EXHIBIT 10.62
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SALE AND SERVICING AGREEMENT
among
OPTION ONE OWNER TRUST 2003-4
as Issuer
and
OPTION ONE LOAN WAREHOUSE CORPORATION
as Depositor
and
OPTION ONE MORTGAGE CORPORATION
as Loan Originator and Servicer
and
▇▇▇▇▇ FARGO BANK MINNESOTA, NATIONAL ASSOCIATION
as Indenture Trustee
Dated as of August 8, 2003
OPTION ONE OWNER TRUST 2003-4
MORTGAGE-BACKED NOTES
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TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS.......................................................................... 1
Section 1.01 Definitions................................................................ 1
Section 1.02 Other Definitional Provisions.............................................. 28
ARTICLE II CONVEYANCE OF THE TRUST ESTATE; ADDITIONAL NOTE PRINCIPAL BALANCES.................. 29
Section 2.01 Conveyance of the Trust Estate; Additional Note Principal
Balances................................................................... 29
Section 2.02 Ownership and Possession of Loan Files..................................... 31
Section 2.03 Books and Records; Intention of the Parties................................ 31
Section 2.04 Delivery of Loan Documents................................................. 32
Section 2.05 Acceptance by the Indenture Trustee of the Loans; Certain.................. 33
Section 2.06 Conditions Precedent to Transfer Dates..................................... 34
Section 2.07 Termination of Revolving Period............................................ 36
Section 2.08 Correction of Errors....................................................... 37
ARTICLE III REPRESENTATIONS AND WARRANTIES..................................................... 37
Section 3.01 Representations and Warranties of the Depositor............................ 37
Section 3.02 Representations and Warranties of the Loan Originator...................... 39
Section 3.03 Representations, Warranties and Covenants of the Servicer.................. 42
Section 3.04 Reserved................................................................... 44
Section 3.05 Representations and Warranties Regarding Loans............................. 44
Section 3.06 Purchase and Substitution.................................................. 44
Section 3.07 Dispositions............................................................... 46
Section 3.08 Servicer Put; Servicer Call................................................ 49
Section 3.09 Modification of Underwriting Guidelines.................................... 50
ARTICLE IV ADMINISTRATION AND SERVICING OF THE LOANS........................................... 50
Section 4.01 Servicer's Servicing Obligations........................................... 50
ARTICLE V ESTABLISHMENT OF TRUST ACCOUNTS; TRANSFER OBLIGATION................................. 50
Section 5.01 Collection Account and Distribution Account................................ 50
Section 5.02 Payments to Securityholders................................................ 55
Section 5.03 Trust Accounts; Trust Account Property..................................... 55
Section 5.04 Advance Account............................................................ 57
Section 5.05 Transfer Obligation Account................................................ 58
Section 5.06 Transfer Obligation........................................................ 59
ARTICLE VI STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS................................ 60
Section 6.01 Statements................................................................. 60
Section 6.02 Specification of Certain Tax Matters....................................... 62
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Section 6.03 Valuation of Loans, Hedge Value and Retained Securities Value;............. 63
ARTICLE VII HEDGING; FINANCIAL COVENANTS...................................................... 64
Section 7.01 Hedging Instruments........................................................ 64
Section 7.02 Financial Covenants........................................................ 65
ARTICLE VIII THE SERVICER..................................................................... 65
Section 8.01 Indemnification; Third Party Claims........................................ 65
Section 8.02 Merger or Consolidation of the Servicer.................................... 67
Section 8.03 Limitation on Liability of the Servicer and Others......................... 68
Section 8.04 Servicer Not to Resign; Assignment......................................... 68
Section 8.05 Relationship of Servicer to Issuer and the Indenture Trustee............... 68
Section 8.06 Servicer May Own Securities................................................ 69
Section 8.07 Indemnification of the Indenture Trustee and Note Agent.................... 69
ARTICLE IX SERVICER EVENTS OF DEFAULT......................................................... 69
Section 9.01 Servicer Events of Default................................................. 69
Section 9.02 Appointment of Successor................................................... 71
Section 9.03 Waiver of Defaults......................................................... 72
Section 9.04 Accounting Upon Termination of Servicer.................................... 73
ARTICLE X TERMINATION; PUT OPTION............................................................. 73
Section 10.01 Termination................................................................ 73
Section 10.02 Optional Termination....................................................... 74
Section 10.03 Notice of Termination...................................................... 74
Section 10.04 Put Option................................................................. 74
ARTICLE XI MISCELLANEOUS PROVISIONS........................................................... 75
Section 11.01 Acts of Securityholders.................................................... 75
Section 11.02 Amendment.................................................................. 75
Section 11.03 Recordation of Agreement................................................... 76
Section 11.04 Duration of Agreement...................................................... 76
Section 11.05 Governing Law.............................................................. 76
Section 11.06 Notices.................................................................... 76
Section 11.07 Severability of Provisions................................................. 77
Section 11.08 No Partnership............................................................. 77
Section 11.09 Counterparts............................................................... 77
Section 11.10 Successors and Assigns..................................................... 77
Section 11.11 Headings................................................................... 77
Section 11.12 Actions of Securityholders................................................. 77
Section 11.13 Non-Petition Agreement..................................................... 78
Section 11.14 Holders of the Securities.................................................. 78
Section 11.15 Due Diligence Fees, Due Diligence.......................................... 78
Section 11.16 No Reliance................................................................ 79
Section 11.17 Confidential Information................................................... 80
Section 11.18 Conflicts.................................................................. 81
Section 11.19 Limitation on Liability.................................................... 81
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Section 11.20 No Agency............................................................... 81
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SALE AND SERVICING AGREEMENT
This Sale and Servicing Agreement is entered into effective as of August
8, 2003, among OPTION ONE OWNER TRUST 2003-4, a Delaware business trust (the
"Issuer" or the "Trust"), OPTION ONE LOAN WAREHOUSE CORPORATION, a Delaware
corporation, as Depositor (in such capacity, the "Depositor"), OPTION ONE
MORTGAGE CORPORATION, a California corporation ("Option One"), as Loan
Originator (in such capacity, the "Loan Originator") and as Servicer (in such
capacity, the "Servicer"), and ▇▇▇▇▇ FARGO BANK MINNESOTA, NATIONAL ASSOCIATION,
a national banking association, as Indenture Trustee on behalf of the
Noteholders (in such capacity, the "Indenture Trustee").
WITNESSETH:
In consideration of the mutual agreements herein contained, the Issuer,
the Depositor, the Loan Originator, the Servicer and the Indenture Trustee
hereby agree as follows for the benefit of each of them and for the benefit of
the holders of the Securities:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions.
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the meanings specified in this
Article. Unless otherwise specified, all calculations of interest described
herein shall be made on the basis of a 360-day year and the actual number of
days elapsed in each Accrual Period.
Accepted Servicing Practices: The Servicer's normal servicing practices in
servicing and administering similar mortgage loans for its own account, which in
general will conform to the mortgage servicing practices of prudent mortgage
lending institutions which service for their own account mortgage loans of the
same type as the Loans in the jurisdictions in which the related Mortgaged
Properties are located and will give due consideration to the Noteholders'
reliance on the Servicer.
Accrual Period: With respect to the Notes, the period commencing on and
including the preceding Payment Date (or, in the case of the first Payment Date,
the period commencing on and including the first Transfer Date (which first
Transfer Date is the first date on which the Note Principal Balance is greater
than zero)) and ending on the day preceding the related Payment Date.
Act or Securities Act: The Securities Act of 1933, as amended.
Additional LIBOR Margin: As defined in the Note Purchase Agreement.
Additional Note Principal Balance: With respect to each Transfer Date, the
aggregate Sales Prices of all Loans conveyed on such date.
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Adjustment Date: With respect to each ARM, the date set forth in the
related Promissory Note on which the Loan Interest Rate on such ARM is adjusted
in accordance with the terms of the related Promissory Note.
Administration Agreement: The Administration Agreement, dated as of August
8, 2003, among the Issuer and the Administrator.
Administrator: Option One Mortgage Corporation, in its capacity as
Administrator under the Administration Agreement.
Advance Account: The account established and maintained pursuant to
Section 5.04.
Affiliate: With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
Agreement: This Agreement, as the same may be amended and supplemented
from time to time.
ALTA: The American Land Title Association and its successors in interest.
Appraised Value: With respect to any Loan, and the related Mortgaged
Property, the lesser of:
(i) the lesser of (a) the value thereof as determined by an
appraisal made for the originator of the Loan at the time of origination of the
Loan by an appraiser who met the minimum requirements of ▇▇▇▇▇▇ ▇▇▇ or ▇▇▇▇▇▇▇
Mac, and (b) the value thereof as determined by a review appraisal conducted by
the Loan Originator in the event any such review appraisal determines an
appraised value more than 10% lower than the value thereof, in the case of a
Loan with a Loan-to-Value Ratio less than or equal to 80%, or more than 5% lower
than the value thereof, in the case of a Loan with a Loan-to-Value Ratio greater
than 80%, as determined by the appraisal referred to in clause (i)(a) above; and
(ii) the purchase price paid for the related Mortgaged
Property by the Borrower with the proceeds of the Loan; provided, however, that
in the case of a refinanced Loan (which is a Loan the proceeds of which were not
used to purchase the related Mortgaged Property) or a Loan originated in
connection with a "lease option purchase" if the "lease option purchase price"
was set 12 months or more prior to origination, such value of the Mortgaged
Property is based solely upon clause (i) above.
ARM: Any Loan, the Loan Interest Rate with respect to which is subject to
adjustment during the life of such Loan.
Assignment: An LPA Assignment or S&SA Assignment.
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Assignment of Mortgage: With respect to any Loan, an assignment of the
related Mortgage in blank or to ▇▇▇▇▇ Fargo Bank Minnesota, National
Association, as custodian or trustee under the applicable custodial agreement or
trust agreement, and notice of transfer or equivalent instrument in recordable
form, sufficient under the laws of the jurisdiction wherein the related
Mortgaged Property is located to reflect the assignment and pledge of such
Mortgage.
Balloon Loan: Any Loan for which the related monthly payments, other than
the monthly payment due on the maturity date stated in the Promissory Note, are
computed on the basis of a period to full amortization ending on a date that is
later than such maturity date.
Basic Documents: This Agreement, the Administration Agreement, the
Custodial Agreement, the Indenture, the Loan Purchase and Contribution
Agreement, the Master Disposition Confirmation Agreement, the Fee letter, the
Note Purchase Agreement, the Guaranty, the Trust Agreement, each Hedging
Instrument and, as and when required to be executed and delivered, the
Assignments.
Blocked Account Agreements: Those Blocked Account Agreements, each dated
as of August 8, 2003, by and among the Trust, Option One, the Indenture Trustee
and Mellon Bank, N. A. and relating to the Trust Accounts, each as in effect
from time to time, and any substitutes or replacements therefor.
Borrower: The obligor or obligors on a Promissory Note.
Business Day: Any day other than (i) a Saturday or Sunday, or (ii) a day
on which banking institutions in New York City, California, Illinois, Maryland,
Minnesota, Pennsylvania, Delaware or in the city in which the corporate trust
office of the Indenture Trustee is located or the city in which the Servicer's
servicing operations are located are authorized or obligated by law or executive
order to be closed.
Certificateholder: A holder of a Trust Certificate.
Change of Control: As defined in the Indenture.
Clean-up Call Date: The first Payment Date occurring after the end of the
Revolving Period and the date on which the Note Principal Balance declines to
10% or less of the aggregate Note Principal Balance as of the end of the
Revolving Period.
Closing Date: August 8, 2003.
Code: The Internal Revenue Code of 1986, as amended from time to time, and
the regulations promulgated by the United States Treasury thereunder.
Collateral Percentage: With respect to each Loan and any Business Day, a
percentage determined as follows:
(a) with respect to all Loans other than Scratch & Dent Loans, 98%
or, upon the occurrence of a Performance Trigger, 95%; and
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(b) with respect to all Scratch & Dent Loans, 90%.
Collateral Value: With respect to each Loan and each Business Day, an
amount equal to the positive difference, if any, between (a) the lesser of (1)
the Collateral Percentage of the Market Value of such Loan, and (2)(A) 100% of
the Principal Balance of each Loan that is not a Scratch & Dent Loan and (B) 75%
of the Principal Balance of each Scratch & Dent Loan, each as of such Business
Day, less (b) the aggregate unreimbursed Servicing Advances attributable to such
Loan as of the most recent Determination Date; provided, however, that the
Collateral Value shall be zero with respect to each Loan (1) that the Loan
Originator is required to repurchase pursuant to Section 2.05 or Section 3.06
hereof or (2) which is a Loan of the type specified in subparagraphs (i)-(xi)
hereof and which is in excess of the limits permitted under subparagraphs
(i)-(xi) hereof, or (3) which remains pledged to the Indenture Trustee later
than 120 days after its related Transfer Date, or (4) which has been released
from the possession of the Custodian to the Servicer or the Loan Originator for
a period in excess of 14 days, or (5) that is a Loan which is 90 or more days
Delinquent or a Foreclosed Loan, or (6) that is a Loan which has a Loan-to-Value
Ratio greater than 95%, or (7) that is not a Wet Funded Loan and for which the
Custodian is not in possession of a complete Custodial Loan File, or (8) that is
a Wet Funded Loan for which the related Custodial Loan File has not been
delivered to the Custodian on or before the later of the 15th Business Day and
the 20th calendar day following the related Transfer Date of such Wet Funded
Loan, (9) that breaches any representation or warranty set forth in Exhibit E
with respect to such Loan, (10) which is not denominated and payable only in
United States dollars in the United States, (11) under which the Borrower is not
a resident of the United States or is a government or a governmental subdivision
or agency, (12) which by its terms is not due and payable on or within 360
months of the original funding date thereof or which has had its payment terms
extended, (13) which has had any of its terms, conditions or provisions modified
or waived other than in compliance with Loan Originator's Underwriting
Guidelines, or (14) which would be deemed part of a "predatory lending" bucket
as defined within the state of the United States in which the related Mortgaged
Property is located; provided, further, that (A):
(i) the aggregate Collateral Value of Loans which are Second
Lien Loans may not exceed 10% of the aggregate Principal Balance of all Loans
that are not Scratch & Dent Loans;
(ii) the aggregate Collateral Value of Loans which are 60 to
89 days Delinquent as of the related Determination Date may not exceed 2% of the
aggregate Principal Balance of all Loans that are not Scratch & Dent Loans;
(iii) the aggregate Collateral Value of Loans with respect to
which the related Borrower's Credit Score is below 525 may not exceed 15% of the
aggregate Principal Balance of all Loans;
(iv) the aggregate Collateral Value of Loans which have a
Loan-to-Value Ratio or CLTV, as applicable, greater than 90% must be less than
10% of the aggregate Principal Balance of all Loans;
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(v) the aggregate Collateral Value of Loans which have a
Loan-to-Value Ratio or CLTV, as applicable, greater than 85% must be less than
25% of the aggregate Principal Balance of all Loans;
(vi) the aggregate Collateral Value of Loans which have a
Loan-to-Value Ratio or CLTV, as applicable, greater than 80% must be less than
30% of the aggregate Principal Balance of all Loans;
(vii) the aggregate Collateral Value of Loans that are Scratch
& Dent Loans may not exceed $50,000,000; provided that the foregoing limit shall
be reduced by the aggregate principal balance of Scratch & Dent Loans subject to
any other secured loan, repurchase or credit facility entered into by the Loan
Originator and the Note Agent or any Affiliate thereof;
(viii) the aggregate Collateral Value of "prime" or
"A-quality" Loans originated by H&R Block Mortgage Corp. may not exceed
$50,000,000; provided that the foregoing limit shall be reduced by the aggregate
principal balance of "prime" or "A-quality" Loans subject to any other secured
loan, repurchase or credit facility entered into by the Loan Originator and the
Note Agent or any Affiliate thereof;
(ix) the aggregate Collateral Value of Loans that are Wet
Funded Loans may not exceed the greater of (A) $100,000,000.00 and (B) 25% of
the aggregate Principal Balance of all Loans; provided, however, that the
foregoing amount in clause (B) shall not exceed $300,000,000.00; provided,
further, that each of the foregoing limits shall be reduced by the aggregate
principal balance of Wet Funded Loans subject to any other note purchase,
secured loan, repurchase or credit facility entered into by the Loan Originator
and the Note Agent or any Affiliate thereof;
(x) the aggregate Collateral Value of Loans originated by the
Loan Originator more than 90 days prior to such Loans' related Transfer Date may
not exceed the lesser of $50,000,000.00 or 15% of the aggregate Principal
Balance of all Loans, or such greater amount as the Market Value Agent may
determine from time to time, in its sole discretion; provided, further, that
each of the foregoing limits shall be reduced by the aggregate principal balance
of Loans originated by the Loan Originator more than 90 days prior to such
Loans' related Transfer Date and subject to any other secured loan, repurchase
or credit facility entered into by the Loan Originator and the Note Agent or any
Affiliate thereof; and
(xi) the aggregate Collateral Value of Loans with Lost Note
Affidavits may not exceed the lesser of $5,000,000.00 or 5% of the aggregate
Principal Balance of all Loans; provided, further, that each of the foregoing
limits shall be reduced by the aggregate principal balance of Loans with Lost
Note Affidavits subject to any other secured loan, repurchase or credit facility
entered into by the Loan Originator and the Note Agent or any Affiliate thereof;
and
(xii) each Loan shall be counted in each applicable category
in (A) above and may be counted in 2 or more categories in (A) above at the same
time; provided that
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once the Collateral Value of any Loan equals zero, it shall not be counted in
any category listed in (A) above.
Collection Account: The account designated as such, established and
maintained by the Servicer in accordance with Section 5.01 (a) (1) hereof.
Combined LTV or CLTV: With respect to any Second Lien Loan, the ratio of
the outstanding Principal Balance on the related date of origination of (a) (i)
such Loan plus (ii) the loan constituting the first lien to the lesser of (b)
(x) the Appraised Value of the Mortgaged Property at origination or (y) if the
Mortgaged Property was purchased within 12 months of the origination of the
Loan, the purchase price of the Mortgaged Property, expressed as a percentage.
Commission: The Securities and Exchange Commission.
Convertible Loan: A Loan that by its terms and subject to certain
conditions contained in the related Mortgage or Promissory Note allows the
Borrower to convert the adjustable Loan Interest Rate on such Loan to a fixed
Loan Interest Rate.
Credit Score: With respect to each Borrower, the credit score for such
Borrower from a nationally recognized credit repository; provided, however, in
the event that a credit score for such Borrower was obtained from two
repositories, the "Credit Score" shall be the lower of the two scores; provided,
further, in the event that a credit score for such Borrower was obtained from
three repositories, the "Credit Score" shall be the middle score of the three
scores.
Custodial Agreement: The custodial agreement dated as of August 8, 2003,
among the Issuer, the Servicer, the Indenture Trustee and the Custodian,
providing for the retention of the Custodial Loan Files by the Custodian on
behalf of the Indenture Trustee.
Custodial Loan File: As defined in the Custodial Agreement.
Custodian: The custodian named in the Custodial Agreement, which custodian
shall not be affiliated with the Servicer, the Loan Originator, the Depositor or
any Subservicer. ▇▇▇▇▇ Fargo Bank Minnesota, National Association, a national
banking association, shall be the initial Custodian pursuant to the terms of the
Custodial Agreement.
Custodian Fee: For any Payment Date, the fee payable to the Custodian on
such Payment Date as set forth in the Custodian Fee Notice for such Payment
Date, which fee shall be calculated in accordance with the separate fee letter
between the Custodian and the Servicer.
Custodian Fee Notice: For any Payment Date, the written notice provided by
the Custodian to the Servicer and the Indenture Trustee pursuant to Section
6.01, which notice shall specify the amount of the Custodian Fee payable on such
Payment Date.
Daily Interest Accrual Amount: With respect to each day and the related
Accrual Period, interest accrued at the Note Interest Rate with respect to such
Accrual Period on the Note Principal Balance as of the preceding Business Day
after giving effect to all changes to the Note Principal Balance on or prior to
such preceding Business Day.
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Deemed Cured: With respect to the occurrence of a Performance Trigger or
Rapid Amortization Trigger, when the condition that originally gave rise to the
occurrence of such trigger has not continued for 20 consecutive days, or if the
occurrence of such Performance Trigger or Rapid Amortization Trigger has been
waived in writing by the Majority Noteholder.
Default: Any occurrence that is, or with notice or the lapse of time or
both would become, an Event of Default.
Defaulted Loan: With respect to any Determination Date, any Loan,
including, without limitation, any Liquidated Loan with respect to which (i) any
Monthly Payment due thereon remains unpaid for more than 120 days past the
original due date therefor, or (ii) any of the following has occurred as of the
end of the related Remittance Period: (a) foreclosure or similar proceedings
have been commenced; or (b) the Servicer or any Subservicer has determined in
good faith and in accordance with the servicing standard set forth in Section
4.01 of the Servicing Addendum that such Loan is in default or imminent default.
Deleted Loan: A Loan replaced or to be replaced by one or more Qualified
Substitute Loans.
Delinquent: A Loan is "Delinquent" if any Monthly Payment due thereon is
not made by the close of business on the day such Monthly Payment is required to
be paid. A Loan is "30 days Delinquent" if any Monthly Payment due thereon has
not been received by the close of business on the corresponding day of the month
immediately succeeding the month in which such Monthly Payment was required to
be paid or, if there is no such corresponding day (e.g., as when a 30-day month
follows a 31-day month in which a payment was required to be paid on the 31st
day of such month), then on the last day of such immediately succeeding month.
The determination of whether a Loan is "60 days Delinquent," "90 days
Delinquent", etc., shall be made in like manner.
Delivery: When used with respect to Trust Account Property means:
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that constitute
"instruments" within the meaning of Section 9-102(a)(47) of the UCC and are
susceptible of physical delivery (except with respect to Trust Account Property
consisting of certificated securities (as defined in Section 8-102(a)(4) of the
UCC)), physical delivery to the Indenture Trustee or its custodian (or the
related Securities Intermediary) endorsed to the Indenture Trustee or its
custodian (or the related Securities Intermediary) or endorsed in blank (and if
delivered and endorsed to the Securities Intermediary, by continuous credit
thereof by book-entry to the related Trust Account);
(b) with respect to a certificated security (i) delivery of such
certificated security endorsed to, or registered in the name of, the Indenture
Trustee or endorsed in blank to its custodian or the related Securities
Intermediary and the making by such Securities Intermediary of appropriate
entries in its records identifying such certificated securities as credited to
the related Trust Account, or (ii) by delivery thereof to a "clearing
corporation" (as defined in Section 8-102(5) of the UCC) and the making by such
clearing corporation of appropriate entries in its records crediting the
securities account of the related Securities
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Intermediary by the amount of such certificated security and the making by such
Securities Intermediary of appropriate entries in its records identifying such
certificated securities as credited to the related Trust Account (all of the
Trust Account Property described in Subsections (a) and (b), "Physical
Property");
and, in any event, any such Physical Property in registered form
shall be in the name of the Indenture Trustee or its nominee or custodian (or
the related Securities Intermediary); and such additional or alternative
procedures as may hereafter become appropriate to effect the complete transfer
of ownership of any such Trust Account Property to the Indenture Trustee or its
nominee or custodian, consistent with changes in applicable law or regulations
or the interpretation thereof;
(c) with respect to any security issued by the U.S. Treasury, ▇▇▇▇▇▇
▇▇▇ or ▇▇▇▇▇▇▇ Mac that is a book-entry security held through the Federal
Reserve System pursuant to federal book-entry regulations, the following
procedures, all in accordance with applicable law, including applicable federal
regulations and Articles 8 and 9 of the UCC: the making by a Federal Reserve
Bank of an appropriate entry crediting such Trust Account Property to an account
of the related Securities Intermediary or the securities intermediary that is
(x) also a "participant" pursuant to applicable federal regulations and (y) is
acting as securities intermediary on behalf of the Securities Intermediary with
respect to such Trust Account Property; the making by such Securities
Intermediary or securities intermediary of appropriate entries in its records
crediting such book-entry security held through the Federal Reserve System
pursuant to federal book-entry regulations and Articles 8 and 9 of the UCC to
the related Trust Account; and such additional or alternative procedures as may
hereafter become appropriate to effect complete transfer of ownership of any
such Trust Account Property to the Indenture Trustee or its nominee or
custodian, consistent with changes in applicable law or regulations or the
interpretation thereof; and
(d) with respect to any item of Trust Account Property that is an
uncertificated security (as defined in Section 8-102(a)(18) of the UCC) and that
is not governed by clause (c) above, registration in the records of the issuer
thereof in the name of the related Securities Intermediary, and the making by
such Securities Intermediary of appropriate entries in its records crediting
such uncertificated security to the related Trust Account.
Designated Depository Institution: With respect to an Eligible Account, an
institution whose deposits are insured by the Bank Insurance Fund or the Savings
Association Insurance Fund of the FDIC, the long-term deposits of which shall be
rated A or better by S&P or A2 or better by Moody's and the short-term deposits
of which shall be rated P-1 or better by Moody's and A-1 or better by S&P,
unless otherwise approved in writing by the Note Agent and which is any of the
following: (A) a federal savings and loan association duly organized, validly
existing and in good standing under the federal banking laws, (B) an institution
duly organized, validly existing and in good standing under the applicable
banking laws of any state, (C) a national banking association duly organized,
validly existing and in good standing under the federal banking laws, (D) a
principal subsidiary of a bank holding company or (E) approved in writing by the
Note Agent and, in each case acting or designated by the Servicer as the
depository institution for the Eligible Account; provided, however, that any
such institution or association shall have combined capital, surplus and
undivided profits of at least $50,000,000.
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Depositor: Option One Loan Warehouse Corporation, a Delaware corporation,
and any successors thereto.
Determination Date: With respect to any Payment Date occurring on the 10th
day of a month, the last calendar day of the month immediately preceding the
month of such Payment Date, and with respect to any other Payment Date, as
mutually agreed by the Servicer and the Noteholders.
Disposition: A Securitization, Whole Loan Sale transaction, or other
disposition of Loans.
Disposition Agent: Bank One, NA (Main Office Chicago) and its successors
and assigns acting at the direction, and as agent, of the Majority Noteholders.
Disposition Participant: As applicable, with respect to a Disposition, any
"depositor" with respect to such Disposition, the Disposition Agent, the
Majority Noteholders, the Issuer, the Servicer, the related trustee and the
related custodian, any nationally recognized credit rating agency, the related
underwriters, the related placement agent, the related credit enhancer, the
related whole-loan purchaser, the related purchaser of securities and/or any
other party necessary or, in the good faith belief of any of the foregoing,
desirable to effect a Disposition.
Disposition Proceeds: With respect to a Disposition, (x) the proceeds of
the Disposition remitted to the Trust in respect of the Loans transferred on the
date of and with respect to such Disposition, including without limitation, any
cash and Retained Securities created in any related Securitization less all
costs, fees and expenses incurred in connection with such Disposition,
including, without limitation, all amounts deposited into any reserve accounts
upon the closing thereof plus or minus (y) the net positive or net negative
value of all Hedging Instruments terminated in connection with such Disposition
minus (z) all other amounts agreed upon in writing by the Note Agent, the Trust
and the Servicer.
Distribution Account: The account established and maintained pursuant to
Section 5.01(a)(2) hereof.
Due Date: The day of the month on which the Monthly Payment is due from
the Borrower with respect to a Loan.
Due Diligence Fees: Shall have the meaning provided in Section 11.15
hereof.
Eligible Account: At any time, a deposit account which is: (i) maintained
with a Designated Depository Institution; (ii) fully insured by either the Bank
Insurance Fund or the Savings Association Insurance Fund of the FDIC; (iii) a
trust account (which shall be a "segregated trust account") maintained with the
corporate trust department of a federal or state chartered depository
institution or trust company with trust powers and acting in its fiduciary
capacity for the benefit of the Indenture Trustee and the Issuer, which
depository institution or trust company shall have capital and surplus of not
less than $50,000,000; or (iv) with the prior written consent of the Majority
Noteholders, any other account.
9
Eligible Servicer: (x) Option One or (y) any other Person that (i) has
been designated as an approved seller-servicer by ▇▇▇▇▇▇ ▇▇▇ or ▇▇▇▇▇▇▇ Mac for
first and second mortgage loans, (ii) has equity of not less than $15,000,000,
as determined in accordance with GAAP and (iii) any other Person to which the
Majority Noteholders may consent in writing.
Escrow Payments: With respect to any Loan, the amounts constituting ground
rents, taxes, assessments, water rates, sewer rents, municipal charges, fire,
hazard, liability and other insurance premiums, condominium charges, and any
other payments required to be escrowed by the related Borrower with the lender
or servicer pursuant to the Mortgage or any other document.
Event of Default: Either a Servicer Event of Default or an Event of
Default under the Indenture.
Exceptions Report: The meaning set forth in the Custodial Agreement.
Exchange Act: The Securities Exchange Act of 1934, as amended.
▇▇▇▇▇▇ Mae: The Federal National Mortgage Association and any successor
thereto.
FDIC: The Federal Deposit Insurance Corporation and any successor thereto.
Fee Letter: The Fee Letter, dated August 8, 2003, by and among the Trust,
Option One and the Note Agent, as the same is in effect from time to time.
Fidelity Bond: As described in Section 4.10 of the Servicing Addendum.
Final Put Date: The Put Date following the end of the Revolving Period on
which the Majority Noteholders exercise the Put Option with respect to the
entire outstanding Note Principal Balance.
Final Recovery Determination: With respect to any defaulted Loan or any
Foreclosure Property, a determination made by the Servicer that all Mortgage
Insurance Proceeds, Liquidation Proceeds and other payments or recoveries which
the Servicer, in its reasonable good faith judgment, expects to be finally
recoverable in respect thereof have been so recovered. The Servicer shall
maintain records, prepared by a servicing officer of the Servicer, of each Final
Recovery Determination.
First Lien Loan: A Loan secured by the lien on the related Mortgaged
Property, subject to no prior liens on such Mortgaged Property.
Foreclosed Loan: As of any Determination Date, any Loan that as of the end
of the preceding Remittance Period has been discharged as a result of (i) the
completion of foreclosure or comparable proceedings by the Servicer on behalf of
the Issuer; (ii) the acceptance of the deed or other evidence of title to the
related Mortgaged Property in lieu of foreclosure or other comparable
proceeding; or (iii) the acquisition of title to the related Mortgaged Property
by operation of law.
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Foreclosure Property: Any real property securing a Foreclosed Loan that
has been acquired by the Servicer on behalf of the Issuer through foreclosure,
deed in lieu of foreclosure or similar proceedings in respect of the related
Loan.
▇▇▇▇▇▇▇ Mac: The Federal Home Loan Mortgage Corporation and any successor
thereto.
GAAP: Generally Accepted Accounting Principles as in effect in the United
States.
Gross Margin: With respect to each ARM, the fixed percentage amount set
forth in the related Promissory Note.
Guaranty: The Guaranty made by H&R Block, Inc. in favor of the Indenture
Trustee and the Noteholders.
Hedge Funding Requirement: With respect to any day, all amounts required
to be paid or delivered by the Issuer under any Hedging Instrument, whether in
respect of payments thereunder or in order to meet margin, collateral or other
requirements thereof. Such amounts shall be calculated by the Market Value Agent
and the Indenture Trustee shall be notified of such amount by the Market Value
Agent.
Hedge Value: With respect to any Business Day and a specific Hedging
Instrument, the positive amount, if any, that is equal to the amount that would
be paid to the Issuer in consideration of an agreement between the Issuer and an
unaffiliated third party, that would have the effect of preserving for the
Issuer the net economic equivalent, as of such Business Day, of all payment and
delivery requirements payable to and by the Issuer under such Hedging Instrument
until the termination thereof, as determined by the Market Value Agent in
accordance with Section 6.03 hereof.
Hedging Counterparty: A Person (i) (A) the long-term and commercial paper
or short-term deposit ratings of which are acceptable to the Majority
Noteholders and (B) which shall agree in writing that, in the event that any of
its long-term or commercial paper or short-term deposit ratings cease to be at
or above the levels deemed acceptable by the Majority Noteholders, it shall
secure its obligations in accordance with the request of the Majority
Noteholders, (ii) that has entered into a Hedging Instrument and (iii) that is
acceptable to the Majority Noteholders.
Hedging Instrument: Any interest rate cap agreement, interest rate floor
agreement, interest rate swap agreement or other interest rate hedging agreement
entered into by the Issuer with a Hedging Counterparty, and which requires the
Hedging Counterparty to deposit all amounts payable thereby directly to the
Collection Account. Each Hedging Instrument shall meet the requirements set
forth in Article VII hereof with respect thereto.
Indenture: The Indenture dated as of August 8, 2003, between the Issuer
and the Indenture Trustee and any amendments thereto.
Indenture Trustee: ▇▇▇▇▇ Fargo Bank Minnesota, National Association, a
national banking association, as Indenture Trustee under the Indenture, or any
successor indenture trustee under the Indenture.
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Indenture Trustee Fee: An annual fee of $5,000 payable by the Servicer in
accordance with a separate fee agreement between the Indenture Trustee and the
Servicer and Section 5.01 hereof.
Independent: When used with respect to any specified Person, such Person
(i) is in fact independent of the Loan Originator, the Servicer, the Depositor
or any of their respective Affiliates, (ii) does not have any direct financial
interest in, or any material indirect financial interest in, the Loan
Originator, the Servicer, the Depositor or any of their respective Affiliates
and (iii) is not connected with the Loan Originator, the Depositor, the Servicer
or any of their respective Affiliates, as an officer, employee, promoter,
underwriter, trustee, partner, director or Person performing similar functions;
provided, however, that a Person shall not fail to be Independent of the Loan
Originator, the Depositor, the Servicer or any of their respective Affiliates
merely because such Person is the beneficial owner of 1% or less of any class of
securities issued by the Loan Originator, the Depositor, the Servicer or any of
their respective Affiliates, as the case may be.
Independent Accountants: A firm of nationally recognized certified public
accountants which is independent according to the provisions of SEC Regulation
S-X, Article 2.
Index: With respect to each ARM, the index set forth in the related
Promissory Note for the purpose of calculating the Loan Interest Rate thereon.
Interest Carry-Forward Amount: With respect to any Payment Date, the
excess, if any, of (A) the Interest Payment Amount for such Payment Date plus
the Interest Carry-Forward Amount for the prior Payment Date over (B) the amount
in respect of interest that is actually paid from the Distribution Account on
such Payment Date in respect of the interest for such Payment Date.
Interest Payment Amount: With respect to any Payment Date, the sum of the
Daily Interest Accrual Amounts for all days in the related Accrual Period.
LIBO Rate. As defined in the Note Purchase Agreement.
LIBOR Business Day: As defined in the Note Purchase Agreement.
LIBOR Determination Date: As defined in the Note Purchase Agreement.
LIBOR Margin: As defined in the Note Purchase Agreement.
Lien: With respect to any asset, (a) any mortgage, lien, pledge, charge,
security interest, hypothecation, option or encumbrance of any kind in respect
of such asset or (b) the interest of a vendor or lessor under any conditional
sale agreement, financing lease or other title retention agreement relating to
such asset.
Lifetime Cap: The provision in the Promissory Note for each ARM which
limits the maximum Loan Interest Rate over the life of such ARM.
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Lifetime Floor: The provision in the Promissory Note for each ARM which
limits the minimum Loan Interest Rate over the life of such ARM.
Liquidated Loan: As defined in Section 4.03(c) of the Servicing Addendum.
Liquidated Loan Losses: With respect to any Determination Date, the
difference between (i) the aggregate Principal Balances as of such date of all
Loans that became Liquidated Loans and (ii) all Liquidation Proceeds received on
or prior to such date.
Liquidation Proceeds: With respect to a Liquidated Loan, any cash amounts
received in connection with the liquidation of such Liquidated Loan, whether
through trustee's sale, foreclosure sale or other disposition, any cash amounts
received in connection with the management of the Mortgaged Property from
Defaulted Loans, any proceeds from Primary Insurance Policies and any other
amounts required to be deposited in the Collection Account pursuant to Section
5.01(b) hereof, in each case including Mortgage Insurance Proceeds and Released
Mortgaged Property Proceeds.
Loan: Any loan sold to the Trust hereunder and pledged to the Indenture
Trustee, which loan includes, without limitation, (i) a Promissory Note or Lost
Note Affidavit and related Mortgage and (ii) all right, title and interest of
the Loan Originator in and to the Mortgaged Property covered by such Mortgage.
The term Loan shall be deemed to include the related Promissory Note or Lost
Note Affidavit, related Mortgage and related Foreclosure Property, if any.
Loan Documents: With respect to a Loan, the documents comprising the
Custodial Loan File for such Loan.
Loan File: With respect to each Loan, the Custodial Loan File and the
Servicer's Loan File.
Loan Interest Rate: With respect to each Loan, the annual rate of interest
borne by the related Promissory Note, as shown on the Loan Schedule, and, in the
case of an ARM, as the same may be periodically adjusted in accordance with the
terms of such Loan.
Loan Originator: Option One and its permitted successors and assigns.
Loan Pool: As of any date of determination, the pool of all Loans conveyed
to the Issuer pursuant to this Agreement on all Transfer Dates up to and
including such date of determination, which Loans have not been released from
the Lien of the Indenture pursuant to the terms of the Basic Documents, together
with the rights and obligations of a holder thereof, and the payments thereon
and proceeds therefrom received on and after the applicable Transfer Cut-off
Date, as identified from time to time on the Loan Schedule.
Loan Purchase and Contribution Agreement: The First Amended and Restated
Loan Purchase and Contribution Agreement, between Option One, as seller and the
Depositor, as purchaser, dated as of August 8, 2003 and all supplements and
amendments thereto.
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Loan Schedule: The schedule of Loans conveyed to the Issuer on the Closing
Date and on each Transfer Date and delivered to the Note Agent and the Custodian
in the form of a computer-readable transmission specifying the information set
forth on Exhibit D hereto and, with respect to Wet Funded Loans, Exhibit C to
the Custodial Agreement.
Loan-to-Value Ratio or LTV: With respect to any First Lien Loan, the ratio
of the original outstanding principal amount of such Loan to the Appraised Value
of the Mortgaged Property at origination.
Lock-Box Clearing Custodial Account: The bank account maintained at Mellon
Bank, N.A. into which Option One initially deposits (or causes to be deposited)
all Monthly Payments it receives as well as any replacement or substitute
account therefore.
Lost Note Affidavit: With respect to any Loan as to which the original
Promissory Note has been permanently lost or destroyed and has not been
replaced, an affidavit from the Loan Originator certifying that the original
Promissory Note has been lost, misplaced or destroyed (together with a copy of
the related Promissory Note and indemnifying the Issuer against any loss, cost
or liability resulting from the failure to deliver the original Promissory Note)
in the form of Exhibit L attached to the Custodial Agreement.
LPA Assignment: The Assignment of Loans from Option One to the Depositor
under the Loan Purchase and Contribution Agreement.
Majority Certificateholders: Has the meaning set forth in the Trust
Agreement.
Majority Noteholders: The Note Agent. In the event of the release of the
Lien of the Indenture in accordance with the terms thereof, the Majority
Noteholders shall mean the Majority Certificateholders.
Market Value: The market value of a Loan as of any Business Day as
determined by the Market Value Agent in accordance with Section 6.03 hereof.
Market Value Agent: Bank One, NA or an Affiliate thereof designated by
Bank One, NA in writing to the parties hereto and, in either case, its
successors in interest.
Master Disposition Confirmation Agreement: The Second Amended and Restated
Master Disposition Confirmation Agreement, dated as of August 8, 2003, by and
among Option One, the Depositor, Option One Owner Trust 2001-1A, Option One
Owner Trust 2001-1B, Option One Owner Trust 2001-2, Option One Owner Trust
2002-3, Option One Owner Trust 2003-4, ▇▇▇▇▇ Fargo Bank Minnesota, National
Association, Bank of America, N.A., Greenwich Capital Financial Products, Inc.,
UBS Warburg Real Estate Securities, Inc., Steamboat Funding Corporation and the
Note Agent, as the same may be amended or restated from time to time.
Maturity Date: With respect to the Notes, as set forth in the Indenture or
such later date as may be agreed in writing by the Majority Noteholders.
Maximum Note Principal Balance: As defined in Section 1.01 of the Note
Purchase Agreement.
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Monthly Advance: The aggregate of the advances made by the Servicer on any
Remittance Date pursuant to Section 4.14 of the Servicing Addendum.
Monthly Payment: The scheduled monthly payment of principal and/or
interest required to be made by a Borrower on the related Loan, as set forth in
the related Promissory Note.
Monthly Remittance Amount: With respect to each Remittance Date, the sum,
without duplication, of (i) the aggregate payments on the Loans collected by the
Servicer pursuant to Section 5.01(b)(i) during the immediately preceding
Remittance Period and (ii) the aggregate of amounts deposited into the
Collection Account pursuant to Section 5.01(b)(ii) through 5.01(b)(ix) during
the immediately preceding Remittance Period.
Moody's: ▇▇▇▇▇'▇ Investors Service, Inc., or any successor thereto.
Mortgage: With respect to any Loan, the mortgage, deed of trust or other
instrument securing the related Promissory Note, which creates a first or second
lien on the fee in real property and/or a first or second lien on the leasehold
in real property securing the Promissory Note and the assignment of rents and
leases related thereto.
Mortgage Insurance Policies: With respect to any Mortgaged Property or
Loan, the insurance policies required pursuant to Section 4.08 of the Servicing
Addendum.
Mortgage Insurance Proceeds: With respect to any Mortgaged Property, all
amounts collected in respect of Mortgage Insurance Policies and not required
either pursuant to applicable law or the related Loan Documents to be applied to
the restoration of the related Mortgage Property or paid to the related
Borrower.
Mortgaged Property: With respect to a Loan, the related Borrower's fee
and/or leasehold interest in the real property (and/or all improvements,
buildings, fixtures, building equipment and personal property thereon (to the
extent applicable) and all additions, alterations and replacements made at any
time with respect to the foregoing) and all other collateral securing repayment
of the debt evidenced by the related Promissory Note.
Net Liquidation Proceeds: With respect to any Payment Date, Liquidation
Proceeds received during the prior Remittance Period, net of any reimbursements
to the Servicer made from such amounts for any unreimbursed Servicing
Compensation and Servicing Advances (including Nonrecoverable Servicing
Advances) made and any other fees and expenses paid in connection with the
foreclosure, inspection, conservation and liquidation of the related Liquidated
Loans or Foreclosure Properties pursuant to Section 4.03 of the Servicing
Addendum.
Net Loan Losses: With respect to any Defaulted Loan that is subject to a
modification pursuant to Section 4.01 of the Servicing Addendum, an amount equal
to the portion of the Principal Balance, if any, forgiven or deferred in
connection with such modification.
Net Worth: With respect to any Person, the excess of total assets of such
Person, over total liabilities of such Person, determined in accordance with
GAAP.
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Nonrecoverable Monthly Advance: Any Monthly Advance previously made or
proposed to be made with respect to a Loan or Foreclosure Property that, in the
good faith business judgment of the Servicer, as evidenced by an Officer's
Certificate of a Servicing Officer delivered to the Note Agent, will not, or, in
the case of a proposed Monthly Advance, would not be, ultimately recoverable
from the related late payments, Mortgage Insurance Proceeds, Liquidation
Proceeds or condemnation proceeds on such Loan or Foreclosure Property as
provided herein.
Nonrecoverable Servicing Advance: With respect to any Loan or any
Foreclosure Property, (a) any Servicing Advance previously made and not
reimbursed from late collections, condemnation proceeds, Liquidation Proceeds,
Mortgage Insurance Proceeds or the Released Mortgaged Property Proceeds on the
related Loan or Foreclosure Property or (b) a Servicing Advance proposed to be
made in respect of a Loan or Foreclosure Property either of which, in the good
faith business judgment of the Servicer, as evidenced by an Officer's
Certificate of a Servicing Officer delivered to the Note Agent, would not be
ultimately recoverable.
Nonutilization Fee: A fee payable by the Issuer to the Note Agent on each
Payment Date in an amount equal to (a) 0.175% times (b) the average daily amount
for the immediately preceding month of (1) $1,020,000,000 less (2) the Note
Principal Balance divided by (c) 360 and multiplied by (d) the actual number of
calendar days that have elapsed since the immediately preceding Payment Date
(or, with respect to the first Payment Date, the Closing Date).
Note: The meaning assigned thereto in the Indenture.
Note Agent: Bank One, NA (Main Office Chicago), acting in its capacity as
agent on behalf of the Purchasers under the Note Purchase Agreement.
Noteholder: The meaning assigned thereto in the Indenture.
Note Interest Rate: The meaning assigned thereto in the Note Purchase
Agreement.
Note Principal Balance: With respect to the Notes, as of any date of
determination (a) the sum of the Additional Note Principal Balances purchased on
or prior to such date pursuant to the Note Purchase Agreement less (b) all
amounts previously distributed in respect of principal of the Notes on or prior
to such day.
Note Purchase Agreement: The Note Purchase Agreement among the Note Agent,
the Issuer and the Depositor, dated as of August 8, 2003.
Note Redemption Amount: As of any Determination Date, an amount without
duplication equal to the sum of (i) the then outstanding Note Principal Balance
of the Notes, plus the Interest Payment Amount for the related Payment Date,
(ii) any Trust Fees and Expenses due and unpaid on the related Payment Date,
(iii) any Servicing Advance Reimbursement Amount as of such Determination Date
and (iv) all amounts due to Hedging Counterparties in respect of the termination
of all related Hedging Instruments.
Officer's Certificate: A certificate signed by a Responsible Officer of
the Depositor, the Loan Originator, the Servicer or the Issuer, in each case, as
required by this Agreement.
16
Opinion of Counsel: A written opinion of counsel who may be employed by
the Servicer, the Depositor, the Loan Originator or any of their respective
Affiliates.
Option One: Option One Mortgage Corporation, a California corporation.
Overcollateralization Shortfall: With respect to any Business Day, an
amount equal to the positive difference, if any, between (a) the Note Principal
Balance on such Business Day and (b) the aggregate Collateral Value of all Loans
in the Loan Pool as of such Business Day; provided, however, that on (A) the
termination of the Revolving Period, (B) the occurrence of a Rapid Amortization
Trigger, (C) the Payment Date on which the Trust is to be terminated pursuant to
Section 10.02 hereof, or (D) the Final Put Date, the Overcollateralization
Shortfall shall be equal to the Note Principal Balance. Notwithstanding anything
to the contrary herein, in no event shall the Overcollateralization Shortfall,
with respect to any Business Day, exceed the Note Principal Balance as of such
date. If as of such Business Day, no Rapid Amortization Trigger or Default under
this Agreement or the Indenture shall be in effect, the Overcollateralization
Shortfall shall be reduced (but in no event to an amount below zero) by all or
any portion of the aggregate Hedge Value as of such Payment Date as the Majority
Noteholders may, in their sole discretion, designate in writing.
Owner Trustee: means Wilmington Trust Company, a Delaware banking
corporation, not in its individual capacity but solely as Owner Trustee under
this Agreement, and any successor owner trustee under the Trust Agreement.
Owner Trustee Fee: The annual fee of $4,000 payable in equal monthly
installments to the Servicer pursuant to Section 5.01(c)(3)(i) which shall in
turn pay such amount annually to the Owner Trustee on the anniversary of the
Closing Date occurring each year during the term of this Agreement.
Paying Agent: The meaning assigned thereto in the Indenture.
Payment Date: Each of, (i) the 10th day of each calendar month commencing
on the first such 10th day to occur after the first Transfer Date, or if any
such day is not a Business Day, the first Business Day immediately following
such day, (ii) any day a Loan is sold pursuant to the terms hereof, (iii) a Put
Date as specified by the Majority Noteholder pursuant to Section 10.05 of the
Indenture, and (iv) an additional Payment Date pursuant to Section 5.01(c)(4)(i)
and 5.01(c)(4)(iii). From time to time, the Majority Noteholders and the Issuer
may agree, upon written notice to the Owner Trustee and the Indenture Trustee,
to additional Payment Dates in accordance with Section 5.01(c)(4)(ii).
Payment Statement: As defined in Section 6.01(b) hereof.
Percentage Interest: As defined in the Trust Agreement.
Performance Trigger: Shall exist, as of any Determination Date, if the
aggregate Principal Balance of all Loans that are not Scratch & Dent Loans and
that are Delinquent greater than 59 days (including Defaulted Loans and
Foreclosed Loans) as of such Determination Date divided by the Pool Principal
Balance as of such Determination Date is greater than 2%, provided, however,
that a Performance Trigger shall not occur if such percentage is reduced to
17
less than 2% within 5 Business Days of such Determination Date as the result of
the exercise of a Servicer Call. A Performance Trigger shall continue to exist
until Deemed Cured.
Periodic Cap: With respect to each ARM Loan and any Rate Change Date
therefor, the annual percentage set forth in the related Promissory Note, which
is the maximum annual percentage by which the Loan Interest Rate for such Loan
may increase or decrease (subject to the Lifetime Cap or the Lifetime Floor) on
such Rate Change Date from the Loan Interest Rate in effect immediately prior to
such Rate Change Date.
Permitted Investments: Each of the following:
(a) Direct general obligations of the United States or the
obligations of any agency or instrumentality of the United States fully and
unconditionally guaranteed, the timely payment or the guarantee of which
constitutes a full faith and credit obligation of the United States.
(b) Federal Housing Administration debentures rated Aa2 or higher by
Moody's and AA or better by S&P.
(c) ▇▇▇▇▇▇▇ Mac senior debt obligations rated Aa2 or higher by
Moody's and AA or better by S&P.
(d) Federal Home Loan Banks' consolidated senior debt obligations
rated Aa2 or higher by Moody's and AA or better by S&P.
(e) ▇▇▇▇▇▇ ▇▇▇ senior debt obligations rated Aa2 or higher by
Moody's.
(f) Federal funds, certificates or deposit, time and demand
deposits, and bankers' acceptances (having original maturities of not more than
365 days) of any domestic bank, the short-term debt obligations of which have
been rated A-1 or better by S&P and P-1 or better by Moody's.
(g) Investment agreements approved by the Note Agent provided:
(1) The agreement is with a bank or insurance company which
has an unsecured, uninsured and unguaranteed obligation (or claims-paying
ability) rated Aa2 or better by Moody's and AA or better by S&P, and
(2) Monies invested thereunder may be withdrawn without any
penalty, premium or charge upon not more than one day's notice (provided such
notice may be amended or canceled at any time prior to the withdrawal date), and
(3) The agreement is not subordinated to any other obligations
of such insurance company or bank, and
(4) The same guaranteed interest rate will be paid on any
future deposits made pursuant to such agreement, and
18
(5) The Indenture Trustee and the Note Agent receive an
opinion of counsel that such agreement is an enforceable obligation of such
insurance company or bank.
(h) Commercial paper (having original maturities of not more than
365 days) rated A-1 or better by S&P and P-1 or better by Moody's.
(i) Investments in money market funds rated AAAM or AAAM-G by S&P
and Aaa or P-1 by Moody's.
(j) Investments approved in writing by the Note Agent;
provided that no instrument described above is permitted to evidence either the
right to receive (a) only interest with respect to obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provided a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations; and provided, further,
that no instrument described above may be purchased at a price greater than par
if such instrument may be prepaid or called at a price less than its purchase
price prior to stated maturity; and provided, further, that, with respect to any
instrument described above, such instrument qualifies as a "permitted
investment" within the meaning of Section 860G(a)(5) of the Code and the
regulations thereunder.
Each reference in this definition to the Rating Agency shall be construed,
as a reference to each of S&P and Moody's.
Person: Any individual, corporation, partnership, joint venture, limited
liability company, association, joint-stock company, trust, national banking
association, unincorporated organization or government or any agency or
political subdivision thereof.
Physical Property: As defined in clause (b) of the definition of
"Delivery" above.
Pool Principal Balance: With respect to any Determination Date, the
aggregate Principal Balances of the Loans as of such Determination Date.
Prepaid Installment: With respect to any Loan, any installment of
principal thereof and interest thereon received prior to the scheduled Due Date
for such installment, intended by the Borrower as an early payment thereof and
not as a Prepayment with respect to such Loan.
Prepayment: Any payment of principal of a Loan which is received by the
Servicer in advance of the scheduled due date for the payment of such principal
(other than the principal portion of any Prepaid Installment), and the proceeds
of any Mortgage Insurance Policy which are to be applied as a payment of
principal on the related Loan shall be deemed to be Prepayments for all purposes
of this Agreement.
Preservation Expenses: Expenditures made by the Servicer in connection
with a foreclosed Loan prior to the liquidation thereof, including, without
limitation, expenditures for real estate property taxes, hazard insurance
premiums, property restoration or preservation.
19
Primary Insurance Policy: A policy of primary mortgage guaranty insurance
issued by a Qualified Insurer pursuant to Section 4.06 of the Servicing
Addendum.
Principal Balance: With respect to any Loan or related Foreclosure
Property, (i) at the Transfer Cut-off Date, the Transfer Cut-off Date Principal
Balance and (ii) with respect to any other date of determination, the
outstanding unpaid principal balance of the Loan as of the end of the preceding
Remittance Period (after giving effect to all payments received thereon and the
allocation of any Net Loan Losses with respect thereto for a Defaulted Loan
prior to the end of such Remittance Period); provided, however, that any
Liquidated Loan shall be deemed to have a Principal Balance of zero.
Proceeding: Means any suit in equity, action at law or other judicial or
administrative proceeding.
Promissory Note: With respect to a Loan, the original executed promissory
note or other evidence of the indebtedness of the related Borrower or Borrowers.
Put/Call Loan: Any (i) non-Scratch & Dent Loan that has become 30 or more
days (but less than 60 days) Delinquent, (ii) non-Scratch & Dent Loan that has
become 60 or more days (but less than 90 days) Delinquent, (iii) non-Scratch &
Dent Loan that has become 90 or more days Delinquent, (iv) non-Scratch & Dent
Loan that is a Defaulted Loan, (v) non-Scratch & Dent Loan that has been in
default for a period of 30 days or more (other than a Loan referred to in clause
(i), (ii), (iii) or (iv) hereof), (vi) non-Scratch & Dent Loan that does not
meet criteria established by independent rating agencies or surety agency
conditions for Dispositions which criteria have been established at the related
Transfer Date and may be modified only to match changed criteria of independent
rating agencies or surety agents, or (vii) non-Scratch & Dent Loan that is
inconsistent with the intended tax status of a Securitization.
Put Date: Any date on which all or a portion of the Notes are to be
purchased by the Issuer as a result of the exercise of the Put Option.
Put Option: The right of the Majority Noteholders to require the Issuer to
repurchase all or a portion of the Notes in accordance with Section 10.04 of the
Indenture.
QSPE Affiliate: Option One Owner Trust 2001-1A, Option One Owner Trust
2001-1B, Option One Owner Trust 2002-2, Option One Owner Trust 2002-3 or any
other Affiliate which is a "qualified special purpose entity" in accordance with
Financial Accounting Standards Board's Statement No. 140 or 125, as they may be
amended from time to time.
Qualified Insurer: An insurance company duly qualified as such under the
laws of the states in which the Mortgaged Property is located, duly authorized
and licensed in such states to transact the applicable insurance business and to
write the insurance provided and that meets the requirements of ▇▇▇▇▇▇ ▇▇▇ and
▇▇▇▇▇▇▇ Mac.
Qualified Substitute Loan: A Loan or Loans substituted for a Deleted Loan
pursuant to Section 3.06 hereof, which (i) has or have been approved in writing
by the Majority Noteholders and (ii) complies or comply as of the date of
substitution with each representation and warranty
20
set forth in Exhibit E and is or are not 30 or more days Delinquent as of the
date of substitution for such Deleted Loan or Loans.
Rapid Amortization Trigger: Shall exist, as of any Determination Date, if
the aggregate Principal Balance of all Loans that are not Scratch & Dent Loans
and that are Delinquent greater than 59 days (including Defaulted Loans and
Foreclosed Loans) as of such Determination Date divided by the Pool Principal
Balance as of such Determination Date is greater than 3%; provided, however,
that a Rapid Amortization Trigger shall not occur if such percentage is reduced
to less than 3% within 5 Business Days of such Determination Date as a result of
the exercise of a Servicer Call.
Rate Change Date: The date on which the Loan Interest Rate of each ARM is
subject to adjustment in accordance with the related Promissory Note.
Rating Agencies: S&P and Moody's or such other nationally recognized
credit rating agencies as may from time to time be designated in writing by the
Majority Noteholders in their sole discretion.
Record Date: With respect to each Payment Date, the close of business of
the immediately preceding Business Day.
Reference Banks: Bankers Trust Company, ▇▇▇▇▇▇▇'▇ Bank PLC, The Tokyo
Mitsubishi Bank and National Westminster Bank PLC and their successors in
interest; provided, however, that if the Note Agent determines that any of the
foregoing banks are not suitable to serve as a Reference Bank, then any leading
banks selected by the Note Agent with the approval of the Issuer, which approval
shall not be unreasonably withheld, which are engaged in transactions in
Eurodollar deposits in the international Eurocurrency market (i) with an
established place of business in London and (ii) which have been designated as
such by the Note Agent with the approval of the Issuer, which approval shall not
be unreasonably withheld.
Refinanced Loan: A Loan the proceeds of which were not used to purchase
the related Mortgaged Property.
Released Mortgaged Property Proceeds: With respect to any Loan, proceeds
received by the Servicer in connection with (i) a taking of an entire Mortgaged
Property by exercise of the power of eminent domain or condemnation or (ii) any
release of part of the Mortgaged Property from the lien of the related Mortgage,
whether by partial condemnation, sale or otherwise; which proceeds in either
case are not released to the Borrower in accordance with applicable law and/or
Accepted Servicing Practices.
Remittance Date: The Business Day immediately preceding each Payment Date.
Remittance Period: With respect to any Payment Date, the period commencing
immediately following the Determination Date for the preceding Payment Date (or,
in the case of the initial Payment Date, commencing immediately following the
initial Transfer Cut-off Date) and ending on and including the related
Determination Date.
21
Repurchase Price: With respect to a Loan the sum of (i), the Principal
Balance thereof as of the date of purchase or repurchase, plus (ii) all accrued
and unpaid interest on such Loan to the date of purchase or repurchase computed
at the applicable Loan Interest Rate, plus (iii) the amount of any unreimbursed
Servicing Advances made by the Servicer with respect to such Loan (after
deducting therefrom any amounts received in respect of such purchased or
repurchased Loan and being held in the Collection Account for future
distribution to the extent such amounts represent recoveries of principal not
yet applied to reduce the related Principal Balance or interest (net of the
Servicing Fee) for the period from and after the date of repurchase). The
Repurchase Price shall be (i) increased by the net negative value or (ii)
decreased by the net positive value of all Hedging Instruments terminated with
respect to the purchase of such Loan. To the extent the Servicer does not
reimburse itself for amounts, if any, in respect of the Servicing Advance
Reimbursement Amount pursuant to Section 5.01(c)(1) hereof, with respect to such
Loan, the Repurchase Price shall be reduced by such amounts.
Reserve Interest Rate: With respect to any LIBOR Determination Date, the
rate per annum that the Note Agent determines to be either (i) the arithmetic
mean (rounded to the nearest whole multiple of 1/16%) of the one-month U.S.
dollar lending rates which New York City banks selected by the Note Agent are
quoting on the relevant LIBOR Determination Date to the principal London offices
of leading banks in the London interbank market or (ii) in the event that the
Note Agent can determine no such arithmetic mean, the lowest one-month U.S.
dollar lending rate which New York City banks selected by the Note Agent are
quoting on such LIBOR Determination Date to leading European banks.
Responsible Officer: When used with respect to the Indenture Trustee or
Custodian, any officer within the corporate trust office of such Person,
including any Vice President, Assistant Vice President, Secretary, Assistant
Secretary or any other officer of such Person customarily performing functions
similar to those performed by any of the above designated officers and also,
with respect to a particular matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject. When used with respect to the Issuer, any officer of the
Owner Trustee who is authorized to act for the Owner Trustee in matters relating
to the Issuer and who is identified on the list of Authorized Officers delivered
by the Owner Trustee to the Indenture Trustee on the date hereof (as such list
may be modified or supplemented from time to time thereafter) and, so long as
the Administration Agreement is in effect, any Vice President or more senior
officer of the Administrator who is authorized to act for the Administrator in
matters relating to the Issuer and to be acted upon by the Administrator
pursuant to the Administration Agreement and who is identified on the list of
Responsible Officers delivered by the Administrator to the Owner Trustee on the
date hereof (as such list may be modified or supplemented from time to time
thereafter). When used with respect to the Depositor, the Loan Originator or the
Servicer, the President, any Vice President, or the Treasurer.
Retained Securities: With respect to a Securitization, any subordinated
securities issued or expected to be issued, or excess collateral value retained
or expected to be retained, in connection therewith to the extent the Depositor,
the Loan Originator or an Affiliate thereof retains, instead of sell, such
securities.
22
Retained Securities Value: With respect to any Business Day and a Retained
Security, the market value thereof as determined by the Market Value Agent in
accordance with Section 6.03(d) hereof.
Revolving Period: With respect to the Notes, the period commencing on the
Closing Date and ending on the earlier of (i) 364 days after such date, and (ii)
the date on which the Revolving Period is terminated pursuant to Section 2.07.
The Revolving Period may be extended annually, in the sole discretion of the
Note Agent, upon the request of the Depositor.
Sales Price: For any Transfer Date, the sum of the Collateral Values with
respect to each Loan conveyed on such Transfer Date as of such Transfer Date.
S&SA Assignment: An Assignment, in the form of Exhibit C hereto, of Loans
and other property from the Depositor to the Issuer pursuant to this Agreement.
Scratch & Dent Loan: Any Loan that does not meet the Underwriting
Guidelines or with respect to which certain documentation is missing from the
Custodial Loan File.
Second Lien Loan: A Loan secured by the lien on the Mortgaged Property,
subject to one Senior Lien on such Mortgaged Property.
Securities: The Notes and the Trust Certificates.
Securities Intermediary: A "securities intermediary" as defined in Section
8-102(a)(14) of the UCC that is holding a Trust Account for the Indenture
Trustee as the sole "entitlement holder" as defined in Section 8-102(a)(7) of
the UCC.
Securitization: A sale or transfer of Loans by the Issuer at the direction
of the Majority Noteholders to any other Person in order to effect one or a
series of structured-finance Securitization transactions, including but not
limited to transactions involving the issuance of securities which may be
treated for federal income tax purposes as indebtedness of Option One or one or
more of its wholly-owned subsidiaries.
Securityholder: Any Noteholder or Certificateholder.
Senior Lien: With respect to any Second Lien Loan, the mortgage loan
having a senior priority lien on the related Mortgaged Property.
Servicer: Option One, in its capacity as the servicer hereunder, or any
successor appointed as herein provided.
Servicer Call: The optional repurchase by the Servicer of a Loan pursuant
to Section 3.08(b) hereof.
Servicer Event of Default: As described in Section 9.01 hereof.
Servicer Put: The mandatory repurchase by the Servicer, at the option of
the Majority Noteholders, of a Loan pursuant to Section 3.08(a) hereof.
23
Servicer's Fiscal Year: May 1st of each year through April 30th of the
following year.
Servicer's Loan File: With respect to each Loan, the file held by the
Servicer, consisting of all documents (or electronic images thereof) relating to
such Loan, including, without limitation, copies of all of the Loan Documents
included in the related Custodial Loan File.
Servicer's Remittance Report: A report prepared and computed by the
Servicer in substantially the form of Exhibit B attached hereto.
Servicing Addendum: The terms and provisions set forth in Exhibit F
attached hereto relating to the administration and servicing of the Loans.
Servicing Advance Reimbursement Amount: With respect to any Determination
Date, the amount of any Servicing Advances that have not been reimbursed as of
such date, including Nonrecoverable Servicing Advances.
Servicing Advances: As defined in Section 4.14(b) of the Servicing
Addendum.
Servicing Compensation: The Servicing Fee and other amounts to which the
Servicer is entitled pursuant to Section 4.15 of the Servicing Addendum.
Servicing Fee: As to each Loan (including any Loan that has been
foreclosed and for which the related Mortgaged Property has become a Foreclosure
Property, but excluding any Liquidated Loan), the fee payable monthly to the
Servicer, which shall be the product of 0.50% (50 basis points), or such other
lower amount as shall be mutually agreed to in writing by the Majority
Noteholders and the Servicer, and the Principal Balance of such Loan as of the
beginning of the related Remittance Period, divided by 12. The Servicing Fee
shall only be payable to the extent interest is collected on a Loan.
Servicing Officer: Any officer of the Servicer or Subservicer involved in,
or responsible for, the administration and servicing of the Loans whose name and
specimen signature appears on a list of servicing officers annexed to an
Officer's Certificate furnished by the Servicer or the Subservicer,
respectively, on the date hereof to the Issuer and the Indenture Trustee, on
behalf of the Noteholders, as such list may from time to time be amended.
S&P: Standard & Poor's Rating Services, a division of The ▇▇▇▇▇▇-▇▇▇▇
Companies, Inc.
State: Means any one of the states of the United States of America or the
District of Columbia.
Subservicer: Any Person with which the Servicer has entered into a
Subservicing Agreement and which is an Eligible Servicer and satisfies any
requirements set forth in Section 4.22 of the Servicing Addendum in respect of
the qualifications of a Subservicer.
Subservicing Account: An account established by a Subservicer pursuant to
a Subservicing Agreement, which account must be an Eligible Account.
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Subservicing Agreement: Any agreement between the Servicer and any
Subservicer relating to subservicing and/or administration of any or all Loans
as provided in Section 4.22 in the Servicing Addendum.
Subsidiary: With respect to any Person, any corporation, partnership or
other entity of which at least a majority of the securities or other ownership
interests having by the terms thereof ordinary voting power to elect a majority
of the board of directors or other persons performing similar functions of such
corporation, partnership or other entity (irrespective of whether or not at the
time securities or other ownership interests of any other class or classes of
such corporation, partnership or other entity shall have or might have voting
power by reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by such Person or one or more Subsidiaries of
such Person or by such Person and one or more Subsidiaries of such Person.
Substitution Adjustment: As to any date on which a substitution occurs
pursuant to Section 2.05 or Section 3.06 hereof, the amount, if any, by which
(a) the aggregate principal balance of any Qualified Substitute Loans (after
application of principal payments received on or before the related Transfer
Cut-off Date) is less than (b) the aggregate of the Principal Balances of the
related Deleted Loans as of the first day of the month in which such
substitution occurs.
Tangible Net Worth: With respect to any Person, as of any date of
determination, the consolidated Net Worth of such Person and its Subsidiaries,
less the consolidated net book value of all assets of such Person and its
Subsidiaries (to the extent reflected as an asset in the balance sheet of such
Person or any Subsidiary at such date) which will be treated as intangibles
under GAAP, including, without limitation, such items as deferred financing
expenses, net leasehold improvements, good will, trademarks, trade names,
service marks, copyrights, patents, licenses and unamortized debt discount and
expense; provided, that residual securities issued by such Person or its
Subsidiaries shall not be treated as intangibles for purposes of this
definition.
Termination Price: As of any Determination Date, an amount without
duplication equal to the greater of (A) the Note Redemption Amount and (B) the
sum of (i) the Principal Balance of each Loan included in the Trust as of the
end of the preceding Remittance Period; (ii) all unpaid interest accrued on the
Principal Balance of each such Loan at the related Loan Interest Rate to the end
of the preceding Remittance Period; and (iii) the aggregate fair market value of
each Foreclosure Property included in the Trust as of the end of the preceding
Remittance Period, as determined by an Independent appraiser acceptable to the
Majority Noteholders as of a date not more than 30 days prior to such Payment
Date.
Transfer Cut-off Date: With respect to each Loan, the first day of the
month in which the Transfer Date with respect to such Loan occurs or if
originated in such month, the date of origination.
Transfer Cut-off Date Principal Balance: As to each Loan, its Principal
Balance as of the opening of business on the Transfer Cut-off Date (after giving
effect to any payments received on the Loan before the Transfer Cut-off Date).
25
Transfer Date: With respect to each Loan, the day such Loan is either (i)
sold and conveyed to the Depositor by the Loan Originator pursuant to the Loan
Purchase and Contribution Agreement and to the Issuer by the Depositor pursuant
to Section 2.01 hereof or (ii) sold to the Issuer pursuant to the Master
Disposition Confirmation Agreement, which results in an increase in the Note
Principal Balance by the related Additional Note Principal Balance. With respect
to any Qualified Substitute Loan, the Transfer Date shall be the day such Loan
is conveyed to the Trust pursuant to Section 2.05 or 3.06.
Transfer Obligation: The obligation of the Loan Originator under Section
5.06 hereof to make certain payments in connection with Dispositions and other
related matters.
Transfer Obligation Account: The account designated as such, established
and maintained pursuant to Section 5.05 hereof.
Transfer Obligation Target Amount: With respect to any Payment Date, the
cumulative total of all withdrawals pursuant to Section 5.05(e), 5.05(f),
5.05(g), and 5.05(h) hereof from the Transfer Obligation Account to but not
including such Payment Date minus any amount withdrawn from the Transfer
Obligation Account to return to the Loan Originator pursuant to Section
5.05(i)(i).
Trust: Option One Owner Trust 2003-4, the Delaware business trust created
pursuant to the Trust Agreement.
Trust Agreement: The Trust Agreement dated as of August 8, 2003 among the
Depositor and the Owner Trustee.
Trust Account Property: The Trust Accounts, all amounts and investments
held from time to time in the Trust Accounts and all proceeds of the foregoing.
Trust Accounts: The Distribution Account, the Collection Account and the
Transfer Obligation Account.
Trust Certificate: The meaning assigned thereto in the Trust Agreement.
Trust Estate: Shall mean the assets subject to this Agreement, the Trust
Agreement and the Indenture and assigned to the Trust, which assets consist of:
(i) such Loans as from time to time are subject to this Agreement as listed in
the Loan Schedule, as the same may be amended or supplemented on each Transfer
Date and by the removal of Deleted Loans and Unqualified Loans and by the
addition of Qualified Substitute Loans, together with the Servicer's Loan Files
and the Custodial Loan Files relating thereto and all proceeds thereof, (ii) the
Mortgages and security interests in the Mortgaged Properties, (iii) all payments
in respect of interest and principal with respect to each Loan received on or
after the related Transfer Cut-off Date, (iv) such assets as from time to time
are identified as Foreclosure Property, (v) such assets and funds as are from
time to time deposited in the Distribution Account, Collection Account and the
Transfer Obligation Account, including, without limitation, amounts on deposit
in such accounts that are invested in Permitted Investments, (vi) lenders'
rights under all Mortgage Insurance Policies and to any Mortgage Insurance
Proceeds, (vii) Net Liquidation Proceeds and Released Mortgaged Property
Proceeds, (viii) all right, title and interest of the Trust (but none of the
26
obligations) in and to the obligations of Hedging Counterparties under Hedging
Instruments and (ix) all right, title and interest of each of the Depositor, the
Loan Originator and the Trust in and under the Basic Documents including,
without limitation, the obligations of the Loan Originator under the Loan
Purchase and Contribution Agreement and/or the Master Disposition Confirmation
Agreement, and all proceeds of any of the foregoing.
Trust Fees and Expenses: As of each Payment Date, an amount equal to the
Servicing Compensation, the Owner Trustee Fee, the Indenture Trustee Fee and the
Custodian Fee, if any, and any expenses of the Servicer, the Owner Trustee, the
Indenture Trustee or the Custodian.
UCC: The Uniform Commercial Code as in effect from time to time in the
State of New York.
UCC Assignment: A form "UCC2" or "UCC3" statement meeting the requirements
of the Uniform Commercial Code of the relevant jurisdiction to reflect an
assignment of a secured party's interest in collateral.
UCC1 Financing Statement: A financing statement meeting the requirements
of the Uniform Commercial Code of the relevant jurisdiction.
Underwriting Guidelines: The underwriting guidelines (including the loan
origination guidelines) of the Loan Originator, as the same may be amended from
time to time with notice to the Note Agent.
Unfunded Transfer Obligation: With respect to any date of determination,
an amount equal to (x) the sum of (A) 10% of the aggregate Collateral Value (as
of the related Transfer Date) of all Loans sold hereunder through and including
such date, plus (B) any amounts withdrawn from the Transfer Obligation Account
for return to the Loan Originator pursuant to Section 5.05(i)(i) hereof prior to
such Payment Date, less (y) the sum of (i) the aggregate amount of payments
theretofore actually made by the Loan Originator (or paid directly put of the
Transfer Obligation Account) in respect of the Transfer Obligation pursuant to
Section 5.06, (ii) the amount obtained by multiplying (a) as to each Disposition
that has previously occurred, the Unfunded Transfer Obligation Percentage as of
the date of such Disposition by (b) the aggregate Collateral Value of all Loans
that were the subject of that Disposition and (iii) without duplication, the
aggregate amount of the Repurchase Prices paid by the Servicer in respect of all
Servicer Puts theretofore effected.
Unfunded Transfer Obligation Percentage: As of any date of determination,
an amount equal to (x) the Unfunded Transfer Obligation as of such date (before
any adjustment thereto made on such date), divided by (y) 100% of the aggregate
Collateral Values as of the related Transfer Date of all Loans in the Loan Pool.
Unqualified Loan: As defined in Section 3.06(a) hereof.
Wet Funded Custodial File Delivery Date: With respect to a Wet Funded
Loan, the later of the fifteenth Business Day and the twentieth calendar day
after the related Transfer Date, provided that if a Default or Event of Default
shall have occurred, the Wet Funded Custodial File
27
Delivery Date shall be the earlier of (x) such fifteenth Business Day or
twentieth calendar day and (y) the fifth day after the occurrence of such event.
Wet Funded Loan: A Loan for which the related Custodial Loan File shall
not have been delivered to the Custodian as of the related Transfer Date.
Whole Loan Sale: A Disposition of Loans pursuant to a whole-loan sale.
Section 1.02 Other Definitional Provisions.
(a) Any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Agreement or in any such certificate or other document, and
accounting terms partly defined in this Agreement or in any such certificate or
other document to the extent not defined, shall have the respective meanings
given to them under GAAP. To the extent that the definitions of accounting terms
in this Agreement or in any such certificate or other document are inconsistent
with the meanings of such terms under GAAP, the definitions contained in this
Agreement or in any such certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; Article, Section, Schedule
and Exhibit references contained in this Agreement are references to Articles,
Sections, Schedules and Exhibits in or to this Agreement unless otherwise
specified; and the term "including" shall mean "including without limitation."
(e) The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such terms.
ARTICLE II
CONVEYANCE OF THE TRUST ESTATE; ADDITIONAL NOTE PRINCIPAL BALANCES
Section 2.01 Conveyance of the Trust Estate; Additional Note Principal
Balances.
(a) (i) On the terms and conditions of this Agreement, on each
Transfer Date during the Revolving Period, the Depositor agrees to offer for
sale and to sell a portion of each of the Loans and contribute to the capital of
the Issuer the balance of each of the Loans and
28
deliver the related Loan Documents to or at the direction of the Issuer. To the
extent the Issuer has or is able to obtain sufficient funds under the Note
Purchase Agreement and the Notes for the purchase thereof, the Issuer agrees to
purchase such Loans offered for sale by the Depositor. On the terms and
conditions of this Agreement and the Master Disposition Confirmation Agreement,
on each Transfer Date during the Revolving Period, the Issuer may acquire Loans
from another QSPE Affiliate of the Loan Originator to the extent the Issuer has
or is able to obtain sufficient funds for the purchase thereof.
(ii) In consideration of the payment of the Additional Note
Principal Balance pursuant to Section 2.06 hereof and as a contribution to the
assets of the Issuer, the Depositor as of the related Transfer Date and
concurrently with the execution and delivery hereof, hereby sells, transfers,
assigns, sets over and otherwise conveys to the Issuer, without recourse, but
subject to the other terms and provisions of this Agreement, all of the right,
title and interest of the Depositor in and to the Trust Estate.
(iii) During the Revolving Period, on each Transfer Date,
subject to the conditions precedent set forth in Section 2.06 and in accordance
with the procedures set forth in Section 2.01(c), the Depositor, pursuant to an
S&SA Assignment, will assign to the Issuer without recourse all of its
respective right, title and interest, in and to the Loans and all proceeds
thereof listed on the Loan Schedule attached to such S&SA Assignment, including
all interest and principal received by the Loan Originator, the Depositor or the
Servicer on or with respect to the Loans on or after the related Transfer
Cut-off Date, together with all right, title and interest in and to the proceeds
of any related Mortgage Insurance Policies and all of the Depositor's rights,
title and interest in and to (but none of its obligations under) the Loan
Purchase and Contribution Agreement and all proceeds of the foregoing.
(iv) The foregoing sales, transfers, assignments, set overs
and conveyances do not, and are not intended to, result in a creation or an
assumption by the Issuer of any of the obligations of the Depositor, the Loan
Originator or any other Person in connection with the Trust Estate or under any
agreement or instrument relating thereto except as specifically set forth
herein.
(b) As of the Closing Date and as of each Transfer Date, the Issuer
acknowledges (or will acknowledge pursuant to the S&SA Assignment) the
conveyance to it of the Trust Estate, including all rights, title and interest
of the Depositor and any QSPE Affiliate in and to the Trust Estate, receipt of
which is hereby acknowledged by the Issuer. Concurrently with such delivery, as
of the Closing Date and as of each Transfer Date, pursuant to the Indenture the
Issuer pledges and grants a continuing first priority security interest in the
Trust Estate to the Indenture Trustee. In addition, concurrently with such
delivery and in exchange therefor, the Owner Trustee, pursuant to the
instructions of the Depositor, has executed (not in its individual capacity, but
solely as Owner Trustee on behalf of the Issuer) and caused the Trust
Certificates to be authenticated and delivered to or at the direction of the
Depositor.
(c) (i) Pursuant to and subject to the Note Purchase Agreement,
the Trust may, at its sole option, from time to time request that the Note Agent
advance on any Transfer Date Additional Note Principal Balances and the Note
Agent shall remit on such Transfer Date, to the Advance Account, an amount equal
to the Additional Note Principal Balance.
29
(ii) Notwithstanding anything to the contrary herein, in no
event shall the Note Agent be required to advance Additional Note Principal
Balances on a Transfer Date if the conditions precedent to a transfer of the
Loans under Section 2.06 and the conditions precedent to the purchase of
Additional Note Principal Balances set forth in Section 3.01 of the Note
Purchase Agreement have not been fulfilled.
(iii) The Servicer shall appropriately note such Additional
Note Principal Balance (and the increased Note Principal Balance) in the next
succeeding Payment Statement; provided, however, that failure to make any such
notation in such Payment Statement or any error in such notation shall not
adversely affect any Noteholder's rights with respect to its Note Principal
Balance and its right to receive interest and principal payments in respect of
the Note Principal Balance held by such Noteholder. The Note Agent shall record
on the schedule attached to such Noteholder's Note, the date and amount of any
Additional Note Principal Balance advanced by it; provided, that failure to make
such recordation on such schedule or any error in such schedule shall not
adversely affect any Noteholder's rights with respect to its Note Principal
Balance and its right to receive interest payments in respect of the Note
Principal Balance held by such Noteholder.
(iv) Absent manifest error, the Note Principal Balance of each
Note as set forth in the Note Agent's records shall be binding upon the
Noteholders and the Trust, notwithstanding any notation made by the Servicer in
its Payment Statement pursuant to the preceding paragraph.
Section 2.02 Ownership and Possession of Loan Files.
With respect to each Loan, as of the related Transfer Date the ownership
of the related Promissory Note, the related Mortgage and the contents of the
related Servicer's Loan File and Custodial Loan File shall be vested in the
Trust for the benefit of the Securityholders, although possession of the
Servicer's Loan File on behalf of and for the benefit of the Securityholders
shall remain with the Servicer, and the Custodian shall take possession of the
Custodial Loan Files as contemplated in Section 2.05 hereof.
Section 2.03 Books and Records; Intention of the Parties.
(a) As of each Transfer Date, the sale of each of the Loans conveyed
by the Depositor on such Transfer Date shall be reflected on the balance sheets
and other financial statements of the Depositor and the Loan Originator, as the
case may be, as a sale of assets and a contribution to capital by the Loan
Originator and the Depositor, as applicable, under GAAP. Each of the Servicer
and the Custodian shall be responsible for maintaining, and shall maintain, a
complete set of books and records for each Loan which shall be clearly marked to
reflect the ownership of each Loan, as of the related Transfer Date, by the
Issuer and for the benefit of the Securityholders.
(b) It is the intention of the parties hereto that, other than for
federal, state and local income or franchise tax purposes, the transfers and
assignments of the Trust Estate on the initial Closing Date, on each Transfer
Date and as otherwise contemplated by the Basic Documents and the Assignments
shall constitute a sale of the Trust Estate including, without
30
limitation, the Loans and all other property comprising the Trust Estate
specified in Section 2.01 (a) hereof, from the Depositor to the Issuer and such
property shall not be property of the Depositor. The parties hereto shall treat
the Notes as indebtedness for federal, state and local income and franchise tax
purposes.
(c) If any of the assignments and transfers of the Loans and the
other property of the Trust Estate specified in Section 2.01 (a) hereof to the
Issuer pursuant to this Agreement or the conveyance of the Loans or any of such
other property of the Trust Estate to the Issuer, other than for federal, state
and local income or franchise tax purposes, is held or deemed not to be a sale
or is held or deemed to be a pledge of security for a loan, the Depositor
intends that the rights and obligations of the parties shall be established
pursuant to the terms of this Agreement and that, in such event, with respect to
such property, (i) consisting of Loans and related property, the Depositor shall
be deemed to have granted, as of the related Transfer Date, to the Issuer a
first priority security interest in the entire right, title and interest of the
Depositor in and to such Loans and proceeds and all other property conveyed to
the Issuer as of such Transfer Date, (ii) consisting of any other property
specified in Section 2.01 (a), the Depositor shall be deemed to have granted, as
of the initial Closing Date, to the Issuer a first priority security interest in
the entire right, title and interest of the Depositor in and to such property
and the proceeds thereof. In such event, with respect to such property, this
Agreement shall constitute a security agreement under applicable law.
(d) On the Closing Date, the Depositor shall, at such party's sole
expense, cause to be filed a UCC1 Financing Statement naming the Issuer as
"secured party" and describing the Trust Estate being sold by the Depositor to
the Issuer with the office of the Secretary of State of the state in which the
Depositor is located (pursuant to Section 9-307 of the UCC) and any other
jurisdictions as shall be necessary to perfect a security interest in the Trust
Estate. In addition, on the Closing Date, the Loan Originator shall, at its
expense, cause to be filed a UCC1 Financing Statement naming the Depositor as
"secured party" and describing the Loans being sold by the Loan Originator to
the Depositor with the office of the Secretary of the State in which the Loan
Originator is located (pursuant to Section 9-307 of the UCC) and such other
jurisdictions as shall be necessary to perfect a security interest in the Trust
Estate.
Section 2.04 Delivery of Loan Documents.
(a) The Loan Originator shall, prior to the related Transfer Date
(or, in the case of each Wet Funded Loan, the related Wet Funded Custodial File
Delivery Date), in accordance with the terms and conditions set forth in the
Custodial Agreement, deliver or cause to be delivered to the Custodian, as the
designated agent of the Indenture Trustee, a Loan Schedule and each of the
documents constituting the Custodial Loan File with respect to each Loan. The
Loan Originator shall assure that (i) in the event that any Wet Funded Loan is
not closed and funded to the order of the appropriate Borrower on the day funds
are provided to the Loan Originator by the Note Agent on behalf of the Issuer,
such funds shall be promptly returned to the Note Agent on behalf of the Issuer
and (ii) in the event that any Wet Funded Loan is subject to a recission, all
funds received in connection with such recission shall be promptly returned to
the Note Agent on behalf of the Issuer.
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(b) The Loan Originator shall, on the related Transfer Date (or in
the case of a Wet Funded Loan, on or before the related Wet Funded Custodial
File Delivery Date), deliver or cause to be delivered to the Servicer the
related Servicer's Loan File (i) for the benefit of, and as agent for, the
Noteholders and (ii) for the benefit of the Indenture Trustee, on behalf of the
Noteholders, for so long as the Notes are outstanding; after the Notes are not
outstanding, the Servicer's Loan File shall be held in the custody of the
Servicer for the benefit of, and as agent for, the Certificateholders.
(c) The Indenture Trustee shall cause the Custodian to take and
maintain continuous physical possession of the Custodial Loan Files in the State
of California (or upon prior written notice from the Custodian to the Loan
Originator and the Note Agent and delivery of an Opinion of Counsel with respect
to the continued perfection of the Indenture Trustee's security interest, in the
State of Minnesota or Utah) and, in connection therewith, shall act solely as
agent for the Noteholders in accordance with the terms hereof and not as agent
for the Loan Originator, the Servicer or any other party.
Section 2.05 Acceptance by the Indenture Trustee of the Loans; Certain
Substitutions and Repurchases; Certification by the Custodian.
(a) The Indenture Trustee declares that it will cause the Custodian
to hold the Custodial Loan Files and any additions, amendments, replacements or
supplements to the documents contained therein, as well as any other assets
included in the Trust Estate and delivered to the Custodian, in trust, upon and
subject to the conditions set forth herein. The Indenture Trustee further agrees
to cause the Custodian to execute and deliver such certifications as are
required under the Custodial Agreement and to otherwise direct the Custodian to
perform all of its obligations with respect to the Custodial Loan Files in
strict accordance with the terms of the Custodial Agreement.
(b) (i) With respect to any Loans which are set forth as
exceptions in the Exceptions Report, the Loan Originator shall cure such
exceptions by delivering such missing documents to the Custodian or otherwise
curing the defect no later than, in the case of (x) a non-Wet Funded Loan, 5
Business Days, or (y) in the case of a Wet Funded Loan one Business Day after
the Wet Funded Custodial File Delivery Date, in each case, following the receipt
of the first Exceptions Report listing such exception with respect to such Loan.
(ii) In the event that, with respect to any Loan, the Loan
Originator does not comply with the document delivery requirements of this
Section 2.05 and such failure has a material adverse effect on the value or
enforceability of any Loan or the interests of the Securityholders in any Loan,
the Loan Originator shall repurchase such Loan within one Business Day of notice
thereof from the Indenture Trustee or the Note Agent at the Repurchase Price
thereof with respect to such Loan by depositing such Repurchase Price in the
Collection Account. In lieu of such a repurchase, the Depositor and Loan
Originator may comply with the substitution provisions of Section 3.06 hereof.
The Loan Originator shall provide the Servicer, the Indenture Trustee, the
Issuer and the Note Agent with a certification of a Responsible Officer on or
prior to such repurchase or substitution indicating that the Loan Originator
intends to repurchase or substitute such Loan.
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(iii) It is understood and agreed that the obligation of the
Loan Originator to repurchase or substitute any such Loan pursuant to this
Section 2.05(b) shall constitute the sole remedy with respect to such failure to
comply with the foregoing delivery requirements.
(c) In performing its reviews of the Custodial Loan Files pursuant
to the Custodial Agreement, the Custodian shall have no responsibility to
determine the genuineness of any document contained therein and any signature
thereon. The Custodian shall not have any responsibility for determining whether
any document is valid and binding, whether the text of any assignment or
endorsement is in proper or recordable form, whether any document has been
recorded in accordance with the requirements of any applicable jurisdiction, or
whether a blanket assignment is permitted in any applicable jurisdiction.
(d) The Servicer's Loan File shall be held in the custody of the
Servicer (i) for the benefit of, and as agent for, the Noteholders and (ii) for
the benefit of the Indenture Trustee, on behalf of the Noteholders, for so long
as the Notes are outstanding; after the Notes are not outstanding, the
Servicer's Loan File shall be held in the custody of the Servicer for the
benefit of, and as agent for, the Certificateholders. It is intended that, by
the Servicer's agreement pursuant to this Section 2.05(d), the Indenture Trustee
shall be deemed to have possession of the Servicer's Loan Files for purposes of
Section 9-313 of the Uniform Commercial Code of the state in which such
documents or instruments are located. The Servicer shall promptly report to the
Indenture Trustee any failure by it to hold the Servicer's Loan File as herein
provided and shall promptly take appropriate action to remedy any such failure.
In acting as custodian of such documents and instruments, the Servicer agrees
not to assert any legal or beneficial ownership interest in the Loans or such
documents or instruments. Subject to Section 8.01(d), the Servicer agrees to
indemnify the Securityholders and the Indenture Trustee, their officers,
directors, employees, agents and "control persons" as such term is used under
the Act and under the Securities Exchange Act of 1934, as amended for any and
all liabilities, obligations, losses, damages, payments, costs or expenses of
any kind whatsoever which may be imposed on, incurred by or asserted against the
Securityholders or the Indenture Trustee as the result of the negligence or
willful misfeasance by the Servicer relating to the maintenance and custody of
such documents or instruments which have been delivered to the Servicer;
provided, however, that the Servicer will not be liable for any portion of any
such amount resulting from the negligence or willful misconduct of any
Securityholders or the Indenture Trustee; and provided, further, that the
Servicer will not be liable for any portion of any such amount resulting from
the Servicer's compliance with any instructions or directions consistent with
this Agreement issued to the Servicer by the Indenture Trustee or the Majority
Noteholders. The Indenture Trustee shall have no duty to monitor or otherwise
oversee the Servicer's performance as custodian of the Servicer Loan File
hereunder.
Section 2.06 Conditions Precedent to Transfer Dates.
Two (2) Business Days prior to each Transfer Date, the Issuer shall give
notice to the Note Agent of such upcoming Transfer Date and provide an estimate
of the number of Loans and aggregate Principal Balance of such Loans to be
transferred on such Transfer Date. On the Business Day prior to each Transfer
Date, the Issuer shall provide the Note Agent a final Loan Schedule with respect
to the Loans to be transferred on such Transfer Date. On each Transfer
33
Date, the Depositor or the applicable QSPE Affiliate shall convey to the Issuer,
the Loans and the other property and rights related thereto described in the
related S&SA Assignment, and the Issuer, only upon the satisfaction of each of
the conditions set forth below on or prior to such Transfer Date, shall deposit
or cause to be deposited cash in the amount of the Additional Note Principal
Balance received from the Note Agent in the Advance Account in respect thereof,
and the Servicer shall, promptly after such deposit, withdraw the amount
deposited in respect of applicable Additional Note Principal Balance from the
Advance Account, and distribute such amount to or at the direction of the
Depositor or the applicable QSPE Affiliate.
As of the Closing Date and each Transfer Date:
(i) the Depositor, the QSPE Affiliate and the Servicer, as
applicable, shall have delivered to the Issuer and the Note Agent duly executed
Assignments, which shall have attached thereto a Loan Schedule setting forth the
appropriate information with respect to all Loans conveyed on such Transfer Date
and shall have delivered to the Note Agent a computer readable transmission of
such Loan Schedule;
(ii) the Depositor shall have deposited, or caused to be
deposited, in the Collection Account all collections received with respect to
each of the Loans on and after the applicable Transfer Cut-off Date or, in the
case of purchases from a QSPE Affiliate, such QSPE Affiliate shall have
deposited, or caused to be deposited, in the Collection Account all collections
received with respect to each of the Loans and allocable to the period after the
related Transfer Date;
(iii) as of such Transfer Date, none of the Loan Originator,
the Depositor or the QSPE Affiliate, as applicable, shall (A) be insolvent, (B)
be made insolvent by its respective sale of Loans or (C) have reason to believe
that its insolvency is imminent;
(iv) the Revolving Period shall not have terminated;
(v) as of such Transfer Date (after giving effect to the sale
of Loans on such Transfer Date), there shall be no Overcollateralization
Shortfall;
(vi) in the case of non-Wet Funded Loans, the Issuer shall
have delivered the Custodial Loan File to the Custodian in accordance with the
Custodial Agreement and the Note Agent shall have received a copy of the Trust
Receipt and Exceptions Report reflecting such delivery;
(vii) each of the representations and warranties made by the
Loan Originator contained in Exhibit E with respect to the Loans shall be true
and correct in all respects as of the related Transfer Date with the same effect
as if then made and the proviso set forth in Section 3.05 with respect to Loans
sold by a QSPE Affiliate shall not be applicable to any Loans, and the Depositor
or the QSPE Affiliate, as applicable, shall have performed all obligations to be
performed by it under the Basic Documents on or prior to such Transfer Date;
(viii) the Depositor or the QSPE Affiliate shall, at its own
expense, within one Business Day following the Transfer Date, indicate in its
computer files that the
34
Loans identified in each S&SA Assignment have been sold to the Issuer pursuant
to this Agreement and the S&SA Assignment;
(ix) the Depositor or the QSPE Affiliate shall have taken any
action requested by the Indenture Trustee, the Issuer or the Noteholders
required to maintain the ownership interest of the Issuer in the Trust Estate;
(x) no selection procedures believed by the Depositor or the
QSPE Affiliate to be adverse to the interests of the Noteholders shall have been
utilized in selecting the Loans to be conveyed on such Transfer Date;
(xi) the Depositor shall have provided the Issuer, the
Indenture Trustee and the Note Agent no later than two Business Days prior to
such date a notice of Additional Note Principal Balance in the form of Exhibit A
hereto;
(xii) after giving effect to the Additional Note Principal
Balance associated therewith, the Note Principal Balance will not exceed the
Maximum Note Principal Balance;
(xiii) all conditions precedent to the Depositor's purchase of
Loans pursuant to the Loan Purchase and Contribution Agreement shall have been
fulfilled as of such Transfer Date and, in the case of purchases from a QSPE
Affiliate, all conditions precedent to the Issuer's purchase of Loans pursuant
to the Master Disposition Confirmation Agreement shall have been fulfilled as of
such Transfer Date;
(xiv) all conditions precedent to the Noteholders' purchase of
Additional Note Principal Balance pursuant to the Note Purchase Agreement shall
have been fulfilled as of such Transfer Date;
(xv) with respect to each Loan acquired from any QSPE
Affiliate that has a limited right of recourse to the Loan Originator under the
terms of the applicable loan purchase agreement, the Loan Originator has not
been required to pay any amount to or on behalf of such QSPE Affiliate that
lowered the recourse to the Loan Originator available to such QSPE Affiliate
below the maximum recourse to the Loan Originator available to such QSPE
Affiliate under the terms of the related loan purchase contract providing for
recourse by that QSPE Affiliate to the Loan Originator; and
(xvi) with respect to each Wet Funded Loan, there has been no
material adverse change in the financial condition of H&R Block, Inc. and the
Guaranty shall be in full force and effect.
Section 2.07 Termination of Revolving Period.
Upon the occurrence of (i) an Event of Default or Default or (ii) a Rapid
Amortization Trigger or (iii) the Unfunded Transfer Obligation Percentage equals
4.0% or less or (iv) Option One or any of its Affiliates shall default under, or
fail to perform as requested under, or shall otherwise materially breach the
terms of any repurchase agreement, loan and security agreement or similar credit
facility or agreement entered into by Option One or any of its Affiliates,
35
including the Sale and Servicing Agreement, dated as of April 1, 2001, among
Option One Owner Trust 2001-1A, the Depositor, Option One and the Indenture
Trustees the Sale and Servicing Agreement, dated as of April 1, 2001, among the
Option One Owner Trust 2001 -1 B, the Depositor, Option One and the Indenture
Trustee, the Sale and Servicing Agreement, dated as of April 1, 2001, among the
Option One Owner Trust 2001-2, the Depositor, Option One and the Indenture
Trustee, and the Sale and Servicing Agreement dated as of July 2, 2002, among
Option One Owner Trust 2002-3, the Depositor, Option One and the Indenture
Trustee, and such default, failure or breach shall entitle any counterparty to
declare the Indebtedness thereunder to be due and payable prior to the maturity
thereof, the Note Agent may, in any such case, in its sole discretion, terminate
the Revolving Period.
Section 2.08 Correction of Errors.
The parties hereto who have relevant information shall cooperate to
reconcile any errors in calculating the Sales Price from and after the Closing
Date. In the event that an error in the Sales Price is discovered by either
party, including without limitation, any error due to miscalculations of Market
Value where insufficient information has been provided with respect to a Loan to
make an accurate determination of Market Value as of any applicable Transfer
Date, any miscalculations of Principal Balance, accrued interest,
Overcollateralization Shortfall or aggregate unreimbursed Servicing Advances
attributable to the applicable Loan, or any prepayments not properly credited,
such party shall give prompt notice to the other parties hereto, and the party
that shall have benefitted from such error shall promptly remit to the other, by
wire transfer of immediately available funds, the amount of such error with no
interest thereon.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Depositor.
The Depositor hereby represents, warrants and covenants to the other
parties hereto and the Securityholders that as of the Closing Date and as of
each Transfer Date:
(a) The Depositor is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization and
has, and had at all relevant times, full power to own its property, to carry on
its business as currently conducted, to enter into and perform its obligations
under each Basic Document to which it is a party;
(b) The execution and delivery by the Depositor of each Basic
Document to which the Depositor is a party and its performance of and compliance
with all of the terms thereof will not violate the Depositor's organizational
documents or constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, or result in the breach or
acceleration of, any material contract, agreement or other instrument to which
the Depositor is a party or which are applicable to the Depositor or any of its
assets;
(c) The Depositor has the full power and authority to enter into and
consummate the transactions contemplated by each Basic Document to which the
Depositor is a
36
party, has duly authorized the execution, delivery and performance of each Basic
Document to which it is a party and has duly executed and delivered each Basic
Document to which it is a party; each Basic Document to which it is a party,
assuming due authorization, execution and delivery by the other party or parties
thereto, constitutes a valid, legal and binding obligation of the Depositor,
enforceable against it in accordance with the terms thereof, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium or other similar laws relating to or affecting the
rights of creditors generally, and by general equity principles (regardless of
whether such enforcement is considered in a proceeding in equity or at law);
(d) The Depositor is not in violation of, and the execution and
delivery by the Depositor of each Basic Document to which the Depositor is a
party and its performance and compliance with the terms of each Basic Document
to which the Depositor is a party will not constitute a violation with respect
to, any order or decree of any court or any order or regulation of any federal,
state, municipal or governmental agency having jurisdiction, which violation
would materially and adversely affect the condition (financial or otherwise) or
operations of the Depositor or any of its properties or materially and adversely
affect the performance of any of its duties hereunder;
(e) There are no actions or proceedings against, or investigations
of, the Depositor currently pending with regard to which the Depositor has
received service of process and no action or proceeding against, or
investigation of, the Depositor is, to the knowledge of the Depositor,
threatened or otherwise pending before any court, administrative agency or other
tribunal that (A) if determined adversely to the Depositor, would prohibit its
entering into any of the Basic Documents to which it is a party or render the
Securities invalid, (B) seek to prevent the issuance of the Securities or the
consummation of any of the transactions contemplated by any of the Basic
Documents to which it is a party or (C) if determined adversely to the
Depositor, would prohibit or materially and adversely affect the performance by
the Depositor of its obligations under, or the validity or enforceability of,
any of the Basic Documents to which it is a party or the Securities;
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Depositor of, or compliance by the Depositor with, any of the
Basic Documents to which the Depositor is a party or the Securities, or for the
consummation of the transactions contemplated by any of the Basic Documents to
which the Depositor is a party, except for such consents, approvals,
authorizations and orders, if any, that have been obtained prior to such date;
(g) The Depositor is solvent, is able to pay its debts as they
become due and has capital sufficient to carry on its business and its
obligations hereunder; it will not be rendered insolvent by the execution and
delivery of any of the Basic Documents to which it is a party or the assumption
of any of its obligations thereunder; no petition of bankruptcy (or similar
insolvency proceeding) has been filed by or against the Depositor;
(h) The Depositor did not transfer the Loans sold thereon by the
Depositor to the Trust with any intent to hinder, delay or defraud any of its
creditors; nor will the Depositor be rendered insolvent as a result of such
sale;
37
(i) The Depositor had good title to, and was the sole owner of, each
Loan sold thereon by the Depositor free and clear of any lien other than any
such lien released simultaneously with the sale contemplated herein, and,
immediately upon each transfer and assignment herein contemplated, the Depositor
will have delivered to the Trust good title to, and the Trust will be the sole
owner of, each Loan transferred by the Depositor thereon free and clear of any
lien;
(j) The Depositor acquired title to each of the Loans sold thereon
by the Depositor in good faith, without notice of any adverse claim;
(k) None of the Basic Documents to which the Depositor is a party,
nor any Officer's Certificate, statement, report or other document prepared by
the Depositor and furnished or to be furnished by it pursuant to any of the
Basic Documents to which it is a party or in connection with the transactions
contemplated thereby contains any untrue statement of material fact or omits to
state a material fact necessary to make the statements contained herein or
therein not misleading;
(l) The Depositor is not required to be registered as an "investment
company" under the Investment Company Act of 1940, as amended;
(m) The transfer, assignment and conveyance of the Loans by the
Depositor thereon pursuant to this Agreement is not subject to the bulk transfer
laws or any similar statutory provisions in effect in any applicable
jurisdiction;
(n) The Depositor's principal place of business and chief executive
offices are located at Irvine, California or at such other address as shall be
designated by such party in a written notice to the other parties hereto;
(o) The Depositor covenants that during the continuance of this
Agreement it will comply in all respects with the provisions of its
organizational documents in effect from time to time;
(p) The Depositor covenants that during the continuance of this
Agreement it will comply in all respects with the restrictions on its activities
referenced in Section A.2. of the non-consolidation opinion of Manatt, ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇, LLP, of even date herewith, with respect to the sale of Loans by the
Depositor to the Issuer; and
(q) The representations and warranties set forth in (h), (i), (j)
and (m) above were true and correct (with respect to the applicable QSPE
Affiliate) with respect to each Loan transferred to the Trust by any QSPE
Affiliate at the time such Loan was transferred to a QSPE Affiliate.
Section 3.02 Representations and Warranties of the Loan Originator.
The Loan Originator hereby represents and warrants to the other parties
hereto and the Securityholders that as of the Closing Date and as of each
Transfer Date:
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(a) The Loan Originator is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization and (i) is duly qualified, in good standing and licensed to carry
on its business in each state where any Mortgaged Property related to a Loan
sold by it is located and (ii) is in compliance with the laws of any such
jurisdiction, in both cases, to the extent necessary to ensure the
enforceability of such Loans in accordance with the terms thereof and had at all
relevant times, full corporate power to originate such Loans, to own its
property, to carry on its business as currently conducted and to enter into and
perform its obligations under each Basic Document to which it is a party;
(b) The execution and delivery by the Loan Originator of each Basic
Document to which it is a party and its performance of and compliance with the
terms thereof will not violate the Loan Originator's articles of organization or
by-laws or constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under; or result in the breach or
acceleration of, any contract, agreement or other instrument to which the Loan
Originator is a party or which may be applicable to the Loan Originator or any
of its assets;
(c) The Loan Originator has the full power and authority to enter
into and consummate all transactions contemplated by the Basic Documents to be
consummated by it, has duly authorized the execution, delivery and performance
of each Basic Document to which it is a party and has duly executed and
delivered each Basic Document to which it is a party; each Basic Document to
which it is a party, assuming due authorization, execution and delivery by each
of the other parties thereto, constitutes a valid, legal and binding obligation
of the Loan Originator, enforceable against it in accordance with the terms
hereof, except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other similar laws relating to or
affecting the rights of creditors generally, and by general equity principles
(regardless of whether such enforcement is considered in a proceeding in equity
or at law);
(d) The Loan Originator is not in violation of, and the execution
and delivery of each Basic Document to which it is a party by the Loan
Originator and its performance and compliance with the terms of each Basic
Document to which it is a party will not constitute a violation with respect to,
any order or decree of any court or any order or regulation of any federal,
state, municipal or governmental agency having jurisdiction, which violation
would materially and adversely affect the condition (financial or otherwise) or
operations of the Loan Originator or its properties or materially and adversely
affect the performance of its duties under any Basic Document to which it is a
party;
(e) There are no actions or proceedings against, or investigations
of, the Loan Originator currently pending with regard to which the Loan
Originator has received service of process and no action or proceeding against,
or investigation of, the Loan Originator is, to the knowledge of the Loan
Originator, threatened or otherwise pending before any court, administrative
agency or other tribunal that (A) if determined adversely to the Loan
Originator, would prohibit its entering into any Basic Document to which it is a
party or render the Securities invalid, (B) seek to prevent the issuance of the
Securities or the consummation of any of the transactions contemplated by any
Basic Document to which it is a party or (C) if determined adversely to the Loan
Originator, would prohibit or materially and adversely affect the sale of the
Loans to the Depositor, the performance by the Loan Originator of its
obligations
39
under, or the validity or enforceability of, any Basic Document to which it is a
party or the Securities;
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for: (1) the execution, delivery and
performance by the Loan Originator of, or compliance by the Loan Originator
with, any Basic Document to which it is a party, (2) the issuance of the
Securities, (3) the sale and contribution of the Loans, or (4) the consummation
of the transactions required of it by any Basic Document to which it is a party,
except such as shall have been obtained before such date;
(g) Immediately prior to the sale of any Loan to the Depositor, the
Loan Originator had good title to the Loans sold by it on such date free and
clear of any lien;
(h) The information, reports, financial statements, exhibits and
schedules furnished in writing by or on behalf of the Loan Originator to the
Note Agent in connection with the negotiation, preparation or delivery of the
Basic Documents to which it is a party or delivered pursuant thereto, when taken
as a whole, do not contain any untrue statement of material fact or omit to
state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. All written
information furnished after the date hereof by or on behalf of the Loan
Originator to the Note Agent in connection with the Basic Documents to which it
is a party and the transactions contemplated thereby will be true, complete and
accurate in every material respect, or (in the case of projections) based on
reasonable estimates, on the date as of which such information is stated or
certified.
(i) The Loan Originator is solvent, is able to pay its debts as they
become due and has capital sufficient to carry on its business and its
obligations under each Basic Document to which it is a party; it will not be
rendered insolvent by the execution and delivery of this Agreement or by the
performance of its obligations under each Basic Document to which it is a party;
no petition of bankruptcy (or similar insolvency proceeding) has been filed by
or against the Loan Originator prior to the date hereof;
(j) The Loan Originator has transferred the Loans transferred by it
on or prior to such Transfer Date without any intent to hinder, delay or defraud
any of its creditors;
(k) The Loan Originator has received fair consideration and
reasonably equivalent value in exchange for the Loans sold by it on such
Transfer Date to the Depositor;
(l) The Loan Originator has not dealt with any broker or agent or
other Person who might be entitled to a fee, commission or compensation in
connection with the transaction contemplated by this Agreement;
(m) The Loan Originator is in compliance with each of its financial
covenants set forth in Section 7.02; and
(n) The Loan Originator's principal place of business and chief
executive offices are located at Irvine, California or at such other address as
shall be designated by such party in a written notice to the other parties
hereto.
40
It is understood and agreed that the representations and warranties set
forth in this Section 3.02 shall survive delivery of the respective Custodial
Loan Files to the Custodian (as the agent of the Indenture Trustee) and shall
inure to the benefit of the Securityholders, the Depositor, the Servicer, the
Indenture Trustee, the Owner Trustee and the Issuer. Upon discovery by the Loan
Originator, the Depositor, the Servicer, the Indenture Trustee, the Note Agent
or the Trust of a breach of any of the foregoing representations and warranties
that materially and adversely affects the value of any Loan or the interests of
the Securityholders in any Loan or in the Securities, the party discovering such
breach shall give prompt written notice (but in no event later than two Business
Days following such discovery) to the other parties. The obligations of the Loan
Originator set forth in Sections 2.05 and 3.06 hereof to cure any breach or to
substitute for or repurchase an affected Loan shall constitute the sole remedies
available hereunder to the Securityholders, the Depositor, the Servicer, the
Indenture Trustee or the Trust respecting a breach of the representations and
warranties contained in this Section 3.02. The fact that the Note Agent has
conducted or has failed to conduct any partial or complete due diligence
investigation of the Loan Files shall not affect the Securityholders rights to
demand repurchase or substitution as provided under this Agreement.
Section 3.03 Representations, Warranties and Covenants of the Servicer.
The Servicer hereby represents and warrants to and covenants with the
other parties hereto and the Securityholders that as of the Closing Date and as
of each Transfer Date:
(a) The Servicer is a corporation duly organized, validly existing
and in good standing under the laws of the State of California and (i) is duly
qualified, in good standing and licensed to carry on its business in each state
where any Mortgaged Property is located, and (ii) is in compliance with the laws
of any such state, in both cases, to the extent necessary to ensure the
enforceability of the Loans in accordance with the terms thereof and to perform
its duties under each Basic Document to which it is a party and had at all
relevant times, full corporate power to own its property, to carry on its
business as currently conducted, to service the Loans and to enter into and
perform its obligations under each Basic Document to which it is a party;
(b) The execution and delivery by the Servicer of each Basic
Document to which it is a party and its performance of and compliance with the
terms thereof will not violate the Servicer's articles of incorporation or
by-laws or constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, or result in the breach or
acceleration of, any material contract, agreement or other instrument to which
the Servicer is a party or which are applicable to the Servicer or any of its
assets;
(c) The Servicer has the full power and authority to enter into and
consummate all transactions contemplated by each Basic Document to which it is a
party, has duly authorized the execution, delivery and performance of each Basic
Document to which it is a party and has duly executed and delivered each Basic
Document to which it is a party. Each Basic Document to which it is a party,
assuming due authorization, execution and delivery by each of the other parties
thereto, constitutes a valid, legal and binding obligation of the Servicer,
enforceable against it in accordance with the terms hereof, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium or other similar
41
laws relating to or affecting the rights of creditors generally, and by general
equity principles (regardless of whether such enforcement is considered in a
proceeding in equity or at law);
(d) The Servicer is not in violation of, and the execution and
delivery of each Basic Document to which it is a party by the Servicer and its
performance and compliance with the terms of each Basic Document to which it is
a party will not constitute a violation with respect to, any order or decree of
any court or any order or regulation of any federal, state, municipal or
governmental agency having jurisdiction, which violation would materially and
adversely affect the condition (financial or otherwise) or operations of the
Servicer or materially and adversely affect the performance of its duties under
any Basic Document to which it is a party;
(e) There are no actions or proceedings against, or investigations
of, the Servicer currently pending with regard to which the Servicer has
received service of process and no action or proceeding against, or
investigation of, the Servicer is, to the knowledge of the Servicer, threatened
or otherwise pending before any court, administrative agency or other tribunal
that (A) if determined adversely to the Servicer, would prohibit its entering
into any Basic Document to which it is a party, (B) seek to prevent the
consummation of any of the transactions contemplated by any Basic Document to
which it is a party or (C) if determined adversely to the Servicer, would
prohibit or materially and adversely affect the performance by the Servicer of
its obligations under, or the validity or enforceability of, any Basic Document
to which it is a party or the Securities;
(f) 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, any Basic
Document to which it is a party or the Securities, or for the consummation of
the transactions contemplated by any Basic Document to which it is a party,
except for such consents, approvals, authorizations and orders, if any, that
have been obtained prior to such date;
(g) The information, reports, financial statements, exhibits and
schedules furnished in writing by or on behalf of the Servicer to the Note Agent
in connection with the negotiation, preparation or delivery of the Basic
Documents to which it is a party or delivered pursuant thereto, when taken as a
whole, do not contain any untrue statement of material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. All written
information furnished after the date hereof by or on behalf of the Servicer to
the Note Agent in connection with the Basic Documents to which it is a party and
the transactions contemplated thereby will be true, complete and accurate in
every material respect, or (in the case of projections) based on reasonable
estimates, on the date as of which such information is stated or certified.
(h) The Servicer is solvent and will not be rendered insolvent as a
result of the performance of its obligations pursuant to under the Basic
Documents to which it is a party;
(i) The Servicer acknowledges and agrees that the Servicing
Compensation represents reasonable compensation for the performance of its
services hereunder and that the
42
entire Servicing Compensation shall be treated by the Servicer, for accounting
purposes, as compensation for the servicing and administration of the Loans
pursuant to this Agreement;
(j) The Servicer is in compliance with each of its financial
covenants set forth in Section 7.02; and
(k) The Servicer is an Eligible Servicer and covenants to remain an
Eligible Servicer or, if not an Eligible Servicer, each Subservicer is an
Eligible Servicer and the Servicer covenants to cause each Subservicer to be an
Eligible Servicer; and
(l) The Servicer shall (1) remit to the Lock-Box Clearing Custodial
Account, all Monthly Payments within one Business Day of the Servicer's receipt
of such Monthly Payments and (2) transfer those Monthly Payments which relate to
Loans owned by the Trust from the Lock-Box Clearing Custodial Account to the
Collection Account within two Business Days of the Servicer's receipt of such
Monthly Payments.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.03 shall survive delivery of the
respective Custodial Loan Files to the Indenture Trustee or the Custodian on its
behalf and shall inure to the benefit of the Depositor, the Securityholders, the
Note Agent, the Indenture Trustee and the Issuer. Upon discovery by the Loan
Originator, the Depositor, the Servicer, the Indenture Trustee, the Owner
Trustee or the Issuer of a breach of any of the foregoing representations,
warranties and covenants that materially and adversely affects the value of any
Loan or the interests of the Securityholders therein or in the Securities, the
party discovering such breach shall give prompt written notice (but in no event
later than two Business Days following such discovery) to the other parties. The
fact that the Note Agent has conducted or has failed to conduct any partial or
complete due diligence investigation shall not affect the Securityholders,
rights to exercise their remedies as provided under this Agreement.
Section 3.04 Reserved.
Section 3.05 Representations and Warranties Regarding Loans.
The Loan Originator makes each of the representations and warranties set
forth on Exhibit E hereto with respect to each Loan, provided, however, that
with respect to each Loan transferred to the Issuer by a QSPE Affiliate, to the
extent that the Loan Originator has at the time of such transfer actual
knowledge of any facts or circumstances that would render any of such
representations and warranties materially false, the Loan Originator shall
notify the Note Agent of such facts or circumstances and, in such event, shall
have no obligation to make such materially false representation and warranty.
In addition, the Loan Originator represents and warrants with respect to
each Loan sold by a QSPE Affiliate that the Loan Originator has not been
required to pay any amount to or on behalf of such QSPE Affiliate that lowered
the recourse to the Loan Originator available to such QSPE Affiliate below the
maximum recourse to the Loan Originator available to such QSPE Affiliate under
the terms of any loan purchase agreement providing for recourse by that QSPE
Affiliate to the Loan Originator.
43
Section 3.06 Purchase and Substitution.
(a) It is understood and agreed that the representations and
warranties set forth in Exhibit E hereto shall survive the conveyance of the
Loans to the Indenture Trustee on behalf of the Issuer, and the delivery of the
Securities to the Securityholders. Upon discovery by the Depositor, the
Servicer, the Loan Originator, the Custodian, the Issuer, the Indenture Trustee,
the Note Agent or any Securityholder of a breach of any of such representations
and warranties or the representations and warranties of the Loan Originator set
forth in Section 3.02 which materially and adversely affects the value or
enforceability of any Loan or the interests of the Securityholders in any Loan
(notwithstanding that such representation and warranty was made to the Loan
Originator's best knowledge) or which constitutes a breach of the
representations and warranties set forth in Exhibit E, the party discovering
such breach shall give prompt written notice to the others. The Loan Originator
shall within 5 Business Days of the earlier of the Loan Originator's discovery
or the Loan Originator's receiving notice of any breach of a representation or
warranty, promptly cure such breach in all material respects. If within 5
Business Days after the earlier of the Loan Originator's discovery of such
breach or the Loan Originator's receiving notice thereof such breach has not
been remedied by the Loan Originator and such breach materially and adversely
affects the interests of the Securityholders in the related Loan (an
"Unqualified Loan"), the Loan Originator shall promptly upon receipt of written
instructions from the Majority Noteholders either (i) remove such Unqualified
Loan from the Trust (in which case it shall become a Deleted Loan) and
substitute one or more Qualified Substitute Loans in the manner and subject to
the conditions set forth in this Section 3.06 or (ii) purchase such Unqualified
Loan at a purchase price equal to the Repurchase Price with respect to such
Unqualified Loan by depositing or causing to be deposited such Repurchase Price
in the Collection Account.
Any substitution of Loans pursuant to this Section 3.06(a) shall be
accompanied by payment by the Loan Originator of the Substitution Adjustment, if
any, (x) if no Overcollateralization Shortfall exists on the date of such
substitution (after giving effect to such substitution), remitted to the
Noteholders in accordance with Section 5.01(c)(4)(i) or (y) otherwise to be
deposited in the Collection Account pursuant to Section 5.01(b) hereof.
(b) As to any Deleted Loan for which the Loan Originator substitutes
a Qualified Substitute Loan or Loans, the Loan Originator shall effect such
substitution by delivering to the Indenture Trustee and Note Agent a
certification executed by a Responsible Officer of the Loan Originator to the
effect that the Substitution Adjustment, if any, has been (x) if no
Overcollateralization Shortfall exists on the date of such substitution (after
giving effect to such substitution), remitted to the Noteholders in accordance
with Section 5.01(c)(4)(i), or (y) otherwise deposited in the Collection
Account. As to any Deleted Loan for which the Loan Originator substitutes a
Qualified Substitute Loan or Loans, the Loan Originator shall effect such
substitution by delivering to the Custodian the documents constituting the
Custodial Loan File for such Qualified Substitute Loan or Loans.
The Servicer shall deposit in the Collection Account all payments received
in connection with each Qualified Substitute Loan after the date of such
substitution. Monthly Payments received with respect to Qualified Substitute
Loans on or before the date of substitution will be retained by the Loan
Originator. The Trust will be entitled to all payments received on the
44
Deleted Loan on or before the date of substitution and the Loan Originator shall
thereafter be entitled to retain all amounts subsequently received in respect of
such Deleted Loan. The Loan Originator shall give written notice to the Issuer,
the Servicer (if the Loan Originator is not then acting as such), the Indenture
Trustee and Note Agent that such substitution has taken place and the Servicer
shall amend the Loan Schedule to reflect (i) the removal of such Deleted Loan
from the terms of this Agreement and (ii) the substitution of the Qualified
Substitute Loan. The Servicer shall promptly deliver to the Issuer, the Loan
Originator, the Indenture Trustee and Note Agent, a copy of the amended Loan
Schedule. Upon such substitution, such Qualified Substitute Loan or Loans shall
be subject to the terms of this Agreement in all respects, and the Loan
Originator shall be deemed to have made with respect to such Qualified
Substitute Loan or Loans, as of the date of substitution, the covenants,
representations and warranties set forth in Exhibit E hereto. On the date of
such substitution, the Loan Originator will (x) if no Overcollateralization
Shortfall exists as of the date of substitution (after giving effect to such
substitution), remit to the Noteholders as provided in Section 5.01(c)(4)(i) or
(y) otherwise deposit into the Collection Account, in each case an amount equal
to the related Substitution Adjustment, if any. In addition, on the date of such
substitution, the Servicer shall cause the Indenture Trustee to release the
Deleted Loan from the lien of the Indenture and the Servicer will cause such
Qualified Substitute Loan to be pledged to the Indenture Trustee under the
Indenture as part of the Trust Estate.
(c) With respect to all Unqualified Loans or other Loans repurchased
by the Loan Originator pursuant to this Agreement, upon the deposit of the
Repurchase Price therefor into the Collection Account or the conveyance of one
or more Qualified Substitute Loans and payment of any Substitution Adjustment,
(i) the Issuer shall assign to the Loan Originator, without representation or
warranty, all of the Issuer's right, title and interest in and to such
Unqualified Loan, which right, title and interest were conveyed to the Issuer
pursuant to Section 2.01 hereof, and (ii) the Indenture Trustee shall assign to
the Loan Originator, without recourse, representation or warranty, all the
Indenture Trustee's right, title and interest in and to such Unqualified Loans
or Loans, which right, title and interest were conveyed to the Indenture Trustee
pursuant to Section 2.01 hereof and the Indenture. The Issuer and the Indenture
Trustee shall, at the expense of the Loan Originator, take any actions as shall
be reasonably requested by the Loan Originator to effect the repurchase of any
such Loans and to have the Custodian return the Custodial Loan File of the
deleted Loan to the Servicer.
(d) It is understood and agreed that the obligations of the Loan
Originator set forth in this Section 3.06 to cure, purchase or substitute for
Unqualified Loans constitute the sole remedies hereunder of the Depositor, the
Issuer, the Indenture Trustee, the Note Agent, the Owner Trustee and the
Securityholders respecting a breach of the representations and warranties
contained in Sections 3.02 hereof and in Exhibit E hereto. Any cause of action
against the Loan Originator relating to or arising out of a defect in a
Custodial Loan File or against the Loan Originator relating to or arising out of
a breach of any representations and warranties made in Sections 3.02 hereof and
in Exhibit E hereto shall accrue as to any Loan upon (i) discovery of such
defect or breach by any party and notice thereof to the Loan Originator or
notice thereof by the Loan Originator to the Indenture Trustee, (ii) failure by
the Loan Originator to cure such defect or breach or purchase or substitute such
Loan as specified above, and (iii) demand upon the Loan Originator, as
applicable, by the Issuer or the Majority Noteholders for all amounts payable in
respect of such Loan.
45
(e) Neither the Issuer nor the Indenture Trustee shall have any duty
to conduct any affirmative investigation other than as specifically set forth in
this Agreement as to the occurrence of any condition requiring the repurchase or
substitution of any Loan pursuant to this Section or the eligibility of any Loan
for purposes of this Agreement.
Section 3.07 Dispositions.
(a) The Majority Noteholders may at any time, and from time to time,
require that the Issuer redeem all or any portion of the Note Principal Balance
of the Notes by paying the Note Redemption Amount with respect to the Note
Principal Balance to be redeemed. In connection with any such redemption, the
Issuer shall effect Dispositions at the direction of the Majority Noteholders in
accordance with this Agreement, including in accordance with this Section 3.07.
(b) (i) In consideration of the consideration received from the
Depositor under the Loan Purchase and Contribution Agreement, the Loan
Originator hereby agrees and covenants that in connection with each Disposition
it shall effect the following:
(A) make such representations and warranties concerning the
Loans as of the "cut-off date" of the related Disposition to the Disposition
Participants as may be necessary to effect the Disposition and such additional
representations and warranties as may be necessary, in the reasonable opinion of
any of the Disposition Participants, to effect such Disposition; provided, that,
to the extent that the Loan Originator has at the time of the Disposition actual
knowledge of any facts or circumstances that would render any of such
representations and warranties materially false, the Loan Originator may notify
the Disposition Participants of such facts or circumstances and, in such event,
shall have no obligation to make such materially false representation and
warranty;
(B) supply such information, opinions of counsel, letters from
law and/or accounting firms and other documentation and certificates regarding
the origination of the Loans as any Disposition Participant shall reasonably
request to effect a Disposition and enter into such indemnification agreements
customary for such transaction relating to or in connection with the Disposition
as the Disposition Participants may reasonably require;
(C) make itself available for and engage in good faith
consultation with the Disposition Participants concerning information to be
contained in any document, agreement, private placement memorandum, or filing
with the Securities and Exchange Commission relating to the Loan Originator or
the Loans in connection with a Disposition and shall use reasonable efforts to
compile any information and prepare any reports and certificates, into a form,
whether written or electronic, suitable for inclusion in such documentation;
(D) to implement the foregoing and to otherwise effect a
Disposition, enter into, or arrange for its Affiliates to enter into insurance
and indemnity agreements, underwriting or placement agreements, servicing
agreements, purchase agreements and any other documentation which may reasonably
be required of or reasonably deemed appropriate by the Disposition Participants
in order to effect a Disposition; and
46
(E) take such further actions as may be reasonably necessary
to effect the foregoing;
provided, that notwithstanding anything to the contrary, (a) the Loan Originator
shall have no liability for the Loans arising from or relating to the ongoing
ability of the related Borrowers to pay under the Loans; (b) none of the
indemnities hereunder shall constitute an unconditional guarantee by the Loan
Originator of collectibility of the Loans; (c) the Loan Originator shall have no
obligation with respect to the financial inability of any Borrower to pay
principal, interest or other amount owing by such Borrower under a Loan; and (d)
the Loan Originator shall only be required to enter into documentation in
connection with Dispositions that is consistent with the prior public
securitizations of affiliates of the Loan Originator, provided that to the
extent an Affiliate of the Note Agent acts as "depositor" or performs a similar
function in a Securitization, additional indemnities and informational
representations and warranties are provided which are consistent with those in
the Basic Documents and may upon request of the Loan Originator be set forth in
a separate agreement between an Affiliate of the Note Agent and the Loan
Originator.
(ii) In the event of any Disposition to the Loan Originator or
any of its Affiliates (except in connection with a Securitization or a
Disposition to a QSPE Affiliate), the purchase price paid by the Loan Originator
or any such Affiliate shall be the "fair market value" of the Loans subject to
such Disposition (as determined by the Market Value Agent based upon recent
sales of comparable loans or such other objective criteria as may be approved
for determining "fair market value" by a "Big Five" national accounting firm).
(iii) As long as no Event of Default or Default shall have
occurred and be continuing under this Agreement or the Indenture, the Servicer
may continue to service the Loans included in any Disposition subject to any
applicable "term-to-term" servicing provisions in Section 9.0l(c) and subject to
any required amendments to the related servicing provisions as may be necessary
to effect the related Disposition including but not limited to the obligation to
make recoverable principal and interest advances on the Loans.
After the termination of the Revolving Period, the Loan Originator,
the Issuer and the Depositor shall use commercially reasonable efforts to effect
a Disposition at the direction of the Disposition Agent.
(c) The Issuer shall effect Dispositions at the direction of the
Majority Noteholders in accordance with the terms of this Agreement and the
Basic Documents. In connection therewith, the Trust agrees to assist the Loan
Originator in such Dispositions and accordingly it shall, at the request and
direction of the Majority Noteholders:
(i) transfer, deliver and sell all or a portion of the Loans,
as of the "cut-off dates" of the related Dispositions, to such Disposition
Participants as may be necessary to effect the Dispositions; provided, that any
such sale shall be for "fair market value," as determined by the Market Value
Agent in its reasonable discretion;
(ii) deposit the cash Disposition Proceeds into the
Distribution Account pursuant to Section 5.01(c)(2)(D);
47
(iii) to the extent that a Securitization creates any Retained
Securities, to accept such Retained Securities as a part of the Disposition
Proceeds in accordance with the terms of this Agreement; and
(iv) take such further actions, including executing and
delivering documents, certificates and agreements, as may be reasonably
necessary to effect such Dispositions.
(d) The Servicer hereby covenants that it will take such actions as
may be reasonably necessary to effect Dispositions as the Disposition
Participants may request and direct, including without limitation providing the
Loan Originator such information as may be required to make representations and
warranties required hereunder, and covenants that it will make such
representations and warranties regarding its servicing of the Loans hereunder as
of the Cut-off Date of the related Disposition as reasonably required by the
Disposition Participants.
(e) [Reserved]
(f) The Majority Noteholders may effect Whole Loan Sales upon
written notice to the Servicer of its intent to cause the Issuer to effect a
Whole Loan Sale at least 5 Business Days in advance thereof. The Disposition
Agent shall serve as agent for Whole Loan Sales and will receive a reasonable
fee for such services provided that no such fee shall be payable if (i) the Loan
Originator or its Affiliates purchase such Loans and (ii) no Event of Default or
Default shall have occurred. The Loan Originator or its Affiliates may
concurrently bid to purchase Loans in a Whole Loan Sale; provided, however, that
neither the Loan Originator nor any such Affiliates shall pay a price in excess
of the fair market value thereof (as determined by the Market Value Agent based
upon recent sales of comparable loans or such other objective criteria as may be
approved for determining "fair market value" by a "Big Five" national accounting
firm). In the event that the Loan Originator does not bid in any such Whole Loan
Sale, it shall have a right of first refusal to purchase the Loans offered for
sale at the price offered by the highest bidder. The Disposition Agent shall
conduct any Whole Loan Sale subject to the Loan Originator's right of first
refusal and shall promptly notify the Loan Originator of the amount of the
highest bid. The Loan Originator shall have five (5) Business Days following its
receipt of such notice to exercise its right of first refusal by notifying the
Disposition Agent in writing.
(g) Except as otherwise expressly set forth under this Section 3.07,
the parties' rights and obligations under this Section 3.07 shall continue
notwithstanding the occurrence of an Event of Default.
(h) The Disposition Participants (and the Majority Noteholders to
the extent directing the Disposition Participants) shall be independent
contractors to the Issuer and shall have no fiduciary obligations to the Issuer
or any of its Affiliates. In that connection, the Disposition Participants shall
not be liable for any error of judgment made in good faith and shall not be
liable with respect to any action they take or omits to take in good faith in
the performance of their duties.
Section 3.08 Servicer Put; Servicer Call.
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(a) Servicer Put. The Servicer shall promptly purchase, upon the
written demand of the Majority Noteholders, any Put/Call Loan; provided,
however, that the Servicer may, upon receipt of such demand, elect to repurchase
such Put/Call Loan pursuant to (b) below, in which case such repurchase shall be
deemed a Servicer Call.
(b) Servicer Call. The Servicer may repurchase any Put/Call Loan at
any time. Such Servicer Calls shall be solely at the option of the Servicer.
Prior to exercising a Servicer Call, the Servicer shall deliver written notice
to the Majority Noteholders and the Indenture Trustee which notice shall
identify each Loan to be purchased and the Repurchase Price therefor; provided,
however, that the Servicer may irrevocably waive its right to repurchase any
Put/Call Loan as soon as reasonably practicable following its receipt of notice
of the occurrence of any event or events giving rise to such Loan being a
Put/Call Loan.
(c) In connection with each Servicer Put, the Servicer shall remit
for deposit into the Collection Account the Repurchase Price for the Loans to be
repurchased. In connection with each Servicer Call, the Servicer shall deposit
into the Collection Account the Repurchase Price for the Loans to be purchased.
The aggregate Repurchase Price of all Loans transferred pursuant to Section
3.08(a) shall in no event exceed the Unfunded Transfer Obligation at the time of
any Servicer Put.
Section 3.09 Modification of Underwriting Guidelines.
The Loan Originator shall give the Note Agent prompt written notification
of any modification or change to the Underwriting Guidelines. If the Noteholder
objects in writing to any modification or change to the Underwriting Guidelines
within 15 days after receipt of such notice, no Loans may be conveyed to the
Issuer pursuant to this Agreement unless such Loans have been originated
pursuant to the Underwriting Guidelines without giving effect to such
modification or change. Notwithstanding anything contained in this Agreement to
the contrary, any Loan conveyed to the Issuer pursuant to this Agreement
pursuant to a modification or change to the Underwriting Guidelines that has
been rejected by the Note Agent or which the Note Agent did not receive notice
of, such Loan shall be deemed an Unqualified Loan and be repurchased or
substituted for in accordance with Section 3.06.
ARTICLE IV
ADMINISTRATION AND SERVICING OF THE LOANS
Section 4.01 Servicer's Servicing Obligations.
The Servicer, as independent contract servicer, shall service and
administer the Loans in accordance with the terms and provisions set forth in
the Servicing Addendum, which Servicing Addendum is incorporated herein by
reference.
ARTICLE V
ESTABLISHMENT OF TRUST ACCOUNTS; TRANSFER OBLIGATION
Section 5.01 Collection Account and Distribution Account.
49
(a) (1) Establishment of Collection Account. The Servicer, for the
benefit of the Noteholders, shall cause to be established and maintained one or
more Collection Accounts (collectively, the "Collection Account"), which shall
be separate Eligible Accounts entitled "Option One Owner Trust 2003-4 Collection
Account, ▇▇▇▇▇ Fargo Bank Minnesota, National Association, as Indenture Trustee,
for the benefit of the Option One Owner Trust 2003-4 Mortgage-Backed Notes." The
Collection Account shall be maintained with a depository institution and shall
satisfy the requirements set forth in the definition of Eligible Account. Funds
in the Collection Account shall be invested in accordance with Section 5.03
hereof. Net investment earnings shall not be considered part of funds available
in the Collection Account.
(2) Establishment of Distribution Account. The Servicer, for
the benefit of the Noteholders, shall cause to be established and maintained,
one or more Distribution Accounts (collectively, the "Distribution Account"),
which shall be separate Eligible Accounts, entitled "Option One Owner Trust
2003-4 Distribution Account, ▇▇▇▇▇ Fargo Bank Minnesota, National Association,
as Indenture Trustee, for the benefit of the Option One Owner Trust 2003-4
Mortgage-Backed Notes." The Distribution Account shall be maintained with a
depository institution and shall satisfy the requirements set forth in the
definition of Eligible Account. Funds in the Distribution Account shall be
invested in accordance with Section 5.03 hereof. The Servicer may, at its
option, maintain one account to serve as both the Distribution Account and the
Collection Account, in which case, the account shall be entitled "Option One
Owner Trust 2003-4 Collection/Distribution Account, ▇▇▇▇▇ Fargo Bank Minnesota,
National Association, as Indenture Trustee, for the benefit of the Option One
Owner Trust 2003-4 Mortgage-Backed Notes." If the Servicer makes such an
election, all references herein or in any other Basic Document to either the
Collection Account or the Distribution Account shall mean the
Collection/Distribution Account described in the preceding sentence.
(3) The Servicer will inform the Indenture Trustee of the
location of any accounts held in the Indenture Trustee's name, including any
location to which an account is transferred.
(4) Upon the termination of any Blocked Account Agreement
(other than a termination consented to by the Indenture Trustee and the Note
Agent upon the termination of the Lien of the Indenture upon the Trust
Accounts), the Servicer shall promptly (and in any event no later than thirty
(30) days following any such termination) establish a replacement Trust Account
(which shall constitute an Eligible Account) at a Designated Depository
Institution approved in writing by the Indenture Trustee and the Note Agent.
(b) Deposits to Collection Account. The Servicer shall deposit or
cause to be deposited (without duplication):
(i) all payments on or in respect of each Loan collected on or
after the related Transfer Cut- off Date or with respect to each Loan purchased
from a QSPE Affiliate, all such payments allocable to such Loan on or after the
related Transfer Date (net, in each case, of any Servicing Compensation retained
therefrom) within two (2) Business Days after receipt thereof;
50
(ii) all Net Liquidation Proceeds within two (2) Business Days
after receipt thereof;
(iii) any amounts payable in connection with the repurchase of
any Loan and the amount of any Substitution Adjustment pursuant to Sections 2.05
and 3.06 hereof concurrently with payment thereof;
(iv) any Repurchase Price payable in connection with a
Servicer Call pursuant to Section 3.08 hereof concurrently with payment thereof;
(v) the deposit of the Termination Price under Section 10.02
hereof concurrently with payment thereof;
(vi) Nonutilization Fees;
(vii) [Reserved];
(viii) any payments received under Hedging Instruments or the
return of amounts by the Hedging Counterparty pledged pursuant to prior Hedge
Funding Requirements in accordance with the last sentence of this Section
5.01(b); and
(ix) any Repurchase Price payable in connection with a
Servicer Put remitted by the Servicer pursuant to Section 3.08.
Except as otherwise expressly provided in Section 5.01(c)(4)(i), the
Servicer agrees that it will cause the Loan Originator, Borrower or other
appropriate Person paying such amounts, as the case may be, to remit directly to
the Servicer for deposit into the Collection Account all amounts referenced in
clauses (i) through (ix) to the extent such amounts are in excess of a Monthly
Payment on the related Loan. To the extent the Servicer receives any such
amounts, it will deposit them into the Collection Account on the same Business
Day as receipt thereof.
(c) Withdrawals From Collection Account; Deposits to Distribution
Account.
(1) Withdrawals From Collection Account -- Reimbursement
Items. The Paying Agent shall periodically but in any event on each
Determination Date, make the following withdrawals from the Collection Account
prior to any other withdrawals, in no particular order of priority:
(i) to withdraw any amount not required to be deposited in the
Collection Account or deposited therein in error, including Servicing
Compensation;
(ii) to withdraw the Servicing Advance Reimbursement Amount;
and
(iii) to clear and terminate the Collection Account in
connection with the termination of this Agreement.
(2) Deposits to Distribution Account - Payment Dates.
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(A) On the Business Day prior to each Payment Date, the Paying
Agent shall deposit into the Distribution Account such amounts as are required
from the Transfer Obligation Account pursuant to Sections 5.05(e), 5.05(f),
5.05(g) and 5.05(h).
(B) After making all withdrawals specified in Section
5.01(c)(l) above, on each Remittance Date, the Paying Agent (based on
information provided by the Servicer for such Payment Date), shall withdraw the
Monthly Remittance Amount (or, with respect to an additional Payment Date
pursuant to Section 5.01(c)(4)(ii), all amounts on deposit in the Collection
Account on such date up to the amount necessary to make the payments due on the
related Payment Date in accordance with Section 5.01(c)(3)) from the Collection
Account not later than 5:00 P.M., New York City time and deposit such amount
into the Distribution Account.
(C) [Reserved]
(D) The Servicer shall deposit or cause to be deposited in the
Distribution Account any cash Disposition Proceeds pursuant to Section 3.07. To
the extent the Servicer receives such amounts, it will deposit them into the
Distribution Account on the same Business Day as receipt thereof.
(3) Withdrawals From Distribution Account -- Payment Dates. On
each Payment Date, to the extent funds are available in the Distribution
Account, the Paying Agent (based on the information provided by the Servicer
contained in the Servicer's Remittance Report for such Payment Date) shall make
withdrawals therefrom for application in the following order of priority:
(i) to distribute on such Payment Date the following amounts
in the following order: (a) to the Indenture Trustee, an amount equal to the
Indenture Trustee Fee and all unpaid Indenture Trustee Fees from prior Payment
Dates and all amounts owing to the Indenture Trustee pursuant to Section 6.07 of
the Indenture and not paid by the Servicer or the Depositor up to an amount not
to exceed $25,000 per annum, (b) to the Custodian, an amount equal to the
Custodian Fee and all unpaid Custodian Fees from prior Payment Dates, (c) to the
Servicer, an amount equal to the Servicing Compensation and all unpaid Servicing
Compensation from prior Payment Dates (to the extent not retained from
collections or remitted to the Servicer pursuant to Section 5.01(c)) and (d) to
the Servicer, in trust for the Owner Trustee, an amount equal to the Owner
Trustee Fee and all unpaid Owner Trustee Fees from prior Payment Dates;
(ii) to distribute on such Payment Date, the Hedge Funding
Requirement to the appropriate Hedging Counterparties;
(iii) to the holders of the Notes pro rata, the sum of the
Interest Payment Amount for such Payment Date and the Interest Carry-Forward
Amount for the preceding Payment Date;
(iv) to the holders of the Notes pro rata, the
Overcollateralization Shortfall for such Payment Date; provided, however, that
if (a) a Rapid Amortization Trigger shall have occurred and not been Deemed
Cured or (b) an Event of Default under the Indenture
52
or Default shall have occurred, the holders of the Notes shall receive, in
respect of principal, all remaining amounts on deposit in the Distribution
Account;
(v) to the Note Agent, the Nonutilization Fee for such Payment
Date, together with any Nonutilization Fees unpaid from any prior Payment Dates;
(vi) to the appropriate Person, amounts in respect of
Issuer/Depositor Indemnities (as defined in the Trust Agreement) and Due
Diligence Fees until such amounts are paid in full;
(vii) to the Transfer Obligation Account, all remaining
amounts until the balance therein equals the Transfer Obligation Target Amount;
(viii) to the Indenture Trustee all amounts owing to the
Indenture Trustee pursuant to Section 6.07 of the Indenture and not paid
pursuant to clause (i) above;
(ix) all Nonrecoverable Servicing Advances not previously
reimbursed; and
(x) to the holders of the Trust Certificates, subject to
Section 5.2(b) of the Trust Agreement, all amounts remaining therein; provided,
however, if the Owner Trustee has notified the Paying Agent that any amounts are
due and owing to it and remain unpaid, then first to the Owner Trustee such
amounts.
(4) (i) If the Loan Originator or the Servicer, as
applicable, repurchases, purchases or substitutes a Loan pursuant to Section
2.05, 3.06, 3.08(a), 3.08(b) or 3.08(c), then the Noteholders and the Issuer
shall deem such date to be an additional Payment Date and the Issuer shall
provide written notice to the Indenture Trustee and the Paying Agent of such
additional Payment Date at least one Business Day prior to such Payment Date. On
such additional Payment Date, the Loan Originator or the Servicer, in
satisfaction of its obligations under 2.05, 3.06, 3.08(a) 3.08(b) or 3.08(c) and
in satisfaction of the obligations of the Issuer and the Paying Agent to
distribute such amounts to the Noteholders pursuant to Section 5.0l(c), shall
remit to the Noteholders, on behalf of the Issuer and the Paying Agent, an
amount equal to the Repurchase Prices and any Substitution Adjustments (as
applicable) to be paid by the Loan Originator or the Servicer by 12:00 p.m. New
York City time, as applicable, under such Section, on such Payment Date, and the
Note Principal Balance will be reduced accordingly. Such amounts shall be deemed
deposited into the Collection Account and the Distribution Account, as
applicable, and such amounts will be deemed distributed pursuant to the terms of
Section 5.01(c). Upon notice of an additional Payment Date to the Paying Agent
and the Indenture Trustee as provided above, the Paying Agent shall provide the
Loan Originator or the Servicer (as applicable) information necessary so that
remittances to the Noteholders pursuant to this clause (4)(i) may be made by the
Loan Originator or the Servicer, as applicable, in compliance with Section
5.02(a) hereof.
(ii) To the extent that there is deposited in the
Collection Account or the Distribution Account any amounts referenced in Section
5.01(b)(v) and 5.01(c)(2)(D), the Majority Noteholders and the Issuer may agree,
upon reasonable written notice to the Paying Agent and the Indenture Trustee, to
additional Payment Dates. The Issuer
53
and the Majority Noteholder shall give the Paying Agent and the Indenture
Trustee at least one (1) Business Day's written notice prior to such additional
Payment Date and such notice shall specify each amount in Section 5.01(c) to be
withdrawn from the Collection Account and Distribution Account on such day.
(iii) To the extent that there is deposited in the
Distribution Account any amounts referenced in Section 5.05(f), the Majority
Noteholders may, in their sole discretion, establish an additional Payment Date
by written notice delivered to the Paying Agent and the Indenture Trustee at
least one Business Day prior to such additional Payment Date. On such additional
Payment Date, the Paying Agent shall pay the sum of the Overcollateralization
Shortfall to the Noteholders in respect of principal on the Notes.
Notwithstanding that the Notes have been paid in full, the Indenture
Trustee, the Paying Agent and the Servicer shall continue to maintain the
Distribution Account hereunder until this Agreement has been terminated.
(d) [Reserved]
Section 5.02 Payments to Securityholders.
(a) All distributions made on the Notes on each Payment Date or
pursuant to Section 5.04(b) of the Indenture will be made on a pro rata basis
among the Noteholders of record of the Notes on the next preceding Record Date
based on the Percentage Interest represented by their respective Notes, without
preference or priority of any kind, and, except as otherwise provided in the
next succeeding sentence, shall be made by wire transfer of immediately
available funds to the account of such Noteholder, if such Noteholder shall own
of record Notes having a Percentage Interest (as defined in the Indenture) of at
least 20% and shall have so notified the Paying Agent and the Indenture Trustee
5 Business Days prior to the related Record Date, and otherwise by check mailed
to the address of such Noteholder appearing in the Notes Register. The final
distribution on each Note will be made in like manner, but only upon presentment
and surrender of such Note at the location specified in the notice to
Noteholders of such final distribution.
(b) All distributions made on the Trust Certificates on each Payment
Date or pursuant to Section 5.04(b) of the Indenture will be made in accordance
with the Percentage Interest among the holders of the Trust Certificates of
record on the next preceding Record Date based on their Percentage Interests (as
defined in the Trust Agreement) on the date of distribution, without preference
or priority of any kind, and, except as otherwise provided in the next
succeeding sentence, shall be made by wire transfer of immediately available
funds to the account of each such holder, if such holder shall own of record a
Trust Certificate in an original denomination aggregating at least 25% of the
Percentage Interests and shall have so notified the Paying Agent and the
Indenture Trustee 5 Business Days prior to the related Record Date, and
otherwise by check mailed to the address of such Certificateholder appearing in
the Certificate Register. The final distribution on each Trust Certificate will
be made in like manner, but only upon presentment and surrender of such Trust
Certificate at the location specified in the notice to holders of the Trust
Certificates of such final distribution. Any amount distributed to the holders
of the Trust Certificates on any Payment Date shall not be subject to any claim
or interest of the
54
Noteholders. In the event that at any time there shall be more than one
Certificateholder, the Indenture Trustee shall be entitled to reasonable
additional compensation from the Servicer for any increase in its obligations
hereunder.
Section 5.03 Trust Accounts; Trust Account Property.
(a) Control of Trust Accounts. Each of the Trust Accounts
established hereunder has been pledged by the issuer to the Indenture Trustee
under the Indenture and shall be subject to the lien of the Indenture. Amounts
distributed from each Trust Account in accordance with the terms of this
Agreement shall be released for the benefit of the Securityholders from the
Trust Estate upon such distribution thereunder or hereunder. The Indenture
Trustee shall possess all right, title and interest in and to all funds on
deposit from time to time in the Trust Accounts and in all proceeds thereof
(including all income thereon) and all such funds, investments, proceeds and
income shall be part of the Trust Account Property and the Trust Estate. If, at
any time, any Trust Account ceases to be an Eligible Account, the Indenture
Trustee shall, within ten Business Days (or such longer period, not to exceed 30
calendar days, with the prior written consent of the Majority Noteholders) (i)
establish a new Trust Account as an Eligible Account, (ii) terminate the
ineligible Trust Account, and (iii) transfer any cash and investments from such
ineligible Trust Account to such new Trust Account.
With respect to the Trust Accounts, the Issuer and the Indenture
Trustee agree, that each such Trust Account shall be subject to the "control"
(in accordance with Section 9-104 of the UCC) of the Indenture Trustee for the
benefit of the Noteholders, and, except as may be consented to in writing by the
Majority Noteholders or provided in the related Blocked Account Agreement, the
Indenture Trustee shall have sole signature and withdrawal authority with
respect thereto.
The Servicer (unless it is also the Paying Agent) shall not be
entitled to make any withdrawals or payments from the Trust Accounts.
(b) (1) Investment of Funds. Funds held in the Collection Account,
the Distribution Account and the Transfer Obligation Account may be invested (to
the extent practicable and consistent with any requirements of the Code) in
Permitted Investments, as directed by the Servicer prior to the occurrence of an
Event of Default and by the Majority Noteholders thereafter, in writing or
facsimile transmission confirmed in writing by the Servicer or Majority
Noteholders, as applicable. In the event the Indenture Trustee has not received
such written direction, such Funds shall be invested in any Permitted Investment
described in clause (i) of the definition of Permitted Investments. In any case,
funds in the Collection Account, the Distribution Account and the Transfer
Obligation Account must be available for withdrawal without penalty, and any
Permitted Investments must mature or otherwise be available for withdrawal, one
Business Day prior to the next Payment Date and shall not be sold or disposed of
prior to its maturity subject to Subsection (b)(2) of this Section. All interest
and any other investment earnings on amounts or investments held in the
Collection Account, the Distribution Account and the Transfer Obligation Account
shall be paid to the Servicer immediately upon receipt by the Indenture Trustee.
All Permitted Investments in which funds in the Collection Account, the
Distribution Account or the Transfer Obligation Account are invested must be
held
55
by or registered in the name of "▇▇▇▇▇ Fargo Bank Minnesota, National
Association, as Indenture Trustee, in trust for the Option One Owner Trust
2003-4 Mortgage-Backed Notes."
(2) Insufficiency and Losses in Trust Accounts. If any amounts
are needed for disbursement from the Collection Account, the Distribution
Account or the Transfer Obligation Account held by or on behalf of the Indenture
Trustee and sufficient uninvested funds are not available to make such
disbursement, the Indenture Trustee shall cause to be sold or otherwise
converted to cash a sufficient amount of the investments in the Collection
Account, the Distribution Account or the Transfer Obligation Account, as the
case may be. The Indenture Trustee shall not be liable for any investment loss
or other charge resulting therefrom, unless such loss or charge is caused by the
failure of the Indenture Trustee to perform in accordance with written
directions provided pursuant to this Section 5.03.
If any losses are realized in connection with any investment in the
Collection Account, the Distribution Account or the Transfer Obligation Account
pursuant to this Agreement during a period in which the Servicer has the right
to direct investments pursuant to Section 5.03(b), then the Servicer shall
deposit the amount of such losses (to the extent not offset by income from other
investments in the Collection Account, the Distribution Account or the Transfer
Obligation Account, as the case may be) into the Collection Account, the
Distribution Account or the Transfer Obligation Account, as the case may be,
immediately upon the realization of such loss. All interest and any other
investment earnings on amounts held in the Collection Account, the Distribution
Account and the Transfer Obligation Account shall be taxed to the Issuer and for
federal and state income tax purposes the Issuer shall be deemed to be the owner
of the Collection Account, the Distribution Account and/or the Transfer
Obligation Account, as the case may be.
(c) Subject to Section 6.01 of the Indenture, the Indenture Trustee
shall not in any way be held liable by reason of any insufficiency in any Trust
Account held by the Indenture Trustee resulting from any investment loss on any
Permitted Investment included therein.
(d) With respect to the Trust Account Property, the Indenture
Trustee acknowledges and agrees that:
(1) any Trust Account Property that is held in deposit
accounts shall be held solely in the Eligible Accounts, subject to the last
sentence of Subsection (a) of this Section 5.03; and each such Eligible Account
shall be subject to the "control" (in accordance with Section 9-104 of the UCC)
of the Indenture Trustee as provided in the related Blocked Account Agreement;
and, without limitation on the foregoing, the Indenture Trustee shall have sole
signature authority with respect thereto except to the extent otherwise provided
in the related Blocked Account Agreement;
(2) any Trust Account Property that constitutes Physical
Property shall be delivered to the Indenture Trustee in accordance with
paragraphs (a) and (b) of the definition of "Delivery" in Section 1.01 hereof
and shall be held, pending maturity or disposition, solely by the Indenture
Trustee or a securities intermediary (as such term is defined in Section
8-102(a)(14) of the UCC) acting solely for the Indenture Trustee;
56
(3) any Trust Account Property that is a book-entry security
held through the Federal Reserve System pursuant to federal book-entry
regulations shall be delivered in accordance with paragraph (c) of the
definition of "Delivery" in Section 1.01 hereof and shall be maintained by the
Indenture Trustee, pending maturity or disposition, through continued book-entry
registration of such Trust Account Property as described in such paragraph; and
(4) any Trust Account Property that is an "uncertificated
security" under Article 8 of the UCC and that is not governed by clause (3)
above shall be delivered to the Indenture Trustee in accordance with paragraph
(d) of the definition of "Delivery" in Section 1.01 hereof and shall be
maintained by the Indenture Trustee, pending maturity or disposition, through
continued registration of the Indenture Trustee's (or its nominee's) ownership
of such security.
Section 5.04 Advance Account.
(a) The Servicer shall cause to be established and maintained in its
name, an Advance Account (the "Advance Account"), which need not be a segregated
account. The Advance Account shall be maintained with any financial institution
the Servicer elects.
(b) Deposits and Withdrawals. Amounts in respect of the transfer of
Additional Note Principal Balances and Loans shall be deposited in and withdrawn
from the Advance Account as provided in Sections 2.01 (c) and 2.06 hereof and
Section 3.01 of the Note Purchase Agreement.
Section 5.05 Transfer Obligation Account.
(a) The Servicer, for the benefit of the Noteholders, shall cause to
be established and maintained in the name of the Indenture Trustee a Transfer
Obligation Account (the 'Transfer Obligation Account"), which shall be a
separate Eligible Account and may be interest-bearing, entitled "Option One
Owner Trust 2003-4 Transfer Obligation Account, ▇▇▇▇▇ Fargo Bank Minnesota,
National Association, as Indenture Trustee, in trust for the Option One Owner
Trust 2003-4 Mortgage-Backed Notes." The Indenture Trustee shall have no
monitoring or calculation obligation with respect to withdrawals from the
Transfer Obligation Account. Amounts in the Transfer Obligation Account shall be
invested in accordance with Section 5.03.
(b) In accordance with Section 5.06, the Loan Originator shall
deposit into the Transfer Obligation Account any amounts as may be required
thereby.
(c) On each Payment Date, the Paying Agent will deposit in the
Transfer Obligation Account any amounts required to be deposited therein
pursuant to Section 5.01(c)(3)(vii).
(d) On the date of each Disposition, the Paying Agent shall withdraw
from the Transfer Obligation Account such amount on deposit therein in respect
of the payment of Transfer Obligations as may be requested by the Disposition
Agent in writing to effect such Disposition.
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(e) On each Payment Date, the Paying Agent shall withdraw from the
Transfer Obligation Account and deposit into the Distribution Account on such
Payment Date the lesser of (x) the amount then on deposit in the Transfer
Obligation Account and (y) the Interest Carry-Forward Amount as of such date.
(f) If with respect to any Business Day there exists an
Overcollateralization Shortfall, the Paying Agent, upon the written direction of
the Note Agent, shall withdraw from the Transfer Obligation Account and deposit
into the Distribution Account on such Business Day the lesser of (x) the amount
then on deposit in the Transfer Obligation Account and (y) the amount of such
Overcollateralization Shortfall as of such date.
(g) If with respect to any Payment Date there shall exist a Hedge
Funding Requirement, the Paying Agent, upon the written direction of the
Servicer or the Note Agent, shall withdraw from the Transfer Obligation Account
and deposit into the Distribution Account on the Business Day prior to such
Payment Date the lesser of (x) the amount then on deposit in the Transfer
Obligation Account (after making all other required withdrawals therefrom with
respect to such Payment Date) and (y) the amount of such Hedge Funding
Requirement as of such date.
(h) In the event of the occurrence of an Event of Default under the
Indenture, the Paying Agent shall withdraw all remaining funds from the Transfer
Obligation Account and apply such funds in satisfaction of the Notes as provided
in Section 5.04(b) of the Indenture.
(i) The Paying Agent shall return to the Loan Originator all amounts
on deposit in the Transfer Obligation Account (after making all other
withdrawals pursuant to this Section 5.05) until the Majority Noteholders
provide written notice to the Indenture Trustee (with a copy to the Loan
Originator and the Servicer) of the occurrence of a default or event of default
(however defined) under any Basic Document with respect to the Issuer, the
Depositor, the Loan Originator or any of their Affiliates and upon the date of
the termination of this Agreement pursuant to Article X, the Paying Agent shall
withdraw any remaining amounts from the Transfer Obligation Account and remit
all such amounts to the Loan Originator.
Section 5.06 Transfer Obligation.
(a) In consideration of the transactions contemplated by the Basic
Documents, the Loan Originator agrees and covenants with the Depositor that:
(i) In connection with each Disposition it shall fund, or
cause to be funded, reserve funds, pay credit enhancer fees, pay, or cause to be
paid, underwriting fees, fund any difference between the cash Disposition
Proceeds and the aggregate Note Principal Balance at the time of such
Disposition, and make, or cause to be made, such other payments as may be, in
the reasonable opinion of the Disposition Agent, commercially reasonably
necessary to effect Dispositions, in each case to the extent that Disposition
Proceeds are insufficient to pay such amounts;
(ii) In connection with Hedging Instruments, on the Business
Day prior to each Payment Date, it shall deliver to the Servicer for deposit
into the Transfer Obligation Account any Hedge Funding Requirement (to the
extent amounts available on the
58
related Payment Date pursuant to Section 5.01 are insufficient to make such
payment), when, as and if due to any Hedging Counterparty;
(iii) if any Interest Carry-Forward Amount shall occur, it
shall deposit into the Transfer Obligation Account any such Interest
Carry-Forward Amount on or before the Business Day preceding such related
Payment Date;
(iv) If on any Business Day there exists an
Overcollateralization Shortfall, upon the written direction of the Note Agent,
it shall on such Business Day deposit into the Transfer Obligation Account the
full amount of the Overcollateralization Shortfall as of such date, provided,
that in the event that notice of such Overcollateralization Shortfall is
provided to the Loan Originator after 3:00 p.m. New York City time, the Loan
Originator shall make such deposit on the following Business Day; and
(v) Notwithstanding anything to the contrary herein, in the
event of the occurrence of an Event of Default under the Indenture, the Loan
Originator shall promptly deposit into the Transfer Obligation Account the
entire amount of the Unfunded Transfer Obligation;
provided, that notwithstanding anything to the contrary contained herein, the
Loan Originator's cumulative payments under or in respect of the Transfer
Obligations (after subtracting therefrom any amounts returned to the Loan
Originator pursuant to Section 5.05(i)) together with the Servicer's payments in
respect of any Servicer Puts shall not in the aggregate exceed the Unfunded
Transfer Obligation.
(b) The Loan Originator agrees that the Noteholders, as ultimate
assignee of the rights of the Depositor under this Agreement and the other Basic
Documents, may enforce the rights of the Depositor directly against the Loan
Originator.
ARTICLE VI
STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS
Section 6.01 Statements.
(a) No later than 12 noon (New York City time) on each Remittance
Date, the Servicer shall deliver to the Indenture Trustee and the Note Agent by
electronic transmission, the receipt and legibility of which shall be confirmed
by telephone, and with hard copy thereof to be delivered no later than one (1)
Business Day after such Remittance Date, the Servicer's Remittance Report,
setting forth the date of such Report (day, month and year), the name of the
Issuer (i.e., "Option One Owner Trust 2003-4"), and the date of this Agreement,
all in substantially the form set out in Exhibit B hereto. Furthermore, on each
Remittance Date, the Servicer shall deliver to the Indenture Trustee and the
Note Agent a data file providing, with respect to each Loan in the Loan Pool as
of the last day of the related Remittance Period (i) if such Loan is an ARM, the
current Loan Interest Rate; (ii) the Principal Balance with respect to such
Loan; (iii) the date of the last Monthly Payment paid in full; and (iv) such
other information as may be reasonably requested by the Note Agent and the
Indenture Trustee. In addition, no later than 12:00 noon (New York City time) on
the 15th day of each calendar month (or if such
59
day is not a Business Day, the preceding Business Day), the Custodian shall
prepare and provide to the Servicer and the Indenture Trustee by facsimile, the
Custodian Fee Notice for the Payment Date falling in such calendar month.
(b) No later than 12 noon (New York City time) on each Remittance
Date, the Servicer shall prepare (or cause to be prepared) and provide to the
Indenture Trustee electronically or via fax, receipt confirmed by telephone, the
Note Agent and each Noteholder, a statement (the "Payment Statement"), stating
each date and amount of a purchase of Additional Note Principal Balance (day,
month and year), the name of the Issuer (i.e., "Option One Owner Trust 2003-4"),
the date of this Agreement and the following information:
(1) the aggregate amount of collections in respect of
principal of the Loans received by the Servicer during the preceding Remittance
Period;
(2) the aggregate amount of collections in respect of interest
on the Loans received by the Servicer during the preceding Remittance Period;
(3) all Mortgage Insurance Proceeds received by the Servicer
during the preceding Remittance Period and not required to be applied to
restoration or repair of the related Mortgaged Property or returned to the
Borrower under applicable law or pursuant to the terms of the applicable
Mortgage Insurance Policy;
(4) all Net Liquidation Proceeds deposited by the Servicer
into the Collection Account during the preceding Remittance Period;
(5) all Released Mortgaged Property Proceeds deposited by the
Servicer into the Collection Account during the preceding Remittance Period;
(6) the aggregate amount of all Servicing Advances made by the
Servicer during the preceding Remittance Period;
(7) the aggregate of all amounts deposited into the
Distribution Account in respect of the repurchase of Unqualified Loans and the
repurchase of Loans pursuant to Section 2.05 hereof during the preceding
Remittance Period;
(8) the aggregate Principal Balance of all Loans for which a
Servicer Call was exercised during the preceding Remittance Period;
(9) the aggregate Principal Balance of all Loans for which a
Servicer Put was exercised during the preceding Remittance Period;
(10) the aggregate amount of all payments received under
Hedging Instruments during the preceding Remittance Period;
(11) the aggregate amount of all withdrawals from the
Distribution Account pursuant to Section 5.01(c)(1)(i) hereof during the
preceding Remittance Period;
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(12) the aggregate amount of cash Disposition Proceeds
received during the preceding Remittance Period;
(13) withdrawals from the Collection Account in respect of the
Servicing Advance Reimbursement Amount with respect to the related Payment Date;
(14) [Reserved];
(15) the number and aggregate Principal Balance of all Loans
that are (i) 30-59 days Delinquent, (ii) 60- 89 days Delinquent, (iii) 90 or
more days Delinquent as of the end of the related Remittance Period;
(16) the aggregate amount of Liquidated Loan Losses incurred
(i) during the preceding Remittance Period, and (ii) during the preceding three
Remittance Periods;
(17) the aggregate of the Principal Balances of all Loans in
the Loan Pool as of the end of the related Remittance Period;
(18) the aggregate amount of all deposits into the
Distribution Account from the Transfer Obligation Account pursuant to Sections
5.05(e), 5.05(f), 5.05(g), and 5.05(h) on the related Payment Date;
(19) the aggregate amount of distributions in respect of
Servicing Compensation to the Servicer, and unpaid Servicing Compensation from
prior Payment Dates for the related Payment Date;
(20) the aggregate amount of distributions in respect of
Indenture Trustee Fees and unpaid Indenture Trustee Fees from prior Payment
Dates for the related Payment Date;
(21) the aggregate amount of distributions in respect of the
Custodian Fee and unpaid Custodian Fees from prior Payment Dates for the related
Payment Date;
(22) the aggregate amount of distributions in respect of the
Owner Trustee Fees and unpaid Owner Trustee Fees from prior Payment Dates and
for the related Payment Date;
(23) the Unfunded Transfer Obligation and
Overcollateralization Shortfall on such Payment Date for the related Payment
Date;
(24) the aggregate amount of distributions to the Transfer
Obligation Account for the related Payment Date;
(25) the aggregate amount of distributions in respect of
Trust/Depositor Indemnities for the related Payment Date;
(26) the aggregate amount of distributions to the holders of
the Trust Certificates for the related Payment Date;
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(27) the Note Principal Balance of the Notes as of the last
day of the related Remittance Period (without taking into account any Additional
Note Principal Balance between the last day of such Remittance Period and the
related Payment Date) before and after giving effect to distributions made to
the holders of the Notes for such Payment Date;
(28) the Pool Principal Balance as of the end of the preceding
Remittance Period; and
(29) whether a Performance Trigger or a Rapid Amortization
Trigger shall exist with respect to such Payment Date.
Such Payment Statement shall also be provided on the Remittance Date to the Note
Agent and Indenture Trustee in the form of a data file in a form mutually agreed
to by and between the Note Agent, the Indenture Trustee and the Servicer. The
Indenture Trustee shall have no duty to monitor the occurrence of a Performance
Trigger, Rapid Amortization Trigger or any events resulting in withdrawals from
the Transfer Obligation Account.
Section 6.02 Specification of Certain Tax Matters.
The Paying Agent shall comply with all requirements of the Code and
applicable state and local law with respect to the withholding from any
distributions made to any Securityholder of any applicable withholding taxes
imposed thereon and with respect to any applicable reporting requirements in
connection therewith, giving due effect to any applicable exemptions from such
withholding and effective certifications or forms provided by the recipient. Any
amounts withheld pursuant to this Section 6.02 shall be deemed to have been
distributed to the Securityholders, as the case may be, for all purposes of this
Agreement. The Indenture Trustee shall have no responsibility for preparing or
filing any tax returns.
Section 6.03 Valuation of Loans, Hedge Value and Retained Securities
Value;
Market Value Agent.
(a) The Note Agent hereby irrevocably appoints, and the Issuer
hereby consents to the appointment of, the Market Value Agent as agent on behalf
of the Noteholders to determine the Market Value of each Loan, the Hedge Value
of each Hedging Instrument and the Retained Securities Value of all Retained
Securities.
(b) Except as otherwise set forth in Section 3.07, the Market Value
Agent shall determine the Market Value of each Loan, for the purposes of the
Basic Documents, in its sole judgment. In determining the Market Value of each
Loan, the Market Value Agent may consider any information that it may deem
relevant and shall base such determination primarily on the lesser of its
estimate of the projected proceeds from such Loan's inclusion in (i) a
Securitization (inclusive of the projected Retained Securities Value of any
Retained Securities to be issued in connection with such Securitization) and
(ii) a Whole Loan Sale, in each case net of such Loan's ratable share of all
costs and fees associated with such Disposition, including, without limitation,
any costs of issuance, sale, underwriting and funding reserve accounts. The
Market Value Agent's determination, in its sole judgment, of Market Value shall
be conclusive
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and binding upon the parties hereto, absent manifest error (including without
limitation, any error contemplated in Section 2.08).
(c) On each Business Day the Market Value Agent shall determine in
its sole judgment the Hedge Value of each Hedging Instrument as of such Business
Day. In making such determination the Market Value Agent may rely exclusively on
quotations provided by the Hedging Counterparty, by leading dealers in
instruments similar to such Hedging Instrument, which leading dealers may
include the Market Value Agent and its Affiliates and such other sources of
information as the Market Value Agent may deem appropriate.
(d) On each Business Day, the Market Value Agent shall determine in
its sole judgment the Retained Securities Value of the Retained Securities, if
any, expected to be issued pursuant to such Securitization as of the closing
date of such Securitization. In making such determination the Market Value Agent
may rely exclusively on quotations provided by leading dealers in instruments
similar to such Retained Securities, which leading dealers may include the
Market Value Agent and its Affiliates and such other sources of information as
the Market Value Agent may deem appropriate.
ARTICLE VII
HEDGING; FINANCIAL COVENANTS
Section 7.01 Hedging Instruments.
(a) On each Transfer Date, the Trust shall enter into such Hedging
Instruments as the Market Value Agent, on behalf of the Majority Noteholders,
shall determine are necessary in order to hedge the interest rate risk with
respect to the Collateral Value of the Loans being purchased on such Transfer
Date. The Market Value Agent shall determine, in its sole discretion, whether
any Hedging Instrument conforms to the requirements of Section 7.0l(b), (c) and
(d).
(b) Each Hedging Instrument shall expressly provide that in the
event of a Disposition or other removal of the Loan from the Trust, such portion
of the Hedging Instrument shall terminate as the Disposition Agent deems
appropriate to facilitate the hedging of the risks specified in Section 7.01(a).
In the event that the Hedging Instrument is not otherwise terminated, it shall
contain provisions that allow the position of the Trust to be assumed by an
Affiliate of the Trust upon the liquidation of the Trust. The terms of the
assignment documentation and the credit quality of the successor to the Trust
shall be subject to the Hedging Counterparty's approval.
(c) Any Hedging Instrument that provides for any payment obligation
on the part of the Issuer must (i) be without recourse to the assets of the
Issuer, (ii) contain a non-petition covenant provision in the form of Section
11.13, (iii) limit payment dates thereunder to Payment Dates and (iv) contain a
provision limiting any cash payments due on any day under such Hedging
Instrument solely to funds available therefor in the Collection Account on such
day pursuant to Section 5.01(c)(3)(ii) hereof and funds available therefor in
the Transfer Obligation Account.
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(d) Each Hedging Instrument must (i) provide for the direct payment
of any amounts thereunder to the Collection Account pursuant to Section
5.01(b)(viii), (ii) contain an assignment of all of the Issuer's rights (but
none of its obligations) under such Hedging Instrument to the Indenture Trustee
and shall include an express consent to the Hedging Counterparty to such
assignment, (iii) provide that in the event of the occurrence of an Event of
Default, such Hedging Instrument shall terminate upon the direction of the
Majority Noteholders, (iv) prohibit the Hedging Counterparty from "setting-off"
or "netting" other obligations of the Issuer or its Affiliates against such
Hedging Counterparty's payment obligations thereunder, (v) provide that the
appropriate portion of the Hedging Instrument will terminate upon the removal of
the related Loans from the Trust Estate and (vi) have economic terms that are
fixed and not subject to alteration after the date of assumption or execution.
(e) If agreed to by the Majority Noteholders, the Issuer may pledge
its assets in order to secure its obligations in respect of Hedge Funding
Requirements, provided that such right shall be limited solely to Hedging
Instruments for which an Affiliate of the Note Agent is a Hedging Counterparty.
(f) The aggregate notional amount of all Hedging Instruments shall
not exceed the Note Principal Balance as of the date on which each Hedging
Instrument is entered into by the Issuer and a Hedging Counterparty.
Section 7.02 Financial Covenants.
(a) Each of the Loan Originator and the Servicer shall maintain a
minimum Tangible Net Worth of $425 million as of any day.
(b) Neither the Loan Originator nor the Servicer may exceed a
maximum leverage ratio (the ratio of total liabilities (exclusive of
non-recourse debt), determined in accordance with GAAP, to its Tangible Net
Worth) of 6.0x as of any day.
(c) Neither the Loan Originator nor the Servicer may exceed a
maximum non-warehouse leverage ratio (the ratio of (i) the sum of (A) all funded
debt (excluding debt from H&R Block, Inc. or any of its Affiliates and all
non-recourse debt) less (B) 100% of its mortgage loan inventory held for sale
less (C) 80% of servicing advance receivables (determined and valued in
accordance with GAAP) to (ii) Tangible Net Worth) of 0.50x at any time.
(d) Each of the Loan Originator and the Servicer shall maintain a
minimum liquidity facility (defined as a committed, unsecured, non-amortizing
liquidity facility from H&R Block, Inc. not to mature (scheduled or accelerated)
prior to the Maturity Date) in an amount no less than $150 million. Such
facility from H&R Block, Inc. cannot contain covenants or termination events
more restrictive than the covenants or termination events contained in the Basic
Documents.
(e) Each of the Loan Originator and the Servicer shall maintain a
committed warehouse credit facility, with a maturity date (scheduled or
accelerated) not earlier than the Maturity Date, in an amount not less than the
Maximum Note Principal Balance from a third-party entity that is not an
Affiliate of the Note Agent, the Loan Originator or the Servicer.
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ARTICLE VIII
THE SERVICER
Section 8.01 Indemnification; Third Party Claims.
(a) The Servicer shall indemnify the Loan Originator, the Owner
Trustee, the Trust, the Depositor, the Indenture Trustee and the Noteholders,
their respective officers, directors, employees, agents and "control persons,"
as such term is used under the Act and under the Securities Exchange Act of 1934
as amended (each a "Servicer Indemnified Party") and hold harmless each of them
against any and all claims, losses, damages, penalties, fines, forfeitures,
reasonable legal fees and related costs, judgments, and other costs and expenses
resulting from any claim, demand, defense or assertion based on or grounded
upon, or resulting from, a breach of any of the Servicer's representations and
warranties and covenants contained in this Agreement or in any way relating to
the failure of the Servicer to perform its duties and service the Loans in
compliance with the terms of this Agreement except to the extent such loss
arises out of such Servicer Indemnified Party's gross negligence or willful
misconduct; provided, however, that if the Servicer is not liable pursuant to
the provisions of Section 8.01(b) hereof for its failure to perform its duties
and service the Loans in compliance with the terms of this Agreement, then the
provisions of this Section 8.01 shall have no force and effect with respect to
such failure. In addition to the foregoing, the Servicer shall indemnify the
Note Agent and hold it harmless against any amounts the Notes Agent is obligated
to pay pursuant to any Blocked Account Agreement to the financial institution at
which either of the Trust Accounts is maintained to the extent such amounts are
incurred or relate to a period following the delivery of a Termination Notice
(as defined under such Blocked Account Agreement) under such Blocked Account
Agreement.
(b) None of the Loan Originator, the Depositor or the Servicer or
any of their respective Affiliates, directors, officers, employees or agents
shall be under any liability to the Owner Trustee, the Issuer, the Indenture
Trustee or the Securityholders for any action taken, or for refraining from the
taking of any action, in good faith pursuant to this Agreement, or for errors in
judgment; provided, however, that this provision shall not protect the Loan
Originator, the Depositor, the Servicer or any of their respective Affiliates,
directors, officers, employees, agents against the remedies provided herein for
the breach of any warranties, representations or covenants made herein, or
against any expense or liability specifically required to be borne by such party
without right of reimbursement pursuant to the terms hereof, or against any
expense or liability which would otherwise be imposed by reason of misfeasance,
bad faith or negligence in the performance of the respective duties of the
Servicer, the Depositor or the Loan Originator, as the case may be. The Loan
Originator, the Depositor, the Servicer and any of their respective Affiliates,
directors, officers, employees, agents may rely in good faith on any document of
any kind which, prima facie, is properly executed and submitted by any Person
respecting any matters arising hereunder.
(c) The Loan Originator agrees to indemnify and hold harmless the
Depositor and the Noteholders, as the ultimate assignees from the Depositor
(each an "Originator Indemnified Party," together with the Servicer Indemnified
Parties, the "Indemnified Parties"), from and against any loss, liability,
expense, damage, claim or injury arising out of or based on
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(i) any breach of any representation, warranty or covenant of the Loan
Originator, the Servicer or their Affiliates, in any Basic Document, including,
without limitation, the origination or prior servicing of the Loans by reason of
any acts, omissions, or alleged acts or omissions arising out of activities of
the Loan Originator, the Servicer or their Affiliates, and (ii) any untrue
statement by the Loan Originator, the Servicer or its Affiliates of any material
fact or any such Person's failure to state a material fact necessary to make
such statements not misleading with respect to any such Person's statements
contained in any Basic Document, including, without limitation, any Officer's
Certificate, statement, report or other document or information prepared by any
such Person and furnished or to be furnished by it pursuant to or in connection
with the transactions contemplated thereby and not corrected prior to completion
of the relevant transaction including, without limitation, such written
information as may have been and may be furnished in connection with any due
diligence investigation with respect to the Loans or any such Person's business,
operations or financial condition, including reasonable attorneys' fees and
other costs or expenses incurred in connection with the defense of any actual or
threatened action, proceeding or claim; provided that the Loan Originator shall
not indemnify an Originator Indemnified Party to the extent such loss,
liability, expense, damage or injury is due to either an Originator Indemnified
Party's willful misfeasance, bad faith or negligence or by reason of an
Originator Indemnified Party's reckless disregard of its obligations hereunder;
provided, further, that the Loan Originator shall not be so required to
indemnify an Originator Indemnified Party or to otherwise be liable to an
Originator Indemnified Party for any losses in respect of the performance of the
Loans, the creditworthiness of the Borrowers under the Loans, changes in the
market value of the Loans or other similar investment risks associated with the
Loans arising from a breach of any representation or warranty set forth in
Exhibit E hereto, a remedy for the breach of which is provided in Section 3.06
hereof. The provisions of this indemnity shall run directly to and be
enforceable by an Originator Indemnified Party subject to the limitations
hereof.
(d) With respect to a claim subject to indemnity hereunder made by
any Person against an Indemnified Party (a "Third Party Claim"), such
Indemnified Party shall notify the related indemnifying parties (each an
"Indemnifying Party") in writing of the Third Party Claim within a reasonable
time after receipt by such Indemnified Party of written notice of the Third
Party Claim unless the Indemnifying Parties shall have previously obtained
actual knowledge thereof. Thereafter, the Indemnified Party shall deliver to the
Indemnifying Parties, within a reasonable time after the Indemnified Party's
receipt thereof, copies of all notices and documents (including court papers)
received by the Indemnified Party relating to the Third Party Claim. No failure
to give such notice or deliver such documents shall effect the rights to
indemnity hereunder. Each Indemnifying Party shall promptly notify the Indenture
Trustee and the Indemnified Party (if other than the Indenture Trustee) of any
claim of which it has been notified and shall promptly notify the Indenture
Trustee and the Indemnified Party (if applicable) of its intended course of
action with respect to any claim.
(e) If a Third Party Claim is made against an Indemnified Party,
while maintaining control over its own defense, the Indemnified Party shall
cooperate and consult fully with the Indemnifying Party in preparing such
defense, and the Indemnified Party may defend the same in such manner as it may
deem appropriate, including settling such claim or litigation after giving
notice to the Indemnifying Party of such terms and the Indemnifying Party will
promptly reimburse the Indemnified Party upon written request; provided,
however, that the
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Indemnified Party may not settle any claim or litigation without the consent of
the Indemnifying Party.
Section 8.02 Merger or Consolidation of the Servicer.
The Servicer shall keep in full effect its existence, rights and
franchises as a corporation, and will obtain and preserve its qualification to
do business as a foreign corporation and maintain such other licenses and
permits in each jurisdiction necessary to protect the validity and
enforceability of each Basic Document to which it is a party and each of the
Loans and to perform its duties under each Basic Document to which it is a
party; provided, however, that the Servicer may merge or consolidate with any
other corporation upon the satisfaction of the conditions set forth in the
following paragraph.
Any Person into which the Servicer may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Servicer shall be a party, or any Person succeeding to the business of the
Servicer, shall be an Eligible Servicer and shall be the successor of the
Servicer, as applicable hereunder, without the execution or filing of any paper
or any further act on the part of any of the parties hereto, anything herein to
the contrary notwithstanding. The Servicer shall send notice of any such merger,
conversion, consolidation or succession to the Indenture Trustee and the issuer.
Section 8.03 Limitation on Liability of the 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 8.01
hereof, 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.
Section 8.04 Servicer Not to Resign; Assignment.
The Servicer shall not resign from the obligations and duties hereby
imposed on it except (a) with the consent of the Majority Noteholders or (b)
upon determination that its duties hereunder are no longer permissible under
applicable law. Any such determination pursuant to clause (b) of the preceding
sentence permitting the resignation of the Servicer shall be evidenced by an
Independent opinion of counsel to such effect delivered (at the expense of the
Servicer) to the Indenture Trustee and the Majority Noteholders. No resignation
of the Servicer shall become effective until a successor servicer, appointed
pursuant to the provisions of Section 9.02 hereof shall have assumed the
Servicer's responsibilities, duties, liabilities (other than those liabilities
arising prior to the appointment of such successor) and obligations under this
Agreement.
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 and any agreement, instrument or act purporting to effect
any such assignment, transfer, delegation or appointment shall be void.
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The Servicer agrees to cooperate with any successor Servicer in effecting
the transfer of the Servicer's servicing responsibilities and rights hereunder
pursuant to the first paragraph of this Section 8.04, including, without
limitation, the transfer to such successor of all relevant records and documents
(including any Loan Files in the possession of the Servicer) and all amounts
received with respect to the Loans and not otherwise permitted to be retained by
the Servicer pursuant to this Agreement. In addition, the Servicer, at its sole
cost and expense, shall prepare, execute and deliver any and all documents and
instruments to the successor Servicer including all Loan Files in its possession
and do or accomplish all other acts necessary or appropriate to effect such
termination and transfer of servicing responsibilities.
Section 8.05 Relationship of Servicer to Issuer and the Indenture Trustee.
The relationship of the Servicer (and of any successor to the Servicer as
servicer under this Agreement) to the Issuer, the Owner Trustee and the
Indenture Trustee under this Agreement is intended by the parties hereto to be
that of an independent contractor and not of a joint venturer, agent or partner
of the issuer, the Owner Trustee or the Indenture Trustee.
Section 8.06 Servicer May Own Securities.
Each of the Servicer and any Affiliate of the Servicer may in its
individual or any other capacity become the owner or pledgee of Securities with
the same rights as it would have if it were not the Servicer or an Affiliate
thereof except as otherwise specifically provided herein; provided, however,
that at any time that Option One or any of its Affiliates is the Servicer,
neither the Servicer nor any of its Affiliates (other than an Affiliate which is
a corporation whose purpose is limited to holding securities and related
activities and which cannot incur recourse debt) may be a Noteholder. Securities
so owned by or pledged to the Servicer or such Affiliate shall have an equal and
proportionate benefit under the provisions of this Agreement, without
preference, priority, or distinction as among all of the Securities; provided,
however, that any Securities owned by the Servicer or any Affiliate thereof,
during the time such Securities are owned by them, shall be without voting
rights for any purpose set forth in this Agreement unless the Servicer or such
Affiliate owns all outstanding Securities of the related class. The Servicer
shall notify the Indenture Trustee promptly after it or any of its Affiliates
becomes the owner or pledgee of a Security.
Section 8.07 Indemnification of the Indenture Trustee and Note Agent.
The Servicer agrees to indemnify the Indenture Trustee and its employees,
officers, directors and agents, and reimburse its reasonable out-of-pocket
expenses in accordance with Section 6.07 of the Indenture as if it was a
signatory thereto. The Servicer agrees to indemnify the Note Agent in accordance
with Section 9.01 of the Note Purchase Agreement as if it were signatory
thereto.
ARTICLE IX
SERVICER EVENTS OF DEFAULT
Section 9.01 Servicer Events of Default.
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(a) In case one or more of the following Servicer Events of
Default shall occur and be continuing (and shall not have been waived by the
majority Noteholders pursuant to Section 9.03), that is to say:
(1) any failure by Servicer to deposit into the Collection
Account or the Distribution Account amounts required to be deposited thereto or
any failure by Servicer to make any of the required payments therefrom; or
(2) any failure on the part of the Servicer duly to observe or
perform in any material respect any other covenants or agreements on the part of
the Servicer, contained in any Basic Document to which it is a party, which
continues unremedied for a period of 30 days (or, in the case of payment of
insurance premiums, for a period of 15 days) after the date on which written
notice of such failure, requiring the same to be remedied, shall have been given
to the Servicer by any other party hereto or to the Servicer (with copy to each
other party hereto), by Holders of 25% of the Percentage Interests of the Notes
or the Trust Certificates; or
(3) any breach on the part of the Servicer in any material
respect of any representation or warranty contained in any Basic Document to
which it is a party which continues unremedied for a period of 30 days after the
date on which notice of such breach, requiring the same to be remedied, shall
have been given to the Servicer by any other party hereto or to the Servicer
(with copy to each other party hereto), by the Note Agent or Holders of 25% of
the Percentage Interests (as defined in the Indenture) of the Notes; or
(4) there shall have been commenced before a court or agency
or supervisory authority having jurisdiction in the premises an involuntary
proceeding against the Servicer under any present or future federal or state
bankruptcy, insolvency or similar law for the appointment of a conservator,
receiver, liquidator, trustee or similar official in any bankruptcy, insolvency,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, which action
shall not have been dismissed for a period of 60 days; or
(5) the Servicer shall consent to the appointment of a
conservator, receiver, liquidator, trustee or similar official in any
bankruptcy, insolvency, readjustment of debt, marshaling of assets and
liabilities or similar proceedings of or relating to it or of or relating to all
or substantially all of its property; or
(6) 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 bankruptcy, insolvency or reorganization statute, make an assignment
for the benefit of its creditors, voluntarily suspend payment of its
obligations, or take any corporate action in furtherance of the foregoing; or
(7) Reserved; or
(8) the Servicer or the Loan Originator fails to comply with
any of its financial covenants set forth in Section 7.02; or
(9) a Change of Control of the Servicer; or
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(10) so long as the Servicer or the Loan Originator is an
Affiliate of either of the Depositor or the Issuer and any "event of default' by
any such party occurs under any of the Basic Documents.
(b) Then, and in each and every such case, so long as a Servicer
Event of Default shall not have been remedied, the Indenture Trustee or the
Majority Noteholders, by notice in writing to the Servicer may, in addition to
whatever rights such Person may have at law or in equity to damages, including
injunctive relief and specific performance, terminate all the rights and
obligations of the Servicer under this Agreement and in and to the Loans and the
proceeds thereof, as servicer under this Agreement. Upon receipt by the Servicer
of such written notice, all authority and power of the Servicer under this
Agreement, whether with respect to the Loans or otherwise, shall, subject to
Section 9.02 hereof, pass to and be vested in a successor servicer, and the
successor servicer is hereby authorized and empowered to execute and deliver, on
behalf of the Servicer, as attorney-in-fact or otherwise, any and all documents
and other instruments and do or cause to be done all other acts or things
necessary or appropriate to effect the purposes of such notice of termination,
including, but not limited to, the transfer and endorsement or assignment of the
Loans and related documents. The Servicer agrees to cooperate with the successor
servicer in effecting the termination of the Servicer's responsibilities and
rights hereunder, including, without limitation, the transfer to the successor
servicer for administration by it of all amounts which shall at the time be
credited by the Servicer to each Collection Account or thereafter received with
respect to the Loans.
(c) Upon the occurrence of (i) an Event of Default or Default
under any of the Basic Documents, (ii) a Servicer Event of Default under this
Agreement, (iii) a Rapid Amortization Trigger or (iv) a material adverse change
in the business or financial conditions of the Servicer (each, a "Term Event"),
the Servicer's right to service the Loans pursuant to the terms of this
Agreement shall be in effect for an initial period commencing on the date on
which such Term Event occurred and shall automatically terminate at 5:00 p.m.
(New York City time), on the last business day of the calendar month in which
such Term Event occurred (the "Initial Term"). Thereafter, the Initial Term
shall be extendible in the sole discretion of the Note Agent by written notice
(each, a "Servicer Extension Notice") of the Note Agent for successive one-month
terms (each such term ending at 5:00 p.m. (New York City time), on the last
Business Day of the related month). Following a Term Event, the Servicer hereby
agrees that the Servicer shall be bound for the duration of the Initial Term and
the term covered by any such Servicer Extension Notice to act as the Servicer
pursuant to this Agreement. Following a Term Event, the Servicer agrees that if,
as of 3:00 p.m. (New York City time) on the last Business Day of any month, the
Servicer shall not have received a Servicer Extension Notice from the Note
Agent, the Servicer shall give written notice of such non-receipt to the Note
Agent by 4:00 p.m. (New York City time). Following a Term Event, the failure of
the Note Agent to deliver a Servicer Extension Notice by 5:00 p.m. (New York
City time) shall result in the automatic and immediate termination of the
Servicer (the "Termination Date"). Notwithstanding these time frames, the
Servicer and the Note Agent shall comply with all applicable laws in connection
with such transfer and the Servicer shall continue to service the Loans until
completion of such transfer.
Section 9.02 Appointment of Successor.
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On and after the date the Servicer receives a notice of termination
pursuant to Section 9.01 hereof or is automatically terminated pursuant to
Section 9.01 (c) hereof, or the Owner Trustee receives the resignation of the
Servicer evidenced by an Opinion of Counsel or accompanied by the consents
required by Section 8.04 hereof, or the Servicer is removed as servicer pursuant
to this Article IX or Section 4.01 of the Servicing Addendum, then, the Majority
Noteholders shall appoint a successor servicer to be the successor in all
respects to the Servicer in its capacity as Servicer under this Agreement and
the transactions set forth or provided for herein and shall be subject to all
the responsibilities, duties and liabilities relating thereto placed on the
Servicer by the terms and provisions hereof; provided, however, that the
successor servicer shall not be liable for any actions of any servicer prior to
it.
The successor servicer shall be obligated to make Servicing Advances
hereunder. As compensation therefor, the successor servicer appointed pursuant
to the following paragraph, shall be entitled to all funds relating to the Loans
which the Servicer would have been entitled to receive from the Collection
Account pursuant to Section 5.01 hereof as if the Servicer had continued to act
as servicer hereunder, together with other Servicing Compensation in the form of
assumption fees, late payment charges or otherwise as provided in Section 4.15
of the Servicing Addendum. The Servicer shall not be entitled to any termination
fee if it is terminated pursuant to Section 9.01 hereof but shall be entitled to
any accrued and unpaid Servicing Compensation to the date of termination.
Any collections received by the Servicer after removal or resignation
shall be endorsed by it to the Indenture Trustee and remitted directly to the
successor servicer. The compensation of any successor servicer appointed shall
be the Servicing Fee, together with other Servicing Compensation provided for
herein. The Indenture Trustee, the Issuer, any Custodian, the Servicer and any
such successor servicer shall take such action, consistent with this Agreement,
as shall be reasonably necessary to effect any such succession. Any costs or
expenses incurred by the Indenture Trustee in connection with the termination of
the Servicer and the succession of a successor servicer shall be an expense of
the outgoing Servicer and, to the extent not paid thereby, an expense of such
successor servicer. The Servicer agrees to cooperate with the Indenture Trustee
and any successor servicer in effecting the termination of the Servicer's
servicing responsibilities and rights hereunder and shall promptly provide the
successor servicer 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 successor servicer all amounts which then have been or should
have been deposited in any Trust Account maintained by the Servicer or which are
thereafter received with respect to the Loans. Upon the occurrence of an Event
of Default, the Majority Noteholders shall have the right to order the
Servicer's Loan Files and all other files of the Servicer relating to the Loans
and all other records of the Servicer and all documents relating to the Loans
which are then or may thereafter come into the possession of the Servicer or any
third parry acting for the Servicer to be delivered to such custodian or
servicer as it selects and the Servicer shall deliver to such custodian or
servicer such assignments as the Majority Noteholders shall request. No
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. No appointment of a
successor to the Servicer hereunder shall be effective until written notice of
such proposed appointment shall have been provided to the Note Agent, the
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Indenture Trustee, the Issuer and the Depositor, the Majority Noteholders and
the Issuer shall have consented in writing thereto.
In connection with such appointment and assumption, the Majority
Noteholder may make such arrangements for the compensation of such successor
servicer out of payments on the Loans as they and such successor servicer shall
agree.
Section 9.03 Waiver of Defaults.
The Majority Noteholders may waive any events permitting removal of the
Servicer as servicer pursuant to this Article IX. Upon any waiver of a past
default, such default shall cease to exist and any Servicer Event of Default
arising therefrom shall be deemed to have been remedied for every purpose of
this Agreement. No such waiver shall extend to any subsequent or other default
or impair any right consequent thereto except to the extent expressly so waived.
Section 9.04 Accounting Upon Termination of Servicer.
Upon termination of the Servicer under this Article IX, the Servicer
shall, at its own expense:
(a) deliver to its successor or, if none shall yet have been
appointed, to the Indenture Trustee the funds in any Trust Account maintained by
the Servicer;
(b) deliver to its successor or, if none shall yet have been
appointed, to the Custodian all Loan Files and related documents and statements
held by it hereunder and a Loan portfolio computer tape;
(c) deliver to its successor or, if none shall yet have been
appointed, to the Indenture Trustee and to the Issuer and the Securityholders a
full accounting of all funds, including a statement showing the Monthly Payments
collected by it and a statement of monies held in trust by it for payments or
charges with respect to the Loans; and
(d) execute and deliver such instruments and perform all acts
reasonably requested in order to effect the orderly and efficient transfer of
servicing of the Loans to its successor and to more fully and definitively vest
in such successor all rights, powers, duties, responsibilities, obligations and
liabilities of the Servicer under this Agreement.
ARTICLE X
TERMINATION; PUT OPTION
Section 10.01 Termination.
(a) This Agreement shall terminate upon either: (A) the later of
(i) the satisfaction and discharge of the Indenture and the provisions thereof,
to the Noteholders of all amounts due and owing in accordance with the
provisions hereof or (ii) the disposition of all funds with respect to the last
Loan and the remittance of all funds due hereunder and the payment of all
amounts due and payable, including, in both cases, without limitation,
72
indemnification payments payable pursuant to any Basic Document to the Indenture
Trustee, the Owner Trustee, the Issuer, the Servicer and the Custodian, written
notice of the occurrence of either of which shall be provided to the Indenture
Trustee by the Servicer; or (B) the mutual consent of the Servicer, the
Depositor and all Securityholders in writing and delivered to the Indenture
Trustee by the Servicer.
(b) The Securities shall be subject to an early redemption or
termination at the option of the Servicer and the Majority Noteholders in the
manner and subject to the provisions of Section 10.02 and 10.04 of this
Agreement.
(c) Except as provided in this Article X, none of the Depositor,
the Servicer nor any Certificateholder or Noteholder shall be entitled to revoke
or terminate the Trust.
Section 10.02 Optional Termination.
(a) The Servicer may, at its option, effect an early termination
of the Trust on any Payment Date on or after the Clean-up Call Date. The
Servicer shall effect such early termination by providing notice thereof to the
Indenture Trustee, the Note Agent and Owner Trustee and by purchasing all of the
Loans at a purchase price, payable in cash, equal to or greater than the
Termination Price. The expense of any Independent appraiser required in
connection with the calculation and payment of the Termination Price under this
Section 10.02 shall be a nonreimbursable expense of the Servicer.
Any such early termination by the Servicer shall be accomplished by
depositing into the Collection Account on the third Business Day prior to the
Payment Date on which the purchase is to occur the amount of the Termination
Price to be paid. The Termination Price and any amounts then on deposit in the
Collection Account (other than any amounts withdrawable pursuant to Section
5.01(c) (1) hereof) shall be deposited in the Distribution Account and
distributed by the Indenture Trustee pursuant to Section 5.01(c)(3) of this
Agreement and Section 9.1 of the Trust Agreement on the next succeeding Payment
Date; and any amounts received with respect to the Loans and Foreclosure
Properties subsequent to the final Payment Date shall belong to the purchaser
thereof.
Section 10.03 Notice of Termination.
Notice of termination of this Agreement or of early redemption and
termination of the Issuer pursuant to Section 10.01 shall be sent by the
Indenture Trustee to the Noteholders in accordance with Section 10.02 of the
Indenture.
Section 10.04 Put Option.
The Majority Noteholders may, at their option, effect a put of the entire
outstanding Note Principal Balance, or any portion thereof, to the Trust on any
date by exercise of the Put Option. The Majority Noteholders shall effect such
put by providing notice thereof in accordance with Section 10.05 of the
Indenture.
Unless otherwise agreed by the Majority Noteholders, on the third Business
Day prior to the Put Date, the Issuer shall deposit the Note Redemption Amount
into the Distribution Account
73
and, if the Put Date occurs after the termination of the Revolving Period and
constitutes a put of the entire outstanding Note Principal Balance, any amounts
then on deposit in the Collection Account (other than any amounts withdrawable
pursuant to Section 5.01(c)(1) hereof) shall be deposited in the Distribution
Account and distributed by the Paying Agent pursuant to section 5.01 (c) (3) of
this Agreement on the Put Date; and any amounts received with respect to the
Loans and Foreclosure Properties subsequent to the Put Date shall belong to the
Issuer.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01 Acts of Securityholders.
Except as otherwise specifically provided herein and except with respect
to Section 11.02(b), whenever action, consent or approval of the Securityholders
is required under this Agreement, such action, consent or approval shall be
deemed to have been taken or given on behalf of, and shall be binding upon, all
Securityholders if the Majority Noteholders agree to take such action or give
such consent or approval.
Section 11.02 Amendment.
(a) This Agreement may be amended from time to time by the
Depositor, the Servicer, the Loan Originator, the Indenture Trustee and the
Issuer by written agreement with notice thereof to the Securityholders, without
the consent of any of the Securityholders, to cure any error or ambiguity, to
correct or supplement any provisions hereof which may be defective or
inconsistent with any other provisions hereof or to add any other provisions
with respect to matters or questions arising under this Agreement; provided,
however, that such action will not adversely affect in any material respect the
interests of the Securityholders, as evidenced by an Opinion of Counsel to such
effect provided at the expense of the party requesting such Amendment.
(b) This Agreement may also be amended from time to time by the
Depositor, the Servicer, the Loan Originator, the Indenture Trustee and the
Issuer by written agreement, with the prior written consent of the Majority
Noteholders, for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement, or of modifying
in any manner the rights of the Securityholders; provided, however, that no such
amendment shall (i) reduce in any manner the amount of, or delay the timing of,
collections of payments on Loans or distributions which are required to be made
on any Security, without the consent of the holders of 100% of the Securities,
(ii) adversely affect in any material respect the interests of any of the
holders of the Securities in any manner other than as described in clause (i),
without the consent of the holders of 100% of the Securities, or (iii) reduce
the percentage of the Securities, the consent of which is required for any such
amendment, without the consent of the holders of 100% of the Securities.
(c) It shall not be necessary for the consent of Securityholders
under this Section to approve the particular form of any proposed amendment, but
it shall be sufficient if such consent shall approve the substance thereof.
74
Prior to the execution of any amendment to this Agreement, the Issuer and
the Indenture Trustee shall be entitled to receive and rely upon an Opinion of
Counsel stating that the execution of such amendment is authorized or permitted
by this Agreement. The Issuer and the Indenture Trustee may, but shall not be
obligated to, enter into any such amendment which affects the Issuer's own
rights, duties or immunities of the Issuer or the Indenture Trustee, as the case
may be, under this Agreement.
Section 11.03 Recordation of Agreement.
To the extent permitted by applicable law, this Agreement, or a memorandum
thereof if permitted under applicable law, is subject to recordation in all
appropriate public offices for real property records in all of the counties or
other comparable jurisdictions in which any or all of the Mortgaged Property is
situated, and in any other appropriate public recording office or elsewhere,
such recordation to be effected by the Servicer at the Securityholders' expense
on direction of the Majority Noteholders but only when accompanied by an Opinion
of Counsel to the effect that such recordation materially and beneficially
affects the interests of the Securityholders or is necessary for the
administration or servicing of the Loans.
Section 11.04 Duration of Agreement.
This Agreement shall continue in existence and effect until terminated as
herein provided.
Section 11.05 Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, (INCLUDING SECTION 5-1401 OF
THE GENERAL OBLIGATIONS LAW BUT OTHERWISE WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAW).
Section 11.06 Notices.
All demands, notices and communications hereunder shall be in writing and
shall be deemed to have been duly given if (i) delivered personally, mailed by
overnight mail, certified mail or registered mail, postage prepaid, or (ii)
transmitted by telecopy, upon telephone confirmation of receipt thereof, as
follows: (I) in the case of the Depositor, to Option One Loan Warehouse
Corporation, 3 Ada, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or such other addresses or
telecopy or telephone numbers as may hereafter be furnished to the
Securityholders and the other parties hereto in writing by the Depositor; (II)
in the case of the Trust, to Option One Owner Trust 2003-4, c/o Wilmington Trust
Company, One ▇▇▇▇▇▇ Square North, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: Corporate Trust Administration, telecopy number: (302)
▇▇▇-▇▇▇▇, telephone number: (▇▇▇) ▇▇▇-▇▇▇▇, or such other address or telecopy or
telephone numbers as may hereafter be furnished to the Noteholders and the other
parties hereto in writing by the Trust; (III) in the case of the Loan
Originator, to Option One Mortgage Corporation, 3 Ada, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇, telecopy number: (▇▇▇) ▇▇▇-▇▇▇▇, telephone number:
(▇▇▇) ▇▇▇-▇▇▇▇ or such other addresses or telecopy or
75
telephone numbers as may hereafter be furnished to the Securityholders and the
other parties hereto in writing by the Loan Originator; (IV) in the case of the
Servicer, to Option One Mortgage Corporation, 3 Ada, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇, telecopy number: (▇▇▇) ▇▇▇-▇▇▇▇, telephone number:
(▇▇▇) ▇▇▇-▇▇▇▇ or such other addresses or telecopy or telephone numbers as may
hereafter be furnished to the Securityholders and the other parties hereto in
writing by the Servicer; and (V) in the case of the Indenture Trustee, at the
Corporate Trust Office, as defined in the Indenture; any such notices shall be
deemed to be effective with respect to any party hereto upon the receipt of such
notice or telephone confirmation thereof by such party, except; provided, that
notices to the Securityholders shall be effective upon mailing or personal
delivery.
Section 11.07 Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be held invalid for any reason whatsoever, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other covenants,
agreements, provisions or terms of this Agreement.
Section 11.08 No Partnership.
Nothing herein contained shall be deemed or construed to create any
partnership or joint venture between the parties hereto and the services of the
Servicer shall be rendered as an independent contractor.
Section 11.09 Counterparts.
This Agreement may be executed in one or more counterparts and by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same Agreement.
Section 11.10 Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the
Servicer, the Loan Originator, the Depositor, the Indenture Trustee, the Issuer
and the Securityholders and their respective successors and permitted assigns.
Section 11.11 Headings.
The headings of the various Sections of this Agreement have been inserted
for convenience of reference only and shall not be deemed to be part of this
Agreement.
Section 11.12 Actions of Securityholders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Agreement to be given or taken
by Securityholders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Securityholders in person or by an
agent duly appointed in writing; and except as herein
76
otherwise expressly provided, such action shall become effective when such
instrument or instruments are delivered to the Depositor, the Servicer or the
Issuer. Proof of execution of any such instrument or of a writing appointing any
such agent shall be sufficient for any purpose of this Agreement and conclusive
in favor of the Depositor, the Servicer and the Issuer if made in the manner
provided in this Section 11.12.
(b) The fact and date of the execution by any Securityholder of
any such instrument or writing may be proved in any reasonable manner which the
Depositor, the Servicer or the Issuer may deem sufficient.
(c) Any request, demand, authorization, direction, notice,
consent, waiver or other act by a Securityholder shall bind every holder of
every Security issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done, or omitted to be done,
by the Depositor, the Servicer or the Issuer in reliance thereon, whether or not
notation of such action is made upon such Security.
(d) The Depositor, the Servicer or the Issuer may require
additional proof of any matter referred to in this Section 11.12 as it shall
deem necessary.
Section 11.13 Non-Petition Agreement.
Notwithstanding any prior termination of any Basic Document, the Loan
Originator, the Servicer, the Depositor and the Indenture Trustee each severally
and not jointly covenants that it shall not, prior to the date which is one year
and one day after the payment in full of the all of the Notes, acquiesce,
petition or otherwise, directly or indirectly, invoke or cause the Trust or the
Depositor to invoke the process of any governmental authority for the purpose of
commencing or sustaining a case against the Issuer or Depositor under any
Federal or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Issuer or Depositor or any substantial part of their respective property
or ordering the winding up or liquidation of the affairs of the Issuer or the
Depositor.
Section 11.14 Holders of the Securities.
(a) Any sums to be distributed or otherwise paid hereunder or
under this Agreement to the holders of the Securities shall be paid to such
holders pro rata based on their Percentage Interests;
(b) Where any act or event hereunder is expressed to be subject to
the consent or approval of the holders of the Securities, such consent or
approval shall be capable of being given by the holder or holders evidencing in
the aggregate not less than 51% of the Percentage Interests.
Section 11.15 Due Diligence Fees, Due Diligence.
The Loan Originator acknowledges that the Note Agent has the right to
perform continuing due diligence reviews with respect to the Loans, for purposes
of verifying compliance with the representations, warranties and specifications
made hereunder, or otherwise, and the
77
Loan Originator agrees that upon reasonable prior notice (with no notice being
required upon the occurrence of an Event of Default) to the Loan Originator, the
Note Agent, the Indenture Trustee and Custodian or its authorized
representatives will be permitted during normal business hours to examine,
inspect, and make copies and extracts of, the Loan Files and any and all
documents, records, agreements, instruments or information relating to such
Loans in the possession or under the control of the Servicer and the Indenture
Trustee. The Loan Originator also shall make available to the Note Agent a
knowledgeable financial or accounting officer for the purpose of answering
questions respecting the Loan Files and the Loans and the financial condition of
the Loan Originator. Without limiting the generality of the foregoing, the Loan
Originator acknowledges that the Note Agent may purchase Notes based solely upon
the information provided by the Loan Originator to the Note Agent in the Loan
Schedule and the representations, warranties and covenants contained herein, and
that the Note Agent, at its option, has the right at any time to conduct a
partial or complete due diligence review on some or all of the Loans securing
such purchase, including without limitation ordering new credit reports and new
appraisals on the related Mortgaged Properties and otherwise re-generating the
information used to originate such Loan. The Note Agent may underwrite such
Loans itself or engage a mutually agreed upon third party underwriter to perform
such underwriting. The Loan Originator agrees to cooperate with the Note Agent
and any third party underwriter in connection with such underwriting, including,
but not limited to, providing the Note Agent and any third party underwriter
with access to any and all documents, records, agreements, instruments or
information relating to such Loans in the possession, or under the control, of
the Servicer. The Loan Originator further agrees that the Loan Originator shall
reimburse the Note Agent for any and all reasonable out-of-pocket costs and
expenses incurred by the Note Agent in connection with the Note Agent's
activities pursuant to this Section 11.15 hereof (the "Due Diligence Fees"). In
addition to the obligations set forth in Section 11.17 of this Agreement, the
Note Agent agrees (on behalf of itself and its Affiliates, directors, officers,
employees and representatives) to use reasonable precaution to keep
confidential, in accordance with its customary procedures for handling
confidential information and in accordance with safe and sound practices, and
not to disclose to any third party, any non-public information supplied to it or
otherwise obtained by it hereunder with respect to the Loan Originator or any of
its Affiliates (including, but not limited to, the Loan File); provided,
however, that nothing herein shall prohibit the disclosure of any such
information to the extent required by statute, rule, regulation or judicial
process; provided, further that, unless specifically prohibited by applicable
law or court order, the Note Agent shall, prior to disclosure thereof, notify
the Loan Originator of any request for disclosure of any such non-public
information. The Note Agent further agrees not to use any such non-public
information for any purpose unrelated to this Agreement and that the Note Agent
shall not disclose such non-public information to any third party underwriter in
connection with a potential Disposition without obtaining a written agreement
from such third party underwriter to comply with the confidentiality provisions
of this Section 11.15.
Section 11.16 No Reliance.
Each of the Loan Originator, the Depositor and the Issuer hereby
acknowledges that it has not relied on the Note Agent or any of its officers,
directors, employees, agents and "control persons" as such term is used under
the Act and under the Securities Exchange Act of 1934, as amended, for any tax,
accounting, legal or other professional advice in connection with the
transactions contemplated by the Basic Documents, that each of the Loan
Originator, the
78
Depositor and the Issuer has retained and been advised by such tax, accounting,
legal and other professionals as it has deemed necessary in connection with the
transactions contemplated by the Basic Documents and that the Note Agent makes
no representation or warranty, and shall have no liability with respect to, the
tax, accounting or legal treatment or implications relating to the transactions
contemplated by the Basic Documents.
Section 11.17 Confidential Information.
In addition to the confidentiality requirements set forth in Section 11.15
of the Agreement, each Noteholder, as well as the Indenture Trustee and the
Disposition Agent (each of said parties singularly referred to herein as a
"Receiving Party" and collectively referred to herein as the "Receiving
Parties"), agrees to hold and treat all Confidential Information (as defined
below) in confidence and in accordance with this Section. Such Confidential
Information will not, without the prior written consent of the Servicer and the
Loan Originator, be disclosed or used by such Receiving Parties or its
subsidiaries, Affiliates, directors, officers, members, employees, agents or
controlling persons (collectively, the "Information Recipients") other than for
the purpose of making a decision to purchase or sell Notes or taking any other
permitted action under this Agreement and or any other Basic Document. Each
Receiving Party agrees to disclose Confidential Information only to its
Information Recipients who need to know it for the purpose of making a decision
to purchase or sell Notes or the taking of any other permitted action under this
Agreement and or any other Basic Document (including in connection with the
servicing of the Loans and in connection with any servicing transfers) or to
Rating Agencies or liquidity providers in the course of the Receiving Party's
business and only to the extent required for such Person's performance of their
respective evaluation of the Receiving Party's financial condition, and who are
informed by such Receiving Party of its confidential nature and who agree to be
bound by the terms of this Section 11.17. Disclosure that is not in violation of
the Right to Financial Privacy Act, the ▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act or other
applicable law by such Receiving Party of any Confidential Information at the
request of its outside auditors or governmental regulatory authorities in
connection with an examination of a Receiving Party by any such authority shall
not constitute a breach of its obligations under this Section 11.17 and shall
not require the prior consent of the Servicer and the Loan Originator.
Each Receiving Party shall be responsible for any breach of this Section
11.17 by its Information Recipients. The Note Agent may use Confidential
Information for internal due diligence purposes in connection with its analysis
of the transactions contemplated by the Basic Documents. The Disposition Agent
may disclose Confidential Information to the Disposition Participants as
required to effect Dispositions. This Section 11.17 shall terminate upon the
occurrence of an Event of Default; provided, however, that such termination
shall not relieve the Receiving Parties or their respective Information
Recipients from the obligation to comply with the ▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act or
other applicable law with respect to their use or disclosure of Confidential
Information following the occurrence of an Event of Default.
As used herein, "Confidential Information" means non-public personal
information (as defined in the ▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act and its enabling
regulations issued by the Federal Trade Commission) regarding Borrowers.
Confidential information shall not include information which (i) is or becomes
generally available to the public other than as a result of a disclosure by a
Receiving Party or any Information Recipients; (ii) was available to a Receiving
Party on a
79
non-confidential basis prior to its disclosure to Receiving Party by the
Servicer or the Loan Originator; (iii) is required to be disclosed by a
governmental authority or related governmental agencies or as otherwise required
by law; (iv) becomes available to a Receiving Party on a non-confidential basis
from a person other than the Servicer or the Loan Originator who, to the best
knowledge of such Receiving Party, is not otherwise bound by a confidentiality
agreement with the Servicer or the Loan Originator and is not otherwise
prohibited from transmitting the information to such Receiving Party.
Section 11.18 Conflicts.
Notwithstanding anything contained in the Basic Documents to the contrary,
in the event of the conflict between the terms of this Agreement and any other
Basic Document, the terms of this Agreement shall control.
Section 11.19 Limitation on Liability.
It is expressly understood and agreed by the parties hereto that (a) this
Agreement is executed and delivered by Wilmington Trust Company, not
individually or personally, but solely as Owner Trustee of Option One Owner
Trust 2003-4, in the exercise of the powers and authority conferred and vested
in it, (b) each of the representations, undertakings and agreements herein made
on the part of the Issuer is made and intended not as personal representations,
undertakings and agreements by Wilmington Trust Company but is made and intended
for the purpose for binding only the Issuer, (c) nothing herein contained shall
be construed as creating any liability on Wilmington Trust Company, individually
or personally, to perform any covenant either expressed or implied contained
herein, all such liability, if any, being expressly waived by the parties hereto
and by any Person claiming by, through or under the parties hereto and (d) under
no circumstances shall Wilmington Trust Company be personally liable for the
payment of any indebtedness or expenses of the Issuer or be liable for the
breach or failure of any obligation, representation, warranty or covenant made
or undertaken by the Issuer under this Agreement or any other related documents.
Section 11.20 No Agency.
Nothing contained herein or in the Basic Documents shall be construed to
create an agency or fiduciary relationship between the Note Agent or the
Majority Noteholders or any of their Affiliates and the Issuer, the Depositor,
the Loan Originator or the Servicer. None of the Note Agent, the Majority
Noteholders or any of their Affiliates shall be liable for any acts or actions
affected in connection with a disposition of Loans, including without
limitation, any Securitization pursuant to Section 3.06, any Loan Originator Put
or Servicer Call pursuant to Section 3.07 hereof nor any Whole Loan Sale
pursuant to Section 3.10 hereof.
(SIGNATURE PAGE FOLLOWS)
80
IN WITNESS WHEREOF, the Issuer, the Depositor, the Servicer, the Indenture
Trustee and the Loan Originator have caused their names to be signed by their
respective officers thereunto duly authorized, as of the day and year first
above written, to this SALE AND SERVICING AGREEMENT.
OPTION ONE OWNER TRUST 2003-4,
By: Wilmington Trust Company not in
its individual capacity but solely
as Owner Trustee
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Financial Services Officer
OPTION ONE LOAN WAREHOUSE
CORPORATION, as Depositor
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇' ▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇' ▇▇▇▇▇
Title: Senior Vice President
OPTION ONE MORTGAGE CORPORATION,
as Loan Originator and Servicer
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇' ▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇' ▇▇▇▇▇
Title: Senior Vice President
▇▇▇▇▇ FARGO BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Indenture Trustee
By: /s/ ▇▇▇ ▇▇▇▇▇
----------------------------------
Name: ▇▇▇ ▇▇▇▇▇
Title: Vice President
Signature Page
to
Sale and Servicing Agreement
EXHIBIT A
FORM OF NOTICE OF ADDITIONAL NOTE PRINCIPAL BALANCE
[Letterhead of Option One Loan Warehouse Corporation]
[Date]
Option One Owner Trust 2003-4
c/o Wilmington Trust Company
▇▇▇▇▇▇ Square North
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Administration
▇▇▇▇▇ Fargo Bank Minnesota, National Association
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Option One Owner Trust 2003-4
Bank One, NA (Main Office Chicago)
Asset Backed Finance
Suite 1L1-0079, 1-19
▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇)▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇)▇▇▇ ▇▇▇▇
Re: Option One Owner Trust 2003-4 Mortgage-Backed Notes
Reference is made to the Sale and Servicing Agreement, dated as of August
8, 2003 (the "Sale and Servicing Agreement"), among Option One Owner Trust
2003-4, as Issuer, Option One Loan Warehouse Corporation, as Depositor, Option
One Mortgage Corporation, as Loan Originator and Servicer, and ▇▇▇▇▇ Fargo Bank
Minnesota, National Association, as Indenture Trustee. Capitalized terms not
defined herein shall have the meanings assigned to such terms in the Sale and
Servicing Agreement.
The undersigned ____________, a duly appointed ___________ of Option One
Loan Warehouse Corporation, acting in such capacity, hereby requests an advance
of Additional Note Principal Balance in an amount of $_____________, such amount
to be advanced on__________, 200_____, a Business Day at least two Business Days
from the date hereof.
Very truly yours,
OPTION ONE LOAN WAREHOUSE
CORPORATION
By: __________________________________
Name:
Title:
A-l
EXHIBIT B
FORM OF SERVICER'S REMITTANCE REPORT TO INDENTURE TRUSTEE
Trial Balance Information Report P139
Next
Investor Borrower Pymt Interest P&I Principal
Investor # Category Loan # Loan # Name Date Rate Pymt Balance
---------- -------- ------ -------- -------- ---- -------- ---- ---------
---------- -------- ----- -------- -------- ---- -------- ---- ---------
---------- -------- ----- -------- -------- ---- -------- ---- ---------
Collection Activity Information Report S215
Pymt
Investor Loan Investor Transaction Pymt Due Service Net Total Principal Late
# Category # Loan # Date # Date Escrow Principal Interest Fees Interest Deposit Balance Charges
-------- -------- ---- -------- ----------- ---- ---- ------ --------- -------- ------- -------- ------- --------- -------
-------- -------- ---- -------- ----------- ---- ---- ------ --------- -------- ------- -------- ------- --------- -------
-------- -------- ---- -------- ----------- ---- ---- ------ --------- -------- ------- -------- ------- --------- -------
Payoff Activity Information Report S214
Next
Investor Loan Investor Date P&I Interest Service Pymt Service Net Prepay Total
# Category # Loan # Paid Pymt Rate Fee Rate Date Principal Interest Fees Interest Premium Collected
-------- -------- ---- -------- ---- ---- -------- -------- ---- --------- -------- ------- -------- ------- ---------
-------- -------- ---- -------- ---- ---- -------- -------- ---- --------- -------- ------- -------- ------- ---------
-------- -------- ---- -------- ---- ---- -------- -------- ---- --------- -------- ------- -------- ------- ---------
B-1
EXHIBIT C
FORM OF S&SA ASSIGNMENT
ASSIGNMENT NO.________________OF LOANS ("S&SA Assignment"),
dated_____________________________, (the "Transfer Date"), by OPTION ONE LOAN
WAREHOUSE CORPORATION, (the "Depositor") to OPTION ONE OWNER TRUST 2003-4 (the
"Issuer") pursuant to the Sale and Servicing Agreement referred to below.
WITNESSETH:
WHEREAS, the Depositor and the Issuer are parties to the Sale and
Servicing Agreement dated as of August 8, 2003 (the "Sale and Servicing
Agreement") among the Depositor, the Issuer, the Servicer, the Loan Originator
and the Indenture Trustee on behalf of the Noteholders, hereinafter as such
agreement may have been, or may from time to time be, amended, supplemented or
otherwise modified;
WHEREAS, pursuant to the Sale and Servicing Agreement, the Depositor
wishes to sell, convey, transfer and assign Loans to the Issuer in exchange for
cash consideration, the Trust Certificates and other good and valid
consideration the receipt and sufficiency of which is hereby acknowledged; and
WHEREAS, the Issuer is willing to acquire such Loans subject to the terms
and conditions hereof and of the Sale and Servicing Agreement;
NOW THEREFORE, the Depositor and the Issuer hereby agree as follows:
1. Defined Terms. All capitalized terms defined in the Sale and Servicing
Agreement and used herein shall have such defined meanings when used herein,
unless otherwise defined herein.
2. Designation of Loans. The Depositor does hereby deliver herewith a Loan
Schedule containing a true and complete list of each Loan to be conveyed on the
Transfer Date. Such list is marked as Schedule A to this S&SA Assignment and is
hereby incorporated into and made a part of this S&SA Assignment.
3. Conveyance of Loans. The Depositor hereby sells, transfers, assigns and
conveys to the Issuer, without recourse, all of the right, title and interest of
the Depositor in and to the Loans and all proceeds thereof listed on the Loan
Schedule attached hereto, including all interest and principal received by the
Depositor or the Servicer on or with respect to the Loans on or after the
related Transfer Cut-off Date, together with all right, title and interest in
and to the proceeds of any related Mortgage Insurance Policies.
4. Issuer Acknowledges Assignment. As of the Transfer Date, pursuant to
this S&SA Assignment and Section 2.01(a) of the Sale and Servicing Agreement,
the Issuer acknowledges its receipt of the Loans listed on the attached Loan
Schedule and all other related property in the Trust Estate.
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5. Acceptance of Rights But Not Obligations. The foregoing sale, transfer,
assignment, set over and conveyance does not, and is not intended to, result in
a creation or an assumption by the Issuer of any obligation of the Depositor,
the Loan Originator or any other Person in connection with this S&SA Assignment
or under any agreement or instrument relating thereto except as specifically set
forth herein.
6. Depositor Acknowledges Receipt of Sales Price. The Depositor hereby
acknowledges receipt of the Sales Price or that is otherwise distributed at its
direction.
7. Conditions Precedent. The conditions precedent in Section 2.06(a) of
the Sale and Servicing Agreement have been satisfied.
8. Limitation on Liability. Section 11.19 of the Sale and Servicing
Agreement is incorporated herein by reference.
9. Counterparts. This S&SA Assignment may be executed in any number of
counterparts all of which taken together shall constitute one and the same
instrument.
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IN WITNESS WHEREOF, the undersigned have caused this S&SA Assignment to be
duly executed and delivered by their respective duly authorized officers on the
day and year first above written.
OPTION ONE LOAN WAREHOUSE CORPORATION,
as Depositor
By: _______________________________
Name:
Title:
OPTION ONE OWNER TRUST 2003-4,
as Issuer
By: Wilmington Trust Company
not in its individual
capacity but solely as
Owner Trustee
By: _______________________________
Name:
Title:
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EXHIBIT D
LOAN SCHEDULE
The Loan Schedule shall set forth the following information with respect
to each Loan (other than Wet Funded Loans):
(1) the Loan Originator's Loan identifying number;
(2) the Mortgagor's name and social security number;
(3) the street address of the Mortgaged Property, including the
state and zip code;
(4) a code indicating whether the Mortgaged Property was
represented by the Mortgagor as being owner-occupied on the
date of origination;
(5) the type of Residential Dwelling constituting the Mortgaged
Property;
(6) the months to maturity at origination, based on the original
amortization schedule;
(7) the loan-to-value ratio at origination;
(8) the rate of interest in effect on the Transfer Cut-off Date;
(9) the date on which the first monthly payment was due, and, if
different, the date on which monthly payments are due as of
the Transfer Cut-off Date;
(10) the stated maturity date;
(11) the amount of the monthly payment due at origination;
(12) the amount of the monthly payment due on the first due date
after the Transfer Cut-off Date;
(13) the interest paid-through date;
(14) the last monthly payment date on which any portion of the
monthly payment was applied to the reduction of principal;
(15) the original principal balance;
(16) the unpaid principal balance as of the close of business on
the Transfer Cut-off Date;
(17) if the Loan is an adjustable-rate loan, the initial adjustment
date thereunder, including the look-back period;
(18) if the Loan is an adjustable-rate loan, the gross margin over
the applicable interest rate index;
(19) a code indicating the purpose of the Loan, as indicated by the
Mortgagor (i.e., purchase financing, rate/term refinancing or
cash-out refinancing);
(20) if the Loan is an adjustable-rate loan, the maximum interest
rate;
(21) if the Loan is an adjustable-rate loan, the minimum interest
rate;
(22) the interest rate at origination;
(23) if the Loan is an adjustable-rate loan, the periodic rate cap
and the maximum adjustment in the interest rate that may be
made on the first adjustment date immediately following the
Transfer Cut-off Date;
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(24) a code indicating the documentation program (i.e., full
documentation, limited documentation or stated income);
(25) if the Loan is an adjustable-rate loan, the applicable
interest rate index to which the gross margin is added,
including the source of such index;
(26) if the Loan is an adjustable-rate loan, the first adjustment
date thereunder to occur after the Transfer Cut-off Date;
(27) the risk grade;
(28) any risk upgrade;
(29) the appraised value of the Mortgaged Property at origination;
(30) if different from the appraised value, the dollar value of the
review appraisal of the Mortgaged Property at origination;
(31) the sale price of the Mortgaged Property, if applicable;
(32) the product type code (e.g., 3/27, 2/28, balloon, etc.);
(33) a code indicating whether the Loan is a first-lien loan or a
second-lien loan;
(34) if the Loan is a second-lien loan, the outstanding principal
balance of the first lien on the date of origination of such
Loan;
(35) if the Loan is a second-lien loan, the combined loan-to-value
ratio of such Loan and the first lien to which it is subject,
as of the origination date of such Loan;
(36) whether such Loan is 30 days or more Delinquent;
(37) the prepayment penalty code;
(38) the prepayment penalty term;
(39) the late charge;
(40) the rounding code (next highest or nearest 0.125%); and
(41) the Mortgagor's FICO score, if any.
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The Loan Schedule to be delivered with respect to Wet Funded Loans shall
set forth the following information:
MBMS Long Format '97 w\ Mersflag
Start length/ End
Field Pos width Pos Dec Definition
-------- ----- ------- ----- --- ------------------------------------------------
Loanidp 1 13 13 0 Previous loan number/ (OLD LOAN NUMBER OR
INVESTOR LOAN NUMBER)
Lname 14 35 48 0 Primary borrower's name/ (LAST, FIRST MIDDLE)
Casenum 49 13 61 0 FHA or VA case number
Closed 62 6 67 0 Date the loan closed/ (MMDDYY)
Firstdue 68 6 73 0 Date first pymt on loan was due/ (MMDDYY)
Issuer 74 4 77 0 User defined issuer code/ (LEAVE BLANK -- PAD
WITH SPACES)
Loanid 78 13 90 0 Loan number/ (SERVICER LOAN NUMBER)
Maturity 91 6 96 0 Maturity date of the loan/ (MMDDYY)
Rate 97 9 105 0 Interest rate on note/ (X 1000 TO REMOVE DECIMAL
(7.125% IS 7125)
Lnamount 106 11 116 0 Original loan amount/ (X 100 TO REMOVE DECIMAL
(100000.00 IS 1000000)
PI 117 10 126 0 Orig principal plus interest/ (X 100 TO REMOVE
DECIMAL (1000.00 IS 100000)
Poolnum 127 10 136 0 Pool number/ (AGENCY POOL NUMBER OR PRIVATE
INVESTOR CODE - CPI)
State 137 2 138 0 Property State abbreviation/ (E.G., NY)
City 139 15 153 0 Property City
Zip 154 5 158 0 Property Zip code
Address 159 35 193 0 Property address/ (NUMBER AND STREET NAME)
Sid 194 23 216 0 Barcode ID (LEAVE BLANK -- PAD WITH SPACES)
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MBMS Long Format '97 w\ Mersflag continued:
Start length/ End
Field Pos width Pos Dec Definition
--------- ----- ------- ----- ----- -------------------------------------------
Armadj 217 6 222 0 1st Adjustment Date (MMDDYY)
Armconv 223 1 223 0 Convertible Account (Y/N)
Armround 224 6 229 0 Percent Rounded (X 100000 TO REMOVE DECIMAL
(7.12500% IS 712500)
Armacap 230 5 234 0 Annual Cap (X 1000 TO REMOVE DECIMAL
(10.125% IS 10125)
Armlcap 235 5 239 0 Lifetime Cap (X 1000 TO REMOVE DECIMAL
(10.125% IS 10125)
Armmargin 240 4 243 0 Margin (X 1000 TO REMOVE DECIMAL (7.125% IS
7125)
Armfloor 244 5 248 0 Floor (X 1000 TO REMOVE DECIMAL (10.125% IS
10125)
Mersmin 249 18 266 0 Mers Min
Mersflag 267 1 267 0 Mersflag
Filler 268 33 300 0 Filler field/ (PAD WITH SPACES)
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EXHIBIT E
REPRESENTATIONS AND WARRANTIES REGARDING THE LOANS
The Loan Originator hereby represents and warrants to the other parties to
the Sale and Servicing Agreement and the Securityholders, with respect to each
such Loan as of the related Transfer Date (except as otherwise expressly agreed
in writing by the Majority Noteholders):
(i) The information set forth in the related Loan Schedule and the
information contained on the electronic data file delivered to the Initial
Noteholder is complete, true and correct;
(ii) All payments required to be made up to the close of business on
the Transfer Date for such Loan under the terms of the Promissory Note have been
made; the Loan Originator has not advanced funds, or induced, solicited or
knowingly received any advance of funds from a party other than the owner of the
related Mortgaged Property, directly or indirectly, for the payment of any
amount required by the Promissory Note or Mortgage;
(iii) There are no delinquent taxes, ground rents, water charges,
sewer rents, assessments, insurance premiums, leasehold payments, including
assessments payable in future installments or other outstanding charges
affecting the related Mortgaged Property;
(iv) The terms of the Promissory Note and the Mortgage have not been
impaired, waived, altered or modified in any respect, except by written
instruments, recorded in the applicable public recording office if necessary to
maintain the lien priority of the Mortgage, and which have been delivered to the
Custodian; the substance of any such waiver, alteration or modification has been
approved by the insurer under the Primary Insurance Policy, if any, and the
title insurer, to the extent required by the related policy, and is reflected on
the related Loan Schedule. No instrument of waiver, alteration or modification
has been executed, and no Borrower has been released, in whole or in part,
except in connection with an assumption agreement approved by the insurer under
the Primary Insurance Policy, if any, the title insurer, to the extent required
by the policy, and which assumption agreement has been delivered to the
Custodian and the terms of which are reflected in the related Loan Schedule;
(v) The Promissory Note and the Mortgage are not subject to any
right of rescission, set-off, counterclaim or defense, including the defense of
usury, nor will the operation of any of the terms of the Promissory Note and the
Mortgage, or the exercise of any right thereunder, render the Mortgage
unenforceable, in whole or in part, or subject to any right of rescission,
set-off, counterclaim or defense, including the defense of usury and no such
right of rescission, set-off, counterclaim or defense has been asserted with
respect thereto;
(vi) All buildings upon the Mortgaged Property are insured by an
insurer acceptable to ▇▇▇▇▇▇ ▇▇▇ or ▇▇▇▇▇▇▇ Mac against loss by fire, hazards of
extended coverage and such other hazards as are customary in the area where the
Mortgaged Property is located, pursuant to insurance policies conforming to the
requirements of the Servicing Addendum. All such insurance policies contain a
standard mortgagee clause naming the Loan Originator, its successors and assigns
as mortgagee and all premiums thereon have been paid. If the Mortgaged Property
is in an area identified on a Flood Hazard Map or Flood Insurance Rate Map
issued by
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the Federal Emergency Management Agency as having special flood hazards (and
such flood insurance has been made available) a flood insurance policy meeting
the requirements of the current guidelines of the Federal Insurance
Administration is in effect which policy conforms to the requirements of ▇▇▇▇▇▇
Mae and ▇▇▇▇▇▇▇ Mac. The Mortgage obligates the Borrower thereunder to maintain
all such insurance at the Borrower's cost and expense, and on the Borrower's
failure to do so, authorizes the holder of the Mortgage to maintain such
insurance at Borrower's cost and expense and to seek reimbursement therefor from
the Borrower;
(vii) Any and all requirements of any federal, state or local law
including, without limitation, usury, truth in lending, real estate settlement
procedures, consumer credit protection, equal credit opportunity, fair housing
or disclosure laws applicable to the origination and servicing of mortgage loans
of a type similar to the Loans have been complied with;
(viii) The Mortgage has not been satisfied, canceled, subordinated
or rescinded, in whole or in part, and the Mortgaged Property has not been
released from the lien of the Mortgage, in whole or in part, nor has any
instrument been executed that would effect any such satisfaction, cancellation,
subordination, rescission or release;
(ix) The Mortgage is a valid, existing and enforceable first lien
(or, with respect to Loans identified as Second Lien Loans on the Loan Schedule,
second lien) on the Mortgaged Property, including all improvements on the
Mortgaged Property subject only to (a) the lien of current real property taxes
and assessments not yet due and payable, (b) covenants, conditions and
restrictions, rights of way, easements and other matters of the public record as
of the date of recording being acceptable to mortgage lending institutions
generally and specifically referred to in the lender's title insurance policy
delivered to the originator of the Loan and which do not adversely affect the
Appraised Value of the Mortgaged Property, and (c) other matters to which like
properties are commonly subject which do not materially interfere with the
benefits of the security intended to be provided by the Mortgage or the use,
enjoyment, value or marketability of the related Mortgaged Property. Any
security agreement, chattel mortgage or equivalent document related to and
delivered in connection with the Loan establishes and creates a valid, existing
and enforceable first lien and first priority security interest on the property
described therein and the Loan Originator has full right to sell and assign the
same to the Depositor and the Issuer. The Mortgaged Property was not, as of the
date of origination of the Loan, subject to a mortgage, deed of trust, deed to
secure debt or other security instrument creating a lien subordinate to the lien
of the Mortgage;
(x) The Promissory Note and the related Mortgage are genuine and
each is the legal, valid and binding obligation of the maker thereof,
enforceable in accordance with its terms;
(xi) All parties to the Promissory Note and the Mortgage had legal
capacity to enter into the Loan and to execute and deliver the Promissory Note
and the Mortgage, and the Promissory Note and the Mortgage have been duly and
properly executed by such parties. The Borrower is a natural person;
(xii) The proceeds of the Loan have been fully disbursed to or for
the account of the Borrower and there is no obligation for the mortgagee to
advance additional funds
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thereunder and any and all requirements as to completion of any on-site or
off-site improvement and as to disbursements of any escrow funds therefor have
been complied with. All costs, fees and expenses incurred in making or closing
the Loan and the recording of the Mortgage have been paid, and the Borrower is
not entitled to any refund of any amounts paid or due to the Loan Originator
pursuant to the Promissory Note or Mortgage;
(xiii) The Loan Originator is the sole legal, beneficial and
equitable owner of the Promissory Note and the Mortgage and has full right to
transfer and sell the Loan to the Depositor and the Issuer free and clear of any
encumbrance, equity, lien, pledge, charge, claim or security interest;
(xiv) All parties which have had any interest in the Loan, whether
as mortgagee, assignee, pledgee or otherwise, are (or, during the period in
which they held and disposed of such interest, were) in compliance with any and
all applicable "doing business" and licensing requirements of the laws of the
state wherein the Mortgaged Property is located;
(xv) The Loan is covered by a lender's title insurance policy
(which, in the case of an ARM has an adjustable rate mortgage endorsement)
commercially acceptable to prudent mortgage lending institutions, issued by a
title insurer licensed and qualified to do business in the jurisdiction where
the Mortgaged Property is located, insuring (subject to the exceptions contained
in (ix)(a) and (b) above) the Loan Originator, its successors and assigns as to
the first priority lien of the Mortgage in the original principal amount of the
Loan and, with respect to any ARM, against any loss by reason of the invalidity
or unenforceability of the lien resulting from the provisions of the Mortgage
providing for adjustment in the Loan Interest Rate and Monthly Payment.
Additionally, such lender's title insurance policy affirmatively insures ingress
and egress to and from the Mortgaged Property, and against encroachments by or
upon the Mortgaged Property or any interest therein. The Loan Originator is the
sole insured of such lender's title insurance policy, and such lender's title
insurance policy is in full force and effect and will be in full force and
effect, and the issuer will be insured thereunder, upon the consummation of the
transactions contemplated by this Agreement. No claims have been made under such
lender's title insurance policy, and no prior holder of the related Mortgage,
including the Loan Originator, has done, by act or omission, anything which
would impair the coverage of such lender's title insurance policy;
(xvi) There is no default, breach, violation or event of
acceleration existing under the Mortgage or the Promissory Note and no event
which, with the passage of time or with notice and the expiration of any grace
or cure period, would constitute a default, breach, violation or event of
acceleration, and the Loan Originator has not waived any default, breach,
violation or event of acceleration;
(xvii) There are no mechanics' or similar liens or claims which have
been filed for work, labor or material (and no rights are outstanding that under
law could give rise to such lien) affecting the related Mortgaged Property which
are or may be liens prior to, or equal or coordinate with, the lien of the
related Mortgage;
(xviii) All improvements which were considered in determining the
Appraised Value of the related Mortgaged Property lay wholly within the
boundaries and building
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restriction lines of the Mortgaged Property, and no improvements on adjoining
properties encroach upon the Mortgaged Property;
(xix) The Loan was originated by the Loan Originator or by a savings
and loan association, a savings bank, a commercial bank or similar banking
institution which is supervised and examined by a federal or state authority, or
by a mortgagee approved as such by the Secretary of HUD;
(xx) Principal payments on the Loan commenced no more than two
months after the proceeds of the Loan were disbursed. The Loan bears interest at
the Loan Interest Rate. With respect to each Loan unless otherwise stated on the
Loan Schedule, the Promissory Note is payable on the first day of each month in
Monthly Payments, which, in the case of each fixed-rate Loan except for Balloon
Loans, are sufficient to fully amortize the original principal balance over the
original term thereof and to pay interest at the related Loan Interest Rate,
and, in the case of each ARM, are changed on each Adjustment Date, and in any
case, are sufficient to fully amortize the original principal balance over the
original term thereof and to pay interest at the related Loan Interest Rate. The
Promissory Note does not permit negative amortization. No Loan is a Convertible
Mortgage Loan;
(xxi) The origination and collection practices used by the Loan
Originator with respect to each Promissory Note and Mortgage have been in all
respects legal, proper, prudent and customary in the mortgage origination and
servicing industry. The Loan has been serviced by the Loan Originator and any
predecessor servicer in accordance with the terms of the Promissory Note. With
respect to escrow deposits and Escrow Payments, if any, all such payments are in
the possession of, or under the control of, the Loan Originator and there exist
no deficiencies in connection therewith for which customary arrangements for
repayment thereof have not been made. No escrow deposits or Escrow Payments or
other charges or payments due the Loan Originator have been capitalized under
any Mortgage or the related Promissory Note and no such escrow deposits or
Escrow Payments are being held by the Loan Originator for any work on a
Mortgaged Property which has not been completed;
(xxii) The Mortgaged Property is free of material damage and waste
and there is no proceeding pending for the total or partial condemnation
thereof;
(xxiii) The Mortgage and related Promissory Note contain customary
and enforceable provisions such as to render the rights and remedies of the
holder thereof adequate for the realization against the Mortgaged Property of
the benefits of the security provided thereby, including, (a) in the case of a
Mortgage designated as a deed of trust, by trustee's sale, and (b) otherwise by
judicial foreclosure. The Mortgaged Property has not been subject to any
bankruptcy proceeding or foreclosure proceeding and the Borrower has not filed
for protection under applicable bankruptcy laws. There is no homestead or other
exemption available to the Borrower which would interfere with the right to sell
the Mortgaged Property at a trustee's sale or the right to foreclose the
Mortgage. The Borrower has not requested, and the Loan Originator has not
allowed to the Borrower any relief under the Soldiers and Sailors Civil Relief
Act of 1940;
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(xxiv) The Loan was underwritten in accordance with the underwriting
standards of the Loan Originator in effect at the time the Loan was originated;
and the Promissory Note and Mortgage are on forms acceptable to prudent mortgage
lending institutions in the secondary market;
(xxv) The Promissory Note is not and has not been secured by any
collateral except the lien of the corresponding Mortgage on the Mortgaged
Property and the security interest of any applicable security agreement or
chattel mortgage referred to in (x) above;
(xxvi) The Loan File contains an appraisal of the related Mortgaged
Property which satisfied the standards of ▇▇▇▇▇▇ ▇▇▇ or ▇▇▇▇▇▇▇ Mac and was made
and signed, prior to the approval of the Loan application, by a qualified
appraiser, duly appointed by the Loan Originator, who had no interest, direct or
indirect in the Mortgaged Property or in any loan made on the security thereof,
whose compensation is not affected by the approval or disapproval of the Loan
and who met the minimum qualifications of ▇▇▇▇▇▇ Mae or ▇▇▇▇▇▇▇ Mac. Each
appraisal of the Loan was made in accordance with the relevant provisions of the
Financial Institutions Reform, Recovery, and Enforcement Act of 1989;
(xxvii) In the event the Mortgage constitutes a deed of trust, a
trustee, duly qualified under applicable law to serve as such, has been properly
designated and currently so serves and is named in the Mortgage, and no fees or
expenses are or will become payable by the Issuer to the trustee under the deed
of trust, except in connection with a trustee's sale after default by the
Borrower;
(xxviii) No Loan contains provisions pursuant to which Monthly
Payments are (a) paid or partially paid with funds deposited in any separate
account established by the Loan Originator, the Borrower, or anyone on behalf of
the Borrower, (b) paid by any source other than the Borrower or (c) contains any
other similar provisions which may constitute a "buydown" provision. The Loan is
not a graduated payment mortgage loan and the Loan does not have a shared
appreciation or other contingent interest feature;
(xxix) The Borrower has executed a statement to the effect that the
Borrower has received all disclosure materials required by applicable law with
respect to the making of fixed rate mortgage loans in the case of fixed-rate
Loans, and adjustable rate mortgage loans in the case of ARMs and rescission
materials with respect to Refinanced Loans, and such statement is and will
remain in the Loan File;
(xxx) No Loan was made in connection with (a) the construction or
rehabilitation of a Mortgaged Property or (b) facilitating the trade-in or
exchange of a Mortgaged Property;
(xxxi) The Loan Originator has no knowledge of any circumstances or
condition with respect to the Mortgage, the Mortgaged Property, the Borrower or
the Borrower's credit standing that can reasonably be expected to cause the Loan
to be an unacceptable investment, cause the Loan to become delinquent, or
adversely affect the value of the Loan;
(xxxii) Each Loan listed on the Loan Schedule as being subject to a
Primary Mortgage Insurance Policy is and will be subject to a Primary Mortgage
Insurance Policy, issued
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by a Qualified Insurer, which insures that portion of the Loan in excess of the
portion of the Appraised Value of the Mortgaged Property required by ▇▇▇▇▇▇ Mae.
All provisions of such Primary Insurance Policy have been and are being complied
with, such policy is in full force and effect, and all premiums due thereunder
have been paid. Any Mortgage subject to any such Primary Insurance Policy
obligates the Borrower thereunder to maintain such insurance and to pay all
premiums and charges in connection therewith. The Loan Interest Rate for the
Loan does not include any such insurance premium;
(xxxiii) The Mortgaged Property is lawfully occupied under
applicable law; all inspections, licenses and certificates required to be made
or issued with respect to all occupied portions of the Mortgaged Property and,
with respect to the use and occupancy of the same, including but not limited to
certificates of occupancy, have been made or obtained from the appropriate
authorities;
(xxxiv) No error, omission, misrepresentation, negligence, fraud or
similar occurrence with respect to a Loan has taken place on the part of any
person, including without limitation the Borrower, any appraiser, any builder or
developer, or any other party involved in the origination of the Loan or in the
application of any insurance in relation to such Loan;
(xxxv) The Assignment of Mortgage is in recordable form and is
acceptable for recording under the laws of the jurisdiction in which the
Mortgaged Property is located;
(xxxvi) Any principal advances made to the Borrower prior to the
Transfer Cutoff Date have been consolidated with the outstanding principal
amount secured by the Mortgage, and the secured principal amount, as
consolidated, bears a single interest rate and single repayment term. The lien
of the Mortgage securing the consolidated principal amount is expressly insured
as having first lien priority by a title insurance policy, an endorsement to the
policy insuring the mortgagee's consolidated interest or by other title evidence
acceptable to ▇▇▇▇▇▇ ▇▇▇ and ▇▇▇▇▇▇▇ Mac. The consolidated principal amount does
not exceed the original principal amount of the Loan;
(xxxvii) Except as set forth on the Loan Schedule, no Loan has a
balloon payment feature;
(xxxviii) If the residential dwelling on the Mortgaged Property is a
condominium unit or a unit in a planned unit development (other than a de
minimis planned unit development) such condominium or planned unit development
project meets the eligibility requirements of ▇▇▇▇▇▇ Mae and ▇▇▇▇▇▇▇ Mac;
(xl) Interest on each Loan is calculated on the basis of a 360-day
year consisting of twelve 30-day months;
(xli) The Mortgaged Property is in material compliance with all
applicable environmental laws pertaining to environmental hazards including,
without limitation, asbestos, and neither the Loan Originator has received, nor
has the related Borrower notified the Loan Originator that it has received, any
notice of any violation or potential violation of such law; and
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(xlii) No Loan is in violation of the Home Ownership and Equity
Protection Act of 1994.
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EXHIBIT F
SERVICING ADDENDUM
Section 4.01 Duties of the Servicer.
The Servicer, as independent contract servicer, shall service and
administer the Loans in accordance with this Agreement and shall have full power
and authority, acting alone, to do or cause to be done 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 duties of the Servicer shall include collecting and posting of all
payments, responding to inquiries of Borrowers or by federal, state or local
government authorities with respect to the Loans, investigating delinquencies,
reporting tax information to Borrowers in accordance with its customary
practices and accounting for collections and furnishing monthly and annual
statements to the Indenture Trustee and the Initial Noteholder, with respect to
distributions, making Servicing Advances pursuant hereto. The Servicer shall
follow its customary standards, policies and procedures in performing its duties
as Servicer. The Servicer shall cooperate with the Indenture Trustee and furnish
to the Indenture Trustee with reasonable promptness information in its
possession as may be necessary or appropriate to enable the Indenture Trustee to
perform its tax reporting duties hereunder, if any.
The Servicer shall give prompt notice to the Indenture Trustee and the
Initial Noteholder of any Proceeding, of which the Servicer has actual
knowledge, to (i) assert a claim against the Trust or (ii) assert jurisdiction
over the Trust.
In the event of a Disposition or other removal of a Loan from the Trust
Estate, the Servicer's obligations under this Agreement shall be terminated with
respect to such Loan.
The Servicer agrees that in the event that any Notes are outstanding after
the applicable Maturity Date and the Majority Noteholders may appoint a
successor servicer in accordance with the provisions of Section 9.02. The
Majority Noteholders may, by written notice to the Servicer and the Indenture
Trustee, elect to have the Servicer continue its duties hereunder after such
Maturity Date.
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 Borrower
if in the Servicer's reasonable and prudent determination such waiver,
modification, postponement or indulgence is not materially adverse to the Issuer
or the Noteholders; provided, however, that the Servicer shall not permit any
modification with respect to any Loan that would change the Loan Interest Rate,
defer or forgive the payment thereof or of any principal or interest payments,
reduce the outstanding principal amount (except for actual payments of
principal), make additional advances of additional principal or extend the final
maturity date on such Loan. Without limiting the generality of the foregoing,
the Servicer shall continue, and is hereby authorized and empowered, to execute
and deliver on behalf of itself, and the Issuer, 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 Property. If reasonably required by the Servicer, the Issuer
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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.
In servicing and administering the Loans, the Servicer shall employ
procedures including collection procedures and exercise the same care that it
customarily employs and exercises in servicing and administering mortgage loans
for its own account giving due consideration to accepted mortgage servicing
practices of prudent lending institutions and the Issuer's and the Noteholders'
reliance on the Servicer.
Section 4.02 Collection of Loan Payments.
Continuously from the date hereof until the principal and interest on all
Loans are paid in full, the Servicer shall proceed diligently to collect all
payments due under each Loan when the same shall become due and payable and
shall, to the extent such procedures shall be consistent with this Agreement and
the terms and provisions of any related Primary Insurance Policy, follow such
collection procedures as it follows with respect to mortgage loans comparable to
the Loans and held for its own account. Further, the Servicer shall take special
care in ascertaining and estimating annual ground rents, taxes, assessments,
water rates, fire and hazard insurance premiums, mortgage insurance premiums,
and all other charges that, as provided in the Mortgage, will become due and
payable to the end that the installments payable by the Borrowers will be
sufficient to pay such charges as and when they become due and payable.
Section 4.03 Realization Upon Defaulted Loans.
(a) The Servicer shall use its best efforts, consistent with the
procedures that the Servicer would use in servicing loans for its own account,
to foreclose upon or otherwise comparably convert the ownership of such
Mortgaged Properties as come into and continue in default and as to which no
satisfactory arrangements can be made for collection of delinquent payments
pursuant to Section 4.01. The Servicer shall use its best efforts to realize
upon Defaulted Loans in such a manner as will maximize the receipt of principal
and interest by the Issuer, taking into account, among other things, the timing
of foreclosure proceedings; provided, however, that the Servicer shall not sell
any Defaulted Loan unless it has been directed to do so by the Majority
Noteholder. The foregoing is subject to the provisions that, in any case in
which Mortgaged Property shall have suffered damage, the Servicer shall not be
required to expend its own funds toward the restoration of such property in
excess of $2,000 unless it shall determine in its discretion (i) that such
restoration will increase the proceeds of liquidation of the related Loan to the
Issuer after reimbursement to itself for such expenses, and (ii) that such
expenses will be recoverable by the Servicer through Mortgage Insurance Proceeds
or Liquidation Proceeds from the related Mortgaged Property. In the event that
any payment due under any Loan is not paid when the same becomes due and
payable, or in the event the Borrower fails to perform any other covenant or
obligation under the Loan and such failure continues beyond any applicable grace
period, the Servicer shall take such action as it shall deem to be in the best
interest of the Issuer and the Noteholders. The Servicer shall notify the Issuer
and the Noteholders in writing of the commencement of foreclosure proceedings.
In such connection, the Servicer shall be responsible for all costs and expenses
incurred by it in any such proceedings; provided, however, that it shall be
entitled to reimbursement thereof from the related Mortgaged Property.
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(b) Notwithstanding the foregoing provisions of this Section 4.03, with
respect to any Loan as to which the Servicer has received actual notice of, or
has actual knowledge of, the presence of any toxic or hazardous substance on the
related Mortgaged Property the Servicer shall not either (i) obtain title to
such Mortgaged Property as a result of or in lieu of foreclosure or otherwise,
or (ii) otherwise acquire possession of, or take any other action, with respect
to, such Mortgaged Property if, as a result of any such action, the Issuer would
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 the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended from time to time, or any comparable law, unless the Servicer has also
previously determined, based on its reasonable judgment and a prudent report
prepared by a Person who regularly conducts environmental audits using customary
industry standards, that:
(1) such Mortgaged Property is in compliance with applicable
environmental laws or, if not, that it would be in the best economic
interest of the Issuer and the Noteholders to take such actions as
are necessary to bring the Mortgaged Property into compliance
therewith; and
(2) there, are no circumstances present at such Mortgaged Property
relating to the use, management or disposal of any hazardous
substances, hazardous materials, hazardous wastes, or
petroleum-based materials for which investigation, testing,
monitoring, containment, clean-up or remediation could be required
under any federal, state or local law or regulation, or that if any
such materials are present for which such action could be required,
that it would be in the best economic interest of the Issuer and the
Noteholders to take such actions with respect to the affected
Mortgaged Property.
The cost of the environmental audit report contemplated by this Section
4.03 shall be advanced by the Servicer, subject to the Servicer's right to be
reimbursed therefor from the Collection Account as provided in Section 5.01(c).
If the Servicer determines, as described above, that it is in the best
economic interest of the Issuer and the Noteholders to take such actions as are
necessary to bring any such Mortgaged Property into compliance with applicable
environmental laws, or to take such action with respect to the containment,
clean-up or remediation of hazardous substances, hazardous materials, hazardous
wastes, or petroleum-based materials affecting any such Mortgaged Property, then
the Servicer shall take such action as it deems to be in the best economic
interest of the Issuer and the Noteholders. The cost of any such compliance,
containment, cleanup or remediation shall be advanced by the Servicer, subject
to the Servicer's right to be reimbursed therefor from the Collection Account as
provided in Section 5.01(c).
(c) The Servicer shall determine, with respect to each Defaulted Loan,
when it has recovered, whether through trustee's sale, foreclosure sale or
otherwise, all amounts it expects to recover from or on account of such
Defaulted Loan, whereupon such Loan shall become a "Liquidated Loan" and shall
promptly deliver to the Initial Noteholder a related liquidation report with
respect to such Liquidated Loan.
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Section 4.04 Establishment of Escrow Accounts; Deposits in Escrow
Accounts.
The Servicer shall segregate and hold all funds collected and received
pursuant to each Loan which constitute Escrow Payments separate and apart from
any of its own funds and general assets and shall establish and maintain one or
more Escrow Accounts, in accordance with the related Mortgage and applicable
law.
The Servicer shall deposit in the Escrow Account or Accounts within two
(2) Business Days after receipt, and retain therein, (i) all Escrow Payments
collected on account of the Loans, for the purpose of effecting timely payment
of any such items as required under the terms of this Agreement, and (ii) all
Mortgage Insurance Proceeds which are to be applied to the restoration or repair
of any Mortgaged Property. The Servicer shall make withdrawals therefrom only to
effect such payments as are required under this Agreement, and for such other
purposes as shall be as set forth or in accordance with Section 4.06. The
Servicer shall be entitled to retain any interest paid on funds deposited in the
Escrow Account by the depository institution other than interest on escrowed
funds required by law to be paid to the Borrower and, to the extent required by
law, the Servicer shall pay interest on escrowed funds to the Borrower
notwithstanding that the Escrow Account is non-interest bearing or that interest
paid thereon is insufficient for such purposes.
Section 4.05 Permitted Withdrawals From Escrow Account.
Withdrawals from the Escrow Account may be made by the Servicer (i) to
effect timely payments of ground rents, taxes, assessments, water rates, hazard
insurance premiums, Primary Insurance Policy premiums, if applicable, and
comparable items, (ii) to reimburse the Servicer for any Servicing Advance made
by the Servicer with respect to a related Loan but only from amounts received on
the related Loan which represent late payments or collections of Escrow Payments
thereunder, (iii) to refund to the Borrower any funds as may be determined to be
overages, (iv) for transfer to the Collection Account in accordance with the
terms of this Agreement, (v) for application to restoration or repair of the
Mortgaged Property, (vi) to pay to the Servicer, or to the Borrower to the
extent required by law, any interest paid on the funds deposited in the Escrow
Account, or (vii) to clear and terminate the Escrow Account on the termination
of this Agreement.
Section 4.06 Payment of Taxes, Insurance and Other Charges; Maintenance of
Primary Insurance Policies; Collections Thereunder.
With respect to each Loan, the Servicer shall maintain accurate records
reflecting the status of ground rents, taxes, assessments, water rates and other
charges which are or may become a lien upon the Mortgaged Property and the
status of Primary Insurance Policy premiums and fire and hazard insurance
coverage and shall obtain, from time to time, all bills for the payment of such
charges, including insurance renewal premiums and shall effect payment thereof
prior to the applicable penalty or termination date and at a time appropriate
for securing maximum discounts allowable, employing for such purpose deposits of
the Borrower in the Escrow Account which shall have been estimated and
accumulated by the Servicer in amounts sufficient for such purposes, as allowed
under the terms of the Mortgage and applicable law. To the extent that the
Mortgage does not provide for Escrow Payments, the Servicer shall determine
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that any such insurance premium payments are made by the Borrower at the time
they first become due and any such tax payments are made in time to avoid loss
of the Mortgaged Property in a tax sale. The Servicer assumes full
responsibility for the timely payment of all such bills and shall effect
payments of all such bills prior to the termination of any such insurance
coverage or loss of any such Mortgaged Property in a tax sale irrespective of
the Borrower's faithful performance it the payment of same or the making of the
Escrow Payments and shall make advances from its own funds to effect such
payments.
The Servicer shall maintain in full force and effect, a Primary Insurance
Policy, issued by a Qualified Insurer, with respect to each Loan for which such
coverage is required. Such coverage shall be maintained until the Loan-to-Value
Ratio of the related Loan is reduced to that amount for which ▇▇▇▇▇▇ ▇▇▇ no
longer requires such insurance to be maintained. The Servicer will not cancel or
refuse to renew any Primary Insurance Policy, if any, in effect on the Closing
Date that is required to be kept in force under this Agreement unless a
replacement Primary Insurance Policy, if any, for such canceled or non-renewed
policy is obtained from and maintained with a Qualified Insurer. The Servicer
shall not take any action which would result in non-coverage under any
applicable Primary Insurance Policy of any loss which, but for the actions of
the Servicer, would have been covered thereunder. In connection with any
assumption or substitution agreement entered into or to be entered into pursuant
to Section 4.12, the Servicer shall promptly notify the insurer under the
related Primary Insurance Policy, if any, of such assumption or substitution of
liability in accordance with the terms of such policy and shall take all actions
which may be required by such insurer as a condition to the continuation of
coverage under the Primary Insurance Policy, if any. If such Primary Insurance
Policy is terminated as a result of such assumption or substitution of
liability, the Servicer shall obtain a replacement Primary Insurance Policy as
provided above.
In connection with its activities as servicer, the Servicer agrees to
prepare and present, on behalf of itself, the Issuer and the Noteholders, claims
to the insurer under any Primary Insurance Policy in a timely fashion in
accordance with the terms of such policies and, in this regard, to take such
action as shall be necessary to permit recovery under any Primary Insurance
Policy respecting a defaulted Loan. Pursuant to Section 5.01, any amounts
collected by the Servicer under any Primary Insurance Policy shall be deposited
in the Collection Account.
Section 4.07 Transfer of Accounts.
The Servicer may transfer the Collection Account or the Escrow Account to
a different depository institution from time to time. Such transfer shall be
made only upon obtaining the consent of the Initial Noteholder, which consent
shall not be unreasonably withheld or delayed. In any case, the Collection
Account and the Escrow Account shall be an Eligible Account.
Section 4.08 Maintenance of Hazard Insurance.
The Servicer shall cause to be maintained for each Loan fire and hazard
insurance with extended coverage as is customary in the area where the Mortgaged
Property is located in an amount which is at least equal to the lesser of (i)
100% of the maximum insurable value of the improvements securing the Loan or
(ii) the outstanding principal balance of the Loan, in each case in an amount
not less than such amount as is necessary to prevent the Borrower and/or the
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Issuer from becoming a co-insurer. If the Mortgaged Property is in an area
identified on a Flood Hazard Boundary Map or Flood Insurance Rate Map issued by
the Flood Emergency Management Agency as having special flood hazards and such
flood insurance has been made available, the Servicer will cause to be
maintained a flood insurance policy meeting the requirements of the current
guidelines of the Federal Insurance Administration with a generally acceptable
insurance carrier, in an amount representing coverage not less than the lesser
of (i) the outstanding principal balance of the Loan or (ii) the maximum amount
of insurance which is available under the National Flood Insurance Act of 1968
or the Flood Disaster Protection Act of 1973, as amended. The Servicer also
shall maintain on any Foreclosure Property, fire and hazard insurance with
extended coverage in an amount which is at least equal to the lesser of (i) 100%
of the maximum insurable value of the improvements which are a part of such
property and (ii) the outstanding principal balance of the related Loan at the
time it became a Foreclosure Property, liability insurance and, to the extent
required and available under the National Flood Insurance Act of 1968 or the
Flood Disaster Protection Act of 1973, as amended, flood insurance in an amount
as provided above. Pursuant to Section 5.01, any amounts collected by the
Servicer under any such policies other than amounts to be deposited in the
Escrow Account and applied to the restoration or repair of the Mortgaged
Property or Foreclosure Property, or released to the Borrower in accordance with
the Servicer's normal servicing procedures, shall be deposited in the Collection
Account, subject to withdrawal pursuant to Section 5.01. Any cost incurred by
the Servicer in maintaining any such insurance shall not, for the purpose of
calculating distributions to the Issuer or the Noteholders, be added to the
unpaid principal balance of the related Loan, notwithstanding that the terms of
such Loan so permit. It is understood and agreed that no earthquake or other
additional insurance need be required by the Servicer or the Borrower or
maintained on property acquired in respect of the Loan, other than pursuant to
such applicable laws and regulations as shall at any time be in force and as
shall require such additional insurance. All such policies shall be endorsed
with standard mortgagee clauses with loss payable to the Servicer, or upon the
direction of the Initial Noteholder to the Indenture Trustee, and shall provide
for at least thirty days prior written notice of any cancellation, reduction in
the amount of, or material change in, coverage to the Servicer. The Servicer
shall not interfere with the Borrower's freedom of choice in selecting either
his insurance carrier or agent, provided, however, that the Servicer shall not
accept any such insurance policies from insurance companies unless such
companies currently reflect a General Policy Rating of B:III or better in Best's
Key Rating Guide and are licensed to do business in the state wherein the
property subject to the policy is located.
Section 4.09 Maintenance of Mortgage Impairment Insurance Policy.
In the event that the Servicer shall obtain and maintain a mortgage
impairment or blanket policy issued by an issuer that has a Best rating of B:III
insuring against hazard losses on all of Mortgaged Properties securing the
Loans, then, to the extent such policy provides coverage in an amount equal to
the amount required pursuant to Section 4.08 and otherwise complies with all
other requirements of Section 4.08, the Servicer shall conclusively be deemed to
have satisfied its obligations as set forth in Section 4.08, it being understood
and agreed that such policy may contain a deductible clause, in which case the
Servicer shall, in the event that there shall not have been maintained on the
related Mortgaged Property or Foreclosure Property a policy complying with
Section 4.08, and there shall have been one or more losses which would have been
covered by such policy, deposit in the Collection Account the amount not
otherwise payable under the
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blanket policy because of such deductible clause. In connection with its
activities as servicer of the Loans, the Servicer agrees to prepare and present,
on behalf of the Issuer and the Noteholders, claims under any such blanket
policy in a timely fashion in accordance with the terms of such policy. Upon
request of the Initial Noteholder, the Servicer shall cause to be delivered to
the Noteholders a certified true copy of such policy and a statement from the
insurer thereunder that such policy shall in no event be terminated or
materially modified without thirty days prior written notice to the Issuer and
the Noteholders.
Section 4.10 Fidelity Bond, Errors and Omissions Insurance.
The Servicer shall maintain, at its own expense, a blanket fidelity bond
and an errors and omissions insurance policy, with broad coverage with
financially responsible companies on all officers, employees or other persons
acting in any capacity with regard to the Loans to handle funds, money,
documents and papers relating to the Loans. The fidelity bond and errors and
omissions insurance shall be in the form of the Mortgage Banker's Blanket Bond
and shall protect and insure the Servicer against losses, including forgery,
theft, embezzlement, fraud, errors and omissions and negligent acts of such
persons. Such fidelity bond shall also protect and insure the Servicer against
losses in connection with the failure to maintain any insurance policies
required pursuant to this Agreement and the release or satisfaction of a Loan
without having obtained payment in full of the indebtedness secured thereby. No
provision of this Section 4.10 requiring the fidelity bond and errors and
omissions insurance shall diminish or relieve the Servicer from its duties and
obligations as set forth in this Agreement. The minimum coverage under any such
bond and insurance policy shall be at least equal to the corresponding amounts
required by ▇▇▇▇▇▇ Mae in the ▇▇▇▇▇▇ ▇▇▇ Servicing Guide or by ▇▇▇▇▇▇▇ Mac in
the ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇' and Servicers' Guide. Upon request of the Initial
Noteholder, the Servicer shall cause to be delivered to the Noteholders a
certified true copy of the fidelity bond and insurance policy and a statement
from the surety and the insurer that such fidelity bond or insurance policy
shall in no event be terminated or materially modified without thirty days'
prior written notice to the Initial Noteholder.
Section 4.11 Title, Management and Disposition of Foreclosure Property.
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 person designated by the Issuer, or in the
event such person is not authorized or permitted to hold title to real property
in the state where the Foreclosure Property is located, or would be adversely
affected under the "doing business" or tax laws of such state by so holding
title, the deed or certificate of sale shall be taken in the name of such Person
or Persons as shall be consistent with an opinion of counsel obtained by the
Servicer from an attorney duly licensed to practice law in the state where the
Foreclosure Property is located. Any Person or Persons holding such title other
than the Issuer shall acknowledge in writing that such title is being held as
nominee for the benefit of the Issuer and the Noteholders.
The Servicer shall either itself or through an agent selected by the
Servicer, manage, conserve, protect and operate each Foreclosure Property (and
may temporarily rent the same) in the same manner that it manages, conserves,
protects and operates other foreclosed property for its own account, and in the
same manner that similar property in the same locality as the
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Foreclosure Property is managed. If a REMIC election is or is to be made with
respect to the arrangement under which the Mortgage Loans and any Foreclosure
Property are held, the Servicer shall manage, conserve, protect and operate each
Foreclosure Property in a manner which does not cause such Foreclosure Property
to fail to qualify as "foreclosure property" within the meaning of Section
860G(a)(8) of the Code or result in the receipt by such REMIC of any "income
from non-permitted assets" within the meaning of Section 860F(a)(2)(B) of the
Code or any "net income from foreclosure property" within the meaning of Section
860G(c)(2) of the Code. The Servicer shall cause each Foreclosure Property to be
inspected promptly upon the acquisition of title thereto and shall cause each
Foreclosure Property to be inspected at least annually thereafter. The Servicer
shall make or cause to be made a written report of each such inspection. Such
reports shall be retained in the Loan File and copies thereof shall be forwarded
by the Servicer to the Issuer. The Servicer shall use its best efforts to
dispose of the Foreclosure Property as soon as possible. The Servicer shall
report monthly to the Issuer and the Noteholders as to the progress being made
in selling such Foreclosure Property, and if, with the written consent of the
Initial Noteholder, a purchase money mortgage is taken in connection with such
sale, such purchase money mortgage shall name the Servicer as mortgagee, and a
separate servicing agreement between the Servicer and the Issuer shall be
entered into with respect to such purchase money mortgage. Notwithstanding the
foregoing, if a REMIC election is made with respect to the arrangement under
which the Loans and the Foreclosure Property are held, such Foreclosure Property
shall be disposed of within three years after the end of the tax year in which
such property becomes Foreclosure Property or such other period as may be
permitted under Section 860G(a)(8) of the Code.
The final sale by the Servicer of any Foreclosure Property ("REO
Disposition") shall be carried out by the Servicer at such price and upon such
terms and conditions as the Servicer deems to be in the best interest of the
Issuer and the Noteholders only with the prior written consent of the Initial
Noteholder. If as of the date title to any Foreclosure Property was acquired by
the Issuer there were outstanding unreimbursed Servicing Advances with respect
to the Foreclosure Property, the Servicer, upon an REO Disposition of such
Foreclosure Property, shall be entitled to reimbursement for any related
unreimbursed Servicing Advances from Liquidation Proceeds received in connection
with such REO Disposition. The Net Liquidation Proceeds from the REO Disposition
shall be deposited in the Collection Account promptly following receipt thereof
for distribution on the succeeding Payment Date in accordance with Section 5.01.
Section 4.12 Assumption Agreements.
The Servicer shall, to the extent it has knowledge of any conveyance or
prospective conveyance by any Borrower of the Mortgaged Property (whether by
absolute conveyance or by contract of sale, and whether or not the Borrower
remains or is to remain liable under the Promissory Note and/or the Mortgage),
exercise its rights to accelerate the maturity of such Loan under any
"due-on-sale" clause applicable thereto; provided, however, that the Servicer
shall not exercise any such rights if prohibited by law from doing so or if the
exercise of such rights would impair or threaten to impair any recovery under
the related Primary Insurance Policy, if any, and shall not be required to
exercise such rights if the transferee of the Mortgaged Property would qualify
for an assumption or substitution under the Servicer's underwriting guidelines.
If the Servicer reasonably believes it is unable under applicable law to enforce
such "due-on-sale" clause, the Servicer shall enter into an assumption agreement
with the person to whom the
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Mortgaged Property has been conveyed or is proposed to be conveyed, pursuant to
which such person becomes liable under the Promissory Note and, to the extent
permitted by applicable state law, the Borrower remains liable thereon. Where an
assumption is allowed pursuant to this Section 4.12, the Servicer, with the
prior written consent of the insurer under the Primary Insurance Policy, if any,
is authorized to enter into a substitution of liability agreement with the
person to whom the Mortgaged Property has been conveyed or is proposed to be
conveyed pursuant to which the original Borrower is released from liability and
such Person is substituted as Borrower and becomes liable under the related
Promissory Note. Any such substitution of liability agreement shall be in lieu
of an assumption agreement.
In connection with any such assumption or substitution of liability, the
Servicer shall follow the underwriting practices and procedures of prudent
mortgage lenders in the state in which the related Mortgaged Property is
located. With respect to an assumption or substitution of liability, Loan
Interest Rate, the amount of the Monthly Payment, and the final maturity date of
such Promissory Note may not be changed. The Servicer shall notify the Issuer
and the Noteholders that any such substitution of liability or assumption
agreement has been completed and shall forward to the Custodian the original of
any such substitution of liability or assumption agreement, which document shall
be added to the related Loan File and shall, for all purposes, be considered a
part of such Loan File to the same extent as all other documents and instruments
constituting a part thereof. Any fee collected by the Servicer for entering into
an assumption or substitution of liability agreement shall be deemed additional
Servicing Compensation.
Notwithstanding the foregoing paragraphs of this Section 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. For
purposes of this Section 4.12, the term "assumption" is deemed to also include a
sale of the Mortgaged Property subject to the Mortgage that is not accompanied
by an assumption or substitution of liability agreement.
Section 4.13 Satisfaction of Mortgages and Release of Loan Files.
Upon the payment in full of any Loan, or the receipt by the Servicer of a
notification that payment in full will be escrowed in a manner customary for
such purposes, the Servicer will immediately notify the Issuer and the Initial
Noteholder by a certification of a servicing officer of the Servicer (a
"Servicing Officer"), which certification shall include a statement to the
effect that all amounts received or to be received in connection with such
payment which are required to be deposited in the Collection Account pursuant to
Section 5.01 have been or will be so deposited, and shall request execution of
any document necessary to satisfy the Loan and delivery to it of the portion of
the Loan File held by Custodian. Upon receipt of a Request for Release and
Receipt, the Custodian shall promptly release the related mortgage documents to
the Servicer in accordance with the Custodial Agreement and the Servicer shall
prepare and process any satisfaction or release. No expense incurred in
connection with any instrument of satisfaction or deed of reconveyance shall be
chargeable to the Collection Account or the Issuer.
In the event the Servicer satisfies or releases a Mortgage without having
obtained payment in full of the indebtedness secured by the Mortgage or should
it otherwise prejudice any
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right the Issuer or the Noteholders may have under the mortgage instruments, the
Servicer, upon written demand, shall remit to the Issuer the then outstanding
principal balance of the related Loan by deposit thereof in the Collection
Account. The Servicer shall maintain the fidelity bond insuring the Servicer
against any loss it may sustain with respect to any Loan not satisfied in
accordance with the procedures set forth herein.
From time to time and as appropriate for the servicing or foreclosure of
the Loan, including for this purpose collection under any Primary Insurance
Policy, the Custodian shall, upon request of the Servicer and delivery to the
Custodian of a servicing receipt signed by a Servicing Officer, release the
requested portion of the Loan File held by the Custodian to the Servicer. Such
servicing receipt shall obligate the Servicer to return the related Mortgage
documents to the Custodian when the need therefor by the Servicer no longer
exists, unless the Loan has been liquidated and the Liquidation Proceeds
relating to the Loan have been deposited in the Collection Account or the Loan
File or such document has been delivered to an attorney, or to a public trustee
or other public official as required by law, for purposes of initiating or
pursuing legal action or other proceedings for the foreclosure of the Mortgaged
Property either judicially or non judicially, and the Servicer has delivered to
the Custodian a certificate of a Servicing Officer certifying as to the name and
address of the Person to which such Loan File or such document was delivered and
the purpose or purposes of such delivery. Upon receipt of a certificate of a
Servicing Officer stating that such Loan was liquidated, the servicing receipt
shall be released by the Custodian to the Servicer.
Section 4.14 Advances by the Servicer.
(a) Not later than the close of business on the Business Day preceding
each Remittance Date, the Servicer shall deposit in the Collection Account an
amount equal to all payments not previously advanced by the Servicer, whether or
not deferred pursuant to Section 4.01, of principal (due after the Transfer
Cut-off Date) and interest not allocable to the period prior to the Transfer
Cut-off Date, at the Loan Interest Rate net of the Servicing Fee, which were due
on a Loan and delinquent at the close of business on the related Remittance
Date; provided, however, that the Servicer shall not be required to deposit such
amount if the amount on deposit in the Collection Account on that Remittance
Date (exclusive of any Monthly Advance required to be effected pursuant to this
Section 4.14) is at least sufficient to fund in full the items described in
Sections 5.01(c)(3)(i) through 5.01(c)(3)(vi) hereof on the related Payment
Date, and, if the amount on deposit in the Collection Account is less than the
sum of such items, the Servicer shall only be required to deposit an amount
equal to the shortfall. The obligation of the Servicer to make such Monthly
Advances is mandatory, notwithstanding any other provision of this Agreement,
and, with respect to any Loan or Foreclosure Property, shall continue until a
Final Recovery Determination in connection therewith; provided that,
notwithstanding anything herein to the contrary, no Monthly Advance shall be
required to be made hereunder by the Servicer if such Monthly Advance would, if
made, constitute a Nonrecoverable Monthly Advance. The determination by the
Servicer that it has made a Nonrecoverable Monthly Advance or that any proposed
Monthly Advance, if made, would constitute a Nonrecoverable Monthly Advance,
shall be evidenced by an Officers' Certificate delivered to the Issuer and the
Indenture Trustee.
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(b) The Servicer will pay all out-of-pocket costs and expenses incurred in
the performance of its servicing obligations including, but not limited to, the
cost of (i) Preservation Expenses, (ii) any enforcement or judicial proceedings,
including foreclosures, (iii) inspection fees and expenses and (iv) the
management and liquidation of Foreclosure Property but is only required to pay
such costs and expenses to the extent the Servicer reasonably believes such
costs and expenses will increase Net Liquidation Proceeds on the related Loan.
Each such amount so paid will constitute a "Servicing Advance." The Servicer may
recover Servicing Advances (x) from the Borrowers to the extent permitted by the
Loans, from Liquidation Proceeds realized upon the liquidation of the related
Loan and (y) as provided in Sections 5.01(c)(1)(ii) or 5.01(c)(3)(i) hereof. In
no case may the Servicer recover Servicing Advances from principal and interest
payments on any Loan or from any amounts relating to any other Loan except as
provided pursuant to Sections 5.01(c)(1)(ii) or 5.01(c)(3)(i) hereof.
Section 4.15 Servicing Compensation.
As compensation for its services hereunder, the Servicer shall, subject to
Section 5.01(c), be entitled to withdraw from the Collection Account or to
retain from interest payments on the Loans the amounts provided for as the
Servicer's Servicing Fee. Additional servicing compensation in the form of
assumption fees, non-sufficient fund fees, modification fees, substitution fees
and other ancillary income, as provided in Section 4.12, and late payment
charges or otherwise shall be retained by the Servicer to the extent not
required to be deposited in the Collection Account. The Servicer shall be
required to pay all expenses incurred by it in connection with its servicing
activities hereunder and shall not be entitled to reimbursement therefor except
as specifically provided for.
Section 4.16 Notification of Adjustments.
On each Adjustment Date, the Servicer shall make interest rate adjustments
for each ARM in compliance with the requirements of the related Mortgage and
Promissory Note. The Servicer shall execute and deliver the notices required by
each Mortgage and Promissory Note regarding interest rate adjustments. The
Servicer also shall provide timely notification to the Noteholders of all
applicable data and information regarding such interest rate adjustments and the
Servicer's methods of implementing such interest rate adjustments. Upon the
discovery by the Servicer or the any Noteholder that the Servicer has failed to
adjust a Loan Interest Rate or a Monthly Payment pursuant to the terms of the
related Promissory Note and Mortgage, the Servicer shall immediately deposit in
the Collection Account from its own funds the amount of any interest loss caused
thereby without reimbursement therefor.
Section 4.17 Statement as to Compliance.
The Servicer will deliver to the Issuer, the Indenture Trustee and the
Initial Noteholder not later than 90 days following the end of each fiscal year
of the Servicer, which as of the Closing Date ends on April 30, an Officers'
Certificate stating, as to each signatory thereof, that (i) a review of the
activities of the Servicer during the preceding year and of performance under
this Agreement has been made under such officers' supervision and (ii) to the
best of such officers' knowledge, based on such review, the Servicer has
fulfilled all of its obligations under
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this Agreement throughout such year, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof.
Section 4.18 Independent Public Accountants' Servicing Report.
Not later than 90 days following the end of each fiscal year of the
Servicer, the Servicer at its expense shall cause a firm of independent public
accountants (which may also render other services to the Servicer) which is a
member of the American Institute of Certified Public Accountants to furnish a
statement to the Issuer, the Indenture Trustee and the Initial Noteholder to the
effect that such firm has examined certain documents and records relating to the
servicing of the Loans under this Agreement and that, on the basis of such
examination conducted substantially in compliance with the Uniform Single
Attestation Program for Mortgage Bankers, such firm confirms that such servicing
has been conducted in compliance with such pooling and servicing agreements
except for such significant exceptions or errors in records that, in the opinion
of such firm, the Uniform Single Attestation Program for Mortgage Bankers
requires it to report.
Section 4.19 Access to Certain Documentation.
The Servicer shall provide to the Office of Thrift Supervision, the FDIC
and any other federal or state banking or insurance regulatory authority that
may exercise authority over the Issuer or any Noteholder access to the
documentation regarding the Loans serviced by the Servicer required by
applicable laws and regulations. Such access shall be afforded without charge,
but only upon reasonable request and during normal business hours at the offices
of the Servicer. In addition, access to the documentation will be provided to
the Issuer or any Noteholder and any Person identified to the Servicer by the
Issuer or any Noteholder without charge, upon reasonable request during normal
business hours at the offices of the Servicer.
Section 4.20 Reports and Returns to be Filed by the Servicer.
The Servicer shall file information reports with respect to the receipt of
mortgage interest received in a trade or business, reports of foreclosures and
abandonments of any Mortgaged Property and information returns relating to
cancellation of indebtedness income with respect to any Mortgaged Property as
required by Sections 6050H, 6050J and 6050P of the Code. Such reports shall be
in form and substance sufficient to meet the reporting requirements imposed by
such Sections 6050H, 6050J and 6050P of the Code.
Section 4.21 Compliance with REMIC Provisions.
If a REMIC election has been made with respect to the arrangement under
which the Loans and Foreclosure Property are held, the Servicer shall not take
any action, cause the REMIC to take any action or fail to take (or fail to cause
to be taken) any action that, under the REMIC Provisions, if taken or not taken,
as the case may be, could (i) endanger the status of the REMIC as a REMIC or
(ii) result in the imposition of a tax upon the REMIC (including but not limited
to the tax on "prohibited transactions" as defined in Section 860F(a)(2) of the
Code and the tax on "contributions" to a REMIC set forth in Section 860G(d) of
the Code) unless the Servicer has received an Opinion of Counsel (at the expense
of the party seeking to take such
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action) to the effect that the contemplated action will not endanger such REMIC
status or result in the imposition of any such tax.
Section 4.22 Subservicing Agreements Between Servicer and Subservicers.
Subject to Sections 4.24 and 4.25, the Servicer may enter into
Subservicing Agreements for any servicing and administration of Loans with any
institution which is in compliance with the laws of each state necessary to
enable it to perform its obligations under such Subservicing Agreement and is an
Eligible Servicer. The Servicer shall give notice to the Indenture Trustee and
the Initial Noteholder of the appointment of any Subservicer which is not an
Affiliate of the Servicer and shall furnish to the Indenture Trustee and the
Initial Noteholder a copy of the Subservicing Agreement (along with any
modifications thereto) between the Servicer and any Subservicer that is not an
Affiliate of the Servicer. For purposes of this Agreement, the Servicer shall be
deemed to have received payments on Loans when any Subservicer has received such
payments. Any such Subservicing Agreement shall be consistent with and not
violate the provisions of this Agreement.
Section 4.23 Successor Subservicers.
Upon notice to the Indenture Trustee and the Initial Noteholder (except if
the Subservicer is an Affiliate of the Servicer), the Servicer shall be entitled
to terminate any Subservicing Agreement in accordance with the terms and
conditions of such Subservicing Agreement and to either itself directly service
the related Loans or enter into a Subservicing Agreement with a successor
Subservicer which qualifies under Section 4.22.
Section 4.24 Liability of Servicer.
The Servicer shall not be relieved of its obligations under this Agreement
notwithstanding any Subservicing Agreement or any of the provisions of this
Agreement relating to agreements or arrangements between the Servicer and a
Subservicer or otherwise, and the Servicer shall be obligated to the same extent
and under the same terms and conditions as if it alone were servicing and
administering the Loans. The Servicer shall be entitled to enter into any
agreement with a Subservicer for indemnification of the Servicer by such
Subservicer and nothing contained in such Subservicing Agreement shall be deemed
to limit or modify this Agreement. The Trust shall not indemnify the Servicer
for any losses due to the Servicer's negligence.
Section 4.25 No Contractual Relationship Between Subservicer and Indenture
Trustee or the Securityholders.
Any Subservicing Agreement and any other transactions or services relating
to the Loans involving a Subservicer shall be deemed to be between the
Subservicer and the Servicer alone and no party hereto nor the Securityholders
shall be deemed parties thereto and shall have no claims, rights, obligations,
duties or liabilities with respect to any Subservicer except as set forth in
Section 4.26.
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Section 4.26 Assumption or Termination of Subservicing Agreement by
Successor Servicer.
In connection with the assumption of the responsibilities, duties and
liabilities and of the authority, power and rights of the Servicer hereunder by
a successor Servicer pursuant to Section 9.02, it is understood and agreed that
the Servicer's rights and obligations under any Subservicing Agreement then in
force between the servicer and a Subservicer may be assumed or terminated by the
successor Servicer at its option without the payment of any fee (notwithstanding
any contrary provision in any Subservicing Agreement).
The Servicer shall, upon request of the successor Servicer, but at the
expense of the Servicer, deliver to the assuming party documents and records
relating to each Subservicing Agreement and an accounting of amounts collected
and held by it and otherwise use its best reasonable efforts to effect the
orderly and efficient transfer of the Subservicing Agreements to the assuming
party, without the payment of any fee by the successor Servicer, notwithstanding
any contrary provision in any Subservicing Agreement.
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