Loan
Purchase and Warranties Agreement to which this Exhibit is attached (the
"Agreement"):
1. The original Mortgage Note (or, with respect to the Mortgage Loan
listed on Schedule I hereto, a lost note affidavit, executed by an officer of
the Seller, with a copy of the original note attached thereto) bearing all
intervening endorsements, endorsed "Pay to the order of Franklin Finance
Corporation, without recourse" and signed in the name of the Seller by an
authorized officer. To the extent that there is no room on the face of the
Mortgage Notes for endorsements, the endorsement may be contained on an
allonge, if state law so allows. If the Mortgage Loan was acquired by the
Seller in a merger, the endorsement must be by "[Seller], successor by merger
to [name of predecessor]". If the Mortgage Loan was acquired or originated by
the Seller while doing business under another name, the endorsement must be by
"[Seller], formerly known as [previous name]".
2. The original of any guarantee executed in connection with the Mortgage
Note.
3. The original Mortgage, with evidence of recording thereon. If in
connection with any Mortgage Loan, the Seller cannot deliver or cause to be
delivered the original Mortgage with evidence of recording thereon on or prior
to the Closing Date because of a delay caused by the public recording office
where such Mortgage has been delivered for recordation, a photocopy of such
Mortgage certified by the Seller to be true and correct will be delivered; if
such Mortgage has been lost or if such public recording office retains the
original recorded Mortgage, the Seller shall deliver or cause to be delivered
to the Purchaser, a photocopy of such Mortgage, certified by such public
recording office to be a true and complete copy of the original recorded
Mortgage.
4. The originals of all assumption, modification, consolidation or
extension agreements, if any, with evidence of recording thereon or certified
copies of such documents if the originals thereof are unavailable.
5. The original Assignment of Mortgage for each Mortgage Loan endorsed
"Pay to the order of Franklin Finance Corporation" and signed in the name of
the Seller by an authorized officer. If the Mortgage Loan was acquired by the
Seller in a merger, the Assignment of Mortgage must be made by "[Seller],
successor by merger to [name of predecessor]". If the Mortgage Loan was
acquired or originated by the Seller while doing business under another name,
the Assignment of Mortgage must be by "[Seller], formerly known as [previous
name]".
6. Originals of all intervening assignments of the Mortgage with evidence
of recording thereon if such intervening assignment has been recorded.
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7. The original mortgagee policy of title insurance or, in the event such
original title policy is unavailable, a certified true copy of the related
policy binder or commitment for title certified to be true and complete by the
title insurance company.
8. Any original security agreement executed in connection with the
Mortgage.
9. The original hazard insurance policy and, if required by law, flood
insurance policy, in accordance with Section 8.02(f) of the Agreement.
10. Mortgage Loan closing statement.
11. Credit report on the Mortgagor.
12. Appraisal report.
13. Photograph of the Mortgaged Property.
14. Survey of the Mortgaged Property, if any.
15. Copy of each instrument necessary to complete identification of any
exception set forth in the exception schedule in the title policy, i.e., map or
plat, restrictions, easements, sewer agreements, etc.
16. All required disclosure statements.
17. If available, termite report, structural engineer's report, water
potability and septic certification.
18. Sales contract.
19. Tax receipts, insurance premium receipts, ledger sheets, insurance
claim files, correspondence, current and historical computerized data files,
and all other processing, underwriting and closing papers and records which are
customarily contained in a mortgage loan file and which are required to
document the Mortgage Loan or to service the Mortgage Loan.
In the event that such original or copy of any document submitted for
recordation to the appropriate public recording office is not so delivered to
the Purchaser or its designee within 90 days following the Closing Date (other
than with respect to the Assignments of Mortgage which shall be delivered to
the Purchaser or its designee in blank), and in the event that the Seller does
not cure such failure within 30 days of discovery or receipt of written
notification of such failure from the Purchaser, the related Mortgage Loan
shall, upon the request of the Purchaser, be repurchased by the Seller at the
price and in the manner specified in Subsection 8.03 of the Agreement. The
foregoing repurchase obligation shall not apply in the event that the Seller
cannot deliver such original or copy of any document submitted for recordation
to the appropriate public recording office within the specified period due to a
delay caused by the recording office in the
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applicable jurisdiction; provided that the Seller shall instead deliver a
recording receipt of such recording office or, if such recording receipt is not
available, an officer's certificate of a servicing officer of the Seller,
confirming that all such documents have been accepted for recording; provided
that, upon request of the Purchaser and delivery by the Purchaser to the Seller
of a schedule of the related Mortgage Loans, the Seller shall reissue and
deliver to the Purchaser or its designee said officer's certificate relating to
the related Mortgage Loans.
A-3
39
EXHIBIT B
[Servicing Agreement]
40
EXHIBIT C
FORM OF SELLER'S/SERVICER'S OFFICER'S CERTIFICATE
I, _____________, hereby certify that I am the duly elected ______________
of Franklin Bank, N.A., a national bank (the "Seller") and further as follows:
1. Attached hereto as Exhibit 1 is a true, correct and complete
copy of the restated Articles of Association of the Seller which is
in full force and effect on the date hereof and which has been in
effect without amendment, waiver, rescission or modification since
[_________.]
2. Attached hereto as Exhibit 2 is a true, correct and complete
copy of the bylaws of the Seller which are in effect on the date
hereof and which have been in effect without amendment, waiver,
rescission or modification since [_________.]
3. Attached hereto as Exhibit 3 is an original certificate of
due incorporation and valid existence of the Seller issued within
ten days of the date hereof, and no event has occurred since the
date thereof which would impair such standing.
4. Attached hereto as Exhibit 4 is a true, correct and complete
copy of the corporate resolutions of the Board of Directors of the
Seller authorizing the Seller to execute and deliver each of the
Mortgage Loan Purchase and Warranties Agreements, dated as of
[__________], 1997, by and between Franklin Finance Corporation (the
"Purchaser") and the Seller (the "Purchase Agreement"), to endorse
the mortgage notes and execute the assignments of mortgages by
original [or facsimile] signature, and to execute and deliver each
of the Servicing Agreements dated as of [__________], 1997, by and
between Franklin Finance Corporation (the "Purchaser") and the
Seller as Servicer (the "Servicing Agreement") and such resolutions
are in effect on the date hereof and have been in effect without
amendment, waiver, rescission or modification since [_________.]
5. Either (i) no consent, approval, authorization or order of
any court or governmental agency or body is required for the
execution, delivery and performance by the Seller of or compliance
by the Seller with the Purchase Agreement and the Servicing
Agreement, the sale of the mortgage loans or the consummation of the
transactions contemplated by the Purchase Agreement and the
Servicing Agreement; or (ii) any required consent, approval,
authorization or order has been obtained by the Seller.
6. Neither the consummation of the transactions contemplated by,
nor the fulfillment of the terms of, the Purchase Agreement and the
Servicing Agreement conflicts or will conflict with or results or
will result in a breach of or constitutes or will constitute a
default under the Articles of Association or by-laws of the Seller,
the terms of any indenture or other agreement or instrument to which
the Seller is a
41
party or by which it is bound or to which it is subject, or any
statute or order, rule, regulations, writ, injunction or decree of
any court, governmental authority or regulatory body to which the
Seller is subject or by which it is bound.
7. To the best of my knowledge, there is no action, suit,
proceeding or investigation pending or threatened against the Seller
which, in my judgment, either in any one instance or in the
aggregate, may result in any material adverse change in the
business, operations, financial condition, properties or assets of
the Seller or in any material impairment of the right or ability of
the Seller to carry on its business substantially as now conducted
or in any material liability on the part of the Seller or which
would draw into question the validity of the Purchase Agreement and
the Servicing Agreement or the mortgage loans or of any action taken
or to be taken in connection with the transactions contemplated
hereby, or which would be likely to impair materially the ability of
the Seller to perform under the terms of the Purchase Agreement and
the Servicing Agreement.
8. Each person listed on Exhibit 5 attached hereto who, as an
officer or representative of the Seller, signed the Purchase
Agreement and any other document delivered prior to or on the date
hereof in connection with any purchase described in the Purchase
Agreement was, at the respective times of such signing and delivery,
and is now, a duly elected or appointed, qualified and acting
officer or representative of the Seller, who holds the office set
forth opposite his or her name on Exhibit 5, and the signatures of
such persons appearing on such documents are their genuine
signatures. The person who, as an officer or representative of the
Seller, signed the Servicing Agreement and any other document
delivered prior to or on the date hereof in connection with any
servicing duties described in the Servicing Agreement was, at the
respective times of such signing and delivery, and is now, a duly
elected or appointed, qualified and acting officer or representative
of the Seller, who holds the office set forth beneath his or her
name on the Servicing Agreement and the signature of such person
appearing on such document is his or her genuine signature.
9. The Seller is duly authorized to engage in the transactions
described and contemplated in the Purchase Agreement and Servicing
Agreement.
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42
IN WITNESS WHEREOF, I have hereunto signed my name and affixed the seal of
the Seller.
Dated: ____________, 1997 By:__________________________
Name:_______________________
Title:
[Seal]
I, _________________________, an __________________ of Franklin Bank,
N.A., hereby certify that _____________________ is the duly elected, qualified
and acting ______________ of the Seller and that the signature appearing above
is his or her genuine signature.
IN WITNESS WHEREOF, I have hereunto signed my name.
Dated: ______________, 1997 By:_____________________________
Name:___________________________
Title:
C-3
43
EXHIBIT 5
to Seller's/Servicer's Officer's Certificate
NAME TITLE SIGNATURE
44
EXHIBIT D
FORM OF OPINION OF COUNSEL TO THE SELLER/SERVICER
_________________, 1997
Franklin Finance Corporation
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
You have requested my opinion, as [General] Counsel to Franklin Bank, N.A.
(the "Seller"), with respect to certain matters in connection with the sale by
the Seller of the Mortgage Loans pursuant to that certain Mortgage Loan
Purchase and Warranties Agreement by and between the Seller and Franklin
Finance Corporation (the "Purchaser"), dated as of __________, 1997 (the
"Purchase Agreement") which sale is in the form of whole loans, delivered
pursuant to a Purchase Agreement and serviced pursuant to an Servicing
Agreement, dated as of __________, 1997, by and between the Purchaser and the
Seller as Servicer (the "Servicing Agreement"). Capitalized terms not
otherwise defined herein have the meanings set forth in the Purchase Agreement
and the Servicing Agreement.
I have examined the following documents:
1. the Purchase Agreement;
2. the Servicing Agreement;
3. the form of Assignment of Mortgage;
4. the form of endorsement of the Mortgage Notes; and
5. such other documents, records and papers as we have deemed
necessary and relevant as a basis for this opinion.
To the extent I have deemed necessary and proper, I have relied upon the
representations and warranties of the Seller contained in the Purchase
Agreement and the Servicing Agreement. I have assumed the authenticity of all
documents submitted to me as originals, the genuineness of all signatures, the
legal capacity of natural persons and the conformity to the originals of all
documents.
Based upon the foregoing, it is my opinion that:
45
1. The Seller is a national bank duly organized and validly
existing under the laws of the United States and is qualified to
transact business in, and is in good standing under, the laws of
Michigan.
2. The Seller has the power to engage in the transactions
contemplated by the Purchase Agreement and the Servicing Agreement
and all requisite power, authority and legal right to execute and
deliver the Purchase Agreement and the Servicing Agreement and to
perform and observe the terms and conditions of such agreements.
3. The Purchase Agreement and Servicing Agreement have been duly
authorized, executed and delivered by the Seller and are legal,
valid and binding agreements enforceable in accordance with their
respective terms against the Seller, subject to bankruptcy laws and
other similar laws of general application affecting rights of
creditors and subject to the application of the rules of equity,
including those respecting the availability of specific performance,
none of which will materially interfere with the realization of the
benefits provided thereunder or with the Purchaser's ownership of
the Mortgage Loans.
4. The Seller has been duly authorized to allow any of its
officers to execute any and all documents by original signature in
order to complete the transactions contemplated by the Purchase
Agreement and the Servicing Agreement and by original or facsimile
signature in order to execute the endorsements to the Mortgage Notes
and the Assignments of Mortgages, and the original or facsimile
signature of the officer at the Seller executing the endorsements to
the Mortgage Notes and the Assignments of Mortgages represents the
legal and valid signature of said officer of the Seller.
5. Either (i) no consent, approval, authorization or order of
any court or governmental agency or body is required for the
execution, delivery and performance by the Seller of or compliance
by the Seller with the Purchase Agreement and the Servicing
Agreement and the sale of the Mortgage Loans or the consummation of
the transactions contemplated by the Purchase Agreement and the
Servicing Agreement or (ii) any required consent, approval,
authorization or order has been obtained by the Seller.
6. Neither the consummation of the transactions contemplated by,
nor the fulfillment of the terms of, the Purchase Agreement and the
Servicing Agreement conflicts or will conflict with or results or
will result in a breach of or constitutes or will constitute a
default under the Articles of Association or by-laws of the Seller,
the terms of any indenture or other agreement or instrument to which
the Seller is a party or by which it is bound or to which it is
subject, or violates any statute or order, rule, regulations, writ,
injunction or decree of any court, governmental authority or
regulatory body to which the Seller is subject or by which it is
bound.
D-2
46
7. There is no action, suit, proceeding or investigation pending
or, to the best of my knowledge, threatened against the Seller
which, in my judgment, either in any one instance or in the
aggregate, may result in any material adverse change in the
business, operations, financial condition, properties or assets of
the Seller or in any material impairment of the right or ability of
the Seller to carry on its business substantially as now conducted
or in any material liability on the part of the Seller or which
would draw into question the validity of the Purchase Agreement and
the Servicing Agreement or the Mortgage Loans or of any action taken
or to be taken in connection with the transactions contemplated
thereby, or which would be likely to impair materially the ability
of the Seller to perform under the terms of the Purchase Agreement
and the Servicing Agreement.
8. The sale of each Mortgage Note and Mortgage as and in the
manner contemplated by the Purchase Agreement is sufficient to fully
transfer to the Purchaser all right, title and interest of the
Seller thereto as noteholder and mortgagee.
9. The Mortgages have been duly assigned and the Mortgage Notes
have been duly endorsed as provided in the Purchase Agreement. The
Assignments of Mortgage are in recordable form, except for the
insertion of the name of the assignee, and upon the name of the
assignee being inserted, and to the best of my knowledge, with
respect to all other states, the Assignments of Mortgage are in
recordable form, except for the insertion of the name of the
assignee, and upon the name of the assignee being inserted, are
acceptable for recording under the laws of such other states. The
endorsement of the Mortgage Notes, the delivery to the Purchaser, or
its designee, of the Assignments of Mortgage, and the delivery of
the original endorsed Mortgage Notes to the Purchaser, or its
designee, are sufficient to permit the Purchaser to avail itself of
all protection available under applicable law against the claims of
any present or future creditors of the Seller, and are sufficient to
prevent any other sale, transfer, assignment, pledge or
hypothecation of the Mortgages and the Mortgage Notes by the Seller
from being enforceable.
This opinion is given to you for your sole benefit, and no other person or
entity is entitled to rely hereon except that the purchaser or purchasers to
which you initially and directly resell the Mortgage Loans may rely on this
opinion as if it were addressed to them as of its date.
Very truly yours,
[General] Counsel
D-3
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EXHIBIT E
______________________, 1997
Federal Home Loan Bank of Chicago (the "FHLB")
_____________________________
_____________________________
Attention: _____________________________
_____________________________
_____________________________
Re: Notice of Sale and Release of Collateral
Dear Sirs:
This letter serves as notice that Franklin Bank, N.A., a national bank
(the "Bank") has committed to sell to Franklin Finance Corporation under a
Mortgage Loan Purchase and Warranties Agreement, dated as of __________, 1997,
certain mortgage loans originated or owned by the Bank. The Bank warrants that
the mortgage loans to be sold to Franklin Finance Corporation are in addition
to and beyond any collateral required to secure advances made by the FHLB to
the Bank.
The Bank acknowledges that the mortgage loans to be sold to Franklin
Finance Corporation shall not be used as additional or substitute collateral
for advances made by the FHLB. Franklin Finance Corporation understands that
the balance of the Bank's mortgage loan portfolio may be used as collateral or
additional collateral for advances made by the FHLB, and confirms that it has
no interest therein.
Execution of this letter by the FHLB shall constitute a full and complete
release of any security interest, claim, or lien which the FHLB may have
against the mortgage loans to be sold to Franklin Finance Corporation.
Very truly yours,
_____________________________
By:_____________________________
Name:___________________________
Title:__________________________
Date:___________________________
Acknowledge and approved:
FEDERAL HOME LOAN BANK OF CHICAGO
By:_____________________________
Name:___________________________
Title:__________________________
Date:___________________________
48
EXHIBIT F
FORM OF SECURITY RELEASE CERTIFICATION
I. RELEASE OF SECURITY INTEREST
The financial institution named below hereby relinquishes any and all
right, title and interest it may have in all Mortgage Loans to be purchased by
Franklin Finance Corporation from Franklin Bank, N.A., pursuant to that certain
Mortgage Loan Purchase and Warranties Agreement, dated as of [__________,
1997,] and certifies that all notes, mortgages, assignments and other documents
in its possession relating to such Mortgage Loans have been delivered and
released to Franklin Bank, N.A. or its designees, as of the date and time of
the sale of such Mortgage Loans to Franklin Finance Corporation.
Name and Address of Financial Institution
________________________________
(name)
________________________________
(Address)
By:_____________________________
II. CERTIFICATION OF RELEASE
Franklin Bank, N.A. hereby certifies to Franklin Finance Corporation that,
as of the date and time of the sale of the above-mentioned Mortgage Loans to
Franklin Finance Corporation, the security interests in the Mortgage Loans
released by the above-named financial institution comprise all security
interests relating to or affecting any and all such Mortgage Loans. The
Company warrants that, as of such time, there are and will be no other security
interests affecting any or all of such Mortgage Loans.
_________________________________
By: _____________________________
Title: __________________________
Date:____________________________
49
EXHIBIT G
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT, dated [__________________,] between
Franklin Bank, N.A., a national bank ("Assignor") and Franklin Finance
Corporation, a Michigan corporation ("Assignee"):
For good and valuable consideration the receipt and sufficiency of which
hereby are acknowledged, and in consideration of the mutual covenants herein
contained, the parties hereto hereby agree as follows:
1. The Assignor hereby grants, transfers and assigns to
Assignee, as Purchaser, all of the right, title and interest of
Assignor with respect to the mortgage loans listed on Exhibit A
attached hereto (the "Mortgage Loans"), and with respect to such
Mortgage Loans, in, to and under (a) that certain Mortgage Loan
Purchase and Warranties Agreement dated [__________,] 1997 by and
between Franklin Bank, N.A. (the "Seller") and Franklin Finance
Corporation (the "Purchase Agreement"), and (b) that certain
Servicing Agreement dated as of [___________], by and between the
Purchaser and the Seller (the "Servicing Agreement"; the Servicing
Agreement and the Purchase Agreement are collectively referred to as
the "Agreements").
2. The Assignor warrants and represents to, and covenants with,
the Assignee that:
a. the Assignor is the lawful owner of the Mortgage
Loans with the full right to transfer the Mortgage Loans free
from any and all claims and encumbrances whatsoever;
b. the Assignor has not received notice of, and has no
knowledge of, any offsets, counterclaims or other defenses
available to the Seller with respect to the Agreements or the
Mortgage Loans;
c. the Assignor has not waived or agreed to any waiver
under, or agreed to any amendment or other modification of,
the Agreements. The Assignor has no knowledge of, and has
not received notice of, any waivers under or amendments or
other modifications of, or assignments of rights or
obligations under, the Agreements; and
d. Neither the Assignor nor anyone acting on its behalf
has offered, transferred, pledged, sold or otherwise disposed
of the Mortgage Loans or any interest in the Mortgage Loans,
or solicited any offer to buy or accept a transfer, pledge or
other disposition of the Mortgage Loans, or any interest in
the Mortgage Loans or otherwise approached or negotiated with
respect to the Mortgage Loans, or any interest in the
Mortgage with any
50
person in any manner, or made any general solicitation by
means of general advertising or in any other manner, or taken
any other action which would constitute a distribution of the
Mortgage Loans under the Securities Act of 1933, as amended
(the "1933 Act") or which would render the disposition of the
Mortgage Loans a violation of Section 5 of the 1933 Act or
require registration pursuant thereto.
3. The Assignee warrants and represents to, and covenants
with, the Assignor and the Seller pursuant to the Agreements that:
a. the Assignee is a corporation duly organized, validly
existing and in good standing under the laws of the
jurisdiction of its incorporation, and has all requisite
corporate power and authority to acquire, own and purchase
the Mortgage Loans;
b. the Assignee has full corporate power and authority
to execute, deliver and perform under this Assignment and
Assumption Agreement, and to consummate the transactions set
forth herein. The execution, delivery and performance of the
Assignee of this Assignment and Assumption Agreement, and the
consummation by it of the transactions contemplated hereby,
have been duly authorized by all necessary corporate action
of the Assignee. This Assignment and Assumption Agreement
has been duly executed and delivered by the Assignee and
constitutes the valid and legally binding obligation of the
Assignee enforceable against the Assignee in accordance with
its respective terms;
c. To the best of Assignee's knowledge, no material
consent, approval, order or authorization of, or declaration,
filing or registration with, any governmental entity is
required to be obtained or made by the Assignee in connection
with the execution, delivery or performance by the Assignee
of this Assignment and Assumption Agreement, or the
consummation by it of the transactions contemplated hereby;
d. The Assignee agrees to be bound, as Purchaser, by all
of the terms, covenants and conditions of the Agreements, the
Mortgage Loans, and from and after the date hereof, the
Assignee assumes for the benefit of each of the Seller and
the Assignor all of the Assignor' s obligations as Purchaser
thereunder, including, without limitation, the limitation on
assignment set forth in Section 19 of the Purchase Agreement;
e. The Assignee understands that the Mortgage Loans have
not been registered under the 1933 Act or the securities laws
of any state;
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51
f. The purchase price being paid by the Assignee for the
Mortgage Loans is in excess of $250,000 and will be paid by
cash remittance of the full purchase price within sixty (60)
days of the sale;
g. The Assignee is acquiring the Mortgage Loans for
investment for its own account only and not for any other
person;
h. The Assignee considers itself a sophisticated institutional
investor having such knowledge and experience in financial
and business matters that it is capable of evaluating the
merits and risks of investment in the Mortgage Loans;
i. The Assignee has been furnished with all information
regarding the Mortgage Loans that it has requested from the
Assignor or the Seller;
j. Neither the Assignee nor anyone acting on its behalf
has offered, transferred, pledged, sold or otherwise disposed
of the Mortgage Loans or any interest in the Mortgage Loans,
or solicited any offer to buy or accept a transfer, pledge or
other disposition of the Mortgage Loans or any interest in
the Mortgage Loans, or otherwise approached or negotiated
with respect to the Mortgage Loans or any interest in the
Mortgage Loans with any person in any manner which would
constitute a distribution of the Mortgage Loans under the
1933 Act or which would render the disposition of the
Mortgage Loans a violation of Section 5 of the 1933 Act or
require registration pursuant thereto, nor will it act, nor
has it authorized or will it authorize any person to act, in
such manner with respect to the Mortgage Loans; and
k. Either: (1) the Assignee is not an employee benefit
plan ("Plan") within the meaning of section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA") or a plan (also "Plan") within the meaning of
section 4975(e)(1) of the Internal Revenue Code of 1986
("Code"), and the Assignee is not directly or indirectly
purchasing the Mortgage Loans on behalf of, investment
manager of, as named fiduciary of, as Trustee of, or with
assets of, a Plan; or (2) the Assignee's purchase of the
Mortgage Loans will not result in a prohibited transaction
under section 406 of ERISA or section 4975 of the Code.
4. (a) The Assignee's address for purposes of all notices and
correspondence related to the Mortgage Loans and the
Agreements is: ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
The Assignee's wire instructions for purposes of all remittances and
payments related to the Mortgage Loans are to be confirmed in writing.
G-3
52
(b) The Assignor's address for purposes for all notices
and correspondence related to the Mortgage Loans and this
Agreement is: ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
5. This Agreement shall be construed in accordance with the
substantive laws of the State of Michigan (without regard to
conflicts of laws principles) and the obligations, rights and
remedies of the parties hereunder shall be determined in accordance
with such laws, except to the extent preempted by federal law.
6. This Agreement shall inure to the benefit of the successors
and assigns of the parties hereto. This Agreement may not be
assigned by the Assignee without the express written consent of the
Assignor. Any entity into which the Assignor or Assignee may be
merged or consolidated shall, without the requirement for any
further writing, be deemed the Assignor or Assignee, respectively,
hereunder.
7. No term or provision of this Agreement may be waived or
modified unless such waiver or modification is in writing and signed
by the party against whom such waiver or modification is sought to
be enforced.
8. This Agreement shall survive the conveyance of the Mortgage
Loans and the assignment of the Agreements by the Assignor.
9. Notwithstanding the assignment of the Agreements by either
the Assignor or Assignee, this Agreement shall not be deemed
assigned by the Assignor or the Assignee unless assigned by separate
written instrument.
10. For the purpose for facilitating the execution of this
Agreement as herein provided and for other purposes, this Agreement
may be executed simultaneously in any number of counterparts, each
of which counterparts shall be deemed to be an original, and such
counterparts shall constitute and be one and the same instrument.
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53
IN WITNESS WHEREOF, the parties have caused this Assignment and Assumption
Agreement to be executed by their duly authorized officers as of the date first
above written.
_________________________ _____________________________
Assignor Assignee
By:______________________ By:__________________________
Its:_____________________ Its:_________________________
Taxpayer Taxpayer
Identification No._______ Identification No.___________
G-5