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SERVICING AGREEMENT
This Servicing Agreement (this "Agreement"), dated as of November 10,
1998, is made and entered into by and among XXXXXX TRUST AND SAVINGS BANK, as
trustee (the "Trustee"), and as Supervisory Servicer (the "Supervisory
Servicer"), PMC Capital, L.P. 1998-1, a Delaware limited partnership, as issuer
(the "Issuer"), and PMC Capital, Inc., a Florida corporation, as servicer (the
"Servicer").
PRELIMINARY STATEMENT
The Issuer is the owner of the Loans and the other property being
pledged, assigned and conveyed by it to the Trustee for inclusion in the Trust
Estate pledged to secure the Notes issued pursuant to the Indenture. The
Servicer is in the business, among other things, of servicing mortgage loans.
The Issuer hereby appoints the Servicer to service the Loans which are included
in the Trust Estate, and the Servicer hereby accepts that appointment.
All covenants and agreements made by the Issuer, the Servicer, the
Supervisory Servicer and the Trustee herein are for the benefit of the Holders
from time to time of the Notes, the Trustee and the Supervisory Servicer. The
Issuer, the Trustee, the Supervisory Servicer and the Servicer are entering
into this Agreement for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged.
In consideration of the mutual agreements herein contained, the
Issuer, the Servicer, the Supervisory Servicer and the Trustee hereby agree as
follows:
ARTICLE I
DEFINITIONS
All capitalized terms used herein and not otherwise defined herein
shall have the meanings set forth in Schedule 1 attached hereto. Unless
otherwise provided, all calculations of interest pursuant to this Agreement are
based on a 360-day year of twelve 30-day months.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 2.1 REPRESENTATIONS AND WARRANTIES OF SERVICER. The Servicer
hereby represents and warrants to the Trustee, the Noteholders, the Supervisory
Servicer and the Issuer as of the
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Closing Date, and at all times during the term of this Agreement shall be
deemed to represent and warrant, that:
(a) The Servicer has been duly formed and is validly existing
under the laws of the jurisdiction of its formation and is duly
qualified to do business and is in good standing under the laws of
each jurisdiction in which the failure to be so qualified would have a
material adverse effect on the enforceability of, or its ability to
service, a Loan and no demand for such qualification has been made
upon the Servicer by any state, and, in any event the Servicer is or
will be in compliance with the laws of any such state to the extent
necessary to insure the enforceability of each Loan and the servicing
of the Loans in accordance with the terms of this Agreement;
(b) The Servicer holds all material licenses, certificates
and permits from all governmental authorities necessary for the
conduct of its business (except where the failure to obtain same would
not materially and adversely affect the Servicer's ability to perform
its obligations hereunder in accordance with the terms of this
Agreement) and has received no notice of proceedings relating to the
revocation of any such license, certificate or permit which singly or
in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would materially and adversely affect the conduct of the
business, results of operations, net worth or condition (financial or
otherwise) of the Servicer;
(c) The Servicer has the full power and authority to execute,
deliver and perform, and to enter into and consummate all transactions
contemplated by this Agreement, has duly authorized the execution,
delivery and performance of this Agreement, has duly executed and
delivered this Agreement and this Agreement constitutes a legal, valid
and binding obligation of the Servicer, enforceable against it in
accordance with its terms, except as such enforcement may be limited
by (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights in general
and (ii) by general equity principles (regardless of whether such
enforcement is considered in a proceeding in equity or at law);
(d) Neither the execution and delivery by the Servicer of
this Agreement, the consummation by the Servicer of the transactions
contemplated hereby, nor the fulfillment of or compliance by the
Servicer with the terms and conditions of this Agreement will conflict
with or result in a breach of any of the terms, conditions or
provisions of the Servicer's organizational documents or bylaws or any
legal restriction or any material agreement or instrument to which the
Servicer is now a party or by which it is bound, or constitute a
default or result in an acceleration under any of the foregoing, or
result in the violation of any law, rule, regulation, order, judgment
or decree to which the Servicer or its property is subject;
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(e) At the date hereof, the Servicer does not believe, nor
does it have any reason or cause to believe, that it cannot perform
each of its covenants contained in this Agreement;
(f) There is no litigation pending or, to the Servicer's
knowledge, threatened, which, if determined adversely to the Servicer,
would materially and adversely affect the execution, delivery or
enforceability of this Agreement, or the ability of the Servicer to
service the Loans hereunder in accordance with the terms hereof or
which would have a material adverse effect on the financial condition
of the Servicer;
(g) No consent, approval, authorization or order of any court
or governmental agency or body is required for the execution, delivery
and performance by the Servicer of or compliance by the Servicer with
this Agreement or the consummation by the Servicer of the transactions
contemplated by this Agreement or if any such consent, approval,
authorization or order is required, the Servicer has obtained or will
obtain it prior to the time necessary for the Servicer to perform its
obligations hereunder;
(h) 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 material fact or omits to state a material fact
necessary to make the statements relating to the Servicer contained
therein not misleading;
(i) The Servicer 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, which default might
have consequences that would materially and adversely affect the
condition (financial or other) or operations of the Servicer or its
properties or might have consequences that would materially and
adversely affect its performance hereunder; and
(j) The Servicer has taken all reasonable actions necessary
to mitigate the risk that computer applications used by it may be
unable to recognize and properly perform date-sensitive functions
involving certain dates prior to, during and after the year 2000.
Upon discovery by either the Issuer, the Servicer, the Supervisory
Servicer or the Trustee of a material breach of any of the foregoing
representations and warranties, the party discovering such breach shall give
prompt written notice to the other parties, with a copy to the Noteholders and
the Rating Agency. Within 30 days of its discovery or its receipt of notice of
any such breach of a representation or warranty, the Servicer shall cure such
breach in all material respects; provided that, if such failure shall be of a
nature that it cannot be cured within 30 days, the Servicer shall give written
notice to the Supervisory Servicer and the Trustee, with a copy to the
Noteholders and the Rating Agency, within such 30 day period of the corrective
action it proposes to take and shall thereafter pursue such corrective action
diligently until such default is cured but in no event longer than 90 days from
the date of such notice.
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SECTION 2.2 COVENANTS OF SERVICER. The Servicer hereby agrees
that during the term of this Agreement:
(a) Compliance With Agreements and Applicable Laws. The
Servicer shall perform each of its obligations under this Agreement
and comply with all material requirements of any law, rule or
regulation applicable to it and the terms of the Loans and any related
agreements.
(b) Existence. The Servicer shall maintain its existence and
shall at all times continue to be duly organized under the laws of the
state of its organization and duly qualified and duly authorized (as
described in Sections 2.1(a), (b) and (c) hereof) and shall conduct
its business in accordance with the terms of its organizational
documents and bylaws.
(c) Financial Statements; Accountants' Reports; Other
Information. The Servicer shall keep or cause to be kept in reasonable
detail books and records of account of the Servicer's assets and
business, including, but not limited to, books and records relating to
the sale of the Loans to the Issuer and the Servicing of such Loans by
the Servicer, which books and records shall be furnished to the
Trustee upon reasonable request.
(d) Access to Records; Discussions With Officers and
Accountants. The Servicer shall, upon the reasonable request of the
Supervisory Servicer, the Trustee or any Noteholder, permit the
Supervisory Servicer, the Trustee or any such Noteholder or any of
their authorized designees:
(i) to inspect the books and records of the Servicer as
they may relate to the Loans and the obligations of the
Servicer under this Agreement; and
(ii) to discuss the affairs, finances and accounts of the
Servicer relating to the Loans and the obligations of the
Servicer under this Agreement with any Authorized Officer of
the Servicer.
Such inspections and discussions shall be conducted during normal
business hours and shall not unreasonably disrupt the business of the
Servicer. Such inspections shall be at the expense of the party
performing or requesting such inspection unless a Servicer Default
shall have occurred and be continuing, in which case any such
inspection shall be at the expense of the Servicer. The books and
records of the Servicer will be maintained at the address of the
Servicer designated herein for receipt of notices, unless the Servicer
shall otherwise advise the Supervisory Servicer, the Trustee and the
Noteholders in writing not less than 15 Business Days prior to any
such change of address..
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(e) Notice of Material Events. The Servicer shall promptly
and in any event, within five Business Days of the occurrence thereof,
inform the Supervisory Servicer, the Trustee, the Noteholders and the
Rating Agency in writing of the occurrence of any of the following:
(i) the submission of any claim or the initiation of any
legal process, litigation or administrative or judicial
investigation against the Servicer involving potential
damages or penalties in an uninsured amount in excess of
$1,000,000 in any one instance or $5,000,000 in the
aggregate;
(ii) any change in the location of the Servicer's
principal office or any change in the location of the
Servicer's books and records;
(iii) the occurrence of any Servicer Default;
(iv) the commencement of any proceedings instituted by or
against the Servicer in any federal, state or local court or
before any governmental body or agency, or before any
arbitration board, or the promulgation of any proceeding or
any proposed or final rule which, if adversely determined,
would result in a material adverse change in the financial
condition or operations of the Servicer;
(v) the commencement of any proceedings by or against the
Servicer under any applicable bankruptcy, reorganization,
liquidation, rehabilitation, insolvency or other similar law
now or hereafter in effect or of any proceeding in which a
receiver, liquidator, conservator, trustee or similar
official shall have been, or may be, appointed or requested
for the Servicer or any of its assets;
(vi) the receipt of notice that (A) any license, permit,
charter, registration or approval necessary for the
performance by the Servicer of its obligations under this
Agreement is to be, or may be, suspended or revoked, or (B)
the Servicer is to cease and desist any practice, procedure
or policy employed by the Servicer in the conduct of its
business, and such cessation may result in a material adverse
change in the financial condition or operations of the
Servicer;
(vii) any merger, consolidation or sale of substantially
all of the assets of the Servicer; or
(viii) the final payment in full of the Notes.
(f) Maintenance of Licenses. The Servicer shall maintain all
licenses, permits, charters and registrations which are material to
the performance by the Servicer of its obligations under this
Agreement.
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(g) Notices. The Servicer shall promptly notify the Trustee,
the Noteholders, the Rating Agency and the Supervisory Servicer in
writing of any event, circumstance or occurrence which may materially
and adversely affect the ability of the Servicer to service any Loan
or to otherwise perform and carry out its duties, responsibilities and
obligations under and in accordance with this Agreement.
SECTION 2.3 CLOSING CERTIFICATE AND OPINION. On the Closing Date, the
Servicer will deliver to the Issuer, the Initial Purchasers, the Supervisory
Servicer, the Noteholders and the Trustee an Opinion of Counsel, dated the
Closing Date, in form and substance satisfactory to the Noteholders, as to the
due authorization, execution and delivery of this Agreement by the Servicer and
the enforceability thereof and such other matters as reasonably requested by
the Noteholders. On the Closing Date, the Servicer shall also deliver an
Officers' Certificate, dated the Closing Date, signed by two Authorized
Officers, to the effect that:
(a) the representations and warranties contained in Section
2.1 hereof are true and correct in all material respects as of the
Closing Date;
(b) no Servicer Default exists hereunder; and
(c) the Servicer maintains such errors and omissions
insurance and fidelity bond coverage as is required by this Agreement.
SECTION 2.4 FIDELITY BOND AND INSURANCE. The Servicer shall maintain
with a responsible company, at its own expense, a blanket fidelity bond in a
minimum amount of $1,000,000 and an errors and omissions insurance policy with
coverage in an amount deemed reasonable by the Servicer, with coverage on all
officers, employees or other persons acting in any capacity requiring such
persons to handle funds, money, documents or papers relating to the Loans
("Servicer Employees"). Any such fidelity bond and errors and omissions
insurance shall protect and insure the Trust Estate and the Trustee, as Trustee
for the Noteholders, its officers, employees and agents against losses,
including losses resulting from forgery, theft, embezzlement, fraud, errors and
omissions and negligent acts of such Servicer Employees. No provision of this
Section 2.4 requiring such fidelity bond and errors and omissions insurance
shall diminish or relieve the Servicer from its duties and obligations as set
forth in this Agreement. Upon the request of the Trustee, the Servicer shall
cause to be delivered to the Trustee a certified true copy of such fidelity
bond and insurance policy. Coverage of the Servicer under a policy or bond
obtained by an Affiliate of the Servicer and providing the coverage required by
this Section shall satisfy the requirements of this Section.
SECTION 2.5 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING
THE LOANS. The Servicer shall provide to the Trustee, the Issuer, the
Supervisory Servicer, the Noteholders and their representatives or designees
access to the documentation regarding the Loans, such access being afforded
without charge but only upon reasonable request and during normal
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business hours at the offices of the Servicer provided that such access shall
not be requested more frequently than is reasonable or justifiable.
The Servicer shall at all times maintain accurate records and books of
account and an adequate system of audit and internal controls. All accounting
and loan servicing records pertaining to each Loan shall be maintained in such
manner as will permit the Trustee, the Noteholders and the Supervisory Servicer
or their duly authorized representatives and designees to examine and audit and
make legible reproductions of records during reasonable business hours. All
such records shall be maintained until no Notes remain Outstanding or such
longer period as is required by Law, including but not limited to, all
transaction registers and loan ledger histories.
SECTION 2.6 MERGER OR CONSOLIDATION. The Servicer will keep in full
effect its existence, rights and franchises, and will obtain and preserve its
qualification to do business in each jurisdiction in which such qualification
is or shall be necessary to protect the validity and enforceability of this
Agreement or any of the Loans and to perform its duties under this Agreement.
Any Person into which the Servicer may be merged or consolidated, or
any Person 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 $50,000,000 (unless otherwise consented to in writing
by the Trustee and the Noteholders) and shall be the successor of the Servicer
hereunder, without the execution or filing of any paper or any further act on
the part of any of the parties hereto except for notice thereof to the Rating
Agency, anything herein to the contrary notwithstanding, provided such
successor accepts the terms and conditions of this Agreement. The Servicer
shall, upon making a determination that it will enter into any such merger or
consolidation, send written notice thereof to the Trustee, the Noteholders, the
Supervisory Servicer and the Rating Agency which shall in no event be less than
30 days prior written notice.
SECTION 2.7 INDEMNIFICATION. The Servicer agrees to indemnify and hold
the Issuer, the Trust Estate, the Initial Purchasers, the Supervisory Servicer,
the Trustee and the Noteholders (and each of their respective officers,
directors, employees and agents) each harmless against any and all claims,
losses, damages, penalties, fines, forfeitures, reasonable legal fees and
related costs, judgments, and other costs and expenses ("Losses") resulting
from any claim, demand, defense or assertion based on or grounded upon, or
resulting from, a material breach of any of the Servicer's representations and
warranties contained in this Agreement or the negligence, bad faith or willful
misconduct of the Servicer relating to the performance of its duties hereunder
and servicing the Loans in compliance with the terms of this Agreement. The
Servicer agrees to indemnify and hold each of the Trustee and the Supervisory
Servicer and each of their respective officers, directors, employees and agents
harmless against any and all Losses incurred by it except for such actions to
the extent caused by any negligence, bad faith or willful misconduct on its
part, arising out of the administration of this Agreement, the Indenture or the
Supervisory Servicing Agreement or the exercise or performance of any of its
rights, powers or duties hereunder or thereunder. The Issuer,
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the Initial Purchasers, the Supervisory Servicer or the Trustee, as the case
may be, shall immediately notify the Servicer if a claim is made by a third
party with respect to this Agreement or the Loans; provided, however, that
failure to so notify shall not relieve the Servicer of its obligations
hereunder. Notwithstanding anything to the contrary contained herein, no Person
acting as Servicer hereunder shall have any liability under this Section 2.7
for the indemnification of any claim based upon or arising from the action or
omission of any predecessor Servicer.
ARTICLE III
GENERAL ADMINISTRATION AND SERVICING OF LOANS
SECTION 3.1 GENERAL DUTIES OF SERVICER. (a) For and on behalf of the
Issuer, the Trustee and the Holders, the Servicer shall service and administer
the Loans in accordance with the provisions of this Agreement and the
instructions of the Trustee hereunder. Unless otherwise specified herein with
respect to specific obligations of the Servicer, the Servicer shall service and
administer the Loans in the best interests of, and for the benefit of, the
Holders, in accordance with the Servicing Standard.
(b) Consistent with the terms of this Agreement, the Servicer may
waive, modify or vary any term of any Loan or consent to the postponement of
strict compliance with any such term or in any manner grant indulgence to any
Obligor if, in the Servicer's reasonable determination, such waiver,
modification, postponement or indulgence is not materially adverse to the
interests of the Trustee on behalf of the Noteholders and the Servicer would
make the same determination if it serviced the Loan for its own account;
provided, however, that the Servicer may not permit any modification with
respect to any Loan that would change the Loan Rate, forgive the payment of any
principal or interest (unless in connection with the liquidation of the related
Loan) or defer or extend the final maturity date of such Loan beyond the term
of the Notes without the written consent of all of the Noteholders. Without
limiting the generality of the foregoing, and subject to the consent of the
Trustee and in accordance with the Servicing Standard, the Servicer shall
continue, and is hereby authorized and empowered, to execute and deliver on
behalf of the Trustee, all instruments of satisfaction or cancellation, or of
partial or full release, discharge and all other comparable instruments, with
respect to the Loans and with respect to the Mortgaged Properties. If
reasonably required by the Servicer, the 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 under
this Agreement.
SECTION 3.2 NO ASSIGNMENT OR DELEGATION OF DUTIES BY SERVICER. The
Servicer, as an independent contractor, shall service and administer the Loans
and shall have full power and authority, acting alone, to do any and all things
in connection with such servicing and administration which the Servicer may
deem necessary or desirable and consistent with the terms of this Agreement.
The Servicer may not enter into subservicing agreements for any servicing and
administration of
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Loans without the prior written consent of the Required Noteholders and the
Trustee (acting at the written direction of the Required Noteholders) (which
consent shall not be unreasonably withheld) and without notice thereof to the
Rating Agency. Except as expressly provided herein, the Servicer shall not
assign or transfer any of its rights, benefits or privileges hereunder to any
other Person, or delegate to or subcontract with, or authorize or appoint any
other Person to perform any of the duties, covenants or obligations to be
performed by the Servicer hereunder, without notice to the Rating Agency and
without the prior written consent of the Required Noteholders and the Trustee
(acting at the written direction of the Required Noteholders) (which consent
shall not be unreasonably withheld), and absent such written consent any
agreement, instrument or act purporting to effect any such assignment,
transfer, delegation or appointment shall be void. The Servicer shall be liable
for all acts and omissions of any delegate, subcontractor or other agent
appointed pursuant to this Agreement. Nothing contained in this Section 3.2
shall prohibit or be deemed to prohibit the Servicer from contracting with
third parties to perform duties that are not duties of the Servicer hereunder
that the Servicer deems reasonably necessary in connection with the servicing
of the Loans including, without limitation, title work, surveying,
environmental consulting, property management and maintenance, construction,
engineering and architectural consulting.
SECTION 3.3 ESTABLISHMENT OF LOCKBOX ACCOUNT; NOTICES TO OBLIGORS;
DEPOSITS IN LOCKBOX ACCOUNT. (a) On or prior to the Closing Date, the Trustee
shall cause to be established and maintained, at the Servicer's expense if the
Servicer is PMC, if not, then at the expense of the Trust Estate, the Lockbox
Account with Bank One, Texas, N.A. or another Financial Institution having a
long-term unsecured debt rating of at least A-2 or its equivalent by the Rating
Agency, at all times that it holds the Lockbox Account (the "Required Rating").
The creation of the Lockbox Account shall be evidenced by a letter agreement
substantially in the form of Exhibit B hereto. A copy of such executed letter
agreement shall be furnished to the Servicer, the Placement Agent, the
Supervisory Servicer, the Noteholders and the Rating Agency.
(b) Within five days after the Closing Date, the Servicer will prepare
and deliver to each of the Obligors, with a copy of such correspondence to the
Trustee and to the Noteholders, notices in the form attached hereto as Exhibit
C, directing each such Obligor to send all future Monthly Payments or Principal
Prepayments directly to the Lockbox Account.
(c) Notwithstanding the foregoing notices, if the Servicer receives
any Collections, including, without limitation, any Monthly Payments, late
payment charges or other payments relating to a Loan, the Servicer will receive
such funds in trust for the Trustee and, if the Servicer is not a financial
institution having a rating of at least "P-1" or its equivalent by the Rating
Agency, will forward such funds to the Lockbox Account no later than the
Business Day immediately following the date the Servicer obtains knowledge of
such receipt. In addition, any Liquidation Proceeds received by the Servicer
will be deposited into the Lockbox Account no later than the Business Day
immediately following the day the Servicer obtains knowledge of such receipt.
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(d) Upon receipt of notice that the institution holding the Lockbox
Account no longer has the Required Rating or that Bank One, Texas, N.A. no
longer wishes to hold the Lockbox Account, the Servicer will, within five
Business Days, establish and maintain, at its expense if the Servicer is PMC,
or if not, at the expense of the Trust Estate, a new Lockbox Account at a
Financial Institution having the Required Rating. Such Lockbox Account shall be
evidenced by a letter agreement substantially in the form of Exhibit B hereto.
A copy of the executed letter agreement shall be furnished to the Servicer, the
Noteholders, the Supervisory Servicer and the Rating Agency within five
Business Days after the new Lockbox Account is established. Within five
Business Days of establishing the new Lockbox Account, the Servicer will
prepare and deliver to each of the Obligors, with copies of such correspondence
to the Trustee, and to the Noteholders, notices, in the form of Exhibit C
attached hereto, directing each such Obligor to send all future Monthly
Payments directly to the Lockbox Account.
SECTION 3.4 PERMITTED WITHDRAWALS FROM THE LOCKBOX ACCOUNT. The
Trustee shall have the sole right to withdraw funds from the Lockbox Account
and shall, on a daily basis, withdraw all deposits to the Lockbox Account and
transfer such funds to the Collection Account established under the Indenture.
The Trustee shall cause the entity holding the Lockbox Account to forward funds
held therein as provided herein.
SECTION 3.5 PAYMENT OF TAXES AND OTHER CHARGES. If the Servicer
receives notice that any taxes, assessments or other charges which are or may
become a lien upon the Mortgaged Property are overdue, the Servicer will give a
written demand to the Obligor to pay such amounts and will verify whether such
payment has been made within 60 days after mailing such notice (but in any
event prior to the time that any taxing authority commences to exercise its
available remedies), subject to any right, pursuant to the Mortgage, of an
Obligor who is contesting the validity of such charges and has paid to the
Servicer a deposit or security in the amount of the contested charge plus
possible costs, interest and penalties or who has otherwise established
adequate reserves against such liability in accordance with generally accepted
accounting principles; provided, further, however, that this provision shall
not have the effect of permitting the Servicer to take, or fail to take, any
action in respect of the payments described herein that would adversely affect
the interest of the Trustee in any Mortgaged Property. If such amounts have not
been paid by the Obligor or the Obligor has not deposited or reserved funds
therefor as described in the immediately preceding sentence, the Servicer will
promptly make such payment as a Servicing Expense and request reimbursement
from the Obligor, and from the Trustee in accordance with Section 3.8 hereof.
SECTION 3.6 COLLECTION OF CERTAIN LOAN PAYMENTS. The Servicer shall
make reasonable efforts to collect all payments called for under the terms and
provisions of the Loans. Consistent with the foregoing, the Servicer shall not,
unless the charging or collection of any such late payment charge, prepayment
charge, assumption fee or any penalty or interest would result in the violation
or contravention of applicable Law, waive or permit to be waived any late
payment charge, prepayment charge, assumption fee or any penalty or interest in
connection with the prepayment of a Loan. Notwithstanding any other provisions
hereof, the Servicer shall not charge or impose on any
EXHIBIT 10.12 SERVICING AGREEMENT - PAGE 10 OF 33
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Obligor, nor seek to charge or impose on any Obligor, nor assert a right to
receive, any fee, charge, premium or penalty that if charged or collected would
violate or contravene any Law, including usury laws or the terms of the related
Loan.
SECTION 3.7 LIMITATION OF LIABILITY OF SERVICER'S OFFICERS AND OTHERS.
No director, officer, employee or agent of the Servicer shall be under any
liability to the Trustee, the Issuer, the Supervisory Servicer, the Holders or
any other persons for any action taken by them or for their refraining to take
any action in good faith pursuant to this Agreement or for errors in judgment;
except that such provision shall not protect any of them from liability which
would be imposed by reason of willful misfeasance, willful misconduct, bad
faith or negligence.
SECTION 3.8 SERVICING COMPENSATION; ADVANCES AND EXPENSES. (a) As
compensation for its services hereunder, the Servicer shall be paid the
Servicing Fee. The Servicer shall be required to pay all expenses incurred by
it in connection with its servicing activities hereunder and shall be entitled
to reimbursement thereof as described below. The Servicing Fee shall be paid to
the Servicer and Servicing Expenses reimbursed to the Servicer pursuant to
Section 6.4 of the Indenture.
(b) All reasonable and customary "out-of-pocket" costs and expenses
incurred in the performance by the Servicer of its servicing obligations
hereunder ("Servicing Expenses") shall constitute routine servicing
responsibilities of the Servicer, which shall include, but are not limited to,
expenditures for the following, subject to the provisions of this Agreement,
(i) attorneys' fees, trustee fees under any deed of trust, recording, filing
and publication fees, title report and title search costs, costs associated
with environmental audits, court costs, witness fees and all other costs
incurred in respect of any enforcement of a Loan, any judicial foreclosure, or
any foreclosure sale, trustee's sale or acquisition in lieu of foreclosure, or
in respect of the insurance, sale or other disposition of any Mortgaged
Property or REO Property; (ii) repair, restoration, maintenance or other
protection of any Mortgaged Property (whether incurred before or after such
property became an REO Property) in accordance with and subject to the
provisions of this Agreement, as applicable; and (iii) compliance with the
Servicer's obligations under Section 3.5 hereof. Servicing Expenses shall not
include any portion of the Servicer's overhead or normal salary and operating
expenses.
(c) Not later than the close of business on each Determination Date,
with respect to each Loan for which a Principal Prepayment was received during
the related Collection Period, the Issuer shall remit to the Trustee for
deposit into the Collection Account, an amount ("Compensating Interest") equal
to any excess of (a) 30 days' interest at the then applicable Class A or Class
B Remittance Rate, as the case may be, on the related principal balance over
(b) that portion of the amount of interest actually received with respect to
such principal balance during such Collection Period and available to be paid
to the Noteholders. Such Compensating Interest shall be net of amounts payable
to the Noteholders and the Servicing Fee.
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SECTION 3.9 THE TRUSTEE'S, THE NOTEHOLDERS' AND SUPERVISORY SERVICER'S
RIGHT TO EXAMINE SERVICER RECORDS AND AUDIT OPERATIONS. The Trustee, the
Noteholders and the Supervisory Servicer and their designees shall have the
right upon reasonable prior notice, during normal business hours and as often
as reasonably required, to examine and audit (at no cost to the Servicer unless
a Servicer Default has occurred and is then continuing) any and all of the
books, records or other information of the Servicer directly relating to the
Loans, whether held by the Servicer or by another on behalf of the Servicer,
which may be relevant to the performance or observance by the Servicer of the
terms, covenants or conditions of this Agreement. The Trustee, the Noteholders
and the Supervisory Servicer shall have the right upon reasonable prior notice,
during normal business hours and as often as reasonably required to perform
ongoing diligence of the Servicer's operations through loan reviews,
re-appraisals (at no cost to the Servicer) or other reasonable review of
Servicer operations. No amounts payable in respect of the foregoing (other than
costs associated with re-appraisals) shall be paid from the Trust Estate unless
a Servicer Default exists and is then continuing.
SECTION 3.10 MAINTENANCE AND RELEASE OF LOAN DOCUMENTATION;
SATISFACTION OF MORTGAGES. (a) The Servicer shall retain, with respect to each
Loan, the originals (or copies if originals are not available) of all of the
instruments and documents relating to the Loan that would be maintained by a
prudent lender servicing such Loan for its own account (the "Servicer Loan
File"), except for those original instruments and documents constituting a part
of the Trustee Loan File that are required to be held by the Trustee.
Each Servicer Loan File shall remain the property of the Issuer
pledged to the Trustee for the benefit of the Holders and shall be held by the
Servicer in trust for the benefit of the Trustee on behalf of the Holders. Upon
written request of the Trustee, the Servicer shall immediately deliver all or
any of such instruments, records and documents in its possession or custody to
the Trustee, together with a list identifying each Loan to which such records
pertain. The Servicer, at its option, may microfilm, microfiche or otherwise
condense any records or documents constituting a part of, or relating to, any
Loan or any Servicer Loan File, provided that the Servicer, upon written
request by the Trustee, promptly reproduces in their entirety any or all such
records or documents at no cost to the Trustee.
(b) The Servicer shall maintain each Servicer Loan File for a period
of four years after the related Loan has been paid in full, is foreclosed upon
or is otherwise liquidated, or such longer period as may be required by Law.
The Servicer shall maintain an appropriate account record for each Loan which
shall include the permanent loan number for each Loan serviced by the Servicer
as shown on the Loan Schedule. Any system utilized for the Loan account records
shall be capable of producing, for any Loan, an account transcript itemizing in
chronological order the date, amount and application of each Monthly Payment by
due date and other information affecting the amounts paid by the Obligor,
including the latest outstanding Loan Principal Balance.
EXHIBIT 10.12 SERVICING AGREEMENT - PAGE 12 OF 33
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(c) The Servicer shall not grant a satisfaction or release of a
Mortgage without having obtained payment in full of the indebtedness secured by
the Mortgage or otherwise prejudice any right the Trustee may have under the
mortgage instruments, subject to Section 4.1 hereof. Upon the prepayment in
full or other liquidation of a Loan, the Servicer shall immediately deposit the
prepayment or Liquidation Proceeds in the Lockbox Account and prepare and
deliver to the Trustee and Supervisory Servicer a request for the appropriate
instrument releasing the Mortgaged Property from the lien of the Mortgage,
together with an Officer's Certificate (i) certifying that (A) all amounts that
the Obligor is obligated to pay under the Underlying Note, the Mortgage and any
other document pertaining to the Loan, including, but not limited to, all
required payments of principal and interest, have been paid in full and
deposited in the Lockbox Account; or (B) all Liquidation Proceeds which the
Servicer reasonably believes will be collected with respect to a Liquidated
Loan have been collected and deposited in the Lockbox Account; and (ii)
requesting that (X) the Trustee Loan File for such Loan be released by the
Trustee to the Servicer and (Y) the Trustee execute and deliver to the Servicer
the appropriate instrument prepared by the Servicer necessary to release the
lien of the Mortgage, together with the Underlying Note bearing written
evidence of cancellation or assignment thereof, as appropriate.
The Trustee shall, upon receipt of a written request from a Servicing
Officer and approval of the Supervisory Servicer, execute any document provided
to the Trustee by the Servicer or take any other action requested in such
request, that is, in the opinion of the Servicer as evidenced by such request,
required by any state or other jurisdiction to discharge the lien of a Mortgage
upon the satisfaction thereof and the Trustee will sign and post, but will not
guarantee receipt of, any such documents to the Servicer, or such other party
as the Servicer may direct in writing, within five Business Days of the
Trustee's receipt of such certificate or documents. Such certificate or
documents shall establish to the Trustee's satisfaction that the related Loan
has been paid in full by or on behalf of the Obligor and that such payment has
been deposited in the Lockbox Account.
Upon receipt of the Trustee Loan File, the Servicer shall record the
mortgage release or satisfaction in the proper recording office, deliver the
Underlying Note and/or the recorded original of such instrument of release or
satisfaction to the Obligor, deposit any remaining documents into the Servicer
Loan File, and retain the Servicer Loan File as provided in section (a) and (b)
above. Any costs and expenses associated with the release of any Loan shall be
the expense of the Trust Estate to the extent not paid by the applicable
Obligor.
Any applications for partial release of any part of a Mortgaged
Property must be approved in the manner set forth in Section 3.12 hereof.
(d) From time to time as is appropriate, the Servicer may request the
Trustee to deliver or cause to be delivered to the Servicer all or part of the
documents constituting a part of the Trustee Loan File to facilitate the
servicing or foreclosure of any Loan, the acquisition of any Mortgaged Property
in lieu of foreclosure, the partial release of any Mortgaged Property from the
lien of the Mortgage or the making of any corrections to the Underlying Note or
the Mortgage or other
EXHIBIT 10.12 SERVICING AGREEMENT - PAGE 13 OF 33
14
documents constituting the Trustee Loan File. To make such request, the
Servicer shall deliver to the Trustee an Officer's Certificate requesting that
possession of all, or any document constituting part of, the Trustee Loan File
be released to the Servicer; such certificate shall certify the reason for such
release. The Servicer also shall deliver to the Trustee together with such
certificate a Trust Receipt signed by a Servicing Officer, in substantially the
form attached as Exhibit A hereto.
If the Servicer at any time seeks to initiate a foreclosure proceeding
with respect to any Mortgaged Property, then the Servicer shall deliver to the
Trustee, for signature by the Trustee, as appropriate, any court pleadings,
requests for Trustee's sale or other documents necessary to the foreclosure or
to any legal action brought to obtain judgment against the Obligor on the
Underlying Note or the Mortgage, or to obtain a deficiency judgment, or to
enforce any other remedies or rights provided by the Underlying Note or the
Mortgage or otherwise available at law or in equity. The Servicer shall also
deliver to the Trustee an Officer's Certificate requesting that such pleadings
or documents be executed by the Trustee and certifying as to the reason such
documents or pleadings are required and that the execution and delivery thereof
by the Trustee will not invalidate the Mortgage except for the termination of
such lien upon completion of the proposed foreclosure. Notwithstanding the
foregoing, the Servicer shall cause possession of any Trustee Loan File or
documents therein that have been released by the Trustee to be returned to the
Trustee when the need for such file or documents no longer exists, but in any
event within 30 calendar days after release by the Trustee unless (i) the Loan
has been liquidated and the Liquidation Proceeds relating to the Loan have been
deposited in the Lockbox Account or (ii) the Trustee Loan File or documents so
released have been delivered to an attorney, a public trustee or other public
official, as required by Law, to initiate or pursue legal action or other
proceedings to foreclose the applicable Mortgage, and the Servicer has
delivered to the Trustee an Officer's Certificate certifying as to the name and
address of the Person to which the Trustee Loan File, or documents therefrom,
have been delivered and the purpose or purposes of such delivery.
(e) The Servicer shall, at its expense if the Servicer is PMC, if not,
at the expense of the Trust Estate, prepare and deliver to the Trustee any
instruments required in connection with substitution of a Loan pursuant to
Section 3.3 of the Indenture and will pay any recording or filing costs
associated therewith.
SECTION 3.11 NOTICE OF LIENS AND OTHER ACTIONS. The Servicer shall, at
all times, exercise reasonable efforts to prevent any lien or judicial levy
upon or writ of attachment against a Mortgaged Property of which the Servicer
is notified or otherwise has knowledge, which is, or may be, superior to the
lien of the Mortgage.
SECTION 3.12 WAIVERS, RELEASES, CONDEMNATIONS, EASEMENTS AND
ALTERATIONS. Any applications for partial releases of real property and
releases of personal property which are part of a Mortgaged Property, the
creation or release of easements, waivers of rights under any Mortgage, consent
to alteration, removal or demolition of improvements and other matters
affecting the Mortgage or the Mortgaged Property, other than those which are
contractually provided for in the
EXHIBIT 10.12 SERVICING AGREEMENT - PAGE 14 OF 33
15
Underlying Note or related loan documents, shall be subject to the prior
written approval of the Trustee which consent shall not be unreasonably
withheld and which shall be provided only upon written certification by the
Servicer that such action is consistent with the Servicing Standard and the
Mortgage and the ability to collect under the Underlying Note will not be
adversely affected by such release.
SECTION 3.13 LIMITATION ON LIABILITY OF SERVICER AND OTHERS. The
Servicer and any director, officer, employee or agent of the Servicer may rely
on any document of any kind which it in good faith reasonably believes to be
genuine and to have been adopted or signed by the proper authorities respecting
any matters arising hereunder. Subject to the terms of Section 2.7 herein, the
Servicer shall have no obligation to appear with respect to, prosecute or
defend any legal action which is not incidental to the Servicer's duty to
service the Loans in accordance with this Agreement. The Issuer agrees to
indemnify and hold the Servicer harmless from any loss, claim, demand,
liability or expense (including, without limitation, past acts of predecessor
Servicers and fees and expenses of legal counsel) arising from or relating to
the performance of its duties under this Agreement which do not result from the
Servicer's negligence, bad faith or willful misconduct.
SECTION 3.14 PROPERTY ADDRESS CHANGE. The Servicer shall note in its
records and notify the Trustee of all changes of address of an Obligor or of a
Mortgaged Property of which the Servicer is notified or of which the Servicer
has knowledge.
ARTICLE IV
SPECIFIC SERVICING PROCEDURES
SECTION 4.1 ASSUMPTION AGREEMENTS. When a Mortgaged Property has been or
is about to be conveyed by the Obligor, the Servicer shall, to the extent it
has knowledge of such conveyance or prospective conveyance, exercise its rights
to accelerate the maturity of the related Loan under any "due-on-sale" clause
contained in the related Mortgage or Underlying Note; provided, however, that
the Servicer shall not exercise any such right if the "due-on-sale" clause, in
the reasonable belief of the Servicer, is not enforceable under applicable law
or if such enforcement would materially increase the risk of default or
delinquency on, or materially decrease the security for, such Loan. In such
event, the Servicer shall enter into an assumption and modification agreement
with the person to whom such property has been or is about to be conveyed,
pursuant to which such person becomes liable under the Underlying Note and,
unless prohibited by applicable law or the Mortgage, the Obligor remains liable
thereon, provided that the Servicer may enter into an assumption agreement with
the transferee and release the transferor-Obligor from liability only if (a)
the transferee qualifies for credit under the customary credit policies of the
Servicer, (b) any applicable Law requires that the transferor-Obligor be
released from liability on the Loan, (c) an officer of the Servicer has
examined and approved all instruments as are necessary to carry out the
assumption transaction and approved such instruments as to form and substance,
(d) the execution and delivery of such
EXHIBIT 10.12 SERVICING AGREEMENT - PAGE 15 OF 33
16
instruments by all necessary parties will not cause the unpaid principal
balance and any accrued interest thereon for the Loan to be uncollectible in
whole or in part, and (e) upon closing the assumption transaction (i) the
Mortgage will continue to be a first lien upon the Mortgaged Property, and (ii)
the Loan Rate and Monthly Payment for the Loan will not be changed nor will the
term of the Note be extended. For each proposed assumption transaction, the
Servicer shall deliver an Officer's Certificate to the Trustee certifying that
each of the applicable requirements specified in the immediately preceding
sentence have been satisfied together with the assumption instruments requiring
execution by the Trustee. Such certificate shall also indicate whether the
seller/transferor of the Mortgaged Property will be released from liability on
the Loan and that the Servicer has made a good faith determination that any
such release will not adversely affect the collectibility of the Loan.
The Servicer is also authorized with the prior approval of the Trustee
to enter into a substitution of liability agreement with such transferee,
pursuant to which the original Obligor is released from liability and such
person is substituted as Obligor and becomes liable under the Underlying Note.
The Servicer shall notify the Trustee that any such substitution or assumption
agreement has been completed by forwarding to the Trustee the original of such
substitution or assumption agreement, which original shall be added by the
Trustee to the related Trustee's Loan File and shall, for all purposes, be
considered a part of such Trustee's Loan File to the same extent as all other
documents and instruments constituting a part thereof. Any fee collected by the
Servicer for consenting to any such conveyance or entering into an assumption
or substitution agreement shall be retained by or paid to the Servicer as
additional servicing compensation.
Notwithstanding the foregoing paragraph 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
Loan by operation of law or any assumption which the Servicer may be restricted
by law from preventing, for any reason whatsoever.
SECTION 4.2 SERVICING DELINQUENT ACCOUNTS; LIQUIDATION OF LOANS. The
Servicer shall exercise diligence in obtaining payment of Monthly Payments when
due under the terms of each Loan and shall use reasonable efforts to contact
any delinquent Obligor.
If any delinquent Obligor shall be or become a bankrupt or otherwise
become the subject of any insolvency or similar proceeding, the Servicer shall
notify the Trustee of such event and, thereafter, shall carry out all
reasonable actions necessary for the benefit and protection of the interests of
the Trustee and the Holders, including, but not limited to, retention of
counsel to represent the Trustee in any bankruptcy or other court proceedings
relating to such Obligor or the Mortgaged Property.
If any Loan previously reported on a Determination Date Report as more
than 90 days delinquent is subsequently reported as being brought current, the
Servicer will verify with the
EXHIBIT 10.12 SERVICING AGREEMENT - PAGE 16 OF 33
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relevant Obligor that the Obligor paid the delinquent payments, by sending the
Obligor the letter in the form attached hereto as Exhibit H.
(b) In the event that any payment due under any Loan and not postponed
pursuant to Section 3.1 is not paid when the same becomes due and payable, or
in the event the Obligor fails to perform any other covenant or obligation
under such Loan and such failure continues beyond any applicable grace period,
the Servicer shall take such other action as it shall deem to be in the best
interests of the Trustee and the Holders. The Servicer shall foreclose upon or
otherwise effect the ownership in the name of the Trustee of Mortgaged
Properties relating to defaulted Loans as to which no satisfactory arrangements
can be made for collection of delinquent payments in accordance with the
customary collection policies of the Servicer and the provisions of Section
3.1. In connection with such foreclosure or other conversion, the Servicer
shall exercise collection and foreclosure procedures with the same degree of
care and skill in its exercise or use as it would exercise or use under the
circumstances in the conduct of its own affairs and shall in any event, comply
with the Servicing Standard. The Servicer shall use its reasonable efforts to
realize upon such defaulted Loans in accordance with the Servicing Standard.
The Servicer shall be responsible for all other costs and expenses incurred by
it in any foreclosure proceedings; provided, however, that it shall be entitled
to reimbursement thereof as contemplated in Sections 3.8 and 4.3 hereof.
No modification, recast or extension of a Loan other than as provided
above and in Section 3.1 is permitted without the prior written consent of the
Trustee and which shall be provided only upon written certification by the
Servicer that such action is consistent with the Servicing Standard and the
Mortgage and the ability to collect under the Underlying Note will not be
adversely affected by such release.
Notwithstanding the foregoing provisions of this Section 4.2, the
Servicer shall not, on behalf of the Trustee, obtain title to a Mortgaged
Property by deed in lieu of foreclosure or otherwise, or take any other action
with respect to any Mortgaged Property, if, as a result of any such action, the
Trustee, on behalf of the Noteholders, could, in the reasonable judgment of the
Servicer, made in accordance with the Servicing Standard, be considered to hold
title to, to be a "mortgagee-in possession" of, or to be an "owner" or
"operator" of such Mortgaged Property within the meaning of CERCLA or any
comparable law, unless the Servicer has previously determined in accordance
with the Servicing Standard, based on a Phase I Environmental Assessment (and
any additional environmental testing that the Servicer deems necessary and
prudent) of such Mortgaged Property conducted by an Independent Person who
regularly conducts Phase I Environmental Assessments and performed during the
twelve-month period preceding any such acquisition of title or other action;
that the Mortgaged Property is in material compliance with applicable
environmental laws and regulations or, if not, that it would maximize the
recovery to the Noteholders on a present value basis to acquire title to or
possession of the Mortgaged Property and to effect such compliance.
(c) If the environmental testing contemplated by Section 4.2(b) above
establishes that any of the conditions set forth therein have not been
satisfied with respect to any Mortgaged Property
EXHIBIT 10.12 SERVICING AGREEMENT - PAGE 17 OF 33
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securing a defaulted Loan, the Servicer shall, in accordance with the Servicing
Standard, prepare a written report to the Trustee and the Noteholders
summarizing the environmental condition of the Mortgaged Property and proposing
a course of action to pursue with respect to such Mortgaged Property. In the
event that the Servicer has not received through the Trustee the written
objection to such proposed course of action of the Holders of more than 50% of
the Outstanding Note Amount within 30 days of the Trustee's distributing such
notice, the Servicer shall be deemed to have been directed by the Noteholders
to take such proposed action.
(d) The Servicer shall report to the Trustee monthly in writing as to
any actions taken by the Servicer with respect to any Mortgaged Property as to
which the environmental testing contemplated in Section 4.2(b) above has
revealed that any of the conditions set forth have not been satisfied, in each
case until the earliest to occur of satisfaction of all such conditions and the
release of the Lien of the related Mortgage on such Mortgaged Property.
(e) If foreclosure has been approved as provided above, the Servicer
shall initiate or cause to be initiated the foreclosure action according to
such procedures as are authorized by Law and the practices in the locality
where the Mortgaged Property is located. In the event that title to the
Mortgaged Property is acquired in foreclosure or by deed in lieu of
foreclosure, the deed or certificate of sale shall be taken in the name of the
Trustee for the benefit of the Holders.
(f) The Servicer shall have the right to determine, in accordance with
the Servicing Standard, the advisability of seeking to obtain a deficiency
judgment if the state in which the Mortgaged Property is located and the terms
of the Loan permit such an action and shall, in accordance with the Servicing
Standard, seek such deficiency judgment if it deems advisable.
(g) After a Loan has become a Liquidated Loan, the Servicer shall
promptly prepare and forward to the Trustee a liquidation report detailing the
Liquidation Proceeds received from the Liquidated Loan, expenses incurred with
respect thereto and any Realized Loss incurred in connection therewith.
(h) If the requirements of Sections 4.2(b) and (c) hereof have been
satisfied, the Servicer may accept a deed in lieu of foreclosure, provided that
(i) marketable title as evidenced by a policy of title insurance can be
conveyed to and acquired by the Trustee or its designee; (ii) no cash
consideration is to be paid to the Obligor by the Trustee; and (iii) the
Servicer has obtained from the Obligor a written acknowledgment that the deed
is being accepted as an accommodation to the Obligor and on the condition that
the Mortgaged Property will be transferred to the Trustee or its designee free
and clear of all claims, liens, encumbrances, attachments, reservations or
restrictions except for those to which the Mortgaged Property was subject at
the time the Mortgaged Property became subject to the Mortgage. Title shall be
conveyed directly from the Obligor to the Trustee for the benefit of the
Holders.
EXHIBIT 10.12 SERVICING AGREEMENT - PAGE 18 OF 33
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(i) The Servicer will indemnify and hold harmless the Trustee, the
Supervisory Servicer and their respective directors, officers, agents and
employees from and against any and all claims, demands, losses, penalties,
liabilities, costs, damages, injuries and expenses, including, without
limitation, reasonable attorneys' fees and expenses, suffered or sustained by
such parties, either directly or indirectly, relating to or arising out of the
violation of an Environmental Law with respect to a Mortgaged Property
resulting from the Servicer's obligations failure to perform its hereunder,
including without limitation any expenses and other costs incurred in
connection with the defense of any such action, proceeding or claim. This
obligation shall survive the termination of this Agreement, the Indenture and
the Supervisory Servicing Agreement or the earlier resignation or removal of
the Trustee or the Supervisory Servicer, as the case may be.
SECTION 4.3 FORECLOSURE EXPENSES. The Servicer shall prepare a written
estimate of the amount of attorneys' fees, trustee's fees and other costs in
respect of any foreclosure or acquisition in lieu of foreclosure. The Servicer
shall arrange payment of attorneys' fees, trustees' fees and other foreclosure
costs at the commencement of foreclosure proceedings.
The Servicer may reimburse itself for any Servicing Expenses paid by
the Servicer, made in connection with such Loan or such foreclosure or other
action, out of amounts received by the Servicer in connection with liquidation
of the Loan, prior to remittance of any such amounts to the Lockbox Account.
Section 4.4 TITLE, MANAGEMENT AND DISPOSITION OF REO PROPERTY. (a)
Upon the acquisition of REO Property by the Servicer by foreclosure or
conveyance in lieu of foreclosure, the Servicer shall notify the Trustee
promptly that the REO Property has been acquired and shall thereafter: (i)
deliver the deed or certificate of sale to the Trustee, or its nominee; (ii)
manage, conserve and protect the REO Property in the same manner and to such
extent as is customary in the locality where such REO Property is located
including the rental of the same, or any part thereof, as the Servicer deems to
be in the best interest of the Trustee for the benefit of the Holders; (iii)
pay all costs such as taxes and assessments relating to the REO Property; (iv)
process any claims for redemption and otherwise comply with any redemption
procedures required by Law; (v) sell or otherwise dispose of the REO Property
and remit the proceeds to the Trustee; and (vi) timely file any and all
federal, state and local tax or information returns or reports as are required
as a result of the acquisition or disposition of REO Property and perform any
withholding required in connection therewith. The Servicer shall not acquire
any REO Property relating to a Charged-Off Loan that is required to be released
from the lien of the Indenture and disposed of by the Issuer on the next
Payment Date. If any REO Property is expected to be acquired, the Servicer
shall inform the Issuer, the Noteholders and the Trustee and the Issuer shall
comply with Section 5.14 of the Indenture.
The Servicer shall manage, conserve, protect and operate each REO
Property for the Trustee solely for the purpose of its prudent and prompt
disposition and sale. The Servicer shall, either itself or through an agent
selected by the Servicer, manage, conserve, protect and operate the REO
Property in the same manner that it manages, conserves, protects and operates
other foreclosed
EXHIBIT 10.12 SERVICING AGREEMENT - PAGE 19 OF 33
20
property for its own account and in the same manner that similar property in
the same locality as the REO Property is managed. The Servicer shall attempt to
sell the same (and may temporarily rent the same) on such terms and conditions
as the Servicer deems to be in the best interest of the Holders.
(b) Until the REO Property is disposed of, the Servicer shall (i) take
appropriate action to secure the REO Property and maintain proper surveillance
over it; (ii) advance all costs such as taxes and assessments; (iii) maintain
the REO Property so as to preserve its value and prevent any additional
deferred maintenance; and (iv) submit monthly statements for services to the
Trustee, together with additional documentation including statements of income
and expenses (accompanied by copies of paid invoices for every expense item).
(c) Until the REO Property is disposed of, the Servicer shall maintain
for such REO Property, a standard hazard insurance policy providing fire and
extended coverage in an amount equal to the full replacement cost of all
improvements on the Mortgaged Property, which requirement may be satisfied by a
master force placed or blanket insurance policy insuring against hazard losses.
If the Mortgaged Property is in an area identified in the Federal Register by
the Federal Emergency Management Agency as having special flood hazards (and
such flood insurance has been made available) Servicer shall maintain a flood
hazard insurance policy meeting the requirements of the current guidelines of
the Federal Insurance Administration with an insurance carrier generally
acceptable to commercial mortgage lending institutions for properties, similar
to the REO Property in an amount representing coverage not less than the lesser
of (i) the full insurable value of such REO Property, or (ii) the maximum
amount of insurance which is available under the Flood Disaster Protection Act
of 1973, as amended from time to time. The Servicer will also maintain
comprehensive general liability insurance and business interruption insurance
(to the extent applicable) in such amounts as are then customary for similarly
situated properties and businesses.
(d) The Servicer shall advance all funds necessary for the proper
operation, management, insurance and maintenance of the REO Property. On each
Determination Date Report, the Servicer shall schedule its reasonable expenses
with respect to any REO Property for the related Collection Period.
(e) The Servicer shall deposit all funds collected and received in
connection with the operation or disposition of any REO Property in the Lockbox
Account no later than the Business Day immediately following notice of receipt
of such funds, net of funds necessary for the proper operation, management,
insurance and maintenance of the REO Property.
(f) If as of the date of disposition of any REO Property there remain
unpaid Servicing Fees with respect to the related Loan, the Servicer, shall be
entitled to payment for the unpaid Servicing Fees and reimbursement for the
unreimbursed related Servicing Expenses from proceeds received in connection
with the disposition prior to remittance of any proceeds to the Trustee.
EXHIBIT 10.12 SERVICING AGREEMENT - PAGE 20 OF 33
21
Disposition of REO Property shall be carried out by the Servicer at
such price and upon such terms and conditions as the Servicer, in its judgment,
believes to be in the best interests of the Holders, subject to and in
accordance with Section 4.2. Upon the sale of any Mortgaged Property, the
Servicer shall remit the net cash proceeds remaining after payment of expenses
of the sale to the Lockbox Account.
(g) If any Charged-Off Loan is expected to be released from the lien
of the Indenture on the next Payment Date, the Servicer shall not commence a
foreclosure proceeding or accept a deed in lieu of foreclosure. Any
determination by the Servicer that a Loan is a Charged-Off Loan shall be made
in good faith.
ARTICLE V
REPORTS TO BE PROVIDED BY SERVICER
SECTION 5.1 DETERMINATION DATE REPORTS.
(a) Monthly Reports. Each month, not later than 12:00 noon Dallas time
on the fifth Business Day preceding each Payment Date, the Servicer shall
deliver to the Trustee, by telecopy, the receipt and legibility of which shall
be confirmed telephonically, with hard copy thereof to be delivered on the next
Business Day, with copies to the Supervisory Servicer (if other than the
Trustee), the Noteholders, the U.S. Small Business Administration and the
Rating Agency, a Determination Date Report in the form attached hereto as
Exhibit D signed by a Servicing Officer stating the date (day, month and year),
referring to this Agreement by name and date and stating, as of the close of
business on the immediately preceding Determination Date:
(i) the aggregate amount of all funds received in respect of
scheduled principal payments on the Loans during the related
Collection Period;
(ii) the aggregate amount of interest received on the Loans
during the related Collection Period;
(iii) the number and Loan Principal Balances of all Loans
which were the subject of Principal Prepayments during the related
Collection Period and the aggregate amount of Principal Prepayments
received with respect to the Loans during such Collection Period;
(iv) the aggregate Loan Principal Balance of the Loans as of
the related Determination Date, stating any REO Properties separately;
EXHIBIT 10.12 SERVICING AGREEMENT - PAGE 21 OF 33
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(v) the loan number and Loan Principal Balance of each
Delinquent Loan for the related Collection Period;
(vi) the loan number and the aggregate number and aggregate
Loan Principal Balance of Loans delinquent 31 days, 91 days and 181 or
more days as of the Determination Date;
(vii) the loan number and the aggregate number and aggregate
Loan Principal Balance of Loans which were Charged-Off Loans as of the
Determination Date and the related recovery thereon;
(viii) the number and aggregate Loan Principal Balance of
Loans (i) which will be released from the lien of the Indenture during
the related Collection Period or on the related Payment Date, (ii)
which have been repurchased including the Takeout Price therefor and
(iii) which have been substituted for a Substitute Loan including any
Asset Substitution Shortfall therefor;
(ix) the number and aggregate Loan Principal Balance of Loans
which were in foreclosure as of the related Determination Date;
(x) with respect to any Loan that became an REO Property
during the related Collection Period, (a) the Loan Principal Balance
of such Loan as of the date title to such REO Property was acquired,
(b) the book value and length of time held of each REO Property as of
the related Determination Date, and (c) the income and expenses
incurred by the Servicer in connection with any REO Property during
the related Collection Period;
(xi) the amount of any Realized Losses incurred during the
related Collection Period;
(xii) the cumulative Realized Losses since the Closing Date;
(xiii) the Required Principal Payment for the related Payment
Date and information as to the calculation of such amount;
(xiv) the amount of the interest accrued on the Notes and
information as to the calculation of such amount;
(xv) the Outstanding Note Amount;
(xvi) the Servicing Fee, Supervisory Servicer's Fee, if any,
Trustee's Fee and Rating Agency fee due on the related Payment Date;
EXHIBIT 10.12 SERVICING AGREEMENT - PAGE 22 OF 33
23
(xvii) the amount of all Servicing Expenses paid by Servicer
during such Collection Period and any and all other amounts deducted
by the Servicer in accordance with the terms hereof from Collections
received by the Servicer prior to remittance thereof to the Lockbox
Account and a detailed report describing the type and amount of all
such Servicing Expenses and other deductions;
(xviii) information as to any Funds Retention Event;
(xix) the Required Reserve Amount, including the beginning
balance thereof, additions thereto and transfers therefrom during the
related Collection Period; and
(xx) such other information as the Trustee, the Noteholders
or the Rating Agency may reasonably require.
To the extent that there are inconsistencies between the telecopy of
the Servicer's Certificate and the hard copy thereof, the Trustee shall be
entitled to rely upon the telecopy.
(b) Annual Statement. Within 90 days after the end of each calendar
year, the Servicer shall furnish to the Trustee and the Noteholders such
information in the form attached hereto as Exhibit E as is reasonably necessary
to provide to the Holders a statement containing the aggregate amount of
principal of and interest on the Notes paid during the prior calendar year,
aggregated for such calendar year or applicable portion thereof during which
such Person was a Holder. Such obligation of the Servicer shall be deemed to
have been satisfied to the extent that substantially comparable information
shall be provided by the Servicer pursuant to any requirements of the Code as
from time to time are in force.
(c) Computer Data. Prior to the Closing Date the Servicer shall
provide the Supervisory Servicer with all data on the Servicer's computerized
servicing system relating to the Loans in an electronically readable form
specified by the Supervisory Servicer and shall update such data at least
monthly.
(d) Other Reports. The Servicer shall furnish to the Trustee, the
Noteholders, the Rating Agency and the Supervisory Servicer, during the term of
this Agreement, such periodic, special or other reports, Officer's
Certificates, data relating to the Loans or information, whether or not
provided for herein, as shall be reasonably requested, all such reports or
information to be provided by and in accordance with such applicable
instructions and directions as the Trustee, the Noteholders or the Supervisory
Servicer may reasonably require; provided, however, the Servicer shall be
reimbursed for the reasonable cost of providing such additional reports.
EXHIBIT 10.12 SERVICING AGREEMENT - PAGE 23 OF 33
24
SECTION 5.2 REPORTS OF FORECLOSURE AND ABANDONMENT OF MORTGAGED
PROPERTY. Each year the Servicer shall make any reports of foreclosures and
abandonments of any Mortgaged Property required by the Code.
SECTION 5.3 QUARTERLY STATEMENT AS TO COMPLIANCE. The Servicer will
deliver to the Trustee, the Noteholders, the Rating Agency and the Supervisory
Servicer, quarterly, no later than each April 15, July 15, October 15 and
January 15, for each quarterly period ending on each March 31, June 30,
September 30 and December 31, commencing on January 15, 1999, an Officer's
Certificate in the form attached hereto as Exhibit F stating that (a) the
Servicer has fully complied with the provisions of this Agreement, (b) a review
of the activities of the Servicer during the preceding quarter and of the
Servicer's performance under this Agreement has been made under such officer's
supervision and (c) to the best of such officer's knowledge, based on such
review, the Servicer has fulfilled all its obligations, duties and
responsibilities under this Agreement throughout such quarterly period (or,
with respect to the first such report, since the Closing Date) and no Servicer
Default exists, or, if there has been a default or failure in the fulfillment
of any such obligation, specifying each such default or failure known to such
officer and the nature and status thereof and the action being taken by the
Servicer to cure such default.
SECTION 5.4 ANNUAL INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING REPORT.
The Servicer at its expense shall cause a nationally recognized firm of
independent certified public accountants to furnish a statement to the Trustee,
the Supervisory Servicer, the Noteholders, and each Rating Agency on or before
May 1 of each year, commencing on May 1, 1999, to the effect that, with respect
to the most recently ended fiscal year, such firm has examined certain records
and documents relating to the Servicer's performance of its servicing
obligations and that, on the basis of such examination, conducted substantially
in compliance with the Uniform Single Attestation Program for Mortgage Bankers,
such firm is of the opinion that such servicing has been conducted
substantially in compliance in all material respects with the requirements of
the standard servicing procedures outlined in the Uniform Single Attestation
Program for Mortgage Bankers, except for such exceptions noted therein. In the
event such firm requires the Trustee or the Supervisory Servicer to agree to
the procedures performed by such firm, the Servicer shall direct the Trustee
and the Supervisory Servicer in writing to so agree; it being understood and
agreed that the Trustee and the Supervisory Servicer will deliver such letter
of agreement in conclusive reliance upon the direction of the Servicer, and
each of the Trustee and the Supervisory Servicer makes no independent inquiry
or investigation as to, and shall have no obligation or liability in respect
of, the sufficiency, validity or correctness of such procedures.
SECTION 5.5 SERVICER'S FINANCIAL STATEMENTS; ANNUAL CERTIFICATION.
Within 120 days after the end of each fiscal year beginning with the fiscal
year ending December 31, 1998, the Servicer shall submit to the Trustee, the
Noteholders and the Rating Agency a copy of its annual audited financial
statements or in the event the Servicer is not PMC, a copy of the annual
audited consolidated financial statement of its parent. Within 45 days after
the end of each of the first three
EXHIBIT 10.12 SERVICING AGREEMENT - PAGE 24 OF 33
25
fiscal quarters of each fiscal year beginning with the quarter ending December
31, 1998, the Servicer shall submit to the Trustee, the Noteholders and the
Rating Agency a copy of its quarterly financial statements. Such financial
statements shall, to the extent required by the Securities Exchange Act of
1934, as amended, whether or not the Servicer is subject to such Act, include a
balance sheet, income statement, statement of retained earnings, beneficiaries'
(or shareholders') equity, statement of cash flows and all related notes and
schedules and shall be in comparative form.
Contemporaneously with the submission of the financial statements
required by the preceding paragraph, the Servicer shall deliver to the Trustee,
the Noteholders and the Rating Agency an Officer's Certificate in the form
attached hereto as Exhibit G to the effect that:
(a) such officer has confirmed that the Fidelity Bond, the
Errors and Omissions Insurance Policy and any other bonds or insurance
required by Section 2.4 hereof are in full force and effect; and
(b) the representations and warranties of the Servicer set
forth in Section 2.1 are true and correct in all material respects as
if made on the date of such certification.
The Servicer shall also furnish and certify such other information as
to its organization, activities and personnel as the Trustee, the Noteholders
the Rating Agency or the Supervisory Servicer may reasonably request from time
to time.
ARTICLE VI
DEFAULTS
SECTION 6.1 SERVICER DEFAULTS. The happening of any one or more of the
following events shall constitute a Servicer Default hereunder:
(a) Any failure by the Servicer to make any payment, deposit,
advance or transfer of funds required to be paid, deposited, advanced
or transferred under the terms of this Agreement, and such failure
continues unremedied for five Business Days after discovery by
Servicer of such failure or receipt by Servicer of notice of such
failure;
(b) Failure on the part of the Servicer duly to observe or
perform in any material respect any of the covenants or agreements
contained in this Agreement or the Supervisory Servicing Agreement
which continues unremedied for 30 days after the giving of written
notice of such failure or breach as the case may be, to the Servicer;
provided, however, if such failure shall be of a nature that it cannot
be cured within 30 days, such failure shall not constitute a Servicer
Default hereunder if within such 30-day period the Servicer gives
notice to the Trustee and the Supervisory Servicer of the corrective
action it proposes to take, which
EXHIBIT 10.12 SERVICING AGREEMENT - PAGE 25 OF 33
26
corrective action is agreed in writing by the Trustee to be satisfactory and
the Servicer shall thereafter pursue such corrective action diligently until
such default is cured;
(c) A decree or order of a court or agency or supervisory
authority having jurisdiction in the premises for the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment
of debt, marshaling 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 90 days;
(d) The Servicer shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment
of debt, marshaling of assets and liabilities or similar proceedings
of or relating to the Servicer or of or relating to all or
substantially all of its property;
(e) The Servicer shall admit in writing its inability to pay
its debts generally as they become due, file a petition to take
advantage of any applicable insolvency or reorganization statute, make
an assignment for the benefit of its creditors or voluntarily suspend
payments of its obligations;
(f) The Servicer shall cease to be an Eligible Servicer;
(g) A material adverse change occurs in the financial
condition of the Servicer, which change materially impairs the ability
of the Servicer to perform its obligations under this Agreement; or
(h) Any representation or warranty made by the Servicer in
any Transaction Document proves to have been incorrect in any material
respect when made, which has a material adverse effect on the
Noteholders and which continues to have a material adverse effect or
be incorrect in any material respect for a period of 30 days after
written notice of such inaccuracy, requiring it to be remedied, has
been given to the Servicer by the Trustee, the Supervisory Servicer or
any Noteholder; provided, however, if such inaccuracy is of a nature
that it cannot be remedied within such 30-day period the Servicer
gives notices to the Trustee and the Supervisory Servicer of the
corrective action it proposes to take, which corrective action is
agreed in writing by the Trustee to be satisfactory and the Servicer
shall thereafter pursue such corrective action diligently until such
default is cured but in no event longer than 90 days from the date of
such notice.
SECTION 6.2 NOTICE OF SERVICER DEFAULT. In the case of a Servicer
Default referred to in Section 6.1 hereof or upon any termination of the
Servicer pursuant to Article VII hereof, the Trustee shall immediately notify
the Supervisory Servicer by telephone or telecopy (telephonic notice to be
EXHIBIT 10.12 SERVICING AGREEMENT - PAGE 26 OF 33
27
followed by written notice within one Business Day) and shall promptly notify
the Rating Agency and the Holders in writing.
SECTION 6.3 REMEDIES. So long as any such Servicer Default shall not
have been remedied within any applicable cure period, the Trustee may, and at
the written direction of the Noteholders holding not less than 66 2/3% of the
Outstanding Note Amount shall, by notice in writing specifying the termination
date to the Servicer and the Supervisory Servicer (and to the Trustee if given
by the Holders), terminate all of the rights and obligations of the Servicer
under this Agreement and in and to the Loans and the proceeds thereof. On or
after the receipt by the Servicer of such written notice, all authority and
power shall pass to and be vested in the Supervisory Servicer pursuant to and
under this Section; and, without limitation, the Supervisory Servicer is hereby
authorized and empowered to execute and deliver, on behalf of the Servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments, and
to do or accomplish all other acts or things necessary or appropriate to effect
the purposes of such notice of termination, whether to complete the purposes of
such notice of termination, whether to complete the transfer and assignment of
the Loans and related documents or otherwise. All reasonable costs and expenses
(including, without limitation, attorneys' fees) of the Trustee, the
Supervisory Servicer or the Servicer incurred in connection with such
termination and transfer will be at the expense of the Servicer. The Servicer
agrees to cooperate with the Supervisory Servicer and the Trustee in effecting
the termination of the Servicer's responsibilities and rights hereunder,
including, without limitation, the transfer to the Supervisory Servicer for
administration by it of any cash amounts held by the Servicer or thereafter
received relating to the Loans and all Servicer Files. In addition to any other
amounts which are then, or, notwithstanding the termination of its activities
as Servicer, may become payable to the Servicer under this Agreement, the
Servicer shall be entitled to receive out of any delinquent payment on account
of interest on a Loan due during a Collection Period prior to the notice of
termination received pursuant to this Section 6.3 and received after such
notice, that portion of such payment which it would have received pursuant to
Section 3.8 hereof if such notice had not been given.
SECTION 6.4 ADDITIONAL REMEDIES OF TRUSTEE UPON SERVICER DEFAULTS.
Upon any Servicer Default, the Trustee, in addition to the rights specified in
Section 6.3 hereof, shall have the right, in its own name and as Trustee, to
take all actions now or hereafter existing at law, in equity or by statute to
enforce its rights and remedies and to protect the interests, and enforce the
rights and remedies, of the Noteholders (including the institution and
prosecution of all judicial, administrative and other proceedings and the
filings of proofs of claim and debt in connection therewith). No remedy
provided for by this Agreement shall be exclusive of any other remedy, and each
and every remedy shall be cumulative and in addition to any other remedy and no
delay or omission to exercise any right or remedy shall impair any such right
or remedy or shall be deemed to be a waiver of any Servicer Default.
SECTION 6.5 SUPERVISORY SERVICER TO ACT; APPOINTMENT OF SUCCESSOR. On
the effective date of any resignation of the Servicer pursuant to Section 7.1
hereof or on the date the Servicer is removed as servicer pursuant to this
Article VI, the Supervisory Servicer (or any successor appointed
EXHIBIT 10.12 SERVICING AGREEMENT - PAGE 27 OF 33
28
by the Supervisory Servicer pursuant to the Supervisory Servicing Agreement)
hereof 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 in
accordance with and subject to the terms and conditions of the Supervisory
Servicing Agreement; provided, however, that the Supervisory Servicer or
successor Servicer shall not be liable for any acts or omissions of the
Servicer occurring prior to such succession or for any breach by the Servicer
of any of its representations or warranties contained herein or in any related
document or agreement. The Supervisory Servicer (or other successor) shall
assume all of the rights and obligations of the Servicer in accordance with the
terms and conditions of the Supervisory Servicing Agreement which shall control
over any provisions herein covering the same subject matter. The Servicer
shall, upon request of the Trustee or the Supervisory Servicer but at the
expense of the Servicer, deliver to the Supervisory Servicer (or other
successor), all Servicer Loan Files, documents and records (including computer
tapes and diskettes) relating to the Loans and an accounting of any amounts
collected and held by the Servicer and otherwise use its reasonable efforts to
effect the orderly and efficient transfer of servicing rights and obligations
to the assuming party.
The Servicer agrees to cooperate with the Trustee and the Supervisory
Servicer or any other successor servicer in effecting the termination of the
Servicer's servicing responsibilities and rights hereunder and shall promptly
provide the Supervisory Servicer or such successor servicer, as applicable, 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
Supervisory Servicer or such successor servicer, as applicable, all amounts
which then have been or should have been deposited in the Lockbox Account by
the Servicer or which are thereafter received with respect to the Loans.
Neither the Trustee, the Supervisory Servicer 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. The Supervisory Servicer shall
provide written notice of each appointment of a successor to the Servicer
hereunder, other than the Supervisory Servicer, to each Holder and the Rating
Agency, and the Trustee.
SECTION 6.6 WAIVER OF DEFAULTS. The Trustee (with the written consent
of Required Noteholders and with notice to the Rating Agency) may, on behalf of
all Noteholders, waive any events permitting removal of the Servicer as
servicer pursuant to this Article VI. Upon any waiver of a past default, such
default shall cease to exist, and any Servicer 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.
EXHIBIT 10.12 SERVICING AGREEMENT - PAGE 28 OF 33
29
ARTICLE VII
TERMINATION
SECTION 7.1 SERVICER NOT TO RESIGN. The Servicer shall not assign this
Agreement or resign from the obligations and duties hereby imposed on it except
by mutual consent of the Servicer and the Trustee (with the Required
Noteholders' consent), or upon the determination that the Servicer's duties
hereunder are no longer permissible under applicable law and such incapacity
cannot be cured by the Servicer. Any such determination permitting the
resignation of the Servicer shall be evidenced by a Certificate of an
Authorized Officer of the Servicer to such effect delivered to the Trustee, the
Noteholders, the Supervisory Servicer and the Rating Agency. No such
resignation shall become effective until a successor has assumed the Servicer's
responsibilities and obligations hereunder in accordance with Section 6.5.
SECTION 7.2 TERM OF AGREEMENT. This Agreement shall continue in
existence and effect until the earlier of (a) the later of the final payment or
other liquidation of the last Loan or the disposition of all property acquired
upon foreclosure or deed in lieu of foreclosure of any Loan and the remittance
of all funds due thereunder, (b) the payment in full of the Notes in accordance
with the Indenture, in addition to all other amounts payable thereunder, and
the discharge of the Indenture in accordance with the terms thereof, or (c)
mutual consent of the Servicer, the Trustee, the Supervisory Servicer and all
Holders in writing.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
SECTION 8.1 AMENDMENT. This Agreement may be amended from time to time
by the Servicer, the Issuer and the Trustee (acting at the written direction of
the Required Noteholders) by written agreement, with 30 days prior written
notice to the Rating Agency and with prior written notice to and consent of the
Supervisory Servicer. Notwithstanding the foregoing, this Agreement may be
amended without the written direction of the Required Noteholders to modify any
provisions of this Agreement required by the Rating Agency to maintain the
rating of the Notes or to cure any ambiguity, defect, omission, conflict or
inconsistency in this Agreement or between the terms of this Agreement and any
other document executed or delivered in connection herewith. This Agreement may
also be amended without the written direction of the Required Noteholders, so
long as such amendment does not materially adversely affect the rights of the
Noteholders.
SECTION 8.2 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE
EXHIBIT 10.12 SERVICING AGREEMENT - PAGE 29 OF 33
30
DETERMINED IN ACCORDANCE WITH SUCH LAWS, WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAW.
SECTION 8.3 NOTICES. All demands, notices and communications hereunder
shall be in writing and shall be duly given if addressed to the appropriate
Notice Address and delivered by hand or sent by nationally recognized express
courier, or mailed by registered mail, postage prepaid, or transmitted by
telecopy, and shall be effective upon receipt, except when telecopied, in which
case, any such communication shall be effective upon telecopy against receipt
of answer back or written confirmation thereof.
SECTION 8.4 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. The parties hereto further agree that the holding by any court
of competent jurisdiction that any remedy pursued by the Trustee hereunder is
unavailable or unenforceable shall not affect in any way the ability of the
Trustee to pursue any other remedy available to it.
SECTION 8.5 NO PARTNERSHIP. Nothing herein contained shall be deemed
or construed to create a 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 Trustee.
SECTION 8.6 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 8.7 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the Servicer, the Issuer, the Supervisory
Servicer and the Trustee and their respective successors and assigns.
SECTION 8.8 NOTIFICATION TO RATING AGENCY AND NOTEHOLDERS. The Trustee
shall give prompt notice to the Rating Agency and the Noteholders of the
occurrence of any of the following events of which it has received notice: (a)
any modification or amendment to this Agreement, the Indenture or any other
Transaction Documents, (b) any proposed removal, replacement, resignation or
change of the Trustee or the Servicer, (c) any Event of Default under the
Indenture or any Servicer Default and (d) the final payment in full of the
Notes. Whenever the terms of this Agreement require that notice or reports be
given to the Rating Agency or the Noteholders, the Person to provide such
notice or reports shall first give them to the Trustee who shall provide them
to the Rating Agency or the Noteholders, as applicable. Additionally, the
Trustee, upon receipt, shall provide copies to
EXHIBIT 10.12 SERVICING AGREEMENT - PAGE 30 OF 33
31
the Rating Agency and the Noteholders of all compliance reports, Determination
Date Reports, financial statements, operating reports, environmental reports
and any and all other reports received by the Trustee from the Servicer, the
Issuer or the Supervisory Servicer from time to time to the extent such reports
have not been otherwise forwarded to the Rating Agency and the Noteholders
pursuant to the provisions of this Agreement or the other Transaction
Documents.
SECTION 8.9 INDULGENCES; NO WAIVERS. Neither the failure nor any delay
on the part of a party to exercise any right, remedy, power or privilege under
this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same or of any other right, remedy, power or privilege,
nor shall any waiver of any right, remedy, power or privilege with respect to
any occurrence be construed as a waiver of such right, remedy, power or
privilege with respect to any other occurrence. No waiver shall be effective
unless it is in writing and is signed by the party asserted to have granted
such waiver.
SECTION 8.10 TITLES NOT TO AFFECT INTERPRETATION. The titles of
paragraphs and subparagraphs contained in this Agreement are for convenience
only, and they neither form a part of this Agreement nor are they to be used in
the construction or interpretation hereof.
SECTION 8.11 ENTIRE AGREEMENT. This Agreement contains the entire
agreement and understanding among the parties hereto with respect to the
subject matter hereof, and supersedes all prior and contemporaneous agreements,
understandings, inducements and conditions, express or implied, oral or
written, of any nature whatsoever with respect to the subject matter hereof.
The express terms hereof control and supersede any course of performance and/or
usage of the trade inconsistent with any of the terms hereof.
SECTION 8.12 RECORDATION OF AGREEMENT. To the extent permitted by
applicable law, this Agreement is subject to recordation in all appropriate
public offices for real property records in all the counties or the comparable
jurisdictions in which any Mortgaged Property is situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected by the Servicer and at its expense upon the written request of the
Trustee.
SECTION 8.13 FURTHER ASSURANCES. Notwithstanding any other provision
of this Agreement, neither Trustee nor the Supervisory Servicer shall have any
obligation to consent to any amendment or modification of this Agreement unless
it has been provided reasonable security or indemnity against its out-of-pocket
expenses (including reasonable attorneys' fees) to be incurred in connection
therewith by the person requesting the amendment. To the extent permitted by
law, the Servicer agrees that it will, from time to time, execute, acknowledge
and deliver, or cause to be executed, acknowledged and delivered, such further
instruments as the Trustee may reasonably request to effectuate the intention
of or facilitate the performance of this Agreement.
EXHIBIT 10.12 SERVICING AGREEMENT - PAGE 31 OF 33
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EXHIBIT 10.12 SERVICING AGREEMENT - PAGE 32 OF 33
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IN WITNESS WHEREOF, the Issuer, the Servicer, the Supervisory Servicer
and the Trustee have caused their names to be signed hereto by their respective
officers thereunto duly authorized as of the day and year first above written.
PMC CAPITAL, INC., as Servicer
By:
-----------------------------------------
Xxx X. Xxxxx
Executive Vice President
XXXXXX TRUST AND SAVINGS BANK,
as Trustee
By:
-----------------------------------------
Xxxxxx X. Xxxxx
Vice President
XXXXXX TRUST AND SAVINGS BANK,
as Supervisory Servicer
By:
-----------------------------------------
Xxxxxx X. Xxxxx
Vice President
PMC CAPITAL, L.P. 1998-1
as Issuer
By: PMC Capital Corp. 1998-1
Its General Partner
By:
-------------------------------------
Xxx X. Xxxxx
Executive Vice President
EXHIBIT 10.12 SERVICING AGREEMENT - PAGE 33 OF 33
