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EXHIBIT 10.35
EXECUTION COPY
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AAMES CAPITAL CORPORATION
Servicer
and
FAIRBANKS CAPITAL CORP.
Sub-Servicer
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SUB-SERVICING AGREEMENT
Dated as of April 21, 1999
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Adjustable Rate Home Equity Mortgage Loans
Pledged under an Indenture dated as of March 1, 1997
Bankers Trust Company of California, N.A., Indenture Trustee
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS..............................................................................................1
Section 1.01 Defined Terms.................................................................1
ARTICLE II
SERVICER'S ENGAGEMENT OF SUB-SERVICER TO PERFORM SERVICING RESPONSIBILITIES..............................2
Section 2.01 Contract for Sub-Servicing....................................................2
Section 2.02 Possession of Mortgage Loan Documents.........................................3
ARTICLE III
SERVICING OF THE MORTGAGE LOANS..........................................................................3
Section 3.01 Sub-Servicer to Service.......................................................3
Section 3.02 Loan Information and Financial Statements.....................................6
Section 3.03 Merger or Consolidation of the Sub-Servicer...................................7
Section 3.04 Limitation on Liability of the Sub-Servicer and Others........................7
Section 3.05 Sub-Servicer Not to Resign....................................................8
Section 3.06 No Transfer or Assignment of Servicing........................................9
Section 3.07 Servicer's Cooperation........................................................9
Section 3.08 Receipt of Mortgage Loan Amounts..............................................9
Section 3.09 Subsequent Transfers..........................................................9
Section 3.10 [Intentionally Omitted]......................................................10
Section 3.11 Compensation to the Sub-Servicer.............................................10
Section 3.12 Appointment as Servicer......................................................11
Section 3.13. Reserve Sub-Account..........................................................12
Section 3.14 Security Interest............................................................12
Section 3.15 Tax Forms....................................................................12
Section 3.16 Additional Servicing Procedures..............................................12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES..........................................................................13
Section 4.01 Representations, Warranties and Covenants of the Sub-Servicer................13
Section 4.02 Representations and Warranties of the Servicer...............................14
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ARTICLE V
DEFAULT........................................................................................16
Section 5.01 Events of Default...................................................16
Section 5.02 Waiver of Defaults..................................................18
ARTICLE VI
TERMINATION....................................................................................18
Section 6.01 Termination.........................................................18
Section 6.02 Termination With Cause..............................................19
Section 6.03 Termination Without Cause...........................................19
Section 6.04 Effect of Termination...............................................19
ARTICLE VII
MISCELLANEOUS..................................................................................20
Section 7.01 Payment of Costs....................................................20
Section 7.02 Reports.............................................................20
Section 7.03 Notices.............................................................21
Section 7.04 Severability Clause.................................................22
Section 7.05 Counterparts........................................................22
Section 7.06 Governing Law.......................................................23
Section 7.07 Security for Expenses...............................................23
Section 7.08 Indemnification.....................................................23
Section 7.09 Protection of Confidential Information..............................25
Section 7.10 Intention of the Parties............................................25
Section 7.11 Third Party Beneficiary.............................................25
Section 7.12 Successors and Assigns; Assignment of Agreement.....................26
Section 7.13 Waivers.............................................................26
Section 7.14 Exhibits............................................................26
Section 7.15 General Interpretive Principles.....................................26
Section 7.16 Reproduction of Documents...........................................26
Section 7.17 Further Agreement; Power-of-Attorney................................27
Section 7.18 Amendments..........................................................27
Section 7.19 Entire Agreement....................................................27
Section 7.20 Expenses............................................................27
Section 7.21 Non-Disclosure......................................................27
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EXHIBIT A
SERVICING AGREEMENT..........................................................A-1
SCHEDULE 2.01
MORTGAGE LOAN SCHEDULE.......................................................B-1
SCHEDULE 3.01(a)
ADDITIONAL SERVICING PROCEDURES..............................................B-2
SCHEDULE 3.01(d)
LOANS FOR WHICH SUB-SERVICER HAS NO PAYMENT OBLIGATIONS ON MAY 12, 1999......B-3
SCHEDULE 4.01(i)
CERTAIN EXCLUDED MORTGAGE LOANS AND REO PROPERTIES...........................B-4
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SUB-SERVICING AGREEMENT
This is a Sub-Servicing Agreement (the "Agreement"), dated as of April 21,
1999, by and between FAIRBANKS CAPITAL CORP., a Utah corporation, having an
office at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, and its
successors and assigns (the "Sub-Servicer"), and Aames Capital Corporation, a
California corporation, having an office at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and its successors and assigns (the "Servicer").
W I T N E S S E T H:
WHEREAS, the Servicer Aames Capital Owner Trust 1997-I as the issuer (the
"Issuer") and Bankers Trust Company (the "Indenture Trustee") have entered into
that certain Servicing Agreement dated as of March 1, 1997 (as amended, the
"Servicing Agreement"), whereby the Servicer will service certain mortgage loans
on behalf of the Indenture Trustee;
WHEREAS, the Servicer desires to enter into a contract with the
Sub-Servicer whereby the Sub-Servicer shall service those mortgage loans listed
on Schedule 2.01 (the "Mortgage Loan Schedule") attached hereto (the "Mortgage
Loans") in the name of on behalf of the Servicer;
WHEREAS, as the parties contemplate that Sub-Servicer may purchase from
Servicer the right to be reimbursed for all delinquency advances made by
Servicer with respect to the Mortgage Loans pursuant a purchase agreement to be
entered into by the parties (the "Purchase Agreement"); and
WHEREAS, certain obligations hereunder will become effective upon the
closing, if any, of the Purchase Agreement (the "Closing Date")
NOW, THEREFORE, in consideration of the mutual agreements hereinafter set
forth, and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the Servicer and the Sub-Servicer hereby agree
as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Defined Terms.
Unless otherwise specified in this Agreement, all capitalized terms not
otherwise defined herein shall have the meanings set forth in the Servicing
Agreement. As used herein, the following terms have the meanings assigned to
them in this Section 1.01:
"Advance" shall mean any Monthly Advance or Servicing Advance.
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"Event of Default" shall have the meaning set forth in Article V.
"Lender" shall mean any lender or lenders providing financing to
Sub-Servicer for the Purchase Agreement.
"Lockbox Advances" shall mean advances on funds received at the lockbox
account for which the lockbox bank does not make funds available for withdrawal
on the same day received.
"Non-Recoverable Advance" shall mean a Servicing Advance made by
Sub-Servicer that would be uncollectible through Monthly Mortgage Payments,
Insurance Proceeds, Liquidation Proceeds, proceeds from a Principal Payment or
other proceeds of the related Mortgage Loan.
"Prior Monthly Advances" shall mean Monthly Advances on the Mortgage Loans
made by Servicer prior to the Sub-Servicing Commencement Date.
"Reserve Sub-account" shall have the meaning set forth in Section 3.13.
"Sub-Servicing Agreements" shall mean this Agreement and each of the
Sub-Servicing Agreements between Servicer and Sub-Servicer with respect to Aames
Mortgage Trust 1996-D, Aames Mortgage Trust 1996-B, and Aames Mortgage Trust
1996-C.
"Sub-Servicing Commencement Date" shall mean May 1, 1999.
"Sub-Servicing Fees" shall mean, with respect to any Collection Period, the
applicable servicing fees and compensation as established pursuant to Section
3.11.
"Uncollectible Advance" shall mean a Monthly Advance made by Sub-Servicer
or a Prior Monthly Advance made by Servicer which is or would be uncollectible
through Monthly Mortgage Payments, Insurance Proceeds, Liquidation Proceeds,
proceeds from a Principal Payment or other proceeds of the related Mortgage
Loan.
ARTICLE II
SERVICER'S ENGAGEMENT OF SUB-SERVICER TO PERFORM
SERVICING RESPONSIBILITIES
Section 2.01 Contract for Sub-Servicing.
The Servicer, by execution and delivery of this Agreement, does hereby
contract with the Sub-Servicer for, and Sub-Servicer hereby agrees to perform
commencing on the Sub-Servicing Commencement Date, in each case subject to the
terms of this Agreement, the servicing of the Mortgage Loans listed on Schedule
2.01.
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Section 2.02 Possession of Mortgage Loan Documents.
(a) Within one (1) Business Day prior to the Sub-Servicing Commencement
Date, the Servicer, at Servicer's sole cost and expense, shall deliver to
Sub-Servicer a copy of each Mortgage File and other servicing, underwriting and
origination documents relating to the Mortgage Loans in Servicer's possession,
and on or before the Sub-Servicing Commencement Date, Servicer shall transfer to
Sub-Servicer all electronic data in Servicer's possession necessary to service
the Mortgage Loans and to provide current data with respect to the Mortgage
Loans and REO Property. Such copies of Mortgage Files shall include, without
limit, all documents relating to servicing, foreclosure, bankruptcy, and REO
Property with respect to any Mortgage Loan.
(b) The Sub-Servicer shall hold each Mortgage File and each document
contained therein in the possession of the Sub-Servicer in trust on behalf of
the Servicer for the benefit of the Indenture Trustee and the Financial Guaranty
Insurer. The Sub-Servicer's possession of any portion of the Mortgage File shall
be for the sole purpose of facilitating the servicing of the related Mortgage
Loan pursuant to this Agreement and the Servicing Agreement, and such retention
and possession by the Sub-Servicer shall be in a custodial capacity only. Any
portion of the Mortgage File retained by the Sub-Servicer shall be identified to
reflect clearly the ownership of the related Mortgage Loan by the Indenture
Trustee. The Sub-Servicer shall release from its custody any Mortgage File
retained by it only in accordance with this Agreement and the Servicing
Agreement. The Sub-Servicer shall provide to the Servicer as soon as practicable
after request therefor by the Servicer a copy of any documents held by it with
respect to any Mortgage Loan.
ARTICLE III
SERVICING OF THE MORTGAGE LOANS
Section 3.01 Sub-Servicer to Service.
(a) The Sub-Servicer, as an independent contractor, shall service and
administer the Mortgage Loans in accordance with the Servicing Agreement and
this Agreement, including the additional servicing procedures set forth on
Schedule 3.01(a) hereto as may be amended from time to time. This Agreement
shall govern in the event of any conflict between this Agreement and the
additional servicing procedures. The Sub-Servicer shall perform all obligations
of Servicer under the Servicing Agreement except as specifically provided herein
and shall prepare and deliver to Servicer all documents and reports required to
be delivered by the Servicer to the Indenture Trustee or the Financial Guaranty
Insurer at least two (2) Business Days prior to the date the Servicer must
deliver such reports, provided, however, that Sub-Servicer shall provide to
Servicer such information as to the Mortgage Loans being serviced by
Sub-Servicer as is required by Servicer to prepare the Servicer Remittance
Report not later than the second
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Business Day of each month. Sub-Servicer shall comply in all material respects
with applicable law in collecting the Mortgage Loans. The Sub-Servicer is hereby
authorized and empowered, subject to the terms of this Agreement, to execute and
deliver on behalf of itself and the Servicer all instruments of satisfaction or
cancellation, or of partial or full release, discharge and all other comparable
instruments, with respect to the Mortgage Loans and with respect to the
Mortgaged Properties. The Servicer shall furnish the Sub-Servicer with any
powers of attorney and other documents necessary or appropriate to enable the
Sub-Servicer to carry out its servicing and administrative duties under this
Agreement.
(b) The Sub-Servicer shall cause the portions of its electronic ledger
relating to the Mortgage Loans to be clearly and unambiguously marked, and shall
make appropriate entries in Sub-Servicer's general accounting records to
indicate that such Mortgage Loans constitute part of the Trust Estate in
accordance with the terms of the Trust Estate created under the Indenture.
(c) The Sub-Servicer shall, in cooperation with the Indenture Trustee,
establish on or prior to the Sub-Servicing Commencement Date and maintain
thereafter one or more trust accounts (the "Sub-Servicing Account") in a manner
consistent with Section 2.02(b) of the Servicing Agreement. The Sub-Servicing
Account shall be an Eligible Account established in the name of the Indenture
Trustee as trustee of Aames Trust 1997-I. The Sub-Servicer shall deposit into
the Sub-Servicing Account no later than the first Business Day after receipt all
proceeds of Mortgage Loans received by the Sub-Servicer (except for Additional
Servicing Compensation as set forth in Section 3.11 hereof) consistent with
Section 2.02 of the Servicing Agreement. The Sub-Servicer shall make Lockbox
Advances necessary to deposit such proceeds into the Sub-Servicing Account in
accordance with this Agreement and Section 2.02 of the Servicing Agreement. The
Sub-Servicer shall remit such proceeds to the Collection Account on or before
the Deposit Date. The Sub-Servicer shall be able to withdraw Sub-Servicer's
servicing compensation from the Sub-Servicing Account on such date in accordance
with Section 2.07 of the Servicing Agreement. The Sub-Servicer shall be
permitted to withdraw from time to time from the Sub-Servicing Account amounts
representing reimbursements for Advances made hereunder or purchased by the
Sub-Servicer from the Seller in accordance with the priorities set forth in
Section 3.01(h). The Sub-Servicer shall send to the Servicer a statement of
proceeds of Mortgage Loans collected by or on behalf of the Sub-Servicer within
two (2) 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
Sub-Servicer into the Collection Account for the same period. The Sub-Servicer
shall direct the investment of the Sub-Servicing Accounts in Permitted
Investments in accordance with the requirements of Section 2.02(b) of the
Servicing Agreement.
(d) The Sub-Servicer shall deposit into the Collection Account one (1)
Business Day prior to each Remittance Date, commencing with the first Remittance
Date after the Sub-Servicing Commencement Date, Monthly Advances due the
Collection Account on such Remittance Date in accordance with the terms of the
Servicing Agreement as if the Sub-Servicer were the Servicer thereunder,
provided, however, that Sub-Servicer shall not be responsible for funding
Servicing Advances or Monthly Advances or remitting any collections on the
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Remittance Date of May 12, 1999 with respect to the Mortgage Loans listed on
Schedule 3.01(d), or any other Mortgage Loan as to which Servicer has received
payments with respect to such Mortgage Loans during April 1999 and all such
advances, payments and collections shall be made directly by Servicer.
Notwithstanding any other provision of this Agreement, Sub-Servicer shall not be
responsible for funding Servicing Advances or Monthly Advances to the extent
that Sub-Servicer deems such Servicing Advances or Monthly Advances to be
Non-Recoverable Advances or Uncollectible Advances, respectively, and gives
Servicer notice that it has deemed such Servicing Advances or Monthly Advances
to be Non-Recoverable Advances or Uncollectible Advances, respectively, five (5)
Business Days prior to the Remittance Date on which such an Advance would have
been made were it not deemed a Non-Recoverable Advance or Uncollectible Advance.
Compensating Interest shall be an obligation of Servicer and Sub-Servicer shall
have no obligation to make any payment with respect to Compensating Interest. To
the extent not paid directly by the Servicer, Sub-Servicer shall have the right
to pay Compensating Interest and off-set it against monies collected by
Sub-Servicer which represent amounts due Servicer with respect to Lockbox
Advances and Servicing Advances previously made by Servicer or from amounts
payable to Servicer including prepayment fees under the Servicing Agreement
(collectively, the "Servicer Reimbursement Funds").
(e) This Agreement is intended to be consistent with and not to violate
the provisions of the Servicing Agreement, including without limit Sections 2.01
and 2.14 thereof. Accordingly, if it is discovered that any provision of this
Agreement is not consistent with or violates any provision of the Servicing
Agreement, the Servicing Agreement shall prevail, and the Sub-Servicer and the
Servicer shall execute such amendments, subject to the provisions of Section
7.18 hereof, as are reasonably necessary to make this Agreement consistent with
the Servicing Agreement while maintaining as nearly as possible the same
economic benefits intended to be conferred on the parties by this Agreement
without regard to such inconsistency or violation.
(f) [Intentionally omitted]
(g) [intentionally omitted]
(h) Except as set forth in this Section 3.01(h), Sub-Servicer shall not be
obligated to reimburse Servicer for any Advance made or Compensating Interest
paid by Servicer. As amounts are collected by Sub-Servicer which represent
reimbursements to Servicer or Sub-Servicer with respect to a particular mortgage
loan (a "Specific Mortgage Loan"), these amounts shall be paid or credited in
the following priority from time to time but in no event less frequently than
once a month:
(i) first, to Sub-Servicer to reimburse it for Monthly Advances
(including any such Advances made by the Servicer, the reimbursement
rights for which have been sold to the Sub-Servicer pursuant to the
Purchase
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Agreement), Servicing Advances, Lockbox Advances and Sub-Servicing
Fees (in that order) with respect to the Specific Mortgage Loan;
(ii) second, to Sub-Servicer to reimburse Sub-Servicer for any
Compensating Interest for any Mortgage Loan which Sub-Servicer has
elected to pay notwithstanding Servicer's obligation to pay
Compensating Interest;
(iii) third, to Sub-Servicer to pay any amount due and payable to
Sub-Servicer under this Agreement or the Purchase Agreement,
including, without limitation, to reimburse Sub-Servicer for any
Monthly Advances and Servicing Advances made by Sub-Servicer that have
not been reimbursed following liquidation of the related Mortgage
Loan, or where proceeds of any Mortgage Loan that would have otherwise
been available to reimburse Sub-Servicer for Advances made by Servicer
or Sub-Servicer under this Agreement have been applied by the
Indenture Trustee or the Financial Guaranty Insurer to set-off amounts
owed by the Servicer in respect of any default by Servicer under this
Agreement or the Servicing Agreement;
(iv) fourth, to Sub-Servicer to fund the Reserve Sub-account to the
extent required by Section 3.13; and
(v) fifth, any remaining amounts, to the Servicer.
(i) Sub-Servicer shall service the Mortgage Loans on a private label basis
under the name of Servicer as Servicer's servicing agent and, except as may be
required by law or is required or desirable in connection with the performance
of its obligations hereunder, Sub-Servicer shall not disclose that it is a
sub-servicer for the Mortgage Loans.
Section 3.02 Loan Information and Financial Statements.
(a) No later than three (3) Business Days following each Remittance Date,
and no later than two (2) Business Days following any request by the Financial
Guaranty Insurer, the Sub-Servicer shall deliver to the Financial Guaranty
Insurer or its designee, a computer tape or electronic transmission in such
format as shall be agreed by the Financial Guaranty Insurer and the Sub-Servicer
containing the "loan level" information with respect to the Mortgage Loans as of
the related Servicer Remittance Date, or such other date specified by the
Financial Guaranty Insurer if such information is being provided upon its
request. The form of such "loan level" information may be modified by mutual
agreement of the Sub-Servicer and the Financial Guaranty Insurer.
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(b) Sub-Servicer shall maintain appropriate records of information
relating to the servicing of the Mortgage Loans and the REO Property and related
books and records. Sub-Servicer will promptly provide Servicer or Financial
Guaranty Insurer with (i) information from and access to such records, upon the
reasonable request of Servicer or Financial Guaranty Insurer, and (ii) audit
rights to discuss the affairs, finances and accounts with the appropriate
officers or employees of the Sub-Servicer and with the Sub-Servicer's
independent accountants.
Section 3.03 Merger or Consolidation of the Sub-Servicer.
(a) The Sub-Servicer shall keep in full effect its existence, rights, and
franchises as a corporation under the laws of the state of its incorporation
except as permitted herein, and shall obtain and preserve its qualification to
do business as a foreign corporation in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement and the Servicing Agreement or any of the
Mortgage Loans and to perform its duties under this Agreement and shall continue
to meet the requirements of Sections 2.01 and 2.14 of the Servicing Agreement as
shall be necessary to perform its duties under this Agreement and the Servicing
Agreement (including maintaining licenses and qualifications necessary to
perform its servicing obligations in states where the Mortgaged Properties are
located).
(b) Any Person into which the Sub-Servicer may be merged or consolidated,
or any corporation resulting from any merger, conversion or consolidation to
which the Sub-Servicer shall be a party, or any Person succeeding to the
business of the Sub-Servicer, shall be the successor of the Sub-Servicer
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, if the successor or surviving Person (i) meets the requirements
and complies with the terms of Section 2.01 of the Servicing Agreement, (ii) has
received the prior written consent of the Financial Guaranty Insurer, and (iii)
has received the prior written consent of the Servicer.
Section 3.04 Limitation on Liability of the Sub-Servicer and Others.
(a) Other than provided in Section 7.08(b) hereof, neither the
Sub-Servicer nor any of the directors or officers or employees or agents of the
Sub-Servicer shall be under any liability to the Servicer or the Financial
Guaranty Insurer 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 Sub-Servicer or any
such Person against any liability that would otherwise be imposed by reason of
such Person's willful misfeasance, bad faith or gross negligence in the
performance of duties by the Sub-Servicer or by reason of such Person's reckless
disregard of its obligations and duties hereunder; and provided, further, that
this provision shall not be construed to entitle the Sub-Servicer to indemnity
in the event that amounts advanced by the Sub-Servicer to retire any senior lien
exceed Net Liquidation Proceeds realized with respect to the related Mortgage
Loan. The Sub-Servicer and any director, officer, employee or agent of the
Sub-Servicer may rely in good faith on any document of any
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kind prima facie properly executed and submitted by any Person respecting any
matters arising hereunder.
(b) Notwithstanding anything else contained in this Agreement, the
Sub-Servicer does not assume (i) any responsibility to indemnify nor make any of
the Seller's representations and warranties under the Servicing Agreement or the
Seller's or the Servicer's representations and warranties under (a) any document
relating to the sale of the Mortgage Loans and (b) the Insurance and Indemnity
Agreement dated as of March 1, 1997, by and between the Financial Guaranty
Insurer and the Servicer; (ii) any obligation to pay a termination fee to any
sub-servicer pursuant to the Servicing Agreement; (iii) any obligation to
purchase one or more of the Mortgage Loans pursuant to any agreement; (iv) any
obligation to record the Mortgage Loans; provided, however, that if the
Sub-Servicer cannot enforce any Mortgage Loan due to a lack of such recording,
the Sub-Servicer shall record such mortgage at the Servicer's expense; or (v),
except as specifically provided herein, any obligations of, or requirement to
pay from Sub-Servicer=s own funds, the Indenture Trustee under the Servicing
Agreement.
(c) The Sub-Servicer shall not be under any obligation to appear in,
prosecute or defend any legal action that is not incidental to its duties to
service the Mortgage Loans in accordance with this Agreement and that in its
opinion may involve it in any expenses or liability; provided, however, that the
Sub-Servicer may, with the prior written consent of the Servicer and the
Financial Guaranty Insurer, undertake any such action that it may deem necessary
or desirable in respect to this Agreement and the rights and duties of the
parties hereto. In such event, the reasonable legal expenses and costs of such
action and any liability resulting therefrom shall be expenses, costs and
liabilities for which the Servicer will be liable and the Sub-Servicer shall be
entitled to be reimbursed therefor from the Servicer upon written demand,
subject to the Financial Guaranty Insurer's consent, to the extent that the
Servicer receives reimbursement from the Trust in accordance with the Servicing
Agreement. To the extent that the Sub-Servicer's actions pursuant to this
Agreement and the results thereof would entitle the Servicer to indemnity from
the Trust Estate if such actions had been performed directly by the Servicer,
the Servicer shall seek indemnification from the Trust Estate for such expenses
and if the Trust Estate actually indemnifies the Servicer, the Servicer shall
indemnify the Sub-Servicer therefore, subject to Financial Guaranty Insurer=s
reasonable consent all in accordance with the Servicing Agreement.
Section 3.05 Sub-Servicer Not to Resign.
The Sub-Servicer shall not resign from the obligations and duties hereby
imposed on it except with the prior written consent of the Financial Guaranty
Insurer, or upon the determination, in Sub-Servicer's reasonable judgment that
the Sub-Servicer's material duties hereunder are no longer permissible under
applicable law, and provided such impermissibility is not caused by an act or
omission of the Sub-Servicer and cannot be cured in a commercially reasonable
manner by the Sub-Servicer. Any such determination permitting the resignation of
the Sub-Servicer shall be evidenced by an Opinion of Counsel to such effect
delivered to the
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Servicer and the Financial Guaranty Insurer, which Opinion of Counsel shall be
in form and substance acceptable to the Servicer and the Financial Guaranty
Insurer.
Section 3.06 No Transfer or Assignment of Servicing.
With respect to the responsibility of the Sub-Servicer to service the
Mortgage Loans hereunder, the Sub-Servicer, acknowledges that the Servicer (and
the Financial Guaranty Insurer, in granting its consent hereto) has acted in
reliance upon the Sub-Servicer's independent status, the adequacy of its
servicing facilities, plant, personnel, records and procedures, its integrity,
reputation and financial standing and the continuance thereof. Without in any
way limiting the generality of this Section 3.06, the Sub-Servicer shall not
either assign or transfer this Agreement or the servicing hereunder nor delegate
its rights or duties hereunder or any portion thereof, whether to any
sub-servicer or otherwise, or sell or otherwise dispose of all or substantially
all of its property or assets, without the prior written consent of the Servicer
and the Financial Guaranty Insurer. Notwithstanding any other provision of this
Agreement, Sub-Servicer shall have the right to assign, transfer and pledge any
right to receive payment under this Agreement without the consent of or notice
to Servicer, the Trust Estate or the Financial Guaranty Insurer.
Section 3.07 Servicer's Cooperation.
The Servicer shall cooperate with the Sub-Servicer, and shall provide to
the Sub-Servicer information in its systems, regarding the Mortgage Loans and
the servicing thereof as reasonably requested by the Sub-Servicer.
Section 3.08 Receipt of Mortgage Loan Amounts.
All amounts collected in connection with the Mortgage Loans before the
Sub-Servicing Commencement Date shall be accounted for and dealt with by the
Servicer in the manner set forth in the Servicing Agreement. Except for
Servicer's interest as Servicer under the Servicing Agreement not specifically
transferred to Sub-Servicer as provided herein, the Servicer specifically
disclaims any interest, legal or equitable, in payments received with respect to
the Mortgage Loans after the Sub-Servicing Commencement Date, and the Servicer
shall endorse any such payments received with respect to the Mortgage Loans
after the Sub-Servicing Commencement Date to the Sub-Servicer and shall forward
such payments to the Sub-Servicer within one Business Day following the receipt
of such payments by the Servicer.
Section 3.09 Subsequent Transfers.
In the event that any mortgage loan, as defined in the Servicing Agreement,
is currently being sub-serviced by another sub-servicer and such other
sub-servicer terminates its servicing of such mortgage loan, such mortgage loan
shall be added to Schedule 2.01, and such mortgage loan shall thereafter be
sub-serviced by the Sub-Servicer; provided, however, that the Sub-Servicer's
obligation to accept servicing with respect to any such mortgage loans shall be
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subject to terms and conditions (including without limit, compensation
provisions) to be mutually agreed upon by the Servicer, Sub-Servicer, and
Financial Guaranty Insurer.
Section 3.10 [Intentionally Omitted].
Section 3.11 Compensation to the Sub-Servicer.
(a) As compensation for Sub-Servicer's services under this Agreement,
Sub-Servicer shall be entitled to the following during its term as Sub-Servicer
(collectively, the "Sub-Servicing Fees"):
(i) payment on a monthly basis on the Remittance Date of an
amount with respect to each Mortgage Loan, that is the product of .000125 (1/12
of 15 basis points) times the aggregate outstanding balance of Mortgage Loans
being serviced by Sub-Servicer as of the first Business Day of each month
whether or not Servicer would be entitled to such Servicing Fee pursuant to the
Servicing Agreement (the "Enhanced Servicing Fees") plus .000416667 (1/12 of 50
basis points) times the aggregate outstanding balance of Mortgage Loans being
serviced by Sub-Servicer for which Servicer would be entitled to such Servicing
Fee pursuant to the Servicing Agreement (the "Regular Servicing Fees"). Payment
of the Enhanced Servicing Fee and Regular Servicing Fees may be made first, by
withdrawals from the Sub-Servicing Account on each Remittance Date to the extent
permitted by Sections 2.02 and 2.07 of the Servicing Agreement; second, from any
prepayment fees received by the Sub-Servicer and due the Servicer under this
Agreement; third, from any reimbursement of Servicing Advances received by the
Sub-Servicer and due the Servicer pursuant to the Servicing Agreement; fourth,
by Sub-Servicer's invoicing the Servicer for such Sub-Servicing Fees, which
invoice shall be paid within ten (10) days of receipt by the Servicer; and
fifth, by payment to the Sub-Servicer from the Reserve Sub-account.
Notwithstanding any other provision of this Agreement, the obligation to pay the
Enhanced Servicing Fee shall commence on the later of the Sub-Servicing
Commencement Date or the Closing Date and shall not be payable with respect to
any period prior to the Sub-Servicing Commencement Date or the Closing Date, as
applicable.
(ii) With the exception of prepayment fees, Sub-Servicer shall be
be entitled to all additional servicing compensation that Servicer would
otherwise be entitled to under Sections 2.02 and 2.07 of the Servicing Agreement
with respect to each Mortgage Loan, for any period in which such Mortgage Loan
was serviced by Sub-Servicer, including without limitation ancillary income,
assumption fees, late payment charges, charges for checks returned for
insufficient funds and extension and other administrative charges ("Additional
Servicing Compensation"). Additional Servicing Compensation will be paid to
Sub-Servicer by Sub-Servicer retaining such Additional Servicing Compensation
prior to depositing proceeds of Mortgage Loans into the Sub-Servicing Account
or, if deposited in the Sub-Servicing Account, by withdrawals from the
Sub-Servicing Account on each Remittance Date as permitted by Sections 2.02 and
2.07 of the Servicing Agreement.
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(iii) The Servicer shall pay to the Sub-Servicer a Set-Up Fee equal to
$5 for each Mortgage Loan for which servicing is transferred to the
Sub-Servicer. Payment of the Set-Up Fees shall be made at Sub-Servicer's
election by Sub-Servicer invoicing the Servicer for such Set-Up Fees, which
invoice shall be paid within ten (10) days of receipt by the Servicer or by
payment to Sub-Servicer from the Reserve Sub-account.
(iv) In the event the Sub-Servicer is terminated pursuant to Section
6.03 of this Agreement, or any Mortgage Loan is transferred to another servicer
or special servicer, the Sub-Servicer shall be entitled (from the Servicer and
not from the Trust Estate unless specifically provided by the Servicing
Agreement) to a Termination Fee of $20 (the "Termination Fee") for each Mortgage
Loan for which the Sub-Servicer transfers servicing in accordance with this
Agreement. In connection with a termination pursuant to Section 6.03 hereof, the
Sub-Servicer shall receive, prior to the transfer of servicing, the Termination
Fees, all outstanding Advances and all other amounts due Sub-Servicer hereunder.
(v) Sub-Servicer shall be entitled to all net income and net gain
realized, and shall be obligated to reimburse any loss from the investment of
funds deposited in the Sub-Servicing Account, as provided in Section 2.02(b) of
the Servicing Agreement. The amount described in this subsection (v) shall be
paid to Sub-Servicer in accordance with the Servicing Agreement, as if the
Sub-Servicer was the Servicer in the Servicing Agreement.
(vi) Sub-Servicer shall remit to Servicer on each Remittance Date all
prepayment fees and compensation payable to Servicer pursuant to 3.01(h)(v), if
any, less any amount due Sub-Servicer hereunder.
Section 3.12 Appointment as Servicer.
If the Servicer is terminated as the servicer under Section 6.01 of the
Servicing Agreement, or Servicer's term is not renewed, the Sub-Servicer, if
appointed by the Indenture Trustee or the Financial Guaranty Insurer, agrees to
accept such appointment as the successor Servicer under the Servicing Agreement
and shall perform all of the duties of the Servicer under the Servicing
Agreement and be bound by all the obligations of the Servicer thereunder, except
that the Sub-Servicer does not assume any obligation described in Sections
3.04(b)(i), (ii) (except as to sub-servicers engaged by the Sub-Servicer) (iii)
or (v) hereof. Upon such occurrence, all future obligations of the Sub-Servicer
under this Agreement shall be terminated, but without payment of any penalty or
Termination Fee, provided, however, that Sub-Servicer shall be entitled to all
unpaid compensation due under Section 3.11 of this Agreement, (provided that the
amount of any unpaid Enhanced Servicing Fees and any unpaid Set-Up Fees shall be
recoverable solely from the Servicer) and Servicer, Sub-Servicer and Financial
Guaranty Insurer shall continue to be entitled and obligated with respect to all
of their respective indemnification obligations pursuant to Section 7.08 of this
Agreement, in each case arising from activities prior to such termination date.
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Section 3.13. Reserve Sub-Account.
Sub-Servicer shall establish a single segregated trust account ("Reserve
Sub-account") to be funded with distributions from, and subject to withdrawals
in accordance with, each of the Sub-Servicing Agreements. The Reserve Sub-
account shall be established for the benefit of Sub-Servicer in the name of, and
under the exclusive dominion and control of Sub-Servicer or its designee.
Sub-Servicer shall deposit into the Reserve Sub-account all amounts designated
for distribution to the Reserve Sub-account at any time pursuant to each of the
Sub-Servicing Agreements until the Reserve Sub-account balance at such time is
$300,000 (the "Reserve Amount"). All net income from the Reserve Sub-account
shall be reinvested in the Reserve Sub-account. Sub-Servicer shall have the
right to withdraw funds from the Reserve Sub-account (i) to reimburse
Sub-Servicer for any Advance made by the Sub-Servicer that was not reimbursed
from proceeds of the related Mortgage Loan following the liquidation or
attempted liquidation of such Mortgage Loan; (ii) to pay any Sub-Servicing Fee
owed Sub-Servicer pursuant to Section 3.11 or any other amount due Sub-Servicer
under this Agreement; and (iii) in accordance with terms of each Sub-Servicing
Agreement other than this Agreement. Sub-Servicer shall determine in its sole
reasonable discretion at least annually whether the Reserve Amount exceeds the
amount required to provide an adequate reserve for amounts payable to
Sub-Servicer from the Reserve Sub-account and shall reduce the Reserve Amount by
the amount of any such excess, provided however, that the Reserve Amount shall
in no event be reduced below $150,000. Promptly after the date on which the last
Sub-Servicing Agreement that is in effect is terminated, Sub-Servicer shall
distribute the balance in the Reserve Sub-account, if any, to Servicer, less any
amounts due Sub-Servicer under the Sub-Servicing Agreements.
Section 3.14 Security Interest.
Servicer hereby grants Sub-Servicer a security interest in the Reserve
Sub-account and in all amounts payable to Servicer under the Servicing Agreement
to secure payment of all amounts due Sub-Servicer under or pursuant to this
Agreement, the Purchase Agreement, any sub-servicing agreement or any similar or
other agreement between Servicer and Sub-Servicer.
Section 3.15 Tax Forms.
The Sub-Servicer shall mail, on or before the date required by law, all
required Internal Revenue Service forms, including without limitation form
numbers 1099, 1099A or 1098, to all persons or entities entitled to receive such
forms for all applicable periods beginning January 1, 2000. Servicer shall
cooperate with Sub-Servicer in the preparation of all such forms and timely
provide to Sub-Servicer all information necessary for Sub-Servicer to prepare
such forms.
Section 3.16 Additional Servicing Procedures.
The parties agree to comply with the additional servicing procedures set
forth on Schedule 3.01(a) hereto as the same may be amended from time to time by
the mutual agreement
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of the parties, provided that this Agreement shall govern in the event of a
conflict between this Agreement and the additional servicing procedures.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01 Representations, Warranties and Covenants of the Sub-Servicer.
The Sub-Servicer hereby represents and warrants to and covenants with the
Servicer and with the Financial Guaranty Insurer that as of the date of this
Agreement or as of such date as is specifically provided herein:
(a) The Sub-Servicer is a corporation duly organized, validly existing and
in good standing under the laws of the State of Utah and is in compliance with
the laws of each state in which any Mortgaged Property is located to the extent
necessary to perform the sub-servicing obligations hereunder;
(b) The execution and delivery of this Agreement by the Sub-Servicer and
its performance of and compliance with the terms of this Agreement will not
violate the Sub-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 Sub-Servicer is a
party or which may be applicable to the Sub-Servicer or any of its assets;
(c) The Sub-Servicer has the full power and authority to enter into and
consummate all transactions contemplated by this Agreement, has duly authorized
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby, and has duly executed and delivered
this Agreement. This Agreement, assuming due authorization, execution and
delivery by the Servicer, constitutes a valid, legal and binding obligation of
the Sub-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 Sub-Servicer is not in violation of, and the execution and
delivery of this Agreement by the Sub-Servicer and its performance and
compliance with the terms of this Agreement 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 Sub-Servicer or materially and adversely affect
the performance of Sub-Servicer's duties hereunder;
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(e) There are no actions or proceedings against, or investigations of, the
Sub-Servicer pending, or, to the best knowledge of the Sub-Servicer, threatened,
before any court, administrative agency or other tribunal (A) that, if
determined adversely, would prohibit its entering into this Agreement, (B)
seeking to prevent the consummation of any of the transactions contemplated by
this Agreement, or (C) that, if determined adversely, would result in a material
adverse change with respect to Sub-Servicer or would be reasonably likely to
impair the ability of Sub-Servicer to perform, or to materially and adversely
affect the performance by the Sub-Servicer of its obligations under, or the
validity or enforceability of, this Agreement;
(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 Sub-Servicer of, or compliance by the Sub-Servicer with, this
Agreement, or for the consummation of the transactions contemplated by this
Agreement, except for such consents, approvals, authorizations and orders, if
any, that have been obtained prior to the date of this Agreement;
(g) The Sub-Servicer is duly licensed where required as a "Licensee" or is
otherwise qualified in each state in which it transacts business and is not in
default of such state's applicable laws, rules and regulations, except where the
failure to so qualify or such default would not have a material adverse effect
on the ability of the Sub-Servicer to conduct its business or perform its
obligations hereunder, and the Sub-Servicer is an FHLMC-approved servicer; and
(h) The Sub-Servicer is not required to be registered as an "investment
company" under the Investment Company Act of 1940, as amended.
Section 4.02 Representations and Warranties of the Servicer.
The Servicer hereby represents and warrants to the Sub-Servicer and to the
Financial Guaranty Insurer that as of the date of this Agreement or as of such
date as is specifically provided herein:
(a) The Servicer is a corporation duly organized, validly existing and in
good standing under the laws of the State of California and has, and had at all
relevant times, full power to own its property, to carry on its business as
presently conducted, to enter into and perform its obligations under this
Agreement;
(b) The execution and delivery of this Agreement by the Servicer and its
performance of and compliance with the terms of this Agreement 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;
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(c) The Servicer has the full power and authority to enter into and
consummate the transactions contemplated by this Agreement, has duly authorized
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby, and has duly executed and delivered
this Agreement. This Agreement, assuming due authorization, execution and
delivery by the Sub-Servicer, 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
this Agreement by the Servicer and its performance and compliance with the terms
of this Agreement and the Servicing Agreement 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 Servicer's duties hereunder and thereunder;
(e) There are no actions or proceedings against, or investigations of, the
Servicer pending, or, to the best knowledge of the Servicer, threatened, before
any court, administrative agency or other tribunal (A) that, if determined
adversely, would prohibit its entering into this Agreement, (B) seeking to
prevent the consummation of any of the transactions contemplated by this
Agreement, or (C) that, if determined adversely, would result in a material
adverse change with respect to Servicer or would be reasonably likely to impair
the ability of Servicer to perform, or to materially and adversely affect the
performance by the Servicer of its obligations under, or the validity or
enforceability of, this Agreement;
(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, this
Agreement, or for the consummation of the transactions contemplated by this
Agreement, except for such consents, approvals, authorizations and orders, if
any, that have been obtained prior to the date of this Agreement;
(g) The Servicer is duly licensed where required as a "Licensee" or is
otherwise qualified in each state in which it transacts business and is not in
default of such state's applicable laws, rules and regulations, except where the
failure to so qualify or such default would not have a material adverse effect
on the ability of the Servicer to conduct its business or perform its
obligations hereunder or under the Servicing Agreement;
(h) The Servicer has serviced the Mortgage Loans in accordance with
applicable laws and the Servicing Agreement. As of the Sub-Servicing
Commencement Date, there will be no
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Advances, Compensating Interest or any other payment required to have been paid
or advanced by the Servicer under the Servicing Agreement that have not been
paid or advanced; and
(i) Schedule 2.01 contains all mortgage loans in the Trust Estate except
for the Mortgage Loans and REO Properties set forth on Schedule 4.01(i).
ARTICLE V
DEFAULT
Section 5.01 Events of Default.
(a) In case one or more of the following events (each, an "Event of
Default") by the Sub-Servicer shall occur and be continuing:
(1) except as set forth in clause (a)(3) below, any failure by the
Sub-Servicer to deposit into the designated account any amount required to be so
deposited or remitted under this Agreement or the Servicing Agreement on the
date required under such agreement, subject to any applicable grace period;
(2) the Sub-Servicer shall fail timely to provide to the Servicer,
the Indenture Trustee, or the Financial Guaranty Insurer any report required by
this Agreement to be provided to the Servicer, the Indenture Trustee, or the
Financial Guaranty Insurer, subject to any applicable grace period;
(3) any failure by the Sub-Servicer to make any Servicing Advance as
required under this Agreement, which failure continues unremedied for a period
of 30 days, or any failure on the part of the Sub-Servicer duly to observe or
perform in any material respect any other of the covenants or agreements on the
part of the Sub-Servicer contained in this Agreement which continues unremedied
for a period of 30 days after the earlier of (a) knowledge of the Sub-Servicer
of such failure and (b) the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Sub-Servicer by
the Servicer, Financial Guaranty Insurer or Indenture Trustee;
(4) the entry against the Sub-Servicer of a decree or order of a
court or agency or supervisory authority having jurisdiction in the premises for
the appointment of a conservator, receiver, liquidator, trustee or similar
official in any bankruptcy, insolvency, conservatorship, receivership,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall have
been entered against the Sub-Servicer and such decree or order shall have
remained in force undischarged or unstayed for a period of 60 consecutive days;
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(5) the Sub-Servicer shall consent to the appointment of a
conservator, receiver, liquidator, trustee or similar official in any
bankruptcy, insolvency, conservatorship, receivership, readjustment of debt,
marshaling of assets and liabilities or similar proceedings of or relating to
the Sub-Servicer or of or relating to all or substantially all of its property;
(6) the Sub-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;
(7) the Sub-Servicer shall cease to be an approved servicer of
residential mortgage loans for FHLMC;
(8) the Sub-Servicer shall assign or transfer or attempt to assign or
transfer all or part of its rights and obligations hereunder except as permitted
by this Agreement;
(9) the Sub-Servicer shall cease to be a wholly-owned subsidiary of
Fairbanks Capital Holding Corp.;
(10) any breach by the Sub-Servicer of a representation or warranty
made in Section 4.01 hereof, which breach continues unremedied for a period of
30 days after the earlier of (a) knowledge of the Sub-Servicer of such breach
and (b) the date on which written notice of such breach requiring the same to be
remedied shall have been given to the Sub-Servicer; or
(11) the Sub-Servicer shall fail to qualify as Sub-Servicer under
Section 2.01 of the Servicing Agreement.
Servicer shall deliver written notice thereof to the Financial Guaranty Insurer,
and in each and every such case, so long as such Event of Default shall not have
been remedied within the applicable time period, if any, set forth above, the
Servicer shall, following ten day's prior written notice to the Financial
Guaranty Insurer which notice shall specify in detail the nature of such Event
of Default terminate, by notice in writing to the Sub-Servicer, all of the
rights and obligations of the Sub-Servicer as Sub-Servicer under this Agreement
unless the Financial Guaranty Insurer directs the Servicer by written notice to
take either no remedial action or a specified remedial measure, in which case
the Servicer shall follow such written notice of the Financial Guaranty Insurer.
From and after the receipt by the Sub-Servicer of such written notice, all
authority and power of the Sub-Servicer under this Agreement, whether with
respect to the Mortgage Loans or otherwise, shall pass to and be vested in the
Servicer pursuant to and under this section, and, without limitations, the
Servicer is hereby authorized and empowered, as attorney-in-fact or otherwise,
to execute and deliver on behalf of Sub-Servicer any and all documents and other
instruments, and to do or accomplish all other acts or things necessary or
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appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and enforcement or assignment of the Mortgage Loans and
related documents, or otherwise.
(b) The Sub-Servicer agrees that if it is terminated pursuant to this
Agreement, it shall promptly (and in any event no later than five Business Days
subsequent to its receipt of the notice of termination), at Servicer's cost and
expense, provide the Servicer with all documents and records (including, without
limitation, those in electronic form) requested by it to enable it to assume the
Sub-Servicer's functions hereunder, and shall cooperate with the Servicer in
effecting the termination of the Sub-Servicer's responsibilities and rights
hereunder and the assumption by a successor of the Sub-Servicer's obligations
hereunder, including, without limitation, the transfer within one Business Day
to the Servicer for administration by it of all cash amounts which shall at the
time be or should have been credited by the Sub-Servicer to the designated
account, or thereafter be received with respect to the Mortgage Loans or any REO
Property subject to Sub-Servicer's rights under Section 6.04.
Section 5.02 Waiver of Defaults.
The Servicer, with the prior written consent of the Financial Guaranty
Insurer, may waive any default by the Sub-Servicer in the performance of its
obligations hereunder and its consequences. Upon any such 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 thereon except to the extent expressly so waived.
ARTICLE VI
TERMINATION
Section 6.01 Termination.
Except as otherwise specifically set forth herein, the obligations and
responsibilities of the Sub-Servicer shall terminate: (i) upon the later of the
final payment or other liquidation (or any advance with respect thereto) of the
last Mortgage Loan and the disposition of all REO Property and the remittance of
all funds due hereunder; (ii) by mutual consent of the Sub-Servicer, the
Servicer, and the Financial Guaranty Insurer in writing, such consent of
Financial Guaranty Insurer not to be unreasonably withheld; (iii) pursuant to
Section 6.02 of this Agreement; (iv) at the option of any successor to the
Servicer in its sole discretion, subject, however, to the prior written consent
of the Financial Guaranty Insurer; (v) at the option of any purchaser of one or
more Mortgage Loans pursuant to the Servicing Agreement, upon such purchase and
only with respect to such purchased Mortgage Loan or Mortgage Loans (including,
without limitation, the purchase of any delinquent loan in accordance with the
Servicing Agreement); (vi) after sixty (60) days notice by the Sub-Servicer to
the Servicer and the
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Financial Guaranty Insurer, that Servicer has not, within ninety (90) days
following the commencement of any bankruptcy proceeding in which the Servicer is
a "debtor", obtained from the bankruptcy court approval of the assumption of
this Agreement; provided, however, that the Sub-Servicer shall not terminate
this Agreement if within ten (10) days of providing such notice, the Financial
Guaranty Insurer or the Indenture Trustee provides reasonable assurance that the
Sub-Servicer will be paid all amounts due under this Agreement; and (vii) upon
termination of the Servicing Agreement pursuant to Section 7.01 thereof.
Section 6.02 Termination With Cause.
(a) The Servicer may, at its sole option, with the prior written consent
of the Financial Guaranty Insurer but without payment of any penalty or
Termination Fee, terminate any rights the Sub-Servicer may have hereunder with
respect to any or all of the Mortgage Loans as provided in Section 5.01 of this
Agreement upon the occurrence of an Event of Default.
(b) The Financial Guaranty Insurer, upon the occurrence of an Event of
Default under this Agreement, but without payment of any penalty or Termination
Fee, shall have the right to terminate this Agreement immediately upon delivery
of written notice to the Servicer and the Sub-Servicer.
Section 6.03 Termination Without Cause.
The Servicer, with the prior written consent of the Financial Guaranty
Insurer, may terminate this Agreement as of the last day of any Collection
Period as to any or all of the Mortgage Loans for reasons other than those set
forth in Sections 6.01(i), (ii), and (iii) by giving the Sub-Servicer at least
45 days notice of termination, provided that the Servicer in its sole
responsibility shall pay the Termination Fee for the Mortgage Loan or Loans
being terminated. Any notice of termination shall be in writing and delivered to
the Sub-Servicer as provided in Section 7.03 of this Agreement.
Section 6.04 Effect of Termination.
(a) With respect to termination of the Sub-Servicer pursuant to Section
6.02 or Section 6.03 of this Agreement, immediately upon the transfer of the
servicing of the Mortgage Loans, Sub-Servicer's obligations to make any Advance
or any other payment required hereunder shall cease. Upon termination of this
Agreement for any reason, with or without cause, the Sub-Servicer shall be
entitled to the Sub-Servicing Fees for each Mortgage Loan subject to termination
for the entire month in which the servicing transfer date occurs as well as all
other unpaid or unreimbursed Sub-Servicing Fees, reimbursement in full for all
Advances made by Sub-Servicer, and all Prior Monthly Advances remaining
unreimbursed and all other compensation, payments and reimbursable expenses due
the Sub-Servicer through the servicing transfer date (the "Sub-Servicer
Compensation").
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(b) In the event of termination pursuant to Section 6.03, Sub-Servicer
shall be paid Sub-Servicer Compensation by the Servicer, any successor servicer,
or otherwise on or prior to such servicing transfer date and if the Sub-Servicer
does not receive the Sub-Servicer Compensation by the servicing transfer date,
the Sub-Servicer will be entitled to net such amounts against funds held in the
Sub-Servicing Account and Sub-Servicer shall not be obligated to transfer
servicing of the Mortgage Loans until such time as Sub-Servicer is paid all the
Sub-Servicer Compensation.
(c) In the event of termination pursuant to Section 6.02, Sub-Servicer
shall not be obligated to transfer servicing until either (i) Sub-Servicer is
paid the Sub-Servicer Compensation by the Servicer, any successor servicer, or
otherwise on or prior to such servicing transfer date, or (ii) the successor
servicer is obligated to deposit into the Receivables Reimbursement Account (as
defined in the Purchase Agreement), all collections relating to unreimbursed
Advances within one (1) Business Day of receipt thereof and the successor
servicer provides an endorsement to Lender on its fidelity bond naming Lender as
a loss payee.
(d) This Section 6.04 shall survive any termination of this Agreement and
any termination of this Agreement shall not prejudice the rights of the
Sub-Servicer to recover any Sub-Servicer Compensation. The Sub-Servicer and its
directors, officers, employees and agents shall continue to be entitled to the
benefits of Section 3.04 of this Agreement notwithstanding any termination of
this Agreement.
ARTICLE VII
MISCELLANEOUS
Section 7.01 Payment of Costs
Except as specifically set forth herein, all costs of Servicer or
Sub-Servicer associated with this Agreement shall be paid by the party incurring
such costs.
Section 7.02 Reports.
As long as this Agreement is in effect, the Sub-Servicer shall deliver to
the Financial Guaranty Insurer and Servicer: (A) the audited consolidated
financial statements, balance sheet and statement of income of the Sub-Servicer
and each subsidiary thereof within 90 days of the close of each fiscal year and
(B) the unaudited consolidated quarterly financial statements, balance sheet and
statement of income of the Sub-Servicer thereof within 45 days of the end of
each fiscal quarter.
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Section 7.03 Notices.
All demands, notices, consents and communications hereunder shall be in
writing and shall be deemed to have been duly given when delivered to the
following addresses:
(1) if to the Servicer:
Aames Capital Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: National Loan Servicing Director
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
Phone No. (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Aames Capital Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
Phone No. (▇▇▇) ▇▇▇-▇▇▇▇
(2) if to the Sub-Servicer:
If by U.S. Mail:
Fairbanks Capital Corp.
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
Phone No. (▇▇▇) ▇▇▇-▇▇▇▇
If by overnight delivery:
Fairbanks Capital Corp.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇. ▇. ▇▇▇▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
Phone No. (▇▇▇) ▇▇▇-▇▇▇▇
(3) if to the Financial Guaranty Insurer:
Financial Security Assurance Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Senior Vice President - Surveillance
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
Phone No. (▇▇▇) ▇▇▇-▇▇▇▇
or such other address as may hereafter be furnished to the other party by like
notice. Any notice given pursuant hereto shall be effective upon receipt by the
party to whom sent.
Section 7.04 Severability Clause.
Any part, provision, representation or warranty of this Agreement that is
prohibited or that is held to be void or unenforceable shall be ineffective to
the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction as to any Mortgage Loan shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties hereto waive any provision of law that prohibits
or renders void or unenforceable any provision hereof. If the invalidity of any
part, provision, representation or warranty of this Agreement shall deprive any
party of the economic benefit intended to be conferred by this Agreement, the
parties shall negotiate, in good faith, to develop a structure the economic
effect of which is nearly as possible the same as the economic effect of this
Agreement without regard to such invalidity.
Section 7.05 Counterparts.
This Agreement may be executed simultaneously in any number of
counterparts. Each counterpart shall be deemed to be an original, and all such
counterparts shall constitute one and the same instrument.
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Section 7.06 Governing Law.
The Agreement shall be construed in accordance with the laws of the State
of California without regard to conflicts rules and the obligations, rights and
remedies of the parties hereunder shall be determined in accordance with the
laws of the State of California except to the extent preempted by Federal Law.
With respect to any claim arising out of this Agreement, each party irrevocably
submits to the jurisdiction of the courts of the state of California, and each
party irrevocably waives any objection which it may have at any time to the
laying of venue of any suit, action or proceeding arising out of or relating
hereto brought in any such courts, irrevocably waives any claim that any such
suit, action or proceeding brought in any such court has been brought in any
inconvenient forum and further waives the right to object, with respect to such
claim, suit, action or proceeding brought in any such court, that such court
does not have jurisdiction over such party, provided that service of process has
been made by any lawful means.
Section 7.07 Security for Expenses.
Except as provided in Section 3.01(e), neither the Servicer nor the
Sub-Servicer shall have any obligation to consent to any amendment or
modification of this Agreement.
Section 7.08 Indemnification.
(a) Servicer Indemnification.
(1) The Servicer shall indemnify the Sub-Servicer and the Financial
Guaranty Insurer 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, in any way relating to the failure of the Servicer
to perform its duties in compliance with the terms of this Agreement; provided,
however, that the Servicer shall not be required to indemnify the Sub-Servicer
or the Financial Guaranty Insurer against any liability due to the willful
malfeasance, bad faith, or negligence of the Sub-Servicer or the Financial
Guaranty Insurer hereunder. This indemnity shall survive the termination of this
Agreement and the payment of the Mortgage Loans. The Sub-Servicer or Financial
Guaranty Insurer, 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 in
compliance with the terms of this Agreement. The Servicer shall promptly notify
the Sub-Servicer and the Financial Guaranty Insurer of any claim of which it has
been notified pursuant to this Section 7.08 by a Person other than the party
claiming indemnification, as the case may be, and, in any event, shall promptly
notify the Sub-Servicer and the Financial Guaranty Insurer of its intended
course of action with respect to any claim.
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(2) The Servicer shall be entitled to participate in and, upon notice
to the Sub-Servicer and the Financial Guaranty Insurer, assume the defense of
any such action or claim in reasonable cooperation with, and with the reasonable
cooperation of the Sub-Servicer and the Financial Guaranty Insurer. The
Sub-Servicer and the Financial Guaranty Insurer shall have the right to employ
their own counsel in any such action in addition to the counsel of the Servicer,
but the fees and expenses of such counsel shall be at the expense of the
Sub-Servicer and the Financial Guaranty Insurer, unless (a) the employment of
counsel by the Sub-Servicer and the Financial Guaranty Insurer at its expense
has been authorized in writing by the Servicer, (b) 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 (c) the named
parties to any such action or proceeding (including any impleaded parties)
include the Servicer and either the Sub-Servicer or the Financial Guaranty
Insurer, or both, and the Sub-Servicer and the Financial Guaranty Insurer 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 the Sub-Servicer or the Financial
Guaranty Insurer to comply with the provisions of this section shall relieve the
Servicer of liability only if such failure is materially prejudicial to the
position of the Servicer and then only to the extent of such prejudice.
(b) Sub-Servicer Indemnification.
(1) The Sub-Servicer shall indemnify the Servicer and the Financial
Guaranty Insurer 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 Sub-Servicer's representations and warranties and covenants
contained in this Agreement or in any way relating to the failure of the
Sub-Servicer to perform its duties in compliance with the terms of this
Agreement; provided, however, that the Sub-Servicer shall not be required to
indemnify the Servicer or the Financial Guaranty Insurer against any liability
due to the willful malfeasance, bad faith, or negligence of the Servicer or the
Financial Guaranty Insurer hereunder. This indemnity shall survive the
termination of this Agreement and the payment of the Mortgage Loans. The
Servicer and the Financial Guaranty Insurer, as the case may be, shall promptly
notify the Sub-Servicer if a claim is made by a third party with respect to a
breach of any of the Sub-Servicer's representations and warranties and covenants
contained in this Agreement or in any way relating to the failure of the
Sub-Servicer to perform its duties in compliance with the terms of this
Agreement. The Sub-Servicer shall promptly notify the Servicer and the Financial
Guaranty Insurer of any claim of which it has been notified pursuant to this
Section 7.08 by a Person other than the Servicer or the Financial Guaranty
Insurer, as the case may be, and, in any event, shall promptly notify the
Servicer and the Financial Guaranty Insurer of its intended course of action
with respect to any claim.
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(2) The Sub-Servicer shall be entitled to participate in and,
upon notice to the Servicer and the Financial Guaranty Insurer, assume the
defense of any such action or claim in reasonable cooperation with, and with the
reasonable cooperation of the Servicer and the Financial Guaranty Insurer. The
Servicer and the Financial Guaranty Insurer shall have the right to employ their
own counsel in any such action in addition to the counsel of the Sub-Servicer,
but the fees and expenses of such counsel shall be at the expense of the
Servicer and the Financial Guaranty Insurer, unless (a) the employment of
counsel by the Servicer and the Financial Guaranty Insurer at its expense has
been authorized in writing by the Sub-Servicer, (b) the Sub-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 (c) the named
parties to any such action or proceeding (including any impleaded parties)
include the Sub-Servicer and either the Servicer or the Financial Guaranty
Insurer, or both, and the Servicer and the Financial Guaranty Insurer 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
Sub-Servicer. The Sub-Servicer shall not be liable for any settlement of any
such claim or action unless the Sub-Servicer shall have consented thereto or be
in default on its obligations hereunder. Any failure by the Servicer or the
Financial Guaranty Insurer to comply with the provisions of this section shall
relieve the Sub-Servicer of liability only if such failure is materially
prejudicial to the position of the Sub-Servicer and then only to the extent of
such prejudice.
Section 7.09 Protection of Confidential Information.
The Sub-Servicer shall keep confidential and shall not divulge to any party
other than the Servicer, the Indenture Trustee, or the Financial Guaranty
Insurer, without the Servicer's prior written consent, any information
pertaining to the Mortgage Loans or any borrower thereunder, except to the
extent that it is appropriate for the Sub-Servicer to do so in working with
legal counsel, auditors, taxing authorities or other governmental agencies or in
accordance with this Agreement.
Section 7.10 Intention of the Parties.
It is the intention of the parties that the Servicer is conveying, and the
Sub-Servicer is receiving, only a contract for sub-servicing the Mortgage Loans.
Accordingly, the parties hereby acknowledge that the Indenture Trustee remains
the sole and absolute beneficial owner of the Mortgage Loans and all rights
related thereto.
Section 7.11 Third Party Beneficiary.
The Indenture Trustee, for the benefit of the Certificateholders, and the
Financial Guaranty Insurer shall be third party beneficiaries under this
Agreement, provided that, except to the extent the Indenture Trustee or its
designee assumes the obligations of the Servicer hereunder as contemplated by
Section 6.04 of the Servicing Agreement, none of the Indenture Trustee, the
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Trust Estate, the Financial Guaranty Insurer, any successor Servicer, or any
Certificateholder shall have any duties under this Agreement or any liabilities
arising herefrom.
Section 7.12 Successors and Assigns; Assignment of Agreement.
This Agreement shall bind and inure to the benefit of and be enforceable by
the Sub-Servicer and the Servicer and the respective successors and assigns of
the Sub-Servicer and the Servicer. This Agreement shall not be assigned, pledged
or hypothecated by the Sub-Servicer to a third party except as otherwise
specifically provided for herein and shall be subject to the prior written
consent of the Financial Guaranty Insurer in each instance. If the Servicer
shall for any reason no longer act in such capacity under the Servicing
Agreement, the Indenture Trustee or its designee may thereupon assume all of the
rights and, except to the extent they arose prior to the date of assumption,
obligations of the Servicer under this Agreement or, alternatively, may
terminate this Agreement as provided in Section 6.01(iv) of this Agreement.
Notwithstanding any other provision of this Agreement, Sub-Servicer shall have
the right to assign, transfer and pledge any right to receive payment under this
Agreement without the consent of or notice to Servicer, the Trust Estate, the
Indenture Trustee or the Financial Guaranty Insurer.
Section 7.13 Waivers.
No term or provision of this Agreement may be waived or modified unless
such waiver or modification is in writing and signed by the party against whom
such waiver or modification is sought to be enforced and the Financial Guaranty
Insurer shall have consented to such waiver.
Section 7.14 Exhibits.
The exhibits to this Agreement are hereby incorporated and made a part
hereof and are an integral part of this Agreement.
Section 7.15 General Interpretive Principles.
The general interpretive principles set forth in the Servicing Agreement
are hereby incorporated herein by reference, provided that references therein to
the Servicing Agreement shall, for the purposes of this Agreement, be deemed to
be references to this Agreement.
Section 7.16 Reproduction of Documents.
The provisions with respect to reproduction of documents set forth in the
Servicing Agreement are hereby incorporated herein by reference, provided that
references therein to the Servicing Agreement shall, for purposes of this
Agreement, be deemed to be references to this Agreement.
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Section 7.17 Further Agreement; Power-of-Attorney.
The Sub-Servicer and the Servicer each agree to execute and deliver to the
other (with copies to the Financial Guaranty Insurer) such reasonable and
appropriate additional documents, instruments or agreements as may be necessary
or appropriate to effectuate the purposes of this Agreement. Servicer hereby
irrevocably grants to Sub-Servicer a limited power-of-attorney to execute
documents as may be necessary or appropriate so as to enable Sub-Servicer to
collect payments against, to liquidate and to otherwise manage and service the
Mortgage Loans and properties in accordance with this Agreement.
Section 7.18 Amendments.
This Agreement may only be modified, supplemented or amended by written
agreement by and between the Sub-Servicer and the Servicer, with the Financial
Guaranty Insurer's prior written consent in each instance. No amendment to the
Servicing Agreement that purports to change the rights or obligations of the
Sub-Servicer hereunder shall be effective against the Sub-Servicer without the
express prior written consent of the Sub-Servicer.
Section 7.19 Entire Agreement.
This Agreement contains the entire agreement and understanding between the
parties with respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings, express or implied, oral or
written, of any nature whatsoever with respect to the subject matter hereof.
Section 7.20 Expenses.
Servicer shall pay Sub-Servicer's costs and expenses reasonably incurred in
connection with its due diligence and the preparation, negotiation, execution,
delivery and enforcement of this Agreement, including but not limited to the
fees and out-of-pocket expenses of its attorneys.
Section 7.21 Non-Disclosure.
The Servicer and Sub-Servicer agree not to disclose information concerning
this transaction without their mutual agreement and the consent of the Financial
Guaranty Insurer, except as may be required by law or regulation.
[Signature page follows]
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IN WITNESS WHEREOF, the Sub-Servicer and the Servicer have caused their
names to be signed hereto by their respective officers thereunto duly authorized
as of the date first above written.
AAMES CAPITAL CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its: Chief Executive Officer
-----------------------------------
FAIRBANKS CAPITAL CORP.
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------
Its: Executive Vice President--
Administration
-----------------------------------
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EXHIBIT A
SERVICING AGREEMENT
A-1
34
SCHEDULE 2.01
MORTGAGE LOAN SCHEDULE
B-1
35
SCHEDULE 3.01(a)
ADDITIONAL SERVICING PROCEDURES
B-2
36
SCHEDULE 3.01(d)
LOANS FOR WHICH SUB-SERVICER HAS NO
PAYMENT OBLIGATIONS ON MAY 12, 1999
All of the Mortgage Loans listed on Schedule 2.01.
B-3
37
SCHEDULE 4.01(i)
CERTAIN EXCLUDED MORTGAGE LOANS AND REO PROPERTIES
B-4
