Exhibit 4.2
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SALE AND SERVICING AGREEMENT
Dated as of [__________]
among
COMPASS ASSET ACCEPTANCE COMPANY, L.L.C.
(Seller)
[_________________]
(Owner Trustee)
COMPASS RECEIVABLES ASSET FUNDING TRUST 200[_]-[__]
COMPASS BANK
(Servicer)
and
[__________]
(Indenture Trustee)
Compass Receivables Asset Funding Trust 200[_]-[__]
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Table of Contents
PAGE
ARTICLE I. DEFINITIONS...............................................................................11
Section 1.01 Definitions......................................................................11
Section 1.02 Other Definitional Provisions....................................................28
Section 1.03 Interest Calculations............................................................29
ARTICLE II. Conveyance of Mortgage Loans; Tax Treatment...............................................30
Section 2.01 Acknowledgment; Conveyance of Mortgage Loans; Custody of Mortgage Files..........30
Section 2.02 Acceptance by Indenture Trustee; Repurchase of Mortgage Loans; Conveyance of
Eligible Substitute Mortgage Loans...............................................34
Section 2.03 Representations, Warranties and Covenants of the Servicer........................35
Section 2.04 Representations and Warranties of the Seller Regarding this Agreement and the
Mortgage Loans; Repurchases and Substitutions....................................37
Section 2.05 Tax Treatment....................................................................42
ARTICLE III. ADMINISTRATION AND SERVICING OF MORTGAGE LOANS............................................42
Section 3.01 The Servicer.....................................................................42
Section 3.02 Collection of Certain Mortgage Loan Payments.....................................45
Section 3.03 Withdrawals from the Collection Account..........................................47
Section 3.04 Maintenance of Hazard Insurance; Property Protection Expenses....................48
Section 3.05 Assumption and Modification Agreements...........................................50
Section 3.06 Realization Upon Defaulted Mortgage Loans........................................50
Section 3.07 [Reserved].......................................................................51
Section 3.08 Indenture Trustee to Cooperate...................................................51
Section 3.09 Servicing Compensation; Payment of Certain Expenses by Servicer..................51
Section 3.10 Annual Statement as to Compliance................................................52
Section 3.11 Annual Servicing Report..........................................................53
Section 3.12 Access to Certain Documentation and Information Regarding the Mortgage Loans.....53
Section 3.13 Maintenance of Certain Servicing Insurance Policies..............................54
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Section 3.14 Reports to the Securities and Exchange Commission................................54
Section 3.15 [Reserved].......................................................................54
Section 3.16 Information Required by the Internal Revenue Service Generally and Reports of
Foreclosures and Abandonments of Mortgaged Property..............................54
Section 3.17 Additional Covenants of Compass Bank.............................................54
Section 3.18 Servicing Certificate............................................................55
ARTICLE IV. [RESERVED]................................................................................58
ARTICLE V. PRIORITY OF PAYMENTS; STATEMENTS TO NOTEHOLDERS; RIGHTS OF NOTEHOLDERS....................58
Section 5.01 Payments.........................................................................58
Section 5.02 Calculation of LIBOR, the Class A Formula Rate and the Class M Formula Rate......60
Section 5.03 Statements to Noteholders........................................................61
ARTICLE VI. THE SERVICER AND THE SELLER...............................................................65
Section 6.01 Liability of the Servicer and the Seller.........................................65
Section 6.02 Merger or Consolidation of, or Assumption of the Obligations of, the Servicer
or the Seller....................................................................65
Section 6.03 Limitation on Liability of the Servicer, the Seller and Others...................65
Section 6.04 Servicer Not to Resign...........................................................66
Section 6.05 Delegation of Duties.............................................................66
ARTICLE VII. SERVICER TERMINATION......................................................................66
Section 7.01 Servicer Termination Events......................................................67
Section 7.02 Indenture Trustee to Act; Appointment of Successor...............................68
Section 7.03 Waiver of Defaults...............................................................70
Section 7.04 Notification to Noteholders......................................................70
ARTICLE VIII. TERMINATION...............................................................................70
Section 8.01 Termination......................................................................70
ARTICLE IX. MISCELLANEOUS PROVISIONS..................................................................73
Section 9.01 Amendment........................................................................73
Section 9.02 Recordation of Agreement.........................................................74
Section 9.03 Duration of Agreement............................................................75
Section 9.04 Governing Law....................................................................75
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Section 9.05 Notices..........................................................................75
Section 9.06 Severability of Provisions.......................................................75
Section 9.07 No Partnership...................................................................76
Section 9.08 Counterparts.....................................................................76
Section 9.09 Successors and Assigns...........................................................76
Section 9.10 Headings.........................................................................76
Section 9.11 Indenture Trustee................................................................76
Section 9.12 Inconsistencies Among Transaction Documents......................................76
Section 9.13 [RESERVED].......................................................................76
Section 9.14 [RESERVED].......................................................................76
Section 9.15 Perfection Representations.......................................................77
Section 9.16 Limitation of Liability..........................................................77
Section 9.17 Inspection of Mortgage Files.....................................................77
ARTICLE X. ADMINISTRATION PROVISIONS.................................................................77
Section 10.01 Administrative Duties............................................................77
Section 10.02 Records..........................................................................79
Section 10.03 Additional Information to be Furnished to the Trust..............................80
EXHIBITS
SCHEDULE 1 Perfection Representations, Warranties and Covenants
EXHIBIT A Mortgage Loan Schedule
EXHIBIT B [Reserved]
EXHIBIT C [Reserved]
EXHIBIT D Form of Class A Note
EXHIBIT E Form of Class M Note
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This Sale and Servicing Agreement (the "Agreement") is entered into
effective as of [__________], among [____________] as owner trustee, not
individually, but solely in its capacity as owner trustee (the "Owner Trustee")
of Compass Receivables Asset Funding Trust 200[_]-[__], a New York common law
trust (the "Trust"), Compass Asset Acceptance Company, L.L.C., a Delaware
limited liability company, as Seller (the "Seller"), Compass Bank, an Alabama
banking corporation, as servicer (the "Servicer"), and [__________], a
[__________], as Indenture Trustee on behalf of the Noteholders (in such
capacity, the "Indenture Trustee").
PRELIMINARY STATEMENT
WHEREAS, the Owner Trustee desires to purchase from the Seller a pool
of Mortgage Loans which were acquired by the Seller from the Originator;
WHEREAS, the Seller, concurrently with the execution of this Agreement,
purchased the Mortgage Loans from the Originator pursuant to the Mortgage Loan
Purchase Agreement;
WHEREAS, the Servicer is willing to service such Mortgage Loans in
accordance with the terms of this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto hereby agree as follows:
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ARTICLE I. DEFINITIONS
Section 1.01. DEFINITIONS. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires, shall have
the meanings specified in this Article.
ACCRUAL PERIOD: [__________].
ADDITIONAL PRINCIPAL REDUCTION AMOUNT: As to any Payment Date, an
amount equal to the excess, if any, of (x) the Principal Reduction Amount over
(y) the Principal Payment Amount.
AFFILIATE: With respect to any Person, any other Person controlling,
controlled by or under common control with such Person. For purposes of this
definition, "control" means the power to direct the management and policies of a
Person, directly or indirectly, whether through ownership of voting securities,
by contract or otherwise and "controlling" and "controlled" shall have meanings
correlative to the foregoing.
AGREEMENT: This Sale and Servicing Agreement and all amendments hereof
and supplements hereto.
APPRAISED VALUE: As to any Mortgage Loan, the appraised value of the
related Mortgaged Property based upon the appraisal used by the Originator at
the time of origination of such Mortgage Loan (or any mortgage loan made by the
Originator on the Mortgaged Property that the Mortgage Loan replaced); PROVIDED
that if the Mortgage Loan was originated simultaneously with or not more than 12
months after another mortgage was placed on the Mortgaged Property, the lesser
of the Appraised Value at origination of the other mortgage and the sales price,
if any, of the related Mortgaged Property.
ASSIGNMENT OF MORTGAGE: With respect to any Mortgage, an assignment,
notice of transfer or equivalent instrument, in recordable form, sufficient
under the laws of the jurisdiction in which the related Mortgaged Property is
located to reflect the sale of the Mortgage to the Indenture Trustee, which
assignment, notice of transfer or equivalent instrument may be in the form of
one or more blanket assignments covering the Mortgage Loans secured by Mortgaged
Properties located in the same jurisdiction.
AUCTION DATE: As defined in Section 8.01(c).
AVAILABLE FUNDS CAP: With respect to any Payment Date, a per annum rate
equal to the weighted average of the Net Loan Rates of each Mortgage Loan, in
each case outstanding as of the first day of the related Collection Period,
multiplied by a fraction of which the numerator is 30 and the denominator is the
number of days in the related Accrual Period.
AVAILABLE PAYMENT AMOUNT: As to any Payment Date, the sum, without
duplication, of all amounts described in clauses (i) through (iv), inclusive, of
Section 3.02(b) received by the Servicer with respect to the related Collection
Period and deposited in the Collection Account.
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BIF: The Bank Insurance Fund, as from time to time constituted, created
under the Financial Institutions Reform, Recovery and Enhancement Act of 1989,
or if at any time after the execution of this instrument the Bank Insurance Fund
is not existing and performing duties now assigned to it, the body performing
such duties on such date.
BOOK-ENTRY NOTE: Any Class A or Class M Note registered in the name of
the Depository or its nominee, ownership of which is reflected on the books of
the Depository or on the books of a Person maintaining an account with such
Depository (directly or as an indirect participant in accordance with the rules
of such Depository).
BUSINESS DAY: Any day other than (i) a Saturday or a Sunday or (ii) a
day on which banking institutions in the State of New York or Alabama are
required or authorized by law to be closed.
CHARGE OFF AMOUNT: As to any Charged Off Mortgage Loan and Collection
Period, an amount equal to the amount of the Principal Balance that the Servicer
has charged off on its servicing records during such Collection Period.
CHARGED OFF MORTGAGE LOAN: A defaulted Mortgage Loan that is not a
Liquidated Mortgage Loan and as to which (i) collection procedures are ongoing
and (ii) the Servicer has charged off all or a portion of the related Principal
Balance.
CLASS: Either the Class A or Class M Notes.
CLASS A FORMULA RATE: With respect to the Class A Notes and any Accrual
Period, a per annum rate equal to LIBOR plus [__]%.
CLASS A NOTE: Any Note designated as a Class A Note on the face
thereof, substantially in the form of Exhibit D hereto.
CLASS A NOTEHOLDER: A Holder of a Class A Note.
CLASS A NOTE RATE: With respect to any Payment Date and Accrual Period,
the lesser of (i) the Class A Formula Rate and (ii) the Available Funds Cap for
such Payment Date.
CLASS A SUPPLEMENTAL INTEREST AMOUNT: As of any Payment Date, the sum
of (i) the excess, if any, of (a) interest due on the Class A Notes at the Class
A Formula Rate over (b) interest due on the Class A Notes at an interest rate
equal to the Available Funds Cap, (ii) any Class A Supplemental Interest Amount
remaining unpaid from prior Payment Dates and (iii) interest on the amount in
clause (ii) at the Class A Formula Rate.
CLASS M FORMULA RATE: With respect to the Class M Notes and any Accrual
Period, a per annum rate equal to LIBOR plus [__]%.
CLASS M NOTE: Any Note designated as a Class M Note on the face
thereof, substantially in the form of Exhibit E hereto.
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CLASS M NOTEHOLDER: A Holder of a Class M Note.
CLASS M NOTE RATE: With respect to any Payment Date and Accrual Period,
the lesser of (i) the Class M Formula Rate and (ii) the Available Funds Cap for
such Payment Date.
CLASS M SUPPLEMENTAL INTEREST AMOUNT: As of any Payment Date, the sum
of (i) the excess, if any, of (a) interest due on the Class M Notes at the Class
M Formula Rate over (b) interest due on the Class M Notes at an interest rate
equal to the Available Funds Cap, (ii) any Class M Supplemental Interest Amount
remaining unpaid from prior Payment Dates and (iii) interest on the amount in
clause (ii) at the Class M Formula Rate.
CLOSING DATE: [__________].
CODE: The Internal Revenue Code of 1986, as amended from time to time,
and any Treasury Regulations promulgated thereunder.
COLLECTION ACCOUNT: The custodial account or accounts created and
maintained for the benefit of the Noteholders and the Ownership Interest
pursuant to Section 3.02(b). The Collection Account shall be an Eligible
Account.
COLLECTION PERIOD: As to any Payment Date and Mortgage Loan, the
calendar month immediately preceding the month in which such Payment Date
occurs, except that with respect to the initial Payment Date, the Collection
Period is the period from [__________] to [__________].
COMBINED LOAN-TO-VALUE RATIO OR CLTV: As to each Mortgage Loan, a
ratio, expressed as a percentage, the numerator of which is the sum of (a) the
original Principal Balance of the Mortgage Loan and (b) the aggregate unpaid
principal balance, at the time of origination of the Mortgage Loan, of all other
mortgage loans, if any, secured by senior liens on the related Mortgaged
Property, and the denominator of which is the Appraised Value of the Mortgaged
Property.
COMPASS BANK: Compass Bank, an Alabama banking corporation, and its
successors.
CORPORATE TRUST OFFICE: As defined in the Indenture.
CURRENT INTEREST: As to the Class A and Class M Notes and any Payment
Date, the interest accrued at the applicable Note Rate during the applicable
Accrual Period on the aggregate Note Principal Amount of such Class of Notes as
of the beginning of the Accrual Period.
CUT-OFF DATE: As to a Mortgage Loan, the close of business on
[__________].
CUT-OFF DATE POOL BALANCE: The aggregate of the Cut-Off Date Principal
Balances of the Mortgage Loans.
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CUT-OFF DATE PRINCIPAL BALANCE: As to any Mortgage Loan, the unpaid
principal balance thereof as of the Cut-Off Date or, as to any Eligible
Substitute Mortgage Loan, as of the date of substitution of such Eligible
Substitute Mortgage Loan.
DEFECTIVE MORTGAGE LOAN: Any Mortgage Loan subject to repurchase or
substitution pursuant to Section 2.02 or 2.04.
DEFINITIVE NOTES: As defined in the Indenture.
DEPOSIT DATE: As to any Payment Date, the Business Day immediately
preceding such Payment Date.
DEPOSIT EVENT: The lowering of the Servicer's short-term debt rating
below "P-1" by Xxxxx'x, "A-1" by Standard & Poor's or "F1" by Fitch or any time
in which COMPASS BANK shall cease to be the Servicer.
DEPOSITORY: The initial Depository shall be The Depository Trust
Company, the nominee of which is Cede & Co., as the registered Holder of Notes,
evidencing $[__________] in initial aggregate principal amount of the Class A
Notes and evidencing $[__________] in initial aggregate principal amount of the
Class M Notes. The Depository shall at all times be a "clearing corporation" as
defined in Section 8-102(a)(5) of the UCC of the State of Alabama.
DEPOSITORY PARTICIPANT: A broker, dealer, bank or other financial
institution or other Person for whom from time to time the Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
DETERMINATION DATE: As to any Payment Date, the second Business Day
prior to such Payment Date.
ELECTRONIC LEDGER: The electronic master record of mortgage loans
(including the Mortgage Loans) maintained by the Servicer.
ELIGIBLE ACCOUNT: An account that is either (i) maintained with a
depository institution whose short-term debt obligations at the time of any
deposit therein are rated in the highest short-term debt rating category by the
Rating Agencies, (ii) an account or accounts maintained with a depository
institution with a long-term unsecured debt rating by each Rating Agency that is
at least investment grade, PROVIDED that the deposits in such account or
accounts are fully insured by either the BIF or the SAIF, (iii) a segregated
trust account maintained with the Indenture Trustee in its fiduciary capacity,
or (iv) an account otherwise acceptable to each Rating Agency, as evidenced by a
letter to such effect from each such Rating Agency to the Indenture Trustee,
without reduction or withdrawal of the then-current ratings of the Class A or
Class M Notes.
ELIGIBLE SUBSTITUTE MORTGAGE LOAN: A Mortgage Loan substituted by the
Seller or the Servicer for a Defective Mortgage Loan pursuant to Section 2.02 or
2.04 which on the date of such substitution must
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(i) have a Principal Balance not substantially greater or less
than the Principal Balance of such Defective Mortgage Loan;
(ii) have (i) a current Loan Rate of not less than the Loan
Rate of the Defective Mortgage Loan and not more than 500 basis points
in excess thereof (ii) in the case of an adjustable rate Mortgage Loan,
the same Index as such Defective Mortgage Loan and (iii) the same Loan
Rate Classification as such Defective Mortgage Loan;
(iii) have a remaining term to maturity not more than six
months earlier or later than the remaining term to maturity of the
Defective Mortgage Loan;
(iv) comply with the representations and warranties set forth
in Section 2.04(b), to the extent such representations and warranties
do not pertain exclusively to the Mortgage Loans transferred on the
Closing Date;
(v) have a Combined Loan-to-Value Ratio that is not greater
than the Combined Loan-to-Value Ratio of the Defective Mortgage Loan as
of the date of origination of such Defective Mortgage Loan;
(vi) have a lien position at least equal to the lien position
of the Mortgage relating to the Defective Mortgage Loan; and
(vii) be the obligation of a Mortgagor whose credit profile is
substantially similar to that of the Mortgagor under the Defective
Mortgage Loan,
PROVIDED, HOWEVER, that with respect to (i) through (vi) above, a Mortgage Loan
may qualify as an Eligible Substitute Mortgage Loan if each of the Rating
Agencies consents to such substitution.
ENHANCEMENT PERCENTAGE: As to any Payment Date, the percentage obtained
by dividing (x) the Interim Overcollateralization Amount by (y) the Pool Balance
as of the last day of the related Collection Period.
ERISA: The Employee Retirement Income Security Act of 1974, as amended.
EVENT OF DEFAULT: As defined in the Indenture.
EXTRA PRINCIPAL PAYMENT AMOUNT: As to any Payment Date, the lesser of
(x) the Monthly Excess Cashflow and (y) the Interim Overcollateralization
Deficiency.
XXXXXX XXX: Xxxxxx Xxx, formerly known as The Federal National Mortgage
Association, or any successor thereto.
FDIC: The Federal Deposit Insurance Corporation and any successor
thereto.
FINAL SCHEDULED PAYMENT DATE: With respect to the Class A and Class M
Notes, the Payment Date in occurring in [__________].
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FITCH: Fitch Ratings, or its successor in interest.
FORECLOSURE PROFIT: As to any Liquidated Mortgage Loan, the amount, if
any, by which (i) the aggregate of its Liquidation Proceeds less Liquidation
Expenses exceeds (ii) the Principal Balance thereof immediately prior to the
final recovery of its Liquidation Proceeds, together with the sum of (x) accrued
and unpaid interest thereon at the applicable Loan Rate from the date interest
was last paid through the date of receipt of the final Liquidation Proceeds and
(y) the related Charge Off Amounts.
INDENTURE: The Indenture dated as of [__________] between the Issuer
and the Indenture Trustee.
INDEX: As to each adjustable rate Mortgage Loan, the index from time to
time in effect for the adjustment of the Loan Rate set forth as such on the
related Mortgage Note.
INDENTURE TRUSTEE: [__________], a [__________], as Indenture Trustee
under the Indenture or any successor indenture trustee under the Indenture
appointed in accordance with such agreement.
INDENTURE TRUSTEE'S STATEMENT TO NOTEHOLDERS: As defined in Section
5.03.
INITIAL MORTGAGE LOAN: Each Mortgage Loan transferred and assigned to
the Owner Trustee on the Closing Date.
INSURANCE PROCEEDS: Proceeds paid by any insurer pursuant to any
insurance policy covering a Mortgage Loan, or by the Servicer pursuant to the
last sentence of Section 3.04, net of any component thereof covering any
expenses incurred by or on behalf of the Servicer in connection with obtaining
such Insurance Proceeds and exclusive of any portion thereof that is applied to
the restoration or repair of the related Mortgaged Property, released to the
Mortgagor in accordance with the Servicer's normal servicing procedures or
required to be paid to any holder of a mortgage senior to such Mortgage Loan.
INTEREST CARRY FORWARD AMOUNT: As to the Class A or Class M Notes and
any Payment Date, the sum of (x) the amount, if any, by which (i) the sum of the
Current Interest and all prior unpaid Interest Carry Forward Amounts for such
Class as of the immediately preceding Payment Date exceeded (ii) the amount of
the actual payment with respect to interest made to such Class on such Payment
Date plus (y) interest on such amount calculated for the related Accrual Period
at the related Note Rate in effect with respect to such Class.
INTEREST COLLECTIONS: As to any Payment Date, the sum, without
duplication of:
(i) the portion allocable to interest of all scheduled monthly payments
on the Mortgage Loans received during the related Collection Period, minus the
Servicing Fee for the related Collection Period;
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(ii) all Net Liquidation Proceeds actually collected by the Servicer
during the related Collection Period (to the extent such Net Liquidation
Proceeds relate to interest and including Recovered Charge Off Amounts);
(iii) the interest portion of the Purchase Price for any Mortgage Loan
repurchased from the Owner Trustee pursuant to the terms of this Agreement
during the related Collection Period;
(iv) the interest portion of all Substitution Adjustment Amounts with
respect to the related Collection Period; and
(v) to the extent advanced by the Servicer pursuant to Section 3.01(f)
and not previously distributed, the amount of any Skip-A-Pay Advance deposited
by the Servicer into the Collection Account with respect to such Payment Date.
INTERIM OVERCOLLATERALIZATION AMOUNT: As to any Payment Date, the
excess, if any, of (x) the Pool Balance as of the last day of the preceding
Collection Period over (y) (i) the aggregate Note Principal Amount of all Class
A and Class M Notes (before taking into account any payments of principal on
such Payment Date) less (ii) the Principal Collections for such Payment Date.
INTERIM OVERCOLLATERALIZATION DEFICIENCY: As to any Payment Date, the
excess, if any, of (x) the Targeted Overcollateralization Amount over (y) the
Interim Overcollateralization Amount.
ISSUER: Compass Receivables Asset Funding Trust 200[_]-[__].
LIBOR: The per annum rate established by the Indenture Trustee in
accordance with Section 5.02.
LIBOR BUSINESS DAY: Any day on which dealings in United States dollars
are transacted in the London interbank market.
LIBOR DETERMINATION DATE: As to any Payment Date, the second LIBOR
Business Day before the first day of the related Accrual Period.
LIEN: Any mortgage, deed of trust, pledge, conveyance, hypothecation,
assignment, participation, deposit arrangement, encumbrance, lien (statutory or
other), preference, priority right or interest or other security agreement or
preferential arrangement of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing or the filing of any financing statement under the UCC (other than any
such financing statement filed for informational purposes only) or comparable
law of any jurisdiction to evidence any of the foregoing.
LIQUIDATED MORTGAGE LOAN: As to any Payment Date, any Mortgage Loan in
respect of which the Servicer has determined as of the end of the related
Collection Period that all
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Liquidation Proceeds which it expects to recover on such Mortgage Loan have been
recovered (exclusive of any possibility of a deficiency judgment).
LIQUIDATION EXPENSES: Out-of-pocket expenses (exclusive of overhead)
that are incurred by the Servicer in connection with the liquidation of any
Mortgage Loan and not recovered under any insurance policy, such expenses
including, without limitation, reasonable legal fees and expenses, any
unreimbursed amount expended pursuant to Section 3.06 (including, without
limitation, amounts advanced to correct defaults on any mortgage loan that is
senior to such Mortgage Loan and amounts advanced to keep current or pay off a
mortgage loan that is senior to such Mortgage Loan) with respect to the related
Mortgage Loan and any related and unreimbursed expenditures for real estate
property taxes, mechanics liens, title perfection, property management or for
property restoration, preservation or insurance against casualty loss or damage.
LIQUIDATION PROCEEDS: Proceeds (including Insurance Proceeds) received
in connection with the liquidation of any Mortgage Loan, whether through
trustee's sale, foreclosure sale or otherwise.
LOAN RATE: As to any Mortgage Loan and day, the per annum rate of
interest applicable under the related Mortgage Note to the calculation of
interest for such day on the Principal Balance.
LOAN RATE CLASSIFICATION: As to each fixed rate Mortgage Loan, a fixed
Loan Rate and as to each adjustable rate Mortgage Loan, an adjustable Loan Rate.
MAJORITY NOTEHOLDER: The Holder or Holders of Notes representing at
least 51% of the aggregate Note Principal Amount of the Class A and Class M
Notes.
MERS: Mortgage Electronic Registration Systems, Inc., a corporation
organized and existing under the laws of the State of Delaware, or any successor
thereto.
MERS(R) SYSTEM: The system of recording transfers of Mortgages
electronically maintained by MERS.
MIN: The Mortgage Identification Number for Mortgage Loans registered
with MERS on the MERS(R)System.
MOM LOAN: With respect to any Mortgage Loan, MERS acting as the
mortgagee of such Mortgage Loan, solely as nominee for the originator of such
Mortgage Loan and its successors and assigns, at the origination thereof.
MONTHLY EXCESS CASHFLOW: As to any Payment Date, the excess, if any, of
(i) the excess, if any, of (x) Interest Collections (for clarity purposes only,
net of any Servicing Fee) over (y) the Current Interest plus the Interest Carry
Forward Amount, if any, of all Class A and Class M Notes (after taking into
account all payments of interest on such Payment Date) plus the Principal Carry
Forward Amount, if any, of all Class A and Class M Notes over (ii) the
Additional Principal Reduction Amount.
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MOODY'S: Xxxxx'x Investors Service, Inc., or any successor thereto.
MORTGAGE: The mortgage, deed of trust or other instrument creating a
first lien on an estate in fee simple interest in real property securing a
Mortgage Loan.
MORTGAGE FILE: The mortgage documents (including without limitation the
related Mortgage Note) listed in Section 2.01 pertaining to a particular
Mortgage Loan and any additional documents required to be added to the Mortgage
File pursuant to this Agreement, which documents may be physical documents or,
pursuant to the terms of Section 2.01, may be optical images or other
representations thereof.
MORTGAGE LOAN: Such of the mortgage loans (together with the related
Mortgage Notes and Mortgages) transferred and assigned to the Owner Trustee
pursuant to Section 2.01 and pursuant to the Transfer Agreement, together with
the Related Documents, as from time to time are held as a part of the Trust, the
mortgage loans originally so held being identified in the Mortgage Loan Schedule
delivered on the Closing Date. As applicable, the term Mortgage Loan shall be
deemed to refer to the Mortgaged Property that has been converted to ownership
by the Servicer prior to the final recovery of related Liquidation Proceeds.
MORTGAGE LOAN PURCHASE AGREEMENT: The mortgage loan purchase agreement
dated as of [__________] between the Seller and the Originator pursuant to which
the Originator conveys to the Seller all of its right, title and interest in and
to the unpaid Principal Balance of the Mortgage Loans, including all interest
and principal payments in respect thereof received on or after the Cut-Off Date,
and certain other rights with respect to the collateral supporting the Mortgage
Loans.
MORTGAGE LOAN SCHEDULE: As to any date, the schedule of Mortgage Loans,
including any Eligible Substitute Mortgage Loans, included in the Trust on such
date. The initial Mortgage Loan Schedule is the schedule delivered by the Seller
to the Indenture Trustee on the Closing Date and delivered as Exhibit A hereto,
which schedule may be in the form of a computer file or an electronic or
magnetic tape and sets forth as to each Mortgage Loan (i) the account number,
(ii) the Cut-Off Date Principal Balance, (iii) the lien position of the related
Mortgage, (iv) the Loan Rate and (v) the CLTV. The Mortgage Loan Schedule will
be amended from time to time to reflect the removal of Mortgage Loans and the
addition of any Eligible Substitute Mortgage Loans to the Trust, and when so
amended shall include the information set forth above with respect to each
Eligible Substitute Mortgage Loan as of its related date of substitution.
MORTGAGE NOTE: As to a Mortgage Loan, the mortgage note or other
evidence of indebtedness under which the related Mortgagor agrees to pay the
indebtedness evidenced thereby and secured by the related Mortgage.
MORTGAGED PROPERTY: The underlying property securing a Mortgage Loan.
MORTGAGOR: The obligor or obligors under a Mortgage.
NET LIQUIDATION PROCEEDS: As to any Liquidated Mortgage Loan,
Liquidation Proceeds less Liquidation Expenses.
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NET LOAN RATE: As to any Mortgage Loan, the Loan Rate less the
Servicing Fee Rate.
NOTE: Any Class A Note or Class M Note.
NOTE OWNER: The Person who is the beneficial owner of a Book-Entry
Note.
NOTE PRINCIPAL AMOUNT: As to any Class A or Class M Note and any date
of determination, (a) the Original Note Principal Amount LESS (b) the aggregate
of amounts paid as principal to the Holders of such Class on previous Payment
Dates pursuant to Section 5.01 hereto.
NOTE RATE: Either the Class A Note Rate or the Class M Note Rate, as
the context requires.
NOTE REGISTER AND NOTE REGISTRAR: As defined in the Indenture.
NOTEHOLDER OR HOLDER: The Person in whose name a Note is registered in
the Note Register, except that, solely for the purpose of giving any consent,
direction, waiver or request pursuant to this Agreement, (x) any Note registered
in the name of the Seller, the Servicer or any Person actually known to a
Responsible Officer to be an Affiliate of the Seller and (y) any Note for which
the Seller, the Servicer or any Person actually known to a Responsible Officer
to be an Affiliate of the Seller or the Servicer is the Note Owner shall be
deemed not to be outstanding (unless to the actual knowledge of a Responsible
Officer (i) the Servicer or the Seller, or such Affiliate, is acting as trustee
or nominee for a Person who is not an Affiliate of the Seller or the Servicer
and who makes the voting decision with respect to such Note or (ii) the Seller,
or the Servicer, or such Affiliate, is the Note Owner of all the Notes) and the
Percentage Interest evidenced thereby shall not be taken into account in
determining whether the requisite amount of Percentage Interests necessary to
effect any such consent, direction, waiver or request has been obtained.
OFFICER'S CERTIFICATE: A certificate signed by the President, an
Executive Vice President, a Senior Vice President, a Vice President, an
Assistant Vice President, the Treasurer, Assistant Treasurer, Controller or
Assistant Controller of the Servicer or the Seller, as the case may be, and
delivered to the Indenture Trustee.
OPINION OF COUNSEL: A written opinion of counsel reasonably acceptable
to the Indenture Trustee, who may be in-house counsel for the Servicer (or its
affiliate) or the Seller (or its affiliate).
ORIGINAL NOTE PRINCIPAL AMOUNT: With respect to the Class A and Class M
Notes, the amount set forth below:
ORIGINAL NOTE PRINCIPAL
CLASS AMOUNT
----------------------------- ---------------------------------------------
A $[__________]
M $[__________]
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ORIGINATOR: Compass Bank.
OVERCOLLATERALIZATION AMOUNT: As to any Payment Date, the excess, if
any, of (x) the Pool Balance as of the last day of the preceding Collection
Period over (y) the aggregate Note Principal Amount of all Class A and Class M
Notes calculated after taking into account all payments in respect of principal
on such Payment Date.
OVERCOLLATERALIZATION RELEASE AMOUNT: As to any Payment Date, the
amount (but not in excess of the Principal Collections for such Payment Date)
equal to the excess, if any, of (i) the Interim Overcollateralization Amount
over (ii) the Targeted Overcollateralization Amount.
OWNER TRUSTEE: [__________], not in its individual capacity but solely
as owner trustee under the Trust Agreement, and any successor owner trustee
under the Trust Agreement appointed in accordance with the terms thereof.
OWNERSHIP INTEREST: As defined in the Trust Agreement.
PAYING AGENT: Any paying agent appointed pursuant to the Indenture.
PAYMENT DATE: The [___] day of each month or, if such day is not a
Business Day, then the next Business Day, beginning in [__________].
PERCENTAGE INTEREST: For purposes of making payments among the Class A
and the Class M Notes, the percentage obtained by dividing the principal
denomination of such Note by the aggregate of the principal denominations of all
Notes of such Class.
PERFECTION REPRESENTATIONS: The representations, warranties and
covenants set forth in Schedule 1 attached hereto.
PERMITTED INVESTMENTS: One or more of the following (excluding any
callable investments purchased at a premium):
(i) direct obligations of, or obligations fully guaranteed as
to timely payment of principal and interest by, the United States or
any agency or instrumentality thereof, PROVIDED that such obligations
are backed by the full faith and credit of the United States;
(ii) repurchase agreements on obligations specified in clause
(i) maturing not more than three months from the date of acquisition
thereof, PROVIDED that the short-term unsecured debt obligations of the
party agreeing to repurchase such obligations are at the date of
acquisition rated by each Rating Agency in its highest short-term
rating category (which is "F1" for Fitch, "A-1+" for Standard & Poor's
and "P-1" for Moody's);
(iii) certificates of deposit, time deposits and bankers'
acceptances (which, if Xxxxx'x is a Rating Agency, shall each have an
original maturity of not more than 90 days and, in the case of bankers'
acceptances, shall in no event have an original maturity of more than
365 days) of any U.S. depository institution or trust company
incorporated under the laws of the United States or any state thereof
and subject to supervision and
15
examination by federal and/or state banking authorities, PROVIDED that
the unsecured short-term debt obligations of such depository
institution or trust company at the date of acquisition thereof have
been rated by each of Moody's, Standard & Poor's and Fitch in its
highest unsecured short-term debt rating category;
(iv) commercial paper (having original maturities of not more
than 270 days) of any corporation incorporated under the laws of the
United States or any state thereof which on the date of acquisition has
been rated by Fitch, Standard & Poor's and Moody's in their highest
short-term rating categories;
(v) short term investment funds sponsored by any trust company
or national banking association incorporated under the laws of the
United States or any state thereof which on the date of acquisition has
been rated by Fitch, Standard & Poor's and Moody's in their respective
highest rating category for long-term unsecured debt, or any other
short-term investment fund the funds in which are invested in
securities rated in the highest rating category by Fitch, Standard &
Poor's and Moody's and which mature on demand or prior to the next
Payment Date;
(vi) interests in any money market fund or mutual fund which
at the date of acquisition has a rating of "Aaa" by Moody's and "AAA"
by Fitch and Standard & Poor's or such lower rating as will not result
in the qualification, downgrading or withdrawal of the then current
rating assigned to the Class A or Class M Notes by each Rating Agency;
and
(vii) other obligations or securities that are indebtedness in
registered form for U.S. federal income tax purposes and that are
reasonably acceptable to each Rating Agency as a Permitted Investment
hereunder and will not result in a reduction in the then-current rating
of the Class A or Class M Notes, as evidenced by a confirmation or
letter to such effect from such Rating Agency;
PROVIDED that no instrument described hereunder shall evidence either the right
to receive (a) only interest with respect to the obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument if such interest and principal payments provide a
yield to maturity at par greater than 120% of the yield to maturity at par of
the underlying obligations; and PROVIDED, FURTHER, that no instrument described
hereunder may be purchased at a price greater than par if such instrument may be
prepaid or called at a price less than its purchase price prior to its stated
maturity.
PERSON: Any individual, corporation, partnership, joint venture,
limited partnership, limited liability company, association, joint-stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
POOL BALANCE: With respect to any date of determination, the aggregate
of the Principal Balances of all Mortgage Loans as of such date.
POOL FACTOR: As to any Payment Date, the percentage, carried to seven
places, obtained by dividing the aggregate Note Principal Amount of the Class A
and Class M Notes for such
16
Payment Date by the aggregate Original Note Principal Amount of the Class A and
Class M Notes.
PRINCIPAL BALANCE: As to any Mortgage Loan (other than a Liquidated
Mortgage Loan) and date, the related Cut-Off Date Principal Balance, minus the
sum of (x) all collections credited against the principal balance of such
Mortgage Loan in accordance with the terms of the related Mortgage Note and (y)
any related Charge Off Amounts credited against the principal balance of such
Mortgage Loan prior to such date. For purposes of this definition, a Liquidated
Mortgage Loan shall be deemed to have a Principal Balance equal to the Principal
Balance of the related Mortgage Loan immediately prior to the final recovery of
related Liquidation Proceeds and a Principal Balance of zero thereafter.
PRINCIPAL CARRY FORWARD AMOUNT: As to the Class A or Class M Notes and
any Payment Date, the amount, if any, by which (i) the amounts payable to such
Class pursuant to Section 5.01(a)(iv) and (v) (with respect to the Class A
Notes) or pursuant to Section 5.01(a)(vii) and (viii) (with respect to the Class
M Notes), as applicable, as of the preceding Payment Date exceeded (ii) the
amount of the actual payments made to such Class on such prior Payment Date
pursuant to Section 5.01(a)(iv) and (v) (with respect to the Class A Notes) or
pursuant to Section 5.01(a)(vii) and (viii) (with respect to the Class M Notes),
as applicable.
PRINCIPAL COLLECTIONS: As to any Payment Date, the sum, without
duplication, of:
(i) the principal portion of all scheduled monthly payments on the
Mortgage Loans received by the Servicer during the related Collection Period;
(ii) the principal portion of the Purchase Price for any Mortgage Loan
repurchased from the Owner Trustee pursuant to the terms of this Agreement
during the related Collection Period;
(iii) the principal portion of all Substitution Adjustment Amounts with
respect to the related Collection Period;
(iv) all Net Liquidation Proceeds (excluding Foreclosure Profits and
Recovered Charge Off Amounts) actually received by the Servicer during the
related Collection Period (to the extent such Net Liquidation Proceeds relate to
principal); and
(v) the principal portion of all other unscheduled collections on the
Mortgage Loans received by the Servicer during the related Collection Period
(including, without limitation, full and partial prepayments of principal made
by the Mortgagors), to the extent not previously distributed.
PRINCIPAL PAYMENT AMOUNT: As to any Payment Date, (i) the Principal
Collections for such Payment Date minus (ii) for Payment Dates occurring on and
after the Stepdown Date and for which a Trigger Event is not in effect, the
Overcollateralization Release Amount, if any.
PRINCIPAL REDUCTION AMOUNT: As to any Payment Date, an amount equal to
(i) the excess of (x) the Pool Balance as of the first day of the Collection
Period over (y) the Pool Balance as of the last day of the Collection Period
minus (ii) for Payment Dates occurring on and after the
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Stepdown Date and for which a Trigger Event is not in effect, the
Overcollateralization Release Amount, if any.
PROSPECTUS SUPPLEMENT: The Prospectus Supplement, dated [__________],
to the Prospectus, dated [______], 2002, relating to the offer and sale of the
Notes.
PURCHASE PRICE: As to any Mortgage Loan purchased from the Owner
Trustee on any date pursuant to Section 2.02, 2.04 or 3.01 an amount equal to
the sum of (i) the Principal Balance thereof plus any related Charge Off Amount
as of the end of the related Collection Period preceding the date of repurchase,
and (ii) accrued and unpaid interest to the end of such Collection Period
computed on a daily basis at the Net Loan Rate on the Principal Balance
outstanding from time to time.
RATING AGENCIES: Moody's, Standard & Poor's and Fitch. If such agency
or a successor is no longer in existence, "Rating Agency" shall be such
nationally recognized statistical credit rating agency, or other comparable
Person, designated by the Seller, notice of which designation shall be given to
the Indenture Trustee. References herein to the highest short term unsecured
rating category of a Rating Agency shall mean "P-1" or better in the case of
Moody's, "A-1+" or better in the case of Standard & Poor's and "F1" in the case
of Fitch and in the case of any other Rating Agency shall mean such equivalent
ratings. References herein to the highest long-term rating category of a Rating
Agency shall mean "AAA" in the case of Fitch and Standard & Poor's and "Aaa" in
the case of Moody's and in the case of any other Rating Agency, such equivalent
rating.
RATINGS: The ratings initially assigned to the Notes by the Rating
Agencies, as evidenced by letters from the Rating Agencies.
RECORD DATE: As to any Payment Date, the Business Day immediately
preceding such Payment Date; PROVIDED, HOWEVER, that if any Notes become
Definitive Notes, the record date for such Notes will be the last Business Day
of the month immediately preceding the month in which the related Payment Date
occurs.
RECOVERED CHARGE OFF AMOUNT: As to any Mortgage Loan that became a
Liquidated Mortgage Loan in a Collection Period, the amount, if any, by which
(i) its Net Liquidation Proceeds that are allocable to principal in accordance
with the related Mortgage Note exceeds (ii) its Principal Balance immediately
prior to foreclosure up to an amount of all related Charge Off Amounts, but in
no event less than zero.
RELATED DOCUMENTS: As defined in Section 2.01(c).
REO: A Mortgaged Property that is acquired by the Owner Trustee in a
foreclosure or by grant of deed in lieu of foreclosure.
REQUIRED EXCESS CASHFLOW: As to any Payment Date, means [__]%, divided
by 12, multiplied by the Pool Balance as of the first day of the related
Collection Period.
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RESPONSIBLE OFFICER: With respect to the Indenture Trustee, any officer
assigned to the corporate trust group (or any successor thereto), including any
vice president, assistant vice president, trust officer, assistant secretary or
any other officer of the Indenture Trustee customarily performing functions
similar to those performed by any of the above designated officers and having
direct responsibility for the administration of this Agreement. When used with
respect to the Servicer, the President or any Vice President, Assistant Vice
President, Treasurer, Assistant Treasurer or any Secretary or Assistant
Secretary.
SAIF: The Savings Association Insurance Fund, as from time to time
constituted, created under the Financial Institutions Reform, Recovery and
Enhancement Act of 1989, or if at any time after the execution of this
instrument the Savings Association Insurance Fund is not existing and performing
duties now assigned to it, the body performing such duties on such date.
SELLER: Compass Asset Acceptance Company L.L.C., a Delaware limited
liability company, and its successors in interest.
SERVICER: Compass Bank, an Alabama banking corporation, or its
successor in interest, or any successor servicer appointed as herein provided.
SERVICER TERMINATION EVENTS: As defined in Section 7.01.
SERVICING CERTIFICATE: A certificate completed by and executed on
behalf of the Servicer in accordance with Section 3.18.
SERVICING FEE: The fee payable to the Servicer pursuant to Section
3.09, equal to 1/12th of the Servicing Fee Rate for each Mortgage Loan in the
Mortgage Loan Schedule multiplied by the outstanding Principal Balance of such
Mortgage Loan as of the first day of the related Collection Period.
SERVICING FEE RATE: A rate equal to [___]% per annum.
SERVICING OFFICER: Any officer of the Servicer or other individual
designated by an officer of the Servicer involved in, or responsible for, the
administration and servicing of the Mortgage Loans, whose name and specimen
signature appear on a list of servicing officers furnished to the Indenture
Trustee on the Closing Date by the Servicer, as such list may be amended from
time to time.
60 DAY DELINQUENCY PERCENTAGE: As to any Collection Period, (a) the
aggregate of the Principal Balances of all Mortgage Loans that are 60 or more
days contractually delinquent, including those Mortgage Loans in bankruptcy,
foreclosure and REO as of the end of such Collection Period, over (b) the Pool
Balance as of the end of such Collection Period.
60 DAY+ ROLLING AVERAGE: As to any Payment Date, the average of the 60
Day Delinquency Percentage for each of the three (3) immediately preceding
Collection Periods; PROVIDED, HOWEVER, that for the initial Payment Date, the 60
Day+ Rolling Average shall equal the 60 Day Delinquent Percentage for the
immediately preceding Collection Period and for the
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second Payment Date, the 60 Day+ Rolling Average shall equal the average of the
60 Day Delinquency Percentage for the immediately two preceding Collection
Periods.
SKIP-A-PAY ADVANCE: For any Collection Period, means the positive
result, if any, of the Required Excess Cashflow on the related Payment Date,
minus the Monthly Excess Cashflow on the related Payment Date. For the avoidance
of doubt, if the result of the foregoing calculation is not a positive number,
the Skip-A-Pay Advance for the related Collection Period shall be zero.
SKIP-A-PAY REIMBURSEMENT AMOUNT: As of any Payment Date means, the
positive result, if any, of the Monthly Excess Cashflow on such Payment Date,
minus the Required Excess Cashflow on such Payment Date.
STANDARD & POOR'S: Standard & Poor's Ratings Services, a division of
The XxXxxx-Xxxx Companies, Inc., or any successor thereto.
STATISTICAL CUT-OFF DATE: The close of business on [__________].
STEPDOWN DATE: The later to occur of:
(i) the earlier to occur of (x) the Payment Date in [__________] and
(y) the first Payment Date on which the Note Principal Amount of the Class A
Notes and Class M Notes has been reduced to zero, and
(ii) the first Payment Date on which the Pool Balance has been reduced
to [__]% of the Cut-Off Date Pool Balance.
STEPPED UP ENHANCEMENT LEVEL: As to any Payment Date, [__________]
times the amount of the 60 Day+ Rolling Average.
SUBSEQUENT CUT-OFF DATE: As to each Eligible Substitute Mortgage Loan,
the close of business on the day designated as the "Subsequent Cut-Off Date"
with respect to the Eligible Substitute Mortgage Loan.
SUBSTITUTION ADJUSTMENT AMOUNT: As to any Defective Mortgage Loan and
the date on which a substitution thereof occurs pursuant to Sections 2.02 or
2.04, the sum of:
(i) the excess, if any, of (a) the Principal Balance of such
Defective Mortgage Loan plus any related Charge Off Amount as of the
end of the related Collection Period preceding the date of substitution
(after the application of any principal payments received on such
Defective Mortgage Loan on or before the date of the substitution of
the applicable Eligible Substitute Mortgage Loan or Loans) over (b) the
aggregate Principal Balance of the applicable Eligible Substitute
Mortgage Loan or Loans, plus
(ii) accrued and unpaid interest to the end of such Collection
Period computed on a daily basis at the Net Loan Rate on the Principal
Balance of such Defective Mortgage Loan outstanding from time to time.
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SUPPLEMENTAL INTEREST AMOUNT: The Class A Supplemental Interest Amount
or Class M Supplemental Interest Amount, as applicable.
TARGETED OVERCOLLATERALIZATION AMOUNT: As to any Payment Date, (x)
prior to the Stepdown Date, [__]% of the Cut-Off Date Pool Balance, and (y) on
and after the Stepdown Date and assuming a Trigger Event is not in effect, the
greater of (i) [__]% of the Pool Balance as of the last day of the related
Collection Period and (ii) [___]% of the Cut-Off Date Pool Balance. If a Trigger
Event is in effect on and after the Stepdown Date, the Targeted
Overcollateralization Amount shall be equal to the Targeted
Overcollateralization Amount for the immediately preceding Payment Date.
TERMINATION PRICE: As defined in Section 8.01(b).
TRANSACTION DOCUMENTS: This Agreement, the Mortgage Loan Purchase
Agreement, the Transfer Agreement, the Trust Agreement and the Indenture.
TRANSFER AGREEMENT: The transfer agreement dated as of [__________]
between the Owner Trustee and the Originator pursuant to which the Originator
will assign to the Owner Trustee all of its right, title and interest in and on
the Transferred Assets not otherwise transferred pursuant to the Mortgage Loan
Purchase Agreement.
TRANSFER DATE: As to any Mortgage Loan transferred to or retransferred
from the Owner Trustee hereunder, the date on which such transfer or retransfer
is made under the terms hereof, which date shall be (i) in the case of the
Mortgage Loans originally listed on the Mortgage Loan Schedule, the Closing
Date, and (ii) in the case of any Eligible Substitute Mortgage Loan, the date on
which such Eligible Substitute Mortgage Loan is conveyed to the Owner Trustee
under the terms hereof.
TRANSFEROR: The Seller, or any such permitted holder of the Ownership
Interest.
TRANSFERRED ASSETS: All aspects, rights, title or interests of, in, to
or under the Mortgage Loans that are not otherwise conveyed hereunder pursuant
to Section 2.01, including, without limitation, all agreements, instruments and
other documents evidencing or governing the Mortgagor's obligations under the
Mortgage Loans or otherwise related thereto or establishing or setting forth the
terms and conditions thereof, and any amendments or modifications thereto, and
all property and collateral securing the borrowers obligations thereunder.
TRIGGER EVENT: Any Payment Date on which the 60 Day+ Rolling Average
equals or exceeds [__]% of the related Enhancement Percentage; PROVIDED, a
Trigger Event shall not be in effect if the Enhancement Percentage equals or
exceeds the Stepped Up Enhancement Level.
TRUST: The trust created by the Trust Agreement, the corpus of which
consists of the Mortgage Loans, such assets as shall from time to time be
identified as deposited in the Collection Account (exclusive of net earnings
thereon), the Mortgage Notes and other Mortgage File documents for the Mortgage
Loans, any property that secured a Mortgage Loan and that has become REO, the
interest of the Seller in certain hazard insurance policies maintained by the
21
Mortgagors or the Servicer in respect of the Mortgage Loans, the Collection
Account and the proceeds of each of the foregoing.
TRUST AGREEMENT: The Trust Agreement dated as of [__________], and
amended and restated as of [__________] among Compass Bank, the Seller and the
Owner Trustee.
UCC: The Uniform Commercial Code, as amended from time to time, and in
effect in any specified jurisdiction.
Section 1.02 OTHER DEFINITIONAL PROVISIONS.
(a) Capitalized terms used herein and not otherwise defined herein have
the meanings assigned to them in the Indenture and the Trust Agreement, as
applicable.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
this Agreement or in any such certificate or other document, and accounting
terms partly defined in this Agreement or in any such certificate or other
document to the extent not defined, shall have the respective meanings given to
them under generally accepted accounting principles. To the extent that the
definitions of accounting terms in this Agreement or in any such certificate or
other document are inconsistent with the meanings of such terms under generally
accepted accounting principles, the definitions contained in this Agreement or
in any such certificate or other document shall control.
(d) The words "hereof", "herein", "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; Article, Section, Schedule
and Exhibit references contained in this Agreement are references to Articles,
Sections, Schedules and Exhibits in or to this Agreement unless otherwise
specified; and the terms "including" and "includes" shall mean "including
without limitation."
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
22
Section 1.03 INTEREST CALCULATIONS.
All calculations of interest hereunder that are made in respect of the
Principal Balance of a Mortgage Loan shall be made based on the number of days
elapsed between the date that interest was last paid on such Mortgage Loan and
the date of receipt of the related Mortgagor's most current payment. All
calculations of interest on the Class A and Class M Notes shall be made on the
basis of a 360-day year and the actual number of days in the related Accrual
Period. All dollar amounts calculated hereunder shall be rounded to the nearest
xxxxx with one-half of one xxxxx being rounded down.
23
ARTICLE II.
CONVEYANCE OF MORTGAGE LOANS; TAX TREATMENT
Section 2.01 ACKNOWLEDGMENT; CONVEYANCE OF MORTGAGE LOANS; CUSTODY OF
MORTGAGE FILES.
(a) The Seller, concurrently with the execution and delivery of this
Agreement, does hereby irrevocably transfer, assign, sell, set over and
otherwise convey to the Owner Trustee without recourse (subject to Sections 2.02
and 2.04) (i) all of its right, title and interest in and to the unpaid
principal balance of each Mortgage Loan and each Eligible Substitute Mortgage
Loan, including all Interest Collections and Principal Collections in respect of
any such Mortgage Loan received after the Cut-Off Date with respect to each
Initial Mortgage Loan and after the Subsequent Cut-Off Date with respect to each
Eligible Substitute Mortgage Loan pursuant to the Mortgage Loan Purchase
Agreement; (ii) property which secured such Mortgage Loan and which has been
acquired by foreclosure or deed in lieu of foreclosure; (iii) its interest in
any insurance policies in respect of the Mortgage Loans (including any Insurance
Proceeds); (iv) all other assets included or to be included in the Trust for the
benefit of the Noteholders and the Transferor and (v) all proceeds of any of the
foregoing.
(b) The Seller agrees to take, or to cause to be taken, such actions
and to execute such documents (including without limitation the filing of all
necessary continuation statements for the UCC-1 financing statement filed in the
State of Alabama and the State of Delaware, as applicable (which shall have been
filed as promptly as practicable, but in no event later than 10 days following
the effective date of this Agreement), describing the Mortgage Loans and naming
the Seller as seller and the Owner Trustee as buyer, and any amendments or other
filings to the UCC-1 financing statement required to reflect a change in the
applicable UCC, or a change of the name or corporate structure of the Seller, as
are necessary to perfect and protect the Noteholders' interests in the Trust
created hereunder, including each Mortgage Loan and the proceeds thereof (other
than delivering to the Indenture Trustee possession of the Mortgage Files, which
possession will, subject to the terms hereof, be maintained by the Servicer as
custodian and bailee for the Indenture Trustee). The parties hereto intend that
the transactions set forth herein constitute a sale and not a pledge by the
Seller to the Owner Trustee of all the Seller's right, title and interest in and
to the Mortgage Loans and other Trust property as and to the extent described
above. Furthermore, the parties hereto intend that (i) the Asset-Backed
Securities Facilitation Act of Alabama (Alabama Act No. 2001-779, the "ACT")
shall apply to the transactions contemplated in this Agreement and (ii) the
transactions contemplated in this Agreement, taken as a whole, shall constitute
a "securitization transaction" within the meaning of such term as set forth in
the Act. In the event the transactions set forth herein are characterized as a
pledge and not a sale, the Seller hereby grants to the Owner Trustee a security
interest in all of the Seller's right, title and interest in, to and under the
Mortgage Loans and such other Trust property, to secure all of the Seller's
obligations hereunder, and this Agreement shall constitute a security agreement
under applicable law. With respect to the Mortgage Loans sold by the Originator
to the Seller, the Servicer shall cause the Originator to file as promptly as
practicable, but in no event later than ten days following the effective date of
this Agreement, in the appropriate public filing office or offices UCC-1
financing statements and continuation
24
statements describing such Mortgage Loans and naming the Originator as seller
and the Seller as buyer, to file appropriate continuation statements thereto, to
file amendments thereto in the case of a change in the applicable UCC, name
change or change in corporate structure and to file appropriate additional UCC-1
financing statements, if any, if the Originator changes its jurisdiction of
incorporation.
(c) In connection with such transfer and assignment by the Seller and
the Servicer, the Indenture Trustee and the Servicer hereby acknowledge that the
Servicer is holding, with respect to the Mortgage Loans transferred on the
Closing Date, and will hold, with respect to each Eligible Substitute Mortgage
Loan, on and from the applicable Transfer Date, as custodian and bailee for the
Indenture Trustee, the following documents or instruments with respect to each
such Mortgage Loan (the "Related Documents"):
(i) the original Mortgage Note with all intervening
endorsements showing a complete chain of title from the
originator of such Mortgage Loan to the Originator or a copy
of such original Mortgage Note with an accompanying lost note
affidavit;
(ii) the original Mortgage, with evidence of recording
thereon, PROVIDED that if the original Mortgage has been
delivered for recording to the appropriate public recording
office of the jurisdiction in which the Mortgaged Property is
located but has not yet been returned to the Originator by
such recording office, the Originator may hold a copy of such
original Mortgage;
(iii) originals of any amendments to the Mortgage Note or
Mortgage, any modification or assumption agreements and any
previous assignments of such Mortgage Loan; and
(iv) for each Mortgage Loan registered on the MERS(R) System,
the original assignment into the name of MERS(R) including the
related MIN of the Mortgage Loan;
PROVIDED, HOWEVER, that as to any Mortgage Loan, if, as evidenced by an Opinion
of Counsel delivered to and in form and substance reasonably satisfactory to the
Owner Trustee and the Indenture Trustee, (x) an optical image or other
electronic representation of the related documents specified in clauses (i)
through (iv) above are enforceable in the relevant jurisdictions to the same
extent as the original of such document and (y) such optical image or other
representation does not impair the ability of an owner of such Mortgage Loan to
transfer its interest in such Mortgage Loan, such optical image or other
representation may be held by the Servicer, as custodian and bailee for the
Indenture Trustee, in lieu of the physical documents specified above.
(d) Except as hereinafter provided, the Servicer shall be entitled to
maintain possession of all of the foregoing documents and instruments, shall not
be required to deliver any of them to the Indenture Trustee or the Owner Trustee
and shall not be required to record an Assignment of Mortgage in favor of the
Indenture Trustee or the Owner Trustee with respect to
25
any Mortgage Loan. In the event, however, that possession of any of such
documents or instruments is required by any Person (including the Indenture
Trustee) acting as successor servicer pursuant to Section 6.04 or 7.02 in order
to carry out the duties of Servicer hereunder, then such successor shall be
entitled to request delivery, at the expense of the Servicer, of such documents
or instruments by the Servicer and to retain such documents or instruments for
servicing purposes; PROVIDED that the Indenture Trustee or Servicer shall
maintain such documents at such offices as may be required by any regulatory
body having jurisdiction over such Mortgage Loans.
(e) The Servicer's right to maintain possession of the Mortgage Files
shall continue so long as (a) at least two of Xxxxx'x, Standard & Poor's and
Fitch assign a long-term senior unsecured debt rating to Compass Bank of at
least "Baa3", in the case of Xxxxx'x, "BBB", in the case of Fitch, and "BBB-",
in the case of Standard & Poor's, (or such lower rating acceptable and assigned
by at least two of Xxxxx'x, Standard & Poor's and Fitch) and (b) the Servicer is
Compass Bank or remains an Affiliate of Compass Bank. At such time as either of
the conditions specified in the preceding sentence is not satisfied, as promptly
as practicable, but in no event more than 90 days thereafter in the case of
clause (i) below and 60 days in the case of clause (ii) below, the Servicer
shall, at the Servicer's expense, to (i) either (x) record an Assignment of
Mortgage in favor of the Owner Trustee (which may be a blanket assignment if
permitted by applicable law) with respect to each of the Mortgage Loans being
serviced by the Servicer in the appropriate real property or other records or
(y) deliver to the Indenture Trustee the assignment of such Mortgage in favor of
the Owner Trustee in form for recordation, together with an Opinion of Counsel
addressed to the Indenture Trustee to the effect that recording is not required
to protect the Owner Trustee's right, title and interest in and to the related
Mortgage Loan or to perfect a first priority security interest in favor of the
Owner Trustee in the related Mortgage Loan, which Opinion of Counsel also shall
be reasonably acceptable to each of the Rating Agencies (as evidenced in
writing), and (ii) unless an Opinion of Counsel, reasonably acceptable to the
Owner Trustee, the Indenture Trustee and the Rating Agencies (as evidenced in
writing), is delivered to the Indenture Trustee to the effect that delivery of
the Mortgage Files is not necessary to protect the Owner Trustee's right, title
and interest in and to the related Mortgage Loans or to perfect a first priority
security interest in favor of the Owner Trustee in the related Mortgage Loans,
deliver the related Mortgage Files to the Indenture Trustee to be held by the
Indenture Trustee in trust, upon the terms herein set forth, for the use and
benefit of the Owner Trustee and all present and future Noteholders, and the
Indenture Trustee shall retain possession thereof except to the extent the
Servicer require any Mortgage Files for normal servicing as contemplated by
Section 3.08. The Servicer shall appoint the Indenture Trustee its
attorney-in-fact to prepare, execute and record any assignments of Mortgages
required under this Section 2.01 in the event that the Servicer should fail to
do so on a timely basis.
(f) Within 90 days following delivery, if any, of the Mortgage Files to
the Indenture Trustee pursuant to the preceding subsection, the Indenture
Trustee shall review each such Mortgage File to ascertain that all required
documents set forth in this Section 2.01 have been executed and received and
that such documents relate to the Mortgage Loans identified on the Mortgage Loan
Schedule, and in so doing the Indenture Trustee may rely on the purported due
execution and genuineness of any signature thereon. If within such 90-day period
the Indenture Trustee finds any document constituting a part of a Mortgage File
not to have been executed or
26
received or to be unrelated to the Mortgage Loans identified in said Mortgage
Loan Schedule or, if in the course of its review, the Indenture Trustee
determines that such Mortgage File is otherwise defective in any material
respect, the Indenture Trustee shall promptly upon the conclusion of its review
notify the Owner Trustee, the Seller and the Servicer, the Seller and the
Servicer shall have a period of 90 days after such notice within which to
correct or cure any such defect; PROVIDED, HOWEVER, that if such defect shall
not have been corrected or cured within such 90-day period due to the failure of
the related office of real property or other records to return any document
constituting a part of a Mortgage File, the Seller or the Servicer shall so
notify the Owner Trustee and the Indenture Trustee and the period during which
such defect may be corrected or cured shall be extended for one additional
90-day period.
(g) The Indenture Trustee shall have no responsibility for reviewing
any Mortgage File except as expressly provided in this Section 2.01. In
reviewing any Mortgage File pursuant to this Section 2.01, the Indenture Trustee
shall have no responsibility for determining whether any document is valid and
binding, whether the text of any assignment or endorsement is in proper or
recordable form (except, if applicable, to determine if the Owner Trustee is the
assignee or endorsee), whether any document has been recorded in accordance with
the requirements of any applicable jurisdiction, or whether a blanket assignment
is permitted in any applicable jurisdiction, whether any Person executing any
document is authorized to do so or whether any signature thereon is genuine, but
shall only be required to determine whether a document has been executed, that
it appears to be what it purports to be and, where applicable, that it purports
to be recorded.
(h) The Servicer hereby confirms to the Indenture Trustee and the Owner
Trustee that on or prior to the Closing Date and on or prior to the applicable
Transfer Date with respect to any Eligible Substitute Mortgage Loan, the
portions of the Electronic Ledger relating to such Mortgage Loans have been or
will have been clearly and unambiguously marked, and the appropriate entries
have been or will have been made in its general accounting records, to indicate
that such Mortgage Loans have been transferred to the Owner Trustee and
constitute part of the Trust in accordance with the terms hereof.
(i) In connection with the assignment, pursuant to Section 2.01(e)(i),
of any Mortgage Loan registered on the MERS(R) System, the Servicer shall, at
the Servicer's expense, at the time specified in the second sentence of Section
2.01(e)(i), to cause the MERS(R) System to indicate that such Mortgage Loans
have been assigned to the Owner Trustee in accordance with this Agreement by
including (or deleting, in the case of Mortgage Loans which are repurchased in
accordance with this Agreement) in such computer files (a) the code "[IDENTIFY
TRUST SPECIFIC CODE]" in the field "[IDENTIFY THE FIELD NAME FOR TRUST]" which
identifies the Trust and (b) the code "[IDENTIFY SERIES SPECIFIC CODE NUMBER]"
in the field "Pool Field" which identifies the series of the Notes issued in
connection with such Mortgage Loans. The Servicer agrees that it will not alter
the codes referenced in this paragraph with respect to any Mortgage Loan during
the term of this Agreement unless and until such Mortgage Loan is repurchased in
accordance with the terms of this Agreement, and there is filed any financing
statement or amendment thereof necessary to comply with the Alabama UCC or the
UCC of any applicable jurisdiction.
27
Section 2.02 ACCEPTANCE BY INDENTURE TRUSTEE; REPURCHASE OF MORTGAGE
LOANS; CONVEYANCE OF ELIGIBLE SUBSTITUTE MORTGAGE LOANS.
(a) The Indenture Trustee hereby acknowledges receipt of all the right,
title and interest of the Seller in and to the assets described Section
2.01(a)(i) through (v), and all of the right, title and interest of the
Originator in and to the Transferred Assets pursuant to the Transfer Agreement,
including but not limited to the transfer and assignment of the Mortgage Notes
and the Mortgages, and declares that it holds and will hold such documents and
interests and all amounts received by it in trust, upon the terms herein set
forth, for the use and benefit of the Owner Trustee and all present and future
Noteholders. If the time to cure any defect of which the Indenture Trustee has
notified the Seller and the Servicer following the Indenture Trustee's review of
the Mortgage Loan files pursuant to Section 2.01 has expired or if any loss is
suffered by the Indenture Trustee, on behalf of the Noteholders, in respect of
any Mortgage Loan as a result of (i) a defect in any document constituting a
part of a Mortgage File or (ii) the Originator's retention of such Mortgage File
or an Assignment of Mortgage not having been recorded, the Seller or, to the
extent the Seller fails to perform, the Servicer shall, in the case of a defect
in such document and the Servicer shall, in the case of a loss resulting from
the Originator's retention of a Mortgage File or Assignment of Mortgage not
having been recorded, on the Business Day next preceding the Payment Date in the
month following the end of the Collection Period in which the time to cure such
defect expired or such loss occurred, either (i) repurchase the related Mortgage
Loan (a "Defective Mortgage Loan") (including any property acquired in respect
thereof and any insurance policy or insurance proceeds with respect thereto)
from the Owner Trustee at a price equal to the Purchase Price which shall be
accomplished by deposit by the Seller or the Servicer, as applicable, in the
Collection Account pursuant to Section 3.02 on such next preceding Business Day,
or (ii) remove such Defective Mortgage Loan from the Owner Trustee and
substitute in its place an Eligible Substitute Mortgage Loan or Loans.
(b) As to any Eligible Substitute Mortgage Loan or Loans, the Servicer
shall cause the Originator to deliver to the Indenture Trustee with respect to
such Eligible Substitute Mortgage Loan or Loans an acknowledgment that the
Originator is holding as custodian for the Indenture Trustee such documents and
agreements, if any, as are permitted to be held by the Originator in accordance
with Section 2.01. An assignment of the Mortgage in favor of the Owner Trustee
with respect to such Eligible Substitute Mortgage Loan or Loans shall be
required to be recorded in the appropriate real property or other records or
delivered to the Indenture Trustee with the Opinion of Counsel referred to in
Section 2.01 under the same circumstances that all other assignments of Mortgage
are required to be recorded hereunder. For any Collection Period during which
the Seller or the Servicer substitutes one or more Eligible Substitute Mortgage
Loans, the Servicer shall determine the Substitution Adjustment Amount. The
Seller or the Servicer, as applicable, shall deposit the Substitution Adjustment
Amount in the Collection Account no later than the Business Day next preceding
the Payment Date in the month following the end of the Collection Period in
which such substitution occurs. The Servicer shall amend the Mortgage Loan
Schedule to reflect the removal of the Defective Mortgage Loan from the terms of
this Agreement and the substitution of the Eligible Substitute Mortgage Loan or
Loans. Upon such substitution, the Eligible Substitute Mortgage Loan or Loans
shall be subject to the terms of this Agreement in all respects, and the Seller
shall be
28
deemed to have made with respect to such Eligible Substitute Mortgage Loan or
Loans, as of the date of substitution, the covenants, representations and
warranties set forth in Section 2.04(b). The Indenture Trustee shall upon
satisfaction of the conditions in this subsection immediately take any
reasonable action requested by the Seller, if any, to effect the reconveyance of
such Defective Mortgage Loan so removed from the Trust to the Seller or the
Servicer, as applicable. The procedures applied by the Seller or the Servicer in
selecting each Eligible Substitute Mortgage Loan shall not be adverse to the
interests of the Noteholders and shall be comparable to the selection procedures
applicable to the Mortgage Loans originally conveyed hereunder.
(c) Upon receipt by the Indenture Trustee of (i) in the case of a
repurchase, a Servicing Certificate to the effect that the Purchase Price for
any such Defective Mortgage Loan has been so deposited in the Collection Account
or (ii) in the case of a substitution, (A) a Servicing Certificate to the effect
that the Substitution Adjustment Amount, if any, has been so deposited in the
Collection Account and (B) an Officer's Certificate reciting the transfer and
assignment of the Eligible Substitute Mortgage Loan(s) to the Indenture Trustee
and, if required at such time, that the related Mortgage File(s) for such
Eligible Substitute Mortgage Loan(s) have been delivered to the Indenture
Trustee and the assignment(s) of Mortgage have been recorded, the Indenture
Trustee shall execute and deliver such instrument of transfer or assignment
presented to it by the Servicer, in each case without recourse, as shall be
necessary to vest in the Seller or the Servicer, as applicable, legal and
beneficial ownership of such Defective Mortgage Loan (including any property
acquired in respect thereof or proceeds of any insurance policy with respect
thereto). It is understood and agreed that the obligation of the Seller or the
Servicer to repurchase or substitute for (to the extent permitted herein) any
Defective Mortgage Loan shall constitute the sole and exclusive remedy
respecting such defect available to Noteholders or the Indenture Trustee against
the Seller or the Servicer, and such obligation on the part of the Servicer
shall survive any resignation or termination of the Servicer hereunder.
Section 2.03 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SERVICER.
The Servicer represents, warrants and covenants that as of the Closing Date:
(a) The Servicer is a banking corporation duly organized, validly
existing and in good standing under the laws of the State of Alabama and has the
corporate power to own its assets and to transact the business in which it is
currently engaged. The Servicer is duly qualified to do business and is in good
standing in each jurisdiction in which the character of the business transacted
by it or properties owned or leased by it require such qualification and in
which the failure to so qualify would have a material adverse effect on the
business, properties, assets, or condition (financial or other) of the Servicer;
(b) The Servicer has the power and authority to make, execute, deliver
and perform its obligations under this Agreement and to perform its obligations
with respect to all of the transactions contemplated under this Agreement, and
has taken all necessary corporate action to authorize the execution, delivery
and performance of its obligations under this Agreement. When executed and
delivered, this Agreement will constitute the legal, valid and binding
obligation of the Servicer enforceable in accordance with its terms, except as
enforcement of such terms may be limited by bankruptcy, insolvency or similar
laws affecting the enforcement
29
of creditors' rights generally and by the availability of equitable remedies
(whether in a proceeding at law or in equity);
(c) The Servicer is not required to obtain the consent of any other
Person or any consent, license, approval or authorization from, or registration
or declaration with, any governmental authority, bureau or agency in connection
with the execution, delivery, performance, validity or enforceability of this
Agreement, except for such consents, licenses, approvals or authorizations, or
registrations or declarations, as shall have been obtained or filed, as the case
may be;
(d) The execution and delivery of this Agreement and the performance of
the transactions contemplated hereby by the Servicer will not violate any
provision of any existing law or regulation or any order or decree of any court
applicable to the Servicer or any provision of the Certificate of Incorporation
or Bylaws of the Servicer, or constitute a material breach of any mortgage,
indenture, contract or other agreement to which the Servicer is a party or by
which the Servicer may be bound; and
(e) No litigation or administrative proceeding of or before any court,
tribunal or governmental body is currently pending, or to the knowledge of the
Servicer threatened, against the Servicer or any of its properties or with
respect to this Agreement or the Notes which in the opinion of the Servicer has
a reasonable likelihood of resulting in a material adverse effect on the
transactions contemplated by this Agreement.
(f) The Servicer is a member of MERS in good standing, and will comply
in all material respects with the rules and procedures of MERS in connection
with the servicing of the Mortgage Loans that are registered with MERS.
The representations and warranties set forth in this Section 2.03 shall
survive the sale and assignment of the Mortgage Loans to the Owner Trustee. Upon
discovery of a breach of any representations and warranties which materially and
adversely affects the interests of the Noteholders, the Person discovering such
breach shall give prompt written notice to the other parties. Within 60 days (or
such longer period as permitted by prior written consent of a Responsible
Officer of the Indenture Trustee) of its discovery or its receipt of notice of
such breach, the Servicer shall cure such breach in all material respects.
Section 2.04 REPRESENTATIONS AND WARRANTIES OF THE SELLER REGARDING
THIS AGREEMENT AND THE MORTGAGE LOANS; REPURCHASES AND SUBSTITUTIONS.
(a) The Seller represents and warrants that as of the Closing Date:
(i) The Seller is a limited liability company duly organized,
validly existing and in good standing under the laws of the
State of Delaware and has the power to own its assets and to
transact the business in which it is currently engaged. The
Seller is duly qualified to do business and is in good
standing in each jurisdiction in which the character of the
business transacted by it or properties owned or leased by it
require such qualification and in which the failure to so
qualify would have a material
30
adverse effect on the business, properties, assets or
condition (financial or other) of the Seller;
(ii) The Seller has the power and authority to make, execute,
deliver and perform its obligations under this Agreement and
to perform its obligations with respect to all of the
transactions contemplated under this Agreement, and has taken
all necessary action to authorize the execution, delivery and
performance of its obligations under this Agreement. When
executed and delivered, this Agreement will constitute the
legal, valid and binding obligation of the Seller enforceable
in accordance with its terms, except as enforcement of such
terms may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally and
by the availability of equitable remedies (whether in a
proceeding at law or in equity);
(iii) The Seller is not required to obtain the consent of any
other Person or any consent, license, approval or
authorization from, or registration or declaration with, any
governmental authority, bureau or agency in connection with
the execution, delivery, performance, validity or
enforceability of this Agreement, except for such consents,
licenses, approvals or authorizations, or registrations or
declarations, as shall have been obtained or filed, as the
case may be;
(iv) The execution and delivery of this Agreement and the
performance of the transactions contemplated hereby by the
Seller will not violate any provision of any existing law or
regulation or any order or decree of any court applicable to
the Seller or any provision of the organizational documents of
the Seller, or constitute a material breach of any mortgage,
indenture, contract or other agreement to which the Seller is
a party or by which the Seller may be bound; and
(v) No litigation or administrative proceeding of or before
any court, tribunal or governmental body is currently pending,
or to the knowledge of the Seller threatened, against the
Seller or any of its properties or with respect to this
Agreement or the Notes which in the opinion of the Seller has
a reasonable likelihood of resulting in a material adverse
effect on the transactions contemplated by this Agreement.
(b) The Seller represents and warrants with respect to each Mortgage
Loan that as of the Closing Date with respect to the Initial Mortgage Loans and
the applicable Transfer Date with respect to any Eligible Substitute Mortgage
Loans (or to the extent expressly stated herein as of such other time).
(i) This Agreement and the Transfer Agreement constitute a
valid transfer and assignment to the Owner Trustee of all
right, title and interest of the Seller and the Originator,
respectively, in and to the Mortgage Loans, all monies due or
to become due with respect thereto, all proceeds thereof,
31
such funds as are from time to time deposited in the
Collection Account (excluding any investment earnings thereon)
and all other property specified in the definition of "Trust"
as being part of the corpus of the Trust conveyed to the Owner
Trustee by the Seller;
(ii) The information set forth in the Mortgage Loan Schedule
with respect to such Mortgage Loan is true and correct in all
material respects;
(iii) Immediately prior to the transfer and assignment by the
Originator to the Seller and the Owner Trustee pursuant to the
Mortgage Loan Purchase Agreement and the Transfer Agreement,
the Mortgage Loan has not been assigned or pledged by the
Originator, and the Originator has good and marketable title
thereto, and the Originator is the sole owner and holder of
such Mortgage Loan free and clear of any and all liens,
claims, encumbrances, participation interests, equities,
pledges, charges or security interests of any nature, and has
full right and authority, under all governmental and
regulatory bodies having jurisdiction over the ownership of
such Mortgage Loan, to transfer and assign the same pursuant
to the Mortgage Loan Purchase Agreement and the Transfer
Agreement;
(iv) Immediately prior to the transfer and assignment by the
Seller to the Owner Trustee pursuant to this Agreement, the
Mortgage Loan has not been assigned or pledged by the Seller,
and the Seller has good and marketable title thereto, and the
Seller is the sole owner and holder of such Mortgage Loan free
and clear of any and all liens, claims, encumbrances,
participation interests, equities, pledges, charges or
security interests of any nature, and has full right and
authority, under all governmental and regulatory bodies having
jurisdiction over the ownership of such Mortgage Loan, to
transfer and assign the same pursuant to this Agreement;
(v) The related Mortgage is a valid and subsisting first lien
or second lien, as set forth on the Mortgage Loan Schedule
with respect to such Mortgage Loan, on the related Mortgaged
Property, and the related Mortgaged Property is free and clear
of all encumbrances and liens having priority over the first
or second lien, as applicable, of such Mortgage except for
liens for (a) real estate taxes and special assessments not
yet delinquent; (b) any first and, if applicable, second
mortgage loan secured by such Mortgaged Property and specified
on the Mortgage Loan Schedule; (c) covenants, conditions and
restrictions, rights of way, easements and other matters of
public record as of the date of recording that are acceptable
to mortgage lending institutions generally; and (d) 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 such Mortgage;
32
(vi) To the best knowledge of the Seller, each Mortgage is not
subject to any valid offset, defense, right of rescission or
counterclaim by any obligor under the Mortgage;
(vii) To the best knowledge of the Seller, there is no
delinquent recording or other tax or fee or assessment lien
against the related Mortgaged Property;
(viii) To the best knowledge of the Seller, there is no
proceeding pending or threatened for the total or partial
condemnation of the related Mortgaged Property, and such
property is free of material damage and is in good repair;
(ix) There are no mechanics' or similar liens or claims which
have been filed for work, labor or material affecting the
related Mortgaged Property which are, or may be, liens prior
or equal to the lien of the related Mortgage, except (a) liens
which are fully insured against by the title insurance policy
referred to in clause (xiii) or (b) liens which do not
materially interfere with the collection of the Mortgage Loan
upon foreclosure or otherwise;
(x) As of the Cut-Off Date for the Initial Mortgage Loans (or
as of the applicable Transfer Date for any Eligible Substitute
Mortgage Loan), no scheduled monthly payment is more than 29
days delinquent (measured on a contractual basis);
(xi) The related Mortgage File contains each of the documents
and instruments specified to be included therein (including,
if applicable, an appraisal (which may be an appraisal
prepared using a statistical data base));
(xii) The related Mortgage Note and the related Mortgage at
the time they were made complied in all material respects with
applicable local, state and federal laws, including, without
limitation, usury, truth-in-lending, real estate settlement
procedures, consumer credit protection (including, without
limitation, the Home Ownership Equity Protection Act), equal
credit opportunity or disclosure laws applicable to the
Mortgage Loan;
(xiii) A lender's title insurance policy or binder was issued
on the date of origination of each Mortgage Loan for Mortgage
loans in excess of $[100,000], and each such policy is valid
and remains in full force and effect, and a title search or
other assurance of title customary in the relevant
jurisdiction was obtained with respect to each Mortgage Loan
as to which no title insurance policy or binder was issued;
33
(xiv) [The related Mortgaged Property is not a mobile home or
a manufactured housing unit that is not permanently attached
to its foundation;]
(xv) The Principal Balance of which, when included in the Pool
Balance (in each case for the Initial Mortgage Loans as of the
Statistical Cut-Off Date), would not cause the aggregate
Principal Balance of the Initial Mortgage Loans that are
secured by Mortgaged Properties located in one United States
postal zip code to exceed [___]%;
(xvi) As of the Statistical Cut-Off Date, the Combined
Loan-to-Value Ratio for each Initial Mortgage Loan was not in
excess of [____]%;
(xvii) No selection procedure reasonably believed by the
Seller to be adverse to the interests of the Noteholders was
utilized in selecting the Mortgage Loan;
(xviii) The Seller has not transferred the Mortgage Loans to
the Owner Trustee with any intent to hinder, delay or defraud
any of its creditors;
(xix) Each Mortgage Note and each Mortgage is in substantially
the form previously provided to the Indenture Trustee by the
Seller and each Mortgage Loan is an enforceable obligation of
the related Mortgagor;
(xx) The Seller has not received a notice of default of any
senior mortgage loan with respect to the related Mortgaged
Property that has not been cured by a party other than the
Servicer;
(xxi) The Initial Mortgage Loan does not have an original term
to maturity in excess of 360 months; and the Principal Balance
of which, when included in the Pool Balance (in each case for
the Initial Mortgage Loans as of the Cut-Off Date), would not
cause the weighted average remaining term to maturity of the
Initial Mortgage Loans on a contractual basis to be greater
than [____] months;
(xxii) The related Mortgaged Property consists of a single
parcel of real property with a one-to-four unit single family
residence erected thereon, or an individual condominium unit,
planned unit development unit or townhouse;
(xxiii) The Principal Balance of which, when included in the
Pool Balance (in each case for the Initial Mortgage Loans as
of the Cut-Off Date), would not cause the average Principal
Balance of such Mortgage Loans to be greater than $[_______];
and
(xxiv) The Principal Balance of which, when included in the
Pool Balance (in each case for the Initial Mortgage Loans as
of the Cut-Off Date),
34
would not cause the weighted average percentage of the Initial
Mortgage Loans secured by first liens to be less than [____]%;
and would not cause the weighted average percentage of the
Initial Mortgage Loans secured by second liens to be greater
than [_____]%.
(c) It is understood and agreed that the representations and warranties
set forth in this Section 2.04 shall survive the transfer and assignment of the
Mortgage Loans to the Owner Trustee and the pledge of the Mortgage Loans to the
Indenture Trustee. Upon discovery by the Seller, the Servicer, the Owner Trustee
or the Indenture Trustee of a breach of any of the representations and
warranties set forth in this Section 2.04, without regard to any limitation set
forth in such representation or warranty concerning the knowledge of the Seller
as to the facts stated therein, which materially and adversely affects the
interests of the Noteholders and the Transferor in respect of the Ownership
Interest in the related Mortgage Loan, the person discovering such breach shall
give prompt written notice to the other parties and each Rating Agency. Within
60 days of its discovery or its receipt of notice of such breach, or, with the
prior written consent of a Responsible Officer of the Indenture Trustee, such
longer period not to exceed 90 days specified in such consent, the Seller or, as
necessary, the Servicer shall cure such breach in all material respects. With
regard to any such breach of the representations and warranties set forth in
Section 2.04(b), unless, at the expiration of such 60 day or longer period, such
breach has been cured in all material respects or otherwise does not exist or
continue to exist, the Seller or the Servicer shall, not later than the Business
Day next preceding the Payment Date in the month following the end of the
Collection Period in which any such cure period expired, either (i) repurchase
such Defective Mortgage Loan (including any property acquired in respect thereof
and any insurance policy or insurance proceeds with respect thereto) or (ii)
remove such Mortgage Loan from the Trust and substitute in its place an Eligible
Substitute Mortgage Loan or Loans, in the same manner and subject to the same
conditions as set forth in Section 2.02. Upon making any such repurchase or
substitution the Seller or the Servicer, as applicable, shall be entitled to
receive an instrument of assignment or transfer from the Indenture Trustee to
the same extent as set forth in Section 2.02 with respect to the repurchase or
replacement of Mortgage Loans under that Section. It is understood and agreed
that, subject to Section 2.04(d), the obligation of the Seller or the Servicer
to purchase or substitute for any such Defective Mortgage Loan (or property
acquired in respect thereof) shall constitute the sole and exclusive remedy
against the Seller or the Servicer respecting such breach of the foregoing
representations or warranties available to Noteholders, the Transferor in
respect of the Ownership Interest, the Owner Trustee or the Indenture Trustee
against the Seller or the Servicer, and such obligation on the part of the
Servicer shall survive any resignation or termination of the Servicer hereunder.
(d) The Seller and the Servicer, jointly and not severally, agree to
indemnify and hold harmless the Owner Trustee against any and all out-of-pocket
financial losses, claims, expenses, damages or liabilities to which the Owner
Trustee may become subject, insofar as such out-of-pocket financial losses,
claims, expenses, damages or liabilities (or actions in respect thereof) arise
out of or are based upon any representation or warranty made by the Seller in
this Section 2.04 on which the Owner Trustee has relied, being, or alleged to
be, untrue or incorrect in any material respect. This indemnity will be in
addition to any liability which the Seller or the Servicer may otherwise have.
35
(e) Promptly after receipt by the Owner Trustee on behalf of the Trust
of written notice of the commencement of any action or proceeding in any way
relating to or arising from this Agreement, the Owner Trustee will notify the
Indenture Trustee, the Seller and the Servicer of the commencement thereof, but
the omission so to notify the party from whom indemnification is sought (the
"Indemnifying Party") will not relieve the Indemnifying Party from any liability
which it may have to the party seeking indemnification (the "Indemnified Party")
except to the extent that the Indemnifying Party is materially adversely
affected by the lack of notice. In case any such action is brought against the
Indemnified Party, and it notifies the Indemnifying Party of the commencement
thereof, the Indemnifying Party will be entitled to participate in the defense
(with the consent of the Indemnified Party which shall not be unreasonably
withheld) of such action at the Indemnifying Party's expense.
Section 2.05 TAX TREATMENT. It is the intention of the Seller and the
Noteholders that the Notes will be indebtedness for federal, state and local
income and franchise tax purposes and for purposes of any other tax imposed on
or measured by income. The terms of this Agreement shall be interpreted to
further the intent of the parties hereto. The Seller, the Indenture Trustee and
each Noteholder (or Note Owner) by acceptance of its Note (or, in the case of a
Note Owner, by virtue of such Note Owner's acquisition of a beneficial interest
therein) agrees to treat the Note (or beneficial interest therein), for purposes
of federal, state and local income or franchise taxes and any other tax imposed
on or measured by income, as indebtedness secured by the Trust Estate and to
report the transactions contemplated by this Agreement on all applicable tax
returns in a manner consistent with such treatment. Each Noteholder agrees that
it will cause any Note Owner acquiring an interest in a Class A or Class M Note
through it to comply with this Agreement as to treatment of the Notes as
indebtedness for federal, state and local income and franchise tax purposes and
for purposes of any other tax imposed on or measured by income. The Servicer
will prepare and file all tax reports required hereunder on behalf of the Owner
Trustee.
ARTICLE III.
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
Section 3.01 THE SERVICER.
(a) The Servicer shall service and administer the Mortgage Loans in a
manner consistent with the terms of this Agreement and with general industry
practice and shall have full power and authority to do any and all things in
connection with such servicing and administration which it may deem necessary or
desirable, it being understood, however, that the Servicer shall at all times
remain responsible to the Indenture Trustee and the Noteholders for the
performance of its duties and obligations hereunder in accordance with the terms
hereof. Any amounts received by the Servicer in respect of a Mortgage Loan shall
be deemed to have been received by the Servicer whether or not actually received
by it. Without limiting the generality of the foregoing, the Servicer shall
continue, and is hereby authorized and empowered by the Indenture Trustee, (i)
in its own name, when the Servicer believes it appropriate in its best judgment
to register any Mortgage Loan on the MERS(R) System, or cause the removal from
the registration of any Mortgage Loan on the MERS(R) System, to execute and
deliver, on behalf of
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the Owner Trustee, any and all instruments of assignment and other comparable
instruments with respect to such assignment or re-recording of a Mortgage in the
name of MERS, solely as nominee for the Owner Trustee and its successors and
assigns, and (ii) to execute and deliver, on behalf of itself, the Noteholders
and the Indenture Trustee or any of them, any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge and all
other comparable instruments, with respect to the Mortgage Loans and with
respect to the Mortgaged Properties. Upon the written request of the Servicer,
the Seller and the Indenture Trustee shall furnish the Servicer with any powers
of attorney and other documents necessary or appropriate to enable the Servicer
to carry out its servicing and administrative duties hereunder. The Servicer in
such capacity may also consent to the placing of a proposed lien senior to that
of the Mortgage on the related Mortgaged Property, provided that such proposed
lien is not secured by a note providing for negative amortization and:
(x) (i) the Mortgage relating to the Mortgage Loan was in a
first lien position as of the Cut-Off Date and was in a first lien
position immediately prior to the placement of the proposed senior
lien, and (ii) the ratio of (a) the sum of the Principal Balance of the
Mortgage Loan and the principal balance of the mortgage loan to be
secured by the proposed senior lien to (b) the Appraised Value of the
Mortgaged Property at the time the Mortgage Loan was originated is not
greater than (1) with respect to Mortgage Loans with an original CLTV
of 85% or less, 85%, (2) with respect to Mortgage Loans with an
original CLTV in excess of 85% and not greater than 95%, 95% and (3)
with respect to Mortgage Loans with an original CLTV in excess of 95%
and not greater than 115%, 115%;
(y) (i) the Mortgage relating to the Mortgage Loan was in a
first or second lien position at the time the related Mortgage Loan was
conveyed to the Owner Trustee and, immediately following the placement
of such proposed senior lien, such Mortgage will be in a second or, if
such Mortgage was in a second lien position at the time the related
Mortgage Loan was conveyed to the Owner Trustee, a third lien position
and (ii) the principal balance of the mortgage loan to be secured by
the proposed senior lien and the rate at which interest accrues thereon
are no greater than those of the related Mortgage Loan as of the date
it was first conveyed to the Owner Trustee; or
(z) the Mortgage relating to the Mortgage Loan was in a second
lien position as of the Cut-Off Date and the proposed senior lien
secures a mortgage loan that refinances an existing first mortgage loan
and the outstanding principal amount of such mortgage loan immediately
following such refinancing and the rate at which interest accrues
thereon are not greater than that of such existing first mortgage loan
at the date the mortgage loan was originated.
(b) If (i) foreclosure proceedings are commenced with respect to any
Mortgage Loan with respect to which the Servicer has consented to the placing of
a subsequent senior lien pursuant to clause (x) in Section 3.01(a), or (ii) any
loss is suffered by the Indenture Trustee on behalf of the Noteholders or the
Transferor in respect of the Ownership Interest in respect of any Mortgage Loan
as a result of (x) a failure to file on or within ten days following the
effective date of this Agreement the UCC-l financing statements referred to in
Section 2.01 or (y) a failure
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to publish on or prior to the Closing Date such notices reflecting the sale of
the Mortgage Loans as are described in Section 3440.1(h) of the California Civil
Code, then the Servicer shall repurchase or substitute for any adversely
affected Mortgage Loan on the Business Day preceding the next Payment Date
following the end of the Collection Period during which such foreclosure
proceedings were commenced or such losses were suffered. Such repurchase or
substitution shall be accomplished in the same manner and subject to the same
conditions as set forth in Section 2.02. Upon making any such repurchase or
substitution the Servicer shall be entitled to receive an instrument of
assignment or transfer from the Indenture Trustee to the same extent as set
forth in Section 2.02.
(c) Upon the request of a Mortgagor or at the Servicer's own
initiative, the Servicer may waive, modify or vary any term of any Mortgage Loan
or consent to the postponement of strict compliance with any such term or in any
manner grant indulgence to any Mortgagor if:
(i) in the Servicer's good faith determination such waiver,
modification, postponement or indulgence will enhance recovery
with respect to such Mortgage Loan; and
(ii) the Mortgagor is in default with respect to the Mortgage
Loan, or such default is, in the judgment of the Servicer
imminent.
(d) Subject to subparagraph (e) below, in addition to the circumstances
described under Section 3.01(c), the Servicer may waive, modify or vary any term
of any Mortgage Loan, if the purpose of such action is to reduce the likelihood
of prepayment or of default of such Mortgage Loan, to increase the likelihood of
repayment or repayment upon default of such Mortgage Loan, to increase the
likelihood of repayment in full of or recoveries under such Mortgage Loan, or to
otherwise benefit the Noteholders and the Transferor in respect of the Ownership
Interest, all in the reasonable judgment of the Servicer.
(e) Notwithstanding any provision in this Agreement to the contrary,
the Servicer may not defer the scheduled monthly interest and principal payment
on any Mortgage Loan that is not in default or (in the judgment of the Servicer)
for which default is not imminent unless (i) the Servicer elects to make a
Skip-A-Pay Advance pursuant to subparagraph (f) below or (ii) each Rating Agency
advises in writing that as a result of such deferment the then current rating of
the Class A and Class M Notes will not be withdrawn, suspended or reduced;
PROVIDED, HOWEVER, that the Servicer may not defer the scheduled monthly payment
on any Mortgage Loan in reliance on clause (i) above unless the Servicer
determines, in its good faith judgment, that such Skip-A-Pay Advance will be
recoverable from future payments on the Mortgage Loans.
(f) If during any Collection Period the Servicer deferred the scheduled
monthly payment on any Mortgage Loan that was not in default or for which
default was not imminent in reliance on clause (i) of subparagraph (e) above, no
later than 12:00 noon New York time on each Deposit Date, the Servicer shall
deposit into the Collection Account an amount equal to the Skip-A-Pay Advance
for such Collection Period. On each Payment Date, the Servicer shall be entitled
to reimburse itself for all previously unreimbursed Skip-A-Pay Advances from
funds on deposit in the Collection Account, before making any payments to
Noteholders pursuant to Section 5.01, up to an amount equal to the Skip-A-Pay
Reimbursement Amount on such
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Payment Date; PROVIDED, HOWEVER, that the Skip-A-Pay Reimbursement Amount that
the Servicer is entitled to receive on such Payment Date shall be reduced by the
portion of such amount, if any, that was applied to reduce the amount of funds
that the Servicer was required to deposit or to cause to be deposited into the
Collection Account on the preceding Deposit Date pursuant to Section 3.02(b).
(g) The relationship of the Servicer (and of any successor to the
Servicer as servicer under this Agreement) to the Indenture Trustee under this
Agreement is intended by the parties to be that of an independent contractor and
not that of a joint venturer, partner or agent.
(h) In the event that the rights, duties and obligations of the
Servicer are terminated hereunder, any successor to the Servicer in its sole
discretion may, to the extent permitted by applicable law, terminate any
existing subservicer arrangements with any subservicer or assume the terminated
subservicer's rights under such subservicing arrangements which termination or
assumption will not violate the terms of such arrangements. Any termination fees
shall be payable by the outgoing Servicer.
(i) Any expenses incurred in connection with the actions described in
Section 3.01(a)(i) shall be borne by the Servicer in accordance with Section
3.09, with no right of reimbursement; PROVIDED that if, as a result of MERS
discontinuing or becoming unable to continue operations in connection with the
MERS System, it becomes necessary to remove any Mortgage Loan from registration
on the MERS System and to arrange for the assignment of the related Mortgages to
the Owner Trustee, then any related expenses shall be reimbursable to the
Servicer.
Section 3.02 COLLECTION OF CERTAIN MORTGAGE LOAN PAYMENTS.
(a) The Servicer shall make reasonable efforts to collect all payments
called for under the terms and provisions of the Mortgage Loans, and shall, to
the extent such procedures shall be consistent with this Agreement, follow such
collection procedures as it follows with respect to mortgage loans in its
servicing portfolio comparable to the Mortgage Loans. Consistent with, and
without limiting the generality of, the foregoing, the Servicer may in its
discretion (i) waive any late payment charge or any assumption fees or other
fees that may be collected in the ordinary course of servicing the Mortgage
Loans, (ii) arrange with a Mortgagor a schedule for the payment of delinquent
amounts, so long as such arrangement is consistent with the Servicer's policies
with respect to the mortgage loans it owns, (iii) sell the Mortgage Loan at its
fair market value to a third party for collection activity or (iv) treat a
Mortgage Loan as current if the Mortgagor has made two standard payments in the
past 60 days to cure the delinquency status of such Mortgage Loan.
(b) The Servicer shall establish and maintain with the Indenture
Trustee a separate trust account (the "Collection Account") titled
"[__________], as Indenture Trustee, in trust for the registered holders of
Compass Receivables Asset Funding Mortgage Loan Asset Backed Notes, Series
200[_]-[__]". In the event that a successor Indenture Trustee is appointed as
provided in Section 6.8 of the Indenture, a new Collection Account shall be
promptly established at and maintained by such successor Indenture Trustee, and
the title of the new Collection Account shall be "[Successor Indenture Trustee],
as Indenture Trustee, in trust for the registered
39
holders of Compass Receivables Asset Funding Mortgage Loan Asset Backed Notes,
Series 200[_]-[__]", and any amounts in the old Collection Account shall be
transferred to the new Collection Account. The Collection Account shall be an
Eligible Account. No later than 12:00 noon New York time on each Deposit Date
(or, if a Deposit Event has occurred and the Servicer has not provided credit
enhancement reasonably acceptable to each of the Rating Agencies, within two (2)
Business Days following receipt thereof by the Servicer), the Servicer shall
deposit or cause to be deposited into the Collection Account the following
payments and collections received or made by it with respect to the Mortgage
Loans (without duplication):
(i) Interest Collections (net of any Servicing Fee) on the
Mortgage Loans;
(ii) Principal Collections on the Mortgage Loans;
(iii) Insurance Proceeds (including, for this purpose, any
amount required to be paid by the Servicer pursuant to Section
3.04 and excluding any portion thereof constituting Principal
Collections); and
(iv) amounts required to be paid by the Servicer in connection
with the termination of the Trust pursuant to Section 8.01;
PROVIDED, HOWEVER, that so long as a Deposit Event has not occurred (unless the
Servicer has provided credit enhancement reasonably acceptable to each of the
Rating Agencies), the amount of funds that the Servicer is required to deposit
or to cause to be deposited into the Collection Account on or before such
Deposit Date shall be reduced by the Skip-A-Pay Reimbursement Amount the
Servicer is entitled to receive on the next Payment Date.
The foregoing requirements respecting deposits to the Collection
Account are exclusive, it being understood that, without limiting the generality
of the foregoing, fees (including annual fees) or late charge penalties payable
by Mortgagors, prepayment penalties, or amounts received by the Servicer for the
accounts of Mortgagors for application towards the payment of taxes, insurance
premiums, assessments and similar items for the account of the Servicer, if any,
need not be deposited in the Collection Account.
(c) The Indenture Trustee shall hold amounts deposited in the
Collection Account as trustee for the Noteholders and the Transferor in respect
of the Ownership Interest. In addition, the Servicer shall notify the Indenture
Trustee in writing on each Determination Date of the amount of payments and
collections to be deposited in the Collection Account with respect to the
related Payment Date.
(d) The Servicer may cause the institution maintaining the Collection
Account to invest any funds in the Collection Account in Permitted Investments
(including obligations of the Servicer or of any of its affiliates, if such
obligations otherwise qualify as Permitted Investments), which shall mature or
otherwise be available not later than the Business Day next preceding the
Payment Date or on the Payment Date next following the date of such investment
as long as such action does not result in a withdrawal or downgrading of the
then current ratings on the Class A and Class M Notes by the Rating Agencies
(except that any investment in an obligation of the institution with which the
Collection Account is maintained may mature on or
40
before 12:00 noon, New York time, on such Payment Date) and shall not be sold or
disposed of prior to its maturity. In the event the Indenture Trustee is at any
time maintaining the Collection Account, any request by the Servicer to invest
funds on deposit in the Collection Account shall be in writing, shall be
delivered to the Indenture Trustee at or before 10:30 A.M., New York time, if
such investment is to be made on such day, and shall certify that the requested
investment is a Permitted Investment that matures at or prior to the time
required hereby. Any such investment shall be registered in the name of or
controlled by the Indenture Trustee as trustee hereunder or in the name of its
nominee and to the extent such investments are certificated they shall be
maintained in the possession or control of the Indenture Trustee in the state of
its Corporate Trust Office. Except as provided above, all income and gain
realized from any such investment shall be for the benefit of the Servicer and
shall be subject to its withdrawal or order from time to time. The amount of any
losses incurred in respect of the principal amount of any such investments shall
be deposited in the Collection Account by the Servicer out of its own funds
immediately as realized.
(e) The Indenture Trustee is hereby authorized to execute purchases and
sales of Permitted Investments as directed by the Servicer through the
facilities of its own trading or capital markets operations. The Indenture
Trustee shall send to the Servicer statements reflecting the monthly activity
for each such purchase and sale made for the preceding month. Although the
Servicer recognizes that it may obtain a broker confirmation or written monthly
statement containing comparable information at no additional cost, the Servicer
hereby agrees that confirmations of investments are not required to be issued by
the Indenture Trustee for each month in which a monthly statement is rendered.
No statement need be rendered pursuant to the provision of this subsection if no
activity occurred in the account for such month.
Section 3.03 WITHDRAWALS FROM THE COLLECTION ACCOUNT.
(a) The Indenture Trustee shall withdraw or cause to be withdrawn funds
from the Collection Account for the following purposes:
(i) On each Payment Date, to make payments to the Noteholders
and the Transferor in respect of the Ownership Interest
pursuant to Section 5.01;
(ii) From time to time, to make investments in Permitted
Investments and to pay to the Servicer all income and gain
earned in respect of Permitted Investments or on funds
deposited in the Collection Account;
(iii) To reimburse the Seller or the Servicer to the extent
permitted by Section 6.03;
(iv) To withdraw any funds deposited in the Collection Account
that were not required to be deposited therein or were
deposited therein in error and to pay such funds to the
appropriate Person;
(v) To pay to the party legally entitled by a final order of a
court of competent jurisdiction in an insolvency proceeding an
amount equal to any preference claim made with respect to
amounts paid with respect to
41
the Mortgage Loans; PROVIDED that, if any such amount is later
determined not to be a preference by such court of competent
jurisdiction and is returned to the Servicer, such amount
shall be redeposited into the Collection Account by the
Servicer;
(vi) to clear and terminate the Collection Account upon the
termination of this Agreement and to pay any amounts remaining
therein to the Transferor in respect of the Ownership
Interest; and
(vii) to reimburse the Servicer for Skip-A-Pay Advances to the
extent permitted by Section 3.01(f).
(b) If the Servicer deposits in the Collection Account any amount not
required to be deposited therein or credited thereto or any amount in respect of
payments by Mortgagors made by checks subsequently returned for insufficient
funds or other reason for non-payment, it may at any time withdraw such amount
from the Collection Account pursuant to Section 3.03(a)(iv), and any such
amounts shall not be included in Interest Collections and Principal Collections,
any provision herein to the contrary notwithstanding. Any withdrawal or debit
permitted by Section 3.03(a) may be accomplished by delivering an Officer's
Certificate to the Indenture Trustee which describes the purpose of such
withdrawal (including, without limitation, that any such amount was deposited in
the Collection Account in error or, in the case of returned checks, that such
amounts were properly debited, respectively). Upon receipt of any such Officer's
Certificate, the Indenture Trustee shall withdraw such amount for the account of
the Servicer. All funds deposited by the Servicer in the Collection Account
shall be held by the Indenture Trustee in trust for the Noteholders and the
Transferor in respect of the Ownership Interest, until disbursed in accordance
with Section 5.01 or Section 5.4(b) of the Indenture or withdrawn or debited in
accordance with this Section.
Section 3.04 MAINTENANCE OF HAZARD INSURANCE; PROPERTY PROTECTION
EXPENSES. Each Mortgage Loan requires that the borrower thereunder maintain
hazard insurance naming the Servicer as loss payee providing extended coverage
in an amount which is at least equal to the lesser of (i) 100% of the insurable
value of the Mortgaged Property or (ii) the combined principal balance owing on
such Mortgage Loan and any mortgage loan senior to such Mortgage Loan from time
to time. The Servicer represents and warrants that it or the Originator verified
the existence of such hazard insurance at the origination of the Mortgage Loan.
The Servicer shall also maintain on property acquired upon foreclosure, or by
grant of deed in lieu of foreclosure, hazard insurance with extended coverage in
an amount which is at least equal to the lesser of (i) 100% of the insurable
value of the Mortgaged Property or (ii) the combined unpaid principal balance
owing on such Mortgage Loan and any mortgage loans senior to such Mortgage Loans
at the time of such foreclosure or grant of deed in lieu of foreclosure plus
accrued interest thereon. Amounts collected by the Servicer under any such
policies shall be deposited in the Collection Account to the extent called for
by Section 3.02. In cases in which any Mortgaged Property is located in a
federally designated flood area, the hazard insurance to be maintained for the
related Mortgage Loan shall include flood insurance. All such flood insurance
shall be in such amounts as are required under applicable guidelines of Xxxxxx
Xxx. The Servicer shall be under no obligation to require that any Mortgagor
maintain earthquake or other additional insurance and
42
shall be under no obligation itself to maintain any such additional insurance on
property acquired in respect of a Mortgage Loan, other than pursuant to such
applicable laws and regulations as shall at any time be in force and as shall
require such additional insurance. As to Mortgaged Properties acquired by the
Servicer as provided herein, the Servicer may satisfy its obligation set forth
in the first sentence of this Section 3.04 by self insuring Mortgaged Properties
for which the aggregate unpaid principal balance of the related Mortgage Loans
PLUS the outstanding balance of any mortgage loans senior to such Mortgage Loans
at the time title was acquired, PLUS accrued interest (the "Combined Exposure"),
was less than $[500,000] (or such other amount as the Servicer may in good faith
determine from time to time) and by causing hazard policies to be maintained
with respect to Mortgaged Properties for which the Combined Exposure equals or
exceeds the self insurance threshold established from time to time by the
Servicer by maintaining a blanket policy consistent with prudent industry
standards insuring against hazard losses on the Mortgaged Properties. Such
policy may contain a deductible clause, in which case the Servicer shall, in the
event that there shall not have been maintained on the related Mortgaged
Property a policy complying with the first sentence of this Section 3.04, and
there shall have been a loss which would have been covered by such policy,
deposit in the Collection Account the amount not otherwise payable under the
blanket policy because of such deductible clause.
Section 3.05 ASSUMPTION AND MODIFICATION AGREEMENTS. In any case in
which a Mortgaged Property has been or is about to be conveyed by the Mortgagor,
the Servicer shall exercise or refrain from exercising its right to accelerate
the maturity of such Mortgage Loan consistent with the then-current practice of
the Servicer and without regard to the inclusion of such Mortgage Loan in the
Trust and not in the Servicer's portfolio. If it elects not to enforce its right
to accelerate or if it is prevented from doing so by applicable law, the
Servicer (so long as such action conforms with the Servicer's underwriting
standards at the time for new originations) is authorized to take or enter into
an assumption and modification agreement from or with the Person to whom such
Mortgaged Property has been or is about to be conveyed, pursuant to which such
Person becomes liable under the Mortgage Note and, to the extent permitted by
applicable law, the Mortgagor remains liable thereon. The Servicer shall notify
the Indenture Trustee that any assumption and modification agreement has been
completed by delivering to the Indenture Trustee an Officer's Certificate
certifying that such agreement is in compliance with this Section and by
forwarding to the applicable Servicer on behalf of the Seller or the Indenture
Trustee, as applicable, the original copy of such assumption and modification
agreement. Any such assumption and modification agreement shall, for all
purposes, be considered a part of the related Mortgage File to the same extent
as all other documents and instruments constituting a part thereof. No change in
the terms of the related Mortgage Note may be made by the Servicer in connection
with any such assumption to the extent that such change would not be permitted
to be made in respect of the original Mortgage Note pursuant to Section 3.01
unless the conditions specified in Section 3.01 are satisfied. Any fee collected
by the Servicer for entering into any such agreement will be retained by the
Servicer as additional servicing compensation.
Section 3.06 REALIZATION UPON DEFAULTED MORTGAGE LOANS.
(a) The Servicer shall foreclose upon or otherwise comparably convert
to ownership Mortgaged Properties securing such of the Mortgage Loans as come
into and continue in default when, in the opinion of the Servicer based upon the
practices and procedures referred to in the
43
following sentence, no satisfactory arrangements can be made for collection of
delinquent payments pursuant to Section 3.02; PROVIDED that if the Servicer has
actual knowledge or reasonably believes that any Mortgaged Property is affected
by hazardous or toxic wastes or substances and that the acquisition of such
Mortgaged Property would not be commercially reasonable, then the Servicer will
not cause the Owner Trustee to acquire title to such Mortgaged Property in a
foreclosure or similar proceeding. In connection with such foreclosure or other
conversion, the Servicer shall follow such practices (including, in the case of
any default on a related senior mortgage loan, the advancing of funds to correct
such default) and procedures as it shall deem necessary or advisable and as
shall be normal and usual in its general mortgage servicing activities. The
foregoing is subject to the proviso that the Servicer shall not be required to
expend its own funds in connection with any foreclosure or towards the
correction of any default on a related senior mortgage loan or restoration of
any property unless it shall determine that such expenditure will increase Net
Liquidation Proceeds. The Servicer will be reimbursed out of Liquidation
Proceeds for advances of its own funds to pay Liquidation Expenses before any
Net Liquidation Proceeds are deposited in the Collection Account.
(b) In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall (i) so long as at least two of Xxxxx'x, Standard & Poor's and Fitch assign
a long-term unsecured debt rating to the Servicer of at least "Baa3", in the
case of Xxxxx'x, "BBB", in the case of Fitch, and "BBB-" in the case of Standard
& Poor's, be issued in the name of the Servicer or (ii) if the rating
requirements in clause (i) are not satisfied, be issued to the Indenture
Trustee, or to its nominee on behalf of Noteholders.
Section 3.07 [RESERVED].
Section 3.08 INDENTURE TRUSTEE TO COOPERATE.
(a) Upon any payment in full of the Principal Balance of any Mortgage
Loan, the Servicer is authorized to execute, pursuant to the authorization
contained in Section 3.01, if the assignments of Mortgage have been recorded as
required hereunder, an instrument of satisfaction regarding the related Mortgage
or written evidence of cancellation thereon and to cause the removal from the
registration on the MERS(R) System of such Mortgage, which instrument of
satisfaction shall be recorded by the Servicer if required by applicable law and
be delivered to the Person entitled thereto. It is understood and agreed that no
expenses incurred in connection with such instrument of satisfaction or transfer
shall be reimbursed from amounts deposited in the Collection Account. If the
Indenture Trustee is holding the Mortgage Files, from time to time and as
appropriate for the servicing or foreclosure of any Mortgage Loan, the Indenture
Trustee shall, upon request of the Servicer and delivery to the Indenture
Trustee of a trust receipt signed by a Servicing Officer, release the related
Mortgage File to the Servicer, and the Indenture Trustee shall execute such
documents as shall be necessary to the prosecution of any such proceedings or
the taking of other servicing actions. Such trust receipt shall obligate the
Servicer to return the Mortgage File to the Indenture Trustee when the need
therefor by the Servicer no longer exists unless the Mortgage Loan shall be
liquidated, in which case, upon receipt of an Officer's Certificate of the
Servicer, the trust receipt shall be released by the Indenture Trustee to the
Servicer.
44
(b) In order to facilitate the foreclosure of the Mortgage securing any
Mortgage Loan that is in default following recordation of the assignments of
Mortgage in accordance with the provisions hereof, the Owner Trustee shall, if
the Servicer so requests in writing and supplies the Owner Trustee with
appropriate forms therefor, assign such Mortgage Loan for the purpose of
collection to the Servicer (any such assignment shall unambiguously indicate
that the assignment is for the purpose of collection only), and, upon such
assignment, such assignee for collection will thereupon bring all required
actions in its own name and otherwise enforce the terms of the Mortgage Loan and
deposit or credit the Net Liquidation Proceeds received with respect thereto in
the Collection Account. In the event that all delinquent payments due under any
such Mortgage Loan are paid by the Mortgagor and any other defaults are cured
then the assignee for collection shall promptly reassign such Mortgage Loan to
the Indenture Trustee and return it to the place where the related Mortgage File
was being maintained.
Section 3.09 SERVICING COMPENSATION; PAYMENT OF CERTAIN EXPENSES BY
SERVICER.
(a) The Servicer shall be entitled to receive the Servicing Fee as
compensation for its services in connection with servicing the Mortgage Loans.
The Servicing Fee for each Collection Period shall be paid to the Servicer out
of Interest Collections prior to their deposit in the Collection Account and
shall not be the responsibility or liability of the Trust, the Owner Trustee,
the Indenture Trustee, the Class A or Class M Noteholders or the Transferor in
respect of the Ownership Interest. Additional servicing compensation in the form
of late payment charges or other receipts not required to be deposited in the
Collection Account shall be retained by the Servicer. The Servicer shall be
required to pay all expenses incurred by it in connection with its activities
hereunder (including payment of Owner Trustee and Indenture Trustee fees,
expenses and indemnifications due to the Indenture Trustee under Section 3.09(b)
below and all other fees and expenses not expressly stated hereunder to be for
the account of the Noteholders and the Transferor in respect of the Ownership
Interest) and shall not be entitled to reimbursement therefor except as
specifically provided herein.
(b) The Servicer shall, out of the Servicing Fee, pay to the Indenture
Trustee from time to time as compensation for its services a fee previously
agreed to by the Servicer and the Indenture Trustee. The Indenture Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Servicer shall reimburse the Indenture Trustee for all
reasonable out-of-pocket expenses incurred or made by it, including costs of
collection, in addition to the compensation for its services. Such expenses
shall include the reasonable compensation and expenses, disbursements and
advances of the Indenture Trustee's agents, counsel, accountants and experts.
The Servicer shall indemnify the Indenture Trustee against any and all loss,
liability or expense (including attorneys' fees) incurred by it in connection
with the administration of the trust created pursuant to the Indenture and the
performance of its duties hereunder and under the Indenture. The Indenture
Trustee shall notify the Servicer promptly of any claim for which it may seek
indemnity. Failure by the Indenture Trustee to so notify the Servicer shall not
relieve the Servicer of its obligations hereunder. The Servicer shall defend any
such claim and the Indenture Trustee may have separate counsel and the Servicer
shall pay the fees and expenses of such counsel. The Indenture Trustee shall not
be entitled to any such reimbursement of any expense or to indemnification
against any loss, liability or expense incurred by the Indenture Trustee through
the Indenture Trustee's own willful misconduct,
45
negligence or bad faith. The indemnification obligations of the Servicer set
forth in this Section 3.09(b) shall survive the resignation and removal of the
Indenture Trustee and the discharge of the Indenture. The Indenture Trustee
shall be entitled to retain and reimburse itself from any amounts payable to the
Transferor pursuant to Section 5.01(a)(xii) in respect of the Ownership Interest
to the extent that the Servicer has failed to pay any amounts owing to the
Indenture Trustee pursuant to this Section 3.09(b).
Section 3.10 ANNUAL STATEMENT AS TO COMPLIANCE.
(a) The Servicer will deliver to the Indenture Trustee and a copy to
each of the Rating Agencies, on or before March 31 of each year, beginning March
31, 200[_], an Officer's Certificate stating that (i) a review of the activities
of the Servicer during the preceding calendar year (or in the case of the
Officer's Certificate delivered in 200[_], from the Closing Date) and of its
performance under this Agreement has been made under such officer's supervision
and (ii) to the best of such officer's knowledge, based on such review, the
Servicer has fulfilled all its material obligations under this Agreement
throughout such year (or in the case of the Officer's Certificate delivered in
200[_], from the Closing Date), or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof. Copies of such Officer's Certificate
shall be provided by the Servicer to any Noteholder upon written request at the
Servicer's expense.
(b) The Servicer shall deliver to the Indenture Trustee and a copy to
each of the Rating Agencies, promptly after having obtained knowledge thereof,
but in no event later than five Business Days thereafter, written notice by
means of an Officer's Certificate of any event which with the giving of notice
or the lapse of time or both, would become a Servicer Termination Event.
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Section 3.11 ANNUAL SERVICING REPORT. On or before March 31 of each
year, beginning March 31, 200[_], the Servicer at its expense shall cause a firm
of nationally recognized independent public accountants (who may also render
other services to the Servicer) to furnish a report to the Indenture Trustee and
a copy to each of the Rating Agencies to the effect that such firm has examined
certain documents and records relating to the servicing of mortgage loans by the
Servicer during the most recent calendar year (or in the case of the report
delivered in 200[_], from the Closing Date) then ended under pooling and
servicing agreements or sale and servicing agreements (including this Agreement)
substantially similar to this Agreement and that such examination, which has
been conducted substantially in compliance with the audit guide for audits of
non-supervised mortgagees approved by the Department of Housing and Urban
Development for use by independent public accountants (to the extent that the
procedures in such audit guide are applicable to the servicing obligations set
forth in such agreements), has disclosed no items of noncompliance with the
provisions of this Agreement which, in the opinion of such firm, are material,
except for such items of noncompliance as shall be set forth in such report.
Section 3.12 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING
THE MORTGAGE LOANS.
(a) The Servicer shall provide to the Indenture Trustee, the Owner
Trustee, the Transferor in respect of the Ownership Interest, the Class A and
Class M Noteholders that are federally insured savings and loan associations,
the Office of Thrift Supervision, the successor to the Federal Home Loan Bank
Board, the FDIC and the supervisory agents and examiners of the Office of Thrift
Supervision access to the documentation regarding the Mortgage Loans required by
applicable regulations of the Office of Thrift Supervision and the FDIC (acting
as operator of the SAIF or the BIF), such access being afforded without charge
but only upon reasonable request and during normal business hours at the offices
of the Servicer. Nothing in this Section shall derogate from the obligation of
the Servicer to observe any applicable law prohibiting disclosure of information
regarding the Mortgagors, and the failure of the Servicer to provide access as
provided in this Section as a result of such obligation shall not constitute a
breach of this Section.
(b) No later than the Determination Date preceding the related Payment
Date, the Servicer shall supply information in such form as the Indenture
Trustee shall reasonably request to the Indenture Trustee and the Paying Agent
as is required in the Indenture Trustee's reasonable judgment to enable the
Paying Agent or the Indenture Trustee, as the case may be, to make the required
payments and to furnish the required reports to Noteholders on such Payment
Date.
Section 3.13 MAINTENANCE OF CERTAIN SERVICING INSURANCE POLICIES. The
Servicer shall during the term of its service as servicer maintain in force (i)
a policy or policies of insurance covering errors and omissions in the
performance of its obligations as servicer hereunder and (ii) a fidelity bond in
respect of its officers, employees or agents. Each such policy or policies and
bond shall, together, comply with the requirements from time to time of Xxxxxx
Xxx for Persons performing servicing for mortgage loans purchased by such
association.
47
Section 3.14 REPORTS TO THE SECURITIES AND EXCHANGE COMMISSION. The
Servicer shall, on behalf of the Owner Trustee, cause to be filed with the
Securities and Exchange Commission any periodic reports required to be filed
under the provisions of the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Securities and Exchange Commission thereunder.
Section 3.15 [RESERVED].
Section 3.16 INFORMATION REQUIRED BY THE INTERNAL REVENUE SERVICE
GENERALLY AND REPORTS OF FORECLOSURES AND ABANDONMENTS OF MORTGAGED PROPERTY.
The Servicer shall prepare and deliver, or cause to be prepared, mailed and
filed all federal and state information reports for the Mortgage Loans when and
as required by all applicable state and federal income tax laws including, to
the extent applicable, returns reporting a cancellation of indebtedness as
prescribed by Section 6050P of the Code. In particular, with respect to the
requirement under Section 6050J of the Code, to the effect that a lender shall
be required to report foreclosures and abandonments of any mortgaged property
for each year beginning in 200[_], the Servicer shall prepare, mail and file in
a timely fashion each year as required by law information statements in
accordance with the reporting requirements imposed by Section 6050J with respect
to each instance occurring during the previous calendar year in which the
Servicer (i) on behalf of the Indenture Trustee acquired an interest in any
Mortgaged Property through foreclosure or other comparable conversion in full or
partial satisfaction of a Mortgage Loan or (ii) knew or had reason to know that
any Mortgaged Property has been abandoned. The information statements from the
Servicer shall be in form and substance sufficient to meet the reporting
requirements imposed by Section 6050J of the Code.
Section 3.17 ADDITIONAL COVENANTS OF COMPASS BANK. Compass Bank hereby
agrees that:
(a) it will maintain its books and records to clearly note the separate
corporate existence of the Seller and the Servicer;
(b) the Seller and Compass Bank will share certain overhead expenses,
although the amount the Seller will be charged for such use will be based on
actual use to the extent practicable and, to the extent such allocation is not
practicable, on a basis reasonably related to use;
(c) separate financial records will be maintained to reflect the assets
and liabilities of the Seller and Compass Bank, which financial records are and
will be subject to audit by independent public accountants at the reasonable
request of the Board of Directors of the Seller or the Servicer, as the case may
be;
(d) except as permitted hereunder, there will be no commingling of the
assets of the Seller with the assets of Compass Bank. All demand deposit
accounts and other bank accounts of the Seller will be maintained separately
from those of Compass Bank. Monetary transactions between the Seller and Compass
Bank are and will continue to be properly reflected in their respective
financial records;
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(e) Compass Bank at all times will recognize, and will take all steps
within its power to maintain, the corporate existence of the Seller and Compass
Bank as being separate and apart from its own corporate existence and will not
refer to the Seller as a department or division of Compass Bank; and
(f) Except as otherwise expressly provided herein, the Seller and
Compass Bank will not guaranty or advance the proceeds for payment of any
obligations of the Trust.
Section 3.18 SERVICING CERTIFICATE. Not later than each Determination
Date, the Servicer shall deliver to the Indenture Trustee, the Paying Agent and
each Rating Agency a Servicing Certificate containing the information set forth
below with respect to the Mortgage Loans on an aggregate basis as of the end of
the preceding Collection Period and such other information as the Indenture
Trustee shall reasonably require (in written form or the form of computer
readable media or such other form as may be agreed to by the Indenture Trustee
and the Servicer), together with an Officer's Certificate to the effect that
such Servicing Certificate is true and correct in all material respects, stating
the related Collection Period, Payment Date, the series number of the Notes, the
date of this Agreement, and:
(i) the Available Payment Amount for such Payment Date,
separately stating the amount of Interest Collections and
Principal Collections;
(ii) the amount of the payments to Holders of the Class A and
Class M Notes for such Payment Date, separately stating the
portions thereof allocable to interest and allocable to
principal;
(iii) the amount of any Interest Carry Forward Amount and
Supplemental Interest Amount for each Class of Notes paid on
such Payment Date and the amount of any Interest Carry Forward
Amount or Supplemental Interest Amount for each Class of Notes
remaining after giving effect to the payments on such Payment
Date;
(iv) the amount of any Extra Principal Payment Amount for such
Payment Date;
(v) the Principal Payment Amount for such Payment Date,
separately stating the components thereof;
(vi) the Principal Carry Forward Amount for each Class for
such Payment Date and the amount of any Principal Carry
Forward Amount for each Class remaining after giving effect to
the payments on such Payment Date;
(vii) the Note Principal Amount of each Class of Notes and the
Pool Factor, the Pool Balance as reported in the prior
Indenture Trustee's Statement to Noteholders or, in the case
of the first Determination Date, the Original Note Principal
Amount for each Class and the Cut-Off Date Pool Balance;
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(viii) the number and aggregate Principal Balance of any
Mortgage Loan purchased or substituted by the Seller or the
Servicer with respect to the related Collection Period
pursuant to Section 2.02;
(ix) the number and aggregate Principal Balance of any
Mortgage Loan purchased or substituted by the Seller or the
Servicer with respect to the related Collection Period
pursuant to Section 2.04;
(x) the number and aggregate Principal Balance of any Mortgage
Loan purchased or substituted by the Seller or the Servicer
with respect to the related Collection Period pursuant to
Section 3.01;
(xi) The number and aggregate Principal Balance of any
Mortgage Loan that the Servicer has consented to the placement
of a senior lien during the related Collection Period pursuant
to Section 3.01(a);
(xii) the amount of any Substitution Adjustment Amounts for
such Payment Date;
(xiii) the amount to be paid to the Transferor in respect of
the Ownership Interest for the related Payment Date pursuant
to Section 5.01(a)(xii);
(xiv) the Note Principal Amount for each Class of Notes and
the Pool Factor after giving effect to the payment to be made
on the related Payment Date;
(xv) the Servicing Fee for the related Collection Period and
any accrued amounts thereof that remain unpaid for previous
Collection Periods;
(xvi) the Overcollateralization Amount, the Interim
Overcollateralization Amount, the Interim
Overcollateralization Deficiency, the Overcollateralization
Release Amount, the Targeted Overcollateralization Amount and
the Monthly Excess Cashflow for such Payment Date;
(xvii) the number of Mortgage Loans outstanding at the
beginning and at the end of the related Collection Period;
(xviii) the Pool Balance as of the end of the related
Collection Period;
(xix) the number and aggregate Principal Balances of Mortgage
Loans (x) as to which the scheduled monthly payment is
contractually delinquent for 30-59 days, 60-89 days and 90 or
more days, respectively and (y) that have become REO, in each
case as of the end of such Collection Period;
(xx) the book value (within the meaning of 12 C.F.R.
section 571.13 or comparable provision) of any real estate
acquired through foreclosure or grant of a deed in lieu of
foreclosure;
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(xxi) whether a Trigger Event has occurred or is continuing;
(xxii) the 60 Day Delinquency Percentage for the related
Collection Period;
(xxiii) the 60 Day+ Plus Rolling Average for such Payment
Date;
(xxiv) LIBOR for such Payment Date;
(xxv) whether a Servicer Termination Event has occurred since
the prior Determination Date, specifying each such Servicer
Termination Event if one has occurred;
(xxvi) the Class A Formula Rate, Class A Note Rate, Class M
Formula Rate, Class M Note Rate and the Available Funds Cap
for such Payment Date;
(xxvii) the amount of any Skip-A-Pay Advances for the related
Collection Period;
(xxviii) the Skip-A-Pay Reimbursement Amount for such Payment
Date;
(xxix) such other information as is required by the Code and
regulations thereunder to be made available to Holders of the
Class A and Class M Notes; and
(xxx) whether an Event of Default has occurred and is
continuing.
The Indenture Trustee shall conclusively rely upon the information
contained in a Servicing Certificate for purposes of making payments pursuant to
Section 5.01, shall have no duty to inquire into such information and shall have
no liability in so relying. The format and content of the Servicing Certificate
may be modified by the mutual agreement of the Servicer and the Indenture
Trustee or as may be required by the rules and regulations of the Securities and
Exchange Commission. The Servicer shall give notice of any such change to the
Rating Agencies.
ARTICLE IV.
[RESERVED]
ARTICLE V.
PRIORITY OF PAYMENTS; STATEMENTS TO
NOTEHOLDERS; RIGHTS OF NOTEHOLDERS
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Section 5.01 PAYMENTS.
(a) PAYMENTS OF INTEREST AND PRINCIPAL COLLECTIONS. Pursuant to Section
3.1 of the Indenture, on each Payment Date, the Indenture Trustee, with respect
to the Notes, and the Paying Agent, with respect to the Ownership Interest,
shall distribute out of the Collection Account, to the extent of the Available
Payment Amount, the following amounts and in the following order of priority to
the following Persons (based on the information set forth in the Servicing
Certificate):
(i) to the Class A Notes, the Current Interest plus the
Interest Carry Forward Amount with respect to the Class A
Notes;
(ii) to the Class M Notes, the Current Interest plus the
Interest Carry Forward Amount with respect to the Class M
Notes;
(iii) to the Class A Notes until the Note Principal Amount of
such Class A Notes has been reduced to zero, [__________]% of
the Principal Payment Amount;
(iv) to the Class A Notes, the Principal Carry Forward Amount
with respect to the Class A Notes;
(v) to the Class A Notes until the Note Principal Amount of
such Class A Notes has been reduced to zero, [__________]% of
the Additional Principal Reduction Amount;
(vi) to the Class M Notes until the Note Principal Amount of
such Class M Notes has been reduced to zero, [__________]% of
the Principal Payment Amount;
(vii) to the Class M Notes, the Principal Carry Forward Amount
with respect to the Class M Notes;
(viii) to the Class M Notes until the Note Principal Amount of
such Class M Notes has been reduced to zero, [__________]% of
the Additional Principal Reduction Amount;
(ix) concurrently, to the Class A Notes and to the Class M
Notes until the Note Principal Amount of each such Class A and
Class M Notes has been reduced to zero, [___________]% of the
Extra Principal Payment Amount to the Class A Notes and
[__________]% of the Extra Principal Payment Amount to the
Class M Notes;
(x) the Class A and Class M Notes, pro rata, according to the
outstanding Class A Supplemental Interest Amount and Class M
Supplemental Interest Amount, the outstanding Class A
Supplemental Interest Amount and the outstanding Class M
Supplemental Interest Amount;
52
(xi) to the Owner Trustee on behalf of the Trust, an amount
sufficient to pay any judgment or settlement affecting the
Trust; and
(xii) to the Transferor in respect of the Ownership Interest,
any remaining Available Payment Amount; PROVIDED, HOWEVER,
that on any Payment Date after the earlier of (i) the date on
which the first auction conducted by the Indenture Trustee
pursuant to Section 8.01(c) does not produce any bid at least
equal to the Termination Price or (ii) the [__________]
Payment Date, any remaining amount available for payment
pursuant to this Section 5.01(a)(xii) shall instead be paid
concurrently, [__________]% to the Class A Notes and
[__________]% to the Class M Notes, in reduction of the
applicable Note Principal Amount of each Class.
PROVIDED, that if the Indenture Trustee collects any money or property pursuant
to Article V of the Indenture, the Indenture Trustee and the Paying Agent shall
pay out the money or property as provided in Section 5.4(b) of the Indenture;
and PROVIDED, FURTHER, that to the extent the Note Principal Amount of the Class
A Notes has been reduced to zero, then 100% of any applicable amounts described
above will be paid to the Class M Notes until the Note Principal Amount of the
Class M Notes has been reduced to zero.
(b) METHOD OF PAYMENT. The Indenture Trustee shall make payments in
respect of a Payment Date to each Noteholder of record on the related Record
Date (other than as provided in Section 8.01 respecting the final payment) by
check or money order mailed to such Noteholder at the address appearing in the
Note Register, or upon written request by a Noteholder delivered to the
Indenture Trustee at least five Business Days prior to such Record Date, by wire
transfer (but only if such Noteholder is the Depository or such Noteholder owns
of record one or more Class of Notes having principal denominations aggregating
at least $[5,000,000]), or by such other means of payment as such Noteholder and
the Indenture Trustee shall agree. Payments among Noteholders shall be made in
proportion to the Percentage Interests evidenced by the Notes held by such
Noteholders. The Indenture Trustee, acting in its capacity as Paying Agent,
shall make payments in respect of a Payment Date to the Transferor of record on
the related Record Date, in respect of the Ownership Interest by wire transfer
or by such other means of payment as the Transferor and the Paying Agent shall
agree.
(c) PAYMENTS ON BOOK-ENTRY NOTES. Each payment with respect to a
Book-Entry Note shall be paid to the Depository, which shall credit the amount
of such payment to the accounts of its Depository Participants in accordance
with its normal procedures. Each Depository Participant shall be responsible for
disbursing such payment to the Note Owners that it represents and to each
indirect participating brokerage firm (a "brokerage firm" or "indirect
participating firm") for which it acts as agent. Each brokerage firm shall be
responsible for disbursing funds to the Note Owners that it represents. All such
credits and disbursements with respect to a Book-Entry Note are to be made by
the Depository and the Depository Participants in accordance with the provisions
of the Class A or Class M Notes. None of the Indenture Trustee, the Paying
Agent, the Note Registrar, the Owner Trustee or the Servicer shall have any
responsibility therefor except as otherwise provided by applicable law.
53
Section 5.02 CALCULATION OF LIBOR, THE CLASS A FORMULA RATE AND THE
CLASS M FORMULA RATE.
(a) CALCULATION OF THE CLASS A FORMULA RATE AND THE CLASS M FORMULA
RATE. On or prior to each LIBOR Determination Date, the Indenture Trustee shall
determine the Class A Formula Rate and Class M Formula Rate for the related
Payment Date.
(b) CALCULATION OF LIBOR. Until the Principal Balance of each Class of
the Notes has been reduced to zero, the Indenture Trustee shall establish LIBOR
on each LIBOR Determination Date as follows:
(i) If on such LIBOR Determination Date a rate for United
States dollar deposits for one month appears on the Dow Xxxxx
Telerate System, page 3750, LIBOR for the next Accrual Period
shall be equal to such rate as of 11:00 A.M., London time;
(ii) If such rate does not appear on such page (or such other
page as may replace that page on that service, or if such
service is no longer offered, such other service for
displaying LIBOR or comparable rates as may be selected by the
Indenture Trustee after consultation with the Servicer), the
rate shall be determined as follows:
(x) The Indenture Trustee on the LIBOR Determination
Date will request the principal London offices of
each of four major reference banks in the London
interbank market, as selected by the Indenture
Trustee, to provide the Indenture Trustee with its
offered quotation for deposits in United States
dollars for the upcoming one-month period, commencing
on the second LIBOR Business Day immediately
following such LIBOR Determination Date, to prime
banks in the London interbank market at approximately
11:00 a.m. London time on such LIBOR Determination
Date and in a principal amount that is representative
for a single transaction in United States dollars in
such market at such time. If at least two such
quotations are provided, LIBOR determined on such
LIBOR Determination Date will be the arithmetic mean
of such quotations.
(y) If fewer than two quotations are provided, LIBOR
determined on such LIBOR Determination Date will be
the arithmetic mean of the rates quoted at
approximately 11:00 a.m. in New York City on such
LIBOR Determination Date by three major banks in New
York City selected by the Indenture Trustee for
one-month United States dollar loans to leading
European banks, in a principal amount that is
representative for a single transaction in United
States dollars in such market at such time; provided,
however, that if the banks so selected by the
Indenture Trustee are not quoting as mentioned in
this sentence, LIBOR determined on
54
such LIBOR Determination Date will continue to be
LIBOR as then currently in effect on such LIBOR
Determination Date.
(iii) The establishment of LIBOR on each LIBOR Determination
Date by the Indenture Trustee and the Indenture Trustee's
calculation of the rate of interest applicable to the Notes
for the related Accrual Period shall (in the absence of
manifest error) be final and binding. The Indenture Trustee
shall, upon determination of LIBOR for the relevant Accrual
Period, inform the Servicer (at the facsimile number given to
the Indenture Trustee in writing) of such rates.
Section 5.03 STATEMENTS TO NOTEHOLDERS. (a) On each Payment Date, the
Indenture Trustee shall make available a copy of the applicable Servicing
Certificate delivered to the Indenture Trustee pursuant to Section 3.18 to each
Noteholder concurrently with each payment to Noteholders (the "Indenture
Trustee's Statement to Noteholders") containing the information set forth below
with respect to such Payment Date:
(i) the Available Payment Amount for such Payment Date,
separately stating the amount of Interest Collections and
Principal Collections;
(ii) the amount of the payments to Holders of the Class A and
Class M Notes for such Payment Date, separately stating the
portions thereof allocable to interest and allocable to
principal;
(iii) the amount of any Interest Carry Forward Amount and
Supplemental Interest Amount for each Class paid on such
Payment Date and the amount of any Interest Carry Forward
Amount or Supplemental Interest Amount for each Class
remaining after giving effect to the payments on such Payment
Date;
(iv) the amount of any Extra Principal Payment Amount for such
Payment Date;
(v) the Principal Payment Amount for such Payment Date,
separately stating the components thereof;
(vi) the Principal Carry Forward Amount for each Class for
such Payment Date and the amount of any Principal Carry
Forward Amount for each Class remaining after giving effect to
the payments on each Payment Date;
(vii) the Note Principal Amount of each Class of Notes and the
Pool Factor, the Pool Balance as reported in the prior
Indenture Trustee's Statement to Noteholders or, in the case
of the first Determination Date, the Original Note Principal
Amount of each Class and the Cut-Off Date Pool Balance;
55
(viii) the number and aggregate Principal Balance of any
Mortgage Loans purchased by the Seller or the Servicer with
respect to the related Collection Period pursuant to Sections
2.02, 2.04 and 3.01;
(ix) The number and aggregate Principal Balance of any
Mortgage Loan that the Servicer has consented to the placement
of a senior lien during the related Collection Period pursuant
to Section 3.01(a);
(x) the amount of any Substitution Adjustment Amounts for such
Payment Date;
(xi) the amount to be paid to the Transferor in respect of the
Ownership Interest for the related Payment Date pursuant to
Section 5.01(a)(xii);
(xii) the Note Principal Amount of each Class of Notes and the
Pool Factor after giving effect to the payment to be made on
the related Payment Date;
(xiii) the Servicing Fee for the related Collection Period and
any accrued amounts thereof that remain unpaid for previous
Collection Periods;
(xiv) the Overcollateralization Amount, the Interim
Overcollateralization Amount, the Interim
Overcollateralization Deficiency, the Overcollateralization
Release Amount, the Targeted Overcollateralization Amount, and
the Monthly Excess Cashflow for such Payment Date;
(xv) the number of Mortgage Loans outstanding at the beginning
and at the end of the related Collection Period;
(xvi) the Pool Balance as of the end of the related Collection
Period;
(xvii) the number and aggregate Principal Balances of Mortgage
Loans (x) as to which the scheduled monthly payment is
contractually delinquent for 30-59 days, 60-89 days and 90 or
more days, respectively and (y) that have become REO, in each
case as of the end of such Collection Period;
(xviii) the book value (within the meaning of 12 C.F.R.
section 571.13 or comparable provision) of any real estate
acquired through foreclosure or grant of a deed in lieu of
foreclosure;
(xix) whether a Trigger Event has occurred or is continuing;
(xx) such other information as is required by the Code and
regulations thereunder to be made available to Holders of the
Class A and Class M Notes;
56
(xxi) the 60 Day Delinquency Percentage for the related
Collection Period;
(xxii) the 60 Day+ Rolling Average for such Payment Date;
(xxiii) LIBOR for such Payment Date;
(xxiv) whether a Servicer Termination Event has occurred since
the prior Determination Date, specifying each such Servicer
Termination Event if one has occurred;
(xxv) whether an Event of Default has occurred and is
continuing;
(xxvi) the Class A Formula Rate, the Class A Note Rate, the
Class M Formula Rate, the Class M Note Rate and the Available
Funds Cap for such Payment Date;
(xxvii) the amount of any Skip-A-Pay Advances for the related
Collection Period; and
(xxviii) the Skip-A-Pay Reimbursement Amount for such Payment
Date.
In the case of information furnished pursuant to clauses (ii) and (iii)
above, the amounts shall be expressed, in a separate section of the report, as a
dollar amount per Class A Note or Class M Note, as applicable, for each Note for
each $[1,000] original dollar amount as of the Cut-Off Date.
To the extent that there are inconsistencies between the telecopy of
the Indenture Trustee's Statement to Noteholders and the hard copy thereof, the
Servicer may rely upon the latter.
The Indenture Trustee will make the reports referred to in this section
(and, at its option, any additional files containing the same information in an
alternative format) available each month to Noteholders and other parties to
this Agreement via the Indenture Trustee's website, which is presently located
at www.[__________]. Persons that are unable to use the above website are
entitled to have a paper copy mailed to them via first class mail by calling the
Indenture Trustee at (800) [___-____]. The Indenture Trustee shall have the
right to change the way the reports referred to in this section are distributed
in order to make such distribution more convenient and/or more accessible to the
above parties and to the Noteholders. The Indenture Trustee shall provide timely
and adequate notification to all above parties and to the Noteholders regarding
any such change.
(b) The Indenture Trustee shall prepare or cause to be prepared (in a
manner consistent with the treatment of the Notes as indebtedness of the Trust,
or as may be otherwise required by Section 3.16 herein) Internal Revenue Service
Form 1099 (or any successor form) and any other tax forms required to be filed
or furnished to Noteholders in respect of payments
57
by the Indenture Trustee (or the Paying Agent) on the Notes and shall file and
distribute such forms as required by law.
(c) Reports and computer tapes furnished by the Servicer pursuant to
this Agreement shall be deemed confidential and of a proprietary nature, and
shall not be copied or distributed except to the extent provided in this
Agreement and to the extent required by law or to the Rating Agencies, the
Seller and to the extent the Servicer instructs the Indenture Trustee in writing
to furnish information regarding the Trust or the Mortgage Loans to third-party
information providers. No Person entitled to receive copies of such reports or
tapes or lists of Noteholders shall use the information therein for the purpose
of soliciting the customers of the Originator or for any other purpose except as
set forth in this Agreement.
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ARTICLE VI.
THE SERVICER AND THE SELLER
Section 6.01 LIABILITY OF THE SERVICER AND THE SELLER. The Servicer
shall be liable in accordance herewith only to the extent of the obligations
specifically imposed upon and undertaken by the Servicer herein. The Seller
shall be liable in accordance herewith only to the extent of the obligations
specifically imposed upon and undertaken by the Seller herein.
Section 6.02 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE SERVICER OR THE SELLER. Any corporation into which the
Servicer or Seller may be merged or consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Servicer or the Seller
shall be a party, or any corporation succeeding to the business of the Servicer
or the Seller, shall be the successor of the Servicer or the Seller, as the case
may be, hereunder, without the execution or filing of any paper or any further
act on the part of any of the parties hereto, anything herein to the contrary
notwithstanding.
Section 6.03 LIMITATION ON LIABILITY OF THE SERVICER, THE SELLER AND
OTHERS. None of the Servicer, the Seller, or any director, officer, employee or
agent of the Servicer or the Seller shall be under any liability to the Owner
Trustee or the Noteholders for any action taken or for refraining from the
taking of any action by the Servicer or the Seller, as applicable, in good faith
pursuant to this Agreement, or for errors in judgment; PROVIDED, HOWEVER, that
this provision shall not protect the Servicer, the Seller or any such person
against any liability which would otherwise be imposed by reason of willful
misfeasance, bad faith or gross negligence in the performance of duties or by
reason of reckless disregard of obligations and duties hereunder, and that this
provision shall not be construed to entitle the Servicer to indemnity in the
event that amounts advanced by the Servicer to retire any senior Lien exceed Net
Liquidation Proceeds realized with respect to the related Mortgage Loan. The
Servicer, the Seller and any director, officer, employee or agent of the
Servicer or the Seller may rely in good faith on any document of any kind prima
facie properly executed and submitted by any Person respecting any matters
arising hereunder. The Servicer, the Seller and any director, officer, employee
or agent of the Servicer or the Seller shall be indemnified by the Owner Trustee
and held harmless against any loss, liability or expense incurred in connection
with any legal action relating to this Agreement or the Notes, other than any
loss, liability or expense related to any specific Mortgage Loan or Mortgage
Loans (except as any such loss, liability or expense shall be otherwise
reimbursable pursuant to this Agreement) and any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or gross negligence in the
performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder. Neither the Servicer nor the Seller shall be
under any obligation to appear in, prosecute or defend any legal action which is
not incidental to its respective duties under this Agreement, and which in its
opinion may involve it in any expense or liability; PROVIDED, HOWEVER, that the
Servicer or the Seller may, in its sole discretion, undertake any such action
which it may deem necessary or desirable in respect of this Agreement and the
rights and duties of the parties hereto and the interests of the Noteholders
hereunder. In such event, the reasonable legal expenses and costs of such action
and any liability resulting therefrom and any claims by the Servicer or the
Seller hereunder for indemnification shall be
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expenses, costs and liabilities of the Owner Trustee, and the Servicer or the
Seller, as the case may be, shall be entitled to be reimbursed therefor and
indemnified pursuant to the terms hereof from amounts deposited in the
Collection Account as provided by Section 3.03. The Servicer's and the Seller's
right to indemnity or reimbursement pursuant to this Section shall survive any
resignation or termination of the Servicer pursuant to Section 6.04 or 7.01 with
respect to any losses, expenses, costs or liabilities arising prior to such
resignation or termination (or arising from events that occurred prior to such
resignation or termination). The Servicer shall have no claim (whether by
subrogation or otherwise) or other action against any Noteholder for any amounts
paid by the Servicer pursuant to any provision of this Agreement.
Section 6.04 SERVICER NOT TO RESIGN. Subject to the provisions of
Section 6.02, the Servicer shall not resign from the obligations and duties
hereby imposed on it except (i) upon determination that the performance of its
obligations or duties hereunder are no longer permissible under applicable law
or are in material conflict by reason of applicable law with any other
activities carried on by it or its subsidiaries or Affiliates, the other
activities of the Servicer so causing such a conflict being of a type and nature
carried on by the Servicer or its subsidiaries or Affiliates at the date of this
Agreement or (ii) upon satisfaction of the following conditions: (a) the
Servicer has proposed a successor servicer to the Indenture Trustee in writing
and such proposed successor servicer is reasonably acceptable to the Indenture
Trustee; (b) each Rating Agency shall have confirmed to the Indenture Trustee
that the appointment of such proposed successor servicer as Servicer hereunder
will not result in the reduction or withdrawal of the then-current rating of the
Class A or Class M Notes; and (c) such proposed successor servicer has agreed in
writing to assume the obligations of Servicer hereunder and the Servicer has
delivered to the Indenture Trustee an Opinion of Counsel to the effect that all
conditions precedent to the resignation of the Servicer and the appointment of
and acceptance by the proposed successor servicer have been satisfied; PROVIDED,
HOWEVER, that in the case of clause (i) above no such resignation by the
Servicer shall become effective until the Indenture Trustee shall have assumed
the Servicer's responsibilities and obligations hereunder or the Indenture
Trustee shall have designated a successor servicer in accordance with Section
7.02. Any such resignation shall not relieve the Servicer of responsibility for
any of the obligations specified in Sections 7.01 and 7.02 as obligations that
survive the resignation or termination of the Servicer. Any such determination
permitting the resignation of the Servicer pursuant to clause (i) above shall be
evidenced by an Opinion of Counsel to such effect delivered to the Indenture
Trustee.
Section 6.05 DELEGATION OF DUTIES. In the ordinary course of business,
the Servicer at any time may delegate any of its duties hereunder to any Person,
including any of its Affiliates, who agrees to conduct such duties in accordance
with standards comparable to those with which the Servicer complies pursuant to
Section 3.01. Such delegation shall not relieve the Servicer of its liabilities
and responsibilities with respect to such duties and shall not constitute a
resignation within the meaning of Section 6.04. The Servicer shall provide each
Rating Agency and the Indenture Trustee with written notice prior to the
delegation of any of its duties to any Person other than any of the Servicer's
Affiliates or their respective successors and assigns.
ARTICLE VII.
SERVICER TERMINATION
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Section 7.01 SERVICER TERMINATION EVENTS.
If any one of the following events ("Servicer Termination Events")
shall occur and be continuing:
(a) Any failure by the Servicer to deposit in the Collection Account
any deposit required to be made under the terms of this Agreement which
continues unremedied for a period of five (5) Business Days after the date upon
which written notice of such failure shall have been given to the Servicer by
the Indenture Trustee or the Seller, or to the Servicer, the Seller and the
Indenture Trustee by the Majority Noteholders; or
(b) Any failure on the part of the Servicer duly to observe or perform
in any material respect any other covenants or agreements of the Servicer set
forth in the Notes or in this Agreement, which failure (A) materially and
adversely affects the interests of Noteholders and (B) continues unremedied for
a period of sixty (60) days after the date on which written notice of such
failure, requiring the same to be remedied, shall have been given to the
Servicer by the Indenture Trustee or the Seller, or to the Servicer, the Seller
and the Indenture Trustee by the Majority Noteholders; or
(c) The entry against the Servicer of a decree or order by a court or
agency or supervisory authority having jurisdiction in the premises for the
appointment of a trustee, conservator, receiver or liquidator in any insolvency,
conservatorship, receivership, readjustment of debt, marshalling of assets and
liabilities or similar proceedings, or for the winding up or liquidation of its
affairs, and the continuance of any such decree or order unstayed and in effect
for a period of 60 consecutive days; or
(d) The consent by the Servicer to the appointment of a trustee,
conservator, receiver or liquidator in any insolvency, conservatorship,
receivership, readjustment of debt, marshalling of assets and liabilities or
similar proceedings of or relating to the Servicer or of or relating to
substantially all of its property; or the Servicer shall admit in writing its
inability to pay its debts generally as they become due, file a petition to take
advantage of any applicable insolvency or reorganization statute, make an
assignment for the benefit of its creditors, or voluntarily suspend payment of
its obligations;
then, and in each and every case, so long as a Servicer Termination Event shall
not have been remedied by the Servicer, either the Indenture Trustee or the
Seller may, and at the direction of the Majority Noteholders, the Indenture
Trustee shall, by notice then given in writing to the Servicer, the Seller and
the Indenture Trustee, as applicable, terminate all of the rights and
obligations of the Servicer as servicer under this Agreement; PROVIDED, HOWEVER,
that the responsibilities and duties of the initial Servicer with respect to the
purchase of Mortgage Loans pursuant to Sections 2.02, 2.04(c) and 3.01 shall not
terminate. Any such notice to the Servicer shall also be given to each Rating
Agency. On or after the receipt by the Servicer of such written notice, all
authority and power of, and all benefits accruing to, the Servicer under this
Agreement, whether with respect to the Notes or the Mortgage Loans or otherwise,
shall pass to and be vested in the Indenture Trustee or, if a successor Servicer
has been appointed under Section 7.02, such successor Servicer pursuant to and
under this Section 7.01; and, without limitation, the Indenture Trustee is
hereby authorized and empowered to execute and deliver, on
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behalf of the Servicer, as attorney-in-fact or otherwise, any and all documents
and other instruments, and to do or accomplish all other acts or things
necessary or appropriate to effect the purposes of such notice of termination,
whether to complete the transfer and endorsement of each Mortgage Loan and
related documents, or otherwise. The Servicer agrees to cooperate with the
Indenture Trustee in effecting the termination of the responsibilities and
rights of the Servicer hereunder, including, without limitation, the transfer to
the Indenture Trustee for the administration by it of all cash amounts that
shall at the time be held by the terminated Servicer and to be deposited by it
in the Collection Account, or that have been deposited by the terminated
Servicer in the Collection Account or thereafter received by the terminated
Servicer with respect to the Mortgage Loans, and the recordation of Assignments
of Mortgages to the Owner Trustee if MERS is not the mortgagee of a Mortgage
Loan or otherwise in accordance with Section 7.02(c). The Indenture Trustee or
other successor servicer shall not be responsible for delays attributable to the
Servicer's failure to deliver information, defects in the information provided
by the Servicer or other circumstances beyond the control of the Indenture
Trustee or other successor servicer.
Notwithstanding the foregoing, a delay in or failure of performance
under Section 7.01(a) for a period of five (5) Business Days or under Section
7.01(b) for a period of sixty (60) days, shall not constitute a Servicer
Termination Event if such delay or failure could not be prevented by the
exercise of reasonable diligence by the Servicer and such delay or failure was
caused by an act of God, acts of declared or undeclared war, public disorder,
terrorism, rebellion or sabotage, epidemics, landslides, lightning, fire,
hurricanes, earthquakes, floods or similar causes. The preceding sentence shall
not relieve the Servicer from using its best efforts to perform its obligations
in a timely manner in accordance with the terms of this Agreement, and the
Servicer shall provide the Indenture Trustee, the Seller and the Noteholders
with an Officer's Certificate giving prompt notice of such failure or delay by
it, together with a description of its efforts to so perform its obligations.
The Servicer shall immediately notify the Indenture Trustee and each Rating
Agency in writing of any Servicer Termination Events.
Section 7.02 INDENTURE TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR.
(a) On and after the time the Servicer receives a notice of resignation
or termination pursuant to Section 6.04 or 7.01, the Indenture Trustee shall be
the successor in all respects to the Servicer in its capacity as servicer under
this Agreement and the transactions set forth or provided for herein and shall
be subject to all the responsibilities, duties and liabilities relating thereto
placed on the Servicer by the terms and provisions hereof; PROVIDED, HOWEVER,
that the responsibilities and duties of Compass Bank as Servicer with respect to
the purchase of the Mortgage Loans pursuant to Sections 2.02, 2.04(c) and 3.01
and the indemnification obligation pursuant to Section 2.04(d) shall remain an
obligation of Compass Bank and shall not become an obligation of the Indenture
Trustee or any other successor servicer. As compensation therefor, the Indenture
Trustee shall be entitled to such compensation as the Servicer would have been
entitled to hereunder if no such notice of termination had been given.
Notwithstanding the above, (i) if the Indenture Trustee is unwilling to act as
successor Servicer, or (ii) if the Indenture Trustee is legally unable so to
act, the Indenture Trustee may (in the situation described in clause (i)) or
shall (in the situation described in clause (ii)) appoint, or petition a court
of competent jurisdiction to appoint, any housing and home finance institution
or other
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mortgage loan or mortgage loan servicer having all licenses and permits required
in order to perform its obligations hereunder and a net worth of not less than
$[50,000,000] as the successor to the Servicer hereunder in the assumption of
all or any part of the responsibilities, duties or liabilities of the Servicer
hereunder; PROVIDED that the appointment of any such successor Servicer will not
result in the qualification, reduction or withdrawal of the then-current rating
assigned to either the Class A or Class M Notes by the Rating Agencies, as
evidenced by a writing to such effect delivered to the Indenture Trustee, and
any successor Servicer appointed hereunder shall be reasonably acceptable to the
Seller. Pending appointment of a successor to the Servicer hereunder, unless the
Indenture Trustee is prohibited by law from so acting, the Indenture Trustee
shall act in such capacity as hereinabove provided. In connection with such
appointment and assumption, the successor shall be entitled to receive
compensation out of payments on Mortgage Loans in an amount equal to the
compensation which the Servicer would otherwise have received pursuant to
Section 3.09 (or such lesser compensation as the Indenture Trustee and such
successor shall agree). The Indenture Trustee and such successor shall take such
action, consistent with this Agreement, as shall be necessary to effectuate any
such succession. All costs incurred in transferring the servicing to a successor
servicer shall be paid by the outgoing Servicer.
(b) Any successor, including the Indenture Trustee, to the Servicer as
Servicer shall during the term of its service as servicer (i) continue to
service and administer the Mortgage Loans for the benefit of Noteholders and
(ii) maintain in force a policy or policies of insurance covering errors and
omissions in the performance of its obligations as Servicer hereunder and a
fidelity bond in respect of its officers, employees and agents to the same
extent as the Servicer is so required pursuant to Section 3.13. The appointment
of a successor Servicer shall not affect any liability of the predecessor
Servicer which may have arisen under this Agreement prior to its termination as
Servicer (including, without limitation, any deductible under an insurance
policy pursuant to Section 3.04), nor shall any successor Servicer be liable for
any acts or omissions of the predecessor Servicer or for any breach by such
Servicer or the Seller of any of their representations or warranties contained
herein or in any related document or agreement.
(c) In connection with the termination or resignation of the Servicer
hereunder, either (i) the successor Servicer, including the Indenture Trustee if
the Indenture Trustee is acting as successor Servicer, shall represent and
warrant that it is a member of MERS in good standing and shall agree to comply
in all material respects with the rules and procedures of MERS in connection
with the servicing of the Mortgage Loans that are registered with MERS, in which
case the predecessor Servicer shall cooperate with the successor Servicer in
causing MERS to revise its records to reflect the transfer of servicing to the
successor Servicer as necessary under MERS' rules and regulations, or (ii) the
predecessor Servicer shall cooperate with the successor Servicer in causing MERS
to execute and deliver an Assignment of Mortgage in recordable form to transfer
the Mortgage from MERS to the Owner Trustee and to execute and deliver such
other notices, documents and other instruments as may be necessary or desirable
to effect a transfer of such Mortgage Loan or servicing of such Mortgage Loan on
the MERS(R) System to the successor Servicer. The predecessor Servicer shall
file or cause to be filed any such assignment in the appropriate recording
office. The predecessor Servicer shall bear any and all fees of MERS, costs of
preparing any Assignments of Mortgage, and fees and costs of filing any
assignments of Mortgage that may be required under this subsection (c). The
successor Servicer
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shall cause such assignment to be delivered to the Indenture Trustee promptly
upon receipt of the original with evidence of recording thereon or a copy
certified by the public recording office in which such Assignment of Mortgage
was recorded.
Section 7.03 WAIVER OF DEFAULTS. The Majority Noteholders may, on
behalf of all Noteholders, waive any events permitting removal of the Servicer
as servicer pursuant to this Article VII, PROVIDED, HOWEVER, that the Majority
Noteholders may not waive a default in making a required payment on a Note
without the consent of each Holder of such Note. Upon any waiver of a past
default, such default shall cease to exist and any Servicer Termination Event
arising therefrom shall be deemed to have been remedied for every purpose of
this Agreement. No such waiver shall extend to any subsequent or other default
or impair any right consequent thereto except to the extent expressly so waived.
Notice of any such waiver shall be given by the Indenture Trustee to the Rating
Agencies.
Section 7.04 NOTIFICATION TO NOTEHOLDERS. Upon any termination or
appointment of a successor to the Servicer pursuant to this Article VII or
Section 6.04 above, the Indenture Trustee shall give prompt written notice
thereof to the Noteholders at their respective addresses appearing in the Note
Register and each Rating Agency.
ARTICLE VIII.
TERMINATION
Section 8.01 TERMINATION.
(a) The respective obligations and responsibilities of the Seller, the
Originator, the Servicer, the Owner Trustee and the Indenture Trustee created
hereby (other than the obligation of the Indenture Trustee to make certain
payments to Noteholders after the Final Scheduled Payment Date and the
obligation of the Servicer to send certain notices as hereinafter set forth)
shall terminate upon notice to the Indenture Trustee of the earliest of (i) the
final payment or other liquidation of the last Mortgage Loan remaining in the
Trust; (ii) the sale of the Mortgage Loans as described in Section 10.2 of the
Indenture and the corresponding redemption of the Notes, (iii) the optional
purchase of the Mortgage Loans as described below in this Section 8.01 and (iv)
the Payment Date in [__________]. Notwithstanding the forgoing, in no event
shall the trust created hereby continue beyond the expiration of 21 years from
the date of the last survivor of the descendants of Xxxxxx X. Xxxxxxx, the late
ambassador of the United States to the Court of St. James's, living on the date
hereof.
(b) The Servicer may, at its option, terminate this Agreement on any
Payment Date on or after the Payment Date on which the sum of the Note Principal
Amount of the Class A and Class M Notes (after giving effect to payments made on
such Payment Date) is less than or equal to [__]% of the sum of the Original
Note Principal Amount of the Class A and Class M Notes by purchasing, on the
next succeeding Payment Date, all of the outstanding Mortgage Loans and REO
Properties at a price (the "Termination Price") equal the greatest of (A) the
sum of (x) 100% of the Principal Balance of each Mortgage Loan (other than any
Mortgage Loan as to which title to the underlying Mortgaged Property has been
acquired and whose fair market value is included pursuant to clause (y) below)
as of the first day of the Collection Period preceding the
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Payment Date upon which the proceeds of any repurchase are to be distributed and
(y) the fair market value of such acquired property (as determined by the
Servicer as of the close of business on the third Business Day next preceding
the date upon which notice of any such termination is furnished to Noteholders
pursuant to Section 8.01(e)) plus, in each case, one month's interest at the
applicable Net Loan Rate on the Principal Balance of each Mortgage Loan
(including any Mortgage Loan as to which title to the underlying Mortgaged
Property has been acquired), (B) the aggregate fair market value (as determined
by the Servicer as of the close of business on such third preceding Business
Day) of all of the assets of the Trust, or (C) the sum of the Note Principal
Amount of the Class A and Class M Notes, together with any unpaid Interest Carry
Forward Amounts and Supplemental Interest Amounts allocable to such Classes,
plus one month's interest on such Note Principal Amount and any unpaid Interest
Carry Forward Amounts and Supplemental Interest Amounts at the Class A Formula
Rate or Class M Formula Rate, as applicable.
Any such purchase shall be accomplished by deposit into the Collection
Account on the Determination Date before such Payment Date of the Termination
Price.
(c) If the Servicer does not repurchase all of the Mortgage Loans
pursuant to Section 8.01(b) above within three (3) months of the first Payment
Date upon which such repurchase option may occur, then promptly on the following
Payment Date the Indenture Trustee shall, at the expense of the Servicer, begin
a process for soliciting bids in connection with an auction of the Mortgage
Loans for an auction to occur on or before the next succeeding Payment Date (the
"First Auction Date" and, if necessary, any date after the First Auction Date
(the "Subsequent Auction Date" and together with the First Auction Date, the
"Auction Date"). The Indenture Trustee shall provide the Servicer written notice
of such auctions at least ten (10) Business Days prior to the applicable Auction
Date. The auctions shall be conducted as follows:
(i) If at least two bids are received, the Indenture Trustee
shall solicit and resolicit new bids from all participating bidders
until only one bid remains or the remaining bidders decline to resubmit
bids. The Indenture Trustee shall accept the highest of such remaining
bids if it is equal to or in excess of the Termination Price. If less
than two bids are received or the highest bid after the resolicitation
process is completed is not equal to or in excess of the Termination
Price, the Indenture Trustee shall not consummate such sale. If a bid
equaling the Termination Price is received, then the Indenture Trustee
may, and if so requested by the Servicer shall, consult with a
financial advisor (at the expense of the Servicer), which may be an
underwriter of the Notes, to determine if the fair market value of the
Mortgage Loans and related property has been offered. The Indenture
Trustee may conclusively rely on such advice and shall be protected in
so relying.
(ii) If the first auction conducted by the Indenture Trustee
does not produce any bid at least equal to the Termination Price, then
the Indenture Trustee shall, beginning on the Payment Date occurring
approximately three months after the Auction Date for the failed first
auction, commence another auction in accordance with the requirements
of this subsection (c). If such second auction does not produce any bid
at least equal to the Termination Price, then the Indenture Trustee
shall, beginning on the
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Payment Date occurring approximately three months after the Auction
Date for the failed second auction, commence another auction in
accordance with the requirements of this subsection (c), and shall
continue to conduct similar auctions approximately every three months
thereafter until the earliest of (i) delivery by the Servicer of notice
of exercise of its repurchase option pursuant to Section 8.01(b) above,
(ii) receipt by the Indenture Trustee of a bid meeting the conditions
specified in the preceding paragraph, or (iii) the Payment Date on
which the Principal Balance of all the Mortgage Loans is reduced to
zero.
(d) If the Indenture Trustee receives a bid meeting the conditions
specified in subsection (c), then the Indenture Trustee shall release, or cause
to be released, to the winning bidder, upon payment of the bid purchase price
and satisfaction of any other terms and conditions of the auction sale, the
Mortgage Files pertaining to the Mortgage Loans being purchased and the Owner
Trustee and the Indenture Trustee shall take such other actions as the winning
bidder may reasonably request to effect the transfer of the Mortgage Loans by
the Owner Trustee to the winning bidder.
(e) Notice of any termination, specifying the Payment Date (which shall
be a date that would otherwise be a Payment Date) upon which the Noteholders may
surrender their Notes to the Indenture Trustee for payment of the final payment
and cancellation, shall be given promptly by the Indenture Trustee (upon receipt
of written directions from the Servicer, if the Servicer is exercising its right
to transfer of the Mortgage Loans, given not later than the first day of the
month preceding the month of such final payment) by letter to the Noteholders
mailed not earlier than the 15th day and not later than the 25th day of the
month next preceding the month of such final payment specifying (i) the Payment
Date upon which final payment of the Notes will be made upon presentation and
surrender of Notes at the office or agency of the Indenture Trustee therein
designated, (ii) the amount of any such final payment and (iii) that the Record
Date otherwise applicable to such Payment Date is not applicable, payments being
made only upon presentation and surrender of the Notes at the office or agency
of the Indenture Trustee therein specified.
(f) Upon presentation and surrender of the Notes, the Indenture Trustee
shall cause to be paid to the Noteholders on the Payment Date for such final
payment, in proportion to their respective Percentage Interests an amount equal
to (i) as to the Class A or Class M Notes, such Class' appropriate share of the
Principal Payment Amount, any Interest Carry Forward Amounts and one month's
interest at the related Note Rate on such Note Principal Amount and (ii) as to
Transferor in respect of the Ownership Interest, the amount which remains on
deposit in the Collection Account (other than the amounts retained to meet
claims) after application pursuant to clause (i) above.
(g) In the event that all of the Noteholders shall not surrender their
Notes for final payment and cancellation on or before such Final Scheduled
Payment Date, the Indenture Trustee shall promptly following such date cause all
funds in the Collection Account not paid in final payment to Noteholders, to be
withdrawn therefrom and credited to the remaining Noteholders by depositing such
funds in a separate escrow account for the benefit of such Noteholders, and the
Servicer (if the Servicer has exercised its right to purchase the Mortgage
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Loans) or the Indenture Trustee (in any other case) shall give a second written
notice to the remaining Noteholders to surrender their Notes for cancellation
and receive the final payment with respect thereto. If within nine months after
the second notice all the Notes shall not have been surrendered for
cancellation, the Ownership Interest will be entitled to all remaining unclaimed
funds and other assets which remain subject hereto, and the Indenture Trustee
upon transfer of such funds shall be discharged of any responsibility for such
funds and the Noteholders shall look to the holder of the Ownership Interest for
payment.
ARTICLE IX.
MISCELLANEOUS PROVISIONS
Section 9.01 AMENDMENT.
(a) This Agreement may be amended from time to time by the Seller, the
Servicer, the Owner Trustee and the Indenture Trustee by written agreement, in
each case without the consent of any of the Noteholders (i) to cure any
ambiguity, (ii) to correct any defective provisions or to correct or supplement
any provisions herein that may be inconsistent with any other provisions herein,
(iii) to add to the duties of the Seller, the Indenture Trustee or the Servicer,
(iv) to add, amend or modify any other provisions with respect to matters or
questions arising under this Agreement which shall not be inconsistent with the
provisions of this Agreement, (v) to add or amend any provisions of this
Agreement as required by any Rating Agency or any other nationally recognized
statistical rating agency in order to maintain or improve any rating of the
Class A and Class M Notes (it being understood that, after obtaining the ratings
in effect on the Closing Date, neither the Indenture Trustee, the Seller nor the
Servicer is obligated to obtain, maintain or improve any such rating), (vi) to
comply with any requirement imposed by changes in accounting policies that do
not materially impact the Notes, or (vii) to comply with any requirements
imposed by the Code; PROVIDED, HOWEVER, that as evidenced by an Opinion of
Counsel (a copy of which shall be delivered to the Indenture Trustee and each
Rating Agency) (at the expense of the party requesting such amendment) in each
case (other than a case arising under clause (vii)) such action shall not
adversely affect in any material respect the interest of any Class A and Class M
Noteholders, and PROVIDED, FURTHER, that the amendment shall not be deemed to
adversely affect in any material respect the interests of the Class A and Class
M Noteholder, and no Opinion of Counsel to that effect shall be required if the
Person requesting the amendment obtains a letter from each Rating Agency stating
that the amendment would not result in the downgrading or withdrawal of the
respective ratings then assigned to the Class A and Class M Notes.
(b) This Agreement also may be amended from time to time by the
Servicer, the Seller, the Owner Trustee and the Indenture Trustee, with the
consent of the Holders of the Class A or Class M Notes which are affected by
such amendment, evidencing Percentage Interests aggregating not less than 51% in
Percentage Interests of such Class or in the case of an amendment which affects
all classes, the Majority Noteholders, for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of this
Agreement or of modifying in any manner the rights of the Noteholders or the
Transferor in respect of the Ownership Interest; PROVIDED, HOWEVER, that no such
amendment shall (i) reduce in any manner
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the amount of, or delay the timing of, payments on any Class A or Class M Note
without the consent of the Holder of such Note or (ii) reduce the aforesaid
percentage required to consent to any such amendment, or (iii) create a material
risk of the Trust incurring taxes imposed under the Code or of the Class A Notes
or Class M Notes not being treated as indebtedness under the Code, or (iv)
result in a downgrading of the ratings of the Class A or Class M Notes without
the consent of the Holders of all Classes of Notes then outstanding or each
Class of Notes affected thereby.
Prior to the solicitation of consent of Noteholders in connection with
any such amendment, the party seeking such amendment shall furnish the Indenture
Trustee with an Opinion of Counsel stating whether such amendment would create a
material risk of the Trust incurring taxes imposed under the Code and notice of
the conclusion expressed in such Opinion of Counsel shall be included with any
such solicitation. An amendment made with the consent of all Noteholders and
executed in accordance with this Section 9.01 shall be permitted or authorized
by this Agreement notwithstanding that such Opinion of Counsel may conclude that
such amendment would create a material risk of the Trust incurring taxes imposed
under the Code.
Prior to the execution of any such amendment, the Indenture Trustee
shall furnish a copy of such amendment to each Rating Agency. In addition,
promptly after the execution of any such amendment made with the consent of the
Class A and/or Class M Noteholders, the Indenture Trustee shall furnish a copy
of such amendment to each applicable Noteholder.
(c) It shall not be necessary for the consent of Noteholders under this
Section 9.01 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Noteholders shall be subject to such reasonable
requirements as the Indenture Trustee may prescribe.
Prior to the execution of any amendment to this Agreement, each of the
Indenture Trustee and the Owner Trustee shall be entitled to receive and
conclusively rely upon an Opinion of Counsel stating that the execution of such
amendment is authorized or permitted by this Agreement and all conditions
precedent to the execution of such amendment have been met. The Indenture
Trustee may, but shall not be obligated to, enter into any such amendment which
affects the Indenture Trustee's own rights, duties, indemnities or immunities
under this Agreement.
Section 9.02 RECORDATION OF AGREEMENT.
To the extent permitted by applicable law, this Agreement, or a
memorandum thereof if permitted under applicable law, is subject to recordation
in all appropriate public offices for real property records in all of the
counties or other comparable jurisdictions in which any or all of the Mortgaged
Properties are situated, and in any other appropriate public recording office or
elsewhere, such recordation to be effected by the Servicer at the Noteholders'
expense on direction of the Indenture Trustee or the Majority Noteholders, but
only when accompanied by an opinion of counsel delivered to the Indenture
Trustee and the Owner Trustee to the effect that
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such recordation materially and beneficially affects the interests of the
Noteholders or is necessary for the administration or servicing of the Mortgage
Loans.
Section 9.03 DURATION OF AGREEMENT.
This Agreement shall continue in existence and effect until terminated
as herein provided.
Section 9.04 GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ALABAMA AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
Section 9.05 NOTICES.
All demands, notices and communications hereunder shall be in writing
and shall be deemed to have been duly given if personally delivered at or mailed
by overnight mail, certified mail or registered mail, postage prepaid, to (a) in
the case of the Seller or the Servicer, 00 Xxxxx 00xx Xxxxxx, Xxxxxxxxxx,
Xxxxxxx 00000, Attention: Senior Vice President, (b) in the case of the
Indenture Trustee, at the Corporate Trust Office, Attention: [__________], (c)
in the case of the Owner Trustee, [__________], [__________], Attention:
[__________]; with a copy to: [__________], Attention: [__________], (d) in the
case of Moody's, ABS Monitoring Department, 00 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, (e) in the case of Standard & Poor's, 00 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000, Attention: Structured Finance Surveillance, and (f) in the
case of Fitch, Xxx Xxxxx Xxxxxx Xxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: RMBS Surveillance Department, or, as to each party, at such other
address as shall be designated by such party in a written notice to each other
party. Any notice required or permitted to be mailed to a Noteholder shall be
given by first class mail, postage prepaid, at the address of such Holder as
shown in the Note Register. Any notice so mailed within the time prescribed in
this Agreement shall be conclusively presumed to have been duly given, whether
or not the Noteholder receives such notice.
Section 9.06 SEVERABILITY OF PROVISIONS.
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be held invalid for any reason whatsoever, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other covenants,
agreements, provisions or terms of this Agreement.
69
Section 9.07 NO PARTNERSHIP.
Nothing herein contained shall be deemed or construed to create any
partnership or joint venture between the parties hereto and the services of the
Servicer shall be rendered as an independent contractor.
Section 9.08 COUNTERPARTS.
This Agreement may be executed in one or more counterparts and by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same Agreement.
Section 9.09 SUCCESSORS AND ASSIGNS.
This Agreement shall inure to the benefit of and be binding upon the
Seller, the Servicer, the Originator, the Owner Trustee, the Indenture Trustee
and the Noteholders and their respective successors and permitted assigns.
The parties hereto hereby agree that all rights of the Owner Trustee
under this Agreement are pledged by the Owner Trustee to the Indenture Trustee
under the Indenture, and that the Indenture Trustee on behalf of the Noteholders
has the right to directly enforce all rights of the Trust under this Agreement.
Section 9.10 HEADINGS.
The headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be part of
this Agreement.
Section 9.11 INDENTURE TRUSTEE.
All privileges, rights and immunities given to the Indenture Trustee in
the Indenture are hereby extended to and applicable to the Indenture Trustee's
obligations hereunder.
Section 9.12 INCONSISTENCIES AMONG TRANSACTION DOCUMENTS.
In the event certain provisions of a Transaction Document conflict with
the provisions of this Sale and Servicing Agreement, the parties hereto agree
that the provisions of this Sale and Servicing Agreement shall be controlling
(other than provisions governing the internal affairs of the Owner Trustee,
which shall be governed by the Trust Agreement).
70
Section 9.13 [RESERVED].
Section 9.14 [RESERVED].
Section 9.15 PERFECTION REPRESENTATIONS. The Perfection Representations
shall be a part of this Agreement for all purposes.
Section 9.16 LIMITATION OF LIABILITY. It is understood by each party
hereto that the sole recourse of each party hereto in respect of the obligations
of the Owner Trustee hereunder and under the other Transaction Documents to
which it is a party shall be to the assets of the Trust. In addition,
[___________] is entering into this Agreement and the other Transaction
Documents to which the Owner Trustee is a party solely in its capacity as
trustee under the Trust Agreement and not in its individual capacity and in no
case shall [_______] (or any Person acting as successor trustee under the Trust
Agreement) be personally liable for or on account of any of the statements,
representations, warranties, covenants or obligations stated to be those of the
Owner Trustee hereunder or thereunder, all such liability, if any, being
expressly waived by the parties hereto and any person claiming by, through or
under such party.
Section 9.17 INSPECTION OF MORTGAGE FILES. Following the time that the
Mortgage Files have been delivered to the Indenture Trustee upon reasonable
prior notice and during regular business hours, the Indenture Trustee shall
permit representatives of applicable state regulatory agencies to inspect the
Mortgage Files on the Indenture Trustee's premises or shall provide such
documents at such places required by state regulations, including the offices of
the Servicer. Any costs incurred by the Indenture Trustee in fulfilling such
obligations shall be paid by the Servicer.
ARTICLE X.
ADMINISTRATION PROVISIONS
Section 10.01 Administrative Duties.
(a) DUTIES WITH RESPECT TO THE INDENTURE. The Servicer shall perform
all its duties and the duties of the Issuer under the Indenture. In addition,
the Servicer shall consult with the Owner Trustee as the Servicer deems
appropriate regarding the duties of the Issuer under the Indenture. The Servicer
shall monitor the performance of the Issuer and shall advise the Owner Trustee
when action is necessary to comply with the Issuer's duties under the Indenture.
The Servicer shall prepare for execution by the Issuer or shall cause the
preparation by other appropriate Persons of all such documents, reports,
filings, instruments, certificates and opinions as it shall be the duty of the
Issuer to prepare, file or deliver pursuant to the Indenture. In furtherance of
the foregoing, the Servicer shall take all necessary action that is the duty of
the Issuer to take pursuant to the Indenture, including, without limitation,
pursuant to Sections 3.1, 3.3, 3.4, 3.5, 3.6, 3.7, 3.9, 3.16, 3.17, 7.3, 8.6,
9.2, 9.3, 11.1 and 11.15 of the Indenture.
(b) Duties with Respect to the Issuer.
71
(i) In addition to the duties of the Servicer set forth in
this Agreement or any of the Transaction Documents, the
Servicer shall perform such calculations and shall prepare for
execution by the Issuer or the Owner Trustee, or shall cause
the preparation by other appropriate Persons of all such
documents, reports, filings, instruments, certificates and
opinions as it shall be the duty of the Issuer or the Owner
Trustee, to prepare, file or deliver pursuant to this
Agreement or any of the Transaction Documents or under state
and federal tax and securities laws, and shall take all
appropriate action that it is the duty of the Issuer to take
pursuant to this Agreement or any of the Transaction
Documents, including, without limitation, pursuant to Sections
2.6 of the Trust Agreement. In accordance with the directions
of the Issuer or the Owner Trustee, the Servicer shall
administer, perform or supervise the performance of such other
activities in connection with the Owner Trust Estate
(including the Transaction Documents) as are not covered by
any of the foregoing provisions and as are expressly requested
by the Issuer or the Owner Trustee and are reasonably within
the capability of the Servicer.
(ii) Notwithstanding anything in this Agreement or any of the
Transaction Documents to the contrary, the Servicer shall be
responsible for promptly notifying the Owner Trustee and the
Indenture Trustee in the event that any withholding tax is
imposed on the Issuer's payments (or allocations of income) to
a Transferor as contemplated by this Agreement. Any such
notice shall be in writing and specify the amount of any
withholding tax required to be withheld by the Owner Trustee
or the Indenture Trustee pursuant to such provision.
(iii) Notwithstanding anything in this Agreement or the
Transaction Documents to the contrary, the Servicer shall be
responsible for performance of the duties of the Issuer or the
Seller set forth in Section 5.5 of the Trust Agreement with
respect to, among other things, accounting and reports to the
Transferor (as defined in the Trust Agreement); PROVIDED,
HOWEVER, that once prepared by the Servicer, the Seller shall
retain responsibility under the Trust Agreement for the
distribution of the Schedule K-1s necessary to enable the
Transferor to prepare its federal and state income tax
returns.
(iv) The Servicer shall perform the duties of the Seller
specified in Section 10.2 of the Trust Agreement required to
be performed in connection with the resignation or removal of
the Owner Trustee, and any other duties expressly required to
be performed by the Servicer under this Agreement or any of
the Transaction Documents.
(v) The Servicer, on behalf of the Seller, shall direct the
Issuer to request the tender of all or a portion of the Notes
in accordance with the Indenture or this Agreement.
72
(vi) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Servicer may enter into
transactions with or otherwise deal with any of its
Affiliates; PROVIDED, HOWEVER, that the terms of any such
transactions or dealings shall be in accordance with any
directions received from the Issuer and shall be, in the
Servicer's opinion, no less favorable to the Issuer in any
material respect.
(vii) The Servicer shall take all necessary action that is the
duty of the Owner Trustee or Issuer to take pursuant to
Section 7.8 of the Trust Agreement.
(c) TAX MATTERS. The Servicer shall prepare and file, or cause to be
prepared and filed, on behalf of the Seller, all required tax returns, tax
elections, financial statements and such annual or other reports of the Issuer
as are necessary for preparation of tax reports as provided in Article V of the
Trust Agreement, including without limitation form 1099. All tax returns will be
signed by the Seller.
(d) NON-MINISTERIAL MATTERS. With respect to matters that in the
reasonable judgment of the Servicer are non-ministerial, the Servicer shall not
take any action pursuant to this Article X unless within a reasonable time
before the taking of such action, the Servicer shall have notified the Owner
Trustee and the Indenture Trustee of the proposed action and the Owner Trustee
and the Indenture Trustee shall not have withheld consent or provided an
alternative direction. For the purpose of the preceding sentence,
"non-ministerial matters" shall include
(i) the initiation of any claim or lawsuit by the Issuer and
the compromise of any action, claim or lawsuit brought by or
against the Issuer (other than in connection with the
collection of the Mortgage Loans);
(ii) the appointment of successor Note Registrars, successor
Note Paying Agents and successor Indenture Trustees pursuant
to the Indenture or the consent to the assignment by the Note
Registrar, Note Paying Agent or Indenture Trustee of its
obligations under the Indenture; and
(iii) the removal of the Indenture Trustee.
(e) EXCEPTIONS. Notwithstanding anything to the contrary in this
Agreement, except as expressly provided herein or in the Transaction Documents,
the Servicer, in its capacity hereunder, shall not be obligated to, and shall
not, (1) make any payments to the Noteholders or the Transferor under the
Transaction Documents, (2) sell any of the assets of the Trust, (3) take any
other action that the Issuer directs the Servicer not to take on its behalf or
(4) in connection with its duties hereunder assume any indemnification
obligation of any other Person.
(f) Neither the Indenture Trustee nor any successor Servicer shall be
responsible for any obligations or duties of a predecessor Servicer under this
Section 10.1.
Section 10.02 RECORDS. The Servicer shall maintain appropriate books of
account and records relating to services performed under this Agreement, which
books of account and records
73
shall be accessible for inspection by the Issuer and the Indenture Trustee at
any time during normal business hours.
Section 10.03 ADDITIONAL INFORMATION TO BE FURNISHED TO THE OWNER
TRUSTEE. The Servicer shall furnish to the Issuer and the Indenture Trustee,
from time to time such additional information regarding the Owner Trust Estate
as the Issuer and the Indenture Trustee shall reasonably request.
74
IN WITNESS WHEREOF, the following have caused their names to be signed
by their respective officers thereunto duly authorized, as of the day and year
first above written, to this Sale and Servicing Agreement.
COMPASS RECEIVABLES ASSET FUNDING TRUST 200[_]-[__],
By: [__________], not in its individual capacity but
solely as Owner Trustee
By:
--------------------------------------------------
Name:
Title:
S-1
COMPASS BANK,
as Servicer
By:
-------------------------------------------
Name:
Title:
S-2
COMPASS ASSET ACCEPTANCE COMPANY, L.L.C.,
as Seller
By:
-------------------------------------------
Name:
Title:
S-3
[__________],
not in its individual capacity but solely
as Indenture Trustee
By:
-------------------------------------------
Name:
Title:
S-4
THE STATE OF ________ )
)
COUNTY OF ________ )
BEFORE ME, on , the undersigned authority, a Notary
Public, on this day personally appeared ____________________, known to me to be
a person and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said [__________] not in its
individual capacity but in its capacity as Owner Trustee of Compass Receivables
Asset Funding Trust 200[_]-[__], as the Trust, and that he executed the same as
the act of such corporation for the purpose and consideration therein expressed,
and in the capacity therein stated.
_______
Notary Public, State of ________
S-5
THE STATE OF ________ )
)
COUNTY OF ________ )
BEFORE ME, on , the undersigned authority, a Notary
Public, on this day personally appeared ____________________, known to me to be
a person and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said Compass Bank, as the
Servicer, and that he executed the same as the act of such corporation for the
purpose and consideration therein expressed, and in the capacity therein stated.
________
Notary Public, State of ________
S-6
THE STATE OF ________ )
)
COUNTY OF ________ )
BEFORE ME, on , the undersigned authority, a Notary
Public, on this day personally appeared ____________________, known to me to be
a person and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said Compass Asset
Acceptance Company, L.L.C., as the Seller, and that he executed the same as the
act of such limited liability company for the purpose and consideration therein
expressed, and in the capacity therein stated.
________
Notary Public, State of ________
S-7
THE STATE OF ________ )
)
COUNTY OF ________ )
BEFORE ME, on , the undersigned authority, a Notary
Public, on this day personally appeared ____________________, known to me to be
the person and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said [__________], as
Indenture Trustee, and that he executed the same as the act of such corporation
for the purposes and consideration therein expressed, and in the capacity
therein stated.
________
Notary Public, State of ________
S-8
SCHEDULE 1
PERFECTION REPRESENTATIONS, WARRANTIES AND COVENANTS
The Seller hereby represents, warrants, and covenants to the Indenture Trustee
as to itself and the Originator as follows on the Closing Date and on each
Payment Date thereafter:
GENERAL
1. This Agreement creates a valid and continuing security interest (as defined
in the applicable UCC) in the Mortgage Loans in favor of the Indenture Trustee,
and the Indenture creates a valid and continuing security interest (as defined
in the applicable UCC), each of which security interest is prior to all other
Liens, and is enforceable as such as against creditors of and purchasers from
the Seller.
2. The Mortgage Loans constitute "general intangibles" or "instruments" within
the meaning of the applicable UCC.
3. The Collection Account and all subaccounts thereof constitute either a
deposit account or a securities account.
4. To the extent that payments and collections received or made with respect to
the Mortgage Loans constitute securities entitlements, such payments and
collections have been and will have been credited to the Collection Account. The
securities intermediary for the Collection Account has agreed to treat all
assets credited to the Collection Account as "financial assets" within the
meaning of the applicable UCC.
CREATION
5. The Seller owns and has good and marketable title to the Mortgage Loans free
and clear of any Lien, claim or encumbrance of any Person, excepting only liens
for taxes, assessments or similar governmental charges or levies incurred in the
ordinary course of business that are not yet due and payable or as to which any
applicable grace period shall not have expired, or that are being contested in
good faith by proper proceedings and for which adequate reserves have been
established, but only so long as foreclosure with respect to such a lien is not
imminent and the use and value of the property to which the Lien attaches is not
impaired during the pendency of such proceeding.
6. The Seller has received all consents and approvals to the sale of the
Mortgage Loans hereunder to the Owner Trustee required by the terms of the
Mortgage Loans that constitute instruments.
7. To the extent the Collection Account or subaccounts thereof constitute
securities entitlements, certificated securities or uncertificated securities,
the Seller has received all consents and approvals required to transfer to the
Indenture Trustee its interest and rights in the Collection Account hereunder.
1-1
PERFECTION
8. The Seller has caused or will have caused, within ten days after the
effective date of this Agreement, the filing of all appropriate financing
statements in the proper filing office in the appropriate jurisdictions under
applicable law in order to perfect the sale of the Mortgage Loans from the
Seller to the Owner Trustee, the security interest in the Mortgage Loans granted
to the Owner Trustee hereunder, the pledge of the Mortgage Loans from the Owner
Trustee to the Indenture Trustee, and the security interest in the Mortgage
Loans granted to the Indenture Trustee under the Indenture.
9. With respect to the Collection Account and all subaccounts that constitute
deposit accounts, either:
(i) the Seller has delivered to the Indenture Trustee a fully-executed
agreement pursuant to which the bank maintaining the deposit accounts
has agreed to comply with all instructions originated by the Indenture
Trustee directing disposition of the funds in the Collection Account
without further consent by the Seller; or
(ii) the Seller has taken all steps necessary to cause the Indenture
Trustee to become the account holder of the Collection Account.
10. With respect to the Collection Account or subaccounts thereof that
constitute securities accounts or securities entitlements, either:
(i) the Seller has caused or will have caused, within ten days after
the effective date of this Agreement, the filing of all appropriate
financing statements in the proper filing office in the appropriate
jurisdictions under applicable law in order to perfect the security
interest in the Collection Account granted by the Seller to the Owner
Trustee and by the Owner Trustee to the Indenture Trustee; or
(ii) the Seller has delivered to the Indenture Trustee a fully-executed
agreement pursuant to which the securities intermediary has agreed to
comply with all instructions originated by the Indenture Trustee
relating to the Collection Account without further consent by the
Seller; or
(iii) the Seller has taken all steps necessary to cause the securities
intermediary to identify in its records the Indenture Trustee as the
person having a security entitlement against the securities
intermediary in the Collection Account.
PRIORITY
11. Other than the transfer of the Transferred Assets to the Owner Trustee under
the Transfer Agreement, the transfer of the Mortgage Loans to the Seller under
the Mortgage Loan Purchase Agreement and the transfer of the Mortgage Loans to
the Owner Trustee pursuant to this Agreement, neither the Seller nor the
Originator have pledged, assigned, sold, granted a security interest in, or
otherwise conveyed any of the Mortgage Loans. Neither the Seller nor the
Originator have authorized the filing of, or are aware of any financing
statements against the
1-2
Seller or the Originator that include a description of collateral covering the
Mortgage Loans other than any financing statement relating to the security
interest granted to the Indenture Trustee hereunder or that has been terminated.
12. The Seller is not aware of any judgment, ERISA or tax lien filings against
either the Seller or the Originator.
13. The Originator has in its possession all original copies of the Mortgage
Notes that constitute or evidence the Mortgage Loans. To the Seller's knowledge,
none of the instruments that constitute or evidence the Mortgage Loans has any
marks or notations indicating that they have been pledged, assigned or otherwise
conveyed to any Person other than the Owner Trustee. All financing statements
filed or to be filed against the Seller and the Originator in favor of the
Indenture Trustee in connection herewith describing the Mortgage Loans contain a
statement to the following effect: "A purchase of or security interest in any
collateral described in this financing statement will violate the rights of the
Indenture Trustee."
14. Neither the Collection Account nor any subaccount thereof is in the name of
any person other than the Seller or the Indenture Trustee as trustee under the
Indenture or in the name of its nominee. The Seller has not consented for the
securities intermediary of the Collection Account to comply with entitlement
orders of any person other than the Indenture Trustee.
15. SURVIVAL OF PERFECTION REPRESENTATIONS. Notwithstanding any other provision
of this Agreement or any other transaction document, the Perfection
Representations contained in this Schedule shall be continuing, and remain in
full force and effect (notwithstanding any replacement of the Servicer or
termination of the Servicer's rights to act as such) until such time as all
obligations under this Agreement have been finally and fully paid and performed.
16. NO WAIVER. The parties to this Agreement (i) shall not, without obtaining a
confirmation of the then-current rating of the Notes, waive any of the
Perfection Representations, and (ii) shall provide the Rating Agencies with
prompt written notice of any breach of the Perfection Representations, and shall
not, without obtaining a confirmation of the then-current rating of the Notes
(as determined after any adjustment or withdrawal of the ratings following
notice of such breach) waive a breach of any of the Perfection Representations.
17. SERVICER TO MAINTAIN PERFECTION AND PRIORITY. The Servicer covenants that,
in order to evidence the interests of the Seller, the Owner Trustee and the
Indenture Trustee under this Agreement, the Servicer shall take such action, or
execute and deliver such instruments (other than effecting a Filing (as defined
below), unless such Filing is effected in accordance with this paragraph) as may
be necessary or advisable (including, without limitation, such actions as are
requested by the Indenture Trustee) to maintain and perfect, as a first priority
interest, the Indenture Trustee's security interest in the Mortgage Loans. The
Servicer shall, from time to time and within the time limits established by law,
prepare and present to the Indenture Trustee for the Indenture Trustee to
authorize (based in reliance on the Opinion of Counsel hereinafter provided for)
the Servicer to file, all financing statements, amendments, continuations,
initial financing statements in lieu of a continuation statement, terminations,
partial terminations, releases or partial releases, or any other filings
necessary or advisable to continue, maintain and perfect the Indenture Trustee's
security interest in the Mortgage Loans as a first-priority interest
1-3
(each a "Filing"). The Servicer shall present each such Filing to the Indenture
Trustee together with (x) an Opinion of Counsel to the effect that such Filing
is (i) consistent with grant of the security interest to the Owner Trustee
pursuant to Section 2.01 of this Agreement and the grant of the security
interest to the Indenture Trustee pursuant to the Indenture, (ii) satisfies all
requirements and conditions to such Filing in this Agreement and (iii) satisfies
the requirements for a Filing of such type under the Uniform Commercial Code in
the applicable jurisdiction (or if the Uniform Commercial Code does not apply,
the applicable statute governing the perfection of security interests), and (y)
a form of authorization for the Indenture Trustee's signature. Upon receipt of
such Opinion of Counsel and form of authorization, the Indenture Trustee shall
promptly authorize in writing the Servicer to, and the Servicer shall, effect
such Filing under the Uniform Commercial Code without the signature of the
Seller or the Owner Trustee or the Indenture Trustee where allowed by applicable
law. Notwithstanding anything else in the transaction documents to the contrary,
the Servicer shall not have any authority to effect a Filing without obtaining
written authorization from the Indenture Trustee.
1-4
EXHIBIT A
MORTGAGE LOAN SCHEDULE
A-1
EXHIBIT B
[RESERVED]
B-1
EXHIBIT C
[RESERVED]
C-1
EXHIBIT D
FORM OF CLASS A NOTE
[Attached as Exhibit A to Indenture]
D-1
EXHIBIT E
FORM OF CLASS M NOTE
[Attached as Exhibit B to Indenture]
E-1
