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SALE AND SERVICING AGREEMENT
Dated as of August 14, 1998
among
FFCA FRANCHISE LOAN OWNER TRUST 1998-1
(Issuer)
FFCA LOAN WAREHOUSE CORPORATION
(Depositor)
FFCA ACQUISITION CORPORATION
(Loan Originator)
FRANCHISE FINANCE CORPORATION OF AMERICA
(Servicer)
and
LASALLE NATIONAL BANK
(Indenture Trustee)
FFCA FRANCHISE LOAN OWNER TRUST 1998-1
FRANCHISE LOAN BACKED NOTES ISSUABLE IN SERIES
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.01 Definitions......................................................1
Section 1.02 Other Definitional Provisions...................................31
ARTICLE II
CONVEYANCE OF THE TRUST ESTATE; ADDITIONAL
NOTE PRINCIPAL BALANCES
Section 2.01 Conveyance of the Trust Estate; Additional Note Principal
Balances..................................................31
Section 2.02 Ownership and Possession of Loan Files..........................33
Section 2.03 Books and Records; Intention of the Parties.....................33
Section 2.04 Delivery of Loan Documents......................................34
Section 2.05 Acceptance by the Indenture Trustee of the Loans; Certain
Substitutions and Repurchases; Certification by the
Custodian..................................................37
Section 2.06 Conditions Precedent to Transfer Dates and Collateral
Value Excess Dates.........................................38
Section 2.07 Termination of Revolving Period.................................40
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Depositor.................40
Section 3.02 Representations and Warranties of the Loan Originator...........43
Section 3.03 Representations, Warranties and Covenants of the Servicer.......45
Section 3.04 Representations and Warranties Regarding Loans..................48
Section 3.05 Purchase and Substitution.......................................56
Section 3.06 Securitizations.................................................59
Section 3.07 Loan Originator Put; Servicer Call..............................60
Section 3.08 Modification of Underwriting Guidelines.........................60
Section 3.09 Environmental Policy and Business Interruption Insurance........60
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ARTICLE IV
ADMINISTRATION AND SERVICING OF THE LOANS
Section 4.01 Duties of the Servicer..........................................61
Section 4.02 Vacancies and Inspections.......................................63
Section 4.03 Fidelity Bond; Errors and Omissions Insurance...................64
Section 4.04 Filing of Continuation Statements...............................64
Section 4.05 Establishment and Administration of Escrow Account..............65
Section 4.06 Subservicing....................................................66
Section 4.07 Successor Servicers.............................................68
Section 4.08 Maintenance of Insurance........................................68
Section 4.09 Periodic Advances...............................................68
Section 4.10 Foreclosure; Repossession and Alternatives......................69
Section 4.11 Title, Management and Disposition of Foreclosure Property.......70
Section 4.12 Compliance With Request for Information.........................72
Section 4.13 Lockbox Trigger Event; Lockbox Account..........................72
Section 4.14 Valuation of Loans, Hedge Value and Retained Securities
Value; Market Value Agent..................................73
ARTICLE V
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01 Collection Account and Distribution Account.....................74
Section 5.02 Payments to Securityholders.....................................78
Section 5.03 Trust Accounts; Trust Account Property..........................79
Section 5.04 Advance Account.................................................81
Section 5.05 Transfer Obligations; Transfer Obligations Account..............81
ARTICLE VI
STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS
Section 6.01 Statements......................................................83
Section 6.02 Specification of Certain Tax Matters............................86
ARTICLE VII
GENERAL SERVICING PROCEDURE
Section 7.01 Due-On-Sale; Due-on-Encumbrance.................................87
Section 7.02 Release of Loan Files...........................................88
Section 7.03 Servicing Compensation..........................................89
Section 7.04 Statement as to Compliance and Financial Statements.............89
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Section 7.05 Independent Public Accountants'Servicing Report.................90
Section 7.06 Right to Examine Servicer Records...............................90
Section 7.07 Reports to the Indenture Trustee; Collection Account
Statements.................................................91
Section 7.08 Access to Information...........................................91
ARTICLE VIII
HEDGING
Section 8.01 Hedging Instruments.............................................92
ARTICLE IX
THE SERVICER
Section 9.01 Indemnification; Third Party Claims.............................93
Section 9.02 Merger or Consolidation of the Servicer.........................95
Section 9.03 Limitation on Liability of the Servicer and Others..............95
Section 9.04 Servicer Not to Resign; Assignment..............................95
Section 9.05 Relationship of Servicer to Issuer and the Indenture Trustee....96
Section 9.06 Servicer May Own Securities.....................................96
ARTICLE X
DEFAULT
Section 10.01 Events of Default..............................................97
Section 10.02 Appointment of Successor.......................................98
Section 10.03 Waiver of Defaults............................................100
Section 10.04 Accounting Upon Termination of Servicer.......................100
ARTICLE XI
TERMINATION
Section 11.01 Termination...................................................100
Section 11.02 Optional Termination..........................................101
Section 11.03 Notice of Termination.........................................101
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01 Acts of Noteholders...........................................101
Section 12.02 Amendment.....................................................101
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Section 12.03 Recordation of Agreement......................................102
Section 12.04 Duration of Agreement.........................................102
Section 12.05 Governing Law.................................................103
Section 12.06 Notices.......................................................103
Section 12.07 Severability of Provisions....................................104
Section 12.08 No Partnership................................................104
Section 12.09 Counterparts..................................................104
Section 12.10 Successors and Assigns........................................104
Section 12.11 Headings......................................................104
Section 12.12 Actions of Securityholders....................................104
Section 12.13 Non-Petition Agreement........................................105
Section 12.14 Holders of the Trust Certificates.............................105
Section 12.15 FFCA to Guarantee Certain Loan Originator Obligations.........105
Section 12.16 Reports in Electronic Form....................................106
EXHIBIT A - Form of Notice of Additional Note Principal Balance
EXHIBIT B - Form of Servicer's Remittance Report to Trustee
EXHIBIT C - Form of S&SA Assignment
EXHIBIT D - Referenced Documents
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This Sale and Servicing Agreement is entered into effective as
of August 14, 1998, among FFCA FRANCHISE LOAN OWNER TRUST 1998-1, a Delaware
business trust (the "Issuer" or the "Trust"), FFCA LOAN WAREHOUSE CORPORATION, a
Delaware corporation, as Depositor (the "Depositor"), FFCA ACQUISITION
CORPORATION, a Delaware corporation, as Loan Originator (the "Loan Originator"),
FRANCHISE FINANCE CORPORATION OF AMERICA, a Delaware corporation ("FFCA"), as
Servicer (the "Servicer"), and LASALLE NATIONAL BANK, a national banking
association, as Indenture Trustee on behalf of the Noteholders (in such
capacity, the "Indenture Trustee").
W I T N E S S E T H:
In consideration of the mutual agreements herein contained,
the Issuer, the Depositor, the Loan Originator, the Servicer and the Indenture
Trustee hereby agree as follows for the benefit of each of them and for the
benefit of the holders of the Notes and the Trust Certificates issued hereunder:
ARTICLE I
DEFINITIONS
Section 1.01 DEFINITIONS.
Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the meanings
specified in this Article. Unless otherwise specified, all calculations of
interest described herein shall be made on the basis of a 360-day year and the
actual number of days elapsed in each Accrual Period.
ACCRUAL PERIOD: With respect to the Notes, the period
commencing on and including the preceding Payment Date (or, in the case of the
first Payment Date, the period commencing on and including the first Transfer
Date) and ending on the day preceding the related Payment Date.
ACT OR SECURITIES ACT: The Securities Act of 1933, as amended.
ADDITIONAL NOTE PRINCIPAL BALANCE:
(a) With respect to each Transfer Date, the lesser of (i) the
product of (x) an amount equal to the average of the Advance Factors
with respect to the Loans conveyed on such date, weighted by Transfer
Cut-off Date Principal Balances multiplied by (y) the sum of the
Transfer Cut-off Date Principal Balances of the Loans conveyed as of
such Transfer Date, and (ii) the product of (x) the average Maximum
Advance Factors of the Loans conveyed on such date weighted by Transfer
Cut-off Date Principal Balances multiplied by (y) the sum of the Market
Value of all Loans conveyed on such date, in either case subtracting
from the product any Overcollateralization Shortfall as of such date.
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(b) With respect to each Collateral Value Excess Date, an
amount equal to the Additional Note Principal Balance that the Issuer
sells to the Initial Noteholder pursuant to the Note Purchase Agreement
on such Collateral Value Excess Date.
ADJUSTABLE RATE LOAN: Any Loan, the Loan Interest Rate with
respect to which is subject to adjustment; provided that under the terms of such
Loan, such adjustments may not modify the Loan Interest Rate to a rate that is
more than six percent above or two percent below the Loan Interest Rate at the
origination of such Loan.
ADMINISTRATION AGREEMENT: The Administration Agreement, dated
as of August 14, 1998, among the Issuer and FFCA, as Administrator and as
Servicer.
ADVANCE ACCOUNT: The account established and maintained
pursuant to SECTION 5.04.
ADVANCE FACTOR: With respect to each Loan, (a) as of the
related Transfer Date, the lesser of (x) 85% (or such other percentage specified
in writing by the Issuer as the Advance Factor with respect to such Loan) and
(y) the Maximum Advance Factor with respect to such Loan and (b) thereafter, the
Maximum Advance Factor with respect to such Loan.
AFFILIATE: With respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, the term "control", when used with
respect to any specified Person, means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise, and the terms "controlling" and
"controlled" have corresponding meanings.
AGREEMENT: This Sale and Servicing Agreement and all
amendments hereof and supplements hereto.
ALTA: The American Land Title Association and its successors
in interest.
ASSIGNMENT: A LPA Assignment or S&SA Assignment.
ASSIGNMENT OF LOAN DOCUMENTS: With respect to each Loan, a
blanket assignment of the related Loan File (other than those Loan Documents in
the Loan File specifically assigned by another Loan Document) with the assignee
in blank, assigning all of the Loan Originator's right, title and interest in
the related Loan File, including but not limited to, the Promissory Note, the
Mortgage and Security Agreement.
ASSIGNMENT OF MORTGAGE: With respect to any Mortgage Loan, an
assignment in blank of the related Mortgage, notice of transfer or equivalent
instrument in recordable form, sufficient under the laws of the jurisdiction
wherein the related Mortgaged Property is located to reflect the assignment and
pledge of such Mortgage.
BASIC DOCUMENTS: This Agreement, the Administration Agreement,
the Custodial Agreement, the Indenture, the Loan Purchase Agreement, the Note
Purchase Agreement, the
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Trust Agreement, the Collection Account Letter Agreement, each Hedging
Instrument and, as and when required to be executed and delivered, the
Assignments and the Lockbox Agreement.
BORROWER: The obligor or obligors on a Promissory Note;
including any person who has assumed or guaranteed the obligations of the
obligor or obligors under such Promissory Note. With respect to each Borrower
that is a special purpose entity, "Borrower" shall be deemed to include the
lessee (including all Affiliates of such lessee and any guarantor of the
lessee's obligations under the lease) of the related Loan Collateral.
BRAND: With respect to each Loan, the franchise concept, if
any, used by the Borrower in operating the related Loan Collateral.
BUSINESS DAY: Any day other than (i) a Saturday or Sunday, or
(ii) a day on which banking institutions in New York City or in the city in
which the corporate trust office of the Indenture Trustee is located or the city
in which the Servicer's servicing operations are located are authorized or
obligated by law or executive order to be closed.
C&G STORE MORTGAGE LOANS: Mortgage Loans secured by
convenience and gasoline stores.
CD FACILITY MORTGAGE LOANS: Mortgage Loans secured by casual
dining or family dining establishments.
CERTIFICATEHOLDER: A holder of a Trust Certificate.
CERTIFICATE REGISTER: The register established pursuant to
SECTION 3.4 of the Trust Agreement.
CLEAN-UP CALL DATE: The first Payment Date occurring on or
after the end of the final Revolving Period on which the Note Principal Balance
declines to 10% or less of the aggregate Note Principal Balance as of the end of
such final Revolving Period.
CLOSING DATE: August 14, 1998, or with respect to a Series of
Notes subsequent to the Series issued on the date hereof, as set forth in the
related Indenture Supplement.
CODE: The Internal Revenue Code of 1986, as amended from time
to time, and the regulations promulgated by the United States Treasury
thereunder.
COLLATERAL VALUE: With respect to each Loan and each Business
Day, an amount equal to (i) the product of the lesser of (x) the Principal
Balance of such Loan after giving effect to all payments received in respect of
principal thereon prior to such Business Day and (y) the Market Value of such
Loan, multiplied by the Advance Factor applicable to such Loan less (ii) the
aggregate unreimbursed Servicing Advances and Periodic Advances attributable to
such Loan; provided, however, that the Collateral Value shall be zero with
respect to each Loan that is 30 or more days Delinquent or which the Loan
Originator is required to repurchase pursuant to SECTION 2.05 or SECTION 3.05
hereof.
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COLLATERAL VALUE EXCESS: With respect to any Business Day, an
amount equal to the positive difference, if any, between (a) (i) the aggregate
Collateral Value of all Loans in the Loan Pool on such Business Day, or (ii) in
the event that a Performance Trigger shall have occurred and not been Deemed
Cured, the aggregate Collateral Value of all Loans in the Loan Pool on such
Business Day multiplied by 0.98 and (b) the Note Principal Balance on such
Business Day.
COLLATERAL VALUE EXCESS DATE: Any Business Day on which a
Collateral Value Excess exists and on which the Initial Noteholder purchases
Additional Note Principal Balance in respect thereof pursuant to SECTION 2.01
hereof.
COLLECTION ACCOUNT: The account designated as such,
established and maintained by the Servicer in accordance with SECTION 5.01(a)(1)
hereof.
COLLECTION ACCOUNT LETTER AGREEMENT: the Letter Agreement
dated August 14, 1998, between FFCA and the Issuer and acknowledged and agreed
to by Norwest Bank Arizona, N.A., Norwest Investment Services, Inc. and the
Indenture Trustee.
CONDEMNATION PROCEEDS: With respect to a Mortgage Loan, all
awards or settlements in respect of the related Mortgaged Property, whether
permanent or temporary, partial or entire, by exercise of the power of eminent
domain or condemnation.
CUSTODIAL AGREEMENT: The custodial agreement dated as of
August 14, 1998, among the Issuer, the Loan Originator, the Servicer, the
Indenture Trustee and the Custodian, providing for the retention of the
Indenture Trustee's Loan Files by the Custodian on behalf of the Indenture
Trustee.
CUSTODIAN: Any custodian appointed by the Indenture Trustee
pursuant to the Custodial Agreement, which custodian shall not be affiliated
with the Servicer, the Loan Originator, any Subservicer or the Depositor.
LaSalle National Bank shall be the initial Custodian pursuant to the terms of
the Custodial Agreement.
CUSTODIAN FEE: If applicable, the annual fee payable to the
Custodian, calculated and payable monthly on each Payment Date pursuant to
SECTION 5.01(c)(3)(i) hereof equal to the fee, if any, set forth in the
Custodial Agreement.
DAILY INTEREST ACCRUAL AMOUNT: With respect to each day,
interest accrued at the Note Interest Rate with respect to such day on the Note
Principal Balance as of the preceding Business Day after giving effect to all
changes to the Note Principal Balance on or prior to such preceding day.
DCR: Duff & ▇▇▇▇▇▇ Credit Rating Co.
DEEMED CURED: A Performance Trigger or Rapid Amortization
Trigger shall be Deemed Cured on the 25th consecutive Business Day on which the
condition that originally gave rise to such event has not continued.
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DEFAULT: Any occurrence that is, or with notice or the lapse
of time or both would become, an Event of Default.
DEFAULTED LOAN: With respect to any date of determination, any
Loan, including, without limitation, any Liquidated Loan with respect to which
any of the following has occurred as of the end of the preceding Due Period: (a)
foreclosure or similar proceedings have been commenced; (b) any portion of a
Monthly Payment becomes 59 days past due by the related Borrower; or (c) the
Servicer or any Subservicer has determined in good faith and in accordance with
the Servicing Standard that such Loan is in default or imminent default.
DEFECTIVE LOAN: As defined in SECTION 3.05(a) hereof.
DELETED LOAN: A Loan replaced or to be replaced by one or more
than one Qualified Substitute Loan.
DELINQUENT: A Loan is "Delinquent" if any Monthly Payment due
thereon is not made by the close of business on the day such Monthly Payment is
required to be paid. A Loan is "30 days Delinquent" if any Monthly Payment due
thereon has not been received by the close of business on the corresponding day
of the month immediately succeeding the month in which such Monthly Payment was
required to be paid or, if there is no such corresponding day (e.g., as when a
30-day month follows a 31-day month in which a payment was required to be paid
on the 31st day of such month), then on the last day of such immediately
succeeding month. The determination of whether a Loan is "60 days Delinquent,"
"90 days Delinquent", etc. shall be done in like manner.
DELIVERY: When used with respect to Trust Account Property
means:
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that
constitute "instruments" within the meaning of SECTION 9-105(1)(i) of
the UCC and are susceptible of physical delivery (except with respect
to Trust Account Property consisting of certificated securities (as
defined in SECTION 8-102(a)(4) of the UCC)), physical delivery to the
Indenture Trustee or its custodian endorsed to the Indenture Trustee or
its custodian or endorsed in blank;
(b) with respect to a certificated security (i) delivery of
such certificated security endorsed to, or registered in the name of,
the Indenture Trustee or endorsed in blank to a securities intermediary
(as defined in SECTION 8-102(a)(14) of the UCC) and the making by such
securities intermediary of appropriate entries in its records
identifying such certificated securities as credited to the securities
account (as defined in SECTION 8-501(a) of the UCC) of the Indenture
Trustee, or (ii) by delivery thereof to a "clearing corporation" (as
defined in SECTION 8-102(5) of the UCC) and the making by such clearing
corporation of appropriate entries in its records crediting the
securities account of a securities intermediary by the amount of such
certificated security and the making by such securities intermediary of
appropriate entries in its records identifying such certificated
securities as credited to the securities account of the Indenture
Trustee (all of the Trust Account Property described in subsections (a)
and (b), "Physical Property");
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and, in any event, any such Physical Property in registered form shall
be registered in the name of the Indenture Trustee or its nominee or
custodian; and such additional or alternative procedures as may
hereafter become appropriate to effect the complete transfer of
ownership of any such Trust Account Property (as defined herein) to the
Indenture Trustee or its nominee or custodian, consistent with then
applicable law or regulations or the interpretation thereof;
(c) with respect to any security issued by the U.S. Treasury,
FNMA or FHLMC that is a book-entry security held through the Federal
Reserve System pursuant to federal book-entry regulations, the
following procedures, all in accordance with applicable law, including
applicable federal regulations and Articles 8 and 9 of the UCC: the
making by a Federal Reserve Bank of an appropriate entry crediting such
Trust Account property to an account of a securities intermediary that
is also a "participant" pursuant to applicable federal regulations; the
making by such securities intermediary of appropriate entries in its
records crediting such book-entry security held through the Federal
Reserve System pursuant to federal book-entry regulations and Articles
8 and 9 of the UCC to the securities account of the Indenture Trustee;
and such additional or alternative procedures as may hereafter become
appropriate to effect complete transfer of ownership of any such Trust
Account Property to the Indenture Trustee or its nominee or custodian,
consistent with then applicable law or regulations or the
interpretation thereof; and
(d) with respect to any item of Trust Account Property that is
an uncertificated security (as defined in SECTION 8-102(a)(18) of the
UCC) and that is not governed by clause (c) above, registration in the
records of the Issuer thereof in the name of the securities
intermediary, and the making by such securities intermediary of
appropriate entries in its records crediting such uncertificated
certificates to the Indenture Trustee.
DENOMINATION: With respect to a Note, the portion of the Note
Principal Balance represented by such Note as specified on the face thereof.
DEPOSITOR: FFCA Loan Warehouse Corporation, a Delaware
corporation, and any successor thereto.
DETERMINATION DATE: With respect to any Payment Date, the
tenth calendar day of the month in which such Payment Date occurs or if such day
is not a Business Day, the immediately preceding Business Day.
DISTRIBUTION ACCOUNT: The account established and maintained
pursuant to SECTION 5.01(a)(2) hereof.
DUE DATE: The day of the month on which the Monthly Payment is
due from the Borrower with respect to a Loan.
DUE DILIGENCE PACKAGE: With respect to a Loan, collectively,
(i) a complete and accurate internal credit write-up with respect to the related
Borrower, (ii) a site inspection and
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valuation report with respect to the Mortgaged Property consistent with the
Underwriting Guidelines, (iii) (x) if such Loan is a C&G Store Mortgage Loan, a
copy of the schedule to the insured properties declaration of the Environmental
Policy or letter from an Environmental Insurer evidencing that such Mortgage
Loan is covered by the Environmental Policy and (y) in the case of each other
Mortgage Loan, (I) (x) a copy of a Phase I environmental assessment conducted
with respect to the related Mortgaged Property, that concluded that no further
investigation of the related Mortgaged Property was necessary or (y) in those
cases where the Phase I environmental assessment concluded that further
investigation of such Mortgaged Property was necessary, copies of the Phase II
environmental assessments conducted with respect to the related Mortgaged
Property, evidencing that no remediation or other further action was required
with respect to such Mortgaged Property or (II) a copy of the schedule to the
insured properties declaration of the Environmental Policy or letter from an
Environmental Insurer evidencing that such Mortgage Loan is covered by the
Environmental Policy, (iv) a complete description of any modifications made to
such Loan since the completion of funding contemplated under the applicable Loan
Documents, without limitation, any information concerning any prior borrower
with respect to any of the related Loan Collateral and (v) such other
information as may be reasonably requested by the Majority Noteholders from time
to time.
DUE PERIOD: With respect to any Determination Date or Payment
Date, the calendar month immediately preceding such Determination Date or
Payment Date, as the case may be.
ELIGIBLE ACCOUNT: At any time, an account which is: (i)
maintained with a depository institution or trust company (a) the long-term debt
obligations of which are at such time rated by each Rating Agency in one of
their three highest long-term rating categories or (b) the short-term debt
obligations of which are then rated by each Rating Agency in their highest
short-term rating category; (ii) fully insured by either the Bank Insurance Fund
or the Savings Association Insurance Fund of the FDIC; (iii) a trust account
(which shall be a "segregated trust account") maintained with the corporate
trust department of a federal or state chartered depository institution or trust
company with trust powers and acting in its fiduciary capacity for the benefit
of the Indenture Trustee and the Issuer, which depository institution or trust
company shall have capital and surplus of not less than $50,000,000; or (iv)
with the prior written consent of the Majority Noteholders, any other account.
(Each reference in this definition of "Eligible Account" to the Rating Agency
shall be construed as a reference to ▇▇▇▇▇'▇ and DCR).
ELIGIBLE SERVICER: A Person that (a) (i) has demonstrated the
ability professionally and competently to service a portfolio of commercial
mortgage loans similar to the Loans and (ii) has a net worth calculated in
accordance with GAAP of at least $5,000,000 or (b) any other Person to which the
Majority Noteholders may consent in writing.
ENVIRONMENTAL INSURER: American International Specialty Lines
Insurance Company, a member company of American International Group, Inc., or
such other environmental insurer as the Majority Noteholders in their sole
discretion may consent to in writing.
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ENVIRONMENTAL POLICY: Any one of the secured creditor impaired
property policies issued by an Environmental Insurer, together with any
endorsements thereto, insuring the Loan Originator and the Indenture Trustee, as
their interests appear, for losses with respect to certain Mortgage Loans caused
by the presence of hazardous substances on or the migration of hazardous
substances from the related Mortgage Properties, acceptable to the Majority
Noteholders in their reasonable discretion, provided that the Environmental
Policy issued by American International Specialty Lines Insurance Company shall
be deemed acceptable to the Majority Noteholders.
EQUIPMENT: All personalty, furniture, securities and any other
property or assets of any kind securing an Equipment Loan.
EQUIPMENT LOAN: A Loan secured by a valid and enforceable
security interest in Equipment of the related Borrower, evidenced by a Security
Agreement and, if applicable, Loan Agreement with respect to such Equipment.
ESCROW ACCOUNT: The separate account or accounts, each of
which shall be an Eligible Account, created and maintained pursuant to SECTION
4.05 hereof.
ESCROW PAYMENTS: With respect to any Mortgage Loan, the
amounts constituting ground rents, taxes, assessments, water rates, sewer rents,
municipal charges, fire, hazard, liability and other insurance premiums,
condominium charges, and any other payments required to be escrowed by the
related Borrower with the lender pursuant to the Mortgage or any other document.
EVENT OF DEFAULT: As described in SECTION 10.01 hereof.
EXTENSION DATE: Any day on which there occurs a Securitization
of Loans with an aggregate Principal Balance at least equal to 66.67% (or such
lesser amount as may be agreed to in writing by the Majority Noteholders) of the
Pool Principal Balance as of the closing date with respect to such
Securitization, and with respect to which Securitization (i) the sum of (x) the
cash Securitization Proceeds and (y) the Retained Securities Value of any
Retained Securities issued in connection therewith was at least equal to the
aggregate Principal Balance of the Loans included in such Securitization as of
the closing date with respect to such Securitization and (ii) immediately after
giving effect to the sale of Loans pursuant to such Securitization, no Borrower
has an Individual Borrower Concentration greater than $30,000,000.
FDIC: The Federal Deposit Insurance Corporation and any
successor thereto.
FFCA: Franchise Finance Corporation of America, a Delaware
corporation.
FFCA ACQUISITION CORP.: FFCA Acquisition Corporation, a
Delaware corporation.
FHLMC: The Federal Home Loan Mortgage Corporation and any
successor thereto.
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FIDELITY BOND: As described in SECTION 4.03 hereof.
FIXED CHARGE COVERAGE RATIO: With respect to a Loan, as of any
date of determination and for any period, the applicable "Fixed Charge Coverage
Ratio" determined in accordance with, and defined in, the Underwriting
Guidelines.
FNMA: The Federal National Mortgage Association and any
successor thereto.
FORECLOSED LOAN: As of any date of determination, (a) any
Mortgage Loan that has been discharged as a result of (i) the completion of
foreclosure or comparable proceedings; (ii) the Owner Trustee's acceptance of
the deed or other evidence of title to the related Mortgaged Property in lieu of
foreclosure or other comparable proceeding; or (iii) the acquisition by the
Owner Trustee of title to the related Mortgaged Property by operation of law and
(b) any Equipment Loan that has been discharged as a result of a repossession or
comparable conversion of the ownership of the related Equipment.
FORECLOSURE PROPERTY: Any real property securing a Foreclosed
Loan that has been acquired by the Servicer through foreclosure, deed in lieu of
foreclosure or similar proceedings in respect of the related Loan if such
Foreclosed Loan is a Mortgage Loan or personalty securing a Foreclosed Loan
acquired by the Servicer pursuant to a foreclosure or other appropriate
procedure in accordance with applicable law if such Foreclosed Loan is an
Equipment Loan.
GAAP: Generally accepted accounting principles as in effect in
the United States.
GROUND LEASE: A lease for which the related Borrower has a
leasehold interest as a lessee of either the land, or the land and the
improvements, located at the related Mortgaged Property.
HAZARDOUS MATERIAL: Each of (a) those substances included
within the definitions of any one or more of the terms "contaminants,"
"pollutants," "hazardous substances," "hazardous materials" and "toxic
substances" in CERCLA, RCRA, and the Hazardous Materials Transportation Act, as
amended, 49 U.S.C. ▇▇.▇▇. 1801 et seq., and in the regulations promulgated
pursuant thereto; (b) those substances listed in the United States Department of
Transportation Table (49 CFR ss. 172. 101 and amendments thereto) or by the
Environmental Protection Agency (or any successor agency) (40 CFR ss. 302 and
amendments thereto) as hazardous substances; (c) such other substances,
materials and wastes that are or become regulated under applicable local, state
or federal laws or regulations, or that are classified as hazardous or toxic
under federal, state or local laws or regulations; and (d) any materials, wastes
or substances that are (i) petroleum, (ii) polychlorinated biphenyl, (iii)
within the definition of "hazardous substance" set forth in SECTION 311 of the
Clean Water Act, (33 U.S.C. ss. 1321) or designated as "toxic pollutants"
subject to Chapter 26 of the Clean Water Act pursuant to SECTION 307 to the
Clean Water Act (33 U.S.C. ss. 1317), (iv) flammable substances or explosives,
or (v) radioactive materials.
HEDGE FUNDING REQUIREMENT: With respect to any day, all
amounts required to be paid or delivered by the Issuer under any Hedging
Instrument, whether in respect of payments thereunder or in order to meet
margin, collateral or other requirements thereof.
- 9 -
HEDGE VALUE: With respect to any Business Day and a specific
Hedging Instrument, the positive amount, if any, that is equal to the amount
that would be paid to the Issuer in consideration of an agreement between the
Issuer and an unaffiliated third party, that would have the effect of preserving
for the Issuer the net economic equivalent, as of such Business Day, of all
payment and delivery requirements payable to and by the Issuer under such
Hedging Instrument until the termination thereof, as determined by the Market
Value Agent in accordance with SECTION 4.14 hereof.
HEDGING COUNTERPARTY: A Person (i) (a) the long-term and
commercial paper or short-term deposit ratings of which are acceptable to the
Majority Noteholders and (b) which shall agree in writing that, in the event
that any of its long-term or commercial paper or short-term deposit ratings
cease to be at or above the levels deemed acceptable by the Majority
Noteholders, it shall secure its obligations in accordance with the reasonable
request of the Majority Noteholders, (ii) that has entered into a Hedging
Instrument and (iii) that is acceptable to the Majority Noteholders; provided,
that as of the date hereof, NationsBank, N.A., ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ &
▇▇▇▇▇ Incorporated and the Bank of Montreal shall be deemed to be acceptable to
the Majority Noteholders.
HEDGING INSTRUMENT: Any interest rate cap agreement, interest
rate floor agreement, interest rate swap agreement or other interest rate
hedging agreement entered into by the Issuer with a Hedging Counterparty, and
which requires the Hedging Counterparty to deposit all amounts payable thereby
directly to the Collection Account. Each Hedging Instrument shall meet the
requirements set forth in Article VIII hereof with respect thereto.
INDENTURE: The Indenture dated as of August 14, 1998, together
with the Indenture Supplement, between the Issuer and the Indenture Trustee.
INDENTURE SUPPLEMENT: With respect to a Series of Notes, the
Indenture Supplement pursuant to which such Series of Notes was issued.
INDENTURE TRUSTEE: LaSalle National Bank, a national banking
association, as Indenture Trustee under the Indenture and this Agreement acting
on behalf of the Noteholders, or any successor indenture trustee under the
Indenture or this Agreement.
INDENTURE TRUSTEE FEE: As to any Payment Date, $750.
INDENTURE TRUSTEE'S LOAN FILE: As defined in SECTION 2.04(a)
hereof.
INDEPENDENT: When used with respect to any specified Person,
such Person (i) is in fact independent of the Loan Originator, the Servicer, the
Depositor or any of their respective Affiliates, (ii) does not have any direct
financial interest in, or any material indirect financial interest in, any of
the Loan Originator, the Servicer, the Depositor or any of their respective
Affiliates and (iii) is not connected with any of the Loan Originator, the
Servicer, the Depositor or any of their
- 10 -
respective Affiliates, as an officer, employee, promoter, underwriter, trustee,
partner, director or Person performing similar functions; provided, however,
that a Person shall not fail to be Independent of the Loan Originator, the
Servicer, the Depositor or any of their respective Affiliates merely because
such Person is the beneficial owner of 1% or less of any class of securities
issued by the Loan Originator, the Servicer, the Depositor or any of their
respective Affiliates, as the case may be.
INDEPENDENT ACCOUNTANTS: A firm of nationally recognized
certified public accountants which is Independent.
INDIVIDUAL BORROWER CONCENTRATION: With respect to each
Borrower and as of any date of determination, the aggregate Principal Balance of
Loans in the Loan Pool with respect to which such Borrower (including all
Affiliates thereof) is an obligor or guarantor under the related Promissory
Note.
INITIAL CERTIFICATION: The meaning set forth in the Custodial
Agreement.
INITIAL NOTEHOLDER: MSSFI.
INSURANCE POLICIES: With respect to any Loan Collateral, any
related insurance policy.
INSURANCE PROCEEDS: With respect to any Loan Collateral, all
amounts collected in respect of Insurance Policies and not required either
pursuant to applicable law or the related Loan Documents to be applied to the
restoration of the related Loan Collateral or paid to the related Borrower.
INTEREST CARRY-FORWARD AMOUNT: With respect to any Payment
Date, the excess, if any, of (a) the Interest Payment Amount for such Payment
Date plus the Interest Carry-Forward Amount for the prior Payment Date over (b)
the amount in respect of interest that is actually paid from the Distribution
Account on such Payment Date in respect of the interest for such Payment Date.
INTEREST PAYMENT AMOUNT: With respect to any Payment Date, the
sum of the Daily Interest Accrual Amounts for all days in the related Accrual
Period.
LASALLE NATIONAL BANK: LaSalle National Bank, a national
banking association.
LIBOR: With respect to each day, the rate for United States
dollar deposits for one month that appears on the Telerate Screen Page 3750 as
of 11:00 a.m., London time, on the related LIBOR Determination Date. If such
rate does not appear on such page (or such other page as may replace that page
on that service, or if such service is no longer offered, such other service for
displaying LIBOR or comparable rates as may be reasonably selected by the
Initial Noteholder), LIBOR for the applicable day will be the Reference Bank
Rate. If no such quotations can be obtained by the Initial Noteholder and no
Reference Bank Rate is available, LIBOR will be LIBOR applicable to the first
preceding day on which LIBOR has been determined in accordance with this
definition.
LIBOR BUSINESS DAY: Any day on which banks are open for
dealing in foreign currency and exchange in London and New York City.
- 11 -
LIBOR DETERMINATION DATE: With respect to each day that is a
LIBOR Business Day, such LIBOR Business Day, and with respect to any day that is
not a LIBOR Business Day, the LIBOR Business Day preceding such day, as
determined by the Initial Noteholder.
LIBOR MARGIN: With respect to each day, a percentage equal to
0.70%.
LIQUIDATED LOAN: With respect to any date of determination,
any Foreclosure Property or any Loan in respect of which a Monthly Payment is in
excess of 30 days past due and as to which the Servicer has determined, in
accordance with the Servicing Standard, that all amounts which it reasonably and
in good faith expects to collect have been recovered from or on account of such
Loan or the related Foreclosure Property; provided, however, that in any event
such Loan or the related Foreclosure Property shall be deemed uncollectible and
therefore be a Liquidated Loan upon the earliest to occur of: (a) the
liquidation of the related Foreclosure Property, (b) the determination by the
Servicer, in accordance with the Servicing Standard, that no further amounts are
collectible from the Loan and any related Loan Collateral, or (c) the date on
which any portion of a Monthly Payment on any Loan is in excess of 59 days past
due (without regard to any applicable grace periods).
LIQUIDATED LOAN LOSSES: With respect to any date of
determination, the difference between (i) the aggregate Principal Balances as of
such date of all Loans that became Liquidated Loans and (ii) all Liquidation
Proceeds allocable to principal received prior to such date.
LIQUIDATION PROCEEDS: With respect to a Liquidated Loan, any
cash amounts received in connection with the liquidation of such Liquidated
Loan, whether through trustee's sale, foreclosure sale or other disposition, any
cash amounts received in connection with the management of the Loan Collateral
from Defaulted Loans and any other amounts required to be deposited in the
Collection Account pursuant to SECTION 5.01(b)(1) hereof, in each case other
than Insurance Proceeds, Released Loan Collateral Proceeds and any proceeds of
Retained Interests, provided, however, that no Liquidation Proceeds shall be
allocated to Retained Interest until all other amounts owing under the
Promissory Note shall have been paid.
LOAN: Any Equipment Loan or Mortgage Loan.
LOAN AGREEMENT: With respect to each Loan, the related loan
agreement between the Borrower and the Loan Originator.
LOAN COLLATERAL: With respect to an Equipment Loan, all of the
Equipment securing such Equipment Loan, with respect to a Mortgage Loan, all of
the Mortgaged Property securing such Mortgage Loan and with respect to a Senior
Loan, all of the Equipment and/or Mortgaged Property securing such Senior Loan.
LOAN DOCUMENTS: With respect to a Loan, the documents
comprising the Indenture Trustee's Loan File for such Loan.
LOAN FILE: With respect to each Loan, the Indenture Trustee's
Loan File and the Servicer's Loan File.
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LOAN INTEREST RATE: With respect to each Loan, the annual rate
of interest borne by the related Promissory Note, as shown on the Loan Schedule,
as the same may be modified by the Servicer in accordance with SECTION 4.01(a)
hereof and, in the case of an Adjustable Rate Loan, as the same may be
periodically adjusted in accordance with the terms of such Loan.
LOAN ORIGINATOR: FFCA Acquisition Corp., in its capacity as
the Loan Originator hereunder.
LOAN ORIGINATOR PUT: The mandatory repurchase by the Loan
Originator, at the option of the Majority Noteholders, of a Loan pursuant to
SECTION 3.07(a) hereof.
LOAN POOL: As of any date of determination, the pool of all
Loans conveyed to the Issuer pursuant to this Agreement on all Transfer Dates up
to and including such date of determination, which Loans have not been released
from the Lien of the Indenture pursuant to the terms thereof, together with the
rights and obligations of a holder thereof, and the payments thereon and
proceeds therefrom received after the applicable Transfer Cutoff Date, as
identified from time to time on the Loan Schedule.
LOAN PURCHASE AGREEMENT: The Loan Purchase Agreement between
the Loan Originator and the Depositor, dated as of August 14, 1998, and all
supplements thereto.
LOAN SCHEDULE: The schedule of Loans conveyed to the Issuer
and delivered to the Initial Noteholder in the form of a computer-readable
transmission specifying the following information with respect to each Loan
conveyed on such date: (i) the Loan Originator's internal loan identifying
number; (ii) the Borrower's name as it appears on the related Promissory Note;
(iii) the name of the Borrower group (to be input consistently for purposes of
computing the Individual Borrower Concentration); (iv) in the case of a Mortgage
Loan, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇ and zip code of the Mortgaged Property;
(v) the original Principal Balance; (vi) the Transfer Cutoff Date Principal
Balance; (vii) the Loan Interest Rate at origination; (viii) the date of
origination; (ix) the industry segment (e.g., CD Facility, C&G Store, QSR
Store); (x) the type of Loan (e.g., Mortgage, Equipment); (xi) the Monthly
Payment as of such Transfer Cutoff Date; (xii) the scheduled maturity date under
the Promissory Note; (xiii) the Fixed Charge Coverage Ratio; (xiv) a flag
indicating whether the figure listed in item (xiii) is a calculation of Fixed
Charge Coverage Ratio with respect to the single unit or in the aggregate; (xv)
the Brand; (xvi) a Prepayment Code; (xvii) a Product Code with respect to such
Loan; (xviii) if such Loan is an Adjustable Rate Loan, the interest rate spread
over LIBOR; (xix) in the case of a Mortgage Loan, the loan to replacement cost
ratio for the related Mortgaged Property (if obtained); and (xx) such other
information as may be reasonably requested by the Majority Noteholders.
LOAN SCHEDULE AND EXCEPTIONS REPORT: The meaning set forth in
the Custodial Agreement.
LOCKBOX ACCOUNT: A demand deposit account or an Eligible
Account held by the Lockbox Bank acceptable to the Majority Noteholders.
- 13 -
LOCKBOX AGREEMENT: An agreement acceptable to the Indenture
Trustee and the Majority Noteholders among the Lockbox Bank, the Servicer, the
Depositor, the Issuer and the Indenture Trustee.
LOCKBOX BANK: A depository institution named by the Servicer
and agreed to by the Majority Noteholders.
LOCKBOX TRIGGER EVENT: The Majority Noteholders, in their sole
discretion may declare the occurrence of a Lockbox Trigger Event at any time
after the Closing Date if the long-term unsecured debt obligations of FFCA (i)
fail to be rated at least BBB- by DCR and Baa3 by Moody's or are not rated by
either of DCR or Moody's and (ii) such condition continues for 30 days after the
occurrence thereof.
LONDON BUSINESS DAY: A day on which dealings in deposits in
United States dollars are transacted in the London interbank market.
LPA ASSIGNMENT: An Assignment of Loans from the Loan
Originator to the Depositor under the Loan Purchase Agreement.
MAJORITY NOTEHOLDERS: The holder or holders of in excess of
50% of the Note Principal Balance. In the event of the release of the Lien of
the Indenture in accordance with the terms thereof, the Majority Noteholders
shall mean the Majority Certificateholders.
MAJORITY CERTIFICATEHOLDERS: The meaning set forth in the
Trust Agreement.
MARKET VALUE: With respect to each Loan and each Business Day,
the Market Value of such Loan as of such Business Day as determined by the
Market Value Agent in accordance with SECTION 4.14 hereof.
MARKET VALUE AGENT: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated and its
successors and assigns.
MATURITY DATE: With respect to the Notes of a given Series, as
set forth in the related Indenture Supplement or such later date as may be
agreed in writing by the Majority Noteholders.
MAXIMUM ADVANCE FACTOR: With respect to each Loan and any date
of determination, a percentage determined as follows:
(i) with respect to QSR Store Mortgage Loans with the
related Borrower's Individual Borrower Concentration
of (a) less than $20,000,000, 92.5%, (b) equal to or
greater than $20,000,000 and less than $40,000,000,
90.0% and (c) equal to or greater than $40,000,000,
85.0%;
(ii) with respect to C&G Store Mortgage Loans with the
related Borrower's Individual Borrower Concentration
of (a) less than $20,000,000, 92.5%,
- 14 -
(b) equal to or greater than $20,000,000 and less
than $40,000,000, 90.0% and (c) equal to or greater
than $40,000,000, 85.0%;
(iii) with respect to CD Facility Mortgage Loans with the
related Borrower's Individual Borrower Concentration
of (a) less than $20,000,000, 85.0%, (b) equal to or
greater than $20,000,000 and less than $40,000,000,
80.0% and (c) equal to or greater than $40,000,000,
0.0%;
(iv) with respect to Other Mortgage Loans, the percentage
or percentages to which the Majority Noteholders and
the Issuer have agreed in writing prior to the
Transfer Date relating thereto; and
(v) with respect to each Equipment Loan, and the related
Borrower, the Maximum Advance Factor applicable to
the related Mortgage Loan;
provided that, with respect to Loans (a) having Retained Interests, to the
extent the aggregate Principal Balance of such Loans equals or exceeds 5% of the
Pool Principal Balance as of such date, each such Loan in excess thereof shall
have a Maximum Advance Factor of 0.0%, (b) that have been included in the Trust
Estate (i) for a period in excess of one year from the Transfer Date thereof or
(ii) after completion of two Securitizations since the applicable Transfer Date
for such Loan, each such Loan shall have a Maximum Advance Factor of 0.0% and
(c) which are Senior Loans (ignoring the proviso to the definition thereof), to
the extent that the aggregate Principal Balance of such Senior Loans equals or
exceeds 20% of the Pool Principal Balance as of such date, each such Senior Loan
in excess thereof shall have a Maximum Advance Factor of 0.0%. The Maximum
Advance Factor with respect to each Loan may also be reduced as provided in
SECTION 3.09(c) hereof.
MAXIMUM NOTE PRINCIPAL BALANCE: For any Series of Notes, as
set forth in the related Indenture Supplement.
MONTHLY PAYMENT: The scheduled monthly payment of principal
and/or interest required to be made by an Borrower on the related Loan, as set
forth in the related Promissory Note.
MOODY'S: ▇▇▇▇▇'▇ Investors Service, Inc., or any successor
thereto.
MORTGAGE: With respect to any Mortgage Loan, the mortgage,
deed of trust or other instrument securing the related Promissory Note, which
creates a first lien on the fee in real property and/or a first lien on the
leasehold estate in real property securing the Promissory Note and the
assignment of rents and leases related thereto.
MORTGAGE LOAN: Any C&S Store Mortgage Loan, CD Facility
Mortgage Loan, QSR Store Mortgage Loan or Other Mortgage Loan pledged to the
Indenture Trustee pursuant to the Indenture, and which Mortgage Loan includes,
without limitation, (i) a Mortgage Note and related Mortgage and (ii) all right,
title and interest of the Loan Originator in and to the Mortgaged Property
covered by such Mortgage. The term Mortgage Loan shall be deemed to
- 15 -
include the related Mortgage Note, related Mortgage and related Foreclosure
Property, if any. The term Mortgage Loan shall exclude any Retained Interest.
MORTGAGED PROPERTY: With respect to a Mortgage Loan, the
related mortgagor's fee and/or leasehold interest in the real property (and/or
all improvements, buildings, fixtures, building equipment and personal property
thereon (to the extent applicable) and all additions, alterations and
replacements made at any time with respect to the foregoing) and all other
collateral securing repayment of the debt evidenced by the related Promissory
Note.
MSSFI: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Securitization Funding Inc.
NEGATIVE AMORTIZATION: With respect to each Adjustable Rate
Loan, any amounts in respect of interest accrued thereon for any Payment Period
in excess of the amount of the Monthly Payment thereon for the related Due Date,
which amounts are capitalized and added to the Principal Balance of such
Adjustable Rate Loan.
NEGATIVE AMORTIZATION CAP: With respect to any Adjustable Rate
Loan, the fixed percentage specified in the related Promissory Note as the
percentage of the original principal balance of such Loan for purposes of
determining whether any Negative Amortization Payment is payable as a part of
the Monthly Payment on such Loan for any Due Date.
NEGATIVE AMORTIZATION PAYMENT: With respect to any Adjustable
Rate Loan and any Due Date immediately succeeding a Due Date on which the
addition of Negative Amortization to the Principal Balance of such Loan caused
such Principal Balance to be more than the product of the Negative Amortization
Cap for such Loan and the original principal balance of such Loan, a prepayment
of principal that is payable (without penalty) by the related Borrower on such
immediately succeeding Due Date in an amount equal to the difference between the
Principal Balance of such Loan and the original principal balance of such Loan.
NET LIQUIDATION PROCEEDS: With respect to any Payment Date,
Liquidation Proceeds received during the period commencing on the preceding
Payment Date and ending on the Business Day immediately prior to such Payment
Date, net of any reimbursements to the Servicer made from such amounts for any
unreimbursed Servicing Compensation, Servicing Advances and Periodic Advances
(including Nonrecoverable Servicing Advances and Nonrecoverable Periodic
Advances) made and any other fees and expenses paid in connection with the
foreclosure, conservation and liquidation of the related Liquidated Loans or
Foreclosure Properties pursuant to SECTION 4.11 hereof.
NET LOAN INTEREST RATE: With respect to each Loan, the related
Loan Interest Rate, less the rate at which the Servicing Fee is calculated.
NET LOAN LOSSES: With respect to any Defaulted Loan that is
subject to a modification pursuant to SECTION 4.01(e) hereof, an amount equal to
the portion of the Principal Balance, if any, released in connection with such
modification.
NONRECOVERABLE PERIODIC ADVANCE: Any portion of a Periodic
Advance previously made or proposed to be made in respect of a Loan which has
not been previously reimbursed to
- 16 -
the Servicer and which, in the good faith judgment of the Servicer, will not, or
in the case of a proposed Periodic Advance would not, be ultimately recoverable
from Liquidation Proceeds or other recoveries in respect of the related Loan.
The determination by the Servicer that (i) it has made a Nonrecoverable Periodic
Advance or (ii) that any proposed advance, if made, would constitute a
Nonrecoverable Periodic Advance, shall be evidenced by a certificate of a
Servicing Officer promptly delivered to the Initial Noteholder detailing the
reasons for such determination.
NONRECOVERABLE SERVICING ADVANCE: With respect to any
Foreclosure Property, (a) any Servicing Advance previously made and not
reimbursed from late collections, Liquidation Proceeds, Insurance Proceeds or
the Released Property Proceeds or (b) a Servicing Advance proposed to be made in
respect of a Loan or Foreclosure Property either of which, in the good faith
business judgment of the Servicer, as evidenced by an Officer's Certificate
delivered to the Initial Noteholder, would not be ultimately recoverable.
NOTE: The meaning assigned thereto in the Indenture.
NOTE INTEREST RATE: Interest will accrue on the Notes on each
day at a per annum interest rate equal to LIBOR for the related LIBOR
Determination Date plus the LIBOR Margin for such day.
NOTE PRINCIPAL BALANCE: With respect to the Notes, as of any
date of determination (a) the sum of the Additional Note Principal Balances of
all Notes purchased on or prior to such date pursuant to the Note Purchase
Agreement less (b) all amounts previously distributed in respect of principal of
the Notes prior to such day.
NOTE PURCHASE AGREEMENT: The Note Purchase Agreement among
MSSFI, the Issuer, the Depositor and the Loan Originator, dated as of August 14,
1998.
NOTE REDEMPTION AMOUNT: As of any date of determination, an
amount without duplication equal to the sum of (i) then outstanding Note
Principal Balance plus all accrued and unpaid interest thereon (ii) any Trust
Fees and Expenses due and unpaid on such date, (iii) any Servicing Advance
Reimbursement Amount and (iv) any Nonrecoverable Periodic Advances.
NOTEHOLDER: The meaning assigned thereto in the Indenture.
OFFICER'S CERTIFICATE: A certificate delivered to the
Indenture Trustee or the Issuer signed by the President or a Vice President or
an Assistant Vice President of the Depositor, the Servicer or the Loan
Originator, in each case, as required by this Agreement.
OPINION OF COUNSEL: A written opinion of counsel who may be
employed by the Loan Originator, the Servicer, the Depositor or any of their
respective Affiliates.
OPTIMAL PRINCIPAL PAYMENT AMOUNT: On each Payment Date, an
amount equal to the sum of (a) the positive difference, if any, between (i)
aggregate Collateral Value of all Loans in the Loan Pool for the prior Payment
Date and (ii) the aggregate Collateral Value of all Loans in the Loan Pool for
such Payment Date, (b) the Overcollateralization Shortfall for such Payment
Date, and (c) on each Payment Date on which a Securitization shall occur, an
amount equal to the
- 17 -
cash Securitization Proceeds, provided, however, that on (a) the Maturity Date,
or (b) the Payment Date on which the Trust is to be terminated pursuant to
SECTION 11.02 hereof, the Optimal Principal Payment Amount shall be equal to the
Note Principal Balance. Notwithstanding anything to the contrary herein, in no
event shall the Optimal Principal Payment Amount with respect to any Payment
Date exceed the Note Principal Balance as of such date.
OTHER MORTGAGE LOANS: Senior Loans and Mortgage Loans other
than QSR Store Mortgage Loans, C&G Store Mortgage Loans, CD Facility Mortgage
Loans or Equipment Loans and as to which the Majority Noteholders, in their sole
discretion, have consented in writing delivered pursuant to the terms hereof and
which may include, without limitation, truck stops, automotive parts and/or
service facilities and car washes.
OUTSTANDING: As defined in the Indenture.
OVERCOLLATERALIZATION SHORTFALL: With respect to any Business
Day, an amount equal to the positive difference, if any, between (a) the Note
Principal Balance on such Business Day and (b) (i) the aggregate Collateral
Value of all Loans in the Loan Pool on such Business Day, or (ii) in the event
that a Performance Trigger shall have occurred and not been Deemed Cured, the
aggregate Collateral Value of all Loans in the Loan Pool on such Business Day
multiplied by 0.98. With the written consent of the Majority Noteholders in
their sole discretion, if as of such Business Day, no Rapid Amortization Trigger
or Default under this Agreement or under the Indenture shall be in effect, the
Overcollateralization Shortfall shall be reduced (but in no event to an amount
below zero) by all or any portion of the aggregate Hedge Value as of such
Business Day as the Majority Noteholders may, in their sole discretion,
designate in writing.
OWNER TRUSTEE: Wilmington Trust Company, as owner trustee
under the Trust Agreement, and any successor owner trustee under the Trust
Agreement.
OWNER TRUSTEE FEE: The annual fee of $2,500 pursuant to the
agreement mentioned in SECTION 8.1 of the Trust Agreement, payable in equal
monthly installments to the Servicer which shall in turn pay, in one lump sum,
such $2,500 to the Owner Trustee on the Payment Date occurring in April each
year during the term of this Agreement, commencing in April 1999.
PAYMENT DATE: The 12th day of each calendar month commencing
on the first such 12th day to occur after the first Transfer Date, or if any
such day is not a Business Day, the first Business Day immediately following
such day. From time to time, the Majority Noteholders and the Issuer may agree,
upon written notice to the Indenture Trustee, to additional Payment Dates in
accordance with SECTION 5.01(c)(3).
PAYMENT PERIOD: With respect to each Adjustable Rate Loan, the
period commencing on the first day of each calendar year and ending on the last
day of such calendar year.
PAYMENT RESET DATE: With respect to each Adjustable Rate Loan,
the first day of the calendar year or, if such day is not a Business Day, the
next succeeding Business Day.
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PAYMENT STATEMENT: As defined in SECTION 6.01(b) hereof.
PERCENTAGE INTEREST: As defined in the Trust Agreement.
PERFORMANCE TRIGGER: With respect to any Business Day, a
Performance Trigger shall mean the existence of one or more of the following
conditions as of such Business Day:
(i) (x) the aggregate Principal Balance of all Loans that
are 30 days or more Delinquent as of such Business
Day divided by (y) the Pool Principal Balance as of
such Business Day is greater than 1.0%; and
(ii) the aggregate Liquidated Loan Losses from the later
of (a) the Closing Date or (b) the most recent
Securitization, through such Business Day are greater
than $25,000.
A Performance Trigger shall continue to exist until Deemed
Cured.
PERIODIC ADVANCE: The aggregate of the advances made by the
Servicer on any Payment Date pursuant to SECTION 4.09, the amount of any such
advances being equal to the total of all Monthly Payments (net of the related
Servicing Fee) on the Loans, that (x) were Delinquent as of the close of
business on the Business Day preceding the related Payment Date and (y) have not
been determined by the Servicer to be Nonrecoverable Periodic Advances.
PERMITTED INVESTMENTS: Each of the following:
(1) obligations of, or guaranteed as to principal and interest
by, the United States or any agency or instrumentality thereof if
backed by the full faith and credit of the United States;
(2) direct U.S. government obligations or obligations of a
federal agency that are backed by the full faith and credit of the U.S.
government or by FNMA or FHLMC, which are subject to a repurchase
agreement that satisfies the following criteria: (a) it must be between
the Indenture Trustee and either (x) primary dealers on the Federal
Reserve reporting dealer list which are rated in one of the three
highest categories for long-term unsecured debt obligations by each
Rating Agency or (y) banks or bank holding companies rated in one of
the three highest categories for long-term unsecured debt obligations
by each Rating Agency; and (B) it must be in writing and include the
following terms: (a) a term no greater than 60 days for any repurchase
transaction; (b) except as may be otherwise provided in the Collection
Account Letter Agreement with respect to the investment of funds on
deposit in the Collection Account, the collateral must be delivered to
the Indenture Trustee or a third party custodian acting as agent for
the Indenture Trustee by appropriate book entries and confirmation
statements, and must have been delivered before or simultaneously with
payment (i.e., perfection by possession of certificated securities);
and (c) the securities sold thereunder must be valued weekly,
marked-to-market at current market price plus accrued interest and the
value of the collateral must be equal to at least 104% of the amount of
cash transferred by or on behalf of the Indenture Trustee under the
repurchase agreement and, if the value of the securities
- 19 -
held as collateral declines to an amount below 104% of the cash
transferred by or on behalf of the Indenture Trustee plus accrued
interest (i.e., a margin call), then additional cash and/or acceptable
securities must be transferred to the Indenture Trustee (except as may
be otherwise provided in the Collection Account Letter Agreement with
respect to the investment of funds on deposit in the Collection
Account) to satisfy such margin call; provided, however, that if the
securities used as collateral are obligations of FNMA or FHLMC, then
the value of the securities held as collateral must equal at least 105%
of the cash transferred by or on behalf of the Indenture Trustee under
such repurchase agreement;
(3) certificates of deposit, time deposits and bankers
acceptances of any United States depository institution or trust
company incorporated under the laws of the United States or any state
thereof, including the Indenture Trustee; provided, however, that the
debt obligations of such depository institution or trust company at the
date of the acquisition thereof have been rated by each Rating Agency
in one of its three highest long-term rating categories;
(4) deposits, including deposits with the Indenture Trustee,
that are fully insured by the Bank Insurance Fund or the Savings
Association Insurance Fund of the FDIC;
(5) commercial paper of any corporation incorporated under the
laws of the United States or any state thereof, including corporate
Affiliates of the Indenture Trustee, which at the time the investment
is made is rated by each Rating Agency in its highest short-term rating
category and which has an original maturity of not more than 365 days;
(6) debt obligations rated by each Rating Agency at the time
the investment is made in one of its three highest long-term rating
categories (or those investments specified in paragraph (3) above with
depository institutions which have debt obligations rated by each
Rating Agency in one of its three highest long-term rating categories);
(7) money market funds that are rated by each Rating Agency at
the time the investment is made in one of its three highest long-term
rating categories; provided, that money market funds that allow for
withdrawals on demand shall be deemed to satisfy any maturity
requirements for Permitted Investments set forth in this Agreement; or
(8) any other investments that the Majority Noteholders may
consent to in writing prior to the time at which such investment is
made;
PROVIDED, HOWEVER, that no instrument described in foregoing subparagraphs (1)
through (7) shall evidence either the right to receive (a) only interest with
respect to the obligations underlying such instrument or (b) both principal and
interest payments derived from obligations underlying such instrument where the
interest and principal payments with respect to such instrument provide a yield
to maturity at par greater than 120% of the yield to maturity at par of the
underlying obligations; and provided, further, that no instrument described in
the foregoing
- 20 -
subparagraphs may be purchased at a price greater than par if such instrument
may be prepaid or called at a price less than its purchase price prior to its
stated maturity.
Each reference in this definition of "Permitted Investments"
to the Rating Agency shall be construed, in the case of each subparagraph above
referring to each Rating Agency, as a reference to each of DCR and Moody's.
PERSON: Any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
national banking association, unincorporated organization or government or any
agency or political subdivision thereof.
PHYSICAL PROPERTY: As defined in clause (b) of the definition
of "Delivery" above.
POOL PRINCIPAL BALANCE: With respect to any date of
determination, the aggregate Principal Balances of the Loans as of the end of
the preceding day; provided, however, that the Pool Principal Balance on any
Distribution Date on which the Termination Price is to be paid to Noteholders
will be deemed to have been equal to zero as of such date.
POSTSECURITIZATION UNFUNDED TRANSFER OBLIGATION: With respect
to any Series of Notes and any date of determination after an Extension Date, an
amount equal to (x) the sum of (a) the Transfer Obligation Carry-Forward Amount,
plus (b) 10% of the aggregate Collateral Value of all Loans sold hereunder since
such Extension Date plus (c) any amounts withdrawn from the Transfer Obligation
Account for return to the Loan Originator pursuant to SECTION 5.05(j) hereof
since such Extension Date less (y) the sum of the aggregate amount of payments
actually made by the Loan Originator in respect of the Transfer Obligation
pursuant to SECTION 2.3(b) of the Loan Purchase Agreement since such Extension
Date and the aggregate amount of the Purchase Prices paid by Servicer in respect
of any Loan Originator Puts since such Extension Date. With respect to any
Series of Notes subsequent to the first Series of Notes, the Postsecuritization
Unfunded Transfer Obligation may be modified as set forth in the Indenture
Supplement.
PREPAYMENT CODE: With respect to each Loan, a code agreed to
in writing by the Loan Originator and the Initial Noteholder, which code shall
identify certain prepayment terms with respect to such Loan as may be agreed in
writing from time to time between the Loan Originator and the Initial
Noteholder.
PRINCIPAL BALANCE: With respect to any Loan or related
Foreclosure Property, (i) at the Transfer Cutoff Date, the outstanding unpaid
principal balance of the Mortgage Loan as of the Transfer Cutoff Date and (ii)
with respect to any other date of determination, the outstanding unpaid
principal balance of the Loan as of the prior Business Day (after giving effect
to all payments received thereon and the allocation of any Net Loan Losses with
respect thereto for a Defaulted Loan on such Business Day); provided, however,
that any Liquidated Loan shall be deemed to have a Principal Balance of zero.
PRINCIPAL CARRY-FORWARD AMOUNT: With respect to any Payment
Date, the excess, if any, of (a) the Optimal Principal Payment Amount for such
Payment Date plus the Principal
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Carry-Forward Amount for the prior Payment Date over (b) the amount in respect
of principal that is actually distributed from the Distribution Account on such
Payment Date.
PRINCIPAL PREPAYMENT: With respect to any Loan and any day,
any principal amount received on a Loan in excess of the principal of the
Monthly Payment due on such day.
PRODUCT CODE: With respect to each Loan, a code agreed to in
writing by the Loan Originator and the Initial Noteholder, which code shall
identify whether such Loan is an Adjustable Rate Loan or a fixed rate Loan,
whether such Loan has a Retained Interest and such other attributes of such Loan
as may be agreed in writing from time to time between the Loan Originator and
the Initial Noteholder.
PROMISSORY NOTE: With respect to a Loan, the original executed
promissory note or other evidence of the indebtedness of the related Borrower or
Borrowers.
PURCHASE PRICE: With respect to a Loan, the Principal Balance
thereof as of the date of purchase or repurchase, plus all accrued and unpaid
interest on such Loan to and including the date of purchase or repurchase
computed at the applicable Loan Interest Rate, plus the amount of any
unreimbursed Servicing Advances and any unreimbursed Periodic Advances made by
the Servicer with respect to such Loan (after deducting therefrom any amounts
received in respect of such purchased or repurchased Loan and being held in the
Collection Account for future distribution to the extent such amounts represent
recoveries of principal not yet applied to reduce the related Principal Balance
or interest (net of the Servicing Fee) for the period from and after the date of
repurchase). To the extent the Servicer does not reimburse itself for amounts,
if any, in respect of the Servicing Advance Reimbursement Amount or
Nonrecoverable Periodic Advances pursuant to SECTION 5.01(c)(1) hereof, with
respect to such Loan, the Purchase Price shall be reduced by such amounts.
QSR STORE MORTGAGE LOANS: Mortgage Loans secured by quick
service restaurants.
QUALIFIED INSURER: An insurance company duly qualified as such
under the laws of the states in which any applicable Loan Collateral is located,
duly authorized and licensed or otherwise qualified in such states to transact
the applicable insurance business and to write the insurance provided, approved
as an insurer in accordance with the Servicing Standard, and whose claims-paying
ability is rated "A" or better (or the equivalent in any successor rating
system) by Best's Key Rating Guide or rated "A" or better by Standard & Poor's
Ratings Services or the equivalent by any Rating Agency as to claims-paying
ability with respect to hazard and flood insurance.
QUALIFIED SUBSTITUTE LOAN: A Loan or Loans substituted for a
Deleted Loan pursuant to SECTION 3.05 hereof, which (i) has or have been
approved in writing by the Majority Noteholders and (ii) complies or comply as
of the date of substitution with each representation and warranty set forth in
SECTION 3.04 hereof and is or are not more than 29 days Delinquent as of the
date of substitution for such Deleted Loan or Loans.
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RAPID AMORTIZATION TRIGGER: With respect to any Business Day,
a Rapid Amortization Trigger shall mean the existence of one or more of the
following conditions as of such Business Day:
(i) the aggregate Principal Balance of all Loans that are
30 to 59 days Delinquent as of such Business Day
divided by the Pool Principal Balance as of such
Business Day is greater than 2.0%;
(ii) the aggregate Principal Balance of all Loans that are
60 to 89 days Delinquent as of such Business Day
divided by the Pool Principal Balance as of such
Business Day is greater than 1.0%;
(iii) the aggregate Principal Balance of all Loans that are
90 days or more Delinquent as of such Business Day
divided by the Pool Principal Balance as of such
Business Day is greater than 0.50%;
(iv) the aggregate Liquidated Loan Losses since the Reset
Date are greater than $100,000; and
(v) (x) the aggregate Liquidated Loan Losses for the
three calendar month period preceding such Business
Day divided by (y) the average Transfer Cutoff Date
Principal Balance of all Loans conveyed to the Issuer
hereunder during such three calendar month period is
greater than 0.10%.
A Rapid Amortization Trigger shall continue to exist until it
is Deemed Cured.
RATING AGENCIES: DCR and Moody's or such other nationally
recognized credit rating agencies as may from time to time be designated in
writing by the Majority Noteholders in their sole discretion.
RECORD DATE: With respect to each Payment Date, the close of
business on the prior Business Day.
REFERENCE BANK RATE: With respect to any day, the arithmetic
mean (rounded upwards, if necessary, to the nearest one sixteenth of a percent)
of the offered rates for United States dollar deposits for one month that are
offered by the Reference Banks as of 11:00 a.m., New York City time, on the
related LIBOR Determination Date to prime banks in the London interbank market
for a period of one month in amounts approximately equal to the Note Principal
Balance, provided that at least two such Reference Banks provide such rate. If
fewer than two offered rates appear, the Reference Bank Rate will be arithmetic
mean of the rates quoted by one or more major banks in New York City, selected
by the Initial Noteholder, as of 11:00 a.m., New York City time, on such day for
loans in U.S. Dollars to leading European Banks for a period of one month in
amounts approximately equal to the outstanding Note Principal Balance. If no
such quotation can be obtained, the Reference Bank Rate will be the Reference
Bank Rate applicable to the preceding day.
REFERENCE BANKS: Three money center banks selected by the
Initial Noteholder.
- 23 -
RELEASED LOAN COLLATERAL PROCEEDS: With respect to any Loan,
proceeds received by the Servicer in connection with (i) a taking of an entire
Mortgaged Property by exercise of the power of eminent domain or condemnation or
(ii) any release of part of the Loan Collateral from the lien of the related
Mortgage or Security Agreement, as the case may be, whether by partial
condemnation, sale or otherwise; which proceeds in either case are not released
to the Borrower in accordance with applicable law, the Servicing Standard or
this Agreement.
RESET DATE: The later of the latest Closing Date and the
latest Extension Date.
RESPONSIBLE OFFICER: When used with respect to (i) the initial
Indenture Trustee or the initial Custodian, any officer in its Asset Backed
Securities Trust Services Group with particular responsibility for the
transactions contemplated by this Agreement and (ii) any successor Indenture
Trustee or Custodian, any officer within the corporate trust office of such
successor Indenture Trustee or Custodian, including any Vice President,
Assistant Vice President, Secretary, Assistant Secretary or any other officer of
such successor Indenture Trustee or Custodian customarily performing functions
similar to those performed by any of the above designated officers and also,
with respect to a particular matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject. When used with respect to the Issuer, any officer in the
corporate trust administration department of the Owner Trustee with direct
responsibility for the administration of the Trust Agreement and this Agreement
on behalf of the Issuer. When used with respect to the Depositor, the Loan
Originator or the Servicer, the President or any Executive Vice President,
Senior Vice President or the Treasurer.
RETAINED INTEREST: With respect to any Loan, any interest
payable under the related Promissory Note other than default interest and
interest at the related Loan Interest Rate (and excluding any prepayment charges
and yield maintenance premiums). Without limiting the generality of the
foregoing, Retained Interest shall include interest designated or defined as
"Shared Appreciation," "Contingent Interest," "Participating Interest,"
"Additional Interest," "Fixed Bumps" or "Payment Escalations" under the terms of
any Loan.
RETAINED SECURITIES: With respect to a Securitization, any
subordinated securities issued or expected to be issued, or excess collateral
value retained or expected to be retained, in connection therewith to the extent
the Loan Originator or an Affiliate thereof decides in its sole discretion to
retain, instead of sell, such securities.
RETAINED SECURITIES VALUE: With respect to any Business Day
and a Retained Security, the market value thereof as determined by the Market
Value Agent in accordance with SECTION 4.14(d) hereof.
REVOLVING PERIOD: The period commencing on the Closing Date
and ending on the earlier of (i) the date on which the Revolving Period is
terminated pursuant to SECTION 2.07 and (ii) with respect to a Note of a given
Series, the date set forth in the related Indenture Supplement.
- 24 -
S&SA ASSIGNMENT: An Assignment, in the form of Exhibit C
hereto, of Loans and other property from the Depositor to the Issuer pursuant to
this Agreement.
SECURITIES: The Notes or Trust Certificates.
SECURITIZATION: A sale or transfer of loans, including Loans,
to an Affiliate of the Depositor in order to effect one or a series of
structured-finance securitization transactions involving the issuance of
securities treated for federal income tax purposes as indebtedness of FFCA or
one or more of its wholly-owned subsidiaries.
SECURITIZATION PARTICIPANT: With respect to a Securitization,
any "depositor" with respect to such Securitization, the Majority Noteholders,
the Issuer, the Servicer, the trustee and the custodian thereunder, any
nationally recognized credit rating agency, the related underwriters, the
related placement agent, the related credit enhancer, the related purchaser of
securities and/or any other party necessary or, in the good faith belief of any
of the foregoing, desirable to effect a Securitization.
SECURITIZATION PROCEEDS: With respect to a Securitization, (x)
the proceeds of the Securitization remitted to the Issuer in respect of the
Loans transferred on the date of and with respect to such Securitization,
including without limitation, any cash and Retained Securities created in such
Securitization less all costs, fees and expenses incurred in connection with
such Securitization, including, without limitation, all amounts deposited into
any reserve funds upon the closing thereof plus or minus (y) the net positive or
net negative value of all Hedging Instruments terminated in connection with such
Securitization minus (z) all other amounts agreed upon in writing by the Initial
Noteholder, the Issuer and the Servicer.
SECURITY AGREEMENT: (a) With respect to any Equipment Loan,
the pledge agreement, security agreement or similar instrument that secures the
related Promissory Note and creates a lien on the related Equipment and (b) with
respect to any Mortgage Loan, any security agreement, contract, instrument or
other document related to security for repayment thereof (other than the related
Mortgage and Promissory Note), executed by the Borrower and/or others in
connection with such Mortgage Loan, and in either case including without
limitation, any guaranty, title insurance policy, hazard insurance policy,
chattel mortgage, letter of credit or certificate of deposit, other pledged
accounts, pledge of stock or other equity interest in the related Borrower, and
any other documents and records relating to any of the foregoing.
SECURITYHOLDER: Any Noteholder or Certificateholder.
SENIOR LOAN: A Loan secured by Loan Collateral with respect to
which a Fixed Charge Coverage Ratio is not provided on the related Loan
Schedule, provided, however, that (i) a Senior Loan which is secured only by
Equipment shall be deemed an Equipment Loan for purposes of this Agreement, (ii)
a Senior Loan which is secured by Mortgaged Property shall be deemed a Mortgage
Loan for purposes of this Agreement, and (iii) a Senior Loan which is secured
only by both Equipment and Mortgaged Property shall be deemed a Mortgage Loan
for purposes of this Agreement.
- 25 -
SERIES: With respect to a Note, the related series of which
such Note is a part, as specified in the Indenture Supplement.
SERVICER: FFCA, in its capacity as the servicer hereunder, or
any successor appointed as herein provided.
SERVICER CALL: The optional repurchase by the Servicer of a
Loan pursuant to SECTION 3.07(b) hereof.
SERVICER'S FISCAL YEAR: January 1st through December 31st of
each year.
SERVICER'S LOAN FILE: With respect to each Loan, the file held
by the Servicer, consisting of originals of all documents relating to such Loan
that are not delivered to the Custodian, copies of all of the Loan Documents
included in the related Indenture Trustee's Loan File and (i) a closing
instruction letter (if any) with respect to the Loan, (ii) a copy of the
Borrower's opinion of counsel (if any), (iii) a copy of the franchise agreement
with all amendments thereto (if any), (iv) a copy of the site inspection and
valuation report and (v) if such Loan is a Mortgage Loan, a survey (if any) of
the related Mortgaged Property and a Title Matters Indemnity Agreement (if any).
SERVICER'S REMITTANCE REPORT: A report prepared and computed
by the Servicer in substantially the form of Exhibit B attached hereto.
SERVICER TERMINATION EVENT: The termination of the Servicer
pursuant to SECTION 10.01(b) hereof.
SERVICING ADVANCE REIMBURSEMENT AMOUNT: With respect to any
date of determination, the amount of any Servicing Advances that have not been
reimbursed as of such date, including Nonrecoverable Servicing Advances.
SERVICING ADVANCES: Subject to SECTION 4.01(b) hereof, all
reasonable, customary and necessary "out of pocket" costs and expenses advanced
or paid by the Servicer with respect to the Loans in accordance with the
performance by the Servicer of its servicing obligations hereunder, including,
but not limited to, the costs and expenses for (i) the preservation, restoration
and protection of Loan Collateral, including without limitation, advances in
respect of real estate taxes and assessments, (ii) any collection, enforcement
or judicial proceedings, including, without limitation, foreclosures,
collections, reports and liquidations pursuant to SECTION 4.10 hereof and (iii)
the conservation, management and sale or other disposition of a Foreclosure
Property pursuant to SECTION 4.11 hereof.
SERVICING COMPENSATION: The Servicing Fee and other amounts to
which the Servicer is entitled pursuant to SECTION 7.01 and SECTION 7.03 hereof.
SERVICING FEE: As to each Loan (including any Loan that has
been foreclosed and has become a Foreclosure Property, but excluding any
Liquidated Loan), the fee payable monthly to the Servicer on each Payment Date,
which (i) in the case of fixed rate Loans shall be the product of 0.25% ( 25
basis points) and the Principal Balance of such Loan as of the beginning of the
- 26 -
immediately preceding Due Period, divided by 12 and (ii) in the case of
Adjustable Rate Loans shall be the product of 0.375% ( 37.5 basis points) and
the Principal Balance of such Loan as of the beginning of the immediately
preceding Due Period, divided by 12. The Servicing Fee includes any servicing
fees owed or payable to any Subservicer, which fees shall be paid from the
Servicing Fee.
SERVICING OFFICER: Any officer of the Servicer or Subservicer
involved in, or responsible for, the administration and servicing of the Loans
whose name and specimen signature appears on a list of servicing officers
annexed to an Officer's Certificate furnished by the Servicer or the
Subservicer, respectively, on the Closing Date to the Issuer and the Indenture
Trustee, on behalf of the Noteholders, as such list may from time to time be
amended.
SERVICING STANDARD: With respect to the servicing of the
Loans, the servicing and administration of the Loans with the same care, skill,
prudence and diligence with which prudent institutional commercial lenders and
loan servicers service comparable loans which are owned, for federal income tax
purposes, by entities which qualify as real estate investment trusts under
Section 856 of the Code (and at least with the same care, skill, prudence and
diligence with which the Servicer generally services loans owned by it), with a
view to the timely collection of all scheduled payments of principal and
interest under the Loans or, if a Loan comes into and continues in default and
no satisfactory arrangements can be made for the collection of the delinquent
payments, the maximization of the recovery on such Loan to the Noteholders on a
present value basis (the relevant discounting of anticipated collections to be
performed at the related Loan Interest Rate), but without regard to:
(i) any relationship that the Servicer, any Subservicer
or any Affiliate of the Servicer or any Subservicer
may have with the related Borrower;
(ii) the ownership of any Notes or the Trust Certificates
by the Servicer or any Affiliate of the Servicer;
(iii) the Servicer's obligation to make Servicing Advances
or Periodic Advances; or
(iv) the Servicer's or any Subservicer's right to receive
compensation for its services or reimbursement of its
costs hereunder or with respect to any particular
transaction.
SUBSERVICER: Any Person with which the Servicer has entered
into a Subservicing Agreement and which is an Eligible Servicer and satisfies
any requirements set forth in SECTION 4.06(a) hereof in respect of the
qualifications of a Subservicer.
SUBSERVICING ACCOUNT: An account established by a Subservicer
pursuant to a Subservicing Agreement, which account must be an Eligible Account.
SUBSERVICING AGREEMENT: Any agreement between the Servicer and
any Subservicer relating to subservicing and/or administration of any or all
Loans as provided in
- 27 -
SECTION 4.06(a) hereof, copies of which shall be made available, along with any
modifications thereto, to the Issuer and the Indenture Trustee.
SUBSTITUTION ADJUSTMENT: As to any date on which a
substitution occurs pursuant to SECTION 2.05 or SECTION 3.05 hereof, the amount,
if any, by which (a) the sum of the aggregate principal balance (after
application of principal payments received on or before the date of
substitution) of any Qualified Substitute Loans as of the date of substitution,
plus any accrued and unpaid interest thereon to the date of substitution, is
less than (b) the sum of the aggregate of the Principal Balances, together with
accrued and unpaid interest thereon to the date of substitution, of the related
Deleted Loans.
TEN YEAR TREASURY YIELD: As of any date of determination, the
yield on United States treasury securities with maturities of ten years, as most
recently reported in the Wall Street Journal, or in the event that the Wall
Street Journal ceases publication, in such source as shall be designated in
writing by the Indenture Trustee.
TERMINATION PRICE: As of any date of determination, an amount
without duplication equal to the greater of (a) the Note Redemption Amount and
(b) the sum of (i) the Principal Balance of each Loan included in the Trust as
of the Payment Date of the termination of the Trust; (ii) all unpaid interest
accrued on the Principal Balance of each such Loan at the related Net Loan
Interest Rate to such Payment Date; and (iii) the aggregate fair market value of
each Foreclosure Property included in the Trust on such Payment Date, as
determined by an Independent appraiser acceptable to the Majority Noteholders as
of a date not more than 30 days prior to such Payment Date.
TITLE MATTERS INDEMNITY AGREEMENT: With respect to each
Mortgage Loan, an agreement (if any) between the Borrower and the Loan
Originator, indemnifying the Loan Originator for any losses arising from title
matters, including without limitation, zoning, use, covenants, conditions and
restrictions and encroachments.
TITLE POLICY: With respect to any Mortgaged Property, an ALTA
(extended coverage) loan title insurance policy or such other form as is
customarily acceptable to prudent lending institutions in the jurisdiction in
which the Mortgaged Property is located (or other satisfactory title insurance
as confirmed in writing by the Majority Noteholders) consistent with the
Underwriting Guidelines.
TRANSFER CUTOFF DATE: With respect to each Loan, the first day
of the month in which the Transfer Date with respect to such Loan occurs.
TRANSFER CUTOFF DATE PRINCIPAL BALANCE: As to each Loan for
which its Transfer Date occurs (i) from and including the first of a calendar
month to and including the Business Day preceding the Payment Date in such
calendar month, its Principal Balance as of the opening of business on the
Transfer Cutoff Date (after giving effect to any payments received on the Loan
before the Transfer Cutoff Date) and (ii) from and including the Payment Date to
and including the last day of a calendar month, its Principal Balance as of the
close of business on the Transfer
- 28 -
Cutoff Date (after giving effect to any payments due on the Loan on or before
the Transfer Cutoff Date).
TRANSFER DATE: With respect to each Loan, the day such Loan is
sold to the Depositor pursuant to the Loan Purchase Agreement and to the Issuer
pursuant to SECTION 2.01 hereof.
TRANSFER OBLIGATION: The obligation of the Loan Originator
under SECTION 2.3(b) of the Loan Purchase Agreement to make certain payments in
connection with Securitizations and other related matters.
TRANSFER OBLIGATION ACCOUNT: The account designated as such,
established and maintained pursuant to SECTION 5.05 hereof.
TRANSFER OBLIGATION CARRY-FORWARD AMOUNT: With respect to any
Extension Date, the lesser of (x) the Unfunded Transfer Obligation as of such
date (immediately after giving effect to any Securitization occurring on such
date) and (y) 10% of the aggregate Collateral Value of all Loans remaining in
the Loan Pool as of such date.
TRANSFER OBLIGATION TARGET AMOUNT: With respect to any date of
determination, the cumulative total of all withdrawals pursuant to SECTION
5.05(e), 5.05(f), 5.05(g) and 5.05(h) hereof from the Transfer Obligation
Account since the Closing Date, after deducting from such total all amounts
returned to the Loan Originator pursuant to SECTION 5.05(j) hereof.
TRUST: The Issuer.
TRUST ACCOUNT PROPERTY: The Trust Accounts, all amounts and
investments held from time to time in the Trust Accounts and all proceeds of the
foregoing.
TRUST ACCOUNTS: The Distribution Account, the Collection
Account, the Transfer Obligation Account, the Lockbox Account, if any, and each
Escrow Account, if any.
TRUST AGREEMENT: The Trust Agreement dated as of March 13,
1998, as amended, among the Depositor, the Loan Originator and the Owner
Trustee.
TRUST CERTIFICATE: The meaning assigned thereto in the Trust
Agreement.
TRUST ESTATE: The assets subject to this Agreement, the Trust
Agreement and the Indenture and assigned to the Trust, which assets consist of:
(i) such Loans as from time to time are subject to this Agreement as listed in
the Loan Schedule, as the same may be amended or supplemented on each Transfer
Date, by the removal of Deleted Loans and by the addition of Qualified
Substitute Loans, together with the Servicer's Loan Files and the Indenture
Trustee's Loan Files relating thereto and all proceeds thereof, (ii) the
Mortgages, Security Agreements and security interests in Loan Collateral, (iii)
all payments in respect of interest due with respect to each Loan on or after
the related Transfer Cutoff Date and all payments in respect of principal
received after such Transfer Cutoff Date net of any Retained Interest (iv) such
assets as from time to time are identified as Foreclosure Property, (v) such
assets and funds as are from time to
- 29 -
time deposited in the Distribution Account, Collection Account, the Transfer
Obligation Account, the Lockbox Account, if any, and each Escrow Account, if
any, including, without limitation, amounts on deposit in such accounts that are
invested in Permitted Investments, (vi) lenders' rights under all Insurance
Policies and to any Insurance Proceeds, (vii) lenders' rights to any
Condemnation Proceeds, (viii) Net Liquidation Proceeds and Released Loan
Collateral Proceeds, (ix) all right, title and interest of the Issuer (but none
of the obligations) in and to the obligations of Hedging Counterparties under
Hedging Instruments, (x) all right, title and interest of the Depositor in and
to the obligations of the Loan Originator under the Loan Purchase Agreement
pursuant to which the Depositor acquired the Loans from the Loan Originator, and
all proceeds of any of the foregoing and (xi) all of the Loan Originator's
right, title and interest in, to and under (but none of its obligations) any
Environmental Policy to the extent relating to Mortgage Loans.
TRUST FEES AND EXPENSES: As of each Payment Date, an amount
equal to the Servicing Compensation, the Indenture Trustee Fee, the Owner
Trustee Fee and the Custodian Fee, if any.
UCC: The Uniform Commercial Code as in effect in the State of
New York.
UCC-1 FINANCING STATEMENT: A financing statement meeting the
requirements of the Uniform Commercial Code of the relevant jurisdiction.
UCC ASSIGNMENT: A form "UCC-2" or "UCC-3" statement meeting
the requirements of the Uniform Commercial Code of the relevant jurisdiction to
reflect an assignment of a secured party's interest in collateral.
UNDERWRITING GUIDELINES: The underwriting guidelines
(including the loan origination guidelines) provided to the Initial Noteholder
on or prior to the Closing Date by the Loan Originator or an Affiliate thereof.
UNFUNDED TRANSFER OBLIGATION: With respect to any Series of
Notes and any date of determination on or prior to an Extension Date, an amount
equal to (x) the sum of (a) 10% of the aggregate Collateral Value of all Loans
sold hereunder since the related Closing Date, plus (B) any amounts withdrawn
from the Transfer Obligation Account for return to the Loan Originator pursuant
to SECTION 5.05(j) hereof since the related Closing Date less (y) the sum of the
aggregate amount of payments actually made by the Loan Originator in respect of
the Transfer Obligation pursuant to SECTION 2.3(b) of the Loan Purchase
Agreement since the related Closing Date and the aggregate amount of the
Purchase Prices paid by Servicer in respect of any Loan Originator Puts since
the related Closing Date. With respect to any Series of Notes subsequent to the
first Series of Notes, the Unfunded Transfer Obligation may be modified as set
forth in the Indenture Supplement.
WILMINGTON TRUST COMPANY: Wilmington Trust Company, a Delaware
banking corporation.
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Section 1.02 OTHER DEFINITIONAL PROVISIONS.
(a) Capitalized terms used herein and not otherwise defined
herein have the meanings assigned to them in the Indenture and the Trust
Agreement.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Agreement or in any such certificate or other document, and
accounting terms partly defined in this Agreement or in any such certificate or
other document to the extent not defined, shall have the respective meanings
given to them under GAAP. To the extent that the definitions of accounting terms
in this Agreement or in any such certificate or other document are inconsistent
with the meanings of such terms under GAAP, the definitions contained in this
Agreement or in any such certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement; Article, Section,
Schedule and Exhibit references contained in this Agreement are references to
Articles, Sections, Schedules and Exhibits in or to this Agreement unless
otherwise specified; and the term "including" shall mean "including without
limitation."
(e) The definitions contained in this Agreement are applicable
to the singular as well as the plural forms of such terms and to the masculine
as well as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred
to herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.
ARTICLE II
CONVEYANCE OF THE TRUST ESTATE; ADDITIONAL NOTE PRINCIPAL BALANCES
Section 2.01 CONVEYANCE OF THE TRUST ESTATE; ADDITIONAL NOTE
PRINCIPAL BALANCES.
(a) (i) On the terms and conditions of this Agreement, on each
Transfer Date, the Depositor agrees to offer for sale and to sell Loans and
deliver related Loan Documents to or at the direction of the Issuer. To the
extent the Issuer has or is able to obtain sufficient funds for the purchase
thereof, the Issuer agrees to purchase such Loans offered for sale by the
Depositor.
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(ii) In consideration of the payment of the Additional Note
Principal Balance pursuant to SECTION 2.06 hereof, the Depositor, as of the
Closing Date and concurrently with the execution and delivery hereof, does
hereby sell, transfer, assign, set over and otherwise convey to the Issuer,
without recourse, but subject to the other terms and provisions of this
Agreement, all of the right, title and interest of the Depositor in and to the
Trust Estate.
(iii) During the Revolving Period, on each Transfer Date,
subject to the conditions precedent set forth in SECTION 2.06(a) and in
accordance with the procedures set forth in SECTION 2.01(c), the Depositor,
pursuant to an S&SA Assignment, will assign to the Issuer without recourse all
the right, title and interest of the Depositor in and to the Loans and all
proceeds thereof listed on the Loan Schedule attached to such S&SA Assignment,
including all interest and principal (i) for each Loan having a Transfer Date
from and including the first day of a calendar month to and including the
Business Day preceding a Payment Date, received on or after the opening of
business of the Transfer Cutoff Date and (ii) for each Loan having a Transfer
Date from and including a Payment Date to and including the last day of a
calendar month, due on the Loan after the Transfer Cutoff Date, in each case
whether received by the Loan Originator, the Depositor or the Servicer, together
with all right, title and interest in and to the proceeds of any related
Insurance Policies and all of the Depositor's right, title and interest in and
to (but none of its obligations under) the Loan Purchase Agreement and all
proceeds of the foregoing.
(iv) The foregoing sales, transfers, assignments, set overs
and conveyances do not, and are not intended to, result in a creation or an
assumption by the Issuer of any obligation of the Depositor, the Loan Originator
or any other Person in connection with the Trust Estate or under any agreement
or instrument relating thereto except as specifically set forth herein.
(b) As of the Closing Date and as of each Transfer Date, the
Issuer acknowledges (or will acknowledge pursuant to the S&SA Assignment) the
conveyance to it of the Trust Estate, including all right, title and interest of
the Depositor in and to the Trust Estate, receipt of which is hereby
acknowledged by the Issuer. Concurrently with such delivery, as of the Closing
Date and as of each Transfer Date, the Issuer pledges (or will pledge pursuant
to the S&SA Assignment) the Trust Estate to the Indenture Trustee. In addition,
concurrently with such delivery and in exchange therefor, the Owner Trustee,
pursuant to the instructions of the Depositor, has executed (not in its
individual capacity, but solely as Owner Trustee on behalf of the Issuer) and
caused the Trust Certificates to be authenticated and delivered to the
Depositor.
(c) (i) Pursuant to and subject to the Note Purchase
Agreement, the Issuer may, at its sole option, from time to time request that
the Initial Noteholder advance on any Transfer Date and on any Collateral Value
Excess Date, Additional Note Principal Balances and the Initial Noteholder shall
remit on such Transfer Date or Collateral Value Excess Date, as the case may be,
to the Advance Account an amount equal to the Additional Note Principal Balance.
(ii) Notwithstanding anything to the contrary herein, in no
event shall the Initial Noteholder be required to advance Additional Note
Principal Balances on a Transfer Date if the conditions precedent to a transfer
of the Loans under SECTION 2.06(a) and the conditions precedent to the purchase
of Additional Note Principal Balances set forth in SECTION 3.01 of the Note
Purchase Agreement have not been fulfilled.
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(iii) Notwithstanding anything to the contrary herein, in no
event shall the Initial Noteholder be required to advance Additional Note
Principal Balance on a Collateral Value Excess Date if the conditions precedent
thereto set forth in SECTION 2.06(b) and the conditions precedent to the
purchase of Additional Note Principal Balances set forth in SECTION 3.01 of the
Note Purchase Agreement have not been fulfilled.
(iv) The Servicer shall appropriately note such Additional
Note Principal Balance (and the increased Note Principal Balance) in the next
succeeding Payment Statement; provided, however, that failure to make any such
notation in such Payment Statement or any error in such notation shall not
adversely affect any Noteholder's rights with respect to its Note Principal
Balance and its right to receive interest and principal payments in respect of
the Note Principal Balance held by such Noteholder. The Initial Noteholder shall
record on the schedule attached to such Noteholder's Note, the date and amount
of any Additional Note Principal Balance advanced by it; provided, that failure
to make such recordation on such schedule or any error in such schedule shall
not adversely affect any Noteholder's rights with respect to its Note Principal
Balance and its right to receive interest payments in respect of the Note
Principal Balance held by such Noteholder.
(v) Absent manifest error, the Note Principal Balance of each
Note as set forth in the Initial Noteholder's records shall be binding upon the
Noteholders and the Issuer, notwithstanding any notation made by the Servicer in
its Payment Statement pursuant to the preceding paragraph.
Section 2.02 OWNERSHIP AND POSSESSION OF LOAN FILES.
With respect to each Loan, as of the related Transfer Date the
ownership of the related Promissory Note, the related Mortgage or Security
Agreement and the contents of the related Servicer's Loan File and Indenture
Trustee's Loan File shall be vested in the Issuer and pledged to the Indenture
Trustee for the benefit of the Securityholders, although possession of the
Servicer's Loan File (other than items required to be maintained in the
Indenture Trustee's Loan Files) on behalf of and for the benefit of the
Securityholders shall remain with the Servicer, and the Custodian shall take
possession of the Indenture Trustee's Loan Files as contemplated in SECTION 2.05
hereof.
Section 2.03 BOOKS AND RECORDS; INTENTION OF THE PARTIES.
(a) As of each Transfer Date, the sale of each of the Loans
conveyed on such Transfer Date shall be reflected on the balance sheets and
other financial statements of the Depositor or the Loan Originator, as the case
may be, as a sale of assets by the Depositor or the Loan Originator, as the case
may be, under GAAP. Each of the Servicer and the Custodian shall be responsible
for maintaining, and shall maintain, a complete set of books and records for
each Loan which shall be clearly marked to reflect the ownership of each Loan,
as of the related Transfer Date, by the Owner Trustee and pledged, as of such
Transfer Date, to the Indenture Trustee for the benefit of the Securityholders.
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(b) It is the intention of the parties hereto that, other than
for federal, state and local income or franchise tax purposes, the transfers and
assignments of the Trust Estate on the Closing Date, on each Transfer Date and
as otherwise contemplated by the Basic Documents and the Assignments shall
constitute a sale of the Trust Estate including, without limitation, the Loans
and all other property comprising the Trust Estate specified in SECTION 2.01(a)
hereof, from the Depositor to the Issuer and such property shall not be property
of the Depositor. The parties hereto shall treat the Notes as indebtedness for
federal, state and local income and franchise tax purposes.
(c) If any of the assignments and transfers of the Loans and
the other property of the Trust Estate specified in SECTION 2.01(a) hereof to
the Owner Trustee pursuant to this Agreement or the conveyance of the Loans or
any of such other property of the Trust Estate to the Owner Trustee, other than
for federal, state and local income or franchise tax purposes, is held or deemed
not to be a sale or is held or deemed to be a pledge of security for a loan, the
Depositor intends that the rights and obligations of the parties shall be
established pursuant to the terms of this Agreement and that, in such event,
with respect to such property, (i) consisting of Loans and related property, the
Depositor shall be deemed to have granted, as of the related Transfer Date, to
the Owner Trustee a first priority security interest in the entire right, title
and interest of the Depositor in and to such Loans and proceeds and all other
property conveyed to the Owner Trustee as of such Transfer Date, (ii) consisting
of any other property specified in SECTION 2.01(a), the Depositor shall be
deemed to have granted, as of the Closing Date, to the Owner Trustee a first
priority security interest in the entire right, title and interest of the
Depositor in and to such property and the proceeds thereof. In such event, with
respect to such property, this Agreement shall constitute a security agreement
under applicable law.
(d) Within ten (10) days of the date first above written, the
Depositor shall, at Depositor's sole expense, cause to be filed UCC-1 financing
statements naming the Owner Trustee as "secured party" and describing the Trust
Estate being sold by the Depositor to the Issuer with the office of the
Secretary of State of the state in which the Depositor is located.
Section 2.04 DELIVERY OF LOAN DOCUMENTS.
(a) With respect to each Loan, the Loan Originator and/or the
Depositor, as the case may be, shall, on or before the related Transfer Date,
deliver or cause to be delivered to the Custodian, as the designated agent of
the Indenture Trustee, each of the following documents (collectively, the
"INDENTURE TRUSTEE'S LOAN FILE"):
(i) With respect to each Mortgage Loan:
(1) The original Promissory Note, endorsed by the Loan
Originator in blank in the following form: "Pay to the order of
______________________, without recourse", with all prior and
intervening endorsements showing a complete chain of endorsement from
origination of the Mortgage Loan to the Loan Originator;
(2) The original Mortgage with evidence of recording thereon
(or, if the original Mortgage has not been returned from the applicable
public recording office or is
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not otherwise available, a copy of the original Mortgage submitted for
recording) and, if the Mortgage was executed pursuant to a power of
attorney, the original power of attorney with evidence of recording
thereon (or, if the original power of attorney has not been returned
from the applicable public recording office or is not otherwise
available, a copy of the original power of attorney submitted for
recording);
(3) The original executed Assignment of Mortgage, in
recordable form. The Assignment of Mortgage may be a blanket
assignment, to the extent such assignment is effective under applicable
law, for Mortgages covering Mortgaged Properties situated within the
same county. If the Assignment of Mortgage is in blanket form, an
Assignment of Mortgage need not be included in the individual Indenture
Trustee's Loan File;
(4) All original intervening assignments of mortgage, with
evidence of recording thereon, showing a complete chain of assignment
from origination of the Mortgage Loan to the Loan Originator (or, if
any such assignment of mortgage has not been returned from the
applicable public recording office or is not otherwise available, a
copy of such assignment of mortgage submitted for recording);
(5) The original of the guaranty (if any) executed in
connection with the Promissory Note or related lease;
(6) The originals of all assumption, modification,
consolidation or extension agreements relating to the Mortgage with
evidence of recording thereon, (or, if the originals have not been
returned from the applicable public recording office or are not
otherwise available, a copy of such originals submitted for recording);
(7) The original attorney's opinion of title and abstract of
title or the original mortgagee title insurance policy, or if the
original mortgagee title insurance policy has not been issued, the
irrevocable commitment to issue the same;
(8) The original of any security agreement, chattel mortgage
or equivalent document executed in connection with the Mortgage Loan;
(9) The original assignment of leases and rents, if separate
from the related Mortgage, with evidence of recording thereon, or a
copy of the original that has been or will, on or prior to the related
Transfer Date be submitted for recordation in the appropriate
governmental recording office of the jurisdiction where the Mortgaged
Property is located;
(10) The original assignment of assignment of leases and
rents, if the assignment of leases and rents is separate from the
related Mortgage, from the Loan Originator in blank, in form and
substance acceptable for recording;
(11) A copy of the UCC-1 Financing Statements and all
necessary UCC continuation statements with evidence of filing and/or
recording thereon or copies thereof that have been sent for filing
and/or recording on or promptly after closing, and UCC
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Assignments executed by the Loan Originator in blank, which UCC
Assignments shall be in form and substance acceptable for filing and/or
recording;
(12) An environmental indemnity agreement (if any);
(13) An Assignment of Loan Documents; and
(14) the original Loan Agreement.
(ii) With respect to each Equipment Loan:
(1) The original Promissory Note, endorsed by the Loan
Originator in blank in the following form: "Pay to the order of
______________________, without recourse", with all prior and
intervening endorsements showing a complete chain of endorsement from
origination of the Loan to the Loan Originator;
(2) The original Security Agreement and, if the Security
Agreement was executed pursuant to a power of attorney, the original
power of attorney;
(3) The original Loan Agreement, to the extent not encompassed
in the Loan Agreement with respect to the related Mortgage Loan;
(4) The original of the guaranty (if any) executed in
connection with the Promissory Note or related lease;
(5) The originals of all assumption, modification,
consolidation or extension agreements relating to the Security
Agreement, or true and correct copies thereof;
(6) A true and correct copy of the UCC-1 Financing Statements
and all necessary UCC continuation statements with evidence of filing
and/or recording thereon or true copies thereof that have been sent for
filing and/or recording on or promptly after closing, and UCC
Assignments executed by the Loan Originator in blank, which UCC
Assignments shall be in form and substance acceptable for filing and/or
recording; and
(7) An Assignment of Loan Documents.
(b) With respect to each Loan, the Loan Originator and the
Depositor shall, on the related Transfer Date, deliver or caused to be delivered
to the Servicer for the benefit of the Indenture Trustee, as secured party on
behalf of the Noteholders, the related Servicer's Loan File.
(c) The Indenture Trustee shall cause the Custodian to take
and maintain continuous physical possession of the Indenture Trustee's Loan
Files in the State of Illinois and, in connection therewith, shall act solely as
agent for the Securityholders in accordance with the terms hereof and not as
agent for the Loan Originator, the Servicer or any other party.
- 36 -
(d) Upon the delivery by the Loan Originator to the Custodian
of any copies of Loan Documents, the Loan Originator shall be deemed to certify
and hereby certifies that each such copy is a true, correct and complete copy of
the related original.
Section 2.05 ACCEPTANCE BY THE INDENTURE TRUSTEE OF THE LOANS;
CERTAIN SUBSTITUTIONS AND REPURCHASES; CERTIFICATION BY THE CUSTODIAN.
(a) The Indenture Trustee declares that it will cause the
Custodian to hold the Indenture Trustee's Loan Files and any additions,
amendments, replacements or supplements to the documents contained therein, as
well as any other assets included in the Trust Estate and delivered to the
Custodian, in trust, upon and subject to the conditions set forth herein. The
Indenture Trustee further agrees to cause the Custodian to execute and deliver
such certifications as are required under the Custodial Agreement and to
otherwise direct the Custodian to perform all of its obligations with respect to
the Indenture Trustee's Loan Files in strict accordance with the terms of the
Custodial Agreement.
(b) (i) With respect to any Loans which are set forth as
exceptions in the Initial Certification or the Loan Schedule and Exceptions
Report, the Loan Originator shall cure such exception by delivering such missing
documents to the Custodian or otherwise curing the defect no later than (a) 5
Business Days after the receipt of the Initial Certification or the first Loan
Schedule and Exceptions Report with respect to such Mortgage Loan or (b) in the
case of Loan Documents which have been delivered to recording or filing offices
and have not been returned to the Loan Originator to permit their delivery to
the Custodian at the time required, 90 days after the related Transfer Date.
(ii) In the event that, with respect to any Loan, the
Loan Originator does not comply with the document delivery requirements of this
SECTION 2.05, the Loan Originator shall purchase such Loan at the Purchase Price
with respect to such Loan by depositing such Purchase Price in the Collection
Account. The Loan Originator shall provide the Servicer, the Indenture Trustee,
the Issuer and the Initial Noteholder with a certification of a Responsible
Officer prior to such repurchase indicating that the Loan Originator intends to
repurchase such Loan. In lieu of such a repurchase, the Depositor and Loan
Originator may comply with the substitution provisions of SECTION 3.05 hereof.
(iii) It is understood and agreed that the obligation
of the Loan Originator to repurchase any such Loan pursuant to this SECTION
2.04(b) shall constitute the sole remedy against it with respect to such failure
to comply with the foregoing delivery requirements.
(c) In performing its reviews of the Indenture Trustee's Loan
Files pursuant to the Custodial Agreement, the Custodian shall have no
responsibility to determine the genuineness of any document contained therein
and any signature thereon. The Custodian shall not have any responsibility for
determining whether any document is valid and binding, whether the text of any
assignment or endorsement is in proper or recordable form, whether any document
has been recorded in accordance with the requirements of any applicable
jurisdiction or whether a blanket assignment is permitted in any applicable
jurisdiction.
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(d) The Servicer's Loan File shall be held in the custody of
the Servicer (i) for the benefit of, and as agent for, the Noteholders and (ii)
for the benefit of the Indenture Trustee, as secured party on behalf of the
Noteholders, for so long as the Indenture continues in full force and effect;
after the Indenture is terminated in accordance with the terms thereof, the
Servicer's Loan File shall be held in the custody of the Servicer for the
benefit of, and as agent for, the Certificateholders. It is intended that, by
the Servicer's agreement pursuant to this SECTION 2.05(d), the Indenture Trustee
shall be deemed to have possession of the Servicer's Loan Files for purposes of
Section 9-305 of the UCC of the state in which such documents or instruments are
located. The Servicer shall promptly report to the Indenture Trustee any failure
by it to hold the Servicer's Loan File as herein provided and shall promptly
take appropriate action to remedy any such failure. In acting as custodian of
such documents and instruments, the Servicer agrees not to assert any legal or
beneficial ownership interest in the Loans or such documents or instruments. The
Servicer agrees to indemnify the Securityholders and the Indenture Trustee, its
officers, directors, employees, agents and "control persons" as such term is
used under the Act and under the Securities Exchange Act of 1934, as amended for
any and all liabilities, obligations, losses, damages, payments, costs or
expenses of any kind whatsoever which may be imposed on, incurred by or asserted
against the Securityholders or the Indenture Trustee as the result of any act or
omission by the Servicer relating to the maintenance and custody of such
documents or instruments which have been delivered to the Servicer; provided,
however, that the Servicer will not be liable for any portion of any such amount
resulting from the negligence or willful misconduct of any Securityholders or
the Indenture Trustee; and provided, further, that the Servicer will not be
liable for any portion of any such amount resulting from the Servicer's
compliance with any instructions or directions consistent with this Agreement
issued to the Servicer by the Indenture Trustee. The Indenture Trustee shall
have no duty to monitor or otherwise oversee the Servicer's performance as
custodian hereunder.
Section 2.06 CONDITIONS PRECEDENT TO TRANSFER DATES AND
COLLATERAL VALUE EXCESS DATES.
(a) On each Transfer Date, the Depositor shall convey to the
Issuer, the Loans and the other property and rights related thereto described in
the related S&SA Assignment, the Issuer, only upon the satisfaction of each of
the conditions set forth below on or prior to such Transfer Date, shall deposit
or cause to be deposited cash in the amount of the Additional Note Principal
Balance in the Advance Account in respect thereof, and the Servicer shall,
promptly after such deposit, withdraw the amount deposited in respect of
applicable Additional Note Principal Balance from the Advance Account, and
distribute such amount to or at the direction of the Depositor.
(i) the Depositor shall have delivered to the Issuer
and the Initial Noteholder duly executed
Assignments, which shall have attached thereto a
Loan Schedule setting forth the appropriate
information with respect to all Loans conveyed
on such Transfer Date and shall have delivered
to the Initial Noteholder a computer readable
transmission of such Loan Schedule;
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(ii) the Depositor shall have deposited in the
Collection Account all collections received with
respect to each of the Loans after but not
including the applicable Transfer Cutoff Date;
(iii) as of such date, neither the Loan Originator,
the Issuer nor the Depositor shall (a) be
insolvent, (b) be made insolvent by its
respective sale of Loans or (c) have reason to
believe that its insolvency is imminent;
(iv) the Revolving Period shall not have terminated;
(v) the Initial Noteholder shall have received the
Due Diligence Packages for such Loans as are to
be transferred on such Transfer Date at least
five Business Days prior to the related Transfer
Date, shall have such completed its due
diligence investigation of such Loans and shall
have approved, in its sole discretion, each such
Loan;
(vi) the Issuer shall have delivered the Indenture
Trustee's Loan File to the Custodian in
accordance with the Custodial Agreement and the
Initial Noteholder shall have received a copy of
the Loan Schedule and Exceptions Report
reflecting such delivery;
(vii) each of the representations and warranties made
by the Depositor pursuant to SECTION 3.04 with
respect to the Loans shall be true and correct
as of the related Transfer Date with the same
effect as if then made, and the Depositor shall
have performed all obligations to be performed
by it under the Basic Documents on or prior to
such Transfer Date;
(viii) the Depositor shall, at its own expense, on or
prior to the Transfer Date, indicate in its
computer files that the Loans identified in the
LPA Assignment and S&SA Assignment have been
sold to the Issuer pursuant to this Agreement
and the S&SA Assignment;
(ix) the Depositor shall have taken any action
required to maintain the ownership interest of
the Issuer in the Trust Estate and the first
perfected security interest therein of the
Indenture Trustee;
(x) no selection procedures believed by the
Depositor to be adverse to the interests of the
Noteholders shall have been utilized in
selecting the Loans to be conveyed on such
Transfer Date;
(xi) the Depositor shall have provided the Issuer,
the Indenture Trustee and the Initial Noteholder
no later than two Business Days prior to such
date a Notice of Additional Note Principal
Balance in the form of Exhibit A hereto;
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(xii) after giving effect to the Additional Note
Principal Balance associated therewith, the Note
Principal Balance will not exceed the Maximum
Note Principal Balance;
(xiii) all conditions precedent to the Depositor's
purchase of Loans pursuant to the Loan Purchase
Agreement shall have been fulfilled as of such
Transfer Date; and
(xiv) all conditions precedent to the Noteholders'
purchase of Additional Note Principal Balance
pursuant to the Note Purchase Agreement shall
have been fulfilled as of such date.
(b) On each Collateral Value Excess Date, the Issuer shall
deposit or cause to be deposited into the Advance Account cash in the amount
equal to the Additional Note Principal Balance with respect to such Collateral
Value Excess Date, only upon the satisfaction of conditions set forth in
subclauses (iii), (iv), (ix), (xi), (xii) and (xiv) of SECTION 2.06(a) on such
Collateral Value Excess Date. The Servicer shall withdraw the amount deposited
in respect of Additional Note Principal Balance from the Advance Account in
respect of such deposit and distribute such amount to or at the direction of the
Depositor.
Section 2.07 TERMINATION OF REVOLVING PERIOD .
Upon the occurrence of (i) an Event of Default or Default
under this Agreement or the Indenture or (ii) a Rapid Amortization Trigger, the
Initial Noteholder (if still a Noteholder) may, in its sole discretion,
terminate the Revolving Period.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR.
The Depositor hereby represents and warrants to the Loan
Originator, the Servicer, the Indenture Trustee, the Owner Trustee and the
Noteholders that as of the Closing Date, as of each Transfer Date and as of each
Collateral Value Excess Date:
(a) The Depositor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and has, and had at all relevant times, full power to own its property,
to carry on its business as currently conducted, to enter into and
perform its obligations under each Basic Document to which it is a
party;
(b) The execution and delivery of each Basic Document to which
it is a party by the Depositor and its performance of and compliance
with all of the terms thereof will not violate the Depositor's
certificate of incorporation or by-laws or constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a
default) under, or result in the breach or acceleration of, any
material contract, agreement or other
- 40 -
instrument to which the Depositor is a party or which may be applicable
to the Depositor or any of its assets;
(c) The Depositor has the full power and authority to enter
into and consummate the transactions contemplated by each Basic
Document to which it is a party, has duly authorized the execution,
delivery and performance of each Basic Document to which it is a party
and has duly executed and delivered each Basic Document to which it is
a party. Each Basic Document to which it is a party, assuming due
authorization, execution and delivery by the other party or parties
thereto, constitutes a valid, legal and binding obligation of the
Depositor, enforceable against it in accordance with the terms thereof,
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other similar laws relating
to or affecting the rights of creditors generally, and by general
equity principles (regardless of whether such enforcement is considered
in a proceeding in equity or at law);
(d) The Depositor is not in violation of, and the execution
and delivery of each Basic Document to which it is a party by the
Depositor and its performance and compliance with the terms of each
Basic Document to which it is a party will not constitute a violation
with respect to, any order or decree of any court or any order or
regulation of any federal, state, municipal or governmental agency
having jurisdiction, which violation would materially and adversely
affect the condition (financial or otherwise) or operations of the
Depositor or its properties or materially and adversely affect the
performance of its duties hereunder;
(e) There are no actions or proceedings against, or
investigations of, the Depositor currently pending with regard to which
the Depositor has received service of process and no action or
proceeding against, or investigation of, the Depositor is, to the
knowledge of the Depositor, threatened or otherwise pending before any
court, administrative agency or other tribunal that (a) if determined
adversely to the Depositor, would prohibit its entering into any of the
Basic Documents to which it is a party or render the Notes invalid, (b)
seek to prevent the issuance of the Notes or the consummation of any of
the transactions contemplated by any of the Basic Documents to which it
is a party or (c) if determined adversely to the Depositor, would
prohibit or materially and adversely affect the performance by the
Depositor of its obligations under, or the validity or enforceability
of, any of the Basic Documents to which it is a party or the Notes;
(f) No consent, approval, authorization or order of any court
or governmental agency or body is required for the execution, delivery
and performance by the Depositor of, or compliance by the Depositor
with, any of the Basic Documents to which it is a party or the Notes,
or for the consummation of the transactions contemplated by any of the
Basic Documents to which it is a party, except for such consents,
approvals, authorizations and orders, if any, that have been obtained
prior to the Closing Date;
(g) The Depositor is solvent, is able to pay its debts as they
become due and has capital sufficient to carry on its business and its
obligations hereunder; it will not be
- 41 -
rendered insolvent by the execution and delivery of any of the Basic
Documents to which it is a party or the assumption of any of its
obligations thereunder; no petition of bankruptcy (or similar
insolvency proceeding) has been filed by or against the Depositor;
(h) As of the Transfer Date related thereto, the Depositor did
not sell the Mortgage Loans sold thereon to the Trust with any intent
to hinder, delay or defraud any of its creditors; nor will the
Depositor be rendered insolvent as a result of such sale;
(i) As of the Transfer Date related thereto, the Depositor had
good title to, and was the sole owner of, each Loan sold thereon free
and clear of any lien other than any such lien released simultaneously
with the sale contemplated herein, and, immediately upon each transfer
and assignment herein contemplated, the Depositor will have delivered
to the Trust good title to, and the Trust will be the sole owner of,
each Mortgage Loan transferred thereon free and clear of any lien;
(j) As of the Transfer Date related thereto, the Depositor
acquired title to each of the Loans sold thereon in good faith, without
notice of any adverse claim;
(k) The Basic Documents and other information identified in
Exhibit D hereto (collectively, the "Referenced Documents"), when taken
as a whole, do not contain any untrue statement of material fact or
omit to state any material fact necessary to make the statements herein
or therein, in light of the circumstances under which they were made,
not misleading. All written information furnished after the date hereof
by or on behalf of the Depositor to the Initial Noteholder or any
Affiliate thereof in connection with the Referenced Documents and the
transactions contemplated thereby will be true, complete and accurate
in every material respect, or (in the case of projections) based on
reasonable estimates, on the date as of which such information is
stated or certified. Except as disclosed in writing to the Initial
Noteholder, there is no fact known to a Responsible Officer of the
Depositor, after due inquiry, that could reasonably be expected to have
a material adverse effect on (a) the property, business, operations,
financial condition or prospects of the Depositor, (b) the ability of
the Depositor to perform its obligations under any Basic Document to
which it is a party, (c) the validity or enforceability of any of the
Basic Documents, (d) the rights and remedies of the Noteholders and the
Indenture Trustee under any of the Basic Documents, (e) the timely
payment of the principal of or interest on the Notes or other amounts
payable in connection therewith or (f) the Loans;
(l) The Depositor is not required to be registered as an
"investment company" under the Investment Company Act of 1940, as
amended; and
(m) As of the Transfer Date related thereto, the transfer,
assignment and conveyance of the Loans by the Depositor thereon
pursuant to this Agreement is not subject to the bulk transfer laws or
any similar statutory provisions in effect in any applicable
jurisdiction.
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(n) The Depositor's principal place of business and chief
executive offices are located at The Perimeter Center, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
Section 3.02 REPRESENTATIONS AND WARRANTIES OF THE LOAN
ORIGINATOR.
The Loan Originator hereby represents and warrants to the
Servicer, the Indenture Trustee, the Owner Trustee, the Noteholders and
the Depositor that as of the Closing Date, as of each Transfer Date and
as of each Collateral Value Excess Date:
(a) The Loan Originator is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware and (i) is duly qualified, in good standing and licensed to
carry on its business in each state where any Loan Collateral is
located and (ii) is in compliance with the laws of any such state, in
both cases, to the extent necessary to ensure the enforceability of the
Loans in accordance with the terms thereof and had at all relevant
times, full corporate power to originate the Loans, to own its
property, to carry on its business as currently conducted and to enter
into and perform its obligations under each Basic Document to which it
is a party;
(b) The execution and delivery by the Loan Originator of each
Basic Document to which it is a party and its performance of and
compliance with the terms thereof will not violate the Loan
Originator's articles of incorporation or by-laws or constitute a
default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, or result in the breach or
acceleration of, any contract, agreement or other instrument to which
the Loan Originator is a party or which may be applicable to the Loan
Originator or any of its assets;
(c) The Loan Originator has the full power and authority to
enter into and consummate all transactions contemplated by the Basic
Documents to be consummated by it, has duly authorized the execution,
delivery and performance of each Basic Document to which it is a party
and has duly executed and delivered each Basic Document to which it is
a party. Each Basic Document to which it is a party, assuming due
authorization, execution and delivery by each of the other parties
thereto, constitutes a valid, legal and binding obligation of the Loan
Originator, enforceable against it in accordance with the terms hereof,
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other similar laws relating
to or affecting the rights of creditors generally, and by general
equity principles (regardless of whether such enforcement is considered
in a proceeding in equity or at law);
(d) The Loan Originator is not in violation of, and the
execution and delivery of each Basic Document to which it is a party by
the Loan Originator and its performance and compliance with the terms
of each Basic Document to which it is a party will not constitute a
violation with respect to, any order or decree of any court or any
order or regulation of any federal, state, municipal or governmental
agency having jurisdiction, which violation would materially and
adversely affect the condition (financial or
- 43 -
otherwise) or operations of the Loan Originator or its properties or
materially and adversely affect the performance of its duties under any
Basic Document to which it is a party;
(e) There are no actions or proceedings against, or
investigations of, the Loan Originator currently pending with regard to
which the Loan Originator has received service of process and no action
or proceeding against, or investigation of, the Loan Originator is, to
the knowledge of the Loan Originator, threatened or otherwise pending
before any court, administrative agency or other tribunal that (a) if
determined adversely to the Loan Originator, would prohibit its
entering into any Basic Document to which it is a party or render the
Notes invalid, (b) seek to prevent the issuance of the Notes or the
consummation of any of the transactions contemplated by any Basic
Document to which it is a party or (c) if determined adversely to the
Loan Originator, would prohibit or materially and adversely affect the
sale of the Loans to the Depositor, the performance by the Loan
Originator of its obligations under, or the validity or enforceability
of, any Basic Document to which it is a party or the Notes;
(f) No consent, approval, authorization or order of any court
or governmental agency or body is required for: (1) the execution,
delivery and performance by the Loan Originator of, or compliance by
the Loan Originator with, any Basic Document to which it is a party,
(2) the issuance of the Notes, (3) the sale of the Loans under the Loan
Purchase Agreement or (4) the consummation of the transactions required
of it by any Basic Document to which it is a party, except such as
shall have been obtained before such date;
(g) Immediately prior to the Transfer Date related thereto,
the Loan Originator had good title to the Loans sold on such Transfer
Date without notice of any adverse claim;
(h) The information, reports and schedules furnished in
writing by or on behalf of the Loan Originator to the Initial
Noteholder or any Affiliate thereof with regard to the Loans, the Due
Diligence Packages, the Basic Documents and other information
identified in Exhibit D hereto (collectively, the "Referenced
Documents"), when taken as a whole, do not contain any untrue statement
of material fact or omit to state any material fact necessary to make
the statements herein or therein, in light of the circumstances under
which they were made, not misleading. All written information furnished
after the date hereof by or on behalf of the Loan Originator to the
Initial Noteholder or any Affiliate thereof in connection with the
Referenced Documents and the transactions contemplated thereby will be
true, complete and accurate in every material respect, or (in the case
of projections) based on reasonable estimates, on the date as of which
such information is stated or certified. Except as disclosed in writing
to the Initial Noteholder, there is no fact known to a Responsible
Officer of the Loan Originator, after due inquiry, that could
reasonably be expected to have a material adverse effect on (a) the
property, business, operations, financial condition or prospects of the
Loan Originator, (b) the ability of the Loan Originator to perform its
obligations under any Basic Document to which it is a party, (c) the
validity or enforceability of any of the Basic Documents, (d) the
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rights and remedies of the Noteholders and the Indenture Trustee under
any of the Basic Documents, (e) the timely payment of the principal of
or interest on the Notes or other amounts payable in connection
therewith or (f) the Loans;
(i) The Loan Originator is solvent, is able to pay its debts
as they become due and has capital sufficient to carry on its business
and its obligations under each Basic Document to which it is a party;
it will not be rendered insolvent by the execution and delivery of this
Agreement or by the performance of its obligations under each Basic
Document to which it is a party; no petition of bankruptcy (or similar
insolvency proceeding) has been filed by or against the Loan Originator
prior to the date hereof;
(j) As of the Transfer Date related thereto, the Loan
Originator has transferred the Loans transferred on or prior to such
Transfer Date without any intent to hinder, delay or defraud any of its
creditors; and
(k) As of the Transfer Date related thereto, the Loan
Originator has received fair consideration and reasonably equivalent
value in exchange for the Loans sold on such Transfer Date to the
Depositor.
It is understood and agreed that the representations and
warranties set forth in this SECTION 3.02 shall survive delivery of the
respective Indenture Trustee's Loan Files to the Custodian (as the agent of the
Indenture Trustee) and shall inure to the benefit of the Securityholders, the
Depositor, the Servicer, the Indenture Trustee, the Owner Trustee and the Trust.
Upon discovery by any of the Loan Originator, the Depositor, the Servicer, the
Indenture Trustee or the Owner Trustee of a breach of any of the foregoing
representations and warranties that materially and adversely affects the value
of any Loan or the interests of the Securityholders therein, the party
discovering such breach shall give prompt written notice (but in no event later
than two Business Days following such discovery) to the other parties. The
obligations of the Loan Originator set forth in Sections 2.05 and 3.05 hereof to
cure any breach or to substitute for or repurchase an affected Loan shall
constitute the sole remedies available hereunder to the Securityholders, the
Depositor, the Servicer, the Indenture Trustee or the Owner Trustee respecting a
breach of the representations and warranties contained in this SECTION 3.02. The
fact that the Initial Noteholder has conducted or has failed to conduct any
partial or complete due diligence investigation of the Loan Files shall not
affect the Noteholders' rights to demand repurchase or substitution as provided
under this Agreement.
Section 3.03 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
SERVICER.
The Servicer hereby represents and warrants to and covenants
with the Owner Trustee, the Indenture Trustee, the Noteholders, the Depositor
and the Loan Originator that as of the Closing Date, as of each Transfer Date
and as of each Collateral Value Excess Date:
(a) The Servicer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and (i) is duly qualified, in good standing and licensed to carry on
its business in each state where any Loan Collateral is located, and
(ii) is in compliance with the laws of any such state, in both cases,
to the
- 45 -
extent necessary to ensure the enforceability of the Loans in
accordance with the terms thereof and to perform its duties under each
Basic Document to which it is a party and had at all relevant times,
full corporate power to own its property, to carry on its business as
currently conducted, to service the Loans and to enter into and perform
its obligations under each Basic Document to which it is a party;
(b) The execution and delivery by the Servicer of each Basic
Document to which it is a party and its performance of and compliance
with the terms thereof will not violate the Servicer's articles of
incorporation or by-laws or constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a default)
under, or result in the breach or acceleration of, any material
contract, agreement or other instrument to which the Servicer is a
party or which may be applicable to the Servicer or any of its assets;
(c) The Servicer has the full power and authority to enter
into and consummate all transactions contemplated by each Basic
Document to which it is a party, has duly authorized the execution,
delivery and performance of each Basic Document to which it is a party
and has duly executed and delivered each Basic Document to which it is
a party. Each Basic Document to which it is a party, assuming due
authorization, execution and delivery by each of the other parties
thereto, constitutes a valid, legal and binding obligation of the
Servicer, enforceable against it in accordance with the terms hereof,
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other similar laws relating
to or affecting the rights of creditors generally, and by general
equity principles (regardless of whether such enforcement is considered
in a proceeding in equity or at law);
(d) The Servicer is not in violation of, and the execution and
delivery of each Basic Document to which it is a party by the Servicer
and its performance and compliance with the terms of each Basic
Document to which it is a party will not constitute a violation with
respect to, any order or decree of any court or any order or regulation
of any federal, state, municipal or governmental agency having
jurisdiction, which violation would materially and adversely affect the
condition (financial or otherwise) or operations of the Servicer or
materially and adversely affect the performance of its duties under any
Basic Document to which it is a party;
(e) There are no actions or proceedings against, or
investigations of, the Servicer currently pending with regard to which
the Servicer has received service of process and no action or
proceeding against, or investigation of, the Servicer is, to the
knowledge of the Servicer, threatened or otherwise pending before any
court, administrative agency or other tribunal that (a) if determined
adversely to the Servicer, would prohibit its entering into any Basic
Document to which it is a party, (b) seek to prevent the consummation
of any of the transactions contemplated by any Basic Document to which
it is a party or (c) if determined adversely to the Servicer, would
prohibit or materially and adversely affect the performance by the
Servicer of its obligations under, or the validity or enforceability
of, any Basic Document to which it is a party or the Notes;
- 46 -
(f) No consent, approval, authorization or order of any court
or governmental agency or body is required for the execution, delivery
and performance by the Servicer of, or compliance by the Servicer with,
any Basic Document to which it is a party or the Notes, or for the
consummation of the transactions contemplated by any Basic Document to
which it is a party, except for such consents, approvals,
authorizations and orders, if any, that have been obtained prior to
such date;
(g) The Basic Documents and other information identified in
Exhibit D hereto (collectively, the "Referenced Documents"), when taken
as a whole, do not contain any untrue statement of material fact or
omit to state any material fact necessary to make the statements herein
or therein, in light of the circumstances under which they were made,
not misleading. All written information furnished after the date hereof
by or on behalf of the Servicer to the Initial Noteholder or any
Affiliate thereof in connection with the Referenced Documents and the
transactions contemplated thereby will be true, complete and accurate
in every material respect, or (in the case of projections) based on
reasonable estimates, on the date as of which such information is
stated or certified. Except as disclosed in writing to the Initial
Noteholder, there is no fact known to a Responsible Officer of the
Servicer, after due inquiry, that could reasonably be expected to have
a material adverse effect on (a) the property, business, operations,
financial condition or prospects of the Servicer, (b) the ability of
the Servicer to perform its obligations under any Basic Document to
which it is a party, (c) the validity or enforceability of any of the
Basic Documents, (d) the rights and remedies of the Noteholders and the
Indenture Trustee under any of the Basic Documents, (e) the timely
payment of the principal of or interest on the Notes or other amounts
payable in connection therewith or (f) the Loans;
(h) The Servicer is solvent and will not be rendered insolvent
as a result of the performance of its obligations pursuant to under the
Basic Documents to which it is a party; and
(i) The Servicer acknowledges and agrees that the Servicing
Fee represents reasonable compensation for the performance of its
services hereunder and that the entire Servicing Fee shall be treated
by the Servicer, for accounting purposes, as compensation for the
servicing and administration of the Loans pursuant to this Agreement.
It is understood and agreed that the representations,
warranties and covenants set forth in this SECTION 3.03 shall survive delivery
of the respective Indenture Trustee's Loan Files to the Indenture Trustee and
shall inure to the benefit of the Depositor, the Noteholders and the Indenture
Trustee. Upon discovery by any of the Loan Originator, the Depositor, the
Servicer, the Indenture Trustee or the Owner Trustee of a breach of any of the
foregoing representations, warranties and covenants that materially and
adversely affects the value of any Loans or the interests of the Noteholders
therein, the party discovering such breach shall give prompt written notice (but
in no event later than two Business Days following such discovery) to the other
parties. The fact that the Initial Noteholder has conducted or has failed to
conduct any partial or complete due diligence investigation shall not affect the
Noteholders' rights to exercise their remedies as provided under this Agreement.
- 47 -
Section 3.04 REPRESENTATIONS AND WARRANTIES REGARDING LOANS.
The Loan Originator hereby represents and warrants to the
Depositor, the Issuer, the Indenture Trustee and the Noteholders, with respect
to each Loan as of the related Transfer Date (except as otherwise expressly
agreed in writing by the Majority Noteholders):
(a) Immediately prior to sale to the Depositor, the Loan
Originator is the sole owner and holder of the Loan.
(b) Immediately prior to sale to the Depositor, the Loan
Originator has full right and authority to sell, assign, transfer and pledge the
Loan.
(c) The Loan Originator is transferring the Loan free and
clear of any and all liens, pledges, equities, charges, claims or security
interests of any nature encumbering the Loan, except those removed immediately
prior to sale to the Depositor and except any security interest created pursuant
to the terms of this Agreement.
(d) With respect to each Mortgage Loan, the related Servicer's
Loan File includes a survey, certified to the Loan Originator and the title
insurance company, which is prepared in accordance with minimum standards for
surveys as determined by ALTA or equivalent at the time of origination of such
Mortgage Loan and contains the signature and seal of a licensed engineer or
surveyor affixed thereto.
(e) With respect to each Mortgage Loan, the related Assignment
of Mortgage and assignment of assignment of leases and rents (if any), except
for the name of the assignee, which is left blank, constitutes the legal, valid
and binding assignment of the Mortgage and the related assignment of leases and
rents from the Loan Originator. The endorsement of each Promissory Note, except
for the name of the assignee, which is left blank, constitutes the legal, valid
and binding assignment of the Promissory Note, and together with the Assignment
of Mortgage and Assignment of Loan Documents, legally and validly conveys all
right, title and interest in the subject Loan to the Indenture Trustee.
(f) With respect to each Equipment Loan, the endorsement of
the related Promissory Note, except for the name of the assignee, which is left
blank, constitutes the legal, valid and binding assignment of the Promissory
Note, and together with the Assignment of Loan Documents, legally and validly
conveys all right, title and interest in the subject Equipment Loan to the
Indenture Trustee.
(g) With respect to each Mortgage Loan, the lien of the
related Mortgage is insured by an ALTA lender's title insurance policy (or a
policy on an equivalent form), issued (or to be issued pursuant to a binding
irrevocable commitment therefor) by a Qualified Insurer, insuring (subject to
the exceptions referred to in subsection (ac) below) the Loan Originator, its
successors and assigns, that the related Mortgage is a valid first lien on the
Mortgaged Property. Such title insurance policy is in full force and effect and
will inure to the benefit of the owner of such Mortgage Loan. Such title
insurance policy insures the Mortgaged Property for not less than the original
principal amount of the Mortgage Loan after all advances of principal. The title
- 48 -
policy does not contain any special exceptions (other than the standard
exclusions) for zoning or uses to the extent that such exceptions would, in the
aggregate, materially and adversely affect the value of the related Mortgaged
Property or the intended use thereof and, where available, has been marked to
delete the standard survey exception or to replace the standard survey exception
with a specific survey reading. No Person claiming through the Loan Originator
has done, by act or omission, anything, or has knowledge of any fact, which
would materially impair the coverage of any such title insurance policy. The
title policy has been marked to delete the intervening lien exception. All
premiums for such policy, including any premiums for endorsements and special
endorsements, have been paid. With respect to each Adjustable Rate Loan, the
related title policy contains an ALTA 6.02 endorsement, or its equivalent, to
the extent available.
(h) With respect to the Indenture Trustee's Loan File for such
Loan, all copies contained therein are true, correct and complete copies of the
related originals.
(i) The Fixed Charge Coverage Ratio for such Loan, to the
extent applicable, is not less than that specified in the Underwriting
Guidelines.
(j) (i) With respect to each Mortgage Loan that is secured by
the related Borrower's fee simple ownership interest in the related Mortgaged
Property, such Borrower is the owner and holder of the landlord's interest under
any lease for use and occupancy of all or any portion of the related Mortgaged
Property. Each Mortgage provides for the appointment of a receiver for rents in
the event of default or allows the mortgagee to enter into possession to collect
the rents. Neither the Loan Originator nor the Borrower has made any assignments
of the landlord's interest in any such lease or any portion of the rents,
additional rents, charges, issues or profits due and payable or to become due
and payable under any such lease, which assignments are presently outstanding
and have priority over the related Mortgage or any related assignment of leases,
rents and profits given in connection with the origination of the related
Mortgage, other than as may be disclosed in the related lender's title insurance
policy referred to in subsection (g) above. An assignment of leases and/or rents
and any security agreement, chattel mortgage or equivalent document related to
and delivered in connection with the Mortgage Loan establishes and creates a
valid and enforceable first lien and first priority security interest on the
property described therein except as enforceability may be limited by (a)
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally, (b) general principles of equity
(regardless of whether such enforcement is considered in a proceeding in equity
or at law) and (c) applicable state laws, which state laws will not materially
interfere with the practical realization of the principal benefits or security
provided thereby.
(ii) With respect to each Equipment Loan, all Equipment
subject to the related Security Agreement is either subject to a UCC-1 Financing
Statement filed and/or recorded (or sent for filing and/or recording on or prior
to the Transfer Cutoff Date) in all places necessary to perfect a valid first
priority lien thereon or, to the extent the related Equipment is securities or
other instruments, the Loan Originator or its agent has a valid first priority
lien thereon perfected by possession.
(k) In reliance on the Borrower's counsel's opinion contained
in the Servicer's Loan File, if any, and the Title Policy contained in the
Indenture Trustee's Loan File, with respect
- 49 -
to each Mortgage that is a deed of trust, a trustee, duly qualified under
applicable law to serve as such, has either been properly designated and
currently so serves or may be substituted in accordance with applicable law.
Except in connection with a trustee's sale or as otherwise required by
applicable law, after default by the Borrower, no fees or expenses are payable
to such trustee.
(l) The Servicer's Loan File contains a site inspection and
valuation report of the related Mortgaged Property which site inspection and
valuation report conforms to the requirements contained in the Underwriting
Guidelines and such site inspection and valuation report was conducted by a
Person whose compensation was and is not affected by the approval or disapproval
of such Loan.
(m) The information set forth in the Loan Schedule for such
Loan is true, correct and complete in all material respects.
(n) The Loan has been originated in accordance with applicable
law and the Underwriting Guidelines.
(o) The Borrower and/or its lessees and/or operator are in
possession of all material licenses, permits, and authorizations required for
use and/or possession of the Loan Collateral.
(p) The Loan has been serviced in accordance with applicable
law and the terms of the related Loan Documents.
(q) Since the completion of funding contemplated under the
applicable Loan Documents of the Loan, the terms of the related Promissory Note,
Mortgage, if applicable, and Security Agreements, if applicable, have not been
impaired, waived, modified, altered, satisfied, canceled or subordinated by the
Loan Originator in any respect, except, in each of the foregoing instances, by
written instruments that are a part of the related Indenture Trustee's Loan
File, recorded in the applicable public recording office if necessary to
maintain the priority of the lien of the related Mortgage, if applicable, and
Security Agreements, if applicable, delivered to the Indenture Trustee or its
designee.
(r) No fraud, error, omission, misrepresentation or negligence
with respect to the origination of a Loan has taken place on the part of any
Person, including, without limitation, the Borrower, any appraiser or any other
party involved in the origination of the Loan. The Loan Originator has reviewed
all of the documents constituting the Indenture Trustee's Loan File, the
Servicer's Loan File and internal credit write-up and has made such inquiries as
it deems necessary to make and confirm the accuracy of the representations set
forth herein.
(s) The Loan is not a participation interest in a loan, but is
a whole loan, and the Loan Originator does not own and is not entitled to own
any equity interest in the Borrower. Except as disclosed in the Due Diligence
Package related thereto, such Loan does not provide for any Retained Interest.
- 50 -
(t) The Loan does not contain a shared appreciation feature or
any terms providing for a contingent interest.
(u) No taxes, ground rents, water charges, sewer rents,
insurance premiums, governmental assessments (including the current portion of
assessments payable in future installments) or other charges affecting the
related Loan Collateral that, prior to the related Transfer Cutoff Date became
due and owing in respect of such Loan Collateral, are delinquent.
(v) Any escrow deposits and payments relating to the Loan are
under the control of the Loan Originator or Servicer and any amounts required to
be deposited by the Borrower have been deposited.
(w) There is no material default, breach, violation or event
of acceleration on the part of the related Borrower existing under the related
Mortgage or Security Agreement or the related Promissory Note, and no event
which, with notice and the expiration of any grace or cure period, would
constitute a default, breach, violation or event of acceleration occurred during
the preceding twelve months. The Loan Originator has not waived any material
default, breach, violation or event of acceleration of any of the foregoing,
and, pursuant to the terms of the related Mortgage or Security Agreement or the
related Promissory Note, no person or party other than the holder of such
Promissory Note may declare any event of default or accelerate the related
indebtedness under either of such Mortgage or Promissory Note.
(x) There is no pending total or partial condemnation of the
related Mortgaged Property, and the Loan Collateral is free and clear of any
damage or waste that would materially and adversely affect its value or
marketability as security for the Loan and the related Loan Collateral is in
good repair and has not been materially damaged by fire, wind or other cause,
which damage has not been fully repaired or for which insurance proceeds have
not been received or are not expected to be received.
(y) With respect to each Mortgage Loan, none of the
improvements that are or are intended to be, security for the Mortgage Loan lie
outside of the boundaries and building restriction lines of the Mortgaged
Property except for certain immaterial encroachments therefrom, and no
improvements on adjoining properties materially encroach upon the Mortgaged
Property, except for those material encroachments insured over by title
insurance or the subject of a Title Matters Indemnity Agreement contained in the
Servicer's Loan File with respect to such Mortgage Loan.
(z) The Loan Collateral is covered by acceptable insurance
meeting the minimum requirements set forth in the Mortgage or Security
Agreement. The Loan Collateral is insured by a fire and extended perils
insurance policy that provides coverage in an amount not less than the lesser of
the Principal Balance of the related Promissory Note and full replacement value
of the Loan Collateral.
(aa) With respect to each Mortgage Loan, the related Loan
Documents require that the related Mortgaged Property be insured by a fire and
extended perils insurance policy, issued by a Qualified Insurer that has a
claims-paying ability rated at least "A:VI" by A.M. Best's
- 51 -
Key Rating Guide, providing coverage against loss or damage sustained by reason
of fire, lightning, windstorm, hail, explosion, riot, riot attending a strike,
civil commotion, aircraft, vehicles and smoke, and, to the extent required under
such Loan Documents, against earthquake and other risks insured against by
Persons operating like properties in the locality of such Mortgaged Property, in
an amount that is not less than 100% of the full insurable replacement cost of
such Mortgaged Property (exclusive of land, footings and foundations). If such
Mortgaged Property is located in a Special Flood Hazard Area (as defined by the
Federal Emergency Management Agency) and flood insurance is available, such Loan
Documents require that a flood insurance policy be in effect. The related Loan
Documents also require the related Mortgaged Property to be covered by
comprehensive general liability insurance in amounts generally required by
institutional lenders for similar properties. The related Loan Documents require
that each such Insurance Policy (i) contain a standard mortgagee clause naming
the Loan Originator, its successors and assigns as mortgagee and (ii) provide
for prior notice to the mortgagee, as additional insured, of termination or
cancellation (and no such notice has been received). In addition, each such
Insurance Policy will be required to be subject to deductibles not greater than
those customarily carried for similar Mortgaged Property, considering the
creditworthiness of the Borrower. The Loan Documents for such Mortgage Loan
obligate the related Borrower to maintain all such insurance, and if such
Borrower fails to do so, authorize the mortgagee to obtain and maintain such
insurance at such Borrower's cost and expense and to seek reimbursement therefor
from such Borrower;
(ab) The Loan is not thirty (30) or more days delinquent in
payment of principal or interest and has not been delinquent by thirty (30) or
more days more than once during the preceding twelve (12) months.
(ac) With respect to each Mortgage Loan, the related Mortgage
is a valid and enforceable first lien on the fee or leasehold estate of the
Borrower in the related Mortgaged Property (as applicable), which Mortgaged
Property is free and clear of all encumbrances and liens having priority over
the first lien of the Mortgage, except (i) for liens for real estate taxes and
special assessments either not yet delinquent or not yet due and payable, (ii)
for covenants, conditions and restrictions, rights of way, easements and other
matters of public record as of the date of recording of such Mortgage, which
exceptions do not, in the aggregate, materially and adversely affect the value
of the related Mortgaged Property or the intended use thereof, (iii) to the
extent such Loan Collateral consists of patents, trademarks or copyrights, or
property as to which perfection of a security interest is effected through
possession, notation on a document of title or recording or filing under any law
other than the UCC, such security interest is perfected as a first priority
security interest under the UCC and (iv) for other matters to which like
properties are commonly subject which do not, individually or in the aggregate,
materially interfere with the benefits of the security intended to be provided
by such Mortgage.
(ad) With respect to each Mortgage Loan, no claims have been
made by the Loan Originator under the related Title Policy. No prior holder of
the related Mortgage has done, by act or omission, anything which would
materially impair the coverage of any such Title Policy and such Title Policy is
in full force and effect, is freely assignable and will inure to the benefit of
the Indenture Trustee or its designee as mortgagee of record. All applicable
premiums for the Title Policy, endorsements and all special endorsements, if
any, have been paid.
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(ae) The Loan Originator has, and all parties to the related
Promissory Note, Mortgage or Security Agreement, and any related agreements or
guaranties had, the power, authority and legal capacity to enter into, execute
and deliver the same and such Promissory Note, Mortgage or Security Agreement,
related agreements and guaranties, if any, have been duly and properly executed
and delivered by the Loan Originator and all other parties.
(af) In connection with each Loan, the related Promissory
Note, Mortgage or Security Agreement and other agreements executed in connection
therewith:
(i) have been completed in compliance with, or are
exempt from, applicable state, federal and local laws and rules and regulations
relating to the origination of and performance under the Loan, including,
without limitation, usury, land sales, the offer and sale of securities and
equal credit opportunity or disclosure, the Federal Truth-in-Lending Act, the
Real Estate Settlement Procedure Act and other consumer protection laws and
neither origination of such Loan nor consummation of the transactions
contemplated hereby involved or will involve the violation of any such laws; and
(ii) are genuine and are the legal, valid and binding
obligation of the Borrower or Borrowers thereof (subject to any non-recourse
provisions therein), and enforceable in accordance with their respective terms,
without defense, offset, counterclaim or right of rescission, except as
enforcement may be limited by (a) bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors' rights generally, (b)
general principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law) and (c) applicable state laws,
which state laws will not materially interfere with the practical realization of
the principal benefits or security provided thereby.
(ag) The related Promissory Note, Mortgage or Security
Agreement, as applicable, and other agreements executed in connection therewith
contain enforceable provisions such as to render the rights and remedies of the
holder thereof adequate for the realization against the Loan Collateral of the
benefits of the security provided thereby.
(ah) The Loan Documents have not been modified to (i) provide
for any holdbacks, other than any holdbacks previously approved by the parties
hereto, (ii) require future advances thereunder, or (iii) require disbursements
of any escrow funds for completion of any on-site or off-site improvements,
other than any requirements for disbursement of escrow funds held pursuant to
the applicable Loan Documents. All applicable costs, fees and expenses incurred
in making, closing or recording such Loan will have been paid on or before the
related Transfer Cutoff Date.
(ai) With respect to each Mortgage Loan, the Loan Originator
has a first lien priority perfected security interest in all Condemnation
Proceeds and casualty proceeds relating to such Mortgaged Property.
(aj) The Loan Collateral is not in construction or substantial
rehabilitation.
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(ak) The Loan is not cross-collateralized with any obligation
other than a Loan. For each Senior Loan, the related Borrower's obligations
thereunder are cross-defaulted with such Borrower's obligations under the
Mortgage Loans and the Equipment Loans (if any) associated with such Senior
Loan.
(al) The conveyance of the Loan on such Transfer Date shall be
deemed a certification by a Responsible Officer of the Loan Originator that no
default by a Borrower is threatened or imminent with respect to such Loan.
(am) With respect to each Mortgage Loan, there is access to
the Mortgaged Property and such access is insured by title insurance (to the
extent available), and each Mortgaged Property, in every case, is serviced by
public or private water and sewer systems. The Loan Originator inspected, or
caused to be inspected, the related Mortgaged Property in connection with the
origination of such Mortgage Loan and the Loan Originator has inspected, or
caused to be inspected, such Mortgaged Property in accordance with the
Underwriting Guidelines.
(an) [Reserved.]
(ao) The Loan Originator has not, directly or indirectly,
advanced funds under the related Promissory Note to a party other than the
related Borrower or its designee. The Loan Originator has not received any
advance of funds by a party other than the related Borrower, for the payment of
any amount required by the related Promissory Note or the related Mortgage or
Security Agreement, as the case may be.
(ap) The related Borrower is not a debtor in any state or
federal bankruptcy or insolvency proceeding.
(aq) The Mortgage or Security Agreement, as the case may be,
prohibits any further pledge or lien on the Loan Collateral, whether equal or
subordinate to the lien of the Mortgage or Security Agreement, as the case may
be, without the prior written consent of the holder.
(ar) All Loan Collateral is located within one of the 50
United States or the District of Columbia.
(as) Each Loan that is a Mortgage Loan is a C&G Store Mortgage
Loan, a QSR Store Mortgage Loan, a CD Facility Mortgage Loan or an Other
Mortgage Loan that is secured by the related Borrower's (x) fee simple estate
("Fee Interest") or (y) leasehold estate in a Ground Lease. With respect to each
Ground Lease:
(i) Such Ground Lease, or a memorandum thereof, has
been recorded, and either any provisions of such Ground Lease that prohibit the
related leasehold estate to be mortgaged have been waived or the lessor has
consented to the leasehold mortgage;
(ii) Except as disclosed in the Due Diligence Package
related to such Loan, such Ground Lease or the related estoppel certificate
provides that the Borrower's interest
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in such Ground Lease is assignable to successors and assigns of the mortgagee
with the consent of, the lessor thereunder which consent shall not be
unreasonably withheld;
(iii) The lessor has delivered an estoppel
certificate stating that at the date of delivery of such estoppel certificate,
such Ground Lease is in full force and effect and no default has occurred under
such Ground Lease nor is there any existing condition which, but for the passage
of time or the giving of notice, or both, would result in a default thereunder;
(iv) The mortgagee under such Ground Lease is
permitted a reasonable opportunity to cure any default under such Ground Lease
which is curable after the receipt of notice of such default before the lessor
thereunder may terminate such Ground Lease;
(v) Such Ground Lease or applicable estoppel
certificate does not restrict the use of the related Mortgaged Property by the
related Borrower, its successors or assigns in a manner that would materially
and adversely affect the security provided by the related Mortgage. The Ground
Lease or applicable estoppel certificate contains a covenant or agreement that
the lessor thereunder is not permitted, in the absence of an uncured default, to
disturb the possession, interest or quiet enjoyment of any lessee in the
relevant portion of the Mortgaged Property for any reason; and
(vi) Such Ground Lease has an original term that,
together with any term or terms for which such Ground Lease may be renewed or
extended by the related Borrower, extends to not earlier than the fifth
anniversary of the stated maturity date of the related Mortgage Loan.
(at) (i) Each Mortgage Loan that is a C&G Store Mortgage Loan
is insured under the Environmental Policy; and
(ii) With respect to each Mortgage Loan that is not a
C&G Store Mortgage Loan, either (a) (x) a Phase I environmental assessment was
conducted with respect to the related Mortgaged Property, that concluded that no
further investigation of the related Mortgaged Property was necessary or (y) if
such Phase I environmental assessment concluded that further investigation of
such Mortgaged Property was necessary, a Phase II environmental assessment was
conducted with respect to the related Mortgaged Property, and such Phase II
environmental assessment evidenced that no remediation or further action was
required with respect to the related Mortgaged Property or (B) such Mortgage
Loan is insured under the Environmental Policy.
(au) With respect to each Mortgage Loan, the related Mortgage
provides that the Borrower will defend and hold the Loan Originator and its
successors and/or assigns harmless from and against claims of any kind
whatsoever (including attorney's fees and costs) paid, incurred, or suffered by,
or asserted against, any such other party resulting from a breach of any
representation, warranty or covenant given by the Borrower under the related
Mortgage.
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(av) As of the related Transfer Date, after giving effect to
the transfer of such Loan, the aggregate Principal Balance of all CD Facility
Mortgage Loans in the Loan Pool will not exceed the greater of (i) 15% of the
Pool Principal Balance and (ii) $30,000,000.
(aw) With respect to each Equipment Loan, the related Security
Agreement creates a valid, existing and enforceable first priority security
interest in the related Equipment and such security interest is perfected as a
first priority security interest under the UCC.
(ax) The information contained in the Due Diligence Package
covering the characteristics of such Loan and the related Borrower and Loan
Collateral is true and correct in all material respects.
(ay) (i) With respect to each Loan that is not identified as
an Adjustable Rate Loan on the Loan Schedule, the Loan Interest Rate with
respect thereto is fixed throughout the term to maturity of such Loan (without
regard to any Retained Interest). The amount of interest accrued on each such
Loan will be calculated based on a 360-day year consisting of twelve 30-day
months.
(ii) With respect to each Loan that is an Adjustable Rate
Loan, the Loan Interest Rate is subject to adjustment on the first day of each
calendar month to equal the sum of LIBOR (as defined in the related Loan
Documents) for such date and a fixed percentage, subject to a maximum rate and
minimum rate in accordance with the terms thereof. The initial amount of the
Monthly Payment related to each Adjustable Rate Loan will fully amortize the
original Principal Balance of such Loan over its original term to maturity at
the initial Loan Interest Rate thereon. The Monthly Payments on each such Loan
will be equal to such amount until the first Payment Reset Date for such Loan,
at which time, and on each succeeding Payment Reset Date thereafter, the amount
of the Monthly Payments to be paid by the related Borrower will be adjusted for
the next succeeding Payment Period to an amount that will fully amortize the
Principal Balance of such Loan on such Payment Reset Date at the Loan Interest
Rate for such Loan as determined on each December 15th prior to the next Payment
Period over its remaining term to maturity. The amount of interest accrued on
each of the Adjustable Rate Loans will be calculated based on a 360-day year and
the actual number of days elapsed. Any Negative Amortization will be added to
the Principal Balance of such Loan on such Due Date. If the Principal Balance of
any Adjustable Rate Loan exceeds the product of the related Negative
Amortization Cap and the original Principal Balance thereof after adding any
Negative Amortization thereto, the related Borrower will be required to prepay
such Loan on the immediately succeeding Due Date in an amount equal to the
difference between such Principal Balance and such original principal balance.
All adjustments to the Loan Interest Rate on any Adjustable Rate Loan have been
made in compliance with the terms of applicable law and the related Promissory
Note.
Section 3.05 PURCHASE AND SUBSTITUTION.
(a) It is understood and agreed that the representations and
warranties set forth in SECTION 3.04 hereof shall survive the conveyance of the
Loans to the Issuer, the pledge of the Loans to the Indenture Trustee and the
delivery of the Notes to the Noteholders. Upon discovery
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by the Depositor, the Servicer, the Loan Originator, the Custodian, the Issuer,
the Indenture Trustee or any Securityholder of a breach of any of such
representations and warranties or the representations and warranties set forth
in SECTION 3.02 which materially and adversely affects the value of the Loans or
the interests of the Securityholders in the related Loan (notwithstanding that
such representation and warranty was made to the Loan Originator's best
knowledge), the party discovering such breach shall give prompt written notice
to the others. The Loan Originator shall within 5 Business Days of any breach of
a representation or warranty, including any breach of the representation set
forth in SECTION 3.04(aw) hereof as a result of an attribute of the aggregate
Loan Pool which would not otherwise cause a breach of any other representation
or warranty, promptly cure such breach in all material respects. If within 5
Business Days after the earlier of the Loan Originator's discovery of such
breach or the Loan Originator's receiving notice thereof such breach has not
been remedied by the Loan Originator and such breach materially and adversely
affects the interests of the Securityholders or in the related Loan (the
"DEFECTIVE LOAN"), the Loan Originator shall promptly upon receipt of written
instructions from the Majority Noteholders either (i) remove such Defective Loan
from the Trust (in which case it shall become a Deleted Loan) and substitute one
or more Qualified Substitute Loans in the manner and subject to the conditions
set forth in this SECTION 3.05 or (ii) purchase such Defective Loan at a
purchase price equal to the Purchase Price with respect to such Defective Loan
by depositing such Purchase Price in the Collection Account. The Loan Originator
shall provide the Servicer, the Indenture Trustee, the Initial Noteholder and
the Issuer with a certification of a Responsible Officer on the Determination
Date next succeeding the end of such 5 Business Days period indicating whether
the Loan Originator is purchasing the Defective Loan or substituting in lieu of
such Defective Loan a Qualified Substitute Loan.
Any substitution of Loans pursuant to this SECTION 3.05(a)
shall be accompanied by payment by the Loan Originator of the Substitution
Adjustment, if any, to be deposited in the Collection Account pursuant to
SECTION 5.01(b)(1) hereof.
It is understood and agreed that the obligation of the Loan
Originator to repurchase or substitute any such Loan pursuant to this SECTION
3.05 shall constitute the sole remedy against it with respect to such breach of
the foregoing representations or warranties or the existence of the foregoing
conditions. With respect to representations and warranties made by the Loan
Originator pursuant to SECTION 3.04 hereof that are made to the Loan
Originator's best knowledge, if it is discovered by any of the Depositor, the
Loan Originator, the Indenture Trustee or the Owner Trustee that the substance
of such representation and warranty is inaccurate and such inaccuracy materially
and adversely affects the value of the related Loan, notwithstanding the Loan
Originator's lack of knowledge, such inaccuracy shall be deemed a breach of the
applicable representation and warranty.
(b) As to any Deleted Loan for which the Loan Originator
substitutes a Qualified Substitute Loan or Loans, the Loan Originator shall
effect such substitution by delivering to the Issuer (i) a certification
executed by a Responsible Officer of the Loan Originator to the effect that the
Substitution Adjustment has been credited to the Collection Account and (ii) the
documents constituting the Indenture Trustee's Loan File for such Qualified
Substitute Loan or Loans.
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The Servicer shall deposit in the Collection Account all
payments received in connection with such Qualified Substitute Loan or Loans
after the date of such substitution. Monthly Payments received with respect to
Qualified Substitute Loans on or before the date of substitution will be
retained by the Loan Originator. The Issuer will be entitled to all payments
received on the Deleted Loan on or before the date of substitution and the Loan
Originator shall thereafter be entitled to retain all amounts subsequently
received in respect of such Deleted Loan. The Loan Originator shall give written
notice to the Issuer, the Servicer (if the Loan Originator is not then acting as
such), the Indenture Trustee and Owner Trustee that such substitution has taken
place and the Servicer shall amend the Loan Schedule to reflect (i) the removal
of such Deleted Loan from the terms of this Agreement and (ii) the substitution
of the Qualified Substitute Loan. The Loan Originator shall promptly deliver to
the Issuer, the Servicer (if the Loan Originator is not then acting as such),
the Indenture Trustee and Owner Trustee, a copy of the amended Loan Schedule.
Upon such substitution, such Qualified Substitute Loan or Loans shall be subject
to the terms of this Agreement in all respects, and the Loan Originator shall be
deemed to have made with respect to such Qualified Substitute Loan or Loans, as
of the date of substitution, the covenants, representations and warranties set
forth in SECTION 3.04 hereof. On the date of such substitution, the Loan
Originator will deposit into the Collection Account an amount equal to the
related Substitution Adjustment, if any. In addition, on the date of such
substitution, the Servicer shall cause the Indenture Trustee to release the
Deleted Loan from the lien of the Indenture and the Servicer will cause such
Qualified Substitute Loan to be pledged to the Indenture Trustee under the
Indenture as part of the Trust Estate.
(c) With respect to all Defective Loans or other Loans
repurchased by the Loan Originator pursuant to this Agreement, upon the deposit
of the Purchase Price therefor into the Collection Account, the Indenture
Trustee shall assign to the Loan Originator, without recourse, representation or
warranty, all the Indenture Trustee's right, title and interest in and to such
Defective Loans or Loans, which right, title and interest were conveyed to the
Indenture Trustee pursuant to SECTION 2.01 hereof. The Indenture Trustee shall,
at the expense of the Loan Originator, take any actions as shall be reasonably
requested by the Loan Originator to effect the repurchase of any such Loans.
(d) It is understood and agreed that the obligations of the
Loan Originator set forth in this SECTION 3.05 to cure, purchase or substitute
for a Defective Loan (and to indemnify the Trust for certain losses as described
herein in connection with a Defective Loan) constitute the sole remedies
hereunder of the Depositor, the Issuer, the Indenture Trustee, Owner Trustee and
the Securityholders respecting a breach of the representations and warranties
contained in SECTION 3.02 and SECTION 3.04 hereof. Any cause of action against
the Loan Originator relating to or arising out of a defect in a Indenture
Trustee's Loan File as contemplated by SECTION 2.05 hereof or against the Loan
Originator relating to or arising out of a breach of any representations and
warranties made in SECTION 3.04 hereof shall accrue as to any Loan upon (i)
discovery of such defect or breach by any party and notice thereof to the Loan
Originator or notice thereof by the Loan Originator to the Indenture Trustee,
(ii) failure by the Loan Originator to cure such defect or breach or purchase or
substitute such Loan as specified above, and (iii) demand upon the Loan
Originator, as applicable, by the Issuer or the Majority Noteholders for all
amounts payable in respect of such Loan.
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(e) Neither the Issuer nor the Indenture Trustee shall have
any duty to conduct any affirmative investigation other than as specifically set
forth in this Agreement as to the occurrence of any condition requiring the
repurchase or substitution of any Loan pursuant to this Section or the
eligibility of any Loan for purposes of this Agreement.
Section 3.06 SECURITIZATIONS.
(a) In accordance with the terms of SECTION 2.3(a) of the Loan Purchase
Agreement, the Loan Originator shall effect Securitizations at the direction of
the Majority Noteholders. In connection therewith, the Issuer agrees to assist
the Loan Originator in such Securitizations and accordingly it shall, at the
request and direction of the Majority Noteholders:
(i) transfer, deliver and sell all or a portion of the
Loans, as of the "cutoff dates" of the related
Securitizations, to such Securitization Participants
as may be necessary to effect the Securitizations;
provided, that any such sale shall be for "fair
market value," as determined by the Majority
Noteholders in their reasonable discretion;
(ii) deposit the cash Securitization Proceeds into the
Collection Account pursuant to SECTION 5.01(b)(1) and
retain any Retained Securities created in
Securitizations in accordance with the terms of the
Trust Agreement;
(iii) to the extent that a Securitization creates any
Retained Securities, to accept such Retained
Securities as a part of the Securitization Proceeds,
PROVIDED, THAT any such acceptance of such Retained
Securities shall be subject to the Issuer's
reasonable approval; and
(iv) take such further actions as may be reasonably
necessary to effect such Securitizations.
(b) The Servicer hereby covenants that it will take such actions as may
be reasonably necessary to effect Securitizations as the Majority Noteholders
may request and direct.
(c) The right of the Majority Noteholders to require the Issuer and the
Loan Originator to effect Securitizations is subject to (i) the conditions set
forth in Section 2.3(a) of the Loan Purchase Agreement and (ii) the Issuer's
right of approval with respect to the Securitization.
(d) The Issuer covenants that no Loan shall remain pledged as
Collateral for a single Series of Notes past the date ending on the second
Securitization which occurs while such Loan was pledged as Collateral.
(e) The Loan Originator shall, in connection with a Securitization,
cause FFCA to obtain an Opinion of Counsel to the effect that the securities
issued shall be treated as the issuance of debt instruments by FFCA or an
Affiliate thereof.
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Section 3.07 LOAN ORIGINATOR PUT; SERVICER CALL.
(a) LOAN ORIGINATOR PUT. The Loan Originator shall promptly repurchase,
upon the written demand of the Majority Noteholders, (i) any Loan that has
become 30 or more days Delinquent, (ii) any Defaulted Loan, (iii) any Loan that
has been in default for a period of 30 days or more, (iv) any Loan that has been
determined to be ineligible for a Securitization by mutual agreement of the
Majority Noteholders and the Servicer and (v) any Mortgage Loan with respect to
which the Loan Originator did not enforce a due-on-sale or due-on-encumbrance
clause pursuant to SECTION 7.01 hereof (each such Loan, a "Put/Call Loan").
(b) SERVICER CALL. The Servicer may repurchase any Put/Call Loan (as
defined in SECTION 3.07(a) hereof). Such Servicer Calls shall be solely at the
option of the Servicer. Prior to exercising a Servicer Call, the Servicer shall
deliver written notice to the Majority Noteholders and the Indenture Trustee
which notice shall identify each Loan to be repurchased and the Purchase Price
therefor.
(c) In connection with each Loan Originator Put, the Loan Originator
shall remit to the Servicer for deposit into the Collection Account, the
Purchase Price for the Loans to be repurchased. In connection with each Servicer
Call, the Servicer shall deposit into the Collection Account the Purchase Price
for the Loans to be repurchased. The aggregate Purchase Price of all Loans
transferred pursuant to SECTION 3.07(a) shall in no event exceed the Unfunded
Transfer Obligation or the Postsecuritization Unfunded Transfer Obligation, as
applicable, at the time of such Loan Originator Put.
Section 3.08 MODIFICATION OF UNDERWRITING GUIDELINES.
The Loan Originator shall give the Initial Noteholder prompt written
notification of any material modification or change to the Underwriting
Guidelines.
Section 3.09 ENVIRONMENTAL POLICY AND BUSINESS INTERRUPTION
INSURANCE.
(a) The Loan Originator shall perform all actions required under the
Environmental Policy to validly assign such policy to the Indenture Trustee with
respect to each Mortgage Loan insured thereunder.
(b) The Loan Originator shall remit to the Collection Account all
amounts received by it under the Environmental Policy with respect to each Loan
insured thereunder; provided that to the extent the Servicer decides in
accordance with the Servicing Standard to apply such proceeds to remediate the
related Mortgaged Property, the Servicer shall retain such amounts for such use.
(c) The Loan Originator hereby covenants that in the event that the
Majority Noteholders determine that it is generally required by national
statistical rating organizations, in connection with securitization transactions
with respect to the Loans (regardless of whether such a Securitization is
expected to occur with respect to the Loans), it shall promptly obtain or cause
to be obtained for each Mortgaged Property, business interruption or rent
insurance, in an amount at least equal to six (6) months of operations of such
Mortgaged Property, or if the Loan
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Originator shall not obtain or cause such insurance to be obtained for any
Mortgage Loan, the parties hereto agree that the Majority Noteholders may
proportionately reduce the Maximum Advance Factor for such Mortgage Loan in an
amount equal to the aggregate reduction in anticipated Securitization Proceeds
attributable to such failure to obtain such insurance.
ARTICLE IV
ADMINISTRATION AND SERVICING OF THE LOANS
Section 4.01 DUTIES OF THE SERVICER.
(a) SERVICING STANDARD. The Servicer, as an independent
contractor, shall remain an Eligible Servicer and shall service and administer
the Loans in the best interests of and for the benefit of the Noteholders, in
accordance with applicable state and Federal Laws, the terms of this Agreement
and the Servicing Standard. To the extent consistent with such terms and in
accordance with such terms, the Servicer shall have full power and authority,
acting alone, to service and administer the Loans with a view toward the
maximization of timely recovery of principal and interest thereon.
Notwithstanding anything to the contrary contained herein, the Servicer, in
servicing and administering the Loans, shall employ or cause to be employed
procedures (including collection, foreclosure, liquidation and Foreclosure
Property management and liquidation procedures) and exercise the same care that
it customarily employs and exercises in servicing and administering loans of the
same type as the Loans for its own account, all in accordance with the Servicing
Standard of prudent lending institutions and servicers of commercial loans of
the same type as the Loans and giving due consideration to the Noteholders'
reliance on the Servicer. In the event of a conflict between this Agreement and
the Servicing Standard, this Agreement shall control. The Servicer has and shall
maintain the facilities, procedures and experienced personnel necessary to
comply with the servicing standard set forth in this subsection (a) and the
duties of the Servicer set forth in this Agreement relating to the servicing and
administration of the Loans. In performing its obligations hereunder the
Servicer shall at all times act in good faith in a commercially reasonable
manner in accordance with applicable law and the Promissory Notes and Mortgages
or Security Agreements, as the case may be.
(b) The Servicer shall notify the Initial Noteholder in
writing in advance of any action taken by the Servicer to (i) release, or agree
to the substitution or exchange of any collateral for, any portion of any Loan
Collateral or related collateral, (ii) release from liability any Person liable
for any obligation under a Mortgage or Security Agreement, as the case may be,
(iii) consent (to the extent the Servicer is entitled under the Mortgage or
other agreement to withhold such consent) to the transfer (direct or indirect)
or encumbrance of any Loan Collateral, (iv) with respect to any lease, consent
(to the extent the Servicer is entitled under the Mortgage or other agreement to
withhold such consent) to the execution, assignment, termination or modification
of such lease if, in the case of the termination of such lease or the execution
of new lease, such would result in a reduction of the monthly rent most recently
payable in respect of the related portion of the Mortgaged Property, or, in the
case of an assignment or modification of such lease, such assignment would
reduce the term thereof or the rental payable thereunder, (v) grant
non-disturbance to any tenant under any lease, (vi) apply Insurance Proceeds or
proceeds of
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a partial condemnation in excess of $50,000 received with respect to a Loan to
the restoration or repair of the related Loan Collateral unless otherwise
required pursuant to the related Loan Documents or applicable law, (vii) waive
any prepayment premium or otherwise waive, amend or modify any term of any Loan,
(viii) accelerate the maturity of any Loan, (ix) take possession of or acquire
title to any Loan Collateral, or (x) sell any Loan Collateral or Foreclosure
Property.
(c) SERVICING ADVANCES. In accordance with the preceding
general servicing standard, the Servicer, or any Subservicer on behalf of the
Servicer, shall make all Servicing Advances in connection with the servicing of
each Loan hereunder. Notwithstanding any provision to the contrary herein,
neither the Servicer nor any Subservicer on behalf of the Servicer shall have
any obligation to satisfy or keep current the indebtedness secured by any on the
related Loan Collateral. No costs incurred by the Servicer or any Subservicer in
respect of Servicing Advances shall, for the purposes of distributions to
Securityholders, be added to the amount owing under the related Loan.
Notwithstanding any obligation by the Servicer to make a Servicing Advance
hereunder with respect to a Loan, before making any Servicing Advance, the
Servicer shall assess the reasonable likelihood of (i) recovering such Servicing
Advance and any prior Servicing Advances for such Loan and (ii) recovering any
amounts attributable to outstanding interest and principal owing on such Loan
for the benefit of the Securityholders in excess of the costs, expenses and
other deductions to obtain such recovery, including without limitation any
Servicing Advances therefor and, if applicable, the outstanding indebtedness of
all. The Servicer shall only make a Servicing Advance with respect to a Loan to
the extent that the Servicer determines in its reasonable, good faith judgment
that such Servicing Advance would likely be recovered as aforesaid; provided,
however, that the Servicer will be entitled to be reimbursed for any
Nonrecoverable Servicing Advances in accordance with the terms of this
Agreement.
(d) WAIVERS, MODIFICATIONS AND EXTENSIONS; SUBORDINATION. The
Servicer shall make reasonably diligent efforts to collect all payments called
for under the terms and provisions of the Loans and shall, to the extent such
procedures shall be consistent with this Agreement, follow the Servicing
Standard. The Servicer may in its discretion waive or permit to be waived any
penalty interest or any other fee or charge which the Servicer would be entitled
to retain hereunder as servicing compensation and extend the Due Date on a
Promissory Note for a period (with respect to each payment as to which the Due
Date is extended) not greater than 90 days after the initially scheduled due
date for such payment. Notwithstanding anything in this Agreement to the
contrary, the Servicer shall not permit any additional extension or modification
with respect to any Loan other than that permitted by the immediately preceding
sentence unless the Loan is a Defaulted Loan. The Servicer may in its discretion
enter in subordination agreements with respect to any Loan, provided that the
Servicer determines, consistent with this Agreement and the Servicing Standard
that the entering into of such subordination agreement is in the best interests
of the Trust; provided further, that the Servicer shall not enter into such a
subordination agreement with respect to any Mortgage Loan if, after giving
effect to such agreement, such Mortgage Loan would fail to constitute a real
estate asset, as described in Section 856 of the Code. The Servicer shall
provide written notice to the Initial Noteholder prior to entering into any
agreement to modify the terms of any Loan after the Transfer Date with respect
thereto, including, without limitation, any cross-default or
cross-collateralization provisions with respect thereto.
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(e) INSTRUMENTS OF SATISFACTION OR RELEASE. Without limiting
the generality of subsection (d) of this SECTION 4.01, the Servicer, in its own
name or in the name of a Subservicer, is hereby authorized and empowered, when
the Servicer believes it appropriate in its best judgment, to execute and
deliver, on behalf of the Securityholders and the Trust or any of them, and upon
notice to the Indenture Trustee, 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 Loans and the Loan Collateral and to
institute foreclosure proceedings or obtain a deed in lieu of foreclosure so as
to convert the ownership of such properties, and to hold or cause to be held
title to such properties, on behalf of the Trust and Securityholders. The
Servicer shall service and administer the Loans in accordance with applicable
state and federal law and shall provide to the Borrowers any reports required to
be provided to them thereby. The Indenture Trustee shall execute, at the written
direction of the Servicer, any limited or special powers of attorney and other
documents reasonably acceptable to the Indenture Trustee to enable the Servicer
or any Subservicer to carry out their servicing and administrative duties
hereunder, including, without limitation, limited or special powers of attorney
with respect to any Foreclosure Property as well as pursuant to SECTION 4.10(c)
hereof, and the Indenture Trustee shall not be accountable for the actions of
the Servicer or any Subservicers under such powers of attorney and shall be
indemnified by such parties with respect to such actions.
(f) TERMINATION OF SERVICING. (i) In the event of a
Securitization or other removal of a Loan from the Trust Estate, the Servicer
shall be terminated with respect to such Loan.
(ii) The Servicer agrees that in the event that any Notes are
Outstanding on the Maturity Date, the Servicer will resign and the Majority
Noteholders shall appoint a successor in accordance with provisions of SECTION
10.02. The Majority Noteholders may, by written notice to the Servicer and the
Indenture Trustee, elect to have the Servicer continue its duties hereunder.
Section 4.02 VACANCIES AND INSPECTIONS .
(a) The Servicer shall promptly notify the Issuer, the
Indenture Trustee and the Initial Noteholder of any actual knowledge on the part
of the Servicer of any material vacancy in any Mortgaged Property, of any
abandonment of any Loan Collateral, of any material adverse change in the
condition or value of any Loan Collateral, of any waste committed thereon, of
any failure on the part of a Borrower to keep the related Loan Collateral in
good condition and repair, of any permanent or substantial injury to the Loan
Collateral through unreasonable use, abuse or neglect or of any other matter
which would materially and adversely affect the value of or the Noteholders'
interest in any Loan Collateral. The Servicer shall also promptly notify the
Issuer, the Indenture Trustee and the Majority Noteholders upon learning thereof
of any state or federal insolvency or bankruptcy proceedings in which any
Borrower is seeking relief or is a defendant debtor provided, however, that
Servicer shall not be deemed to be in default under this Agreement for failure
to give such notice if Servicer has no knowledge of any such proceeding and
could not reasonably be expected to have such knowledge in the ordinary course
of Servicer's business.
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(b) The Servicer shall inspect or cause to be inspected the
Loan Collateral with respect to each Loan at such times and in such manner as
are consistent with the Servicing Standard; provided that if any Monthly Payment
becomes more than 45 days Delinquent, or if the Fixed Charge Coverage Ratio with
respect to any Loan Collateral is less than 105%, the related Loan Collateral
shall be inspected as soon as practicable thereafter.
(c) The Servicer shall make a written report of each
inspection required pursuant to paragraph (b) above, on a form reasonably
acceptable to the Initial Noteholder and shall submit a copy of each such report
to the Initial Noteholder.
Section 4.03 FIDELITY BOND; ERRORS AND OMISSIONS INSURANCE.
The Servicer shall maintain with a responsible company, and at
its own expense, a blanket fidelity bond and an errors and omissions insurance
policy or policies, which policy or policies shall be in such form and amount as
would permit it to be a qualified Federal National Mortgage Association
seller-servicer of multi-family mortgage loans, with broad coverage on all
officers, employees or other persons acting in any capacity requiring such
persons to handle funds, money, documents or papers relating to the Loans
("Servicer Employees"). Any such fidelity bond and errors and omissions
insurance shall protect and insure the Servicer against losses, including losses
resulting from forgery, theft, embezzlement, fraud, errors and omissions and
negligent acts (including acts relating to the origination and servicing of
loans of the same type as the Loans) of such Servicer Employees. Such fidelity
bond shall also protect and insure the Servicer against losses in connection
with the release or satisfaction of a Loan without having obtained payment in
full of the indebtedness secured thereby. In the event of any loss of principal
or interest on a Loan for which reimbursement is received from the Servicer's
fidelity bond or errors and omissions insurance, the process from any such
insurance will be deposited in the Collection Account. No provision of this
SECTION 4.03 requiring such fidelity bond and errors and omission insurance
shall diminish or relieve the Servicer from its duties and obligations as set
forth in this Agreement. Upon the request of the Issuer or the Indenture
Trustee, the Servicer shall cause to be delivered to the requesting party a
certified true copy of such fidelity bond and insurance policy.
Section 4.04 FILING OF CONTINUATION STATEMENTS.
On or before the fifth anniversary of the filing of any
financing statements by the Loan Originator and the Depositor, respectively,
with respect to the assets conveyed to the Trust, the Loan Originator and the
Depositor shall prepare, have executed by the necessary parties and file in the
proper jurisdictions all financing and continuation statements necessary to
maintain the liens, security interests and priorities of such liens and security
interests that have been granted by the Loan Originator and the Depositor,
respectively, and the Loan Originator and the Depositor shall continue to file
on or before each fifth anniversary of the filing of any financing and
continuation statements such additional financing and continuation statements
until the Trust has terminated pursuant to Section 9.1 of the Trust Agreement.
The Indenture Trustee agrees to reasonably cooperate with the Loan Originator
and the Depositor in preparing, executing and filing such statements, at the
expense of the Loan Originator or the Depositor, as applicable; provided,
however, that the Indenture Trustee shall have no responsibility to prepare or
file such
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statements. The Servicer agrees to notify the Loan Originator and the Depositor
on the third Payment Date prior to each such fifth anniversary of the
requirement that they file such financing and continuation statements. The
filing of any such statement with respect to the Loan Originator and the
Depositor shall not be construed as any indication of an intent of any party
contrary to the expressed intent set forth in SECTION 2.03 hereof. If the Loan
Originator or the Depositor has ceased to do business whenever any such
financing and continuation statements must be filed or the Loan Originator or
the Depositor fails to file any such financing statements or continuation
statements at least one month prior to the expiration thereof, each of the Loan
Originator and the Depositor does hereby make, constitute and appoint the
Indenture Trustee its attorney-in-fact, with full power and authority, to
execute and file in the Depositor's name and on the Depositor's behalf and at
the Depositor's expense any such financing statements or continuation statements
required under this SECTION 4.04.
Section 4.05 ESTABLISHMENT AND ADMINISTRATION OF ESCROW
ACCOUNT.
(a) The Servicer shall maintain accurate records with respect
to all Loan Collateral reflecting the status of taxes, basic carrying costs and
other similar items that are or may become a lien thereon and the status of
insurance premiums and ground rent, if applicable, payable in respect thereof.
(b) After the occurrence of a Default or Event of Default
under this Agreement or the Indenture, the Majority Noteholders may, in their
sole discretion, direct the Servicer to, upon the occurrence and continuation of
a default under a Mortgage Loan, direct the Borrower thereunder to remit amounts
in respect of Escrow Payments to the Escrow Account, for application by the
Servicer in accordance with the Servicing Standard. In such event, the Servicer
shall establish the Escrow Account under an arrangement consented to in writing
by the Majority Noteholders in their reasonable discretion.
(c) The Servicer may direct any depository institution or
trust company in which the Escrow Accounts (to the extent permitted by law and
subject to the related Loan Documents) are maintained to invest the funds held
therein in one or more Permitted Investments; provided, however, that such funds
must be either (i) immediately available or (ii) available in accordance with a
schedule which will permit the Servicer to meet its payment obligations
hereunder. The Servicer shall be entitled to all income and gain realized from
the investment of funds deposited in the Escrow Accounts (to the extent
permitted by law and subject to the related Loan Documents). The Servicer shall
deposit amounts from its own funds in such Escrow Accounts to make whole any
loss incurred in respect of any such investment of funds therein immediately
upon the realization of such loss.
(d) Notwithstanding anything to the contrary in this SECTION
4.05, upon the occurrence of a Lockbox Trigger Event, the Servicer shall cause
each Borrower required to make Escrow Payments to directly remit to the Lockbox
Account, such Escrow Payments for deposit into the Escrow Account.
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Section 4.06 SUBSERVICING.
(a) The Servicer may, with the prior written consent of the
Majority Noteholders, which consent shall not be unreasonably withheld, enter
into Subservicing Agreements for any servicing and administration of Loans with
any institution that is an Eligible Servicer and in compliance with the laws of
each state necessary to enable it to perform its obligations under such
Subservicing Agreement. The Servicer shall give prior written notice to the
Issuer and the Indenture Trustee of the appointment of any Subservicer. The
Servicer shall be entitled to terminate any Subservicing Agreement in accordance
with the terms and conditions of such Subservicing Agreement and to either
service the related Loans directly or enter into a Subservicing Agreement with a
successor subservicer which qualifies hereunder. In the event that the Majority
Noteholders fail to respond to a request by the Servicer for consent to enter
into a Subservicing Agreement within three Business Days after receipt of such
request, the requested consent shall be deemed to have been granted.
In the event of termination of any Subservicer, and unless a
successor Subservicer has otherwise been appointed, all servicing obligations of
such Subservicer shall be assumed simultaneously by the Servicer without any
additional act or deed on the part of such Subservicer or the Servicer, and the
Servicer shall service directly the related Loans.
Each Subservicing Agreement shall include the provision that
such agreement may be immediately terminated by the Indenture Trustee in the
event that the Servicer shall, for any reason, no longer be the Servicer. In no
event shall any Subservicing Agreement require the Indenture Trustee, as
successor Servicer, for any reason whatsoever to pay compensation to a
Subservicer in order to terminate such Subservicer.
(b) Notwithstanding any Subservicing Agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Servicer and a Subservicer or reference to actions taken through a Subservicer
or otherwise, the Servicer shall remain obligated and primarily liable to the
Issuer, the Indenture Trustee and the Securityholders for the servicing and
administration of the Loans in accordance with the provisions of this Agreement
without diminution of such obligation or liability by virtue of such
Subservicing Agreements or arrangements or by virtue of indemnification from the
Subservicer and to the same extent and under the same terms and conditions as if
the Servicer alone were servicing and administering the Loans. For purposes of
this Agreement, the Servicer shall be deemed to have received payments on Loans
when the Subservicer has actually received such payments and, unless the context
otherwise requires, references in this Agreement to actions taken or to be taken
by the Servicer in servicing the Loans include actions taken or to be taken by a
Subservicer on behalf of the Servicer. The Servicer shall be entitled to enter
into any agreement with a Subservicer for indemnification of the Servicer by
such Subservicer, and nothing contained in this Agreement shall be deemed to
limit or modify such indemnification.
(c) In the event the Servicer shall for any reason no longer
be the Servicer (including by reason of an Event of Default with respect to the
Servicer), the successor Servicer, on behalf of the Issuer, the Indenture
Trustee and the Securityholders pursuant to SECTION 4.07 hereof, shall thereupon
assume all of the rights and obligations of the Servicer under each
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Subservicing Agreement that the Servicer may have entered into, unless the
successor Servicer elects to terminate any Subservicing Agreement in accordance
with its terms. The successor Servicer shall be deemed to have assumed all of
the Servicer's interest therein and to have replaced the Servicer as a party to
each Subservicing Agreement to the same extent as if the Subservicing Agreements
had been assigned to the assuming party, except that the Servicer shall not
thereby be relieved of any liability or obligations under the Subservicing
Agreements which accrued prior to the transfer of servicing to the successor
Servicer. The Servicer, at its expense and without right of reimbursement
therefor, shall, upon request of the successor Servicer, deliver to the assuming
party all documents and records relating to each Subservicing Agreement and the
Loans then being serviced and an accounting of amounts collected and held by it
and otherwise use its best efforts to effect the orderly and efficient transfer
of the Subservicing Agreements to the assuming party.
(d) As part of its servicing activities hereunder, the
Servicer, for the benefit of the Issuer, the Indenture Trustee and the
Securityholders, shall enforce the obligations of each Subservicer under the
related Subservicing Agreement. Such enforcement, including, without limitation,
the legal prosecution of claims and the pursuit of other appropriate remedies,
shall be in such form and carried out to such an extent and at such time as the
Servicer, in its good faith business judgment, would require were it the owner
of the related Loans. The Servicer shall pay the costs of such enforcement at
its own expense and shall be reimbursed therefor only (i) from a general
recovery resulting from such enforcement to the extent, if any, that such
recovery exceeds all amounts due in respect of the related Loan or (ii) from a
specific recovery of costs, expenses or attorneys' fees against the party
against which such enforcement is directed.
(e) Any Subservicing Agreement that may be entered into and
any other transactions or services relating to the Loans involving a Subservicer
shall be deemed to be between the Subservicer and the Servicer alone and none of
the Issuer, the Indenture Trustee or the Securityholders shall be deemed parties
thereto or shall have any claims, rights, obligations, duties or liabilities
with respect to the Subservicer in its capacity as such except as set forth in
subsection (c) of this SECTION 4.06.
(f) In those cases where a Subservicer is servicing a Loan
pursuant to a Subservicing Agreement, the Subservicer will be required to
establish and maintain one or more accounts (collectively, the "SUBSERVICING
ACCOUNT"). The Subservicing Account shall be an Eligible Account. The
Subservicer will be required to deposit into the Subservicing Account, no later
than the first Business Day after receipt, all proceeds of Loans received by the
Subservicer and remit such proceeds to the Servicer for deposit in the
Collection Account not later than the Business Day following receipt thereof by
the Subservicer. Notwithstanding anything in this subsection (f) to the
contrary, the Subservicer shall only be able to withdraw funds from the
Subservicing Account for the purpose of remitting such funds to the Servicer for
deposit into the Collection Account. The Servicer shall require the Subservicer
to cause any collection agent of the Subservicer to send a copy to the Servicer
of each statement of monthly payments collected by or on behalf of the
Subservicer within five Business Days after the end of every month, and the
Servicer shall compare the information provided in such reports with the
deposits made by the Subservicer into the Collection Account for the same
period. The Servicer shall be deemed
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to have received payments on the Loans on the date on which the Subservicer has
received such payments.
Section 4.07 SUCCESSOR SERVICERS.
In the event that the Servicer is terminated pursuant to
SECTION 10.01 hereof, or resigns pursuant to SECTION 9.04 hereof or otherwise
becomes unable to perform its obligations under this Agreement, the Majority
Noteholders will appoint a successor servicer in accordance with the provisions
of SECTION 10.02 hereof.
Section 4.08 MAINTENANCE OF INSURANCE.
(a) The Servicer shall cause to be maintained for each
Foreclosure Property acquired by the Trust such types and amounts of insurance
coverage as the Servicer shall deem reasonable.
(b) Any amounts collected by the Servicer under any Insurance
Policies shall be paid over or applied by the Servicer as follows:
(i) In the case of amounts received in respect of any Loan:
(A) for the restoration or repair of the
affected Loan Collateral, in which event
such amounts shall be released to the
Borrower in accordance with the terms of the
related Promissory Note or
(B) to the extent not so used, in reduction of
the Principal Balance of the related Loan,
in which event such amounts shall be
deposited into the Collection Account,
unless the related instruments require a different application, in which case
such amounts shall be applied in the manner provided therein; and
(ii) Subject to SECTION 4.10 hereof, in the case of amounts
received in respect of any Foreclosure Property, for the restoration or
repair of such Foreclosure Property, unless the Servicer determines,
consistent with the servicing standard set forth in SECTION 4.01
hereof, that such restoration or repair is not in the best economic
interest of the Trust, in which event such amounts shall be deposited
into the Collection Account as a payment received from the operation of
such Foreclosure Property.
(c) The Servicer will cause to be performed any and all acts
required to be performed by the Servicer to preserve the rights and remedies of
the Trust and the Indenture Trustee in any Insurance Policies applicable to the
Loans including, without limitation, in each case, any necessary notifications
of insurers, assignments of policies or interests therein, and establishments of
co-insured, joint loss payee and mortgagee rights in favor of the Trust and the
Indenture Trustee.
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Section 4.09 PERIODIC ADVANCES.
(a) If, on any Payment Date, the Servicer determines that any
Monthly Payments due on the Due Date immediately preceding such Payment Date
have not been received as of the close of business on the Business Day preceding
such Payment Date, the Servicer shall determine the amount of any Periodic
Advance required to be made with respect to the related Payment Date. The
Servicer shall, on or prior to such Payment Date, furnish a statement to the
Indenture Trustee (the information in such statement to be made available to the
Initial Noteholder upon request) setting forth the amount of such Monthly
Payments which were not received as of the close of business on the Business Day
preceding the related Payment Date, and shall include in the amount to be
deposited in the Collection Account on such Payment Date an amount equal to the
Periodic Advance, if any, from its own funds.
(b) The Servicer shall designate on its records the specific
Loans and related installments (or portions thereof) as to which such Periodic
Advance shall be deemed to have been made for purposes of withdrawals from the
Collection Account pursuant to SECTION 5.01(c)(1).
Section 4.10 FORECLOSURE; REPOSSESSION AND ALTERNATIVES.
(a) If any monthly payment due under any Loan is not paid when
the same is due and payable, or if the Borrower fails to perform any other
covenant or obligation under such Loan and such failure continues beyond any
applicable grace period, the Servicer shall take such action as it shall deem to
be in the best interest of the Trust, including but not limited to proceeding
against the Loan Collateral securing such Loan, pursuing collection litigation
or alternative court proceedings to foreclosure or repossession actions. In the
event that the Servicer determines not to proceed against the Loan Collateral or
Borrower, as applicable, on or before the Determination Date following such
determination, the Servicer shall determine in good faith in accordance with the
Servicing Standard that all amounts which it expects to receive with respect to
such Loan have been received. If the Servicer makes such a determination, it
shall give notice to such effect to the Issuer and the Indenture Trustee.
(b) In accordance with the criteria for proceeding against the
Loan Collateral set forth in subsection (a) of this SECTION 4.10, unless
otherwise prohibited by applicable law or court or administrative order, the
Servicer, on behalf of the Trust and the Indenture Trustee, may, at any time,
institute repossession or foreclosure proceedings to the extent permitted by
law, exercise any power of sale to the extent permitted by law, obtain a deed in
lieu of foreclosure, or otherwise acquire possession of or title to the related
Loan Collateral, by operation of law or otherwise.
In accordance with the criteria for proceeding against the
Loan Collateral set forth in subsection (a) of this SECTION 4.10, the Servicer
shall institute foreclosure proceedings, repossess, exercise any power of sale
to the extent permitted by law, obtain a deed in lieu of foreclosure or
otherwise acquire possession of or title to any Loan Collateral, by operation of
law or otherwise, only in the event that in the Servicer's reasonable judgment
such action is likely to result in a positive economic benefit to the Trust by
creating net liquidation proceeds (after reimbursement of all amounts owed with
respect to such Loan to the Servicer).
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With respect to any Mortgage Loan not covered under the
Environmental Policy, prior to acquiring any Foreclosure Property, however, the
Servicer shall cause a review to be performed, in accordance with the Servicing
Standard, on the related Mortgaged Property by a company such as Equifax, Inc.
or Toxicheck, and the scope of such review shall be limited to the review of
public records and documents for indications that such Mortgaged Property has on
it, has under it, or is near hazardous or toxic material or waste. If such
review reveals that the Mortgaged Property has on it, under it or is near
hazardous or toxic material or waste or reveals any other environmental problem,
the Servicer shall provide a copy to the Indenture Trustee of the related report
with an attached certification of a Responsible Officer that based on an
analysis of all available information (including potential clean up costs and
liability claims) at the time it is the best judgment of such Responsible
Officer that such foreclosure shall increase Net Liquidation Proceeds to the
Indenture Trustee and the Trust shall take title to such Mortgaged Property. The
Indenture Trustee shall promptly forward such report and certification to the
Noteholders.
(c) The Indenture Trustee shall furnish the Servicer, within 5
days after request of the Servicer therefor, any powers of attorney and other
documents necessary and appropriate to carry out its duties hereunder, including
any documents or powers of attorney necessary to foreclose any Mortgage or
Security Agreement, as the case may be. The forms of any such powers or
documents shall be appended to such requests.
Section 4.11 TITLE, MANAGEMENT AND DISPOSITION OF FORECLOSURE
PROPERTY.
In the event that any Loan Collateral becomes a Foreclosure
Property, the deed or certificate of sale shall be taken in the name of the
Indenture Trustee for the benefit of the Securityholders. The Servicer shall
manage, conserve, protect and operate each Foreclosure Property for the
Indenture Trustee and the Securityholders solely for the purpose of the prudent
and prompt disposition and sale of such Foreclosure Property. The Servicer
shall, either itself or through an agent selected by the Servicer, manage,
conserve, protect and operate the Foreclosure Property in the same manner that
it manages, conserves, protects and operates other foreclosure property for its
own account.
Subject to SECTION 4.10 hereof, the Servicer shall, consistent
with the Servicing Standard, foreclose upon or otherwise comparably convert the
ownership of Properties securing such of the Loans as come into and continue in
default and as to which no satisfactory arrangements can be made for collection
of delinquent payments. In connection with realization upon defaulted Loans, the
Servicer shall follow such practices and procedures as it shall deem necessary
or advisable, as shall be normal and usual in accordance with the Servicing
Standard and as shall meet the requirements of insurers under any insurance
policy required to be maintained hereunder with respect to the related Loan. The
Servicer shall be responsible for all costs and expenses incurred by it in any
such proceedings; provided, however, that such costs and expenses will be
recoverable as Servicing Advances by the Servicer as contemplated herein.
The Servicer shall not be required to make any Servicing
Advance, to foreclose upon or repossess any Loan Collateral, or otherwise expend
its own funds toward the restoration of any Loan Collateral that shall have
suffered damage from any cause of damage to Loan
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Collateral such that the complete restoration of such property is not fully
reimbursable by the hazard insurance policies required to be maintained pursuant
to this Agreement unless it shall determine in its reasonable judgment, as
evidenced by a certificate of a Servicing Officer, that such foreclosure or
restoration, as the case may be, will increase the proceeds of liquidation of
the related Loan after reimbursement to itself of Servicing Advances. Any
Servicing Advances made with respect to a Loan shall be recoverable by the
Servicer only from recoveries on such Loan except to the extent such Servicing
Advance is deemed a Nonrecoverable Servicing Advance.
The Servicer may offer to sell to any Person any Foreclosure
Property, if and when the Servicer determines, in a manner consistent with the
Servicing Standard, that such a sale would be in the best interests of the
Trust. The Servicer shall, consistent with the Servicing Standard, use its best
efforts to dispose of any Foreclosure Property acquired under SECTION 4.10
hereof within three years of the date of its acquisition on behalf of the Trust.
The Servicer shall give the Indenture Trustee not less than five days' prior
notice of its intention to sell any Foreclosure Property and shall accept the
highest bid received from any Person for any Foreclosure Property in an amount
at least equal to the sum of:
(1) the Principal Balance of the related foreclosed Loan; and
(2) all unpaid interest accrued thereon at the related Loan
Interest Rate through the date of sale.
In the absence of any such bid, the Servicer shall accept the
highest bid received from any Person that is determined to be a fair price for
such Foreclosure Property by the Servicer, if the highest bidder is a Person
other than an Interested Person, or by an Independent appraiser retained by the
Servicer, if the highest bidder is an Interested Person. In the absence of any
bid determined to be fair as aforesaid, the Servicer shall offer the affected
Foreclosure Property for sale to any Person, other than an Interested Person, in
a commercially reasonable manner for a period of not less than 10 or more than
30 days, and shall accept the highest cash bid received therefor in excess of
the highest bid previously submitted. If no such bid is received, any Interested
Person may resubmit its original bid and the Servicer shall accept the highest
outstanding cash bid, regardless of from whom received. No Interested Person
shall be obligated to submit a bid to purchase any Foreclosure Property and,
notwithstanding anything to the contrary herein, neither the Indenture Trustee,
in its individual capacity, nor any of its Affiliates may bid for or purchase
any Foreclosure Property pursuant hereto.
In determining whether any bid constitutes a fair price for
any Foreclosure Property, the Servicer shall take into account, and any
appraiser or other expert in real estate matters shall be instructed to take
into account, as applicable, among other factors, the financial standing of any
tenant of the Foreclosure Property, the physical condition of the Foreclosure
Property and the state of the local and national economies.
Subject to the provisions of SECTION 4.10 hereof, the Servicer
shall act on behalf of the Indenture Trustee in negotiating and taking any other
action necessary or appropriate in connection with the sale of any Foreclosure
Property, including the collection of all amounts
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payable in connection therewith. Any sale of a Foreclosure Property shall be
without recourse to the Indenture Trustee, the Servicer or the Trust and, if
consummated in accordance with the terms of this Agreement, neither the Servicer
nor the Indenture Trustee shall have any liability to any Securityholder with
respect to the purchase price therefor accepted by the Servicer or the Indenture
Trustee.
The Servicer may contract with any independent contractor for
the operation and management of any Foreclosure Property; provided, however,
that:
(i) the terms and conditions of any such contract shall not be
inconsistent with this Agreement;
(ii) any such contract shall require, or shall be administered
to require, that the independent contractor pay all costs and expenses
incurred in connection with the operation and management of such
Foreclosure Property, remit all related revenues (net of such costs and
expenses) to the Servicer as soon as practicable, but in no event later
than 30 days following the receipt thereof by such independent
contractor;
(iii) none of the provisions of this SECTION 4.11 relating to
any such contract or to actions taken through any such independent
contractor shall be deemed to relieve the Servicer of any of its duties
and obligations hereunder with respect to the operation and management
of any such Foreclosure Property; and
(iv) the Servicer shall be obligated with respect thereto to
the same extent as if it alone were performing all duties and
obligations in connection with the operation and management of such
Foreclosure Property.
The Servicer shall be entitled to enter into any agreement with any
independent contractor performing services for it related to its duties
and obligations hereunder for indemnification of the Servicer by such
independent contractor, and nothing in this Agreement shall be deemed
to limit or modify such indemnification. The Servicer shall not be
liable for any fees owed by it to any such independent contractor and
any amounts so expended shall be deemed Servicing Advances. Each
liquidation of a Foreclosure Property shall be carried by the Servicer
at such price and upon such terms and conditions as the Servicer shall
deem necessary or advisable and as shall be normal and usual in its
several servicing activities, and the resulting Net Liquidation
Proceeds shall be deposited into the Collection Account pursuant to
SECTION 5.01(b)(1) hereof.
Section 4.12 COMPLIANCE WITH REQUEST FOR INFORMATION. The
Servicer shall provide to the Indenture Trustee, upon its request, information
regarding the Notes and the Loans and such other information as the Indenture
Trustee shall be required to deliver to any Noteholder and any prospective
transferee designated by a Noteholder to satisfy a condition of eligibility set
forth under Rule 144A(d)(4) under the Securities Act of 1933, as amended.
Section 4.13 LOCKBOX TRIGGER EVENT; LOCKBOX ACCOUNT.
In the event of the occurrence of a Lockbox Trigger Event:
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(a) The Servicer, Depositor and Issuer shall each promptly
execute and deliver the Lockbox Agreement.
(b) The Servicer shall promptly cause Borrowers to make all
payments on the Loans (including, without limitation, Escrow Payments),
irrespective of method of payment, directly to the Lockbox Bank pursuant to the
Lockbox Agreement. Amounts received by a Lockbox Bank in respect of the Loans
may initially be deposited into a demand deposit account maintained by the
Lockbox Bank for the benefit of the Indenture Trustee, as secured party on
behalf of the Noteholders. The Lockbox Agreement shall require the Lockbox Bank
to deposit all payments on the Loans in the Lockbox Account no later than the
Business Day after receipt, and to cause all amounts credited to the Lockbox
Account on account of such payments to be transferred to the Collection Account
or Escrow Account, as the case may be, in accordance with the written
instructions of the Servicer, no later than the second Business Day after
receipt of such payments. The Servicer shall pay all fees and costs incurred
connection with the entering into of the Lockbox Agreement, the establishment of
the Lockbox Account and the administration of the provisions of the Lockbox
Agreement.
Section 4.14 VALUATION OF LOANS, HEDGE VALUE AND RETAINED
SECURITIES VALUE; MARKET VALUE AGENT .
(a) The Loan Originator hereby irrevocably appoints the Market
Value Agent to determine the Market Value of each Loan, the Hedge Value of each
Hedging Instrument and the Retained Securities Value of all Retained Securities.
(b) The Market Value Agent shall determine the Market Value of
each Loan in its reasonable judgment. In determining the Market Value of each
Loan, the Market Value Agent may consider any information that it may deem
relevant and may base such determination solely on its estimate of the projected
proceeds from such Loan's inclusion in a Securitization and the projected
Retained Securities Value of any Retained Securities to be issued in connection
with such Securitization, net of such Loan's ratable share of all costs and fees
associated with such Securitization, including, without limitation the costs of
issuance, underwriting and funding reserve accounts. The Market Value Agent's
determination, in its reasonable judgment, of Market Value shall be conclusive
and binding upon the parties hereto.
(c) On each Business Day the Market Value Agent shall
determine in its reasonable judgment the Hedge Value of each Hedging Instrument
as of such Business Day. In making such determination the Market Value Agent may
rely exclusively on quotations provided by the Hedging Counterparty, by leading
dealers in instruments similar to such Hedging Instrument, which leading dealers
may include the Market Value Agent and its Affiliates and such other sources of
information as the Market Value Agent may deem appropriate.
(d) On each Business Day, the Market Value Agent shall
determine in its reasonable judgment the Retained Securities Value of the
Retained Securities, if any, expected to be issued pursuant to such
Securitization as of the closing date of such Securitization. In making such
determination the Market Value Agent may rely exclusively on quotations provided
by leading dealers in instruments similar to such Retained Securities, which
leading dealers may
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include the Market Value Agent and its Affiliates and such other sources of
information as the Market Value Agent may deem appropriate.
ARTICLE V
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01 COLLECTION ACCOUNT AND DISTRIBUTION ACCOUNT .
(a) (1) ESTABLISHMENT OF COLLECTION ACCOUNT. The Servicer, for the
benefit of the Securityholders, shall cause to be established and
maintained one or more Collection Accounts (collectively, the
"Collection Account"), which shall be separate Eligible Accounts
entitled "Collection Account, LaSalle National Bank, as Indenture
Trustee, in trust for the FFCA Franchise Loan Backed Notes, Series
1998-1". The Collection Account may be maintained with the Indenture
Trustee or any other depository institution which satisfies the
requirements set forth in the definition of Eligible Account. The
creation of any Collection Account other than one maintained with the
Indenture Trustee shall be evidenced by a letter agreement between the
Servicer and the depository institution acceptable to the Majority
Noteholders. A copy of such letter agreement shall be furnished to the
Majority Noteholders and the Indenture Trustee and, upon request of any
Securityholder, to such Securityholder. Funds in the Collection Account
shall be invested in accordance with SECTION 5.03 hereof.
The Collection Account shall be established, as of the date
hereof, as an Eligible Account pursuant to the definition thereof. The
Collection Account may, upon written notice to the Issuer and the
Indenture Trustee, be transferred by the Servicer to a different
depository institution so long as such transfer is to an Eligible
Account acceptable to the Majority Noteholders.
(2) ESTABLISHMENT OF DISTRIBUTION ACCOUNT. No later than the
date hereof, the Servicer, for the benefit of the Noteholders, shall
cause to be established and maintained with LaSalle National Bank one
or more Distribution Accounts (collectively, the "Distribution
Account"), which shall be separate Eligible Accounts and may be
interest bearing, entitled "Distribution Account, LaSalle National
Bank, as Indenture Trustee, in trust for the FFCA Franchise Loan Backed
Notes, Series 1998-1." Funds in the Distribution Account shall not be
invested.
(b) (1) DEPOSITS TO COLLECTION ACCOUNT. The Servicer shall deposit or
cause to be deposited (without duplication), within two (2) Business
Days after receipt thereof, into the Collection Account and retain
therein in trust for the benefit of the Securityholders:
(i) all payments on or in respect of each Loan conveyed
pursuant to SECTION 2.01(a)(iii) hereof;
(ii) all Net Liquidation Proceeds pursuant to SECTION 4.11
hereof;
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(iii) all Insurance Proceeds not required to be applied to
restoration or repair of Loan Collateral pursuant to
SECTION 4.05;
(iv) all Released Loan Collateral Proceeds;
(v) any amounts payable in connection with the repurchase
of any Loan and the amount of any Substitution
Adjustment pursuant to Sections 2.05 and 3.05 hereof;
(vi) any Purchase Price payable in connection with a
Servicer Call pursuant to SECTION 3.07 hereof;
(vii) the deposit of the Termination Price under SECTION
11.01 hereof;
(viii) any Periodic Advances pursuant to SECTION 4.09;
(ix) any cash Securitization Proceeds pursuant to SECTION
3.06; and
(x) any payments received under Hedging Instruments or
the return of amounts by the Hedging Counterparty
pledged pursuant to prior Hedge Funding Requirements;
(xi) all proceeds paid under the Environmental Policy and
not retained by the Servicer in connection with
remediation of Mortgaged Properties pursuant to
SECTION 3.09 hereof; and
(xii) any Purchase Price payable in connection with a Loan
Originator Put remitted by the Loan Originator
pursuant to SECTION 3.07 hereof.
(c) WITHDRAWALS FROM COLLECTION ACCOUNT; DEPOSITS TO
DISTRIBUTION ACCOUNT.
(1) WITHDRAWALS FROM COLLECTION ACCOUNT -- REIMBURSEMENT
ITEMS. Periodically, the Indenture Trustee (except as may be otherwise
provided in writing by the Collection Account Letter Agreement), at the
direction of the Servicer, shall make the following withdrawals from
the Collection Account prior to any other withdrawals, in no particular
order of priority:
(i) to withdraw any amount not required to be deposited
in the Collection Account or deposited therein in
error;
(ii) to withdraw the Servicing Advance Reimbursement
Amount;
(iii) to clear and terminate the Collection Account in
connection with the termination of this Agreement;
(iv) to reimburse the Servicer for any Nonrecoverable
Periodic Advances;
(v) to make the payments set forth in SECTION 9.01(e)
hereof;
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(vi) to make any payments in respect of Servicer
indemnities pursuant to SECTION 9.01(f) hereof;
(vii) to pay to the Loan Originator any Retained Interest
actually received with respect to the related Loan;
and
(viii) to reimburse the Servicer for unreimbursed Periodic
Advances, the Servicer's right to reimburse itself,
pursuant to this clause (viii) with respect to any
Periodic Advance (other than Nonrecoverable Advances,
which are reimbursable pursuant to clause (iv) above)
being limited to amounts that represent collections
of interest (net of any related Retained Interest)
and principal received in respect of the particular
Loan as to which such Periodic Advance was made;
(2) INDENTURE TRUSTEE DEPOSITS TO DISTRIBUTION ACCOUNT -
PAYMENT DATES. (a) On the Business Day prior to each Payment Date, the
Indenture Trustee shall deposit into the Distribution Account such
amounts as are required from the Transfer Obligation Account pursuant
to SECTION 5.05(e), 5.05(f) and 5.05(g).
(b) After making all withdrawals specified in SECTION
5.01(c)(1) above, on the Business Day prior to each Payment Date, the
Indenture Trustee, except as may be otherwise provided in the
Collection Account Letter Agreement, (based on information provided by
the Servicer for such Payment Date) shall withdraw from the Collection
Account not later than 2:00 p.m. Phoenix, Arizona time and deposit into
the Distribution Account all remaining funds on deposit therein,
provided that on or after any date on which the long term senior
unsecured debt of the Servicer is unrated or rated at or below "BB" by
Standard & Poor's Ratings Group, the Indenture Trustee, except as may
be otherwise provided in the Collection Account Letter Agreement, shall
make such withdrawal of remaining amounts from the Collection Account
on every other Business Day and deposit such funds in the Distribution
Account.
(3) WITHDRAWALS FROM DISTRIBUTION ACCOUNT -- PAYMENT DATES. On
each Payment Date, to the extent funds are available in the
Distribution Account, the Indenture Trustee (based on the information
provided by the Servicer contained in the Servicer's Remittance Report
for such Payment Date) shall make withdrawals therefrom by 3:00 p.m.
(New York City time), for application in the following order of
priority:
(i) to distribute on such Payment Date the following
amounts pursuant to the Indenture in the following
order: (a) to the Indenture Trustee, an amount equal
to the Indenture Trustee Fee and all unpaid Indenture
Trustee Fees from prior Payment Dates, (b) to the
Custodian, an amount equal to the Custodian Fee, if
any, and all unpaid Custodian Fees from prior Payment
Dates, (c) to the Servicer, (x) only if Servicer is
not FFCA or any Affiliate thereof, an amount equal to
the Servicing Compensation and all unpaid Servicing
Compensation from prior Payment Dates and (y) all
Nonrecoverable Servicing Advances not previously
reimbursed, (d) to the
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Servicer, in trust for the Owner Trustee, an amount
equal to the Owner Trustee Fee and all unpaid Owner
Trustee Fees from prior Payment Dates, and;
(ii) to distribute on such Payment Date, the Hedge Funding
Requirement to the appropriate Hedging
Counterparties; provided, that only cash on or in
respect of fixed rate Loans (including cash
Securitization Proceeds received therefrom) shall be
distributed for such purpose and; provided, further,
that amounts distributed pursuant to clause (i) above
to the extent not attributable to a specific Loan
shall be deemed paid from Loans bearing a fixed Loan
Interest Rate, pro rata based on their aggregate
Principal Balances relative to the Pool Principal
Balance on such Payment Date;
(iii) to the holders of the Notes pro rata, the sum of the
Interest Payment Amount for such Payment Date and the
Interest Carry-Forward Amount for the preceding
Payment Date;
(iv) to the holders of the Notes pro rata, the sum of the
Optimal Principal Payment Amount for such Payment
Date and the Principal Carry-Forward Amount for the
preceding Payment Date; provided, however, that if
(a) a Rapid Amortization Trigger shall have occurred
and not been Deemed Cured or (b) an Event of Default
or Default under this Agreement or the Indenture
shall have occurred, the holders of the Notes shall
receive, in respect of principal, all remaining
amounts on deposit in the Collection Account.
(v) to the Servicer if the Servicer is the Loan
Originator or an Affiliate thereof, an amount equal
to the Servicing Compensation for the related Payment
Date and all unpaid Servicing Compensation from prior
Payment Dates;
(vi) to the Transfer Obligation Account, all remaining
amounts until the balance therein equals the Transfer
Obligation Target Amount;
(vii) to each Indemnified Party (as defined in the Trust
Agreement) until all amounts due and owing under
Issuer/Depositor Indemnities (as defined in the Trust
Agreement) are paid in full; and
(viii) to the holders of the Trust Certificates of record on
the next preceding Record Date, pro rata, all amounts
remaining therein.
The Majority Noteholders and the Issuer may agree, upon
written notice to the Indenture Trustee, to additional Payment Dates. In
addition, there shall be an additional Payment Date on (i) any day which
Securitization Proceeds, Purchase Prices or proceeds in respect of Put/Call
Loans are deposited into the Collection Account on or before 2 p.m. Phoenix,
Arizona time, and (ii) the Business Day after any day on which Securitization
Proceeds, Purchase Prices or proceeds in respect of Put/Call Loans are deposited
into the Collection Account after 2 p.m. Phoenix, Arizona
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time. The Issuer and the Majority Noteholders shall give the Indenture Trustee
at least one (1) Business Day's written notice prior to such additional Payment
Date and such notice shall specify each amount in SECTION 5.01(c) to be
withdrawn from the Collection Account and Distribution Account on such day.
Notwithstanding that the Notes have been paid in full, the
Indenture Trustee and the Servicer shall continue to maintain the Distribution
Account hereunder until this Agreement has been terminated.
Section 5.02 PAYMENTS TO SECURITYHOLDERS.
(a) All distributions made on the Notes on each Payment Date
will be made on a pro rata basis among the Noteholders of record of the Notes on
the next preceding Record Date based on the Percentage Interest represented by
their respective Notes, without preference or priority of any kind, and, except
as otherwise provided in the next succeeding sentence, shall be made by wire
transfer of immediately available funds to the account of such Noteholder, if
such Noteholder shall own of record Notes in original Denominations aggregating
at least $250,000 and shall have so notified the Indenture Trustee, and
otherwise by check mailed to the address of such Noteholder appearing in the
Notes Register. The final distribution on each Note will be made in like manner,
but only upon presentment and surrender of such Note at the location specified
in the notice to Noteholders of such final distribution.
(b) All distributions made on the Trust Certificates on each
Payment Date will be made pro rata among the holders of the Trust Certificates
of record on the next preceding Record Date based on their Percentage Interests
(as defined in the Trust Agreement), without preference or priority of any kind,
and, except as otherwise provided in the next succeeding sentence, shall be made
by wire transfer of immediately available funds to the account of each such
holder, if such holder shall own of record a Trust Certificate in an original
denomination aggregating at least 50% of the Percentage Interests (as defined in
the Trust Agreement) and shall have so notified the Indenture Trustee, and
otherwise by check mailed to the address of such Certificateholder appearing in
the Certificate Register. The final distribution on each Trust Certificate will
be made in like manner, but only upon presentment and surrender of such Trust
Certificate at the location specified in the notice to holders of the Trust
Certificates of such final distribution. Any amount distributed to the holders
of the Trust Certificates on any Payment Date shall not be subject to any claim
or interest of the Noteholders. In the event that at any time there shall be
more than one Certificateholder, the Indenture Trustee shall be entitled to
reasonable additional compensation from the Servicer for its obligations
hereunder, including, without limitation, its obligations to distribute funds
and produce and deliver statements.
(c) For purposes of this SECTION 5.02, the sole holder of the
Trust Certificates shall be deemed to be the Depositor until such time as the
Depositor provides written notice to the contrary to the Indenture Trustee and
the Initial Noteholder.
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Section 5.03 TRUST ACCOUNTS; TRUST ACCOUNT PROPERTY.
(a) CONTROL OF TRUST ACCOUNTS. Each of the Trust Accounts
established hereunder has been pledged by the Issuer to the Indenture Trustee
under the Indenture and shall be subject to the lien of the Indenture. In
addition to the provisions hereunder, each of the Trust Accounts shall also be
established and maintained pursuant to the Indenture. Amounts distributed from
each Trust Account in accordance with the Indenture and this Agreement shall be
released from the lien of the Indenture upon such distribution thereunder or
hereunder. The Indenture Trustee shall possess all right, title and interest in
and to all funds on deposit from time to time in the Trust Accounts and in all
proceeds thereof (including all income thereon) and all such funds, investments,
proceeds and income shall be part of the Trust Account Property and the Trust
Estate. If, at any time, any Trust Account ceases to be an Eligible Account, the
Indenture Trustee (or the Servicer on its behalf) shall, within ten Business
Days (or such longer period, not to exceed 30 calendar days, with the prior
written consent of the Majority Noteholders) (i) establish a new Trust Account
as an Eligible Account, (ii) terminate the ineligible Trust Account, and (iii)
transfer any cash and investments from such ineligible Trust Account to such new
Trust Account.
Except as may be otherwise provided in the Collection Account
Letter Agreement, with respect to the Trust Accounts, the Indenture Trustee
agrees, by its acceptance hereof, that each such Trust Account shall be subject
to the sole and exclusive custody and control of the Indenture Trustee for the
benefit of the Noteholders, and, except as may be otherwise provided in the
Collection Account Letter Agreement or as may be consented to in writing by the
Majority Noteholders, the Indenture Trustee shall have sole signature and
withdrawal authority with respect thereto.
The Servicer shall have the power, revocable by the Majority
Noteholder or by the Owner Trustee with the consent of the Indenture Trustee, to
instruct the Indenture Trustee or Owner Trustee to make withdrawals and payments
from the Trust Accounts for the purpose of permitting the Servicer to carry out
its duties hereunder or permitting the Indenture Trustee or Owner Trustee to
carry out their respective duties herein or under the Indenture or the Trust
Agreement, as applicable.
(b) (1) INVESTMENT OF FUNDS. Funds held in the Collection Account and
the Transfer Obligation Account may be invested (to the extent
practicable and consistent with any requirements of the Code) in
Permitted Investments, as directed by the Servicer prior to the
occurrence and continuation of an Event of Default, and by the Majority
Noteholders thereafter, in writing or by telephone or facsimile
transmission confirmed in writing by the Loan Originator or Majority
Noteholders, as applicable. In any case, funds in the Collection
Account and the Transfer Obligation Account must be available for
withdrawal without penalty, and any Permitted Investments must mature
or otherwise be available for withdrawal, not later than the Business
Day following the date of such investment and, in any event one
Business Day prior to the next Payment Date and shall not be sold or
disposed of prior to its maturity subject to subsection (b)(2) of this
Section. All interest and any other investment earnings on amounts or
investments held in the Collection Account and the Transfer Obligation
Account shall be deposited into the
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Collection Account or the Transfer Obligation Account, as the case may
be, immediately upon receipt by the Indenture Trustee. All Permitted
Investments in which funds in the Collection Account or the Transfer
Obligation Account are invested must be held by or registered in the
name of "LaSalle National Bank, as Indenture Trustee, in trust for the
FFCA Franchise Loan Backed Notes, Series 1998-1".
(2) INSUFFICIENCY AND LOSSES IN TRUST ACCOUNTS. If any amounts
are needed for disbursement from the Collection Account or the Transfer
Obligation Account held by or on behalf of the Indenture Trustee and
sufficient uninvested funds are not available to make such
disbursement, the Indenture Trustee (or the Servicer, as applicable)
shall cause to be sold or otherwise converted to cash a sufficient
amount of the investments in the Collection Account or the Transfer
Obligation Account, as the case may be. The Indenture Trustee shall not
be liable for any investment loss or other charge resulting therefrom,
unless such loss or charge is caused by the failure of the Indenture
Trustee to perform in accordance with written directions provided
pursuant to this SECTION 5.03.
If any losses are realized in connection with any investment
in the Collection Account or the Transfer Obligation Account pursuant to this
Agreement and the Indenture, then the Loan Originator shall deposit the amount
of such losses (to the extent not offset by income from other investments in the
Collection Account or the Transfer Obligation Account, as the case may be) into
the Collection Account or the Transfer Obligation Trust Account, as the case may
be, immediately upon the realization of such loss. All interest and any other
investment earnings on amounts held in the Collection Account and the Transfer
Obligation Account shall be taxed to the Issuer and for federal and state income
tax purposes the Issuer shall be deemed to be the owner of the Collection
Account and/or the Transfer Obligation Account, as the case may be.
(c) Subject to SECTION 6.01 of the Indenture, the Indenture
Trustee shall not in any way be held liable by reason of any insufficiency in
any Trust Account held by the Indenture Trustee resulting from any investment
loss on any Permitted Investment included therein (except to the extent that the
Indenture Trustee is an obligor and has defaulted thereon).
(d) With respect to the Trust Account Property, the Indenture
Trustee acknowledges and agrees that:
(1) any Trust Account Property that is held in deposit
accounts shall be held solely in the Eligible Accounts, subject to the
last sentence of subsection (a) of this SECTION 5.03; and, except as
may be otherwise provided in the Collection Account Letter Agreement,
each such Eligible Account shall be subject to the sole and exclusive
dominion, custody and control of the Indenture Trustee; and, without
limitation on the foregoing, except as may be otherwise provided in the
Collection Account Letter Agreement, the Indenture Trustee shall have
sole signature authority with respect thereto;
(2) any Trust Account Property that constitutes Physical
Property shall be delivered to the Indenture Trustee in accordance with
paragraph (a) of the definition of "Delivery" in SECTION 1.01 hereof
and shall be held, pending maturity or disposition,
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solely by the Indenture Trustee or a securities intermediary (as such
term is defined in section 8-102(a)(14) of the UCC) acting solely for
the Indenture Trustee;
(3) any Trust Account Property that is a book-entry security
held through the Federal Reserve System pursuant to federal book-entry
regulations shall be delivered in accordance with paragraph (b) of the
definition of "Delivery" in SECTION 1.01 hereof and shall be maintained
by the Indenture Trustee, pending maturity or disposition, through
continued book-entry registration of such Trust Account Property as
described in such paragraph; and
(4) any Trust Account Property that is an "uncertificated
security" under Article 8 of the UCC and that is not governed by clause
(3) above shall be delivered to the Indenture Trustee in accordance
with paragraph (c) of the definition of "Delivery" in SECTION 1.01
hereof and shall be maintained by the Indenture Trustee, pending
maturity or disposition, through continued registration of the
Indenture Trustee's (or its nominee's) ownership of such security.
(e) The Servicer shall have the power, revocable by the
Majority Noteholders or by the Issuer with the consent of the Majority
Noteholders, to instruct the Indenture Trustee to make withdrawals and payments
from the Trust Accounts for the purpose of permitting the Servicer or the Issuer
to carry out their respective duties hereunder or permitting the Indenture
Trustee to carry out its duties under the Indenture.
Section 5.04 ADVANCE ACCOUNT
(a) The Servicer shall cause to be established and maintained
in its name, an Advance Account (the "ADVANCE ACCOUNT"), which need not be a
segregated account. The Advance Account shall be maintained with any financial
institution the Servicer elects.
(b) DEPOSITS AND WITHDRAWALS. Amounts in respect of the
purchase of Additional Note Principal Balances and Loans shall be deposited in
and withdrawn from the Advance Account as provided in Sections 2.01(c) and 2.06
hereof, SECTION 3.01 of the Note Purchase Agreement and SECTION 2.1 of the Loan
Purchase Agreement.
Section 5.05 TRANSFER OBLIGATION; TRANSFER OBLIGATION ACCOUNT
(a) The Servicer, for the benefit of the Noteholders, shall
cause to be established and maintained in the name of the Indenture Trustee a
Transfer Obligation Account (the "TRANSFER OBLIGATION ACCOUNT"), which shall be
a separate Eligible Account and may be interest-bearing, entitled "Transfer
Obligation Account, LaSalle National Bank, as Indenture Trustee, in trust for
the FFCA Franchise Loan Backed Notes, Series 1998-1." The Transfer Obligation
Account may be maintained with the Indenture Trustee or any other depository
institution which satisfies the requirements set forth in the definition of
Eligible Account. The establishment of a Transfer Obligation Account with a
depositary institution other than the Indenture Trustee shall be evidenced by a
letter agreement between the Servicer and such depository institution acceptable
to the Indenture Trustee. A copy of such letter agreement shall
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be furnished to the Indenture Trustee and, upon request of any Securityholder,
to such Securityholder. Amounts in the Transfer Obligation Account shall be
invested in accordance with SECTION 5.03.
(b) In accordance with SECTION 2.3(b) of the Loan Purchase
Agreement, the Loan Originator shall deposit into the Transfer Obligation
Account such amounts as may be required thereby.
(c) On each Payment Date, the Indenture Trustee will deposit
in the Transfer Obligation Account any amounts required to be deposited therein
pursuant to SECTION 5.01(c)(3)(vi).
(d) On the date of each Securitization, the Indenture Trustee
shall withdraw from the Transfer Obligation Account such amount on deposit
therein as may be requested by the Majority Noteholders in writing to effect
such Securitization.
(e) On each Payment Date, the Indenture Trustee, upon the
written direction of the Servicer shall withdraw from the Transfer Obligation
Account and deposit into the Distribution Account on such Payment Date the
lesser of (x) the amount then on deposit in the Transfer Obligation Account and
(y) the Interest Carry-Forward Amount as of such date.
(f) If with respect to any Payment Date the
Overcollateralization Shortfall exceeds the greater of (x) 1% of the aggregate
Principal Balance of all Loans as of the prior Business Day and (y) $250,000,
the Indenture Trustee, upon the written direction of the Servicer shall withdraw
from the Transfer Obligation Account and deposit into the Distribution Account
on the Business Day prior to such Payment Date the lesser of the amount then on
deposit in the Transfer Obligation Account and the amount of such
Overcollateralization Shortfall as of such date.
(g) If with respect to any Payment Date there shall exist a
Hedge Funding Requirement, the Indenture Trustee, upon the written direction of
the Servicer shall withdraw from the Transfer Obligation Account and deposit
into the Distribution Account on the Business Day prior to such Payment Date the
lesser of (x) the amount then on deposit in the Transfer Obligation Account
(after making all other required withdrawals therefrom with respect to such
Payment Date) and (y) the amount of such Hedge Funding Requirement as of such
date.
(h) In the event of the occurrence of an Event of Default
under the Indenture, the Indenture Trustee shall withdraw all remaining funds
from the Transfer Obligation Account and apply such funds in satisfaction of the
Notes as provided in SECTION 5.04(b) of the Indenture.
(i) Upon the date of the termination of this Agreement
pursuant to Article XI, the Indenture Trustee, at the written direction of the
Loan Originator, shall withdraw any remaining amounts from the Transfer
Obligation Account and remit all such amounts to the Loan Originator.
(j) The Indenture Trustee shall (i) at the direction of the
Majority Noteholders, return to the Loan Originator in the manner specified to
the Indenture Trustee by
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the Majority Noteholders in such direction all amounts deposited in the Transfer
Obligation Account by the Loan Originator in connection therewith pursuant to
SECTION 2.3(b)(v) of the Loan Purchase Agreement, in the event that an Event of
Default is waived by the Noteholders and (ii) return to the Loan Originator at
the written direction of the Servicer, all amounts on deposit in the Transfer
Obligation Account until the Majority Noteholders provide written notice to the
Indenture Trustee (with a copy to the Loan Originator) of the occurrence of a
default or event of default (however defined) under any Basic Document with
respect to the Issuer, FFCA or the Depositor.
ARTICLE VI
STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS
Section 6.01 STATEMENTS.
(a) On each Determination Date, the Servicer shall deliver to
the Indenture Trustee and the Initial Noteholder by facsimile, the receipt and
legibility of which shall be confirmed by telephone, and with hard copy thereof
to be delivered no later than one (1) Business Day after such Determination
Date, the Servicer's Remittance Report, setting forth the date of such Report
(day, month and year), the name of the Issuer (i.e., "FFCA Franchise Loan Owner
Trust 1998-1"), the Series designation of the Notes (i.e., "Series 1998-1") and
the date of this Agreement, all in substantially the form set out in Exhibit B
hereto. Furthermore, on each Determination Date, the Servicer shall deliver to
the Indenture Trustee and the Initial Noteholder a magnetic tape or computer
disk providing, with respect to each Loan in the Loan Pool as of such
Determination Date: (i) the Loan Originator's internal loan identifying number;
(ii) if such Loan is an Adjustable Rate Loan, the current Loan Interest Rate;
(iii) the current Principal Balance with respect to such Loan; (iv) the date of
the last Monthly Payment paid in full; (v) the current Fixed Charge Coverage
Ratio (if updated from information provided in the Loan Schedule); (vi) a flag
indicating whether the figure listed in item (v) is a calculation of Fixed
Charge Coverage Ratio with respect to the single unit or in the aggregate; and
(vii) such other information as may be reasonably requested by the Majority
Noteholders.
(b) (i) On any Business Day, upon the request of the Initial
Noteholder, the Servicer shall prepare and provide a statement setting forth the
following information as of the close of business on the prior Business Day:
(a) for each Loan with respect to which a Servicing
Advance or Periodic Advance is outstanding, (i) the
aggregate amount of Servicing Advances outstanding,
(ii) the aggregate amount of Periodic Advances
outstanding and (iii) the outstanding Principal
Balance of such Loan; and
(b) the Pool Principal Balance.
(ii) On each Determination Date, the Servicer shall prepare
and provide to the Indenture Trustee for distribution to the Issuer, the Initial
Noteholder and each Certificateholder, a statement (the "PAYMENT STATEMENT"),
stating each date of a purchase of Additional Note
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Principal Balance (day, month and year), the name of the Issuer (i.e., "FFCA
Franchise Loan Owner Trust 1998-1"), the Series designation of the Notes (i.e.,
"Series 1998-1"), the date of this Agreement and the following information:
(a) the aggregate amount of collections in respect of
principal of the Loans received by the Servicer
during the preceding Due Period;
(b) the aggregate amount of collections in respect of
interest on the Loans received by the Servicer during
the preceding Due Period;
(c) all Insurance Proceeds received by the Servicer and
not required to be applied to restoration or repair
of the related Loan Collateral during the preceding
Due Period;
(d) all Net Liquidation Proceeds deposited by the
Servicer into the Collection Account during the
preceding Due Period;
(e) all Released Loan Collateral Proceeds deposited by
the Servicer into the Collection Account during the
preceding Due Period;
(f) the aggregate amount of all Periodic Advances and all
Servicing Advances, set forth separately, made by the
Servicer during the preceding Due Period;
(g) the aggregate of all amounts deposited into the
Collection Account in respect of the repurchase of
Defective Loans and the repurchase of Loans pursuant
to SECTION 2.05 hereof during the preceding Due
Period;
(h) the aggregate Principal Balance of all Loans for
which a Servicer Call was exercised during the
preceding Due Period;
(i) the aggregate Principal Balance of all Loans for
which a Loan Originator Put was exercised during the
preceding Due Period;
(j) the aggregate amount of all payments received under
Hedging Instruments during the preceding Due Period;
(k) the aggregate amount of proceeds received in respect
of the Environmental Policy during the preceding Due
Period;
(l) when applicable, the aggregate amount of cash
Securitization Proceeds received during the preceding
Due Period;
(m) withdrawals from the Collection Account in respect of
the Servicing Advance Reimbursement Amount during the
preceding Due Period;
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(n) withdrawals from the Collection Account in respect of
Nonrecoverable Periodic Advances during the preceding
Due Period;
(o) the number and aggregate Principal Balance of all
Loans that are (i) 30-59 days Delinquent, (ii) 60-89
days Delinquent, (iii) 90 or more days Delinquent as
of the related Payment Date;
(p) the aggregate amount of Liquidated Loan Losses
incurred (i) during the preceding Due Period, (ii)
during the preceding three Due Periods and (iii)
since the Reset Date;
(q) the aggregate of the Principal Balances of all Loans
in the Loan Pool as of the related Payment Date; and
(r) the aggregate amount of all withdrawals from the
Collection Account pursuant to SECTION 5.01(c)(1)(i)
hereof during the preceding Due Period.
(iii) On the Business Day following each Business Day on which
money is deposited into the Collection Account, the Servicer shall cause to be
delivered to the Initial Noteholder by facsimile, the receipt and legibility of
which shall be confirmed by telephone, a statement setting forth the total
deposits into the Collection Account on the prior Business Day and the balance
in the Collection Account as of the close of business on the prior Business Day.
(c) On each Determination Date, the Indenture Trustee shall
deliver to the Initial Noteholder a magnetic tape or computer disk in a form
mutually agreed the Initial Noteholder and the Indenture Trustee, setting forth
the following information:
(a) the aggregate amount of all deposits into the
Distribution Account from the Transfer Obligation
Account pursuant to SECTION 5.05(e), 5.05(f) AND
5.05(g) on the preceding payment Date;
(c) if the Servicer is not FFCA or an Affiliate thereof,
the aggregate amount of distributions in respect of
Servicing Compensation to the Servicer, and unpaid
Servicing Compensation from prior Payment Dates for
the related Payment Date;
(d) the aggregate amount of distributions in respect of
Indenture Trustee Fees and unpaid Indenture Trustee
Fees from prior Payment Dates for the related payment
Date;
(e) the aggregate amount of distributions in respect of
Owner Trustee Fees and unpaid Owner Trustee Fees from
prior Payments Dates for the related Payment Date;
(f) the aggregate amount of distributions in respect of
the Custodian Fee and unpaid Custodian Fees from
prior Payment Dates for the related Payment Date;
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(g) if a Rapid Amortization Trigger shall have occurred
and not been Deemed Cured or a Default or Event of
Default shall have occurred hereunder or under the
Indenture, the aggregate amount of distributions on
the Notes in respect of principal in excess of the
Optimal Principal Payment Amount and the Principal
Carry-Forward Amount for the related Payment Date;
(h) the aggregate amount of distributions in respect of
Servicing Compensation and unpaid Servicing
Compensation from prior Payment Dates, to the
Servicer, if FFCA or an Affiliate thereof is the
Servicer, for the related Payment Date;
(i) the aggregate amount of distributions to the Transfer
Obligation Account for the related Payment Date;
(j) the aggregate amount of distributions in respect of
Issuer/Depositor Indemnities (as defined in the Trust
Agreement) for the related Payment Date;
(k) the aggregate amount of distributions to the holders
of the Trust Certificates for the related Payment
Date; and
(l) the Note Principal Balance of the Notes before and
after giving effect to distributions made to the
holders of the Notes for the related Payment Date.
All reports prepared by the Indenture Trustee of the
withdrawals from and deposits into the Collection Account will be based in whole
or in part upon the information provided to the Indenture Trustee by the
Servicer, and the Indenture Trustee may fully rely upon and shall have no
liability with respect to such information provided by the Servicer.
(d) On each Payment Date, the Indenture Trustee shall forward
to the holders of the Trust Certificates a copy of the Payment Statement in
respect of such Payment Date and a statement setting forth the amounts actually
distributed to such holders of the Trust Certificates on such Payment Date,
together with such other information as the Indenture Trustee deems necessary or
appropriate.
Section 6.02 SPECIFICATION OF CERTAIN TAX MATTERS.
The Indenture Trustee shall comply with all requirements of
the Code and applicable state and local law with respect to the withholding from
any distributions made to any Noteholder of any applicable withholding taxes
imposed thereon and with respect to any applicable reporting requirements in
connection therewith, giving due effect to any applicable exemptions from such
withholding and effective certifications or forms provided by the recipient. Any
amounts withheld pursuant to this SECTION 6.02 shall be deemed to have been
distributed to the Noteholders, as the case may be, for all purposes of this
Agreement or the Indenture.
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ARTICLE VII
GENERAL SERVICING PROCEDURE
Section 7.01 DUE-ON-SALE; DUE-ON-ENCUMBRANCE.
(a) When any Borrower proposes to convey all or any portion of
its interests in Loan Collateral, or if such a conveyance has actually occurred,
the Servicer shall immediately give notice to the Initial Noteholder of such
conveyance and shall enforce any due-on-sale clause or due-on-encumbrance clause
contained in any Promissory Note or Mortgage or Security Agreement, to the
extent permitted under the terms of the Loan and applicable law and governmental
regulations. In the event that the Servicer determines, in accordance with the
Servicing Standard, that waiver of such clauses would be in accordance with the
Servicing Standard, the Servicer shall promptly give written notice to the
Majority Noteholders of its approval of any such subordinate lien. If a Borrower
applies for approval to place a subordinate monetary lien on Loan Collateral in
accordance with the terms of the Loan Documents, the Servicer shall promptly
give written notice to the Majority Noteholders of the requested encumbrance and
obtain and deliver to the Majority Noteholders such appraisals and other
supporting documentation as are required by the terms of the Loan Documents
together with such additional information as the Majority Noteholders shall
request to facilitate review and approval of the requested encumbrance. In the
event that the Servicer determines, in accordance with the Servicing Standard,
that permitting such subordinate lien would be in accordance with the Servicing
Standard, the Servicer may consent to such lien and shall promptly give written
notice to the Majority Noteholders thereof. Any processing fees paid by a
Borrower in connection with an application for a subordinate monetary lien (net
of any fees and expenses of the Majority Noteholders including the Majority
Noteholders' counsel's fees and expenses) shall be retained by the Servicer as
Servicing Compensation. The Servicer shall not approve any request to
subordinate the lien of any Mortgage Loan to any other lien.
(b) If any Loan Collateral is to be conveyed to a Person by a
Borrower, and such Person is to enter into an assumption agreement or supplement
to the Promissory Note or Mortgage or Security Agreement which requires the
signature of the Indenture Trustee, or if an instrument of release signed by the
Indenture Trustee is required releasing the Borrower from liability on the Loan,
the Servicer shall deliver or cause to be delivered to the Majority Noteholders
for review, and upon the written approval thereof, to the Indenture Trustee for
signature the assumption agreement with the Person to whom the Loan Collateral
is to be conveyed and such modification agreement or supplement to the
Promissory Note or Mortgage or Security Agreement or other instruments as are
reasonable or necessary to carry out the terms of the Promissory Note or
Mortgage or Security Agreement or otherwise to comply with any applicable laws
regarding assumptions or the transfer of the Loan Collateral to such Person. The
Servicer shall also deliver or cause to be delivered to the Majority Noteholders
with the foregoing documents a letter explaining the nature of such documents
and the reason or reasons why the Indenture Trustee's signature is required.
With such letter the Servicer shall deliver to the Majority Noteholders and the
Indenture Trustee a certificate of a servicing officer certifying that: (i) a
Servicing Officer has examined and approved such documents as to form and
substance, (ii) the Indenture Trustee's execution and delivery thereof will not
conflict with or
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violate any terms of this Agreement (iii) any required consents of insurers
under any insurance policies required by this Agreement have been obtained, (iv)
there are no changes or modifications other than the identity of the Borrower
other than those previously approved in writing by the Majority Noteholders and
(v) if the seller/transferor of the Loan Collateral is to be released from
liability on the Loan, such release will not (based on the Servicer's good faith
determination) adversely affect the collectability of the Loan. Upon the closing
of the transactions contemplated by such documents, the Servicer shall cause the
originals of the assumption agreement, the release (if any) or the modification
or supplement to the Promissory Note or Mortgage or Security Agreement to be
delivered to the Indenture Trustee and deposited with the Indenture Trustee's
Loan File for such Loan.
Section 7.02 RELEASE OF LOAN FILES.
If with respect to any Loan:
(i) the outstanding Principal Balance of such Loan plus
all interest accrued thereon shall have been paid;
(ii) the Servicer shall have received, in escrow, payment
in full of such Loan in a manner customary for such
purposes;
(iii) such Loan has become a Defective Loan and has been
repurchased or a Qualified Substitute Loan has been
conveyed to the Trust pursuant to SECTION 3.05
hereof;
(iv) such Loan or the related Foreclosure Property has
been sold in connection with the termination of the
Trust pursuant to SECTION 11.01 hereof;
(v) such Loan has been purchased by the Loan Originator
in accordance with the terms of SECTION 3.07;
(vi) the related Foreclosure Property has been sold
pursuant to SECTION 4.11 hereof; or
(vii) such Loan has been included in a Securitization and
concurrently with such release the Securitization
Proceeds associated therewith will be deposited into
the Collection Account.
In each such case, the Servicer shall deliver a certificate to
the effect that the Servicer has complied with all of its obligations under this
Agreement with respect to such Loan and requesting that the Indenture Trustee
release to the Servicer the related Indenture Trustee's Loan File, and the
Indenture Trustee shall, within five Business Days or such shorter period as may
be required by applicable law, release, or cause the Custodian to release
(unless such Indenture Trustee's Loan File has previously been released), the
related Indenture Trustee's Loan File to the Servicer and execute and deliver
such instruments of transfer or assignment prepared and delivered to it by the
Servicer, in each case without recourse, representation or warranty as
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shall be necessary to vest ownership of such Loan in the Servicer or such other
Person as may be specified in such certificate, the forms of any such instrument
to be appended to such certificate.
Section 7.03 SERVICING COMPENSATION.
As compensation for its services hereunder, the Servicer shall
be entitled to receive from the Collection Account the Servicing Fee, out of
which the Servicer shall pay any servicing fees owed or payable to any
Subservicer. Additional servicing compensation in the form of assumption fees,
modification fees, and other administrative fees (exclusive of any prepayment
premiums), insufficient funds charges, amounts remitted pursuant to SECTION 7.01
hereof and late payment charges shall be part of the Servicing Compensation
payable to the Servicer hereunder and shall be paid either by the Servicer's
retaining such additional servicing compensation prior to deposit into the
Collection Account pursuant to SECTION 5.01(b)(1) hereof or, if deposited into
the Collection Account, as part of the Servicing Compensation withdrawn
therefrom pursuant to SECTION 5.01(c)(1) hereof.
The Servicer shall be required to pay all expenses incurred by
it in connection with its servicing activities hereunder and shall not be
entitled to reimbursement therefor except as specifically provided for herein.
The Loan Originator also agrees to pay all reasonable costs and expenses
incurred by any successor Servicer or the Indenture Trustee in replacing the
Servicer in the event of a default by the Servicer in the performance of its
duties under the terms and conditions of this Agreement.
Section 7.04 STATEMENT AS TO COMPLIANCE AND FINANCIAL
STATEMENTS.
The Servicer will deliver to the Initial Noteholder:
(a) not later than 90 days following the end of each fiscal
year of the Servicer (beginning on March 31, 1999), an Officer's Certificate
stating that (i) a review of the activities of the Servicer during the preceding
year and of performance under this Agreement has been made under such officer's
supervision and (ii) to the best of such officer's knowledge, based on such
review, the Servicer has fulfilled all of its obligations under this Agreement
throughout such year, or, if there has been a default in the fulfillment of any
such obligation, specifying each such default known to such officer and the
nature and status thereof and what action the Servicer proposes to take with
respect thereto.
(b) As soon as available and in no event later than 45 days
after the end of each of the first three quarterly fiscal periods of FFCA, a
Quarterly Report on "Form 10-Q" filed by FFCA with the Securities and Exchange
Commission.
(c) As soon as available and in no event later than 90 days
after the end of each fiscal year of FFCA, an Annual Report on "Form 10-K" filed
by FFCA with the Securities and Exchange Commission.
(d) As soon as available and in any event within 90 days after
the end of each fiscal year of FFCA, the annual report that is delivered to its
shareholders.
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(e) Within 10 days after service of process on any of the
following, notice of all legal or arbitrable proceedings affecting the Servicer
or any of its subsidiaries that questions or challenges the validity or
enforceability of any of the Basic Documents or as to which there is a
reasonable likelihood of adverse determination which would result in a material
adverse effect with respect to the value of the Loans or the interests of any of
the Securityholders therein. The Servicer shall also furnish and certify to the
requesting party such other information as to (i) its organization, activities
and personnel relating to the performance of the obligations of the Servicer
hereunder, (ii) its financial condition, (iii) the Loans and (iv) the
performance of the obligations of any Subservicer under the related Subservicing
Agreement, in each case as the Indenture Trustee or the Depositor may reasonably
request from time to time.
Section 7.05 INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING REPORT.
Not later than 90 days following the end of each fiscal year
of the Servicer (beginning on March 31, 1999), the Servicer at its expense shall
cause a nationally recognized firm of Independent Certified Public Accountants
(which may also render other services to the Servicer) to furnish a statement to
the Indenture Trustee, the Depositor and the Initial Noteholder to the effect
that such firm has examined certain documents and records relating to the
servicing of the Loans under this Agreement or of loans under pooling and
servicing agreements (including the Loans and this Agreement) substantially
similar to one another (such statement to have attached thereto a schedule
setting forth the pooling and servicing agreements covered thereby) and that, on
the basis of such examination conducted substantially in compliance with the
Uniform Single Attestation Program for Mortgage Bankers or the Audit Program for
Mortgages serviced for FHLMC, such firm confirms that such servicing has been
conducted in compliance with such pooling and servicing agreements except for
such significant exceptions or errors in records that, in the opinion of such
firm, the Uniform Single Attestation Program for Mortgage Bankers or the
Attestation Program for Mortgages serviced for FHLMC requires it to report, each
of which errors and omissions shall be specified in such statement. In rendering
such statement, such firm may rely, as to matters relating to direct servicing
of loans by Subservicers, upon comparable statements for examinations conducted
substantially in compliance with the Uniform Single Attestation Program for
Mortgage Bankers or the Audit Program for Mortgages serviced for FHLMC (rendered
within one year of such statement) of Independent certified public accountants
with respect to the related Subservicer.
Section 7.06 RIGHT TO EXAMINE SERVICER RECORDS.
Each Securityholder, the Indenture Trustee, the Issuer and
each of their respective agents shall have the right upon reasonable prior
notice, during normal business hours and as often as reasonably required, to
examine, audit and copy, at the expense of the Person making such examination
(but, in the case of the Indenture Trustee, at the expense of the Servicer), any
and all of the books, records or other information of the Servicer (including
without limitation any Subservicer to the extent provided in the related
Subservicing Agreement), whether held by the Servicer or by another on behalf of
the Servicer, which may be relevant to the performance or observance by the
Servicer of the terms, covenants or conditions of this Agreement. In the case of
the supervisory agents and examiners of the Issuer, Indenture Trustee and the
Securityholders, access to the documentation regarding the Loans required by
applicable state and federal
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regulations shall be afforded without charge but only upon reasonable request
and during normal business hours at the offices of the Servicer designated by
it.
The Servicer also agrees to make available on a reasonable
basis to the Securityholders or any prospective Securityholder a knowledgeable
financial or accounting officer for the purpose of answering reasonable
questions respecting recent developments affecting the Servicer or the financial
statements of the Servicer and to permit the Securityholders and any prospective
Securityholder to inspect the Servicer's servicing facilities during normal
business hours for the purpose of satisfying the Securityholders and such
prospective Securityholder that the Servicer has the ability to service the
Loans in accordance with this Agreement.
Section 7.07 REPORTS TO THE INDENTURE TRUSTEE; COLLECTION
ACCOUNT STATEMENTS.
If the Collection Account is not maintained with the Indenture
Trustee, then not later than 25 days after each Record Date, the Servicer shall
forward to the Indenture Trustee a statement, certified by a Servicing Officer,
setting forth the status of the Collection Account as of the close of business
on the preceding Record Date and showing, for the period covered by such
statement, the aggregate of deposits into the Collection Account for each
category of deposit specified in SECTION 5.01(b)(1) hereof, the aggregate of
withdrawals from the Collection Account for each category of withdrawal
specified in SECTION 5.01(c)(1) hereof, in each case, for the related Due
Period.
Section 7.08 ACCESS TO INFORMATION.
(a) The Servicer understands that, in connection with the
transfer of the Notes, Noteholders may request that the Servicer make available
to the Noteholders and to prospective Noteholders annual audited financial
statements of the Servicer for any or all of the most recently completed five
fiscal years for which such statements are available, which request shall not be
unreasonably denied.
(b) So long as any Notes remain outstanding, each of the
Issuer and any Noteholder shall, at any time and from time to time during
regular business hours, or at such other times upon reasonable notice to the
Servicer and the Servicer shall permit the Issuer and any Noteholder, or its
agents or representatives to:
(i) examine all books, records and documents (including
computer tapes and disks) in the possession or under the control of the Servicer
relating to the Loans, the servicing of the Loans and the compliance of the
terms of the Basic Documents, as may be reasonably requested;
(ii) visit the offices and property of the Servicer for the
purpose of examining such materials described in clause (b)(i) above;
(iii) consult with such professionals as may reasonably be
aware of the operations or condition of the Servicer, including, without
limitation, accountants and auditors, and the Servicer shall cause such
professionals to cooperate with any examination conducted in
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accordance with the terms of this SECTION 7.08 and to provide access to those
materials listed in subclause (b)(i) above in the possession or under the
control of such professionals.
ARTICLE VIII
HEDGING
Section 8.01 HEDGING INSTRUMENTS.
(a) The Issuer, promptly upon the request of the Market Value
Agent, on behalf of the Majority Noteholders, shall enter into such Hedging
Instruments as the Market Value Agent, on behalf of the Majority Noteholders,
may deem appropriate to hedge the interest rate risk associated with the Notes
attributable to Loans bearing a fixed Loan Interest Rate and relative to the
expected Securitization Proceeds therefrom; provided that payments thereunder to
the Collection Account pursuant to SECTION 5.01(b)(1)(x) constitute qualifying
income under SECTION 856(c)(5)(G) of the Code. The Market Value Agent shall
determine, in its sole discretion, whether any Hedging Instrument conforms to
the requirements of SECTION 8.01(b) and (c).
(b) Each Hedging Instrument shall expressly provide that in
the event of a Securitization, such portion of the Hedging Instrument shall
terminate as the Majority Noteholders deem appropriate to facilitate the hedging
of the risks specified in SECTION 8.01(a).
(c) Any Hedging Instrument that provides for any payment
obligation on the part of the Issuer must (i) be without recourse to the assets
of the Issuer, (ii) contain a non-petition covenant provision in the form of
SECTION 12.l3, (iii) limit payment dates thereunder to Payment Dates and (iv)
contain a provision limiting any cash payments due on any day under such Hedging
Instrument solely to funds available therefor in the Collection Account on such
day pursuant to SECTION 5.01(c)(3)(ii) hereof and funds available therefor in
the Transfer Obligation Account.
(d) Each Hedging Instrument must (i) provide for the direct
payment of any amounts thereunder to the Collection Account pursuant to SECTION
5.01(b)(1)(x), (ii) contain an assignment of all of the Issuer's rights (but
none of its obligations) under such Hedging Instrument to the Indenture Trustee
and shall include an express consent of the Hedging Counterparty to such
assignment, (iii) provide that in the event of the occurrence of an Event of
Default, such Hedging Instrument shall terminate upon the direction of the
Majority Noteholders, (iv) prohibit the Hedging Counterparty from "setting-off"
or "netting" other obligations of the Issuer or its Affiliates against such
Hedging Counterparty's payment obligations thereunder and (v) provide that the
appropriate portion of the Hedging Instrument will terminate upon the removal of
the related Loans from the Trust Estate.
(e) The Issuer shall not pledge or otherwise transfer or
encumber any of its assets in order to secure its obligations in respect of any
Hedge Funding Requirements.
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ARTICLE IX
THE SERVICER
Section 9.01 INDEMNIFICATION; THIRD PARTY CLAIMS.
(a) The Servicer shall indemnify the Loan Originator, the
Owner Trustee, the Trust, the Depositor, the Indenture Trustee and the
Noteholders, their respective officers, directors, employees, agents and
"control persons," as such term is used under the Act and under the Securities
Exchange Act of 1934 as amended (each an "INDEMNIFIED PARTY") and hold harmless
each of them against any and all claims, losses, damages, penalties, fines,
forfeitures, reasonable legal fees and related costs, judgments, and other costs
and expenses resulting from any claim, demand, defense or assertion based on or
grounded upon, or resulting from, a breach of any of the Servicer's
representations and warranties and covenants contained in this Agreement or in
any way relating to the failure of the Servicer to perform its duties and
service the Loans in compliance with the terms of this Agreement; provided,
however, that if the Servicer is not liable pursuant to the provisions of
SECTION 9.01(d) hereof for its failure to perform its duties and service the
Loans in compliance with the terms of this Agreement, then the provisions of
this SECTION 9.01 shall have no force and effect with respect to such failure.
(b) The Loan Originator, the Depositor, the Indenture Trustee
or the Noteholders, as the case may be, shall promptly notify the Servicer if a
claim is made by a third party with respect to a breach of any of the Servicer's
representations and warranties and covenants contained in this Agreement or in
any way relating to the failure of the Servicer to perform its duties and
service the Loans in compliance with the terms of this Agreement. The Servicer
shall promptly notify the Indenture Trustee and the Depositor of any claim of
which it has been notified pursuant to this SECTION 9.01 by a Person other than
the Depositor, and, in any event, shall promptly notify the Depositor of its
intended course of action with respect to any claim.
(c) The Servicer shall be entitled to participate in and, upon
notice to the Indemnified Party, assume the defense of any such action or claim
in reasonable cooperation with, and with the reasonable cooperation of, the
Indemnified Party. The Indemnified Party will have the right to employ its own
counsel in any such action in addition to the counsel of the Servicer, but the
fees and expenses of such counsel will be at the expense of such Indemnified
Party, unless (i) the employment of counsel by the Indemnified Party at its
expense has been authorized in writing by the Servicer, (ii) the Servicer has
not in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, or
(iii) the named parties to any such action or proceeding (including any
impleaded parties) include both the Servicer and one or more Indemnified
Parties, and the Indemnified Parties shall have been advised by counsel that
there may be one or more legal defenses available to them which are different
from or additional to those available to the Servicer. The Servicer shall not be
liable for any settlement of any such claim or action unless the Servicer shall
have consented thereto or be in default on its obligations hereunder. Any
failure by an Indemnified Party to comply with the provisions of this SECTION
9.01 shall relieve the Servicer of liability only
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if such failure is materially prejudicial to the defense of the Servicer of such
claim or action and then only to the extent of such prejudice.
(d) None of the Loan Originator, the Depositor or the Servicer
or any of their respective Affiliates, directors, officers, employees or agents
shall be under any liability to the Owner Trustee, the Issuer, the Indenture
Trustee or the Securityholders for any action taken, or for refraining from the
taking of any action, in good faith pursuant to this Agreement, or for errors in
judgment; provided, however, that this provision shall not protect the Loan
Originator, the Depositor, the Servicer or any of their respective Affiliates,
directors, officers, employees, agents against the remedies provided herein for
the breach of any warranties, representations or covenants made herein, or
against any expense or liability specifically required to be borne by such party
without right of reimbursement pursuant to the terms hereof, or against any
expense or liability which would otherwise be imposed by reason of misfeasance,
bad faith or negligence in the performance of the respective duties of the
Servicer, the Depositor or the Loan Originator, as the case may be. The Loan
Originator, the Depositor, the Servicer and any of their respective Affiliates,
directors, officers, employees, agents may rely in good faith on any document of
any kind which, prima facie, is properly executed and submitted by any Person
respecting any matters arising hereunder.
(e) The Servicer, the Loan Originator, the Depositor, the
Indenture Trustee and any of their respective directors, officers, employees,
agents, Affiliates and "control persons," as such term is used under the Act and
the Securities Exchange Act of 1934, as amended, shall be indemnified by the
Trust and held harmless against any loss, liability or expense incurred in
connection with any audit, controversy or judicial proceeding relating to a
governmental taxing authority or any legal action relating to this Agreement or
the Securities, other than any loss, liability or expense related to any
specific Loan or Loans (except as any such loss, liability or expense shall be
otherwise reimbursable pursuant to this Agreement) and any loss, liability or
expense incurred by reason of willful misfeasance, bad faith or negligence in
the performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder. Except as otherwise provided herein, none of
the Loan Originator, the Depositor, the Servicer or the Indenture Trustee shall
be under any obligation to appear in, prosecute or defend any legal action that
is not related to its respective duties under this Agreement and which may
involved it in any expenses or liability; provided, however, that, except as
otherwise provided herein, any of the Loan Originator, the Depositor, the
Servicer or the Indenture Trustee may, with the prior consent of the Majority
Noteholders, in its discretion undertake any such action which it may deem
necessary or desirable with respect to this Agreement and the rights and duties
of the parties hereto and the interests of the Issuer hereunder. In such event,
the legal expenses and costs of such action and any liability resulting
therefrom shall be reimbursed therefor out of the Collection Account, to the
extent that funds are available therein, as provided in SECTION 5.01(c)(1).
(f) The Servicer and any Affiliate thereof shall be
indemnified and held harmless by the Owner Trust against any liability or
expense incurred in connection with any third party claims brought against the
Servicer and any Affiliate thereto, which are related to the servicing of the
Loans in accordance with this Agreement, including actions taken by the Servicer
in accordance with written instructions given to the Servicer by the
Noteholders, other
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than any liability or expense: (i) specifically required to be borne thereby
pursuant to the terms hereof or otherwise incidental to the performance of
obligations and duties hereunder, including the prosecution of enforcement
actions in respect of any specific Loan or Loans (except as any such liability
or expense shall be otherwise reimbursable pursuant to this Agreement); (ii)
incurred in connection with any breach of a representation, warranty or covenant
made therein; (iii) incurred by reason of misfeasance, bad faith or negligence
by the Servicer or its Affiliates in the performance of its or their obligations
or duties hereunder; (iv) incurred in connection with any violation by the
Servicer or its Affiliates of any state or federal securities law; (v) claims
for which the Servicer is required to indemnify any Person pursuant to this
SECTION 9.01; or (vi) which result from the failure of the Servicer to service
and administer the Loans in strict compliance with the terms of this Agreement.
(g) SERVICER TO INDEMNIFY INDENTURE TRUSTEE. The Servicer
agrees to perform all of its obligations set forth in SECTION 6.07 of the
Indenture.
Section 9.02 MERGER OR CONSOLIDATION OF THE SERVICER.
The Servicer shall keep in full effect its existence, rights
and franchises as a corporation, and will obtain and preserve its qualification
to do business as a foreign corporation and maintain such other licenses and
permits in each jurisdiction necessary to protect the validity and
enforceability of each Basic Document to which it is a party and each of the
Loans and to perform its duties under each Basic Document to which it is a
party; provided, however, that the Servicer may merge or consolidate with any
other corporation upon the satisfaction of the conditions set forth in the
following paragraph.
Any Person into which the Servicer may be merged or
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Servicer shall be a party, or any Person succeeding
to the business of the Servicer, shall be an Eligible Servicer and shall be the
successor of the Servicer, as applicable hereunder, without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding. The Servicer shall send notice
of any such merger, conversion, consolidation or succession to the Indenture
Trustee and the Issuer.
Section 9.03 LIMITATION ON LIABILITY OF THE SERVICER AND
OTHERS.
The Servicer and any director, officer, employee or agent of
the Servicer may rely on any document of any kind which it in good faith
reasonably believes to be genuine and to have been adopted or signed by the
proper authorities respecting any matters arising hereunder. Subject to the
terms of SECTION 9.01 hereof, the Servicer shall have no obligation to appear
with respect to, prosecute or defend any legal action which is not incidental to
the Servicer's duty to service the Loans in accordance with this Agreement.
Section 9.04 SERVICER NOT TO RESIGN; ASSIGNMENT.
The Servicer shall not resign from the obligations and duties
hereby imposed on it except (a) with the consent of the Indenture Trustee or (b)
upon determination that its duties
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hereunder are no longer permissible under applicable law. Any such determination
pursuant to clause (b) of the preceding sentence permitting the resignation of
the Servicer shall be evidenced by an independent opinion of counsel to such
effect delivered (at the expense of the Servicer) to the Indenture Trustee. No
resignation of the Servicer shall become effective until a successor servicer,
appointed pursuant to the provisions of SECTION 10.02 hereof and satisfying the
requirements of SECTION 4.07 hereof with respect to the qualifications of a
successor Servicer, shall have assumed the Servicer's responsibilities, duties,
liabilities (other than those liabilities arising prior to the appointment of
such successor) and obligations under this Agreement.
Except as expressly provided herein, the Servicer shall not
assign or transfer any of its rights, benefits or privileges hereunder to any
other Person, or delegate to or subcontract with, or authorize or appoint any
other Person to perform any of the duties, covenants or obligations to be
performed by the Servicer hereunder and any agreement, instrument or act
purporting to effect any such assignment, transfer, delegation or appointment
shall be void.
The Servicer agrees to cooperate with any successor Servicer
in effecting the transfer of the Servicer's servicing responsibilities and
rights hereunder pursuant to the first paragraph of this SECTION 9.04,
including, without limitation, the transfer to such successor of all relevant
records and documents (including any Loan Files in the possession of the
Servicer) and all amounts received with respect to the Loans and not otherwise
permitted to be retained by the Servicer pursuant to this Agreement. In
addition, the Servicer, at its sole cost and expense, shall prepare, execute and
deliver any and all documents and instruments to the successor Servicer
including all Loan Files in its possession and do or accomplish all other acts
necessary or appropriate to effect such termination and transfer of servicing
responsibilities.
Section 9.05 RELATIONSHIP OF SERVICER TO ISSUER AND THE
INDENTURE TRUSTEE.
The relationship of the Servicer (and of any successor to the
Servicer as servicer under this Agreement) to the Issuer and the Indenture
Trustee under this Agreement is intended by the parties hereto to be that of an
independent contractor and not of a joint venturer, agent or partner of the
Issuer or the Indenture Trustee.
Section 9.06 SERVICER MAY OWN SECURITIES.
Each of the Servicer and any Affiliate of the Servicer may in
its individual or any other capacity become the owner or pledgee of Securities
with the same rights as it would have if it were not the Servicer or an
Affiliate thereof except as otherwise specifically provided herein. Securities
so owned by or pledged to the Servicer or such Affiliate shall have an equal and
proportionate benefit under the provisions of this Agreement, without
preference, priority, or distinction as among all of the Securities; provided,
however, that any Securities owned by the Servicer or any Affiliate thereof,
during the time such Securities are owned by them, shall be without voting
rights for any purpose set forth in this Agreement. The Servicer shall notify
the Indenture Trustee promptly after it or any of its Affiliates becomes the
owner or pledgee of a Security.
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ARTICLE X
DEFAULT
Section 10.01 EVENTS OF DEFAULT.
(a) In case one or more of the following Events of Default by
the Servicer shall occur and be continuing, that is to say:
(i) any failure by Servicer to deposit (a) into the Collection
Account in accordance with SECTION 5.01(b) any amount required to be
deposited by it under any Basic Document to which it is a party, which
failure continues unremedied for two days following the date on which
such deposit was first requested to be made or (b) the full amount of
any Periodic Advance required to be made on the day such Periodic
Advances are required to be made, which failure continues unremedied
until 12:00 p.m. New York City time on the Business Day following such
day; or
(ii) any failure on the part of the Servicer duly to observe
or perform in any material respect any other of the material covenants
or agreements on the part of the Servicer, contained in any Basic
Document to which it is a party, which continues unremedied for a
period of 30 days (or, in the case of payment of insurance premiums,
for a period of 15 days) after the date on which written notice of such
failure, requiring the same to be remedied, shall have been given to
the Servicer by any other party hereto or to the Servicer (with copy to
each other party hereto), by Holders of 25% of the Percentage Interests
(as defined in the Indenture) of the Notes or the Certificates; or
(iii) any breach on the part of the Servicer of any
representation or warranty contained in any Basic Document to which it
is a party that materially and adversely affects the interests of any
of the parties hereto or any Securityholder and which continues
unremedied for a period of 30 days after the date on which notice of
such breach, requiring the same to be remedied, shall have been given
to the Servicer by any other party hereto or to the Servicer (with copy
to each other party hereto), by the Initial Noteholder or Holders of
25% of the Percentage Interests of the Notes or the Certificates; or
(iv) there shall have been commenced before a court or agency
or supervisory authority having jurisdiction in the premises an
involuntary proceeding against the Servicer under any present or future
federal or state bankruptcy, insolvency or similar law for the
appointment of a conservator, receiver, liquidator, trustee or similar
official in any bankruptcy, insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings, or for
the winding-up or liquidation of its affairs, which action shall not
have been dismissed for a period of 60 days; or
(v) the Servicer shall consent to the appointment of a
conservator, receiver, liquidator, trustee or similar official in any
bankruptcy, insolvency, readjustment of debt,
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marshalling of assets and liabilities or similar proceedings of or
relating to it or of or relating to all or substantially all of its
property; or
(vi) the Servicer shall admit in writing its inability to pay
its debts generally as they become due, file a petition to take
advantage of any applicable bankruptcy, insolvency or reorganization
statute, make an assignment for the benefit of its creditors,
voluntarily suspend payment of its obligations, or take any corporate
action in furtherance of the foregoing.
(b) Then, and in each and every such case, so long as an Event
of Default shall not have been remedied, the Indenture Trustee or the Majority
Noteholders, by notice in writing to the Servicer may, in addition to whatever
rights such Person may have at law or in equity to damages, including injunctive
relief and specific performance, may terminate all the rights and obligations of
the Servicer under this Agreement and in and to the Loans and the proceeds
thereof, as servicer under this Agreement. Upon receipt by the Servicer of such
written notice, all authority and power of the Servicer under this Agreement,
whether with respect to the Loans or otherwise, shall, subject to SECTION 10.02
hereof, pass to and be vested in a successor servicer, and the successor
servicer is hereby authorized and empowered to execute and deliver, on behalf of
the Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments and do or cause to be done all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, including, but
not limited to, the transfer and endorsement or assignment of the Loans and
related documents. The Servicer agrees to cooperate with the successor servicer
in effecting the termination of the Servicer's responsibilities and rights
hereunder, including, without limitation, the transfer to the successor servicer
for administration by it of all amounts which shall at the time be credited by
the Servicer to each Collection Account or thereafter received with respect to
the Loans.
(c) Immediately upon the occurrence hereunder or under the
Indenture of an Event of Default or a Default, the Loan Originator, shall, upon
the request of the Majority Noteholders provide to the Indenture Trustee and the
Initial Noteholder for each (i) Mortgage, (ii) power of attorney pursuant to
which a Mortgage was executed, (iii) assumption, modification, consolidation or
extension agreement relating to a Mortgage, (iv) Assignment of Mortgage, (v)
assignment of leases or rents, (vi) UCC-1 Financing Statement and UCC
continuation statement, (vii) Security Agreement and (viii) assumption,
modification, consolidation or extension agreement relating to a Security
Agreement with respect to which the Indenture Trustee's Loan File does not
contain the original, a certificate or certificates of (x) in the case of items
(i) and (ii) a Responsible Officer of the Loan Originator, the closing attorney
or an officer of the title insurer or agent of the title insurer that issued the
related Title Policy and (y) in the case of the remaining items, a Responsible
Officer of the Loan Originator, certifying that such copy is a true, correct and
complete copy of the related original, which original has not been returned from
the applicable public recording office.
Section 10.02 APPOINTMENT OF SUCCESSOR.
On and after the date the Servicer receives a notice of
termination pursuant to SECTION 10.01 hereof, or the Indenture Trustee receives
the resignation of the Servicer evidenced
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by an Opinion of Counsel or accompanied by the consents required by SECTION 9.04
hereof, or the Servicer is removed as servicer pursuant to this Article X or
SECTION 4.01(f)(ii), then, subject to SECTION 4.07 hereof, the Majority
Noteholders shall appoint a successor servicer to be the successor in all
respects to the Servicer in its capacity as Servicer under this Agreement and
the transactions set forth or provided for herein and shall be subject to all
the responsibilities, duties and liabilities relating thereto placed on the
Servicer by the terms and provisions hereof; provided, however, that the
successor servicer shall not be liable for any actions of any servicer prior to
it.
The successor servicer shall be obligated to make Servicing
Advances hereunder. As compensation therefor, the successor servicer appointed
pursuant to the following paragraph, shall be entitled to all funds relating to
the Loans which the Servicer would have been entitled to receive from the
Collection Account pursuant to SECTION 5.01(c) hereof as if the Servicer had
continued to act as servicer hereunder, together with other Servicing
Compensation in the form of assumption fees, late payment charges or otherwise
as provided in SECTION 7.03 hereof. The Servicer shall not be entitled to any
termination fee if it is terminated pursuant to SECTION 10.01 hereof but shall
be entitled to any accrued and unpaid Servicing Fee to the date of termination.
Any collections received by the Servicer after removal or
resignation shall be endorsed by it to the Indenture Trustee and remitted
directly to the successor servicer. The compensation of any successor servicer
appointed shall be the Servicing Fee, together with other Servicing Compensation
provided for herein. The Indenture Trustee, the Issuer, any Custodian, the
Servicer and any such successor servicer shall take such action, consistent with
this Agreement, as shall be reasonably necessary to effect any such succession.
Any costs or expenses incurred by the Indenture Trustee in connection with the
termination of the Servicer and the succession of a successor servicer shall be
an expense of the outgoing Servicer and, to the extent not paid thereby, an
expense of such successor servicer. The Servicer agrees to cooperate with the
Indenture Trustee and any successor servicer in effecting the termination of the
Servicer's servicing responsibilities and rights hereunder and shall promptly
provide the successor servicer all documents and records reasonably requested by
it to enable it to assume the Servicer's functions hereunder and shall promptly
also transfer to the successor servicer all amounts which then have been or
should have been deposited in any Trust Account maintained by the Servicer or
which are thereafter received with respect to the Loans. No successor servicer
shall be held liable by reason of any failure to make, or any delay in making,
any distribution hereunder or any portion thereof caused by (i) the failure of
the Servicer to deliver, or any delay in delivering, cash, documents or records
to it or (ii) restrictions imposed by any regulatory authority having
jurisdiction over the Servicer hereunder. No appointment of a successor to the
Servicer hereunder shall be effective until written notice of such proposed
appointment shall have been provided by the Indenture Trustee to the Initial
Noteholder, the Issuer and the Depositor and the Depositor, the Majority
Noteholders and the Issuer shall have consented in writing thereto.
In connection with such appointment and assumption, the
Majority Noteholder may make such arrangements for the compensation of such
successor servicer out of payments on the Loans as they and such successor
servicer shall agree.
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Section 10.03 WAIVER OF DEFAULTS.
The Majority Noteholders may waive any events permitting
removal of the Servicer as servicer pursuant to this Article X; provided,
however, that the Majority Noteholders may not waive a default in making a
required distribution on a Note or Trust Certificate without the consent of the
related Noteholder or Certificateholder. Upon any waiver of a past default, such
default shall cease to exist and any Event of Default arising therefrom shall be
deemed to have been remedied for every purpose of this Agreement. No such waiver
shall extend to any subsequent or other default or impair any right consequent
thereto except to the extent expressly so waived.
Section 10.04 ACCOUNTING UPON TERMINATION OF SERVICER.
Upon termination of the Servicer under this Article X, the
Servicer shall, at its own expense:
(a) deliver to its successor or, if none shall yet have been
appointed, to the Indenture Trustee the funds in any Trust Account maintained by
the Servicer;
(b) deliver to its successor or, if none shall yet have been
appointed, to the Indenture Trustee all Loan Files and related documents and
statements held by it hereunder and a Loan portfolio computer tape;
(c) deliver to its successor or, if none shall yet have been
appointed, to the Indenture Trustee and to the Issuer and the Securityholders a
full accounting of all funds, including a statement showing the Monthly Payments
collected by it and a statement of monies held in trust by it for payments or
charges with respect to the Loans; and
(d) execute and deliver such instruments and perform all acts
reasonably requested in order to effect the orderly and efficient transfer of
servicing of the Loans to its successor and to more fully and definitively vest
in such successor all rights, powers, duties, responsibilities, obligations and
liabilities of the Servicer under this Agreement.
ARTICLE XI
TERMINATION
Section 11.01 TERMINATION.
This Agreement shall terminate upon either: (a) the later of
(i) the satisfaction and discharge of the Indenture and the provisions thereof
or (ii) the disposition of all funds with respect to the last Loan and the
remittance of all funds due hereunder and the payment of all amounts due and
payable (including, without limitation, indemnification payments payable
pursuant to any Basic Document) to the Indenture Trustee, the Owner Trustee, the
Issuer and the Custodian, written notice of the occurrence of either of which
shall be provided to the Indenture Trustee by the Servicer; or (b) the mutual
consent of the Servicer, the Depositor, the Loan
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Originator and all Securityholders in writing and delivered to the Indenture
Trustee by the Servicer.
Section 11.02 OPTIONAL TERMINATION.
The Majority Certificateholders may, at their option, effect
an early termination of the Trust on any Payment Date on or after the Clean-up
Call Date. The Majority Certificateholders shall effect such early termination
by providing notice thereof to the Indenture Trustee and Owner Trustee and by
purchasing all of the Loans at a purchase price, payable in cash, equal to or
greater than the Termination Price. The expense of any Independent appraiser
required under this SECTION 11.02 shall be a nonreimbursable expense of the
Majority Certificateholders.
Any such early termination by the Majority Certificateholders
shall be accomplished by depositing into the Collection Account on the third
Business Day prior to the Payment Date on which the purchase is to occur the
amount of the Termination Price to be paid. The Termination Price and any
amounts then on deposit in the Collection Account (other than any amounts
withdrawable pursuant to SECTION 5.01(c)(1) hereof) shall be distributed by the
Indenture Trustee (except as may be otherwise provided in the Collection Account
Letter Agreement) pursuant to SECTION 5.01(c)(3) and SECTION 9.1 of the Trust
Agreement on the next succeeding Payment Date; and any amounts received with
respect to the Loans and Foreclosure Properties subsequent to the final Payment
Date shall belong to the purchaser thereof.
Section 11.03 NOTICE OF TERMINATION.
Notice of termination of this Agreement or of early redemption
and termination of the Trust shall be sent (i) by the Indenture Trustee to the
Noteholders in accordance with SECTION 10.02 of the Indenture and (ii) by the
Owner Trustee to the Certificateholders in accordance with SECTION 9.1(d) of the
Trust Agreement.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01 ACTS OF NOTEHOLDERS.
Except as otherwise specifically provided herein, whenever
action, consent or approval of the Securityholders is required under this
Agreement, such action, consent or approval shall be deemed to have been taken
or given on behalf of, and shall be binding upon, all Securityholders if the
Majority Securityholders agree to take such action or give such consent or
approval.
Section 12.02 AMENDMENT.
(a) This Agreement may be amended from time to time by the
Depositor, the Servicer, the Loan Originator, the Indenture Trustee and the
Issuer by written agreement with notice thereof to the Securityholders, without
the consent of any of the Securityholders, to cure
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any error or ambiguity, to correct or supplement any provisions hereof which may
be defective or inconsistent with any other provisions hereof or to add any
other provisions with respect to matters or questions arising under this
Agreement; provided, however, that such action will not adversely affect in any
material respect the interests of the Securityholders. An amendment described
above shall be deemed not to adversely affect in any material respect the
interests of the Securityholders if an Opinion of Counsel is obtained to such
effect.
(b) This Agreement may also be amended from time to time by
the Depositor, the Servicer, the Loan Originator, the Indenture Trustee and the
Issuer by written agreement, with the prior written consent of the Majority
Noteholders, for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement, or of modifying
in any manner the rights of the Securityholders; provided, however, that no such
amendment shall (i) reduce in any manner the amount of, or delay the timing of,
collections of payments on Loans or distributions which are required to be made
on any Security, without the consent of the holders of 100% of the Notes, (ii)
adversely affect in any material respect the interests of any of the holders of
the Notes in any manner other than as described in clause (i), without the
consent of the holders of 100% of the Notes, or (iii) reduce the percentage of
the Notes, the consent of which is required for any such amendment, without the
consent of the holders of 100% of the Notes.
(c) It shall not be necessary for the consent of
Securityholders under this Section to approve the particular form of any
proposed amendment, but it shall be sufficient if such consent shall approve the
substance thereof.
Prior to the execution of any amendment to this Agreement, the
Issuer and the Indenture Trustee shall be entitled to receive and rely upon an
Opinion of Counsel stating that the execution of such amendment is authorized or
permitted by this Agreement. The Issuer and the Indenture Trustee may, but shall
not be obligated to, enter into any such amendment which affects the Issuer's
own rights, duties or immunities of the Issuer or the Indenture Trustee, as the
case may be, under this Agreement.
Section 12.03 RECORDATION OF AGREEMENT.
To the extent permitted by applicable law, this Agreement, or
a memorandum thereof if permitted under applicable law, is subject to
recordation in all appropriate public offices for real property records in all
of the counties or other comparable jurisdictions in which any or all of the
Loan Collateral is situated, and in any other appropriate public recording
office or elsewhere, such recordation to be effected by the Servicer at the
Noteholders' expense on direction of the Majority Noteholders but only when
accompanied by an Opinion of Counsel to the effect that such recordation
materially and beneficially affects the interests of the Noteholders or is
necessary for the administration or servicing of the Loans.
Section 12.04 DURATION OF AGREEMENT.
This Agreement shall continue in existence and effect until
terminated as herein provided.
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Section 12.05 GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
Section 12.06 NOTICES.
All demands, notices and communications hereunder shall be in
writing and shall be deemed to have been duly given if (i) delivered personally,
mailed by overnight mail, certified mail or registered mail, postage prepaid, or
(ii) transmitted by telecopy, upon telephone confirmation of receipt thereof
(with a copy delivered by overnight courier), as follows: (I) in the case of the
Depositor, to FFCA Loan Warehouse Corporation, The Perimeter Center, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, telecopy
number: (▇▇▇) ▇▇▇-▇▇▇▇, telephone number: (▇▇▇) ▇▇▇-▇▇▇▇ or such other addresses
or telecopy or telephone numbers as may hereafter be furnished to the
Securityholders and the other parties hereto in writing by the Depositor; (II)
in the case of the Issuer, to FFCA Franchise Loan Owner Trust 1998-1, c/o
Wilmington Trust Company, ▇▇▇▇▇▇ Square North, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Corporate Trust Administration, telecopy
number: (▇▇▇) ▇▇▇-▇▇▇▇, telephone number: (▇▇▇) ▇▇▇-▇▇▇▇ or such other address
or telecopy or telephone numbers as may hereafter be furnished to the
Securityholders and the other parties hereto in writing by the Depositor; (III)
in the case of the Loan Originator, to FFCA Acquisition Corporation, The
Perimeter Center, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇
▇. ▇▇▇▇▇, telecopy number: (▇▇▇) ▇▇▇-▇▇▇▇, telephone number: (▇▇▇) ▇▇▇-▇▇▇▇ or
such other addresses or telecopy or telephone numbers as may hereafter be
furnished to the Securityholders and the other parties hereto in writing by the
Loan Originator, (IV) in the case of the Servicer, to Franchise Finance
Corporation of America, The Perimeter Center, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, telecopy number: (602)
▇▇▇-▇▇▇▇, telephone number: (▇▇▇) ▇▇▇-▇▇▇▇ or such other addresses or telecopy
or telephone numbers as may hereafter be furnished to the Securityholders and
the other parties hereto in writing by the Servicer; (V) in the case of the
Indenture Trustee, to LaSalle National Bank, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: Asset-Backed Securities Trust
Services Group, FFCA Franchise Loan Owner Trust 1998-1 telecopy number: (312)
▇▇▇-▇▇▇▇, telephone number: (▇▇▇) ▇▇▇-▇▇▇▇ or such other addresses or telecopy
or telephone numbers as may hereafter be furnished to the Securityholders and
the other parties hereto in writing by the Indenture Trustee; (VI) in the case
of the Initial Noteholder, to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Securitization Funding Inc., ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, telecopy
number: (▇▇▇) ▇▇▇-▇▇▇▇, telephone number: (▇▇▇) ▇▇▇-▇▇▇▇; and (VII) in the case
of the Securityholders, as set forth in the Note Register. Any such notices
shall be deemed to be effective with respect to any party hereto upon the
receipt of such notice or telephone confirmation thereof by such party, except;
provided, that notices to the Securityholders shall be effective upon mailing or
personal delivery.
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Section 12.07 SEVERABILITY OF PROVISIONS.
If any one or more of the covenants, agreements, provisions or
terms of this Agreement shall be held invalid for any reason whatsoever, then
such covenants, agreements, provisions or terms shall be deemed severable from
the remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other covenants,
agreements, provisions or terms of this Agreement.
Section 12.08 NO PARTNERSHIP.
Nothing herein contained shall be deemed or construed to
create any partnership or joint venture between the parties hereto and the
services of the Servicer shall be rendered as an independent contractor.
Section 12.09 COUNTERPARTS.
This Agreement may be executed in one or more counterparts and
by the different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same Agreement.
Section 12.10 SUCCESSORS AND ASSIGNS.
This Agreement shall inure to the benefit of and be binding
upon the Servicer, the Loan Originator, the Depositor, the Indenture Trustee,
the Issuer and the Noteholders and their respective successors and permitted
assigns.
Section 12.11 HEADINGS.
The headings of the various sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be
part of this Agreement.
Section 12.12 ACTIONS OF SECURITYHOLDERS.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Agreement to be given or taken
by Securityholders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Securityholders in person or by
agent duly appointed in writing; and except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
are delivered to the Depositor, the Servicer or the Issuer. Proof of execution
of any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Agreement and conclusive in favor of the
Depositor, the Servicer and the Issuer if made in the manner provided in this
SECTION 12.12.
(b) The fact and date of the execution by any Securityholder
of any such instrument or writing may be proved in any reasonable manner which
the Depositor, the Servicer or the Issuer deems sufficient.
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(c) Any request, demand, authorization, direction, notice,
consent, waiver or other act by a Securityholder shall bind every holder of
every Security issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done, or omitted to be done,
by the Depositor, the Servicer or the Issuer in reliance thereon, whether or not
notation of such action is made upon such Security.
(d) The Depositor, the Servicer or the Issuer may require
additional proof of any matter referred to in this SECTION 12.12 as it shall
deem necessary.
Section 12.13 NON-PETITION AGREEMENT
Notwithstanding any prior termination of any Basic Document,
the Loan Originator, the Servicer, the Depositor and the Indenture Trustee each
severally and not jointly covenants that it shall not, prior to the date which
is one year and one day after the payment in full of the all of the Notes,
acquiesce, petition or otherwise, directly or indirectly, invoke or cause the
Trust or the Depositor to invoke the process of any governmental authority for
the purpose of commencing or sustaining a case against the Trust or Depositor
under any Federal or state bankruptcy, insolvency or similar law or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Trust or Depositor or any substantial part of their
respective property or ordering the winding up or liquidation of the affairs of
the Trust or the Depositor.
Section 12.14 HOLDERS OF THE TRUST CERTIFICATES.
(a) Any sums to be distributed or otherwise paid hereunder or
under the Trust Agreement to the holders of the Trust Certificates shall be paid
to such holders pro rata based on their Percentage Interests (as defined in the
Trust Agreement);
(b) Where any act or event hereunder is expressed to be
subject to the consent or approval of the holders of the Trust Certificates,
such consent or approval shall be capable of being given by the holder or
holders evidencing in the aggregate not less than 51% of the Percentage
Interests (as defined in the Trust Agreement).
Section 12.15 FFCA TO GUARANTEE CERTAIN LOAN ORIGINATOR
OBLIGATIONS.
(a) FFCA hereby unconditionally guarantees to the Indenture
Trustee and the Noteholders the due and punctual payment of all amounts payable
by the Loan Originator under Sections 2.3 and 3.1 of the Loan Purchase Agreement
and Sections 2.05, 3.05 and 3.07(a) hereof (collectively, the "Guaranteed
Obligations") when and as such obligations thereunder shall become due and
payable. In case of the inability of the Loan Originator to pay punctually any
such amounts, FFCA hereby agrees, upon written demand by the Indenture Trustee
or the Majority Noteholders, to pay or cause to be paid any such amounts
punctually when and as the same shall become due and payable (exclusive of any
grace period).
(b) FFCA hereby agrees that its obligations under this SECTION
12.15 constitute a guaranty of payment when due and not of collection.
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(c) FFCA hereby agrees that its obligations under this SECTION
12.15 shall be unconditional, irrespective of the validity, regularity or
enforceability of any Basic Document to which the Loan Originator is a party
against the Loan Originator, the absence of any action to enforce the Loan
Originator's obligations under any Basic Document to which it is a party, any
waiver or consent by the Indenture Trustee or the Majority Noteholders with
respect to any of the Guaranteed Obligations or any other circumstance which
might otherwise constitute a legal or equitable discharge or defense of a FFCA
(other than the defenses of statute of limitations or payment (as such defenses
may apply to FFCA), which are not waived); provided, however, that FFCA shall be
entitled to exercise any right that the Loan Originator could have exercised
under each Basic Document to which the Loan Originator is a party to cure any
default in respect of the Guaranteed Obligations.
(d) FFCA hereby waives (i) promptness, diligence, presentment,
demand of payment, protest, order and, except as set forth in paragraph (a)
hereof, notice of any kind in connection with each Basic Document to which the
Loan Originator is a party, or (ii) any requirement that the Indenture Trustee
or the Noteholders exhaust any right to take any action against the Loan
Originator or any other person prior to or contemporaneously with proceeding to
exercise any right against FFCA under this SECTION 12.15.
Section 12.16 REPORTS IN ELECTRONIC FORM.
Notwithstanding anything to the contrary in this Agreement,
any report required to be furnished by a party to this Agreement to the Initial
Noteholder may be furnished by magnetic tape or computer disk in a form mutually
agreed to by the Initial Noteholder and the party providing such information,
provided that such report is delivered timely in accordance with the terms
herein.
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IN WITNESS WHEREOF, the Issuer, the Depositor, the Servicer,
the Loan Originator and the Indenture Trustee have caused their names to be
signed by their respective officers thereunto duly authorized, as of the day and
year first above written, to this Sale and Servicing Agreement.
FFCA FRANCHISE LOAN OWNER TRUST 1998-1,
as Issuer
By: Wilmington Trust Company, not in its individual
capacity but solely as Owner Trustee
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Financial Services Officer
FFCA LOAN WAREHOUSE CORPORATION,
as Depositor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
FFCA ACQUISITION CORPORATION
as Loan Originator
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
FRANCHISE FINANCE CORPORATION OF AMERICA,
as Servicer
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
LASALLE NATIONAL BANK,
as Indenture Trustee
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: First Vice President
THE STATE OF ___________ )
)
COUNTY OF ______________ )
BEFORE ME, the undersigned authority, a Notary Public, on this
_____ day of August 1998 personally appeared _______________, known to me to be
a person and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said _________________, not
in its individual capacity but in its capacity as Owner Trustee of FFCA
FRANCHISE LOAN OWNER TRUST 1998-1 as Issuer, and that he executed the same as
the act of such corporation for the purpose and consideration therein expressed,
and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF _____________________________,
this the ____ day of August, 1998.
___________________________________________
Notary Public, State of ___________________
THE STATE OF ____________ )
)
COUNTY OF _______________ )
BEFORE ME, the undersigned authority, a Notary Public, on this
_____ day of August 1998 personally appeared ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, known to me to be
a person and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said FFCA LOAN WAREHOUSE
CORPORATION, as the Depositor, and that he executed the same as the act of such
corporation for the purpose and consideration therein expressed, and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF _____________________________,
this the ____ day of August, 1998.
_________________________________________
Notary Public, State of _________________
THE STATE OF ___________ )
)
COUNTY OF ______________ )
BEFORE ME, the undersigned authority, a Notary Public, on this
_____ day of August 1998 personally appeared ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, known to me to
be the person and officer whose name is subscribed to the foregoing instrument
and acknowledged to me that the same was the act of the said FFCA ACQUISITION
CORPORATION, as the Loan Originator and Servicer, and that he executed the same
as the act of such corporation for the purposes and consideration therein
expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF FFCA ACQUISITION CORPORATION,
this the ____ day of August, 1998.
___________________________________________
Notary Public, State of ___________________
THE STATE OF ___________ )
)
COUNTY OF ______________ )
BEFORE ME, the undersigned authority, a Notary Public, on this
_____ day of August 1998 personally appeared ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, known to me to
be the person and officer whose name is subscribed to the foregoing instrument
and acknowledged to me that the same was the act of the said FRANCHISE FINANCE
CORPORATION OF AMERICA, as the Loan Originator and Servicer, and that he
executed the same as the act of such corporation for the purposes and
consideration therein expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF FRANCHISE FINANCE CORPORATION
OF AMERICA, this the ____ day of August, 1998.
________________________________________
Notary Public, State of ________________
THE STATE OF ___________ )
)
COUNTY OF ______________ )
BEFORE ME, the undersigned authority, a Notary Public, on this
day of August 1998 personally appeared ▇▇▇▇▇▇▇ ▇▇▇▇▇, known to me to be the
person and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said LASALLE NATIONAL BANK,
as the Indenture Trustee, and that she executed the same as the act of such
entity for the purposes and consideration therein expressed, and in the capacity
therein stated.
GIVEN UNDER MY HAND AND SEAL OF LASALLE NATIONAL BANK this the
____ day of August, 1998.
________________________________________
Notary Public, State of ________________
EXHIBIT D
LIST OF REFERENCED DOCUMENTS
1. Financial Statements of FFCA.
2. Loan delinquency history reports.
3. Default/Loss history reports.
4. Underwriting Guidelines.
5. Index of Form Documents:
(a) Loan Agreement;
(b) Promissory Note;
(c) Deed of Trust;
(d) Mortgage;
(e) Guaranty - Multi Guarantors;
(f) Guaranty - Single Guarantors;
(g) Environmental Indemnity Agreement;
(h) Underlying Borrower's Legal Opinion; and
(i) Form of Estoppel.
6. Environmental Policy entitled "Secured Creditor - Secured Creditor
Impaired Property Policy."
7. Servicing Procedures & Policy Manual.
8. Hedging Procedures & Policy Manual.
9. Geographic Information Systems Procedures & Policy Booklet.
10. Asset Management Presentation dated January 27, 1998.
11. List of FFCA Approved Concepts/Brands.
12. FFCA written research reports on Approved Concepts/Brands.
13. Example of FFCA regression model entitled; "Burger King Regression
Model."
All of such Referenced Documents are attached hereto.