Exhibit 10.55
================================================================================
SECOND AMENDED AND RESTATED SALE AND SERVICING AGREEMENT
among
OPTION ONE OWNER TRUST 2001-1B
as Issuer
and
OPTION ONE LOAN WAREHOUSE CORPORATION
as Depositor
and
OPTION ONE MORTGAGE CORPORATION
as Loan Originator and Servicer
and
WELLS FARGO BANK, N.A.
as Indenture Trustee
Dated as of April 29, 2005
OPTION ONE OWNER TRUST 2001-1B
MORTGAGE-BACKED NOTES
================================================================================
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............... 32
Section 2.02 Ownership and Possession of Loan Files........................................... 34
Section 2.03 Books and Records; Intention of the Parties...................................... 34
Section 2.04 Delivery of Loan Documents....................................................... 35
Section 2.05 Acceptance by the Indenture Trustee of the Loans; Certain Substitutions
and Repurchases; Certification by the Custodian.................................. 36
Section 2.06 Conditions Precedent to Transfer Dates, Funding Dates and Collateral
Value Increase Dates............................................................. 38
Section 2.07 Termination of Revolving Period.................................................. 41
Section 2.08 Correction of Errors............................................................. 41
ARTICLE III REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Depositor.................................. 42
Section 3.02 Representations and Warranties of the Loan Originator............................ 44
Section 3.03 Representations, Warranties and Covenants of the Servicer........................ 46
Section 3.04 Reserved......................................................................... 49
Section 3.05 Representations and Warranties Regarding Loans................................... 49
Section 3.06 Purchase and Substitution........................................................ 49
Section 3.07 Dispositions..................................................................... 52
Section 3.08 Servicer Put; Servicer Call...................................................... 55
Section 3.09 Modification of Underwriting Guidelines.......................................... 55
ARTICLE IV ADMINISTRATION AND SERVICING OF THE LOANS
Section 4.01 Servicer's Servicing Obligations................................................. 55
ARTICLE V ESTABLISHMENT OF TRUST ACCOUNTS; TRANSFER OBLIGATION
Section 5.01 Collection Account and Distribution Account...................................... 56
Section 5.02 Payments to Securityholders...................................................... 60
Section 5.03 Trust Accounts; Trust Account Property........................................... 61
Section 5.04 Advance Account.................................................................. 63
Section 5.05 Transfer Obligation Account...................................................... 63
Section 5.06 Transfer Obligation.............................................................. 64
ARTICLE VI STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS
Section 6.01 Statements....................................................................... 66
i
Section 6.02 Specification of Certain Tax Matters............................................. 68
Section 6.03 Valuation of Loans and Residual Securities, Hedge Value and
Retained Securities Value; Market Value Agent.................................. 69
ARTICLE VII HEDGING; FINANCIAL COVENANTS
Section 7.01 Hedging Instruments.............................................................. 70
Section 7.02 Financial Covenants.............................................................. 71
ARTICLE VIII THE SERVICER
Section 8.01 Indemnification; Third Party Claims.............................................. 71
Section 8.02 Merger or Consolidation of the Servicer.......................................... 73
Section 8.03 Limitation on Liability of the Servicer and Others............................... 74
Section 8.04 Servicer Not to Resign;Assignment................................................ 74
Section 8.05 Relationship of Servicer to Issuer and the Indenture Trustee..................... 74
Section 8.06 Servicer May Own Securities...................................................... 75
Section 8.07 Indemnification of the Indenture Trustee and Initial Noteholder.................. 75
ARTICLE IX SERVICER EVENTS OF DEFAULT
Section 9.01 Servicer Events of Default....................................................... 75
Section 9.02 Appointment of Successor......................................................... 77
Section 9.03 Waiver of Defaults............................................................... 78
Section 9.04 Accounting Upon Termination of Servicer.......................................... 79
ARTICLE X TERMINATION; PUT OPTION
Section 10.01 Termination...................................................................... 79
Section 10.02 Optional Termination............................................................. 80
Section 10.03 Notice of Termination............................................................ 80
Section 10.04 Put Option....................................................................... 80
ARTICLE XI MISCELLANEOUS PROVISIONS
Section 11.01 Acts of Securityholders.......................................................... 81
Section 11.02 Amendment........................................................................ 81
Section 11.03 Recordation of Agreement......................................................... 82
Section 11.04 Duration of Agreement............................................................ 82
Section 11.05 Governing Law.................................................................... 82
Section 11.06 Notices.......................................................................... 82
Section 11.07 Severability of Provisions....................................................... 83
Section 11.08 No Partnership................................................................... 83
Section 11.09 Counterparts..................................................................... 83
Section 11.10 Successors and Assigns........................................................... 83
Section 11.11 Headings......................................................................... 83
Section 11.12 Actions of Securityholders....................................................... 83
Section 11.13 Non-Petition Agreement........................................................... 84
Section 11.14 Holders of the Securities........................................................ 84
Section 11.15 Due Diligence Fees, Due Diligence................................................ 84
Section 11.16 No Reliance...................................................................... 85
Section 11.17 Confidential Information......................................................... 86
Section 11.18 Conflicts........................................................................ 87
ii
Section 11.19 Limitation on Liability.......................................................... 87
Section 11.20 No Agency........................................................................ 87
iii
SALE AND SERVICING AGREEMENT
This Second Amended and Restated Sale and Servicing Agreement is entered
into effective as of April 29, 2005, among OPTION ONE OWNER TRUST 2001-1B, a
Delaware business trust (the "Issuer" or the "Trust"), OPTION ONE LOAN WAREHOUSE
CORPORATION, a Delaware corporation, as Depositor (in such capacity, the
"Depositor"), OPTION ONE MORTGAGE CORPORATION, a California corporation ("Option
One"), as Loan Originator (in such capacity, the "Loan Originator") and as
Servicer (in such capacity, the "Servicer"), and WELLS FARGO BANK, N.A.
(formerly known as Wells Fargo Bank Minnesota, National Association), 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 Securities:
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.
2001-1A Sale and Servicing Agreement: The Sale and Servicing Agreement,
dated as of April 1, 2001, and as amended and restated through and including
April 16, 2004, among Option One Owner Trust 2001 -1A, the Depositor, Option One
and the Indenture Trustee.
Accepted Servicing Practices: The Servicer's normal servicing practices in
servicing and administering similar mortgage loans for its own account, which in
general will conform to the mortgage servicing practices of prudent mortgage
lending institutions which service for their own account mortgage loans of the
same type as the Loans in the jurisdictions in which the related Mortgaged
Properties are located and will give due consideration to the Noteholders'
reliance on the Servicer.
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 (which first
Transfer Date is the first date on which the Note Principal Balance is greater
than zero)) and ending on the day preceding the related Payment Date.
Act or Securities Act: The Securities Act of 1933, as amended.
1
Additional Advance Rate: As defined in the Pricing Side Letter.
Additional LIBOR Margin: As defined in the Pricing Side Letter.
Additional Note Balance: As defined in the Advance Indenture.
Additional Note Principal Balance: With respect to each (i) Transfer Date,
the aggregate Sales Prices of all Loans and Residual Securities conveyed on such
date and (ii) Funding Date, the amount of Additional Note Balance purchased by
the Issuer from the Advance Trust on such date.
Adjustment Date: With respect to each ARM, the date set forth in the
related Promissory Note on which the Loan Interest Rate on such ARM is adjusted
in accordance with the terms of the related Promissory Note.
Administration Agreement: The Administration Agreement, dated as of April
1, 2001, among the Issuer and the Administrator.
Administrator: Option One Mortgage Corporation, in its capacity as
Administrator under the Administration Agreement.
Advance Account: The account established and maintained pursuant to
Section 5.04.
Advance Depositor: Option One Advance Corporation.
Advance Documents: The "Transaction Documents" as defined in the Advance
Indenture.
Advance Indenture: The Indenture, dated as of November 1, 2003, between
Option One Advance Trust 2003-ADV1, as issuer and Wells Fargo Bank Minnesota,
National Association, not in its individual capacity, but solely as indenture
trustee.
Advance Note: Any of the Advance Trust's Advance Receivables Backed Notes,
Series 2003-ADV1, executed, authenticated and delivered under the Advance
Indenture.
Advance Note Event of Default: An "Event of Default" as defined in the
Advance Indenture.
Advance Note Purchase Agreement: The Note Purchase Agreement, dated as of
November 1, 2003, among the Advance Trust, Option One Owner Trust 2001-1A,
Option One Owner Trust 2001-1B, Option One Owner Trust 2001-2 and Greenwich
Capital Financial Products, Inc. as agent.
Advance Trust: Option One Advance Trust 2003-ADV1.
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, "control" when used with respect to any
specified Person means the power to direct
2
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 meanings correlative to the foregoing.
Agreement: This Agreement, as the same may be amended and supplemented
from time to time.
ALTA: The American Land Title Association and its successors in interest.
Appraised Value: With respect to any Loan, and the related Mortgaged
Property, the lesser of:
(i) the lesser of (a) the value thereof as determined by an
appraisal made for the originator of the Loan at the time of origination of the
Loan by an appraiser who met the minimum requirements of Fannie Mae or Freddie
Mac or through an automated appraisal process consistent with the Underwriting
Guidelines, and (b) the value thereof as determined by a review appraisal
conducted by the Loan Originator in the event any such review appraisal
determines an appraised value more than 10% lower than the value thereof, in the
case of a Loan with a Loan-to-Value Ratio less than or equal to 80%, or more
than 5% lower than the value thereof, in the case of a Loan with a Loan-to-Value
Ratio greater than 80%, as determined by the appraisal referred to in clause
(i)(a) above; and
(ii) the purchase price paid for the related Mortgaged
Property by the Borrower with the proceeds of the Loan; provided, however, that
in the case of a refinanced Loan (which is a Loan the proceeds of which were not
used to purchase the related Mortgaged Property) or a Loan originated in
connection with a "lease option purchase" if the "lease option purchase price"
was set 12 months or more prior to origination, such value of the Mortgaged
Property is based solely upon clause (i) above.
(iii) ARM: Any Loan, the Loan Interest Rate with respect to
which is subject to adjustment during the life of such Loan.
Assignment: With respect to the Loans, an LPA Assignment or S&SA
Assignment. With respect to the Residual Securities, an RSTA Assignment or S&SA
Assignment.
Assignment of Mortgage: With respect to any Loan, an assignment of the
related Mortgage in blank or to Wells Fargo Bank, N.A., as custodian or trustee
under the applicable custodial agreement or trust agreement, and 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.
Balloon Loan: Any Loan for which the related monthly payments, other than
the monthly payment due on the maturity date stated in the Promissory Note, are
computed on the basis of a period to full amortization ending on a date that is
later than such maturity date.
Basic Documents: This Agreement, the Administration Agreement, the
Custodial Agreement, the Indenture, the Loan Purchase and Contribution
Agreement, the Master Disposition Confirmation Agreement, the Note Purchase
Agreement, the Guaranty, the Advance
3
Note Purchase Agreement, the Trust Agreement, the Residual Securities Transfer
Agreement, each Hedging Instrument and, as and when required to be executed and
delivered, the Assignments.
Bill of Sale: With respect to any Funding Date, a bill of sale,
substantially in the form attached as Exhibit C to the Receivables Purchase
Agreement, delivered by Option One and the Depositor to the Issuer, the Agent
and the Indenture Trustee pursuant to the Receivables Purchase Agreement.
Block: Block Financial Corporation, A Delaware corporation, and any
successor thereto.
Borrower: The obligor or obligors on a Promissory Note.
Business Day: Any day other than (i) a Saturday or Sunday, or (ii) a day
on which the New York Stock Exchange, the Federal Reserve Bank of New York or
banking institutions in New York City, California, Maryland, Minnesota,
Pennsylvania, Delaware 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, or (iii) a day on which trading in securities on the New York Stock
Exchange or any other major securities exchange in the United States is not
conducted.
Certificateholder: A holder of a Trust Certificate.
Change of Control: As defined in the Indenture.
Clean-up Call Date: The first Payment Date occurring after the end of the
Revolving Period and the date on which the Note Principal Balance declines to
10% or less of the aggregate Note Principal Balance as of the end of the
Revolving Period.
Closing Date: April 18, 2001.
Code: The Internal Revenue Code of 1986, as amended from time to time, and
the regulations promulgated by the United States Treasury thereunder.
Collateral Percentage: As defined in the Pricing Side Letter.
Collateral Value: As defined in the Pricing Side Letter.
Collateral Value Increase Date: any date following the related Transfer
Date that the Collateral Value of specified Mortgage Loans shall be 102%
pursuant to clause (III)(a)(2)(A) of the definition of Collateral Value.
Collection Account: The account designated as such, established and
maintained by the Servicer in accordance with Section 5.01(a)(1) hereof.
Combined LTV or CLTV: With respect to any Second Lien Loan, the ratio of
the outstanding Principal Balance on the related date of origination of (a) (i)
such Loan plus (ii) the loan constituting the first lien to the lesser of (b)
(x) the Appraised Value of the Mortgaged
4
Property at origination or (y) if the Mortgaged Property was purchased within 12
months of the origination of the Loan, the purchase price of the Mortgaged
Property, expressed as a percentage.
Commission: The Securities and Exchange Commission.
Convertible Loan: A Loan that by its terms and subject to certain
conditions contained in the related Mortgage or Promissory Note allows the
Borrower to convert the adjustable Loan Interest Rate on such Loan to a fixed
Loan Interest Rate.
Credit Score: With respect to each Borrower, the credit score for such
Borrower from a nationally recognized credit repository; provided, however, in
the event that a credit score for such Borrower was obtained from two
repositories, the "Credit Score" shall be the lower of the two scores; provided,
further, in the event that a credit score for such Borrower was obtained from
three repositories, the "Credit Score" shall be the middle score of the three
scores.
Custodial Agreement: The custodial agreement dated as of April 1, 2001,
among the Issuer, the Servicer, the Indenture Trustee and the Custodian,
providing for the retention of the Custodial Loan Files by the Custodian on
behalf of the Indenture Trustee.
Custodial Loan File: As defined in the Custodial Agreement.
Custodian: The custodian named in the Custodial Agreement, which custodian
shall not be affiliated with the Servicer, the Loan Originator, the Depositor or
any Subservicer. Wells Fargo Bank, N.A., a national banking association, shall
be the initial Custodian pursuant to the terms of the Custodial Agreement.
Custodian Fee: For any Payment Date, the fee payable to the Custodian on
such Payment Date as set forth in the Custodian Fee Notice for such Payment
Date, which fee shall be calculated in accordance with the separate fee letter
between the Custodian and the Servicer.
Custodian Fee Notice: For any Payment Date, the written notice provided by
the Custodian to the Servicer and the Indenture Trustee pursuant to Section
6.01, which notice shall specify the amount of the Custodian Fee payable on such
Payment Date.
Daily Interest Accrual Amount: With respect to each day and the related
Accrual Period, the sum of (i) interest accrued at the Note Interest Rate with
respect to such Accrual Period on the Note Principal Balance as of the preceding
Business Day minus the principal balance of the Advance Note and the portion of
the Note Principal Balance related to the Residual Securities as of the
preceding Business Day after giving effect to all changes to the Note Principal
Balance, the principal amount of the Advance Note and the portion of the Note
Principal Balance related to the Residual Securities on or prior to such
preceding Business Day and (ii) interest accrued at the Additional Advance Rate
plus the Additional LIBOR Margin on the portion of the Note Principal Balance
equal to the outstanding principal balance of the Advance Note and the portion
of the Note Principal Balance related to the Residual Securities as of the
preceding Business Day after giving effect to all changes to the principal
amount of the Advance Note and the portion of the Note Principal Balance related
to the Residual Securities on or prior to such Business Day.
5
Deemed Cured: With respect to the occurrence of a Performance Trigger or
Rapid Amortization Trigger, when the condition that originally gave rise to the
occurrence of such trigger has not continued for 20 consecutive days, or if the
occurrence of such Performance Trigger or Rapid Amortization Trigger has been
waived in writing by the Majority Noteholder.
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 Determination Date, any Loan,
including, without limitation, any Liquidated Loan with respect to which any of
the following has occurred as of the end of the related Remittance Period: (a)
foreclosure or similar proceedings have been commenced; or (b) the Servicer or
any Subservicer has determined in good faith and in accordance with the
servicing standard set forth in Section 4.01 of the Servicing Addendum that such
Loan is in default or imminent default.
Deleted Loan: A Loan replaced or to be replaced by one or more Qualified
Substitute Loans.
Deleted Residual Security: A Residual Security replaced or to be replaced
by one or more Qualified Substitute Residual Securities.
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 made 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 (or the
related Securities Intermediary) endorsed to the Indenture Trustee or its
custodian (or the related Securities Intermediary) or endorsed in blank (and if
delivered and endorsed to the Securities Intermediary, by continuous credit
thereof by book-entry to the related Trust Account);
(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 its custodian or the related Securities
Intermediary and the making by such Securities Intermediary of appropriate
entries in its records identifying such certificated securities as credited to
the related Trust Account, 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
6
appropriate entries in its records crediting the securities account of the
related 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 related Trust
Account (all of the Trust Account Property described in Subsections (a) and (b),
"Physical Property");
and, in any event, any such Physical Property in registered form
shall be in the name of the Indenture Trustee or its nominee or custodian (or
the related Securities Intermediary); and such additional or alternative
procedures as may hereafter become appropriate to effect the complete transfer
of ownership of any such Trust Account Property to the Indenture Trustee or its
nominee or custodian, consistent with changes in applicable law or regulations
or the interpretation thereof;
(c) with respect to any security issued by the U.S. Treasury, Fannie
Mae or Freddie Mac 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 the related Securities Intermediary or the securities intermediary that is
(x) also a "participant" pursuant to applicable federal regulations and (y) is
acting as securities intermediary on behalf of the Securities Intermediary with
respect to such Trust Account Property; the making by such Securities
Intermediary or 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 related Trust Account; 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 changes in 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 related Securities Intermediary, and the making by
such Securities Intermediary of appropriate entries in its records crediting
such uncertificated security to the related Trust Account.
Designated Depository Institution: With respect to an Eligible Account, an
institution whose deposits are insured by the Bank Insurance Fund or the Savings
Association Insurance Fund of the FDIC, the long-term deposits of which shall be
rated A or better by S&P or A2 or better by Moody's and the short-term deposits
of which shall be rated P-1 or better by Moody's and A-1 or better by S&P,
unless otherwise approved in writing by the Initial Noteholder and which is any
of the following: (A) a federal savings and loan association duly organized,
validly existing and in good standing under the federal banking laws, (B) an
institution duly organized, validly existing and in good standing under the
applicable banking laws of any state, (C) a national banking association duly
organized, validly existing and in good standing under the federal banking laws,
(D) a principal subsidiary of a bank holding company or (E) approved in writing
by the Initial Noteholder and, in each case acting or designated by the Servicer
as the
7
depository institution for the Eligible Account; provided, however, that any
such institution or association shall have combined capital, surplus and
undivided profits of at least $50,000,000.
Depositor: Option One Loan Warehouse Corporation, a Delaware corporation,
and any successors thereto.
Determination Date: With respect to any Payment Date occurring on the 10th
day of a month, the last calendar day of the month immediately preceding the
month of such Payment Date, and with respect to any other Payment Date, as
mutually agreed by the Servicer and the Noteholders.
Disposition: A Securitization, Whole Loan Sale transaction, or other
disposition of Loans or Residual Securities.
Disposition Agent: Greenwich Capital Markets, Inc. and its successors and
assigns acting at the direction, and as agent, of the Majority Noteholders.
Disposition Participant: As applicable, with respect to a Disposition, any
"depositor" with respect to such Disposition, the Disposition Agent, the
Majority Noteholders, the Issuer, the Servicer, the related trustee and the
related custodian, any nationally recognized credit rating agency, the related
underwriters, the related placement agent, the related credit enhancer, the
related whole-loan purchaser, 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 Disposition.
Disposition Proceeds: With respect to a Disposition, (x) the proceeds of
the Disposition remitted to the Trust in respect of the Loans or Residual
Securities transferred on the date of and with respect to such Disposition,
including without limitation, any cash and Retained Securities created in any
related Securitization less all costs, fees and expenses incurred in connection
with such Disposition, including, without limitation, all amounts deposited into
any reserve accounts upon the closing thereof plus or minus (y) the net positive
or net negative value of all Hedging Instruments terminated in connection with
such Disposition minus (z) all other amounts agreed upon in writing by the
Initial Noteholder, the Trust and the Servicer.
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 Fees: Shall have the meaning provided in Section 11.15
hereof.
Eligible Account: At any time, an account which is: (i) maintained with a
Designated Depository Institution; (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
8
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.
Eligible Servicer: (x) Option One or (y) any other Person that (a) (i) has
been designated as an approved seller-servicer by Fannie Mae or Freddie Mac for
first and second mortgage loans and (ii) has equity of not less than
$15,000,000, as determined in accordance with GAAP or (b) any other Person to
which the Majority Noteholders may consent in writing.
Escrow Payments: With respect to any 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
or servicer pursuant to the Mortgage or any other document.
Event of Default: Either a Servicer Event of Default or an Event of
Default under the Indenture.
Exceptions Report: The meaning set forth in the Custodial Agreement.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Fannie Mae: The Federal National Mortgage Association and any successor
thereto.
FDIC: The Federal Deposit Insurance Corporation and any successor thereto.
Fidelity Bond: As described in Section 4.10 of the Servicing Addendum.
Final Put Date: The Put Date following the end of the Revolving Period on
which the Majority Noteholders exercise the Put Option with respect to the
entire outstanding Note Principal Balance.
Final Recovery Determination: With respect to any defaulted Loan or any
Foreclosure Property, a determination made by the Servicer that all Mortgage
Insurance Proceeds, Liquidation Proceeds and other payments or recoveries which
the Servicer, in its reasonable good faith judgment, expects to be finally
recoverable in respect thereof have been so recovered. The Servicer shall
maintain records, prepared by a servicing officer of the Servicer, of each Final
Recovery Determination.
Financial Covenants: With respect to Option One, the following financial
covenants:
(a) Option One must maintain a minimum "Tangible Net Worth" (defined and
determined in accordance with GAAP and exclusive of (i) any loans outstanding to
any officer or director of Option One or its Affiliates (ii) any intangibles
(other than originated or purchased servicing rights) and (iii) any receivables
from Block) of $425 million as of any day.
(b) Option One must maintain a ratio of 1.0 or greater at any time
pursuant to the Capital Adequacy Test, attached as Exhibit I hereto.
9
(c) Option One may not exceed a maximum non-warehouse leverage ratio (the
ratio of (i) the sum of (A) all funded debt (excluding debt from Block or any of
its Affiliates and all non-recourse debt) less (B) 91% of its mortgage loan
inventory held for sale less (C) 90% of servicing advance receivables
(determined and valued in accordance with GAAP) to (ii) Tangible Net Worth) of
0.50x at any time. Any direct or indirect debt provided by Block will be subject
to the Subordination Agreement; or, if Block does not enter into the
Subordination Agreement, the maximum permitted non-warehousing leverage ratio
including debt from Block will be 1.0x at any time, provided, that no more than
0.5x of such non-warehouse leverage ratio can be funded by entities not
affiliated with Option One or Block.
(d) Option One must maintain a minimum liquidity facility (defined as a
committed, unsecured, non-amortizing liquidity facility from Block not to mature
(scheduled or accelerated) prior to the Maturity Date) in an amount no less than
$150 million. Such facility from Block cannot contain covenants or termination
events more restrictive than the covenants or termination events contained in
the Basic Documents.
(e) Option One must maintain a minimum "Net Income" (defined and
determined in accordance with GAAP) of at least $1 based on the total of the
current quarter combined with the previous three quarters.
First Lien Loan: A Loan secured by the lien on the related Mortgaged
Property, subject to no prior liens on such Mortgaged Property.
Foreclosed Loan: As of any Determination Date, any Loan that as of the end
of the preceding Remittance Period has been discharged as a result of (i) the
completion of foreclosure or comparable proceedings by the Servicer on behalf of
the Issuer; (ii) the 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 of title to the related Mortgaged Property
by operation of law.
Foreclosure Property: Any real property securing a Foreclosed Loan that
has been acquired by the Servicer on behalf of the Issuer through foreclosure,
deed in lieu of foreclosure or similar proceedings in respect of the related
Loan.
Freddie Mac: The Federal Home Loan Mortgage Corporation and any successor
thereto.
Funding Account: As defined in the Advance Indenture.
Funding Date: With respect to the Advance Note, the day on which
Additional Note Balance is purchased by the Issuer under the Advance Note
Purchase Agreement.
Funding Notice: As defined in the Advance Indenture.
GAAP: Generally Accepted Accounting Principles as in effect in the United
States.
Gross Margin: With respect to each ARM, the fixed percentage amount set
forth in the related Promissory Note.
10
Guaranty: The Guaranty made by H&R Block, Inc. in favor of the Indenture
Trustee and the Noteholders.
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. Such amounts shall be calculated by the Market Value Agent
and the Indenture Trustee shall be notified of such amount by the Market Value
Agent.
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 6.03 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 request of the Majority
Noteholders, (ii) that has entered into a Hedging Instrument and (iii) that is
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 VII hereof with respect thereto.
Indenture: The Indenture dated as of April 1, 2001, and as amended and
restated through and including April 29, 2005, between the Issuer and the
Indenture Trustee, as the same may be further amended from time to time.
Indenture Trustee: Wells Fargo Bank, N.A., a national banking association,
as Indenture Trustee under the Indenture, or any successor indenture trustee
under the Indenture.
Indenture Trustee Fee: An annual fee of $5,000 payable by the Servicer in
accordance with a separate fee agreement between the Indenture Trustee and the
Servicer and Section 5.01 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, the Loan
Originator, the Servicer, the Depositor or any of their respective Affiliates
and (iii) is not connected with the Loan Originator, the Depositor, the Servicer
or any of their respective Affiliates, as an officer, employee, promoter,
underwriter, trustee, partner, director or
11
Person performing similar functions; provided, however, that a Person shall not
fail to be Independent of the Loan Originator, the Depositor, the Servicer 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 Depositor, the Servicer or any of their respective Affiliates, as the case
may be.
Independent Accountants: A firm of nationally recognized certified public
accountants which is independent according to the provisions of SEC Regulation
S-X, Article 2.
Index: With respect to each ARM, the index set forth in the related
Promissory Note for the purpose of calculating the Loan Interest Rate thereon.
Initial Noteholder: Steamboat Funding Corporation or an Affiliate thereof
identified in writing by Greenwich Capital Financial Products, Inc. to the
Indenture Trustee and the other parties hereto. 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.
LIBOR Business Day: Any day on which banks in the City of London are open
and conducting transactions in United States dollars.
LIBOR Determination Date: With respect to each Accrual Period, the second
LIBOR Business Day preceding the commencement of such Accrual Period.
LIBOR Margin: As defined in the Pricing Side Letter.
Lien: With respect to any asset, (a) any mortgage, lien, pledge, charge,
security interest, hypothecation, option or encumbrance of any kind in respect
of such asset or (b) the interest of a vendor or lessor under any conditional
sale agreement, financing lease or other title retention agreement relating to
such asset.
Lifetime Cap: The provision in the Promissory Note for each ARM which
limits the maximum Loan Interest Rate over the life of such ARM.
Lifetime Floor: The provision in the Promissory Note for each ARM which
limits the minimum Loan Interest Rate over the life of such ARM.
Liquidated Loan: As defined in Section 4.03(c) of the Servicing Addendum.
12
Liquidated Loan Losses: With respect to any Determination Date, 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 on or 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 Mortgaged Property from
Defaulted Loans, any proceeds from Primary Insurance Policies 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 Mortgage Insurance Proceeds and
Released Mortgaged Property Proceeds. Liquidation Proceeds shall also include
any awards or settlements in respect of the related Mortgage Property, whether
permanent or temporary, partial or entire, by exercise of the power of eminent
domain or condemnation.
Loan: Any loan sold to the Trust hereunder and pledged to the Indenture
Trustee, which loan includes, without limitation, (i) a Promissory Note or Lost
Note Affidavit 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 Loan shall be deemed to include the related Promissory Note or Lost
Note Affidavit, related Mortgage and related Foreclosure Property, if any.
Loan Documents: With respect to a Loan, the documents comprising the
Custodial Loan File for such Loan or with respect to a Residual Security, the
related pooling and servicing agreement or indenture, the physical Residual
Security unless such Residual Security is held in book-entry form and any
transferor letters, transferee letters, assignments or bond powers required
under the related pooling and servicing agreement, the related indenture or
applicable law to transfer such Residual Security.
Loan File: With respect to each Loan, the Custodial Loan File and the
Servicer's Loan File.
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, and, in the
case of an ARM, as the same may be periodically adjusted in accordance with the
terms of such Loan.
Loan Originator: Option One and its permitted successors and assigns.
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 of the Basic Documents, together
with the rights and obligations of a holder thereof, and the payments thereon
and proceeds therefrom received on and after the applicable Transfer Cut-off
Date, as identified from time to time on the Loan Schedule.
Loan Purchase and Contribution Agreement: The Loan Purchase and
Contribution Agreement, between Option One, as seller and the Depositor, as
purchaser, dated as of April 1, 2001, and all supplements and amendments
thereto.
13
Loan Schedule: The schedule of Loans conveyed to the Issuer on the Closing
Date and on each Transfer Date and delivered to the Initial Noteholder and the
Custodian in the form of a computer-readable transmission specifying the
information set forth on Exhibit D hereto and, with respect to Wet Funded Loans,
Exhibit C to the Custodial Agreement.
Loan-to-Value Ratio or LTV: With respect to any First Lien Loan, the ratio
of the original outstanding principal amount of such Loan to the Appraised Value
of the Mortgaged Property at origination.
Lost Note Affidavit: With respect to any Loan as to which the original
Promissory Note has been permanently lost or destroyed and has not been
replaced, an affidavit from the Loan Originator certifying that the original
Promissory Note has been lost, misplaced or destroyed (together with a copy of
the related Promissory Note and indemnifying the Issuer against any loss, cost
or liability resulting from the failure to deliver the original Promissory Note)
in the form of Exhibit L attached to the Custodial Agreement.
LPA Assignment: The assignment of Loans from Option One to the Depositor
under the Loan Purchase and Contribution Agreement.
Majority Certificateholders: Has the meaning set forth in the Trust
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.
Market Value: The market value of a Loan or Residual Security as of any
Business Day as determined by the Market Value Agent in accordance with Section
6.03 hereof.
Market Value Agent: Greenwich Capital Financial Products, Inc. or an
Affiliate thereof designated by Greenwich Capital Financial Products, Inc. in
writing to the parties hereto and, in either case, its successors in interest.
Master Disposition Confirmation Agreement: The Master Disposition
Confirmation Agreement, dated as of April 1, 2001, by and among Option One, the
Depositor, Option One Owner Trust 2001-1A, Option One Owner Trust 2001-1B,
Option One Owner Trust 2001-2, Wells Fargo Bank Minnesota, National Association,
Bank of America, N.A., Greenwich Capital Financial Products, Inc., and Steamboat
Funding Corporation.
Maturity Date: With respect to the Notes, as set forth in the Indenture or
such later date as may be agreed in writing by the Majority Noteholders.
Maximum Note Principal Balance: As defined in Section 1.01 of the Note
Purchase Agreement.
Monthly Advance: The aggregate of the advances made by the Servicer on any
Remittance Date pursuant to Section 4.14 of the Servicing Addendum.
14
Monthly Payment: The scheduled monthly payment of principal and/or
interest required to be made by a Borrower on the related Loan, as set forth in
the related Promissory Note.
Monthly Remittance Amount: With respect to each Remittance Date, the sum,
without duplication, of (i) the aggregate payments on the Loans collected by the
Servicer pursuant to Section 5.01(b)(1)(i) during the immediately preceding
Remittance Period and (ii) the aggregate of amounts deposited into the
Collection Account pursuant to Section 5.01(b)(1)(ii) through 5.01(b)(1)(xi)
during the immediately preceding Remittance Period.
Moody's: Moody's Investors Service, Inc., or any successor thereto.
Mortgage: With respect to any Loan, the mortgage, deed of trust or other
instrument securing the related Promissory Note, which creates a first or second
lien on the fee in real property and/or a first or second lien on the leasehold
in real property securing the Promissory Note and the assignment of rents and
leases related thereto.
Mortgage Insurance Policies: With respect to any Mortgaged Property or
Loan, the insurance policies required pursuant to Section 4.08 of the Servicing
Addendum.
Mortgage Insurance Proceeds: With respect to any Mortgaged Property, all
amounts collected in respect of Mortgage Insurance Policies and not required
either pursuant to applicable law or the related Loan Documents to be applied to
the restoration of the related Mortgaged Property or paid to the related
Borrower.
Mortgaged Property: With respect to a Loan, the related Borrower'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.
Net Liquidation Proceeds: With respect to any Payment Date, Liquidation
Proceeds received during the prior Remittance Period, net of any reimbursements
to the Servicer made from such amounts for any unreimbursed Servicing
Compensation and Servicing Advances (including Nonrecoverable Servicing
Advances) made and any other fees and expenses paid in connection with the
foreclosure, inspection, conservation and liquidation of the related Liquidated
Loans or Foreclosure Properties pursuant to Section 4.03 of the Servicing
Addendum.
Net Loan Losses: With respect to any Defaulted Loan that is subject to a
modification pursuant to Section 4.01 of the Servicing Addendum, an amount equal
to the portion of the Principal Balance, if any, released in connection with
such modification.
Net Worth: With respect to any Person, the excess of total assets of such
Person, over total liabilities of such Person, determined in accordance with
GAAP.
Nonrecoverable Monthly Advance: Any Monthly Advance previously made or
proposed to be made with respect to a Loan or Foreclosure Property that, in the
good faith business judgment of the Servicer, as evidenced by an Officer's
Certificate of a Servicing Officer delivered to the Initial Noteholder, will
not, or, in the case of a proposed Monthly Advance,
15
would not be, ultimately recoverable from the related late payments, Mortgage
Insurance Proceeds, Liquidation Proceeds or condemnation proceeds on such Loan
or Foreclosure Property as provided herein.
Nonrecoverable Servicing Advance: With respect to any Loan or any
Foreclosure Property, (a) any Servicing Advance previously made and not
reimbursed from late collections, condemnation proceeds, Liquidation Proceeds,
Mortgage Insurance Proceeds or the Released Mortgaged Property Proceeds on the
related Loan or Foreclosure Property 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 of a Servicing Officer delivered to the Initial Noteholder, would
not be ultimately recoverable.
Nonutilization Fee: As defined in the Pricing Side Letter.
Note: The meaning assigned thereto in the Indenture.
Noteholder: The meaning assigned thereto in the Indenture.
Note Interest Rate: With respect to each Accrual Period, a per annum
interest rate equal to One-Month LIBOR for the related LIBOR Determination Date
plus the LIBOR Margin and the Additional LIBOR Margin for such Accrual Period.
Note Principal Balance: With respect to the Notes, as of any date of
determination (a) the sum of the Additional Note Principal Balances 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 on or prior
to such day.
Note Purchase Agreement: The Note Purchase Agreement, dated as of April
18, 2001, and as amended and restated through and including April 29, 2005,
among the Initial Noteholder, the Issuer and the Depositor, as The same may be
amended from time to time.
Note Redemption Amount: As of any Determination Date, an amount without
duplication equal to the sum of (i) the then outstanding Note Principal Balance
of the Notes, plus the Interest Payment Amount for the related Payment Date,
(ii) any Trust Fees and Expenses due and unpaid on the related Payment Date,
(iii) any Servicing Advance Reimbursement Amount as of such Determination Date
and (iv) all amounts due to Hedging Counterparties in respect of the termination
of all related Hedging Instruments.
Officer's Certificate: A certificate signed by a Responsible Officer of
the Depositor, the Loan Originator, the Servicer or the Issuer, in each case, as
required by this Agreement.
One-Month LIBOR: With respect to each Accrual Period, the rate determined
by the Initial Noteholder on the related LIBOR Determination Date on the basis
of the offered rate for one-month U.S. dollar deposits, as such rate appears on
Telerate Page 3750 as of 11:00 a.m. (London time) on such LIBOR Determination
Date; provided that if such rate does not appear on Telerate Page 3750, the rate
for such date will be determined on the basis of the offered rates of the
Reference Banks for one-month U.S. dollar deposits, as of 11:00 a.m. (London
time) on such LIBOR Determination Date. In such event, the Initial Noteholder
will request the principal
16
London office of each of the Reference Banks to provide a quotation of its rate.
If on such LIBOR Determination Date, two or more Reference Banks provide such
offered quotations, One-Month LIBOR for the related Accrual Period shall be the
arithmetic mean of all such offered quotations (rounded to the nearest whole
multiple of 1/16%). If on such LIBOR Determination Date, fewer than two
Reference Banks provide such offered quotations, One-Month LIBOR for the Accrual
Period shall be the higher of (i) LIBOR as determined on the previous LIBOR
Determination Date and (ii) the Reserve Interest Rate. Notwithstanding the
foregoing, if, under the priorities described above, One-Month LIBOR for a LIBOR
Determination Date would be based on One-Month LIBOR for the previous LIBOR
Determination Date for the third consecutive LIBOR Determination Date, the
Initial Noteholder shall select an alternative comparable index (over which the
Initial Noteholder has no control), used for determining one-month Eurodollar
lending rates that is calculated and published (or otherwise made available) by
an independent party.
Opinion of Counsel: A written opinion of counsel who may be employed by
the Servicer, the Depositor, the Loan Originator or any of their respective
Affiliates.
Option One: Option One Mortgage Corporation, a California corporation.
Overcollateralization Shortfall: As defined in the Pricing Side Letter.
Owner Trustee: means Wilmington Trust Company, a Delaware banking
corporation, not in its individual capacity but solely as Owner Trustee under
this Agreement, and any successor owner trustee under the Trust Agreement.
Owner Trustee Fee: The annual fee of $4,000 payable in equal monthly
installments to the Servicer pursuant to Section 5.01(c)(3)(i) which shall in
turn pay such amount annually to the Owner Trustee on the anniversary of the
Closing Date occurring each year during the term of this Agreement.
Paying Agent: The meaning assigned thereto in the Indenture.
Payment Date: Each of, (i) the 10th day of each calendar month commencing
on the first such 10th 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, (ii) any day a Loan or Residual Security is sold pursuant to the terms
hereof, (iii) a Put Date as specified by the Majority Noteholder pursuant to
Section 10.05 of the Indenture, and (iv) an additional Payment Date pursuant to
Section 5.01(c)(4)(i) and 5.01(c)(4)(iii). From time to time, the Majority
Noteholders and the Issuer may agree, upon written notice to the Owner Trustee
and the Indenture Trustee, to additional Payment Dates in accordance with
Section 5.01(c)(4)(ii).
Payment Statement: As defined in Section 6.01(b) hereof.
Percentage Interest: As defined in the Trust Agreement.
Performance Trigger: Shall exist, as of any Determination Date, if the
aggregate Principal Balance of all Loans that are not Scratch & Dent Loans and
that are Delinquent greater than 59 days (including Defaulted Loans and
Foreclosed Loans) as of such Determination Date
17
divided by the Pool Principal Balance as of such Determination Date is greater
than 2%, provided, however, that a Performance Trigger shall not occur if such
percentage is reduced to less than 2% within 5 Business Days of such
Determination Date as the result of the exercise of a Servicer Call. A
Performance Trigger shall continue to exist until Deemed Cured.
Periodic Cap: With respect to each ARM Loan and any Rate Change Date
therefor, the annual percentage set forth in the related Promissory Note, which
is the maximum annual percentage by which the Loan Interest Rate for such Loan
may increase or decrease (subject to the Lifetime Cap or the Lifetime Floor) on
such Rate Change Date from the Loan Interest Rate in effect immediately prior to
such Rate Change Date.
Permitted Investments: Each of the following:
(e) Direct general obligations of the United States or the
obligations of any agency or instrumentality of the United States fully and
unconditionally guaranteed, the timely payment or the guarantee of which
constitutes a full faith and credit obligation of the United States.
(f) Federal Housing Administration debentures rated Aa2 or higher by
Moody's and AA or better by S&P.
(g) Freddie Mac senior debt obligations rated Aa2 or higher by
Moody's and AA or better by S&P.
(h) Federal Home Loan Banks' consolidated senior debt obligations
rated Aa2 or higher by Moody's and AA or better by S&P.
(i) Fannie Mae senior debt obligations rated Aa2 or higher by
Moody's.
(j) Federal funds, certificates or deposit, time and demand
deposits, and bankers' acceptances (having original maturities of not more than
365 days) of any domestic bank, the short-term debt obligations of which have
been rated A-1 or better by S&P and P-1 or better by Moody's.
(k) Investment agreements approved by the Initial Noteholder
provided:
(1) The agreement is with a bank or insurance company which
has an unsecured, uninsured and unguaranteed obligation (or claims-paying
ability) rated Aa2 or better by Moody's and AA or better by S&P, and
(2) Monies invested thereunder may be withdrawn without any
penalty, premium or charge upon not more than one day's notice (provided such
notice may be amended or canceled at any time prior to the withdrawal date), and
(3) The agreement is not subordinated to any other obligations
of such insurance company or bank, and
18
(4) The same guaranteed interest rate will be paid on any
future deposits made pursuant to such agreement, and
(5) The Indenture Trustee and the Initial Noteholder receive
an opinion of counsel that such agreement is an enforceable obligation of such
insurance company or bank.
(l) Commercial paper (having original maturities of not more than
365 days) rated A-1 or better by S&P and P-1 or better by Moody's.
(m) Investments in money market funds rated AAAM or AAAM-G by S&P
and Aaa or P-1 by Moody's.
(n) Investments approved in writing by the Initial Noteholder;
provided that no instrument described above is permitted to evidence either the
right to receive (a) only interest with respect to obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provided 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 above 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 stated maturity; and provided, further, that, with respect to any
instrument described above, such instrument qualifies as a "permitted
investment" within the meaning of Section 860G(a)(5) of the Code and the
regulations thereunder.
Each reference in this definition to the Rating Agency shall be construed,
as a reference to each of S&P 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 Determination Date, the
aggregate Principal Balances of the Loans as of such Determination Date.
Prepaid Installment: With respect to any Loan, any installment of
principal thereof and interest thereon received prior to the scheduled Due Date
for such installment, intended by the Borrower as an early payment thereof and
not as a Prepayment with respect to such Loan.
Prepayment: Any payment of principal of a Loan which is received by the
Servicer in advance of the scheduled due date for the payment of such principal
(other than the principal portion of any Prepaid Installment), and the proceeds
of any Mortgage Insurance Policy which are to be applied as a payment of
principal on the related Loan shall be deemed to be Prepayments for all purposes
of this Agreement.
19
Preservation Expenses: Expenditures made by the Servicer in connection
with a foreclosed Loan prior to the liquidation thereof, including, without
limitation, expenditures for real estate property taxes, hazard insurance
premiums, property restoration or preservation.
Pricing Side Letter: The pricing letter of even date herewith, signed by
the parties hereto.
Primary Insurance Policy: A policy of primary mortgage guaranty insurance
issued by a Qualified Insurer pursuant to Section 4.06 of the Servicing
Addendum.
Principal Balance: With respect to any Loan or related Foreclosure
Property, (i) at the Transfer Cut-off Date, the Transfer Cut-off Date Principal
Balance and (ii) with respect to any other date of determination, the
outstanding unpaid principal balance of the Loan as of the end of the preceding
Remittance Period (after giving effect to all payments received thereon and the
allocation of any Net Loan Losses with respect thereto for a Defaulted Loan
prior to the end of such Remittance Period); provided, however, that any
Liquidated Loan shall be deemed to have a Principal Balance of zero. With
respect to any Residual Security, (i) at the Transfer Cut-off Date the Transfer
Cut-off Date Principal Balance and (ii) with respect to any other date of
determination, the outstanding unpaid principal balance of the Residual Security
as of such date.
Proceeding: Means any suit in equity, action at law or other judicial or
administrative proceeding.
Promissory Note: With respect to a Loan, the original executed promissory
note or other evidence of the indebtedness of the related Borrower or Borrowers.
Put/Call Loan: Any (i) non-Scratch & Dent Loan that has become 30 or more
days (but less than 60 days) Delinquent, (ii) non-Scratch & Dent Loan that has
become 60 or more days (but less than 90 days) Delinquent, (iii) non-Scratch &
Dent Loan that has become 90 or more days Delinquent, (iv) non-Scratch & Dent
Loan that is a Defaulted Loan, (v) non-Scratch & Dent Loan that has been in
default for a period of 30 days or more (other than a Loan referred to in clause
(i), (ii), (iii) or (iv) hereof), (vi) non-Scratch & Dent Loan that does not
meet criteria established by independent rating agencies or surety agency
conditions for Dispositions which criteria have been established at the related
Transfer Date and may be modified only to match changed criteria of independent
rating agencies or surety agents, or (vii) non-Scratch & Dent Loan that is
inconsistent with the intended tax status of a Securitization.
Put Date: Any date on which all or a portion of the Notes are to be
purchased by the Issuer as a result of the exercise of the Put Option.
Put Option: The right of the Majority Noteholders to require the Issuer to
repurchase all or a portion of the Notes in accordance with Section 10.04 of the
Indenture.
QSPE Affiliate: Option One Owner Trust 2001-1A, Option One Owner Trust
2001-2, Option One Owner Trust 2002-3, Option One Owner Trust 2003-4. Option One
Owner Trust 2003-5 or any other Affiliate which is a "qualified special purpose
entity" in accordance with Financial Accounting Standards Board's Statement No.
140 or 125.
20
Qualified Insurer: An insurance company duly qualified as such under the
laws of the states in which the Mortgaged Property is located, duly authorized
and licensed in such states to transact the applicable insurance business and to
write the insurance provided and that meets the requirements of Fannie Mae and
Freddie Mac.
Qualified Substitute Loan: A Loan or Loans substituted for a Deleted Loan
pursuant to Section 3.06 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 Exhibit E and is
or are not 30 or more days Delinquent as of the date of substitution for such
Deleted Loan or Loans.
Qualified Substitute Residual Security: A Residual Security or Residual
Securities substituted for a Deleted Residual Security pursuant to Section 3.06
hereof, which has or have been approved in writing by the Majority Noteholders.
Rapid Amortization Trigger: Shall exist, as of any Determination Date, if
the aggregate Principal Balance of all Loans that are not Scratch & Dent Loans
and that are Delinquent greater than 59 days (including Defaulted Loans and
Foreclosed Loans) as of such Determination Date divided by the Pool Principal
Balance as of such Determination Date is greater than 3%; provided, however,
that a Rapid Amortization Trigger shall not occur if such percentage is reduced
to less than 3% within 5 Business Days of such Determination Date as a result of
the exercise of a Servicer Call. A Rapid Amortization Trigger shall continue to
exist until it is Deemed Cured.
Rate Change Date: The date on which the Loan Interest Rate of each ARM is
subject to adjustment in accordance with the related Promissory Note.
Rating Agencies: S&P 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.
Receivables Purchase Agreement: The Receivables Purchase Agreement, dated
as of November 1, 2003, among Option One, the Advance Depositor and the Advance
Trust.
Receivables Seller: Option One.
Record Date: With respect to each Payment Date, the close of business of
the immediately preceding Business Day.
Reference Banks: Deutsche Bank National Trust Company, Barclay's Bank PLC,
The Tokyo Mitsubishi Bank and National Westminster Bank PLC and their successors
in interest; provided, however, that if the Initial Noteholder determines that
any of the foregoing banks are not suitable to serve as a Reference Bank, then
any leading banks selected by the Initial Noteholder with the approval of the
Issuer, which approval shall not be unreasonably withheld, which are engaged in
transactions in Eurodollar deposits in the international Eurocurrency market (i)
with an established place of business in London and (ii) which have been
designated as such by the Initial Noteholder with the approval of the Issuer,
which approval shall not be unreasonably withheld.
21
Refinanced Loan: A Loan the proceeds of which were not used to purchase
the related Mortgaged Property.
Released Mortgaged Property 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 Mortgaged Property from the lien of the related Mortgage,
whether by partial condemnation, sale or otherwise; which proceeds in either
case are not released to the Borrower in accordance with applicable law and/or
Accepted Servicing Practices.
Remittance Date: The Business Day immediately preceding each Payment Date.
Remittance Period: With respect to any Payment Date, the period commencing
immediately following the Determination Date for the preceding Payment Date (or,
in the case of the initial Payment Date, commencing immediately following the
initial Transfer Cut-off Date) and ending on and including the related
Determination Date.
Repurchase Price: With respect to a Loan the sum of (i) the Principal
Balance thereof as of the date of purchase or repurchase, plus (ii) all accrued
and unpaid interest on such Loan to the date of purchase or repurchase computed
at the applicable Loan Interest Rate, plus (iii) the amount of any unreimbursed
Servicing 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). The
Repurchase Price shall be (i) increased by the net negative value or (ii)
decreased by the net positive value of all Hedging Instruments terminated with
respect to the purchase of such Loan. To the extent the Servicer does not
reimburse itself for amounts, if any, in respect of the Servicing Advance
Reimbursement Amount pursuant to Section 5.01(c)(1) hereof, with respect to such
Loan, the Repurchase Price shall be reduced by such amounts. With respect to a
Residual Security the sum of (i) the Principal Balance thereof as of the date of
purchase or repurchase, plus (ii) all accrued and unpaid interest on such
Residual Security to the date of purchase or repurchase computed at the
applicable Residual Security Interest Rate.
Residual Security: Any security sold to the Trust hereunder and pledged to
the Indenture Trustee, which security must be (i) a mortgage-backed security
issued by Option One Mortgage Acceptance Corp. and evidencing an interest in a
securitization trust backed by residential mortgage loans, which mortgage loans
are serviced by Option One (including, without limitation, securities designated
as class C certificates and class P certificates that meet the foregoing
criteria) or (ii) net interest margin security issued by a trust sponsored by
Option One and backed by class C certificates and/or class P certificates, which
certificates are in turn backed by residential mortgage loans serviced by Option
One.
Residual Securities Interest Rate: With respect to each Residual Security,
the annual rate of interest borne by such Residual Security.
22
Residual Securities Pool: As of any date of determination, the pool of all
Residual Securities conveyed to the Issuer pursuant to this Agreement on all
Transfer Dates up to and including such date of determination, which Residual
Securities have not been released from the Lien of the Indenture pursuant to the
terms of the Basic Documents, together with the rights and obligations of a
holder thereof, and the payments thereon and proceeds therefrom received on and
after the applicable Transfer Cut-off Date, as identified from time to time on
the Residual Securities Schedule.
Residual Securities Schedule: The schedule of Residual Securities conveyed
to the Issuer on the Closing Date and on each Transfer Date and delivered to the
Initial Noteholder in the form of a computer-readable transmission specifying
the information set forth on Exhibit G hereto.
Residual Securities Transfer Agreement: The Residual Securities Transfer
Agreement dated as of April 16, 2004, between the Loan Originator and the
Depositor, as the same may be further amended or supplemented from time to time.
Reserve Interest Rate: With respect to any LIBOR Determination Date, the
rate per annum that the Initial Noteholder determines to be either (i) the
arithmetic mean (rounded to the nearest whole multiple of 1/16%) of the
one-month U.S. dollar lending rates which New York City banks selected by the
Initial Noteholder are quoting on the relevant LIBOR Determination Date to the
principal London offices of leading banks in the London interbank market or (ii)
in the event that the Initial Noteholder can determine no such arithmetic mean,
the lowest one-month U.S. dollar lending rate which New York City banks selected
by the Initial Noteholder are quoting on such LIBOR Determination Date to
leading European banks.
Responsible Officer: When used with respect to the Indenture Trustee or
Custodian, any officer within the corporate trust office of such Person,
including any Vice President, Assistant Vice President, Secretary, Assistant
Secretary or any other officer of such Person 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 or any officer of the
Owner Trustee who is authorized to act for the Owner Trustee in matters relating
to the Issuer and who is identified on the list of Authorized Officers delivered
by the Administrator to the Owner Trustee on the date hereof (as such list may
be modified or supplemented from time to time thereafter) and, so long as the
Administration Agreement is in effect, any Vice President or more senior officer
of the Administrator who is authorized to act for the Administrator in matters
relating to the Issuer and to be acted upon by the Administrator pursuant to the
Administration Agreement and who is identified on the list of Responsible
Officers delivered by the Administrator to the Owner Trustee on the date hereof
(as such list may be modified or supplemented from time to time thereafter).
When used with respect to the Depositor, the Loan Originator or the Servicer,
the President, any Vice President, or the Treasurer.
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
23
connection therewith to the extent the Depositor, the Loan Originator or an
Affiliate thereof retains, 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 6.03(d) hereof.
Revolving Period: With respect to the Notes, the period commencing on
April 29, 2005 and ending on the earlier of (i) April 28, 2006 and (ii) the date
on which the Revolving Period is terminated pursuant to Section 2.07.
RSTA Assignment: The assignment of Residual Securities from Option One to
the Depositor under the Residual Securities Transfer Agreement.
Sales Price: With respect to each Loan and each Residual Security and any
Transfer Date, the sum of the Collateral Values with respect to such Loan or
such Residual Security conveyed on such Transfer Date as of such Transfer Date.
S&SA Assignment: An assignment, in the form of Exhibit C hereto, of Loans
or Residual Securities and other property from the Depositor to the Issuer
pursuant to this Agreement.
Scratch & Dent Loan: A Loan identified as having minor documentation,
appraisal or underwriting deficiencies, which Loan may not be Delinquent on the
Transfer Date; provided, that the Loan Originator has provided a detailed
description of such deficiencies to the Initial Noteholder prior to the Transfer
Date (or, with respect to Loans that become Scratch & Dent Loans after the
Transfer Date, within one Business Day of the discovery, of such deficiencies);
provided further, however, that any Scratch & Dent Loan which has deficiencies
that render it an Unqualified Loan will be repurchased or substituted pursuant
to the procedures in Section 3.05.
Second Lien Loan: A Loan secured by the lien on the Mortgaged Property,
subject to one Senior Lien on such Mortgaged Property.
Securities: The Notes and the Trust Certificates.
Securities Intermediary: A "securities intermediary" as defined in Section
8-102(a)(14) of the UCC that is holding a Trust Account for the Indenture
Trustee as the sole "entitlement holder" as defined in Section 8-102(a)(7) of
the UCC.
Securitization: A sale or transfer of Loans or Residual Securities by the
Issuer at the direction of the Majority Noteholders to any other Person in order
to effect one or a series of structured-finance securitization transactions,
including but not limited to transactions involving the issuance of securities
which may be treated for federal income tax purposes as indebtedness of Option
One or one or more of its wholly-owned subsidiaries.
Securityholder: Any Noteholder or Certificateholder.
24
Senior Lien: With respect to any Second Lien Loan, the mortgage loan
having a senior priority lien on the related Mortgaged Property.
Servicer: Option One, 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 3.08(b) hereof.
Servicer Event of Default: As described in Section 9.01 hereof.
Servicer Put: The mandatory repurchase by the Servicer, at the option of
the Majority Noteholders, of a Loan pursuant to Section 3.08(a) hereof.
Servicer's Fiscal Year: May 1st of each year through April 30th of the
following year.
Servicer's Loan File: With respect to each Loan, the file held by the
Servicer, consisting of all documents (or electronic images thereof) relating to
such Loan, including, without limitation, copies of all of the Loan Documents
included in the related Custodial Loan File.
Servicer's Remittance Report: A report prepared and computed by the
Servicer in substantially the form of Exhibit B attached hereto.
Servicing Addendum: The terms and provisions set forth in Exhibit F
attached hereto relating to the administration and servicing of the Loans.
Servicing Advance Reimbursement Amount: With respect to any Determination
Date, the amount of any Servicing Advances that have not been reimbursed as of
such date, including Nonrecoverable Servicing Advances.
Servicing Advances: As defined in Section 4.14(b) of the Servicing
Addendum.
Servicing Compensation: The Servicing Fee and other amounts to which the
Servicer is entitled pursuant to Section 4.15 of the Servicing Addendum.
Servicing Fee: As to each Loan (including any Loan that has been
foreclosed and for which the related Mortgaged Property has become a Foreclosure
Property, but excluding any Liquidated Loan), the fee payable monthly to the
Servicer, which shall be the product of 0.50% (50 basis points), or such other
lower amount as shall be mutually agreed to in writing by the Majority
Noteholders and the Servicer, and the Principal Balance of such Loan as of the
beginning of the related Remittance Period, divided by 12. The Servicing Fee
shall only be payable to the extent interest is collected on a Loan.
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 date hereof to the Issuer and the Indenture Trustee, on
behalf of the Noteholders, as such list may from time to time be amended.
25
S&P: Standard & Poor's Rating Services, a division of The McGraw-Hill
Companies, Inc.
State: Means any one of the states of the United States of America or the
District of Columbia.
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 4.22 of the Servicing Addendum 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 Section 4.22 in the Servicing Addendum.
Subsidiary: With respect to any Person, any corporation, partnership or
other entity of which at least a majority of the securities or other ownership
interests having by the terms thereof ordinary voting power to elect a majority
of the board of directors or other persons performing similar functions of such
corporation, partnership or other entity (irrespective of whether or not at the
time securities or other ownership interests of any other class or classes of
such corporation, partnership or other entity shall have or might have voting
power by reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by such Person or one or more Subsidiaries of
such Person or by such Person and one or more Subsidiaries of such Person.
Substitution Adjustment: With respect to any Loan, as to any date on which
a substitution occurs pursuant to Section 2.05 or Section 3.06 hereof, the
amount, if any, by which (a) the aggregate principal balance of any Qualified
Substitute Loans (after application of principal payments received on or before
the related Transfer Cut-off Date) is less than (b) the aggregate of the
Principal Balances of the related Deleted Loans as of the first day of the month
in which such substitution occurs. With respect to any Residual Security, as to
any date on which a substitution occurs pursuant to Section 2.05 or Section 3.06
hereof, the amount, if any, by which (a) the aggregate principal balance of any
Qualified Substitute Residual Security (after application of principal payments
received on or before the related Transfer Cut-off Date) is less than (b) the
aggregate of the Principal Balances of the related Deleted Residual Securities
as of the first day of the month in which such substitution occurs.
Tangible Net Worth: With respect to any Person, as of any date of
determination, the consolidated Net Worth of such Person and its Subsidiaries,
less the consolidated net book value of all assets of such Person and its
Subsidiaries (to the extent reflected as an asset in the balance sheet of such
Person or any Subsidiary at such date) which will be treated as intangibles
under GAAP, including, without limitation, such items as deferred financing
expenses, net leasehold improvements, good will, trademarks, trade names,
service marks, copyrights, patents, licenses and unamortized debt discount and
expense; provided, that residual securities issued by such Person or its
Subsidiaries shall not be treated as intangibles for purposes of this
definition.
26
Termination Price: As of any Determination Date, 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
end of the preceding Remittance Period; (ii) all unpaid interest accrued on the
Principal Balance of each such Loan at the related Loan Interest Rate to the end
of the preceding Remittance Period; (iii) the aggregate fair market value of
each Foreclosure Property included in the Trust as of the end of the preceding
Remittance Period, 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; (iv) the Note Principal Balance of the Advance Note as of such date; (v)
all accrued and unpaid interest on the Advance Note; (v) the Principal Balance
of each Residual Security as of such date; (vi) all accrued and unpaid interest
on the Residual Security as of such date; and (vii) all other amounts due under
the Advance Documents.
Transfer Cut-off Date: With respect to each Loan or Residual Security, the
first day of the month in which the Transfer Date with respect to such Loan or
Residual Security occurs or, with respect a Loan originated in such month, the
date of origination.
Transfer Cut-off Date Principal Balance: As to each Loan or Residual
Security, its Principal Balance as of the opening of business on the Transfer
Cut-off Date (after giving effect to any payments received on the Loan or
Residual Security before the Transfer Cut-off Date).
Transfer Date: With respect to each Loan or Residual Security, the day
such Loan or Residual Security is either (i) sold and conveyed to the Depositor
by the Loan Originator pursuant to the Loan Purchase and Contribution Agreement
or the Residual Securities Transfer Agreement and to the Issuer by the Depositor
pursuant to Section 2.01 hereof or (ii) sold to the Issuer pursuant to the
Master Disposition Confirmation Agreement, which results in an increase in the
Note Principal Balance by the related Additional Note Principal Balance. With
respect to any Qualified Substitute Loan or Qualified Substitute Residual
Security, the Transfer Date shall be the day such Loan is conveyed to the Trust
pursuant to Section 2.05 or 3.06.
Transfer Obligation: The obligation of the Loan Originator under Section
5.06 hereof to make certain payments in connection with Dispositions and other
related matters.
Transfer Obligation Account: The account designated as such, established
and maintained pursuant to Section 5.05 hereof.
Transfer Obligation Target Amount: With respect to any Payment Date, 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 to but not
including such Payment Date minus any amount withdrawn from the Transfer
Obligation Account to return to the Loan Originator pursuant to Section
5.05(i)(i).
Trust: Option One Owner Trust 2001-1B, the Delaware business trust created
pursuant to the Trust Agreement.
Trust Agreement: The Trust Agreement dated as of April 1, 2001 among the
Depositor and the Owner Trustee.
27
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 and the
Transfer Obligation Account.
Trust Certificate: The meaning assigned thereto in the Trust Agreement.
Trust Estate: Shall mean 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 and by the removal of Deleted Loans and Unqualified Loans and by the
addition of Qualified Substitute Loans, together with the Servicer's Loan Files
and the Custodial Loan Files relating thereto and all proceeds thereof, (ii) the
Mortgages and security interests in the Mortgaged Properties, (iii) all payments
in respect of interest and principal with respect to each Loan and Residual
Security received on or after the related Transfer Cut-off Date, (iv) such
assets as from time to time are identified as Foreclosure Property, (v) such
assets and funds as are from time to time deposited in the Distribution Account,
Collection Account and the Transfer Obligation Account, including, without
limitation, amounts on deposit in such accounts that are invested in Permitted
Investments, (vi) lenders' rights under all Mortgage Insurance Policies and to
any Mortgage Insurance Proceeds, (vii) Net Liquidation Proceeds and Released
Mortgaged Property Proceeds, (viii) all right, title and interest of the Trust
(but none of the obligations) in and to the obligations of Hedging
Counterparties under Hedging Instruments (ix) the Advance Note and all right,
title and interest of the Trust in and under the Advance Documents, including
without limitation, all voting and consent rights of the Noteholders thereunder,
(x) such Residual Securities as from time to time are subject to this Agreement
as listed in the Residual Securities Schedule, as the same may be amended or
supplemented on each Transfer Date and by the removal of Deleted Residual
Securities and Unqualified Residual Securities and by the addition of Qualified
Substitute Residual Securities, together with the Loan Documents relating
thereto and all proceeds thereof and (xi) all right, title and interest of each
of the Depositor, the Loan Originator and the Trust in and under the Basic
Documents including, without limitation, the obligations of the Loan Originator
under the Loan Purchase and Contribution Agreement, the Master Disposition
Confirmation Agreement and the Residual Securities Transfer Agreement, and all
proceeds of any of the foregoing.
Trust Fees and Expenses: As of each Payment Date, an amount equal to the
Servicing Compensation, the Owner Trustee Fee, the Indenture Trustee Fee and the
Custodian Fee, if any, and any expenses of the foregoing.
UCC: The Uniform Commercial Code as in effect in the State of New York.
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.
28
UCC-1 Financing Statement: A financing statement meeting the requirements
of the Uniform Commercial Code of the relevant jurisdiction.
Underwriting Guidelines: The underwriting guidelines (including the loan
origination guidelines) of the Loan Originator, as the same may be amended from
time to time with notice to the Initial Noteholder.
Unfunded Transfer Obligation: With respect to any date of determination,
an amount equal to (x) the sum of (A) 10% of the aggregate Collateral Value (as
of the related Transfer Date) of all Loans sold hereunder, plus (B) 10% of the
aggregate Collateral Value (as of the related Funding Date) of the initial
principal balance of the Advance Note and all Additional Note Balance related
thereto purchased by the Issuer, plus (C) 10% of the aggregate Collateral Value
(as of the related Transfer Date) of all Residual Securities sold hereunder,
plus (D) any amounts withdrawn from the Transfer Obligation Account for return
to the Loan Originator pursuant to Section 5.05(i)(i) hereof prior to such
Payment Date, less (y) the sum of (i) the aggregate amount of payments actually
made by the Loan Originator in respect of the Transfer Obligation pursuant to
Section 5.06, (ii) the amount obtained by multiplying (a) the Unfunded Transfer
Obligation Percentage by (b) the aggregate Collateral Value (as of the related
date of Disposition) of all Loans and Residual Securities that have been subject
to a Disposition and (iii) without duplication, the aggregate amount of the
Repurchase Prices paid by the Servicer in respect of any Servicer Puts.
Unfunded Transfer Obligation Percentage: As of any date of determination,
an amount equal to (x) the Unfunded Transfer Obligation as of such date, divided
by (y) 100% of the aggregate Collateral Values as of the related Transfer Date
of all Loans in the Loan Pool and all Residual Securities in the Residual
Securities Pool..
Unqualified Loan: As defined in Section 3.06(a) hereof.
Unqualified Residual Security As defined in Section 3.06(a) hereof.
Wet Funded Custodial File Delivery Date: With respect to a Wet Funded
Loan, the later of the fifteenth Business Day and the twentieth calendar day
after the related Transfer Date, provided that if a Default or Event of Default
shall have occurred, the Wet Funded Custodial File Delivery Date shall be the
earlier of (x) such fifteenth Business Day or twentieth calendar day and (y) the
fifth day after the occurrence of such event.
Wet Funded Loan: A Loan for which the related Custodial Loan File shall
not have been delivered to the Custodian as of the related Transfer Date. Whole
Loan Sale: A Disposition of Loans pursuant to a whole-loan sale.
Section 1.02 Other Definitional Provisions.
(a) 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
29
agreements or instruments) references to all attachments thereto and
instruments incorporated therein; references to a Person are also to its
permitted successors and assigns.
(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.
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 during the Revolving Period, the Depositor agrees to offer for
sale and to sell a portion of each of the Loans or Residual Securities, as
applicable, and contribute to the capital stock of the Issuer the balance of
each of the Loans or Residual Securities, as applicable, and deliver the related
Loan Documents to or at the direction of the Issuer. To the extent the Issuer
has or is able to obtain sufficient funds under the Note Purchase Agreement and
the Notes for the purchase thereof, the Issuer agrees to purchase such Loans
offered for sale by the Depositor. On the terms and conditions of this Agreement
and the Master Disposition Confirmation Agreement, on each Transfer Date during
the Revolving Period, the Issuer may acquire Loans from another QSPE Affiliate
of the Loan Originator to the extent the Issuer has or is able to obtain
sufficient funds for the purchase thereof. On the terms and conditions of this
Agreement and the Residual Securities Transfer Agreement, on each Transfer Date
during the Revolving Period, the Issuer may acquire Residual Securities from the
Loan Originator to the extent the Issuer has or is able to obtain sufficient
funds for the purchase thereof. On the terms and conditions of this Agreement
and the Advance Note Purchase Agreement, on each Funding Date during the
30
Revolving Period, the Issuer shall acquire Additional Note Balance from the
Advance Trust to the extent the Issuer has or is able to obtain sufficient funds
under the Note Purchase Agreement and the Notes for the purchase thereof.
(ii) On each Transfer Date, in consideration of the payment of
the Additional Note Principal Balance pursuant to Section 2.06(a) hereof and as
a contribution to the assets of the Issuer, the Depositor as of the related
Transfer Date and concurrently with the execution and delivery hereof, hereby
sells, transfers, assigns, sets over and otherwise conveys 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
of its respective right, title and interest, in and to the Loans and Residual
Securities and all proceeds thereof listed on the Loan Schedule or Residual
Securities Schedule, as applicable, attached to such S&SA Assignment, including
all interest and principal received by the Loan Originator, the Depositor or the
Servicer on or with respect to the Loans or Residual Securities on or after the
related Transfer Cut-off Date, together with all right, title and interest in
and to the proceeds of any related Mortgage Insurance Policies and all of the
Depositor's rights, title and interest in and to (but none of its obligations
under) the Loan Purchase and Contribution Agreement, the Residual Securities
Transfer 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 of the obligations 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 and each
Funding Date, the Issuer acknowledges the conveyance to it of the Trust Estate,
including, as applicable, all rights, title and interest of the Depositor and
any QSPE Affiliate 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 and each Funding Date, pursuant to the
Indenture the Issuer pledges 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 or at the
direction of the Depositor.
(c) (i) Pursuant to and subject to the Note Purchase Agreement, the
Trust may, at its sole option, from time to time request that the Initial
Noteholder advance on any Transfer Date Additional Note Principal Balances and
the Initial Noteholder shall remit on such Transfer Date, to the Advance
Account, an amount equal to the Additional Note Principal Balance. In addition,
if the Initial Noteholder determines on any date following the related Transfer
Date (any such date, a "Collateral Value Increase Date") that the Collateral
value of specified Mortgage Loans shall be 102% pursuant to clause (2)(A) of the
definition of Collateral
31
Value, the Trust may request that the Initial Noteholder advance Additional Note
Principal Balances equal to such increase in the Collateral Value of the related
Mortgage Loans and the Initial Noteholder may, in its sole discretion, make such
advance of Additional Note Principal Balances. Pursuant to and subject to the
Note Purchase Agreement, the Trust shall request that the Initial Noteholder
advance on each Funding Date Additional Note Principal Balances equal to the
Additional Note Balance to be purchased by the Trust on such date and the
Initial Noteholder shall remit on such Funding Date to the Funding Account an
amount equal to such 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 or Collateral Value Increase Date if the
conditions precedent with respect to such Transfer Date or Collateral Value Date
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. Notwithstanding anything to the contrary herein, in no
event shall the Initial Noteholder be required to advance Additional Note
Principal Balances on a Funding Date if the conditions precedent with respect to
such Funding Date under Section 2.06(b), the conditions precedent to the
purchase of Additional Note Principal Balances set forth in Section 3.02 of the
Note Purchase Agreement and the conditions precedent to the purchase of
Additional Principal Balances set forth in Section 3.01 of the Advance Note
Purchase Agreement have not been fulfilled.
(iii) 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.
(iv) 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 Trust, 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 and the contents of the
related Servicer's Loan File and Custodial Loan File shall be vested in the
Trust for the benefit of the Securityholders, although possession of the
Servicer's Loan File on behalf of and for the benefit of the Securityholders
shall remain with the Servicer, and the Custodian shall take possession of the
Custodial Loan Files as contemplated in Section 2.05 hereof.
32
Section 2.03 Books and Records; Intention of the Parties.
(a) As of each Transfer Date, the sale of each of the Loans and
Residual Securities conveyed by the Depositor on such Transfer Date shall be
reflected on the balance sheets and other financial statements of the Depositor
and the Loan Originator, as the case may be, as a sale of assets and a
contribution to capital by the Loan Originator and the Depositor, as applicable,
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 and Residual Security which shall be clearly marked to reflect the
ownership of each Loan or Residual Security, as of the related Transfer Date, by
the Issuer and for the benefit of the Securityholders.
(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 initial Closing Date, on each Transfer
Date and as otherwise contemplated by the Basic Documents and the Assignments
shall constitute a sale of the Loans, Residual Securities and all related
property from the Depositor to the Issuer and such property shall not be
property of the Depositor. 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 on each Funding Date shall constitute a sale of the
Advance Note, the related Additional Note Balances and all related property from
the Advance Trust to the Issuer and such property shall not be property of the
Advance Depositor or the Receivables Seller. 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 or the
Residual Securities and the other property of the Trust Estate specified in
Section 2.01(a) hereof to the Issuer pursuant to this Agreement or the
conveyance of the Loans or the Residual Securities or any of such other property
of the Trust Estate to the Issuer, 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 or Residual Securities and related property, the Depositor
shall be deemed to have granted, as of the related Transfer Date, to the Issuer
a first priority security interest in the entire right, title and interest of
the Depositor in and to such Loans or Residual Securities and proceeds and all
other property conveyed to the Issuer 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 initial Closing Date, to the Issuer 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) On the Closing Date, the Depositor shall, at such party's sole
expense, cause to be filed UCC-1 Financing Statements naming the Issuer as
"secured party" and describing the Trust Estate being sold by the Depositor to
the Issuer with the appropriate governmental filing office in the state in which
the Depositor is organized and any other jurisdictions as shall be necessary to
perfect a security interest in the Trust Estate. In addition, on the Closing
Date, the Loan Originator shall, at its expense, cause to be filed UCC-1
Financing Statements naming the Depositor as "secured party" and describing the
Loans being sold by the
33
Loan Originator to the Depositor with the appropriate governmental office in the
state in which the Loan Originator is organized and such other jurisdictions as
shall be necessary to perfect a security interest in the Trust Estate. In
addition, on the Closing Date, the Depositor shall, at its expense, cause to be
filed UCC-1 Financing Statements naming the Depositor as "secured party" and
describing the Loans being sold by the Loan Originator to the Depositor with the
appropriate governmental office in the state in which the Loan Originator is
organized and such other jurisdictions as shall be necessary to perfect a
security interest in the Trust Estate. On or before the initial Funding Date,
the Issuer shall, at its expense, cause to be filed UCC-1 Financing Statements
naming the Issuer as "secured party" and describing the Advance Note being sold
by the Advance Trust to the Issuer with the appropriate governmental office in
the state in which the Advance Trust is organized and such other jurisdictions
as shall be necessary to perfect a security interest in the Trust Estate. On or
before the initial Transfer Date with respect to Residual Securities, the Issuer
shall, at its expense, cause to be filed UCC-1 Financing Statements naming the
Issuer as "secured party" and describing each Residual Security being sold by
the Advance Trust to the Issuer with the appropriate governmental office in the
state of Delaware and such other jurisdictions as shall be necessary to perfect
a security interest in the Trust Estate.
Section 2.04 Delivery of Loan Documents.
(a) The Loan Originator shall, prior to the related Transfer Date
(or, in the case of each Wet Funded Loan, the related Wet Funded Custodial File
Delivery Date), in accordance with the terms and conditions set forth in the
Custodial Agreement, deliver or cause to be delivered to the Custodian, as the
designated agent of the Indenture Trustee, a Loan Schedule and each of the
documents constituting the Custodial Loan File with respect to each Loan. The
Loan Originator shall assure that (i) in the event that any Wet Funded Loan is
not closed and funded to the order of the appropriate Borrower on the day funds
are provided to the Loan Originator by the Initial Noteholder on behalf of the
Issuer, such funds shall be promptly returned to the Initial Noteholder on
behalf of the Issuer and (ii) in the event that any Wet Funded Loan is subject
to a recission, all funds received in connection with such recission shall be
promptly returned to the Initial Noteholder on behalf of the Issuer. With
respect to each Residual Security, the Loan Originator shall, prior to the
related Transfer Date, deliver or cause to be delivered to the Indenture trustee
a Residual Security Schedule and each of the related Loan Documents and shall
cause the Delivery of such Residual Security to the Indenture Trustee.
(b) The Loan Originator shall, on the related Transfer Date (or in
the case of a Wet Funded Loan, on or before the related Wet Funded Custodial
File Delivery Date), deliver or cause to be delivered to the Servicer the
related Servicer's Loan File (i) for the benefit of, and as agent for, the
Noteholders and (ii) for the benefit of the Indenture Trustee, on behalf of the
Noteholders, for so long as the Notes are outstanding; after the Notes are not
outstanding, the Servicer's Loan File shall be held in the custody of the
Servicer for the benefit of, and as agent for, the Certificateholders.
(c) The Indenture Trustee shall cause the Custodian to take and
maintain continuous physical possession of the Custodial Loan Files in the State
of California (or upon prior written notice from the Custodian to the Loan
Originator and the Initial Noteholder and delivery of an Opinion of Counsel with
respect to the continued perfection of the Indenture
34
Trustee's security interest, in the State of Minnesota or Utah) and, in
connection therewith, shall act solely as agent for the Noteholders in
accordance with the terms hereof and not as agent for the Loan Originator, the
Servicer or any other party.
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 Custodial 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 Custodial 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 Exceptions Report, the Loan Originator shall cure such
exceptions by delivering such missing documents to the Custodian or otherwise
curing the defect no later than, in the case of (x) a non-Wet Funded Loan, 5
Business Days, or (y) in the case of a Wet Funded Loan one Business Day after
the Wet Funded Custodial File Delivery Date, in each case, following the receipt
of the first Exceptions Report listing such exception with respect to such Loan.
(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 and such failure has a material adverse effect on the value or
enforceability of any Loan or the interests of the Securityholders in any Loan,
the Loan Originator shall repurchase such Loan within one Business Day of notice
thereof from the Indenture Trustee or the Initial Noteholder at the Repurchase
Price thereof with respect to such Loan by depositing such Repurchase Price in
the Collection Account. In lieu of such a repurchase, the Depositor and Loan
Originator may comply with the substitution provisions of Section 3.06 hereof.
The Loan Originator shall provide the Servicer, the Indenture Trustee, the
Issuer and the Initial Noteholder with a certification of a Responsible Officer
on or prior to such repurchase or substitution indicating that the Loan
Originator intends to repurchase or substitute such Loan.
(iii) It is understood and agreed that the obligation of the
Loan Originator to repurchase or substitute any such Loan pursuant to this
Section 2.05(b) shall constitute the sole remedy with respect to such failure to
comply with the foregoing delivery requirements.
(c) In performing its reviews of the Custodial 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.
35
(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, on behalf of the Noteholders, for so long
as the Notes are outstanding; after the Notes are not outstanding, 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.
Subject to Section 8.01(d), the Servicer agrees to indemnify the Securityholders
and the Indenture Trustee, their 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 the negligence or willful misfeasance 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 or the Majority Noteholders. The Indenture Trustee shall have
no duty to monitor or otherwise oversee the Servicer's performance as custodian
of the Servicer Loan File hereunder.
Section 2.06 Conditions Precedent to Transfer Dates, Funding Dates and
Collateral Value Increase Dates.
(a) Two (2) Business Days prior to each Transfer Date, the Issuer
shall give notice to the Initial Noteholder of such upcoming Transfer Date and
provide an estimate of the number of Loans and Residual Securities and the
aggregate Principal Balance of such Loans and the aggregate Principal Balance of
such Residual Securities to be transferred on such Transfer Date. On the
Business Day prior to each Transfer Date, the Issuer shall provide the Initial
Noteholder a final Loan Schedule with respect to the Loans to be transferred on
such Transfer Date and a final Residual Securities Schedule with respect to the
Residual Securities to be transferred on such Transfer Date. On each Transfer
Date, the Depositor or the applicable QSPE Affiliate shall convey to the Issuer,
the Loans, Residual Securities and the other property and rights related thereto
described in the related S&SA Assignment, and 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 received from the Initial Noteholder 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 or the applicable QSPE Affiliate.
36
As of the Closing Date, each Transfer Date and, as applicable, each
Collateral Value Increase Date:
(i) the Depositor, the QSPE Affiliate and the Servicer, as
applicable, shall have delivered to the Issuer and the Initial Noteholder duly
executed Assignments, which shall have attached thereto a Loan Schedule and
Residual Securities Schedule, as applicable, setting forth the appropriate
information with respect to all Loans and Residual Securities conveyed on such
Transfer Date and shall have delivered to the Initial Noteholder a computer
readable transmission of such Loan Schedule and/or Residual Securities Schedule;
(ii) the Depositor shall have deposited, or caused to be
deposited, in the Collection Account all collections received with respect to
each of the Loans and Residual Securities on and after the applicable Transfer
Cut-off Date or, in the case of purchases from a QSPE Affiliate, such QSPE
Affiliate shall have deposited, or caused to be deposited, in the Collection
Account all collections received with respect to each of the Loans and allocable
to the period after the related Transfer Date;
(iii) as of such Transfer Date or Collateral Value Increase
Date, neither the Loan Originator, the Depositor or the QSPE Affiliate, as
applicable, shall (A) be insolvent, (B) be made insolvent by its respective sale
of Loans or Residual Securities or (C) have reason to believe that its
insolvency is imminent;
(iv) the Revolving Period shall not have terminated;
(v) as of such Transfer Date or Collateral Value Increase Date
(after giving effect to the sale of Loans on such Transfer Date), there shall be
no Overcollateralization Shortfall;
(vi) in the case of non-Wet Funded Loans, the Issuer shall
have delivered the Custodial Loan File to the Custodian in accordance with the
Custodial Agreement and the Initial Noteholder shall have received a copy of the
Trust Receipt and Exceptions Report reflecting such delivery;
(vii) each of the representations and warranties made by the
Loan Originator contained in Exhibit E with respect to the Loans and Section 3
of the Residual Securities Transfer Agreement with respect to the Residual
Securities shall be true and correct in all material respects as of the related
Transfer Date with the same effect as if then made and the proviso set forth in
Section 3.05 with respect to Loans sold by a QSPE Affiliate shall not be
applicable to any Loans, and the Depositor or the QSPE Affiliate, as applicable,
shall have performed all obligations to be performed by it under the Basic
Documents on or prior to such Transfer Date or Collateral Value Increase Date;
(viii) the Depositor or the QSPE Affiliate shall, at its own
expense, within one Business Day following the Transfer Date, indicate in its
computer files that the Loans and Residual Securities identified in each S&SA
Assignment have been sold to the Issuer pursuant to this Agreement and the S&SA
Assignment;
37
(ix) the Depositor or the QSPE Affiliate shall have taken any
action requested by the Indenture Trustee, the Issuer or the Noteholders
required to maintain the ownership interest of the Issuer in the Trust Estate;
(x) no selection procedures believed by the Depositor or the
QSPE Affiliate to be adverse to the interests of the Noteholders shall have been
utilized in selecting the Loans or the Residual Securities 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;
(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 and the Residual Securities pursuant to the Loan Purchase and Contribution
Agreement and the Residual Securities Transfer Agreement shall have been
fulfilled as of such Transfer Date and, in the case of purchases from a QSPE
Affiliate, all conditions precedent to the Issuer's purchase of Loans pursuant
to the Master Disposition Confirmation Agreement shall have been fulfilled as of
such Transfer Date;
(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 Transfer Date or Collateral Value Increase Date;
(xv) with respect to each Loan acquired from any QSPE
Affiliate that has a limited right of recourse to the Loan Originator under the
terms of the applicable loan purchase agreement, the Loan Originator has not
been required to pay any amount to or on behalf of such QSPE Affiliate that
lowered the recourse to the Loan Originator available to such QSPE Affiliate
below the maximum recourse to the Loan Originator available to such QSPE
Affiliate under the terms of the related loan purchase contract providing for
recourse by that QSPE Affiliate to the Loan Originator; and
(xvi) with respect to each Wet Funded Loan, the Guaranty shall
be in full force and effect.
(b) Two (2) Business Days prior to each Funding Date, the Issuer shall
deliver or cause to be delivered to the Initial Noteholder the Funding Notice
and Funding Date Report delivered by the Receivables Seller pursuant to the
Receivables Purchase Agreement. On each Funding Date, the Issuer shall purchase
the Additional Note Balance issued by the Advance Trust on such Funding Date,
and the Issuer, only upon the satisfaction of each of the conditions set forth
below on or prior to such Funding Date, shall cause the Initial Noteholder to
deposit the applicable Additional Note Principal Balance into the Funding
Account.
38
As of the each Funding Date:
(xvii) the Receivables Seller and the Advance Depositor, shall
have delivered to the Issuer the related Funding Notice and Bill of Sale, and
the exhibits related thereto, pursuant to the Receivables Purchase Agreement;
(xviii) neither the Loan Originator nor the Depositor shall
(A) be insolvent or (B) have reason to believe that its insolvency is imminent;
(xix) the Revolving Period shall not have terminated;
(xx) after giving effect to the purchase of Additional Note
Balance on such Funding Date, there shall be no Overcollateralization Shortfall;
(xxi) the Issuer shall have taken any action requested by the
Indenture Trustee or the Noteholders required to maintain the ownership interest
of the Issuer in the Trust Estate;
(xxii) the Issuer shall have provided 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;
(xxiii) after giving effect to the Additional Note Principal
Balance associated therewith, the Note Principal Balance will not exceed the
Maximum Note Principal Balance;
(xxiv) all conditions precedent to the Issuer's purchase of
Additional Note Balance pursuant to the Advance Note Purchase Agreement shall
have been fulfilled as of such Funding Date; and
(xxv) all conditions precedent to the Noteholders' purchase of
Additional Note Balance pursuant to the Note Purchase Agreement shall have been
fulfilled as of such Funding Date.
Section 2.07 Termination of Revolving Period.
Upon the occurrence of (i) an Event of Default or Default or (ii) a Rapid
Amortization Trigger or (iii) the Unfunded Transfer Obligation Percentage equals
4.0% or less or (iv) Option One or any of its Affiliates shall default under, or
fail to perform as requested under, or shall otherwise materially breach the
terms of any repurchase agreement, loan and security agreement or similar credit
facility or agreement entered into by Option One or any of its Affiliates,
including the 2001-1A Sale and Servicing Agreement and the Sale and Servicing
Agreement, dated as of April 1, 2001, as amended and restated through and
including November 25, 2003, among the Option One Owner Trust 2001-2, the
Depositor, Option One and the Indenture Trustee, and such default, failure or
breach shall entitle any counterparty to declare the Indebtedness thereunder to
be due and payable prior to the maturity thereof, the Initial Noteholder may, in
any such case, in its sole discretion, terminate the Revolving Period.
39
Section 2.08 Correction of Errors.
The parties hereto who have relevant information shall cooperate to
reconcile any errors in calculating the Sales Price from and after the Closing
Date. In the event that an error in the Sales Price is discovered by either
party, including without limitation, any error due to miscalculations of Market
Value where insufficient information has been provided with respect to a Loan or
Residual Security to make an accurate determination of Market Value as of any
applicable Transfer Date, any miscalculations of Principal Balance, accrued
interest, Overcollateralization Shortfall or aggregate unreimbursed Servicing
Advances attributable to the applicable Loan or Residual Security, or any
prepayments not properly credited, such party shall give prompt notice to the
other parties hereto, and the party that shall have benefitted from such error
shall promptly remit to the other, by wire transfer of immediately available
funds, the amount of such error with no interest thereon.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Depositor.
The Depositor hereby represents, warrants and covenants to the other
parties hereto and the Securityholders that as of the Closing Date and as of
each Transfer Date:
(a) The Depositor is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization 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 by the Depositor of each Basic
Document to which the Depositor is a party and its performance of and compliance
with all of the terms thereof will not violate the Depositor's organizational
documents 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 Depositor is a party or which are 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 the
Depositor 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);
40
(d) The Depositor is not in violation of, and the execution and
delivery by the Depositor of each Basic Document to which the Depositor is a
party and its performance and compliance with the terms of each Basic Document
to which the Depositor 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 any of its properties or materially and adversely
affect the performance of any 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
Securities invalid, (B) seek to prevent the issuance of the Securities 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 reasonably be expected to 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 Securities (it being understood that the satisfaction of the Financial
Covenants by the Loan Originator is not considered an obligation of the
Depositor);
(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 the Depositor is a party or the Securities, or for the
consummation of the transactions contemplated by any of the Basic Documents to
which the Depositor is a party, except for such consents, approvals,
authorizations and orders, if any, that have been obtained prior to such 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 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) The Depositor did not transfer the Loans or Residual Securities
sold thereon by the Depositor 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) The Depositor had good title to, and was the sole owner of, each
Loan and Residual Security sold thereon by the Depositor 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 Loan and Residual Security transferred by the
Depositor thereon free and clear of any lien;
41
(j) The Depositor acquired title to each of the Loans and Residual
Securities sold thereon by the Depositor in good faith, without notice of any
adverse claim;
(k) None of the Basic Documents to which the Depositor is a party,
nor any Officer's Certificate, statement, report or other document prepared by
the Depositor and furnished or to be furnished by it pursuant to any of the
Basic Documents to which it is a party or in connection with the transactions
contemplated thereby contains any untrue statement of material fact or omits to
state a material fact necessary to make the statements contained herein or
therein not misleading;
(l) The Depositor is not required to be registered as an "investment
company" under the Investment Company Act of 1940, as amended;
(m) The transfer, assignment and conveyance of the Loans and the
Residual Securities 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;
(n) The Depositor's principal place of business and chief executive
offices are located at Irvine, California or at such other address as shall be
designated by such party in a written notice to the other parties hereto;
(o) The Depositor covenants that during the continuance of this
Agreement it will comply in all respects with the provisions of its
organizational documents in effect from time to time; and
(p) The representations and warranties set forth in (h), (i), (j)
and (m) above were true and correct (with respect to the applicable QSPE
Affiliate) with respect to each Loan transferred to the Trust by any QSPE
Affiliate at the time such Loan was transferred to a QSPE Affiliate.
Section 3.02 Representations and Warranties of the Loan Originator.
The Loan Originator hereby represents and warrants to the other parties
hereto and the Securityholders that as of the Closing Date and as of each
Transfer Date:
(a) The Loan Originator is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization and (i) is duly qualified, in good standing and licensed to carry
on its business in each state where any Mortgaged Property related to a Loan
sold by it is located and (ii) is in compliance with the laws of any such
jurisdiction, in both cases, to the extent necessary to ensure the
enforceability of such Loans in accordance with the terms thereof and had at all
relevant times, full corporate power to originate such 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 organization 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
42
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 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 Securities invalid, (B) seek to prevent the issuance of the
Securities 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 reasonably be expected to prohibit or materially and adversely
affect the sale of the Loans or Residual Securities 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 Securities,
provided, however, that for purposes of calculating whether the Loan Seller
satisfies the Financial Covenants, such action, proceeding or investigation
shall not be taken into account unless there is a reasonable possibility of an
adverse determination of such action, proceeding or investigation;
(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
Securities, (3) the sale and contribution of the Loans or the sale of the
Residual Securities, 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;
43
(g) Immediately prior to the sale of any Loan or Residual Security
to the Depositor, the Loan Originator had good title to such Loan or Residual
Security sold by it on such date without notice of any adverse claim;
(h) The information, reports, financial statements, exhibits and
schedules furnished in writing by or on behalf of the Loan Originator to the
Initial Noteholder in connection with the negotiation, preparation or delivery
of the Basic Documents to which it is a party or delivered pursuant thereto,
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 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 in connection with the Basic Documents to
which it is a party 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.
(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) The Loan Originator has transferred the Loans or Residual
Securities transferred by it on or prior to such Transfer Date without any
intent to hinder, delay or defraud any of its creditors;
(k) The Loan Originator has received fair consideration and
reasonably equivalent value in exchange for the Loans and Residual Securities
sold by it on such Transfer Date to the Depositor;
(l) The Loan Originator has not dealt with any broker or agent or
other Person who might be entitled to a fee, commission or compensation in
connection with the transaction contemplated by this Agreement;
(m) The Loan Originator is in compliance with each of its financial
covenants set forth in Section 7.02; and
(n) The Loan Originator's principal place of business and chief
executive offices are located at Irvine, California or at such other address as
shall be designated by such party in a written notice to the other parties
hereto.
It is understood and agreed that the representations and warranties set
forth in this Section 3.02 shall survive delivery of the respective Custodial
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 Issuer. Upon discovery by the Loan
Originator, the Depositor, the Servicer, the Indenture Trustee or the Trust of a
breach of any of the foregoing representations and warranties that materially
and adversely affects the value of
44
any Loan or Residual Security or the interests of the Securityholders in any
Loan or Residual Security or in the Securities, 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 3.06 hereof to cure any breach or to
substitute for or repurchase an affected Loan or Residual Security shall
constitute the sole remedies available hereunder to the Securityholders, the
Depositor, the Servicer, the Indenture Trustee or the Trust 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
Securityholders 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
other parties hereto and the Securityholders that as of the Closing Date and as
of each Transfer Date:
(a) The Servicer is a corporation duly organized, validly existing
and in good standing under the laws of the State of California and (i) is duly
qualified, in good standing and licensed to carry on its business in each state
where any Mortgaged Property 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 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 are 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,
45
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
reasonably be expected to 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 Securities,
provided, however, that for the purpose of calculating whether the Servicer
satisfies the Financial Covenants, such action, proceeding or investigation
shall not be taken into account unless there is a reasonable possibility of an
adverse determination of such action, proceeding or investigation;
(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 Securities, 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 information, reports, financial statements, exhibits and
schedules furnished in writing by or on behalf of the Servicer to the Initial
Noteholder in connection with the negotiation, preparation or delivery of the
Basic Documents to which it is a party or delivered pursuant thereto, 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 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 in connection with the Basic Documents to which it is a
party 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.
(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;
(i) The Servicer acknowledges and agrees that the Servicing
Compensation represents reasonable compensation for the performance of its
services hereunder and that the entire Servicing Compensation shall be treated
by the Servicer, for accounting purposes, as compensation for the servicing and
administration of the Loans pursuant to this Agreement;
(j) The Servicer is in compliance with each of its financial
covenants set forth in Section 7.02; and
46
(k) The Servicer is an Eligible Servicer and covenants to remain an
Eligible Servicer or, if not an Eligible Servicer, each Subservicer is an
Eligible Servicer and the Servicer covenants to cause each Subservicer to be an
Eligible Servicer.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.03 shall survive delivery of the
respective Custodial Loan Files to the Indenture Trustee or the Custodian on its
behalf and shall inure to the benefit of the Depositor, the Securityholders, the
Indenture Trustee and the Issuer. Upon discovery by the Loan Originator, the
Depositor, the Servicer, the Indenture Trustee, the Owner Trustee or the Issuer
of a breach of any of the foregoing representations, warranties and covenants
that materially and adversely affects the value of any Loan or Residual Security
or the interests of the Securityholders therein or in the Securities, 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 Securityholders,
rights to exercise their remedies as provided under this Agreement.
Section 3.04 Reserved.
Section 3.05 Representations and Warranties Regarding Loans.
The Loan Originator makes each of the representations and warranties set
forth on Exhibit E hereto with respect to each Loan and makes each
representation and warranty set forth in Section 3 of the Residual Securities
Transfer Agreement with respect to each Residual Security, provided, however,
that with respect to each Loan transferred to the Issuer by a QSPE Affiliate, to
the extent that the Loan Originator has at the time of such transfer actual
knowledge of any facts or circumstances that would render any of such
representations and warranties materially false, the Loan Originator shall
notify the Initial Noteholder of such facts or circumstances and, in such event,
shall have no obligation to make such materially false representation and
warranty.
In addition, the Loan Originator represents and warrants with respect to
each Loan sold by a QSPE Affiliate that the Loan Originator has not been
required to pay any amount to or on behalf of such QSPE Affiliate that lowered
the recourse to the Loan Originator available to such QSPE Affiliate below the
maximum recourse to the Loan Originator available to such QSPE Affiliate under
the terms of any loan purchase agreement providing for recourse by that QSPE
Affiliate to the Loan Originator.
Section 3.06 Purchase and Substitution.
(a) It is understood and agreed that the representations and
warranties set forth in Exhibit E hereto and in Section 3 of the Residual
Securities Transfer Agreement shall survive the conveyance of the Loans or the
Residual Securities to the Indenture Trustee on behalf of the Issuer, and the
delivery of the Securities to the Securityholders. Upon discovery 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 of the Loan
Originator set forth in Section 3.02 which materially
47
and adversely affects the value or enforceability of any Loan or Residual
Security or the interests of the Securityholders in any Loan or Residual
Security (notwithstanding that such representation and warranty was made to the
Loan Originator's best knowledge) or which, as a result of the attributes of the
aggregate Loan Pool or Residual Securities Pool, constitutes a breach of the
representations and warranties set forth in Exhibit E or in Section 3 of the
Residual Securities Transfer Agreement, the party discovering such breach shall
give prompt written notice to the others. The Loan Originator shall within 5
Business Days of the earlier of the Loan Originator's discovery or the Loan
Originator's receiving notice of any breach of a 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 in the related Loan (an "Unqualified Loan") or related
Residual Security (an "Unqualified Residual Security"), the Loan Originator
shall promptly upon receipt of written instructions from the Majority
Noteholders either (i) remove such Unqualified Loan (in which case it shall
become a Deleted Loan) or Unqualified Residual Security (in which case it shall
become a Deleted Residual Security) from the Trust and substitute one or more
Qualified Substitute Loans (in place of a Deleted Loan) or Qualified Residual
Securities (in place of a Deleted Residual Security) in the manner and subject
to the conditions set forth in this Section 3.06 or (ii) purchase such
Unqualified Loan or Unqualified Residual Security at a purchase price equal to
the Repurchase Price with respect to such Unqualified Loan or Unqualified
Residual Security by depositing or causing to be deposited such Repurchase Price
in the Collection Account.
Any substitution of Loans or Residual Securities pursuant to this Section
3.06(a) shall be accompanied by payment by the Loan Originator of the
Substitution Adjustment, if any, (x) if no Overcollateralization Shortfall
exists on the date of such substitution (after giving effect to such
substitution), remitted to the Noteholders in accordance with Section
5.01(c)(4)(i) or (y) otherwise to be deposited in the Collection Account
pursuant to Section 5.01(b)(1) hereof.
(b) As to any Deleted Loan or Deleted Residual Security for which
the Loan Originator substitutes a Qualified Substitute Loan or Loans or
Qualified Substitute Residual Security or Residual Securities, the Loan
Originator shall effect such substitution by delivering to the Indenture Trustee
and Initial Noteholder a certification executed by a Responsible Officer of the
Loan Originator to the effect that the Substitution Adjustment, if any, has been
(x) if no Overcollateralization Shortfall exists on the date of such
substitution (after giving effect to such substitution), remitted to the
Noteholders in accordance with Section 5.01(c)(4)(i), or (y) otherwise deposited
in the Collection Account. 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 Custodian the documents
constituting the Custodial Loan File for such Qualified Substitute Loan or
Loans. As to any Deleted Residual Security for which the Loan Originator
substitutes a Qualified Substitute Residual Security or Residual Securities, the
Loan Originator shall effect such substitution by delivering to the Trustee the
Loan Documents for such Qualified Substitute Residual Security or Residual
Securities.
The Servicer shall deposit in the Collection Account all payments received
in connection with each Qualified Substitute Loan or Qualified Substitute
Residual Security after the date of such substitution. Monthly Payments received
with respect to Qualified Substitute Loans or
48
Qualified Substitute Residual Securities on or before the date of substitution
will be retained by the Loan Originator. The Trust will be entitled to all
payments received on the Deleted Loan or Deleted Residual Security 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 or
Residual Security. 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 Initial Noteholder that such substitution has taken place and the
Servicer shall amend the Loan Schedule or Residual Security Schedule, as
applicable, to reflect (i) the removal of such Deleted Loan or Deleted Residual
Security from the terms of this Agreement and (ii) the substitution of the
Qualified Substitute Loan or Qualified Substitute Residual Security. The
Servicer shall promptly deliver to the Issuer, the Loan Originator, the
Indenture Trustee and Initial Noteholder, a copy of the amended Loan Schedule
and/or a copy of the amended Residual Security Schedule. Upon such substitution,
such Qualified Substitute Loan or Loans or Qualified Substitute Residual
Security or Residual Securities 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 Exhibit
E hereto and with respect to such or Qualified Substitute Residual Security or
Residual Securities, the covenants, representations and warranties set forth in
the Residual Securities Transfer Agreement. On the date of such substitution,
the Loan Originator will (x) if no Overcollateralization Shortfall exists as of
the date of substitution (after giving effect to such substitution), remit to
the Noteholders as provided in Section 5.01(c)(4)(i) or (y) otherwise deposit
into the Collection Account, in each case 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 or
Deleted Residual Securities from the lien of the Indenture and the Servicer will
cause such Qualified Substitute Loan or Qualified Substitute Residual Securities
to be pledged to the Indenture Trustee under the Indenture as part of the Trust
Estate.
(c) With respect to all Unqualified Loans, Unqualified Residual
Securities or other Loans or Residual Securities repurchased by the Loan
Originator pursuant to this Agreement, upon the deposit of the Repurchase Price
therefor into the Collection Account, (i) the Issuer shall assign to the Loan
Originator, without representation or warranty, all of the Issuer's right, title
and interest in and to such Unqualified Loan or Unqualified Residual Security,
which right, title and interest were conveyed to the Issuer pursuant to Section
2.01 hereof and (ii) 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 Unqualified Loans or Loans or Unqualified
Residual Security or Residual Securities, which right, title and interest were
conveyed to the Indenture Trustee pursuant to Section 2.01 hereof and the
Indenture. The Issuer and 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 or Residual Securities and
to have the Custodian return the Custodial Loan File of the deleted Loan to the
Servicer or to have the Trustee return the Loan Documents of the Deleted
Residual Security to the Servicer.
(d) It is understood and agreed that the obligations of the Loan
Originator set forth in this Section 3.06 to cure, purchase or substitute for a
Unqualified Loan or Unqualified
49
Residual Security constitute the sole remedies hereunder of the Depositor, the
Issuer, the Indenture Trustee, the Owner Trustee and the Securityholders
respecting a breach of the representations and warranties contained in Sections
3.02 hereof and in Exhibit E hereto and the Residual Security Transfer
Agreement. Any cause of action against the Loan Originator relating to or
arising out of a defect in a Custodial Loan File or the Loan Documents (with
respect to a Residual Security) or against the Loan Originator relating to or
arising out of a breach of any representations and warranties made in Sections
3.02 hereof and in Exhibit E hereto or the Residual Security Transfer Agreement
shall accrue as to any Loan or Residual Security 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 or Residual Security 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 or Residual Security.
(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 or Residual Security pursuant to this Section or the
eligibility of any Loan for purposes of this Agreement.
Section 3.07 Dispositions.
(a) The Majority Noteholders may at any time, and from time to time,
require that the Issuer redeem all or any portion of the Note Principal Balance
of the Notes by paying the Note Redemption Amount with respect to the Note
Principal Balance to be redeemed. In connection with any such redemption, the
Issuer shall effect Dispositions at the direction of the Majority Noteholders in
accordance with this Agreement, including in accordance with this Section 3.07.
(b) (i) In consideration of the consideration received from the
Depositor under the Loan Purchase and Contribution Agreement and the Residual
Securities Transfer Agreement, the Loan Originator hereby agrees and covenants
that in connection with each Disposition it shall effect the following:
(A) make such representations and warranties concerning the
Loans as of the "cut-off date" of the related Disposition to the Disposition
Participants as may be necessary to effect the Disposition and such additional
representations and warranties as may be necessary, in the reasonable opinion of
any of the Disposition Participants, to effect such Disposition; provided, that,
to the extent that the Loan Originator has at the time of the Disposition actual
knowledge of any facts or circumstances that would render any of such
representations and warranties materially false, the Loan Originator may notify
the Disposition Participants of such facts or circumstances and, in such event,
shall have no obligation to make such materially false representation and
warranty;
(B) supply such information, opinions of counsel, letters from
law and/or accounting firms and other documentation and certificates regarding
the origination of the Loans or the issuance of the Residual Securities as any
Disposition Participant shall reasonably request to effect a Disposition and
enter into such indemnification agreements customary for such
50
transaction relating to or in connection with the Disposition as the Disposition
Participants may reasonably require;
(C) make itself available for and engage in good faith
consultation with the Disposition Participants concerning information to be
contained in any document, agreement, private placement memorandum, or filing
with the Securities and Exchange Commission relating to the Loan Originator, the
Loans or the Residual Securities in connection with a Disposition and shall use
reasonable efforts to compile any information and prepare any reports and
certificates, into a form, whether written or electronic, suitable for inclusion
in such documentation;
(D) to implement the foregoing and to otherwise effect a
Disposition, enter into, or arrange for its Affiliates to enter into insurance
and indemnity agreements, underwriting or placement agreements, servicing
agreements, purchase agreements and any other documentation which may reasonably
be required of or reasonably deemed appropriate by the Disposition Participants
in order to effect a Disposition; and
(E) take such further actions as may be reasonably necessary
to effect the foregoing;
provided, that notwithstanding anything to the contrary, (a) the Loan Originator
shall have no liability for the Loans or the Residual Securities arising from or
relating to the ongoing ability of the related Borrowers to pay under the Loans
or under the loans underlying the Residual Securities; (b) none of the
indemnities hereunder shall constitute an unconditional guarantee by the Loan
Originator of collectibility of the Loans or the Residual Securities; (c) the
Loan Originator shall have no obligation with respect to the financial inability
of any Borrower to pay principal, interest or other amount owing by such
Borrower under a Loan or under a loan underlying a Residual Security; and (d)
the Loan Originator shall only be required to enter into documentation in
connection with Dispositions that is consistent with the prior public
securitizations of affiliates of the Loan Originator, provided that to the
extent an Affiliate of the Initial Noteholder acts as "depositor" or performs a
similar function in a Securitization, additional indemnities and informational
representations and warranties are provided which are consistent with those in
the Basic Documents and may upon request of the Loan Originator be set forth in
a separate agreement between an Affiliate of the Initial Noteholder and the Loan
Originator.
(ii) In the event of any Disposition to the Loan Originator or
any of its Affiliates (except in connection with a Securitization or a
Disposition to a QSPE Affiliate), the purchase price paid by the Loan Originator
or any such Affiliate shall be the "fair market value" of the Loans or the
Residual Securities subject to such Disposition (as determined by the Market
Value Agent based upon recent sales of comparable loans or securities or such
other objective criteria as may be approved for determining "fair market value"
by a "Big Five" national accounting firm).
(iii) As long as no Event of Default or Default shall have
occurred and be continuing under this Agreement or the Indenture, the Servicer
may continue to service the Loans included in any Disposition subject to any
applicable "term-to-term" servicing provisions in Section 9.01(c) and subject to
any required amendments to the related servicing provisions as
51
may be necessary to effect the related Disposition including but not limited to
the obligation to make recoverable principal and interest advances on the Loans.
After the termination of the Revolving Period, the Loan Originator,
the Issuer and the Depositor shall use commercially reasonable efforts to effect
a Disposition at the direction of the Disposition Agent.
(c) The Issuer shall effect Dispositions at the direction of the
Majority Noteholders in accordance with the terms of this Agreement and the
Basic Documents. In connection therewith, the Trust agrees to assist the Loan
Originator in such Dispositions 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
or Residual Securities, as of the "cut-off dates" of the related Dispositions,
to such Disposition Participants as may be necessary to effect the Dispositions;
provided, that any such sale shall be for "fair market value," as determined by
the Market Value Agent in its reasonable discretion;
(ii) deposit the cash Disposition Proceeds into the
Distribution Account pursuant to Section 5.01(c)(2)(D);
(iii) to the extent that a Securitization creates any Retained
Securities, to accept such Retained Securities as a part of the Disposition
Proceeds in accordance with the terms of this Agreement; and
(iv) take such further actions, including executing and
delivering documents, certificates and agreements, as may be reasonably
necessary to effect such Dispositions.
(d) The Servicer hereby covenants that it will take such actions as
may be reasonably necessary to effect Dispositions as the Disposition
Participants may request and direct, including without limitation providing the
Loan Originator such information as may be required to make representations and
warranties required hereunder, and covenants that it will make such
representations and warranties regarding its servicing of the Loans hereunder as
of the Cut-off Date of the related Disposition as reasonably required by the
Disposition Participants.
(e) [reserved]
(f) The Majority Noteholders may effect Whole Loan Sales upon
written notice to the Servicer of its intent to cause the Issuer to effect a
Whole Loan Sale at least 5 Business Days in advance thereof. The Disposition
Agent shall serve as agent for Whole Loan Sales and will receive a reasonable
fee for such services provided that no such fee shall be payable if (i) the Loan
Originator or its Affiliates purchase such Loans and (ii) no Event of Default or
Default shall have occurred. The Loan Originator or its Affiliates may
concurrently bid to purchase Loans in a Whole Loan Sale; provided, however, that
neither the Loan Originator nor any such Affiliates shall pay a price in excess
of the fair market value thereof (as determined by the Market Value Agent based
upon recent sales of comparable loans or such other objective criteria as may be
approved for determining "fair market value" by a "Big Five" national accounting
firm). In the event that the Loan Originator does not bid in any such Whole Loan
52
Sale, it shall have a right of first refusal to purchase the Loans offered for
sale at the price offered by the highest bidder. The Disposition Agent shall
conduct any Whole Loan Sale subject to the Loan Originator's right of first
refusal and shall promptly notify the Loan Originator of the amount of the
highest bid. The Loan Originator shall have five (5) Business Days following its
receipt of such notice to exercise its right of first refusal by notifying the
Disposition Agent in writing.
(g) Except as otherwise expressly set forth under this Section 3.07,
the parties' rights and obligations under this Section 3.07 shall continue
notwithstanding the occurrence of an Event of Default.
(h) The Disposition Participants (and the Majority Noteholders to
the extent directing the Disposition Participants) shall be independent
contractors to the Issuer and shall have no fiduciary obligations to the Issuer
or any of its Affiliates. In that connection, the Disposition Participants shall
not be liable for any error of judgment made in good faith and shall not be
liable with respect to any action they take or omits to take in good faith in
the performance of their duties.
Section 3.08 Servicer Put; Servicer Call.
(a) Servicer Put. The Servicer shall promptly purchase, upon the
written demand of the Majority Noteholders, any Put/Call Loan; provided,
however, that the Servicer may, upon receipt of such demand, elect to repurchase
such Put/Call Loan pursuant to (b) below, in which case such repurchase shall be
deemed a Servicer Call.
(b) Servicer Call. The Servicer may repurchase any Put/Call Loan at
any time. 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 purchased and the Repurchase Price therefor; provided,
however, that the Servicer may irrevocably waive its right to repurchase any
Put/Call Loan as soon as reasonably practicable following its receipt of notice
of the occurrence of any event or events giving rise to such Loan being a
Put/Call Loan.
(c) In connection with each Servicer Put, the Servicer shall remit
for deposit into the Collection Account the Repurchase Price for the Loans to be
repurchased. In connection with each Servicer Call, the Servicer shall deposit
into the Collection Account the Repurchase Price for the Loans to be purchased.
The aggregate Repurchase Price of all Loans transferred pursuant to Section
3.08(a) shall in no event exceed the Unfunded Transfer Obligation at the time of
any Servicer Put.
Section 3.09 Modification of Underwriting Guidelines.
The Loan Originator shall give the Initial Noteholder prompt written
notification of any modification or change to the Underwriting Guidelines. If
the Noteholder objects in writing to any modification or change to the
Underwriting Guidelines within 15 days after receipt of such notice, no Loans
may be conveyed to the Issuer pursuant to this Agreement unless such Loans have
been originated pursuant to the Underwriting Guidelines without giving effect to
such modification or change. Notwithstanding anything contained in this
Agreement to the contrary,
53
any Loan conveyed to the Issuer pursuant to this Agreement pursuant to a
modification or change to the Underwriting Guidelines that has been rejected by
the Initial Noteholder or which the Initial Noteholder did not receive notice
of, such Loan shall be deemed an Unqualified Loan and be repurchased or
substituted for in accordance with Section 3.06.
ARTICLE IV
ADMINISTRATION AND SERVICING OF THE LOANS
Section 4.01 Servicer's Servicing Obligations.
The Servicer, as independent contract servicer, shall service and
administer the Loans in accordance with the terms and provisions set forth in
the Servicing Addendum, which Servicing Addendum is incorporated herein by
reference.
ARTICLE V
ESTABLISHMENT OF TRUST ACCOUNTS; TRANSFER OBLIGATION
Section 5.01 Collection Account and Distribution Account.
(a) (1) Establishment of Collection Account. The Servicer, for the
benefit of the Noteholders, shall cause to be established and maintained one or
more Collection Accounts (collectively, the "Collection Account"), which shall
be separate Eligible Accounts entitled "Option One Owner Trust 2001-1B
Collection Account, Wells Fargo Bank, N.A., as Indenture Trustee, for the
benefit of the Option One Owner Trust 2001-1B Mortgage-Backed Notes." The
Collection Account shall be maintained with a depository institution and shall
satisfy the requirements set forth in the definition of Eligible Account. Funds
in the Collection Account shall be invested in accordance with Section 5.03
hereof. Net investment earnings shall not be considered part of funds available
in the Collection Account.
(2) Establishment of Distribution Account. The Servicer, for
the benefit of the Noteholders, shall cause to be established and maintained,
one or more Distribution Accounts (collectively, the "Distribution Account"),
which shall be separate Eligible Accounts, entitled "Option One Owner Trust
2001-1B Distribution Account, Wells Fargo Bank, N.A., as Indenture Trustee, for
the benefit of the Option One Owner Trust 2001-1B Mortgage-Backed Notes." The
Distribution Account shall be maintained with a depository institution and shall
satisfy the requirements set forth in the definition of Eligible Account. Funds
in the Distribution Account shall be invested in accordance with Section 5.03
hereof. The Servicer may, at its option, maintain one account to serve as both
the Distribution Account and the Collection Account, in which case, the account
shall be entitled "Option One Owner Trust 2001-1B Collection/Distribution
Account, Wells Fargo Bank, N.A., as Indenture Trustee, for the benefit of the
Option One Owner Trust 2001-1B Mortgage-Backed Notes." If the Servicer makes
such an election, all references herein or in any other Basic Document to either
the Collection Account or the Distribution Account shall mean the
Collection/Distribution Account described in the preceding sentence.
54
(3) The Servicer will inform the Indenture Trustee of the
location of any accounts held in the Indenture Trustee's name, including any
location to which an account is transferred.
(b) Deposits to Collection Account. The Servicer shall deposit or
cause to be deposited (without duplication):
(i) all payments on or in respect of each Loan collected on or
after the related Transfer Cut- off Date or with respect to each Loan purchased
from a QSPE Affiliate, all such payments allocable to such Loan on or after the
related Transfer Date (net, in each case, of any Servicing Compensation retained
therefrom) within two (2) Business Days after receipt thereof;
(ii) all Net Liquidation Proceeds within two (2) Business Days
after receipt thereof;
(iii) all Mortgage Insurance Proceeds within two (2) Business
Days after receipt thereof;
(iv) all Released Mortgaged Property Proceeds within two (2)
Business Days after receipt thereof;
(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 3.06 hereof concurrently with payment thereof;
(vi) any Repurchase Price payable in connection with a
Servicer Call pursuant to Section 3.08 hereof concurrently with payment thereof;
(vii) the deposit of the Termination Price under Section 10.02
hereof concurrently with payment thereof;
(viii) Nonutilization Fees;
(ix) [reserved];
(x) any payments received under Hedging Instruments or the
return of amounts by the Hedging Counterparty pledged pursuant to prior Hedge
Funding Requirements in accordance with the last sentence of this Section
5.01(b)(1); and
(xi) any Repurchase Price payable in connection with a
Servicer Put remitted by the Servicer pursuant to Section 3.08.
Except as otherwise expressly provided in Section 5.01(c)(4)(i), the
Servicer agrees that it will cause the Loan Originator, Borrower or other
appropriate Person paying such amounts, as the case may be, to remit directly to
the Servicer for deposit into the Collection Account all amounts referenced in
clauses (i) through (xi) to the extent such amounts are in excess of a
55
Monthly Payment on the related Loan. To the extent the Servicer receives any
such amounts, it will deposit them into the Collection Account on the same
Business Day as receipt thereof.
(c) Withdrawals From Collection Account; Deposits to Distribution
Account.
(1) Withdrawals From Collection Account -- Reimbursement
Items. The Paying Agent shall periodically but in any event on each
Determination Date, 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, including Servicing
Compensation;
(ii) to withdraw the Servicing Advance Reimbursement Amount;
and
(iii) to clear and terminate the Collection Account in
connection with the termination of this Agreement.
(2) Deposits to Distribution Account - Payment Dates.
(A) On the Business Day prior to each Payment Date, the Paying
Agent shall deposit into the Distribution Account such amounts as are required
from the Transfer Obligation Account pursuant to Sections 5.05(e), 5.05(f),
5.05(g) and 5.05(h).
(B) After making all withdrawals specified in Section
5.01(c)(1) above, on each Remittance Date, the Paying Agent (based on
information provided by the Servicer for such Payment Date), shall withdraw the
Monthly Remittance Amount (or, with respect to an additional Payment Date
pursuant to Section 5.01(c)(4)(ii), all amounts on deposit in the Collection
Account on such date up to the amount necessary to make the payments due on the
related Payment Date in accordance with Section 5.01(c)(3)) from the Collection
Account not later than 5:00 P.M., New York City time and deposit such amount
into the Distribution Account.
(C) On each Payment Date, the Servicer shall cause to be
deposited in the Distribution Account all payments on the Advance Note made on
or before such Payment Date and not previously distributed pursuant to Section
5.01(c)(3).
(D) The Servicer shall deposit or cause to be deposited in the
Distribution Account any cash Disposition Proceeds pursuant to Section 3.07. To
the extent the Servicer receives such amounts, it will deposit them into the
Distribution Account on the same Business Day as receipt thereof.
(E) On each Payment Date, the Servicer shall cause to be
deposited in the Distribution Account all payments on each Residual Security
made on or before such Payment Date.
(3) Withdrawals From Distribution Account -- Payment Dates. On
each Payment Date, to the extent funds are available in the Distribution
Account, the Paying Agent
56
(based on the information provided by the Servicer contained in the Servicer's
Remittance Report for such Payment Date) shall make withdrawals therefrom for
application in the following order of priority:
(i) to distribute on such Payment Date the following amounts
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 and all amounts owing to the Indenture Trustee pursuant to Section 6.07 of
the Indenture and not paid by the Servicer or the Depositor up to an amount not
to exceed $25,000 per annum, (b) to the Custodian, an amount equal to the
Custodian Fee and all unpaid Custodian Fees from prior Payment Dates, (c) to the
Servicer, an amount equal to the Servicing Compensation and all unpaid Servicing
Compensation from prior Payment Dates (to the extent not retained from
collections or remitted to the Servicer pursuant to Section 5.01(c)) and (d) to
the 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;
(ii) to distribute on such Payment Date, the Hedge Funding
Requirement to the appropriate Hedging Counterparties;
(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
Overcollateralization Shortfall for such 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 under the Indenture or Default shall have
occurred, the holders of the Notes shall receive, in respect of principal, all
remaining amounts on deposit in the Distribution Account;
(v) to the Initial Noteholder, the Nonutilization Fee for such
Payment Date, together with any Nonutilization Fees unpaid from any prior
Payment Dates;
(vi) to the appropriate Person, amounts in respect of
Issuer/Depositor Indemnities (as defined in the Trust Agreement) and Due
Diligence Fees until such amounts are paid in full;
(vii) to the Transfer Obligation Account, all remaining
amounts until the balance therein equals the Transfer Obligation Target Amount;
(viii) to the Indenture Trustee all amounts owing to the
Indenture Trustee pursuant to Section 6.07 of the Indenture and not paid
pursuant to clause (i) above;
(ix) all Nonrecoverable Servicing Advances not previously
reimbursed; and
(x) to the holders of the Trust Certificates, in accordance
with Section 5.2(b) of the Trust Agreement, all amounts remaining therein.
57
(4) (i) If the Loan Originator or the Servicer, as
applicable, repurchases, purchases or substitutes a Loan pursuant to Section
2.05, 3.06, 3.08(a), 3.08(b) or 3.08(c), then the Noteholders and the Issuer
shall deem such date to be an additional Payment Date and the Issuer shall
provide written notice to the Indenture Trustee and the Paying Agent of such
additional Payment Date at least one Business Day prior to such Payment Date. On
such additional Payment Date, the Loan Originator or the Servicer, in
satisfaction of its obligations under 2.05, 3.06, 3.08(a) 3.08(b) or 3.08(c) and
in satisfaction of the obligations of the Issuer and the Paying Agent to
distribute such amounts to the Noteholders pursuant to Section 5.01(c), shall
remit to the Noteholders, on behalf of the Issuer and the Paying Agent, an
amount equal to the Repurchase Prices and any Substitution Adjustments (as
applicable) to be paid by the Loan Originator or the Servicer by 12:00 p.m. New
York City time, as applicable, under such Section, on such Payment Date, and the
Note Principal Balance will be reduced accordingly. Such amounts shall be deemed
deposited into the Collection Account and the Distribution Account, as
applicable, and such amounts will be deemed distributed pursuant to the terms of
Section 5.01(c). Upon notice of an additional Payment Date to the Paying Agent
and the Indenture Trustee as provided above, the Paying Agent shall provide the
Loan Originator or the Servicer (as applicable) information necessary so that
remittances to the Noteholders pursuant to this clause (4)(i) may be made by the
Loan Originator or the Servicer, as applicable, in compliance with Section
5.02(a) hereof.
(ii) To the extent that there is deposited in the
Collection Account or the Distribution Account any amounts referenced in Section
5.01(b)(1)(vii) and 5.01(c)(2)(D), the Majority Noteholders and the Issuer may
agree, upon reasonable written notice to the Paying Agent and the Indenture
Trustee, to additional Payment Dates. The Issuer and the Majority Noteholder
shall give the Paying Agent and 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.
(iii) To the extent that there is deposited in the
Distribution Account any amounts referenced in Section 5.05(f), the Majority
Noteholders may, in their sole discretion, establish an additional Payment Date
by written notice delivered to the Paying Agent and the Indenture Trustee at
least one Business Day prior to such additional Payment Date. On such additional
Payment Date, the Paying Agent shall pay the sum of the Overcollateralization
Shortfall to the Noteholders in respect of principal on the Notes.
Notwithstanding that the Notes have been paid in full, the Indenture
Trustee, the Paying Agent 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 or
pursuant to Section 5.04(b) of the Indenture 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
58
immediately available funds to the account of such Noteholder, if such
Noteholder shall own of record Notes having a Percentage Interest (as defined in
the Indenture) of at least 20% and shall have so notified the Paying Agent and
the Indenture Trustee 5 Business Days prior to the related Record Date, 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 or pursuant to Section 5.04(b) of the Indenture will be made in accordance
with the Percentage Interest 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) on the date of distribution, 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 25% of the
Percentage Interests and shall have so notified the Paying Agent and the
Indenture Trustee 5 Business Days prior to the related Record Date, 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 any increase in its
obligations hereunder.
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. Amounts
distributed from each Trust Account in accordance with the terms of this
Agreement shall be released for the benefit of the Securityholders from the
Trust Estate 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 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.
With respect to the Trust Accounts, the Issuer and the Indenture
Trustee agree, that each such Trust Account shall be subject to the sole and
exclusive dominion, custody and control of the Indenture Trustee for the benefit
of the Noteholders, and, except as may be
59
consented to in writing by the Majority Noteholders, the Indenture Trustee shall
have sole signature and withdrawal authority with respect thereto.
The Servicer (unless it is also the Paying Agent) shall not be
entitled to make any withdrawals or payments from the Trust Accounts.
(b) (1) Investment of Funds. Funds held in the Collection Account,
the Distribution 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 of an
Event of Default and by the Majority Noteholders thereafter, in writing or
facsimile transmission confirmed in writing by the Servicer or Majority
Noteholders, as applicable. In the event the Indenture Trustee has not received
such written direction, such Funds shall be invested in any Permitted Investment
described in clause (i) of the definition of Permitted Investments. In any case,
funds in the Collection Account, the Distribution 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, 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, the Distribution Account and the Transfer Obligation Account
shall be paid to the Servicer immediately upon receipt by the Indenture Trustee.
All Permitted Investments in which funds in the Collection Account, the
Distribution Account or the Transfer Obligation Account are invested must be
held by or registered in the name of "Wells Fargo Bank, N.A., as Indenture
Trustee, in trust for the Option One Owner Trust 2001-1B Mortgage-Backed Notes."
(2) Insufficiency and Losses in Trust Accounts. If any amounts
are needed for disbursement from the Collection Account, the Distribution
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 shall cause to be sold or otherwise
converted to cash a sufficient amount of the investments in the Collection
Account, the Distribution 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, the Distribution Account or the Transfer Obligation Account
pursuant to this Agreement during a period in which the Servicer has the right
to direct investments pursuant to Section 5.03(b), then the Servicer shall
deposit the amount of such losses (to the extent not offset by income from other
investments in the Collection Account, the Distribution Account or the Transfer
Obligation Account, as the case may be) into the Collection Account, the
Distribution Account or the Transfer Obligation 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, the Distribution
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, the Distribution Account and/or the Transfer
Obligation Account, as the case may be.
60
(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.
(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 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, 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
paragraphs (a) and (b) of the definition of "Delivery" in Section 1.01 hereof
and shall be held, pending maturity or disposition, 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 (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 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
(d) 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.
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 transfer of
Additional Note Principal Balances purchased on Transfer Dates related to Loans
and Residual Securities shall be deposited in and withdrawn from the Advance
Account as provided in Sections 2.01 (c) and 2.06 hereof and Section 3.01 of the
Note Purchase Agreement.
Section 5.05 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
61
interest-bearing, entitled "Option One Owner Trust 2001-1B Transfer Obligation
Account, Wells Fargo Bank, N.A., as Indenture Trustee, in trust for the Option
One Owner Trust 2001-1B Mortgage-Backed Notes." The Indenture Trustee shall have
no monitoring or calculation obligation with respect to withdrawals from the
Transfer Obligation Account. Amounts in the Transfer Obligation Account shall be
invested in accordance with Section 5.03.
(b) In accordance with Section 5.06, the Loan Originator shall
deposit into the Transfer Obligation Account any amounts as may be required
thereby.
(c) On each Payment Date, the Paying Agent will deposit in the
Transfer Obligation Account any amounts required to be deposited therein
pursuant to Section 5.01(c)(3)(vii).
(d) On the date of each Disposition, the Paying Agent shall withdraw
from the Transfer Obligation Account such amount on deposit therein in respect
of the payment of Transfer Obligations as may be requested by the Disposition
Agent in writing to effect such Disposition.
(e) On each Payment Date, the Paying Agent 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 Business Day there exists an
Overcollateralization Shortfall, the Paying Agent, upon the written direction of
the Initial Noteholder, shall withdraw from the Transfer Obligation Account and
deposit into the Distribution Account on such Business Day the lesser of (x) the
amount then on deposit in the Transfer Obligation Account and (y) 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 Paying Agent, upon the written direction of the
Servicer or the Initial Noteholder, 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 Paying Agent 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) The Paying Agent shall return to the Loan Originator all amounts
on deposit in the Transfer Obligation Account (after making all other
withdrawals pursuant to this Section 5.05) until the Majority Noteholders
provide written notice to the Indenture Trustee (with a copy to the Loan
Originator and the Servicer) of the occurrence of a default or event of default
(however defined) under any Basic Document with respect to the Issuer, the
Depositor, the Loan Originator or any of their Affiliates and (ii) upon the date
of the termination of this
62
Agreement pursuant to Article X, the Paying Agent shall withdraw any remaining
amounts from the Transfer Obligation Account and remit all such amounts to the
Loan Originator.
Section 5.06 Transfer Obligation.
(a) In consideration of the transactions contemplated by the Basic
Documents, the Loan Originator agrees and covenants with the Depositor that:
(i) In connection with each Disposition it shall fund, or
cause to be funded, reserve funds, pay credit enhancer fees, pay, or cause to be
paid, underwriting fees, fund any difference between the cash Disposition
Proceeds and the aggregate Note Principal Balance at the time of such
Disposition, and make, or cause to be made, such other payments as may be, in
the reasonable opinion of the Disposition Agent, commercially reasonably
necessary to effect Dispositions, in each case to the extent that Disposition
Proceeds are insufficient to pay such amounts;
(ii) In connection with Hedging Instruments, on the Business
Day prior to each Payment Date, it shall deliver to the Servicer for deposit
into the Transfer Obligation Account any Hedge Funding Requirement (to the
extent amounts available on the related Payment Date pursuant to Section 5.01
are insufficient to make such payment), when, as and if due to any Hedging
Counterparty;
(iii) if any Interest Carry-Forward Amount shall occur, it
shall deposit into the Transfer Obligation Account any such Interest
Carry-Forward Amount on or before the Business Day preceding such related
Payment Date;
(iv) If on any Business Day there exists an
Overcollateralization Shortfall, upon the written direction of the Initial
Noteholder, it shall on such Business Day deposit into the Transfer Obligation
Account the full amount of the Overcollateralization Shortfall as of such date,
provided, that in the event that notice of such Overcollateralization Shortfall
is provided to the Loan Originator after 3:00 p.m. New York City time, the Loan
Originator shall make such deposit on the following Business Day; and
(v) Notwithstanding anything to the contrary herein, in the
event of the occurrence of an Event of Default under the Indenture, the Loan
Originator shall promptly deposit into the Transfer Obligation Account the
entire amount of the Unfunded Transfer Obligation;
provided, that notwithstanding anything to the contrary contained herein, the
Loan Originator's cumulative payments under or in respect of the Transfer
Obligations (after subtracting therefrom any amounts returned to the Loan
Originator pursuant to Section 5.05(i)(i)) together with the Servicer's payments
in respect of any Servicer Puts shall not in the aggregate exceed the Unfunded
Transfer Obligation.
(b) The Loan Originator agrees that the Noteholders, as ultimate
assignee of the rights of the Depositor under this Agreement and the other Basic
Documents, may enforce the rights of the Depositor directly against the Loan
Originator.
63
ARTICLE VI
STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS
Section 6.01 Statements.
(a) No later than 12 noon (New York City time) on each Remittance
Date, the Servicer shall deliver to the Indenture Trustee and the Initial
Noteholder by electronic transmission, 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 Remittance Date, the Servicer's Remittance
Report, setting forth the date of such Report (day, month and year), the name of
the Issuer (i.e., "Option One Owner Trust 2001-1B"), and the date of this
Agreement, all in substantially the form set out in Exhibit B hereto.
Furthermore, on each Remittance Date, the Servicer shall deliver to the
Indenture Trustee and the Initial Noteholder a data file providing, with respect
to each Loan in the Loan Pool as of the last day of the related Remittance
Period (i) if such Loan is an ARM, the current Loan Interest Rate; (ii) the
Principal Balance with respect to such Loan; (iii) the date of the last Monthly
Payment paid in full; and (iv) such other information as may be reasonably
requested by the Initial Noteholder and the Indenture Trustee. In addition, no
later than 12:00 noon (New York City time) on the 15th day of each calendar
month (or if such day is not a Business Day, the preceding Business Day), the
Custodian shall prepare and provide to the Servicer and the Indenture Trustee by
facsimile, the Custodian Fee Notice for the Payment Date falling in such
calendar month.
(b) No later than 12 noon (New York City time) on each Remittance
Date, the Servicer shall prepare (or cause to be prepared) and provide to the
Indenture Trustee electronically or via fax, receipt confirmed by telephone, the
Initial Noteholder and each Noteholder, a statement (the "Payment Statement"),
stating each date and amount of a purchase of Additional Note Principal Balance
(day, month and year), the name of the Issuer (i.e., "Option One Owner Trust
2001-1B"), the date of this Agreement and the following information:
(1) the aggregate amount of collections in respect of
principal of the Loans received by the Servicer during the preceding Remittance
Period;
(2) the aggregate amount of collections in respect of interest
on the Loans received by the Servicer during the preceding Remittance Period;
(3) all Mortgage Insurance Proceeds received by the Servicer
during the preceding Remittance Period and not required to be applied to
restoration or repair of the related Mortgaged Property or returned to the
Borrower under applicable law or pursuant to the terms of the applicable
Mortgage Insurance Policy;
(4) all Net Liquidation Proceeds deposited by the Servicer
into the Collection Account during the preceding Remittance Period;
(5) all Released Mortgaged Property Proceeds deposited by the
Servicer into the Collection Account during the preceding Remittance Period;
64
(6) the aggregate amount of all Servicing Advances made by the
Servicer during the preceding Remittance Period;
(7) the aggregate of all amounts deposited into the
Distribution Account in respect of the repurchase of Unqualified Loans and the
repurchase of Loans pursuant to Section 2.05 hereof during the preceding
Remittance Period;
(8) the aggregate Principal Balance of all Loans for which a
Servicer Call was exercised during the preceding Remittance Period;
(9) the aggregate Principal Balance of all Loans for which a
Servicer Put was exercised during the preceding Remittance Period;
(10) the aggregate amount of all payments received under
Hedging Instruments during the preceding Remittance Period;
(11) the aggregate amount of all withdrawals from the
Distribution Account pursuant to Section 5.01(c)(1)(i) hereof during the
preceding Remittance Period;
(12) the aggregate amount of cash Disposition Proceeds
received during the preceding Remittance Period;
(13) withdrawals from the Collection Account in respect of the
Servicing Advance Reimbursement Amount with respect to the related Payment Date;
(14) [reserved];
(15) 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 end of the related Remittance Period;
(16) the aggregate amount of Liquidated Loan Losses incurred
(i) during the preceding Remittance Period, and (ii) during the preceding three
Remittance Periods;
(17) the aggregate of the Principal Balances of all Loans in
the Loan Pool as of the end of the related Remittance Period;
(18) the aggregate amount of all deposits into the
Distribution Account from the Transfer Obligation Account pursuant to Sections
5.05(e), 5.05(f), 5.05(g), and 5.05(h) on the related Payment Date;
(19) 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;
(20) 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;
65
(21) the aggregate amount of distributions in respect of the
Custodian Fee and unpaid Custodian Fees from prior Payment Dates for the related
Payment Date;
(22) the aggregate amount of distributions in respect of the
Owner Trustee Fees and unpaid Owner Trustee Fees from prior Payment Dates and
for the related Payment Date;
(23) the Unfunded Transfer Obligation and
Overcollateralization Shortfall on such Payment Date for the related Payment
Date;
(24) the aggregate amount of distributions to the Transfer
Obligation Account for the related Payment Date;
(25) the aggregate amount of distributions in respect of
Trust/Depositor Indemnities for the related Payment Date;
(26) the aggregate amount of distributions to the holders of
the Trust Certificates for the related Payment Date;
(27) the Note Principal Balance of the Notes as of the last
day of the related Remittance Period (without taking into account any Additional
Note Principal Balance between the last day of such Remittance Period and the
related Payment Date) before and after giving effect to distributions made to
the holders of the Notes for such Payment Date;
(28) the Pool Principal Balance as of the end of the preceding
Remittance Period; and
(29) whether a Performance Trigger or a Rapid Amortization
Trigger shall exist with respect to such Payment Date.
Such Payment Statement shall also be provided on the Remittance Date to the
Initial Noteholder and Indenture Trustee in the form of a data file in a form
mutually agreed to by and between the Initial Noteholder, the Indenture Trustee
and the Servicer. The Indenture Trustee shall have no duty to monitor the
occurrence of a Performance Trigger, Rapid Amortization Trigger or any events
resulting in withdrawals from the Transfer Obligation Account.
Section 6.02 Specification of Certain Tax Matters.
The Paying Agent 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 Securityholder 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 Securityholders, as the case may be, for all purposes of this
Agreement. The Indenture Trustee shall have no responsibility for preparing or
filing any tax returns.
66
Section 6.03 Valuation of Loans and Residual Securities, Hedge Value and
Retained Securities Value; Market Value Agent.
(a) The Initial Noteholder hereby irrevocably appoints, and the
Issuer hereby consents to the appointment of, the Market Value Agent as agent on
behalf of the Noteholders to determine the Market Value of each Loan and
Residual Security, the Hedge Value of each Hedging Instrument and the Retained
Securities Value of all Retained Securities.
(b) Except as otherwise set forth in Section 3.07, the Market Value
Agent shall determine the Market Value of each Loan and Residual Security, for
the purposes of the Basic Documents, in its sole judgment, exercised in good
faith. In determining the Market Value of each Loan and Residual Security, the
Market Value Agent may consider any information that it may deem relevant and
shall base such determination primarily on the lesser of its estimate of the
projected proceeds from such Loan's or Residual Security's inclusion in (i) a
Securitization (inclusive of the projected Retained Securities Value of any
Retained Securities to be issued in connection with such Securitization) and
(ii) a Whole Loan Sale, in each case net of such Loan's ratable share of all
costs and fees associated with such Disposition, including, without limitation,
any costs of issuance, sale, underwriting and funding reserve accounts. The
Market Value Agent's determination, in its sole judgment, of Market Value shall
be conclusive and binding upon the parties hereto, absent manifest error
(including without limitation, any error contemplated in Section 2.08).
(c) On each Business Day the Market Value Agent shall determine in
its sole judgment, exercised in good faith, 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 sole judgment, exercised in good faith, 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 include the Market Value Agent and its Affiliates and such
other sources of information as the Market Value Agent may deem appropriate.
ARTICLE VII
HEDGING; FINANCIAL COVENANTS
Section 7.01 Hedging Instruments.
(a) On each Transfer Date, the Trust shall enter into such Hedging
Instruments as the Market Value Agent, on behalf of the Majority Noteholders,
shall determine are necessary in order to hedge the interest rate risk with
respect to the Collateral Value of the
67
Loans being purchased on such Transfer Date. The Market Value Agent shall
determine, in its sole discretion, whether any Hedging Instrument conforms to
the requirements of Section 7.01(b), (c) and (d).
(b) Each Hedging Instrument shall expressly provide that in the
event of a Disposition or other removal of the Loan from the Trust, such portion
of the Hedging Instrument shall terminate as the Disposition Agent deems
appropriate to facilitate the hedging of the risks specified in Section 7.01(a).
In the event that the Hedging Instrument is not otherwise terminated, it shall
contain provisions that allow the position of the Trust to be assumed by an
Affiliate of the Trust upon the liquidation of the Trust. The terms of the
assignment documentation and the credit quality of the successor to the Trust
shall be subject to the Hedging Counterparty's approval.
(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
11.13, (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 to 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, (v) provide that the
appropriate portion of the Hedging Instrument will terminate upon the removal of
the related Loans from the Trust Estate and (vi) have economic terms that are
fixed and not subject to alteration after the date of assumption or execution.
(e) If agreed to by the Majority Noteholders, the Issuer may pledge
its assets in order to secure its obligations in respect of Hedge Funding
Requirements, provided that such right shall be limited solely to Hedging
Instruments for which an Affiliate of the Initial Noteholder is a Hedging
Counterparty.
(f) The aggregate notional amount of all Hedging Instruments shall
not exceed the Note Principal Balance as of the date on which each Hedging
Instrument is entered into by the Issuer and a Hedging Counterparty.
68
Section 7.02 Financial Covenants.
Each of the Loan Originator and the Servicer shall satisfy the Financial
Covenants.
ARTICLE VIII
THE SERVICER
Section 8.01 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 a "Servicer 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 except to the extent such loss
arises out of such Servicer Indemnified Party's gross negligence or willful
misconduct; provided, however, that if the Servicer is not liable pursuant to
the provisions of Section 8.01(b) 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 8.01 shall have no force and effect with respect to
such failure.
(b) 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.
(c) The Loan Originator agrees to indemnify and hold harmless the
Depositor and the Noteholders, as the ultimate assignees from the Depositor
(each an "Originator Indemnified Party," together with the Servicer Indemnified
Parties, the "Indemnified Parties"), from and against any loss, liability,
expense, damage, claim or injury arising out of or based on (i) any breach of
any representation, warranty or covenant of the Loan Originator, the Servicer or
69
their Affiliates, in any Basic Document, including, without limitation, the
origination or prior servicing of the Loans by reason of any acts, omissions, or
alleged acts or omissions arising out of activities of the Loan Originator, the
Servicer or their Affiliates, and (ii) any untrue statement by the Loan
Originator, the Servicer or its Affiliates of any material fact or any such
Person's failure to state a material fact necessary to make such statements not
misleading with respect to any such Person's statements contained in any Basic
Document, including, without limitation, any Officer's Certificate, statement,
report or other document or information prepared by any such Person and
furnished or to be furnished by it pursuant to or in connection with the
transactions contemplated thereby and not corrected prior to completion of the
relevant transaction including, without limitation, such written information as
may have been and may be furnished in connection with any due diligence
investigation with respect to the Loans or any such Person's business,
operations or financial condition, including reasonable attorneys' fees and
other costs or expenses incurred in connection with the defense of any actual or
threatened action, proceeding or claim; provided that the Loan Originator shall
not indemnify an Originator Indemnified Party to the extent such loss,
liability, expense, damage or injury is due to either an Originator Indemnified
Party's willful misfeasance, bad faith or negligence or by reason of an
Originator Indemnified Party's reckless disregard of its obligations hereunder;
provided, further, that the Loan Originator shall not be so required to
indemnify an Originator Indemnified Party or to otherwise be liable to an
Originator Indemnified Party for any losses in respect of the performance of the
Loans or Residual Securities, the creditworthiness of the Borrowers under the
Loans, changes in the market value of the Loans or Residual Securities or other
similar investment risks associated with the Loans or Residual Securities
arising from a breach of any representation or warranty set forth in Exhibit E
hereto or Section 3 of the Residual Securities Transfer Agreement, as
applicable, a remedy for the breach of which is provided in Section 3.06 hereof.
The provisions of this indemnity shall run directly to and be enforceable by an
Originator Indemnified Party subject to the limitations hereof.
(d) With respect to a claim subject to indemnity hereunder made by
any Person against an Indemnified Party (a "Third Party Claim"), such
Indemnified Party shall notify the related indemnifying parties (each an
"Indemnifying Party") in writing of the Third Party Claim within a reasonable
time after receipt by such Indemnified Party of written notice of the Third
Party Claim unless the Indemnifying Parties shall have previously obtained
actual knowledge thereof. Thereafter, the Indemnified Party shall deliver to the
Indemnifying Parties, within a reasonable time after the Indemnified Party's
receipt thereof, copies of all notices and documents (including court papers)
received by the Indemnified Party relating to the Third Party Claim. No failure
to give such notice or deliver such documents shall effect the rights to
indemnity hereunder. Each Indemnifying Party shall promptly notify the Indenture
Trustee and the Indemnified Party (if other than the Indenture Trustee) of any
claim of which it has been notified and shall promptly notify the Indenture
Trustee and the Indemnified Party (if applicable) of its intended course of
action with respect to any claim.
(e) If a Third Party Claim is made against an Indemnified Party,
while maintaining control over its own defense, the Indemnified Party shall
cooperate and consult fully with the Indemnifying Party in preparing such
defense, and the Indemnified Party may defend the same in such manner as it may
deem appropriate, including settling such claim or litigation after giving
notice to the Indemnifying Party of such terms and the Indemnifying Party will
promptly reimburse the Indemnified Party upon written request; provided,
however, that the
70
Indemnified Party may not settle any claim or litigation without the consent of
the Indemnifying Party; provided, further, that the Indemnifying Party shall
have the right to reject the selection of counsel by the Indemnified Party if
the Indemnifying Party reasonably determines that such counsel is inappropriate
in light of the nature of the claim or litigation and shall have the right to
assume the defense of such claim or litigation if the Indemnifying Party
determines that the manner of defense of such claim or litigation is
unreasonable.
Section 8.02 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 8.03 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 8.01
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 8.04 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 Majority Noteholders or (b)
upon determination that its duties 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 and the Majority Noteholders. No resignation
of the Servicer shall become effective until a successor servicer, appointed
pursuant to the provisions of Section 9.02 hereof 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
71
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 8.04, 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 8.05 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, the Owner Trustee 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, the Owner Trustee or the Indenture Trustee.
Section 8.06 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; provided, however,
that at any time that Option One or any of its Affiliates is the Servicer,
neither the Servicer nor any of its Affiliates (other than an Affiliate which is
a corporation whose purpose is limited to holding securities and related
activities and which cannot incur recourse debt) may be a Noteholder. 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 unless the Servicer or such
Affiliate owns all outstanding Securities of the related class. The Servicer
shall notify the Indenture Trustee promptly after it or any of its Affiliates
becomes the owner or pledgee of a Security.
Section 8.07 Indemnification of the Indenture Trustee and Initial
Noteholder.
The Servicer agrees to indemnify the Indenture Trustee and its employees,
officers, directors and agents, and reimburse its reasonable out-of-pocket
expenses in accordance with Section 6.07 of the Indenture as if it was a
signatory thereto. The Servicer agrees to indemnify the Initial Noteholder in
accordance with Section 9.01 of the Note Purchase Agreement as if it were
signatory thereto.
72
ARTICLE IX
SERVICER EVENTS OF DEFAULT
Section 9.01 Servicer Events of Default.
(a) In case one or more of the following Servicer Events of Default
shall occur and be continuing, that is to say:
(1) any failure by Servicer to deposit into the Collection
Account or the Distribution Account or any failure by Servicer to make any of
the required payments therefrom; or
(2) 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 of the Notes or the Trust Certificates; or
(3) 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 (as defined in the Indenture) of
the Notes; or
(4) 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, marshaling 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
(5) the Servicer shall consent to the appointment of a
conservator, receiver, liquidator, trustee or similar official in any
bankruptcy, insolvency, readjustment of debt, marshaling 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
(6) 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; or
73
(7) Reserved; or
(8) the Servicer or the Loan Originator fails to comply with
any of its financial covenants set forth in Section 7.02; or
(9) a Change of Control of the Servicer; or
(10) so long as the Servicer or the Loan Originator is an
Affiliate of either of the Depositor or the Issuer and any "event of default' by
any such party occurs under any of the Basic Documents.
(b) Then, and in each and every such case, so long as a Servicer
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 9.02 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) Upon the occurrence of (i) an Event of Default or Default under
any of the Basic Documents, (ii) a Servicer Event of Default under this
Agreement, (iii) a Rapid Amortization Trigger or (iv) a determination,
reasonably made by the Initial Noteholder, that an event has occurred that shall
materially impair the ability of the Servicer to service and administer the
Loans in accordance with the terms and provisions set forth in the Servicing
Addendum (each, a "Term Event"), the Servicer's right to service the Loans
pursuant to the terms of this Agreement shall be in effect for an initial period
commencing on the date on which such Term Event occurred and shall automatically
terminate at 5:00 p.m. (New York City time), on the last business day of the
calendar month in which such Term Event occurred (the "Initial Term").
Thereafter, the Initial Term shall be extendible in the sole discretion of the
Initial Noteholder by written notice (each, a "Servicer Extension Notice") of
the Initial Noteholder for successive one-month terms (each such term ending at
5:00 p.m. (New York City time), on the last business day of the related month).
Following a Term Event, the Servicer hereby agrees that the Servicer shall be
bound for the duration of the Initial Term and the term covered by any such
Servicer Extension Notice to act as the Servicer pursuant to this Agreement.
Following a Term Event, the Servicer agrees that if, as of 3:00 p.m. (New York
City time) on the last business day of any month, the Servicer shall not have
received a Servicer Extension Notice from the Initial Noteholder, the Servicer
shall give written notice of such non-receipt to the Initial Noteholder by
74
4:00 p.m. (New York City time). Following a Term Event, the failure of the
Initial Noteholder to deliver a Servicer Extension Notice by 5:00 p.m. (New York
City time) shall result in the automatic and immediate termination of the
Servicer (the "Termination Date"). Notwithstanding these time frames, the
Servicer and the Initial Noteholder shall comply with all applicable laws in
connection with such transfer and the Servicer shall continue to service the
Loans until completion of such transfer.
Section 9.02 Appointment of Successor.
On and after the date the Servicer receives a notice of termination
pursuant to Section 9.01 hereof or is automatically terminated pursuant to
Section 9.01 (c) hereof, or the Owner Trustee receives the resignation of the
Servicer evidenced by an Opinion of Counsel or accompanied by the consents
required by Section 8.04 hereof, or the Servicer is removed as servicer pursuant
to this Article IX or Section 4.01 of the Servicing Addendum, then, 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 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 4.15
of the Servicing Addendum. The Servicer shall not be entitled to any termination
fee if it is terminated pursuant to Section 9.01 hereof but shall be entitled to
any accrued and unpaid Servicing Compensation 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. Upon the occurrence of an Event
of Default, the Majority Noteholders shall have the right to order the
Servicer's Loan Files and all other files of the Servicer relating to the Loans
and all other records of the Servicer and all
75
documents relating to the Loans which are then or may thereafter come into the
possession of the Servicer or any third parry acting for the Servicer to be
delivered to such custodian or servicer as it selects and the Servicer shall
deliver to such custodian or servicer such assignments as the Majority
Noteholders shall request. 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 to the Initial Noteholder, the Indenture Trustee, the Issuer 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.
Section 9.03 Waiver of Defaults.
The Majority Noteholders may waive any events permitting removal of the
Servicer as servicer pursuant to this Article IX. Upon any waiver of a past
default, such default shall cease to exist and any Servicer Event of Default
arising therefrom shall be deemed to have been remedied for every purpose of
this Agreement. No such waiver shall extend to any subsequent or other default
or impair any right consequent thereto except to the extent expressly so waived.
Section 9.04 Accounting Upon Termination of Servicer.
Upon termination of the Servicer under this Article IX, 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 Custodian 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.
76
ARTICLE X
TERMINATION; PUT OPTION
Section 10.01 Termination.
(a) This Agreement shall terminate upon either: (A) the later of (i)
the satisfaction and discharge of the Indenture and the provisions thereof and
payment to the Noteholders of all amounts due and owing in accordance with the
provisions hereof or (ii) the disposition of all funds with respect to the last
Loan and Residual Security and the remittance of all funds due hereunder and the
payment of all amounts due and payable, including, in both cases, without
limitation, indemnification payments payable pursuant to any Basic Document to
the Indenture Trustee, the Owner Trustee, the Issuer, the Servicer 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 and all Securityholders in writing and delivered to the
Indenture Trustee by the Servicer.
(b) The Securities shall be subject to an early redemption or
termination at the option of the Servicer and the Majority Noteholders in the
manner and subject to the provisions of Section 10.02 and 10.04 of this
Agreement.
(c) Except as provided in this Article X, none of the Depositor, the
Servicer nor any Certificateholder or Noteholder shall be entitled to revoke or
terminate the Trust.
Section 10.02 Optional Termination.
(a) The Servicer may, at its option, effect an early termination of
the Trust on any Payment Date on or after the Clean-up Call Date. The Servicer
shall effect such early termination by providing notice thereof to the Indenture
Trustee and Owner Trustee and by purchasing all of the Loans, the Residual
Securities and the Advance Note at a purchase price, payable in cash, equal to
or greater than the Termination Price. The expense of any Independent appraiser
required in connection with the calculation and payment of the Termination Price
under this Section 10.02 shall be a nonreimbursable expense of the Servicer.
Any such early termination by the Servicer 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 deposited in the Distribution Account and
distributed by the Indenture Trustee pursuant to Section 5.01(c)(3) of this
Agreement and Section 9.1 of the Trust Agreement on the next succeeding Payment
Date; and any amounts received with respect to the Loans, the Residual
Securities and Foreclosure Properties subsequent to the final Payment Date shall
belong to the purchaser thereof.
77
Section 10.03 Notice of Termination.
Notice of termination of this Agreement or of early redemption and
termination of the Issuer pursuant to Section 10.01 shall be sent by the
Indenture Trustee to the Noteholders in accordance with Section 10.02 of the
Indenture.
Section 10.04 Put Option.
The Majority Noteholders may, at their option, effect a put of the entire
outstanding Note Principal Balance, or any portion thereof, to the Trust on any
date by exercise of the Put Option. The Majority Noteholders shall effect such
put by providing notice thereof in accordance with Section 10.05 of the
Indenture.
Unless otherwise agreed by the Majority Noteholders, on the third Business
Day prior to the Put Date, the Issuer shall deposit the Note Redemption Amount
into the Distribution Account and, if the Put Date occurs after the termination
of the Revolving Period and constitutes a put of the entire outstanding Note
Principal Balance, any amounts then on deposit in the Collection Account (other
than any amounts withdrawable pursuant to Section 5.01(c)(1) hereof) shall be
deposited in the Distribution Account and distributed by the Paying Agent
pursuant to section 5.01 (c) (3) of this Agreement on the Put Date; and any
amounts received with respect to the Loans, Residual Securities and Foreclosure
Properties subsequent to the Put Date shall belong to the Issuer.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01 Acts of Securityholders.
Except as otherwise specifically provided herein and except with respect
to Section 11.02(b), 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 Noteholders agree to take such action or give
such consent or approval.
Section 11.02 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 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, as evidenced by an Opinion of Counsel to such
effect provided at the expense of the party requesting such Amendment.
78
(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 Residual Securities or distributions which
are required to be made on any Security, without the consent of the holders of
100% of the Securities, (ii) adversely affect in any material respect the
interests of any of the holders of the Securities in any manner other than as
described in clause (i), without the consent of the holders of 100% of the
Securities, or (iii) reduce the percentage of the Securities, the consent of
which is required for any such amendment, without the consent of the holders of
100% of the Securities.
(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 11.03 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 Mortgaged Property is
situated, and in any other appropriate public recording office or elsewhere,
such recordation to be effected by the Servicer at the Securityholders' 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 Securityholders or is necessary for the
administration or servicing of the Loans.
Section 11.04 Duration of Agreement.
This Agreement shall continue in existence and effect until terminated as
herein provided.
Section 11.05 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.
79
Section 11.06 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, as
follows: (1) in the case of the Depositor, to Option One Loan Warehouse
Corporation, 3 Ada, Irvine, California 92618, 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; (2) in
the case of the Trust, to Option One Owner Trust 2001-1B, c/o Wilmington Trust
Company, One Rodney Square North, 1100 North Market Street, Wilmington, Delaware
19890, Attention: Corporate Trust Administration, telecopy number: (302)
651-8882, telephone number: (302) 651-1000, or such other address or telecopy or
telephone numbers as may hereafter be furnished to the Noteholders and the other
parties hereto in writing by the Trust; (3) in the case of the Loan Originator,
to Option One Mortgage Corporation, 3 Ada, Irvine, California 92618, Attention:
William O'Neill, telecopy number: (949) 790-7540, telephone number: (949)
790-7504 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; (4) in the case of the Servicer, to Option One
Mortgage Corporation, 3 Ada, Irvine, California 92618, Attention: William
O'Neill, telecopy number: (949) 790-7540, telephone number: (949) 790-7504 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; and (5) in the case of the Indenture Trustee, at the Corporate Trust
Office, as defined in the Indenture, 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.
Section 11.07 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 11.08 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 11.09 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.
80
Section 11.10 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 Securityholders and their respective successors and permitted assigns.
Section 11.11 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 11.12 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 an
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 11.12.
(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 may deem sufficient.
(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 11.12 as it shall deem
necessary.
Section 11.13 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 Issuer 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 Issuer or Depositor or any substantial part of their respective property
or ordering the winding up or liquidation of the affairs of the Issuer or the
Depositor.
81
Section 11.14 Holders of the Securities.
(a) Any sums to be distributed or otherwise paid hereunder or under
this Agreement to the holders of the Securities shall be paid to such holders
pro rata based on their Percentage Interests;
(b) Where any act or event hereunder is expressed to be subject to
the consent or approval of the holders of the Securities, 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.
Section 11.15 Due Diligence Fees, Due Diligence.
The Loan Originator acknowledges that the Initial Noteholder has the right
to perform continuing due diligence reviews with respect to the Loans, for
purposes of verifying compliance with the representations, warranties and
specifications made hereunder, or otherwise, and the Loan Originator agrees that
upon reasonable prior notice (with no notice being required upon the occurrence
of an Event of Default) to the Loan Originator, the Initial Noteholder, the
Indenture Trustee and Custodian or its authorized representatives will be
permitted during normal business hours to examine, inspect, and make copies and
extracts of, the Loan Files and any and all documents, records, agreements,
instruments or information relating to such Loans in the possession or under the
control of the Servicer and the Indenture Trustee. The Loan Originator also
shall make available to the Initial Noteholder a knowledgeable financial or
accounting officer for the purpose of answering questions respecting the Loan
Files and the Loans and the financial condition of the Loan Originator. Without
limiting the generality of the foregoing, the Loan Originator acknowledges that
the Initial Noteholder may purchase Notes based solely upon the information
provided by the Loan Originator to the Initial Noteholder in the Loan Schedule
and the representations, warranties and covenants contained herein, and that the
Initial Noteholder, at its option, has the right at any time to conduct a
partial or complete due diligence review on some or all of the Loans securing
such purchase, including without limitation ordering new credit reports and new
appraisals on the related Mortgaged Properties and otherwise re-generating the
information used to originate such Loan. The Initial Noteholder may underwrite
such Loans itself or engage a mutually agreed upon third party underwriter to
perform such underwriting. The Loan Originator agrees to cooperate with the
Initial Noteholder and any third party underwriter in connection with such
underwriting, including, but not limited to, providing the Initial Noteholder
and any third party underwriter with access to any and all documents, records,
agreements, instruments or information relating to such Loans in the possession,
or under the control, of the Servicer. The Loan Originator further agrees that
the Loan Originator shall reimburse the Initial Noteholder for any and all
reasonable out-of-pocket costs and expenses incurred by the Initial Noteholder
in connection with the Initial Noteholder's activities pursuant to this Section
11.15 hereof (the "Due Diligence Fees"). In addition to the obligations set
forth in Section 11.17 of this Agreement, the Initial Noteholder agrees (on
behalf of itself and its Affiliates, directors, officers, employees and
representatives) to use reasonable precaution to keep confidential, in
accordance with its customary procedures for handling confidential information
and in accordance with safe and sound practices, and not to disclose to any
third party, any non-public information supplied to it or otherwise obtained by
it hereunder with respect to the Loan Originator or any of its Affiliates
(including, but not limited to, the Loan
82
File); provided, however, that nothing herein shall prohibit the disclosure of
any such information to the extent required by statute, rule, regulation or
judicial process; provided, further that, unless specifically prohibited by
applicable law or court order, the Initial Noteholder shall, prior to disclosure
thereof, notify the Loan Originator of any request for disclosure of any such
non-public information. The Initial Noteholder further agrees not to use any
such non-public information for any purpose unrelated to this Agreement and that
the Initial Noteholder shall not disclose such non-public information to any
third party underwriter in connection with a potential Disposition without
obtaining a written agreement from such third party underwriter to comply with
the confidentiality provisions of this Section 11.15.
Section 11.16 No Reliance.
Each of the Loan Originator, the Depositor and the Issuer hereby
acknowledges that it has not relied on the Initial Noteholder or any of 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 tax, accounting, legal or other professional advice in connection with
the transactions contemplated by the Basic Documents, that each of the Loan
Originator, the Depositor and the Issuer has retained and been advised by such
tax, accounting, legal and other professionals as it has deemed necessary in
connection with the transactions contemplated by the Basic Documents and that
the Initial Noteholder makes no representation or warranty, and shall have no
liability with respect to, the tax, accounting or legal treatment or
implications relating to the transactions contemplated by the Basic Documents.
Section 11.17 Confidential Information.
In addition to the confidentiality requirements set forth in Section 11.15
of the Agreement, each Noteholder, as well as the Indenture Trustee and the
Disposition Agent (each of said parties singularly referred to herein as a
"Receiving Party" and collectively referred to herein as the "Receiving
Parties"), agrees to hold and treat all Confidential Information (as defined
below) in confidence and in accordance with this Section. Such Confidential
Information will not, without the prior written consent of the Servicer and the
Loan Originator, be disclosed or used by such Receiving Parties or its
subsidiaries, Affiliates, directors, officers, members, employees, agents or
controlling persons (collectively, the "Information Recipients") other than for
the purpose of making a decision to purchase or sell Notes or taking any other
permitted action under this Agreement and or any other Basic Document. Each
Receiving Party agrees to disclose Confidential Information only to its
Information Recipients who need to know it for the purpose of making a decision
to purchase or sell Notes or the taking of any other permitted action under this
Agreement and or any other Basic Document (including in connection with the
servicing of the Loans and in connection with any servicing transfers) and who
are informed by such Receiving Party of its confidential nature and who agree to
be bound by the terms of this Section 11.17. Disclosure that is not in violation
of the Right to Financial Privacy Act, the Gramm-Leach-Bliley Act or other
applicable law by such Receiving Party of any Confidential Information at the
request of its outside auditors or governmental regulatory authorities in
connection with an examination of a Receiving Party by any such authority shall
not constitute a breach of its obligations under this Section 11.17 and shall
not require the prior consent of the Servicer and the Loan Originator.
83
Each Receiving Party shall be responsible for any breach of this Section
11.17 by its Information Recipients. The Initial Noteholder may use Confidential
Information for internal due diligence purposes in connection with its analysis
of the transactions contemplated by the Basic Documents. The Disposition Agent
may disclose Confidential Information to the Disposition Participants as
required to effect Dispositions. This Section 11.17 shall terminate upon the
occurrence of an Event of Default; provided, however, that such termination
shall not relieve the Receiving Parties or their respective Information
Recipients from the obligation to comply with the Gramm-Leach-Bliley Act or
other applicable law with respect to their use or disclosure of Confidential
Information following the occurrence of an Event of Default.
As used herein, "Confidential Information" means non-public personal
information (as defined in the Gramm-Leach-Bliley Act and its enabling
regulations issued by the Federal Trade Commission) regarding Borrowers.
Confidential Information shall not include information which (i) is or becomes
generally available to the public other than as a result of a disclosure by a
Receiving Party or any Information Recipients; (ii) was available to a Receiving
Party on a non-confidential basis prior to its disclosure to Receiving Party by
the Servicer or the Loan Originator; (iii) is required to be disclosed by a
governmental authority or related governmental agencies or as otherwise required
by law; (iv) becomes available to a Receiving Party on a non-confidential basis
from a Person other than the Servicer or the Loan Originator who, to the best
knowledge of such Receiving Party, is not otherwise bound by a confidentiality
agreement with the Servicer or the Loan Originator and is not otherwise
prohibited from transmitting the information to such Receiving Party.
Section 11.18 Conflicts.
Notwithstanding anything contained in the Basic Documents to the contrary,
in the event of the conflict between the terms of this Agreement and any other
Basic Document, the terms of this Agreement shall control.
Section 11.19 Limitation on Liability.
It is expressly understood and agreed by the parties hereto that (a) this
Agreement is executed and delivered by Wilmington Trust Company, not
individually or personally, but solely as Owner Trustee of Option One Owner
Trust 2001-1B, in the exercise of the powers and authority conferred and vested
in it, (b) each of the representations, undertakings and agreements herein made
on the part of the Issuer is made and intended not as personal representations,
undertakings and agreements by Wilmington Trust Company but is made and intended
for the purpose for binding only the Issuer, (c) nothing herein contained shall
be construed as creating any liability on Wilmington Trust Company, individually
or personally, to perform any covenant either expressed or implied contained
herein, all such liability, if any, being expressly waived by the parties hereto
and by any Person claiming by, through or under the parties hereto and (d) under
no circumstances shall Wilmington Trust Company be personally liable for the
payment of any indebtedness or expenses of the Issuer or be liable for the
breach or failure of any obligation, representation, warranty or covenant made
or undertaken by the Issuer under this Agreement or any other related documents.
84
Section 11.20 No Agency.
Nothing contained herein or in the Basic Documents shall be construed to
create an agency or fiduciary relationship between the Initial Noteholder or the
Majority Noteholders or any of their Affiliates and the Issuer, the Depositor,
the Loan Originator or the Servicer. None of the Initial Noteholder, the
Majority Noteholders or any of their Affiliates shall be liable for any acts or
actions affected in connection with a disposition of Loans or Residual
Securities, including without limitation, any Securitization pursuant to Section
3.06, any Loan Originator Put or Servicer Call pursuant to Section 3.07 hereof
nor any Whole Loan Sale pursuant to Section 3.10 hereof.
(SIGNATURE PAGE FOLLOWS)
85
IN WITNESS WHEREOF, the Issuer, the Depositor, the Servicer, the
Indenture Trustee and the Loan Originator 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 Second Amended and Restated Sale and Servicing
Agreement.
OPTION ONE OWNER TRUST 2001-1B,
By: Wilmington Trust Company
not in its individual capacity
but solely as Owner Trustee
By: /s/ Mary Kay Pupillo
-------------------------------
Name: Mary Kay Pupillo
Title: Assistant Vice President
OPTION ONE LOAN WAREHOUSE
CORPORATION, as Depositor
By: /s/ C.R. Fulton
-------------------------------
Name: Charles R. Fulton
Title: Assistant Secretary
OPTION ONE MORTGAGE CORPORATION,
as Loan Originator and Servicer
By: /s/ C.R. Fulton
-------------------------------
Name: Charles R. Fulton
Title: Vice President
WELLS FARGO BANK, N.A.,
as Indenture Trustee
By: /s/ Darron C. Woodus
-------------------------------
Name: Darron C. Woodus
Title: Assistant Vice President
86