AMENDED AND RESTATED
SALE AND SERVICING AGREEMENT
dated as of March 5, 2004
by and among
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION,
as Depositor,
ABFS MORTGAGE LOAN TRUST 1998-4,
as Issuer,
AMERICAN BUSINESS CREDIT, INC.,
as Servicer,
WILSHIRE CREDIT CORPORATION,
as Back-up Servicer,
JPMORGAN CHASE BANK,
as Collateral Agent,
and
THE BANK OF NEW YORK,
as Indenture Trustee
AMENDED AND RESTATED SALE AND SERVICING AGREEMENT, dated as of March 5,
2004 (this "Agreement"), by and among PRUDENTIAL SECURITIES SECURED FINANCING
CORPORATION, a Delaware corporation, as depositor (the "Depositor"), ABFS
MORTGAGE LOAN TRUST 1998-4, a Delaware statutory trust, as issuer (the "Trust"),
AMERICAN BUSINESS CREDIT, INC., a Pennsylvania corporation, as servicer (the
"Servicer"), WILSHIRE CREDIT CORPORATION, a Nevada corporation, as Back-up
Servicer (the "Back-up Servicer"), JPMORGAN CHASE BANK (f/k/a Chase Bank of
Texas, N.A.), a New York banking corporation, as collateral agent (the
"Collateral Agent"), and THE BANK OF NEW YORK, a New York banking corporation,
as indenture trustee (the "Indenture Trustee"), which amends and restates the
Sale and Servicing Agreement, dated as of November 1, 1998 (the "Original
Agreement"), by and among the Depositor, the Trust, the Servicer, the Collateral
Agent and the Indenture Trustee.
W I T N E S S E T H
WHEREAS, pursuant to the Original Agreement, the Depositor has sold to
the Trust, and the Trust has purchased from the Depositor, the mortgage loans
(the "Mortgage Loans") listed on Schedule I to this Agreement;
WHEREAS, immediately after such purchase, the Trust has pledged such
Mortgage Loans to the Indenture Trustee pursuant to the terms of an Indenture,
dated as of November 1, 1998 (the "Indenture"), between the Trust and the
Indenture Trustee, and issued the ABFS Mortgage Loan Trust 1998-4, Mortgage
Backed Notes (the "Notes");
WHEREAS, the Servicer has agreed to service the Mortgage Loans, which
constitute the principal assets of the Trust;
WHEREAS, the Collateral Agent holds, on behalf of the Indenture
Trustee, the Mortgage Loans and certain other assets pledged to the Indenture
Trustee pursuant to the Indenture;
WHEREAS, Financial Security Assurance Inc. (the "Note Insurer") is
intended to be a third-party beneficiary of this Agreement, and is hereby
recognized by the parties hereto to be a third-party beneficiary of this
Agreement; and
WHEREAS, the Depositor, the Servicer, the Collateral Agent and the
Indenture Trustee, with the consent of the Note Insurer, desire to amend and
restate the Original Agreement to provide for a Back-up Servicer, and Wilshire
Credit Corporation has agreed to serve in the capacity of Back-up Servicer
hereunder.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Trust, the Depositor, the Servicer, the Back-up
Servicer, the Collateral Agent and the Indenture Trustee hereby agree as
follows:
ARTICLE I.
DEFINITIONS
Section 1.01 Certain Defined Terms. Capitalized terms used herein but
not defined herein shall have the meanings ascribed to such terms in Appendix I
attached hereto.
Section 1.02 Provisions of General Application. (a) All accounting
terms not specifically defined herein shall be construed in accordance with
GAAP.
(b) The terms defined herein and in Appendix I to the Indenture include
the plural as well as the singular.
(c) The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole. All references to Articles
and Sections shall be deemed to refer to Articles and Sections of this
Agreement.
(d) Any reference to statutes are to be construed as including all
statutory provisions consolidating, amending or replacing the statute to which
reference is made and all regulations promulgated pursuant to such statutes.
(e) All calculations of interest with respect to the Class A-1 Notes
provided for herein shall be made on the basis of a 360-day year consisting of
twelve 30-day months. All calculations of interest with respect to the Class A-2
Notes provided for herein shall be on the basis of a 360-day year and the actual
number of days elapsed in the related Accrual Period. All calculations of
interest with respect to any Mortgage Loan provided for herein shall be made in
accordance with the terms of the related Mortgage Note and Mortgage or, if such
documents do not specify the basis upon which interest accrues thereon, on the
basis of a 360-day year consisting of twelve 30-day months, to the extent
permitted by applicable law.
(f) Any Mortgage Loan payment is deemed to be received on the date such
payment is actually received by the Servicer; provided, however, that, for
purposes of calculating distributions on the Notes, prepayments with respect to
any Mortgage Loan are deemed to be received on the date they are applied in
accordance with Accepted Servicing Practices consistent with the terms of the
related Mortgage Note and Mortgage to reduce the outstanding Principal Balance
of such Mortgage Loan on which interest accrues.
Section 1.03 Business Day Certificate. On the Closing Date (with
respect to the calendar years 1998 and 1999) and thereafter, within fifteen (15)
days prior to the end of each calendar year while this Agreement remains in
effect (with respect to the succeeding calendar years), the Servicer shall
provide to the Indenture Trustee, the Back-up Servicer and the Collateral Agent
a certificate of a Servicing Officer specifying the days on which banking
institutions in the Commonwealth of Pennsylvania are authorized or obligated by
law, executive order or governmental decree to be closed.
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ARTICLE II.
SALE AND CONVEYANCE OF THE MORTGAGE LOANS
Section 2.01 Purchase and Sale of Initial Mortgage Loans. The Depositor
does hereby sell, transfer, assign, set over and convey to the Trust, without
recourse, but subject to the terms and provisions of this Agreement, all of the
right, title and interest of the Depositor in and to the Initial Mortgage Loans,
including the outstanding principal of, and interest due on, such Initial
Mortgage Loans listed on Schedule I attached hereto, and all other assets
included or to be included in the Trust Estate. In connection with such transfer
and assignment, and pursuant to Section 2.07 of the Unaffiliated Seller's
Agreement, the Depositor does hereby also irrevocably transfer, assign, set over
and otherwise convey to the Trust all of its rights under the Unaffiliated
Seller's Agreement, including, without limitation, its right to exercise the
remedies created by Sections 2.06 and 3.05 of the Unaffiliated Seller's
Agreement for defective documentation and for breaches of representations and
warranties, agreements and covenants of the Unaffiliated Seller and the
Originators contained in Sections 3.01, 3.02 and 3.03 of the Unaffiliated
Seller's Agreement.
Section 2.02 Purchase and Sale of Subsequent Mortgage Loans. (a)
Subject to the satisfaction of the conditions set forth in Section 2.14(b) of
the Indenture, in consideration of the Trust's delivery on the related
Subsequent Transfer Dates to or upon the order of the Depositor of all or a
portion of the balance of funds in the Pre-Funding Account, the Depositor shall
on any Subsequent Transfer Date sell, transfer, assign, set over and convey to
the Trust without recourse, but subject to terms and provisions of this
Agreement, all of the right, title and interest of the Depositor in and to the
Subsequent Mortgage Loans, including the outstanding principal of, and interest
due on, such Subsequent Mortgage Loans, and all other assets included or to be
included in the Trust Estate. In connection with such transfer and assignment,
and pursuant to Section 2.07 of the Unaffiliated Seller's Agreement, the
Depositor will also irrevocably transfer, assign, set over and otherwise convey
to the Trust all of its rights under the Unaffiliated Seller's Agreement and the
related Subsequent Transfer Agreement, including, without limitation, its right
to exercise the remedies created by Sections 2.06 and 3.05 of the Unaffiliated
Seller's Agreement for defective documentation and for breaches of
representations and warranties, agreements and covenants of the Unaffiliated
Seller and the Originators contained in Sections 3.01, 3.02 and 3.03 of the
Unaffiliated Seller's Agreement.
The amount released from the Pre-Funding Account with respect to a
transfer of Subsequent Mortgage Loans shall be one-hundred percent (100%) of the
Aggregate Principal Balances of the Subsequent Mortgage Loans so transferred, as
of the related Subsequent Cut-Off Date.
(b) In connection with the transfer and assignment of the Subsequent
Mortgage Loans to the Trust, the Depositor shall cause the Unaffiliated Seller
to satisfy the document delivery requirements set forth in Section 2.05 hereof.
(c) For any Subsequent Mortgage Loan that has a first Due Date that
occurs later than the last day of the Due Period following the Due Period in
which the Subsequent Mortgage Loan was sold to the Trust, on each applicable
Servicer Distribution Date, the Servicer will deposit into the Distribution
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Account 30 days' interest at the related Mortgage Interest Rate, net of the
Servicing Fee, for each month after the month in which the Subsequent Transfer
occurs until, but not including, the month in which such first Due Date occurs.
Section 2.03 Purchase Price. On the Closing Date, as full consideration
for the Depositor's sale of the Initial Mortgage Loans to the Trust, the Trust
will deliver to, or at the direction of, the Depositor (i) an amount in cash
equal to the sum of (A) 99.65% and 99.65% of the Original Note Principal Balance
as of the Closing Date of the Class A-1 Notes and the Class A-2 Notes,
respectively, plus (B) accrued interest on the Original Note Principal Balance
of the Class A-1 Notes at the rate of 6.505% per annum, from (and including)
November 1, 1998 to (but not including) the Closing Date, minus (C) the Original
Pre-Funded Amount and the Original Capitalized Interest Amount, payable by wire
transfer of same day funds, and (ii) the Trust Certificates to be issued
pursuant to the Trust Agreement.
Section 2.04 Possession of Mortgage Files; Access to Mortgage Files.
(a) Upon the receipt by the Depositor, or its designee, of the purchase price
for the Initial Mortgage Loans set forth in Section 2.03 hereof and the issuance
of the Notes pursuant to the Indenture, the ownership of each Mortgage Note,
each Mortgage and the contents of the Mortgage File related to each Initial
Mortgage Loan will be vested in the Indenture Trustee, for the benefit of the
Noteholders and the Note Insurer.
(b) Pursuant to Section 2.05 hereof and Section 2.05 of the
Unaffiliated Seller's Agreement, the Unaffiliated Seller has delivered or caused
to be delivered the Indenture Trustee's Mortgage File related to each Initial
Mortgage Loan to the Collateral Agent, on behalf of the Indenture Trustee.
(c) The Collateral Agent will be the custodian, on behalf of the
Indenture Trustee, to hold the Indenture Trustee's Mortgage Files in trust for
the benefit of all present and future Noteholders and the Note Insurer. In the
event the Collateral Agent resigns or is removed, the Indenture Trustee shall
either (x) hold the Indenture Trustee's Mortgage Files, or (y) appoint a
successor Collateral Agent to hold the Indenture Trustee's Mortgage Files as set
forth in Section 9.08 hereof.
(d) The Collateral Agent shall afford the Depositor, the Trust, the
Note Insurer, the Servicer and the Back-up Servicer reasonable access to all
records and documentation regarding the Mortgage Loans relating to this
Agreement, such access being afforded at customary charges, upon reasonable
prior written request and during normal business hours at the offices of the
Collateral Agent.
Section 2.05 Delivery of Mortgage Loan Documents. (a) In connection
with the transfer and assignment of the Mortgage Loans, the Depositor shall,
with respect to the Initial Mortgage Loans, and shall on or before the
Subsequent Transfer Date with respect to Subsequent Mortgage Loans, deliver, or
cause the Unaffiliated Seller to deliver, to the Collateral Agent, on behalf of
the Indenture Trustee (as pledgee of the Trust pursuant to the Indenture), the
following documents or instruments with respect to each Mortgage Loan so
transferred or assigned:
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(i) the original Mortgage Note, endorsed without recourse in
blank by the related Originator, including all intervening endorsements
showing a complete chain of endorsement;
(ii) the related original Mortgage with evidence of recording
indicated thereon or a copy thereof certified by the applicable
recording office;
(iii) the recorded mortgage assignment, or copy thereof
certified by the applicable recording office, if any, showing a
complete chain of assignment from the originator of the related
Mortgage Loan to the related Originator (which assignment may, at such
Originator's option, be combined with the assignment referred to in
subpart (iv) hereof, in which case it must be in recordable form, but
need not have been previously recorded);
(iv) a mortgage assignment in recordable form (which, if
acceptable for recording in the relevant jurisdiction, may be included
in a blanket assignment or assignments) of each Mortgage from the
related Originator to the Indenture Trustee;
(v) originals of all assumption, modification and substitution
agreements in those instances where the terms or provisions of a
Mortgage or Mortgage Note have been modified or such Mortgage or
Mortgage Note has been assumed; and
(vi) an original title insurance policy (or (A) a copy of the
title insurance policy, or (B) a binder thereof or copy of such binder
together with a certificate from the related Originator that the
original Mortgage has been delivered to the title insurance company
that issued such binder for recordation).
In instances where the original recorded Mortgage and a completed
assignment thereof in recordable form cannot be delivered by the related
Originator to the Unaffiliated Seller, and by the Unaffiliated Seller to the
Collateral Agent, on behalf of the Indenture Trustee prior to or concurrently
with the execution and delivery of this Agreement (or, with respect to
Subsequent Mortgage Loans, prior to or on the related Subsequent Transfer Date),
due to a delay in connection with recording, the related Originator may:
(x) in lieu of delivering such original recorded Mortgage,
deliver to the Collateral Agent, on behalf of the Indenture Trustee, a
copy thereof; provided, that the related Originator certifies that the
original Mortgage has been delivered to a title insurance company for
recordation after receipt of its policy of title insurance or binder
therefor; and
(y) in lieu of delivering the completed assignment in
recordable form, deliver to the Collateral Agent, on behalf of the
Indenture Trustee, the assignment in recordable form, otherwise
complete except for recording information.
The Collateral Agent, on behalf of the Indenture Trustee, shall
promptly upon receipt thereof, with respect to each Mortgage Note described in
Section 2.05(a)(i) hereof and each assignment described in Section 2.05(a)(iv)
hereof, endorse such Mortgage Note and assignment as follows: "The Bank of New
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York, as Indenture Trustee under the Indenture dated as of November 1, 1998,
ABFS Mortgage Loan Trust 1998-4."
(b) As promptly as practicable, but in any event within thirty (30)
days from the Closing Date or the Subsequent Transfer Date, as applicable, the
Unaffiliated Seller shall promptly submit, or cause to be submitted by the
related Originator, for recording in the appropriate public office for real
property records, each assignment referred to in Section 2.05(a)(iv). The
Collateral Agent, on behalf of the Indenture Trustee, shall retain a copy of
each assignment submitted for recording. In the event that any such assignment
is lost or returned unrecorded because of a defect therein, the Unaffiliated
Seller or such Originator shall promptly prepare a substitute assignment or cure
such defect, as the case may be, and thereafter the Unaffiliated Seller or such
Originator shall submit each such assignment for recording. The costs relating
to the delivery and recordation of the documents in connection with the Mortgage
Loans as specified in this Article II shall be borne by the Unaffiliated Seller.
(c) The Unaffiliated Seller or the related Originator shall, within
five (5) Business Days after the receipt thereof, deliver, or cause to be
delivered, to the Collateral Agent, on behalf of the Indenture Trustee: (i) the
original recorded Mortgage and related power of attorney, if any, in those
instances where a copy thereof certified by the related Originator was delivered
to the Collateral Agent, on behalf of the Indenture Trustee; (ii) the original
recorded assignment of Mortgage from the related Originator to the Indenture
Trustee, which, together with any intervening assignments of Mortgage, evidences
a complete chain of assignment from the originator of the Mortgage Loan to the
Indenture Trustee, in those instances where copies of such assignments certified
by the related Originator were delivered to the Collateral Agent, on behalf of
the Indenture Trustee, and (iii) the title insurance policy or title opinion
required in Section 2.05(a)(vi). The Collateral Agent shall review the recorded
assignment to confirm the information contained therein. The Collateral Agent
shall notify Indenture Trustee, the Note Insurer and the Servicer, of any defect
in such assignment based on such review. The Servicer shall have a period of
sixty (60) days following such notice to correct or cure such defect. In the
event that the Servicer fails to record an assignment of a Mortgage as provided
herein, the Collateral Agent shall, at the Servicer's expense, use reasonable
efforts to prepare and, if required hereunder, file such assignments for
recordation in the appropriate real property or other records and the Servicer
hereby appoints the Collateral Agent as its attorney-in-fact with full power and
authority acting in its stead for the purpose of such preparation, execution and
filing.
Notwithstanding anything to the contrary contained in this Section
2.05, in those instances where the public recording office retains the original
Mortgage, power of attorney, if any, assignment or assignment of Mortgage after
it has been recorded or such original has been lost, the Unaffiliated Seller or
the related Originator shall be deemed to have satisfied its obligations
hereunder upon delivery to the Collateral Agent, on behalf of the Indenture
Trustee, of a copy of such Mortgage, power of attorney, if any, assignment or
assignment of Mortgage certified by the public recording office to be a true
copy of the recorded original thereof.
From time to time the Unaffiliated Seller or the related Originator may
forward, or cause to be forwarded, to the Collateral Agent, on behalf of the
Indenture Trustee, additional original documents evidencing any assumption or
modification of a Mortgage Loan.
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(d) All original documents relating to the Mortgage Loans that are not
delivered to the Collateral Agent, on behalf of the Indenture Trustee, as
permitted by Section 2.05(a) hereof are, and shall be, held by the Servicer, the
Unaffiliated Seller or the related Originator, as the case may be, in trust for
the benefit of the Indenture Trustee, on behalf of the Noteholders and the Note
Insurer. In the event that any such original document is required pursuant to
the terms of this Section 2.05 to be a part of an Indenture Trustee's Mortgage
File, such document shall be delivered promptly to the Collateral Agent, on
behalf of the Indenture Trustee. From and after the sale of the Mortgage Loans
to the Trust pursuant hereto, to the extent that the Unaffiliated Seller or the
related Originator retains legal title of record to any Mortgage Loans prior to
the vesting of legal title in the Trust, such title shall be retained in trust
for the Trust as the owner of the Mortgage Loans, and the Indenture Trustee, as
the pledgee of the Trust under the Indenture. In acting as custodian of any
original document which is part of the Indenture Trustee's Mortgage Files, the
Servicer agrees further that it does not and will not have or assert any
beneficial ownership interest in the related Mortgage Loans or the Mortgage
Files. Promptly upon the Servicer's receipt of any such original document, the
Servicer, on behalf of the Trust, shall xxxx conspicuously each such original
document, and its master data processing records with a legend evidencing that
the Trust has purchased the related Mortgage Loan and all right and title
thereto and interest therein, and pledged such Mortgage Loan and all right and
title thereto and interest therein to the Indenture Trustee, on behalf of the
Noteholders and the Note Insurer.
Section 2.06 Acceptance of the Trust Estate; Certain Substitutions;
Certification by the Collateral Agent. (a) The Indenture Trustee agrees to
execute and deliver to the Depositor, the Note Insurer, the Collateral Agent and
the Servicer on or prior to the Closing Date an acknowledgement of receipt of
the Note Insurance Policy in the form attached as Exhibit B hereto.
(b) The Collateral Agent, on behalf of the Indenture Trustee, agrees
to:
(i) execute and deliver to the Depositor, the Note Insurer,
the Indenture Trustee, the Servicer and the Unaffiliated Seller, on or
prior to the Closing Date or any Subsequent Transfer Date, as
applicable, with respect to each Mortgage Loan transferred on such
date, an acknowledgement of receipt of the Mortgage File containing the
original Mortgage Note (with any exceptions noted), in the form
attached as Exhibit C hereto, and declares that it will hold such
documents and any amendments, replacements or supplements thereto, as
well as any other assets included in the definition of Trust Estate and
delivered to the Collateral Agent, on behalf of the Indenture Trustee,
in trust upon and subject to the conditions set forth herein, for the
benefit of the Noteholders and the Note Insurer.
(ii) to review (or cause to be reviewed) each Indenture
Trustee's Mortgage File within thirty (30) days after the Closing Date
or any Subsequent Transfer Date, as applicable (or, with respect to any
Qualified Substitute Mortgage Loans, within thirty (30) days after the
receipt by the Collateral Agent, on behalf of the Indenture Trustee,
thereof), and to deliver to the Unaffiliated Seller, the Servicer, the
Depositor, the Indenture Trustee and the Note Insurer a certification,
in the form attached hereto as Exhibit D, to the effect that, except as
otherwise noted, as to each Mortgage Loan listed in the related
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Mortgage Loan Schedule (other than any Mortgage Loan paid in full or
any Mortgage Loan specifically identified in such certification as not
covered by such certification), (i) all documents required to be
delivered to it pursuant to Section 2.05 are in its possession, (ii)
each such document has been reviewed by it and has not been mutilated,
damaged, torn or otherwise physically altered (handwritten additions,
changes or corrections shall not constitute physical alteration if they
reasonably appear to have been initialed by the Mortgagor), appears
regular on its face and relates to such Mortgage Loan, and (iii) based
on its examination and only as to the foregoing documents, the
information set forth on the Mortgage Loan Schedule as to the
information set forth in (i), (ii), (v) and (vi) of the definition of
"Mortgage Loan Schedule" accurately reflects the information set forth
in the Indenture Trustee's Mortgage File delivered on such date.
(iii) to review (or cause to be reviewed) each Indenture
Trustee's Mortgage File within ninety (90) days after the Closing Date
or any Subsequent Transfer Date, as applicable (or, with respect to any
Qualified Substitute Mortgage Loans, within ninety (90) days after the
receipt by the Collateral Agent, on behalf of the Indenture Trustee,
thereof), and to deliver to the Unaffiliated Seller, the Servicer, the
Depositor, the Indenture Trustee, the Rating Agencies and the Note
Insurer a certification in the form attached hereto as Exhibit E to the
effect that, except as otherwise noted, as to each Mortgage Loan listed
in the related Mortgage Loan Schedule (other than any Mortgage Loan
paid in full or any Mortgage Loan specifically identified in such
certification as not covered by such certification), (i) all documents
required to be delivered to it pursuant to Section 2.05 are in its
possession, (ii) each such document has been reviewed by it and has not
been mutilated, damaged, torn or otherwise physically altered
(handwritten additions, changes or corrections shall not constitute
physical alteration if they reasonably appear to be initialed by the
Mortgagor), appears regular on its face and relates to such Mortgage
Loan, and (iii) based on its examination and only as to the foregoing
documents, the information set forth in the definition of "Mortgage
Loan Schedule" accurately reflects the information set forth in the
Indenture Trustee's Mortgage File delivered on such date.
In performing any such review, the Collateral Agent may conclusively
rely on the Unaffiliated Seller as to the purported genuineness of any such
document and any signature thereon. It is understood that the scope of the
Collateral Agent's review of the Indenture Trustee's Mortgage Files is limited
solely to confirming that the documents listed in Section 2.05 have been
executed and received and relate to the Indenture Trustee's Mortgage Files
identified in the related Mortgage Loan Schedule. The Collateral Agent shall be
under no duty or obligation to inspect, review or examine any such documents,
instruments, certificates or other papers to determine that they are genuine,
enforceable, or appropriate for the represented purpose or that they are other
than what they purport to be on their face.
(c) If the Collateral Agent during the process of reviewing the
Indenture Trustee's Mortgage Files finds any document constituting a part of a
Indenture Trustee's Mortgage File which is not executed, has not been received,
is unrelated to the Mortgage Loan identified in the related Mortgage Loan
Schedule, or does not conform to the requirements of Section 2.05 or the
description thereof as set forth in the related Mortgage Loan Schedule, the
Collateral Agent shall promptly so notify the Servicer, the Back-up Servicer,
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the Unaffiliated Seller, the Originators, the Note Insurer and the Indenture
Trustee. Pursuant to Section 2.06(b) of the Unaffiliated Seller's Agreement, the
Unaffiliated Seller and the Originators have agreed to use reasonable efforts to
cause to be remedied a material defect in a document constituting part of an
Indenture Trustee's Mortgage File of which it is so notified by the Collateral
Agent. If, however, within sixty (60) days after the Collateral Agent's notice
to it respecting such defect the Unaffiliated Seller or the Originators have not
caused to be remedied the defect and the defect materially and adversely affects
the interest of the Noteholders and the Note Insurer in the related Mortgage
Loan, the Unaffiliated Seller and the Originators will be obligated, pursuant to
Section 3.05 of the Unaffiliated Seller's Agreement, to either (i) substitute in
lieu of such Mortgage Loan a Qualified Substitute Mortgage Loan in the manner
and subject to the conditions set forth in Section 3.05 of the Unaffiliated
Seller's Agreement or (ii) purchase such Mortgage Loan at a purchase price equal
to the Loan Repurchase Price. Upon receipt by the Collateral Agent and the
Indenture Trustee of a certification, in the form attached hereto as Exhibit F,
of a Servicing Officer of such substitution or purchase and, in the case of a
substitution, upon receipt by the Collateral Agent, on behalf of the Indenture
Trustee, of the related Indenture Trustee's Mortgage File, and the deposit of
the amounts described above in the Collection Account, the Collateral Agent
shall release to the Servicer for release to the Unaffiliated Seller the related
Indenture Trustee's Mortgage File and the Indenture Trustee shall execute,
without recourse, and deliver such instruments of transfer furnished by the
Unaffiliated Seller as may be necessary to transfer such Mortgage Loan to the
Unaffiliated Seller. The Collateral Agent shall notify the Indenture Trustee,
who shall notify the Note Insurer if the Unaffiliated Seller fails to repurchase
or substitute for a Mortgage Loan in accordance with the foregoing.
Section 2.07 Grant of Security Interest. (a) Except with respect to the
REMIC Provisions, it is intended that the conveyance of the Mortgage Loans and
other property by the Depositor to the Trust as provided in this Article II be,
and be construed as, a sale of the Mortgage Loans and such other property by the
Depositor to the Trust. It is, further, not intended that such conveyance be
deemed a pledge of the Mortgage Loans or such other property by the Depositor to
the Trust to secure a debt or other obligation of the Depositor. However, in the
event that the Mortgage Loans or any of such other property are held to be
property of the Depositor, or if for any reason this Agreement is held or deemed
to create a security interest in the Mortgage Loans or any of such other
property, then it is intended that: (i) this Agreement shall also be deemed to
be a security agreement within the meaning of the Uniform Commercial Code; (ii)
the conveyance provided for in this Article II shall be deemed to be a grant by
the Depositor to the Trust of a security interest in all of the Depositor's
right, title and interest in and to the Mortgage Loans and such other property
and all amounts payable to the holders of the Mortgage Loans in accordance with
the terms thereof and all proceeds of the conversion, voluntary or involuntary,
of the foregoing into cash, instruments, securities or other property,
including, without limitation, all amounts from time to time held or invested in
the Distribution Account, whether in the form of cash, instruments, securities
or other property; (iii) the possession by the Collateral Agent, on behalf of
the Indenture Trustee, of the Mortgage Notes and such other items of property as
constitute instruments, money, negotiable documents or chattel paper shall be
deemed to be "possession by the secured party" for purposes of perfecting the
security interest pursuant to the Uniform Commercial Code; and (iv)
notifications to persons holding such property, and acknowledgments, receipts or
confirmations from persons holding such property, shall be deemed notifications
to, or acknowledgments, receipts or confirmations from financial intermediaries,
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bailees or agents, as applicable, of the Indenture Trustee for the purpose of
perfecting such security interest under applicable law. The Depositor, the
Trust, the Collateral Agent and the Indenture Trustee, shall, to the extent
consistent with this Agreement, take such actions as may be reasonably necessary
to ensure that, if this Agreement were deemed to create a security interest in
the Mortgage Loans or any of such other property, such security interest would
be deemed to be a perfected security interest of first priority under applicable
law and will be maintained as such throughout the term of this Agreement.
(b) The Unaffiliated Seller, the Depositor and the Servicer shall take
no action inconsistent with the Trust's ownership of the Trust Estate and each
shall indicate or shall cause to be indicated in its records and records held on
its behalf that ownership of each Mortgage Loan and the other assets in the
Trust Estate are held by the Collateral Agent, on behalf of the Indenture
Trustee, for the benefit of the Noteholders and the Note Insurer. In addition,
the Unaffiliated Seller, the Depositor and the Servicer shall respond to any
inquiries from third parties with respect to ownership of a Mortgage Loan or any
other asset in the Trust Estate by stating that it is not the owner of such
asset and that the Trust is the owner of such Mortgage Loan or other asset in
the Trust Estate, which is held by the Collateral Agent, on behalf of the
Indenture Trustee, for the benefit of the Noteholders and the Note Insurer.
Section 2.08 Further Action Evidencing Assignments. (a) The Servicer
agrees that, from time to time, at its expense, it shall cause the Unaffiliated
Seller (and the Depositor on behalf of itself also agrees that it shall),
promptly to execute and deliver all further instruments and documents, and take
all further action, that may be necessary or appropriate, or that the Servicer,
the Indenture Trustee or the Collateral Agent may reasonably request, in order
to perfect, protect or more fully evidence the transfer of ownership of the
Mortgage Loans and other assets in the Trust Estate or to enable the Collateral
Agent, on behalf of the Indenture Trustee, to exercise or enforce any of its
rights hereunder. Without limiting the generality of the foregoing, the Servicer
and the Depositor will, upon the request of the Servicer, the Indenture Trustee
or the Collateral Agent execute and file (or cause to be executed and filed)
such real estate filings, financing or continuation statements, or amendments
thereto or assignments thereof, and such other instruments or notices, as may be
necessary or appropriate.
(b) The Depositor hereby grants to the Servicer, the Indenture Trustee
and the Collateral Agent powers of attorney to execute all documents on its
behalf under this Agreement and the Unaffiliated Seller's Agreement as may be
necessary or desirable to effectuate the foregoing.
Section 2.09 Assignment of Agreement. The Depositor hereby acknowledges
and agrees that the Trust may assign its interest under this Agreement to the
Indenture Trustee, for the benefit of the Noteholders and the Note Insurer, as
may be required to effect the purposes of the Indenture, without further notice
to, or consent of, the Depositor, and the Indenture Trustee shall succeed to
such of the rights and obligations of the Trust hereunder as shall be so
assigned. The Trust shall, pursuant to the Indenture, assign all of its right,
title and interest in and to the Mortgage Loans and its right to exercise the
remedies created by Section 2.06 and 3.05 of the Unaffiliated Seller's Agreement
for breaches of the representations, warranties, agreements and covenants of the
Unaffiliated Seller or the Originators contained in Sections 2.05, 2.06, 3.02
and 3.03 of the Unaffiliated Seller's Agreement, assign such right, title and
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interest to the Indenture Trustee, of the benefit of the Noteholders and the
Note Insurer. The Depositor agrees that, upon such assignment to the Indenture
Trustee, such representations, warranties, agreements and covenants will run to
and be for the benefit of the Indenture Trustee and the Indenture Trustee may
enforce, without joinder of the Depositor or the Trust, the repurchase
obligations of the Unaffiliated Seller and the Originators set forth herein with
respect to breaches of such representations, warranties, agreements and
covenants.
Section 2.10 REMIC Matters. (a) It is intended that the REMIC Trust
formed under the Trust Agreement shall constitute, and that the affairs of the
REMIC Trust shall be conducted so as to qualify it as, a REMIC as defined in and
in accordance with the REMIC Provisions. In furtherance of such intention, the
Indenture Trustee, the Collateral Agent and the Servicer agree to provide to the
Tax Matters Person, at the Tax Matters Person's expense, any information within
the control of the Indenture Trustee, the Collateral Agent or the Servicer
necessary for the Tax Matters Person to complete its duties set forth in Section
2.15 of the Trust Agreement.
(b) In the event that any tax is imposed on "prohibited transactions"
of the REMIC as defined in Section 860F(a)(2) of the Code, on the "net income
from foreclosure property" of the REMIC as defined in Section 860G(c) of the
Code, on any contribution to the REMIC after the Startup Day pursuant to Section
860G(d) of the Code, or any other tax (other than any minimum tax imposed by
Sections 23151(a) or 23153(a) of the Pennsylvania Revenue and Taxation Code) is
imposed, such tax shall be paid by (i) the Indenture Trustee, if such tax arises
out of or results from the gross negligence or willful breach or misconduct by
the Indenture Trustee in the performance of any of its obligations under the
Basic Documents to which it is a party, (ii) the Owner Trustee, if such tax
arises out of or results from the gross negligence or willful breach or
misconduct by the Owner Trustee in the performance of any of its obligations
under the Basic Documents to which it is a party, (iii) the Collateral Agent, if
such tax arises out of or results from the gross negligence or willful breach or
misconduct by the Collateral Agent in the performance of any of its obligations
set forth under subsection (c) below, (iv) the Servicer, if such tax arises out
of or results from the gross negligence or willful breach or misconduct by the
Servicer in the performance of any of its obligations under the Basic Documents
to which it is a party, or (v) the Holders of the Trust Certificates relating to
Pool II, in proportion to their Percentage Interests. To the extent such tax is
chargeable against the Holders of the Trust Certificates relating to Pool II,
the Indenture Trustee is hereby authorized to retain from amounts otherwise
distributable to the Holders of the Trust Certificates relating to Pool II on
any Distribution Date sufficient funds to reimburse the Indenture Trustee for
the payment of such tax (to the extent that the Indenture Trustee has not been
previously reimbursed or indemnified therefor).
(c) Following the Startup Day and at any time that any Class A-2 Notes
are outstanding, (x) neither the Indenture Trustee nor the Collateral Agent
shall knowingly accept any contribution of assets to the REMIC Trust, unless
such contribution is accompanied by an Opinion of Counsel (at the expense of the
Unaffiliated Seller or the Servicer) to the effect that the inclusion of such
assets in the REMIC Trust will not cause the REMIC Trust to fail to qualify as a
REMIC or subject the REMIC Trust to any tax under the REMIC Provisions or other
applicable provisions of federal, state and local law or ordinances and (y) the
Collateral Agent will not release any assets unless it shall have received a
properly executed Request for Release; provided, that a deposit of funds into
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either Cross-collateralization Reserve Account in accordance with Section 8.02
hereof, or a payment of funds from either Cross-collateralization Reserve
Account in accordance with Section 8.02 hereof, does not need to be accompanied
by such an Opinion of Counsel.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations of the Servicer. The Servicer hereby
represents and warrants to the Indenture Trustee, the Depositor, the Collateral
Agent, the Trust, the Note Insurer, the Back-up Servicer, and the Noteholders as
of the Closing Date and during the term of this Agreement that:
(a) Each of the Servicer and the Subservicers is duly
organized, validly existing and in good standing under the laws of
their respective states of incorporation and has the power to own its
assets and to transact the business in which it is currently engaged.
Each of the Servicer and the Subservicers is duly qualified to do
business as a foreign corporation and is in good standing in each
jurisdiction in which the character of the business transacted by it or
properties owned or leased by it or the performance of its obligations
hereunder requires such qualification and in which the failure so to
qualify could reasonably be expected to have a material adverse effect
on the business, properties, assets, or condition (financial or other)
of the Servicer or the Subservicers or the performance of their
respective obligations hereunder;
(b) The Servicer has the power and authority to make, execute,
deliver and perform this Agreement and all of the transactions
contemplated under this Agreement, and has taken all necessary
corporate action to authorize the execution, delivery and performance
of this Agreement, and assuming the due authorization, execution and
delivery hereof by the other parties hereto constitutes, or will
constitute, the legal, valid and binding obligation of the Servicer,
enforceable in accordance with its terms, except as enforcement of such
terms may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights of
creditors generally, and by general equity principles (regardless of
whether such enforcement is considered in a proceeding in equity or at
law;
(c) The Servicer is not required to obtain the consent of any
other party or any consent, license, approval or authorization from, or
registration or declaration with, any governmental authority, bureau or
agency which consent already has not been obtained in connection with
the execution, delivery, performance, validity or enforceability of
this Agreement, except such as have been obtained prior to the Closing
Date;
(d) The execution, delivery and performance of this Agreement
by the Servicer will not violate any provision of any existing law or
regulation or any order or decree of any court or the charter or bylaws
of the Servicer, or constitute a breach of any mortgage, indenture,
contract or other Agreement to which the Servicer is a party or by
which it may be bound;
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(e) There is no action, suit, proceeding or investigation
pending or threatened against the Servicer or the Subservicers which,
either in any one instance or in the aggregate, is, in the Servicer's
judgment, likely to result in any material adverse change in the
business, operations, financial condition, properties, or assets of the
Servicer or the Subservicers, or in any material impairment of the
right or ability of any of them to carry on its business substantially
as now conducted, or in any material liability on the part of any of
them, or which would draw into question the validity of this Agreement,
the Notes, or the Mortgage Loans or of any action taken or to be taken
in connection with the obligations of the Servicer or the Subservicers
contemplated herein or therein, or which would be likely to impair
materially the ability of the Servicer or the Subservicers to perform
their respective obligations hereunder;
(f) Neither this Agreement nor any statement, report, or other
document furnished by the Servicer or the Subservicers pursuant to this
Agreement or in connection with the transactions contemplated hereby,
including, without limitation, the sale or placement of the Notes,
contains any untrue statement of fact provided by or on behalf of the
Servicer or omits to state a fact necessary to make the statements
provided by or on behalf of the Servicer contained herein or therein
not misleading:
(g) The Servicer does not believe, nor does it have any reason
or cause to believe, that it cannot perform each and every covenant
contained in this Agreement; and
(h) None of the Servicer or the Subservicers is an "investment
company" or a company "controlled by an investment company," within the
meaning of the Investment Company Act of 1940, as amended.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.01 shall survive the delivery of the
respective Indenture Trustee's Mortgage Files to the Collateral Agent, on behalf
of the Indenture Trustee or to another custodian, as the case may be, and inure
to the benefit of the Indenture Trustee.
Section 3.02 Representations, Warranties and Covenants of the
Depositor. The Depositor hereby represents, warrants and covenants to the
Indenture Trustee, the Trust, the Collateral Agent, the Servicer and the Back-up
Servicer that as of the date of this Agreement or as of such date specifically
provided herein:
(a) The Depositor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware;
(b) The Depositor has the corporate power and authority to
convey the Mortgage Loans and to execute, deliver and perform, and to
enter into and consummate transactions contemplated by this Agreement;
(c) This Agreement has been duly and validly authorized,
executed and delivered by the Depositor, all requisite corporate action
having been taken, and, assuming the due authorization, execution and
delivery hereof by the other parties hereto, constitutes or will
constitute the legal, valid and binding agreement of the Depositor,
enforceable against the Depositor in accordance with its terms, except
as such enforcement may be limited by bankruptcy, insolvency,
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reorganization, moratorium or other similar laws relating to or
affecting the rights of creditors generally, and by general equity
principles (regardless of whether such enforcement is considered in a
proceeding in equity or at law);
(d) No consent, approval, authorization or order of or
registration or filing with, or notice to, any governmental authority
or court is required for the execution, delivery and performance of or
compliance by the Depositor with this Agreement or the consummation by
the Depositor of any of the transactions contemplated hereby, except as
have been made on or prior to the Closing Date;
(e) None of the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby or thereby, or the
fulfillment of or compliance with the terms and conditions of this
Agreement, (i) conflicts or will conflict with or results or will
result in a breach of, or constitutes or will constitute a default or
results or will result in an acceleration under (A) the charter or
bylaws of the Depositor, or (B) of any term, condition or provision of
any material indenture, deed of trust, contract or other agreement or
instrument to which the Depositor or any of its subsidiaries is a party
or by which it or any of its subsidiaries is bound; (ii) results or
will result in a violation of any law, rule, regulation, order,
judgment or decree applicable to the Depositor of any court or
governmental authority having jurisdiction over the Depositor or its
subsidiaries; or (iii) results in the creation or imposition of any
lien, charge or encumbrance which would have a material adverse effect
upon the Mortgage Loans or any documents or instruments evidencing or
securing the Mortgage Loans;
(f) There are no actions, suits or proceedings before or
against or investigations of, the Depositor pending, or to the
knowledge of the Depositor, threatened, before any court,
administrative agency or other tribunal, and no notice of any such
action, which, in the Depositor's reasonable judgment, might materially
and adversely affect the performance by the Depositor of its
obligations under this Agreement, or the validity or enforceability of
this Agreement; and
(g) The Depositor is not in default with respect to any order
or decree of any court or any order, regulation or demand of any
federal, state, municipal or governmental agency that may materially
and adversely affect its performance hereunder.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.02 shall survive delivery of the
respective Indenture Trustee's Mortgage Files to the Collateral Agent, on behalf
of the Indenture Trustee or to another custodian, as the case may be, and shall
inure to the benefit of the Indenture Trustee.
Section 3.03 Representations, Warranties and Covenants of the
Collateral Agent. The Collateral Agent hereby represents, warrants and covenants
to the Indenture Trustee, the Trust, the Servicer, the Back-up Servicer and the
Depositor that as of the date of this Agreement or as of such date specifically
provided herein:
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(a) The Collateral Agent is a national banking association
duly organized, validly existing and in good standing under the laws of
the United States of America;
(b) The Collateral Agent has the corporate power and authority
to execute, deliver and perform, and to enter into and consummate
transactions contemplated by this Agreement;
(c) This Agreement has been duly and validly authorized,
executed and delivered by the Collateral Agent, all requisite corporate
action having been taken, and, assuming the due authorization,
execution and delivery hereof by the other parties hereto, constitutes
or will constitute the legal, valid and binding agreement of the
Collateral Agent, enforceable against the Collateral Agent in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting the rights of creditors generally, and by
general equity principles (regardless of whether such enforcement is
considered in a proceeding in equity or at law);
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.02 shall survive delivery of the
respective Indenture Trustee's Mortgage Files to the Collateral Agent, on behalf
of the Indenture Trustee or to another custodian, as the case may be, and shall
inure to the benefit of the Indenture Trustee.
Section 3.04 Representations, Warranties and Covenants of the Indenture
Trustee. The Indenture Trustee hereby represents, warrants and covenants to the
Collateral Agent, the Trust, the Servicer, the Back-up Servicer and the
Depositor that as of the date of this Agreement or as of such date specifically
provided herein:
(a) The Indenture Trustee is a banking corporation duly
organized, validly existing and in good standing under the laws of the
State of New York;
(b) The Indenture Trustee has the corporate power and
authority to execute, deliver and perform, and to enter into and
consummate transactions contemplated by this Agreement;
(c) This Agreement has been duly and validly authorized,
executed and delivered by the Indenture Trustee, all requisite
corporate action having been taken, and, assuming the due
authorization, execution and delivery hereof by the other parties
hereto, constitutes or will constitute the legal, valid and binding
agreement of the Indenture Trustee, enforceable against the Indenture
Trustee in accordance with its terms, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights of creditors
generally, and by general equity principles (regardless of whether such
enforcement is considered in a proceeding in equity or at law);
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.02 shall survive delivery of the
respective Indenture Trustee's Mortgage Files to the Collateral Agent, on behalf
of the Indenture Trustee or to another custodian, as the case may be, and shall
inure to the benefit of the Indenture Trustee.
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Section 3.05 Representations, Warranties and Covenants of the Back-up
Servicer. The Back-up Servicer hereby represents, warrants and covenants to the
Indenture Trustee, the Depositor, the Servicer, the Collateral Agent, the Note
Insurer and the Noteholders that as of the date of this Agreement, or as of such
date specifically provided herein:
(a) The Back-up Servicer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada and has the
corporate power to own its assets and to transact the business in which it is
currently engaged. The Back-up Servicer is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which the
character of the business transacted by it or properties owned or leased by it
or the performance of its obligations hereunder requires such qualification and
in which the failure so to qualify could reasonably be expected to have a
material adverse effect on the business, properties, assets, or condition
(financial or other) of the Back-up Servicer or the performance of its
obligations hereunder;
(b) The Back-up Servicer has the power and authority to make, execute,
deliver and perform this Agreement and all of the transactions contemplated
under this Agreement, and has taken all necessary corporate action to authorize
the execution, delivery and performance of this Agreement. When executed and
delivered, this Agreement will constitute the legal, valid and binding
obligation of the Back-up Servicer, enforceable in accordance with its terms,
except as enforcement of such terms may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally and by the
availability of equitable remedies;
(c) The Back-up Servicer is not required to obtain the consent of any
other party or any consent, license, approval or authorization from, or
registration or declaration with, any governmental authority, bureau or agency
which consent already has not been obtained in connection with the execution,
delivery, performance, validity or enforceability of this Agreement, except such
as have been obtained prior to the date hereof;
(d) The execution, delivery and performance of this Agreement by the
Back-up Servicer will not violate any provision of any existing law or
regulation or any order or decree of any court or the Articles of Incorporation
or Bylaws of the Back-up Servicer or constitute a breach of any mortgage,
indenture, contract or other Agreement to which the Back-up Servicer is a party
or by which it may be bound;
(e) There is no action, suit, proceeding or investigation pending or
threatened against the Back-up Servicer which, either in any one instance or in
the aggregate, is, in the Back-up Servicer's judgment, likely to result in any
material adverse change in the business, operations, financial condition,
properties, or assets of the Back-up Servicer, or in any material impairment of
the right or ability of it to carry on its business substantially as now
conducted, or in any material liability on the part of the Back-up Servicer or
which would draw into question the validity of this Agreement, the Certificates,
or the Mortgage Loans or of any action taken or to be taken in connection with
the obligations of the Back-up Servicer contemplated herein or therein, or which
would be likely to impair materially the ability of the Back-up Servicer to
perform its obligations hereunder;
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(f) Neither this Agreement nor any statement, report, or other document
furnished or to be furnished pursuant to this Agreement or in connection with
the transactions contemplated hereby contains any untrue statement of fact
provided by or on behalf of the Back-up Servicer or omits to state a fact
necessary to make the statements provided by or on behalf of the Back-up
Servicer contained herein or therein not misleading; and
(g) The Back-up Servicer does not believe, nor does it have any reason
or cause to believe, that it cannot perform each and every covenant contained in
this Agreement.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.05 shall survive delivery of the
respective Mortgage Files to the Collateral Agent on behalf of the Indenture
Trustee or to a custodian, as the case may be, and shall inure to the benefit of
the Indenture Trustee.
ARTICLE IV.
THE MORTGAGE LOANS
Section 4.01 Representations and Warranties Concerning the Mortgage
Loans. With respect to each Mortgage Loan, the Depositor hereby assigns to the
Trust, pursuant to Section 2.07 of the Unaffiliated Seller's Agreement, the
representations, warranties and covenants of the Unaffiliated Seller and the
Originators set forth in Sections 3.01, 3.02 and 3.03 of the Unaffiliated
Seller's Agreement. Such representations, warranties and covenants are made or
deemed to be made (x) with respect to the Initial Mortgage Loans, as of the
Initial Cut-Off Date and (y) with respect to the Subsequent Mortgage Loans, as
of the related Subsequent Cut-Off Date.
Section 4.02 Purchase and Substitution. (a) It is understood and agreed
that the representations and warranties set forth in Sections 3.01, 3.02 and
3.03 of the Unaffiliated Seller's Agreement shall survive the purchase by the
Depositor of the Mortgage Loans, the subsequent transfer thereof by the
Depositor to the Trust, the subsequent pledge thereof by the Trust to the
Indenture Trustee, for the benefit of the Noteholders and the Notes Insurer, and
the delivery of the Notes to the Noteholders, and shall continue in full force
and effect, notwithstanding any restrictive or qualified endorsement on the
Mortgage Notes and notwithstanding subsequent termination of this Agreement or
the Unaffiliated Seller's Agreement.
(b) Upon discovery by the Unaffiliated Seller, the Depositor, the
Trust, the Back-up Servicer, any Subservicer, the Indenture Trustee, the
Collateral Agent, the Note Insurer or a Noteholder (x) of a breach of any of the
representations and warranties in Sections 3.01, 3.02 or 3.03 of the
Unaffiliated Seller's Agreement which materially and adversely affects the value
of the Mortgage Loans or the interest of the Noteholders or the Note Insurer, or
which materially and adversely affects the interests of the Note Insurer or the
Noteholders in the related Mortgage Loan in the case of a representation and
warranty relating to a particular Mortgage Loan (notwithstanding that such
representation and warranty was made to the Unaffiliated Seller's or the
Originator's best knowledge), or (y) that a Mortgage Loan does not constitute a
Qualified Mortgage, the party discovering such breach or failure shall promptly
17
(and in any event within five (5) days of the discovery) give written notice
thereof to the others. Within sixty (60) days of the earlier of its discovery or
its receipt of notice of any breach of a representation or warranty, the
Servicer shall, or shall cause the Unaffiliated Seller or an Originator to, (a)
promptly cure such breach in all material respects, (b) purchase such Mortgage
Loan on the next succeeding Servicer Distribution Date, in the manner and at the
price specified in Section 2.06(b) and this Section 4.02, or (c) remove such
Mortgage Loan from the Trust Estate (in which case it shall become a Deleted
Mortgage Loan) and substitute one or more Qualified Substitute Mortgage Loans in
the manner specified in Section 2.06(b) and this Section 4.02; provided, that,
with respect to the Mortgage Loans in Pool II, such substitution is effected not
later than the date which is two (2) years after the Startup Day or at such
later date, if the Indenture Trustee and the Note Insurer receive an Opinion of
Counsel to the effect set forth in Section 4.02(e). The Collateral Agent shall
give prompt written notice to the Indenture Trustee, who shall deliver such
notice to the Note Insurer and the Rating Agencies of any repurchase or
substitution made pursuant to this Section 4.02 or Section 2.06(b).
(c) As to any Deleted Mortgage Loan for which the Unaffiliated Seller
substitutes a Qualified Substitute Mortgage Loan or Loans, the Servicer shall
cause the Unaffiliated Seller or an Originator, as applicable, to effect such
substitution by delivering to the Indenture Trustee a certification, in the form
attached hereto as Exhibit F, executed by a Servicing Officer, and the documents
described in Sections 2.05(a)(i)-(vi) for such Qualified Substitute Mortgage
Loan or Loans.
(d) The Servicer shall deposit in the Distribution Account all payments
received in connection with such Qualified Substitute Mortgage Loan or Loans
after the date of such substitution. Monthly Payments received with respect to
Qualified Substitute Mortgage Loan or Loans on or before the date of
substitution will be retained by the Unaffiliated Seller. The Trust will own all
payments received on the Deleted Mortgage Loan on or before the date of
substitution, and the Unaffiliated Seller shall thereafter be entitled to retain
all amounts subsequently received in respect of such Deleted Mortgage Loan. The
Servicer shall give written notice to the Indenture Trustee, the Collateral
Agent, the Back-up Servicer and the Note Insurer that such substitution has
taken place and shall amend the Mortgage Loan Schedule to reflect the removal of
such Deleted Mortgage Loan from the terms of this Agreement and the substitution
of the Qualified Substitute Mortgage Loan or Loans. Upon such substitution, such
Qualified Substitute Mortgage Loan or Loans shall be subject to the terms of
this Agreement in all respects.
(e) Notwithstanding any contrary provision of this Agreement, with
respect to any Mortgage Loan in Pool II which is not in default or as to which
no default is imminent, no purchase or substitution pursuant to Section 2.06(b)
or this Section 4.02 shall be made unless the Unaffiliated Seller provides to
the Indenture Trustee, the Collateral Agent and the Note Insurer an Opinion of
Counsel to the effect that such purchase or substitution would not (i) result in
the imposition of taxes on "prohibited transactions" of the REMIC Trust, as
defined in Section 860F of the Code or a tax on contributions to the REMIC Trust
under the REMIC Provisions, or (ii) cause the REMIC Trust to fail to qualify as
a REMIC at any time that any Class A-2 Notes are outstanding. Any Mortgage Loan
as to which purchase or substitution was delayed pursuant to this Section
4.02(e) shall be purchased or substituted (subject to compliance with Section
2.06 and this Section 4.02) upon the earlier of (x) the occurrence of a default
18
or reasonably foreseeable default with respect to such Mortgage Loan and (y)
receipt by the Indenture Trustee, the Collateral Agent and the Note Insurer of
an Opinion of Counsel to the effect that such purchase or substitution will not
result in the events described in clauses (i) and (ii) of the preceding
sentence.
(f) It is understood and agreed that the obligations of the
Unaffiliated Seller and the Originators set forth in Sections 2.06 and 3.05 of
the Unaffiliated Seller's Agreement to, and the Servicer's obligation set forth
in this Section 4.02 to cause the Unaffiliated Seller and the Originators to,
cure, purchase or substitute for a defective Mortgage Loan, or to indemnify as
described in Section 3.03(h) of the Unaffiliated Seller's Agreement, constitute
the sole remedies of the Indenture Trustee, the Collateral Agent, the Note
Insurer and the Noteholders respecting a breach of the representations and
warranties of the Unaffiliated Seller and the Originators set forth in Sections
3.01, 3.02 and 3.03 of the Unaffiliated Seller's Agreement.
(g) Pursuant to Section 3.03(g) of the Unaffiliated Seller's Agreement,
the Unaffiliated Seller and the Originators shall be obligated to indemnify the
Indenture Trustee, the Collateral Agent, the Noteholders and the Note Insurer
for any third party claims arising out of a breach by the Unaffiliated Seller or
the related Originator of representations or warranties regarding the Mortgage
Loans.
(h) Pursuant to Section 3.03(h) of the Unaffiliated Seller's Agreement,
the Unaffiliated Seller and each of the Originators shall be jointly and
severally responsible for any repurchase, cure or substitution obligation of the
Unaffiliated Seller or any of the Originators under this Agreement or the Sale
and Servicing Agreement.
ARTICLE V.
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
Section 5.01 The Servicer. The Servicer shall service and administer
the Mortgage Loans in accordance with the Accepted Servicing Practices and shall
have full power and authority to do any and all things not inconsistent
therewith in connection with such servicing and administration which it may deem
necessary or desirable subject to the limitations set forth in this Agreement.
The Indenture Trustee shall furnish the Servicer with any powers of attorney and
other documents necessary or appropriate to enable the Servicer to carry out its
servicing and administrative duties hereunder. Without limiting the generality
of the foregoing, the Servicer shall continue, and is hereby authorized and
empowered by the Indenture Trustee, to execute and deliver, on behalf of itself,
the Noteholders and the Indenture Trustee or any of them, any and all
instruments of satisfaction or cancellation, or of partial or full release or
discharge and all other comparable instruments, and to effect such
modifications, waivers, indulgences and other like matters as are in its
judgment necessary or desirable, with respect to the Mortgage Loans and the
Mortgaged Properties and the servicing and administration thereof. The Servicer
shall notify the Indenture Trustee of any such waiver, release, discharge,
modification, indulgence or other such matter by delivering to the Indenture
Trustee an Officer's Certificate certifying that such agreement is in compliance
with this Section 5.01 together with the original copy of any written agreement
or other document executed in connection therewith, all of which written
agreements or documents shall, for all purposes, be considered a part of the
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related Indenture Trustee's Mortgage File to the same extent as all other
documents and instruments constituting a part thereof. Notwithstanding anything
in this Agreement to the contrary, the Servicer shall not permit any
modification with respect to any Mortgage Loan that would decrease the Mortgage
Interest Rate, reduce or increase the principal balance, decrease the lien
priority, or change the final maturity date on or of such Mortgage Loan unless
(i) the Mortgagor is in default with respect to the Mortgage Loan or such
default is, in the judgment of the Servicer, imminent and (ii) the Note Insurer
consents to such modifications in writing; provided, however, that the Servicer
shall be permitted to extend the final maturity date on a Mortgage Loan by 180
days or less without the consent of the Note Insurer.
The relationship of the Servicer (and of any successor to the Servicer
as servicer under this Agreement) to the Indenture Trustee under this Agreement
is intended by the parties to be that of an independent contractor and not that
of a joint venturer, partner or agent.
Section 5.02 Collection of Certain Mortgage Loan Payments; Collection
Account. (a) The Servicer shall make its reasonable efforts to collect all
payments called for under the terms and provisions of the Mortgage Loans, and
shall, to the extent such procedures shall be consistent with this Agreement,
follow Accepted Servicing Practices. Consistent with the foregoing, the Servicer
may in its discretion waive any assumption fees or other fees which may be
collected in the ordinary course of servicing such Mortgage Loans.
(b) The Servicer shall establish and maintain in the name of the
Indenture Trustee the Collection Account, in trust for the benefit of the
Noteholders and the Note Insurer. The Collection Account shall be established
and maintained as an Eligible Account.
(c) The Servicer shall deposit in the Collection Account any amounts
representing Monthly Payments on the Mortgage Loans due or to be applied as of a
date after the Cut-Off Date, and thereafter, on each Business Day (except as
otherwise permitted herein), the following payments and collections received or
made by it (other than in respect of principal collected and interest due on the
Mortgage Loans on or before the Cut-Off Date):
(i) payments of interest on the Mortgage Loans;
(ii) payments of principal of the Mortgage Loans;
(iii) the Loan Repurchase Price of Mortgage Loans repurchased
pursuant to Sections 2.06, 4.02 or 5.05;
(iv) the Substitution Adjustment received in connection with
Mortgage Loans for which Qualified Substitute Mortgage Loans are
received pursuant to Sections 2.06, 4.02 and 3.03;
(v) all Liquidation Proceeds; and
(vi) all Insurance Proceeds (including, for this purpose, any
amounts required to be deposited by the Servicer pursuant to Section
5.04 hereof).
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It is understood that the Servicer need not deposit amounts
representing fees, prepayment premiums, late payment charges or extension or
other administrative charges payable by Mortgagors, or amounts received by the
Servicer for the account of Mortgagors for application towards the payment of
taxes, insurance premiums, assessments and similar items.
(d) The Indenture Trustee shall invest any funds in the Collection
Account in Permitted Investments as directed by the Servicer, which shall mature
not later than the Business Day next preceding the Distribution Date next
following the date of such investment (except that any investment held by the
Indenture Trustee may mature on such Distribution Date) and shall not be sold or
disposed of prior to its maturity. All net income and gain realized from any
such investment shall be for the benefit of the Servicer and shall be subject to
its withdrawal or order on a Distribution Date. The Servicer shall deposit from
its own funds the amount of any loss, to the extent not offset by investment
income or earnings, in the Collection Account upon the realization of such loss.
Section 5.03 Permitted Withdrawals from the Collection Account. The
Indenture Trustee shall make withdrawals from the Collection Account, on any
Distribution Date, for the following purposes:
(a) to reimburse the Servicer for Liquidation Expenses
theretofore incurred in respect of any Mortgage Loan in an amount not
to exceed the amount of the sum of the related Insurance Proceeds and
Liquidation Proceeds deposited in the Collection Account pursuant to
Section 5.02(c)(v)-(vi);
(b) to reimburse the Servicer for amounts expended by it
pursuant to Section 5.04 in good faith in connection with the
restoration of damaged property, in an amount not to exceed the amount
of the related Insurance Proceeds and Liquidation Proceeds (net of
withdrawals pursuant to Section 5.03(a)) and amounts representing
proceeds of other insurance policies covering the property subject to
the related Mortgage deposited in the Collection Account pursuant to
Section 5.02(c)(v)-(vi);
(c) to pay to the Unaffiliated Seller amounts received in
respect of any Defective Mortgage Loan purchased or substituted for by
the Unaffiliated Seller to the extent that the distribution of any such
amounts on the Distribution Date upon which the proceeds of such
purchase are distributed would make the total amount distributed in
respect of any such Mortgage Loan on such Distribution Date greater
than the Loan Repurchase Price or the Substitution Adjustment therefor;
(d) to reimburse the Servicer for unreimbursed Servicing
Advances, without interest, with respect to the Mortgage Loans for
which it has made a Servicing Advance, from subsequent collections with
respect to interest on such Mortgage Loans and from Liquidation
Proceeds, Insurance Proceeds and/or the Loan Repurchase Price or
Substitution Adjustment of or relating to such Mortgage Loans;
(e) to reimburse the Servicer for any Periodic Advances
determined in good faith to have become Nonrecoverable Advances, such
reimbursement to be made from any funds in the Collection Account;
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(f) to withdraw any amount received from a Mortgagor that is
recoverable and sought to be recovered as a voidable preference by a
Indenture Trustee in bankruptcy pursuant to the Bankruptcy Code in
accordance with a final, nonappealable order of a court having
competent jurisdiction;
(g) to withdraw any funds deposited in the Collection Account
that were not required to be deposited therein; and
(h) to pay the Servicer the Servicing Compensation pursuant to
Section 5.08 hereof to the extent not retained or paid.
The Servicer shall keep and maintain a separate accounting for each
Mortgage Loan for the purpose of accounting for withdrawals from the Collection
Account pursuant to this Section 5.03.
Section 5.04 Hazard Insurance Policies; Property Protection Expenses.
(a) The Servicer shall cause to be maintained for each Mortgage Loan a hazard
insurance policy with extended coverage which contains a standard mortgagee's
clause with an appropriate endorsement in an amount equal to the lesser of (x)
the maximum insurable value of the related Mortgaged Property or (y) the sum of
the Principal Balance of such Mortgage Loan plus the outstanding balance of any
mortgage loan senior to such Mortgage Loan, but in no event shall such amount be
less than is necessary to prevent the Mortgagor from becoming a coinsurer
thereunder. The Servicer shall also maintain on property acquired upon
foreclosure, or by deed in lieu of foreclosure, hazard insurance with extended
coverage in an amount which is at least equal to the lesser of (i) the maximum
insurable value from time to time of the improvements which are a part of such
property or (ii) the sum of the Principal Balance of such Mortgage Loan and the
principal balance of any mortgage loan senior to such Mortgage Loan at the time
of such foreclosure plus accrued interest and the good-faith estimate of the
Servicer of related Liquidation Expenses to be incurred in connection therewith.
Amounts collected by the Servicer under any such policies shall be deposited in
the Collection Account to the extent that they constitute Liquidation Proceeds
or Insurance Proceeds. Each hazard insurance policy shall contain a standard
mortgage clause naming the Originator, its successors and assigns, as mortgagee.
The Servicer shall be under no obligation to require that any Mortgagor maintain
earthquake or flood or other additional insurance and shall be under no
obligation itself to maintain any such additional insurance on property acquired
in respect of a Mortgage Loan, other than pursuant to such applicable laws and
regulations as shall at any time be in force and as shall require such
additional insurance.
(b) If the Servicer shall obtain and maintain a blanket policy issued
by an insurer acceptable to the Rating Agencies and the Note Insurer insuring
against hazard losses on all of the Mortgage Loans, it shall conclusively be
deemed to have satisfied its obligations as set forth in Section 5.04(a), it
being understood and agreed that such policy may contain a deductible clause, in
which case the Servicer shall, in the event that there shall not have been
maintained on the related Mortgaged Property a policy complying with Section
5.04(a), and there shall have been a loss which would have been covered by such
policy, deposit in the Collection Account the amount not otherwise payable under
the blanket policy because of such deductible clause.
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(c) If the Mortgaged Property or REO Property is located at the time of
origination of the Mortgage Loan in a federally designated special flood hazard
area (and if the flood insurance policy referenced herein has been made
available), the Servicer will cause to be maintained flood insurance in respect
thereof. Such flood insurance shall be in an amount equal to the lesser of (i)
the sum of the Principal Balance of the related Mortgage Loan and the principal
balance of the related first lien, if any, (ii) the maximum insurable value of
the related Mortgaged Property, and (iii) the maximum amount of such insurance
available for the related Mortgaged Property under the national flood insurance
program (assuming that the area in which such Mortgaged Property is located is
participating in such program).
Section 5.05 Assumption and Modification Agreements. In any case in
which a Mortgaged Property has been or is about to be conveyed by the Mortgagor,
the Servicer shall exercise its right to accelerate the maturity of the related
Mortgage Loan and require that the Principal Balance thereof be paid in full on
or prior to such conveyance by the Mortgagor under any "due-on-sale" clause
applicable thereto. If such "due-on-sale" clause, by its terms, is not operable
or the Servicer is prevented, as provided in the last paragraph of this Section
5.05, from enforcing any such clause, the Servicer is authorized, subject to the
consent of the Note Insurer, to take or enter into an assumption and
modification agreement from or with the Person to whom such property has been or
is about to be conveyed, pursuant to which such Person becomes liable under the
Mortgage Note and the Mortgagor remains liable thereon or, if the Servicer in
its reasonable judgment finds it appropriate, is released from liability
thereon. The Servicer shall notify the Indenture Trustee and the Collateral
Agent that any assumption and modification agreement has been completed by
delivering to the Indenture Trustee, the Collateral Agent and the Note Insurer
an Officer's Certificate certifying that such agreement is in compliance with
this Section 5.05 together with the original copy of such assumption and
modification agreement. Any such assumption and modification agreement shall,
for all purposes, be considered a part of the related Mortgage File to the same
extent as all other documents and instruments constituting a part thereof. In
connection with any such agreement, the then current Mortgage Interest Rate
thereon shall not be increased or decreased. Any fee collected by the Servicer
for entering into any such agreement will be retained by the Servicer as
additional servicing compensation. At its sole election, the Servicer may
purchase from the Trust any Mortgage Loan that has been assumed in accordance
with this Section 5.05 within one month after the date of such assumption at a
price equal to the greater of (i) the fair market value of such Mortgage Loan
(as determined by the Servicer in its good faith judgment) and (ii) the Loan
Repurchase Price. Such amount, if any, shall be deposited into the Collection
Account in the Due Period in which such repurchase is made.
Notwithstanding the foregoing paragraph of this Section 5.05 or any
other provision of this Agreement, the Servicer shall not be deemed to be in
default, breach or any other violation of its obligations hereunder by reason of
any assumption of a Mortgage Loan, or transfer of any Mortgaged Property without
the assumption thereof, by operation of law or any assumption or transfer which
the Servicer reasonably believes it may be restricted by law from preventing for
any reason whatsoever.
Section 5.06 Realization Upon Defaulted Mortgage Loans. (a) The
Servicer shall foreclose upon or otherwise comparably convert to ownership
Mortgaged Properties securing such of the Mortgage Loans as come into and
continue in default and as to which no satisfactory arrangements can be made for
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collection of delinquent payments pursuant to Section 5.02(a). Prior to
conducting any sale in a foreclosure proceeding or accepting a deed-in-lieu of
foreclosure with respect to any Mortgaged Property, the Servicer shall cause an
environmental review to be performed, in accordance with Accepted Servicing
Practices on the Mortgaged Property by a company such as Equifax, Inc. or
Toxicheck. If such review reveals that the Mortgaged Property has on it, under
it or is near hazardous or toxic material or waste or reveals any other
environmental problem, the Servicer shall not foreclose or accept a deed-in-lieu
of foreclosure, without the prior written consent of the Note Insurer. In
connection with such foreclosure or other conversion, the Servicer shall follow
such practices (including, in the case of any default on a related senior
mortgage loan, the advancing of funds to correct such default) and procedures
which are consistent with Accepted Servicing Practices as it shall deem
necessary or advisable and as shall be normal and usual in its general first and
second mortgage loan servicing activities. The foregoing is subject to the
proviso that the Servicer shall not be required to expend its own funds in
connection with any foreclosure or towards the correction of any default on a
related senior mortgage loan or restoration of any property unless, in the
reasonable judgment of the Servicer, such expenses will be recoverable from
Liquidation Proceeds.
(b) In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be issued to the Indenture Trustee, or to its nominee, on behalf of
Noteholders and the Note Insurer. In the event that the Trust acquires any
Mortgaged Property as aforesaid or otherwise in connection with a default or
imminent default on a Mortgage Loan, such Mortgaged Property shall be disposed
of by or on behalf of the Trust within two (2) years after its acquisition by
the Trust unless the Servicer shall have furnished the Indenture Trustee with an
Opinion of Counsel to the effect that the holding by the Trust of such Mortgaged
Property subsequent to two (2) years after its acquisition will not result in
the imposition of taxes on "prohibited transactions" of the Trust as defined in
Section 860F of the Code or cause the Trust to fail to qualify as a REMIC at any
time that any of the Class A-2 Notes are outstanding.
(c) Any Insurance Proceeds or Liquidation Proceeds received with
respect to a Mortgage Loan or REO Property (other than received in connection
with a purchase by the Trust Certificateholders of all the Mortgage Loans and
REO Properties in the Trust Estate pursuant to Section 10.01 of the Indenture)
will be applied in the following order of priority, in each case to the extent
of Available Funds: first, to pay the Servicer any accrued and unpaid Servicing
Fees relating to such Mortgage Loan; second, to reimburse the Servicer or any
Subservicer for any related unreimbursed Servicing Advances, and any related
unreimbursed Periodic Advances theretofore funded by the Servicer or any
Subservicer from its own funds, in each case, with respect to the related
Mortgage Loan; third, to accrued and unpaid interest on the Mortgage Loan, at
the Mortgage Interest Rate (or at such lesser rate as may be in effect for such
Mortgage Loan pursuant to application of the Civil Relief Act) on the Principal
Balance of such Mortgage Loan, to the date such Mortgage Loan is determined to
be a Liquidated Mortgage Loan if it is a Liquidated Mortgage Loan, or to the Due
Date in the Due Period prior to the Distribution Date on which such amounts are
to be distributed if such determination has not yet been made, minus any unpaid
Servicing Fees with respect to such Mortgage Loan; fourth, to the extent of the
Principal Balance of the Mortgage Loan outstanding immediately prior to the
receipt of such proceeds, as a recovery of principal of the related Mortgage
Loan; and fifth, to any prepayment or late payment charges or penalty interest
payable in connection with the receipt of such proceeds and to all other fees
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and charges due and payable with respect to such Mortgage Loan. The amount of
any gross Insurance Proceeds and Liquidation Proceeds received with respect to
any Mortgage Loan or REO Property minus the amount of any unreimbursed Servicing
Advances, unreimbursed Periodic Advances or unpaid Servicing Fees, in each case,
with respect to the related Mortgage Loan, are the "Net Recovery Proceeds" with
respect to such Mortgage Loan or REO Property.
Section 5.07 Indenture Trustee to Cooperate. Upon the payment in full
of the Principal Balance of any Mortgage Loan, the Servicer will notify the
Indenture Trustee and the Collateral Agent by a certification (which
certification shall include a statement to the effect that all amounts received
in connection with such payment which are required to be deposited in the
Collection Account pursuant to Section 5.02 have been so deposited) of a
Servicing Officer. Upon any such payment in full, the Servicer is authorized to
execute, pursuant to the authorization contained in Section 5.01, an instrument
of satisfaction regarding the related Mortgage, which instrument of satisfaction
shall be recorded by the Servicer if required by applicable law and be delivered
to the Person entitled thereto, it being understood and agreed that no expenses
incurred in connection with such instrument of satisfaction shall be reimbursed
from the Collection Account. From time to time and as appropriate for the
servicing or foreclosure of any Mortgage Loan, the Collateral Agent shall, upon
request of the Servicer and delivery to the Collateral Agent of a Request for
Release signed by a Servicing Officer, release the related Mortgage File to the
Servicer and shall execute such documents as shall be necessary for the
prosecution of any such proceedings. Such Request for Release shall obligate the
Servicer to return the Indenture Trustee's Mortgage File to the Collateral Agent
when the need therefor by the Servicer no longer exists unless the Mortgage Loan
shall be liquidated, in which case, upon receipt of a certificate of a Servicing
Officer similar to that hereinabove specified, the Request for Release shall be
released by the Collateral Agent to the Servicer.
Section 5.08 Servicing Compensation; Payment of Certain Expenses by
Servicer. On each Distribution Date, the Servicer shall be entitled to receive,
and the Indenture Trustee shall pay, out of collections on the Mortgage Loans
for the Due Period, as servicing compensation for such Due Period, an amount
(the "Monthly Servicing Fee") equal to the product of one-twelfth of the
Servicing Fee Rate and the aggregate outstanding Principal Balance of each Pool
of Mortgage Loans as of the beginning of such Due Period; provided, however,
that prior to the termination of the Back-up Servicer, the Monthly Servicing Fee
shall be reduced on each Distribution Date by the amount, if any, of the Back-up
Servicing Fee Deficiency on such Distribution Date. The Servicer shall provide
written notice to the Indenture Trustee and the Collateral Agent setting forth
the amount of such reduction at least five (5) Business Days prior to the next
Distribution Date. Additional servicing compensation in the form of assumption
fees, late payment charges or extension and other administrative charges shall
be retained by the Servicer. The Servicer shall be required to pay all expenses
incurred by it in connection with its activities hereunder (including payment of
all fees and expenses of the Subservicer, payment of the Indenture Trustee Fee
and payment of the Collateral Agent Fee to the extent that monies in the
Collection Account are insufficient therefor, as provided in Section 6.16 of the
Indenture and Section 9.05 hereof, and all other fees and expenses not expressly
stated hereunder to be payable by or from another source) and shall not be
entitled to reimbursement therefor except as specifically provided herein.
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Section 5.09 Annual Statement as to Compliance. The Servicer will
deliver to the Indenture Trustee, the Collateral Agent, the Rating Agencies, the
Note Insurer and each Noteholder, on or before April 30 of each year, beginning
April 30, 1999, an Officer's Certificate of the Servicer stating that (a) a
review of the activities of the Servicer during the preceding calendar year and
of its performance under this Agreement has been made under such officer's
supervision and (b) to the best of such officer's knowledge, based on such
review, the Servicer has fulfilled all its material obligations under this
Agreement throughout such year, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof.
Section 5.10 Annual Independent Public Accountants' Servicing Report.
On or before April 30 of each year, beginning April 30, 1999, the Servicer at
its expense shall cause a firm of independent public accountants that is a
member of the American Institute of Certified Public Accountants (who may also
render other services to the Servicer) to furnish a report to the Indenture
Trustee, the Collateral Agent, the Rating Agencies and each Noteholder to the
effect that such firm has examined certain documents and records relating to the
servicing of mortgage loans under servicing agreements (including this
Agreement) substantially similar to this Agreement, and that such examination,
which has been conducted substantially in compliance with the Uniform Single
Attestation Program for Mortgage Bankers (to the extent that the procedures in
such audit guide are applicable to the servicing obligations set forth in such
agreements), has disclosed no items of noncompliance with the provisions of this
Agreement which, in the opinion of such firm, are material, except for such
items of noncompliance as shall be set forth in such report.
Section 5.11 Access to Certain Documentation. The Servicer shall permit
the designated agents or representatives of each Noteholder, the Note Insurer,
the Collateral Agent and the Indenture Trustee (i) to examine and make copies of
and abstracts from all books, records and documents (including computer tapes
and disks) in the possession or under the control of the Servicer relating to
the Mortgage Loans and (ii) to visit the offices and properties of the Servicer
for the purpose of examining such materials and to discuss matters relating to
the Mortgage Loans and the Servicer's performance under this Agreement with any
of the officers or employees of the Servicer having knowledge thereof and with
the independent public accountants of the Servicer (and by this provision the
Servicer authorizes its accountants to discuss their respective finances and
affairs), all at such reasonable times, as often as may be reasonably requested
and without charge to such Noteholder, the Note Insurer, the Collateral Agent or
the Indenture Trustee.
Section 5.12 Maintenance of Fidelity Bond. The Servicer shall during
the term of its service as Servicer maintain in force a fidelity bond and errors
and omissions insurance in respect of its officers, employees or agents. Such
bond and insurance shall comply with the requirements from time to time of the
FNMA for Persons performing servicing for mortgage loans purchased by such
association.
Section 5.13 The Subservicers. The parties acknowledge that the
Servicer intends to appoint the Subservicers as the Servicer's agents for the
purpose of servicing on the Servicer's behalf such of the Mortgage Loans as were
originated in the States of New Jersey, Pennsylvania and New York. The Servicer
agrees to cause the Subservicers to service such Mortgage Loans in a manner
26
consistent with the Accepted Servicing Practices set forth in this Agreement,
and agrees that receipt by the Subservicers of any and all amounts which by the
terms hereof are required to be deposited in the Collection Account shall
constitute receipt thereof by the Servicer for all purposes hereof as of the
date so received by the Subservicers. Notwithstanding such designation of the
Subservicers, the Servicer agrees that it is, and it shall remain, fully
obligated under the terms hereof as Servicer with respect to all such Mortgage
Loans, and nothing herein shall relieve or release the Servicer from its
obligations to the other parties hereto to service such Mortgage Loans in the
manner provided in this Agreement.
Section 5.14 Reports to the Indenture Trustee; Collection Account
Statements; Reports to the Back-up Servicer. (a) Not later than fifteen (15)
days after each Distribution Date, the Servicer shall provide to the Indenture
Trustee, the Collateral Agent, the Back-up Servicer and the Note Insurer a
statement, certified by a Servicing Officer, setting forth the status of the
Collection Account as of the close of business on the related Distribution Date,
stating that all distributions required by this Agreement to be made by the
Servicer on behalf of the Indenture Trustee have been made (or if any required
distribution has not been made by the Servicer, specifying the nature and status
thereof) and showing, for the period covered by such statement, the aggregate of
deposits into and withdrawals from the Collection Account for each category of
deposit specified in Section 5.02 and each category of withdrawal specified in
Section 5.03 and the aggregate of deposits into the Collection Account as
specified in Section 6.01. Such statement shall also state the aggregate unpaid
principal balance of all the Mortgage Loans as of the close of business on the
last day of the month preceding the month in which such Distribution Date
occurs. Copies of such statement shall be provided by the Indenture Trustee to
any Noteholder upon request.
(b) No later than 12:00 noon, New York, New York time on the Servicer
Distribution Date, the Servicer shall deliver to the Back-up Servicer an
electronic transmission acceptable to the Back-up Servicer containing the
Servicer Remittance Report and the Required Information with respect to such
Servicer Distribution Date.
Section 5.15 Optional Purchase of Defaulted Mortgage Loans. (a)
Subject to Section 5.15(b), the Unaffiliated Seller or any Affiliate of the
Unaffiliated Seller, in its sole discretion, shall have the right to elect (by
written notice sent to the Servicer, the Indenture Trustee and the Note
Insurer), but shall not be obligated, to purchase for its own account from the
Trust any Mortgage Loan which is ninety (90) days or more Delinquent in the
manner and at the Loan Purchase Price (except that the amount described in
clause (ii) of the definition of Loan Purchase Price shall in no case be net of
the Servicing Fee). The purchase price for any Mortgage Loan purchased hereunder
shall be deposited in the Collection Account and the Collateral Agent, upon the
Indenture Trustee's receipt of such deposit, shall release or cause to be
released to the purchaser of such Mortgage Loan the related Indenture Trustee's
Mortgage File and shall execute and deliver such instruments of transfer or
assignment prepared by the purchaser of such Mortgage Loan, in each case without
recourse, as shall be necessary to vest in the purchaser of such Mortgage Loan
any Mortgage Loan released pursuant hereto and the purchaser of such Mortgage
Loan shall succeed to all the Indenture Trustee's right, title and interest in
and to such Mortgage Loan and all security and documents related thereto. Such
assignment shall be an assignment outright and not for security. The purchaser
of such Mortgage Loan shall thereupon own such Mortgage Loan, and all security
27
and documents, free of any further obligation to the Indenture Trustee, the
Collateral Agent, the Note Insurer or the Noteholders with respect thereto.
(b) After the Unaffiliated Seller or an Affiliate of the Unaffiliated
Seller has repurchased defaulted Mortgage Loans in a Aggregate Principal Balance
equal to 1% of the Maximum Collateral Amount, then notwithstanding the
foregoing, unless the Note Insurer consents, any such Unaffiliated Seller or
Affiliate of the Unaffiliated Seller may only exercise its option pursuant to
this Section 5.15 with respect to the Mortgage Loan or Mortgage Loans that have
been Delinquent for the longest period at the time of such repurchase. Any
request by the Unaffiliated Seller or Affiliate to the Note Insurer for consent
to repurchase Mortgage Loans that are not the most Delinquent shall be
accompanied by a description of the Mortgage Loans that have been Delinquent
longer than the Mortgage Loan or Mortgage Loans the Unaffiliated Seller or such
Affiliate proposes to repurchase. If the Note Insurer fails to respond to such
request within ten (10) Business Days after receipt thereof, the Unaffiliated
Seller or such Affiliate may repurchase the Mortgage Loan or Mortgage Loans
proposed to be repurchased without the consent of, or any further action by, the
Note Insurer. Notice to the Note Insurer shall be delivered in accordance with
the terms of the Insurance and Indemnity Agreement.
Section 5.16 Reports to be Provided by the Servicer. (a) Two (2)
Business Days prior to each Servicer Distribution Date, the Servicer shall
deliver to the Indenture Trustee a report for such Distribution Date, setting
forth the information required in the definition of "Indenture Trustee's
Remittance Report."
(b) On each Servicer Distribution Date, the Servicer shall deliver to
the Indenture Trustee, the Back-up Servicer, and the Note Insurer (via E-mail at
xxxxxxxx@xxx.xxx) a Servicer Remittance Report for such Servicer Distribution
Date setting forth the following information with respect to all Mortgage Loans
as well as a break out as to (x) consumer purpose and business purpose Mortgage
Loans and (y) each Mortgage Loan Group, in each case, as of the close of
business on the last Business Day of the prior calendar month (except as
otherwise provided in clause (v) below):
(i) the total number of Mortgage Loans and the Aggregate
Principal Balances thereof, together with the number, Aggregate
principal balances of such Mortgage Loans and the percentage (based on
the Aggregate Principal Balances of the Mortgage Loans) of the
Aggregate Principal Balances of such Mortgage Loans to the Aggregate
Principal Balance of all Mortgage Loans (A) 31-59 days Delinquent, (B)
60-89 days Delinquent and (C) 90 or more days Delinquent;
(ii) the number, Aggregate Principal Balances of all Mortgage
Loans and percentage (based on the Aggregate Principal Balances of the
Mortgage Loans) of the Aggregate Principal Balances of such Mortgage
Loans to the aggregate Principal Balance of all Mortgage Loans in
foreclosure proceedings and the number, Aggregate Principal Balances of
all Mortgage Loans and percentage (based on the Aggregate Principal
Balances of the Mortgage Loans) of any such Mortgage Loans also
included in any of the statistics described in the foregoing clause
(i);
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(iii) the number, Aggregate Principal Balances of all Mortgage
Loans and percentage (based on the Aggregate Principal Balances of the
Mortgage Loans) of the Aggregate Principal Balances of such Mortgage
Loans to the Aggregate Principal Balance of all Mortgage Loans relating
to Mortgagors in bankruptcy proceedings and the number, Aggregate
Principal Balances of all Mortgage Loans and percentage (based on the
Aggregate Principal Balances of the Mortgage Loans) of any such
Mortgage Loans also included in any of the statistics described in the
foregoing clause (i);
(iv) the number, Aggregate Principal Balances of all Mortgage
Loans and percentage (based on the Aggregate Principal Balances of the
Mortgage Loans) of the Aggregate Principal Balances of such Mortgage
Loans to the Aggregate Principal Balance of all Mortgage Loans relating
to REO Properties and the number, Aggregate Principal Balances of all
Mortgage Loans and percentage (based on the Aggregate Principal
Balances of the Mortgage Loans) of any such Mortgage Loans also
included in any of the statistics described in the foregoing clause
(i);
(v) the weighted average Mortgage Interest Rate as of the Due
Date occurring in the Due Period related to such Distribution Date;
(vi) the weighted average remaining term to stated maturity of
all Mortgage Loans;
(vii) the book value of any REO Property;
(viii) the Cumulative Loan Losses and the aggregate Cumulative
Loan Losses since the Closing Date; and
(ix) the total number of Mortgage Loans and the Pool Principal
Balance.
(c) In connection with the transfer of the Notes, the Indenture Trustee
on behalf of any Noteholder may request that the Servicer make available to any
prospective Noteholder annual audited financial statements of the Servicer for
one or more of the most recently completed five (5) fiscal years for which such
statements are publicly available, which request shall not be unreasonably
denied or unreasonably delayed. Such annual audited financial statements also
shall be made available to the Note Insurer upon request.
(d) The Servicer also agrees to make available on a reasonable basis to
the Note Insurer or any prospective Noteholder a knowledgeable financial or
accounting officer for the purpose of answering reasonable questions respecting
recent developments affecting the Servicer or the financial statements of the
Servicer and to permit the Note Insurer or any prospective Noteholder to inspect
the Servicer's servicing facilities during normal business hours for the purpose
of satisfying the Note Insurer or such prospective Noteholder that the Servicer
has the ability to service the Mortgage Loans in accordance with this Agreement.
Section 5.17 Adjustment of Servicing Compensation in Respect of Prepaid
Mortgage Loans. The Monthly Servicing Fee that the Servicer shall be entitled to
receive with respect to each Mortgage Loan and each Distribution Date shall be
offset on such Distribution Date by an amount equal to the Prepayment Interest
Shortfall with respect to such Mortgage Loan to the extent that it is the
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subject of Principal Prepayments during the month preceding the month of such
Distribution Date. The amount of any offset against the Monthly Servicing Fee
with respect to any Distribution Date under this Section 5.17 shall be limited
to the Monthly Servicing Fee otherwise payable to the Servicer (without
adjustment on account of Prepayment Interest Shortfalls) with respect to such
Mortgage Loan, and the rights of the Noteholders to the offset of the aggregate
Prepayment Interest Shortfalls against the Monthly Servicing Fee shall not be
cumulative.
Section 5.18 Periodic Advances; Special Advance. (a) If, on any
Servicer Distribution Date, the Servicer determines that any Monthly Payments
due on the Due Date immediately preceding such Servicer Distribution Date have
not been received as of the close of business on the Business Day preceding such
Servicer Distribution Date, the Servicer shall determine the amount of any
Periodic Advance required to be made with respect to the related Distribution
Date. The Servicer shall, one (1) Business Day after such Servicer Distribution
Date, deliver a magnetic tape or diskette to the Indenture Trustee indicating
the payment status of each Mortgage Loan as of such Servicer Distribution Date.
The Servicer shall include in the amount to be deposited in the Collection
Account on such Servicer Distribution Date an amount equal to the Periodic
Advance, if any, which deposit may be made in whole or in part from funds in the
Collection Account being held for future distribution or withdrawal on or in
connection with Distribution Dates in subsequent months. Any funds being held
for future distribution to Noteholders and so used shall be replaced by the
Servicer from its own funds by deposit in the Collection Account on or before
the Business Day preceding any such future Servicer Distribution Date to the
extent that funds in the Collection Account on such Servicer Distribution Date
shall be less than payments to Noteholders required to be made on such date.
The Servicer shall designate on its records the specific Mortgage Loans
and related installments (or portions thereof) as to which such Periodic Advance
shall be deemed to have been made, such determination being conclusive for
purposes of withdrawals from the Collection Account pursuant to Section 5.03
hereof.
(b) In addition to the Periodic Advances the Servicer shall make
special advances ("Special Advances") on the Servicer Distribution Date
occurring in December 1998, of $ 331,648.85, with respect to interest on
Mortgage Loans in Pool I not having their first payment due until after November
1998 and $58,645.48 with respect to interest on Mortgage Loans in Pool II not
having their first payment due until after November 1998, and Special Advances
of $1,854.42 on the Servicer Distribution Date occurring in January 1999, with
respect to interest on Mortgage Loans in Pool I not having their first payment
due until after December 1998 and $6,293.26, with respect to interest on
Mortgage Loans not having their first payment due until after December 1998. The
Special Advances shall be made without regard to recoverability, and shall not
be reimbursable. In no event shall the Indenture Trustee, as successor Servicer,
be liable for the payment of the Special Advances.
Section 5.19 Indemnification; Third Party Claims. (a) The Servicer
agrees to indemnify and to hold each of the Trust, the Owner Trustee, the
Depositor, the Indenture Trustee, the Collateral Agent, the Unaffiliated Seller,
the Note Insurer, the Back-up Servicer and each Noteholder harmless against any
and all claims, losses, penalties, fines, forfeitures, legal fees and related
costs, judgments, and any other costs, fees and expenses that the Trust, the
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Owner Trustee, the Depositor, the Indenture Trustee, the Collateral Agent, the
Unaffiliated Seller, the Note Insurer and any Noteholder may sustain in any way
related to the failure of the Servicer to perform its duties and service the
Mortgage Loans in compliance with the terms of this Agreement and the other
Basic Document. Each indemnified party and the Servicer shall immediately notify
the other indemnified parties if a claim is made by a third party with respect
to this Agreement and the other Basic Documents, and the Servicer shall assume
the defense of any such claim and pay all expenses in connection therewith,
including reasonable counsel fees, and promptly pay, discharge and satisfy any
judgment or decree which may be entered against the Trust, the Owner Trustee,
the Depositor, the Servicer, the Indenture Trustee, the Collateral Agent, the
Unaffiliated Seller, the Note Insurer, the Back-up Servicer and/or a Noteholder
in respect of such claim. The Indenture Trustee shall reimburse the Servicer in
accordance with Section 5.08 hereof for all amounts advanced by it pursuant to
the preceding sentence except to the extent that the claim relates directly to
the failure of the Servicer to service and administer the Mortgages in
compliance with the terms of this Agreement; provided, that the Servicer's
indemnity hereunder shall not be in any manner conditioned on the availability
of funds for such reimbursement.
(b) The Indenture Trustee may, if necessary, reimburse the Servicer
from amounts otherwise distributable on the related Trust Certificates for all
amounts advanced by it pursuant to Section 4.04(a)(ii) of the Unaffiliated
Seller's Agreement, except to the extent that the claim relates directly to the
failure of the Servicer, if it is the Unaffiliated Seller, or is an Affiliate of
the Unaffiliated Seller, to perform its obligations to service and administer
the Mortgages in compliance with the terms of the Unaffiliated Seller's
Agreement and this Agreement, or the failure of the Unaffiliated Seller to
perform its duties in compliance with the terms of this Agreement.
(c) The Indenture Trustee shall reimburse the Unaffiliated Seller from
amounts otherwise distributable on the related Trust Certificates for all
amounts advanced by the Unaffiliated Seller pursuant to the second sentence of
Section 4.04(a)(ii) of the Unaffiliated Seller's Agreement except when the
relevant claim relates directly to the failure of the Unaffiliated Seller to
perform its duties in compliance with the terms of the Unaffiliated Seller's
Agreement.
Section 5.20 Maintenance of Corporate Existence and Licenses; Merger or
Consolidation of the Servicer. (a) The Servicer will keep in full effect its
existence, rights and franchises as a corporation, will obtain and preserve its
qualification to do business as a foreign corporation in each jurisdiction
necessary to protect the validity and enforceability of this Agreement or any of
the Mortgage Loans and to perform its duties under this Agreement and will
otherwise operate its business so as to cause the representations and warranties
under Section 3.01 to be true and correct at all times under this Agreement.
(b) Any Person into which the Servicer may be merged or consolidated,
or any corporation resulting from any merger, conversion or consolidation to
which the Servicer shall be a party, or any Person succeeding to the business of
the Servicer, shall be an established mortgage loan servicing institution that
has a net worth of at least $15,000,000 and is a Permitted Transferee, and in
all events shall be the successor of the Servicer without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
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anything herein to the contrary notwithstanding. The Servicer shall send notice
of any such merger or consolidation to the Owner Trustee, the Indenture Trustee,
the Collateral Agent and the Note Insurer.
Section 5.21 Assignment of Agreement by Servicer; Servicer Not to
Resign. The Servicer shall not assign this Agreement nor resign from the
obligations and duties hereby imposed on it except by mutual consent of the
Trust, the Depositor, the Servicer, the Unaffiliated Seller, the Note Insurer,
the Collateral Agent, the Back-up Servicer and the Indenture Trustee or upon the
determination that the Servicer's duties hereunder are no longer permissible
under applicable law and that such incapacity cannot be cured by the Servicer
without incurring, in the reasonable judgment of the Note Insurer, unreasonable
expense. Any such determination that the Servicer's duties hereunder are no
longer permissible under applicable law permitting the resignation of the
Servicer shall be evidenced by a written Opinion of Counsel (who may be counsel
for the Servicer) to such effect delivered to the Indenture Trustee, the
Collateral Agent, the Back-up Servicer, the Unaffiliated Seller, the Trust, the
Depositor and the Note Insurer. No such resignation shall become effective until
the Indenture Trustee or a successor appointed in accordance with the terms of
this Agreement has assumed the Servicer's responsibilities and obligations
hereunder in accordance with Section 7.02. The Servicer shall provide the
Indenture Trustee, the Collateral Agent, the Rating Agencies and the Note
Insurer with 30 days' prior written notice of its intention to resign pursuant
to this Section 5.21.
Section 5.22 Periodic Filings with the Securities and Exchange
Commission; Additional Information. The Indenture Trustee shall prepare or cause
to be prepared for filing with the Commission (other than the initial Current
Report on Form 8-K to be filed by the Depositor in connection with the issuance
of the Notes) any and all reports, statements and information respecting the
Trust and/or the Notes required to be filed, and shall solicit any and all
proxies of the Noteholders whenever such proxies are required to be solicited,
pursuant to the Securities Exchange Act of 1934, as amended. The Depositor shall
promptly file, and exercise its reasonable best efforts to obtain a favorable
response to, no-action requests with, or other appropriate exemptive relief
from, the Commission seeking the usual and customary exemption from such
reporting requirements granted to issuers of securities similar to the Notes.
Fees and expenses incurred by the Indenture Trustee in connection with the
foregoing shall be reimbursed pursuant to Section 6.16 of the Indenture and
shall not be paid by the Trust.
The Servicer and the Depositor each agree to promptly furnish to the
Indenture Trustee, from time to time upon request, such further information,
reports and financial statements as the Indenture Trustee deems appropriate to
prepare and file all necessary reports with the Commission.
Section 5.23 Duties of Back-up Servicer. (a) Commencing with the date
of this Agreement, the Back-up Servicer shall perform its duties in accordance
with paragraph (b) below, and as further required by this Agreement until such
time as the services of the Back-up Servicer are terminated by the Servicer
(with the consent of the Certificate Insurer) by written notice to the Back-up
Servicer, (i) in accordance with Section 7.02(f), or (ii) in connection with the
termination of this Agreement in accordance with Section 8.01.
(b) Upon receiving the Servicer Remittance Report and the Required
Information in an electronic transmission from the Servicer in accordance with
Section 5.14 on each Servicer Distribution Date, the Back-up Servicer shall use
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such electronic transmission to (i) confirm it is in readable form, (ii) confirm
the data included in such electronic transmission has been successfully loaded
onto the servicing system of the Back-up Servicer and (iii) with respect to the
first Servicer Distribution Date after the date of this Agreement only, compare
the following information contained in the Servicer Remittance Report with that
contained in the Required Information: (A) the total number of Mortgage Loans,
(B) the aggregate Principal Balance of the Mortgage Loans, (C) the weighted
average Mortgage Interest Rate of the Mortgage Loans and (D) the Aggregate
Principal Balance of the Mortgage Loans which are (1) thirty (30) days
Delinquent, (2) sixty (60) days Delinquent, (3) ninety (90) days Delinquent, (4)
the underlying properties of which are subject to foreclosure proceedings at
such time and (5) REO Mortgage Loans. The Back-up Servicer shall immediately
notify the Servicer, the Note Insurer and the Indenture Trustee if such
electronic transmission does not comply with clauses (i), (ii) and (iii) above.
Within ten (10) days of each Distribution Date after the date of this Agreement,
the Back-up Servicer shall deliver an Officer's Certificate to the Note Insurer,
the Indenture Trustee and the Servicer certifying compliance by the Back-up
Servicer with this Section 5.23.
(c) No payments are payable by the Trust to the Back-up Servicer in
connection with the commencement of its services hereunder, or any termination
under Section 7.02, other than as provided under Sections 5.07 and 8.02 of the
Indenture (as amended by Supplemental Indenture No. 1).
ARTICLE VI.
APPLICATION OF FUNDS
Section 6.01 Deposits to the Distribution Account. On each Servicer
Distribution Date, the Servicer shall cause to be deposited in the Distribution
Account, from funds on deposit in the Collection Account, (a) an amount equal to
the Servicer Remittance Amount and (b) Net Foreclosure Profits, if any with
respect to the related Distribution Date, minus any portion thereof payable to
the Servicer pursuant to Section 5.03. On each Servicer Distribution Date, the
Servicer shall also deposit into the Distribution Account any Periodic Advances
with respect to the related Distribution Date calculated in accordance with
Section 5.18 and any amounts required to be deposited in connection with a
Subsequent Mortgage Loan pursuant to Section 2.14(b) of the Indenture; on the
Servicer Distribution Dates occurring in December 1998 and January 1999, the
Servicer also will deposit the related Special Advance pursuant to Section
5.18(b).
Section 6.02 Collection of Money. Except as otherwise expressly
provided herein, the Indenture Trustee may demand payment or delivery of all
money and other property payable to or receivable by the Indenture Trustee
pursuant to this Agreement, including (a) all payments due on the Mortgage Loans
in accordance with the respective terms and conditions of such Mortgage Loans
and required to be paid over to the Indenture Trustee by the Servicer or by any
Subservicer and (b) Insured Payments. The Indenture Trustee shall hold all such
money and property received by it, as part of the Trust Estate and shall apply
it as provided in the Indenture.
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Section 6.03 Application of Principal and Interest. In the event that
Net Liquidation Proceeds on a Liquidated Mortgage Loan are less than the
Principal Balance of the related Mortgage Loan plus accrued interest thereon, or
any Mortgagor makes a partial payment of any Monthly Payment due on a Mortgage
Loan, such Net Liquidation Proceeds or partial payment shall be applied to
payment of the related Mortgage Note as provided therein, and if not so
provided, first to interest accrued at the Mortgage Interest Rate and then to
principal.
Section 6.04 Information Concerning the Mortgage Loans. No later than
12:00 noon Pennsylvania time on the fourth Business Day preceding each
Distribution Date, the Servicer shall deliver to the Indenture Trustee and the
Back-up Servicer a report in computer-readable form containing such information
as to each Mortgage Loan and as to each Mortgage Loan Group as of such
Distribution Date and such other information as the Indenture Trustee shall
reasonably require.
Section 6.05 Compensating Interest. Not later than the close of
business on the third Business Day prior to the Distribution Date, the Servicer
shall remit to the Indenture Trustee (without right to reimbursement therefor)
for deposit into the related Distribution Account, an amount equal to, for each
Mortgage Loan, the lesser of (a) the Prepayment Interest Shortfall for such
Mortgage Loan for the related Distribution Date resulting from Principal
Prepayments during the related Due Period and (b) its Monthly Servicing Fees
with respect to such Mortgage Loan received in the related Due Period and shall
not have the right to reimbursement therefor (the "Compensating Interest").
Section 6.06 Effect of Payments by the Note Insurer; Subrogation.
Anything herein to the contrary notwithstanding, any payment with respect to
principal of or interest on the Notes which is made with moneys received
pursuant to the terms of the Note Insurance Policy shall not be considered
payment of the Notes from the Trust Estate. The Depositor, the Servicer, the
Trust, the Collateral Agent and the Indenture Trustee acknowledge and agree,
that without the need for any further action on the part of the Note Insurer,
the Depositor, the Servicer, the Trust, the Collateral Agent, the Indenture
Trustee or the Note Registrar (a) to the extent the Note Insurer makes payments,
directly or indirectly, on account of principal of or interest on the Notes to
the Holders of such Notes, the Note Insurer will be fully subrogated to, and
each Noteholder, the Servicer, the Depositor, the Trust, the Collateral Agent
and the Indenture Trustee hereby delegate and assign to the Note Insurer, to the
fullest extent permitted by law, the rights of such Holders to receive such
principal and interest from the Trust Estate, including, without limitation, any
amounts due to the Noteholders in respect of securities law violations arising
from the offer and sale of the Notes, and (b) the Note Insurer shall be paid
such amounts from the sources and in the manner provided herein for the payment
of such amounts and as provided in the Insurance Agreement. The Indenture
Trustee, the Collateral Agent and the Servicer shall cooperate in all respects
with any reasonable request by the Note Insurer for action to preserve or
enforce the Note Insurer's rights or interests under this Agreement without
limiting the rights or affecting the interests of the Holders as otherwise set
forth herein.
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ARTICLE VII.
SERVICER DEFAULT
Section 7.01 Servicer Events of Default. (a) The following events shall
each constitute a "Servicer Event of Default" hereunder:
(i) any failure by the Servicer to remit to the Indenture
Trustee any payment required to be made by the Servicer under the terms
of this Agreement (other than Servicing Advances covered by clause (ii)
below), which continues unremedied for one (1) Business Day after the
date upon which written notice of such failure, requiring the same to
be remedied, shall have been given to the Servicer and the Note Insurer
by the Indenture Trustee or to the Servicer and the Indenture Trustee
by the Note Insurer or Noteholders of Notes evidencing Percentage
Interests of at least 25%;
(ii) the failure by the Servicer to make any required
Servicing Advance, which failure continues unremedied for a period of
thirty (30) days after the date on which written notice of such
failure, requiring the same to be remedied, shall have been given to
the Servicer by the Indenture Trustee or to the Servicer and the
Indenture Trustee by any Noteholder or the Note Insurer;
(iii) any failure on the part of the Servicer duly to observe
or perform in any material respect any other of the covenants or
agreements on the part of the Servicer contained in this Agreement, or
the failure of any representation and warranty made pursuant to Section
3.01(a) hereof to be true and correct which continues unremedied for a
period of thirty (30) days after the date on which written notice of
such failure, requiring the same to be remedied, shall have been given
to the Servicer by the Back-up Servicer or the Indenture Trustee or to
the Servicer and the Indenture Trustee by any Noteholder or the Note
Insurer;
(iv) a decree or order of a court or agency or supervisory
authority having jurisdiction in an involuntary case under any present
or future federal or state bankruptcy, insolvency or similar law or for
the appointment of a conservator or receiver or liquidation in any
insolvency, readjustment of debt, marshalling of assets and liabilities
or similar proceedings, or for the winding-up or liquidation of its
affairs, shall have been entered against the Servicer and such decree
or order shall have remained in force, undischarged or unstayed for a
period of sixty (60) days;
(v) the Servicer shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment
of debt, marshalling of assets and liabilities or similar proceedings
of or relating to the Servicer or of or relating to all or
substantially all of the Servicer's property;
(vi) the Servicer shall admit in writing its inability
generally to pay its debts as they become due, file a petition to take
advantage of any applicable insolvency or reorganization statute, make
an assignment for the benefit of its creditors, or voluntarily suspend
payment of its obligations;
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(vii) the Note Insurer shall notify the Indenture Trustee of
any "event of default" under the Insurance Agreement;
(viii) if on any Distribution Date the Rolling Six Month
Delinquency Rate exceeds 12.75% for Mortgage Loan Pool I and 12.75% for
Mortgage Loan Pool II;
(ix) if on any Distribution Date, commencing in December 1999,
the Twelve Month Loss Amount exceeds 1.75% of the aggregate outstanding
Principal Balance for the Mortgage Loans in Pool I and 1.75% for the
Mortgage Loans in Pool II, as of the close of business on the first day
of the twelfth preceding calendar month;
(x) if (a) on any Distribution Date occurring before December
1, 1999, the aggregate Cumulative Loan Losses since the Initial Cut-Off
Date exceed 1.00% of the Original Pool Principal Balance, (b) on any
Distribution Date on or after December 1, 1999 and before December 1,
2000, the aggregate Cumulative Loan Losses since the Initial Cut-Off
Date exceed 1.50% of the Original Pool Principal Balance, (c) on any
Distribution Date on or after December 1, 2000 and before December 1,
2001, the aggregate Cumulative Loan Losses since the Initial Cut-Off
Date exceed 2.25% of the Original Pool Principal Balance, (d) on any
Distribution Date on or after December 1, 2001 and before December 1,
2002, the aggregate Cumulative Loan Losses since the Initial Cut-Off
Date exceed 3.00% of the Original Pool Principal Balance, or (e) on any
Distribution Date on or after December 1, 2002, the aggregate
Cumulative Loan Losses since the Initial Cut-Off Date exceed 3.75% of
the Original Pool Principal Balance;
(xi) the occurrence of an Event of Default under the
Indenture; or
(xii) a Servicer Extension Notice shall not have been
delivered as set forth in Section 8.04 hereof.
(b) So long as a Servicer Event of Default shall have occurred and not
have been remedied: (x) with respect solely to Section 7.01(a)(i), if such
payment is in respect of Periodic Advances or Compensating Interest owing by the
Servicer and such payment is not made by 12:00 noon New York time on the second
Business Day prior to the applicable Distribution Date, the Indenture Trustee,
upon receipt of written notice or discovery by a Responsible Officer of such
failure, shall give immediate telephonic and facsimile notice of such failure to
a Servicing Officer of the Servicer and to the Note Insurer and the Indenture
Trustee shall, with the consent of the Note Insurer, terminate all of the rights
and obligations of the Servicer under this Agreement, except for the Servicer's
indemnification obligation under Section 5.19, and the Back-up Servicer, or a
successor Servicer appointed in accordance with Section 7.02, shall immediately
make such Periodic Advance or payment of Compensating Interest and assume,
pursuant to Section 7.02 hereof, the duties of a successor Servicer; provided,
however, that the Back-up Servicer shall not be required to act as successor
servicer until such time as the Back-up Servicer has agreed in writing with the
Indenture Trustee and the Note Insurer to so act; (y) with respect to that
portion of Section 7.01(a)(i) not referred to in the preceding clause (x) and
with respect to clauses (ii), (iii), (iv), (v), (vi) and (vii) of Section 7.01,
the Indenture Trustee shall, but only at the direction of the Note Insurer or
the Majority Noteholders, by notice in writing to the Servicer and the Back-up
Servicer and a Responsible Officer of the Indenture Trustee and subject to the
36
prior written consent of the Note Insurer, in the case of any removal at the
direction of the Majority Noteholders, and in addition to whatever rights such
Noteholders may have at law or equity to damages, including injunctive relief
and specific performance, terminate all the rights and obligations of the
Servicer under this Agreement and in and to the Mortgage Loans and the proceeds
thereof, as servicer; and (z) with respect to clauses (viii)-(x) of Section
7.01(a), the Indenture Trustee shall, but only at the direction of the Note
Insurer, after notice in writing to the Servicer, the Back-up Servicer and a
Responsible Officer of the Indenture Trustee, terminate all the rights and
obligations of the Servicer under this Agreement and in and to the Mortgage
Loans and the proceeds thereof, as Servicer. Upon receipt by the Servicer of
such written notice, all authority and power of the Servicer under this
Agreement, whether with respect to the Mortgage Loans or otherwise, shall,
subject to Section 7.02, pass to and be vested in the Back-up Servicer or its
designee approved by the Note Insurer, and the Back-up Servicer is hereby
authorized and empowered to execute and deliver, on behalf of the Servicer, as
attorney-in-fact or otherwise, at the expense of the Servicer, any and all
documents and other instruments and do or cause to be done all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, including, but not limited to, the transfer and endorsement or
assignment of the Mortgage Loans and related documents. The Servicer agrees to
cooperate (and pay any related costs and expenses) with the Indenture Trustee in
effecting the termination of the Servicer's responsibilities and rights
hereunder, including, without limitation, the transfer to the Back-up Servicer,
or its designee, for administration by it of all amounts which shall at the time
be credited by the Servicer to the Collection Account or thereafter received
with respect to the Mortgage Loans. The Indenture Trustee shall promptly notify
the Note Insurer and the Rating Agencies of the occurrence of a Servicer Event
of Default.
Section 7.02 Back-up Servicer to Act; Appointment of Successor. (a) On
and after the time the Servicer receives a notice of termination pursuant to
Section 7.01 or fails to receive a Servicer Extension Notice pursuant to Section
8.04, or the Indenture Trustee receives the resignation of the Servicer
evidenced by an Opinion of Counsel pursuant to Section 5.21, or the Servicer is
removed as Servicer pursuant to this Article VII, in which event the Indenture
Trustee shall promptly notify the Rating Agencies, except as otherwise provided
in Section 7.01, the Back-up Servicer shall be the successor in all respects to
the Servicer in its capacity as servicer under this Agreement and the
transactions set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Servicer
by the terms and provisions hereof arising on or after the date of succession;
provided, however, that the Back-up Servicer shall not be liable for any actions
or the representations and warranties of any Servicer prior to it and including,
without limitation, the obligations of the Servicer set forth in Sections 2.06
and 4.02 hereof; provided, further, that the Back-up Servicer shall be entitled
to be indemnified by American Business Credit, Inc., in its capacity as the
Servicer, in accordance with Section 5.19 and/or from the Payment Accounts
pursuant to Section 8.02 of the Indenture for any losses or liabilities
resulting from the actions of any prior servicer, unless such losses or
liabilities result from the gross negligence, willful misconduct or reckless
disregard of the Back-up Servicer. The Back-up Servicer, as successor Servicer,
shall be obligated to pay Compensating Interest pursuant to Section 6.05 in any
event and to make advances pursuant to Section 5.18 unless, and only to the
extent the Back-up Servicer determines reasonably and in good faith that such
advances would not be recoverable pursuant to Section 5.04, such determination
37
to be evidenced by a certification of a Responsible Officer of the Back-up
Servicer delivered to the Note Insurer.
(b) Notwithstanding the above, the Indenture Trustee may, if the
Back-up Servicer shall be unwilling to so act, or shall, if the Back-up Servicer
is unable to so act or if the Majority Noteholders with the consent of the Note
Insurer or the Note Insurer so requests in writing to the Indenture Trustee,
appoint, pursuant to such direction of the Majority Noteholders and Note Insurer
or the Note Insurer, or if no such direction is provided to the Indenture
Trustee, pursuant to the provisions set forth in Section 7.02(c), or petition a
court of competent jurisdiction to appoint, any established mortgage loan
servicing institution acceptable to the Note Insurer that has a net worth of not
less than $15,000,000 as the successor to the Servicer hereunder in the
assumption of all or any part of the responsibilities, duties or liabilities of
the Servicer hereunder. Notwithstanding any other provisions of this Agreement,
prior to the Back-up Servicer becoming the Servicer hereunder, the Depositor and
the Servicer intend to revise this Agreement to remove certain provisions not
applicable to a substitute servicer and to revise and add certain provisions to
make this Agreement applicable to a substitute servicer. Without limitation,
these provisions include Sections 2.08; 3.01; 4.02; 5.03(d); 5.04; 5.06; 5.08;
5.13; 5.18(b); 7.01; and 8.04; and, with respect to Section 9.05, the Back-up
Servicer, prior to becoming the Service hereunder, will require reimbursement
for any of the Collateral Agent's expenses it is required to pay pursuant to
Section 9.05. Such reimbursement shall be paid by a Person other than the
Collateral Agent. In no event will the Collateral Agent or the Indenture Trustee
assume, nor do any of the parties hereto anticipate that the Indenture Trustee
will assume, any added responsibilities as a result of the removal, revision or
addition of any provisions, including, without limitation, to the Sections
listed herein upon the Back-up Servicer becoming the Servicer hereunder. These
revisions may be made only upon the agreement of the Servicer, the Depositor and
the Indenture Trustee, with the prior written consent of the Note Insurer, in
all cases in accordance with Section 10.03 hereof; provided, however, should it
become necessary to appoint a successor servicer hereunder and no agreement is
reached providing for the Back-up Servicer to become Servicer hereunder, then
the services of the Back-up Servicer will be terminated and the Back-up Servicer
will no longer be entitled to the Back-up Servicing Fee.
(c) In the event the Back-up Servicer is the successor Servicer, it
shall be entitled to the same Servicing Compensation (including the Servicing
Fee as adjusted pursuant to the definition thereof) and other funds pursuant to
Section 5.08 hereof as the Servicer if the Servicer had continued to act as
servicer hereunder. In the event the Back-up Servicer is unable or unwilling to
act as successor Servicer, or, if the Note Insurer so directs, the Indenture
Trustee shall appoint such other entity as may be designated by the Note Insurer
or, if the Note Insurer shall not have designated another entity within 30 days
following written notice to the Trustee and the Note Insurer by the Back-up
Servicer that it will not serve as successor servicer, then, the Indenture
Trustee shall solicit, by public announcement, bids from housing and home
finance institutions, banks and mortgage servicing institutions meeting the
qualifications set forth above. Such public announcement shall specify that the
successor servicer shall be entitled to the full amount of the aggregate
Servicing Fees hereunder as servicing compensation, together with the other
Servicing Compensation. Within thirty (30) days after any such public
announcement, the Indenture Trustee shall negotiate and effect the sale,
transfer and assignment of the servicing rights and responsibilities hereunder
to the qualified party submitting the highest qualifying bid. The Indenture
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Trustee shall deduct from any sum received by the Indenture Trustee from the
successor to the Servicer in respect of such sale, transfer and assignment all
costs and expenses of any public announcement and of any sale, transfer and
assignment of the servicing rights and responsibilities hereunder and the amount
of any unreimbursed Servicing Advances and Periodic Advances owed to the
Indenture Trustee. After such deductions, the remainder of such sum shall be
paid by the Indenture Trustee to the Servicer at the time of such sale, transfer
and assignment to the Servicer's successor.
(d) The Indenture Trustee and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession. The Servicer agrees to cooperate with the Indenture Trustee and any
successor Servicer in effecting the termination of the Servicer's servicing
responsibilities and rights hereunder and shall promptly provide the Indenture
Trustee or such successor Servicer, as applicable, at the Servicer's cost and
expense, all documents and records reasonably requested by it to enable it to
assume the Servicer's functions hereunder and shall promptly also transfer to
the Indenture Trustee or such successor servicer, as applicable, all amounts
that then have been or should have been deposited in the Collection Account by
the Servicer or that are thereafter received with respect to the Mortgage Loans.
Any collections received by the Servicer after such removal or resignation shall
be endorsed by it to the Indenture Trustee and remitted directly to the
Indenture Trustee or, at the direction of the Indenture Trustee, to the
successor Servicer. Neither the Indenture Trustee nor any other successor
Servicer shall be held liable by reason of any failure to make, or any delay in
making, any distribution hereunder or any portion thereof caused by (i) the
failure of the Servicer to deliver, or any delay in delivering, cash, documents
or records to it, or (ii) restrictions imposed by any regulatory authority
having jurisdiction over the Servicer hereunder. Notwithstanding anything to the
contrary herein, no appointment of a successor Servicer under this Agreement
shall be effective until the Indenture Trustee and the Note Insurer shall have
consented thereto, and written notice of such proposed appointment shall have
been provided by the Indenture Trustee to the Note Insurer and to each
Noteholder. The Indenture Trustee shall not resign as Servicer until a successor
Servicer reasonably acceptable to the Note Insurer has been appointed. The Note
Insurer shall have the right to remove the Indenture Trustee as successor
Servicer under this Section 7.02 without cause, and the Back-up Servicer shall
appoint such other successor Servicer as directed by the Note Insurer.
(e) Subject to Section 7.02(b), pending appointment of a successor
Servicer hereunder, the Indenture Trustee shall act in such capacity as
hereinabove provided. In connection with such appointment and assumption, the
Indenture Trustee may make such arrangements for the compensation of such
successor Servicer out of payments on Mortgage Loans as it and such successor
shall agree; provided, however, that unless agreed to by the Note Insurer no
such compensation shall be in excess of that permitted the Servicer pursuant to
Section 5.08, together with other Servicing Compensation. The Servicer, the
Indenture Trustee and such successor Servicer shall take such action, consistent
with this Agreement, as shall be necessary to effectuate any such succession.
(f) Upon the earliest to occur of (i) the appointment and qualification
of any successor servicer (whether it shall be the Back-up Servicer or another
entity), (ii) notice by the Note Insurer, given in its sole discretion on any
date on or after twelve months from the date of this Agreement, to the Back-up
Servicer, with a copy to the Collateral Agent, the Indenture Trustee and the
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Servicer, or (iii) termination of the Back-up Servicer for cause as provided in
the succeeding sentence, the obligations of the Back-up Servicer under Section
5.23 shall terminate, without expense to the Trust, and the Back-up Servicer
shall no longer be entitled to the Back-up Servicing Fee. On any Distribution
Date prior to the date which is twelve months from the date of this Agreement,
if the Back-up Servicer shall not have submitted an Officer's Certificate (as
required by Section 5.23 hereof) evidencing the performance by it of its duties
for the related Due Period, the Note Insurer may, by notice to the Back-up
Servicer with a copy to the Indenture Trustee and the Servicer, terminate the
obligations of the Back-up Servicer hereunder, effective 30 days from the date
of such notice, unless the Back-up Servicer cures such failure within such 30
day period, or demonstrates to the Note Insurer's satisfaction that its failure
to perform was due to circumstances beyond the control of the Back-up Service.
Section 7.03 Waiver of Defaults. The Majority Noteholders may, on
behalf of all Noteholders, and subject to the consent of the Note Insurer, waive
any events permitting removal of the Servicer as servicer pursuant to this
Article VII; provided, however, that the Majority Noteholders may not waive a
default in making a required distribution on a Note without the consent of the
Holder of such Note. Upon any 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 thereto
except to the extent expressly so waived. Notice of any such waiver shall be
given by the Indenture Trustee to the Rating Agencies and the Note Insurer.
Section 7.04 Rights of the Note Insurer to Exercise Rights of the
Noteholders. By accepting its Note, each Noteholder agrees that unless a Note
Insurer Default exists, the Note Insurer shall be deemed to be the Noteholders
for all purposes (other than with respect to the receipt of payment on the
Notes) and shall have the right to exercise all rights of the Noteholders under
this Agreement and under the Notes without any further consent of the
Noteholders, including, without limitation:
(a) the right to require the Unaffiliated Seller to repurchase
Mortgage Loans pursuant to Sections 2.06 and 4.02 hereof to the extent
set forth therein;
(b) the right to give notices of breach or to terminate the
rights and obligations of the Servicer as servicer pursuant to Section
7.01 hereof and to consent to or direct waivers of Servicer defaults
pursuant to Section 7.03 hereof;
(c) the right to direct the actions of the Indenture Trustee
during the continuance of a Servicer Event of Default pursuant to
Sections 7.01 and 7.02 hereof;
(d) the right to institute proceedings against the Servicer
pursuant to Section 7.01 hereof;
(e) the right to remove the Indenture Trustee pursuant to
Section 6.09 of the Indenture;
(f) the right to direct foreclosures upon the failure of the
Servicer to do so in accordance with the provisions of Section 5.06 of
this Agreement; and
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(g) any rights or remedies expressly given the Majority
Noteholders.
In addition, each Noteholder agrees that, subject to Section 10.02,
unless a Note Insurer Default exists, the rights specifically enumerated above
may only be exercised by the Noteholders with the prior written consent of the
Note Insurer.
Section 7.05 Indenture Trustee To Act Solely with Consent of the Note
Insurer. Unless a Note Insurer Default exists, the Indenture Trustee shall not,
without the Note Insurer's consent or unless directed by the Note Insurer:
(a) terminate the rights and obligations of the Servicer as
Servicer pursuant to Section 7.01 hereof;
(b) agree to any amendment pursuant to Section 10.03 hereof;
or
(c) undertake any litigation.
The Note Insurer may, in writing and in its sole discretion renounce
all or any of its rights under Sections 7.04, 7.05 or 7.06 or any requirement
for the Note Insurer's consent for any period of time.
Section 7.06 Mortgage Loans, Trust Estate and Accounts Held for Benefit
of the Note Insurer. (a) The Indenture Trustee shall hold the Trust Estate and
the Indenture Trustee's Mortgage Files, for the benefit of the Noteholders and
the Note Insurer, and all references in this Agreement and in the Notes to the
benefit of Noteholders shall be deemed to include the Note Insurer. The
Indenture Trustee shall cooperate in all reasonable respects with any reasonable
request by the Note Insurer for action to preserve or enforce the Note Insurer's
rights or interests under this Agreement and the Notes unless, as stated in an
Opinion of Counsel addressed to the Indenture Trustee and the Note Insurer, such
action is adverse to the interests of the Noteholders or diminishes the rights
of the Noteholders or imposes additional burdens or restrictions on the
Noteholders.
(b) The Servicer hereby acknowledges and agrees that it shall service
the Mortgage Loans for the benefit of the Noteholders and for the benefit of the
Note Insurer, and all references in this Agreement to the benefit of or actions
on behalf of the Noteholders shall be deemed to include the Note Insurer.
Section 7.07 Note Insurer Default. Notwithstanding anything elsewhere
in this Agreement or in the Notes to the contrary, if a Note Insurer Default
exists, or if and to the extent the Note Insurer has delivered its written
renunciation of all of its rights under this Agreement, the provisions of this
Article VII and all other provisions of this Agreement which (a) permit the Note
Insurer to exercise rights of the Noteholders, (b) restrict the ability of the
Noteholders, the Servicer, the Collateral Agent, the Back-up Servicer or the
Indenture Trustee to act without the consent or approval of the Note Insurer,
(c) provide that a particular act or thing must be acceptable to the Note
Insurer, (d) permit the Note Insurer to direct (or otherwise to require) the
actions of the Indenture Trustee, the Collateral Agent, the Servicer, the
Back-up Servicer or the Noteholders, (e) provide that any action or omission
taken with the consent, approval or authorization of the Note Insurer shall be
authorized hereunder or shall not subject the party taking or omitting to take
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such action to any liability hereunder or (f) which have a similar effect, shall
be of no further force and effect and the Indenture Trustee shall administer the
Trust Estate and perform its obligations hereunder solely for the benefit of the
Holders of the Notes. Nothing in the foregoing sentence, nor any action taken
pursuant thereto or in compliance therewith, shall be deemed to have released
the Note Insurer from any obligation or liability it may have to any party or to
the Noteholders hereunder, under any other agreement, instrument or document
(including, without limitation, the Note Insurance Policy) or under applicable
law.
ARTICLE VIII.
TERMINATION
Section 8.01 Termination. (a) Subject to Section 8.02, this Agreement
shall terminate upon notice to the Indenture Trustee of either: (i) the
disposition of all funds with respect to the last Mortgage Loan and the
remittance of all funds due hereunder and the payment of all amounts due and
payable to the Note Insurer and the Indenture Trustee or (ii) mutual consent of
the Trust, the Indenture Trustee, the Collateral Agent, the Servicer, the Note
Insurer and all Noteholders in writing.
(b) In addition, subject to Section 8.02, the Servicer may, at its
option and at its sole cost and expense, call the Class A-2 Notes or terminate
the Trust in accordance with the terms of Section 10.01 of the Indenture.
(c) If on any Distribution Date, the Servicer determines that there are
no outstanding Mortgage Loans and no other funds or assets in the Trust Estate
other than funds in the Distribution Account, the Servicer shall send a final
distribution notice promptly to each Noteholder in accordance with Section
8.01(d).
(d) Notice of any termination, specifying the Distribution Date upon
which the Trust will terminate and the Noteholders shall surrender their Notes
to the Indenture Trustee for payment of the final distribution and cancellation,
shall be given promptly by the Servicer by letter to Noteholders mailed during
the month of such final distribution before the Servicer Distribution Date in
such month, specifying (i) the Distribution Date upon which final payment of the
Notes will be made upon presentation and surrender of Notes at the office of the
Indenture Trustee therein designated, (ii) the amount of any such final payment
and (iii) that the Record Date otherwise applicable to such Distribution Date is
not applicable, payments being made only upon presentation and surrender of the
Notes at the office of the Indenture Trustee therein specified. The Servicer
shall give such notice to the Indenture Trustee therein specified. The Servicer
shall give such notice to the Indenture Trustee at the time such notice is given
to Noteholders. The obligations of the Note Insurer hereunder shall terminate
upon the deposit by the Servicer with the Indenture Trustee of a sum sufficient
to purchase all of the Mortgage Loans and REO Properties as set forth in Section
10.01 of the Indenture or when the Note Principal Balance of the Notes has been
reduced to zero.
(e) In the event that all of the Noteholders do not surrender their
Notes for cancellation within six (6) months after the time specified in the
above-mentioned written notice, the Servicer shall give a second written notice
to the remaining Noteholders to surrender their Notes for cancellation and
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receive the final distribution with respect thereto. If within six (6) months
after the second notice, all of the Notes shall not have been surrendered for
cancellation, the Indenture Trustee may take appropriate steps, or may appoint
an agent to take appropriate steps, to contact the remaining Noteholders
concerning surrender of their Notes and the cost thereof shall be paid out of
the funds and other assets which remain subject hereto. If within nine (9)
months after the second notice all the Notes shall not have been surrendered for
cancellation, the related Trust Certificateholders shall be entitled to all
unclaimed funds and other assets which remain subject hereto and the Indenture
Trustee upon transfer of such funds shall be discharged of any responsibility
for such funds and the Noteholders shall look only to the related Trust
Certificateholders for payment and not to the Note Insurer. Such funds shall
remain uninvested.
Section 8.02 Additional Termination Requirements. (a) In the event that
the Servicer exercises its option to call the Class A-2 Notes or terminate the
Trust as provided in Section 10.01 of the Indenture, the sub-trust of the Trust
consisting of the Pool II Mortgage Loans or the Trust as a whole, as the case
may be, shall be terminated in accordance with the following additional
requirements, unless the Indenture Trustee has been furnished with an Opinion of
Counsel to the effect that the failure of the REMIC Trust to comply with the
requirements of this Section 8.02 will not (i) result in the imposition of taxes
on "prohibited transactions" of the REMIC Trust as defined in Section 860F of
the Code or (ii) cause the REMIC Trust to fail to qualify as a REMIC at any time
that any Class A-2 Notes are outstanding:
(i) within ninety (90) days prior to the final Distribution
Date, the Servicer shall adopt, and the Indenture Trustee shall sign, a
plan of complete liquidation of the REMIC Trust meeting the
requirements of a "Qualified Liquidation" under Section 860F of the
Code and any regulations thereunder;
(ii) at or after the time of adoption of such a plan of
complete liquidation and at or prior to the final Distribution Date,
the Indenture Trustee shall sell all of the assets of the REMIC Trust
to the Servicer for cash; and
(iii) at the time of the making of the final payment on all of
the Notes, the Indenture Trustee shall distribute or credit, or cause
to be distributed or credited (A) to the Noteholders the related Note
Principal Balance, plus one month's interest thereon at the related
Note Rate, (B) to the Note Insurer any amounts due the Note Insurer
under this Agreement and unpaid, including unreimbursed Insured
Payments and I&I Payments and (C) to the related Trust
Certificateholders, all cash on hand after such payment to the
Noteholders (other than cash retained to meet claims), and the REMIC
Trust shall terminate at such time.
(b) By their acceptance of the Notes, the Holders thereof hereby agree
to appoint the Servicer as their attorney in fact to: (i) adopt such a plan of
complete liquidation (and the Noteholders hereby appoint the Indenture Trustee
as their attorney in fact to sign such plan) as appropriate or upon the written
request of the Note Insurer and (ii) to take such other action in connection
therewith as may be reasonably required to carry out such plan of complete
liquidation all in accordance with the terms hereof.
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Section 8.03 Accounting Upon Termination of Servicer. Upon termination
of the Servicer, the Servicer shall, at its expense:
(a) deliver to the successor Servicer or, if none shall yet
have been appointed, to the Indenture Trustee, the funds in any
Account;
(b) deliver to the successor Servicer, if none shall yet have
been appointed, to the Indenture Trustee all Indenture Trustee's
Mortgage Files and related documents and statements held by it
hereunder and a Mortgage Loan portfolio computer tape;
(c) deliver to the successor Servicer, if none shall yet have
been appointed, to the Indenture Trustee and, upon request, to the
Noteholders a full accounting of all funds, including a statement
showing the Monthly Payments collected by it and a statement of monies
held in trust by it for the payments or charges with respect to the
Mortgage Loans; and
(d) execute and deliver such instruments and perform all acts
reasonably requested in order to effect the orderly and efficient
transfer of servicing of the Mortgage Loans to the successor Servicer
and to more fully and definitively vest in such successor all rights,
powers, duties, responsibilities, obligations and liabilities of the
Servicer under this Agreement.
Section 8.04 Retention and Termination of the Servicer. The Servicer
hereby covenants and agrees to act as Servicer under this Agreement for an
initial term commencing on the Closing Date and expiring on March 31, 1999 (the
"Initial Term"). Thereafter, the Initial Term shall be extendible in the sole
discretion of the Note Insurer by written notice (each, a "Servicer Extension
Notice") of the Note Insurer (or the Indenture Trustee if revocable written
standing instructions of the Note Insurer have been previously delivered to the
Indenture Trustee), for any specified number of three (3) month terms to the
Servicer. Each such Servicer Extension Notice, if any, shall be delivered by the
Note Insurer (or the Indenture Trustee, as applicable,) to the other parties to
this Agreement. The Servicer hereby agrees that, as of the date hereof and upon
its receipt of any Servicer Extension Notice, the Servicer shall be bound for
the duration of the Initial Term and the term covered by any such Servicer
Extension Notice to act as the Servicer, subject to and in accordance with the
other provisions of this Agreement. The Servicer agrees that if, as of the
fifteenth day prior to the last day of any such servicing term, the Servicer
shall not have received a Servicer Extension Notice from the Note Insurer or
Indenture Trustee, as applicable, the Servicer shall, within five (5) days
thereafter, give written notice of such non-receipt to the Note Insurer and the
Indenture Trustee. The failure of the Note Insurer or the Indenture Trustee, as
applicable, to deliver a Servicer Extension Notice by the end of any such
three-month term shall result in the automatic termination of the Servicer.
ARTICLE IX.
THE COLLATERAL AGENT
Section 9.01 Duties of the Collateral Agent. (a) The Collateral Agent,
prior to the occurrence of an Event of Default and after the curing of all
Events of Default which may have occurred, undertakes to perform such duties and
44
only such duties as are specifically set forth in this Agreement. If an Event of
Default has occurred and has not been cured or waived, the Collateral Agent
shall exercise such of the rights and powers vested in it by this Agreement, and
use the same degree of care and skill in its exercise as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
(b) The Collateral Agent, upon receipt of all resolutions,
certificates, statements, opinions, reports, documents, orders or other
instruments furnished to the Collateral Agent which are specifically required to
be furnished pursuant to any provision of this Agreement, shall examine them to
determine whether they conform on their face to the requirements of this
Agreement; provided, however, that the Collateral Agent shall not be responsible
for the accuracy or content of any resolution, certificate, statement, opinion,
report, document, order or other instrument furnished by any Person hereunder.
If any such instrument is found not to conform on its face to the requirements
of this Agreement, the Collateral Agent shall note it as such on the Initial
Certification or Final Certification delivered pursuant to Section 2.06(b).
(c) No provision of this Agreement shall be construed to relieve the
Collateral Agent from liability for its own negligent action, its own negligent
failure to act or its own willful misconduct; provided, however, that:
(i) prior to the occurrence of an Event of Default, and after
the curing of all such Events of Default which may have occurred, the
duties and obligations of the Collateral Agent shall be determined
solely by the express provisions of this Agreement, the Collateral
Agent shall not be liable except for the performance of such duties and
obligations as are specifically set forth in this Agreement, no implied
covenants or obligations shall be read into this Agreement against the
Collateral Agent and, in the absence of bad faith on the part of the
Collateral Agent, the Collateral Agent may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the Collateral
Agent and conforming to the requirements of this Agreement;
(ii) the Collateral Agent shall not be personally liable for
an error of judgment made in good faith by a Responsible Officer or
other officers of the Collateral Agent, unless it shall be proved that
the Collateral Agent was negligent in ascertaining the pertinent facts;
(iii) the Collateral Agent shall not be personally liable with
respect to any action taken, suffered or omitted to be taken by it in
good faith in accordance with the direction of the Note Insurer or the
Indenture Trustee or with the consent of the Note Insurer or the
Indenture Trustee;
(iv) the Collateral Agent shall not be required to expend or
risk its own funds or otherwise incur financial liability for the
performance of any of its duties hereunder or the exercise of any of
its rights or powers if there is reasonable ground for believing that
the repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it and none of the provisions
contained in this Agreement shall in any event require the Collateral
45
Agent to perform, or be responsible for the manner of performance of,
any of the obligations of the Servicer or the Indenture Trustee under
this Agreement; and
(v) subject to the other provisions of this Agreement and
without limiting the generality of this Section 9.01, the Collateral
Agent shall have no duty (A) to see to any recording, filing, or
depositing of this Agreement or any agreement referred to herein or any
financing statement or continuation statement evidencing a security
interest, or to see to the maintenance of any such recording or filing
or depositing or to any rerecording, refiling or redepositing of any
thereof, (B) to see to any insurance, (C) to see to the payment or
discharge of any tax, assessment, or other governmental charge or any
lien or encumbrance of any kind owing with respect to, assessed or
levied against, any part of the Trust, the Trust Estate, the
Noteholders or the Mortgage Loans, (D) to confirm or verify the
contents of any reports or certificates of any Person delivered to the
Collateral Agent pursuant to this Agreement believed by the Collateral
Agent to be genuine and to have been signed or presented by the proper
party or parties.
Section 9.02 Certain Matters Affecting the Collateral Agent. Except as
otherwise provided in Section 9.01 hereof:
(a) the Collateral Agent may rely and shall be protected in
acting or refraining from acting upon any resolution, Officer's
Certificate, Opinion of Counsel, certificate of auditors or any other
certificate, statement, instrument, opinion, report, notice, request,
consent, order, appraisal, bond or other paper or document believed by
it to be genuine and to have been signed or presented by the proper
party or parties;
(b) the Collateral Agent may consult with counsel and any
Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken or suffered or omitted by it
hereunder in good faith and in accordance with such Opinion of Counsel;
(c) the Collateral Agent shall be under no obligation to
exercise any of the trusts or powers vested in it by this Agreement or
to institute, conduct or defend by litigation hereunder or in relation
hereto at the request, order or direction of the Note Insurer or any of
the Noteholders, pursuant to the provisions of this Agreement, unless
such Noteholders or the Note Insurer, as applicable, shall have offered
to the Indenture Trustee reasonable security or indemnity against the
costs, expenses and liabilities which may be incurred therein by the
Collateral Agent or thereby; nothing contained herein shall, however,
relieve the Collateral Agent of the obligation, upon the occurrence of
an Event of Default (which has not been cured), to exercise such of the
rights and powers vested in it by this Agreement, and to use the same
degree of care and skill in its exercise as a prudent person would
exercise or use under the circumstances in the conduct of such person's
own affairs;
(d) the Collateral Agent shall not be personally liable for
any action taken, suffered or omitted by it in good faith and believed
by it to be authorized or within the discretion or rights or powers
conferred upon it by this Agreement;
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(e) prior to the occurrence of an Event of Default and after
the curing of all Events of Default which may have occurred, the
Collateral Agent shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
bond or other paper or document, unless requested in writing to do so
by the Note Insurer or Holders of Class A Notes evidencing Percentage
Interests aggregating not less than 25%; provided, however, that if the
payment within a reasonable time to the Collateral Agent of the costs,
expenses or liabilities likely to be incurred by it in the making of
such investigation is, in the opinion of the Collateral Agent, not
reasonably assured to the Collateral Agent by the security afforded to
it by the terms of this Agreement, the Collateral Agent may require
reasonable indemnity against such expense or liability as a condition
to taking any such action. The reasonable expense of every such
examination shall be paid by the Servicer or, if paid by the Collateral
Agent, shall be repaid by the Servicer upon demand from the Servicer's
own funds;
(f) the right of the Collateral Agent to perform any
discretionary act enumerated in this Agreement shall not be construed
as a duty, and the Collateral Agent shall not be answerable for
anything other than its negligence or willful misconduct in the
performance of such act;
(g) the Collateral Agent may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through agents or attorneys.
Section 9.03 Collateral Agent Not Liable for Notes or Mortgage Loans.
(a) The recitals contained herein shall be taken as the statements of the Trust
and the Servicer, as the case may be, and the Collateral Agent assumes no
responsibility for their correctness. The Collateral Agent makes no
representations as to the validity or sufficiency of this Agreement or of any
Mortgage Loan or related document. The Collateral Agent shall not be accountable
for the use or application of any funds paid to the Servicer in respect of the
Mortgage Loans or deposited in or withdrawn from the Collection Account by the
Servicer. The Collateral Agent shall not be responsible for the legality or
validity of the Agreement or the validity, priority, perfection or sufficiency
of the security for the Notes issued or intended to be issued under the
Indenture.
Section 9.04 Collateral Agent May Own Notes. (a) The Collateral Agent
in its individual or any other capacity may become the owner or pledgor of Notes
with the same rights it would have if it were not Collateral Agent, and may
otherwise deal with the parties hereto.
Section 9.05 Collateral Agent's Fees and Expenses; Indemnity. (a) The
Collateral Agent acknowledges that in consideration of the performance of its
duties hereunder it is entitled to receive the Collateral Agent's Fee in
accordance with the provisions of Section 8.02(a) of the Indenture. The Servicer
shall pay any other fees and expenses of the Collateral Agent as separately
agreed between the Servicer and the Collateral Agent. The Trust, the Depositor,
the Indenture Trustee and the Note Insurer shall not pay any of the Collateral
Agent fees and expenses in connection with this transaction. The Collateral
Agent shall not be entitled to compensation for any expense, disbursement or
advance as may arise from its negligence or bad faith, and the Collateral Agent
shall have no lien on the Trust Estate for the payment of its fees and expenses.
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(b) The Collateral Agent and any director, officer, employee or agent
of the Collateral Agent shall be indemnified by the Servicer and held harmless
against any loss, liability, claim, damage or expense arising out of, or imposed
upon the Trust Estate or the Collateral Agent through the Servicer's acts or
omissions in violation of this Agreement, other than any loss, liability or
expense incurred by reason of willful misfeasance, bad faith or negligence of
the Collateral Agent in the performance of its duties hereunder or by reason of
the Collateral Agent's reckless disregard of obligations and duties hereunder.
The obligations of the Servicer under this Section 9.05 arising prior to any
resignation or termination of the Servicer hereunder shall survive termination
of the Servicer and payment of the Notes.
Section 9.06 Eligibility Requirements for Collateral Agent. (a) The
Collateral Agent hereunder shall at all times be a banking entity (a) organized
and doing business under the laws of any state or the United States of America
subject to supervision or examination by federal or state authority, (b)
authorized under such laws to exercise corporate trust powers, including taking
title to the Trust Estate on behalf of the Indenture Trustee, for the benefit of
the Noteholders and the Note Insurer, (c) having a combined capital and surplus
of at least $50,000,000, (d) whose long-term deposits, if any, shall be rated at
least BBB- by S&P and Baa3 by Moody's (except as provided herein) or such lower
long-term deposit rating as may be approved in writing by the Note Insurer, and
(e) reasonably acceptable to the Note Insurer as evidenced in writing. If such
banking entity publishes reports of condition at least annually, pursuant to law
or to the requirements of the aforesaid supervising or examining authority, then
for the purposes of determining an entity's combined capital and surplus for
clause (c) of this Section 9.06, the amount set forth in its most recent report
of condition so published shall be deemed to be its combined capital and
surplus. In case at any time the Collateral Agent shall cease to be eligible in
accordance with the provisions of this Section 9.06, the Collateral Agent shall
resign immediately in the manner and with the effect specified in Section 9.07.
Section 9.07 Resignation and Removal of the Collateral Agent. (a) The
Collateral Agent may at any time resign and be discharged from the trusts hereby
created by giving thirty (30) days' written notice thereof to the Indenture
Trustee, the Servicer, and the Note Insurer.
(b) If at any time the Collateral Agent shall cease to be eligible in
accordance with the provisions of Section 9.06 and shall fail to resign after
written request therefor by the Indenture Trustee, the Servicer or the Note
Insurer, or if at any time the Collateral Agent shall become incapable of
acting, or shall be adjudged bankrupt or insolvent, or a receiver of the
Collateral Agent or of its property shall be appointed, or any public officer
shall take charge or control of the Collateral Agent or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Indenture Trustee or the Servicer, with the consent of the Note Insurer, or the
Note Insurer may remove the Collateral Agent.
(c) If the Collateral Agent fails to perform in accordance with the
terms of this Agreement, the Indenture Trustee, the Servicer or the Majority
Noteholders, with the consent of the Note Insurer, or the Note Insurer may
remove the Collateral Agent.
48
(d) Upon removal or receipt of notice of resignation of the Collateral
Agent, the Indenture Trustee shall either (i) take possession of the Indenture
Trustee's Mortgage Files and assume the duties of the Collateral Agent hereunder
or (ii) appoint a successor Collateral Agent pursuant to Section 9.08. If the
Indenture Trustee shall assume the duties of the Collateral Agent hereunder, it
shall notify the Trust, the Depositor, the Servicer and Note Insurer in writing.
Section 9.08 Successor Collateral Agent. Upon the resignation or
removal of the Collateral Agent, the Indenture Trustee may appoint a successor
Collateral Agent, with the written approval of the Note Insurer; provided,
however, that the successor Collateral Agent so appointed shall in no event be
the Unaffiliated Seller, the Depositor or the Servicer or any Person known to a
Responsible Officer of the Indenture Trustee to be an Affiliate of the
Unaffiliated Seller, the Depositor or the Servicer and shall be approved by the
Note Insurer. The Indenture Trustee or such custodian, as the case may be, shall
assume the duties of the Collateral Agent hereunder. Any successor Collateral
Agent appointed as provided in this Section 9.08 shall execute, acknowledge and
deliver to the Trust, the Depositor, the Note Insurer, the Servicer, the
Indenture Trustee and to its predecessor Collateral Agent an instrument
accepting such appointment hereunder, and thereupon the resignation or removal
of the predecessor Collateral Agent shall become effective and such successor
Collateral Agent, without any further act, deed or conveyance, shall become
fully vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with the like effect as if originally named as Collateral
Agent herein. The predecessor Collateral Agent shall deliver to the successor
Collateral Agent all Indenture Trustee's Mortgage Files and related documents
and statements held by it hereunder, and the Servicer and the predecessor
Collateral Agent shall execute and deliver such instruments and do such other
things as may reasonably be required for more fully and certainly vesting and
confirming in the successor Collateral Agent all such rights, powers, duties and
obligations. The cost of any such transfer to the successor Collateral Agent
shall be for the account of the Collateral Agent in the event of the resignation
of the Collateral Agent, and shall be for the account of the Servicer in the
event of the removal of the Collateral Agent. No successor Collateral Agent
shall accept appointment as provided in this Section 9.08 unless at the time of
such acceptance such successor Collateral Agent shall be eligible under the
provisions of Section 9.06. Upon acceptance of appointment by a successor
Collateral Agent as provided in this Section 9.08, the Servicer shall mail
notice of the succession of such Collateral Agent hereunder to all Noteholders
at their addresses as shown in the Note Register and to the Rating Agencies. If
the Servicer fails to mail such notice within ten (10) days after acceptance of
appointment by the successor Collateral Agent, the successor Collateral Agent
shall cause such notice to be mailed at the expense of the Servicer.
Section 9.09 Merger or Consolidation of Collateral Agent. Any Person
into which the Collateral Agent may be merged or converted or with which it may
be consolidated or any corporation or national banking association resulting
from any merger, conversion or consolidation to which the Collateral Agent shall
be a party, or any corporation or national banking association succeeding to the
business of the Collateral Agent, shall be the successor of the Collateral Agent
hereunder; provided, that such corporation or national banking association shall
be eligible under the provisions of Section 9.06, without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding.
49
ARTICLE X.
MISCELLANEOUS PROVISIONS
Section 10.01 Limitation on Liability. None of the Trust, the Owner
Trustee, the Depositor, the Servicer, the Back-up Servicer, the Collateral
Agent, the Indenture Trustee or any of the directors, officers, employees or
agents of such Persons shall be under any liability to the Trust, the
Noteholders or the Note Insurer for any action taken, or for refraining from the
taking of any action, in good faith pursuant to this Agreement, or for errors in
judgment; provided, however, that this provision shall not protect the Trust,
the Owner Trustee, the Depositor, the Servicer, the Back-up Servicer, the
Collateral Agent, the Indenture Trustee or any such Person against any breach of
warranties or representations made herein, or against any specific liability
imposed on each such party pursuant to this Agreement or against any liability
which would otherwise be imposed by reason of willful misfeasance, bad faith or
gross negligence in the performance of duties or by reason of reckless disregard
of obligations or duties hereunder. The Trust, the Owner Trustee, the Depositor,
the Servicer, the Back-up Servicer, the Collateral Agent, the Indenture Trustee
and any director, officer, employee or agent of such Person may rely in good
faith on any document of any kind which, prima facie, is properly executed and
submitted by any appropriate Person respecting any matters arising hereunder.
Section 10.02 Acts of Noteholders. (a) Except as otherwise specifically
provided herein, whenever Noteholder action, consent or approval is required
under this Agreement, such action, consent or approval shall be deemed to have
been taken or given on behalf of, and shall be binding upon, all Noteholders if
the Majority Noteholders or the Note Insurer agrees to take such action or give
such consent or approval.
(b) The death or incapacity of any Noteholder shall not operate to
terminate this Agreement or the Trust, nor entitle such Noteholder's legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of the Trust, nor
otherwise affect the rights, obligations and liabilities of the parties hereto
or any of them.
(c) No Noteholder shall have any right to vote (except as expressly
provided for herein) or in any manner otherwise control the operation and
management of the Trust, or the obligations of the parties hereto, nor shall
anything herein set forth, or contained in the terms of the Notes, be construed
so as to constitute the Noteholders from time to time as partners or members of
an association; nor shall any Noteholder be under any liability to any third
person by reason of any action taken by the parties to this Agreement pursuant
to any provision hereof.
Section 10.03 Amendment. (a) This Agreement may be amended from time to
time by the Trust, the Servicer, the Back-up Servicer, the Depositor, the
Collateral Agent and the Indenture Trustee by written agreement, upon the prior
written consent of the Note Insurer, without notice to or consent of the
Noteholders to cure any ambiguity, to correct or supplement any provisions
herein, to comply with any changes in the Code, or to make any other provisions
with respect to matters or questions arising under this Agreement which shall
not be inconsistent with the provisions of this Agreement; provided, however,
that such action shall not, as evidenced by an Opinion of Counsel, at the
expense of the party requesting the change, delivered to the Indenture Trustee,
50
adversely affect in any material respect the interests of any Noteholder; and
provided further, that no such amendment shall reduce in any manner the amount
of, or delay the timing of, payments received on Mortgage Loans which are
required to be distributed on any Note without the consent of such Noteholder,
or change the rights or obligations of any other party hereto without the
consent of such party. The Indenture Trustee shall give prompt written notice to
the Rating Agencies of any amendment made pursuant to this Section 10.03.
(b) This Agreement may be amended from time to time by the Trust, the
Servicer, the Back-up Servicer, the Depositor, the Collateral Agent and the
Indenture Trustee, with the consent of the Note Insurer, the Majority
Noteholders and the Holders of the majority of the Percentage Interest in the
Trust Certificates, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of the Noteholders; provided, however, that
no such amendment shall be made unless the Indenture Trustee receives an Opinion
of Counsel, at the expense of the party requesting the change, that such change
will not adversely affect the status of the REMIC Trust as a REMIC or cause a
tax to be imposed on the REMIC; and provided, further, that no such amendment
shall reduce in any manner the amount of, or delay the timing of, payments
received on Mortgage Loans which are required to be distributed on any Class of
Notes without the consent of the Holders of such Class of Notes or reduce the
percentage for the Holders of which are required to consent to any such
amendment without the consent of the Holders of 100% of such Class of Notes
affected thereby.
(c) It shall not be necessary for the consent of Holders under this
Section 10.03 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent shall approve the substance thereof. It
shall not be necessary to obtain the consent of the Back-up Servicer under this
Section 10.03 (i) for any amendment that does not affect the rights or duties of
the Back-up Servicer under this Agreement, or (ii) after cessation of the
Back-up Servicer's obligations and right to receive the Back-up Servicing Fee,
as provided in Section 7.02(f); provided, however, any amendment made without
the consent of the Back-up Servicer shall not be applicable to the Back-up
Servicer, whether acting as the Back-up Servicer or as Servicer.
Section 10.04 Recordation of Agreement. To the extent permitted by
applicable law, this Agreement, or a memorandum thereof if permitted under
applicable law, is subject to recordation in all appropriate public offices for
real property records in all of the counties or other comparable jurisdictions
in which any or all of the properties subject to the Mortgages are situated, and
in any other appropriate public recording office or elsewhere, such recordation
to be effected by the Servicer at the Noteholders' expense on direction and at
the expense of Majority Noteholders requesting such recordation, but only when
accompanied by an Opinion of Counsel to the effect that such recordation
materially and beneficially affects the interests of the Noteholders or is
necessary for the administration or servicing of the Mortgage Loans.
Section 10.05 Duration of Agreement. This Agreement shall continue in
existence and effect until terminated as herein provided.
Section 10.06 Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given when
delivered to (i) in the case of the Servicer, the Subservicers, the Originators
51
or the Unaffiliated Seller, addressed to such Person, c/o American Business
Financial Services, Inc., The Xxxxxxxxx Building, 000 Xxxx Xxxxxx Xxxx, 0xx
Xxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000, Attention: General Counsel; (ii) in the
case of the Trust, ABFS Mortgage Loan Trust 1998-4, c/o the Owner Trustee at its
Corporate Trust Office, Attention: Corporate Trust Administration; (iii) in the
case of the Collateral Agent, JPMorgan Chase Bank, 0000 Xxxxxx, 00xx xxxxx,
Xxxxxxx, Xxxxx 00000, Attention: Document Custody Manager --ABFS Mortgage Loan
Trust 1998-4; (iv) in the case of the Indenture Trustee, The Bank of New York,
at its Corporate Trust Office, Attention: ABFS Mortgage Loan Trust 1998-4; (v)
in the case of the Depositor or the Underwriter, Prudential Securities Secured
Financing Corporation or Prudential Securities Incorporated, Xxx Xxx Xxxx Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000, Attention: General Counsel; (vi) in the case of the
Note Insurer, Financial Security Assurance Inc., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000 Attention: Surveillance Department (in each case in which notice or
other communication to the Note Insurer refers to an Event of Default, a
Servicer Event of Default or a claim on the Note Insurance Policy or with
respect to which failure on the part of the Note Insurer to respond shall be
deemed to constitute consent or acceptance, then a copy of such notice or other
communication should also be sent to the attention of each of the General
Counsel and the Head- Financial Guaranty Group, and shall be marked to indicate
"URGENT MATERIAL ENCLOSED"); (vii) in the case of Standard & Poor's Rating
Services, 00 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 Attention: Residential
Mortgage Surveillance Group; (viii) in the case of Xxxxx'x Investors Service,
Inc., 00 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 Attention: Home Equity
Monitoring Group; (ix) in the case of the Back-up Servicer, Wilshire Credit
Corporation, 00000 X.X. Xxxxxxxx Xxx, Xxxxx 000, Xxxxxxxxx, XX 00000, Attention:
Xxx Xxxxxxx and (x) in the case of the Noteholders, as set forth in the Note
Register. Any such notices shall be deemed to be effective with respect to any
party hereto upon the receipt of such notice by such party, except that notices
to the Noteholders shall be effective upon mailing or personal delivery.
Section 10.07 Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be held
invalid for any reason whatsoever, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other covenants, agreements, provisions or terms of this
Agreement.
Section 10.08 No Partnership. Nothing herein contained shall be deemed
or construed to create a co-partnership or joint venture between the parties
hereto and the services of the Servicer shall be rendered as an independent
contractor and not as agent for the Noteholders.
Section 10.09 Counterparts. This Agreement may be executed in one or
more counterparts and by the different parties hereto on separate counterparts,
each of which, when so executed, shall be deemed to be an original; such
counterparts, together, shall constitute one and the same agreement.
Section 10.10 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the Trust, the Servicer, the Depositor, the
Indenture Trustee, the Collateral Agent and the Noteholders and their respective
successors and permitted assigns.
52
Section 10.11 Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
Section 10.12 The Note Insurer Default. Any right conferred to the Note
Insurer shall be suspended during any period in which a Note Insurer Default
exists. At such time as the Notes are no longer outstanding hereunder, and no
amounts owed to the Note Insurer hereunder remain unpaid, the Note Insurer's
rights hereunder shall terminate.
Section 10.13 Third Party Beneficiary. The parties agree that each of
the Unaffiliated Seller and the Note Insurer is intended and shall have all
rights of a third-party beneficiary of this Agreement.
Section 10.14 Intent of the Parties. It is the intent of the parties
hereto and Noteholders that, for federal income taxes, state and local income or
franchise taxes and other taxes imposed on or measured by income, (x) the Class
A-1 Notes be treated as debt, and (y) the Class A-2 Notes will be treated as
evidencing beneficial ownership interests in a REMIC. The parties to this
Agreement and the Holder of each Note, by acceptance of its Note, and each
Beneficial Owner thereof, agree to treat, and to take no action inconsistent
with the treatment of, the related Notes in accordance with the preceding
sentence for purposes of federal income taxes, state and local income and
franchise taxes and other taxes imposed on or measured by income.
Section 10.15 Appointment of Tax Matters Person. The Holders of the
Trust Certificates relating to the Class A-2 Notes are hereby appointed as the
Tax Matters Person for the REMIC Trust for all purposes of the Code. The Tax
Matters Person will perform, or cause to be performed, such duties and take, or
cause to be taken, such actions as are required to be performed or taken by the
Tax Matters Person under the Code. The Holders of the Trust Certificates
relating to the Class A-2 Notes may hereafter appoint a different entity as Tax
Matters Person.
Section 10.16 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PROVISIONS) OF THE STATE
OF NEW YORK.
(b) THE TRUST, THE SERVICER, THE BACK-UP SERVICER, THE DEPOSITOR, THE
COLLATERAL AGENT AND THE INDENTURE TRUSTEE HEREBY SUBMIT TO THE NON-EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES
DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY, AND EACH
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL
SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO THE ADDRESS SET
FORTH IN SECTION 10.06 HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE U.S.
MAILS, POSTAGE PREPAID. THE TRUST, THE DEPOSITOR, THE SERVICER, THE BACK-UP
SERVICER, THE COLLATERAL AGENT AND THE INDENTURE TRUSTEE EACH HEREBY WAIVE ANY
53
OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY
ACTION INSTITUTED HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION
10.16 SHALL AFFECT THE RIGHT OF THE TRUST, THE DEPOSITOR, THE SERVICER, THE
BACK-UP SERVICER, THE COLLATERAL AGENT OR THE INDENTURE TRUSTEE TO SERVE LEGAL
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT ANY OF THEIR RIGHTS TO
BRING ANY ACTION OR PROCEEDING IN THE COURTS OF ANY OTHER JURISDICTION.
(c) THE TRUST, THE DEPOSITOR, THE SERVICER, THE BACK-UP SERVICER, THE
COLLATERAL AGENT AND THE INDENTURE TRUSTEE EACH HEREBY WAIVES ANY RIGHT TO HAVE
A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT,
OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR IN CONNECTION WITH
THIS AGREEMENT. INSTEAD, ANY DISPUTE WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A
JURY.
[Remainder of Page Intentionally Left Blank]
54
IN WITNESS WHEREOF, the Servicer, the Back-up Servicer, the Trust, the
Indenture Trustee, the Collateral Agent and the Depositor have caused their
names to be signed hereto by their respective officers thereunto duly authorized
as of the day and year first above written.
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION, as Depositor
By:
------------------------------------------
Name:
Title:
ABFS MORTGAGE LOAN TRUST 1998-4
By: WACHOVIA BANK, NATIONAL
ASSOCIATION (as successor to First Union Trust
Company, National Association), not in
its individual capacity, but solely as Owner
Trustee under the Trust Agreement
By:
------------------------------------------
Name:
Title:
AMERICAN BUSINESS CREDIT, INC., as Servicer
By:
------------------------------------------
Name:
Title:
THE BANK OF NEW YORK, as Indenture Trustee
By:
------------------------------------------
Name:
Title:
JPMORGAN CHASE BANK, as Collateral Agent
By:
------------------------------------------
Name:
Title:
WILSHIRE CREDIT CORPORATION, as Back-up Servicer
By:
------------------------------------------
Name:
Title:
i
Acknowledged, agreed and consented to pursuant to Section 10.03:
FINANCIAL SECURITY ASSURANCE INC.,
as Certificate Insurer
By:
------------------------------------------------
Name:
Title:
ABFS WAREHOUSE TRUST 2003-1,
as Holder of a majority of the Percentage Interest
in the Trust Certificates
By: WILMINGTON TRUST COMPANY,
not in its individual capacity, but solely as Owner Trustee
By:
---------------------------------------------------------
Name:
Title:
ii
TABLE OF CONTENTS
Page
Article I. DEFINITIONS............................................................................................2
Section 1.01 Certain Defined Terms........................................................................2
Section 1.02 Provisions of General Application............................................................2
Section 1.03 Business Day Certificate.....................................................................2
Article II. SALE AND CONVEYANCE OF THE MORTGAGE LOANS.............................................................3
Section 2.01 Purchase and Sale of Initial Mortgage Loans..................................................3
Section 2.02 Purchase and Sale of Subsequent Mortgage Loans...............................................3
Section 2.03 Purchase Price...............................................................................4
Section 2.04 Possession of Mortgage Files; Access to Mortgage Files.......................................4
Section 2.05 Delivery of Mortgage Loan Documents..........................................................5
Section 2.06 Acceptance of the Trust Estate; Certain Substitutions; Certification by the
Collateral Agent.............................................................................7
Section 2.07 Grant of Security Interest...................................................................9
Section 2.08 Further Action Evidencing Assignments.......................................................10
Section 2.09 Assignment of Agreement.....................................................................11
Section 2.10 REMIC Matters...............................................................................11
Article III. REPRESENTATIONS AND WARRANTIES......................................................................12
Section 3.01 Representations of the Servicer.............................................................12
Section 3.02 Representations, Warranties and Covenants of the Depositor..................................14
Section 3.03 Representations, Warranties and Covenants of the Collateral Agent...........................15
Section 3.04 Representations, Warranties and Covenants of the Indenture Trustee..........................15
Section 3.05 Representations, Warranties and Covenants of the Back-up Servicer...........................16
Article IV. THE MORTGAGE LOANS...................................................................................17
Section 4.01 Representations and Warranties Concerning the Mortgage Loans................................17
Section 4.02 Purchase and Substitution...................................................................18
Article V. ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS....................................................20
Section 5.01 The Servicer................................................................................20
Section 5.02 Collection of Certain Mortgage Loan Payments; Collection Account............................21
Section 5.03 Permitted Withdrawals from the Collection Account...........................................22
Section 5.04 Hazard Insurance Policies; Property Protection Expenses.....................................23
Section 5.05 Assumption and Modification Agreements......................................................24
Section 5.06 Realization Upon Defaulted Mortgage Loans...................................................24
Section 5.07 Indenture Trustee to Cooperate..............................................................26
Section 5.08 Servicing Compensation; Payment of Certain Expenses by Servicer.............................26
Section 5.09 Annual Statement as to Compliance...........................................................26
Section 5.10 Annual Independent Public Accountants' Servicing Report.....................................27
Section 5.11 Access to Certain Documentation.............................................................27
Section 5.12 Maintenance of Fidelity Bond................................................................27
i
Page
Section 5.13 The Subservicers............................................................................27
Section 5.14 Reports to the Indenture Trustee; Collection Account Statements; Reports to the
Back-up Servicer............................................................................28
Section 5.15 Optional Purchase of Defaulted Mortgage Loans...............................................28
Section 5.16 Reports to be Provided by the Servicer......................................................29
Section 5.17 Adjustment of Servicing Compensation in Respect of Prepaid Mortgage Loans...................31
Section 5.18 Periodic Advances; Special Advance..........................................................31
Section 5.19 Indemnification; Third Party Claims.........................................................32
Section 5.20 Maintenance of Corporate Existence and Licenses; Merger or Consolidation of the
Servicer....................................................................................33
Section 5.21 Assignment of Agreement by Servicer; Servicer Not to Resign.................................33
Section 5.22 Periodic Filings with the Securities and Exchange Commission; Additional Information........33
Section 5.23 Duties of Back-up Servicer..................................................................34
Article VI. APPLICATION OF FUNDS.................................................................................35
Section 6.01 Deposits to the Distribution Account........................................................35
Section 6.02 Collection of Money.........................................................................35
Section 6.03 Application of Principal and Interest.......................................................35
Section 6.04 Information Concerning the Mortgage Loans...................................................35
Section 6.05 Compensating Interest.......................................................................35
Section 6.06 Effect of Payments by the Note Insurer; Subrogation.........................................36
Article VII. SERVICER DEFAULT....................................................................................36
Section 7.01 Servicer Events of Default..................................................................36
Section 7.02 Back-up Servicer to Act; Appointment of Successor...........................................39
Section 7.03 Waiver of Defaults..........................................................................41
Section 7.04 Rights of the Note Insurer to Exercise Rights of the Noteholders............................42
Section 7.05 Indenture Trustee To Act Solely with Consent of the Note Insurer............................42
Section 7.06 Mortgage Loans, Trust Estate and Accounts Held for Benefit of the Note Insurer..............43
Section 7.07 Note Insurer Default........................................................................43
Article VIII. TERMINATION........................................................................................44
Section 8.01 Termination.................................................................................44
Section 8.02 Additional Termination Requirements.........................................................45
Section 8.03 Accounting Upon Termination of Servicer.....................................................45
Section 8.04 Retention and Termination of the Servicer...................................................46
Article IX. THE COLLATERAL AGENT.................................................................................46
Section 9.01 Duties of the Collateral Agent..............................................................46
Section 9.02 Certain Matters Affecting the Collateral Agent..............................................48
Section 9.03 Collateral Agent Not Liable for Notes or Mortgage Loans.....................................49
Section 9.04 Collateral Agent May Own Notes..............................................................49
ii
Page
Section 9.05 Collateral Agent's Fees and Expenses; Indemnity.............................................49
Section 9.06 Eligibility Requirements for Collateral Agent...............................................50
Section 9.07 Resignation and Removal of the Collateral Agent.............................................50
Section 9.08 Successor Collateral Agent..................................................................51
Section 9.09 Merger or Consolidation of Collateral Agent.................................................51
Article X. MISCELLANEOUS PROVISIONS..............................................................................52
Section 10.01 Limitation on Liability.....................................................................52
Section 10.02 Acts of Noteholders.........................................................................52
Section 10.03 Amendment...................................................................................53
Section 10.04 Recordation of Agreement....................................................................54
Section 10.05 Duration of Agreement.......................................................................54
Section 10.06 Notices.....................................................................................54
Section 10.07 Severability of Provisions..................................................................55
Section 10.08 No Partnership..............................................................................55
Section 10.09 Counterparts................................................................................55
Section 10.10 Successors and Assigns......................................................................55
Section 10.11 Headings....................................................................................55
Section 10.12 The Note Insurer Default....................................................................55
Section 10.13 Third Party Beneficiary.....................................................................55
Section 10.14 Intent of the Parties.......................................................................55
Section 10.15 Appointment of Tax Matters Person...........................................................56
Section 10.16 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL................................56
EXHIBITS
EXHIBIT A Contents of the Mortgage File
EXHIBIT B Indenture Trustee's Acknowledgement of Receipt
EXHIBIT C Collateral Agent's Acknowledgement of Receipt
EXHIBIT D Initial Certification of Collateral Agent
EXHIBIT E Final Certification of Collateral Agent
EXHIBIT F Request for Release of Documents
EXHIBIT G Form of Subsequent Contribution Agreement
EXHIBIT H Required Information
SCHEDULES
SCHEDULE I Mortgage Loan Schedule
iii
