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EXHIBIT 10.3
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SERVICING AGREEMENT
among
GRANITE FINANCIAL, INC.
(the "Servicer")
GF FUNDING CORP. IV
(the "Transferor")
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
(the "Trustee")
and
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
(the "Back-up Servicer")
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Dated as of December 1, 1997
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TABLE OF CONTENTS
Page
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ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.01 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2 SERVICER REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.01 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 4
(a) Organization and Good Standing . . . . . . . . . . . . . . . . . . . . . 4
(b) Authorization and Binding Obligation . . . . . . . . . . . . . . . . . . 4
(c) No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(d) No Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(e) Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(f) Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(g) Standard of Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(h) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(i) Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 3 ADMINISTRATION AND SERVICING OF LEASE CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.01 Responsibilities of Servicer . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.02 Servicer Standard of Care . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.03 Lockbox Account and Servicer Remittances . . . . . . . . . . . . . . . . 9
Section 3.04 Servicer Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.05 Financing Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.06 Maintenance of Insurance Policy; Insurance Proceeds . . . . . . . . . . . 10
Section 3.07 Personal Property and Sales Taxes . . . . . . . . . . . . . . . . . . . . 11
Section 3.08 Servicing Compensation . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.09 Substitution or Purchase of Lease Contracts . . . . . . . . . . . . . . . 11
Section 3.10 No Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 4 ACCOUNTINGS, STATEMENTS AND REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.01 Monthly Servicer's Reports . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.02 Financial Statements; Certification as to Compliance; Notice of Default . 13
Section 4.03 Independent Accountants' Reports; Annual Federal Tax Lien Search . . . . 14
Section 4.04 Access to Certain Documentation and Information . . . . . . . . . . . . . 15
Section 4.05 Other Necessary Data . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 4.06 Trustee to Cooperate . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 5 THE SERVICER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.01 Servicer Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.02 Corporate Existence; Reorganizations . . . . . . . . . . . . . . . . . . 18
Section 5.03 Limitation on Liability of the Servicer and Others . . . . . . . . . . . 19
Section 5.04 The Servicer Not to Resign . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 6 SERVICING TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.01 Servicer Events of Default . . . . . . . . . . . . . . . . . . . . . . . 20
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Section 6.02 Back-up Servicer to Act; Taking of Bids; Appointment of
Successor Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 6.03 Notification to Certificateholders . . . . . . . . . . . . . . . . . . . 23
Section 6.04 Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6.05 Effects of Termination of Servicer . . . . . . . . . . . . . . . . . . . 24
Section 6.06 No Effect on Other Parties . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 7 THE BACK-UP SERVICER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.01 Representations of Back-up Servicer . . . . . . . . . . . . . . . . . . . 25
Section 7.02 Merger or Consolidation of, or Assumption of the Obligations of, Back-up
Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.03 Back-up Servicer Resignation . . . . . . . . . . . . . . . . . . . . . . 26
Section 7.04 Oversight of Servicing . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 7.05 Back-up Servicer Compensation . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.06 Duties and Responsibilities . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 8 MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 8.01 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 8.02 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 8.03 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 8.04 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 8.05 Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . 29
Section 8.06 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 8.07 Article Headings and Captions . . . . . . . . . . . . . . . . . . . . . . 29
Section 8.08 Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 8.09 Assignment for Security for the Certificates . . . . . . . . . . . . . . 29
Section 8.10 No Servicing Assignment . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 8.11 MBIA Default or Termination . . . . . . . . . . . . . . . . . . . . . . . 30
Section 8.12 Third Party Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 8.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Exhibit A Form of Monthly Servicer=s Report
Exhibit B Form of Lockbox Agreement
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SERVICING AGREEMENT
This SERVICING AGREEMENT ("Agreement"), dated as of December 1, 1997,
is by and among Granite Financial, Inc., a Delaware corporation, as Servicer
(the "Servicer"), GF Funding Corp. IV, a Delaware corporation, as Transferor
(the "Transferor"), Norwest Bank Minnesota, National Association, as Back-up
Servicer (the "Back-up Servicer"), and Norwest Bank Minnesota, National
Association, as Trustee (the "Trustee").
PRELIMINARY STATEMENT
The Transferor has entered into a Trust and Security Agreement dated
as of December 1, 1997, (as amended from time to time, the "Trust and Security
Agreement"), with the Trustee, the Back-up Servicer and the Servicer, pursuant
to which the GF Funding Corp. IV Master Trust intends to issue one or more
Series of Certificates (the "Certificates").
The Transferor and Granite Financial, Inc. (the "Company") have
entered into a Lease Acquisition Agreement dated as of December 1, 1997 (as
amended from time to time, the "Lease Acquisition Agreement"), providing for,
among other things, the contribution, from time to time, by the Company to the
Transferor of all of the Company's right, title and interest in and to certain
Lease Assets which the Transferor is and will be conveying to the Trustee, for
the benefit of the Certificateholders and MBIA. As a precondition to the
effectiveness of the Lease Acquisition Agreement and the Trust and Security
Agreement, the Lease Acquisition Agreement and the Trust and Security Agreement
require that the Servicer, the Transferor, the Trustee and the Back-up Servicer
enter into this Agreement to provide for the servicing of the Lease Assets.
In addition, the Transferor is conveying to the Trustee, among other
things, all of the Transferor's rights derived under this Agreement and the
Lease Acquisition Agreement, and the Servicer agrees that all covenants and
agreements made by the Servicer herein with respect to the Lease Assets shall
also be for the benefit of the Trustee, MBIA and all holders from time to time
of the Certificates. For its services under this Agreement, the Servicer, the
Back-up Servicer and the Trustee will receive the compensation described herein
or in the Trust and Security Agreement.
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ARTICLE 1
DEFINITIONS
SECTION 1.01 DEFINED TERMS. Except as otherwise specified or as
the context may otherwise require, the following terms have the respective
meanings set forth below for all purposes of this Agreement, and the
definitions of such terms are equally applicable both to the singular and
plural forms of such terms and to the masculine, feminine and neuter genders of
such terms. Capitalized terms used but not otherwise defined herein shall have
the respective meanings assigned to such terms in the Trust and Security
Agreement or, if not defined therein, in the Lease Acquisition Agreement.
"Agreement": This Servicing Agreement, dated as of December 1, 1997,
by and among the Servicer, the Transferor, the Back-up Servicer and the
Trustee, as amended from time to time in accordance with the terms hereof.
"Back-up Servicer": Initially, Norwest Bank Minnesota, National
Association, until a successor Person shall have become the Back-up Servicer
pursuant to the applicable provisions of this Agreement, and thereafter
"Back-up Servicer" shall mean such successor Person.
"Company": Granite Financial, Inc. and all successors thereto in
accordance with the Lease Acquisition Agreement.
"Computer Tape": Any computer tape or disk prepared by the Servicer
and distributed to various parties as required herein.
"Lease Acquisition Agreement": The Lease Acquisition Agreement, dated
as of December 1, 1997 between the Transferor and the Company, as amended from
time to time in accordance with the terms thereof.
"Lease Assets": For purposes of this Agreement, Lease Assets shall
mean, collectively, the "Lease Assets" as defined in the Lease Acquisition
Agreement.
"Lockbox": The meaning given in the Lockbox Agreement.
"Lockbox Account": The account established at the Lockbox Bank by the
Trustee pursuant to the Lockbox Agreement, which account is maintained in the
name of, and at the sole control of, the Trustee and any Permitted Parties for
and on behalf of the Trustee, MBIA, the Certificateholders, the Transferor and
any Permitted Parties into which account shall be deposited payments related to
the Lease Receivables and as to which solely the Trustee and any Permitted
Parties shall have the ability to withdraw funds.
"Lockbox Agreement": An agreement among the Trustee, the Transferor,
any Permitted Parties and the Lockbox Bank, substantially in the form attached
hereto as Exhibit B or such other form as approved by MBIA together with all
amendments and supplements thereto and all subsequent agreements of a similar
nature between the Transferor, the Trustee, any Permitted Parties and any
successor Lockbox Bank.
"Lockbox Bank": Any bank approved by MBIA, and any successor Lockbox
Bank appointed pursuant to Section 3.03(a) hereof.
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"Monthly Servicer's Report": The report prepared by the Servicer
pursuant to Section 4.01 hereof.
"Nonrecoverable Advance": A Servicer Advance that the Servicer
determines in good faith, and in accordance with its customary servicing
practices, is unlikely to be eventually repaid from Scheduled Payments made by
or on behalf of the related Customer in accordance with Section 3.04 hereof.
"Officer's Certificate": A certificate signed by the Chairman of the
Board, the Vice-Chairman of the Board, the President, a Vice President, the
Treasurer or the Secretary of the Servicer.
"Permitted Parties": A trustee acting for the sole benefit of the
Certificateholders, MBIA and the holders of any securities issued by a wholly
owned special purpose corporation of the Company as to which MBIA has issued an
insurance policy with respect to the senior class of such securities.
"Reported Companies": The Servicer and its Affiliates on a
consolidated basis, including any entity with which the Servicer merges, and if
the initial Servicer is no longer acting as Servicer, then in addition, any
successor Servicer appointed pursuant to this Agreement.
"Reported Companies' Financial Statements": The Reported Companies'
audited consolidated balance sheet and income statements, consolidated
statements of sources and uses/applications of cash, auditors' opinion letters
regarding audited financial statements, and all notes to the audited financial
statements.
"Servicer": Granite Financial, Inc. until a successor Person shall
have become the Servicer pursuant to the applicable provisions of this
Agreement, and thereafter "Servicer" shall mean such successor Person.
"Servicer Advance": The meaning set forth in Section 3.04 hereof.
"Servicer Default": Any occurrence or circumstance which with notice
or the lapse of time or both would be a Servicer Event of Default under this
Agreement.
"Servicer Event of Default": Each of the occurrences or circumstances
enumerated in Section 6.01 hereof.
"Servicer Termination Notice": The notice described in Section 6.01
hereof.
"Servicing Officers": Those officers of the Servicer involved in, or
responsible for, the administration and servicing of the Lease Contracts, as
identified on the list of Servicing Officers furnished by the Servicer to the
Trustee, the Back-up Servicer, and MBIA from time to time.
"Transferor": GF Funding Corp. IV, and all successors thereto in
accordance with the terms of the Trust and Security Agreement.
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ARTICLE 2
SERVICER REPRESENTATIONS AND WARRANTIES
SECTION 2.01 REPRESENTATIONS AND WARRANTIES. The Servicer makes
the following representations and warranties as of each Delivery Date, except
as otherwise specified below, which shall survive such date:
(a) Organization and Good Standing. The Servicer has been duly
organized and is validly existing and in good standing as a corporation under
the laws of the State of Delaware or the laws of such other state as permitted
by Section 5.02(a), with requisite power and authority to own its properties,
perform its obligations under this Agreement and to transact the business in
which it is now engaged or in which it proposes to engage.
(b) Authorization and Binding Obligation. Each of this Agreement,
the Trust and Security Agreement and the Insurance Agreement has been duly
authorized, executed and delivered by the Servicer and constitutes the valid
and legally binding obligation of the Servicer enforceable against the Servicer
in accordance with its terms, subject as to enforcement to any bankruptcy,
insolvency, reorganization and other similar laws of general applicability
relating to or affecting creditors' rights generally and to general principles
of equity regardless of whether enforcement is sought in a court of equity or
law.
(c) No Violation. The entering into of this Agreement, the Trust
and Security Agreement and the Insurance Agreement and the performance by the
Servicer of its obligations under this Agreement, the Trust and Security
Agreement and the Insurance Agreement and the consummation of the transactions
herein and therein contemplated will not conflict with or result in a breach of
any of the terms or provisions of, or constitute a default under, or result in
the creation or imposition of any lien, charge or encumbrance upon any of the
property or assets of such Servicer pursuant to the terms of any material
indenture, mortgage, deed of trust or other agreement or instrument to which it
is a party or by which it is bound or to which any of its property or assets is
subject, nor will such action result in any violation of the provisions of its
certificate of incorporation or bylaws, or any statute or any order, rule or
regulation of any court or any regulatory authority or other governmental
agency or body having jurisdiction over it or any of its properties; and no
consent, approval, authorization, order, registration or qualification of or
with any court, or any such regulatory authority or other governmental agency
or body is required for the Servicer to enter into this Agreement, the Trust
and Security Agreement and the Insurance Agreement.
(d) No Proceedings. There are no proceedings or investigations
pending, or to the knowledge of the Servicer, threatened against or affecting
the Servicer or any subsidiary in or before any court, governmental authority
or agency or arbitration board or tribunal, including but not limited to any
such proceeding or investigation with respect to any environmental or other
liability resulting from the ownership or use of any of the Equipment, which,
individually or in the aggregate, involve the probability of materially and
adversely affecting the properties, business, prospects, profits or condition
(financial or otherwise) of the Servicer and its subsidiaries, or the ability
of the Servicer to perform its obligations under this Agreement, the Trust and
Security Agreement or the Insurance Agreement. The Servicer is not in default
with respect to any order of any court, governmental authority or agency or
arbitration board or tribunal.
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(e) Approvals. The Servicer (i) is not in violation of any laws,
ordinances, governmental rules or regulations to which it is subject, (ii) has
not failed to obtain any licenses, permits, franchises or other governmental
authorizations necessary to the ownership of its property or to the conduct of
its business, and (iii) is not in violation in any material respect of any term
of any agreement, charter instrument, bylaw or instrument to which it is a
party or by which it may be bound, which violation or failure to obtain
materially adversely affect the business or condition (financial or otherwise)
of the Servicer and its subsidiaries.
(f) Investment Company. The Servicer is not an investment company
which is required to register under the Investment Company Act of 1940, as
amended.
(g) Standard of Care. The Servicer has serviced the Lease
Contracts and Equipment in a manner consistent with industry standards for
lease contracts similar to the Lease Contracts and Equipment, and in any event
in a prudent and commercially reasonable manner, and has conducted its
servicing operations in a manner consistent with industry standards for
servicing of financial portfolios.
(h) Insurance. The Servicer maintains insurance with respect to
its operations and property which is adequate and customary in light of the
Servicer's operations.
(i) Net Worth. As of the Initial Delivery Date, the Servicer is
in compliance with the Net Worth Requirement.
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ARTICLE 3
ADMINISTRATION AND SERVICING OF LEASE CONTRACTS
SECTION 3.01 RESPONSIBILITIES OF SERVICER.
(a) The Transferor hereby appoints the Servicer, for the benefit
of MBIA and the Certificateholders, to act as Servicer of the Lease Assets and
as such, the Servicer shall be responsible for, and shall, in accordance with
its customary servicing procedures, pursue the managing, servicing,
administering, enforcing and making of collections on the Lease Contracts, the
Equipment, the Lease Receivables and any Insurance Policies, the enforcement of
the Trustee's security interest in the Lease Contracts, Lease Receivables and
Equipment conveyed pursuant to the Trust and Security Agreement, and the sale
or the releasing of the Equipment upon the expiration or other termination of
the related Lease Contract (or repossession thereof without termination), each
in accordance with the standards and procedures set forth in this Agreement and
any related provisions of the Trust and Security Agreement and Lease
Acquisition Agreement. The Servicer's responsibilities shall include
monitoring and posting of all payments, responding to inquiries of Customers,
investigating delinquencies, accounting for collections and furnishing monthly
and annual statements to the Back-up Servicer, the Trustee, MBIA, the Rating
Agencies and the Certificateholders with respect to payments under the Lease
Contracts, making Servicer Advances, providing appropriate federal income tax
information to the Trustee for use in providing information to the
Certificateholders or MBIA, collecting and remitting sales and property taxes
to taxing authorities, and maintaining the perfected security interest of the
Trustee in the Trust Estate. The Servicer (at its expense) shall have full
power and authority, acting at its sole discretion, to do any and all things in
connection with such managing, servicing, administration, enforcement,
collection and such sale of the Equipment that it may deem necessary or
desirable, including the prudent delegation of such responsibilities; provided
that only with the prior written consent of MBIA shall the Servicer subcontract
with another firm to act as subservicer with respect to the Servicer's
obligations hereunder and then only so long as the Servicer remains fully
responsible and accountable for performance of all obligations of the Servicer
hereunder; provided further that the Servicer may subcontract out its
remarketing obligations with respect to the Equipment without the consent of
MBIA so long as the Servicer remains fully responsible and accountable for the
performance of such obligations. Without limiting the generality of the
foregoing, the Servicer shall, and is hereby authorized and empowered by the
Trustee, subject to Section 3.02 hereof, to execute and deliver (on behalf of
itself, the Certificateholders, the Trustee or any of them) any and all
instruments of satisfaction or cancellation, or of partial or full release or
discharge, and all other comparable instruments, with respect to the Lease
Contracts and any files or documentation pertaining to the Lease Assets. The
Servicer also may, in its sole discretion, waive any late payment charge or
penalty, or any other fees that may be collected in the ordinary course of
servicing any Lease Contract. Notwithstanding the foregoing, the Servicer
shall not, except pursuant to a judicial order from a court of competent
jurisdiction, or as otherwise expressly provided in this Agreement, release or
waive the right to collect the Scheduled Payments or any unpaid balance on any
Lease Contract. The Trustee shall, at the expense of the Servicer, furnish the
Servicer with any powers of attorney and other documents necessary or
appropriate to enable the Servicer to carry out its servicing and
administrative duties hereunder, and the Trustee shall not be responsible for
the Servicer's application thereof.
(b) The Servicer shall conduct any Lease Contract management,
servicing, administration, collection or enforcement actions in the following
manner:
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(i) The Servicer, as agent for and on behalf of the
Trustee, MBIA and the Certificateholders, with respect to any
Defaulted Lease Contract shall follow such practices and procedures as
are normal and consistent with the Servicer's standards and procedures
relating to its own lease contracts, lease receivables and equipment
that are similar to the Lease Contracts, Lease Receivables and the
Equipment, and, in any event, consistent with the standard of care
described in Section 3.02 hereof, including without limitation, the
taking of appropriate actions to foreclose or otherwise liquidate any
such Defaulted Lease Contract, together with the related Equipment, to
collect any Guaranty Amounts, and to enforce the Transferor's rights
under the Lease Acquisition Agreement. All Recoveries, Insurance
Proceeds or Residual Proceeds in respect of any such Lease Receivable
and the related Equipment received by the Servicer shall be remitted
to the Trustee for deposit in the Collection Account pursuant to
Section 3.03 hereof;
(ii) The Servicer may ▇▇▇ to enforce or collect upon Lease
Contracts as agent for the Trustee on behalf of the Certificateholders
and MBIA. If the Servicer elects to commence a legal proceeding to
enforce a Lease Contract, the act of commencement shall be deemed to
be an automatic conveyance of the Lease Contract to the Servicer for
purposes of collection only. If, however, in any enforcement suit or
legal proceeding it is held that the Servicer may not enforce a Lease
Contract on the ground that it is not a real party in interest or a
holder entitled to enforce the Lease Contract, then the Trustee on
behalf of the Certificateholders and MBIA shall, at the Servicer's
request and expense, take such steps as the Servicer deems necessary
and instructs the Trustee in writing to take to enforce the Lease
Contract, including bringing suit in its name or the names of the
Certificateholders or MBIA, and the Trustee shall be indemnified by
the Servicer for any such action taken. Any Lease Contract
temporarily released from the custody of the Trustee to the Servicer
or its agents shall have stamped on it prior to its delivery a legend
to the effect that the Lease Contract is the property of Norwest Bank
Minnesota, National Association as Trustee, and the Servicer shall
promptly return all Lease Contracts when the need therefore no longer
exists, provided that no more than 25 Lease Contracts shall be
released to the Servicer at any one time;
(iii) The Servicer shall exercise any rights of recourse
against third parties that exist with respect to any Lease Contract in
accordance with the Servicer's usual practice and, in any event,
consistent with the standard of care described in Section 3.02 hereof.
In exercising recourse rights, the Servicer is authorized on the
Trustee's behalf to reconvey the Lease Contract to the person against
whom recourse exists to the extent necessary, and at the price set
forth in the document creating the recourse. The Servicer will not
reduce or diminish such recourse rights, except to the extent that it
exercises such right;
(iv) The Servicer may not allow substitutions of
Substitute Lease Contracts that do not comply with Section 3.09
hereof, Sections 2.04, 3.03 and 3.04 of the Lease Acquisition
Agreement and Section 4.04 of the Trust and Security Agreement. If a
Customer requests a financing of an upgrade to any Equipment, the
Servicer shall either (A) include such upgrade on an existing Lease
Contract and treat the Scheduled Payments related thereto as an
Additional Lease Contract for all purposes of this Agreement, the
Lease Acquisition Agreement and the Trust and Security Agreement, or
(B) originate a separate lease contract for such Customer;
(v) The Servicer may waive, modify or vary any terms of
any Lease Contract or consent to the postponement of strict compliance
with any such term if in the Servicer's reasonable and prudent
determination such waiver, modification or postponement is not
materially adverse to the Certificateholders or MBIA; provided,
however, that (A) the Servicer
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shall not forgive any payment of rent, (B) the Servicer shall not
permit any modification with respect to any Lease Contract that would
decrease any Scheduled Payment, defer the payment of any principal or
interest or any Scheduled Payment, reduce the Implicit Principal
Balance (except in connection with actual payments attributable to
such Implicit Principal Balance), or prevent the complete amortization
of the Implicit Principal Balance from occurring by the Calculation
Date preceding the Stated Maturity of the related Series of
Certificates, and (C) except as otherwise specifically provided
herein, the Servicer will not waive or modify the requirement that a
Customer maintain insurance with respect to the related Equipment.
The Servicer shall provide the Back-up Servicer, MBIA and the Trustee
with an Amended Lease Schedule to the related Series Lease Schedule
reflecting any modification of any Scheduled Payment;
(vi) The Servicer shall not consent to the termination of
any Lease Contract in connection with loss of or damage to the related
Equipment unless the Customer has paid an amount not less than the
Removal Price for such Lease Contract, or if less, the maximum amount
legally collectible under the related Lease Contract;
(vii) Upon termination of a Lease Contract after payment of
the last Scheduled Payment due thereunder or in the event that the
Servicer in the enforcement of any Lease Contract otherwise (A)
acquires title to any item of Equipment with respect to which title
was held by the Customer or (B) reclaims possession of Equipment from
the Customer, the Servicer shall use its best efforts to sell or
re-lease such item of Equipment on market value terms promptly and
consistent with the standard of care set forth in Section 3.02 hereof.
Any Insurance Proceeds, Recoveries or Residual Proceeds related
thereto shall be deposited in accordance with Section 3.03 hereof;
(viii) Notwithstanding any provision to the contrary
contained in this Agreement, the Servicer shall exercise any right
under a Lease Contract to accelerate the unpaid Scheduled Payments,
due or to become due thereunder in such a manner as to maximize the
net proceeds available to the Trust Estate; provided, however, that
the Servicer will not accelerate any Scheduled Payment unless
permitted to do so by the terms of the Lease Contract or under
applicable law;
(ix) The Servicer shall maintain insurance with respect to
its operations and property which is adequate and customary in light
of the Servicer's operations; and
(x) The Servicer shall comply with and not modify its
credit and collection policies with respect to the Lease Contracts in
any manner which would adversely affect the Certificates or the Trust
Estate.
SECTION 3.02 SERVICER STANDARD OF CARE. In managing,
administering, servicing, enforcing and making collections on the Lease
Contracts and Equipment pursuant to this Agreement, the Servicer will exercise
that degree of skill and care consistent with industry standards for servicing
of micro to medium ticket equipment leasing portfolios, and that which the
Servicer customarily exercises with respect to similar lease contracts and
equipment owned or originated by it, and in any event, in a prudent and
commercially reasonable manner. The Servicer shall punctually perform all of
its obligations and agreements under this Agreement and shall comply with all
applicable federal and state laws and regulations, shall maintain all state and
federal licenses and franchises necessary for it to perform its servicing
responsibilities hereunder, and shall not materially impair the rights of MBIA
or the
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Certificateholders in any Lease Contracts or payments thereunder.
SECTION 3.03 LOCKBOX ACCOUNT AND SERVICER REMITTANCES.
(a) The Transferor and the Trustee shall establish the Lockbox
Account on the Initial Delivery Date at the Lockbox Bank pursuant to the
Lockbox Agreement. Upon request, each of the Transferor, the Lockbox Bank, the
Servicer and any other party to the Lockbox Agreement shall provide MBIA and
the Trustee with Opinions of Counsel reasonably acceptable to MBIA and the
Trustee regarding the enforceability of the Lockbox Agreement against such
person. The Servicer shall pay to the Lockbox Bank when due the fees set forth
in the Lockbox Agreement. The Lockbox Bank may be removed by the Transferor
with the written consent of MBIA and the Trustee if the Lockbox Bank has failed
to perform its duties to the satisfaction of the Transferor and the Servicer,
provided that a successor Lockbox Bank, meeting the qualifications of a
corporate trustee as set forth in Section 7.08 of the Trust and Security
Agreement, has executed a Lockbox Agreement in form and substance satisfactory
to MBIA, the Trustee, the Transferor and the Servicer.
(b) After the Lockbox Agreement has been executed, the Servicer
shall promptly notify the Customers of the transfer of the Lease Contracts to
the GF Funding Corp. IV Master Trust and instruct the Customers to send all
payments relating to Lease Receivables directly to the Lockbox Bank for deposit
into the Lockbox Account. On each Business Day, the Trustee shall, or shall
cause the Lockbox Bank to, transfer to the Collection Account all amounts
allocable to the Lease Contracts on deposit in the Lockbox Account.
(c) The Servicer, as agent of the Transferor, the
Certificateholders and MBIA, shall remit to the Trustee for deposit in the
Collection Account by 12:00 noon Minneapolis time on each Tuesday and Thursday
that is a Business Day, or if such day is not a Business Day, on the next
Business Day thereafter, the amounts described below that have been collected
by the Servicer through 4:00 p.m. Minneapolis time on the preceding Business
Day so long as such amounts in the aggregate exceed $1,000:
(i) all payments made under the Lease Contracts by or on
behalf of the Customers relating to the Lease Receivables, including
prepayments and Overdue Payments but excluding taxes and Servicing
Charges, received directly by the Servicer;
(ii) all Residual Proceeds and Recoveries;
(iii) the Removal Price of any Lease Contract purchased by
the Company or the Transferor, to the extent received by the Servicer;
(iv) all Guaranty Amounts; and
(v) all Insurance Proceeds.
The Servicer shall hold in trust for the benefit of the Holders of the
Certificates and MBIA any payment it receives relating to items (i) through (v)
above until such time as the Servicer transfers any such payment to the Trustee
for deposit in the Collection Account.
(d) If ACH debits are utilized with respect to a Lease Contract,
(x) the Transferor, the Trustee and the ACH Bank shall enter into a depositary
agreement acceptable to the Trustee and (y) the
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Servicer will notify the National Automated Clearing House System to debit the
Customer for all payments relating to Lease Receivables under such Lease
Contract and to credit an account (the "ACH Account") maintained at the ACH
Bank, in the name of and in the sole control of (i) the Trustee for the benefit
of the Certificateholders and MBIA and (ii) any other Permitted Parties, and
the Servicer shall not revoke or modify such notifications. The Servicer shall
be responsible for the payment of the fees of any ACH Account and shall not be
entitled to reimbursement therefor. In the event (i) a Customer provides the
Servicer or the ACH Bank with written notice of its termination of such
Customer's authorization agreement for ACH debits, or (ii) the Servicer
otherwise receives directly moneys with respect to Lease Receivables that would
otherwise involve ACH debits, the Servicer shall deposit all payments from all
such Customers into the Collection Account in accordance with subsection (c)
above, and, in the case of clause (i), the Servicer shall promptly instruct the
Customer to send all lease payments directly to the Lockbox. Payments received
in the ACH Account representing any payment listed in Section 3.03(c)(i)
through (v) above, and which are no longer provisional will be transferred to
the Collection Account on a daily basis.
SECTION 3.04 SERVICER ADVANCES. Not later than 10:00 a.m.
(Minneapolis time) on the Determination Date prior to each Payment Date, the
Servicer shall make an advance (a "Servicer Advance") on such date by remitting
to the Trustee for deposit in the Collection Account an amount equal to the
Scheduled Payments or portion thereof for each Lease Contract which is a
Delinquent Lease Contract and which were due in the prior Due Period but not
received and deposited in the Collection Account on or prior to such
Determination Date; provided that, if and until the Class B Certificates are
issued, such deposit shall equal the lesser of (i) the Scheduled Payments or
portion thereof for each Lease Contract which is a Delinquent Lease Contract
and which were due in the prior Due Period but not received and deposited in
the Collection Account on or prior to such Determination Date and (ii) the
shortfall, if any, between (a) the amounts on deposit in the Collection Account
as of such Determination Date and (b) the amounts required to be paid on the
related Payment Date pursuant to clauses (i) through (xvi) of Section 12.02 (d)
of the Trust and Security Agreement; provided, further, however, that the
Servicer shall not be obligated to make any Servicer Advance pursuant to this
Section 3.04 that the Servicer determines in good faith, and in accordance with
its customary servicing practices, is unlikely to be eventually repaid from
Scheduled Payments made by or on behalf of the related Customer; provided,
further, that the Servicer may not make a Servicer Advance with respect to a
Lease Contract once it has become a Defaulted Lease Contract. On each
Determination Date, the Servicer shall deliver to the Back-up Servicer, the
Trustee, MBIA and the Placement Agent the Monthly Servicer's Report, which
shall include a listing of the aggregate amount of Scheduled Payments not
received for the immediately prior Due Period, the amount of Servicer Advances,
and the amounts which it has determined in its sole discretion, and in
accordance with its customary servicing practices, are unlikely to be
recoverable from the related Customers.
SECTION 3.05 FINANCING STATEMENTS. The Servicer will make all
Uniform Commercial Code filings and recordings as may be required pursuant to
the terms of the Trust and Security Agreement. The Servicer shall, in
accordance with its customary servicing procedures and at its own expense, be
responsible for taking such steps as are necessary to maintain perfection of
such security interests. The Trustee hereby authorizes the Servicer to
re-perfect or to cause the re-perfection of such security interest on its
behalf as Trustee, as necessary.
SECTION 3.06 MAINTENANCE OF INSURANCE POLICY; INSURANCE PROCEEDS.
The Servicer shall have the obligation to verify, monitor and enforce the
acquisition and maintenance of a Customer's Insurance Policies in a manner
consistent with past practice, provided that the Servicer shall do so in a
manner consistent with that practiced by other lessors in the industry with
similar lease contracts and
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equipment owned or serviced by them. In the event that a Customer fails to
maintain an Insurance Policy as required by the terms of the related Lease
Contract, and the cost of the Equipment is in excess of $35,000, the Servicer
shall procure and maintain such insurance in an amount not less than the amount
required by such Lease Contract. The Servicer may satisfy its obligations
under this Section 3.06 by maintaining a blanket insurance policy covering all
of the Equipment. Any Insurance Proceeds shall be remitted to the Trustee for
deposit in the Collection Account pursuant to Section 3.03.
SECTION 3.07 PERSONAL PROPERTY AND SALES TAXES. The Servicer
shall, on behalf of the Transferor, pay or cause to be paid all personal
property, sales and use taxes on or with respect to the Equipment, or the
acquisition or leasing thereof, as and when such taxes become due, to the
extent a Customer has paid amounts to the Servicer or into the Lockbox Account
for such taxes. The Servicer shall also cause to be filed in a timely manner
any and all returns and reports required in connection with the payment of such
taxes.
SECTION 3.08 SERVICING COMPENSATION.
(a) As compensation for the performance of its obligations under
this Agreement the Servicer shall be entitled to receive the Servicer Fee and
the Additional Servicer Fee, if applicable. The Servicer Fee with respect to
any Lease Contract shall be paid monthly, commencing on the related Initial
Payment Date and terminating on the first to occur of (i) the receipt of the
last Scheduled Payment and related Residual Proceeds with respect to the last
remaining Lease Contract, (ii) the receipt of Recoveries and Insurance Proceeds
with respect to the last remaining Lease Contract, or (iii) the date on which
the Transferor or MBIA purchases the last remaining Lease Contract. The
Servicer Fee shall be paid to the Servicer at the times and in the priority as
set forth in the Trust and Security Agreement. The Servicer shall pay all
expenses incurred by it in connection with its servicing activities hereunder,
including, without limitation, payment of the fees and disbursements of the
Independent Accountants and payment of expenses incurred in connection with
distributions and reports to the Trustee, the Back-up Servicer, MBIA, the
Rating Agencies and Certificateholders, payment of the fee of the Lockbox Bank
under the Lockbox Agreement and any payment of any fees in connection with the
ACH Account and shall not be entitled to reimbursement for such expenses;
provided, however, that the Servicer will be entitled to reimbursement pursuant
to Section 12.02(d)(i)(B) of the Trust and Security Agreement for reasonable
costs and expenses incurred by the Servicer (including reasonable attorney's
fees and out-of-pocket expenses) in connection with the realization, attempted
realization or enforcement of rights and remedies upon Defaulted Lease
Contracts, from amounts received as Recoveries from such Defaulted Lease
Contracts.
(b) In connection with any transfer of the servicing obligations
to a successor Servicer in accordance with Section 6.02 hereof, the Back-up
Servicer shall be entitled to reimbursement of Transition Costs as provided
therein and in the Trust and Security Agreement.
SECTION 3.09 SUBSTITUTION OR PURCHASE OF LEASE CONTRACTS.
(a) The Servicer shall not allow termination of a Lease Contract
prior to the scheduled expiration date or prepayment of any Lease Contract
(except as may be specifically required under such Lease Contract in connection
with a casualty to the related Equipment), unless the Transferor has (i)
conveyed to the Trustee a Substitute Lease Contract, the Lease Receivables
under such Substitute Lease Contract and the Transferor's interest in the
related Equipment and delivered to the Trustee the original executed
counterpart of the Substitute Lease Contract or (ii) removed such prepaid Lease
Contract and the related Equipment from the Trust Estate by remittance of the
Removal Price to the
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Servicer for deposit in the Collection Account in accordance with Section 3.03
hereof; provided, however, that removals and substitutions of Lease Contracts
pursuant to this subparagraph (a) shall comply with the requirements of Section
4.04 of the Trust and Security Agreement, and the criteria set forth in Section
3.04 of the Lease Acquisition Agreement.
(b) The Servicer shall permit the Transferor to (i) remove any
Defaulted Lease Contract or Delinquent Lease Contract from the Trust Estate by
remittance by the Transferor to the Servicer, for deposit in the Collection
Account in accordance with Section 3.03 hereof, of the Removal Price for such
Lease Contract or (ii) substitute for any Defaulted Lease Contract or
Delinquent Lease Contract, a Substitute Lease Contract and the Lease
Receivables under such Substitute Lease Contract and the Transferor's interest
in the related Equipment and, upon the delivery to the Trustee of the original
executed counterpart of the Substitute Lease Contract and the related Lease
Contract File; provided that removals and substitutions of Lease Contracts
pursuant to this subparagraph (b) shall comply with the requirements of Section
4.04 of the Trust and Security Agreement and the criteria set forth in Section
3.04 of the Lease Acquisition Agreement.
(c) Notwithstanding any other provision contained in this
Agreement, the Servicer shall not, with respect to a Defaulted Lease Contract,
(i) negotiate or enter into a new lease with the Customer relating to the
Equipment or the Customer's obligations under such Defaulted Lease Contract or
(ii) allow the Customer thereunder to resume its rights under such Defaulted
Lease Contract, unless the Transferor has removed or made a substitution for
such Defaulted Lease Contract in the manner set forth in subsection (b) hereof.
(d) In the event that the Company is required to repurchase or
substitute a Lease Contract pursuant to Sections 2.06 or 3.03 of the Lease
Acquisition Agreement, the Servicer shall permit such repurchase or
substitution only in accordance with the terms of Sections 3.03 and 3.04 of the
Lease Acquisition Agreement, as applicable.
SECTION 3.10 NO OFFSET. Prior to the termination of this
Agreement, the obligations of the Servicer under this Agreement shall not be
subject to any defense, counterclaim or right of offset that the Servicer has
or may have against the Transferor, whether in respect of this Agreement, any
Lease Contract, Lease Receivable, Equipment or otherwise.
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ARTICLE 4
ACCOUNTINGS, STATEMENTS AND REPORTS
SECTION 4.01 MONTHLY SERVICER'S REPORTS. No later than 10:00 a.m.
(Minneapolis time) on each Determination Date, the Servicer shall deliver the
Monthly Servicer's Report to the Transferor, the Back-up Servicer, the Trustee,
and the Placement Agent, and the Trustee will deliver the Monthly Servicer's
Report to each Certificateholder, MBIA, and the Rating Agencies in the form
attached as Exhibit A hereto with respect to the activity in the immediately
preceding Due Period. In the course of preparing the Monthly Servicer's
Report, the Servicer shall seek direction from the Holder of the Transferor
Certificate as to remittance of any funds to be paid pursuant to Section
12.02(d)(xvi) of the Trust and Security Agreement. Lease Contracts which have
been substituted for or purchased by the Company or the Transferor shall be
identified by Customer lease number on the Monthly Servicer's Report. On each
Payment Date, the Servicer shall deliver to the Back-up Servicer and MBIA a
Computer Tape in a format acceptable to the Back-up Servicer containing the
information from which the Servicer prepared the Monthly Servicer's Report, as
well as any additional information reasonably requested by the Back-up Servicer
prior to such Payment Date.
SECTION 4.02 FINANCIAL STATEMENTS; CERTIFICATION AS TO COMPLIANCE;
NOTICE OF DEFAULT.
(a) The Servicer (and the Company if the initial Servicer is no
longer the Servicer) will deliver to the Trustee, the Placement Agent, MBIA,
the Back-up Servicer, the Rating Agencies and each Certificateholder of
Outstanding Certificates (and, upon the request of any Certificateholder, to
any prospective transferee of any Certificate which has executed an agreement
with the Transferor and the Servicer containing terms substantially similar to
those set forth in Section 4.04(f) hereof):
(i) within 120 days after the end of each fiscal year of
the Reported Companies, a copy of the Reported Companies' Financial
Statements, all in reasonable detail and accompanied by an opinion of
a firm of Independent Accountants stating that such financial
statements present fairly the financial condition of the Reported
Companies (or, in the case of a successor Servicer, such successor
Servicer's financial condition) and have been prepared in accordance
with generally accepted accounting principles consistently applied
(except for changes in application in which such accountants concur),
and that the examination of such accountants in connection with such
financial statements has been made in accordance with generally
accepted auditing standards, and accordingly included such tests of
the accounting records and such other auditing procedures as were
considered necessary in the circumstances;
(ii) with each set of Reported Companies' Financial
Statements delivered pursuant to subsection (a)(i) above, the Servicer
will deliver an Officer's Certificate stating that such officer has
reviewed the relevant terms of the Trust and Security Agreement, the
Lease Acquisition Agreement, the Insurance Agreement and this
Agreement and has made, or caused to be made, under such officer's
supervision, a review of the transactions and conditions of the
Reported Companies during the period covered by the Reported Companies
Financial Statements then being furnished, that the review has not
disclosed the existence of any Servicer Default or Servicer Event of
Default or, if a Servicer Default or a Servicer Event of Default
exists, describing its nature and what action the Servicer has taken
and is taking with respect thereto, and that on the basis of such
review the officer signing such certificate is of the opinion that
during such period the Servicer has serviced the Lease Contracts in
compliance with the
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procedures hereof except as disclosed in such certificate.
(iii) immediately upon becoming aware of the existence of
any condition or event which constitutes a Servicer Default or a
Servicer Event of Default, a written notice describing its nature and
period of existence and what action the Servicer is taking or proposes
to take with respect thereto;
(iv) promptly upon the Servicer's becoming aware of:
(A) any proposed or pending investigation of it
or the Transferor by any governmental authority or agency, or
(B) any pending or proposed court or
administrative proceeding which involves or may involve the
probability of materially and adversely affecting the
properties, business, prospects, profits or condition
(financial or otherwise) of the Servicer or the Transferor or
the Trust Estate,
a written notice specifying the nature of such investigation or
proceeding and what action the Servicer is taking or proposes to take with
respect thereto and evaluating its merits;
(v) with reasonable promptness any other data and
information with respect to the Servicer or the Lease Assets which may
be reasonably requested from time to time, including without
limitation any information required to be made available at any time
to any prospective transferee of any Certificates in order to satisfy
the requirements of Rule 144A under the Securities Act of 1933, as
amended;
(vi) quarterly, unaudited versions of the Reported
Companies' consolidating balance sheet and income statement within 45
days after the end of each quarter; and
(vii) such other information as may be specified in the
Trust and Security Agreement.
(b) On or before each December 31, commencing December 31, 1998,
so long as any of the Certificates are outstanding, the Servicer shall furnish
to MBIA, each Certificateholder and the Trustee an Officer's Certificate either
stating that such action has been taken with respect to the recording, filing,
and rerecording and refiling of any financing statements and continuation
statements as necessary to maintain the interest of the Trustee created by the
Trust and Security Agreement with respect to the Trust Estate and reciting the
details of such action or stating that no such action is necessary to maintain
such interest. Such Officer's Certificate shall also describe the recording,
filing, rerecording and refiling of any financing statements and continuation
statements that will be required to maintain the interest of the Trustee in the
Trust Estate until the date such next Officer's Certificate is due.
SECTION 4.03 INDEPENDENT ACCOUNTANTS' REPORTS; ANNUAL FEDERAL TAX
LIEN SEARCH.
(a) Within 45 days of the Initial Delivery Date and promptly at
the end of each of the Servicer's fiscal years thereafter, the Servicer at its
expense shall cause the Independent Accountants (who may also render and
deliver other services to the Servicer and its Affiliates) to prepare a
statement to the Back-up Servicer, the Trustee, the Certificateholders, MBIA,
the Rating Agencies and the Placement Agent, dated as of the close of such
period, to the effect that the Independent Accountants have examined the
servicing procedures, manuals, guides and records of the Servicer, and the
accounts and records of the Servicer relating to the Lease Contracts and any
files or documentation pertaining to
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the Lease Assets (which procedures, manuals, guides and records shall be
described in one or more schedules to such statement), that such Independent
Accountants have compared the information contained in the Monthly Servicer's
Reports delivered in the relevant period with information contained in the
accounts and records for such period, and that, on the basis of such
examination and comparison, nothing has come to the Independent Accountants'
attention to indicate that the Servicer has not, during the relevant period,
serviced the Lease Contracts in compliance with such servicing procedures,
manual and guides and in the same manner required by the Servicer's standards
and with the same degree of skill and care consistent with that which the
Servicer customarily exercises with respect to similar Lease Contracts owned by
it and otherwise in compliance with this Agreement, that such accounts and
records have not been maintained in accordance with Section 4.04 hereof, that
the information contained in the Monthly Servicer's Reports does not reconcile
with the information contained in the accounts and records or that such
certificates, accounts and records have not been properly prepared and
maintained in all material respects or in accordance with the requirements of
this Agreement, except in each case for (i) such exceptions as the Independent
Accountants shall believe to be immaterial and (ii) such other exceptions as
shall be set forth in such statement. The Servicer shall deliver to the
Back-up Servicer, the Trustee, the Certificateholders, the Placement Agent, the
Rating Agencies and MBIA a copy of any such statement within 120 days of the
close of the relevant period.
(b) Promptly after the end of the Servicer's fiscal year,
commencing with the fiscal year ending June 30, 1998, the Servicer, at its
expense, shall cause a search of any and all federal tax liens against the
Company and the Transferor and any Affiliates as of the end of such fiscal year
to be conducted and shall deliver to the Back-up Servicer, the Trustee, the
Certificateholders and MBIA on or before July 31 of each year, commencing July
31, 1998, an officer's certificate signed by a Servicing Officer (i) stating
that there are no outstanding federal tax liens filed against any portion of
the Trust Estate, the Company, the Transferor, or any Affiliate or (ii) listing
the outstanding federal tax liens filed against any portion of the Trust
Estate, the Company, the Transferor, or any Affiliate. In the event any such
certificate shall disclose any such federal tax liens, the Servicer shall
promptly thereafter, satisfy any such federal tax liens.
SECTION 4.04 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION.
(a) The Servicer shall provide to the Back-up Servicer, MBIA, the
Trustee, or any Certificateholder and their duly authorized representatives,
attorneys or accountants access to any and all documentation regarding the
Trust Estate (including the Series Lease Schedule) that the Servicer may
possess, such access being afforded without charge but only upon reasonable
request and during normal business hours so as not to interfere unreasonably
with the Servicer's normal operations or customer or employee relations, at
offices of the Servicer designated by the Servicer.
(b) At all times during the term hereof, the Servicer shall keep
available at its principal executive office for inspection by
Certificateholders, the Trustee, the Back-up Servicer and MBIA a list of all
Lease Contracts then held as a part of the Trust Estate, together with a
reconciliation of such list to that set forth in the Series Lease Schedules and
each of the Monthly Servicer's Reports, indicating the cumulative addition and
removal of Lease Contracts from the Trust Estate.
(c) The Servicer will maintain accounts and records as to each
respective Lease Contract serviced by the Servicer that are accurate and
sufficiently detailed as to permit (i) the reader thereof to know as of the
most recent Calculation Date the status of such Lease Contract, including any
payments, Insurance Proceeds, Residual Proceeds and Recoveries received or
owing (and the nature of each) thereon and (ii) the reconciliation between
payments, Insurance Proceeds, Residual Proceeds or
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Recoveries on (or with respect to) each Lease Contract and the amounts from
time to time deposited in the Collection Account in respect of such Lease
Contract.
(d) The Servicer will maintain all of its computerized accounts
and records so that, from the Initial Delivery Date and after each Acquisition
Date and the conveyance of the related Lease Contract, Lease Receivables and
Equipment to the Trustee, the Servicer's accounts and records (including any
back-up computer archives) that refer to any such Lease Contracts, Lease
Receivables or Equipment indicate clearly that the Lease Contracts, Lease
Receivables and Equipment are owned by the Trustee for the benefit of MBIA and
the Certificateholders. Indication of the Trustee's interest in a Lease
Contract will be deleted from or modified on the Servicer's accounts and
records when, and only when, the Lease Contract has been paid in full, replaced
with a Substitute Lease Contract or purchased by the Company or the Transferor
or conveyed to the Servicer pursuant to this Agreement.
(e) Nothing in this Section 4.04 shall affect the obligation of
the Servicer to observe any applicable law prohibiting disclosure of
information regarding the Customers, and the failure to provide information
otherwise required by this Section 4.04 as a result of such observance by the
Servicer, shall not constitute a breach of this Section 4.04.
(f) All information obtained by the Trustee, the Back-up Servicer,
MBIA or any Certificateholder regarding the Customers and the Lease Contracts,
whether upon exercise of its rights under this Section 4.04 or otherwise, shall
be maintained by the Trustee, the Back-up Servicer, MBIA or the
Certificateholder, as applicable, in confidence and shall not be disclosed to
any other Person, unless such disclosure shall not violate any applicable law
or regulation or any proprietary rights of the Company, the Transferor or the
Servicer unless ordered by a court of applicable jurisdiction; provided that
MBIA may make disclosures with respect to any of the above matters to the
Rating Agencies, any reinsurer or any entity having regulatory authority over
MBIA and provided further that the Certificateholders may disclose such
information to the extent permitted by the applicable Certificate Purchase
Agreement.
SECTION 4.05 OTHER NECESSARY DATA. The Servicer shall, on request
of the Back-up Servicer, the Trustee or MBIA, (i) on reasonable notice, furnish
the Trustee, the Back-up Servicer or MBIA such data necessary for the
administration of the Trust Estate as can be reasonably generated by the
Servicer's existing data processing systems, and (ii) on and after a Servicer
Event of Default, within 5 Business Days, provide the Trustee and the Back-up
Servicer with access to the Servicer's existing data processing systems and any
files or records with respect to the Lease Assets that it may have.
SECTION 4.06 TRUSTEE TO COOPERATE. Upon payment (including
through application of any prepayment) in full of any Lease Contract, the
Servicer will notify the Trustee on the next succeeding Determination Date by
written certification (which certification shall include a statement to the
effect that all amounts received in connection with such payments in full which
are required to be deposited in the Collection Account pursuant to Section 3.03
hereof have been so deposited) of a Servicing Officer and shall request
delivery of the Lease Contract to the Servicer. Upon receipt of such delivery
request, the Trustee shall within 7 days of such request by the Servicer
release such Lease Contract to the Servicer. Upon release of such Lease
Contract, the Servicer is authorized to execute an instrument in satisfaction
of such Lease Contract and to do such other acts and execute such other
documents as it deems necessary to discharge the Customer thereunder and, if
applicable, release any security interest in the Equipment related thereto.
The Servicer shall determine when a Lease Contract has been paid in full. Upon
the written request of a Servicing Officer and subject to the Trustee's rights
to indemnity contained herein and in the Trust and Security Agreement, the
Trustee shall perform such other acts as reasonably requested in writing by the
Servicer and otherwise cooperate with the Servicer in enforcement of the
Certificateholders' rights and remedies with respect to Lease Contracts.
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ARTICLE 5
THE SERVICER
SECTION 5.01 SERVICER INDEMNIFICATION.
(a) The Servicer shall indemnify and hold harmless the Trustee,
the Transferor, the Back-up Servicer, MBIA, and the Certificateholders, from
and against any loss, liability, claim, expense, damage or injury suffered or
sustained to the extent that such loss, liability, claim, expense, damage or
injury arose out of or was imposed by reason of the failure by the Servicer to
perform its duties in accordance with the terms of this Agreement or are
attributable to errors or omissions of the Servicer related to such duties or
a breach of the representations and warranties made by the Servicer in Section
2.01 hereof; provided, however, that the Servicer shall not indemnify any party
to the extent that acts of fraud, gross negligence or breach of fiduciary duty
by such party contributed to such loss, liability, claim, expense, damage or
injury.
(b) The Servicer shall not be liable for any settlement of any
action or claim effected without its consent. If the Servicer has made any
indemnity payments to MBIA, the Trustee, the Back-up Servicer or the
Certificateholders pursuant to this Section and such party thereafter collects
any of such amounts from others, such party will promptly repay such amounts
collected to the Servicer, without interest. The provisions of this Section
5.01 shall survive any expiration or termination of this Agreement.
SECTION 5.02 CORPORATE EXISTENCE; REORGANIZATIONS.
(a) The Servicer shall keep in full effect its existence and good
standing as a corporation in the State of Delaware and will obtain and preserve
its qualification to do business as a foreign corporation in each jurisdiction
in which such qualification is or shall be necessary to enable the Servicer to
perform its duties under this Agreement, except where the failure to so qualify
would not have a material adverse effect on the Trust Estate or the ability of
the Servicer to perform its duties hereunder; provided, however, that the
Servicer may reorganize as a corporation in another state provided that the
Transferor has provided to MBIA and the Certificateholders an Officer's
Certificate to the effect that (i) such action will not cause the Company to
breach any obligation under this Agreement and (ii) such action would be in the
best interests of the Servicer and would not have a material adverse effect on
the Certificateholders or MBIA.
(b) The Servicer shall not (i) (other than pursuant to one or more
additional lease pool financings) convey, transfer or lease substantially all
of its assets as an entirety to any Person, or (ii) merge or consolidate with
another Person, unless (A) either the Servicer is the survivor or such Person
or the merged or consolidated entity acquires substantially all the assets of
the Servicer as an entirety, has adequate servicing skills and personnel, is
substantially involved in the equipment financing lease business and executes
and delivers to the Transferor, MBIA and the Trustee an agreement, in form and
substance reasonably satisfactory to the Transferor, MBIA, the Controlling
Holders and the Trustee, which contains an assumption by such Person or entity
of the due and punctual performance and observance of each covenant and
condition to be performed or observed by the Servicer under this Agreement, (B)
no Default, Event of Default or Servicer Default (or an event that due to the
lapse of time or failure to act would become a Servicer Default) has occurred
and is continuing, and (C) MBIA shall have given its prior written consent.
The Servicer shall provide prompt written notice of such event to
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the Rating Agencies and shall provide to the Trustee, for the benefit of MBIA
and the Certificateholders, an Opinion of Counsel confirming the enforceability
of such assumption agreement.
(c) The Servicer shall provide written notice (to the extent the
Servicer has actual knowledge or notice and the provision of such information
does not violate any securities laws) to the Trustee and MBIA within ten days
after any acquisition by one person or a group of persons acting in concert of
more than 50% of the stock of the Servicer.
SECTION 5.03 LIMITATION ON LIABILITY OF THE SERVICER AND OTHERS.
Except as provided in Section 5.01 hereof, neither the Servicer nor any of the
officers, directors, employees or agents of the Servicer shall be under any
liability for any action taken or for refraining from the taking of any action
in its capacity as Servicer pursuant to this Agreement; provided, however, that
this provision shall not protect the Servicer or any such person against any
liability which would otherwise be imposed by reason of willful misconduct, bad
faith or gross negligence (which includes negligence with respect to the duties
of the Servicer explicitly set forth in this Agreement) in the performance of
its duties hereunder. The Servicer and any officer, director, employee or
agent of the Servicer may rely in good faith on any document of any kind prima
facie properly executed and submitted by any Person with respect to any matters
arising hereunder. No implied covenants or obligations shall be read into this
Agreement against the Servicer. In the event the Servicer performs any
activities beyond the requirements of this Agreement, the Servicer shall have
the option but will not be required to perform such activities in the future.
SECTION 5.04 THE SERVICER NOT TO RESIGN.
(a) The Servicer shall not resign from the duties and obligations
hereby imposed on it except upon a determination by its Board of Directors that
by reason of change in applicable legal requirements, with which the Servicer
cannot reasonably comply, the continued performance by the Servicer of its
duties under this Agreement would cause it to be in violation of such legal
requirements, said determination to be evidenced by a resolution from its Board
of Directors to such effect, accompanied by an Opinion of Counsel to such
effect and reasonably satisfactory to the Trustee and MBIA.
(b) No such resignation shall become effective until a successor
Servicer shall have assumed the responsibilities and obligations of the
Servicer hereunder.
(c) Except as provided in Sections 5.02 and 6.01 hereof, the
duties and obligations of the Servicer under this Agreement shall continue
until this Agreement shall have been terminated as provided in Section 8.01
hereof, and shall survive the exercise by the Transferor or the Trustee of any
right or remedy under this Agreement, or the enforcement by the Transferor,
MBIA, the Trustee or any Certificateholder of any provision of the Certificates
or this Agreement.
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ARTICLE 6
SERVICING TERMINATION
SECTION 6.01 SERVICER EVENTS OF DEFAULT.
(a) Any of the following acts or occurrences shall constitute a
Servicer Event of Default:
(i) Any failure by the Servicer to deliver to the Trustee
for payment to Certificateholders any proceeds or payments received
from a Customer or in respect of the Trust Estate and required to be
so delivered under the terms of the Trust and Security Agreement and
this Agreement that continues unremedied until 10:00 a.m. (Minneapolis
time) on the following Business Day; provided, however, that the
Trustee, upon receiving actual knowledge of such failure, shall give
the Servicer prompt written, telecopied or telephonic notice of such
failure. Notwithstanding the foregoing, any failure by the Trustee to
deliver such notice to the Servicer shall not prevent the occurrence
of a Servicer Event of Default; or
(ii) Any failure by the Servicer to deliver a Monthly
Servicer's Report pursuant to Section 4.01 hereof that continues
unremedied until 10:00 a.m., Minneapolis time, the following Business
Day; provided, however, that if the Servicer has not delivered the
Monthly Servicer's Report by 12:00 noon (Minneapolis time) on the
Determination Date, the Trustee shall give the Servicer notice of such
failure. Notwithstanding the foregoing, any failure by the Trustee to
deliver such notice to the Servicer shall not prevent the occurrence
of a Servicer Event of Default; or
(iii) Any failure by the Servicer to make a Servicer
Advance pursuant to Section 3.04 hereof or to deposit any Removal
Price received by it that continues unremedied until 10:00 a.m.
(Minneapolis time) the following Business Day; provided, however, that
if the Servicer has not made the Servicer Advance or deposited any
Removal Price received by it by 12:00 noon (Minneapolis time) on the
Determination Date and the Trustee has received written notification
from the Servicer by way of the Monthly Servicer's Report or otherwise
that such Servicer Advance or Removal Price is to be paid, the Trustee
shall give the Servicer prompt written, telecopied or telephonic
notice of such failure. Notwithstanding the foregoing, any failure by
the Trustee to deliver such notice to the Servicer shall not prevent
the occurrence of a Servicer Event of Default; or
(iv) Any failure on the part of the Servicer in its
capacity as such duly to observe or perform in any material respect
any other covenants or agreements of the Servicer set forth in this
Agreement or the Trust and Security Agreement, as the case may be, or
if any representation or warranty of the Servicer set forth in Section
2.01 of this Agreement shall prove to be incorrect, which failure or
breach (A) materially and adversely affects or could affect the
interest or rights of MBIA, the Trustee, or the Certificateholders and
(B) continues unremedied for a period of 30 days after the date on
which the Servicer becomes aware of such failure or breach or written
notice of such failure or breach, requiring the situation giving rise
to such breach or non-conformity to be remedied, shall have been given
to a Servicing Officer of the Servicer by the Trustee, MBIA, the
Transferor, or the Back-up Servicer, or to a Servicing Officer of the
Servicer, MBIA and the Trustee by Certificateholders representing not
less than 25% of the Outstanding Principal Amount of all Series; or
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(v) Any assignment by the Servicer to a delegate of its
duties or rights under this Agreement, except as specifically
permitted hereunder, or any attempt to make such an assignment; or
(vi) The entry of a decree or order for relief by a court
having jurisdiction in respect of the Servicer or a petition against
the Servicer (or any entity with which the Servicer has merged) in an
involuntary case under any federal bankruptcy laws, as now or
hereafter in effect, or any other present or future federal or state
bankruptcy insolvency or similar law, or appointing a conservator,
receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official for the Servicer (or any entity with which the
Servicer has merged) for any substantial part of its property, or
ordering the winding up or liquidation of the affairs of the Servicer
(or any entity with which the Servicer has merged) and the continuance
of any such decree or order unstayed and in effect for a period of 60
consecutive days; or
(vii) The commencement by the Servicer (or any entity with
which the Servicer has merged) of a voluntary case under any federal
bankruptcy laws, as now or hereafter in effect, or any other present
or future federal or state bankruptcy, insolvency, reorganization or
similar law, or the consent by the Servicer (or any entity with which
the Servicer has merged) to the appointment of or taking possession by
a conservator, receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official in any insolvency, readjustment
of debt, marshaling of assets and liabilities, bankruptcy or similar
proceedings of or relating to the Servicer (or any entity with which
the Servicer has merged) or relating to a substantial part of its
property, or the making by the Servicer (or any entity with which the
Servicer has merged) of an assignment for the benefit of creditors, or
the failure by the Servicer (or any entity with which the Servicer has
merged) generally to pay its debts as such debts become due or if the
Servicer (or any entity with which the Servicer has merged) shall
admit in writing its inability to pay its debts as they become due, or
the taking of corporate action by the Servicer (or any entity with
which the Servicer has merged) in furtherance of any of the foregoing;
or
(viii) The occurrence of a Trigger Event if the initial
Servicer is the Servicer.
(b) So long as a Servicer Event of Default shall not have been
remedied within the period set forth in (i), (ii), (iii), (iv) or (vi) above,
as applicable, or if a Servicer Event of Default described in (v), (vii) or
(viii) above occurs, the Trustee, at the direction of MBIA shall, or if there
has been an MBIA Default or Termination, the Trustee, the Transferor, or the
Back-up Servicer may and shall at the request of the Controlling Holders, by
notice (the "Servicer Termination Notice") then given in writing to the
Servicer and the Back-up Servicer, terminate all, but not less than all, of the
rights and obligations of the Servicer under this Agreement.
(c) Upon the occurrence of a Trigger Event, the Trustee shall, at
the direction of MBIA, or if there has been an MBIA Default or Termination, the
Trustee, the Transferor, or the Back-up Servicer may and shall at the request
of the Controlling Holders, by Servicer Termination Notice then given in
writing to the Servicer and the Back-up Servicer, terminate all but not less
than all of the rights and obligations of the Servicer under this Agreement.
(d) On or after the receipt by the Servicer of a Servicer
Termination Notice, all authority and power of the Servicer under this
Agreement, whether with respect to the Certificates or the Lease Contracts or
otherwise, shall pass to and be vested in the successor Servicer appointed
pursuant to
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Section 6.02 hereof, and, without limitation, such successor Servicer is hereby
authorized and empowered to execute and deliver, on behalf of the Servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments, and
to do or accomplish all other acts or things necessary or appropriate to effect
the purposes of such notice of termination, whether to complete the transfer of
the Lease Contracts and related documents, or otherwise. The Servicer agrees
to cooperate with the Trustee, the Back-up Servicer and the successor Servicer
in effecting the termination of the responsibilities and rights of the Servicer
hereunder, including, without limitation, the transfer to the successor
Servicer for administration by it of all cash amounts that shall at the time be
held by the Servicer for deposit, or have been deposited by the Servicer, in
the Collection Account or thereafter received with respect to any of the Lease
Contracts. To assist the successor Servicer in enforcing all rights under the
Lease Contracts and the Insurance Polices to the extent they relate to the
Lease Contracts, the outgoing Servicer, at its own expense, shall transfer its
records (electronic and otherwise) relating to such Lease Contracts to the
successor Servicer in such form as the successor Servicer may reasonably
request and shall transfer the related Lease Contracts and Lease Contract Files
(to the extent not held by the Trustee) and all other records, correspondence
and documents relating to the Lease Contracts that it may possess to the
successor Servicer in the manner and at such times as the successor Servicer
shall reasonably request. In addition to any other amounts that are then
payable to the Servicer under this Agreement, the Servicer shall be entitled to
receive reimbursements for any unreimbursed Servicer Advance made during the
period prior to the delivery of a Servicer Termination Notice pursuant to this
Section 6.01 which terminates the obligations and right of the Servicer under
this Agreement.
SECTION 6.02 BACK-UP SERVICER TO ACT; TAKING OF BIDS; APPOINTMENT
OF SUCCESSOR SERVICER.
(a)(i) Except as provided in Section 6.02(d) hereof, on and
after the time the Servicer resigns pursuant to Section 5.04 hereof or
receives a Servicer Termination Notice pursuant to Section 6.01(b) or
(c) hereof, the Back-up Servicer shall, unless prevented by law,
automatically and without further action be the successor Servicer.
If the Back-up Servicer cannot serve as successor Servicer, MBIA, or
if an MBIA Default or Termination has occurred and is continuing, the
Trustee, shall appoint another firm acceptable to it and the
Controlling Holders.
(ii) The successor Servicer shall, upon the execution of a
written agreement to be bound by all of the provisions of this
Agreement, be the successor in all respects to the Servicer in its
capacity as Servicer under this Agreement and the transactions set
forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on
the Servicer by the terms and provisions hereof; provided, however,
that the successor Servicer (x) shall not be required to make any
Servicer Advance if such Servicer Advance would be prohibited by
applicable law and (y) shall not be liable for any acts or omissions
of the outgoing Servicer or for any breach by the outgoing Servicer of
any of its representations and warranties contained herein or in any
related document or agreement. With the prior written consent of MBIA
(which consent shall not be unreasonably withheld), the successor
Servicer may subcontract with another firm to act as subservicer so
long as the successor Servicer remains fully responsible and
accountable for performance of all obligations of the Servicer on and
after the time the Servicer receives the Servicer Termination Notice.
The successor Servicer shall be entitled to the Servicer Fee and any
Additional Servicer Fee, subject to the taking of bids as described in
subsection (b) below.
(b) Solely for purposes of establishing the fee to be paid to the
successor Servicer upon receipt of a Servicer Termination Notice, the Back-up
Servicer shall solicit written bids, with a copy to
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MBIA (such bids to include a proposed servicer fee and servicing transfer
costs) from not less than three entities experienced in the servicing of Lease
Contracts similar to the Lease Contracts and that are not affiliates of the
Trustee, the Back-up Servicer, the Servicer or the Transferor and are
reasonably acceptable to MBIA. The Transferor may also solicit additional bids
from other such entities. Any such written solicitation shall prominently
indicate that bids should specify any applicable subservicing fees required to
be paid from the Servicer Fee and that any fees and transfer costs in excess of
the Servicer Fee shall be paid only pursuant to Section 12.02(d)(ix) of the
Trust and Security Agreement as the Additional Servicer Fee. The successor
Servicer shall act as Servicer hereunder and shall, subject to the availability
of sufficient funds in the Collection Account pursuant to Section 12.02(d)(i)
(up to the Servicer Fee) and Section 12.02(d)(ix) (up to any Additional
Servicer Fee and any successor Servicer's Transition Costs) and Section
12.02(d)(ix) (up to any additional Transition Costs) of the Trust and Security
Agreement, receive as compensation therefor a fee equal to the fee proposed in
the bid so solicited which provides for the lowest combination of servicer fee
and transition costs, as reasonably determined by MBIA.
(c) The Servicer, the Back-up Servicer, the Transferor, the
Trustee and such successor Servicer shall take such action, consistent with
this Agreement, as shall be necessary to effectuate any such succession. The
Back-up Servicer (or the Trustee or the Certificateholders if such
Certificateholders have previously reimbursed the Back-up Servicer and the
Trustee therefor) shall be reimbursed for Transition Costs, if any, incurred in
connection with the assumption of responsibilities of the successor Servicer,
upon receipt of documentation of such costs and expenses and in accordance with
Section 12.02(d)(ix) of the Trust and Security Agreement. The Back-up Servicer
shall have no claim against the Transferor or the Trust Estate for any costs
and expenses incurred in effecting such succession in excess of the amount
specified in the definition of "Transition Costs."
(d) Upon written notification to the Trustee that on any
Determination Date following the solicitation of bids provided for in Section
6.02(b) hereof, the sum of the aggregate Implicit Principal Balance for all
Lease Contracts plus any amount on deposit in the Cash Collateral Account less
the Outstanding Principal Amount of all Series is less than the lesser of (1)
$50,000 or (2) the proposed servicing transfer costs set forth in the lowest
bid solicited pursuant to Section 6.02(b) hereof, then the Back-up Servicer
shall be relieved of its obligation under Section 6.02(a)(i) hereof, and MBIA,
or if there is an MBIA Default or Termination, the Transferor shall appoint a
successor Servicer. In such event, MBIA shall be reimbursed for any Transition
Costs incurred solely pursuant to Section 6.02(b) hereof in the manner and to
the extent provided for in Section 12.02(d)(ix) of the Trust and Security
Agreement.
SECTION 6.03 NOTIFICATION TO CERTIFICATEHOLDERS. The Servicer
shall promptly notify the successor Servicer (if specified in the Trust and
Security Agreement), Back-up Servicer, MBIA, the Transferor, the Rating
Agencies and the Trustee of any Servicer Event of Default upon actual knowledge
thereof by a Servicing Officer. Upon any termination of, or appointment of a
successor to, the Servicer pursuant to this Article 6, the Trustee shall give
prompt written notice thereof to the Rating Agencies and the Certificateholders
at their respective addresses appearing in the Certificate Register.
SECTION 6.04 WAIVER OF PAST DEFAULTS. The Trustee shall, at the
direction of MBIA or at the direction of the Controlling Holders, on behalf of
all Certificateholders, with the written consent of MBIA, so long as there is
no MBIA Default or Termination, waive any default by the Servicer in the
performance of its obligations hereunder and its consequences, other than a
default with respect to required deposits and payments in accordance with
Article 3 or a default of the type set forth in clause (vi) or (vii) of Section
6.01(a) hereof, which waiver shall require the consent of each
Certificateholder
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and MBIA. Upon any such waiver of a past default, such default shall cease to
exist, and any Servicer Event of Default arising therefrom shall be deemed to
have been remedied for every purpose of this Agreement. No such waiver shall
extend to any subsequent or other default or impair any right consequent
thereon except to the extent expressly waived. The Trustee shall provide to
the Rating Agencies notification of any such waiver.
SECTION 6.05 EFFECTS OF TERMINATION OF SERVICER.
(a) Upon the appointment of the successor Servicer, the
predecessor Servicer shall remit any Scheduled Payments, Overdue Payments and
any other payments or proceeds that it may receive pursuant to any Lease
Contract or otherwise to the successor Servicer after such date of appointment.
(b) After the delivery of a Servicer Termination Notice, the
outgoing Servicer shall have no further obligations with respect to the
management, administration, servicing, enforcement, custody or collection of
the Lease Contracts and the successor Servicer shall have all of such
obligations, except that the outgoing Servicer will transmit or cause to be
transmitted directly to the successor Servicer, promptly on receipt and in the
same form in which received, any amounts held by the outgoing Servicer
(properly endorsed where required for the successor Servicer to collect them)
received as payments upon or otherwise in connection with the Lease Contracts.
The outgoing Servicer's indemnification obligations pursuant to Section 5.01
hereof will survive the termination of the Servicer but will not extend to any
acts or omissions of a successor Servicer.
SECTION 6.06 NO EFFECT ON OTHER PARTIES. Upon any termination of
the rights and powers of the Servicer pursuant to Section 6.01 hereof, or upon
any appointment of a successor Servicer, all the rights, powers, duties and
obligations of the other parties under this Agreement, the Trust and Security
Agreement, and the Lease Acquisition Agreement shall remain unaffected by such
termination or appointment and shall remain in full force and effect
thereafter.
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ARTICLE 7
THE BACK-UP SERVICER
SECTION 7.01 REPRESENTATIONS OF BACK-UP SERVICER. The Back-up
Servicer makes the following representations and warranties:
(a) The Back-up Servicer has been duly organized and is validly
existing as a national banking association in good standing under the laws of
the United States of America, with power and authority to own its properties
and to conduct its business as such properties shall be currently owned and
such business is presently conducted.
(b) The Back-up Servicer has the power and authority to execute
and deliver this Agreement, the Trust and Security Agreement and the Insurance
Agreement and to carry out their respective terms; and the execution, delivery,
and performance of this Agreement, the Trust and Security Agreement and the
Insurance Agreement shall have been duly authorized by the Back-up Servicer by
all necessary corporate action.
(c) Each of this Agreement, the Trust and Security Agreement and
the Insurance Agreement constitutes a legal, valid, and binding obligation of
the Back-up Servicer enforceable in accordance with its respective terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, or other similar laws affecting the enforcement of creditors'
rights in general and by general principles of equity, regardless of whether
such enforceability shall be considered in a proceeding in equity or at law.
(d) The consummation of the transactions contemplated by this
Agreement, the Trust and Security Agreement and the Insurance Agreement and the
fulfillment of the terms thereof shall not conflict with, result in any breach
of any of the terms and provisions of, nor constitute (with or without notice
or lapse of time) a default under, the articles of incorporation or by-laws of
the Back-up Servicer, or any indenture, agreement, or other instrument to which
the Back-up Servicer is a party or by which it shall be bound; nor result in
the creation or imposition of any Lien upon any of its properties pursuant to
the terms of any such indenture, agreement, or other instrument; nor violate
any law or any order, rule, or regulation applicable to the Back-up Servicer of
any court or of any Federal or state regulatory body, administrative agency, or
other governmental instrumentality having jurisdiction over the Back-up
Servicer or its properties.
(e) There are no proceedings or investigations pending or, to the
Back-up Servicer's best knowledge, threatened before any court, regulatory
body, administrative agency, or other governmental instrumentality having
jurisdiction over the Back-up Servicer or its properties (i) asserting the
invalidity of the Servicing Agreement, the Trust and Security Agreement or the
Insurance Agreement, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement, the Trust and Security Agreement
or the Insurance Agreement, (iii) seeking any determination or ruling that
might materially and adversely affect the performance by the Back-up Servicer
of its obligations under, or the validity or enforceability of, this Agreement,
the Trust and Security Agreement or the Insurance Agreement.
SECTION 7.02 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, BACK-UP SERVICER. Any Person (i) into which the Back-up
Servicer may be merged or consolidated, (ii) which may result from any merger
or consolidation to which the Back-up Servicer shall be a party, or
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(iii) which may succeed to the properties and assets of the Back-up Servicer
substantially AS a whole, which Person in any of the foregoing cases executes
an agreement of assumption to perform every obligation of the Back-up Servicer
hereunder, shall be the successor to the Back-up Servicer under this Agreement
with the prior written consent of MBIA and without any further act on the part
of any of the parties to this Agreement. In the event that the resulting
entity does not meet the eligibility requirements for the Trustee set forth in
the Trust and Security Agreement, the Back-up Servicer, upon the written
request of MBIA, shall resign from its obligations and duties under this
Agreement.
SECTION 7.03 BACK-UP SERVICER RESIGNATION. The Back-up Servicer
shall not resign from its obligations and duties under this Agreement, the
Trust and Security Agreement or the Insurance Agreement except (i) as provided
in Section 7.02 above, or (ii) upon determination that the performance of its
duties shall no longer be permissible under applicable law (any such
determination permitting the resignation of the Back-up Servicer shall be
evidenced by an Opinion of Counsel to such effect delivered to the Trustee and
MBIA). Upon the Back-up Servicer's resignation or termination pursuant to
Section 7.02 hereof or this Section 7.03, notice thereof shall be provided to
the Rating agencies and the Back-up Servicer shall comply with the provisions
of this Agreement until the acceptance of a successor servicer.
SECTION 7.04 OVERSIGHT OF SERVICING.
(a) Prior to each Payment Date, the Back-up Servicer shall review
the Monthly Servicer's Report related thereto and shall determine the
following:
(i) that such Monthly Servicer's Report is complete on
its face;
(ii) that the amount credited to and withdrawn from the
Lockbox Account is the same as the amount set forth in the Monthly
Servicer's Report as so credited; and
(iii) that the amount credited to and withdrawn from the
Collection Account and the Cash Collateral Account, and the balance of
such accounts, as set forth in the records of the Back-up Servicer,
are the same as the amount set forth in the Monthly Servicer's Report.
(b) The Back-up Servicer shall, within 30 days of the receipt
thereof, load the Computer Tape received from the Servicer pursuant to the
Section 4.01 hereof, make sure such Computer Tape is in readable form and shall
calculate and check the following:
(i) the Aggregate IPB as of the most recent Calculation
Date;
(ii) each Series IPB as of the most recent Calculation
Date;
(iii) the Class A Principal Distribution Amount and the
Class B Principal Distribution Amount for each Series of Certificates
as of the most recent Payment Date; and
(iv) the Annualized Gross Default Rate, the Cumulative
Gross Default Rate and the Delinquency Rate for the related Due Period
as set forth in the most recent Monthly Servicer's Report.
In addition, the Back-up Servicer shall confirm that the items set forth in the
Monthly Servicer's Report, other than the items listed in the section entitled
"Deposits by or on behalf of the Servicer" are accurate
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based solely on a comparison to the Computer Tape referred to above.
(c) In the event of any discrepancy between the information set
forth in subparagraphs (a) and (b) as calculated by the Servicer from that
determined or calculated by the Back-up Servicer, the Back-up Servicer shall
promptly notify the Servicer, the Trustee, the Certificateholders and MBIA of
such discrepancy. If within 30 days of such notice being provided to the
Servicer, the Back-up Servicer and the Servicer are unable to resolve such
discrepancy, the Back-up Servicer shall promptly notify the Rating Agencies,
MBIA and the Holders of the Certificates of such discrepancy.
(d) Based solely on the information included in the Series Lease
Schedule delivered on each Acquisition Date and the Computer Tapes provided
each Payment Date thereafter, the Back-up Servicer shall determine that any
Additional Lease Contracts satisfy the criterion set forth in Section 3.04(b)
of the Lease Acquisition Agreement and that the acquisition of such Additional
Lease Contracts do not violate the Concentration Limits set forth in the Lease
Acquisition Agreement.
(e) The Back-up Servicer will make a site visit to the offices of
the Servicer on an annual basis for the purpose of reviewing the operations of
the Servicer. The reasonable out-of-pocket costs and expenses of the Back-up
Servicer incurred in connection with this Agreement, including without
limitation, the site visit referred to in the preceding sentence will be
reimbursed to the Back-up Servicer by the Servicer.
(f) Other than as specifically set forth elsewhere in this
Agreement, the Back-up Servicer shall have no obligation to supervise, verify,
monitor or administer the performance of the Servicer and shall have no
liability for any action taken or omitted by the Servicer.
(g) The Back-up Servicer shall consult fully with the Servicer as
may be necessary from time to time to perform or carry out the Back-up
Servicer's obligations hereunder, including the obligation to succeed at any
time to the duties and obligations of the Servicer as servicer under Section
6.02 hereof.
SECTION 7.05 BACK-UP SERVICER COMPENSATION. As compensation for
the performance of its obligations as Back-up Servicer under this Agreement the
Back-up Servicer shall be entitled to receive the Back-up Servicer Fee.
SECTION 7.06 DUTIES AND RESPONSIBILITIES.
(a) The Back-up Servicer shall perform such duties and only such
duties as are specifically set forth in this Agreement, and no implied
covenants or obligations shall be read into this Agreement against the Back-up
Servicer; and
(b) In the absence of bad faith or negligence on its part, the
Back-up Servicer may conclusively rely as to the truth of the statements and
the correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Back-up Servicer and conforming to the requirements
of this Agreement; but in the case of any such certificates or opinions, which
by any provision hereof are specifically required to be furnished to the
Back-up Servicer, the Back-up Servicer shall be under a duty to examine the
same and to determine whether or not they conform to the requirements of this
Agreement.
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ARTICLE 8
MISCELLANEOUS PROVISIONS
SECTION 8.01 TERMINATION.
(a) Except with respect to a particular party under Sections 5.01,
5.04, 5.05, 6.01, 7.02 or 7.03 hereof, the respective duties and obligations of
the Servicer, the Transferor, the Back-up Servicer and the Trustee created by
this Agreement shall terminate upon the discharge of the Trust and Security
Agreement in accordance with its terms; and the respective duties and
obligations of the Trustee shall terminate with respect to the Trustee in the
event the Trustee resigns or is replaced under Section 7.09 of the Trust and
Security Agreement; provided, however, that no resignation or removal of the
Trustee and no appointment of a successor Trustee shall become effective until
the acceptance of appointment by the successor Trustee under Section 7.10 of
the Trust and Security Agreement. Upon the termination of this Agreement
pursuant to this Section 8.01(a), the Servicer shall pay all monies with
respect to the Lease Assets held by the Servicer and to which the Servicer is
not entitled to the Transferor or upon the Transferor's order.
(b) This Agreement shall not be automatically terminated as a
result of an Event of Default under the Trust and Security Agreement or any
action taken by the Trustee thereafter with respect thereto, and any
liquidation or preservation of the Trust Estate by the Trustee thereafter shall
be subject to the rights of the Servicer to service the Lease Receivables and
to collect servicing compensation as provided hereunder.
SECTION 8.02 AMENDMENTS.
(a) Subject to paragraph (b) of this Section 8.02, this Agreement
may be amended from time to time by the Transferor, the Servicer, the Back-up
Servicer, and the Trustee, with the consent of MBIA but without the consent of
any of the Certificateholders, to cure any ambiguity, to correct or supplement
any provisions herein that may be inconsistent with any other provisions herein
and therein, as the case may be.
(b) The provisions of this Agreement may be waived from time to
time and this Agreement may be amended from time to time by the Transferor, the
Servicer and the Back-up Servicer, with the consent of the Trustee, MBIA and
the Controlling Holders, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement;
provided, however, that no such amendment or waiver shall, without the consent
of each Certificateholder, (i) alter the priorities with which any allocation
of funds shall be made under this Agreement, (ii) permit the creation of any
Lien on the Trust Estate (other than the Lien of the Trust and Security
Agreement) or any portion thereof or deprive any such Certificateholder of the
benefit of this Agreement with respect to the Trust Estate or any portion
thereof, (iii) modify this Section 8.02 or (iv) modify any of the items
referred to in clauses (i) through (viii) of Section 9.02 (a) of the Trust and
Security Agreement.
(c) Promptly after the execution of any amendment, the Servicer
shall send to the Trustee, MBIA, each Holder of the Certificates and each
Rating Agency a conformed copy of each such amendment.
(d) Any amendment or modification effected contrary to the
provisions of this Section 8.02 shall be void.
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(e) The manner of obtaining any consents from the
Certificateholders and of evidencing the authorization of the execution thereof
by Certificateholders shall be subject to such reasonable regulations as the
Trustee may prescribe.
SECTION 8.03 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
CONFLICT OF LAWS PRINCIPLES AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 8.04 NOTICES. All demands, notices and communications
hereunder shall be in writing and shall be delivered or mailed by registered or
certified United States mail, postage prepaid, and addressed, in each case as
follows: (a) if to the Transferor, at ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇-▇,
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇; (b) if the Servicer, at ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇; (c) if to the Trustee, at ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇; (d) if to MBIA, at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Structured Finance - Insured Portfolio Management
(SF-IPM); or (e) if to the Certificateholders at the address set forth on
Exhibit A to the applicable Certificate Purchase Agreement. All notices and
demands shall be deemed to have been given either at the time of the delivery
thereof to any officer of the Person entitled to receive such notices and
demands at the address of such Person for notices hereunder, or on the third
day after the mailing thereof to such address, as the case may be.
SECTION 8.05 SEVERABILITY OF PROVISIONS. If one or more of the
provisions of this Agreement shall be for any reason whatever held invalid,
such provisions shall be deemed severable from the remaining covenants and
provisions of this Agreement, and shall in no way affect the validity or
enforceability of such remaining provisions, the rights of any parties hereto,
or the rights of the Trustee, MBIA or any Certificateholder. To the extent
permitted by law, the parties hereto waive any provision of law which renders
any provision of this Agreement prohibited or unenforceable in any respect.
SECTION 8.06 BINDING EFFECT. All provisions of this Agreement
shall be binding upon and inure to the benefit of the respective successors and
assigns of the parties hereto, and all such provisions shall inure to the
benefit of the Certificateholders. This Agreement may not be modified except
by a writing signed by all parties hereto.
SECTION 8.07 ARTICLE HEADINGS AND CAPTIONS. The article headings
and captions in this Agreement are for convenience of reference only, and shall
not limit or otherwise affect the meaning hereof.
SECTION 8.08 LEGAL HOLIDAYS. In the case where the date on which
any action required to be taken, document required to be delivered or payment
required to be made is not a Business Day, such action, delivery or payment
need not be made on such date, but may be made on the next succeeding Business
Day.
SECTION 8.09 ASSIGNMENT FOR SECURITY FOR THE CERTIFICATES. The
Servicer and the Back-up Servicer understand that the Transferor will convey to
the Trustee all its right, title and interest to this Agreement. The Servicer
and the Back-up Servicer consent to such conveyance and further agree that all
representations, warranties, covenants and agreements of the Servicer and the
Back-up Servicer made
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herein shall also be for the benefit of and inure to the Trustee and all
Holders from time to time of the Certificates.
SECTION 8.10 NO SERVICING ASSIGNMENT. Notwithstanding anything to
the contrary contained herein, except as provided in Sections 5.02, 5.04 and
8.09 hereof, this Agreement may not be assigned by the Transferor or the
Servicer without the prior written consent of MBIA and the Controlling Holders.
SECTION 8.11 MBIA DEFAULT OR TERMINATION. If an MBIA Default or
Termination occurs and is continuing, MBIA's right to consent hereunder and to
direct the Trustee shall be voided and, in such event, in all provisions of
this Agreement wherein MBIA's consent or direction is required or permitted,
the consent or direction of the Controlling Holders shall be required or
permitted unless a larger number of Holders is required under the relevant
provision of this Agreement.
SECTION 8.12 THIRD PARTY BENEFICIARY. Each of MBIA and the
Certificateholders are express third party beneficiaries to this Agreement.
SECTION 8.13 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
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IN WITNESS WHEREOF, the Transferor, the Servicer, the Trustee and the
Back-up Servicer have caused this Servicing Agreement to be duly executed by
their respective officers thereunto duly authorized as of the date and year
first above written.
GF FUNDING CORP. IV, as Transferor
By:
----------------------------------------
Name:
Title:
GRANITE FINANCIAL, INC., as Servicer
By:
----------------------------------------
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee and Back-up Servicer
By:
----------------------------------------
Name:
Title: