1
EXHIBIT 10.3
SERVICING AGREEMENT
among
GRANITE FINANCIAL, INC.
(the "Servicer")
GF FUNDING CORP. II
(the "Transferor")
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
(the "Trustee")
and
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
(the "Back-up Servicer")
Dated as of November 1, 1996
TABLE OF CONTENTS
Page
ARTICLE 1 2
DEFINITIONS 2
Section 1.01 Defined Terms 2
ARTICLE 2 4
SERVICER REPRESENTATIONS AND WARRANTIES 4
Section 2.01 Representations and Warranties 4
(a) Organization and Good Standing 4
(b) Authorization and Binding Obligation 4
(c) No Violation 4
(d) No Proceedings 4
(e) Approvals 4
(f) Investment Company 5
(g) Standard of Care 5
(h) Insurance 5
(i) Net Worth 5
ARTICLE 3 6
ADMINISTRATION AND SERVICING OF LEASE CONTRACTS 6
Section 3.01 Responsibilities of Servicer 6
Section 3.02 Servicer Standard of Care 8
Section 3.03 Lockbox Account and Servicer Remittances 9
Section 3.04 Servicer Advances 10
Section 3.05 Financing Statements 10
Section 3.06 Maintenance of Insurance Policy; Insurance
Proceeds 10
Section 3.07 Personal Property and Sales Taxes 11
Section 3.08 Servicing Compensation 11
Section 3.09 Substitution or Purchase of Lease Contracts 11
Section 3.10 No Offset 12
Section 3.11 Required Audits 12
ARTICLE 4 13
ACCOUNTINGS, STATEMENTS AND REPORTS 13
Section 4.01 Monthly Servicer's Reports 13
Section 4.02 Financial Statements; Certification as to
Compliance; Notice of Default 13
Section 4.03 Independent Accountants' Reports; Annual
Federal Tax Lien Search 14
Section 4.04 Access to Certain Documentation and Information 15
Section 4.05 Other Necessary Data 16
Section 4.06 Trustee to Cooperate 16
ARTICLE 5 18
THE SERVICER 18
Section 5.01 Servicer Indemnification 18
Section 5.02 Corporate Existence; Reorganizations 18
Section 5.03 Limitation on Liability of the Servicer and
Others 18
Section 5.04 The Servicer Not to Resign 19
ARTICLE 6 20
SERVICING TERMINATION 20
Section 6.01 Servicer Events of Default 20
Section 6.02 Back-up Servicer to Act; Taking of Bids;
Appointment of Successor Servicer 22
Section 6.03 Notification to Certificateholders 23
Section 6.04 Waiver of Past Defaults 23
Section 6.05 Effects of Termination of Servicer 23
Section 6.06 No Effect on Other Parties 24
ARTICLE 7 25
THE BACK-UP SERVICER 25
Section 7.01 Representations of Back-up Servicer 25
Section 7.02 Merger or Consolidation of, or Assumption
of the Obligations of, Back-up Servicer 25
Section 7.03 Back-up Servicer Resignation 26
Section 7.04 Oversight of Servicing 26
Section 7.05 Back-up Servicer Compensation 27
Section 7.06 Duties and Responsibilities 27
ARTICLE 8 28
MISCELLANEOUS PROVISIONS 28
Section 8.01 Termination 28
Section 8.02 Amendments 28
Section 8.03 Governing Law 29
Section 8.04 Notices 29
Section 8.05 Severability of Provisions 29
Section 8.06 Binding Effect 29
Section 8.07 Article Headings and Captions 29
Section 8.08 Legal Holidays 29
Section 8.09 Assignment for Security for the Certificates 29
Section 8.10 No Servicing Assignment 30
Section 8.11 MBIA Default or Termination 30
Section 8.12 Third Party Beneficiary 30
Section 8.13 Counterparts 30
SERVICING AGREEMENT
This SERVICING AGREEMENT ("Agreement"), dated as of November
1, 1996, is by and among Granite Financial, Inc., a Delaware
corporation, as Servicer (the "Servicer"), GF Funding Corp. II, a
Delaware corporation, as Transferor (the "Transferor"), Norwest
Bank Minnesota, National Association, as Back-up Servicer (the
"Back-up Servicer"), and Norwest Bank Minnesota, National
Association, as Trustee (the "Trustee").
PRELIMINARY STATEMENT
The Transferor has entered into a Trust and Security
Agreement dated as of November 1, 1996, (as amended from time to
time, the "Trust and Security Agreement"), with the Trustee, the
Back-up Servicer and the Servicer, pursuant to which the GF
Funding Corp. II Master Trust intends to issue one or more Series
of Certificates (the "Certificates").
The Transferor and Granite Financial, Inc. (the "Company")
have entered into a Lease Acquisition Agreement dated as of
November 1, 1996 (as amended from time to time, the "Lease
Acquisition Agreement"), providing for, among other things, the
contribution, from time to time, by the Company to the Transferor
of all of the Company's right, title and interest in and to
certain Lease Assets which the Transferor is and will be
conveying to the Trustee, for the benefit of the
Certificateholders and MBIA. In addition, the Transferor may, to
the extent permitted under the Trust and Security Agreement,
enter into Lease Sale Agreements with other Sellers of Lease
Assets, which the Transferor will be conveying to the Trustee,
for the benefit of the Certificateholders and MBIA. As a
precondition to the effectiveness of the Lease Acquisition
Agreement and the Trust and Security Agreement, the Lease
Acquisition Agreement and the Trust and Security Agreement
require that the Servicer, the Transferor, the Trustee and the
Back-up Servicer enter into this Agreement to provide for the
servicing of the Lease Assets.
In addition, the Transferor is conveying to the Trustee,
among other things, all of the Transferor's rights derived under
this Agreement and the Lease Acquisition Agreement, and the
Servicer agrees that all covenants and agreements made by the
Servicer herein with respect to the Lease Assets shall also be
for the benefit of the Trustee, MBIA and all holders from time to
time of the Certificates. For its services under this Agreement,
the Servicer, the Back-up Servicer and the Trustee will receive
the compensation described herein or in the Trust and Security
Agreement.
ARTICLE 1
DEFINITIONS
Section 1.01 Defined Terms. Except as otherwise specified or
as the context may otherwise require, the following terms have the
respective meanings set forth below for all purposes of this
Agreement, and the definitions of such terms are equally applicable
both to the singular and plural forms of such terms and to the
masculine, feminine and neuter genders of such terms. Capitalized
terms used but not otherwise defined herein shall have the respective
meanings assigned to such terms in the Trust and Security Agreement
or, if not defined therein, in the Lease Acquisition Agreement.
"Agreement": This Servicing Agreement, dated as of November 1,
1996, by and among the Servicer, the Transferor, the Back-up Servicer
and the Trustee, as amended from time to time in accordance with the
terms hereof.
"Back-up Servicer": Initially, Norwest Bank Minnesota, National
Association, until a successor Person shall have become the Back-up
Servicer pursuant to the applicable provisions of this Agreement, and
thereafter "Back-up Servicer" shall mean such successor Person.
"Company": Granite Financial, Inc. and all successors thereto
in accordance with the Lease Acquisition Agreement.
"Computer Tape": Any computer tape or disk prepared by the
Servicer and distributed to various parties as required herein.
"Lease Acquisition Agreement": The Lease Acquisition Agreement,
dated as of November 1, 1996, between the Transferor and the Company,
as amended from time to time in accordance with the terms thereof.
"Lease Assets": For purposes of this Agreement, Lease Assets
shall mean, collectively, the "Lease Assets" as defined in the Lease
Acquisition Agreement and the "Lease Assets" as defined in the Lease
Sale Agreements.
"Lease Sale Agreement": Each Lease Sale Agreement entered into
by the Transferor with a Seller and approved by MBIA in writing,
substantially in the form of Exhibit I to the Trust and Security
Agreement.
"Lockbox Account": The account established at the Lockbox Bank
by the Trustee pursuant to the Lockbox Agreement, which account is
maintained in the name of, and at the sole control of, the Trustee
and any Permitted Parties for and on behalf of the Trustee, MBIA, the
Certificateholders, the Transferor and any Permitted Parties into
which account shall be deposited payments related to the Lease
Receivables and as to which solely the Trustee and any Permitted
Parties shall have the ability to withdraw funds.
"Lockbox Agreement": An agreement among the Trustee, the
Transferor, any Permitted Parties and the Lockbox Bank, substantially
in the form attached hereto as Exhibit B or such other form as
approved by MBIA together with all amendments and supplements thereto
and all subsequent agreements of a similar nature between the
Transferor, the Trustee, any Permitted Parties and any successor
Lockbox Bank.
"Lockbox Bank": Any bank approved by MBIA, and any successor
Lockbox Bank appointed pursuant to Section 3.03(a) hereof.
"Monthly Servicer's Report": The report prepared by the
Servicer pursuant to Section 4.01 hereof.
"Nonrecoverable Advance": A Servicer Advance that the Servicer
determines in good faith, and in accordance with its customary
servicing practices, is unlikely to be eventually repaid from
Scheduled Payments made by or on behalf of the related Customer in
accordance with Section 3.04 hereof.
"Officer's Certificate": A certificate signed by the Chairman
of the Board, the Vice-Chairman of the Board, the President, a Vice
President, the Treasurer or the Secretary of the Servicer.
"Permitted Parties": A trustee for any other securitization
transaction engaged in by the Company or its Affiliates for the
benefit of the trust established thereunder, reasonably acceptable to
MBIA.
"Reported Companies": The Servicer and its Affiliates on a
consolidated basis, and if the initial Servicer is no longer acting
as Servicer, then in addition, any successor Servicer appointed
pursuant to this Agreement.
"Reported Companies' Financial Statements": The Reported
Companies' audited consolidating balance sheet and income statement,
consolidated statement of sources and uses/applications of cash,
auditors opinion letter regarding audited financial statements, and
all notes to the audited financial statements.
"Seller": Any Person that has been approved in writing by MBIA
to sell Lease Contracts to the Transferor pursuant to a Lease Sale
Agreement.
"Servicer": Granite Financial, Inc. until a successor Person
shall have become the Servicer pursuant to the applicable provisions
of this Agreement, and thereafter "Servicer" shall mean such
successor Person.
"Servicer Advance": The meaning set forth in Section 3.04
hereof.
"Servicer Default": Any occurrence or circumstance which with
notice or the lapse of time or both would be a Servicer Event of
Default under this Agreement.
"Servicer Event of Default": Each of the occurrences or
circumstances enumerated in Section 6.01 hereof.
"Servicer Termination Notice": The notice described in Section
6.01 hereof.
"Servicing Officers": Those officers of the Servicer involved
in, or responsible for, the administration and servicing of the Lease
Contracts, as identified on the list of Servicing Officers furnished
by the Servicer to the Trustee, the Back-up Servicer, and MBIA from
time to time.
"Transferor": GF Funding Corp. II, and all successors thereto
in accordance with the terms of the Trust and Security Agreement.
ARTICLE 2
SERVICER REPRESENTATIONS AND WARRANTIES
Section 2.01 Representations and Warranties. The Servicer
makes the following representations and warranties as of each
Delivery Date, except as otherwise specified below, which shall
survive such date:
(a) Organization and Good Standing. The Servicer has been duly
organized and is validly existing and in good standing as a
corporation under the laws of the State of Delaware or the laws of
such other state as permitted by Section 5.02(a), with requisite
power and authority to own its properties, perform its obligations
under this Agreement and to transact the business in which it is now
engaged or in which it proposes to engage.
(b) Authorization and Binding Obligation. Each of this
Agreement, the Trust and Security Agreement and the Insurance
Agreement has been duly authorized, executed and delivered by the
Servicer and constitutes the valid and legally binding obligation of
the Servicer enforceable against the Servicer in accordance with its
terms, subject as to enforcement to any bankruptcy, insolvency,
reorganization and other similar laws of general applicability
relating to or affecting creditors' rights generally and to general
principles of equity regardless of whether enforcement is sought in a
court of equity or law.
(c) No Violation. The entering into of this Agreement, the
Trust and Security Agreement and the Insurance Agreement and the
performance by the Servicer of its obligations under this Agreement,
the Trust and Security Agreement and the Insurance Agreement and the
consummation of the transactions herein and therein contemplated will
not conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any of
the property or assets of such Servicer pursuant to the terms of any
material indenture, mortgage, deed of trust or other agreement or
instrument to which it is a party or by which it is bound or to which
any of its property or assets is subject, nor will such action result
in any violation of the provisions of its certificate of
incorporation or bylaws, or any statute or any order, rule or
regulation of any court or any regulatory authority or other
governmental agency or body having jurisdiction over it or any of its
properties; and no consent, approval, authorization, order,
registration or qualification of or with any court, or any such
regulatory authority or other governmental agency or body is required
for the Servicer to enter into this Agreement, the Trust and Security
Agreement and the Insurance Agreement.
(d) No Proceedings. There are no proceedings or investigations
pending, or to the knowledge of the Servicer, threatened against or
affecting the Servicer or any subsidiary in or before any court,
governmental authority or agency or arbitration board or tribunal,
including but not limited to any such proceeding or investigation
with respect to any environmental or other liability resulting from
the ownership or use of any of the Equipment, which, individually or
in the aggregate, involve the probability of materially and adversely
affecting the properties, business, prospects, profits or condition
(financial or otherwise) of the Servicer and its subsidiaries, or the
ability of the Servicer to perform its obligations under this
Agreement, the Trust and Security Agreement or the Insurance
Agreement. The Servicer is not in default with respect to any order
of any court, governmental authority or agency or arbitration board
or tribunal.
(e) Approvals. The Servicer (i) is not in violation of any
laws, ordinances, governmental rules or regulations to which it is
subject, (ii) has not failed to obtain any licenses, permits,
franchises or other governmental authorizations necessary to the
ownership of its property or to the conduct of its business, and
(iii) is not in violation in any material respect of any term of any
agreement, charter instrument, bylaw or instrument to which it is a
party or by which it may be bound, which violation or failure to
obtain materially adversely affect the business or condition
(financial or otherwise) of the Servicer and its subsidiaries.
(f) Investment Company. The Servicer is not an investment
company which is required to register under the Investment Company
Act of 1940, as amended.
(g) Standard of Care. The Servicer has serviced the Lease
Contracts and Equipment in a manner consistent with industry
standards for lease contracts similar to the Lease Contracts and
Equipment, and in any event in a prudent and commercially reasonable
manner, and has conducted its servicing operations in a manner
consistent with industry standards for servicing of financial
portfolios.
(h) Insurance. The Servicer maintains insurance with respect
to its operations and property which is adequate and customary in
light of the Servicer's operations.
(i) Net Worth. As of the Initial Delivery Date, the Servicer
is in compliance with the Net Worth Requirement.
ARTICLE 3
ADMINISTRATION AND SERVICING OF LEASE CONTRACTS
Section 3.01 Responsibilities of Servicer.
(a) The Transferor hereby appoints the Servicer, for the
benefit of MBIA and the Certificateholders, to act as Servicer of the
Lease Assets and as such, the Servicer shall be responsible for, and
shall, in accordance with its customary servicing procedures, pursue
the managing, servicing, administering, enforcing and making of
collections on the Lease Contracts, the Equipment, the Lease
Receivables and any Insurance Policies, the enforcement of the
Trustee's security interest in the Lease Contracts, Lease Receivables
and Equipment conveyed pursuant to the Trust and Security Agreement,
and the sale or the releasing of the Equipment upon the expiration or
other termination of the related Lease Contract (or repossession
thereof without termination), each in accordance with the standards
and procedures set forth in this Agreement and any related provisions
of the Trust and Security Agreement and Lease Acquisition Agreement.
The Servicer's responsibilities shall include monitoring and posting
of all payments, responding to inquiries of Customers, investigating
delinquencies, accounting for collections and furnishing monthly and
annual statements to the Back-up Servicer, the Trustee, MBIA, the
Rating Agencies and the Certificateholders with respect to payments
under the Lease Contracts, making Servicer Advances, providing
appropriate federal income tax information to the Trustee for use in
providing information to the Certificateholders or MBIA, collecting
and remitting sales and property taxes to taxing authorities, and
maintaining the perfected security interest of the Trustee in the
Trust Estate. The Servicer (at its expense) shall have full power
and authority, acting at its sole discretion, to do any and all
things in connection with such managing, servicing, administration,
enforcement, collection and such sale of the Equipment that it may
deem necessary or desirable, including the prudent delegation of such
responsibilities; provided that only with the prior written consent
of MBIA shall the Servicer subcontract with another firm to act as
subservicer with respect to the Servicer's obligations hereunder and
then only so long as the Servicer remains fully responsible and
accountable for performance of all obligations of the Servicer
hereunder; provided further that the Servicer may subcontract out its
remarketing obligations with respect to the Equipment without the
consent of MBIA so long as the Servicer remains fully responsible and
accountable for the performance of such obligations. Without
limiting the generality of the foregoing, the Servicer shall, and is
hereby authorized and empowered by the Trustee, subject to Section
3.02 hereof, to execute and deliver (on behalf of itself, the
Certificateholders, the 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 Lease Contracts and any files or documentation
pertaining to the Lease Assets. The Servicer also may, in its sole
discretion, waive any late payment charge or penalty, or any other
fees that may be collected in the ordinary course of servicing any
Lease Contract. Notwithstanding the foregoing, the Servicer shall
not, except pursuant to a judicial order from a court of competent
jurisdiction, or as otherwise expressly provided in this Agreement,
release or waive the right to collect the Scheduled Payments or any
unpaid balance on any Lease Contract. The Trustee shall, at the
expense of the Servicer, 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, and the Trustee shall not be responsible for the
Servicer's application thereof.
(b) The Servicer shall conduct any Lease Contract management,
servicing, administration, collection or enforcement actions in the
following manner:
(i) The Servicer, as agent for and on behalf of the
Trustee, MBIA and the Certificateholders, with respect to any
Defaulted Lease Contract shall follow such practices and
procedures as are normal and consistent with the Servicer's
standards and procedures relating to its own lease contracts,
lease receivables and equipment that are similar to the Lease
Contracts, Lease Receivables and the Equipment, and, in any
event, consistent with the standard of care described in Section
3.02 hereof, including without limitation, the taking of
appropriate actions to foreclose or otherwise liquidate any such
Defaulted Lease Contract, together with the related Equipment,
to collect any Guaranty Amounts, and to enforce the Transferor's
rights under the Lease Acquisition Agreement. All Recoveries,
Insurance Proceeds or Residual Proceeds in respect of any such
Lease Receivable and the related Equipment received by the
Servicer shall be remitted to the Trustee for deposit in the
Collection Account pursuant to Section 3.03 hereof;
(ii) The Servicer may xxx to enforce or collect upon Lease
Contracts as agent for the Trustee on behalf of the
Certificateholders and MBIA. If the Servicer elects to commence
a legal proceeding to enforce a Lease Contract, the act of
commencement shall be deemed to be an automatic conveyance of
the Lease Contract to the Servicer for purposes of collection
only. If, however, in any enforcement suit or legal proceeding
it is held that the Servicer may not enforce a Lease Contract on
the ground that it is not a real party in interest or a holder
entitled to enforce the Lease Contract, then the Trustee on
behalf of the Certificateholders and MBIA shall, at the
Servicer's request and expense, take such steps as the Servicer
deems necessary and instructs the Trustee in writing to take to
enforce the Lease Contract, including bringing suit in its name
or the names of the Certificateholders or MBIA, and the Trustee
shall be indemnified by the Servicer for any such action taken.
Any Lease Contract temporarily released from the custody of the
Trustee to the Servicer or its agents shall have stamped on it
prior to its delivery a legend to the effect that the Lease
Contract is the property of Norwest Bank Minnesota, National
Association as Trustee, and the Servicer shall promptly return
all Lease Contracts when the need therefore no longer exists,
provided that no more than 25 Lease Contracts shall be released
to the Servicer at any one time;
(iii) The Servicer shall exercise any rights of
recourse against third parties that exist with respect to any
Lease Contract in accordance with the Servicer's usual practice
and, in any event, consistent with the standard of care
described in Section 3.02 hereof. In exercising recourse
rights, the Servicer is authorized on the Trustee's behalf to
reconvey the Lease Contract to the person against whom recourse
exists to the extent necessary, and at the price set forth in
the document creating the recourse. The Servicer will not
reduce or diminish such recourse rights, except to the extent
that it exercises such right;
(iv) The Servicer may not allow substitutions of Substitute
Lease Contracts that do not comply with Section 3.09 hereof,
Sections 2.04, 3.03 and 3.04 of the Lease Acquisition Agreement
and Section 4.04 of the Trust and Security Agreement. If a
Customer requests a financing of an upgrade to any Equipment,
the Servicer shall either (A) include such upgrade on an
existing Lease Contract and treat the Scheduled Payments related
thereto as an Additional Lease Contract for all purposes of this
Agreement, the Lease Acquisition Agreement and the Trust and
Security Agreement, or (B) originate a separate lease contract
for such Customer;
(v) The Servicer may waive, modify or vary any terms of
any Lease Contract or consent to the postponement of strict
compliance with any such term if in the Servicer's reasonable
and prudent determination such waiver, modification or
postponement is not materially adverse to the Certificateholders
or MBIA; provided, however, that (A) the Servicer shall not
forgive any payment of rent, (B) the Servicer shall not permit
any modification with respect to any Lease Contract that would
decrease any Scheduled Payment, defer the payment of any
principal or interest or any Scheduled Payment, reduce the
Implicit Principal Balance (except in connection with actual
payments attributable to such Implicit Principal Balance), or
prevent the complete amortization of the Implicit Principal
Balance from occurring by the Calculation Date preceding the
Stated Maturity of the related Series of Certificates and,
(C) except as otherwise specifically provided herein, the
Servicer will not waive or modify the requirement that a
Customer maintain insurance with respect to the related
Equipment. The Servicer shall provide the Back-up Servicer,
MBIA and the Trustee with an Amended Lease Schedule to the
related Series Lease Schedule reflecting any modification of any
Scheduled Payment;
(vi) The Servicer shall not consent to the termination of
any Lease Contract in connection with loss of or damage to the
related Equipment unless the Customer has paid an amount not
less than the Removal Price for such Lease Contract, or if less,
the maximum amount legally collectible under the related Lease
Contract;
(vii) Upon termination of a Lease Contract after
payment of the last Scheduled Payment due thereunder or in the
event that the Servicer in the enforcement of any Lease Contract
otherwise (A) acquires title to any item of Equipment with
respect to which title was held by the Customer or (B) reclaims
possession of Equipment from the Customer, the Servicer shall
use its best efforts to sell or re-lease such item of Equipment
on market value terms promptly and consistent with the standard
of care set forth in Section 3.02 hereof. Any Insurance
Proceeds, Recoveries or Residual Proceeds related thereto shall
be deposited in accordance with Section 3.03 hereof;
(viii) Notwithstanding any provision to the contrary
contained in this Agreement, the Servicer shall exercise any
right under a Lease Contract to accelerate the unpaid Scheduled
Payments, due or to become due thereunder in such a manner as to
maximize the net proceeds available to the Trust Estate;
provided, however, that the Servicer will not accelerate any
Scheduled Payment unless permitted to do so by the terms of the
Lease Contract or under applicable law;
(ix) The Servicer shall maintain insurance with respect to
its operations and property which is adequate and customary in
light of the Servicer's operations; and
(x) The Servicer shall comply with and not modify its
credit and collection policies with respect to the Lease
Contracts in any manner which would adversely affect the
Certificates or the Trust Estate.
Section 3.02 Servicer Standard of Care. In managing,
administering, servicing, enforcing and making collections on the
Lease Contracts and Equipment pursuant to this Agreement, the
Servicer will exercise that degree of skill and care consistent with
industry standards for servicing of small to medium ticket equipment
leasing portfolios, and that which the Servicer customarily exercises
with respect to similar lease contracts and equipment owned or
originated by it, and in any event, in a prudent and commercially
reasonable manner. The Servicer shall punctually perform all of its
obligations and agreements under this Agreement and shall comply with
all applicable federal and state laws and regulations, shall maintain
all state and federal licenses and franchises necessary for it to
perform its servicing responsibilities hereunder, and shall not
materially impair the rights of MBIA or the Certificateholders in any
Lease Contracts or payments thereunder.
Section 3.03 Lockbox Account and Servicer Remittances.
(a) The Transferor and the Trustee shall establish the Lockbox
Account within 30 days of the Initial Delivery Date at the Lockbox
Bank pursuant to the Lockbox Agreement. At the time of execution of
the Lockbox Agreement, each of the Transferor, the Servicer, the
Lockbox Bank and any other party to the Lockbox Agreement shall
provide MBIA with opinions of counsel reasonably acceptable to MBIA
regarding the enforceability of the Lockbox Agreement against such
person. The Servicer shall pay to the Lockbox Bank when due the fees
set forth in the Lockbox Agreement. The Lockbox Bank may be removed
by the Transferor with the written consent of MBIA if the Lockbox
Bank has failed to perform its duties to the satisfaction of the
Transferor and the Servicer, provided that a successor Lockbox Bank,
meeting the qualifications of a corporate trustee as set forth in
Section 7.08 of the Trust and Security Agreement, has executed a
Lockbox Agreement in form and substance satisfactory to MBIA, the
Trustee, the Transferor and the Servicer.
(b) After the Lockbox Agreement has been executed, the Servicer
shall promptly notify the Customers of the transfer of the Lease
Contracts to the GF Funding Corp. II Master Trust and instruct the
Customers to send all payments relating to Lease Receivables directly
to the Lockbox Bank for deposit into the Lockbox Account. On each
Business Day, the Trustee shall, or shall cause the Lockbox Bank to,
transfer to the Collection Account all amounts allocable to the Lease
Contracts on deposit in the Lockbox Account.
(c) The Servicer, as agent of the Transferor, the
Certificateholders and MBIA shall remit to the Trustee for deposit in
the Collection Account by 12:00 noon Minneapolis time on each Tuesday
and Thursday that is a Business Day, or if such day is not a Business
Day, on the next Business Day thereafter, the amounts described below
that have been collected by the Servicer through 4:00 p.m.
Minneapolis time on the preceding Business Day so long as such
amounts in the aggregate exceed $1,000:
(i) all payments made under the Lease Contracts by or on
behalf of the Customers relating to the Lease Receivables,
including prepayments and Overdue Payments but excluding taxes
and Servicing Charges, received directly by the Servicer;
(ii) all Residual Proceeds and Recoveries;
(iii) the Removal Price of any Lease Contract purchased
by the Company or the Transferor, to the extent received by the
Servicer;
(iv) all Guaranty Amounts; and
(v) all Insurance Proceeds.
The Servicer shall hold in trust for the benefit of the Holders
of the Certificates and MBIA any payment it receives relating to
items (i) through (v) above until such time as the Servicer transfers
any such payment to the Trustee for deposit in the Collection
Account.
(d) If ACH debits are utilized with respect to a Lease
Contract, (x) the Transferor, the Trustee and the ACH Bank shall
enter into a depositary agreement acceptable to the Trustee and
substantially in the form of the Lockbox Agreement and (y) the
Servicer will notify the National Automated Clearing House System to
debit the Customer for all payments relating to Lease Receivables
under such Lease Contract and to credit an account (the "ACH
Account") maintained at the ACH Bank, in the name of and in the sole
control of the Trustee for the benefit of the Certificateholders and
MBIA, and the Servicer shall not revoke or modify such notifications.
The Servicer shall be responsible for the payment of the fees of any
ACH Account and shall not be entitled to reimbursement therefor. In
the event (i) a Customer provides the Servicer or the applicable ACH
Bank with written notice of its termination of such Customer's
authorization agreement for ACH debits, or (ii) the Servicer
otherwise receives directly moneys with respect to Lease Receivables
that would otherwise involve ACH debits, the Servicer shall deposit
all payments from all such Customers into the Collection Account in
accordance with subsection (c) above, and, in the case of clause (i),
the Servicer shall promptly instruct the Customer to send all lease
payments directly to the Lockbox Bank. Payments received in the ACH
Account representing any payment listed in Section 3.03(c)(i) through
(v) above, will be transferred by the Trustee to the Collection
Account on the related Determination Date.
Section 3.04 Servicer Advances. Not later than 10:00 a.m.
(Minneapolis time) on the Determination Date prior to each Payment
Date, the Servicer shall make an advance (a "Servicer Advance") on
such date by remitting to the Trustee for deposit in the Collection
Account the lesser of (i) an amount equal to the Scheduled Payments
or portion thereof for each Lease Contract which is a Delinquent
Lease Contract and which were due in the prior Due Period but not
received and deposited in the Collection Account on or prior to such
Determination Date and (ii) the shortfall, if any, between the Lease
payments then held in the Collection Account and the amount required
to make all distributions under Section 12.02(d)(i) through (xvii) of
the Trust and Security Agreement; provided, however, that the
Servicer shall not be obligated to make any Servicer Advance under
clause (i) or (ii) above pursuant to this Section 3.04 that the
Servicer determines in good faith, and in accordance with its
customary servicing practices, is unlikely to be eventually repaid
from Scheduled Payments made by or on behalf of the related Customer;
provided, further, that the Servicer may not make a Servicer Advance
with respect to a Lease Contract once it has become a Defaulted Lease
Contract. On each Determination Date, the Servicer shall deliver to
the Back-up Servicer, the Trustee, MBIA and the Placement Agent the
Monthly Servicer's Report, which shall include a listing of the
aggregate amount of Scheduled Payments not received for the
immediately prior Due Period, the amount of Servicer Advances, and
the amounts which it has determined in its sole discretion, and in
accordance with its customary servicing practices, are unlikely to be
recoverable from the related Customers.
Section 3.05 Financing Statements. The Servicer will make all
Uniform Commercial Code filings and recordings as may be required
pursuant to the terms of the Trust and Security Agreement. The
Servicer shall, in accordance with its customary servicing procedures
and at its own expense, be responsible for taking such steps as are
necessary to maintain perfection of such security interests. The
Trustee hereby authorizes the Servicer to re-perfect or to cause the
re-perfection of such security interest on its behalf as Trustee, as
necessary.
Section 3.06 Maintenance of Insurance Policy; Insurance
Proceeds. The Servicer shall have the obligation to verify, monitor
and enforce the acquisition and maintenance of a Customer's Insurance
Policies in a manner consistent with past practice, provided that the
Servicer shall do so in a manner consistent with that practiced by
other lessors in the industry with similar lease contracts and
equipment owned or serviced by them. In the event that a Customer
fails to maintain an Insurance Policy as required by the terms of the
related Lease Contract, and the cost of the Equipment is in excess of
$50,000, the Servicer shall procure and maintain such insurance in an
amount not less than the amount required by such Lease Contract. The
Servicer may satisfy its obligations under this Section 3.06 by
maintaining a blanket insurance policy covering all of the Equipment.
Any Insurance Proceeds shall be remitted to the Trustee for deposit
in the Collection Account pursuant to Section 3.03.
Section 3.07 Personal Property and Sales Taxes. The Servicer
shall, on behalf of the Transferor, pay or cause to be paid all
personal property, sales and use taxes on or with respect to the
Equipment, or the acquisition or leasing thereof, as and when such
taxes become due, to the extent a Customer has paid amounts to the
Servicer or into the Lockbox Account for such taxes. The Servicer
shall also cause to be filed in a timely manner any and all returns
and reports required in connection with the payment of such taxes.
Section 3.08 Servicing Compensation.
(a) As compensation for the performance of its obligations
under this Agreement the Servicer shall be entitled to receive the
Servicer Fee and the Additional Servicer Fee, if applicable. The
Servicer Fee with respect to any Lease Contract shall be paid
monthly, commencing on the related Initial Payment Date and
terminating on the first to occur of (i) the receipt of the last
Scheduled Payment and related Residual Proceeds with respect to the
last remaining Lease Contract, (ii) the receipt of Recoveries and
Insurance Proceeds with respect to the last remaining Lease Contract,
or (iii) the date on which the Transferor or MBIA purchases the last
remaining Lease Contract. The Servicer Fee shall be paid to the
Servicer at the times and in the priority as set forth in the Trust
and Security Agreement. The Servicer shall pay all expenses incurred
by it in connection with its servicing activities hereunder,
including, without limitation, payment of the fees and disbursements
of the Independent Accountants and payment of expenses incurred in
connection with distributions and reports to the Trustee, the Back-up
Servicer, MBIA, the Rating Agencies and Certificateholders, payment
of the fee of the Lockbox Bank under the Lockbox Agreement and any
payment of any fees in connection with the ACH Account and shall not
be entitled to reimbursement for such expenses; provided, however,
that the Servicer will be entitled to reimbursement pursuant to
Section 12.02(d)(i)(B) for reasonable costs and expenses incurred by
the Servicer (including reasonable attorney's fees and out-of-pocket
expenses) in connection with the realization, attempted realization
or enforcement of rights and remedies upon Defaulted Lease Contracts,
from amounts received as Recoveries from such Defaulted Lease
Contracts.
(b) In connection with any transfer of the servicing
obligations to a successor Servicer in accordance with Section 6.02
hereof, the Back-up Servicer shall be entitled to reimbursement of
Transition Costs as provided therein and in the Trust and Security
Agreement.
Section 3.09 Substitution or Purchase of Lease Contracts.
(a) The Servicer shall not allow termination of a Lease
Contract prior to the scheduled expiration date or prepayment of any
Lease Contract (except as may be specifically required under such
Lease Contract in connection with a casualty to the related
Equipment), unless the Transferor or the applicable Seller has
(i) conveyed to the Trustee a Substitute Lease Contract, the Lease
Receivables under such Substitute Lease Contract and the Transferor's
or the applicable Seller's interest in the related Equipment and
delivered to the Trustee the original executed counterpart of the
Substitute Lease Contract or (ii) removed such prepaid Lease Contract
and the related Equipment from the Trust Estate by remittance of the
Removal Price to the Servicer for deposit in the Collection Account
in accordance with Section 3.03 hereof; provided, however, that
removals and substitutions of Lease Contracts pursuant to this
subparagraph (a) shall comply with the requirements of Section 4.04
of the Trust and Security Agreement, the criteria set forth in
Section 3.04 of the Lease Acquisition Agreement and the criteria set
forth in Section 6 of the applicable Lease Sale Agreement.
(b) The Servicer shall permit the Transferor to (i) remove any
Defaulted Lease Contract or Delinquent Lease Contract from the Trust
Estate by remittance by the Transferor to the Servicer, for deposit
in the Collection Account in accordance with Section 3.03 hereof, of
the Removal Price for such Lease Contract or (ii) substitute for any
Defaulted Lease Contract or Delinquent Lease Contract, a Substitute
Lease Contract and the Lease Receivables under such Substitute Lease
Contract and the Transferor's interest in the related Equipment and,
upon the delivery to the Trustee of the original executed counterpart
of the Substitute Lease Contract and the related Lease Contract File;
provided that removals and substitutions of Lease Contracts pursuant
to this subparagraph (b) shall comply with the requirements of
Section 4.04 of the Trust and Security Agreement and the criteria set
forth in Section 3.04 of the Lease Acquisition Agreement.
(c) Notwithstanding any other provision contained in this
Agreement, the Servicer shall not, with respect to a Defaulted Lease
Contract, (i) negotiate or enter into a new lease with the Customer
relating to the Equipment or the Customer's obligations under such
Defaulted Lease Contract or (ii) allow the Customer thereunder to
resume its rights under such Defaulted Lease Contract, unless the
Transferor has removed or made a substitution for such Defaulted
Lease Contract in the manner set forth in subsection (b) hereof.
(d) In the event that the Company is required to repurchase or
substitute a Lease Contract pursuant to Sections 2.06 or 3.03 of the
Lease Acquisition Agreement, or a Seller is required to repurchase or
substitute a Lease Contract pursuant to Section 5 of the Lease Sale
Agreement, the Servicer shall permit such repurchase or substitution
only in accordance with the terms of Sections 3.03 and 3.04 of the
Lease Acquisition Agreement or Section 6 of the Lease Sale Agreement,
as applicable.
Section 3.10 No Offset. Prior to the termination of this
Agreement, the obligations of the Servicer under this Agreement shall
not be subject to any defense, counterclaim or right of offset that
the Servicer has or may have against the Transferor, whether in
respect of this Agreement, any Lease Contract, Lease Receivable,
Equipment or otherwise.
Section 3.11 Required Audits. The Servicer shall cause the
Independent Accountants to perform all Required Audits on a timely
basis and report the results of such audits to MBIA and the Rating
Agencies.
ARTICLE 4
ACCOUNTINGS, STATEMENTS AND REPORTS
Section 4.01 Monthly Servicer's Reports. No later than 10:00
a.m. (Minneapolis time) on each Determination Date, the Servicer
shall deliver the Monthly Servicer's Report to the Transferor, the
Back-up Servicer, the Trustee, and the Placement Agent, and the
Trustee will deliver the Monthly Servicer's Report to each
Certificateholder, MBIA, and the Rating Agencies in the form attached
as Exhibit A hereto with respect to the activity in the immediately
preceding Due Period. In the course of preparing the Monthly
Servicer's Report, the Servicer shall seek direction from the
Transferor as to remittance of any funds to be paid pursuant to
Section 12.02(d)(xviii) of the Trust and Security Agreement. Lease
Contracts which have been substituted for or purchased by the Company
or the Transferor shall be identified by Customer lease number on the
Monthly Servicer's Report. On each Payment Date, the Servicer shall
deliver to the Back-up Servicer and MBIA a Computer Tape in a format
acceptable to the Back-up Servicer containing the information from
which the Servicer prepared the Monthly Servicer's Report, as well as
any additional information reasonably requested by the Back-up
Servicer prior to such Payment Date.
Section 4.02 Financial Statements; Certification as to
Compliance; Notice of Default.
(a) The Servicer (and the Company if the initial Servicer is no
longer the Servicer) will deliver to the Trustee, the Placement
Agent, MBIA, the Back-up Servicer, the Rating Agencies and each
Certificateholder of Outstanding Certificates (and, upon the request
of any Certificateholder, to any prospective transferee of any
Certificate which has executed an agreement with the Transferor and
the Servicer containing terms substantially similar to those set
forth in Section 4.04(f) hereof):
(i) within 120 days after the end of each fiscal year of
the Reported Companies, a copy of the Reported Companies'
Financial Statements, all in reasonable detail and accompanied
by an opinion of a firm of Independent Accountants stating that
such financial statements present fairly the financial condition
of the Reported Companies (or, in the case of a successor
Servicer, such successor Servicer's financial condition) and
have been prepared in accordance with generally accepted
accounting principles consistently applied (except for changes
in application in which such accountants concur), and that the
examination of such accountants in connection with such
financial statements has been made in accordance with generally
accepted auditing standards, and accordingly included such tests
of the accounting records and such other auditing procedures as
were considered necessary in the circumstances;
(ii) with each set of Reported Companies' Financial
Statements delivered pursuant to subsection (a)(i) above, the
Servicer will deliver an Officer's Certificate stating that such
officer has reviewed the relevant terms of the Trust and
Security Agreement, the Lease Acquisition Agreement, the
Insurance Agreement and this Agreement and has made, or caused
to be made, under such officer's supervision, a review of the
transactions and conditions of the Reported Companies during the
period covered by the Reported Companies Financial Statements
then being furnished, that the review has not disclosed the
existence of any Servicer Default or Servicer Event of Default
or, if a Servicer Default or a Servicer Event of Default exists,
describing its nature and what action the Servicer has taken and
is taking with respect thereto, and that on the basis of such
review the officer signing such certificate is of the opinion
that during such period the Servicer has serviced the Lease
Contracts in compliance with the procedures hereof except as
disclosed in such certificate.
(iii) immediately upon becoming aware of the existence
of any condition or event which constitutes a Servicer Default
or a Servicer Event of Default, a written notice describing its
nature and period of existence and what action the Servicer is
taking or proposes to take with respect thereto;
(iv) promptly upon the Servicer's becoming aware of:
(A) any proposed or pending investigation of it or
the Transferor by any governmental authority or agency, or
(B) any pending or proposed court or administrative
proceeding which involves or may involve the probability of
materially and adversely affecting the properties,
business, prospects, profits or condition (financial or
otherwise) of the Servicer or the Transferor or the Trust
Estate,
a written notice specifying the nature of such investigation or
proceeding and what action the Servicer is taking or proposes to take
with respect thereto and evaluating its merits;
(v) with reasonable promptness any other data and
information with respect to the Servicer or the Lease Assets
which may be reasonably requested from time to time, including
without limitation any information required to be made available
at any time to any prospective transferee of any Certificates in
order to satisfy the requirements of Rule 144A under the
Securities Act of 1933, as amended;
(vi) quarterly, unaudited versions of the Reported
Companies' consolidating balance sheet and income statement and
consolidated sources and uses of funds within 45 days after the
end of each quarter; and
(vii) such other information as may be specified
in the Trust and Security Agreement.
(b) On or before each November 5, commencing November 5, 1997,
so long as any of the Certificates are outstanding, the Servicer
shall furnish to MBIA, each Certificateholder and the Trustee an
Officer's Certificate either stating that such action has been taken
with respect to the recording, filing, and rerecording and refiling
of any financing statements and continuation statements as necessary
to maintain the interest of the Trustee created by the Trust and
Security Agreement with respect to the Trust Estate and reciting the
details of such action or stating that no such action is necessary to
maintain such interest. Such Officer's Certificate shall also
describe the recording, filing, rerecording and refiling of any
financing statements and continuation statements that will be
required to maintain the interest of the Trustee in the Trust Estate
until the date such next Officer's Certificate is due.
Section 4.03 Independent Accountants' Reports; Annual Federal
Tax Lien Search.
(a) Promptly at the end of the Servicer's fiscal year, the
Servicer at its expense shall cause the Independent Accountants (who
may also render and deliver other services to the Servicer and its
Affiliates) to prepare a statement to the Back-up Servicer, the
Trustee, the Certificateholders, MBIA, the Rating Agencies and the
Placement Agent, dated as of the close of such period, to the effect
that the Independent Accountants have examined the servicing
procedures, manuals, guides and records of the Servicer, and the
accounts and records of the Servicer relating to the Lease Contracts
and any files or documentation pertaining to the Lease Assets (which
procedures, manuals, guides and records shall be described in one or
more schedules to such statement), that such Independent Accountants
have compared the information contained in the Monthly Servicer's
Reports delivered in the relevant period with information contained
in the accounts and records for such period, and that, on the basis
of such examination and comparison, nothing has come to the
Independent Accountants' attention to indicate that the Servicer has
not, during the relevant period, serviced the Lease Contracts in
compliance with such servicing procedures, manual and guides and in
the same manner required by the Servicer's standards and with the
same degree of skill and care consistent with that which the Servicer
customarily exercises with respect to similar Lease Contracts owned
by it and otherwise in compliance with this Agreement, that such
accounts and records have not been maintained in accordance with
Section 4.04 hereof, that the information contained in the Monthly
Servicer's Reports does not reconcile with the information contained
in the accounts and records or that such certificates, accounts and
records have not been properly prepared and maintained in all
material respects or in accordance with the requirements of this
Agreement, except in each case for (i) such exceptions as the
Independent Accountants shall believe to be immaterial and (ii) such
other exceptions as shall be set forth in such statement. The
Servicer shall deliver to the Back-up Servicer, the Trustee, the
Certificateholders, the Placement Agent, the Rating Agencies and MBIA
a copy of any such statement within 120 days of the close of the
relevant period.
(b) Promptly after the end of the Servicer's fiscal year,
commencing with the fiscal year ending June 30, 1997, the Servicer,
at its expense, shall cause a search of any and all federal tax liens
against the Company and the Transferor and any Affiliates as of the
end of such fiscal year to be conducted and shall deliver to the Back-
up Servicer, the Trustee, the Certificateholders and MBIA on or
before July 31 of each year, commencing July 31, 1997, an officer's
certificate signed by a Servicing Officer (i) stating that there are
no outstanding federal tax liens filed against any portion of the
Trust Estate, the Company, the Transferor, or any Affiliate or
(ii) listing the outstanding federal tax liens filed against any
portion of the Trust Estate, the Company, the Transferor, or any
Affiliate. In the event any such certificate shall disclose any such
federal tax liens, the Servicer shall promptly thereafter, satisfy
any such federal tax liens.
Section 4.04 Access to Certain Documentation and Information.
(a) The Servicer shall provide to the Back-up Servicer, MBIA,
the Trustee, or any Certificateholder and their duly authorized
representatives, attorneys or accountants access to any and all
documentation regarding the Trust Estate (including the Series Lease
Schedule) that the Servicer may possess, such access being afforded
without charge but only upon reasonable request and during normal
business hours so as not to interfere unreasonably with the
Servicer's normal operations or customer or employee relations, at
offices of the Servicer designated by the Servicer.
(b) At all times during the term hereof, the Servicer shall
keep available at its principal executive office for inspection by
Certificateholders, the Trustee, the Back-up Servicer and MBIA a list
of all Lease Contracts then held as a part of the Trust Estate,
together with a reconciliation of such list to that set forth in the
Series Lease Schedules and each of the Monthly Servicer's Reports,
indicating the cumulative addition and removal of Lease Contracts
from the Trust Estate.
(c) The Servicer will maintain accounts and records as to each
respective Lease Contract serviced by the Servicer that are accurate
and sufficiently detailed as to permit (i) the reader thereof to know
as of the most recent Calculation Date the status of such Lease
Contract, including any payments, Insurance Proceeds, Residual
Proceeds and Recoveries received or owing (and the nature of each)
thereon and (ii) the reconciliation between payments, Insurance
Proceeds, Residual Proceeds or Recoveries on (or with respect to)
each Lease Contract and the amounts from time to time deposited in
the Collection Account in respect of such Lease Contract.
(d) The Servicer will maintain all of its computerized accounts
and records so that, from and after each Acquisition Date and the
conveyance of the related Lease Contract, Lease Receivables and
Equipment to the Trustee, the Servicer's accounts and records
(including any back-up computer archives) that refer to any such
Lease Contracts, Lease Receivables or Equipment indicate clearly that
the Lease Contracts, Lease Receivables and Equipment are owned by the
Trustee for the benefit of MBIA and the Certificateholders.
Indication of the Trustee's interest in a Lease Contract will be
deleted from or modified on the Servicer's accounts and records when,
and only when, the Lease Contract has been paid in full, replaced
with a Substitute Lease Contract or purchased by the Company or the
Transferor or conveyed to the Servicer pursuant to this Agreement.
(e) Nothing in this Section 4.04 shall affect the obligation of
the Servicer to observe any applicable law prohibiting disclosure of
information regarding the Customers, and the failure to provide
information otherwise required by this Section 4.04 as a result of
such observance by the Servicer, shall not constitute a breach of
this Section 4.04.
(f) All information obtained by the Trustee, the Back-up
Servicer, MBIA or any Certificateholder regarding the Customers and
the Lease Contracts, whether upon exercise of its rights under this
Section 4.04 or otherwise, shall be maintained by the Trustee, the
Back-up Servicer, MBIA or the Certificateholder, as applicable, in
confidence and shall not be disclosed to any other Person, unless
such disclosure shall not violate any applicable law or regulation
or any proprietary rights of the Company, the Transferor or the
Servicer unless ordered by a court of applicable jurisdiction;
provided that MBIA may make disclosures with respect to any of the
above matters to the Rating Agencies, reinsurers or any entity having
regulatory authority over MBIA and provided further that the
Certificateholders may disclose such information to the extent
permitted by Section 14 of the applicable Certificate Purchase
Agreement.
Section 4.05 Other Necessary Data. The Servicer shall, on
request of the Back-up Servicer, the Trustee or MBIA, (i) on
reasonable notice, furnish the Trustee, the Back-up Servicer or MBIA
such data necessary for the administration of the Trust Estate as can
be reasonably generated by the Servicer's existing data processing
systems, and (ii) on and after a Servicer Event of Default, within 5
Business Days, provide the Trustee and the Back-up Servicer with
access to the Servicer's existing data processing systems and any
files or records with respect to the Lease Assets that it may have.
Section 4.06 Trustee to Cooperate. Upon payment (including
through application of any prepayment) in full of any Lease Contract,
the Servicer will notify the Trustee on the next succeeding
Determination Date by written certification (which certification
shall include a statement to the effect that all amounts received in
connection with such payments in full which are required to be
deposited in the Collection Account pursuant to Section 3.03 hereof
have been so deposited) of a Servicing Officer and shall request
delivery of the Lease Contract to the Servicer. Upon receipt of such
delivery request, the Trustee shall within 7 days of such request by
the Servicer release such Lease Contract to the Servicer. Upon
release of such Lease Contract, the Servicer is authorized to execute
an instrument in satisfaction of such Lease Contract and to do such
other acts and execute such other documents as it deems necessary to
discharge the Customer thereunder and, if applicable, release any
security interest in the Equipment related thereto. The Servicer
shall determine when a Lease Contract has been paid in full. Upon
the written request of a Servicing Officer and subject to the
Trustee's rights to indemnity contained herein and in the Trust and
Security Agreement, the Trustee shall perform such other acts as
reasonably requested in writing by the Servicer and otherwise
cooperate with the Servicer in enforcement of the Certificateholders'
rights and remedies with respect to Lease Contracts.
ARTICLE 5
THE SERVICER
Section 5.01 Servicer Indemnification.
(a) The Servicer shall indemnify and hold harmless the Trustee,
the Transferor, the Back-up Servicer, MBIA, and the
Certificateholders, from and against any loss, liability, claim,
expense, damage or injury suffered or sustained to the extent that
such loss, liability, claim, expense, damage or injury arose out of
or was imposed by reason of the failure by the Servicer to perform
its duties in accordance with the terms of this Agreement or are
attributable to errors or omissions of the Servicer related to such
duties or a breach of the representations and warranties made by the
Servicer in Section 2.01 hereof; provided, however, that the Servicer
shall not indemnify any party to the extent that acts of fraud, gross
negligence or breach of fiduciary duty by such party contributed to
such loss, liability, claim, expense, damage or injury.
(b) The Servicer shall not be liable for any settlement of any
action or claim effected without its consent. If the Servicer has
made any indemnity payments to MBIA, the Trustee, the Back-up
Servicer or the Certificateholders pursuant to this Section and such
party thereafter collects any of such amounts from others, such party
will promptly repay such amounts collected to the Servicer, without
interest. The provisions of this Section 5.01 shall survive any
expiration or termination of this Agreement.
Section 5.02 Corporate Existence; Reorganizations.
(a) The Servicer shall keep in full effect its existence and
good standing as a corporation in the State of Delaware and will
obtain and preserve its qualification to do business as a foreign
corporation in each jurisdiction in which such qualification is or
shall be necessary to enable the Servicer to perform its duties under
this Agreement, except where the failure to so qualify would not have
a material adverse effect on the Trust Estate or the ability of the
Servicer to perform its duties hereunder; provided, however, that the
Servicer may reorganize as a corporation in another state, if to do
so would be in the best interests of the Servicer and would not have
a material adverse effect upon the Certificateholders or MBIA.
(b) The Servicer shall not (i) (other than pursuant to one or
more additional lease pool financings) convey, transfer or lease
substantially all of its assets as an entirety to any Person, or
(ii) merge or consolidate with another Person, unless (A) such Person
or the merged or consolidated entity acquires substantially all the
assets of the Servicer as an entirety, has adequate servicing skills
and personnel, is substantially involved in the equipment financing
lease business and executes and delivers to the Transferor, MBIA and
the Trustee an agreement, in form and substance reasonably
satisfactory to the Transferor, MBIA, the Controlling Holders and the
Trustee, which contains an assumption by such Person or entity of the
due and punctual performance and observance of each covenant and
condition to be performed or observed by the Servicer under this
Agreement, (B) no Default, Event of Default or Servicer Default (or
an event that due to the lapse of time or failure to act would become
a Servicer Default) has occurred and is continuing, and (C) MBIA
shall have given its prior written consent. The Servicer shall
provide prompt written notice of such event to the Rating Agencies
and shall provide to the Trustee, for the benefit of MBIA and the
Certificateholders, an Opinion of Counsel confirming the
enforceability of such assumption agreement.
Section 5.03 Limitation on Liability of the Servicer and
Others. Except as provided in Section 5.01 hereof, neither the
Servicer nor any of the officers, directors, employees or agents of
the Servicer shall be under any liability for any action taken or for
refraining from the taking of any action in its capacity as Servicer
pursuant to this Agreement; provided, however, that this provision
shall not protect the Servicer or any such person against any
liability which would otherwise be imposed by reason of willful
misconduct, bad faith or gross negligence (which includes negligence
with respect to the duties of the Servicer explicitly set forth in
this Agreement) in the performance of its duties hereunder. The
Servicer and any officer, director, employee or agent of the Servicer
may rely in good faith on any document of any kind prima facie
properly executed and submitted by any Person with respect to any
matters arising hereunder. No implied covenants or obligations shall
be read into this Agreement against the Servicer. In the event the
Servicer performs any activities beyond the requirements of this
Agreement, the Servicer shall have the option but will not be
required to perform such activities in the future.
Section 5.04 The Servicer Not to Resign.
(a) The Servicer shall not resign from the duties and
obligations hereby imposed on it except upon a determination by its
Board of Directors that by reason of change in applicable legal
requirements, with which the Servicer cannot reasonably comply, the
continued performance by the Servicer of its duties under this
Agreement would cause it to be in violation of such legal
requirements, said determination to be evidenced by a resolution from
its Board of Directors to such effect, accompanied by an Opinion of
Counsel to such effect and reasonably satisfactory to the Trustee and
MBIA.
(b) No such resignation shall become effective until a
successor Servicer shall have assumed the responsibilities and
obligations of the Servicer hereunder.
(c) Except as provided in Sections 5.02 and 6.01 hereof, the
duties and obligations of the Servicer under this Agreement shall
continue until this Agreement shall have been terminated as provided
in Section 8.01 hereof, and shall survive the exercise by the
Transferor or the Trustee of any right or remedy under this
Agreement, or the enforcement by the Transferor, MBIA, the Trustee or
any Certificateholder of any provision of the Certificates or this
Agreement.
ARTICLE 6
SERVICING TERMINATION
Section 6.01 Servicer Events of Default.
(a) Any of the following acts or occurrences shall constitute a
Servicer Event of Default:
(i) Any failure by the Servicer to deliver to the Trustee
for payment to Certificateholders any proceeds or payments
received from a Customer or in respect of the Trust Estate and
required to be so delivered under the terms of the Trust and
Security Agreement and this Agreement that continues unremedied
until 10:00 a.m. (Minneapolis time) on the following Business
Day; provided, however, that the Trustee, upon receiving actual
knowledge of such failure, shall give the Servicer prompt
written, telecopied or telephonic notice of such failure.
Notwithstanding the foregoing, any failure by the Trustee to
deliver such notice to the Servicer shall not prevent the
occurrence of a Servicer Event of Default; or
(ii) Any failure by the Servicer to deliver a Monthly
Servicer's Report pursuant to Section 4.01 hereof that continues
unremedied until 10:00 a.m., Minneapolis time, the following
Business Day; provided, however, that if the Servicer has not
delivered the Monthly Servicer's Report by 12:00 noon
(Minneapolis time) on the Determination Date, the Trustee shall
give the Servicer notice of such failure. Notwithstanding the
foregoing, any failure by the Trustee to deliver such notice to
the Servicer shall not prevent the occurrence of a Servicer
Event of Default; or
(iii)Any failure by the Servicer to make a Servicer Advance
pursuant to Section 3.04 hereof or to deposit any Removal Price
received by it that continues unremedied until 10:00 a.m.
(Minneapolis time) the following Business Day; provided,
however, that if the Servicer has not made the Servicer Advance
or deposited any Removal Price received by it by 12:00 noon
(Minneapolis time) on the Determination Date and the Trustee has
received written notification from the Servicer by way of the
Monthly Servicer's Report or otherwise that such Servicer
Advance or Removal Price is to be paid, the Trustee shall give
the Servicer prompt written, telecopied or telephonic notice of
such failure. Notwithstanding the foregoing, any failure by the
Trustee to deliver such notice to the Servicer shall not prevent
the occurrence of a Servicer Event of Default; or
(iv) Any failure on the part of the Servicer in its
capacity as such duly to observe or perform in any material
respect any other covenants or agreements of the Servicer set
forth in this Agreement or the Trust and Security Agreement, as
the case may be, or if any representation or warranty of the
Servicer set forth in Section 2.01 of this Agreement shall prove
to be incorrect, which failure or breach (A) materially and
adversely affects or could affect the interest or rights of
MBIA, the Trustee, or the Certificateholders and (B) continues
unremedied for a period of 30 days after the date on which the
Servicer becomes aware of such failure or breach or written
notice of such failure or breach, requiring the situation giving
rise to such breach or non-conformity to be remedied, shall have
been given to a Servicing Officer of the Servicer by the
Trustee, MBIA, the Transferor, or the Back-up Servicer, or to a
Servicing Officer of the Servicer, MBIA and the Trustee by
Holders of Certificates representing not less than 25% of the
Outstanding Principal Amount of all Series; or
(v) Any assignment by the Servicer to a delegate of its
duties or rights under this Agreement, except as specifically
permitted hereunder, or any attempt to make such an assignment;
or
(vi) The entry of a decree or order for relief by a court
having jurisdiction in respect of the Servicer or a petition
against the Servicer in an involuntary case under any federal
bankruptcy laws, as now or hereafter in effect, or any other
present or future federal or state bankruptcy insolvency or
similar law, or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official for
the Servicer or for any substantial part of its property, or
ordering the winding up or liquidation of the affairs of the
Servicer and the continuance of any such decree or order
unstayed and in effect for a period of 60 consecutive days; or
(vii)The commencement by the Servicer of a voluntary case
under any federal bankruptcy laws, as now or hereafter in
effect, or any other present or future federal or state
bankruptcy, insolvency, reorganization or similar law, or the
consent by the Servicer to the appointment of or taking
possession by a conservator, receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official in
any insolvency, readjustment of debt, marshaling of assets and
liabilities, bankruptcy or similar proceedings of or relating to
the Servicer or relating to a substantial part of its property,
or the making by the Servicer of an assignment for the benefit
of creditors, or the failure by the Servicer generally to pay
its debts as such debts become due or if the Servicer shall
admit in writing its inability to pay its debts as they become
due, or the taking of corporate action by the Servicer in
furtherance of any of the foregoing; or
(viii)The occurrence of a Trigger Event if the initial
Servicer is the Servicer.
(b) So long as a Servicer Event of Default shall not have been
remedied within the period set forth in (i), (ii), (iii), (iv) or
(vi) above, as applicable, or if a Servicer Event of Default
described in (v), (vii) or (viii) above occurs, the Trustee, at the
direction of MBIA shall, or if there has been an MBIA Default or
Termination, the Trustee, the Transferor, or the Back-up Servicer may
and shall at the request of the Controlling Holders, by notice (the
"Servicer Termination Notice") then given in writing to the Servicer
and the Back-up Servicer, terminate all, but not less than all, of
the rights and obligations of the Servicer under this Agreement.
(c) Upon the occurrence of a Trigger Event, the Trustee shall,
at the direction of MBIA, or if there has been an MBIA Default or
Termination, the Trustee, the Transferor, or the Back-up Servicer may
and shall at the request of the Controlling Holders, by Servicer
Termination Notice then given in writing to the Servicer and the Back-
up Servicer, terminate all but not less than all of the rights and
obligations of the Servicer under this Agreement.
(d) On or after the receipt by the Servicer of a Servicer
Termination Notice, all authority and power of the Servicer under
this Agreement, whether with respect to the Certificates or the Lease
Contracts or otherwise, shall pass to and be vested in the successor
Servicer appointed pursuant to Section 6.02 hereof, and, without
limitation, such successor Servicer is hereby authorized and
empowered to execute and deliver, on behalf of the Servicer, as
attorney-in-fact or otherwise, any and all documents and other
instruments, and 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 of the Lease Contracts
and related documents, or otherwise. The Servicer agrees to
cooperate with the Trustee, the Back-up Servicer and the successor
Servicer in effecting the termination of the responsibilities and
rights of the Servicer hereunder, including, without limitation, the
transfer to the successor Servicer for administration by it of all
cash amounts that shall at the time be held by the Servicer for
deposit, or have been deposited by the Servicer, in the Collection
Account or thereafter received with respect to any of the Lease
Contracts. To assist the successor Servicer in enforcing all rights
under the Lease Contracts and the Insurance Polices to the extent
they relate to the Lease Contracts, the outgoing Servicer, at its own
expense, shall transfer its records (electronic and otherwise)
relating to such Lease Contracts to the successor Servicer in such
form as the successor Servicer may reasonably request and shall
transfer the related Lease Contracts and Lease Contract Files (to the
extent not held by the Trustee) and all other records, correspondence
and documents relating to the Lease Contracts that it may possess to
the successor Servicer in the manner and at such times as the
successor Servicer shall reasonably request. In addition to any
other amounts that are then payable to the Servicer under this
Agreement, the Servicer shall be entitled to receive reimbursements
for any unreimbursed Servicer Advance made during the period prior to
the delivery of a Servicer Termination Notice pursuant to this
Section 6.01 which terminates the obligations and right of the
Servicer under this Agreement.
Section 6.02 Back-up Servicer to Act; Taking of Bids;
Appointment of Successor Servicer.
(a)(i) Except as provided in Section 6.02(d) hereof, on
and after the time the Servicer resigns pursuant to Section 5.04
hereof or receives a Servicer Termination Notice pursuant to
Section 6.01(b) or (c) hereof, the Back-up Servicer shall,
unless prevented by law, automatically and without further
action be the successor Servicer. If the Back-up Servicer
cannot serve as successor Servicer, MBIA, or if an MBIA Default
or Termination has occurred and is continuing, the Trustee,
shall appoint another firm acceptable to it and the Controlling
Holders.
(ii) The successor Servicer shall, upon the execution of a
written agreement to be bound by all of the provisions of this
Agreement, be the successor in all respects to the Servicer in
its capacity as Servicer under this Agreement and the
transactions set forth or provided for herein and shall be
subject to all the responsibilities, duties and liabilities
relating thereto placed on the Servicer by the terms and
provisions hereof; provided, however, that the successor
Servicer (x) shall not be required to make any Servicer Advance
if such Servicer Advance would be prohibited by applicable law
and (y) shall not be liable for any acts or omissions of the
outgoing Servicer or for any breach by the outgoing Servicer of
any of its representations and warranties contained herein or in
any related document or agreement. With the prior written
consent of MBIA (which consent shall not be unreasonably
withheld), the successor Servicer may subcontract with another
firm to act as subservicer so long as the successor Servicer
remains fully responsible and accountable for performance of all
obligations of the Servicer on and after the time the Servicer
receives the Servicer Termination Notice. The successor
Servicer shall be entitled to the Servicer Fee and any
Additional Servicer Fee, subject to the taking of bids as
described in subsection (b) below.
(b) Solely for purposes of establishing the fee to be paid to
the successor Servicer upon receipt of a Servicer Termination Notice,
the Back-up Servicer shall solicit written bids, with a copy to MBIA
(such bids to include a proposed servicer fee and servicing transfer
costs) from not less than three entities experienced in the servicing
of Lease Contracts similar to the Lease Contracts and that are not
affiliates of the Trustee, the Back-up Servicer, the Servicer or the
Transferor and are reasonably acceptable to MBIA. The Transferor may
also solicit additional bids from other such entities. Any such
written solicitation shall prominently indicate that bids should
specify any applicable subservicing fees required to be paid from the
Servicer Fee and that any fees and transfer costs in excess of the
Servicer Fee shall be paid only pursuant to Section 12.02(d)(ix) of
the Trust and Security Agreement as the Additional Servicer Fee. The
successor Servicer shall act as Servicer hereunder and shall, subject
to the availability of sufficient funds in the Collection Account
pursuant to Section 12.02(d)(i) (up to the Servicer Fee) and
Section 12.02(d)(ix) (up to any Additional Servicer Fee and any
successor Servicer's Transition Costs) and Section 12.02(d)(xi) (up
to any additional Transition Costs) of the Trust and Security
Agreement, receive as compensation therefor a fee equal to the fee
proposed in the bid so solicited which provides for the lowest
combination of servicer fee and transition costs, as reasonably
determined by MBIA.
(c) The Servicer, the Back-up Servicer, the Transferor, the
Trustee and such successor Servicer shall take such action,
consistent with this Agreement, as shall be necessary to effectuate
any such succession. The Back-up Servicer (or the Trustee or the
Certificateholders if such Certificateholders have previously
reimbursed the Back-up Servicer and the Trustee therefor) shall be
reimbursed for Transition Costs, if any, incurred in connection with
the assumption of responsibilities of the successor Servicer, upon
receipt of documentation of such costs and expenses and in accordance
with Section 12.02(d)(ix) of the Trust and Security Agreement. The
Back-up Servicer shall have no claim against the Transferor or the
Trust Estate for any costs and expenses incurred in effecting such
succession in excess of the amount specified in the definition of
"Transition Costs."
(d) Upon written notification to the Trustee that on any
Determination Date following the solicitation of bids provided for in
Section 6.02(b) hereof, the sum of the aggregate Implicit Principal
Balance for all Lease Contracts plus the amount on deposit in the
Cash Collateral Account less the Outstanding Principal Amount of all
Series is less than the lesser of (1) $50,000 or (2) the proposed
servicing transfer costs set forth in the lowest bid solicited
pursuant to Section 6.02(b) hereof, then the Back-up Servicer shall
be relieved of its obligation under Section 6.02(a)(i) hereof, and
MBIA, or if there is an MBIA Default or Termination, the Transferor
shall appoint a successor Servicer. In such event, MBIA shall be
reimbursed for any Transition Costs incurred solely pursuant to
Section 6.02(b) hereof in the manner and to the extent provided for
in Section 12.02(d)(ix) of the Trust and Security Agreement.
Section 6.03 Notification to Certificateholders. The Servicer
shall promptly notify the successor Servicer (if specified in the
Trust and Security Agreement), Back-up Servicer, MBIA, the
Transferor, the Rating Agencies and the Trustee of any Servicer Event
of Default upon actual knowledge thereof by a Servicing Officer.
Upon any termination of, or appointment of a successor to, the
Servicer pursuant to this Article 6, the Trustee shall give prompt
written notice thereof to the Rating Agencies and the
Certificateholders at their respective addresses appearing in the
Certificate Register.
Section 6.04 Waiver of Past Defaults. The Trustee shall, at
the direction of MBIA or at the direction of the Controlling Holders,
on behalf of all Certificateholders, with the written consent of
MBIA, so long as there is no MBIA Default or Termination, waive any
default by the Servicer in the performance of its obligations
hereunder and its consequences, other than a default with respect to
required deposits and payments in accordance with Article 3 or a
default of the type set forth in clause (vii) or (viii) of Section
6.01(a) hereof, which waiver shall require the consent of each
Certificateholder and MBIA. Upon any such waiver of a past default,
such default shall cease to exist, and any Servicer Event of Default
arising therefrom shall be deemed to have been remedied for every
purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereon
except to the extent expressly waived. The Trustee shall provide to
the Rating Agencies notification of any such waiver.
Section 6.05 Effects of Termination of Servicer.
(a) Upon the appointment of the successor Servicer, the
predecessor Servicer shall remit any Scheduled Payments, Overdue
Payments and any other payments or proceeds that it may receive
pursuant to any Lease Contract or otherwise to the successor Servicer
after such date of appointment.
(b) After the delivery of a Servicer Termination Notice, the
outgoing Servicer shall have no further obligations with respect to
the management, administration, servicing, enforcement, custody or
collection of the Lease Contracts and the successor Servicer shall
have all of such obligations, except that the outgoing Servicer will
transmit or cause to be transmitted directly to the successor
Servicer, promptly on receipt and in the same form in which received,
any amounts held by the outgoing Servicer (properly endorsed where
required for the successor Servicer to collect them) received as
payments upon or otherwise in connection with the Lease Contracts.
The outgoing Servicer's indemnification obligations pursuant to
Section 5.01 hereof will survive the termination of the Servicer but
will not extend to any acts or omissions of a successor Servicer.
Section 6.06 No Effect on Other Parties. Upon any termination
of the rights and powers of the Servicer pursuant to Section 6.01
hereof, or upon any appointment of a successor Servicer, all the
rights, powers, duties and obligations of the other parties under
this Agreement, the Trust and Security Agreement, and the Lease
Acquisition Agreement shall remain unaffected by such termination or
appointment and shall remain in full force and effect thereafter.
ARTICLE 7
THE BACK-UP SERVICER
Section 7.01 Representations of Back-up Servicer. The Back-up
Servicer makes the following representations and warranties:
(a) The Back-up Servicer has been duly organized and is validly
existing as a national banking association in good standing under the
laws of the United States of America, with power and authority to own
its properties and to conduct its business as such properties shall
be currently owned and such business is presently conducted.
(b) The Back-up Servicer has the power and authority to execute
and deliver this Agreement, the Trust and Security Agreement and the
Insurance Agreement and to carry out their respective terms; and the
execution, delivery, and performance of this Agreement, the Trust and
Security Agreement and the Insurance Agreement shall have been duly
authorized by the Back-up Servicer by all necessary corporate action.
(c) Each of this Agreement, the Trust and Security Agreement
and the Insurance Agreement constitutes a legal, valid, and binding
obligation of the Back-up Servicer enforceable in accordance with its
respective terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, or other similar laws
affecting the enforcement of creditors' rights in general and by
general principles of equity, regardless of whether such
enforceability shall be considered in a proceeding in equity or at
law.
(d) The consummation of the transactions contemplated by this
Agreement, the Trust and Security Agreement and the Insurance
Agreement and the fulfillment of the terms thereof shall not conflict
with, result in any breach of any of the terms and provisions of, nor
constitute (with or without notice or lapse of time) a default under,
the articles of incorporation or by-laws of the Back-up Servicer, or
any indenture, agreement, or other instrument to which the Back-up
Servicer is a party or by which it shall be bound; nor result in the
creation or imposition of any lien upon any of its properties
pursuant to the terms of any such indenture, agreement, or other
instrument; nor violate any law or any order, rule, or regulation
applicable to the Back-up Servicer of any court or of any Federal or
state regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over the Back-up Servicer or its
properties.
(e) There are no proceedings or investigations pending or, to
the Back-up Servicer's best knowledge, threatened before any court,
regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over the Back-up Servicer or its
properties (i) asserting the invalidity of the Servicing Agreement,
the Trust and Security Agreement or the Insurance Agreement,
(ii) seeking to prevent the consummation of any of the transactions
contemplated by this Agreement, the Trust and Security Agreement or
the Insurance Agreement, (iii) seeking any determination or ruling
that might materially and adversely affect the performance by the
Back-up Servicer of its obligations under, or the validity or
enforceability of, this Agreement, the Trust and Security Agreement
or the Insurance Agreement.
Section 7.02 Merger or Consolidation of, or Assumption of the
Obligations of, Back-up Servicer. Any Person (i) into which the
Back-up Servicer may be merged or consolidated, (ii) which may result
from any merger or consolidation to which the Back-up Servicer shall
be a party, or (iii) which may succeed to the properties and assets
of the Back-up Servicer substantially as a whole, which Person in any
of the foregoing cases executes an agreement of assumption to perform
every obligation of the Back-up Servicer hereunder, shall be the
successor to the Back-up Servicer under this Agreement with the prior
written consent of MBIA and without any further act on the part of
any of the parties to this Agreement. In the event that the
resulting entity does not meet the eligibility requirements for the
Trustee set forth in the Trust and Security Agreement, the Back-up
Servicer, upon the written request of MBIA, shall resign from its
obligations and duties under this Agreement.
Section 7.03 Back-up Servicer Resignation. The Back-up
Servicer shall not resign from its obligations and duties under this
Agreement, the Trust and Security Agreement or the Insurance
Agreement except (i) as provided in Section 7.02 above, or (ii) upon
determination that the performance of its duties shall no longer be
permissible under applicable law (any such determination permitting
the resignation of the Back-up Servicer shall be evidenced by an
Opinion of Counsel to such effect delivered to the Trustee and MBIA).
Upon the Back-up Servicer's resignation or termination pursuant to
Sections 7.02 hereof or this Section 7.03, notice thereof shall be
provided to the Rating agencies and the Back-up Servicer shall comply
with the provisions of this Agreement until the acceptance of a
successor servicer.
Section 7.04 Oversight of Servicing.
(a) Prior to each Payment Date, the Back-up Servicer shall
review the Monthly Servicer's Report related thereto and shall
determine the following:
(i) that such Monthly Servicer's Report is complete on its
face;
(ii) that the amount credited to and withdrawn from the
Lockbox Account is the same as the amount set forth in the
Monthly Servicer's Report as so credited; and
(iii) that the amounts credited to and withdrawn from
the Collection Account and the Cash Collateral Account, and the
balance of such accounts, as set forth in the records of the
Back-up Servicer, are the same as the amount set forth in the
Monthly Servicer's Report.
(b) The Back-up Servicer shall, within 30 days of the receipt
thereof, load the Computer Tape received from the Servicer pursuant
to the Section 4.01 hereof, make sure such Computer Tape is in
readable form and shall calculate and check the following:
(i) the Aggregate IPB as of the most recent Calculation
Date;
(ii) each Series IPB as of the most recent Calculation
Date;
(iii) the Class A Principal Distribution Amount and the
Class B Principal Distribution Amount for each Series of
Certificates as of the most recent Payment Date; and
(iv) the Annualized Gross Default Rate, the Cumulative
Gross Default Rate, the 1-30 Day Delinquency Rate and the 61-90
Day Delinquency Rate for the related Due Period as set forth in
the most recent Monthly Servicer's Report.
In addition, the Back-up Servicer shall confirm that the items set
forth in the Monthly Servicer's Report, other than the items listed
in the section entitled "Deposits by or on behalf of the Servicer"
are accurate based solely on a comparison to the Computer Tape
referred to above.
(c) In the event of any discrepancy between the information set
forth in subparagraphs (a) and (b) as calculated by the Servicer from
that determined or calculated by the Back-up Servicer, the Back-up
Servicer shall promptly notify the Servicer, the Trustee, the
Certificateholders and MBIA of such discrepancy. If within 30 days
of such notice being provided to the Servicer, the Back-up Servicer
and the Servicer are unable to resolve such discrepancy, the Back-up
Servicer shall promptly notify the Rating Agencies, MBIA and the
Holders of the Certificates of such discrepancy.
(d) Based solely on the information included in the Series
Lease Schedule delivered on each Acquisition Date and the Computer
Tapes provided each Payment Date thereafter, the Back-up Servicer
shall determine that any Additional Lease Contracts and Substitute
Lease Contracts satisfy the criterion set forth in Section 3.04(b) of
the Lease Acquisition Agreement and that the acquisition of such
Additional Lease Contracts and Substitute Lease Contracts do not
violate the Concentration Limits set forth in the Lease Acquisition
Agreement.
(e) The Back-up Servicer will make a site visit to the offices
of the Servicer on an annual basis for the purpose of reviewing the
operations of the Servicer. The reasonable out-of-pocket costs and
expenses of the Back-up Servicer incurred in connection with this
Agreement, including without limitation, the site visit referred to
in the preceding sentence will be reimbursed to the Back-up Servicer
by the Servicer.
(f) Other than as specifically set forth elsewhere in this
Agreement, the Back-up Servicer shall have no obligation to
supervise, verify, monitor or administer the performance of the
Servicer and shall have no liability for any action taken or omitted
by the Servicer.
(g) The Back-up Servicer shall consult fully with the Servicer
as may be necessary from time to time to perform or carry out the
Back-up Servicer's obligations hereunder, including the obligation to
succeed at any time to the duties and obligations of the Servicer as
servicer under Section 6.02 hereof.
Section 7.05 Back-up Servicer Compensation. As compensation
for the performance of its obligations as Back-up Servicer under this
Agreement the Back-up Servicer shall be entitled to receive the Back-
up Servicer Fee.
Section 7.06 Duties and Responsibilities.
(a) The Back-up Servicer shall perform such duties and only
such duties as are specifically set forth in this Agreement, and no
implied covenants or obligations shall be read into this Agreement
against the Back-up Servicer; and
(b) In the absence of bad faith or negligence on its part, the
Back-up Servicer may conclusively rely as to the truth of the
statements and the correctness of the opinions expressed therein,
upon certificates or opinions furnished to the Back-up Servicer and
conforming to the requirements of this Agreement; but in the case of
any such certificates or opinions, which by any provision hereof are
specifically required to be furnished to the Back-up Servicer, the
Back-up Servicer shall be under a duty to examine the same and to
determine whether or not they conform to the requirements of this
Agreement.
ARTICLE 8
MISCELLANEOUS PROVISIONS
Section 8.01 Termination.
(a) Except with respect to a particular party under Sections
5.01, 5.04, 5.05, 6.01, 7.02 or 7.03 hereof, the respective duties
and obligations of the Servicer, the Transferor, the Back-up Servicer
and the Trustee created by this Agreement shall terminate upon the
discharge of the Trust and Security Agreement in accordance with its
terms; and the respective duties and obligations of the Trustee shall
terminate with respect to the Trustee in the event the Trustee
resigns or is replaced under Section 7.09 of the Trust and Security
Agreement; provided, however, that no resignation or removal of the
Trustee and no appointment of a successor Trustee shall become
effective until the acceptance of appointment by the successor
Trustee under Section 7.10 of the Trust and Security Agreement. Upon
the termination of this Agreement pursuant to this Section 8.01(a),
the Servicer shall pay all monies with respect to the Lease Assets
held by the Servicer and to which the Servicer is not entitled to the
Transferor or upon the Transferor's order.
(b) This Agreement shall not be automatically terminated as a
result of an Event of Default under the Trust and Security Agreement
or any action taken by the Trustee thereafter with respect thereto,
and any liquidation or preservation of the Trust Estate by the
Trustee thereafter shall be subject to the rights of the Servicer to
service the Lease Receivables and to collect servicing compensation
as provided hereunder.
Section 8.02 Amendments.
(a) Subject to paragraph (b) of this Section 8.02, this
Agreement may be amended from time to time by the Transferor, the
Servicer, the Back-up Servicer, and the Trustee, with the consent of
MBIA but without the consent of any of the Certificateholders, to
cure any ambiguity, to correct or supplement any provisions herein
that may be inconsistent with any other provisions herein and
therein, as the case may be.
(b) The provisions of this Agreement may be waived from time to
time and this Agreement may be amended from time to time by the
Transferor, the Servicer and the Back-up Servicer, with the consent
of the Trustee, MBIA and the Controlling Holders, for the purpose of
adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement; provided, however, that no such
amendment or waiver shall, without the consent of each
Certificateholder, (i) alter the priorities with which any allocation
of funds shall be made under this Agreement, (ii) permit the creation
of any lien on the Trust Estate (other than the lien of the Trust and
Security Agreement) or any portion thereof or deprive any such
Certificateholder of the benefit of this Agreement with respect to
the Trust Estate or any portion thereof, (iii) modify this Section
8.02 or (iv) modify any of the items referred to in clauses (i)
through (viii) of Section 9.02 (a) of the Trust and Security
Agreement.
(c) Promptly after the execution of any amendment, the Servicer
shall send to the Trustee, MBIA, each Holder of the Certificates and
each Rating Agency a conformed copy of each such amendment.
(d) Any amendment or modification effected contrary to the
provisions of this Section 8.02 shall be void.
(e) The manner of obtaining any consents from the
Certificateholders and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject to such
reasonable regulations as the Trustee may prescribe.
Section 8.03 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO CONFLICT OF LAWS PRINCIPLES AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE
WITH SUCH LAWS.
Section 8.04 Notices. All demands, notices and communications
hereunder shall be in writing and shall be delivered or mailed by
registered or certified United States mail, postage prepaid, and
addressed, in each case as follows: (a) if to the Transferor, at
0000 X. 00xx Xxxxxx, Xxxxx X, Xxxxxxxxxxx, XX 00000; (b) if the
Servicer, at 0000 X. 00xx Xxxxxx, Xxxxxxxxxxx, XX 00000; (c) if to
the Trustee, at Xxxxx Xxxxxx xxx Xxxxxxxxx Xxxxxx, Xxxxxxxxxxx,
Xxxxxxxxx 00000-0000; (d) if to MBIA, at 000 Xxxx Xxxxxx, Xxxxxx,
Xxx Xxxx 00000, Attention: Structured Finance - Insured Portfolio
Management (SF-IPM); or (e) if to the Certificateholders at the
address set forth on Exhibit A to the applicable Certificate Purchase
Agreement. All notices and demands shall be deemed to have been
given either at the time of the delivery thereof to any officer of
the Person entitled to receive such notices and demands at the
address of such Person for notices hereunder, or on the third day
after the mailing thereof to such address, as the case may be.
Section 8.05 Severability of Provisions. If one or more of
the provisions of this Agreement shall be for any reason whatever
held invalid, such provisions shall be deemed severable from the
remaining covenants and provisions of this Agreement, and shall in no
way affect the validity or enforceability of such remaining
provisions, the rights of any parties hereto, or the rights of the
Trustee, MBIA or any Certificateholder. To the extent permitted by
law, the parties hereto waive any provision of law which renders any
provision of this Agreement prohibited or unenforceable in any
respect.
Section 8.06 Binding Effect. All provisions of this Agreement
shall be binding upon and inure to the benefit of the respective
successors and assigns of the parties hereto, and all such provisions
shall inure to the benefit of the Certificateholders. This Agreement
may not be modified except by a writing signed by all parties hereto.
Section 8.07 Article Headings and Captions. The article
headings and captions in this Agreement are for convenience of
reference only, and shall not limit or otherwise affect the meaning
hereof.
Section 8.08 Legal Holidays. In the case where the date on
which any action required to be taken, document required to be
delivered or payment required to be made is not a Business Day, such
action, delivery or payment need not be made on such date, but may be
made on the next succeeding Business Day.
Section 8.09 Assignment for Security for the Certificates.
The Servicer and the Back-up Servicer understand that the Transferor
will convey to the Trustee all its right, title and interest to this
Agreement. The Servicer and the Back-up Servicer consent to such
conveyance and further agree that all representations, warranties,
covenants and agreements of the Servicer and the Back-up Servicer
made herein shall also be for the benefit of and inure to the Trustee
and all Holders from time to time of the Certificates.
Section 8.10 No Servicing Assignment. Notwithstanding
anything to the contrary contained herein, except as provided in
Sections 5.02, 5.04 and 8.09 hereof, this Agreement may not be
assigned by the Transferor or the Servicer without the prior written
consent of MBIA and the Controlling Holders.
Section 8.11 MBIA Default or Termination. If an MBIA Default
or Termination occurs and is continuing, MBIA's right to consent
hereunder and to direct the Trustee shall be voided and, in such
event, in all provisions of this Agreement wherein MBIA's consent or
direction is required or permitted, the consent or direction of the
Controlling Holders shall be required or permitted.
Section 8.12 Third Party Beneficiary. Each of MBIA and the
Holders of the Certificates are express third party beneficiaries to
this Agreement.
Section 8.13 Counterparts. This Agreement may be executed in
any number of counterparts, each of which so executed shall be deemed
to be an original, but all such counterparts shall together
constitute but one and the same instrument.
IN WITNESS WHEREOF, the Transferor, the Servicer, the Trustee
and the Back-up Servicer have caused this Servicing Agreement to be
duly executed by their respective officers thereunto duly authorized
as of the date and year first above written.
GF FUNDING CORP. II, Transferor
By: s/ Xxxxxxx X. Xxxxxx
Name: Xxxxxxx X. Xxxxxx
Title: President
GRANITE FINANCIAL, INC., Servicer
By: s/ Xxxxxxx X. Xxxxxx
Name: Xxxxxxx X. Xxxxxx
Title: President
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee and Back-
up Servicer
By: s/ Xxxxxx Xxxxxxxx
Name: Xxxxxx Xxxxxxxx
Title: Assistant Vice President
