SERVICING AGREEMENT
among
GRANITE FINANCIAL, INC. (the "Servicer")
GF FUNDING CORP. III (the "Transferor")
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(the "Trustee")
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(the "Back-up Servicer")
Dated as of March 1, 1997
TABLE OF CONTENTS
Page
ARTICLE 1 2
DEFINITIONS 2
Section 1.01 Defined Terms 2
ARTICLE 2 4
SERVICER REPRESENTATIONS AND WARRANTIES 4
Section 2.01 Representations and Warranties 4
(a) Organization and Good Standing 4
(b) Authorization and Binding Obligation 4
(c) No Violation 4
(d) No Proceedings 4
(e) Approvals 4
(f) Investment Company 5
(g) Standard of Care 5
(h) Insurance 5
(i) Net Worth 5
ARTICLE 3 6
ADMINISTRATION AND SERVICING OF LEASE CONTRACTS 6
Section 3.01 Responsibilities of Servicer 6
Section 3.02 Servicer Standard of Care 8
Section 3.03 Lockbox Account and Servicer Remittances 9
Section 3.04 Servicer Advances 10
Section 3.05 Financing Statements 10
Section 3.06 Maintenance of Insurance Policy; Insurance
Proceeds 10
Section 3.07 Personal Property and Sales Taxes 11
Section 3.08 Servicing Compensation 11
Section 3.09 Substitution or Purchase of Lease Contracts 11
Section 3.10 No Offset 12
ARTICLE 4 13
ACCOUNTINGS, STATEMENTS AND REPORTS 13
Section 4.01 Monthly Servicer's Reports 13
Section 4.02 Financial Statements; Certification as to
Compliance; Notice of Default 13
Section 4.03 Independent Accountants' Reports; Annual
Federal Tax Lien Search 14
Section 4.04 Access to Certain Documentation and Information 15
Section 4.05 Other Necessary Data 16
Section 4.06 Trustee to Cooperate 16
ARTICLE 5 18
THE SERVICER 18
Section 5.01 Servicer Indemnification 18
Section 5.02 Corporate Existence; Reorganizations 18
Section 5.03 Limitation on Liability of the Servicer and
Others 19
Section 5.04 The Servicer Not to Resign 19
ARTICLE 6 20
SERVICING TERMINATION 20
Section 6.01 Servicer Events of Default 20
Section 6.02 Back-up Servicer to Act; Taking of Bids;
Appointment of Successor Servicer 22
Section 6.03 Notification to Certificateholders 23
Section 6.04 Waiver of Past Defaults 23
Section 6.05 Effects of Termination of Servicer 23
Section 6.06 No Effect on Other Parties 24
ARTICLE 7 25
THE BACK-UP SERVICER 25
Section 7.01 Representations of Back-up Servicer 25
Section 7.02 Merger or Consolidation of, or Assumption
of the Obligations of, Back-up Servicer 25
Section 7.03 Back-up Servicer Resignation 26
Section 7.04 Oversight of Servicing 26
Section 7.05 Back-up Servicer Compensation 27
Section 7.06 Duties and Responsibilities 27
ARTICLE 8 28
MISCELLANEOUS PROVISIONS 28
Section 8.01 Termination 28
Section 8.02 Amendments 28
Section 8.03 GOVERNING LAW 29
Section 8.04 Notices 29
Section 8.05 Severability of Provisions 29
Section 8.06 Binding Effect 29
Section 8.07 Article Headings and Captions 29
Section 8.08 Legal Holidays 29
Section 8.09 Assignment for Security for the Certificates 29
Section 8.10 No Servicing Assignment 30
Section 8.11 MBIA Default or Termination 30
Section 8.12 Third Party Beneficiary 30
Section 8.13 Counterparts 30
SERVICING AGREEMENT
This SERVICING AGREEMENT ("Agreement"), dated as of March 1,
1997, is by and among Granite Financial, Inc., a Delaware
corporation, as Servicer (the "Servicer"), GF Funding Corp. III,
a Delaware corporation, as Transferor (the "Transferor"),
Norwest Bank Minnesota, National Association, as Back-up
Servicer (the "Back-up Servicer"), and Norwest Bank
Minnesota, National
Association, as Trustee (the "Trustee").
PRELIMINARY STATEMENT
The Transferor has entered into a Trust and
Security Agreement dated as of March 1, 1997, (as amended
from time to time, the "Trust and Security Agreement"), with
the Trustee, the Back-up Servicer and the Servicer,
pursuant to which the
Transferor intends to issue the Certificates
(the "Certificates").
The Transferor and Granite Financial, Inc. (the
"Company") have entered into a Lease Acquisition Agreement
dated as of March 1, 1997 (as amended from time to time, the
"Lease Acquisition Agreement"), providing for, among other
things, the contribution, from time to time, by the Company to
the Transferor of all of the Company's right, title and
interest in and to certain Lease Assets which the
Transferor is and will be conveying to the Trustee, for the
benefit of the Certificateholders and MBIA. As a
precondition to the effectiveness of the Lease Acquisition
Agreement and the Trust and Security Agreement, the
Lease Acquisition Agreement and the Trust and Security
Agreement require that the Servicer, the Transferor, the
Trustee and the Back-up Servicer enter into this Agreement
to provide for the servicing of the Lease Assets.
In addition, the Transferor is conveying to the
Trustee, among other things, all of the Transferor's rights
derived under this Agreement and the Lease Acquisition
Agreement, and the Servicer agrees that all covenants and
agreements made by the Servicer herein with respect to the
Lease Assets shall also be for the benefit of the Trustee,
MBIA and all holders from time to time of the Certificates.
For its services under this Agreement, the Servicer, the Back-
up Servicer and the Trustee will receive the compensation
described herein or in the Trust and Security Agreement.
ARTICLE 1
DEFINITIONS
Section 1.01 Defined Terms. Except as otherwise
specified or as the context may otherwise require, the
following terms have the respective meanings set forth below
for all purposes of this Agreement, and the definitions of
such terms are equally applicable both to the singular and
plural forms of such terms and to the masculine, feminine
and neuter genders of such terms. Capitalized terms used but
not otherwise defined herein shall have the respective
meanings assigned to such terms in the Trust and Security
Agreement or, if not defined therein, in the Lease
Acquisition Agreement.
"Agreement": This Servicing Agreement, dated as of March
1, 1997, by and among the Servicer, the Transferor, the
Back-up Servicer and the Trustee, as amended from time to
time in accordance with the terms hereof.
"Back-up Servicer": Initially, Norwest Bank
Minnesota, National Association, until a successor Person shall
have become the Back-up Servicer pursuant to the applicable
provisions of this Agreement, and thereafter "Back-up
Servicer" shall mean such successor Person.
"Company": Granite Financial, Inc. and all
successors thereto in accordance with the Lease Acquisition
Agreement.
"Computer Tape": Any computer tape or disk prepared by
the Servicer and distributed to various parties as required
herein.
"Lease Acquisition Agreement": The Lease
Acquisition Agreement, dated as of March 1, 1997 between the
Transferor and the Company, as amended from time to time in
accordance with the terms thereof.
"Lockbox": The meaning given in the Lockbox Agreement.
"Lockbox Account": The account established at the
Lockbox Bank by the Trustee pursuant to the Lockbox
Agreement, which account is maintained in the name of, and at
the sole control of, the Trustee and any Permitted Parties for
and on behalf of the Trustee, MBIA, the Certificateholders,
the Transferor and any Permitted Parties into which account
shall be deposited payments related to the Lease
Receivables and as to which solely the Trustee and any
Permitted Parties shall have the ability to withdraw funds.
"Lockbox Agreement": An agreement among the Trustee,
the Transferor, any Permitted Parties and the Lockbox
Bank, substantially in the form attached hereto as Exhibit B
or such other form as approved by MBIA together with all
amendments and supplements thereto and all subsequent
agreements of a similar nature between the Transferor, the
Trustee, any Permitted Parties and any successor Lockbox Bank.
"Lockbox Bank": Any bank approved by MBIA, and
any
successor Lockbox Bank appointed pursuant to Section
3.03(a) hereof.
"Monthly Servicer's Report": The report prepared by
the Servicer pursuant to Section 4.01 hereof.
"Nonrecoverable Advance": A Servicer Advance that
the Servicer determines in good faith, and in accordance
with its customary servicing practices, is unlikely to be
eventually repaid from Scheduled Payments made by or on
behalf of the related Customer in accordance with Section
3.04 hereof.
"Officer's Certificate": A certificate signed by
the
Chairman of the Board, the Vice-Chairman of the Board,
the President, a Vice President, the Treasurer or the
Secretary of the Servicer.
"Permitted Parties": A trustee acting for the sole
benefit of the Certificateholders, MBIA and the holders of any
securities issued by a wholly owned special purpose
corporation of the Company as to which MBIA has issued an
insurance policy with
respect to the senior class of such securities.
"Reported Companies": The Servicer and its Affiliates on
a consolidated basis, and if the initial Servicer is no
longer acting as Servicer, then in addition, any successor
Servicer appointed pursuant to this Agreement.
"Reported Companies' Financial Statements": The
Reported Companies' audited consolidating balance
sheet and income
statement, consolidated statement of sources
and
uses/applications of cash, auditors opinion letter
regarding audited financial statements, and all notes to
the audited financial statements.
"Servicer": Granite Financial, Inc. until a
successor Person shall have become the Servicer pursuant to
the applicable provisions of this Agreement, and thereafter
"Servicer" shall mean such successor Person.
"Servicer Advance": The meaning set forth in Section
3.04 hereof.
"Servicer Default": Any occurrence or circumstance
which with notice or the lapse of time or both would be a
Servicer Event of Default under this Agreement.
"Servicer Event of Default": Each of the occurrences
or circumstances enumerated in Section 6.01 hereof.
"Servicer Termination Notice": The notice described
in Section 6.01 hereof.
"Servicing Officers": Those officers of the
Servicer involved in, or responsible for, the administration
and servicing of the Lease Contracts, as identified on the
list of Servicing Officers furnished by the Servicer to the
Trustee, the Back-up Servicer, and MBIA from time to time.
"Transferor": GF Funding Corp. III, and all
successors thereto in accordance with the terms of the Trust
and Security Agreement.
ARTICLE 2
SERVICER REPRESENTATIONS AND WARRANTIES
Section 2.01 Representations and Warranties. The
Servicer makes the following representations and warranties
as of the Closing Date, except as otherwise specified below,
which shall survive such date:
(a) Organization and Good Standing. The Servicer has
been duly organized and is validly existing and in good
standing as a corporation under the laws of the State of
Delaware or the laws of such other state as permitted by
Section 5.02(a), with requisite power and authority to own
its properties, perform its obligations under this Agreement
and to transact the business in which it is now engaged or in
which it proposes to engage.
(b) Authorization and Binding Obligation. Each of
this Agreement, the Trust and Security Agreement and the
Insurance Agreement has been duly authorized, executed and
delivered by the Servicer and constitutes the valid and legally
binding obligation of the Servicer enforceable against the
Servicer in accordance
with its terms, subject as to enforcement to any
bankruptcy, insolvency, reorganization and other similar
laws of general applicability relating to or affecting
creditors' rights generally and to general principles of
equity regardless of whether enforcement is sought in a court
of equity or law.
(c) No Violation. The entering into of this Agreement,
the Trust and Security Agreement and the Insurance Agreement
and the performance by the Servicer of its obligations
under this Agreement, the Trust and Security Agreement and
the Insurance Agreement and the consummation of the
transactions herein and therein contemplated will not
conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, or result in
the creation or imposition of any lien, charge or
encumbrance upon any of the property or assets of such
Servicer pursuant to the terms of any material
indenture, mortgage, deed of trust or other agreement or
instrument to which it is a party or by which it is bound or
to which any of its property or assets is subject, nor will
such action result in any violation of the provisions of its
certificate of incorporation or bylaws, or any statute or any
order, rule or regulation of any court or any regulatory
authority or other governmental agency or body having
jurisdiction over it or any of its properties; and no consent,
approval, authorization, order, registration
or
qualification of or with any court, or any such
regulatory authority or other governmental agency or body is
required for the Servicer to enter into this Agreement, the
Trust and Security Agreement and the Insurance Agreement.
(d) No Proceedings. There are no proceedings
or
investigations pending, or to the knowledge of the
Servicer, threatened against or affecting the Servicer or any
subsidiary in or before any
court, governmental authority or agency or
arbitration board or tribunal, including but not limited to
any such proceeding or investigation with respect to
any
environmental or other liability resulting from the ownership
or use of any of the Equipment, which, individually or in
the aggregate, involve the probability of materially and
adversely affecting the properties, business, prospects,
profits or
condition (financial or otherwise) of the Servicer and
its subsidiaries, or the ability of the Servicer to
perform its obligations under this Agreement, the Trust
and Security Agreement or the Insurance Agreement. The
Servicer is not in default with respect to any order of
any court, governmental authority or agency or arbitration
board or tribunal.
(e) Approvals. The Servicer (i) is not in violation of
any laws, ordinances, governmental rules or regulations to
which it is subject, (ii) has not failed to obtain any
licenses, permits, franchises or other governmental
authorizations necessary to the ownership of its property or
to the conduct of its business, and (iii) is not in violation
in any material respect of any term of any agreement, charter
instrument, bylaw or instrument to which it is a party or
by which it may be bound, which violation or failure to
obtain materially adversely affect the business or condition
(financial or otherwise) of the Servicer and its
subsidiaries.
(f) Investment Company. The Servicer is not an
investment
company which is required to register under the
Investment Company Act of 1940, as amended.
(g) Standard of Care. The Servicer has serviced the
Lease
Contracts and Equipment in a manner consistent with
industry standards for lease contracts similar to the Lease
Contracts and Equipment, and in any event in a prudent
and commercially
reasonable manner, and has conducted its servicing operations
in a manner consistent with industry standards for
servicing of financial portfolios.
(h) Insurance. The Servicer maintains insurance
with respect to its operations and property which is
adequate and customary in light of the Servicer's operations.
(i) Net Worth. As of the Closing Date, the Servicer is
in compliance with the Net Worth Requirement.
ARTICLE 3
ADMINISTRATION AND SERVICING OF LEASE CONTRACTS
Section 3.01 Responsibilities of Servicer.
(a) The Transferor hereby appoints the Servicer, for
the benefit of MBIA and the Certificateholders, to act as
Servicer of the Lease Assets and as such, the Servicer shall
be responsible for, and shall, in accordance with its
customary servicing procedures, pursue the managing,
servicing, administering, enforcing and making of
collections on the Lease Contracts, the Equipment, the Lease
Receivables and any Insurance Policies, the enforcement of
the Trustee's security interest in the Lease Contracts,
Lease Receivables and Equipment conveyed pursuant to the
Trust and Security Agreement, and the sale or the releasing of
the Equipment upon the expiration or other termination of the
related Lease Contract (or repossession thereof
without termination), each in accordance with the
standards and
procedures set forth in this Agreement and any related
provisions of the Trust and Security Agreement and Lease
Acquisition Agreement. The Servicer's responsibilities
shall include monitoring and posting of all payments,
responding to inquiries of Customers, investigating
delinquencies, accounting for
collections and furnishing monthly and annual statements to
the Back-up Servicer, the Trustee, MBIA, the Rating Agencies
and the Certificateholders with respect to payments under
the Lease Contracts, making Servicer Advances, providing
appropriate federal income tax information to the Trustee
for use in providing
information to the Certificateholders or
MBIA,
collecting and remitting sales and property taxes to
taxing authorities, and maintaining the perfected security
interest of the Trustee in the Trust Estate. The Servicer
(at its expense) shall have full power and authority,
acting at its sole discretion, to do any and all things
in connection with such managing, servicing, administration,
enforcement, collection and such sale of the Equipment
that it may deem necessary or desirable, including the
prudent delegation of such
responsibilities; provided that only with the prior
written consent of MBIA shall the Servicer subcontract with
another firm to act as subservicer with respect to the
Servicer's obligations hereunder and then only so long as the
Servicer remains fully responsible and accountable for
performance of all obligations of the Servicer hereunder;
provided further that the Servicer may subcontract out its
remarketing obligations with respect to the Equipment
without the consent of MBIA so long as the Servicer remains
fully responsible and accountable for the performance of such
obligations. Without limiting the generality of the
foregoing, the Servicer shall, and is hereby authorized
and empowered by the Trustee, subject to Section 3.02
hereof, to execute and deliver (on behalf of itself, the
Certificateholders, the Trustee or any of them) any and
all instruments of
satisfaction or cancellation, or of partial or full release
or
discharge, and all other comparable instruments, with respect
to
the Lease Contracts and any files or documentation pertaining
to
the Lease Assets. The Servicer also may, in its sole
discretion, waive any late payment charge or penalty, or any
other fees that may be collected in the ordinary course of
servicing any Lease Contract. Notwithstanding the foregoing,
the Servicer shall not, except pursuant to a judicial order
from a court of competent jurisdiction, or as otherwise
expressly provided in
this
Agreement, release or waive the right to collect the
Scheduled Payments or any unpaid balance on any Lease
Contract. The
Trustee shall, at the expense of the Servicer, furnish
the Servicer with any powers of attorney and other
documents necessary or appropriate to enable the Servicer to
carry out its servicing and administrative duties hereunder,
and the Trustee shall not be responsible for the Servicer's
application thereof.
(b) The Servicer shall conduct any Lease
Contract management, servicing, administration, collection or
enforcement actions in the following manner:
(i) The Servicer, as agent for and on behalf of
the Trustee, MBIA and the Certificateholders, with
respect to
any Defaulted Lease Contract shall follow such practices
and procedures as are normal and consistent with the
Servicer's standards and
procedures relating to its own lease
contracts, lease receivables and equipment that are
similar to the Lease Contracts, Lease Receivables and the
Equipment, and, in any event, consistent with the
standard of care described in
Section 3.02 hereof, including without
limitation, the taking of appropriate actions to
foreclose or otherwise liquidate any such Defaulted
Lease Contract, together with the related Equipment, to
collect any Guaranty Amounts, and to enforce the
Transferor's rights under the Lease Acquisition
Agreement. All Recoveries, Insurance Proceeds or
Residual Proceeds in respect of any such Lease Receivable
and the related Equipment received by
the
Servicer shall be remitted to the Trustee for deposit in
the Collection Account pursuant to Section 3.03 hereof;
(ii) The Servicer may ▇▇▇ to enforce or collect
upon Lease Contracts as agent for the Trustee on behalf
of the Certificateholders and MBIA. If the Servicer
elects to
commence a legal proceeding to enforce a Lease Contract,
the act of commencement shall be deemed to be an
automatic conveyance of the Lease Contract to the
Servicer for purposes of collection only. If,
however, in
any
enforcement suit or legal proceeding it is held that
the Servicer may not enforce a Lease Contract on the
ground that it is not a real party in interest or a
holder entitled to
enforce the Lease Contract, then the Trustee on behalf
of
the Certificateholders and MBIA shall, at the
Servicer's request and expense, take such steps as the
Servicer deems necessary and instructs the Trustee in
writing to take to
enforce the Lease Contract, including bringing suit in
its name or the names of the Certificateholders or MBIA,
and the Trustee shall be indemnified by the Servicer for
any such action taken. Any Lease Contract temporarily
released from the custody of the Trustee to the
Servicer or its agents shall have stamped on it prior
to its delivery a legend to
the effect that the Lease Contract is the property
of
Norwest Bank Minnesota, National Association as Trustee,
and the Servicer shall promptly return all Lease
Contracts when the need therefore no longer exists,
provided that no more than 25 Lease Contracts shall be
released to the Servicer at any one time;
(iii) The Servicer shall exercise any rights
of
recourse against third parties that exist with respect to
any Lease Contract in accordance with the Servicer's usual
practice and, in any event, consistent with the standard of
care described in Section 3.02 hereof. In exercising
recourse rights, the Servicer is authorized on the Trustee's
behalf to reconvey the Lease Contract to the person against
whom recourse exists to the extent necessary, and at the
price set forth in the document creating the recourse. The
Servicer will not reduce or diminish such recourse rights,
except to the extent that it exercises such right;
(iv) The Servicer may not allow substitutions of
Substitute Lease Contracts that do not comply with Section
3.09 hereof, Sections 2.04, 3.03 and 3.04 of the Lease
Acquisition Agreement and Section 4.03 of the Trust and
Security Agreement. If a Customer requests a financing of
an upgrade to any Equipment, the Servicer shall either
(A) include such upgrade on an existing Lease Contract and
treat the Scheduled Payments related thereto as an
Additional Lease Contract for all purposes of this
Agreement, the Lease Acquisition Agreement and the Trust and
Security Agreement, or (B) originate a separate lease
contract for such Customer;
(v) The Servicer may waive, modify or vary any terms
of any Lease Contract or consent to the postponement of
strict compliance with any such term if in the Servicer's
reasonable and prudent determination such waiver,
modification or postponement is not materially adverse to
the Certificateholders or MBIA; provided, however, that
(A) the Servicer shall not forgive any payment of rent,
(B) the Servicer shall not permit any modification with
respect to any Lease Contract that would decrease any
Scheduled Payment, defer the payment of any principal or
interest or any Scheduled Payment, reduce the Implicit
Principal Balance (except in connection with actual payments
attributable to such Implicit Principal Balance), or prevent
the complete amortization of the Implicit Principal Balance
from occurring by the Calculation Date preceding the Stated
Maturity of the Certificates and, (C) except as otherwise
specifically provided herein, the Servicer will not waive or
modify the requirement that a Customer maintain insurance
with respect to the related Equipment. The Servicer shall
provide the Back-up Servicer, MBIA and the Trustee with an
Amended Lease Schedule to the Lease Schedule reflecting any
modification of any Scheduled Payment;
(vi) The Servicer shall not consent to the termination
of any Lease Contract in connection with loss of or damage
to the related Equipment unless the Customer has paid an
amount not less than the Removal Price for such Lease
Contract, or if less, the maximum amount legally collectible
under the related Lease Contract;
(vii) Upon termination of a Lease Contract after
payment of the last Scheduled Payment due thereunder or in
the event that the Servicer in the enforcement of any Lease
Contract otherwise (A) acquires title to any item of
Equipment with respect to which title was held by the
Customer or (B) reclaims possession of Equipment from the
Customer, the Servicer shall use its best efforts to sell or
re-lease such item of Equipment on market value terms
promptly and consistent with the standard of care set forth
in Section 3.02 hereof. Any Insurance Proceeds, Recoveries
or Residual Proceeds related thereto shall be deposited in
accordance with Section 3.03 hereof;
(viii) Notwithstanding any provision to the contrary
contained in this Agreement, the Servicer shall exercise any
right under a Lease Contract to accelerate the unpaid
Scheduled Payments, due or to become due thereunder in such
a manner as to maximize the net proceeds available to the
Trust Estate; provided, however, that the Servicer will not
accelerate any Scheduled Payment unless permitted to do so
by the terms of the Lease Contract or under applicable law;
(ix) The Servicer shall maintain insurance with respect
to its operations and property which is adequate and
customary in light of the Servicer's operations; and
(x) The Servicer shall comply with and not modify its
credit and collection policies with respect to the Lease
Contracts in any manner which would adversely affect the
Certificates or the Trust Estate.
Section 3.02 Servicer Standard of Care. In managing,
administering, servicing, enforcing and making collections on the
Lease Contracts and Equipment pursuant to this Agreement, the
Servicer will exercise that degree of skill and care consistent
with industry standards for servicing of small to medium ticket
equipment leasing portfolios, and that which the Servicer
customarily exercises with respect to similar lease contracts and
equipment owned or originated by it, and in any event, in a
prudent and commercially reasonable manner. The Servicer shall
punctually perform all of its obligations and agreements under
this Agreement and shall comply with all applicable federal and
state laws and regulations, shall maintain all state and federal
licenses and franchises necessary for it to perform its servicing
responsibilities hereunder, and shall not materially impair the
rights of MBIA or the Certificateholders in any Lease Contracts
or payments thereunder.
Section 3.03 Lockbox Account and Servicer Remittances.
(a) The Transferor and the Trustee shall establish the
Lockbox Account within 30 days of the Closing Date at the Lockbox
Bank pursuant to the Lockbox Agreement. At the time of execution
of the Lockbox Agreement, each of the Transferor, the Lockbox
Bank, the Servicer and any other party to the Lockbox Agreement
shall provide MBIA with opinions of counsel reasonably acceptable
to MBIA regarding the enforceability of the Lockbox Agreement
against such person. The Servicer shall pay to the Lockbox Bank
when due the fees set forth in the Lockbox Agreement. The
Lockbox Bank may be removed by the Transferor with the written
consent of MBIA if the Lockbox Bank has failed to perform its
duties to the satisfaction of the Transferor and the Servicer,
provided that a successor Lockbox Bank, meeting the
qualifications of a corporate trustee as set forth in Section
7.08 of the Trust and Security Agreement, has executed a Lockbox
Agreement in form and substance satisfactory to MBIA, the
Trustee, the Transferor and the Servicer.
(b) After the Lockbox Agreement has been executed, the
Servicer shall promptly notify the Customers of the transfer of
the Lease Contracts to the GF Funding Equipment Lease Trust 19971
and instruct the Customers to send all payments relating to
Lease Receivables directly to the Lockbox Bank for deposit into
the Lockbox Account. On each Business Day, the Trustee shall, or
shall cause the Lockbox Bank to, transfer to the Collection
Account all amounts allocable to the Lease Contracts on deposit
in the Lockbox Account.
(c) The Servicer, as agent of the Transferor, the
Certificateholders and MBIA shall remit to the Trustee for
deposit in the Collection Account by 12:00 noon Minneapolis time
on each Tuesday and Thursday that is a Business Day, or if such
day is not a Business Day, on the next Business Day thereafter,
the amounts described below that have been collected by the
Servicer through 4:00 p.m. Minneapolis time on the preceding
Business Day so long as such amounts in the aggregate exceed
$1,000:
(i) all payments made under the Lease Contracts by or
on behalf of the Customers relating to the Lease
Receivables, including prepayments and Overdue Payments but
excluding taxes and Servicing Charges, received directly by
the Servicer;
(ii) all Residual Proceeds and Recoveries;
(iii) the Removal Price of any Lease Contract
purchased by the Company or the Transferor, to the extent
received by the Servicer;
(iv) all Guaranty Amounts; and
(v) all Insurance Proceeds.
The Servicer shall hold in trust for the benefit of the
Holders of the Certificates and MBIA any payment it receives
relating to items (i) through (v) above until such time as the
Servicer transfers any such payment to the Trustee for deposit in
the Collection Account.
(d) If ACH debits are utilized with respect to a Lease
Contract, (x) the Transferor, the Trustee and the ACH Bank shall
enter into a depositary agreement acceptable to the Trustee and
(y) the Servicer will notify the National Automated Clearing
House System to debit the Customer for all payments relating to
Lease Receivables under such Lease Contract and to credit an
account (the "ACH Account") maintained at the ACH Bank, in the
name of and in the sole control of the (i) Trustee for the
benefit of the Certificateholders and MBIA and (ii) any other
Permitted Parties, and the Servicer shall not revoke or modify
such notifications. The Servicer shall be responsible for the
payment of the fees of any ACH Account and shall not be entitled
to reimbursement therefor. In the event (i) a Customer provides
the Servicer or the ACH Bank with written notice of its
termination of such Customer's authorization agreement for ACH
debits, or (ii) the Servicer otherwise receives directly moneys
with respect to Lease Receivables that would otherwise involve
ACH debits, the Servicer shall deposit all payments from all such
Customers into the Collection Account in accordance with
subsection (c) above, and, in the case of clause (i), the
Servicer shall promptly instruct the Customer to send all lease
payments directly to the Lockbox. Payments received in the ACH
Account representing any payment listed in Section 3.03(c)(i)
through (v) above and which are no longer provisional will be
transferred to the Collection Account on a daily basis.
Section 3.04 Servicer Advances. Not later than 10:00 a.m.
(Minneapolis time) on the Determination Date prior to each
Payment Date, the Servicer shall make an advance (a "Servicer
Advance") on such date by remitting to the Trustee for deposit in
the Collection Account an amount equal to the Scheduled Payments
or portion thereof for each Lease Contract which is a Delinquent
Lease Contract and which were due in the prior Monthly Period but
not received and deposited in the Collection Account on or prior
to such Determination Date; provided that, if and until the Class
B Certificates are issued, such deposit shall equal the lesser of
(i) the Scheduled Payments or portion thereof for each Lease
Contract which is a Delinquent Lease Contract and which were due
in the prior Monthly Period but not received and deposited in the
Collection Account on or prior to such Determination Date and
(ii) the shortfall, if any, between (a) the amounts on deposit in
the Collection Account as of such Determination Date and (b) the
amounts required to be paid on the related Payment Date pursuant
to clauses (i) through (xiii) of Section 12.02 (d) of the Trust
and Security Agreement; provided, further, however, that the
Servicer shall not be obligated to make any Servicer Advance
pursuant to this Section 3.04 that the Servicer determines in
good faith, and in accordance with its customary servicing
practices, is unlikely to be eventually repaid from Scheduled
Payments made by or on behalf of the related Customer; provided,
further, that the Servicer may not make a Servicer Advance with
respect to a Lease Contract once it has become a Defaulted Lease
Contract. On each Determination Date, the Servicer shall deliver
to the Back-up Servicer, the Trustee, MBIA and the Placement
Agent the Monthly Servicer's Report, which shall include a
listing of the aggregate amount of Scheduled Payments not
received for the immediately prior Monthly Period, the amount of
Servicer Advances, and the amounts which it has determined in its
sole discretion, and in accordance with its customary servicing
practices, are unlikely to be recoverable from the related
Customers.
Section 3.05 Financing Statements. The Servicer will make
all Uniform Commercial Code filings and recordings as may be
required pursuant to the terms of the Trust and Security
Agreement. The Servicer shall, in accordance with its customary
servicing procedures and at its own expense, be responsible for
taking such steps as are necessary to maintain perfection of such
security interests. The Trustee hereby authorizes the Servicer
to re-perfect or to cause the re-perfection of such security
interest on its behalf as Trustee, as necessary.
Section 3.06 Maintenance of Insurance Policy; Insurance
Proceeds. The Servicer shall have the obligation to verify,
monitor and enforce the acquisition and maintenance of a
Customer's Insurance Policies in a manner consistent with past
practice, provided that the Servicer shall do so in a manner
consistent with that practiced by other lessors in the industry
with similar lease contracts and equipment owned or serviced by
them. In the event that a Customer fails to maintain an
Insurance Policy as required by the terms of the related Lease
Contract, and the cost of the Equipment is in excess of $50,000,
the Servicer shall procure and maintain such insurance in an
amount not less than the amount required by such Lease Contract.
The Servicer may satisfy its obligations under this Section 3.06
by maintaining a blanket insurance policy covering all of the
Equipment. Any Insurance Proceeds shall be remitted to the
Trustee for deposit in the Collection Account pursuant to Section
3.03.
Section 3.07 Personal Property and Sales Taxes. The
Servicer shall, on behalf of the Transferor, pay or cause to be
paid all personal property, sales and use taxes on or with
respect to the Equipment, or the acquisition or leasing thereof,
as and when such taxes become due, to the extent a Customer has
paid amounts to the Servicer or into the Lockbox Account for such
taxes. The Servicer shall also cause to be filed in a timely
manner any and all returns and reports required in connection
with the payment of such taxes.
Section 3.08 Servicing Compensation.
(a) As compensation for the performance of its obligations
under this Agreement the Servicer shall be entitled to receive
the Servicer Fee and the Additional Servicer Fee, if applicable.
The Servicer Fee with respect to any Lease Contract shall be paid
monthly, commencing on the Initial Payment Date and terminating
on the first to occur of (i) the receipt of the last Scheduled
Payment and related Residual Proceeds with respect to the last
remaining Lease Contract, (ii) the receipt of Recoveries and
Insurance Proceeds with respect to the last remaining Lease
Contract, or (iii) the date on which the Transferor or MBIA
purchases the last remaining Lease Contract. The Servicer Fee
shall be paid to the Servicer at the times and in the priority as
set forth in the Trust and Security Agreement. The Servicer
shall pay all expenses incurred by it in connection with its
servicing activities hereunder, including, without limitation,
payment of the fees and disbursements of the Independent
Accountants and payment of expenses incurred in connection with
distributions and reports to the Trustee, the Back-up Servicer,
MBIA, the Rating Agencies and Certificateholders, payment of the
fee of the Lockbox Bank under the Lockbox Agreement and any
payment of any fees in connection with the ACH Account and shall
not be entitled to reimbursement for such expenses; provided,
however, that the Servicer will be entitled to reimbursement
pursuant to Section 12.02(d)(i)(B) of the Trust and Security
Agreement for reasonable costs and expenses incurred by the
Servicer (including reasonable attorney's fees and out-of-pocket
expenses) in connection with the realization, attempted
realization or enforcement of rights and remedies upon Defaulted
Lease Contracts, from amounts received as Recoveries from such
Defaulted Lease Contracts.
(b) In connection with any transfer of the servicing
obligations to a successor Servicer in accordance with Section
6.02 hereof, the Back-up Servicer shall be entitled to
reimbursement of Transition Costs as provided therein and in the
Trust and Security Agreement.
Section 3.09 Substitution or Purchase of Lease Contracts.
(a) The Servicer shall not allow termination of a Lease
Contract prior to the scheduled expiration date or prepayment of
any Lease Contract (except as may be specifically required under
such Lease Contract in connection with a casualty to the related
Equipment), unless the Transferor has (i) conveyed to the Trustee
a Substitute Lease Contract, the Lease Receivables under such
Substitute Lease Contract and the Transferor's interest in the
related Equipment and delivered to the Trustee the original
executed counterpart of the Substitute Lease Contract or
(ii) removed such prepaid Lease Contract and the related
Equipment from the Trust Estate by remittance of the Removal
Price to the Servicer for deposit in the Collection Account in
accordance with Section 3.03 hereof; provided, however, that
removals and substitutions of Lease Contracts pursuant to this
subparagraph (a) shall comply with the requirements of
Section 4.03 of the Trust and Security Agreement and the criteria
set forth in Section 3.04 of the Lease Acquisition Agreement.
(b) The Servicer shall permit the Transferor to (i) remove
any Defaulted Lease Contract or Delinquent Lease Contract from
the Trust Estate by remittance by the Transferor to the Servicer,
for deposit in the Collection Account in accordance with
Section 3.03 hereof, of the Removal Price for such Lease Contract
or (ii) substitute for any Defaulted Lease Contract or Delinquent
Lease Contract, a Substitute Lease Contract and the Lease
Receivables under such Substitute Lease Contract and the
Transferor's interest in the related Equipment and, upon the
delivery to the Trustee of the original executed counterpart of
the Substitute Lease Contract and the related Lease Contract
File; provided that removals and substitutions of Lease Contracts
pursuant to this subparagraph (b) shall comply with the
requirements of Section 4.03 of the Trust and Security Agreement
and the criteria set forth in Section 3.04 of the Lease
Acquisition Agreement.
(c) Notwithstanding any other provision contained in this
Agreement, the Servicer shall not, with respect to a Defaulted
Lease Contract, (i) negotiate or enter into a new lease with the
Customer relating to the Equipment or the Customer's obligations
under such Defaulted Lease Contract or (ii) allow the Customer
thereunder to resume its rights under such Defaulted Lease
Contract, unless the Transferor has removed or made a
substitution for such Defaulted Lease Contract in the manner set
forth in subsection (b) hereof.
(d) In the event that the Company is required to repurchase
or substitute a Lease Contract pursuant to Sections 2.06 or 3.03
of the Lease Acquisition Agreement the Servicer shall permit such
repurchase or substitution only in accordance with the terms of
Sections 3.03 and 3.04 of the Lease Acquisition Agreement.
Section 3.10 No Offset. Prior to the termination of this
Agreement, the obligations of the Servicer under this Agreement
shall not be subject to any defense, counterclaim or right of
offset that the Servicer has or may have against the Transferor,
whether in respect of this Agreement, any Lease Contract, Lease
Receivable, Equipment or otherwise.
ARTICLE 4
ACCOUNTINGS, STATEMENTS AND REPORTS
Section 4.01 Monthly Servicer's Reports. No later than
10:00 a.m. (Minneapolis time) on each Determination Date, the
Servicer shall deliver the Monthly Servicer's Report to the
Transferor, the Back-up Servicer, the Trustee, and the Placement
Agent, and the Trustee will deliver the Monthly Servicer's Report
to each Certificateholder, MBIA, and the Rating Agencies in the
form attached as Exhibit A hereto with respect to the activity in
the immediately preceding Monthly Period. In the course of
preparing the Monthly Servicer's Report, the Servicer shall seek
direction from the Holder of the Transferor Certificate as to
remittance of any funds to be paid pursuant to Section
12.02(d)(xvi) of the Trust and Security Agreement. Lease
Contracts which have been substituted for or purchased by the
Company or the Transferor shall be identified by Customer lease
number on the Monthly Servicer's Report. On each Payment Date,
the Servicer shall deliver to the Back-up Servicer and MBIA a
Computer Tape in a format acceptable to the Back-up Servicer
containing the information from which the Servicer prepared the
Monthly Servicer's Report, as well as any additional information
reasonably requested by the Back-up Servicer prior to such
Payment Date.
Section 4.02 Financial Statements; Certification as to
Compliance; Notice of Default.
(a) The Servicer (and the Company if the initial Servicer
is no longer the Servicer) will deliver to the Trustee, the
Placement Agent, MBIA, the Back-up Servicer, the Rating Agencies
and each Certificateholder of Outstanding Certificates (and, upon
the request of any Certificateholder, to any prospective
transferee of any Certificate which has executed an agreement
with the Transferor and the Servicer containing terms
substantially similar to those set forth in Section 4.04(f)
hereof):
(i) within 120 days after the end of each fiscal year
of the Reported Companies, a copy of the Reported Companies'
Financial Statements, all in reasonable detail and
accompanied by an opinion of a firm of Independent
Accountants stating that such financial statements present
fairly the financial condition of the Reported Companies
(or, in the case of a successor Servicer, such successor
Servicer's financial condition) and have been prepared in
accordance with generally accepted accounting principles
consistently applied (except for changes in application in
which such accountants concur), and that the examination of
such accountants in connection with such financial
statements has been made in accordance with generally
accepted auditing standards, and accordingly included such
tests of the accounting records and such other auditing
procedures as were considered necessary in the
circumstances;
(ii) with each set of Reported Companies' Financial
Statements delivered pursuant to subsection (a)(i) above,
the Servicer will deliver an Officer's Certificate stating
that such officer has reviewed the relevant terms of the
Trust and Security Agreement, the Lease Acquisition
Agreement, the Insurance Agreement and this Agreement and
has made, or caused to be made, under such officer's
supervision, a review of the transactions and conditions of
the Reported Companies during the period covered by the
Reported Companies Financial Statements then being
furnished, that the review has not disclosed the existence
of any Servicer Default or Servicer Event of Default or, if
a Servicer Default or a Servicer Event of Default exists,
describing its nature and what action the Servicer has taken
and is taking with respect thereto, and that on the basis of
such review the officer signing such certificate is of the
opinion that during such period the Servicer has serviced
the Lease Contracts in compliance with the procedures hereof
except as disclosed in such certificate.
(iii) immediately upon becoming aware of the
existence of any condition or event which constitutes a
Servicer Default or a Servicer Event of Default, a written
notice describing its nature and period of existence and
what action the Servicer is taking or proposes to take with
respect thereto;
(iv) promptly upon the Servicer's becoming aware of:
(A) any proposed or pending investigation of it
or the Transferor by any governmental authority or
agency, or
(B) any pending or proposed court or
administrative proceeding which involves or may involve
the probability of materially and adversely affecting
the properties, business, prospects, profits or
condition (financial or otherwise) of the Servicer or
the Transferor or the Trust Estate,
a written notice specifying the nature of such investigation
or proceeding and what action the Servicer is taking or proposes
to take with respect thereto and evaluating its merits;
(v) with reasonable promptness any other data and
information with respect to the Servicer or the Lease Assets
which may be reasonably requested from time to time,
including without limitation any information required to be
made available at any time to any prospective transferee of
any Certificates in order to satisfy the requirements of
Rule 144A under the Securities Act of 1933, as amended;
(vi) quarterly, unaudited versions of the Reported
Companies' consolidating balance sheet and income statement
within 45 days after the end of each quarter; and
(vii) such other information as may be
specified in the Trust and Security Agreement.
(b) On or before each March 25, commencing March 25, 1998,
so long as any of the Certificates are outstanding, the Servicer
shall furnish to MBIA, each Certificateholder and the Trustee an
Officer's Certificate either stating that such action has been
taken with respect to the recording, filing, and rerecording and
refiling of any financing statements and continuation statements
as necessary to maintain the interest of the Trustee created by
the Trust and Security Agreement with respect to the Trust Estate
and reciting the details of such action or stating that no such
action is necessary to maintain such interest. Such Officer's
Certificate shall also describe the recording, filing,
rerecording and refiling of any financing statements and
continuation statements that will be required to maintain the
interest of the Trustee in the Trust Estate until the date such
next Officer's Certificate is due.
Section 4.03 Independent Accountants' Reports; Annual
Federal Tax Lien Search.
(a) Promptly at the end of the Servicer's fiscal year, the
Servicer at its expense shall cause the Independent Accountants
(who may also render and deliver other services to the Servicer
and its Affiliates) to prepare a statement to the Back-up
Servicer, the Trustee, the Certificateholders, MBIA, the Rating
Agencies and the Placement Agent, dated as of the close of such
period, to the effect that the Independent Accountants have
examined the servicing procedures, manuals, guides and records of
the Servicer, and the accounts and records of the Servicer
relating to the Lease Contracts and any files or documentation
pertaining to the Lease Assets (which procedures, manuals, guides
and records shall be described in one or more schedules to such
statement), that such Independent Accountants have compared the
information contained in the Monthly Servicer's Reports delivered
in the relevant period with information contained in the accounts
and records for such period, and that, on the basis of such
examination and comparison, nothing has come to the Independent
Accountants' attention to indicate that the Servicer has not,
during the relevant period, serviced the Lease Contracts in
compliance with such servicing procedures, manual and guides and
in the same manner required by the Servicer's standards and with
the same degree of skill and care consistent with that which the
Servicer customarily exercises with respect to similar Lease
Contracts owned by it and otherwise in compliance with this
Agreement, that such accounts and records have not been
maintained in accordance with Section 4.04 hereof, that the
information contained in the Monthly Servicer's Reports does not
reconcile with the information contained in the accounts and
records or that such certificates, accounts and records have not
been properly prepared and maintained in all material respects or
in accordance with the requirements of this Agreement, except in
each case for (i) such exceptions as the Independent Accountants
shall believe to be immaterial and (ii) such other exceptions as
shall be set forth in such statement. The Servicer shall deliver
to the Back-up Servicer, the Trustee, the Certificateholders, the
Placement Agent, the Rating Agencies and MBIA a copy of any such
statement within 120 days of the close of the relevant period.
(b) Promptly after the end of the Servicer's fiscal year,
commencing with the fiscal year ending June 30, 1998, the
Servicer, at its expense, shall cause a search of any and all
federal tax liens against the Company and the Transferor and any
Affiliates as of the end of such fiscal year to be conducted and
shall deliver to the Back-up Servicer, the Trustee, the
Certificateholders and MBIA on or before July 31 of each year,
commencing July 31, 1998, an officer's certificate signed by a
Servicing Officer (i) stating that there are no outstanding
federal tax liens filed against any portion of the Trust Estate,
the Company, the Transferor, or any Affiliate or (ii) listing the
outstanding federal tax liens filed against any portion of the
Trust Estate, the Company, the Transferor, or any Affiliate. In
the event any such certificate shall disclose any such federal
tax liens, the Servicer shall promptly thereafter, satisfy any
such federal tax liens.
Section 4.04 Access to Certain Documentation and
Information.
(a) The Servicer shall provide to the Back-up Servicer,
MBIA, the Trustee, or any Certificateholder and their duly
authorized representatives, attorneys or accountants access to
any and all documentation regarding the Trust Estate (including
the Lease Schedule) that the Servicer may possess, such access
being afforded without charge but only upon reasonable request
and during normal business hours so as not to interfere
unreasonably with the Servicer's normal operations or customer or
employee relations, at offices of the Servicer designated by the
Servicer.
(b) At all times during the term hereof, the Servicer shall
keep available at its principal executive office for inspection
by Certificateholders, the Trustee, the Back-up Servicer and MBIA
a list of all Lease Contracts then held as a part of the Trust
Estate, together with a reconciliation of such list to that set
forth in the Initial Lease Schedule or the Amended Lease Schedule
and each of the Monthly Servicer's Reports, indicating the
cumulative addition and removal of Lease Contracts from the Trust
Estate.
(c) The Servicer will maintain accounts and records as to
each respective Lease Contract serviced by the Servicer that are
accurate and sufficiently detailed as to permit (i) the reader
thereof to know as of the most recent Calculation Date the status
of such Lease Contract, including any payments, Insurance
Proceeds, Residual Proceeds and Recoveries received or owing (and
the nature of each) thereon and (ii) the reconciliation between
payments, Insurance Proceeds, Residual Proceeds or Recoveries on
(or with respect to) each Lease Contract and the amounts from
time to time deposited in the Collection Account in respect of
such Lease Contract.
(d) The Servicer will maintain all of its computerized
accounts and records so that, from the Closing Date and after
each Acquisition Date and the conveyance of the related Lease
Contract, Lease Receivables and Equipment to the Trustee, the
Servicer's accounts and records (including any back-up computer
archives) that refer to any such Lease Contracts, Lease
Receivables or Equipment indicate clearly that the Lease
Contracts, Lease Receivables and Equipment are owned by the
Trustee for the benefit of MBIA and the Certificateholders.
Indication of the Trustee's interest in a Lease Contract will be
deleted from or modified on the Servicer's accounts and records
when, and only when, the Lease Contract has been paid in full,
replaced with a Substitute Lease Contract or purchased by the
Company or the Transferor or conveyed to the Servicer pursuant to
this Agreement.
(e) Nothing in this Section 4.04 shall affect the
obligation of the Servicer to observe any applicable law
prohibiting disclosure of information regarding the Customers,
and the failure to provide information otherwise required by this
Section 4.04 as a result of such observance by the Servicer,
shall not constitute a breach of this Section 4.04.
(f) All information obtained by the Trustee, the Back-up
Servicer, MBIA or any Certificateholder regarding the Customers
and the Lease Contracts, whether upon exercise of its rights
under this Section 4.04 or otherwise, shall be maintained by the
Trustee, the Back-up Servicer, MBIA or the Certificateholder, as
applicable, in confidence and shall not be disclosed to any other
Person, unless such disclosure shall not violate any applicable
law or regulation or any proprietary rights of the Company, the
Transferor or the Servicer unless ordered by a court of
applicable jurisdiction; provided that MBIA may make disclosures
with respect to any of the above matters to the Rating Agencies,
reinsurers or any entity having regulatory authority over MBIA
and provided further that the Certificateholders may disclose
such information to the extent permitted by the applicable
Certificate Purchase Agreement.
Section 4.05 Other Necessary Data. The Servicer shall, on
request of the Back-up Servicer, the Trustee or MBIA, (i) on
reasonable notice, furnish the Trustee, the Back-up Servicer or
MBIA such data necessary for the administration of the Trust
Estate as can be reasonably generated by the Servicer's existing
data processing systems, and (ii) on and after a Servicer Event
of Default, within 5 Business Days, provide the Trustee and the
Back-up Servicer with access to the Servicer's existing data
processing systems and any files or records with respect to the
Lease Assets that it may have.
Section 4.06 Trustee to Cooperate. Upon payment
(including through application of any prepayment) in full of any
Lease Contract, the Servicer will notify the Trustee on the next
succeeding Determination Date by written certification (which
certification shall include a statement to the effect that all
amounts received in connection with such payments in full which
are required to be deposited in the Collection Account pursuant
to Section 3.03 hereof have been so deposited) of a Servicing
Officer and shall request delivery of the Lease Contract to the
Servicer. Upon receipt of such delivery request, the Trustee
shall within 7 days of such request by the Servicer release such
Lease Contract to the Servicer. Upon release of such Lease
Contract, the Servicer is authorized to execute an instrument in
satisfaction of such Lease Contract and to do such other acts and
execute such other documents as it deems necessary to discharge
the Customer thereunder and, if applicable, release any security
interest in the Equipment related thereto. The Servicer shall
determine when a Lease Contract has been paid in full. Upon the
written request of a Servicing Officer and subject to the
Trustee's rights to indemnity contained herein and in the Trust
and Security Agreement, the Trustee shall perform such other acts
as reasonably requested in writing by the Servicer and otherwise
cooperate with the Servicer in enforcement of the
Certificateholders' rights and remedies with respect to Lease
Contracts.
ARTICLE 5
THE SERVICER
Section 5.01 Servicer Indemnification.
(a) The Servicer shall indemnify and hold harmless the
Trustee, the Transferor, the Back-up Servicer, MBIA, and the
Certificateholders, from and against any loss, liability, claim,
expense, damage or injury suffered or sustained to the extent
that such loss, liability, claim, expense, damage or injury arose
out of or was imposed by reason of the failure by the Servicer to
perform its duties in accordance with the terms of this Agreement
or are attributable to errors or omissions of the Servicer
related to such duties or a breach of the representations and
warranties made by the Servicer in Section 2.01 hereof; provided,
however, that the Servicer shall not indemnify any party to the
extent that acts of fraud, gross negligence or breach of
fiduciary duty by such party contributed to such loss, liability,
claim, expense, damage or injury.
(b) The Servicer shall not be liable for any settlement of
any action or claim effected without its consent. If the
Servicer has made any indemnity payments to MBIA, the Trustee,
the Back-up Servicer or the Certificateholders pursuant to this
Section and such party thereafter collects any of such amounts
from others, such party will promptly repay such amounts
collected to the Servicer, without interest. The provisions of
this Section 5.01 shall survive any expiration or termination of
this Agreement.
Section 5.02 Corporate Existence; Reorganizations.
(a) The Servicer shall keep in full effect its existence
and good standing as a corporation in the State of Delaware and
will obtain and preserve its qualification to do business as a
foreign corporation in each jurisdiction in which such
qualification is or shall be necessary to enable the Servicer to
perform its duties under this Agreement, except where the failure
to so qualify would not have a material adverse effect on the
Trust Estate or the ability of the Servicer to perform its duties
hereunder; provided, however, that the Servicer may reorganize as
a corporation in another state, if to do so would be in the best
interests of the Servicer and would not have a material adverse
effect upon the Certificateholders or MBIA.
(b) The Servicer shall not (i) (other than pursuant to one
or more additional lease pool financings) convey, transfer or
lease substantially all of its assets as an entirety to any
Person, or (ii) merge or consolidate with another Person, unless
(A) such Person or the merged or consolidated entity acquires
substantially all the assets of the Servicer as an entirety, has
adequate servicing skills and personnel, is substantially
involved in the equipment financing lease business and executes
and delivers to the Transferor, MBIA and the Trustee an
agreement, in form and substance reasonably satisfactory to the
Transferor, MBIA, the Controlling Holders and the Trustee, which
contains an assumption by such Person or entity of the due and
punctual performance and observance of each covenant and
condition to be performed or observed by the Servicer under this
Agreement, (B) no Default, Event of Default or Servicer Default
(or an event that due to the lapse of time or failure to act
would become a Servicer Default) has occurred and is continuing,
and (C) MBIA shall have given its prior written consent. The
Servicer shall provide prompt written notice of such event to the
Rating Agencies and shall provide to the Trustee, for the benefit
of MBIA and the Certificateholders, an Opinion of Counsel
confirming the enforceability of such assumption agreement.
(c) The Servicer shall provide written notice (to the
extent the Servicer has actual knowledge or notice and the
provision of such information does not violate any securities
laws) to the Trustee and MBIA within ten days after any
acquisition by one person or a group of persons acting in concert
of more than 50% of the stock of the Servicer.
Section 5.03 Limitation on Liability of the Servicer and
Others. Except as provided in Section 5.01 hereof, neither the
Servicer nor any of the officers, directors, employees or agents
of the Servicer shall be under any liability for any action taken
or for refraining from the taking of any action in its capacity
as Servicer pursuant to this Agreement; provided, however, that
this provision shall not protect the Servicer or any such person
against any liability which would otherwise be imposed by reason
of willful misconduct, bad faith or gross negligence (which
includes negligence with respect to the duties of the Servicer
explicitly set forth in this Agreement) in the performance of its
duties hereunder. The Servicer and any officer, director,
employee or agent of the Servicer may rely in good faith on any
document of any kind prima facie properly executed and submitted
by any Person with respect to any matters arising hereunder. No
implied covenants or obligations shall be read into this
Agreement against the Servicer. In the event the Servicer
performs any activities beyond the requirements of this
Agreement, the Servicer shall have the option but will not be
required to perform such activities in the future.
Section 5.04 The Servicer Not to Resign.
(a) The Servicer shall not resign from the duties and
obligations hereby imposed on it except upon a determination by
its Board of Directors that by reason of change in applicable
legal requirements, with which the Servicer cannot reasonably
comply, the continued performance by the Servicer of its duties
under this Agreement would cause it to be in violation of such
legal requirements, said determination to be evidenced by a
resolution from its Board of Directors to such effect,
accompanied by an Opinion of Counsel to such effect and
reasonably satisfactory to the Trustee and MBIA.
(b) No such resignation shall become effective until a
successor Servicer shall have assumed the responsibilities and
obligations of the Servicer hereunder.
(c) Except as provided in Sections 5.02 and 6.01 hereof,
the duties and obligations of the Servicer under this Agreement
shall continue until this Agreement shall have been terminated as
provided in Section 8.01 hereof, and shall survive the exercise
by the Transferor or the Trustee of any right or remedy under
this Agreement, or the enforcement by the Transferor, MBIA, the
Trustee or any Certificateholder of any provision of the
Certificates or this Agreement.
ARTICLE 6
SERVICING TERMINATION
Section 6.01 Servicer Events of Default.
(a) Any of the following acts or occurrences shall
constitute a Servicer Event of Default:
(i) Any failure by the Servicer to deliver to the
Trustee for payment to Certificateholders any proceeds or
payments received from a Customer or in respect of the Trust
Estate and required to be so delivered under the terms of
the Trust and Security Agreement and this Agreement that
continues unremedied until 10:00 a.m. (Minneapolis time) on
the following Business Day; provided, however, that the
Trustee, upon receiving actual knowledge of such failure,
shall give the Servicer prompt written, telecopied or
telephonic notice of such failure. Notwithstanding the
foregoing, any failure by the Trustee to deliver such notice
to the Servicer shall not prevent the occurrence of a
Servicer Event of Default; or
(ii) Any failure by the Servicer to deliver a Monthly
Servicer's Report pursuant to Section 4.01 hereof that
continues unremedied until 10:00 a.m., Minneapolis time, the
following Business Day; provided, however, that if the
Servicer has not delivered the Monthly Servicer's Report by
12:00 noon (Minneapolis time) on the Determination Date, the
Trustee shall give the Servicer notice of such failure.
Notwithstanding the foregoing, any failure by the Trustee to
deliver such notice to the Servicer shall not prevent the
occurrence of a Servicer Event of Default; or
(iii)Any failure by the Servicer to make a Servicer
Advance pursuant to Section 3.04 hereof or to deposit any
Removal Price received by it that continues unremedied until
10:00 a.m. (Minneapolis time) the following Business Day;
provided, however, that if the Servicer has not made the
Servicer Advance or deposited any Removal Price received by
it by 12:00 noon (Minneapolis time) on the Determination
Date and the Trustee has received written notification from
the Servicer by way of the Monthly Servicer's Report or
otherwise that such Servicer Advance or Removal Price is to
be paid, the Trustee shall give the Servicer prompt written,
telecopied or telephonic notice of such failure.
Notwithstanding the foregoing, any failure by the Trustee to
deliver such notice to the Servicer shall not prevent the
occurrence of a Servicer Event of Default; or
(iv) Any failure on the part of the Servicer in its
capacity as such duly to observe or perform in any material
respect any other covenants or agreements of the Servicer
set forth in this Agreement or the Trust and Security
Agreement, as the case may be, or if any representation or
warranty of the Servicer set forth in Section 2.01 of this
Agreement shall prove to be incorrect, which failure or
breach (A) materially and adversely affects or could affect
the interest or rights of MBIA, the Trustee, or the
Certificateholders and (B) continues unremedied for a period
of 30 days after the date on which the Servicer becomes
aware of such failure or breach or written notice of such
failure or breach, requiring the situation giving rise to
such breach or non-conformity to be remedied, shall have
been given to a Servicing Officer of the Servicer by the
Trustee, MBIA, the Transferor, or the Back-up Servicer, or
to a Servicing Officer of the Servicer, MBIA and the Trustee
by Holders of Certificates representing not less than 25% of
the Certificate Balance; or
(v) Any assignment by the Servicer to a delegate of
its duties or rights under this Agreement, except as
specifically permitted hereunder, or any attempt to make
such an assignment; or
(vi) The entry of a decree or order for relief by a
court having jurisdiction in respect of the Servicer or a
petition against the Servicer in an involuntary case under
any federal bankruptcy laws, as now or hereafter in effect,
or any other present or future federal or state bankruptcy
insolvency or similar law, or appointing a conservator,
receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official for the Servicer or
for any substantial part of its property, or ordering the
winding up or liquidation of the affairs of the Servicer and
the continuance of any such decree or order unstayed and in
effect for a period of 60 consecutive days; or
(vii)The commencement by the Servicer of a voluntary
case under any federal bankruptcy laws, as now or hereafter
in effect, or any other present or future federal or state
bankruptcy, insolvency, reorganization or similar law, or
the consent by the Servicer to the appointment of or taking
possession by a conservator, receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official
in any insolvency, readjustment of debt, marshaling of
assets and liabilities, bankruptcy or similar proceedings of
or relating to the Servicer or relating to a substantial
part of its property, or the making by the Servicer of an
assignment for the benefit of creditors, or the failure by
the Servicer generally to pay its debts as such debts become
due or if the Servicer shall admit in writing its inability
to pay its debts as they become due, or the taking of
corporate action by the Servicer in furtherance of any of
the foregoing; or
(viii)The occurrence of a Trigger Event if the initial
Servicer is the Servicer.
(b) So long as a Servicer Event of Default shall not have
been remedied within the period set forth in (i), (ii), (iii),
(iv) or (vi) above, as applicable, or if a Servicer Event of
Default described in (v), (vii) or (viii) above occurs, the
Trustee, at the direction of MBIA shall, or if there has been an
MBIA Default or Termination, the Trustee, the Transferor, or the
Back-up Servicer may and shall at the request of the Controlling
Holders, by notice (the "Servicer Termination Notice") then given
in writing to the Servicer and the Back-up Servicer, terminate
all, but not less than all, of the rights and obligations of the
Servicer under this Agreement.
(c) Upon the occurrence of a Trigger Event, the Trustee
shall, at the direction of MBIA, or if there has been an MBIA
Default or Termination, the Trustee, the Transferor, or the Backup
Servicer may and shall at the request of the Controlling
Holders, by Servicer Termination Notice then given in writing to
the Servicer and the Back-up Servicer, terminate all but not less
than all of the rights and obligations of the Servicer under this
Agreement.
(d) On or after the receipt by the Servicer of a Servicer
Termination Notice, all authority and power of the Servicer under
this Agreement, whether with respect to the Certificates or the
Lease Contracts or otherwise, shall pass to and be vested in the
successor Servicer appointed pursuant to Section 6.02 hereof,
and, without limitation, such successor Servicer is hereby
authorized and empowered to execute and deliver, on behalf of the
Servicer, as attorney-in-fact or otherwise, any and all documents
and other instruments, and to do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such
notice of termination, whether to complete the transfer of the
Lease Contracts and related documents, or otherwise. The
Servicer agrees to cooperate with the Trustee, the Back-up
Servicer and the successor Servicer in effecting the termination
of the responsibilities and rights of the Servicer hereunder,
including, without limitation, the transfer to the successor
Servicer for administration by it of all cash amounts that shall
at the time be held by the Servicer for deposit, or have been
deposited by the Servicer, in the Collection Account or
thereafter received with respect to any of the Lease Contracts.
To assist the successor Servicer in enforcing all rights under
the Lease Contracts and the Insurance Polices to the extent they
relate to the Lease Contracts, the outgoing Servicer, at its own
expense, shall transfer its records (electronic and otherwise)
relating to such Lease Contracts to the successor Servicer in
such form as the successor Servicer may reasonably request and
shall transfer the related Lease Contracts and Lease Contract
Files (to the extent not held by the Trustee) and all other
records, correspondence and documents relating to the Lease
Contracts that it may possess to the successor Servicer in the
manner and at such times as the successor Servicer shall
reasonably request. In addition to any other amounts that are
then payable to the Servicer under this Agreement, the Servicer
shall be entitled to receive reimbursements for any unreimbursed
Servicer Advance made during the period prior to the delivery of
a Servicer Termination Notice pursuant to this Section 6.01 which
terminates the obligations and right of the Servicer under this
Agreement.
Section 6.02 Back-up Servicer to Act; Taking of Bids;
Appointment of Successor Servicer.
(a)(i) Except as provided in Section 6.02(d) hereof,
on and after the time the Servicer resigns pursuant to
Section 5.04 hereof or receives a Servicer Termination
Notice pursuant to Section 6.01(b) or (c) hereof, the
Back-up Servicer shall, unless prevented by law,
automatically and without further action be the successor
Servicer. If the Back-up Servicer cannot serve as successor
Servicer, MBIA, or if an MBIA Default or Termination has
occurred and is continuing, the Trustee, shall appoint
another firm acceptable to it and the Controlling Holders.
(ii) The successor Servicer shall, upon the execution
of a written agreement to be bound by all of the provisions
of this Agreement, be the successor in all respects to the
Servicer in its capacity as Servicer under this Agreement
and the transactions set forth or provided for herein and
shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Servicer by the
terms and provisions hereof; provided, however, that the
successor Servicer (x) shall not be required to make any
Servicer Advance if such Servicer Advance would be
prohibited by applicable law and (y) shall not be liable for
any acts or omissions of the outgoing Servicer or for any
breach by the outgoing Servicer of any of its
representations and warranties contained herein or in any
related document or agreement. With the prior written
consent of MBIA (which consent shall not be unreasonably
withheld), the successor Servicer may subcontract with
another firm to act as subservicer so long as the successor
Servicer remains fully responsible and accountable for
performance of all obligations of the Servicer on and after
the time the Servicer receives the Servicer Termination
Notice. The successor Servicer shall be entitled to the
Servicer Fee and any Additional Servicer Fee, subject to the
taking of bids as described in subsection (b) below.
(b) Solely for purposes of establishing the fee to be paid
to the successor Servicer upon receipt of a Servicer Termination
Notice, the Back-up Servicer shall solicit written bids, with a
copy to MBIA (such bids to include a proposed servicer fee and
servicing transfer costs) from not less than three entities
experienced in the servicing of Lease Contracts similar to the
Lease Contracts and that are not affiliates of the Trustee, the
Back-up Servicer, the Servicer or the Transferor and are
reasonably acceptable to MBIA. The Transferor may also solicit
additional bids from other such entities. Any such written
solicitation shall prominently indicate that bids should specify
any applicable subservicing fees required to be paid from the
Servicer Fee and that any fees and transfer costs in excess of
the Servicer Fee shall be paid only pursuant to Section
12.02(d)(ix) of the Trust and Security Agreement as the
Additional Servicer Fee. The successor Servicer shall act as
Servicer hereunder and shall, subject to the availability of
sufficient funds in the Collection Account pursuant to Section
12.02(d)(i) (up to the Servicer Fee) and Section 12.02(d)(ix) (up
to any Additional Servicer Fee and any successor Servicer's
Transition Costs) and Section 12.02(d)(ix) (up to any additional
Transition Costs) of the Trust and Security Agreement, receive as
compensation therefor a fee equal to the fee proposed in the bid
so solicited which provides for the lowest combination of
servicer fee and transition costs, as reasonably determined by
MBIA.
(c) The Servicer, the Back-up Servicer, the Transferor, the
Trustee and such successor Servicer shall take such action,
consistent with this Agreement, as shall be necessary to
effectuate any such succession. The Back-up Servicer (or the
Trustee or the Certificateholders if such Certificateholders have
previously reimbursed the Back-up Servicer and the Trustee
therefor) shall be reimbursed for Transition Costs, if any,
incurred in connection with the assumption of responsibilities of
the successor Servicer, upon receipt of documentation of such
costs and expenses and in accordance with Section 12.02(d)(ix) of
the Trust and Security Agreement. The Back-up Servicer shall
have no claim against the Transferor or the Trust Estate for any
costs and expenses incurred in effecting such succession in
excess of the amount specified in the definition of "Transition
Costs."
(d) Upon written notification to the Trustee that on any
Determination Date following the solicitation of bids provided
for in Section 6.02(b) hereof, the sum of the aggregate Implicit
Principal Balance for all Lease Contracts plus the amount on
deposit in the Cash Collateral Account less the Class A
Certificate Balance and Class B Certificate Balance is less than
the lesser of (1) $50,000 or (2) the proposed servicing transfer
costs set forth in the lowest bid solicited pursuant to Section
6.02(b) hereof, then the Back-up Servicer shall be relieved of
its obligation under Section 6.02(a)(i) hereof, and MBIA, or if
there is an MBIA Default or Termination, the Transferor shall
appoint a successor Servicer. In such event, MBIA shall be
reimbursed for any Transition Costs incurred solely pursuant to
Section 6.02(b) hereof in the manner and to the extent provided
for in Section 12.02(d)(ix) of the Trust and Security Agreement.
Section 6.03 Notification to Certificateholders. The
Servicer shall promptly notify the successor Servicer (if
specified in the Trust and Security Agreement), Back-up Servicer,
MBIA, the Transferor, the Rating Agencies and the Trustee of any
Servicer Event of Default upon actual knowledge thereof by a
Servicing Officer. Upon any termination of, or appointment of a
successor to, the Servicer pursuant to this Article 6, the
Trustee shall give prompt written notice thereof to the Rating
Agencies and the Certificateholders at their respective addresses
appearing in the Certificate Register.
Section 6.04 Waiver of Past Defaults. The Trustee shall,
at the direction of MBIA or at the direction of the Controlling
Holders, on behalf of all Certificateholders, with the written
consent of MBIA, so long as there is no MBIA Default or
Termination, waive any default by the Servicer in the performance
of its obligations hereunder and its consequences, other than a
default with respect to required deposits and payments in
accordance with Article 3 or a default of the type set forth in
clause (vii) or (viii) of Section 6.01(a) hereof, which waiver
shall require the consent of each Certificateholder and MBIA.
Upon any such waiver of a past default, such default shall cease
to exist, and any Servicer Event of Default arising therefrom
shall be deemed to have been remedied for every purpose of this
Agreement. No such waiver shall extend to any subsequent or
other default or impair any right consequent thereon except to
the extent expressly waived. The Trustee shall provide to the
Rating Agencies notification of any such waiver.
Section 6.05 Effects of Termination of Servicer.
(a) Upon the appointment of the successor Servicer, the
predecessor Servicer shall remit any Scheduled Payments, Overdue
Payments and any other payments or proceeds that it may receive
pursuant to any Lease Contract or otherwise to the successor
Servicer after such date of appointment.
(b) After the delivery of a Servicer Termination Notice,
the outgoing Servicer shall have no further obligations with
respect to the management, administration, servicing,
enforcement, custody or collection of the Lease Contracts and the
successor Servicer shall have all of such obligations, except
that the outgoing Servicer will transmit or cause to be
transmitted directly to the successor Servicer, promptly on
receipt and in the same form in which received, any amounts held
by the outgoing Servicer (properly endorsed where required for
the successor Servicer to collect them) received as payments upon
or otherwise in connection with the Lease Contracts. The
outgoing Servicer's indemnification obligations pursuant to
Section 5.01 hereof will survive the termination of the Servicer
but will not extend to any acts or omissions of a successor
Servicer.
Section 6.06 No Effect on Other Parties. Upon any
termination of the rights and powers of the Servicer pursuant to
Section 6.01 hereof, or upon any appointment of a successor
Servicer, all the rights, powers, duties and obligations of the
other parties under this Agreement, the Trust and Security
Agreement, and the Lease Acquisition Agreement shall remain
unaffected by such termination or appointment and shall remain in
full force and effect thereafter.
ARTICLE 7
THE BACK-UP SERVICER
Section 7.01 Representations of Back-up Servicer. The
Back-up Servicer makes the following representations and
warranties:
(a) The Back-up Servicer has been duly organized and is
validly existing as a national banking association in good
standing under the laws of the United States of America, with
power and authority to own its properties and to conduct its
business as such properties shall be currently owned and such
business is presently conducted.
(b) The Back-up Servicer has the power and authority to
execute and deliver this Agreement, the Trust and Security
Agreement and the Insurance Agreement and to carry out their
respective terms; and the execution, delivery, and performance of
this Agreement, the Trust and Security Agreement and the
Insurance Agreement shall have been duly authorized by the
Back-up Servicer by all necessary corporate action.
(c) Each of this Agreement, the Trust and Security
Agreement and the Insurance Agreement constitutes a legal, valid,
and binding obligation of the Back-up Servicer enforceable in
accordance with its respective terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, or
other similar laws affecting the enforcement of creditors' rights
in general and by general principles of equity, regardless of
whether such enforceability shall be considered in a proceeding
in equity or at law.
(d) The consummation of the transactions contemplated by
this Agreement, the Trust and Security Agreement and the
Insurance Agreement and the fulfillment of the terms thereof
shall not conflict with, result in any breach of any of the terms
and provisions of, nor constitute (with or without notice or
lapse of time) a default under, the articles of incorporation or
by-laws of the Back-up Servicer, or any indenture, agreement, or
other instrument to which the Back-up Servicer is a party or by
which it shall be bound; nor result in the creation or imposition
of any lien upon any of its properties pursuant to the terms of
any such indenture, agreement, or other instrument; nor violate
any law or any order, rule, or regulation applicable to the
Back-up Servicer of any court or of any Federal or state
regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over the Back-up Servicer or
its properties.
(e) There are no proceedings or investigations pending or,
to the Back-up Servicer's best knowledge, threatened before any
court, regulatory body, administrative agency, or other
governmental instrumentality having jurisdiction over the Back-up
Servicer or its properties (i) asserting the invalidity of the
Servicing Agreement, the Trust and Security Agreement or the
Insurance Agreement, (ii) seeking to prevent the consummation of
any of the transactions contemplated by this Agreement, the Trust
and Security Agreement or the Insurance Agreement, (iii) seeking
any determination or ruling that might materially and adversely
affect the performance by the Back-up Servicer of its obligations
under, or the validity or enforceability of, this Agreement, the
Trust and Security Agreement or the Insurance Agreement.
Section 7.02 Merger or Consolidation of, or Assumption of
the Obligations of, Back-up Servicer. Any Person (i) into which
the Back-up Servicer may be merged or consolidated, (ii) which
may result from any merger or consolidation to which the Back-up
Servicer shall be a party, or (iii) which may succeed to the
properties and assets of the Back-up Servicer substantially as a
whole, which Person in any of the foregoing cases executes an
agreement of assumption to perform every obligation of the
Back-up Servicer hereunder, shall be the successor to the Back-up
Servicer under this Agreement with the prior written consent of
MBIA and without any further act on the part of any of the
parties to this Agreement. In the event that the resulting
entity does not meet the eligibility requirements for the Trustee
set forth in the Trust and Security Agreement, the Back-up
Servicer, upon the written request of MBIA, shall resign from its
obligations and duties under this Agreement.
Section 7.03 Back-up Servicer Resignation. The Back-up
Servicer shall not resign from its obligations and duties under
this Agreement, the Trust and Security Agreement or the Insurance
Agreement except (i) as provided in Section 7.02 above, or
(ii) upon determination that the performance of its duties shall
no longer be permissible under applicable law (any such
determination permitting the resignation of the Back-up Servicer
shall be evidenced by an Opinion of Counsel to such effect
delivered to the Trustee and MBIA). Upon the Back-up Servicer's
resignation or termination pursuant to Sections 7.02 hereof or
this Section 7.03, notice thereof shall be provided to the Rating
agencies and the Back-up Servicer shall comply with the
provisions of this Agreement until the acceptance of a successor
servicer.
Section 7.04 Oversight of Servicing.
(1) Prior to each Payment Date, the Back-up Servicer shall
review the Monthly Servicer's Report related thereto and shall
determine the following:
(i) that such Monthly Servicer's Report is complete on
its face;
(ii) that the amount credited to and withdrawn from the
Lockbox Account is the same as the amount set forth in the
Monthly Servicer's Report as so credited; and
(iii) that the amounts credited to and withdrawn
from the Collection Account and the Cash Collateral Account,
and the balance of such accounts, as set forth in the
records of the Back-up Servicer, are the same as the amount
set forth in the Monthly Servicer's Report.
(b) The Back-up Servicer shall, within 30 days of the
receipt thereof, load the Computer Tape received from the
Servicer pursuant to the Section 4.01 hereof, make sure such
Computer Tape is in readable form and shall calculate and check
the following:
(i) the Aggregate IPB as of the most recent
Calculation Date;
(ii) the Class A Principal Distribution Amount and the
Class B Principal Distribution Amount as of the most recent
Payment Date; and
(iii) the Annualized Gross Default Rate, the
Cumulative Gross Default Rate and the Delinquency Rate for
the related Monthly Period as set forth in the most recent
Monthly Servicer's Report.
In addition, the Back-up Servicer shall confirm that the items
set forth in the Monthly Servicer's Report, other than the items
listed in the section entitled "Deposits by or on behalf of the
Servicer" are accurate based solely on a comparison to the
Computer Tape referred to above.
(c) In the event of any discrepancy between the information
set forth in subparagraphs (a) and (b) as calculated by the
Servicer from that determined or calculated by the Back-up
Servicer, the Back-up Servicer shall promptly notify the
Servicer, the Trustee, the Certificateholders and MBIA of such
discrepancy. If within 30 days of such notice being provided to
the Servicer, the Back-up Servicer and the Servicer are unable to
resolve such discrepancy, the Back-up Servicer shall promptly
notify the Rating Agencies, MBIA and the Holders of the
Certificates of such discrepancy.
(d) Based solely on the information included in the Initial
Lease Schedule delivered on the Closing Date and each Amended
Lease Schedule delivered on each Acquisition Date and the
Computer Tapes provided each Payment Date thereafter, the Back-up
Servicer shall determine that any Funded Lease Contracts and
Substitute Lease Contracts satisfy the criterion set forth in
Section 3.04(b) of the Lease Acquisition Agreement and that the
acquisition of such Funded Lease Contracts and Substitute Lease
Contracts do not violate the Concentration Limits set forth in
the Lease Acquisition Agreement.
(e) The Back-up Servicer will make a site visit to the
offices of the Servicer on an annual basis for the purpose of
reviewing the operations of the Servicer. The reasonable out-of
pocket costs and expenses of the Back-up Servicer incurred in
connection with this Agreement, including without limitation, the
site visit referred to in the preceding sentence will be
reimbursed to the Back-up Servicer by the Servicer.
(f) Other than as specifically set forth elsewhere in this
Agreement, the Back-up Servicer shall have no obligation to
supervise, verify, monitor or administer the performance of the
Servicer and shall have no liability for any action taken or
omitted by the Servicer.
(g) The Back-up Servicer shall consult fully with the
Servicer as may be necessary from time to time to perform or
carry out the Back-up Servicer's obligations hereunder, including
the obligation to succeed at any time to the duties and
obligations of the Servicer as servicer under Section 6.02
hereof.
Section 7.05 Back-up Servicer Compensation. As
compensation for the performance of its obligations as Back-up
Servicer under this Agreement the Back-up Servicer shall be
entitled to receive the Back-up Servicer Fee.
Section 7.06 Duties and Responsibilities.
(a) The Back-up Servicer shall perform such duties and only
such duties as are specifically set forth in this Agreement, and
no implied covenants or obligations shall be read into this
Agreement against the Back-up Servicer; and
(b) In the absence of bad faith or negligence on its part,
the Back-up Servicer may conclusively rely as to the truth of the
statements and the correctness of the opinions expressed therein,
upon certificates or opinions furnished to the Back-up Servicer
and conforming to the requirements of this Agreement; but in the
case of any such certificates or opinions, which by any provision
hereof are specifically required to be furnished to the Back-up
Servicer, the Back-up Servicer shall be under a duty to examine
the same and to determine whether or not they conform to the
requirements of this Agreement.
ARTICLE 8
MISCELLANEOUS PROVISIONS
Section 8.01 Termination.
(a) Except with respect to a particular party under
Sections 5.01, 5.04, 5.05, 6.01, 7.02 or 7.03 hereof, the
respective duties and obligations of the Servicer, the
Transferor, the Back-up Servicer and the Trustee created by this
Agreement shall terminate upon the discharge of the Trust and
Security Agreement in accordance with its terms; and the
respective duties and obligations of the Trustee shall terminate
with respect to the Trustee in the event the Trustee resigns or
is replaced under Section 7.09 of the Trust and Security
Agreement; provided, however, that no resignation or removal of
the Trustee and no appointment of a successor Trustee shall
become effective until the acceptance of appointment by the
successor Trustee under Section 7.10 of the Trust and Security
Agreement. Upon the termination of this Agreement pursuant to
this Section 8.01(a), the Servicer shall pay all monies with
respect to the Lease Assets held by the Servicer and to which the
Servicer is not entitled to the Transferor or upon the
Transferor's order.
(b) This Agreement shall not be automatically terminated as
a result of an Event of Default under the Trust and Security
Agreement or any action taken by the Trustee thereafter with
respect thereto, and any liquidation or preservation of the Trust
Estate by the Trustee thereafter shall be subject to the rights
of the Servicer to service the Lease Receivables and to collect
servicing compensation as provided hereunder.
Section 8.02 Amendments.
(a) Subject to paragraph (b) of this Section 8.02, this
Agreement may be amended from time to time by the Transferor, the
Servicer, the Back-up Servicer, and the Trustee, with the consent
of MBIA but without the consent of any of the Certificateholders,
to cure any ambiguity, to correct or supplement any provisions
herein that may be inconsistent with any other provisions herein
and therein, as the case may be.
(b) The provisions of this Agreement may be waived from
time to time and this Agreement may be amended from time to time
by the Transferor, the Servicer and the Back-up Servicer, with
the consent of the Trustee, MBIA and the Controlling Holders, for
the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of this Agreement; provided,
however, that no such amendment or waiver shall, without the
consent of each Certificateholder, (i) alter the priorities with
which any allocation of funds shall be made under this Agreement,
(ii) permit the creation of any lien on the Trust Estate (other
than the lien of the Trust and Security Agreement) or any portion
thereof or deprive any such Certificateholder of the benefit of
this Agreement with respect to the Trust Estate or any portion
thereof, (iii) modify this Section 8.02 or (iv) modify any of the
items referred to in clauses (i) through (viii) of Section 9.02
(a) of the Trust and Security Agreement.
(c) Promptly after the execution of any amendment, the
Servicer shall send to the Trustee, MBIA, each Holder of the
Certificates and each Rating Agency a conformed copy of each such
amendment.
(d) Any amendment or modification effected contrary to the
provisions of this Section 8.02 shall be void.
(e) The manner of obtaining any consents from the
Certificateholders and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject to such
reasonable regulations as the Trustee may prescribe.
Section 8.03 GOVERNING LAW. THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL
BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 8.04 Notices. All demands, notices and
communications hereunder shall be in writing and shall be
delivered or mailed by registered or certified United States
mail, postage prepaid, and addressed, in each case as follows:
(a) if to the Transferor, at ▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇; (b) if the Servicer, at ▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇; (c) if to the Trustee, at ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇;
(d) if to MBIA, at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: Structured Finance - Insured Portfolio Management (SF
IPM); or (e) if to the Certificateholders at the address set
forth on Exhibit A to the applicable Certificate Purchase
Agreement. All notices and demands shall be deemed to have been
given either at the time of the delivery thereof to any officer
of the Person entitled to receive such notices and demands at the
address of such Person for notices hereunder, or on the third day
after the mailing thereof to such address, as the case may be.
Section 8.05 Severability of Provisions. If one or more
of the provisions of this Agreement shall be for any reason
whatever held invalid, such provisions shall be deemed severable
from the remaining covenants and provisions of this Agreement,
and shall in no way affect the validity or enforceability of such
remaining provisions, the rights of any parties hereto, or the
rights of the Trustee, MBIA or any Certificateholder. To the
extent permitted by law, the parties hereto waive any provision
of law which renders any provision of this Agreement prohibited
or unenforceable in any respect.
Section 8.06 Binding Effect. All provisions of this
Agreement shall be binding upon and inure to the benefit of the
respective successors and assigns of the parties hereto, and all
such provisions shall inure to the benefit of the
Certificateholders. This Agreement may not be modified except by a
writing signed by all parties hereto.
Section 8.07 Article Headings and Captions. The article
headings and captions in this Agreement are for convenience of
reference only, and shall not limit or otherwise affect the
meaning hereof.
Section 8.08 Legal Holidays. In the case where the date
on which any action required to be taken, document required to be
delivered or payment required to be made is not a Business Day,
such action, delivery or payment need not be made on such date,
but may be made on the next succeeding Business Day.
Section 8.09 Assignment for Security for the Certificates.
The Servicer and the Back-up Servicer understand that the
Transferor will convey to the Trustee all its right, title and
interest to this Agreement. The Servicer and the Back-up
Servicer consent to such conveyance and further agree that all
representations, warranties, covenants and agreements of the
Servicer and the Back-up Servicer made herein shall also be for
the benefit of and inure to the Trustee and all Holders from time
to time of the Certificates.
Section 8.10 No Servicing Assignment. Notwithstanding
anything to the contrary contained herein, except as provided in
Sections 5.02, 5.04 and 8.09 hereof, this Agreement may not be
assigned by the Transferor or the Servicer without the prior
written consent of MBIA and the Controlling Holders.
Section 8.11 MBIA Default or Termination. If an MBIA
Default or Termination occurs and is continuing, MBIA's right to
consent hereunder and to direct the Trustee shall be voided and,
in such event, in all provisions of this Agreement wherein MBIA's
consent or direction is required or permitted, the consent or
direction of the Controlling Holders shall be required or
permitted unless a larger number of Holders is required under the
relevant provision of this Agreement.
Section 8.12 Third Party Beneficiary. Each of MBIA and
the Holders of the Certificates are express third party
beneficiaries to this Agreement.
Section 8.13 Counterparts. This Agreement may be executed
in any number of counterparts, each of which so executed shall be
deemed to be an original, but all such counterparts shall
together constitute but one and the same instrument.
IN WITNESS WHEREOF, the Transferor, the Servicer, the
Trustee and the Back-up Servicer have caused this Servicing
Agreement to be duly executed by their respective officers
thereunto duly authorized as of the date and year first above
written.
GF FUNDING CORP. III,
Transferor
By: ______________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
GRANITE FINANCIAL, INC.,
Servicer
By: ______________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as
Trustee and Back-up Servicer
By: ______________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Assistant Vice
President
Exhibit A
Form of Monthly Servicer's Report
[see attached]
Exhibit B
FORM OF LOCKBOX AGREEMENT
This Lockbox Agreement, dated as of [
], 1997 is by and between [ ] (the
"Bank"), Granite Financial, Inc. ("Granite"), as servicer on
behalf of GF Funding Corp. III, GF Funding Corp. III, Norwest Bank
Minnesota, National Association, as Trustee under the terms of the
Trust and Security Agreement dated as of March 1, 1997 for the
benefit of MBIA Insurance Corporation and the Certificateholders
thereunder (the "Secured Party").
WHEREAS, GF Funding Corp. III has assigned to the Secured
Party the right to certain payments which GF Funding Corp. III is
to receive from its customers;
WHEREAS, GF Funding Corp. III and the Secured Party wish to
expedite the posting of deposits to the Secured Party account
described below (the "Secured Party's Account"):
[enter info re Collection Account]
WHEREAS, GF Funding Corp. III's customers have been directed
to mail payments to GF Funding Corp. III at the post office box
described as follows:
GF Funding Corp. III
[address]
(the "Lockbox"); and
WHEREAS, Granite, GF Funding Corp. III, the Secured Party, and
Bank wish to set forth their mutual understandings as to the terms
and conditions upon which Bank will pick up the contents of the
Lockbox and upon which Bank will receive such contents at its
Operations Center, process the checks, drafts and other
instruments for the payment of money contained in such mail, and
wire transfer the appropriate amounts to the Secured Party's
Account.
NOW THEREFORE, in consideration of the promises and of the
mutual covenants and agreements hereinafter contained, the parties
agree as follows:
1. Deliver Contents of Lockbox to Operations Center
Each business day, Bank or its authorized designees shall
remove the contents of the Lockbox and deliver them to Bank's
Operations Center in ________________ ("Operations Center"). Every
day is a business day except Saturdays, Sundays and holidays
observed by Bank. Bank may, at its option and without any
obligation to do so, perform the services set forth in this
Agreement on a day that is not a business day.
2. Process Contents of Lockbox
Bank will process the mail removed from the Lockbox ("Items")
and deliver it to its Operations Center. Standard processing of
the Items will generally include the following:
2.1 All Items will be opened and inspected.
2.2 Each check will be examined for date, payee, signature,
consistency of written and numerical amounts on the face
of the check, and legends. Bank will only process
checks which are made payable to a payee whose name or
reasonable variations thereof appear on the "Wholesale
Lockbox Implementation Worksheet" attached as Exhibit I
hereto.
2.2.1 Any check that is undated will be dated by Bank
with the date that the Item is processed, and will
be processed as if correctly dated.
2.2.2 A postdated check will be processed if the
check is postdated not later than 2 days from the
date the check was received at the Operations
Center. Otherwise the check will be delivered to
the Granite.
2.2.3 Any check whose written and numerical amounts
disagree will be credited to the Lockbox Account
(as defined below) in an amount equal to the
written amount; provided however, that if the
written amount is ambiguous, such check will be
delivered to Granite.
2.2.4 A request to obtain proper signature or
authority to pay will be stamped on any unsigned
check, and such check will be deposited to the
Lockbox Account.
2.2.5 If a check contains the legend "paid in full"
or any other language that is intended to modify GF
Funding Corp. III's contractual rights, or is
payable to a payee other than a payee whose name or
reasonable variations thereof appear on the
"Wholesale Lockbox Implementation Worksheet"
attached as Exhibit I hereto, the check will be
delivered to Granite.
2.3 Mail that does not contain any checks will be delivered
to Granite.
2.4 If the amount of any check differs from the amount of
the invoice received in the same envelope, the amount on
the invoice will be crossed out and the amount of the
check will be inserted.
2.5 If a check is received without an accompanying invoice,
any related correspondence and other material received
with such check will be stapled to the envelope in which
it is received.
2.6 Each business day, copies of all deposit tickets, all
tape listing, all rejected checks, and all other
instruments and papers referred to in this paragraph
will be delivered to Granite in accordance with the
instructions set forth in the "Wholesale Lockbox
Implementation Worksheet" attached hereto as Exhibit I.
3. Deposit Checks to Lockbox Account; Wire Transfer to Secured
Party's Account
(a) For all processed checks, other than those with respect
to which Paragraph 2 provides a different procedure, the GF
Funding Corp. III hereby authorize Bank to supply any endorsement
necessary to pass good title of such checks to the Secured Party
and to deposit them into an account (the "Lockbox Account") at the
Bank held in the name of the Secured Party on the business day of
receipt; provided, however, that for this purpose checks received
by Bank at its Operations Center after 3:00 P.M. on a business day
will be deemed to have been received on the following business
day.
(b) On each business day, Bank shall wire transfer in
immediately available funds to the Secured Party's Account, all
amounts on deposit in the Lockbox Account representing payments
collected and cleared by Bank from customers of GF Funding Corp.
III which are available by 3:00 P.M. on such business day.
4. Credit for Checks
Bank will credit the Lockbox Account for each deposited
check in accordance with Bank's then current availability schedule
applicable to the Lockbox Account. Collected balances will be
used in computing earnings allowances which shall only be used to
offset the fees due pursuant to Section 7 below.
5. Account Subject to Deposit Agreement
Except as modified by this Agreement each and every provision
of any account agreement between the Secured Party and Bank with
respect to the Lockbox Account shall remain in full force and
effect.
6. Limitation of Liability
Bank's liability in connection with the performance of the
transactions covered by this Agreement shall be strictly limited
as follows:
6.1 Bank shall have no duty to perform services not
enumerated herein. Bank shall exercise Ordinary Care in
selecting agents and independent contractors to pick up
and deliver the contents of the Lockbox ("Bank's
Designees"). In the event of loss caused by Bank's
Designee's negligence or misconduct, Bank's sole
obligation will be to exercise reasonable efforts, at GF
Funding Corp. III's cost and expense, to assist GF
Funding Corp. III in obtaining redress from the
responsible party. "Ordinary Care" means the observance
of reasonable commercial standards, prevailing in the
area in which Bank is located, with respect to the
business in which Bank is engaged.
6.2 Bank shall exercise Ordinary Care in determining the
optimum time to pick up mail at the Lockbox and the best
carrier to deliver that mail to Bank. However, Bank
shall not be liable in the event the chosen pickup time
and carrier prove not to result in the earliest possible
availability of funds.
6.3 In performing its duties hereunder, Bank will exercise
Ordinary Care and will act in good faith. Bank will not
be accountable for its failure to perform any of its
obligations hereunder, except in the event of its
negligence or willful misconduct, or that of its
employees, officers, or agents. If, as a result of such
negligence or willful misconduct, Bank is liable for
mishandling any item, such liability shall be limited to
the lesser of the face amount of any check involved or
the actual amount of GF Funding Corp. III's direct loss
as a result of such mishandling, and in no event shall
Bank be responsible for any incidental or consequential
damages.
6.4 Bank shall not be liable for any loss, delay or damage
arising from acts beyond its control including but not
limited to acts of God, strikes, lockouts, riots, acts of
war, epidemics, governmental regulations imposed after
the fact, fire, communication line failures, power
failures, electronic data processing equipment failures,
earthquakes or other disasters.
7. Fees.
For the services to be provided by Bank, Granite will pay Bank
in accordance with the schedule attached hereto as Schedule I.
Where applicable, there shall be added to the fees amounts equal
to any applicable taxes, however designated, exclusive of taxes
based on the net income of Bank. Except as otherwise
agreed, all fees and taxes shall be invoiced monthly and shall be
due and payable thirty (30) days after date of invoice.
8. Access to Lockbox and Lockbox Account.
Notwithstanding anything to the contrary contained herein, the
Lockbox and the Lockbox Account shall be maintained by Bank for
the sole benefit of the Secured Party, on behalf of MBIA Insurance
Corporation and all other persons for whom the Secured Party is
acting as trustee. Secured Party shall have sole dominion and
control over the Lockbox and the Lockbox Account at all times and
shall exclusively be entitled to give instructions to Bank
concerning the Lockbox and the Lockbox Account. Bank is hereby
authorized to follow any and all instructions given by the Secured
Party to Bank regarding the Lockbox and the Lockbox Account from
time to time.
9. Debits to the Lockbox Account.
Bank agrees not to make any charges or debits to the Lockbox
Account, except as approved by Secured Party and MBIA or exercise
any right of set-off or banker's lien with respect thereto;
provided, however that Bank may (without the approval of the
Secured Party or MBIA) credit or debit the Lockbox Account to
correct processing mistakes which are capable of correcting,
including without limitation chargebacks, return items and other
similar account adjustments.
10. Term and Termination.
This Agreement shall be effective as of the date and year
first written above when a copy of this Agreement, executed by the
Bank, Granite, Secured Party and GF Funding Corp. III, has been
delivered to Bank. The parties hereto may terminate this
Agreement at any time, with or without cause, upon 30 days'
written notice to the other parties.
11. Notice.
Any notice required or permitted by this Agreement shall be
deemed to have been given when mailed, postage prepaid, or when
delivered to the following addresses:
If to Bank:
If to the Secured Party:
▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇-▇▇▇▇
If to GF Funding Corp. III:
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
If to Granite:
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
[BANK]
By:
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Secured Party
By:
Name:
Title:
GF FUNDING CORP. III
By:
Name:
Title:
GRANITE FINANCIAL, INC.
By:
Name:
Title:
Schedule I
attach fee schedule
EXHIBIT I
Attach Wholesale Lockbox Implementation Worksheet