SALE AND SERVICING AGREEMENT
dated as of March 1, 2001
by and among
ABFS OSO, INC.
as Depositor,
AMERICAN BUSINESS FINANCIAL SERVICES, INC.
as Guarantor
AMERICAN BUSINESS CREDIT, INC.,
HOMEAMERICAN CREDIT, INC., D/B/A UPLAND MORTGAGE, and
AMERICAN BUSINESS MORTGAGE SERVICES, INC.
as Originators
ABFS MORTGAGE LOAN WAREHOUSE TRUST 2001-1,
AMERICAN BUSINESS CREDIT, INC.,
as Servicer,
EMC MORTGAGE CORPORATION,
as Back-up Servicer
and
THE CHASE MANHATTAN BANK,
as Indenture Trustee and Collateral Agent
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms...............................................................................2
Section 1.02. Provisions of General Application...................................................................2
Section 1.03. Business Day Certificate............................................................................2
ARTICLE II
SALE AND CONVEYANCE OF THE MORTGAGE LOANS
Section 2.01. Purchase and Sale of Initial Mortgage Loans.........................................................3
Section 2.02. Purchase and Sale of Subsequent Mortgage Loans......................................................3
Section 2.03. Obligation to Purchase Subsequent Mortgage Loans....................................................4
Section 2.04. Possession of Mortgage Files; Access to Mortgage Files..............................................4
Section 2.05. Delivery of Mortgage Loan Documents.................................................................4
Section 2.06. Acceptance of the Trust Estate; Certain Substitutions; Certification by the Collateral
Agent...........................................................................................7
Section 2.07. Grant of Security Interest..........................................................................9
Section 2.08. Further Action Evidencing Assignments..............................................................10
Section 2.09. Assignment of Agreement............................................................................10
Section 2.10. Books and Records..................................................................................10
Section 2.11. Cost of Delivery and Recordation of Documents......................................................11
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations, Warranties and Covenants of the Originators.......................................11
Section 3.02. Representations and Warranties of the Servicer.....................................................14
Section 3.03. Representations, Warranties and Covenants of the Depositor.........................................16
Section 3.04. Representations, Warranties and Covenants of the Indenture Trustee and the Collateral Agent........18
Section 3.05. Representations, Warranties and Covenants of the Back-up Servicer..................................19
ARTICLE IV
THE MORTGAGE LOANS
Section 4.01. Representations and Warranties Concerning the Mortgage Loans.......................................20
Section 4.02. Purchase and Substitution..........................................................................29
(i)
ARTICLE V
THE ORIGINATORS, THE DEPOSITOR AND THE TRUST
Section 5.01. Covenants of the Depositor and the Trust...........................................................31
Section 5.02. Merger or Consolidation; Ownership of Depositor....................................................34
Section 5.03. Costs..............................................................................................34
Section 5.04. Indemnification....................................................................................35
Section 5.05. Corporate Separateness.............................................................................36
Section 5.06. Financial Covenants................................................................................36
ARTICLE VI
[RESERVED]
ARTICLE VII
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
Section 7.01. The Servicer.......................................................................................37
Section 7.02. Collection of Certain Mortgage Loan Payments; Collection Account...................................37
Section 7.03. Permitted Withdrawals from the Collection Account..................................................39
Section 7.04. Hazard Insurance Policies; Property Protection Expenses............................................40
Section 7.05. Assumption and Modification Agreements.............................................................40
Section 7.06. Realization Upon Defaulted Mortgage Loans..........................................................41
Section 7.07. Indenture Trustee to Cooperate.....................................................................42
Section 7.08. Servicing Compensation; Payment of Certain Expenses by Servicer....................................43
Section 7.09. Annual Statement as to Compliance..................................................................43
Section 7.10. Annual Independent Public Accountants' Servicing Report............................................43
Section 7.11. Access to Certain Documentation....................................................................44
Section 7.12. Maintenance of Fidelity Bond and Errors and Omissions Insurance....................................44
Section 7.13. The Subservicers...................................................................................44
Section 7.14. Reports to the Indenture Trustee; Collection Account Statements....................................44
Section 7.15. Optional Purchase of Defaulted Mortgage Loans......................................................45
Section 7.16. Reports to be Provided by the Servicer.............................................................45
Section 7.17. Adjustment of Servicing Compensation in Respect of Prepaid Mortgage Loans..........................48
Section 7.18. Periodic Advances..................................................................................48
Section 7.19. Indemnification; Third Party Claims................................................................48
Section 7.20. Maintenance of Corporate Existence and Licenses; Merger or Consolidation of the Servicer...........49
Section 7.21. Assignment of Agreement by Servicer; Servicer Not to Resign........................................50
Section 7.22. Back-up Servicing..................................................................................50
ARTICLE VIII
APPLICATION OF FUNDS
Section 8.01. Deposits to the Payment Account....................................................................51
Section 8.02. Collection of Money................................................................................51
(ii)
Section 8.03. Application of Principal and Interest..............................................................51
Section 8.04. Effect of Payments by the Note Insurer; Subrogation................................................52
Section 8.05. Calculations of Fixed Rate and Market Value........................................................52
ARTICLE IX
SERVICER DEFAULT
Section 9.01. Servicer Events of Default.........................................................................52
Section 9.02. Back-up Servicer to Act; Appointment of Successor; Confidential Information........................55
Section 9.03. Waiver of Defaults.................................................................................57
Section 9.04. Indenture Trustee To Act Solely with Consent of the Controlling Party..............................57
Section 9.05. Mortgage Loans, Trust Estate and Accounts Held for Benefit of the Note Insurer.....................57
ARTICLE X
TERMINATION
Section 10.01. Termination.......................................................................................58
Section 10.02. Additional Termination Requirements...............................................................58
Section 10.03. Accounting Upon Termination of Servicer...........................................................59
ARTICLE XI
THE COLLATERAL AGENT
Section 11.01. Duties of the Collateral Agent....................................................................59
Section 11.02. Certain Matters Affecting the Collateral Agent....................................................61
Section 11.03. Collateral Agent Not Liable for the Note or Mortgage Loans........................................62
Section 11.04. Collateral Agent May Own the Note.................................................................62
Section 11.05. Collateral Agent's Fees and Expenses; Indemnity...................................................62
Section 11.06. Eligibility Requirements for Collateral Agent.....................................................62
Section 11.07. Resignation and Removal of the Collateral Agent...................................................63
Section 11.08. Successor Collateral Agent........................................................................63
Section 11.09. Merger or Consolidation of Collateral Agent.......................................................64
ARTICLE XII
[RESERVED]
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.01. Limitation on Liability...........................................................................64
Section 13.02. Amendment.........................................................................................65
Section 13.03. Recordation of Agreement..........................................................................65
Section 13.04. Duration of Agreement.............................................................................65
(iii)
Section 13.05. Notices...........................................................................................65
Section 13.06. Severability of Provisions........................................................................66
Section 13.07. No Partnership....................................................................................66
Section 13.08. Successors and Assigns............................................................................66
Section 13.09. Headings..........................................................................................66
Section 13.10. Third Party Beneficiary...........................................................................66
Section 13.11. Tax Treatment of the Note.........................................................................67
Section 13.12. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL......................................67
Section 13.13. Counterparts......................................................................................67
EXHIBITS
EXHIBIT A Indenture Trustee's Acknowledgement of Receipt
EXHIBIT B [Reserved]
EXHIBIT C Certification of Collateral Agent
EXHIBIT D Request for Release of Documents
EXHIBIT E Form of Release of Security Interest
EXHIBIT F Form of Subsequent Transfer Agreement
EXHIBIT G Form of Subsequent Sale Agreement
EXHIBIT H Form of Demand Note
EXHIBIT I Information Pertaining to the Originators and the Depositor
SCHEDULE I Mortgage Loan Schedule
APPENDIX I Definitions
(iv)
SALE AND SERVICING AGREEMENT, dated as of March 1, 2001 (this
"Agreement"), by and among ABFS OSO, INC. a Delaware corporation, as depositor
(the "Depositor"), AMERICAN BUSINESS CREDIT, INC., a Pennsylvania corporation
("ABC"), HOMEAMERICAN CREDIT, INC. D/B/A UPLAND MORTGAGE, a Pennsylvania
corporation ("Upland") and AMERICAN BUSINESS MORTGAGE SERVICES, INC. a New
Jersey corporation ("ABMS", and together with ABC and Upland, the
"Originators"), AMERICAN BUSINESS FINANCIAL SERVICES INC., a Delaware
corporation ("ABFS" and the "Guarantor"). ABFS MORTGAGE LOAN WAREHOUSE TRUST
2001-1, a Delaware business trust, as issuer (the "Trust"), AMERICAN BUSINESS
CREDIT, INC., a Pennsylvania corporation, as servicer (the "Servicer"), EMC
MORTGAGE CORPORATION, a Delaware corporation, as back-up servicer (the "Back-up
Servicer") and THE CHASE MANHATTAN BANK, a New York banking corporation, as
indenture trustee and collateral agent (respectively, the "Indenture Trustee"
and the "Collateral Agent").
W I T N E S S E T H
WHEREAS, the Originators desire to sell to the Depositor and the
Depositor desires to sell to the Trust, and the Trust desires to purchase from
the Depositor, the mortgage loans (the "Mortgage Loans") listed on Schedule I to
this Agreement;
WHEREAS, immediately after such purchase, the Trust will pledge such
Mortgage Loans to the Indenture Trustee pursuant to the terms of an Indenture,
dated as of March 1, 2001 (the "Indenture"), between the Trust and the Indenture
Trustee, and issue the ABFS Mortgage Loan Warehouse Trust 2001-1, Mortgage
Backed Note (the "Note");
WHEREAS, the Servicer has agreed to service the Mortgage Loans, which
constitute the principal assets of the Trust;
WHEREAS, the Back-up Servicer has agreed to perform certain duties
during the pendency of the Servicer's appointment hereunder and to act as
successor Servicer if the Servicer is terminated;
WHEREAS, the Collateral Agent will hold, on behalf of the Indenture
Trustee, the Mortgage Loans and certain other assets pledged to the Indenture
Trustee pursuant to the Indenture;
WHEREAS, MBIA Insurance Corporation (the "Note Insurer") is intended to
be a third-party beneficiary of this Agreement, and is hereby recognized by the
parties hereto as a third-party beneficiary of this Agreement; and
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Trust, the Depositor, the Originators, ABFS,
the Back-up Servicer, the Servicer, the Collateral Agent and the Indenture
Trustee hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. Capitalized terms used herein but
not defined herein shall have the meanings ascribed to such terms in Appendix I
attached hereto.
Section 1.02. Provisions of General Application(a) . (a) All accounting
terms not specifically defined herein shall be construed in accordance with
GAAP.
(b) The terms defined herein and in Appendix I to the
Indenture include the plural as well as the singular.
(c) The words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole. All references to
Articles and Sections shall be deemed to refer to Articles and Sections of this
Agreement.
(d) Any reference to statutes are to be construed as including
all statutory provisions consolidating, amending or replacing the statute to
which reference is made and all regulations promulgated pursuant to such
statutes.
(e) All calculations of interest with respect to the Class A
Note provided for herein shall be made on the basis of a 360-day year and the
actual number of days elapsed; provided, that, after a Rate Fixing Date, such
calculations shall be made on the basis of a year of 360 days consisting of
twelve 30-day months. All calculations of interest with respect to any Mortgage
Loan provided for herein shall be made in accordance with the terms of the
related Mortgage Note and Mortgage or, if such documents do not specify the
basis upon which interest accrues thereon, on the basis of a 360-day year
consisting of twelve 30-day months, to the extent permitted by applicable law.
(f) Any Mortgage Loan payment is deemed to be received on the
date such payment is actually received by the Servicer; provided, however, that,
for purposes of calculating payments on the Note, prepayments with respect to
any Mortgage Loan are deemed to be received on the date they are applied in
accordance with Accepted Servicing Practices consistent with the terms of the
related Mortgage Note and Mortgage to reduce the outstanding Principal Balance
of such Mortgage Loan on which interest accrues.
Section 1.03. Business Day Certificate. On the Closing Date (with
respect to the calendar year 2001) and thereafter, within fifteen (15) days
prior to the end of each calendar year while this Agreement remains in effect
(with respect to the succeeding calendar years), the Servicer shall provide to
the Indenture Trustee, the Note Insurer and the Collateral Agent a certificate
of a Servicing Officer specifying the days on which banking institutions in the
Commonwealth of Pennsylvania are authorized or obligated by law, executive order
or governmental decree to be closed.
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ARTICLE II
SALE AND CONVEYANCE OF THE MORTGAGE LOANS
Section 2.01. Purchase and Sale of Initial Mortgage Loans(a) . (a) On
the Initial Closing Date, in consideration of each Originator's receipt of its
related Originator Purchase Price, the Originators do hereby sell, transfer,
assign, set over and convey to the Depositor, without recourse, but subject to
the terms and provisions of this Agreement, all of their respective right, title
and interest in and to (i) the Mortgage Loans listed in the Mortgage Loan
Schedule attached as Schedule I to the Indenture (including property that
secures a Mortgage Loan that becomes an REO Property), including the related
Mortgage Files delivered or to be delivered to the Collateral Agent, on behalf
of the Indenture Trustee, pursuant to the terms of this Agreement, including all
payments of principal received, collected or otherwise recovered on and after
the Initial Closing Date for each Mortgage Loan, all payments of interest due on
each Mortgage Loan on and after the Initial Closing Date therefor whenever
received and all other proceeds received in respect of such Mortgage Loans, (ii)
the Insurance Policies, and (iii) all proceeds of the conversion, voluntary or
involuntary, of any of the foregoing into cash or other liquid assets,
including, without limitation, all insurance proceeds and condemnation awards
(the "Initial Originator Conveyed Assets").
(b) On the Initial Closing Date, in consideration of (i) the
Initial Purchaser, on behalf of the Trust, delivering to or at the direction of,
the Depositor an amount in cash equal to the sum of the Purchase Price for the
Initial Mortgage Loans, and (ii) the Trust delivering to the Depositor the Trust
Certificates to be issued pursuant to the Trust Agreement, the Depositor does
hereby sell, transfer, assign, set over and convey to the Trust, without
recourse, but subject to the terms and provisions of this Agreement, all of its
respective right, title and interest in and to the Initial Originator Conveyed
Assets and the Sale and Servicing Agreement (the "Initial Depositor Conveyed
Assets").
(c) ABFS acknowledges that it is the 100% owner of all common
stock issued by the Depositor, and the Depositor acknowledges that it is the
100% owner of all Trust Certificates issued by the Trust. As a consequence of
the foregoing and in accordance with the definition of Originator Purchase
Price, ABFS acknowledges and agrees to deliver a Demand Note to each Originator
in the form attached as Exhibit H, on behalf of the Depositor, and in
consideration for the transfers of Mortgage Loans made by the Depositor
hereunder each of which Demand Note shall evidence the obligation of ABFS to pay
to the applicable Originator on demand an amount equal to the cumulative excess
of the Market Value of the Mortgage Loans sold by such Originator over the Cash
Portion of such Originator's Originator Purchase Price.
(d) The closing for the purchase and sale of the Initial
Mortgage Loans shall take place at the offices of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇
▇▇▇▇, ▇▇, at 10:00 a.m., New York, New York time, on the Initial Closing Date,
or such other place and time as the parties shall agree.
Section 2.02. Purchase and Sale of Subsequent Mortgage Loans. Subject
to the requirements of Section 2.03 hereof, the Depositor shall purchase the
offered Subsequent Mortgage Loans pursuant to a Subsequent Transfer Agreement
3
substantially in the form of Exhibit F hereto, and the Trust shall purchase the
offered Subsequent Mortgage Loans pursuant to a Subsequent Sale Agreement
substantially in the form of Exhibit G hereto.
Section 2.03. Obligation to Purchase Subsequent Mortgage Loans. The
obligations of the Depositor and the Trust, respectively, to purchase Mortgage
Loans shall be subject to all the conditions thereto (including without
limitation the status of such Mortgage Loans as Eligible Mortgage Loans as of
the proposed date of sale thereof) set forth in this Agreement and the
Indenture. The Depositor shall not be obligated to purchase any Mortgage Loans
hereunder if it has not received payment in like cash amount in respect thereof
from the Initial Purchaser or the Trust and the Trust shall not be obligated to
purchase any Mortgage Loans hereunder if it has not received the Purchase Price
therefore from the Initial Purchaser.
Section 2.04. Possession of Mortgage Files; Access to Mortgage
Files.(a) (a) Upon the receipt by the Depositor, or its designee, of the
Originator Purchase Price for the Initial Mortgage Loans set forth in Section
2.01 hereof and the issuance of the Note pursuant to the Indenture, the
ownership of each Mortgage Note, including principal due and interest accrued
thereon after the Initial Closing Date, each Mortgage and the contents of the
Mortgage File related to each Initial Mortgage Loan and all the other Initial
Originator Conveyed Assets will be vested in the Trust, and will be pledged to
the Indenture Trustee, for the benefit of the Noteholder and the Note Insurer.
(b) Pursuant to Section 2.05 hereof, the related Originator
will have delivered or caused to be delivered the Indenture Trustee's Mortgage
File related to each Initial Mortgage Loan to the Collateral Agent, on behalf of
the Indenture Trustee.
(c) The Collateral Agent will be the custodian, on behalf of
the Indenture Trustee, to hold the Indenture Trustee's Mortgage Files in trust
for the benefit of all present and future Noteholders and the Note Insurer (and
shall be deemed to have held such items on behalf of the Depositor and the Trust
during the transfer thereof by each of the items comprising the Indenture
Trustee's Mortgage Files prior to the Indenture Trustee's acquiring a security
interest therein). In the event the Collateral Agent resigns or is removed,
either (x) the Indenture Trustee (if the Indenture Trustee and the Collateral
Agent are not the same Person) shall hold the Indenture Trustee's Mortgage
Files, or (y) the Trust, at the direction of the Controlling Party, shall
appoint a successor Collateral Agent to hold the Indenture Trustee's Mortgage
Files as set forth in Section 11.08 hereof.
(d) The Collateral Agent shall afford the Depositor, the
Originators, the Trust, the Initial Purchaser, the Note Insurer and the Servicer
reasonable access to all records and documentation regarding the Mortgage Loans
relating to this Agreement, such access being afforded at customary charges,
upon reasonable prior written request and during normal business hours at the
offices of the Collateral Agent.
Section 2.05. Delivery of Mortgage Loan Documents(a) . (a) In
connection with the transfer and assignment of the Mortgage Loans, the related
Originator shall no less than three (3) Business Days prior to the Initial
Closing Date, with respect to the Initial Mortgage Loans, and shall no less than
three (3) Business Days prior to the Subsequent Purchase Date with respect to
Subsequent Mortgage Loans, deliver to the Collateral Agent, on behalf of the
Indenture Trustee (as pledgee of the Trust pursuant to the Indenture), the
4
following documents or instruments with respect to each Mortgage Loan so
transferred or assigned:
(i) the original Mortgage Note, endorsed without recourse from
the Originators to "The Chase Manhattan Bank, as collateral agent for
the holder of the related mortgage note from time to time"; including
all intervening endorsements showing a complete chain of endorsement;
(ii) the related original Mortgage and related power of
attorney, if any, with evidence of recording indicated thereon or a
copy thereof certified by the applicable recording office;
(iii) if the original Mortgage does not show the related
Originator as the mortgagor thereon, the recorded mortgage assignment,
or copy thereof certified by the applicable recording office, showing a
complete chain of assignment from the originator of the related
Mortgage Loan to the related Originator (which assignment may, at such
Originator's option, be combined with the assignment referred to in
subpart (iv) hereof, in which case it must be in recordable form, but
need not have been previously recorded);
(iv) a mortgage assignment in recordable form (which, if
acceptable for recording in the relevant jurisdiction, may be included
in a blanket assignment or assignments) of each Mortgage endorsed from
the related Originator to "The Chase Manhattan Bank, as collateral
agent for the holder of the related mortgage note from time to time";
(v) originals of all assumption, modification and substitution
agreements in those instances where the terms or provisions of a
Mortgage or Mortgage Note have been modified or such Mortgage or
Mortgage Note has been assumed; and
(vi) an original title insurance policy (or (A) a copy of the
title insurance policy, or (B) a binder thereof or copy of such binder
together with a certificate from the related Originator that the
original Mortgage has been delivered to the title insurance company
that issued such binder for recordation); and
(vii) if the Mortgage Loan Schedule indicates that such
Mortgage Loan is a business purpose loan, an original surety agreement,
if any.
In instances where the original recorded Mortgage and an original
assignment cannot be delivered by the related Originator to the Collateral
Agent, on behalf of the Indenture Trustee, prior to or concurrently with the
execution and delivery of this Agreement (or, with respect to Subsequent
Mortgage Loans, prior to or on the related Subsequent Purchase Date), due to a
delay in connection with recording, the related Originator may:
(x) in lieu of delivering such original recorded Mortgage, deliver to
the Collateral Agent, on behalf of the Indenture Trustee, a copy
thereof; provided, that the related Originator certifies that the
original Mortgage has been delivered to a title insurance company for
recordation after receipt of its policy of title insurance or binder
therefor; and
5
(y) in lieu of delivering such original mortgage assignment in
recordable form, deliver to the Collateral Agent, on behalf of the
Indenture Trustee, the assignment in recordable form, otherwise
complete except for recording information.
(b) In the event (i) a Mortgage Loan has been transferred to
and held by the Trust for 180 days or more, or (ii) an Event of Default has
occurred and is continuing, as promptly as practicable, but in any event within
thirty (30) days, the Servicer shall promptly submit for recording in the
appropriate public office for real property records, each assignment referred to
in Section 2.05(a)(iv). The Collateral Agent, on behalf of the Indenture
Trustee, shall retain a copy of each assignment submitted for recording. In the
event that any such assignment is lost or returned unrecorded because of a
defect therein, such Originator shall promptly prepare a substitute assignment
or cure such defect, as the case may be, and thereafter such Originator shall
submit each such assignment for recording. The costs relating to the delivery
and recordation of the documents in connection with the Mortgage Loans as
specified in this Article II shall be borne by the related Originator.
(c) The related Originator shall, within five (5) Business
Days after the receipt thereof, deliver, or cause to be delivered, to the
Collateral Agent, on behalf of the Indenture Trustee: (i) the original recorded
Mortgage and related power of attorney, if any, in those instances where a copy
thereof certified by the related Originator was delivered to the Collateral
Agent, on behalf of the Indenture Trustee; (ii) the assignment of Mortgage from
the related Originator to the Indenture Trustee, which, together with any
original recorded intervening assignments of Mortgage, evidencing a complete
chain of assignment from the originator of the Mortgage Loan to the Indenture
Trustee, in those instances where copies of such assignments certified by the
related Originator were delivered to the Collateral Agent, on behalf of the
Indenture Trustee, and (iii) the title insurance policy or title opinion
required in Section 2.05(a)(vi). In the event the assignment is recorded in
accordance with Section 2.05(b), the Collateral Agent shall review the recorded
assignment to confirm the information contained therein. The Collateral Agent
shall notify the Indenture Trustee, the Note Insurer and the Servicer, of any
defect in such assignment based on such review. The Servicer shall have a period
of thirty (30) days following such notice to correct or cure such defect or to
cause the related Originator to correct or cure such defect. If the Servicer or
the related Originator fails to record an assignment of a Mortgage as provided
herein, the Collateral Agent shall, at the Servicer's expense, use reasonable
efforts to prepare and, if required hereunder, file such assignments for
recordation in the appropriate real property or other records and the related
Originator hereby appoints the Collateral Agent as its attorney-in-fact with
full power and authority acting in its stead for the purpose of such
preparation, execution and filing to correct or cure such defect.
Notwithstanding anything to the contrary contained in this Section 2.05, in
those instances where the public recording office retains the original Mortgage,
power of attorney, if any, assignment or assignment of Mortgage after it has
been recorded or such original has been lost, the related Originator shall be
deemed to have satisfied its obligations hereunder upon delivery to the
Collateral Agent, on behalf of the Indenture Trustee, of a copy of such
Mortgage, power of attorney, if any, assignment or assignment of Mortgage
certified by the public recording office to be a true copy of the recorded
original thereof. From time to time the Depositor or the related Originator may
forward, or cause to be forwarded, to the Collateral Agent, on behalf of the
Indenture Trustee, additional original documents evidencing any assumption or
modification of a Mortgage Loan.
6
(d) All original documents relating to the Mortgage Loans that
are not delivered to the Collateral Agent, on behalf of the Indenture Trustee,
as permitted by Section 2.05(a) hereof are, and shall be, held by the Servicer,
the Depositor or the related Originator, as the case may be, in trust for the
benefit of the Indenture Trustee, on behalf of the Noteholder and the Note
Insurer. In the event that any such original document is required pursuant to
the terms of this Section 2.05 to be a part of an Indenture Trustee's Mortgage
File, such document shall be delivered promptly to the Collateral Agent, on
behalf of the Indenture Trustee. From and after the sale of the Mortgage Loans
to the Trust pursuant hereto, to the extent that the Depositor or the related
Originator retains legal title of record to any Mortgage Loans prior to the
vesting of legal title in the Trust, such title shall be retained in trust for
the Trust as the owner of the Mortgage Loans, and the Indenture Trustee, as the
pledgee of the Trust under the Indenture. In acting as custodian of any original
document which is part of the Indenture Trustee's Mortgage Files, the Servicer
agrees further that it does not and will not have or assert any beneficial
ownership interest in the related Mortgage Loans or the Mortgage Files. Promptly
upon the Servicer's receipt of any such original document, the Servicer, on
behalf of the Trust, shall ▇▇▇▇ conspicuously each such original document, and
its master data processing records with a legend evidencing that the Trust has
purchased the related Mortgage Loan and all right and title thereto and interest
therein, and pledged such Mortgage Loan and all right and title thereto and
interest therein to the Indenture Trustee, on behalf of the Noteholder and the
Note Insurer.
Section 2.06. Acceptance of the Trust Estate; Certain Substitutions;
Certification by the Collateral Agent(a) . (a) Upon delivery of the Note
Insurance Policy to the Indenture Trustee, the Indenture Trustee agrees to
execute and deliver to the Depositor, the Note Insurer, the Collateral Agent and
the Servicer an acknowledgement of receipt of the Note Insurance Policy in the
form attached as Exhibit A hereto.
(b) The Collateral Agent is authorized and directed, on behalf
of the Indenture Trustee, to execute and deliver to the Depositor, the Note
Insurer, the Indenture Trustee, the Servicer, the Rating Agencies and the
related Originator, on or prior to 2:00 p.m., New York, New York time on the
Business Day preceding the Initial Closing Date or any Subsequent Purchase Date,
as applicable, with respect to each Mortgage Loan transferred on such date, a
certification in the form attached hereto as Exhibit C to the effect that,
except as otherwise noted, as to each Mortgage Loan listed in the related
Mortgage Loan Schedule (other than any Mortgage Loan paid in full or any
Mortgage Loan specifically identified in such certification as not covered by
such certification), (i) all documents required to be delivered to it pursuant
to Section 2.05(a)(i), (ii), (iii), (iv) and (vi) and, to the extent included in
the Mortgage File, documents in Section 2.05(a)(v) are in its possession, (ii)
each such document and each other document included in the Mortgage File has
been reviewed by it and has not been mutilated, damaged, torn or otherwise
physically altered (handwritten additions, changes or corrections shall not
constitute physical alteration if they reasonably appear to be initialed or
otherwise accepted by the Mortgagor), appears regular on its face and relates to
such Mortgage Loan, and (iii) based on its examination and only as to the
foregoing documents, the information set forth in clauses (i), (ii), (v), (vi),
(viii) and (ix) of the definition of "Mortgage Loan Schedule" accurately
reflects the information set forth in the Indenture Trustee's Mortgage File
delivered on such date.
In performing any such review, the Collateral Agent may
conclusively rely on the Originators as to the purported genuineness of any such
7
document and any signature thereon. It is understood that the scope of the
Collateral Agent's review of the Indenture Trustee's Mortgage Files is limited
solely to confirming that the documents listed in Section 2.05 have been
executed and received and relate to the Indenture Trustee's Mortgage Files
identified in the related Mortgage Loan Schedule. The Collateral Agent shall be
under no duty or obligation (i) to inspect, review or examine any such
documents, instruments, certificates or other papers to determine that they are
genuine, enforceable, or appropriate for the represented purpose or that they
are other than what they purport to be on their face or (ii) to determine
whether any Indenture Trustee's Mortgage File should include any of the
documents specified in Section 2.05(a)(v). It is understood that the scope of
the Collateral Agent's review of the Indenture Trustee's Mortgage Files is
limited solely to confirming that the documents listed in Section 2.05(a)(i),
(ii), (iii), (iv), (v) (to the extent included in the Mortgage File) and (vi)
have been received and further confirming that any and all documents delivered
pursuant to these Sections have been executed and relate to the Mortgage Loans
identified in the Mortgage Loan Schedule and that the information set forth in
clauses (i), (ii), (v), (vi), (viii) and (ix) of the definition of Mortgage Loan
Schedule accurately reflects the information set forth in the Indenture
Trustee's Mortgage File. The Collateral Agent shall have no responsibility for
determining whether any document is valid and binding, whether the text of any
assignment or endorsement is in proper or recordable form, whether any document
has been recorded in accordance with the requirements of any applicable
jurisdiction, or whether a blanket assignment is permitted in any applicable
jurisdiction.
(c) If notwithstanding the delivery of its Certificate
pursuant to Section 2.06(b), the Collateral Agent during the process of
reviewing the Indenture Trustee's Mortgage Files subsequently finds any document
constituting a part of an Indenture Trustee's Mortgage File which is not
executed, has not been received, is unrelated to the Mortgage Loan identified in
the related Mortgage Loan Schedule, or does not conform to the requirements of
Section 2.05 or the description thereof as set forth in the related Mortgage
Loan Schedule, the Collateral Agent shall promptly so notify the Servicer, the
Depositor, the Originators, the Indenture Trustee, the Note Insurer and the
Initial Purchaser. Pursuant to Section 4.02(b), the Depositor and the
Originators have agreed to use reasonable efforts to cause to be remedied a
material defect in a document constituting part of an Indenture Trustee's
Mortgage File of which it is so notified by the Collateral Agent. If, however,
within thirty (30) Business Days after the Collateral Agent's notice to it
respecting such defect the Depositor or the Originators have not caused to be
remedied the defect and the Depositor or the related Originator has not
delivered to the Collateral Agent a certificate to the effect that the defect
does not materially and adversely affect the value of, or the interest of the
Noteholder, the Indenture Trustee or the Note Insurer in the related Mortgage
Loan, the Depositor or the Originators will be obligated, pursuant to Section
4.02, to either (i) substitute in lieu of such Mortgage Loan a Qualified
Substitute Mortgage Loan in the manner and subject to the conditions set forth
in Section 4.02 or (ii) purchase such Mortgage Loan at a purchase price equal to
the Loan Repurchase Price. Upon receipt by the Collateral Agent and the
Indenture Trustee of a certification of a Servicing Officer, in the form
attached hereto as Exhibit D, in respect of a substitution or purchase and, in
the case of a substitution, upon receipt by the Collateral Agent, on behalf of
the Indenture Trustee, of the related Indenture Trustee's Mortgage File, and the
delivery of the certification required to be delivered by the Collateral Agent
pursuant to Section 2.06(b) (with no exceptions noted) and the deposit of the
amounts described above in the Collection Account, the Collateral Agent shall
release to the Servicer for release to the Originators (or the Depositor, as the
case may be) the related Indenture Trustee's Mortgage File and the Indenture
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Trustee shall execute, without recourse, and deliver such instruments of
transfer furnished by the Originators (or the Depositor, as the case may be) as
may be necessary to transfer such Mortgage Loan to the Originator (or the
Depositor, as the case may be) . The Collateral Agent shall notify the Note
Insurer and the Indenture Trustee if the Depositor or the Originators fail to
repurchase or substitute for a Mortgage Loan in accordance with the foregoing.
Section 2.07. Grant of Security Interest(a) . (a) It is intended that
the conveyance of the Mortgage Loans and other property by the Originators to
the Depositor, and by the Depositor to the Trust, as provided in this Article II
be, and be construed as, sales of the Mortgage Loans and such other property by
Originators to the Depositor and by the Depositor to the Trust, respectively. It
is, further, not intended that such conveyance be deemed a pledge of the
Mortgage Loans or such other property by the Originators to the Depositor, and
by the Depositor to the Trust, to secure a debt or other obligation of the
Originators or the Depositor, as the case may be. However, in the event that the
Mortgage Loans or any of such other property are held to be property of the
Originators or the Depositor, as the case may be, or if for any reason this
Agreement is held or deemed to create a security interest in the Mortgage Loans
or any of such other property, then it is intended that: (i) this Agreement
shall also be deemed to be a security agreement within the meaning of the
Uniform Commercial Code between the respective assignor and assignee; (ii) the
conveyance provided for in this Article II shall be deemed to be a grant by the
Originators to the Depositor, and by the Depositor to the Trust, respectively,
of a security interest in all of such Originator's or the Depositor's respective
right, title and interest in and to the Mortgage Loans and such other property
and all amounts payable to the holders of the Mortgage Loans in accordance with
the terms thereof and all proceeds of the conversion, voluntary or involuntary,
of the foregoing into cash, instruments, securities or other property,
including, without limitation, all amounts from time to time held or invested in
the Payment Account, whether in the form of cash, instruments, securities or
other property; (iii) the possession by the Collateral Agent, on behalf of the
Indenture Trustee, of the Mortgage Notes and such other items of property as
constitute instruments, money, negotiable documents or chattel paper shall be
deemed to be "possession by the secured party" for purposes of perfecting the
security interest pursuant to the Uniform Commercial Code; and (iv)
notifications to persons holding such property, and acknowledgments, receipts or
confirmations from persons holding such property, shall be deemed notifications
to, or acknowledgments, receipts or confirmations from financial intermediaries,
bailees or agents, as applicable, of the Indenture Trustee for the purpose of
perfecting such security interest under applicable law. The Depositor, the
Servicer, on behalf of the Trust, the Collateral Agent and the Indenture
Trustee, shall, to the extent consistent with this Agreement, take such actions
as may be reasonably necessary to ensure that, if this Agreement were deemed to
create a security interest in the Mortgage Loans or any of such other property,
such security interest would be deemed to be a perfected security interest of
first priority under applicable law and will be maintained as such throughout
the term of this Agreement.
(b) The Originators, the Depositor and the Servicer shall take
no action inconsistent with the Trust's ownership of the Trust Estate and each
shall indicate or shall cause to be indicated in its records and records held on
its behalf that ownership of each Mortgage Loan and the other assets in the
Trust Estate are held by the Collateral Agent, on behalf of the Indenture
Trustee, for the benefit of the Noteholder and the Note Insurer. The Collateral
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Agent is authorized to act, pursuant to the terms of this Agreement, as agent
and bailee of the Indenture Trustee for the benefit of the Noteholder and the
Note Insurer and shall be authorized to act at the direction of such parties. In
addition, the Originators, the Depositor and the Servicer shall respond to any
inquiries from third parties with respect to ownership of a Mortgage Loan or any
other asset in the Trust Estate by stating that it is not the owner of such
asset and that the Trust is the owner of such Mortgage Loan or other asset in
the Trust Estate, which is held by the Collateral Agent, on behalf of the
Indenture Trustee, for the benefit of the Noteholder and the Note Insurer.
Section 2.08. Further Action Evidencing Assignments(a) . (a) The
Servicer agrees that, from time to time, at its expense, it shall cause the
Originators to (and the Depositor on behalf of itself also agrees that it
shall), promptly execute and deliver all further instruments and documents, and
take all further action, that may be necessary or appropriate, or that the
Servicer, the Indenture Trustee or the Collateral Agent may reasonably request,
in order to perfect, protect or more fully evidence the transfer of ownership of
the Mortgage Loans and other assets in the Trust Estate or to enable the
Collateral Agent, on behalf of the Indenture Trustee, to exercise or enforce any
of its rights hereunder. Without limiting the generality of the foregoing, the
Servicer, the Originators and the Depositor will, upon the request of the
Servicer, the Indenture Trustee or the Collateral Agent execute and file (or
cause to be executed and filed) such real estate filings, financing or
continuation statements, or amendments thereto or assignments thereof, and such
other instruments or notices, as may be necessary or appropriate.
(b) The Originators and the Depositor hereby grant to the
Servicer, the Indenture Trustee, the Collateral Agent and the Back-up Servicer,
if required, powers of attorney to execute all documents on its behalf under
this Agreement as may be necessary or desirable to effectuate the foregoing.
Section 2.09. Assignment of Agreement. The Originators and the
Depositor hereby acknowledge and agree that the Trust has assigned its interest
under this Agreement to the Indenture Trustee, for the benefit of the Noteholder
and the Note Insurer, pursuant to the Indenture, that no further notice to, or
consent of, the Originators or the Depositor is required with respect to such
assignment, and the Indenture Trustee shall succeed to such of the rights of the
Trust hereunder as have been so assigned. The Trust shall, pursuant to the
Indenture, assign all of its right, title and interest in and to the Mortgage
Loans and its right to exercise the remedies created by Section 2.06 and 4.02
for breaches of the representations, warranties, agreements and covenants of the
Depositor or the Originators contained in Sections 2.05, 2.06, 3.01 and 4.01,
assign such right, title and interest to the Indenture Trustee, for the benefit
of the Noteholder and the Note Insurer. The Originators and the Depositor agree
that, upon such assignment to the Indenture Trustee, such representations,
warranties, agreements and covenants will run to and be for the benefit of the
Indenture Trustee and the Indenture Trustee may enforce, without joinder of the
Trust, the repurchase obligations of the Depositor and the Originators set forth
herein with respect to breaches of such representations, warranties, agreements
and covenants.
Section 2.10. Books and Records. The transfer of each Mortgage Loan
shall be reflected on each of the Originators' and the Depositor's accounting
and other related records, balance sheet and other financial statements as a
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sale of assets by the Originators to the Depositor and by the Depositor to the
Trust, respectively. Each of the Originators and the Depositor shall be
responsible for maintaining, and shall maintain, a complete set of books and
records for each Mortgage Loan which shall be clearly marked to reflect the
ownership of each Mortgage Loan by the Trust, and the pledge of each Mortgage
Loan by the Trust to the Indenture Trustee, for the benefit of the Noteholder.
Section 2.11. Cost of Delivery and Recordation of Documents. The costs
relating to the delivery and recordation of the documents in connection with the
Mortgage Loans as specified in this Article II shall be borne by the Originators
or upon Default, will be deemed a reimbursable Servicing Advance.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations, Warranties and Covenants of the
Originators. Each of the Originators hereby represents, warrants and covenants,
in respect of itself only, to the Depositor, the Indenture Trustee, the Trust,
the Collateral Agent, the Note Insurer, Back-up Servicer and the Noteholder, as
of each Closing Date, that:
(a) The Originator is a corporation duly organized, validly
existing and in good standing under the laws of (i) with respect to ABC and
Upland, the State of Pennsylvania, or (ii) with respect to ABMS, the State of
New Jersey, and has all licenses necessary to carry on its business as now being
conducted and is licensed, qualified and in good standing in each state where a
Mortgaged Property is located if the laws of such state require licensing or
qualification in order to conduct business of the type conducted by the
Originator and to perform its obligations as the Originator hereunder, and in
any event the Originator is in compliance with the laws of any such state to the
extent necessary to ensure the enforceability of the related Mortgage Loan; the
Originator has the full power and authority, corporate and otherwise, to execute
and deliver this Agreement and to perform in accordance herewith; the execution,
delivery and performance of this Agreement (including all instruments of
transfer to be delivered pursuant to this Agreement) by the Originator and the
consummation of the transactions contemplated hereby have been duly and validly
authorized; this Agreement evidences the valid, binding and enforceable
obligation of the Originator; and all requisite corporate action has been taken
by the Originator to make this Agreement valid and binding upon the Originator
in accordance with its terms;
(b) No consent, approval, authorization or order of any court
or governmental agency or body is required for the execution, delivery and
performance by the Originator of, or compliance by the Originator with, this
Agreement or the sale of the Mortgage Loans pursuant to the terms of this
Agreement or the consummation of the transactions contemplated by this
Agreement, or if required, such approval has been obtained prior to the Closing
Date;
(c) Neither the execution and delivery of this Agreement, nor
the acquisition or origination of the Mortgage Loans by the Originator or the
transactions contemplated hereby, nor the fulfillment of or compliance with the
terms and conditions of this Agreement, has or will conflict with or result in a
breach of any of the terms, conditions or provisions of the Originator's charter
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or by-laws or any legal restriction or any agreement or instrument to which the
Originator is now a party or by which it is bound or to which its property is
subject, or constitute a default or result in an acceleration under any of the
foregoing, or result in the violation of any law, rule, regulation, order,
judgment or decree to which the Originator or its property is subject, or impair
the ability of the Indenture Trustee (or the Servicer as the agent of the
Indenture Trustee) to realize on the Mortgage Loans, or impair the value of the
Mortgage Loans;
(d) Neither this Agreement nor any statement, report or other
document prepared by the Originator and furnished or to be furnished pursuant to
this Agreement or in connection with the transactions contemplated hereby
contains any untrue statement or alleged untrue statement of any material fact
or omits to state a material fact necessary to make the statements contained
herein or therein, in light of the circumstances under which they were made, not
misleading;
(e) There is no action, suit, proceeding or investigation
pending or, to the knowledge of the Originator, threatened before a court,
administrative agency or government tribunal against the Originator which,
either in any one instance or in the aggregate, may result in any material
adverse change in the business, operations, financial condition, properties or
assets of the Originator, or in any material impairment of the right or ability
of the Originator to carry on its business substantially as now conducted, or in
any material liability on the part of the Originator, or which would draw into
question the validity of this Agreement, the Mortgage Loans, or of any action
taken or to be taken in connection with the obligations of the Originator
contemplated herein, or which would impair materially the ability of the
Originator to perform under the terms of this Agreement or that will prohibit
its entering into this Agreement or the consummation of any of the transactions
contemplated hereby;
(f) The Originator is not in violation of or in default with
respect to, and the execution and delivery of this Agreement by the Originator
and its performance of and compliance with the terms hereof will not constitute
a violation or default with respect to, any order or decree of any court or any
order, regulation or demand of any federal, state, municipal or governmental
agency, which violation or default might have consequences that would materially
and adversely affect the condition (financial or other) or operations of the
Originator or its properties or might have consequences that would materially
and adversely affect its performance hereunder or under any subservicing
agreement;
(g) Upon the receipt of each Mortgage File by the Depositor
(or its assignee) under this Agreement, the Depositor (or its assignee) will
have good title to each related Mortgage Loan and such other items comprising
the corpus of the Trust Estate free and clear of any lien created by the
Originator (other than liens which will be simultaneously released);
(h) The consummation of the transactions contemplated by this
Agreement are in the ordinary course of business of the Originator, and the
transfer, assignment and conveyance of the Mortgage Notes and the Mortgages by
the Originator pursuant to this Agreement are not subject to the bulk transfer
or any similar statutory provisions in effect in any applicable jurisdiction;
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(i) With respect to any Mortgage Loan purchased by the
Originator, the Originator acquired title to the Mortgage Loan in good faith,
without notice of any adverse claim;
(j) The Originator believes that it can perform each and every
covenant contained in this Agreement. The Originator is solvent and the sale of
the Mortgage Loans by the Originator pursuant to the terms of this Agreement
will not cause the Originator to become insolvent. The sale of the Mortgage
Loans by the Originator pursuant to the terms of this Agreement was not
undertaken with the intent to hinder, delay or defraud any of the Originator's
creditors;
(k) The Mortgage Loans are not intentionally selected in a
manner so as to affect adversely the interests of the Depositor or of any
transferee of the Depositor (including the Trust and the Indenture Trustee);
(l) The Originator will treat the disposition of the Mortgage
Loans pursuant to this Agreement as a sale for all purposes, including tax and
accounting purposes;
(m) The Originator is not an "investment company" or a company
"controlled by an investment company" within the meaning of the Investment
Company Act of 1940, as amended;
(n) The Originator is not involved in the day-to-day
management of the Depositor or the Trust, except to the limited extent provided
in the Basic Documents.
(o) The financial statements and books and records of the
Originator prepared after the Closing Date reflect the separate existence of the
Depositor and the Trust.
(p) The Originator does not act as an agent of the Depositor
or the Trust in any capacity except to the limited extent provided in the Basic
Documents, but instead presents itself to the public as an entity separate from
the Depositor and the Trust.
(q) The Originators shall cooperate with such parties and the
firm of independent certified public accountants retained with respect to the
issuance of the Note in making available all information and taking all steps
reasonably necessary or reasonably required by the Note Insurer to permit the
accountants' letters required hereunder to be delivered within the times set for
delivery herein;
(r) The Originators agree to satisfy or cause to be satisfied
on or prior to the Closing Date, all of the conditions set forth in Section 4.01
of the Indenture that are within the Originator's (or their agents') control;
(s) The Originator hereby agrees to do all acts, transactions,
and things and to execute and deliver all agreements, documents, instruments,
and papers by and on behalf of the Originator as the Indenture Trustee, Owner
Trustee, the Note Insurer or the Initial Purchaser or their counsel may
reasonably request in order to (A) consummate the transfer of the Mortgage Loans
to the Depositor and from the Depositor to the Trust and the subsequent transfer
thereof to the Indenture Trustee, and the issuance and sale of the Note;
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(t) The Originator shall not, until one year and one day after
such time as the Note is paid in full (i) institute the filing of a bankruptcy
petition against the Depositor or the Trust based upon any claim in its favor
arising under the Basic Documents, (ii) file a petition or consent to a petition
seeking relief on behalf of the Depositor or the Trust under the Bankruptcy
Code, (iii) consent to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or similar official) of the Depositor or the Trust or a
substantial part of their property, (iv) make any assignment for the benefit of
the Depositor's or the Trust's creditors or (v) cause the Depositor or the Trust
to admit its inability to pay its debts generally as they become due;
(u) The Originator has not dealt with any broker or agent or
anyone else that may be entitled to any commission or compensation in connection
with the sale of the Mortgage Loans to the Depositor other than to the Depositor
or an affiliate thereof;
(v) The consideration received by the Originator upon the sale
of the Mortgage Loans under this Agreement constitutes fair consideration and
reasonably equivalent value for the Mortgage Loans; and
(w) The principal place of business and chief executive office
of such Originator and the offices where it keeps all of its records relating to
the Mortgage Loans are located at the address(es) of such Originator listed on
Exhibit I or such other locations of which the Indenture Trustee and the Note
Insurer have been notified in accordance with this Section 3.01 in jurisdictions
where all action required by this Section 3.01 has been taken and completed. The
Federal Employer Identification Number of such Originator is correctly set forth
on Exhibit I. In the past five (5) years preceding the date hereof, such
Originator has not used any corporate names, trade names or assumed names other
than the name in which it has executed this Agreement and the names listed in
Exhibit I hereto. The Originator will not change its name, identity or corporate
structure or relocate its chief executive office or any office where records
relating to the Mortgage Loans are kept or change its jurisdiction of
incorporation unless it shall have: (i) given the Indenture Trustee and the Note
Insurer at least thirty (30) days' prior written notice thereof and (ii)
delivered to the Indenture Trustee and the Note Insurer all financing
statements, instruments and other documents reasonably requested by the
Indenture Trustee or the Note Insurer in connection with such change or
relocation.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.01 shall survive the delivery of the
respective Indenture Trustee's Mortgage Files to the Collateral Agent, on behalf
of the Indenture Trustee or to another custodian, as the case may be, and inure
to the benefit of the Indenture Trustee, the Trust, the Note Insurer, and the
Noteholder.
Section 3.02. Representations and Warranties of the Servicer. The
Servicer hereby represents and warrants to the Indenture Trustee, the Depositor,
ABFS, the Collateral Agent, the Trust, the Note Insurer, Back-up Servicer and
the Noteholder as of each Closing Date and during the term of this Agreement
that:
(a) Each of the Servicer and the Subservicers is duly
organized, validly existing and in good standing under the laws of their
respective states of incorporation and has the power to own its assets and to
14
transact the business in which it is currently engaged. Each of the Servicer and
the Subservicers is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction in which the character of the business
transacted by it or properties owned or leased by it or the performance of its
obligations hereunder requires such qualification and in which the failure so to
qualify could reasonably be expected to have a material adverse effect on the
business, properties, assets, or condition (financial or other) of the Servicer
or the Subservicers or the performance of their respective obligations
hereunder;
(b) The Servicer has the power and authority to make, execute,
deliver and perform this Agreement and all of the transactions contemplated
under this Agreement, and has taken all necessary corporate action to authorize
the execution, delivery and performance of this Agreement, and assuming the due
authorization, execution and delivery hereof by the other parties hereto
constitutes, or will constitute, the legal, valid and binding obligation of the
Servicer, enforceable in accordance with its terms, except as enforcement of
such terms may be limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to or affecting the rights of creditors
generally, and by general equity principles (regardless of whether such
enforcement is considered in a proceeding in equity or at law);
(c) The Servicer is not required to obtain the consent of any
other party or any consent, license, approval or authorization from, or
registration or declaration with, any governmental authority, bureau or agency
which consent already has not been obtained in connection with the execution,
delivery, performance, validity or enforceability of this Agreement, except such
as have been obtained prior to the Closing Date;
(d) The execution, delivery and performance of this Agreement
by the Servicer will not violate any provision of any existing law or regulation
or any order or decree of any court or the charter or bylaws of the Servicer, or
constitute a breach of any mortgage, indenture, contract or other Agreement to
which the Servicer is a party or by which it may be bound;
(e) There is no action, suit, proceeding or investigation
pending or threatened against the Servicer or the Subservicers which, either in
any one instance or in the aggregate, is, in the Servicer's judgment, likely to
result in any material adverse change in the business, operations, financial
condition, properties, or assets of the Servicer or the Subservicers, or in any
material impairment of the right or ability of any of them to carry on its
business substantially as now conducted, or in any material liability on the
part of any of them, or which would draw into question the validity of this
Agreement, the Note, or the Mortgage Loans or of any action taken or to be taken
in connection with the obligations of the Servicer or the Subservicers
contemplated herein or therein, or which would be likely to impair materially
the ability of the Servicer or the Subservicers to perform their respective
obligations hereunder;
(f) Neither this Agreement nor any statement, report, or other
document furnished by the Servicer or the Subservicers pursuant to this
Agreement or in connection with the transactions contemplated hereby contains
any untrue statement of fact provided by or on behalf of the Servicer or omits
to state a fact necessary to make the statements provided by or on behalf of the
Servicer contained herein or therein not misleading;
(g) The Servicer does not believe, nor does it have any reason
or cause to believe, that it cannot perform each and every covenant contained in
this Agreement;
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(h) None of the Servicer or the Subservicers is an "investment
company" or a company "controlled by an investment company," within the meaning
of the Investment Company Act of 1940, as amended;
(i) no Servicer Event of Default or event or circumstance
which, with the giving of notice or the passage of time, or both, could
constitute a Servicer Event of Default, has occurred or would result from any
transfer to be made on such Closing Date; and
(j) The Servicer shall take such actions as may be reasonably
necessary to effect Dispositions in accordance with Section 10.04 of the
Indenture as the Disposition Participants may reasonably request and direct,
including without limitation, providing the Originators, the Trust and the
Depositor such information as may be required to make representations and
warranties required hereunder.
It is understood and agreed that the representations,
warranties and covenants set forth in this Section 3.02 shall survive the
delivery of the respective Indenture Trustee's Mortgage Files to the Collateral
Agent, on behalf of the Indenture Trustee or to another custodian, as the case
may be, and inure to the benefit of the Indenture Trustee, the Trust, the Note
Insurer and the Noteholder.
Section 3.03. Representations, Warranties and Covenants of the
Depositor. The Depositor hereby represents, warrants and covenants to the
Indenture Trustee, the Originators, the Trust, the Collateral Agent, the
Noteholder, the Note Insurer, ABFS, Back-up Servicer and the Servicer that as of
the date of this Agreement or as of such date specifically provided herein:
(a) The Depositor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware;
(b) The Depositor has the corporate power and authority to
convey the Mortgage Loans and to execute, deliver and perform, and to enter into
and consummate transactions contemplated by this Agreement;
(c) This Agreement has been duly and validly authorized,
executed and delivered by the Depositor, all requisite corporate action having
been taken, and, assuming the due authorization, execution and delivery hereof
by the other parties hereto, constitutes or will constitute the legal, valid and
binding agreement of the Depositor, enforceable against the Depositor in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights of creditors generally, and by general
equity principles (regardless of whether such enforcement is considered in a
proceeding in equity or at law);
(d) No consent, approval, authorization or order of or
registration or filing with, or notice to, any governmental authority or court
is required for the execution, delivery and performance of or compliance by the
Depositor with this Agreement or the consummation by the Depositor of any of the
transactions contemplated hereby, except as have been made on or prior to the
Closing Date;
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(e) None of the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby or thereby, or the
fulfillment of or compliance with the terms and conditions of this Agreement,
(i) conflicts or will conflict with or results or will result in a breach of, or
constitutes or will constitute a default or results or will result in an
acceleration under (A) the charter or bylaws of the Depositor, or (B) of any
term, condition or provision of any material indenture, deed of trust, contract
or other agreement or instrument to which the Depositor or any of its
subsidiaries is a party or by which it or any of its subsidiaries is bound; (ii)
results or will result in a violation of any law, rule, regulation, order,
judgment or decree applicable to the Depositor of any court or governmental
authority having jurisdiction over the Depositor or its subsidiaries; or (iii)
results in the creation or imposition of any lien, charge or encumbrance which
would have a material adverse effect upon the Mortgage Loans or any documents or
instruments evidencing or securing the Mortgage Loans;
(f) There are no actions, suits or proceedings before or
against or investigations of, the Depositor pending, or to the knowledge of the
Depositor, threatened, before any court, administrative agency or other
tribunal, and no notice of any such action, which, in the Depositor's reasonable
judgment, might materially and adversely affect the performance by the Depositor
of its obligations under this Agreement, or the validity or enforceability of
this Agreement; and
(g) The Depositor is not in default with respect to any order
or decree of any court or any order, regulation or demand of any federal, state,
municipal or governmental agency that may materially and adversely affect its
performance hereunder.
(h) Upon the receipt of each Mortgage File by the Trust (or
its assignee) under this Agreement, the Trust (or its assignee) will have good
title to each related Mortgage Loan and such other items comprising the corpus
of the Trust Estate free and clear of any lien created by the Depositor (other
than liens which will be simultaneously released);
(i) The consummation of the transactions contemplated by this
Agreement are in the ordinary course of business of the Depositor, and the
transfer, assignment and conveyance of the Mortgage Notes and the Mortgages by
the Depositor pursuant to this Agreement are not subject to the bulk transfer or
any similar statutory provisions in effect in any applicable jurisdiction;
(j) With respect to any Mortgage Loan purchased by the
Depositor, the Depositor acquired title to the Mortgage Loan in good faith,
without notice of any adverse claim;
(k) The Depositor believes, that it can perform each and every
covenant contained in this Agreement. The Depositor is solvent and the sale of
the Mortgage Loans by the Depositor pursuant to the terms of this Agreement will
not cause the Depositor to become insolvent. The sale of the Mortgage Loans by
the Depositor pursuant to the terms of this Agreement was not undertaken with
the intent to hinder, delay or defraud any of the Depositor's creditors;
(l) The Mortgage Loans are not intentionally selected in a
manner so as to affect adversely the interests of the Trust or of any transferee
of the Trust (including the Indenture Trustee);
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(m) The Depositor is not an "investment company" or a company
controlled by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended; and
(n) The principal place of business and chief executive office
of the Depositor and the offices where it keeps all of its records relating to
the Mortgage Loans are located at the address(es) of the Depositor listed on
Exhibit I or such other locations of which the Indenture Trustee and the Note
Insurer have been notified in accordance with this Section 3.03 in jurisdictions
where all action required by this Section 3.03 has been taken and completed. The
Federal Employer Identification Number of the Depositor is correctly set forth
on Exhibit I. In the past five (5) years preceding the date hereof, the
Depositor has not used any corporate names, trade names or assumed names other
than the name in which it has executed this Agreement and the names listed in
Exhibit I hereto. The Depositor will not change its name, identity or corporate
structure or relocate its chief executive office or any office where records
relating to the Mortgage Loans are kept or change its jurisdiction of
incorporation unless it shall have: (i) given the Indenture Trustee and the Note
Insurer at least thirty (30) days' prior written notice thereof and (ii)
delivered to the Indenture Trustee and the Note Insurer all financing
statements, instruments and other documents reasonably requested by the
Indenture Trustee or the Note Insurer in connection with such change or
relocation.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.03 shall survive delivery of the
respective Indenture Trustee's Mortgage Files to the Collateral Agent, on behalf
of the Indenture Trustee or to another custodian, as the case may be, and shall
inure to the benefit of the Indenture Trustee, the Trust, the Note Insurer, and
the Noteholder.
Section 3.04. Representations, Warranties and Covenants of the
Indenture Trustee and the Collateral Agent. The Indenture Trustee and the
Collateral Agent hereby represent, warrant and covenant to the Trust, the
Servicer, the Originators, the Note Insurer, Back-up Servicer and the Depositor
that as of the date of this Agreement or as of such date specifically provided
herein:
(a) Each of the Indenture Trustee and the Collateral Agent is
a banking corporation duly organized, validly existing and in good standing
under the laws of the State of New York;
(b) Each of the Indenture Trustee and the Collateral Agent has
the corporate power and authority to execute, deliver and perform, and to enter
into and consummate transactions contemplated by this Agreement;
(c) This Agreement has been duly and validly authorized,
executed and delivered by the Indenture Trustee and the Collateral Agent, all
requisite corporate action having been taken, and, assuming the due
authorization, execution and delivery hereof by the other parties hereto,
constitutes or will constitute the legal, valid and binding agreement of the
Indenture Trustee and the Collateral Agent, enforceable against such party in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights of creditors generally, and by general
18
equity principles (regardless of whether such enforcement is considered in a
proceeding in equity or at law);
(d) It is understood and agreed that the representations,
warranties and covenants set forth in this Section 3.04 shall survive delivery
of the respective Indenture Trustee's Mortgage Files to the Collateral Agent, on
behalf of the Indenture Trustee or to another custodian, as the case may be.
Section 3.05. Representations, Warranties and Covenants of the Back-up
Servicer. The Back-up Servicer hereby represents, warrants and covenants to the
Trust, the Servicer, the Originators, the Note Insurer, Indenture Trustee, ABFS,
Collateral Agent and the Depositor that as of the date of this Agreement or as
of such date specifically provided herein:
(a) Each of the Back-up Servicer and any subservicer engaged
by the Back-up Servicer is duly organized, validly existing and in good standing
under the laws of their respective states of incorporation and has the power to
own its assets and to transact the business in which it is currently engaged.
Each of the Back-up Servicer and any subservicer engaged by the Back-up Servicer
is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the character of the business transacted
by it or properties owned or leased by it or the performance of its obligations
hereunder requires such qualification and in which the failure so to qualify
could reasonably be expected to have a material adverse effect on the business,
properties, assets, or condition (financial or other) of the Back-up Servicer or
any subservicer engaged by the Back-up Servicer or the performance of their
respective obligations hereunder;
(b) The Back-up Servicer has the power and authority to make,
execute, deliver and perform this Agreement and all of the transactions
contemplated under this Agreement, and has taken all necessary corporate action
to authorize the execution, delivery and performance of this Agreement, and
assuming the due authorization, execution and delivery hereof by the other
parties hereto constitutes, or will constitute, the legal, valid and binding
obligation of the Back-up Servicer, enforceable in accordance with its terms,
except as enforcement of such terms may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights of creditors generally, and by general equity principles (regardless of
whether such enforcement is considered in a proceeding in equity or at law);
(c) The Back-up Servicer is not required to obtain the consent
of any other party or any consent, license, approval or authorization from, or
registration or declaration with, any governmental authority, bureau or agency
which consent already has not been obtained in connection with the execution,
delivery, performance, validity or enforceability of this Agreement, except such
as have been obtained prior to the Closing Date;
(d) The execution, delivery and performance of this Agreement
by the Back-up Servicer will not violate any provision of any existing law or
regulation or any order or decree of any court or the charter or bylaws of the
Back-up Servicer, or constitute a breach of any mortgage, indenture, contract or
other Agreement to which the Back-up Servicer is a party or by which it may be
bound;
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(e) There is no action, suit, proceeding or investigation
pending or threatened against the Back-up Servicer or any subservicer engaged by
the Back-up Servicer which, either in any one instance or in the aggregate, is,
in the Back-up Servicer's judgment, likely to result in any material adverse
change in the business, operations, financial condition, properties, or assets
of the Back-up Servicer or any subservicer engaged by the Back-up Servicer, or
in any material impairment of the right or ability of any of them to carry on
its business substantially as now conducted, or in any material liability on the
part of any of them, or which would draw into question the validity of this
Agreement, the Note, or the Mortgage Loans or of any action taken or to be taken
in connection with the obligations of the Back-up Servicer or any subservicer
engaged by the Back-up Servicer contemplated herein or therein, or which would
be likely to impair materially the ability of the Back-up Servicer or any
subservicer engaged by the Back-up Servicer to perform their respective
obligations hereunder;
(f) Neither this Agreement nor any statement, report, or other
document furnished by the Back-up Servicer or any subservicer engaged by the
Back-up Servicer pursuant to this Agreement or in connection with the
transactions contemplated hereby contains any untrue statement of fact provided
by or on behalf of the Back-up Servicer or omits to state a fact necessary to
make the statements provided by or on behalf of the Back-up Servicer contained
herein or therein not misleading;
(g) The Back-up Servicer believes that it can perform each and
every covenant relating to the Back-up Servicer contained in this Agreement; and
(h) None of the Back-up Servicer or any subservicer engaged by
the Back-up Servicer is an "investment company" or a company "controlled by an
investment company," within the meaning of the Investment Company Act of 1940,
as amended.
ARTICLE IV
THE MORTGAGE LOANS
Section 4.01. Representations and Warranties Concerning the Mortgage
Loans. The Originators and the Depositor represent and warrant to the Indenture
Trustee, the Collateral Agent, the Trust, the Liquidity Provider, the Note
Insurer, ABFS and the Noteholder that, as of the Closing Date, as to each
Initial Mortgage Loan, and as of the Subsequent Purchase Date, as to each
Subsequent Mortgage Loan, both immediately prior and immediately after the sale
and transfer of such Mortgage Loan by the Originators to the Depositor and by
the Depositor to the Trust:
(a) The information set forth in each Mortgage Loan Schedule
is complete, true and correct;
(b) The information to be provided by the Originators or any
Affiliate to the Depositor, the Trust, the Collateral Agent, the Indenture
Trustee and the Note Insurer in connection with an Initial Mortgage Loan or a
Subsequent Mortgage Loan will be true and correct in all material respects at
the date or dates respecting which such information is furnished;
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(c) Each Mortgage is a valid first or second lien on a fee
simple (or its equivalent under applicable state law) estate in the real
property securing the amount owed by the Mortgagor under the Mortgage Note
subject only to (i) the lien of current real property taxes and assessments
which are not delinquent, (ii) with respect to any Mortgage Loan identified on
the Mortgage Loan Schedule as secured by a second lien, the related first
mortgage loan, (iii) covenants, conditions and restrictions, rights of way,
easements and other matters of public record as of the date of recording of such
Mortgage, such exceptions appearing of record being acceptable to mortgage
lending institutions generally in the area wherein the property subject to the
Mortgage is located or specifically reflected in the appraisal obtained in
connection with the origination of the related Mortgage Loan obtained by the
related Originator and (iv) other matters to which like properties are commonly
subject which do not materially interfere with the benefits of the security
intended to be provided by such Mortgage;
(d) Immediately prior to the transfer and assignment by the
related Originator to the Depositor, the Originator had good title to, and was
the sole owner of each Mortgage Loan, free of any interest of any other Person,
and the Originator has transferred all right, title and interest in each
Mortgage Loan to the Depositor;
(e) Immediately prior to the transfer and assignment by the
Depositor to the Trust, the Depositor had good title to, and was the sole owner
of each Mortgage Loan, free of any interest of any other Person, and the
Depositor has transferred all right, title and interest in each Mortgage Loan to
the Trust;
(f) As of the applicable Closing Date, no payment of principal
or interest on or in respect of any Mortgage Loan remains unpaid for thirty (30)
or more days past the date the same was due in accordance with the related
Mortgage Note without regard to applicable grace periods and without giving
effect to any Periodic Advances by the applicable Originator or any Affiliate
thereof;
(g) To the best knowledge of the Originators, there is no
mechanic's lien or claim for work, labor or material (and no rights are
outstanding that under law could give rise to such lien) affecting the premises
subject to any Mortgage which is or may be a lien prior to, or equal or
coordinate with, the lien of such Mortgage, except those which are insured
against by the title insurance policy referred to in (aa) below;
(h) [Reserved]
(i) To the best knowledge of the Depositor and each of the
Originators, there is no delinquent tax or assessment lien against any Mortgaged
Property;
(j) Such Mortgage Loan, the Mortgage, and the Mortgage Note,
including, without limitation, the obligation of the Mortgagor to pay the unpaid
principal of and interest on the Mortgage Note, are each not subject to any
right of rescission (or any such rescission right has expired in accordance with
applicable law), set-off, counterclaim, or defense, including the defense of
usury, nor will the operation of any of the terms of the Mortgage Note or the
Mortgage, or the exercise of any right thereunder, render either the Mortgage
Note or the Mortgage unenforceable, in whole or in part, or subject to any right
of rescission, set-off, counterclaim, or defense, including the defense of
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usury, and no such right of rescission, set-off, counterclaim, or defense has
been asserted with respect thereto;
(k) To the best knowledge of the Depositor and each of the
Originators, the Mortgaged Property is free of material damage and is in good
repair, and there is no pending or threatened proceeding for the total or
partial condemnation of the Mortgaged Property;
(l) Neither the Originators nor the Depositor has received a
notice of default of any first mortgage loan secured by the Mortgaged Property
which has not been cured by a party other than the Originator or any Affiliate
thereof;
(m) Each Mortgage Note and Mortgage are in substantially the
forms previously provided to the Depositor, the Note Insurer and the Indenture
Trustee on behalf of the Originators;
(n) The Mortgage Loan was originated in accordance with the
Originator's Credit Policy Manual;
(o) The Mortgage Loans were (i) originated by the Originator,
in the normal course of business, (ii) not selected by the Depositor or the
Originators for sale hereunder or inclusion in the Trust Estate on any basis
adverse to the Trust Estate relative to the portfolio of similar mortgage loans
of the Depositor or the Originators, and (iii) prior to the applicable Closing
Date or Subsequent Purchase Date, serviced by the Originator or an Affiliate
thereof in accordance with Accepted Servicing Practices;
(p) No more than 5% (by Principal Balance) of the Mortgage
Loans constitutes a lien on leasehold interests, the cost of the leasehold
expense has been factored into the debt-to-income calculations with respect to
the related Mortgagor and the maturity date of the ground lease is later than
the maturity date of the Mortgage Loan;
(q) Each Mortgage contains customary and enforceable
provisions which render the rights and remedies of the holder thereof adequate
for the realization against the related Mortgaged Property of the benefits of
the security including (A) in the case of a Mortgage designated as a deed of
trust, by trustee's sale and (B) otherwise by judicial foreclosure. To the best
of the Depositor's and the Originators' knowledge, there is no homestead or
other exemption available to the related Mortgagor which would materially
interfere with the right to sell the related Mortgaged Property at a trustee's
sale or the right to foreclose the related Mortgage. The Mortgage contains
customary and enforceable provisions for the acceleration of the payment of the
Principal Balance of such Mortgage Loan in the event all or any part of the
related Mortgaged Property is sold or otherwise transferred without the prior
written consent of the holder thereof;
(r) The proceeds of such Mortgage Loan have been fully
disbursed, including reserves set aside by the Originators, there is no
requirement for, and neither the Depositor nor the Originators shall make any
future advances thereunder. Any future advances made prior to the applicable
Closing Date have been consolidated with the principal balance secured by the
Mortgage, and such principal balance, as consolidated, bears a single interest
rate and single repayment term reflected on the applicable Mortgage Loan
Schedule. The Principal Balance as of the applicable Closing Date does not
exceed the original principal amount of such Mortgage Loan. Except with respect
22
to no more than $150,000 of escrow funds in the aggregate with respect to all
Mortgage Loans, any and all requirements as to completion of any on-site or
off-site improvements and as to disbursements of any escrow funds therefor have
been complied with. All costs, fees, and expenses incurred in making, or
recording such Mortgage Loan have been paid;
(s) The terms of the Mortgage and the Mortgage Note have not
been impaired, waived, altered, or modified in any respect, except by a written
instrument which has been recorded, if necessary to protect the interest of the
Indenture Trustee, and which has been delivered to the Collateral Agent, on
behalf of the Indenture Trustee. The substance of any such alteration or
modification is or as to Subsequent Mortgage Loans will be reflected on the
applicable Mortgage Loan Schedule and, to the extent necessary, has been or will
be approved by (i) the insurer under the applicable mortgage title insurance
policy, and (ii) the insurer under any other insurance policy required hereunder
for such Mortgage Loan where such insurance policy requires approval and the
failure to procure approval would impair coverage under such policy;
(t) No instrument of release, waiver, alteration, or
modification has been executed in connection with such Mortgage Loan, and no
Mortgagor has been released, in whole or in part, except in connection with an
assumption agreement which has been approved by the insurer under any insurance
policy required hereunder for such Mortgage Loan where such policy requires
approval and the failure to procure approval would impair coverage under such
policy, and which is part of the Mortgage File and has been delivered to the
Collateral Agent, on behalf of the Indenture Trustee, and the terms of which are
reflected in the applicable Mortgage Loan Schedule;
(u) There is no default, breach, violation, or event of
acceleration existing under the Mortgage or the Mortgage Note and no event
which, with the passage of time or with notice and the expiration of any grace
or cure period, would constitute such a default, breach, violation or event of
acceleration, and neither the Originators nor the Depositor has waived any such
default, breach, violation or event of acceleration. All taxes, governmental
assessments (including assessments payable in future installments), insurance
premiums, water, sewer, and municipal charges, leaseholder payments, or ground
rents which previously became due and owing in respect of or affecting the
related Mortgaged Property have been paid. Neither the Originators nor the
Depositor has advanced funds, or induced, solicited, or knowingly received any
advance of funds by a party other than the Mortgagor, directly or indirectly,
for the payment of any amount required by the Mortgage or the Mortgage Note;
(v) All of the improvements which were included for the
purposes of determining the Appraised Value of the Mortgaged Property were
completed at the time that such Mortgage Loan was originated and lie wholly
within the boundaries and building restriction lines of such Mortgaged Property.
Except for de minimis encroachments, no improvements on adjoining properties
encroach upon the Mortgaged Property. To the best of the Depositor's and the
Originators' knowledge, no improvement located on or being part of the Mortgaged
Property is in violation of any applicable zoning law or regulation. All
inspections, licenses, and certificates required to be made or issued with
respect to all occupied portions of the Mortgaged Property (including all such
23
improvements which were included for the purpose of determining such Appraised
Value) and, with respect to the use and occupancy of the same, including, but
not limited to, certificates of occupancy and fire underwriters certificates,
have been made or obtained from the appropriate authorities and the Mortgaged
Property is lawfully occupied under applicable law;
(w) To the best of the Depositor's and the Originators'
knowledge, there do not exist any circumstances or conditions with respect to
the Mortgage, the Mortgaged Property, the Mortgagor, or the Mortgagor's credit
standing that can be reasonably expected to cause such Mortgage Loan to become
delinquent or adversely affect the value or marketability of such Mortgage Loan,
other than any such circumstances or conditions permitted under the Originator's
Underwriting Guidelines;
(x) All parties which have had any interest in the Mortgage,
whether as mortgagee, assignee, pledgee or otherwise, are (or, during the period
in which they held and disposed of such interest, were) (i) in compliance with
any and all applicable licensing requirements of the laws of the state wherein
the Mortgaged Property is located and (ii) (A) organized under the laws of such
state, (B) qualified to do business in such state, (C) federal savings and loan
associations or national banks having principal offices in such state, (D) not
doing business in such state, or (E) not required to qualify to do business in
such state;
(y) The Mortgage Note and the Mortgage are genuine, and each
is the legal, valid and binding obligation of the maker thereof, enforceable in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium, or other similar laws
affecting the enforcement of creditors' rights generally and except that the
equitable remedy of specific performance and other equitable remedies are
subject to the discretion of the courts. All parties to the Mortgage Note and
the Mortgage had legal capacity to execute the Mortgage Note and the Mortgage
and convey the estate therein purported to be conveyed, and the Mortgage Note
and the Mortgage have been duly and properly executed by such parties or
pursuant to a valid power-of-attorney that has been recorded with the Mortgage;
(z) The transfer of the Mortgage Note and the Mortgage as and
in the manner contemplated by Section 2.05 of this Agreement is sufficient (i)
to fully to transfer to the Depositor all right, title, and interest of the
Originators thereto as note holder and mortgagee and (ii) to the extent an
Originator retains an interest in such Mortgage Note or Mortgage, to grant to
the Depositor the security interest referred to in Section 2.07 hereof and
thereafter (x) to transfer the right, title and interest of the Depositor to the
Trust and (y) to pledge the interest of the Trust to the Indenture Trustee for
the benefit of the Noteholder. The Mortgage has been duly assigned by the
Originators to the Depositor and by the Depositor to the Trust and the Mortgage
Note has been duly endorsed. The Assignment of Mortgage delivered to the
Collateral Agent, on behalf of the Indenture Trustee, pursuant to Section
2.05(a)(iv) is in recordable form and is acceptable for recording under the laws
of the applicable jurisdiction. The endorsement of the Mortgage Note, the
delivery to the Collateral Agent, on behalf of the Indenture Trustee, of the
endorsed Mortgage Note, and such Assignment of Mortgage, and the delivery of
such Assignment of Mortgage to the Collateral Agent, on behalf of the Indenture
Trustee, for recording are sufficient to permit the Indenture Trustee to avail
itself of all protection available under applicable law against the claims of
any present or future creditors of the Depositor or any of the Originators, and
24
are sufficient to prevent any other sale, transfer, assignment, pledge, or
hypothecation of the Mortgage Note and Mortgage by the Depositor or any of the
Originators from being enforceable, even if the Servicer does not record such
Assignment of Mortgage in the applicable recording office. The Indenture Trustee
shall have a first priority perfected security interest in the Pledged Mortgage
Loans;
(aa) Any and all requirements of any federal, state, or local
law, including, without limitation, usury, truth-in-lending, real estate
settlement procedures, consumer credit protection, equal credit opportunity, or
disclosure laws applicable to such Mortgage Loan have been complied with, and
the Servicer shall maintain in its possession, available for the Indenture
Trustee's inspection, and shall deliver to the Indenture Trustee or its designee
upon demand, evidence of compliance with all such requirements. The consummation
of the transactions contemplated by this Agreement will not cause the violation
of any such laws;
(bb) Such Mortgage Loan is covered by an ALTA mortgage title
insurance policy or such other generally used and acceptable form of policy,
issued by and the valid and binding obligation of a title insurer qualified to
do business in the jurisdiction where the Mortgaged Property is located,
insuring the Originator, and its successors and assigns, as to the first or
second priority lien, as applicable, of the Mortgage in the original principal
amount of such Mortgage Loan. The assignment to the Indenture Trustee of the
Originator's interest in such mortgage title insurance policy does not require
the consent of or notification to the insurer. Such mortgage title insurance
policy is in full force and effect and will be in full force and effect and
inure to the benefit of the Indenture Trustee upon the consummation of the
transactions contemplated by this Agreement. No claims have been made under such
mortgage title insurance policy and none of the Depositor, the Originators nor
any prior holder of the Mortgage has done, by act or omission, anything which
would impair the coverage of such mortgage title insurance policy;
(cc) All improvements upon the Mortgaged Property are insured
against loss by fire, hazards of extended coverage, and such other hazards as
are customary in the area where the Mortgaged Property is located pursuant to
insurance policies conforming to the requirements of Section 7.04 hereof. If the
Mortgaged Property at origination was located in an area identified on a flood
hazard boundary map or flood insurance rate map issued by the Federal Emergency
Management Agency as having special flood hazards (and such flood insurance has
been made available), such Mortgaged Property was covered by flood insurance at
origination. Each individual insurance policy is the valid and binding
obligation of the insurer, is in full force and effect, and will be in full
force and effect and inure to the benefit of the Indenture Trustee upon the
consummation of the transactions contemplated by this Agreement, and contain a
standard mortgage clause naming the originator of such Mortgage Loan, and its
successors and assigns, as mortgagee and loss payee. All premiums thereon have
been paid. The Mortgage obligates the Mortgagor to maintain all such insurance
at the Mortgagor's cost and expense, and upon the Mortgagor's failure to do so,
authorizes the holder of the Mortgage to obtain and maintain such insurance at
the Mortgagor's cost and expense and to seek reimbursement therefor from the
Mortgagor, and none of the Depositor, the related Originator or any prior holder
of the Mortgage has acted or failed to act so as to impair the coverage of any
such insurance policy or the validity, binding effect, and enforceability
thereof;
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(dd) If the Mortgage constitutes a deed of trust, a trustee,
duly qualified under applicable law to serve as such, has been properly
designated and currently so serves and is named in such Mortgage, and no fees or
expenses are or will become payable by the Indenture Trustee or the Noteholder
to the trustee under the deed of trust, except in connection with a trustee's
sale after default by the Mortgagor;
(ee) The Mortgaged Property consists of one or more parcels of
real property separately assessed for tax purposes. To the extent there is
erected thereon a detached or an attached one-family residence or a detached
two-to six-family dwelling, or an individual condominium unit in a low-rise
condominium, or an individual unit in a planned unit development, or a
commercial property, a manufactured dwelling, or a mixed use or multiple purpose
property, such residence, dwelling or unit is not (i) a unit in a cooperative
apartment, (ii) a property constituting part of a syndication, (iii) a time
share unit, (iv) a property held in trust, (v) a mobile home, (vi) a
log-constructed home, or (vii) a recreational vehicle;
(ff) There exist no material deficiencies with respect to
escrow deposits and payments, if such are required, for which customary
arrangements for repayment thereof have not been made or which the Depositor or
the related Originator expects not to be cured, and no escrow deposits or
payments of other charges or payments due the Depositor have been capitalized
under the Mortgage or the Mortgage Note;
(gg) Such Mortgage Loan was not originated at a below market
interest rate. Such Mortgage Loan does not have a shared appreciation feature,
or other contingent interest feature;
(hh) The origination and collection practices used by the
Depositor, the Originators or the Servicer with respect to such Mortgage Loan
have been in all respects legal, proper, prudent, and customary in the mortgage
origination and servicing business;
(ii) The Mortgagor has, to the extent required by applicable
law, executed a statement to the effect that the Mortgagor has received all
disclosure materials, if any, required by applicable law with respect to the
making of fixed-rate mortgage loans. The Servicer shall maintain or cause to be
maintained such statement in the Mortgage File;
(jj) All amounts received by the Depositor or the Originators
with respect to such Mortgage Loan after the applicable Closing Date or
applicable Subsequent Purchase Date and required to be deposited in the Payment
Account have been so deposited in the Payment Account and are, as of the Closing
Date, or will be as of the Subsequent Purchase Date, as applicable, in the
Payment Account;
(kk) The appraisal report with respect to the Mortgaged
Property contained in the Mortgage File was signed prior to the approval of the
application for such Mortgage Loan by a qualified appraiser, duly appointed by
the originator of such Mortgage Loan, who had no interest, direct or indirect,
in the Mortgaged Property or in any loan made on the security thereof and whose
compensation is not affected by the approval or disapproval of such application;
(ll) Each of the Originators and the Depositor has no
knowledge with respect to the Mortgaged Property of any governmental or
26
regulatory action or third party claim made, instituted or threatened in writing
relating to a violation of any applicable federal, state or local environmental
law, statute, ordinance, regulation, order, decree or standard;
(mm) With respect to second lien Mortgage Loans:
(i) the Depositor and the Originators have no knowledge
that the Mortgagor has received notice from the holder of the prior
mortgage that such prior mortgage is in default,
(ii) no consent from the holder of the prior mortgage is
needed for the creation of the second lien Mortgage or, if required,
has been obtained and is in the related Mortgage File,
(iii) if the prior mortgage has a negative amortization
feature, the CLTV was determined using the maximum loan amount of such
prior mortgage,
(iv) the related first mortgage loan encumbering the
related Mortgaged Property does not have a mandatory future advance
provision, and
(v) no more than 20.00% (by Principal Balance) of the
Mortgage Loans are secured by Mortgages that are second liens.
(nn) To the best of the Depositor's and the Originators'
knowledge, no error, omission, misrepresentation, negligence, fraud or similar
occurrence with respect to a Mortgage Loan has taken place on the part of any
person, including, without limitation, the Mortgagor, any appraiser, any builder
or developer, or any other party involved in the origination of the Mortgage
Loan or in the application of any insurance in relation to such Mortgage Loan;
(oo) Each Mortgaged Property is in compliance with all
environmental laws, ordinances, rules, regulations and orders of federal, state
or governmental authorities relating thereto. No hazardous material has been or
is incorporated in, stored on or under (other than properly stored materials,
used for reasonable residential purposes), released from, treated on,
transported to or from, or disposed of on or from, any Mortgaged Property such
that, under applicable law (A) any such hazardous material would be required to
be eliminated before the Mortgaged Property could be altered, renovated,
demolished or transferred, or (B) the owner of the Mortgaged Property, or the
holder of a security interest therein, could be subjected to liability for the
removal of such hazardous material or the elimination of the hazard created
thereby. Neither the Originators nor any Mortgagor has received notification
from any federal, state or other governmental authority relating to any
hazardous materials on or affecting the Mortgaged Property or to any potential
or known liability under any environmental law arising from the ownership or
operation of the Mortgaged Property. For the purposes of this subsection, the
term "hazardous materials" shall include, without limitation, gasoline,
petroleum products, explosives, radioactive materials, polychlorinated biphenyls
or related or similar materials, asbestos or any material containing asbestos,
lead, lead-based paint and any other substance or material as may be defined as
a hazardous or toxic substance by any federal, state or local environmental law,
ordinance, rule, regulation or order, including, without limitation, CERCLA, the
Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act,
the Toxic Substances Control Act and any regulations promulgated pursuant
thereto;
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(pp) With respect to any business purpose loan, the related
Mortgage Note contains an acceleration clause, accelerating the maturity date
under the Mortgage Note to the date the individual guarantying such loan, if
any, becomes subject to any bankruptcy, insolvency, reorganization, moratorium,
or other similar laws affecting the enforcement of creditors' rights generally;
(qq) Except for 1.00% (by Principal Balance) of the Mortgage
Loans, which may have an initial LTV ratio range of up to 100.00%, no Mortgage
Loans have initial LTV ratios greater than 90.00%;
(rr) At origination, no Mortgage Loan had an original term to
maturity of greater than 360 months;
(ss) At origination, each Mortgage Loan had an original term
to maturity of at least 60 months;
(tt) No more than 15.00% (by Principal Balance) of the
Mortgage Loans are loans the proceeds of which are to be used for business
purposes;
(uu) At least 80.00% (by Principal Balance) of the Mortgage
Loans are secured exclusively by Owner Occupied Mortgaged Property;
(vv) To the extent that a credit score was obtained, the
weighted average FICO score (by Principal Balance) for the Mortgage Loans is at
least 560, not more than 20.00% (by Principal Balance) of the Mortgage Loans
have FICO scores that are less than 500 and at least 90.00% (by Principal
Balance) of the Mortgage Loans have FICO scores;
(ww) The Mortgage Loans have a weighted average CLTV (by
Principal Balance) of not more than 79.99% and no more than 50.00% (by Principal
Balance) of the Mortgage Loans have a CLTV greater than 80.00%;
(xx) No more than 30.00% (by Principal Balance) of the
Mortgage Loans are made to limited or no documentation borrowers;
(yy) No more than 10.00% (by Principal Balance) of the
Mortgage Loans have been originated by a party other than an Originator;
(zz) The Mortgage Interest Rate for each Mortgage Loan is
fixed;
(aaa) No more than 1.00% (by Principal Balance ) of the
Mortgage Loans consist of balloon Mortgage Loans that mature within 10 years of
the date of origination;
(bbb) No Mortgage Loan has a Principal Balance greater than
$550,000;
(ccc) At least 65.00% (by Principal Balance) of the Mortgage
Loans are secured by a single-family detached home, an individual unit in a
planned unit development or a townhouse;
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(ddd) No more than 2.00% (by Principal Balance) of the
Mortgage Loans are secured by manufactured homes; and
(eee) Each of the Originators and the Depositor further
represent and warrant to the Indenture Trustee and the Noteholder that as of the
Subsequent Purchase Date all representations and warranties set forth in clauses
(a) through (ddd) above will be correct in all material respects as to each
Subsequent Mortgage Loan, and the representations so made in this subsection
(eee) as to the following matter will be correct: each Subsequent Mortgage Loan
will not be thirty (30) or more days contractually delinquent as of the related
Subsequent Purchase Date.
Section 4.02. Purchase and Substitution(a) . (a) It is understood and
agreed that the representations and warranties set forth in Sections 3.01, 3.02,
3.03 and 4.01 herein shall survive the purchase by the Depositor of the Mortgage
Loans, the subsequent transfer thereof by the Depositor to the Trust, the
subsequent pledge thereof by the Trust to the Indenture Trustee, for the benefit
of the Noteholder and the Note Insurer, and the delivery of the Note to the
Noteholder, and shall continue in full force and effect, notwithstanding any
restrictive or qualified endorsement on the Mortgage Notes and notwithstanding
subsequent termination of this Agreement.
(b) Upon discovery by the Originators, the Depositor, the
Servicer, any Subservicer, the Indenture Trustee, the Collateral Agent, the Note
Insurer or a Noteholder of a breach of any of the representations and warranties
in Sections 3.01, 3.02, 3.03 or 4.01 hereof which materially and adversely
affects the value of the Mortgage Loans or the interest of the Indenture
Trustee, the Noteholder or the Note Insurer, or which materially and adversely
affects the value of or the interests of the Indenture Trustee, the Noteholder
or the Note Insurer in the related Mortgage Loan in the case of a representation
and warranty relating to a particular Mortgage Loan(determined as if the
Depositor and the Originators had knowledge of all facts and circumstances in
existence as of such date, notwithstanding that such representation and warranty
was made to the Depositor's or the Originator's best knowledge), the party
discovering such breach or failure shall promptly (and in any event within five
(5) Business Days of the discovery) give written notice thereof to the others,
provided, that, the failure to deliver such notice shall not diminish, modify or
otherwise affect any obligation of the Depositor or any Originator hereunder
including any obligation to effect a cure, repurchase or substitution of the
Mortgage Loan. Within thirty (30) days of the earlier of its discovery or its
receipt of notice of any breach of a representation or warranty, the Servicer
shall, or shall cause the Depositor or the relevant Originator to (a) promptly
cure such breach in all material respects, (b) purchase such Mortgage Loan on
the next succeeding Servicer Payment Date, in the manner and at the price
specified in Section 2.06(b) and this Section 4.02, or (c) remove such Mortgage
Loan from the Trust Estate (in which case it shall become a Deleted Mortgage
Loan) and substitute one or more Qualified Substitute Mortgage Loans in the
manner specified in Section 2.06(c) and this Section 4.02. The Collateral Agent
shall give prompt written notice to the Indenture Trustee, who shall deliver
such notice to the Note Insurer and the Rating Agencies of any repurchase or
substitution made pursuant to this Section 4.02 or Section 2.06(c).
(c) As to any Deleted Mortgage Loan for which the Originator
(or the Depositor, as the case may be) substitutes a Qualified Substitute
29
Mortgage Loan or Loans, the Servicer shall cause the Depositor or an Originator,
as applicable, to effect such substitution by (i) delivering to the Indenture
Trustee a certification, in the form attached hereto as Exhibit F, executed by a
Servicing Officer, and the documents described in Sections 2.05(a)(i)-(vi) for
such Qualified Substitute Mortgage Loan or Loans and (ii) depositing the
Substitution Amount into the Payment Account.
(d) The Servicer shall deposit in the Collection Account all
payments received in connection with such Qualified Substitute Mortgage Loan or
Loans after the date of such substitution. Monthly Payments received with
respect to Qualified Substitute Mortgage Loan or Loans on or before the date of
substitution will be retained by the Originators (or the Depositor, as the case
may be). The Trust will own all payments received on the Deleted Mortgage Loan
on or before the date of substitution, and the Originators (or the Depositor, as
the case may be) shall thereafter be entitled to retain all amounts subsequently
received in respect of such Deleted Mortgage Loan. The Servicer shall give
written notice to the Indenture Trustee, the Collateral Agent and the Note
Insurer that such substitution has taken place and shall amend the Mortgage Loan
Schedule to reflect the removal of such Deleted Mortgage Loan from the terms of
this Agreement and the substitution of the Qualified Substitute Mortgage Loan or
Loans. Upon such substitution, such Qualified Substitute Mortgage Loan or Loans
shall be subject to the terms of this Agreement in all respects.
(e) With respect to any Mortgage Loan that has been converted
to an REO Mortgage Loan, all references in this Section 4.02 or Section 2.06 to
"Mortgage Loan" shall be deemed to also refer to the REO Mortgage Loan. With
respect to any Mortgage Loan that the Servicer, Originator or Depositor has the
option to repurchase that is or becomes a Liquidated Mortgage Loan, in lieu of
repurchasing such Mortgage Loan, the Servicer, Originator or Depositor shall
deposit into the Payment Account, pursuant to Section 8.01 of the Indenture, an
amount equal to the amount of the Liquidated Loan Loss, if any, incurred in
connection with the liquidation of such Mortgage Loan within the same time
period in which the Servicer, Originator or Depositor would have otherwise been
required to repurchase such Mortgage Loan.
(f) It is understood and agreed that the obligations of the
Originators and the Depositor set forth herein to, and the Servicer's obligation
set forth in this Section 4.02 to cause the Originators or the Depositor to,
cure, purchase or substitute for a defective Mortgage Loan, or to indemnify as
described in subsection (g) below, constitute the sole remedies of the Indenture
Trustee, the Collateral Agent, the Note Insurer and the Noteholder respecting a
breach of the representations and warranties of the Originators.
(g) The Originators hereby indemnify the Indenture Trustee,
the Depositor, the Note Insurer, the Back-up Servicer, the Trust, the Owner
Trustee, the Collateral Agent and the Noteholder and their successors, assigns,
agents and servants (collectively, the "Indemnified Parties") from and against,
any and all liabilities, obligations, losses, damages, taxes, claims, actions
and suits, and any and all reasonable costs, expenses and disbursements
(including reasonable legal fees and expenses) of any kind and nature whatsoever
(collectively, "Expenses") which may at any time be imposed on, incurred by, or
asserted against any Indemnified Party in any way relating to or arising out of
a breach by the Depositor or the related Originator of the representations or
warranties herein, except to the extent caused by negligence or willful
misconduct of such Indemnified Party. The indemnities contained herein shall
30
survive the resignation or termination of the Indemnified Parties or the
termination of this Agreement. In the event, the Originators, as the
Indemnifying Parties, are unable to indemnify against all of the Expenses, the
unpaid Expenses shall be paid out of funds that would otherwise be distributed
to the holders of the Trust Certificates.
(h) Each of the Originators shall be jointly and severally
responsible for any repurchase, cure or substitution obligation of the
Originators under this Agreement or the Indenture.
ARTICLE V
THE ORIGINATORS, THE DEPOSITOR AND THE TRUST
Section 5.01. Covenants of the Depositor and the Trust. (a) Depositor
covenants to the Indenture Trustee, the Trust, the Collateral Agent, the Note
Insurer, the Back-up Servicer, the Originators, the Servicer and the Noteholder
as follows:
(i) The Depositor shall cooperate with such parties and
the firm of independent certified public accountants retained with
respect to the issuance of the Note in making available all information
and taking all steps reasonably necessary or reasonably required by the
Note Insurer to permit the accountants' letters required hereunder to
be delivered within the times set for delivery herein;
(ii) The Depositor agree to satisfy or cause to be
satisfied on or prior to the Closing Date, all of the conditions set
forth in Section 4.01 of the Indenture that are within the Depositor's
(or their agents') control;
(iii) The Depositor hereby agrees to do all acts,
transactions, and things and to execute and deliver all agreements,
documents, instruments, and papers by and on behalf of the Depositor as
the Indenture Trustee, Owner Trustee, the Note Insurer or the Initial
Purchaser or their counsel may reasonably request in order to (A)
consummate the transfer of the Mortgage Loans to the Depositor and from
the Depositor to the Trust and the subsequent transfer thereof to the
Indenture Trustee, and the issuance and sale of the Note and (B)
consummate a securitization or whole-loan transfer of some or all of
the Mortgage Loans;
(iv) The Depositor covenants to the Noteholder and the
Note Insurer that it shall not, for so long as an Event of Default
exists under the Indenture, pay any dividend to the holders of its
common stock;
(v) The Depositor shall not engage in any business or
activity of any kind or enter into any transaction or indenture,
mortgage, instrument, agreement contract, lease or other undertaking
other than the transactions contemplated and authorized by the Basic
Documents. Without limiting the generality of the foregoing, the
Depositor shall not create, incur, guarantee, assume or suffer to exist
any indebtedness or other liabilities, whether direct or contingent,
other than (i) as a result of the endorsement of negotiable instruments
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for deposit or collection or similar transactions in the ordinary
course of business, (ii) the incurrence of obligations under the Basic
Documents and (iii) the incurrence of operating expenses in the
ordinary course of business permitted under this Agreement;
(vi) The Depositor shall not amend its certificate of
incorporation or by-laws in any respect without the prior written
consent of the Controlling Party.
(vii) The Depositor has been formed for, and shall limit
its activities to, the following purposes: (i) to conduct sales of the
Mortgage Loans and to distribute the proceeds of the sale of the
Mortgage Loans to the Originators in consideration of their respective
contributions; (ii) in the event of the occurrence of a breach of
certain representations and warranties, to cause the substitution or
repurchase of the related Mortgage Loans by the Originators; and (iii)
to enter into and perform its obligations under the Basic Documents and
engage in those activities that are necessary, suitable or convenient
to accomplish the foregoing or are incidental thereto or connected
therewith;
(viii) The Depositor shall not incur, assume or guarantee
any indebtedness for borrowed money or for the deferred purchase price
of goods or services except under the provisions of the Basic
Documents;
(ix) The Depositor shall maintain separate corporate
records and books of account from those of the Originators or any of
their affiliates;
(x) The Depositor shall not become involved in the day to
day management of any other person, and it shall operate so as not to
be substantively consolidated with any other person;
(xi) The Depositor shall maintain its assets separate
from those of the Originators or any of their affiliates;
(xii) The Depositor shall conduct correspondence in its
own name on its own stationery;
(xiii) The Depositor shall not act as an agent of any
other entity or Person except pursuant to contractual documents
indicating such capacity;
(xiv) The Depositor will not sell, assign (by operation
of law or otherwise) dispose of, or grant any option with respect to,
or create or suffer to exist any Lien upon or with respect to, the
Trust Certificates, or assign any right to receive income with respect
thereto.
(b) The Trust covenants to the Indenture Trustee, the
Depositor, the Collateral Agent, the Note Insurer, the Back-up Servicer, the
Servicer, the Originators and the Noteholder are as follows:
(i) The Trust shall not engage in any business or
activity of any kind or enter into any transaction or indenture,
mortgage, instrument, agreement contract, lease or other undertaking
32
other than the transactions contemplated and authorized by the Basic
Documents. Without limiting the generality of the foregoing, the Trust
shall not create, incur, guarantee, assume or suffer to exist any
indebtedness or other liabilities, whether direct or contingent, other
than (i) as a result of the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
business, (ii) the incurrence of obligations under the Basic Documents
and (iii) the incurrence of operating expenses in the ordinary course
of business permitted under this Agreement;
(ii) The Trust shall not amend the Trust Agreement in any
respect without the prior written consent of the Controlling
Party;
(iii) The Trust has been formed for, and shall limit its
activities to, the following purposes: (i) to issue the Note
pursuant to the Indenture, to conduct sales of the Note and to
distribute the proceeds of the sale of the Note to the
Depositor in consideration of its contribution; (ii) on the
Closing Date for any such placement of Notes and pursuant to
the Basic Documents, to pledge the Mortgage Loans to the
Indenture Trustee, on behalf of the Noteholder and the Note
Issuer, as security for the Trust's obligations under the
Note; (iii) in the event of the occurrence of a breach of
certain representations and warranties, to cause the
substitution or repurchase of the related Mortgage Loans by
the Originators; (iv) to distribute to the Noteholder any
portion of the Basic Documents released from the lien of and
remitted to the Trust pursuant to the Basic Documents; (v) to
enter into and perform its obligations under the Basic
Documents and engage in those activities that are necessary,
suitable or convenient to accomplish the foregoing or are
incidental thereto or connected therewith and (vi) to engage
in other such activities as may be required in connection with
conservation of the Trust Estate and making of distributions
on the Note;
(iv) The Trust shall not incur, assume or guarantee any
indebtedness for borrowed money or for the deferred purchase
price of goods or services except under the provisions of the
Basic Documents;
(v) The Trust shall maintain separate corporate records
and books of account from those of the Originators or any of
their affiliates;
(vi) The Trust shall not become involved in the day to
day management of any other person, and it shall operate so as
not to be substantively consolidated with any other person;
(vii) The Trust shall maintain its assets separate from
those of the Originators or any of their affiliates;
(viii) The Trust is not an "investment company; or a
company "controlled by an investment company," within the
meaning of the Investment Company Act of 1940, as amended;
(ix) The Trust shall conduct correspondence in its own
name on its own stationery; and
33
(x) The Trust shall not act as an agent of any other
entity or Person except pursuant to contractual documents
indicating such capacity.
Section 5.02. Merger or Consolidation; Ownership of Depositor. (a) Each
of the Originators, the Trust and the Depositor will keep in full effect its
existence, rights and franchises as a corporation and will obtain and preserve
its qualification to do business as a foreign corporation, in each jurisdiction
necessary to protect the validity and enforceability of this Agreement or any of
the Mortgage Loans and to perform its duties under this Agreement. ABFS will not
sell, assign (by operation of law or otherwise) or otherwise dispose of, or
grant any option with respect to, or create or suffer to exist any Lien upon or
with respect to, any of the Stock of the Depositor, or assign any right to
receive income with respect thereto. The Depositor and the Trust shall not merge
or consolidate with or into, except as contemplated by the Basic Documents, or
convey, transfer, lease or otherwise dispose of (whether in one transaction or
in a series of transactions, and except as otherwise contemplated herein) all or
any material part of its assets (whether now owned or hereafter acquired) to, or
acquire all or any material part of the assets of, any Person. Any Person into
which any of the Originators, the Trust or the Depositor may be merged or
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Originators or the Depositor shall be a party, or any
Person succeeding to the business of the Originators or the Depositor, shall be
approved by the Controlling Party, which approval shall not be unreasonably
withheld. If the approval of the Controlling Party is not acquired, the
successor shall be an established mortgage loan servicing institution that is a
Permitted Transferee and in all events shall be the successor of the Originators
or the Depositor without the execution or filing of any paper or any further act
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding. The Originators and the Depositor shall send notice of any such
merger or consolidation to the Indenture Trustee and the Note Insurer.
Section 5.03. Costs. In connection with the transactions contemplated
under this Agreement, the Trust Agreement, the Insurance Agreement and the
Indenture, the Originators jointly and severally shall promptly pay: (a) the
fees and disbursements of the Depositor's and the Originators' counsel; (b) the
fees of the Indenture Trustee and the fees and disbursements of the Indenture
Trustee's counsel; (c) the fees of the Owner Trustee and the fees and
disbursements of the Owner Trustee's counsel; (d) the fees and disbursements for
BDO ▇▇▇▇▇▇▇ LLP, accountants for the Originators; (e) the fees and disbursements
of the Back-up Servicer and the fees and disbursements of the Back-up Servicer's
counsel; (f) all third-party expenses of the Initial Purchaser, the Note Insurer
and the Liquidity Provider including fees and disbursements of such parties'
respective counsel, rating agency fees and expenses, and all legal, auditing or
other expenses in connection with any waiver or amendment of, or administration
of the Basic Documents or enforcement of rights and remedies under any Basic
Document (including any such fees in connection with the enforcement of the
Trust's rights under the Basic Documents, (g) fees in respect of due diligence
on or prior to the Initial Closing Date (but in no event later than April 6,
2001), in an amount of not more than $66,067; and (h) thereafter, periodic due
diligence fees not to exceed $43,933 with respect to the period from the Initial
Closing Date through the first anniversary of the Initial Closing Date and
$75,000 with respect to any 12 calendar month period thereafter (exclusive of
amounts described in clause (a)); and (i) on or before September 30, 2001, a
facility fee to the Note Insurer in the amount of $54,000; provided, however, if
34
the Note Insurer issues a policy for any term securitization entered into by any
of the Originators, the Depositor or the Trust after April 1, 2001 but on or
prior to March 31, 2002, and the amount insured under such policy is equal to or
greater than $75,000,000, such facility fee shall be waived (if such policy is
issued prior to September 30, 2001) or refunded to the Servicer (if such policy
is issued after September 30, 2001). All other costs and expenses in connection
with the transactions contemplated hereunder shall be borne by the party
incurring such expenses unless otherwise provided under the Basic Documents.
Section 5.04. Indemnification. (a) The Originators, the Depositor
and ABFS, jointly and severally, agree to indemnify and to hold the Indenture
Trustee, the Note Insurer, the Back-up Servicer, and each Noteholder harmless
against any and all claims, losses, penalties, fines, forfeitures, legal fees
and related costs, judgments, and any other costs, fees and expenses that the
Indenture Trustee, the Back-up Servicer, the Note Insurer or any Noteholder may
sustain in any way related to the failure of any of the Originators or the
Depositor to perform any of their duties in compliance with the terms of this
Agreement. The Originators or the Depositor shall immediately notify the
Indenture Trustee, the Note Insurer and each Noteholder if a claim is made by a
third party with respect to this Agreement, and at the request of the
Controlling Party the Originators or the Depositor shall assume the defense of
any such claim and pay all expenses in connection therewith, including
reasonable counsel fees, and promptly pay, discharge and satisfy any judgment or
decree which may be entered against the Indenture Trustee, the Note Insurer, the
Back-up Servicer or any Noteholder in respect of such claim. In the event, the
Originators, the Depositor or ABFS, as the Indemnifying Parties, are unable to
indemnify against all of the Expenses, the unpaid Expenses shall be paid out of
funds that would otherwise be distributed to the holders of the Trust
Certificates.
(b) Promptly after receipt by an indemnified party under this
Section 5.04 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 5.04, notify the indemnifying party in writing of the
commencement thereof, but the omission to so notify the indemnifying party will
not relieve the indemnifying party from any liability which the indemnifying
party may have to any indemnified party hereunder except to the extent such
indemnifying party has been prejudiced thereby. In case any such action is
brought against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. After notice from the indemnifying party
to such indemnified party of its election to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 5.04 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it that are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall have
the right to select separate counsel to assert such legal defenses and to
otherwise participate in the defense of such action on behalf of such
indemnified party or parties and the indemnifying party shall be liable for the
expenses of such separate counsel. The indemnifying party shall not be liable
for the expenses of more than one separate counsel.
35
Section 5.05. Corporate Separateness. (a) The Originators will operate
in such a manner that the Depositor and the Trust would not be substantively
consolidated in the trust estate of the Originators and the separate existence
of the Depositor and/or the Trust would not be disregarded in the event of a
bankruptcy or insolvency of the Originators. Without limiting the generality of
the foregoing and in addition to the other covenants set forth herein, ABFS, the
Originators, the Servicer, the Depositor and the Trust (each, an "ABFS Company")
shall take all actions required on its part to ensure that each of the Depositor
and the Trust shall:
(i) conduct its business solely in its own name and make
all written and oral communications solely in its name;
(ii) provide for its expenses and liabilities from its
own funds;
(iii) not be contractually liable for the payment of any
liability of any other ABFS Company nor generally hold its
assets nor creditworthiness as being available for the payment
of any liability of any other ABFS Company;
(iv) maintain an arm's-length relationship with each
other ABFS Company;
(v) not transfer any assets between itself and any other
ABFS Company without fair consideration or with the intent to
hinder, delay or defraud the creditors of any other ABFS
Company; and
(vi) each ABFS Company shall insure that any consolidated
financial statements of any ABFS Company that include the
Depositor or the Trust have notes clearly stating that the
Depositor and the Trust are entities separate and distinct
from each of the other ABFS Companies and that the assets of
the Depositor and the Trust will be available first and
foremost to satisfy the claims of the creditors of the
Depositor and the Trust.
Section 5.06. Financial Covenants. ABFS will not permit at any time:
(a) the Leverage Ratio to exceed 3:1;
(b) Tangible Net Worth to be less than the sum of (i)
$43,000,000 plus (ii) 50% of the cumulative Net Income for each fiscal quarter
ending after the Initial Closing Date (excluding any fiscal quarter for which
Net Income was less than zero);
(c) the Net Income to be less than zero for two consecutive
fiscal quarters;
(d) the ratio of (i) the total book value of all Retained
Interests held by ABFS and its subsidiaries to (ii) the total stockholder's
equity of ABFS, in each case determined on a consolidated basis in accordance
with GAAP, to exceed 6.0:1; or
(e) any lien to exist on any hedge arrangement entered into by
ABFS or any of its subsidiaries in connection with the Mortgage Loans.
36
ARTICLE VI
[RESERVED]
ARTICLE VII
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
Section 7.01. The Servicer. (a) The Servicer shall service and
administer the Mortgage Loans in accordance with the Accepted Servicing
Practices and shall have full power and authority to do any and all things not
inconsistent therewith in connection with such servicing and administration
which it may deem necessary or desirable subject to the limitations set forth in
this Agreement. The Indenture Trustee shall furnish the Servicer with any powers
of attorney and other documents necessary or appropriate to enable the Servicer
to carry out its servicing and administrative duties hereunder. Without limiting
the generality of the foregoing, the Servicer shall continue, and is hereby
authorized and empowered by the Indenture Trustee, to execute and deliver, on
behalf of itself, the Noteholder and the Indenture Trustee or any of them, any
and all instruments of satisfaction or cancellation, or of partial or full
release or discharge and all other comparable instruments, and to effect such
modifications, waivers, indulgences and other like matters as are in its
judgment necessary or desirable, with respect to the Mortgage Loans and the
Mortgaged Properties and the servicing and administration thereof. The Servicer
shall notify the Indenture Trustee and the Note Insurer of any such waiver,
release, discharge, modification, indulgence or other such matter by delivering
to the Indenture Trustee and the Note Insurer an Officer's Certificate
certifying that such agreement is in compliance with this Section 7.01 together
with the original copy of any written agreement or other document executed in
connection therewith, all of which written agreements or documents shall, for
all purposes, be considered a part of the related Indenture Trustee's Mortgage
File to the same extent as all other documents and instruments constituting a
part thereof. Notwithstanding anything in this Agreement to the contrary, the
Servicer shall not permit any modification with respect to any Mortgage Loan
unless (i) the modifications do not decrease the Mortgage Interest Rate, reduce
or increase the principal balance, decrease the lien priority, increase the
current LTV above the lesser of the current LTV or the original LTV, or change
the final maturity date on or of such Mortgage Loan and (ii) the Note Insurer
consents to such modifications in writing; provided, however, that the Servicer
shall be permitted to extend the final maturity date on any Mortgage Loan by 180
days or less without the consent of the Note Insurer.
(b) The relationship of the Servicer (and of any successor to
the Servicer as servicer under this Agreement) to the Indenture Trustee under
this Agreement is intended by the parties to be that of an independent
contractor and not that of a joint venturer, partner or agent.
(c) The Servicer agrees to give notice as required under
Section 3.07 and Section 3.13 of the Indenture.
Section 7.02. Collection of Certain Mortgage Loan Payments; Collection
Account. (a) The Servicer shall make reasonable efforts to collect all payments
called for under the terms and provisions of the Mortgage Loans, and shall, to
the extent such procedures shall be consistent with this Agreement, follow the
Accepted Servicing Practices. Consistent with the foregoing, the Servicer may in
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its sole discretion waive any assumption fees or other fees which may be
collected in the ordinary course of servicing such Mortgage Loans.
(b) The Servicer shall establish and maintain, in the name of
the Indenture Trustee, the Collection Account, in trust for the benefit of the
Noteholder and the Note Insurer. The Collection Account shall be established and
maintained as an Eligible Account.
(c) The Servicer shall deposit, or cause to be deposited, in
the Collection Account any amounts representing Monthly Payments on the Mortgage
Loans due or which have been or are to be applied as of a date after the
applicable Closing Date or applicable Subsequent Purchase Date and thereafter,
no later than the third Business Day following receipt thereof (except as
otherwise permitted herein), the following payments and collections received or
made by it (other than in respect of principal collected and interest due on the
Mortgage Loans on or before the related Closing Date or applicable Subsequent
Purchase Date):
(i) payments of interest on the Mortgage Loans;
(ii) payments of principal of the Mortgage Loans;
(iii) the Loan Repurchase Price of Mortgage Loans
repurchased pursuant to Sections 2.06, 4.02 or 7.05;
(iv) the Substitution Adjustment received in connection
with Mortgage Loans for which Qualified Substitute Mortgage Loans are
received pursuant to Sections 2.06 and 4.02;
(v) all Liquidation Proceeds; and
(vi) all Insurance Proceeds (including, for this purpose,
any amounts required to be deposited by the Servicer pursuant to
Section 7.04 hereof).
It is understood that the Servicer need not deposit amounts representing
assumption fees, prepayment premiums, late payment charges or extension or other
administrative fees or charges payable by Mortgagors (but may retain such
amounts as servicing compensation), or amounts received by the Servicer for the
account of Mortgagors for application towards the payment of taxes, insurance
premiums, assessments and similar items.
(d) The Servicer shall direct the Indenture Trustee to invest
any funds in the Collection Account in Permitted Investments, which shall mature
not later than the Business Day next preceding the Servicer Payment Date next
following the date of such investment (except that any investment for which the
Indenture Trustee is the obligor may mature on such Servicer Payment Date) and
shall not be sold or disposed of prior to its maturity. All net income and gain
realized from any such investment shall be for the benefit of the Servicer and
shall be subject to its withdrawal or order on a Servicer Payment Date. The
Servicer shall deposit from its own funds the amount of any loss, to the extent
not offset by investment income or earnings, in the Collection Account upon the
realization of such loss.
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Section 7.03. Permitted Withdrawals from the Collection Account. The
Servicer may make withdrawals from the Collection Account, on or prior to any
Servicer Payment Date, for the following purposes:
(a) to reimburse the Servicer for Liquidation Expenses
theretofore incurred in respect of any Mortgage Loan in an amount not to exceed
the amount of the sum of the related Insurance Proceeds and Liquidation Proceeds
deposited in the Collection Account pursuant to Section 7.02(c)(v)-(vi) (net of
withdrawals made pursuant to Section 7.03(b));
(b) to reimburse the Servicer for amounts expended by it
pursuant to Section 7.04 in good faith in connection with the restoration of
damaged property, in an amount not to exceed the amount of the related Insurance
Proceeds and Liquidation Proceeds (net of withdrawals pursuant to Section
7.03(a) and amounts representing proceeds of other insurance policies covering
the property subject to the related Mortgage deposited in the Collection Account
pursuant to Section 7.02(c)(v)-(vi) (net of withdrawals pursuant to Section
7.03(a));
(c) to pay to the Depositor or the Originator amounts received
in respect of any Deleted Mortgage Loan purchased or substituted for by the
Depositor or the Originator to the extent that the Depositor or the Originator
is entitled to such amount pursuant to Section 4.02(d);
(d) to reimburse the Servicer for unreimbursed Servicing
Advances, without interest, with respect to the Mortgage Loans for which it has
made a Servicing Advance, from subsequent collections with respect to interest
on such Mortgage Loans and from Liquidation Proceeds, Insurance Proceeds and/or
the Loan Repurchase Price or Substitution Adjustment of or relating to such
Mortgage Loans;
(e) to reimburse the Servicer for any Periodic Advances, such
reimbursement to be made from any collections in respect of the related Mortgage
Loan with respect to which such Periodic Advance was made;
(f) to withdraw any Net Foreclosure Profits;
(g) to withdraw any amount received from a Mortgagor that is
recoverable and sought to be recovered as a voidable preference by a trustee in
bankruptcy pursuant to the Bankruptcy Code in accordance with a final,
nonappealable order of a court having competent jurisdiction;
(h) to withdraw any funds deposited in the Collection Account
since the immediately preceding Payment Date that were not required to be
deposited therein; and
(i) to pay the Servicer the Servicing Compensation pursuant to
Section 7.08 hereof to the extent not retained or paid.
The Servicer shall keep and maintain a separate accounting for each Mortgage
Loan for the purpose of accounting for withdrawals from the Collection Account
pursuant to this Section 7.03.
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Section 7.04. Hazard Insurance Policies; Property Protection Expenses.
(a) The Servicer shall cause to be maintained for each Mortgage Loan a hazard
insurance policy with extended coverage which contains a standard mortgagee's
clause with an appropriate endorsement in an amount equal to the lesser of (x)
the maximum insurable value of the related Mortgaged Property or (y) the sum of
the Principal Balance of such Mortgage Loan plus the outstanding balance of any
mortgage loan senior to such Mortgage Loan, but in no event shall such amount be
less than is necessary to prevent the Mortgagor from becoming a coinsurer
thereunder. The Servicer shall also maintain on property acquired upon
foreclosure, or by deed in lieu of foreclosure, hazard insurance with extended
coverage in an amount which is at least equal to the lesser of (i) the maximum
insurable value from time to time of the improvements which are a part of such
property or (ii) the sum of the Principal Balance of such Mortgage Loan and the
principal balance of any mortgage loan senior to such Mortgage Loan at the time
of such foreclosure plus accrued interest and the good-faith estimate of the
Servicer of related Liquidation Expenses to be incurred in connection therewith.
Amounts collected by the Servicer under any such policies shall be deposited in
the Collection Account to the extent that they constitute Liquidation Proceeds
or Insurance Proceeds. Each hazard insurance policy shall contain a standard
mortgage clause naming the Originator, its successors and assigns, as mortgagee.
(b) If the Servicer shall obtain and maintain a blanket policy
issued by an insurer acceptable to the Note Insurer insuring against hazard
losses on all of the Mortgage Loans, it shall conclusively be deemed to have
satisfied its obligations as set forth in Section 7.04(a), it being understood
and agreed that such policy may contain a deductible clause, in which case the
Servicer shall, in the event that there shall not have been maintained on the
related Mortgaged Property a policy complying with Section 7.04(a), and there
shall have been a loss which would have been covered by such policy, deposit in
the Collection Account the amount not otherwise payable under the blanket policy
because of such deductible clause.
(c) If the Mortgaged Property or REO Property is located at
the time of origination of the Mortgage Loan in a federally designated special
flood hazard area (and if the flood insurance policy referenced herein has been
made available), the Servicer will cause to be maintained flood insurance in
respect thereof. Such flood insurance shall be in an amount equal to the lesser
of (i) the sum of the Principal Balance of the related Mortgage Loan and the
principal balance of the related first lien, if any, (ii) the maximum insurable
value of the related Mortgaged Property, and (iii) the maximum amount of such
insurance available for the related Mortgaged Property under the national flood
insurance program (assuming that the area in which such Mortgaged Property is
located is participating in such program).
Section 7.05. Assumption and Modification Agreements. (a) In any case
in which a Mortgaged Property has been or is about to be conveyed by the
Mortgagor, the Servicer shall, to the extent permitted by law, exercise its
right to accelerate the maturity of the related Mortgage Loan and require that
the Principal Balance thereof be paid in full on or prior to such conveyance by
the Mortgagor under any "due-on-sale" clause applicable thereto. If such
"due-on-sale" clause, by its terms, is not operable or the Servicer is
prevented, as provided in the last paragraph of this Section 7.05, from
enforcing any such clause, the Servicer is authorized, subject to the consent of
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the Note Insurer, to take or enter into an assumption and modification agreement
from or with the Person to whom such property has been or is about to be
conveyed, pursuant to which such Person becomes liable under the Mortgage Note
and the Mortgagor remains liable thereon or, if the Servicer in its reasonable
judgment finds it appropriate, is released from liability thereon. The Servicer
shall notify the Indenture Trustee and the Collateral Agent that any assumption
and modification agreement has been completed by delivering to the Indenture
Trustee, the Collateral Agent and the Note Insurer an Officer's Certificate
certifying that such agreement is in compliance with this Section 7.05 together
with the original copy of such assumption and modification agreement. Any such
assumption and modification agreement shall, for all purposes, be considered a
part of the related Mortgage File to the same extent as all other documents and
instruments constituting a part thereof. In connection with any such agreement,
the then current Mortgage Interest Rate thereon shall not be increased or
decreased. Any fee collected by the Servicer for entering into any such
agreement will be retained by the Servicer as additional servicing compensation.
At its sole election, the Servicer may purchase from the Trust any Mortgage Loan
that has been assumed in accordance with this Section 7.05 within one month
after the date of such assumption at a price equal to the greater of (i) the
fair market value of such Mortgage Loan (as determined by the Servicer in its
good faith judgment) and (ii) the Loan Repurchase Price. Such amount, if any,
shall be deposited into the Collection Account in the Due Period in which such
repurchase is made.
(b) Notwithstanding Section 7.05(a) or any other provision of
this Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Mortgage Loan, or transfer of any Mortgaged Property without the assumption
thereof, by operation of law or any assumption or transfer which the Servicer
reasonably believes it may be restricted by law from preventing for any reason
whatsoever.
Section 7.06. Realization Upon Defaulted Mortgage Loans. (a) The
Servicer shall foreclose upon or otherwise comparably convert to ownership
Mortgaged Properties securing such of the Mortgage Loans as come into and
continue in default and as to which no satisfactory arrangements can be made for
collection of delinquent payments pursuant to Section 7.02(a). If required by
its Accepted Servicing Practices, the Servicer shall, prior to conducting any
sale in a foreclosure proceeding or accepting a deed-in-lieu of foreclosure with
respect to any Mortgaged Property, the Servicer shall cause an environmental
review to be performed, in accordance with Accepted Servicing Practices on the
Mortgaged Property by a company such as Equifax, Inc. or Toxicheck. If such
review reveals that the Mortgaged Property has on it, under it or is near
hazardous or toxic material or waste or reveals any other environmental problem,
the Servicer shall not foreclose or record a deed-in-lieu of foreclosure,
without the prior written consent of the Controlling Party, such consent not to
be unreasonably withheld or delayed. In connection with such foreclosure or
other conversion, the Servicer shall follow such practices (including, in the
case of any default on a related senior mortgage loan, the advancing of funds to
correct such default) and procedures which are consistent with Accepted
Servicing Practices as it shall deem necessary or advisable and as shall be
normal and usual in its general first and second mortgage loan servicing
activities. Notwithstanding the foregoing, the Servicer shall not be required to
expend its own funds in connection with any foreclosure or towards the
correction of any default on a related senior mortgage loan or restoration of
any property unless, in the reasonable judgment of the Servicer, such expenses
will be recoverable from Liquidation Proceeds or Insurance Proceeds.
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(b) In the event that title to any Mortgaged Property is
acquired in foreclosure or by deed in lieu of foreclosure, the deed or
certificate of sale shall be issued to Indenture Trustee, or to its nominee, on
behalf of Noteholder and the Note Insurer. With respect to any REO Property, the
Servicer either itself or through an agent selected by the Servicer shall
manage, conserve, protect and operate such REO Property in the same manner and
to such extent as is customary in the locality where such REO Property is
located. Any net income generated from the REO Property and the proceeds from a
sale of any REO Property shall be deposited in the Collection Account. Any
expenses incurred by the Servicer pursuant to its obligations under this Section
7.06(b) with respect to any REO Property shall constitute Servicing Advances.
(c) Any Insurance Proceeds or Liquidation Proceeds received
with respect to a Mortgage Loan or REO Property (other than received in
connection with a purchase by the Trust Certificateholders of all the Mortgage
Loans and REO Properties in the Trust Estate pursuant to Section 10.01 of the
Indenture) will be applied in the following order of priority, in each case to
the extent of Available Funds: first, to pay the Servicer any accrued and unpaid
Servicing Fees relating to such Mortgage Loan; second, to reimburse the Servicer
or any Subservicer for any related unreimbursed Servicing Advances, and any
related unreimbursed Periodic Advances theretofore funded by the Servicer or any
Subservicer from its own funds, in each case, with respect to the related
Mortgage Loan; third, to accrued and unpaid interest on the Mortgage Loan, at
the Mortgage Interest Rate (or at such lesser rate as may be in effect for such
Mortgage Loan pursuant to application of the Relief Act) on the Principal
Balance of such Mortgage Loan, to the date such Mortgage Loan is determined to
be a Liquidated Mortgage Loan if it is a Liquidated Mortgage Loan, or to the Due
Date in the Due Period prior to the Payment Date on which such amounts are to be
paid if such determination has not yet been made, minus any unpaid Servicing
Fees with respect to such Mortgage Loan; fourth, to the extent of the Principal
Balance of the Mortgage Loan outstanding immediately prior to the receipt of
such proceeds, as a recovery of principal of the related Mortgage Loan; and
fifth, to any prepayment or late payment charges or penalty interest payable in
connection with the receipt of such proceeds and to all other fees and charges
due and payable with respect to such Mortgage Loan. The amount of any gross
Insurance Proceeds and Liquidation Proceeds received with respect to any
Mortgage Loan or REO Property minus the amount of any unreimbursed Servicing
Advances, unreimbursed Periodic Advances or unpaid Servicing Fees, in each case,
with respect to the related Mortgage Loan, are the "Net Recovery Proceeds" with
respect to such Mortgage Loan or REO Property.
Section 7.07. Indenture Trustee to Cooperate. Upon the payment in full
of the Principal Balance of any Mortgage Loan, the Servicer shall deliver to the
Indenture Trustee and the Collateral Agent a Request for Release (which request
shall include a statement to the effect that all amounts received in connection
with such payment which are required to be deposited in the Collection Account
pursuant to Section 7.02 have been so deposited) of a Servicing Officer. Upon
any such payment in full, the Servicer is authorized to execute, pursuant to the
authorization contained in Section 7.01, an instrument of satisfaction regarding
the related Mortgage, which instrument of satisfaction shall be recorded by the
Servicer if required by applicable law and be delivered to the Person entitled
thereto, it being understood and agreed that no expenses incurred in connection
with such instrument of satisfaction shall be reimbursed from the Collection
Account. From time to time and as appropriate for the servicing or foreclosure
of any Mortgage Loan, the Collateral Agent shall, upon request of the Servicer
and delivery to the Collateral Agent of a Request for Release signed by a
Servicing Officer, release the related Mortgage File to the Servicer and shall
execute, as Collateral Agent on behalf of the Indenture Trustee, such documents
42
as shall be necessary for the prosecution of any such proceedings. Such Request
for Release shall obligate the Servicer to return the Indenture Trustee's
Mortgage File to the Collateral Agent when the need therefor by the Servicer no
longer exists unless the Mortgage Loan shall be liquidated, in which case, upon
receipt of a certificate of a Servicing Officer similar to that hereinabove
specified, the Request for Release shall be released by the Collateral Agent to
the Servicer.
Section 7.08. Servicing Compensation; Payment of Certain Expenses by
Servicer. On each Payment Date, the Servicer shall be entitled to receive, and
the Indenture Trustee shall pay, out of collections on the Mortgage Loans for
the Due Period, as servicing compensation for such Due Period, an amount (the
"Monthly Servicing Fee") equal to the product of one-twelfth of the Servicing
Fee Rate and the aggregate outstanding Principal Balance of the Mortgage Loans
as of the beginning of such Due Period. Additional servicing compensation in the
form of assumption fees, prepayment premiums, late payment charges or extension
and other administrative charges shall be retained by the Servicer. The Servicer
shall be required to pay all expenses incurred by it in connection with its
activities hereunder (including payment of all fees and expenses of the
Subservicer, payment of the Indenture Trustee Fee to the extent that monies in
the Collection Account are insufficient therefor, payments provided in Section
6.16 of the Indenture and payment of the Collateral Agent Fee as provided in
Section 11.05 hereof), and all other fees and expenses not expressly stated
hereunder to be payable by or from another source and shall not be entitled to
reimbursement therefor except as specifically provided herein. The Back-up
Servicer shall not be responsible to pay any expenses or fees due to the
Indenture Trustee or the Collateral Agent unless and until such time as the
Back-up Servicer becomes the Servicer.
Section 7.09. Annual Statement as to Compliance. The Servicer will
deliver to the Indenture Trustee, the Collateral Agent, the Rating Agencies, the
Depositor, the Note Insurer and each Noteholder, on or before April 30 of each
year, beginning April 30, 2002, an Officer's Certificate of the Servicer stating
that (a) a review of the activities of the Servicer during the preceding
calendar year and of its performance under this Agreement has been made under
such officer's supervision and (b) to the best of such officer's knowledge,
based on such review, the Servicer has fulfilled all its material obligations
under this Agreement throughout such year, or, if there has been a default in
the fulfillment of any such obligation, specifying each such default known to
such officer and the nature and status thereof.
Section 7.10. Annual Independent Public Accountants' Servicing Report.
On or before April 30 of each year, beginning April 30, 2002, the Servicer at
its expense shall cause a firm of independent public accountants that is a
member of the American Institute of Certified Public Accountants (who may also
render other services to the Servicer) to furnish a report to the Indenture
Trustee, the Collateral Agent, the Back-up Servicer, the Rating Agencies, the
Depositor, the Note Insurer and each Noteholder to the effect that such firm has
examined certain documents and records relating to the servicing of mortgage
loans under servicing agreements (including this Agreement) substantially
similar to this Agreement, and that such examination, which has been conducted
substantially in compliance with the Uniform Single Attestation Program for
Mortgage Bankers (to the extent that the procedures in such audit guide are
applicable to the servicing obligations set forth in such agreements), has
disclosed no items of noncompliance with the provisions of this Agreement which,
43
in the opinion of such firm, are material, except for such items of
noncompliance as shall be set forth in such report.
Section 7.11. Access to Certain Documentation. Upon receipt of notice,
at least five (5) Business Days prior to such request, the Servicer shall permit
the designated agents or representatives of the Controlling Party, Back-up
Servicer and the Indenture Trustee (i) to examine and make copies of and
abstracts from all books, records and documents (including computer tapes and
disks) in the possession or under the control of the Servicer relating to the
Mortgage Loans and (ii) to visit the offices and properties of the Servicer for
the purpose of examining such materials and to discuss matters relating to the
Mortgage Loans and the Servicer's performance under this Agreement with any of
the officers or employees of the Servicer having knowledge thereof and with the
independent public accountants of the Servicer (and by this provision the
Servicer authorizes its accountants to discuss their respective finances and
affairs), all at such reasonable times, as often as may be reasonably requested
and without charge to such Noteholder, the Initial Purchaser, the Note Insurer,
the Collateral Agent or the Indenture Trustee.
Section 7.12. Maintenance of Fidelity Bond and Errors and Omissions
Insurance. The Servicer shall during the term of its service as Servicer
maintain in force a fidelity bond and errors and omissions insurance in respect
of its officers, employees or agents. Such bond and insurance shall comply with
the requirements from time to time of ▇▇▇▇▇▇ ▇▇▇ for Persons performing
servicing for mortgage loans purchased by such association, including any such
requirements with respect to the amounts of such bond and insurance.
Section 7.13. The Subservicers. The parties acknowledge that the
Servicer intends to appoint the Subservicers as the Servicer's agents for the
purpose of servicing on the Servicer's behalf such of the Mortgage Loans as were
originated by such Subservicer. The Servicer agrees to cause the Subservicers to
service such Mortgage Loans in a manner consistent with the Accepted Servicing
Practices set forth in this Agreement, and agrees that receipt by the
Subservicers of any and all amounts which by the terms hereof are required to be
deposited in the Collection Account shall constitute receipt thereof by the
Servicer for all purposes hereof as of the date so received by the Subservicers.
Notwithstanding such designation of the Subservicers, the Servicer agrees that
it is, and it shall remain, fully obligated under the terms hereof as Servicer
with respect to all such Mortgage Loans, and nothing herein shall relieve or
release the Servicer from its obligations to the other parties hereto to service
such Mortgage Loans in the manner provided in this Agreement.
Section 7.14. Reports to the Indenture Trustee; Collection Account
Statements. Not later than fifteen (15) days after each Payment Date, the
Servicer shall provide to the Indenture Trustee, the Collateral Agent and the
Note Insurer a statement, certified by a Servicing Officer, setting forth the
status of the Collection Account as of the close of business on the related
Payment Date, stating that all payments required by this Agreement to be made by
the Servicer on behalf of the Indenture Trustee have been made (or if any
required payment has not been made by the Servicer, specifying the nature and
status thereof) and showing, for the period covered by such statement, the
aggregate of deposits into and withdrawals from the Collection Account for each
category of deposit specified in Section 7.02 and each category of withdrawal
44
specified in Section 7.03 and the aggregate of deposits into the Collection
Account as specified in Section 8.01. Such statement shall also state the
aggregate unpaid principal balance of all the Mortgage Loans as of the close of
business on the last day of the month preceding the month in which such Payment
Date occurs. Copies of such statement shall be provided by the Indenture Trustee
to any Noteholder upon request.
Section 7.15. Optional Purchase of Defaulted Mortgage Loans. Any
Originator, the Depositor or the Servicer, in its sole discretion, shall have
the right to elect (by written notice sent to the Servicer, the Indenture
Trustee and the Note Insurer), but shall not be obligated, to purchase for its
own account from the Trust any Mortgage Loan which is ninety (90) days or more
Delinquent in the manner and at the Loan Repurchase Price provided, that, as of
any date, (i) the Servicer shall not have thus purchased Mortgage Loans having
had a Purchase Price in excess of 5% of the cumulative Purchase Prices paid to
date on all Mortgage Loans sold under this Agreement, and (ii) no Originator
(including the Servicer whether acting in its capacity as the Servicer or as an
Originator) or the Depositor may have thus purchased Mortgage Loans sold by it
hereunder in excess of 5% of the cumulative Purchase Price paid to date on all
Mortgage Loans sold by it under this Agreement. The Loan Repurchase Price for
any Mortgage Loan purchased hereunder shall be deposited in the Collection
Account and the Collateral Agent, upon the Indenture Trustee's receipt of such
deposit, shall release or cause to be released to the purchaser of such Mortgage
Loan the related Indenture Trustee's Mortgage File and shall execute and deliver
such instruments of transfer or assignment prepared by the purchaser of such
Mortgage Loan, in each case without recourse, as shall be necessary to vest in
the purchaser of such Mortgage Loan any Mortgage Loan released pursuant hereto
and the purchaser of such Mortgage Loan shall succeed to all the Indenture
Trustee's right, title and interest in and to such Mortgage Loan and all
security and documents related thereto. Such assignment shall be an assignment
outright and not for security. The purchaser of such Mortgage Loan shall
thereupon own such Mortgage Loan, and all security and documents, free of any
further obligation to the Indenture Trustee, the Collateral Agent, the Note
Insurer or the Noteholder with respect thereto. The purchaser of such Mortgage
Loan shall give written notice to the Note Insurer of the means by which any
Mortgage Loan purchased pursuant to this Section 7.15 is ultimately disposed of.
Section 7.16. Reports to be Provided by the Servicer. (a) On each
Servicer Payment Date, the Servicer shall deliver to the Indenture Trustee,
Back-up Servicer, Liquidity Provider and the Note Insurer (i) a Noteholder
Statement, (ii) a collateral file containing all loan level information as is
generally provided to the lead underwriter for securitizations entered into by
the Servicer and the Originators for purposes of calculation of the Market Value
of the Mortgage Loans and (iii) a Servicer Remittance Report for such Payment
Date, setting forth the following information with respect to all Mortgage Loans
as well as a break out as to consumer purpose and business purpose Mortgage
Loans, in each case, as of the close of business on the last Business Day of the
prior calendar month (except as otherwise provided in clause (v) below):
(i) the total number of Mortgage Loans and the Aggregate
Principal Balances thereof, together with the number, Aggregate
Principal Balances of such Mortgage Loans and the percentage of the
Aggregate Principal Balances of such Mortgage Loans to the Aggregate
Principal Balance of all Mortgage Loans (A) 31-59 days Delinquent, (B)
60-89 days Delinquent and (C) 90 or more days Delinquent;
45
(ii) the number, Aggregate Principal Balances of all
Mortgage Loans and percentage of the Aggregate Principal Balances of
such Mortgage Loans to the Aggregate Principal Balance of all Mortgage
Loans in foreclosure proceedings and the number, Aggregate Principal
Balances of all Mortgage Loans and percentage of any such Mortgage
Loans also included in any of the statistics described in the foregoing
clause (i);
(iii) the number, Aggregate Principal Balances of all
Mortgage Loans and percentage of the Aggregate Principal Balances of
such Mortgage Loans to the Aggregate Principal Balance of all Mortgage
Loans relating to Mortgagors in bankruptcy proceedings and the number,
Aggregate Principal Balances of all Mortgage Loans and percentage of
any such Mortgage Loans also included in any of the statistics
described in the foregoing clause (i);
(iv) the number, Aggregate Principal Balances of all
Mortgage Loans and percentage of the Aggregate Principal Balances of
such Mortgage Loans to the Aggregate Principal Balance of all Mortgage
Loans relating to REO Properties and the number, Aggregate Principal
Balances of all Mortgage Loans and percentage of any such Mortgage
Loans also included in any of the statistics described in the foregoing
clause (i);
(v) such loan level information as is generally included
in the offering documents for securitizations entered into by the
Servicer and the Originators;
(vi) the book value of any REO Property;
(vii) the Aggregate Principal Balance of all Mortgage
Loans that have ceased to be Eligible Mortgage Loans since the Initial
Closing Date (such Principal Balance measured as of the day immediately
preceding the date on which each such Mortgage Loan ceased to be an
Eligible Mortgage Loan), provided that each such Mortgage Loan was
Delinquent more than 30 days at the time such Mortgage Loan ceased to
be an Eligible Mortgage Loan, but excluding any Mortgage Loans that
have been released from the lien of the Indenture due to the
Disposition of such Mortgage Loans in a securitization or as part of a
whole loan sale;
(viii) the number, Aggregate Principal Balances of all
Mortgage Loans and percentage (based on the Aggregate Principal
Balances of the Mortgage Loans) of the Aggregate Principal Balances of
such Mortgage Loans to the Aggregate Principal Balance of all Mortgage
Loans transferred to or removed from the Trust during the prior Due
Period;
(ix) the weighted average Mortgage Interest Rate
(weighted by Principal Balance) as of the Due Date occurring in the Due
Period related to such Payment Date;
(x) the weighted average remaining term to stated
maturity of all Mortgage Loans;
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(xi) the weighted average initial LTV ratio (by Principal
Balance) of all of the Mortgage Loans and the aggregate Principal
Balance of the Mortgage Loans that have an LTV greater than 90%;
(xii) the weighted average original term to stated
maturity of all Mortgage Loans;
(xiii) the Aggregate Principal Balance of the Mortgage
Loans the proceeds of which are to be used for business purposes;
(xiv) the Aggregate Principal Balance of the Mortgage
Loans that are secured exclusively by Owner Occupied Mortgaged
Property;
(xv) the weighted average FICO (by Principal Balance) for
the Mortgage Loans and the Aggregate Principal Balance of Mortgage
Loans with a FICO less than 500;
(xvi) the weighted average CLTV (by Principal Balance) of
the Mortgage Loans and the Aggregate Principal Balance of the Mortgage
Loans that have a CLTV greater than 80%;
(xvii) the Aggregate Principal Balance of the Mortgage
Loans made to limited or no documentation borrowers;
(xviii) the Net Excess Spread for the Due Period related
to such Payment Date;
(xix) the Aggregate Principal Balance of the Mortgage
Loans included in the Trust Estate for more than 240 days; and
(xx) any other information reasonably requested by the
Note Insurer.
(b) In the event the Servicer is replaced by a successor
Servicer, the successor Servicer, upon reasonable advance written notice, shall
make available the information contained in the Noteholder Statement to be
posted by Bloomberg News Services. The Liquidity Provider, at its expense and
discretion, may provide the information relating to the Trust to Bloomberg.
(c) In connection with the transfer of the Note, the Indenture
Trustee on behalf of any Noteholder may request that the Servicer make available
to any prospective Noteholder annual audited financial statements of the
Servicer for one or more of the most recently completed five (5) fiscal years
for which such statements are publicly available together with the most recent
unaudited quarterly financial statements of the Servicer, which request shall
not be unreasonably denied or unreasonably delayed. Such annual audited
financial statements also shall be made available to the Initial Purchaser and
Back-up Servicer upon request.
(d) The Servicer also agrees, upon reasonable advance written
notice, to make available on a reasonable basis to the Initial Purchaser, the
Note Insurer, the Back-up Servicer and any prospective Noteholder a
knowledgeable financial or accounting officer for the purpose of answering
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reasonable questions respecting recent developments affecting the Servicer or
the financial statements of the Servicer and to permit the Initial Purchaser,
the Note Insurer, the Back-up Servicer and any prospective Noteholder to inspect
the Servicer's servicing facilities during normal business hours for the purpose
of satisfying the Initial Purchaser, the Note Insurer, the Back-up Servicer and
such prospective Noteholder that the Servicer has the ability to service the
Mortgage Loans in accordance with this Agreement.
Section 7.17. Adjustment of Servicing Compensation in Respect of
Prepaid Mortgage Loans. The Monthly Servicing Fee that the Servicer shall be
entitled to receive with respect to each Mortgage Loan and each Payment Date
shall be offset on such Payment Date by an amount equal to the Prepayment
Interest Shortfall with respect to such Mortgage Loan to the extent that it is
the subject of Principal Prepayments during the month preceding the month of
such Payment Date. The amount of any offset against the Monthly Servicing Fee
with respect to any Payment Date under this Section 7.17 shall be limited to the
Monthly Servicing Fee otherwise payable to the Servicer (without adjustment on
account of Prepayment Interest Shortfalls) with respect to such Mortgage Loan,
and the rights of the Noteholder to the offset of the aggregate Prepayment
Interest Shortfalls against the Monthly Servicing Fee shall not be cumulative.
Section 7.18. Periodic Advances. (a) If, on any Servicer Payment Date,
the Servicer determines that any Monthly Payments due on the Due Date
immediately preceding such Servicer Payment Date have not been received as of
the end of the related Due Period and that such a Periodic Advance would not be
a Non-recoverable Advance, (i) prior to the occurrence and continuation of an
Event of Default, the Servicer shall have the option to make a Periodic Advance
with respect to the related Payment Date and (ii) if an Event of Default has
occurred and is continuing the Servicer shall be required to make a Periodic
Advance with respect to the related Payment Date. The Servicer shall, on the
Servicer Payment Date, deliver a magnetic tape or diskette to the Back-up
Servicer indicating the payment status of each Mortgage Loan, including the
amount of any advances on such Mortgage Loan, as of such Servicer Payment Date.
The Servicer shall include in the amount to be deposited in the Payment Account
on such Servicer Payment Date an amount equal to the Periodic Advance, if any,
which deposit may be made in whole or in part from funds in the Collection
Account being held for future payment or withdrawal on or in connection with
Payment Dates in subsequent months. Any funds being held for future payment to
Noteholder and so used shall be replaced by the Servicer from its own funds by
deposit in the Collection Account on or before the Business Day preceding any
such future Servicer Payment Date to the extent that funds in the Collection
Account on such Servicer Payment Date shall be less than payments to Noteholder
required to be made on such date.
(b) The Servicer shall designate on its records the specific
Mortgage Loans and related installments (or portions thereof) as to which such
Periodic Advance shall be deemed to have been made, such determination being
conclusive for purposes of withdrawals from the Collection Account pursuant to
Section 7.03 hereof absent manifest error.
Section 7.19. Indemnification; Third Party Claims. (a) The Servicer
agrees to indemnify and to hold each of the Trust, the Owner Trustee, the
Depositor, the Indenture Trustee, the Collateral Agent, the Originators, the
Note Insurer, the Back-up Servicer and each Noteholder harmless against any and
all claims, losses, penalties, fines, forfeitures, legal fees and related costs,
judgments, and any other costs, fees and expenses that the Trust, the Owner
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Trustee, the Depositor, the Indenture Trustee, the Collateral Agent, the
Originators, the Note Insurer, the Back-up Servicer and any Noteholder may
sustain in any way related to the failure of the Servicer to perform its duties
and service the Mortgage Loans in compliance with the terms of this Agreement
and the other Basic Documents including Section 8.02 of the Trust Agreement.
Each indemnified party and the Servicer shall immediately notify the other
indemnified parties if a claim is made by a third party with respect to this
Agreement and the other Basic Documents, and at the request of the indemnified
party, the Servicer and ABFS shall assume the defense of any such claim and pay
all expenses in connection therewith, including reasonable counsel fees, and
promptly pay, discharge and satisfy any judgment or decree which may be entered
against the Trust, the Owner Trustee, the Depositor, the Servicer, the Indenture
Trustee, the Collateral Agent, the Originators, the Note Insurer, the Back-up
Servicer and/or a Noteholder in respect of such claim. The obligations of the
Servicer under this Section 7.19 arising prior to any resignation or termination
of the Servicer and ABFS hereunder shall survive the resignation or termination
of the Servicer; provided, that in no event shall the Servicer nor ABFS be
liable for the acts or omissions of the Back-up Servicer or any Successor
Servicer.
(b) The Back-up Servicer agrees to indemnify and to hold each
of the Trust, the Owner Trustee, the Depositor, the Indenture Trustee, the
Collateral Agent, the Originators, the Note Insurer, the Servicer and each
Noteholder harmless against any and all claims, losses, penalties, fines,
forfeitures, legal fees and related costs, judgments, and any other costs, fees
and expenses that the Trust, the Owner Trustee, the Depositor, the Indenture
Trustee, the Collateral Agent, the Originators, the Note Insurer, the Servicer
and any Noteholder may sustain in any way related to the failure of the Back-up
Servicer to perform its duties and service the Mortgage Loans in compliance with
the terms of this Agreement and the other Basic Documents including Section 8.02
of the Trust Agreement. Each indemnified party and the Back-up Servicer shall
immediately notify the other indemnified parties if a claim is made by a third
party with respect to this Agreement and the other Basic Documents, and at the
request of the indemnified party, the Back-up Servicer shall assume the defense
of any such claim and pay all expenses in connection therewith, including
reasonable counsel fees, and promptly pay, discharge and satisfy any judgment or
decree which may be entered against the Trust, the Owner Trustee, the Depositor,
the Back-up Servicer, the Indenture Trustee, the Collateral Agent, the
Originators, the Note Insurer, the Servicer and/or a Noteholder in respect of
such claim. The obligations of the Back-up Servicer under this Section 7.19
arising prior to any resignation or termination of the Back-up Servicer
hereunder shall survive the resignation or termination of the Back-up Servicer;
provided, that in no event shall the Back-up Servicer be liable for the acts or
omissions of any predecessor Servicer.
Section 7.20. Maintenance of Corporate Existence and Licenses; Merger
or Consolidation of the Servicer. (a) The Servicer will keep in full effect its
existence, rights and franchises as a corporation, will obtain and preserve its
qualification to do business as a foreign corporation in each jurisdiction
necessary to protect the validity and enforceability of this Agreement or any of
the Mortgage Loans and to perform its duties under this Agreement and will
otherwise operate its business so as to cause the representations and warranties
under Section 3.02 to be true and correct at all times under this Agreement. Any
person succeeding to the business of the Servicer shall assume all rights and
obligations of the Servicer under the Basic Documents.
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(b) Any Person into which the Servicer may be merged or
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Servicer shall be a party, or any Person succeeding
to the business of the Servicer, shall be an established mortgage loan servicing
institution that has a net worth of at least $15,000,000 and is a Permitted
Transferee, and in all events shall be the successor of the Servicer without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding. The Servicer
shall send notice of any such merger or consolidation to the Owner Trustee, the
Indenture Trustee, the Note Insurer, the Collateral Agent and the Initial
Purchaser.
Section 7.21. Assignment of Agreement by Servicer; Servicer Not to
Resign. The Servicer shall not assign this Agreement nor resign from the
obligations and duties hereby imposed on it except by mutual consent of the
Indenture Trustee, the Collateral Agent, the Rating Agencies, the Note Insurer,
Back-up Servicer and the Owner Trustee, on behalf of the Trust, at the direction
of the Trust Certificateholders, the Initial Purchaser or upon the determination
that the Servicer's duties hereunder are no longer permissible under applicable
law and that such incapacity cannot be cured by the Servicer without incurring,
in the reasonable judgment of the Controlling Party, unreasonable expense. Any
such determination that the Servicer's duties hereunder are no longer
permissible under applicable law permitting the resignation of the Servicer
shall be evidenced by a written Opinion of Counsel (who may be counsel for the
Servicer) to such effect delivered to the Trust, the Indenture Trustee, the
Collateral Agent, the Rating Agencies, the Note Insurer, the Back-up Servicer
and the Initial Purchaser. No such resignation shall become effective until the
Indenture Trustee or a successor appointed in accordance with the terms of this
Agreement has assumed the Servicer's responsibilities and obligations hereunder
in accordance with Section 9.02. The Servicer shall provide the Indenture
Trustee, the Collateral Agent, the Rating Agencies, the Note Insurer, the
Back-up Servicer and the Initial Purchaser with 30 days' prior written notice of
its intention to resign pursuant to this Section 7.21. No such resignation shall
become effective until the Back-up Servicer or a Successor Servicer shall have
assumed the responsibilities and obligations of the Servicer in accordance with
Section 9.02.
Section 7.22. Back-up Servicing. (a) EMC Mortgage Corporation is hereby
appointed to act as Back-up Servicer with respect to this Agreement. The Back-up
Servicer hereby agrees to cooperate with the Servicer to establish the format of
and information contained on the computer diskette to be supplied by the
Servicer pursuant to Section 7.22(b) below.
(b) Pursuant to Section 7.16(a) the Servicer agrees to
deliver, and the Back-up Servicer shall accept, from the Servicer delivery of
the information required to be set forth in the Servicer Remittance Report and
all information used as the basis for the Servicer Remittance Report in hard
copy and on diskette.
(c) The Back-up Servicer shall assume its duties as Successor
Servicer in accordance with Section 9.02 except upon determination that the
Back-up Servicer is legally unable to perform the duties of the Servicer under
this Agreement as provided in Section 9.02.
(d) Other than the duties specifically set forth in this
Agreement, the Back-up Servicer shall have no obligations hereunder, including,
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without limitation, to supervise, verify, monitor or administer the performance
of the Servicer. As long as it is not the Servicer, the Back-up Servicer shall
have no liability for any actions taken or omitted by the Servicer prior to the
date on which it becomes the Successor Servicer. The duties and obligations of
the Back-up Servicer shall be determined solely by the express provisions of
this Agreement and no implied covenants or obligations shall be read into this
Agreement against the Back-up Servicer. The Back-up Servicer shall not be
required to expend or risk its own funds or otherwise incur financial liability
in the performance of any of its duties hereunder, or in the exercise of any of
its rights or powers (other than in the ordinary course of the performance of
such duties or the exercise of such rights or powers), if the repayment of such
funds or adequate written indemnity against such risk or liability is not
reasonably assured to it in writing prior to the expenditure or risk of such
funds or incurrence of financial liability.
(e) Neither the Back-up Servicer nor any of its directors,
officers, employees or agents shall be under any liability to any of the parties
hereto, except as specifically provided in this Agreement, for any action taken
or for refraining from the taking of any action pursuant to this Agreement or
for errors in judgment; provided, however, that this provision shall not protect
the Back-up Servicer against any misfeasance, bad faith or negligence in the
performance of duties or by reason of reckless disregard of obligations and
duties under this Agreement. The Back-up Servicer and any of its directors,
officers, employees or agents may rely in good faith on the advice of counsel or
on any document of any kind prima facie properly executed and submitted by any
Person respecting any matters arising under this Agreement.
ARTICLE VIII
APPLICATION OF FUNDS
Section 8.01. Deposits to the Payment Account. On each Servicer Payment
Date, the Servicer shall cause to be deposited in the Payment Account, from
funds on deposit in the Collection Account, (a) an amount equal to the Servicer
Remittance Amount and (b) Net Foreclosure Profits, if any with respect to the
related Payment Date, minus any portion thereof payable to the Servicer pursuant
to Section 7.03. On each Servicer Payment Date, the Servicer shall also deposit
into the Payment Account any amounts required to be deposited in connection with
a Subsequent Mortgage Loan pursuant to Section 2.14(b) of the Indenture.
Section 8.02. Collection of Money. Except as otherwise expressly
provided herein, the Indenture Trustee may demand payment or delivery of all
money and other property payable to or receivable by the Indenture Trustee
pursuant to this Agreement, including all payments due on the Mortgage Loans in
accordance with the respective terms and conditions of such Mortgage Loans and
required to be paid over to the Indenture Trustee by the Servicer or by any
Subservicer. The Indenture Trustee shall hold all such money and property
received by it, as part of the Trust Estate and shall apply it as provided in
the Indenture.
Section 8.03. Application of Principal and Interest. In the event that
Net Liquidation Proceeds on a Liquidated Mortgage Loan are less than the
Principal Balance of the related Mortgage Loan plus accrued interest thereon, or
any Mortgagor makes a partial payment of any Monthly Payment due on a Mortgage
Loan, such Net Liquidation Proceeds or partial payment shall be applied to
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payment of the related Mortgage Note as provided therein, and if not so
provided, first to interest accrued at the Mortgage Interest Rate and then to
principal.
Section 8.04. Effect of Payments by the Note Insurer; Subrogation.
Anything herein to the contrary notwithstanding, any payment with respect to
principal of or interest on the Note which is made with moneys received pursuant
to the terms of the Note Insurance Policy shall not be considered payment of the
Note from the Trust Estate. The Depositor, the Servicer, the Trust, the
Collateral Agent and the Indenture Trustee acknowledge and agree, that without
the need for any further action on the part of the Note Insurer, the Depositor,
the Servicer, the Trust, the Collateral Agent, the Indenture Trustee or the Note
Registrar (a) to the extent the Note Insurer makes payments, directly or
indirectly, on account of principal of or interest on the Note to the
Noteholders, the Note Insurer will be fully subrogated to the Noteholders to the
extent of such payments and each Noteholder, the Servicer, the Depositor, the
Trust, the Collateral Agent and the Indenture Trustee hereby delegate and assign
to the Note Insurer, to the fullest extent permitted by law, the rights of such
Holders to receive such principal and interest from the Trust Estate, including,
without limitation, any amounts due to the Noteholder in respect of securities
law violations arising from the offer and sale of the Note, and (b) the Note
Insurer shall be paid such amounts from the sources and in the manner provided
herein for the payment of such amounts and as provided in the Insurance
Agreement. The Indenture Trustee, the Collateral Agent and the Servicer shall
cooperate in all respects with any reasonable request by the Note Insurer for
action to preserve or enforce the Note Insurer's rights or interests under this
Agreement without limiting the rights or affecting the interests of the Holders
as otherwise set forth herein.
Section 8.05. Calculations of Fixed Rate and Market Value. Each
determination of the Fixed Rate, the Interpolated Benchmark Treasury Rate, the
Interpolated Benchmark Swap Rate and the Market Value of the Eligible Mortgage
Loans shall be made by the Note Insurer or, if the Note Insurer so elects, by
the Liquidity Agent acting on its behalf. Any such determination made in good
faith by the Note Insurer or the Liquidity Agent shall be conclusive and binding
on all parties. In the event there is any inconsistency in any determination
made by the Note Insurer and any determination made by the Liquidity Agent, the
determination by the Note Insurer shall control.
ARTICLE IX
SERVICER DEFAULT
Section 9.01. Servicer Events of Default. (a) The following events
shall each constitute a "Servicer Event of Default" hereunder:
(i) any failure by the Servicer to remit to the Indenture
Trustee or any other party any payment required to be made by the
Servicer under the terms of this Agreement or any other Basic Document
(other than Servicing Advances covered by clause (ii) below), which
continues unremedied for one (1) Business Day after the date upon which
written notice of such failure, requiring the same to be remedied,
shall have been given to the Servicer and the Note Insurer by the
Indenture Trustee or to the Servicer and the Indenture Trustee by the
Note Insurer;
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(ii) the failure by the Servicer to make any required
Servicing Advance which failure continues unremedied for a period of
thirty (30) days after the date on which written notice of such
failure, requiring the same to be remedied, shall have been given to
the Servicer by the Indenture Trustee or to the Servicer and the
Indenture Trustee by the Note Insurer;
(iii) any failure on the part of the Servicer duly to
observe or perform in any material respect any other of the covenants
or agreements on the part of the Servicer contained in this Agreement,
or the failure of any representation and warranty made pursuant to
Section 3.02 hereof to be true and correct which continues unremedied
for a period of thirty (30) days after the date on which written notice
of such failure, requiring the same to be remedied, shall have been
given to the Servicer by the Indenture Trustee or to the Servicer and
the Indenture Trustee by the Note Insurer;
(iv) a decree or order of a court or agency or
supervisory authority having jurisdiction in an involuntary case under
any present or future federal or state bankruptcy, insolvency or
similar law or for the appointment of a conservator or receiver or
liquidation in any insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the
Servicer or ABFS and such decree or order shall have remained in force,
undischarged or unstayed for a period of forty-five (45) days;
(v) the Servicer shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment
of debt, marshalling of assets and liabilities or similar proceedings
of or relating to the Servicer or ABFS or of or relating to all or
substantially all of the Servicer's or ABFS property;
(vi) the Servicer or ABFS shall admit in writing its
inability generally to pay its debts as they become due, file a
petition to take advantage of any applicable insolvency or
reorganization statute, make an assignment for the benefit of its
creditors, or voluntarily suspend payment of its obligations;
(vii) the Note Insurer shall notify the Indenture Trustee
of any "event of default" under the Insurance Agreement;
(viii) a Trigger Event shall occur;
(ix) ABFS shall breach any of the financial covenants set
forth in Section 5.06 herein;
(x) a Change of Control shall occur;
(xi) ABFS or the Servicer shall pay any Subordinated Debt
in advance of their stated maturity or, after a Default or Event of
Default under the Basic Agreements has occurred, make any payment of
any kind on any Subordinated Debt until all of the obligations have
been paid and performed in full; or ABFS shall permit the outstanding
principal balance of its Subordinated Debt at any time to be more than
10% lower than the outstanding principal balance at the end of the last
fiscal quarter;
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(xii) ABFS or the Servicer permit the Eligible Liquid
Assets of ABFS (and its subsidiaries, on a consolidated basis) at the
end of any calendar quarter to be less than 30% of the amount of
principal scheduled to become due on the subordinated debt in the next
three (3) months;
(xiii) ABFS or the Servicer shall fail to pay any
principal or interest when due on any outstanding indebtedness having
an aggregate principal amount in excess of $1,000,000 and such failure
shall continue after the applicable grace period, if any, specified in
the agreement or instrument relating to such outstanding indebtedness,
or any such outstanding indebtedness of ABFS or the Servicer having an
aggregate principal amount in excess of $1,000,000 shall be declared to
be due and payable or required to be prepaid (other than a regularly
scheduled payment) prior to the date of maturity thereof; or
(xiv) the occurrence of an Event of Default under the
Indenture.
(b) So long as a Servicer Event of Default shall have occurred
and not have been remedied: (x) with respect solely to Section 9.01(a)(i), if
such payment is in respect of Periodic Advances owing by the Servicer and such
payment is not made by 12:00 noon New York time on the second Business Day prior
to the applicable Payment Date, the Indenture Trustee, upon receipt of written
notice or discovery by a Responsible Officer of such failure, shall give
immediate telephonic and facsimile notice of such failure to a Servicing Officer
of the Servicer, Back-up Servicer and to the Note Insurer and the Indenture
Trustee shall, with the consent of the Controlling Party, terminate all of the
rights and obligations of the Servicer under this Agreement, except for the
Servicer's indemnification obligation under Section 7.19, and the Back-up
Servicer shall become the Servicer and shall immediately make such Periodic
Advance (based on the best information available to it at the time) and assume,
pursuant to Section 9.02 hereof, the duties of a successor Servicer; (y) with
respect to that portion of Section 9.01(a)(i) not referred to in the preceding
clause (x) and with respect to all other clauses of Section 9.01, the Indenture
Trustee shall, but only at the written direction of the Controlling Party, by
notice in writing to the Servicer and a Responsible Officer of the Indenture
Trustee, and in addition to whatever rights such Noteholder or the Note Insurer
may have at law or equity to damages, including injunctive relief and specific
performance, terminate all the rights and obligations of the Servicer under this
Agreement, except for the Servicer's indemnification obligations under Section
7.19, and in and to the Mortgage Loans and the proceeds thereof, as servicer.
Upon receipt by the Servicer of such written notice, all authority and power of
the Servicer under this Agreement, whether with respect to the Mortgage Loans or
otherwise, shall, subject to Section 7.02, pass to and be vested in the Back-up
Servicer, or its designee approved by the Controlling Party, and the Back-up
Servicer is hereby authorized and empowered to execute and deliver, on behalf of
the Servicer, as attorney-in-fact or otherwise, at the expense of the Servicer,
any and all documents and other instruments and do or cause to be done all other
acts or things necessary or appropriate to effect the purposes of such notice of
termination, including, but not limited to, the transfer and endorsement or
assignment of the Mortgage Loans and related documents. The Servicer agrees to
cooperate with (and pay any reasonable out-of-pocket related costs and expenses
incurred by) the Indenture Trustee and the Back-up Servicer in effecting the
termination of the Servicer's responsibilities and rights hereunder and the
transfer of such responsibilities to the Back-up Servicer, including, without
54
limitation, the transfer to the Back-up Servicer for administration by it of all
amounts which shall at the time be credited by the Servicer to the Collection
Account or thereafter received with respect to the Mortgage Loans. The Indenture
Trustee shall promptly notify the Note Insurer, Back-up Servicer and the Rating
Agencies of the occurrence of a Servicer Event of Default.
Section 9.02. Back-up Servicer to Act; Appointment of Successor;
Confidential Information. (a) On and after the time the Servicer receives a
notice of termination pursuant to Section 9.01, or the Indenture Trustee
receives the resignation of the Servicer evidenced by an Opinion of Counsel (if
required) pursuant to Section 7.21, or the Servicer is removed as Servicer
pursuant to this Article IX in which event the Indenture Trustee shall promptly
notify the Rating Agencies, Note Insurer and the Back-up Servicer, except as
otherwise provided in Section 9.01, the Back-up Servicer shall be the successor
in all respects to the Servicer in its capacity as servicer under this Agreement
and the transactions set forth or provided for herein and shall be subject to
all the responsibilities, duties and liabilities relating thereto placed on the
Servicer by the terms and provisions hereof arising on or after the date of
succession; provided, however, that the Back-up Servicer shall not be liable for
any actions or the representations and warranties of any Servicer prior to it
and including, without limitation, the obligations of the Servicer set forth in
Sections 2.06 and 4.02 hereof.
(b) In the event the Back-up Servicer becomes the successor
Servicer, it shall be entitled to the same Servicing Compensation (including the
Servicing Fee as adjusted pursuant to the definition thereof) and other funds
pursuant to Section 7.08 hereof as the Servicer if the Servicer had continued to
act as servicer plus the Back-up Servicing Supplemental Fee and shall cease to
receive the Back-up Servicer Standby Fee. In the event the Back-up Servicer does
not for any reason act as successor Servicer (it being understood that the
Back-up Servicer has an obligation to assume the duties of the Servicer if
requested to do so by the Controlling Party), the Indenture Trustee shall, at
the direction of the Controlling Party, solicit, by public announcement, bids
from housing and home finance institutions, banks and mortgage servicing
institutions meeting the qualifications set forth above. Such public
announcement shall specify that the successor servicer shall be entitled to the
full amount of the aggregate Servicing Fees hereunder as servicing compensation,
together with the other Servicing Compensation. Within thirty (30) days after
any such public announcement, the Indenture Trustee shall, at the direction of
the Controlling Party, negotiate and effect the sale, transfer and assignment of
the servicing rights and responsibilities hereunder to the qualified party
submitting the highest qualifying bid. The Indenture Trustee shall deduct from
any sum received by the Indenture Trustee from the successor to the Servicer in
respect of such sale, transfer and assignment all costs and expenses of any
public announcement and of any sale, transfer and assignment of the servicing
rights and responsibilities hereunder and the amount of any unreimbursed
Servicing Advances and Periodic Advances owed to the Back-up Servicer. After
such deductions, the remainder of such sum shall be paid by the Indenture
Trustee to the Servicer at the time of such sale, transfer and assignment to the
Servicer's successor. In connection with such appointment and assumption, the
Controlling Party may make such arrangements for the compensation of such
Successor Servicer out of payments on Mortgage Loans as it and such Successor
shall agree; provided, however, that no such compensation shall be in excess of
that permitted the Servicer pursuant to Section 7.08 plus the Back-up Servicing
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Supplemental Fee, together with other Servicing Compensation. The Servicer, the
Indenture Trustee, Back-up Servicer and such Successor Servicer shall take such
action, consistent with this Agreement, as shall be necessary to effectuate any
such succession.
(c) The Back-up Servicer and such successor shall take such
action, consistent with this Agreement, as shall be necessary to effectuate any
such succession. The Servicer agrees to cooperate with the Back-up Servicer and
any Successor Servicer in effecting the termination of the Servicer's servicing
responsibilities and rights hereunder and shall promptly provide the Back-up
Servicer or such Successor Servicer, as applicable, at the Servicer's cost and
expense, all documents and records reasonably requested by it to enable it to
assume the Servicer's functions hereunder and shall promptly also transfer to
the Back-up Servicer or such Successor Servicer, as applicable, all amounts that
then have been or should have been deposited in the Collection Account by the
Servicer or that are thereafter received with respect to the Mortgage Loans. Any
collections received by the Servicer after such removal or resignation shall be
endorsed by it to the Indenture Trustee and remitted directly to the Back-up
Servicer or, at the direction of the Back-up Servicer, to the Successor
Servicer. Neither the Back-up Servicer nor any other Successor Servicer shall be
held liable by reason of any failure to make, or any delay in making, any
payment hereunder or any portion thereof caused by (i) the failure of the
Servicer to deliver, or any delay in delivering, cash, documents or records to
it, or (ii) restrictions imposed by any regulatory authority having jurisdiction
over the Servicer hereunder. Notwithstanding anything to the contrary herein, no
appointment of a Successor Servicer under this Agreement shall be effective
until the Back-up Servicer and the Controlling Party shall have consented
thereto, and written notice of such proposed appointment shall have been
provided by the Indenture Trustee to the Note Insurer, the Depositor, the Rating
Agencies and to each Noteholder.
(d) The Back-up Servicer acknowledges that, in the course of
meeting its respective duties and obligations under this Agreement, it may
obtain information relating to the Servicer, the Originators, ABFS and their
Affiliates or the Trust which is of a confidential and proprietary nature
("Proprietary Information"). Such Proprietary Information may include, but is
not limited to, non-public trade secrets, know how, invention techniques,
processes, programs, schematics, software source documents, data an financial
information. The Back-up Servicer shall at all times, both during the term of
this Agreement and after its termination, keep in trust and confidence all such
Proprietary Information, and shall not use such Proprietary Information other
than in the course of its respective duties under this Agreement, nor shall the
Back-up Servicer disclose any such Proprietary Information without the written
consent of the Servicer or the Trust unless legally required to disclose such
information. The Back-up Servicer further agrees to immediately return all
Proprietary Information (including copies thereof) in its possession, custody or
control upon termination of this Agreement for any reason. The parties hereto
agree that the Servicer, the Originators, ABFS and their Affiliates and/or the
Trust shall have the right to enforce these non-disclosure provisions by an
action for specific performance.
(e) Notwithstanding anything herein to the contrary, EMC
Mortgage Corporation shall not resign from the obligations and duties imposed on
it as Back-up Servicer under this Agreement except upon determination that the
performance of its duties under this Agreement shall no longer be permissible
under applicable law and subject to the approval of the Note Insurer. Notice of
any such determination permitting the resignation shall be communicated to the
Indenture Trustee, the Noteholder, Note Insurer and the Rating Agencies at the
earliest practicable time and any such determination shall be evidenced by an
Opinion of Counsel to such effect delivered to the Indenture Trustee, Note
Insurer, the Rating Agencies and the Noteholder concurrently with or promptly
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after such notice. The Back-up Servicer shall not resign as Servicer until a
successor Servicer reasonably acceptable to the Note Insurer has been appointed.
The Controlling Party shall have the right to remove the Back-up Servicer as
Successor Servicer under this Section 9.02 for cause, and the Indenture Trustee
shall appoint such other successor Servicer as directed by the Controlling
Party.
Section 9.03. Waiver of Defaults. The Controlling Party may, on behalf
of the Noteholder, waive any events permitting removal of the Servicer as
servicer pursuant to this Article IX; provided, however, that the Controlling
Party may not waive a default in making a required payment on a Note without the
consent of the Noteholder. Upon any waiver of a past default, such default shall
cease to exist, and any Servicer Event of Default arising therefrom shall be
deemed to have been remedied for every purpose of this Agreement. No such waiver
shall extend to any subsequent or other default or impair any right consequent
thereto except to the extent expressly so waived. Notice of any such waiver
shall be given by the Indenture Trustee to the Rating Agencies, the Note
Insurer, Back-up Servicer and the Initial Purchaser.
Section 9.04. Indenture Trustee To Act Solely with Consent of the
Controlling Party. The Indenture Trustee shall not, without the Controlling
Party's consent or unless directed by the Controlling Party:
(a) terminate the rights and obligations of the Servicer as
Servicer pursuant to Section 9.01 hereof;
(b) agree to any amendment pursuant to Section 13.02 hereof;
or
(c) undertake any litigation.
The Controlling Party may, in writing and in its sole discretion renounce all or
any of its rights under Sections 9.04 or 9.05 or any requirement for the
Controlling Party's consent for any period of time.
Section 9.05. Mortgage Loans, Trust Estate and Accounts Held for
Benefit of the Note Insurer. (a) The Indenture Trustee shall hold the Trust
Estate and the Indenture Trustee's Mortgage Files, for the benefit of the
Noteholder and the Note Insurer, and all references in this Agreement and in the
Note to the benefit of Noteholder shall be deemed to include the Note Insurer.
The Indenture Trustee shall cooperate in all reasonable respects with any
reasonable request by the Note Insurer for action to preserve or enforce the
Note Insurer's rights or interests under this Agreement and the Note unless, as
stated in an Opinion of Counsel addressed to the Indenture Trustee and the Note
Insurer, such action materially and adversely affects the interests of the
Noteholder (taking into account the Note Insurance Policy).
(b) The Servicer hereby acknowledges and agrees that it shall
service the Mortgage Loans for the benefit of the Noteholder and for the benefit
of the Note Insurer, and all references in this Agreement to the benefit of or
actions on behalf of the Noteholder shall be deemed to include the Note Insurer.
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ARTICLE X
TERMINATION
Section 10.01. Termination. (a) Subject to Section 10.02, this
Agreement shall terminate upon notice to the Indenture Trustee of the later to
occur of: (a)(i) the disposition of all funds with respect to the last Mortgage
Loan and the remittance of all funds due hereunder, the payment of all amounts
due and payable to the Noteholder, the Note Insurer and the Indenture Trustee
and (ii) mutual consent of the parties hereto (in the case of the Trust by the
Owner Trustee at the direction of the Trust Certificateholders and in the case
of the Indenture Trustee by the Noteholder) and the Note Insurer or (b) the next
day following the Final Purchase Date.
(b) In addition, subject to Section 10.02, certain of the
Trust Certificateholders or the Servicer may, at their respective option and at
their respective sole cost and expense, call the Note or terminate the Trust in
accordance with the terms of Section 10.01 of the Indenture.
(c) Notice of any termination, specifying the Payment Date
upon which the Note will be paid in full and the Noteholder shall surrender
their Notes to the Indenture Trustee for final payment and cancellation, shall
be given promptly by the Servicer by letter to Noteholder mailed during the
month of such final payment before the Servicer Payment Date in such month,
specifying (i) the Payment Date upon which final payment of the Note will be
made upon presentation and surrender of Notes at the office of the Indenture
Trustee therein designated, (ii) the amount of any such final payment and (iii)
that the Record Date otherwise applicable to such Payment Date is not
applicable, payments being made only upon presentation and surrender of the Note
at the office of the Indenture Trustee therein specified. The Servicer shall
give such notice to the Indenture Trustee therein specified at the time such
notice is given to Noteholder. Subject to Section 10.01(a), the obligations of
the Note Insurer hereunder and under the Note Insurance Policy shall terminate
upon the deposit by the Servicer with the Indenture Trustee of a sum sufficient
to purchase all of the Mortgage Loans and REO Properties as set forth in Section
10.01 of the Indenture or when the Note Principal Balance of the Note has been
reduced to zero.
(d) In the event that the Noteholder does not surrender the
Note for cancellation within six (6) months after the time specified in the
above-mentioned written notice, the Servicer shall give a second written notice
to the remaining Noteholder to surrender their Notes for cancellation and
receive the final payment with respect thereto. If within six (6) months after
the second notice, the Note shall not have been surrendered for cancellation,
the Indenture Trustee may take appropriate steps, or may appoint an agent to
take appropriate steps, to contact the Noteholder concerning surrender of the
Note and the cost thereof shall be paid out of the funds and other assets which
remain subject hereto. If within nine (9) months after the second notice the
Note shall not have been surrendered for cancellation, the related Trust
Certificateholders shall be entitled to all unclaimed funds and other assets
which remain subject hereto and the Indenture Trustee upon transfer of such
funds shall be discharged of any responsibility for such funds and the
Noteholder shall look only to the related Trust Certificateholders and not to
the Note Insurer for payment. Such funds shall remain uninvested.
Section 10.02. Additional Termination Requirements. By its acceptance
of the Note, the Holder thereof hereby agrees to appoint the Servicer as its
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attorney in fact to: (i) with the consent of the Controlling Party, adopt such a
plan of complete liquidation (and the Noteholder hereby appoint the Indenture
Trustee as its attorney in fact to sign such plan) as appropriate or upon the
written request of the Note Insurer and (ii) to take such other action in
connection therewith as may be reasonably required to carry out such plan of
complete liquidation all in accordance with the terms hereof.
Section 10.03. Accounting Upon Termination of Servicer. Upon
termination of the Servicer, the Servicer shall, at its expense:
(a) deliver to the successor Servicer or, if none shall yet
have been appointed, to the Indenture Trustee, the funds in any Account;
(b) deliver to the successor Servicer or, if none shall yet
have been appointed, to the Indenture Trustee all Indenture Trustee's Mortgage
Files and related documents and statements held by it hereunder and a Mortgage
Loan portfolio computer tape;
(c) deliver to the successor Servicer or, if none shall yet
have been appointed, to the Indenture Trustee and, upon request, to the Note
Insurer a full accounting of all funds, including a statement showing the
Monthly Payments collected by it and a statement of monies held in trust by it
for the payments or charges with respect to the Mortgage Loans; and
(d) execute and deliver such instruments and perform all acts
reasonably requested in order to effect the orderly and efficient transfer of
servicing of the Mortgage Loans to the successor Servicer and to more fully and
definitively vest in such successor all rights, powers, duties,
responsibilities, obligations and liabilities of the Servicer under this
Agreement.
ARTICLE XI
THE COLLATERAL AGENT
Section 11.01. Duties of the Collateral Agent. (a) The Collateral
Agent shall not be deemed to have notice or knowledge of any Event of Default
under the Basic Documents unless a Responsible Officer assigned to and working
for the Collateral Agent and having direct responsibility for this Agreement has
actual knowledge thereof or unless written notice of any event that is in fact
such an Event of Default, or Default is received by the Collateral Agent, and
such notice references the Note generally, the Trust, the Trust Estate or the
Basic Document.
(b) The Collateral Agent, upon receipt of all resolutions,
certificates, statements, opinions, reports, documents, orders or other
instruments furnished to the Collateral Agent which are specifically required to
be furnished pursuant to any provision of this Agreement, shall examine them to
determine whether they conform on their face to the requirements of this
Agreement; provided, however, that the Collateral Agent shall not be responsible
for the accuracy or content of any resolution, certificate, statement, opinion,
report, document, order or other instrument furnished by any Person hereunder.
If any such instrument is found not to conform on its face to the requirements
of this Agreement, the Collateral Agent shall note it as such on the Initial
Certification or Final Certification delivered pursuant to Section 2.06(b).
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(c) No provision of this Agreement shall be construed to
relieve the Collateral Agent from liability for its own negligent action, its
own negligent failure to act or its own willful misconduct; provided, however,
that:
(i) the duties and obligations of the Collateral Agent
shall be determined solely by the express provisions of this
Agreement, the Collateral Agent shall not be liable except for
the performance of such duties and obligations as are
specifically set forth in this Agreement, no implied covenants
or obligations shall be read into this Agreement against the
Collateral Agent and, in the absence of bad faith on the part
of the Collateral Agent, the Collateral Agent may conclusively
rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or
opinions furnished to the Collateral Agent and conforming to
the requirements of this Agreement;
(ii) the Collateral Agent shall not be personally liable
for an error of judgment made in good faith by a Responsible
Officer or other officers of the Collateral Agent, unless it
shall be proved that the Collateral Agent was negligent in
ascertaining the pertinent facts;
(iii) the Collateral Agent shall not be personally liable
with respect to any action taken, suffered or omitted to be
taken by it in good faith in accordance with the direction of
the Note Insurer or the Indenture Trustee or with the consent
of the Note Insurer or the Indenture Trustee;
(iv) the Collateral Agent shall not be required to expend
or risk its own funds or otherwise incur financial liability
for the performance of any of its duties hereunder or the
exercise of any of its rights or powers if there is reasonable
ground for believing that the repayment of such funds or
adequate indemnity against such risk or liability is not
reasonably assured to it and none of the provisions contained
in this Agreement shall in any event require the Collateral
Agent to perform, or be responsible for the manner of
performance of, any of the obligations of the Servicer or the
Indenture Trustee under this Agreement; and
(v) subject to the other provisions of this Agreement and
without limiting the generality of this Section 11.01, the
Collateral Agent shall have no duty (A) to see to any
recording, filing, or depositing of this Agreement or any
agreement referred to herein or any financing statement or
continuation statement evidencing a security interest, or to
see to the maintenance of any such recording or filing or
depositing or to any re-recording, refiling or redepositing of
any thereof, (B) to see to any insurance, (C) to see to the
payment or discharge of any tax, assessment, or other
governmental charge or any lien or encumbrance of any kind
owing with respect to, assessed or levied against, any part of
the Trust, the Trust Estate, the Noteholder or the Mortgage
Loans, (D) to confirm or verify the contents of any reports or
certificates of any Person delivered to the Collateral Agent
pursuant to this Agreement believed by the Collateral Agent to
be genuine and to have been signed or presented by the proper
party or parties.
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Section 11.02. Certain Matters Affecting the Collateral Agent. Except
as otherwise provided in Section 11.01 hereof:
(a) the Collateral Agent may rely and shall be protected in
acting or refraining from acting upon any resolution, Officer's Certificate,
Opinion of Counsel, certificate of auditors or any other certificate, statement,
instrument, opinion, report, notice, request, consent, order, appraisal, bond or
other paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) the Collateral Agent may consult with counsel and any
Opinion of Counsel shall be full and complete authorization and protection in
respect of any action taken or suffered or omitted by it hereunder in good faith
and in accordance with such Opinion of Counsel;
(c) the Collateral Agent shall be under no obligation to
exercise any of the powers vested in it by this Agreement or to institute,
conduct or defend by litigation hereunder or in relation hereto at the request,
order or direction of the Note Insurer or the Noteholder, pursuant to the
provisions of this Agreement, unless the Note Insurer or such Noteholder, as
applicable, shall have offered to the Collateral Agent reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein by the Collateral Agent or thereby; nothing contained herein shall,
however, relieve the Collateral Agent of the obligation, upon the occurrence of
an Event of Default (which has not been cured), to exercise such of the rights
and powers vested in it by this Agreement, and to use the same degree of care
and skill in its exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs;
(d) the Collateral Agent shall not be personally liable for
any action taken, suffered or omitted by it in good faith and believed by it to
be authorized or within the discretion or rights or powers conferred upon it by
this Agreement;
(e) the Collateral Agent shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, bond or other paper or document, unless requested in writing to do so
by the Note Insurer or the Noteholder; provided, however, that if the payment
within a reasonable time to the Collateral Agent of the costs, expenses or
liabilities likely to be incurred by it in the making of such investigation is,
in the opinion of the Collateral Agent, not reasonably assured to the Collateral
Agent by the security afforded to it by the terms of this Agreement, the
Collateral Agent may require reasonable indemnity against such expense or
liability as a condition to taking any such action. The reasonable expense of
every such examination shall be paid by the Servicer or, if paid by the
Collateral Agent, shall be repaid by the Servicer upon demand from the
Servicer's own funds;
(f) the right of the Collateral Agent to perform any
discretionary act enumerated in this Agreement shall not be construed as a duty,
and the Collateral Agent shall not be answerable for anything other than its
negligence or willful misconduct in the performance of such act;
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(g) the Collateral Agent may execute any of the powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys.
Section 11.03. Collateral Agent Not Liable for the Note or Mortgage
Loans. The recitals contained herein shall be taken as the statements of the
Trust and the Servicer, as the case may be, and the Collateral Agent assumes no
responsibility for their correctness. The Collateral Agent makes no
representations as to the validity or sufficiency of this Agreement or of any
Mortgage Loan or related document. The Collateral Agent shall not be accountable
for the use or application of any funds paid to the Servicer in respect of the
Mortgage Loans or deposited in or withdrawn from the Collection Account by the
Servicer. The Collateral Agent shall not be responsible for the legality or
validity of the Agreement or the validity, priority, perfection or sufficiency
of the security for the Note issued or intended to be issued under the
Indenture.
Section 11.04. Collateral Agent May Own the Note. The Collateral Agent
in its individual or any other capacity may become the owner or pledgor of the
Note with the same rights it would have if it were not Collateral Agent, and may
otherwise deal with the parties hereto.
Section 11.05. Collateral Agent's Fees and Expenses; Indemnity. (a) The
Collateral Agent acknowledges that in consideration of the performance of its
duties hereunder it is entitled to receive its fees and expenses from the
Servicer, as separately agreed between the Servicer and the Collateral Agent.
The Depositor, the Indenture Trustee, the Note Insurer and the Initial Purchaser
shall not pay any of the Collateral Agent fees and expenses in connection with
this transaction. The Collateral Agent shall not be entitled to compensation for
any expense, disbursement or advance as may arise from its negligence or bad
faith.
(b) The Collateral Agent and any director, officer, employee
or agent of the Collateral Agent shall be indemnified by the Trust in accordance
with Section 8.02(c) and (n) of the Indenture (and, to the extent not paid by
the Trust, by the Servicer) and held harmless against any loss, liability,
claim, damage or reasonable expense incurred in connection with this Agreement
other than any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or negligence of the Collateral Agent in the performance
of its duties hereunder or by reason of the Collateral Agent 's reckless
disregard of obligations and duties hereunder. The obligations of the Servicer
under this Section 11.05 arising prior to any resignation or termination of the
Servicer hereunder shall survive termination of the Servicer and payment of the
Note.
Section 11.06. Eligibility Requirements for Collateral Agent. The
Collateral Agent hereunder shall at all times be a banking entity (a) organized
and doing business under the laws of any state or the United States of America
subject to supervision or examination by federal or state authority, (b)
authorized under such laws to exercise corporate trust powers, including taking
title to the Trust Estate on behalf of the Indenture Trustee, for the benefit of
the Noteholder and the Note Insurer, (c) having a combined capital and surplus
of at least $50,000,000, (d) whose long-term deposits, if any, shall be rated at
least BBB- by S&P and Baa3 by Moody's (except as provided herein) or such lower
long-term deposit rating as may be approved in writing by the Controlling Party,
and (e) reasonably acceptable to the Controlling Party as evidenced in writing.
If such banking entity publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of determining an entity's combined capital and
surplus for clause (c) of this Section 11.06, the amount set forth in its most
recent report of condition so published shall be deemed to be its combined
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capital and surplus. In case at any time the Collateral Agent shall cease to be
eligible in accordance with the provisions of this Section 11.06, the Collateral
Agent shall resign immediately in the manner and with the effect specified in
Section 11.07.
Section 11.07. Resignation and Removal of the Collateral Agent(a) . (a)
The Collateral Agent may at any time resign and be discharged from the trusts
hereby created by giving thirty (30) days' written notice thereof to the
Indenture Trustee, the Servicer, and the Controlling Party.
(b) If at any time the Collateral Agent shall cease to be
eligible in accordance with the provisions of Section 11.06 and shall fail to
resign after written request therefor by the Indenture Trustee, the Servicer or
the Controlling Party, or if at any time the Collateral Agent shall become
incapable of acting, or shall be adjudged bankrupt or insolvent, or a receiver
of the Collateral Agent or of its property shall be appointed, or any public
officer shall take charge or control of the Collateral Agent or of its property
or affairs for the purpose of rehabilitation, conservation or liquidation, then
the Indenture Trustee or the Servicer, with the consent of the Controlling
Party, or the Controlling Party may remove the Collateral Agent.
(c) If the Collateral Agent fails to perform in accordance
with the terms of this Agreement, the Indenture Trustee or, the Servicer, with
the consent of the Controlling Party, or the Controlling Party may remove the
Collateral Agent.
(d) Upon removal or receipt of notice of resignation of the
Collateral Agent, either (i) the Indenture Trustee shall (but only if the
Indenture Trustee and the Collateral Agent are not the same Person) take
possession of the Indenture Trustee's Mortgage Files and assume the duties of
the Collateral Agent hereunder or (ii) the Trust, with the consent of the
Controlling Party, shall appoint a successor Collateral Agent pursuant to
Section 11.08. If the Indenture Trustee shall assume the duties of the
Collateral Agent hereunder, it shall notify the Trust, the Depositor, the
Servicer and Note Insurer in writing.
Section 11.08. Successor Collateral Agent. Upon the resignation or
removal of the Collateral Agent, the Trust may (and, at the direction of the
Controlling Party, shall) appoint a successor Collateral Agent, with the written
approval of the Controlling Party; provided, however, that the successor
Collateral Agent so appointed shall in no event be an Originator, the Depositor
or the Servicer or any Person known to a Responsible Officer of the Indenture
Trustee to be an Affiliate of an Originator, the Depositor or the Servicer and
shall be approved by the Controlling Party. The Indenture Trustee or such
custodian, as the case may be, shall assume the duties of the Collateral Agent
hereunder. Any successor Collateral Agent appointed as provided in this Section
11.08 shall execute, acknowledge and deliver to the Trust, the Depositor, the
Note Insurer, the Servicer, the Indenture Trustee and to its predecessor
Collateral Agent an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor Collateral Agent shall
become effective and such successor Collateral Agent, without any further act,
deed or conveyance, shall become fully vested with all the rights, powers,
duties and obligations of its predecessor hereunder, with the like effect as if
originally named as Collateral Agent herein. The predecessor Collateral Agent
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shall deliver to the successor Collateral Agent all Indenture Trustee's Mortgage
Files and related documents and statements held by it hereunder, and the
Servicer and the predecessor Collateral Agent shall execute and deliver such
instruments and do such other things as may reasonably be required for more
fully and certainly vesting and confirming in the successor Collateral Agent all
such rights, powers, duties and obligations. The cost of any such transfer to
the successor Collateral Agent shall be for the account of the Collateral Agent
in the event of the resignation of the Collateral Agent, and shall be for the
account of the Servicer in the event of the removal of the Collateral Agent. No
successor Collateral Agent shall accept appointment as provided in this Section
11.08 unless at the time of such acceptance such successor Collateral Agent
shall be eligible under the provisions of Section 11.06. Upon acceptance of
appointment by a successor Collateral Agent as provided in this Section 11.08,
the Servicer shall mail notice of the succession of such Collateral Agent
hereunder to all Noteholder at their addresses as shown in the Note Register and
to the Note Insurer and the Rating Agencies. If the Servicer fails to mail such
notice within ten (10) days after acceptance of appointment by the successor
Collateral Agent, the successor Collateral Agent shall cause such notice to be
mailed at the expense of the Servicer.
Section 11.09. Merger or Consolidation of Collateral Agent. Any Person
into which the Collateral Agent may be merged or converted or with which it may
be consolidated or any corporation or national banking association resulting
from any merger, conversion or consolidation to which the Collateral Agent shall
be a party, or any corporation or national banking association succeeding to the
business of the Collateral Agent, shall be the successor of the Collateral Agent
hereunder; provided, that such corporation or national banking association shall
be eligible under the provisions of Section 11.06, without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding.
ARTICLE XII
[RESERVED]
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.01. Limitation on Liability. None of the Trust, the Owner
Trustee, the Depositor, the Servicer, the Collateral Agent, the Indenture
Trustee or any of the directors, officers, employees or agents of such Persons
shall be under any liability to the Trust, the Note Insurer or the Noteholder
for any action taken, or for refraining from the taking of any action, in good
faith pursuant to this Agreement, or for errors in judgment; provided, however,
that this provision shall not protect the Trust, the Owner Trustee, the
Depositor, the Servicer, the Collateral Agent, the Indenture Trustee or any such
Person against any breach of warranties or representations made herein by such
party, or against any specific liability imposed on each such party pursuant to
this Agreement or against any liability which would otherwise be imposed upon
such party by reason of willful misfeasance, bad faith or gross negligence in
the performance of duties or by reason of reckless disregard of obligations or
duties hereunder. The Trust, the Owner Trustee, the Depositor, the Servicer, the
Collateral Agent, the Indenture Trustee and any director, officer, employee or
agent of such Person may rely in good faith on any document of any kind which,
prima facie, is properly executed and submitted by any appropriate Person
respecting any matters arising hereunder.
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Section 13.02. Amendment. (a) This Agreement may be amended from time
to time by the Owner Trustee, on behalf of the Trust, the Servicer, the
Depositor, Back-up Servicer, the Collateral Agent, the Note Insurer and the
Indenture Trustee by written agreement, upon the prior written consent of the
Controlling Party, without notice to or consent of the Noteholder or the Holders
of the Trust Certificates to cure any ambiguity, to correct or supplement any
provisions herein, or to make any other provisions with respect to matters or
questions arising under this Agreement which shall not be inconsistent with the
provisions of this Agreement; provided, however, that such action shall not, as
evidenced by (i) an Opinion of Counsel, at the expense of the party requesting
the change, delivered to the Indenture Trustee or (ii) a letter from each Rating
Agency confirming that such action will not result in the reduction,
qualification or withdrawal of the then-current ratings on the Note (without
giving effect to the Note Insurance Policy), adversely affect in any material
respect the interests of any Noteholder; and provided, further, that no such
amendment shall reduce in any manner the amount of, or delay the timing of,
payments received on Mortgage Loans which are required to be paid on any Note
without the consent of such Noteholder, or change the rights or obligations of
any other party hereto without the consent of such party. The Indenture Trustee
shall give prompt written notice to the Rating Agencies of any amendment made
pursuant to this Section 13.02.
(b) This Agreement may be amended from time to time by the
Owner Trustee, on behalf of the Trust, the Servicer, the Depositor, the
Collateral Agent, the Note Insurer and the Indenture Trustee, with the consent
of the Controlling Party, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement or
of modifying in any manner the rights of the Noteholder; provided, however, that
no such amendment shall reduce in any manner the amount of, or delay the timing
of, payments received on Mortgage Loans which are required to be paid on the
Note without the consent of the Noteholder.
Section 13.03. Recordation of Agreement. To the extent permitted by
applicable law, this Agreement, or a memorandum thereof if permitted under
applicable law, is subject to recordation in all appropriate public offices for
real property records in all of the counties or other comparable jurisdictions
in which any or all of the properties subject to the Mortgages are situated, and
in any other appropriate public recording office or elsewhere, such recordation
to be effected by the Servicer at the direction of the Controlling Party
requesting such recordation.
Section 13.04. Duration of Agreement. This Agreement shall continue in
existence and effect until terminated as herein provided.
Section 13.05. Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given when
delivered to (i) in the case of the Servicer, ABFS, the Subservicers, the
Depositor or the Originators, addressed to such Person, c/o American Business
Financial Services, Inc., ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇ Cynwyd, Pennsylvania 19004, Attention: General Counsel; (ii) in
65
the case of the Trust, ABFS Mortgage Loan Warehouse Trust 2001-1, c/o the Owner
Trustee at its Corporate Trust Office, Attention: Corporate Trust
Administration; (iii) in the case of the Indenture Trustee or the Collateral
Agent, ▇/▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Bank, ▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇▇▇, Attention: Institutional Trust Services, ABFS MLWT 2001-1,
telephone (▇▇▇) ▇▇▇-▇▇▇▇, telecopy (▇▇▇) ▇▇▇-▇▇▇▇; (iv) in the case of the
Liquidity Agent or the Liquidity Provider, Bear, ▇▇▇▇▇▇▇ & Co. Incorporated, ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Senior
Managing Director; (v) in the case of the Note Insurer or Initial Purchaser,
MBIA Insurance Corporation or Triple-A One Funding Corporation, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇ Attention: Insured Portfolio Management-Mortgage Backed
Securities (in each case in which notice or other communication to the Note
Insurer refers to an Event of Default, a Servicer Event of Default or a claim on
the Note Insurance Policy or with respect to which failure on the part of the
Note Insurer to respond shall be deemed to constitute consent or acceptance,
then a copy of such notice or other communication should also be sent to the
attention of the General Counsel, and shall be marked to indicate "URGENT
MATERIAL ENCLOSED"); (vi) in the case of Standard & Poor's Rating Services, a
division of the McGraw Hill Companies, Inc., ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇ Attention: Residential Mortgage Surveillance Group; (vii) in the case of
▇▇▇▇▇'▇ Investors Service, Inc., ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Home Equity Monitoring Group; (viii) in the case of the Back-up
Servicer, EMC Mortgage Corporation, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇▇▇▇▇; and (ix) in the case of the Noteholder, as
set forth in the Note Register. Any such notices shall be deemed to be effective
with respect to any party hereto upon the receipt of such notice by such party,
except that notices to the Noteholder shall be effective upon mailing or
personal delivery.
Section 13.06. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be held
invalid for any reason whatsoever, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other covenants, agreements, provisions or terms of this
Agreement.
Section 13.07. No Partnership. Nothing herein contained shall be deemed
or construed to create a co-partnership or joint venture between the parties
hereto and the services of the Servicer shall be rendered as an independent
contractor and not as agent for the Noteholder.
Section 13.08. Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the Trust, the Servicer, the Depositor, the
Indenture Trustee, Back-up Servicer, the Collateral Agent, the Note Insurer and
the Noteholder and their respective successors and permitted assigns.
Section 13.09. Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
Section 13.10. Third Party Beneficiary. The parties agree that each of
the Owner Trustee, the Note Insurer and the Initial Purchaser is intended and
shall have all rights of a third-party beneficiary of this Agreement.
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Section 13.11. Tax Treatment of the Note. It is the intent of the
parties hereto and Noteholder that, for federal income taxes, state and local
income or franchise taxes and other taxes imposed on or measured by income, the
Note is treated as debt. The parties to this Agreement and the Holder of the
Note, by acceptance of the Note, agree to treat, and to take no action
inconsistent with the treatment of, the Note in accordance with the preceding
sentence for purposes of federal income taxes, state and local income and
franchise taxes and other taxes imposed on or measured by income.
Section 13.12. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PROVISIONS) OF THE STATE
OF NEW YORK.
(b) THE ORIGINATORS, THE TRUST, THE SERVICER, THE BACK-UP
SERVICER, THE DEPOSITOR, ABFS, THE COLLATERAL AGENT AND THE INDENTURE TRUSTEE
HEREBY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF
NEW YORK AND THE UNITED STATES DISTRICT COURT LOCATED IN THE BOROUGH OF
MANHATTAN IN NEW YORK CITY, AND EACH WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY
REGISTERED MAIL DIRECTED TO THE ADDRESS SET FORTH IN SECTION 13.06 HEREOF AND
SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE (5) DAYS AFTER THE SAME
SHALL HAVE BEEN DEPOSITED IN THE U.S. MAILS, POSTAGE PREPAID. THE ORIGINATORS,
THE TRUST, THE SERVICER, THE BACK-UP SERVICER, THE DEPOSITOR, THE SERVICER, THE
COLLATERAL AGENT AND THE INDENTURE TRUSTEE EACH HEREBY WAIVE ANY OBJECTION BASED
ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED
HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS
DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION 12.15 SHALL AFFECT THE
RIGHT OF THE ORIGINATORS, THE TRUST, THE SERVICER, THE BACK-UP SERVICER, THE
DEPOSITOR, THE SERVICER, ABFS, THE COLLATERAL AGENT, THE NOTE INSURER OR THE
INDENTURE TRUSTEE TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
AFFECT ANY OF THEIR RIGHTS TO BRING ANY ACTION OR PROCEEDING IN THE COURTS OF
ANY OTHER JURISDICTION.
(c) THE ORIGINATORS, THE TRUST, THE SERVICER, THE BACK-UP
SERVICER, THE DEPOSITOR, THE SERVICER, THE COLLATERAL AGENT AND THE INDENTURE
TRUSTEE EACH HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY
DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR IN CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY
DISPUTE WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
Section 13.13. Counterparts. This Agreement may be executed in one or
more counterparts and by the different parties hereto on separate counterparts,
67
each of which, when so executed, shall be deemed to be an original; such
counterparts, together, shall constitute one and the same agreement.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the Servicer, ABFS, the Trust, the Indenture
Trustee, the Originators, the Back-up Servicer, the Collateral Agent and the
Depositor have caused their names to be signed hereto by their respective
officers thereunto duly authorized as of the day and year first above written.
ABFS OSO, INC., as Depositor
By:
---------------------------------------
Name:
Title:
AMERICAN BUSINESS CREDIT, INC.
By:
---------------------------------------
Name:
Title:
HOMEAMERICAN CREDIT, INC. D/B/A
UPLAND MORTGAGE
By:
---------------------------------------
Name:
Title:
AMERICAN BUSINESS MORTGAGE SERVICES, INC.
By:
---------------------------------------
Name:
Title:
[Signature Page to Sale and Servicing Agreement]
AMERICAN BUSINESS FINANCIAL
SERVICES, INC.
By:
---------------------------------------
Name:
Title:
ABFS MORTGAGE LOAN WAREHOUSE
TRUST 2001-1
By: FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION, not in its individual
capacity, but solely as Owner Trustee
under the Trust Agreement
By:
---------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, as
Indenture Trustee and Collateral Agent
By:
---------------------------------------
Name:
Title:
EMC MORTGAGE CORPORATION, as Back-up
Servicer
By:
---------------------------------------
Name:
Title: