SERVICING AGREEMENT
among
POINT WEST CAPITAL CORPORATION, as the Servicer,
ALLEGIANCE CAPITAL, LLC, as the Special Servicer,
*** as the Servicing Advisor,
ALLEGIANCE FUNDING CORP. I, as the Depositor,
and
MANUFACTURERS AND TRADERS TRUST COMPANY, as the Trustee,
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Dated as of August 1, 1998
***Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
TABLE OF CONTENTS
Page
ARTICLE ONE
DEFINITIONS
Section 1.01 Defined Terms..........................................................................2
Section 1.02 Certain Rules of Construction..........................................................6
ARTICLE TWO
REPRESENTATIONS AND WARRANTIES
Section 2.01 Servicer Representations and Warranties................................................7
Section 2.02 Special Servicer Representations and Warranties........................................8
Section 2.03 Servicing Advisor Representations and Warranties.......................................9
ARTICLE THREE
ADMINISTRATION AND SERVICING OF LOANS
Section 3.01 Responsibilities of the Servicer......................................................12
Section 3.02 Responsibilities of Special Servicer..................................................12
Section 3.03 Responsibilities of the Servicing Advisor.............................................15
Section 3.04 Servicing Standard of Care............................................................15
Section 3.05 Lockbox Account; Remittances..........................................................15
Section 3.06 Financing Statements; Title Filings...................................................16
Section 3.07 Maintenance of Insurance Policy; Insurance Proceeds..................................16
Section 3.08 No Offset.............................................................................16
Section 3.09 Servicing Compensation................................................................17
Section 3.10 Prepayments Permitted; Substitution or Purchase of Loans..............................18
Section 3.11 Due-on-Sale Clauses; Assumptions; Due-on-Encumbrance Clauses..........................19
Section 3.12 Realization Upon Defaulted Loans......................................................20
Section 3.13 Title and Management of Repossessed Collateral........................................22
Section 3.14 Sale of Defaulted Loans and Repossessed Collateral....................................24
Section 3.15 Modifications, Waivers, Amendments and Consents.......................................26
ARTICLE FOUR
ACCOUNTINGS, STATEMENTS AND REPORTS
Section 4.01 Reports...............................................................................29
Section 4.02 Financial Statements; Certification as to Compliance; Notice of Default...............30
Section 4.03 Annual Independent Accountants' Reports...............................................32
Section 4.04 Access to Certain Documentation and Information.......................................32
Section 4.05 Other Necessary Data..................................................................33
Page
ARTICLE FIVE
THE SERVICER, THE SPECIAL SERVICER AND THE DEPOSITOR
Section 5.01 Indemnification.......................................................................34
Section 5.02 Corporate Existence; Reorganizations..................................................34
Section 5.03 Limitation on Liability of the Servicer, the Special Servicer, the Servicing Advisor ...
and Others. .....................................................................35
Section 5.04 The Servicer, the Special Servicer and the Servicing Advisor Not to Resign............36
Section 5.05 Depositor Indemnification.............................................................36
ARTICLE SIX
SERVICING TERMINATION
Section 6.01 Events of Default.....................................................................37
Section 6.02 Appointment of Successor Servicer; Taking of Bids.....................................38
Section 6.03 Effects of Termination................................................................40
Section 6.04 No Effect on Other Parties. ..........................................................40
Section 6.05 Waiver of Past Defaults...............................................................40
Section 6.06 Notification to Certificateholders and the Certificateholder Agent....................40
ARTICLE SEVEN
GENERAL PROVISIONS
Section 7.01 Termination of the Agreement..........................................................41
Section 7.02 Amendments............................................................................41
Section 7.03 Governing Law.........................................................................42
Section 7.04 Notices...............................................................................42
Section 7.05 Severability of Provisions............................................................42
Section 7.06 Binding Effect........................................................................42
Section 7.07 Article Headings and Captions.........................................................42
Section 7.08 Legal Holidays........................................................................42
Section 7.09 Assignment for Security for the Certificates. ........................................43
Section 7.10 No Servicing Assignment...............................................................43
Section 7.11 Notifications.........................................................................43
Section 7.12 Successor Servicer....................................................................43
This SERVICING AGREEMENT (this "Agreement"), dated as of August 1,
1998, is entered into among Point West Capital Corporation, a Delaware
corporation (the "Servicer"), Allegiance Capital, LLC, a Delaware limited
liability company (the "Special Servicer"), *** corporation (the "Servicing
Advisor"), Allegiance Funding Corp. I, a Delaware corporation (the "Depositor"),
and Manufacturers and Traders Trust Company, a New York banking corporation (the
"Trustee").
RECITALS
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The Depositor has entered into a Trust Agreement dated as of August 1,
1998 (the "Trust Agreement"), with the Trustee and the Servicer, pursuant to
which the Depositor, on behalf of the Trust, has caused or will cause the
issuance of various Series of Revolving Certificates and various Series of Term
Certificates.
The Depositor and Allegiance Capital, LLC, a limited liability company
(the "Company"), have entered into a Loan Acquisition Agreement, dated as of
August 1, 1998 (the "Loan Acquisition Agreement"), providing for, among other
things, the contribution and sale, from time to time, by the Company to the
Depositor of all of its right, title and interest in and to certain Loan Assets
which the Depositor is and will be conveying to the Trustee pursuant to the
Trust Agreement. As a precondition to the effectiveness of the Loan Acquisition
Agreement, such agreement requires that the Servicer, the Servicing Advisor, the
Depositor and the Trustee enter into this Agreement to provide for the servicing
of the Loan Assets.
In addition, the Depositor is conveying to the Trustee, among other
things, all of the Depositor's rights derived under this Agreement and the Loan
Acquisition Agreement, and each of the Servicer, the Special Servicer and the
Servicing Advisor agrees that all representations, warranties, covenants and
agreements made by such Person herein with respect to the Loan Assets and
otherwise shall also be for the benefit of the Trustee and all
Certificateholders. For their services under this Agreement, the Servicer, the
Special Servicer and the Servicing Advisor will receive the compensation
described herein or in the Trust Agreement.
In consideration of the mutual agreements contained herein and of other
good and valuable consideration (the receipt and adequacy of which are hereby
acknowledged), the parties hereto agree as follows:
***Confidential information omitted purusant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
1
ARTICLE ONE
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DEFINITIONS
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Section 1.01 Defined Terms.
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Each capitalized term used herein but not otherwise defined has the
meaning assigned to such term in the Trust Agreement or, if not defined therein,
in the Loan Acquisition Agreement. For purposes of this Agreement, each of the
following terms has the meaning specified herein:
"Agreement": The meaning set forth in the introductory paragraph
hereof.
"Annual Pool Report": The annual report, substantially in the form of
Exhibit E, prepared by the Special Servicer pursuant to and in accordance with
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Section 4.01(c).
"Assuming Party": The meaning set forth in Section 3.11(a).
"Company": The Person described in the recitals hereof and all
successors and permitted assigns of such Person under the Loan Acquisition
Agreement.
***.
"Depositor": The Person described in the introduction hereto and all
successors and permitted assigns of such Person under the Trust Agreement.
"Directing Holders": The Holders of not less than 51% of the
Outstanding Principal Amount of the lowest Class of Certificates then
Outstanding (or Classes, if more than one Series is Outstanding).
"Eligible Account": One or more accounts (a) that are maintained with a
depository institution the long-term unsecured debt obligations of which have
been rated by the Rating Agency in one of its two highest rating categories at
the time of any deposit therein, (b) that are trust accounts with any depository
institution held by the depository institution in its capacity as a corporate
trustee, or (c) the deposits in which are insured by the FDIC (to the limits
established by the FDIC) and the uninsured deposits in which are otherwise
secured such that the Special Servicer has a claim with respect to the funds in
such accounts or a perfected first security interest against any collateral
securing such funds that is superior to claims of any other depositors or
creditors of the depository institution with which such accounts are maintained.
"Environmental Assessment": With respect to any Mortgaged Property, a
"Phase I" environmental assessment of such Mortgaged Property meeting the
applicable standards of the American Society for Testing Materials.
"Event of Default": The meaning set forth in Section 6.01.
"Hazardous Substances": All substances or materials: (a) that are or
become defined as hazardous wastes, hazardous substances, pollutants,
contaminants, or toxic substances under any Environmental Law; (b) that are
defined by any Environmental Law as toxic, explosive, corrosive, ignitable,
infectious, radioactive, mutagenic, or otherwise hazardous; (c) the presence of
which require investigation or response
***Confidential information omitted purusant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
2
under any Environmental Law; (d) that constitute a nuisance, trespass, or health
or safety hazard to Person or neighboring properties; (e) that consist of
underground or aboveground storage tanks, whether empty, filled, or partially
filled with any substance; or (f) that contain, without limitation, asbestos,
polychlorinated biphenyls, urea formaldehyde foam insulation, petroleum
hydrocarbons, petroleum derived substances or wastes, crude oil, nuclear fuel,
natural gas, or synthetic gas.
"Indemnified Party": The meaning set forth in Section 5.01(a).
"Interested Person": With respect to any specified Loan, a Person other
than an Independent Person.
"Liquidated Loan": Any Defaulted Loan with respect to which the
Servicer has determined, in accordance with Section 3.04, that all Recoveries
that it expects with respect to such Loan (a) have been received or (b) have
been identified and are reasonably expected to be received within ninety (90)
days from the date of such determination.
"Loan Acquisition Agreement": The meaning set forth in the recitals
hereof.
"Loan Payment Data": At any time, a record of the monthly Loan balance,
all loan payments received and application of interest, principal and other fees
for each Loan in the Loan Pool from the closing date of such Loan to the date of
such report.
"Lockbox Account": The meaning set forth in Section 3.05.
"Lockbox Bank": The meaning set forth in Section 3.05.
"Operating Account": The meaning set forth in Section 3.13.
"Outgoing Servicer": Any Person who receives a Termination Notice
pursuant to Section 6.01.
"Recovery Expenses": As of any date of determination, the sum of the
following: (a) all expenses, if any, incurred by the Servicer, the Special
Servicer or the Servicing Advisor, as the case may be, in connection with any
Defaulted Loan or Repossessed Collateral (including legal fees and expenses,
committee or referee fees, and, if applicable, brokerage commissions and
conveyance taxes) provided that, if any of the foregoing expenses are to be
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retained by the Servicer, the Special Servicer or the Servicing Advisor, as the
case may be, and not to be paid or reimbursed to an Independent Person, such
expenses shall not constitute "Recovery Expenses" unless such expenses were
approved in writing in advance by the Certificateholder Agent; (b) all advances
made to an Independent Person by the Servicer, the Special Servicer or the
Servicing Advisor, as applicable, with respect to any Defaulted Loan or
Repossessed Collateral and not previously reimbursed as provided for herein; and
(c) Workout Fees, if any, due to the Special Servicer.
"Report": Each of the Servicer Report, the Special Servicer Report, the
Annual Pool Report and the *** prepare pursuant to Section 4.01.
"Repossessed Collateral": Loan Collateral related to a Defaulted Loan
that has been repossessed.
"Request for Release of Documents": The request prepared by the
Servicer or the Special Servicer substantially in the form of Exhibit C.
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***Confidential information omitted purusant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
3
"Servicer": The Person described in the introduction hereto until a
successor Person shall have become (if applicable) the Servicer pursuant to the
applicable provisions of this Agreement, whereupon "Servicer" shall mean such
successor Person.
"Servicer Default": Any occurrence or circumstance which with notice or
the lapse of time or both would be a Servicer Event of Default under this
Agreement.
"Servicer Event of Default": Each of the occurrences or circumstances
enumerated in Section 6.01(a) that occurs with respect to the Servicer.
"Servicer Financial Statements": The Servicer's audited consolidated
and consolidating balance sheet and income statement, consolidated and
consolidating statement of cash flows, auditors opinion letter regarding audited
financial statements, and all notes to such audited financial statements.
"Servicer Report": The monthly report, substantially in the form of
Exhibit A, prepared by the Servicer pursuant to and in accordance with Section
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4.01(a).
"Servicer State of Incorporation": The State of incorporation of the
Servicer, which, as of the Initial Delivery Date, is the State of Delaware.
"Servicer Termination Notice": A Termination Notice applicable to the
Servicer, as provided in Section 6.01(b).
"Servicing Advisor": The Person described in the introduction hereto
until a successor Person shall have (if applicable) become the Servicing Advisor
pursuant to the applicable provisions of this Agreement, whereupon "Servicing
Advisor" shall mean such successor Person.
"Servicing Advisor Default": Any occurrence or circumstance which with
notice or the lapse of time or both would be a Servicing Advisor Event of
Default under this Agreement.
"Servicing Advisor Event of Default": Each of the occurrences or
circumstances enumerated in Section 6.01(a) that occurs with respect to the
Servicing Advisor.
"Servicing Advisor Fee": With respect to each Loan, the monthly fee
payable on each Payment Date to the Servicing Advisor in consideration for its
performance of its duties as Servicing Advisor under this Agreement, in an
amount equal to the lesser of (a) $83.50 per Loan plus five hundred dollars
($500) for each *** delivered pursuant to Section 4.01(e) and (b) the amount
calculated in clause (a) of the definition of "Special Servicer Fee" contained
in the Trust Agreement.
"Servicing Advisor State of Incorporation": The State of incorporation
of the Servicing Advisor, which, as of the Initial Delivery Date, is the State
of ***.
"Servicing Advisor Termination Notice": A Termination Notice applicable
to the Servicing Advisor, as provided in Section 6.01(b).
"Servicing Guidelines": Part III of the Program Guidelines, which
relates to servicing generally.
***Confidential information omitted purusant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
4
"Servicing Officer": As the context requires, any of the officers of
the Servicer, the Special Servicer or the Servicing Advisor, as applicable,
involved in, or responsible for, the administration and servicing of the Loans,
as identified on the list of Servicing Officers furnished by such Person to the
Trustee and the other parties hereto from time to time.
"Special Servicer": The Person described in the introduction hereto
until a successor Person shall have (if applicable) become the Special Servicer
pursuant to the applicable provisions of the Agreement, whereupon "Special
Servicer" shall mean such successor Person.
"Special Servicer Default": Any occurrence or circumstance which with
notice or the lapse of time or both would be a Special Servicer Event of Default
under this Agreement.
"Special Servicer Event of Default": Each of the occurrences or
circumstances enumerated in Section 6.01(a) that occurs with respect to the
Special Servicer.
"Special Servicer Report": The quarterly report, substantially in the
form of Exhibit B, prepared by the Special Servicer pursuant to and in
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accordance with Section 4.01(b).
"Special Servicer State of Incorporation": The State of organization of
the Special Servicer, which, as of the Initial Delivery Date, is Delaware.
"Special Servicer Termination Notice": A Termination Notice applicable
to the Special Servicer, as provided in Section 6.01(b).
"Specified Lockbox Account": The meaning set forth in Section 3.05.
"Successor Servicer": Any successor Servicer, successor Special
Servicer or successor Servicing Advisor appointed in accordance with Article 6.
"Termination Notice": The notice described in Section 6.01(b).
"Transition Costs": The meaning set forth in the Trust Agreement.
"Trust Agreement": The meaning set forth in the recitals hereof.
"Trustee": The Person described in the introduction hereto until a
0successor Person shall have become(if applicable) the Trustee pursuant to the
applicable provisions of the Trust Agreement, whereupon "Trustee" shall mean
such successor Person.
"Workout Fee": With respect to any Determination Date and any Loan that
is, at the beginning of the related Due Period, or became, at any time during
such Due Period, a Defaulted Loan (other than by reason of the breach of a
representation or warranty by the Company hereunder or defective documentation
that has a material adverse effect on Certificateholders), a fee payable to the
Special Servicer in an amount equal to (a) in the case of a Liquidated Loan or
in the case of a Defaulted Loan or any Repossessed Collateral that is sold or
repurchased pursuant to any provision of this Agreement during the related Due
Period, the product of (i) the amount equal to the product of (A) 1.25% and (B)
all Recoveries received on such Loan during such Due Period (reduced by the
amount of the unpaid accrued interest on such Loan during such Due Period) and
(ii) a fraction, the numerator of which is all of such Recoveries and the
denominator of which
5
is the Loan Balance of such Loan at the time of disposition, or (b) in the case
of each other such Loan, the product of (i) 1.25% and (ii) an amount equal to
(A) the amount of Collections received with respect to such Loan during such Due
Period less (B) the aggregate amount of Recovery Expenses incurred with respect
thereto and not deducted from Collections received in a previous Due Period
pursuant to this clause (b); provided that the amount of Special Servicer Fees
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accrued from the date such Loan became a Defaulted Loan to the end of the
related Due Period shall be subtracted from the amount calculated in clause (a)
or (b)
Section 1.02 Certain Rules of Construction.
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Unless the context of this Agreement clearly requires otherwise: (a)
references to the plural include the singular and to the singular include the
plural; (b) references to any gender include any other gender; (c) the words
"include" and "including" are not limiting; (d) the word "or" has the inclusive
meaning represented by the phrase "and/or"; (e) the words "hereof," "herein,"
"hereby," and "hereunder," and any other similar words, refer to this Agreement
as a whole and not to any particular provision hereof; and (f) article, section,
subsection, clause, exhibit, and schedule references are to this Agreement.
Article, section, and subsection headings are for convenience of reference only,
shall not constitute a part of this Agreement for any other purpose, and shall
not affect the construction of this Agreement. All exhibits and schedules
attached hereto are incorporated herein by this reference. Any reference herein
to this Agreement or any other agreement, document, or instrument includes all
permitted alterations, amendments, changes, extensions, modifications, renewals,
or supplements thereto or thereof, as applicable.
6
ARTICLE TWO
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REPRESENTATIONS AND WARRANTIES
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Section 2.01 Servicer Representations and Warranties.
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The Servicer makes the following representations and warranties to the
Depositor, the Trustee and the Certificateholders as of the Initial Delivery
Date, which shall survive the Initial Delivery Date:
(a) The Servicer has been duly incorporated and is validly existing and
in good standing as a corporation under the laws of the Servicer State of
Incorporation, with requisite corporate power and authority to own its
properties, perform its obligations under each of the Transaction Documents to
which it is a party and to transact the business in which it is now engaged or
in which it proposes to engage.
(b) Each of the Transaction Documents to which it is a party has been
duly authorized, executed and delivered by the Servicer and constitutes the
valid and legally binding obligation of the Servicer, enforceable against the
Servicer in accordance with its terms, subject as to enforcement to any
bankruptcy, insolvency, reorganization and other similar laws of general
applicability relating to or affecting creditors' rights generally and to
general principles of equity regardless of whether enforcement is sought in a
court of equity or law.
(c) The execution and delivery by the Servicer of each of the
Transaction Documents to which it is a party and the performance by the Servicer
of its obligations under such documents and the consummation of the transactions
contemplated therein will not conflict with or result in a breach of any of the
terms or provisions of, or constitute a default under, or result in the creation
or imposition of any lien, charge or encumbrance upon any of the property or
assets of the Servicer pursuant to the terms of any material indenture,
mortgage, deed of trust or other agreement or instrument to which it is a party
or by which it is bound or to which any of its property or assets is subject,
nor will such action result in any violation of the provisions of its
Certificate of Incorporation or Bylaws, or any statute or any order, rule or
regulation of any court or any regulatory authority or other governmental agency
or body having jurisdiction over it or any of its properties; and no consent,
approval, authorization, order, registration or qualification of or with any
court, or any such regulatory authority or other governmental agency or body is
required for the Servicer to enter into each of the Transaction Documents to
which it is a party.
(d) There are no proceedings or investigations pending, or to the
knowledge of the Servicer, threatened against or affecting the Servicer in or
before any court, governmental authority or agency or arbitration board or
tribunal, which, individually or in the aggregate, involve the probability of
materially and adversely affecting the properties, business, prospects, profits
or condition (financial or otherwise) of the Servicer, or the ability of the
Servicer to perform its obligations under the Transaction Documents to which it
is a party. The Servicer is not in default with respect to any order of any
court, governmental authority or agency or arbitration board or tribunal.
(e) The Servicer (i) is not in violation of any laws, ordinances,
governmental rules or regulations to which it is subject, (ii) has not failed to
obtain any licenses, permits, franchises or other governmental authorizations
necessary to the ownership of its property or to the conduct of its business or
the performance of its obligations under the Transaction Documents to which it
is a party, and (iii) is not in violation in any material respect of any term of
any agreement, charter instrument, bylaw or instrument to which it is a party
7
or by which it may be bound, which violation or failure to obtain materially
adversely affects the business or condition (financial or otherwise) of the
Servicer.
(f) The Servicer will service the Loans in accordance with the
terms and conditions contained herein.
(g) There has been no material adverse change in the financial
condition of the Servicer since April 28, 1998 and all information concerning
the Servicer furnished by it to the Depositor, the Certificateholder Agent, any
Certificateholder, the Trustee or the Rating Agency prior in connection with the
Transaction Documents or any transaction contemplated thereby is true and
accurate in all material respects or based on reasonable estimates (but, if
based on estimates, shall be identified as so based) on the date as of which
such information is stated or certified, as applicable, and no such information
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein or therein, in
light of the circumstances under which such statements were made and taken as a
whole, not misleading; provided that, to the extent that the representations and
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warranties of the Servicer contained in this subsection (g) relate to any such
information that was not prepared by the Servicer or any of its Affiliates, then
such representations and warranties are made by the Servicer solely to the best
of its knowledge. As used in this clause, "information" does not include casual
oral conversations or informal oral statements of opinions on which it would be
unreasonable to rely.
Section 2.02 Special Servicer Representations and Warranties.
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The Special Servicer makes the following representations and warranties
to the Depositor, the Trustee and the Certificateholders as of the Initial
Delivery Date, which shall survive the Initial Delivery Date:
(a) The Special Servicer has been duly organized and is validly
existing and in good standing as a limited liability company under the laws of
the Special Servicer State of Incorporation, with requisite limited liability
company power and authority to own its properties, perform its obligations under
the Transaction Documents to which it is a party and to transact the business in
which it is now engaged or in which it proposes to engage.
(b) Each of the Transaction Documents to which it is a party has been
duly authorized, executed and delivered by the Special Servicer and constitutes
the valid and legally binding obligation of the Special Servicer, enforceable
against the Special Servicer in accordance with its terms, subject as to
enforcement to any bankruptcy, insolvency, reorganization and other similar laws
of general applicability relating to or affecting creditors' rights generally
and to general principles of equity regardless of whether enforcement is sought
in a court of equity or law.
(c) The execution and delivery by the Special Servicer of each of the
Transaction Documents to which it is a party and the performance by the Special
Servicer of its obligations under such documents and the consummation of the
transactions contemplated therein will not conflict with or result in a breach
of any of the terms or provisions of, or constitute a default under, or result
in the creation or imposition of any lien, charge or encumbrance upon any of the
property or assets of the Special Servicer pursuant to the terms of any material
indenture, mortgage, deed of trust or other agreement or instrument to which it
is a party or by which it is bound or to which any of its property or assets is
subject, nor will such action result in any violation of the provisions of its
Certificate of Formation or Operating Agreement, or any statute or any order,
rule or regulation of any court or any regulatory authority or other
governmental agency or body
8
having jurisdiction over it or any of its properties; and no consent, approval,
authorization, order, registration or qualification of or with any court, or any
such regulatory authority or other governmental agency or body is required for
the Special Servicer to enter into each of the Transaction Documents to which it
is a party.
(d) There are no proceedings or investigations pending, or to the
knowledge of the Special Servicer, threatened against or affecting the Special
Servicer in or before any court, governmental authority or agency or arbitration
board or tribunal, which, individually or in the aggregate, involve the
probability of materially and adversely affecting the properties, business,
prospects, profits or condition (financial or otherwise) of the Special
Servicer, or the ability of the Special Servicer to perform its obligations
under the Transaction Documents to which it is a party. The Special Servicer is
not in default with respect to any order of any court, governmental authority or
agency or arbitration board or tribunal.
(e) The Special Servicer (i) is not in violation of any laws,
ordinances, governmental rules or regulations to which it is subject, (ii) has
not failed to obtain any licenses, permits, franchises or other governmental
authorizations necessary to the ownership of its property or to the conduct of
its business or the performance of its obligations under the Transaction
Documents to which it is a party, and (iii) is not in violation in any material
respect of any term of any agreement, charter instrument, bylaw or instrument to
which it is a party or by which it may be bound, which violation or failure to
obtain materially adversely affects the business or condition (financial or
otherwise) of the Special Servicer.
(f) The Special Servicer will service the Loans in accordance with the
terms and conditions contained herein.
(g) There has been no material adverse change in the financial
condition of the Special Servicer since April 28, 1998 and all information
concerning the Special Servicer furnished by it to the Depositor, the
Certificateholder Agent, any Certificateholder, the Trustee or the Rating Agency
prior in connection with the Transaction Documents or any transaction
contemplated thereby is true and accurate in all material respects or based on
reasonable estimates (but, if based on estimates, shall be identified as so
based) on the date as of which such information is stated or certified, as
applicable, and no such information contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances under which such
statements were made and taken as a whole, not misleading; provided that, to the
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extent that the representations and warranties of the Special Servicer contained
in this subsection (g) relate to any such information that was not prepared by
the Special Servicer or any of its Affiliates, then such representations and
warranties are made by the Special Servicer solely to the best of its knowledge.
As used in this clause, "information" does not include casual oral conversations
or informal oral statements of opinions on which it would be unreasonable to
rely.
Section 2.03 Servicing Advisor Representations and Warranties.
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The Servicing Advisor makes the following representations and
warranties to the Depositor, the Trustee and the Certificateholders as of the
Initial Delivery Date, which shall survive the Initial Delivery Date:
(a) The Servicing Advisor has been duly incorporated and is validly
existing and in good standing as a corporation under the laws of the Servicing
Advisor State of Incorporation, with requisite corporate power and authority to
own its properties, perform its obligations under the Transaction Documents to
which it is a party and to transact the business in which it is now engaged or
in which it proposes to engage.
9
(b) Each of the Transaction Documents to which it is a party has been
duly authorized, executed and delivered by the Servicing Advisor and constitutes
the valid and legally binding obligation of the Servicing Advisor enforceable
against the Servicing Advisor, in accordance with its terms, subject as to
enforcement to any bankruptcy, insolvency, reorganization and other similar laws
of general applicability relating to or affecting creditors' rights generally
and to general principles of equity regardless of whether enforcement is sought
in a court of equity or law.
(c) The execution and delivery by the Servicing Advisor of each of the
Transaction Documents to which it is a party and the performance by the
Servicing Advisor of its obligations under such documents and the consummation
of the transactions contemplated therein will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default under, or
result in the creation or imposition of any lien, charge or encumbrance upon any
of the property or assets of the Servicing Advisor pursuant to the terms of any
material indenture, mortgage, deed of trust or other agreement or instrument to
which it is a party or by which it is bound or to which any of its property or
assets is subject, nor will such action result in any violation of the
provisions of its Articles of Incorporation or Bylaws, or any statute or any
order, rule or regulation of any court or any regulatory authority or other
governmental agency or body having jurisdiction over it or any of its
properties; and no consent, approval, authorization, order, registration or
qualification of or with any court, or any such regulatory authority or other
governmental agency or body is required for the Servicing Advisor to enter into
each of the Transaction Documents to which it is a party.
(d) Except as previously disclosed in writing, there are no proceedings
or investigations pending, or to the knowledge of the Servicing Advisor,
threatened against or affecting the Servicing Advisor in or before any court,
governmental authority or agency or arbitration board or tribunal, which,
individually or in the aggregate, involve the probability of materially and
adversely affecting the properties, business, prospects, profits or condition
(financial or otherwise) of the Servicing Advisor, or the ability of the
Servicing Advisor to perform its obligations under the Transaction Documents to
which it is a party. The Servicing Advisor is not in default with respect to any
order of any court, governmental authority or agency or arbitration board or
tribunal.
(e) The Servicing Advisor (i) is not in violation of any laws,
ordinances, governmental rules or regulations to which it is subject, (ii) has
not failed to obtain any licenses, permits, franchises or other governmental
authorizations necessary to the ownership of its property or to the conduct of
its business or the performance of its obligations under the Transaction
Documents to which it is a party, and (iii) is not in violation in any material
respect of any term of any agreement, charter instrument, bylaw or instrument to
which it is a party or by which it may be bound, which violation or failure to
obtain materially adversely affects the business or condition (financial or
otherwise) of the Servicing Advisor.
(f) The Servicing Advisor will provide all services in respect of the
Loans in accordance with the terms and conditions contained herein.
(g) There has been no material adverse change in the financial
condition of the Servicing Advisor since April 28, 1998 and all information
concerning the Servicing Advisor furnished by it to the Depositor, the
Certificateholder Agent, any Certificateholder, the Trustee or the Rating Agency
prior in connection with the Transaction Documents or any transaction
contemplated thereby is true and accurate in all material respects or based on
reasonable estimates (but, if based on estimates, shall be identified as so
based) on the date as of which such information is stated or certified, as
applicable, and no such information contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances under which such
statements were
10
made and taken as a whole, not misleading; provided that, to the extent that the
--------
representations and warranties of the Servicing Advisor contained in this
subsection (g) relate to any such information that was not prepared by the
Servicing Advisor or any of its Affiliates, then such representations and
warranties are made by the Servicing Advisor solely to the best of its
knowledge. As used in this clause, "information" does not include casual oral
conversations or informal oral statements of opinions on which it would be
unreasonable to rely.
11
ARTICLE THREE
--------------
ADMINISTRATION AND SERVICING OF LOANS
-------------------------------------
Section 3.01 Responsibilities of the Servicer.
------------ ---------------------------------
(a) The Servicer, for the benefit of the Depositor, the Trustee and the
Certificateholders, shall be responsible for, and shall perform, in accordance
with the Servicing Guidelines the duties of reporting and collecting on the
Loans, in accordance with the standards and procedures set forth in this
Agreement and any related provisions of the Trust Agreement and the Loan
Acquisition Agreement. The Servicer's responsibilities shall include sending
monthly billing and periodic reporting notices to the Obligors, collecting and
posting all payments, accounting for collections, furnishing monthly and annual
statements to the Special Servicer, the Servicing Advisor, the Trustee, the
Rating Agency, the Certificateholders and the Certificateholder Agent with
respect to payments and maintaining the perfected security interest of the
Trustee in the Trust Estate. The Servicer (at its expense), acting alone, shall
have full power and authority, acting at its sole discretion, to do any and all
things in connection with such reporting and collection that it may deem
necessary or desirable. Without limiting the generality of the foregoing, the
Servicer shall, and is hereby authorized and empowered by the Trustee, subject
to Section 3.04, to execute and deliver (on behalf of itself, the
Certificateholders, the Certificateholder Agent, the Trustee or any of them) any
and all instruments necessary to the performance of its obligations with respect
to the Loans and any files or documentation pertaining to the Loan Assets
(including the Loan Files). Subject to Section 3.04, the Servicer also may, in
its sole discretion, waive any late payment charge or penalty, or any other fees
that may be payable to it in the ordinary course of servicing any Loan.
Notwithstanding the foregoing, the Servicer shall not, except pursuant to a
judicial order from a court of competent jurisdiction, or as otherwise expressly
provided in this Agreement, release or waive the right to collect the Scheduled
Payments or any unpaid balance on any Loan or any prepayment or assumption fees.
The Trustee shall, at the expense of the Servicer, furnish the Servicer with any
powers of attorney and other documents necessary or appropriate to enable the
Servicer to carry out its duties hereunder, and the Trustee shall not be
responsible for the Servicer's application thereof.
(b) The Servicer shall cooperate with and take directions from the
Special Servicer in connection with the Loans, including any Delinquent Loan,
Defaulted Loan or Underperforming Loan.
(c) The Servicer shall monitor collections of Loan payments made to the
Lockbox Account and administer and update collection information, which
information shall be made available to the Servicer on a daily basis by
electronic transfer. The Servicer shall promptly, but within two (2) Business
Days of receipt thereof, remit to the Lockbox Account any Collections remitted
to or received by it.
(d) In the performance of its duties hereunder, the Servicer shall
comply with Section 3.04.
Section 3.02 Responsibilities of Special Servicer.
------------ -------------------------------------
(a) The Special Servicer, for the benefit of the Depositor, the Trustee
and the Certificateholders, shall be responsible for, and shall, in accordance
with the Servicing Guidelines, pursue the managing, servicing, administering and
enforcing of the Loans, the enforcement of the Trustee's interest in the Loan
and Assets conveyed and assigned pursuant to the Trust Agreement, the
repossession and sale of the Loan Collateral upon default of the related Loan
and the enforcement of all other remedies under the Loans, in accordance with
the standards and procedures set forth in this Agreement and any related
provisions of the
12
Trust Agreement. The Special Servicer's responsibilities shall include
responding to inquiries of Obligors, investigating delinquencies, providing
appropriate federal income tax information to the Trustee for use in providing
information to the Certificateholders and the Certificateholder Agent and
maintaining Insurance Policies. Subject to Section 3.04 and the other provisions
contained herein, the Special Servicer (at its expense) shall have full power
and authority, acting at its sole discretion, to do any and all things in
connection with such management, servicing, administration, enforcement and such
sale of the Loan Collateral that it may deem necessary or desirable. Without
limiting the generality of the foregoing, the Special Servicer shall, and is
hereby authorized and empowered by the Trustee, subject to Section 3.04, to
execute and deliver (on behalf of itself, the Depositor, the Certificateholders,
the Certificateholder Agent, the Trustee or any of them) any and all instruments
of satisfaction or cancellation, or of partial or full release or discharge, and
all other comparable instruments, with respect to the Loans and any files or
documentation pertaining to the Loan Assets. Subject to Section 3.04, the
Special Servicer also may, in its sole discretion, waive any late payment charge
or penalty, or any other fees (but not, without the prior written consent of the
Certificateholder Agent, any prepayment fee or premium) that may be payable to
it in the ordinary course of servicing any Loan. Notwithstanding the foregoing,
the Special Servicer shall not, except pursuant to a judicial order from a court
of competent jurisdiction, or as otherwise expressly provided in this Agreement,
release or waive the right to collect the Scheduled Payments or any unpaid
balance on any Loan. The Trustee shall, at the expense of the Special Servicer,
furnish the Special Servicer with any powers of attorney and other documents
necessary or appropriate to enable the Special Servicer to carry out its
servicing and administrative duties hereunder, and the Trustee shall not be
responsible for the Special Servicer's application thereof.
(b) The Special Servicer shall conduct any Loan management, servicing,
administration or enforcement actions in the following manner:
(i) The Special Servicer, as agent for and on behalf of the
Depositor, the Trustee and the Certificateholders, with respect to any
Defaulted Loan, shall follow such practices and procedures as are
normal and consistent with the Special Servicer's standards and
procedures relating to its own loans and interests in collateral that
are similar to the Loans and the Loan Collateral, and in any event,
consistent with the standard of care described in Section 3.04,
including the taking of appropriate actions to foreclose or otherwise
liquidate any such Defaulted Loan, together with the related Loan
Collateral, to collect any Guaranty Amounts, and to enforce the
Depositor's rights under the Loan Acquisition Agreement. All
Collections (including Recoveries) in respect of any Loan or Loan
Collateral, if for any reason received by the Special Servicer, shall
be remitted to the Lockbox Account within two (2) Business Days of
receipt thereof;
(ii) The Special Servicer may sue to enforce or collect upon
the Loans as agent for the Certificateholders and the Trust Estate. If
the Special Servicer elects to commence a legal proceeding to enforce a
Loan, then the act of commencement shall be deemed to be an automatic
assignment of the Loan to the Special Servicer for purposes of
collection only, and a Servicing Officer shall deliver by facsimile a
Request for Release of Documents to the Trustee (with a copy to the
Certificateholder Agent) requesting delivery to the Special Servicer of
the Loan and stating the reasons for the delivery of any original
documents. Upon receipt of such delivery request, the Trustee shall
release such Loan to the Special Servicer within two (2) Business Days
of receipt of such request (receipt being deemed to have occurred upon
confirmation of facsimile transmission). Upon release of such items as
provided herein, the Special Servicer is authorized to execute an
instrument in satisfaction of such Loan and to do such other acts and
execute such other documents as it deems necessary to discharge the
Obligor thereunder and release any security interest in the
13
Loan Collateral related thereto. The Special Servicer shall determine,
in accordance with the standard of care described in Section 3.04, when
a Loan has been paid in full and when a Loan has become a Liquidated
Loan. If in any enforcement suit or legal proceeding it is held that
the Special Servicer may not enforce a Loan on the ground that it is
not a real party in interest or a holder entitled to enforce the Loan,
then the Trustee on behalf of the Certificateholders shall, at the
Special Servicer's request and expense, take such steps as the Special
Servicer deems necessary and instructs the Trustee in writing to take
to enforce the Loan, including bringing suit in its name or the name of
the Depositor, as beneficial owner of the Loan, or the names of the
Certificateholders, as third party beneficiaries thereunder, and the
Trustee shall be indemnified by the Special Servicer for any such
action taken.
(iii) The Special Servicer shall exercise any rights of
recourse against third parties that exist with respect to any Loan in
accordance with the Special Servicer's usual practice and in any event,
consistent with the standard of care described in Section 3.04. In
exercising recourse rights, the Special Servicer is authorized on the
Trustee's behalf to reassign the Loan to the person against whom
recourse exists to the extent necessary, and at the price set forth in
the document creating the recourse. The Special Servicer will not
reduce or diminish such recourse rights, except to the extent that it
exercises such right;
(iv) The Special Servicer may waive, modify or vary any terms
of any Loan or consent to the postponement of strict compliance with
any such term solely in accordance with Section 3.15. The Special
Servicer shall provide the Servicer and the Trustee with an amended
Loan Schedule reflecting any modification of any Scheduled Payment.
(v) The Special Servicer shall not consent to the termination
of any Loan in connection with loss of or damage to the related Loan
Collateral unless the Obligor has paid an amount not less than an
amount equal to the Loan Balance of such Loan plus any accrued interest
thereon or, if less, the maximum amount legally collectible under the
related Loan. In the event of damage to any Loan Collateral
constituting a total loss, in lieu of terminating the related Loan, at
the request of the Obligor, the Special Servicer may allow the Obligor
to use the insurance proceeds to purchase Loan Collateral and
substitute such Loan Collateral for the damaged Loan Collateral under
the Loan if, in the reasonable judgement of the Special Servicer, doing
so would maximize the total recovery with respect to such Loan.
(vi) If the Special Servicer, in the enforcement of any Loan,
claims possession of the Loan Collateral from an Obligor, then the
Special Servicer shall use its best efforts to sell such Loan
Collateral promptly and consistent with the standard of care set forth
in Section 3.04. Any Recoveries related thereto shall be deposited in
accordance with Section 3.05.
(vii) Notwithstanding any provision to the contrary contained
in this Agreement, the Special Servicer shall use its best efforts to
exercise any right under a Defaulted Loan to accelerate the unpaid
Scheduled Payments due or to become due thereunder to the extent it
believes, consistently with the Servicing Guidelines, that such action
will maximize the net proceeds available to the Trust Estate; provided
--------
that the Special Servicer shall not accelerate any Scheduled Payment
unless permitted to do so by the terms of the Loan or under applicable
law.
(c) The Special Servicer shall hold copies of the Loan Files in its
capacity as Special Servicer for the benefit of the Depositor, the Trustee and
the Certificateholders. The possession of a copy of each
14
Loan File by the Special Servicer is for the sole purpose of servicing the
related Loan. Upon the release of the lien of the Trust Agreement with respect
to any Loan in accordance with Section 3.05 of the Trust Agreement, the Special
Servicer will no longer hold the related Loan File in its capacity as Special
Servicer hereunder. Each Loan File shall be held and maintained by the Special
Servicer in accordance with the standard of care set forth in Section 3.04.
Section 3.03 Responsibilities of the Servicing Advisor.
------------ ------------------------------------------
The Servicing Advisor, for the benefit of the Depositor, the Trustee
and the Certificateholders, shall be responsible for, and shall, in accordance
with the Servicing Guidelines: (a) within ten (10) Business Days of the receipt
thereof, review the Special Servicer Report to ***;(b) in accordance with
Section 4.01(d), prepare and deliver to the Special Servicer ***; (c) in
accordance with Section 4.01(e), prepare and deliver to the Special Servicer
***; (d) respond to all inquiries of, and provide such further advice as
requested by the Special Servicer with respect to ***; and (e) at the direction
of the Special Servicer, oversee, either directly or indirectly through an
Affiliate of the Servicing Advisor, ***. Notwithstanding anything to the
contrary contained herein, the Servicing Advisor shall have no right to take any
action with respect to *** without the express prior authorization of the
Special Servicer.
Section 3.04 Servicing Standard of Care.
------------ ---------------------------
In managing, administering, servicing, enforcing and making collections
on the Loan Contracts and the Loan Assets pursuant to this Agreement: (a) each
of the Servicer and the Special Servicer will exercise that degree of skill and
care consistent with industry standards for the servicing of secured commercial
loans, and that which each of the Servicer and the Special Servicer, as
applicable, customarily exercises with respect to similar loan contracts and
interests in Loan Assets owned or originated by it in a manner consistent with
the Servicing Guidelines, and in any event, in a prudent and commercially
reasonable manner; and (b) in performing its duties under Section 3.03 (a)-(e)
inclusive, the Servicing Advisor will exercise that degree of skill and care
consistent with industry standards in financial and management consulting in the
death care industry and that which the Servicing Advisor customarily exercises
in performance of financial and management consulting services to clients in the
death care industry, will handle any funds collected by it in accordance with
the standards established by this Agreement and will act in a prudent and
commercially reasonable manner. Each of the Servicer, the Special Servicer and
the Servicing Advisor shall punctually perform all of its obligations and
agreements under this Agreement and shall comply with all applicable federal and
state laws and regulations, shall maintain all state and federal licenses and
franchises necessary for it to perform its responsibilities hereunder, and shall
not materially impair the rights of the Certificateholders in any Loans or
payments thereunder.
Section 3.05 Lockbox Account; Remittances.
------------ -----------------------------
The Servicer shall open and maintain one or more bank accounts at
Manufacturers and Traders Trust Company, located in Buffalo, New York or such
other bank as the Certificateholder Agent and the Trustee shall approve (which
approval shall not be unreasonably withheld) (the"Lockbox Bank"), in the name of
the Trustee for the benefit of the Certificateholders (individually, a
"Specified Lockbox Account" and, collectively, the "Lockbox Account"). The
Servicer shall provide three (3) Business Days prior written
***Confidential information omitted purusant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
15
notice to the Depositor, the Trustee and the Certificateholder Agent of the
opening of any Specified Lockbox Account and the name of any new Lockbox Bank.
The Company shall, in writing, direct all Obligors to make all payments
(including Scheduled Payments) directly to the Lockbox Account. Notwithstanding
anything to the contrary contained herein, upon the occurrence and during the
continuation of a Servicer Default, (a) the Servicer shall not have the right to
establish any new Specified Lockbox Account and (b) the Certificateholder Agent
may direct, in writing, (i) the Trustee to establish a new Specified Lockbox
Account at any Lockbox Bank, whereupon the Trustee shall so establish a new
Specified Lockbox Account, and (ii) the Special Servicer to direct, in writing,
all Obligors to make all payments (including Scheduled Payments) directly to a
Specified Lockbox Account, whereupon the Special Servicer shall so direct all
Obligors. Neither the Servicer, the Special Servicer, the Servicing Advisor nor
the Depositor shall have any right to withdraw, or otherwise exercise any
control over, any amounts contained in any Specified Lockbox Account. The
Servicer and the Trustee shall provide standing instructions to each Lockbox
Bank that all amounts deposited in the Lockbox Account other than amounts
deposited in error (which are shown to be other than Collections) shall be
electronically transferred to the Collection Account on a daily basis after such
funds have been collected by the Lockbox Bank; none of the amounts deposited in
the Lockbox Account in error shall constitute the property of the Depositor, the
Trustee or the Certificateholders. If, for any reason, any Collections are
received by the Servicer or the Special Servicer, the Servicer and the Special
Servicer shall (i) send notice to the Obligor that future payments are to be
made directly to the applicable Specified Lockbox Account and (ii) hold in trust
for the benefit of the Trustee and the Certificateholders such Collections (in
the form received) until such time as amounts are transferred to the Lockbox
Account as required pursuant to Section 3.01(c).
Section 3.06 Financing Statements; Title Filings.
------------ ------------------------------------
The Servicer will make all UCC filings and recordings, and shall take
all other actions, as may be required pursuant to the terms of the Transaction
Documents to maintain perfected the interest of the Depositor and to maintain
the perfected security interest of the Trustee (for the benefit of the
Certificateholders) in the Trust Estate. The Servicer shall, in accordance with
its customary servicing procedures and at its own expense, be responsible for
taking such steps as are necessary to maintain perfection of such security
interests. The Trustee hereby authorizes the Servicer to re-perfect or to cause
the re-perfection of such security interest on its behalf as Trustee, as
necessary. The Servicer shall provide the Company, the Depositor and the Trustee
with copies of all such UCC filings and recordings.
Section 3.07 Maintenance of Insurance Policy; Insurance Proceeds.
----------- -----------------------------------------------------
The Special Servicer shall have the obligation to verify, monitor and
enforce the acquisition and maintenance of each Obligor's Insurance Policies.
Unless required to be held in trust in accordance with the related loan
document, any Insurance Proceeds shall be deposited in the Lockbox Account
pursuant to Section 3.05.
Section 3.08 No Offset.
------------ ----------
The obligations of the Servicer, the Special Servicer and the Servicing
Advisor under the Agreement shall not be subject to any defense, counterclaim or
right of offset that the Servicer or Special Servicer has or may have against
the Depositor or any other Person, whether in respect of this Agreement, any
Loan, any Loan Asset or otherwise.
16
Section 3.09 Servicing Compensation.
------------ -----------------------
(a) As compensation for the performance of its obligations under this
Agreement, the Servicer shall be entitled to receive the Servicer Fee. The
Servicer Fee shall be paid monthly on each Payment Date in accordance with the
provisions of the Trust Agreement. The Servicer Fee shall be payable with
respect to the period commencing on the Initial Delivery Date and ending on the
first to occur of (i) the receipt of the last Scheduled Payment with respect to
the last remaining Loan, (ii) the receipt of all Recoveries with respect to the
last remaining Loan, (iii) the date on which the Depositor redeems the
Certificates pursuant to Article Ten of the Trust Agreement or (iv) the receipt
by the Servicer of a Servicer Termination Notice; provided that, after such
---------
receipt of the Servicer Termination Notice, the successor Servicer shall be
entitled to the Servicer Fee. The Servicer Fee shall be paid by the Trustee to
the Servicer at the times and in the priority as set forth in the Trust
Agreement. The Servicer shall also be entitled to receive any Servicing Charges
collected by it other than assumption and substitution fees pursuant to Section
3.11. The Servicer shall pay all expenses incurred by it in connection with its
servicing activities hereunder, including payment of the fees and disbursements
of the Independent Accountants and payment of expenses incurred by it in
connection with distributions and reports to the Trustee, the Special Servicer,
the Rating Agency, the Certificateholders and the Certificateholder Agent and
shall not be entitled to reimbursement for such expenses; provided that the
--------
Servicer will be entitled to prompt reimbursement from the Depositor, out of
amounts received as Recoveries with respect to a Defaulted Loan, for the
reasonable costs and expenses incurred by the Servicer (including reasonable
attorneys' fees and out-of-pocket expenses) in connection with the realization
or attempted realization upon, or the enforcement of rights and remedies with
respect to, such Defaulted Loan.
(b) As compensation for the performance of its obligations under this
Agreement, the Special Servicer shall be entitled to receive the Special
Servicer Fee and, with respect to Defaulted Loans not assigned to the Servicing
Advisor for collection in accordance with the terms hereof, the related Workout
Fees. The Special Servicer Fee and the Workout Fees shall be payable on each
Payment Date in accordance with the provisions of the Trust Agreement. The
Special Servicer Fee shall be payable with respect to the period commencing on
the Initial Delivery Date and ending on the first to occur of (i) the receipt of
the last Scheduled Payment with respect to the last remaining Loan, (ii) the
receipt of all Recoveries with respect to the last remaining Loan, or (iii) the
date on which the Depositor redeems the Certificates pursuant to Article Ten of
the Trust Agreement or (iv) the receipt by the Special Servicer of a Special
Servicer Termination Notice; provided that, after such receipt of the Special
--------
Servicer Termination Notice, the successor Special Servicer shall be entitled to
the Special Servicer Fee. The Special Servicer Fee shall be paid by the Trustee
to the Special Servicer at the times and in the priority as set forth in the
Trust Agreement. The Special Servicer shall also be entitled to retain any fees
collected by it from an Obligor in connection with activities permitted pursuant
to Sections 3.11 or 3.15 in an amount not to exceed 1% of the Loan Balance per
Loan assumption, substitution, modification or other permitted activity. The
Special Servicer shall pay all expenses incurred by it in connection with its
servicing activities hereunder, including payment of the fees and disbursements
of the Servicing Advisor and the Independent Accountants and payment of expenses
incurred in connection with distributions and reports to the Trustee, the
Servicer, the Rating Agency, the Certificateholders and the Certificateholder
Agent and shall not be entitled to reimbursement for such expenses; provided
--------
that the Special Servicer will be entitled to prompt reimbursement from the
Trust Estate, out of amounts received as Recoveries with respect to a Defaulted
Loan, for the reasonable costs and expenses incurred by the Special Servicer
(including reasonable attorneys' fees and out-of-pocket expenses) in connection
with the realization or attempted realization upon, or the enforcement of rights
and remedies with respect to, such Defaulted Loan.
17
(c) As compensation for the performance of its obligations under the
Agreement, the Servicing Advisor shall be entitled to receive the Servicing
Advisor Fee and, with respect to Defaulted Loans assigned to it for collection
by the Special Servicer in accordance with the terms hereof, the related Workout
Fees. The Servicing Advisor Fee with respect to any Loan and the Workout Fees
shall be payable on each Payment Date in accordance with the provisions of the
Trust Agreement. The Servicing Advisor Fee shall be payable with respect to the
period commencing on the Initial Delivery Date and ending on the first to occur
of (i) the receipt of the last Scheduled Payment with respect to the last
remaining Loan, (ii) the receipt of all Recoveries with respect to the last
remaining Loan, or (iii) the date on which the Depositor redeems the
Certificates pursuant to Article Ten of the Trust Agreement or (iv) the receipt
by the Servicing Advisor of a Servicing Advisor Termination Notice; provided
--------
that, after such receipt of the Servicing Advisor Termination Notice, the
successor Servicing Advisor shall be entitled to the Servicing Advisor Fee. The
Servicing Advisor Fee shall be paid by the Special Servicer at the times and in
the priority as set forth in the Trust Agreement. The Servicing Advisor shall
pay all expenses incurred by it in connection with its servicing activities
hereunder; provided that the Servicing Advisor will be entitled to prompt
--------
reimbursement from the Special Servicer, out of amounts received as Recoveries
with respect to a Defaulted Loan, for the reasonable costs and expenses incurred
by the Servicing Advisor (including reasonable attorneys' fees and out-of-pocket
expenses) in connection with the realization or attempted realization upon, or
the enforcement of rights and remedies with respect to, such Defaulted Loans.
(d) Notwithstanding anything to the contrary contained herein, all
payments made or reimbursed to the Servicer, the Special Servicer or the
Servicing Advisor hereunder (including Recovery Expenses) shall be made, and all
services shall be performed, without duplication, and no such Person shall
receive any amounts for services actually performed by any other such Person.
Section 3.10 Prepayments Permitted; Substitution or Purchase of Loans.
------------ ---------------------------------------------------------
(a) The Servicer shall accept prepayments and terminations of the Loans
in accordance with their terms, provided that all amounts due under such Loans
--------
are deposited in the Lockbox Account pursuant to Section 3.05. All amounts
collected with respect to prepaid Loans shall be deposited in the Lockbox
Account and held in trust for the benefit of the Certificateholders in
accordance with Section 3.05.
(b) Notwithstanding any other provision to the contrary contained
herein, neither the Special Servicer nor the Servicer shall, with respect to a
Defaulted Loan (i) negotiate or enter into a new loan with the Obligor relating
to the Loan Assets or the Obligor's obligations under such Defaulted Loan, or
(ii) allow the Obligor thereunder to resume its rights under such Defaulted
Loan, unless the Depositor has removed or made a substitution for such Defaulted
Loan in the manner set forth in the Trust Agreement and the Loan Acquisition
Agreement or, subject to Section 3.04(d) of the Trust Agreement, otherwise
received the prior written consent of the Directing Holders and the Controlling
Holders.
(c) If the Company is required to repurchase or substitute a Loan
pursuant to the terms of the Loan Acquisition Agreement, the Special Servicer
shall permit such repurchase or substitution only in accordance with the terms
of the Loan Acquisition Agreement and the terms hereof.
18
Section 3.11 Due-on-Sale Clauses; Assumptions; Due-on-Encumbrance
(a) If any Loan contains a provision in the nature of a "due-on-sale"
clause, which by its terms:
(i) provides that such Loan shall (or may at the lender's
option) become due and payable upon the sale or other transfer of an
interest in the related Loan Collateral; or
(ii) provides that such Loan may not be assumed without the
consent of the lender in connection with any such sale or other
transfer;
then, for so long as such Loan is included in the Trust Estate, the Special
Servicer, on behalf of the Trust Estate, will enforce and may not waive any
due-on-sale clause contained in the related Note or Mortgage. The Special
Servicer is authorized to take or enter into an assumption agreement from or
with the Person to whom such property has been or is about to be conveyed (the
"Assuming Party"), and to release the original Obligor from liability upon the
Loan and substitute such Assuming Party as obligor thereon; provided that: (i)
--------
the Special Servicer shall re-underwrite the Loan in a manner consistent with
the Program Guidelines and shall not approve any assumption unless the Loan and
the Assuming Party qualify under the Program Guidelines; (ii) the
Certificateholder Agent shall have been provided with any information reasonably
requested and shall have approved in writing in advance such assumption, which
approval shall in the absence of material deviations from the Program Guidelines
not be unreasonably withheld; and (iii) the terms of any such assumption or
substitution agreement shall not be materially different from those in the
original Note or Mortgage. The Special Servicer shall notify the Trustee, the
Certificateholder Agent and the Rating Agency that any such assumption or
substitution agreement has been completed and forward to the Trustee the
original of such agreement, which original shall be added by the Trustee to the
related Loan File, and shall, for all purposes, be considered a part of such
Loan File to the same extent as all other documents and instruments constituting
a part thereof. In connection with any such assumption or substitution
agreement, the interest rate, principal amount and other material payment terms
of the Loan pursuant to the related Note shall not be changed, except as
otherwise permitted by Section 3.15. Subject to Section 3.09(b), any fee
collected by the Special Servicer for entering into an assumption or
substitution agreement will be retained by it.
(b) For so long as such Loan is included in the Trust Estate, the
Special Servicer shall enforce any provision in any Loan in the nature of a
"due-on-encumbrance" clause, which by its terms:
(i) provides that such Loan shall (or may at the lender's
option) become due and payable upon the creation of any lien or other
encumbrance on the related Loan Collateral; or
(ii) requires the consent of the related mortgagee to the
creation of any such lien or other encumbrance on the related Loan
Collateral.
(c) Nothing in this Section 3.11 shall constitute a waiver of the
Trustee's right, if it becomes the mortgagee of record or beneficiary of record
under any Mortgage, to receive notice of any assumption of a Loan, any sale or
other transfer of the related Mortgaged Property or the creation of any lien or
other encumbrance with respect to such Mortgaged Property.
(d) Except as otherwise permitted by this Section, the Special Servicer
shall not agree to modify, waive or amend, and no assumption or substitution
agreement entered into pursuant this Section 3.11 shall contain any terms that
are different from, any term of any Loan or the related Note.
19
Section 3.12 Realization Upon Defaulted Loans.
------------ ---------------------------------
(a) Subject to Section 3.14, the Special Servicer shall repossess,
foreclose upon or otherwise comparably convert the ownership of assets securing
such of the Loans as come into and continue in default and as to which no
satisfactory arrangements can be made for collection of delinquent payments
pursuant to the Servicing Guidelines and the provisions of the Agreement, and
which are not released from the Trust Estate pursuant to any other provision
hereof, if the Special Servicer determines, in a manner consistent with the
servicing standard set forth in Section 3.04, that such action would be in the
best economic interest of the Certificateholders. The Special Servicer shall
advance the costs and expenses of any such proceeding unless it makes a
determination, in its reasonable business judgment, that such advance, if made,
would be nonrecoverable. The Special Servicer shall be entitled to reimbursement
of advances made pursuant to the preceding sentence from Recoveries on such
Loan.
If the Special Servicer elects to proceed with a foreclosure
in accordance with the laws of the state where the Loan Collateral is located,
the Special Servicer shall not be required to pursue a deficiency judgment
against the related Obligor or any other liable party if the laws of the state
do not permit such a deficiency judgment after such foreclosure or if the
Special Servicer determines, in its best judgment, that the likely recovery if a
deficiency judgment is obtained will not be sufficient to warrant the cost,
time, expense or exposure of pursuing the deficiency judgment. If title to any
Mortgaged Property is acquired in foreclosure or by deed in lieu of foreclosure,
then the deed or certificate of sale shall be issued to the Trustee, or to its
nominee on behalf of Certificateholders.
(b) Notwithstanding any provision to the contrary contained in this
Agreement, the Special Servicer shall not, on behalf of the Trust Estate, obtain
title to a Mortgaged Property as a result of or in lieu of foreclosure or
otherwise, and shall not otherwise acquire possession of, or take any other
action with respect to, any Mortgaged Property if, as a result of any such
action, the Trustee, the Servicer, the Depositor, the Company or the
Certificateholders, would be considered to hold title to, to be a "mortgagee-in-
possession" of or to be an "owner" or "operator" of such Mortgaged Property
within the meaning of the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended from time to time, or any comparable law,
unless the Special Servicer has previously determined in accordance with this
Section 3.12, based on an Environmental Assessment report prepared by an
Independent Person satisfying the requirements set forth in the first sentence
of Section 3.12(c), that:
(i) such Mortgaged Property is in compliance with applicable
environmental laws (in the reasonable judgment of such Independent
Person based upon all available information) or, if not, that it would
be in the best economic interest of the Trust Estate and there would be
no adverse effect on the Servicer, Special Servicer, Trustee or
Depositor to take such actions as are necessary to bring such Mortgaged
Property in compliance therewith, and
(ii) there are no circumstances present at such Mortgaged
Property relating to the use, management or disposal of any Hazardous
Substances for which investigation, testing, monitoring, containment,
clean-up or remediation could be required under any currently effective
federal, state or local law or regulation (in the reasonable judgment
of such Independent Person based upon all available information), or
that, if any such Hazardous Substances are present for which such
action could be required, it would be in the best economic interest of
the Trust Estate and there would be no adverse effect on the Servicer,
Special Servicer, Trustee or the Depositor to take such actions with
respect to the affected Mortgaged Property.
20
In the event that the Environmental Assessment first obtained
by the Special Servicer with respect to a Mortgaged Property indicates that such
Mortgaged Property may not be in compliance with applicable environmental laws
or that Hazardous Substances may be present but does not definitively establish
such fact, the Special Servicer shall cause such further environmental tests to
be conducted by an Independent Person who regularly conducts such tests as the
Special Servicer shall deem prudent to protect the interests of
Certificateholders. Any such tests shall be deemed part of the Environmental
Assessment obtained by the Special Servicer for purposes of this Section 3.12.
(c) The Environmental Assessment contemplated by Section 3.12(b) shall
be prepared by any Independent Person who regularly conducts environmental
audits for purchasers of commercial property, as determined by the Special
Servicer in a manner consistent with the servicing standard set forth in Section
3.04. The Special Servicer shall advise the Trustee by delivery of a certificate
of a Special Servicer Officer of the cost of preparation of an Environmental
Assessment, and the Trustee shall pay such cost from amounts on deposit in the
Collection Account. The Trustee may rely conclusively on such certificate and
shall have no duty or obligation to re-calculate the amounts stated therein. To
the extent that amounts on deposit in the Collection Account are insufficient,
the Special Servicer shall advance the amount of such insufficiency as an
advance unless the Special Servicer makes a determination, in its reasonable
business judgment, that such advance would be nonrecoverable.
(d) If the Special Servicer determines pursuant to Section 3.12(b)(i)
that a Mortgaged Property securing a Defaulted Loan is not in compliance with
applicable environmental laws but that it is in the best economic interest of
the Trust Estate to take such actions as are necessary to bring such Mortgaged
Property in compliance therewith, or if the applicable Special Servicer
determines pursuant to Section 3.12(b)(ii) that the circumstances referred to
therein relating to Hazardous Substances are present on a Mortgaged Property
securing a Defaulted Loan but that it is in the best economic interest of the
Trust Estate to take such action with respect to the containment, clean-up or
remediation of Hazardous Substances affecting such Mortgaged Property as is
required by law or regulation, the Special Servicer shall take such action as it
deems to be in the best economic interest of the Trust Estate and that would not
have an adverse effect on the Servicer, the Special Servicer, the Depositor, the
Trustee or the Certificateholders; provided that, in advance of any such action,
--------
the Trustee shall mail notice to the Certificateholders and the
Certificateholder Agent of such proposed action, which notice shall be prepared
by the Special Servicer, and if the Trustee receives, within thirty (30) days of
such notification, instructions from the Directing Holders directing the Special
Servicer not to take such action, then the Special Servicer shall so refrain;
provided further that, if there has occurred a Depositor Event of Default, then
- -------- -------
the Special Servicer shall act without the instructions of the Directing
Holders, unless, in the case of a Depositor Event of Default under Section
6.01(a), (b) or (c) of the Trust Agreement, the Directing Holders are
Independent. The Special Servicer shall advise the Trustee by delivery of an
Officer's Certificate of the cost of any such compliance, containment, clean-up
or remediation, and the Trustee shall pay such cost from amounts on deposit in
the Collection Account. To the extent that amounts on deposit in the Collection
Account are insufficient, the Special Servicer shall advance the amount of such
shortfall unless the Special Servicer makes a determination, in its reasonable
business judgment, that such advance, if made, would be nonrecoverable. The
Special Servicer shall be entitled to reimbursement of advances made pursuant to
the preceding sentence from Recoveries on such Loan.
(e) The Servicer shall report to the Internal Revenue Service and to
the related Obligor, in the manner required by applicable law, the information
required to be reported regarding any Mortgaged Property or any mortgagor
including regarding any Mortgaged Property that is abandoned or foreclosed. The
Servicer shall concurrently deliver a copy of any such report to the Trustee.
The Special Servicer, on
21
a timely basis, shall provide the Servicer with such information as to any Loan
as is necessary to enable the Servicer to comply with this Section 3.12(e).
(f) The Special Servicer shall cause an updated Valuation to be
prepared with respect to any Loan (i) promptly upon such Loan becoming a
Defaulted Loan and (ii) so long as such Loan remains a Defaulted Loan, on each
six (6) month anniversary of the date such Loan became a Defaulted Loan. Such
updated Valuation shall be prepared by an Independent Person or the Servicing
Advisor (or an Affiliate thereof) for an amount not to exceed the lesser of (A)
the lowest amount then being quoted to or available to the Special Servicer for
the preparation of such a Valuation and (B) $5,000, adjusted for inflation based
on changes in the "Consumer Price Index" since the date of this Agreement. Upon
its receipt of each updated Valuation, the Special Servicer shall promptly
provide a copy thereof to the Servicer, the Servicing Advisor, the Directing
Holders, the Trustee and the Certificateholder Agent. The cost of all updated
Valuation(s) made in accordance with this Section 3.12(f) shall be an expense of
the Trust Estate.
(g) Upon any Defaulted Loan becoming a Liquidated Loan, the Servicer
shall deliver a certificate of a Servicing Officer to the Depositor, the Trustee
and the Certificateholder Agent specifying (i) the actual amount of all
Recoveries received by the Servicer in respect of such Loan to the date of such
certificate, and (ii) the amount of all other Recoveries, if any, that the
Servicer expects to be recovered in the future with respect to such Loan.
Section 3.13 Title and Management of Repossessed Collateral.
------------ -----------------------------------------------
(a) In the event that title to any Loan Collateral is acquired for the
benefit of Certificateholders, by foreclosure, by deed in lieu of foreclosure or
upon abandonment or reclamation from bankruptcy, the deed or certificate of sale
shall be taken in the name of the Trustee, or its nominee, on behalf of the
Trust Estate. The Special Servicer shall manage, conserve, protect and operate
any Repossessed Collateral for the Certificateholders solely for the purpose of
its prompt disposition and sale.
(b) The Special Servicer shall not be required to remit to the Lockbox
Account, but shall segregate and hold, all funds collected and received in
connection with the operation of any Repossessed Collateral (including among
other things, rent, insurance proceeds and liquidation proceeds) separate and
apart from its own funds and general assets and shall establish and maintain
with respect to any Repossessed Collateral an account held in trust for the
Trust Estate for the benefit of the Certificateholders (the "Operating
Account"), which shall be an Eligible Account, and will account separately for
funds received or expended with respect to the Repossessed Collateral of any
Loan. The Special Servicer shall notify the Trustee, the Servicer and the
Certificateholder Agent in writing of the location and account number of each
Operating Account immediately upon its establishment and shall notify the
Trustee, the Servicer and the Certificateholder Agent prior to any subsequent
change thereof. Amounts on deposit in any Operating Account shall not be
invested.
(c) The Special Servicer shall have full power and authority, subject
only to the specific requirements and prohibitions of this Agreement, to do any
and all things in connection with any Repossessed Collateral as are commercially
reasonable and not inconsistent with the manner in which the Special Servicer
manages and operates similar property owned or managed by the Special Servicer
or any of its Affiliates, all on such terms and for such period as the Special
Servicer deems to be in the best interests of the Certificateholders and in
accordance with Section 3.04. In connection therewith, the Special Servicer
shall deposit or cause to be deposited on a daily basis in the Operating Account
all revenues received by it with respect to any Repossessed Collateral and the
related Loan, and shall withdraw therefrom funds
22
necessary for the proper operation, management and maintenance of any
Repossessed Collateral and for other property protection expenses, including:
(i) all insurance premiums due and payable in respect of
any Repossessed Collateral;
(ii) all property taxes and assessments in respect of any
Repossessed Collateral that may result in the imposition of a lien
thereon; and
(iii) all costs and expenses necessary to maintain, manage or
operate any Repossessed Collateral.
If the amounts on deposit in the Operating Account are
insufficient for the purposes set forth in clauses (i) through (iii) above, then
the Special Servicer shall advance the amount of any such shortfall unless the
Special Servicer makes a determination, in its reasonable business judgment,
that such advance is not reasonably recoverable from anticipated Recoveries with
respect to such Repossessed Collateral. The Special Servicer shall be entitled
to reimbursement of advances made pursuant to the preceding sentence from
Recoveries on such Loan or Repossessed Collateral.
(d) The Special Servicer shall or shall direct the Servicing Advisor to
use its best efforts to contract with any Independent Person for the operation
and management of any Repossessed Collateral, provided that:
(i) the terms and conditions of any such contract shall not be
inconsistent herewith;
(ii) any such contract shall require that the Independent
Person pay all costs and expenses incurred in connection with the
operation and management of such Repossessed Collateral, including
those listed above, and return all related revenues (net of such costs
and expenses);
(iii) none of the provisions of this Section 3.13(c) relating
to any such contract or to actions taken through any such Independent
Person shall be deemed to relieve the Special Servicer or the Servicing
Advisor of any of its duties and obligations to the Trust Estate, the
Servicer or the Trustee on behalf of the Certificateholders with
respect to the operation and management of any such Repossessed
Collateral;
(iv) the Special Servicer shall be obligated with respect
thereto to the same extent as if it alone were performing all duties
and obligations in connection with the operation and management of such
Repossessed Collateral; and
(v) the Servicing Advisor, and if the Independent Person shall
be the Servicing Advisor or an Affiliate, the Special Servicer, shall
have delivered a written opinion to the Special Servicer, and the
Special Servicer shall have delivered a copy thereof to the Trustee and
the Certificateholder Agent, to the effect that any such hiring of an
Independent Person, in light of among other things any fees which may
be charged, will maximize ultimate proceeds to the Trust Estate with
respect to the related Repossessed Collateral.
The Special Servicer shall be entitled to enter into any
agreement with any Independent Person performing services for it related to its
duties and obligations hereunder for indemnification of the Special Servicer by
such Independent Person, and nothing in this Agreement shall be deemed to limit
or
23
modify such indemnification. Fees, if any, owed to any Independent Person
other than the Special Servicer, Servicing Advisor or an Affiliate thereof shall
be payable from amounts on deposit in the Operating Account or, if the amount on
deposit therein is insufficient therefor, the Special Servicer shall advance
such fees unless the Special Servicer makes a determination, in its reasonable
business judgment, that such advance is not reasonably recoverable from the
operation or sale of the related Repossessed Collateral. The Special Servicer
shall be entitled to reimbursement of such advances from Recoveries on such Loan
or Repossessed Collateral. Notwithstanding anything to the contrary contained in
any of the Transaction Documents, for purposes of this Section 3.13(d) (but not
for purposes of the definition of "Recovery Expenses" contained herein), an
"Independent Person" shall, prior to the delivery of a Servicing Advisor
Termination Notice with respect to the initial Servicing Advisor, include the
initial Servicing Advisor or an Affiliate thereof.
(e) On each Determination Date, the Special Servicer shall withdraw
from the Operating Account and deposit into the Collection Account the proceeds
and collections received during the related Due Period, net of expenses;
provided, that the Special Servicer may retain in the Operating Account such
- --------
portion of such proceeds and collections as may be necessary to maintain in the
Operating Account sufficient funds for the proper operation, management and
maintenance of the Repossessed Collateral, including without limitation the
creation of reasonable reserves for repairs, replacements and necessary capital
improvements and other related expenses. On the first Business Day prior to each
Determination Date, the Special Servicer shall notify the Servicer of the amount
of all such deposits (and the Loans to which the deposits relate) to be made
into the Collection Account on the following Determination Date.
(f) Promptly following any acquisition by the Trust Estate of any
Repossessed Collateral, the Special Servicer shall, upon the request of the
Certificateholder Agent, determine the fair market value of such Repossessed
Collateral based on an appraisal, conducted within sixty (60) days of such
acquisition. Such appraisal shall be prepared by an Independent Person or by the
Special Servicer (or an Affiliate thereof) for an amount not to exceed the
lesser of (i) the lowest amount then being quoted to the Servicing Advisor for
the preparation of such an appraisal and (ii) $5,000, adjusted for inflation
based on changes in the "Consumer Price Index" since the date of this Agreement.
Notwithstanding anything to the contrary contained herein, if an appraisal or
Valuation with respect to such Repossessed Collateral has previously been
conducted, whether pursuant to Section 3.12(f) or otherwise, within six (6)
months of such acquisition by the Trust Estate, then no new appraisal shall be
required. The cost of any appraisal made in accordance with this Section 3.13(f)
shall be an expense of the Trust Estate.
Section 3.14 Sale of Defaulted Loans and Repossessed Collateral.
------------ ---------------------------------------------------
(a) The Special Servicer may offer to sell to any Person (including the
Special Servicer) any Defaulted Loan or any Repossessed Collateral, if and when
the Special Servicer determines, with the advice of the Servicing Advisor and
consistent with the servicing standard set forth in Section 3.04, that such a
sale would be in the best economic interests of the Trust Estate. The Special
Servicer shall give the Servicer, the Depositor, the Trustee, the
Certificateholder Agent and the Directing Holders not less than ten (10)
Business Days prior written notice of its intention to (i) purchase any
Defaulted Loan or Repossessed Collateral (which purchase must be approved in
writing in advance by the Controlling Holders) or (ii) sell any Defaulted Loan
or Repossessed Collateral. Subject to the repurchase or purchase rights, as the
case may be, of the Depositor and the Directing Holders pursuant to Section
3.04(d) of the Trust Agreement, the Special Servicer may purchase such Defaulted
Loan or Repossessed Collateral unless a higher bid is received from another
Person. The Special Servicer shall accept the highest bid received from any
Person for any Defaulted Loan or any Repossessed Collateral in an amount at
least equal to the Repurchase Price therefor.
24
In the absence of any such bid, the Special Servicer shall
accept the highest bid received from any Person that is determined by the
Special Servicer, with the advice of the Servicing Advisor, to be a fair price
for such Defaulted Loan or Repossessed Collateral, if the highest bidder is a
Person other than an Interested Person, or is determined to be such a price by
the Trustee, if the highest bidder is an Interested Person. Notwithstanding
anything to the contrary herein: (i) neither the Trustee, in its individual
capacity, nor any of its Affiliates may bid for or purchase any Defaulted Loan
or any Repossessed Collateral; and (ii) any sale to an Interested Person must be
consented to in writing in advance by the Controlling Holders (which consent may
not be unreasonably withheld).
Subject to the repurchase or purchase rights, as the case may
be, of the Depositor and the Directing Holders pursuant to Section 3.04(d) of
the Trust Agreement, the Special Servicer shall not be obligated by either of
the foregoing paragraphs or otherwise to accept the highest bid if the Special
Servicer determines, or is advised by the Servicing Advisor, in accordance with
the servicing standard stated in Section 3.04, that rejection of such bid would
be in the best interests of the Certificateholders. In addition, the Special
Servicer may accept a lower bid if it determines, with the advice of the
Servicing Advisor, and in accordance with the servicing standard stated in
Section 3.04, that acceptance of such bid would be in the best interests of the
Certificateholders (for example, if the prospective buyer making the lower bid
is more likely to perform its obligations, or the terms offered by the
prospective buyer making the lower bid are more favorable).
(b) In determining whether any bid constitutes a fair price for any
Defaulted Loan or any Repossessed Collateral, the Special Servicer or the
Trustee, and the Servicing Advisor, shall take into account, as applicable,
among other factors, the period and amount of any delinquency on the affected
Defaulted Loan, the physical condition of the related Repossessed Collateral and
the state of the local economy. The Special Servicer shall dispose of
Repossessed Collateral in accordance with Section 3.02(b)(vi).
(c) Subject to the provisions of the preceding Section 3.14(a) and (b),
the Special Servicer and the Trustee shall act on behalf of the Trust Estate in
negotiating and taking any other action necessary or appropriate in connection
with the sale of any Defaulted Loan or Repossessed Collateral, including the
collection of all amounts payable in connection therewith. Any sale of a
Defaulted Loan or any Repossessed Collateral shall be without recourse to, or
representation or warranty by, the Trustee, the Depositor, the Servicer, the
Special Servicer or the Trust Estate (except that any contract of sale and
assignment and conveyance documents may contain customary warranties of title,
so long as the only recourse for breach thereof is to the Trust Estate), and, if
consummated in accordance with the terms of this Agreement, none of the
Servicer, the Special Servicer, the Depositor or the Trustee shall have any
liability to the Trust Estate or any Certificateholder with respect to the
purchase price therefor accepted by the Special Servicer or the Trustee.
(d) The net proceeds of any sale after deduction of the expenses of
such sale incurred in connection therewith shall be promptly deposited in the
Collection Account.
25
Section 3.15 Modifications, Waivers, Amendments and Consents.
------------ ------------------------------------------------
(a) None of the Servicer, the Special Servicer or the Servicing Advisor
shall have any right to agree to any modification, waiver or amendment of any
term of any Loan, or to any substitution of collateral, except as provided in
Section 3.11 and this Section 3.15. The Special Servicer may agree to any
modification, waiver or amendment of any term of any Defaulted Loan, or to any
substitution of collateral securing a Defaulted Loan, without the consent of the
Trustee, the Servicer or any Certificateholder, to the extent permitted by
paragraphs (b) through (h) of this Section 3.15. All modifications, waivers or
amendments of any such Loan shall be in writing and shall be consistent with the
servicing standard set forth in Section 3.04.
(b) The Special Servicer shall not agree to any modification, waiver
(other than a waiver referred to in Section 3.11 which waiver, if any, shall be
governed by Section 3.11) or amendment of any term of any Loan if such
modification, waiver or amendment would:
(i) result in the forgiveness of any Scheduled Payment on such
Loan;
(ii) decrease any Scheduled Payment or the interest or coupon
rate applicable to such Loan;
(iii) defer the payment of any principal or interest of any
Scheduled Payment on such Loan, other than an extension of not more
than one Scheduled Payment per year, in accordance with the Servicing
Guidelines, provided that the Special Servicer shall not defer
--------
Scheduled Payments for any one Loan more than five times in the
aggregate, provided further that no such deferral may be to a date
-------- -------
later than the earlier of (A) the original maturity date of the Loan
and (B) the Determination Date immediately preceding the date that is
six (6) months prior to the Series Termination Date;
(iv) reduce the Loan Balance of such Loan (except in
connection with actual payments attributable to such Loan Balance);
(v) prevent the complete amortization of the Loan Balance of
such Loan from occurring by the Determination Date immediately
preceding the Series Termination Date; or
(vi) result in a release of the lien of the Loan (or related
Mortgage) or related on any material portion of the related Loan
Collateral without a corresponding principal prepayment (and any
corresponding prepayment fee or premium) in an amount not less than the
fair market value (as determined by an appraisal delivered to the
Special Servicer) of the property to be released, or would in the
Special Servicer's judgment, otherwise materially impair the security
for such Loan or reduce the likelihood of timely payment of amounts due
thereon.
(c) Notwithstanding subsection (b) above, the Special Servicer may
extend the date on which any balloon payment is scheduled to be due, without the
consent of the Trustee, the Servicer, or any Certificateholder if, but only if:
(i) any such extension shall be for a period of not more than
twelve (12) months and each monthly payment shall be in an amount at
least sufficient to pay interest accrued and principal payments
sufficient to meet the amortization schedule on the related Loan since
the immediately preceding Due Date;
26
(ii) the Special Servicer has previously determined in its
reasonable business judgment, with the advice of the Servicing Advisor,
that (A) such extension is reasonably likely to produce a greater
recovery than liquidation of the related Loan, (B) no material damage
or deferred maintenance exists at the related Mortgaged Property and
(C) the Obligor is in material compliance with all applicable federal
and state regulations governing the operation of the related Mortgaged
Property.
(d) The Special Servicer must provide that any interest deferred shall
be added to the principal balance of the related Loan (and shall be due on the
maturity date of such Loan, or such earlier date as the Special Servicer may
deem appropriate), and such deferred interest shall accrue interest at the
related Loan interest rate.
(e) The Special Servicer may, as a condition to granting any request by
a Obligor for consent, modification, waiver or indulgence or any other matter or
thing, the granting of which is not prohibited by the terms of this Agreement,
require that such Obligor pay to the Special Servicer, as additional servicing
compensation, a reasonable or customary fee for the additional services
performed in connection with such request, together with any related costs and
expenses incurred by the Special Servicer.
(f) The Special Servicer shall notify the Trustee, the
Certificateholder Agent, the Rating Agency and the Servicer of any modification,
waiver or amendment of any term of any Loan and the date and terms thereof
(including the fees and expenses payable to the Special Servicer), and shall
deliver to the Trustee for deposit in the related Loan File, an original
counterpart of the agreement relating to such modification, waiver or amendment,
promptly following the execution thereof.
(g) The Special Servicer may from time to time permit an Obligor to
substitute collateral for all or a portion of the related Mortgaged Property or
pledge additional collateral for the related Loan, or may release part of the
related Mortgaged Property from the lien of the related Mortgage; provided that
--------
(i) if such release is not in accordance with the related Loan, the Special
Servicer shall: (A) (i) provide the Certificateholder Agent with any information
reasonably requested by the Certificateholder Agent and (ii) obtain the prior
written consent of the Certificateholder Agent to such release, which consent
shall, in the absence of material deviations from the Program Guidelines, not be
unreasonably withheld; and (B) obtain the prior written confirmation from the
Rating Agency that such release shall not result in the downgrade, qualification
or withdrawal of the ratings then assigned to any Series or Class of
Certificates, and (ii) the Special Servicer shall not permit an Obligor to
substitute any Loan Collateral pursuant to this Section 3.15 unless (A) the
Special Servicer shall have first determined, in accordance with the servicing
standard set forth in Section 3.04, and based upon an Environmental Assessment
prepared by an Independent Person satisfying the requirements set forth in
Section 3.12, at the expense of the Obligor, that such substitute Loan
Collateral is in compliance with applicable environmental laws and that there
are no circumstances present at such substitute Loan Collateral relating to the
use, management or disposal of any Hazardous Substances for which investigation,
testing, monitoring, containment, clean-up or remediation would be required
under any then effective federal, state or local law or regulation, or, if any
such containment, clean-up or remediation is required, that adequate funds
therefor have been placed in escrow with the Special Servicer by or on behalf of
the Obligor, and (B) the Certificateholder Agent shall have been provided with
any information reasonably requested and shall have approved in writing in
advance such substitution, which approval shall, in the absence of material
deviations from the Program Guidelines, not be unreasonably withheld. In the
event that the Special Servicer intends to permit an Obligor to substitute Loan
Collateral for all or any portion of a Mortgaged Property or pledge additional
Loan Collateral for the related Loan as permitted hereunder, if the security
interest of the Trust Estate in such collateral would be perfected by
27
possession, or if such collateral requires special care or protection, then,
prior to agreeing to such substitution or addition of Loan Collateral, then the
Special Servicer shall make arrangements for such possession, care or protection
and, prior to agreeing to such substitution or addition of collateral (or such
arrangement for possession, care or protection), shall obtain the prior written
consent of the Trustee (which consent shall not be unreasonably withheld,
delayed or conditioned) and the written confirmation by the Rating Agency with
respect thereto to the effect that such substitution or addition of collateral
shall not result in the downgrade, qualification or withdrawal of the ratings
then assigned to the Certificates.
(h) The Special Servicer shall have no liability to the Trust Estate,
the Certificateholders or any other Person if its analysis and determination
that the modification, waiver or amendment is reasonably likely to produce a
greater recovery on a present-value basis than liquidation proves to be wrong or
incorrect, so long as the analysis and determination was made in the good faith
reasonable business judgment of the Special Servicer.
Section 3.16 Fidelity Bond; Directors and Officers Insurance.
------------ ------------------------------------------------
Each of the Servicer, the Special Servicer and, at any time that the
Servicing Advisor possesses signatory authority with respect to any Specified
Lockbox Account or Operating Account, the Servicing Advisor shall maintain, at
such Person's own expense, a blanket fidelity bond on all officers and employees
of such Person with respect to actions concerning the handling of funds or
documents or other papers relating to the Loans. Each of the Servicer and the
Special Servicer shall maintain, at such Person's own expense, directors and
officers liability insurance covering all Servicing Officers with respect to
wrongful acts relating to the servicing of the Loans. Such fidelity bond and
directors and officers insurance shall be substantially in the form and shall
provide for coverage in the amounts indicated on Exhibit F. No provision of this
Section 3.16 shall diminish or relieve the Servicer, the Special Servicer and
the Servicing Advisor, as applicable, from their respective duties and
obligations as set forth in this Agreement. Each of the Servicer and the Special
Servicer shall cause to be delivered to the Trustee (with a copy to the
Certificateholder Agent) on or before the initial Funding Date, and the
Servicing Advisor shall cause to be delivered to the Trustee (with a copy to the
Certificateholder Agent) at such time as it is required to maintain a fidelity
bond hereunder): (a) a certified true copy of the fidelity bond and directors
and officers insurance, as applicable, respecting such Person; (b) a written
statement from each surety issuing such fidelity bond and directors and officers
insurance, as applicable, that such fidelity bond or directors and officers
insurance, as applicable, shall in no event be terminated or materially modified
without thirty (30) days prior written notice to the Trustee; and (c) written
evidence reasonably satisfactory to the Trustee and the Certificateholder Agent
that such fidelity bond and directors and officers insurance, as applicable,
provides that the Trustee, on behalf of the Certificateholders, is the
beneficiary or loss payee, as applicable, thereunder.
28
ARTICLE FOUR
------------
ACCOUNTINGS, STATEMENTS AND REPORTS
-----------------------------------
Section 4.01 Reports.
------------ --------
(a) No later than 10:00 a.m., California time, on each Determination
Date, the Servicer shall deliver the Servicer Report to the Depositor, the
Certificateholder Agent, the Certificateholders, the Special Servicer and the
Trustee, and not later than the following Business Day the Trustee will deliver
the Servicer Report to the Rating Agency with respect to the activity in the
immediately preceding Due Period. In the course of preparing the Servicer
Report, the Servicer shall seek direction from the Depositor as to remittance of
any funds to be paid pursuant to Section 5.02 of the Trust Agreement and any
related Supplement(s). The Servicer shall identify Loans which have been
substituted with a Substitute Loan or purchased by the Company or removed by the
Depositor by Obligor loan number on the Servicer Report. On each Determination
Date, the Servicer shall deliver to the Trustee a computer diskette in a format
acceptable to the Trustee containing the Loan Payment Data. Nothing in this
Section shall limit or otherwise affect the Trustee's obligations under Section
5.03 of the Trust Agreement to deliver the Servicer Report.
(b) On the second Determination Date following the end of each calendar
quarter, the Special Servicer shall deliver the Special Servicer Report to the
Depositor, the Certificateholders, the Certificateholder Agent, the Servicer,
the Servicing Advisor and the Trustee, and the Trustee will deliver the Special
Servicer Report to the Rating Agency with respect to the Loan Collateral
performance in the preceding calendar quarter. Nothing in this Section shall
limit or otherwise affect the Trustee's obligations under Section 5.03 of the
Trust Agreement to deliver the Special Servicer Report.
(c) 3Not later than May 31 of each year, the Special Servicer shall
deliver to the Depositor, the Certificateholders, the Certificateholder Agent
and the Servicer, and, not later than the following Business Day, the Trustee
shall deliver to the Rating Agency, the Annual Pool Report prepared by the
Special Servicer with respect to the performance of the Loans and the related
Loan Collateral during the immediately preceding calendar year.
(d) Not later than May 15 of each year, the Servicing Advisor shall
deliver to the Special Servicer, and not later than May 31 of each year the
Special Servicer shall deliver to the Depositor, the Trustee, the
Certificateholder Agent, and, if requested, the Rating Agency, ***.
(e) Following a written request by the Special Servicer, within 15
Business Days following the later of (i) such request and (ii) the receipt by
the Servicing Advisor of such financial statement data concerning the related
Obligor and Loan Collateral as has been reasonably requested by it, the
Servicing Advisor shall also prepare and deliver to the Special Servicer, the
Depositor, the Trustee, the Certificateholder Agent, and, if requested, the
Rating Agency, ***.
***Confidential information omitted purusant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
29
(f) If a Swap Agreement is in effect with respect to any Due Period,
the Servicer shall also include in the Servicer Report delivered in connection
with such Due Period the computations with respect to and the amounts of any
Swap Payments due under such Swap Agreement with respect to such Due Period.
Section 4.02 Financial Statements; Certification as to Compliance;
------------ -----------------------------------------------------
Notice of Default.
- -------------------
(a) The Servicer will deliver to the Trustee, the Special Servicer, the
Rating Agency, the Certificateholder Agent and each Certificateholder:
(i) within one hundred twenty (120) days after the end of each
fiscal year, a copy of either (A) the Servicer Financial Statements for
such Servicer, all in reasonable detail and accompanied by an opinion
of the Independent Accountant stating that such financial statements
present fairly the financial condition of the Servicer (or, in the case
of a successor Servicer, such successor Servicer's financial condition)
and have been prepared in accordance with generally accepted accounting
principles consistently applied (except for changes in application in
which such accountants concur), and that the examination of such
accountants in connection with such financial statements has been made
in accordance with generally accepted auditing standards, and
accordingly included such tests of the accounting records and such
other auditing procedures as were considered necessary in the
circumstances or (B) the Servicer's Form 10-K for such fiscal year;
(ii) with each set of Servicer Financial Statements or Form
10-K delivered pursuant to subsection (a)(i) above, the Servicer will
deliver an Officer's Certificate stating that such officer has reviewed
the relevant terms of the Trust Agreement, the Loan Acquisition
Agreement and this Agreement and has made, or caused to be made, under
such officer's supervision, a review of the transactions and condition
of the Servicer during the period covered by the Servicer Financial
Statements then being furnished, that the review has not disclosed the
existence of any Servicer Default or Servicer Event of Default or, if a
Servicer Default or Servicer Event of Default exists, describing its
nature and what action the Servicer has taken and is taking with
respect thereto, and that on the basis of such review the officer
signing such certificate is of the opinion that during such period the
Servicer has serviced the Loans in compliance with the procedures
hereof except as disclosed in such certificate;
(iii) immediately upon becoming aware of the existence of any
condition or event which constitutes a Servicer Default, Servicer Event
of Default, Depositor Event of Default, Special Servicer Default,
Special Servicer Event of Default, Servicing Advisor Default or
Servicing Advisor Event of Default, a written notice describing its
nature and period of existence and what action the Servicer or, if
known to the Servicer, such other Person, as applicable, is taking or
proposes to take with respect thereto;
(iv) promptly upon the Servicer's becoming aware of:
(A) any proposed or pending investigation of it or
the Depositor, the Servicer, the Special Servicer or the
Servicing Advisor by any governmental authority or agency, or
(B) any pending or proposed court or administrative
proceeding which involves or may involve the probability of
materially and adversely affecting the properties, business,
prospects, profits or condition
30
(financial or otherwise) of the Depositor, the Servicer,
the Special Servicer or the Servicing Advisor,
a written notice specifying the nature of such investigation or
proceeding and what action the Servicer or, if known to the Servicer,
such other Person, as applicable, is taking or proposes to take with
respect thereto and evaluating its merits;
(v) with reasonable promptness any other data and information
with respect to the Servicer, the Depositor or the Loan Assets which
may be reasonably requested from time to time, including any
information required to be made available at any time to any
prospective transferee of any Certificates in order to satisfy the
requirements of Rule 144A under the Securities Act of 1933, as amended;
and
(vi) within sixty (60) days following the end of a fiscal
quarter, either (A) the Service's most recent Form 10-Q or (B)
unaudited Servicer Financial Statements for such fiscal quarter.
(b) The Special Servicer will deliver to the Trustee, the Servicer, the
Rating Agency, the Certificateholder Agent and each Certificateholder:
(i) immediately upon becoming aware of the existence of any
condition or event which constitutes a Servicer Default, Servicer Event
of Default, Depositor Event of Default, Special Servicer Default,
Special Servicer Event of Default, Servicing Advisor Default, Servicing
Advisor Event of Default or non-compliance with the Pool Performance
Condition, a written notice describing its nature and period of
existence and what action the Special Servicer or, if known to the
Special Servicer, such other Person, as applicable, is taking or
proposes to take with respect thereto;
(ii) promptly upon the Special Servicer's becoming aware of:
(A) any proposed or pending investigation of it or
the Depositor, the Servicer, the Special Servicer or the
Servicing Advisor by any governmental authority or agency, or
(B) any pending or proposed court or administrative
proceeding which involves or may involve the probability of
materially and adversely affecting the properties, business,
prospects, profits or condition (financial or otherwise) of
the Depositor, the Servicer, the Special Servicer or the
Servicing Advisor,
a written notice specifying the nature of such investigation or
proceeding and what action the Special Servicer or, if known to the
Special Servicer, such other Person, as applicable is taking or
proposes to take with respect thereto and evaluating its merits; and
(iii) with reasonable promptness any other data and
information with respect to the Special Servicer, the Depositor or the
Loan Assets which may be reasonably requested from time to time,
including any information required to be made available at any time to
any prospective transferee of any Certificates in order to satisfy the
requirements of Rule 144A under the Securities Act of 1933, as amended.
31
(c) On the Determination Date occurring in March, beginning in 1998, so
long as any of the Certificates are Outstanding, each of the Servicer and the
Special Servicer shall furnish to the Trustee and the Certificateholder Agent an
Officer's Certificate either stating that such action has been taken with
respect to the recording, filing, and rerecording and refiling of any financing
statements and continuation statements, and all other actions, as necessary to
maintain the perfected security interest of the Trustee (for the benefit of the
Certificateholders) in the Trust Estate and to maintain the interest of the
Depositor (assigned to the Trustee) in the Loan Assets and reciting the details
of such actions or stating that no such actions are necessary to maintain such
interest. Such Officer's Certificates shall also describe the recording, filing,
rerecording and refiling of any financing statements and continuation
statements, and such other actions, that will be required to maintain the
perfected security interest of the Trustee (for the benefit of the
Certificateholders) in the Trust Estate until the date such next Officer's
Certificates are due. On the Payment Date following such Determination Date, the
Trustee shall furnish a copy of such Officer's Certificates to each
Certificateholder. In addition, on the Determination Date occurring in March,
2002, and on each five (5) year anniversary thereof so long as any of the
Certificates are Outstanding, the Special Servicer shall furnish to the Trustee
and the Certificateholder Agent an Opinion of Counsel stating that, in the
opinion of such counsel, either (a) such action has been taken with respect to
the recording, filing, and rerecording and refiling of any financing statements
and continuation statements, and all other actions, as necessary to maintain the
perfected security interest of the Trustee (for the benefit of the
Certificateholders) in the Trust Estate and to maintain the interest of the
Depositor (assigned to the Trustee) in the Loan Assets and reciting the details
of such actions or (b) no such actions are necessary to maintain such interest.
Such opinion shall also specify any actions necessary to be taken prior to the
expected date of the next opinion in order to maintain the perfected security
interest of the Trustee (for the benefit of the Certificateholders).
Section 4.03 Annual Independent Accountants' Reports.
------------ ----------------------------------------
Commencing with the fiscal year ending December 31, 1998, and each
fiscal year thereafter, the Servicer at its expense shall cause the Independent
Accountant (who may also render and deliver other services to the Servicer and
its Affiliates) to undertake agreed upon procedures (as of the close of such
fiscal year) and prepare a report in respect thereof, substantially in the form
of Exhibit G hereto, addressed to each of the Special Servicer, the Trustee, the
Certificateholders, the Certificateholder Agent and the Rating Agency, so long
as Rated Certificates are Outstanding. The Servicer shall deliver to the Special
Servicer, the Servicing Advisor, the Trustee, the Certificateholders, the
Certificateholder Agent and the Rating Agency, so long as Certificates are
Outstanding, a copy of any such statement within one hundred twenty (120) days
of the close of the relevant fiscal year.
Section 4.04 Access to Certain Documentation and Information.
------------ ------------------------------------------------
(a) The Servicer, the Special Servicer, the Servicing Advisor and the
Depositor shall provide to the Servicer, the Special Servicer, the Servicing
Advisor, the Trustee, the Rating Agency, the Certificateholder Agent or any
Certificateholder and their duly authorized representatives, attorneys or
accountants access to any and all documentation regarding the Trust Estate
(including the Loan Schedule) that the Servicer, the Special Servicer, the
Servicing Advisor or the Depositor may, as the case may be, possess, such access
being afforded without charge but only upon reasonable request and during normal
business hours so as not to interfere unreasonably with such party's normal
operations or customer or employee relations, at offices of such party
designated by such party.
(b) At all times during the term hereof, the Servicer shall keep
available at its principal executive office for inspection by
Certificateholders, the Certificateholder Agent, the Rating Agency, the Trustee,
the Special Servicer and the Servicing Advisor a list of all Loans then held as
a part of the Trust
32
Estate, together with a reconciliation of such list to that set forth in the
Loan Schedule and each of the Servicer Reports, indicating the cumulative
addition and removal of Loans from the Trust Estate.
(c) The Servicer will maintain accounts and records as to each
respective Loan serviced by the Servicer that are accurate and sufficiently
detailed as to permit (i) the reader thereof to know as of the most recent
Determination Date the status of such Loan, including any payments and
Recoveries received or owing (and the nature of each) thereon and (ii) the
reconciliation between payments or Recoveries on (or with respect to) each Loan
and the amounts from time to time deposited in the Collection Account in respect
of such Loan.
(d) The Servicer, the Special Servicer and the Depositor will maintain
all computerized accounts and records so that, from and after the Initial
Delivery Date and each Acquisition Date, the accounts and records (including any
back-up computer archives) that refer to any Loan conveyed on such date indicate
clearly that the Loans and perfected first priority security interest in the
Loan Collateral are owned by the Depositor and pledged to the Trustee for the
benefit of the Certificateholders. Indication of the Trustee's interest in a
Loan will be deleted from or modified on the accounts and records when, and only
when, the Loan has been paid in full, replaced with a Substitute Loan, purchased
by the Company or removed by the Depositor.
(e) Nothing in this Section 4.04 shall affect the obligation of the
Servicer or the Special Servicer to observe any applicable law prohibiting
disclosure of information regarding the Obligors, and the failure to provide
information otherwise required by this Section 4.04 as a result of such
observance by the Servicer or the Special Servicer shall not constitute a breach
of this Section 4.04.
(f) All information obtained by the Trustee, the Rating Agency, the
Servicer, the Special Servicer, the Servicing Advisor, the Certificateholder
Agent or any Certificateholder regarding the Obligors and the Loans, whether
upon exercise of its rights under this Section 4.04 or otherwise, shall be
maintained by the Trustee, the Rating Agency, the Servicing Advisor, the
Certificateholder Agent or the Certificateholder, as applicable, in confidence
and shall not be disclosed to any other Person (other than to or among such
other Persons), unless ordered by a court of applicable jurisdiction, provided
--------
that the Certificateholder Agent and the Certificateholders may disclose such
information to the extent permitted by the applicable Certificate Purchase
Agreement.
Section 4.05 Other Necessary Data.
------------ ---------------------
(a) The Servicer shall, on request of the Special Servicer or the
Trustee, (i) on reasonable notice, furnish the Trustee such data necessary for
the administration of the Trust Estate as can be reasonably generated by the
Servicer's existing data processing systems, and (ii) on and after a Servicer
Event of Default, within five (5) Business Days, provide the Trustee and the
Special Servicer with access to the Servicer's existing data processing systems
and any files or records with respect to the Loan Assets that it may have.
(b) The Special Servicer shall, on request of the Servicer or the
Trustee, (i) on reasonable notice, furnish the Trustee such data necessary for
the administration of the Trust Estate as can be reasonably generated by the
Special Servicer's existing data processing systems, and (ii) on and after a
Special Servicer Event of Default, within five (5) Business Days, provide the
Trustee and the Servicer with access to the Special Servicer's existing data
processing systems and any files or records with respect to the Loan Assets that
it may have.
33
ARTICLE FIVE
------------
THE SERVICER, THE SPECIAL SERVICER AND THE DEPOSITOR
-----------------------------------------------------
Section 5.01 Indemnification.
----------- ----------------
(a) The Servicer, the Special Servicer and the Servicing Advisor shall
indemnify and hold harmless the Trustee, the Depositor, the Trust Estate, the
Certificateholder Agent and each Certificateholder (each, an "Indemnified
Party") from and against any loss, liability, claim, expense, damage or injury
suffered or sustained to the extent that such loss, liability, claim, expense,
damage or injury arose out of or was imposed by reason of the failure by such
Servicer, Special Servicer or Servicing Advisor to perform its duties under the
Agreement or are attributable to errors or omissions of the Servicer, the
Special Servicer or the Servicing Advisor related to such duties; provided that
--------
none of the Servicer or the Special Servicer or the Servicing Advisor shall
indemnify any party to the extent that acts of fraud, gross negligence or breach
of fiduciary duty by such party contributed to such loss, liability, claim,
expense, damage or injury.
(b) The Servicer, the Special Servicer and the Servicing Advisor shall
have the right to defend any such action, suit or proceeding; provided that an
--------
Indemnified Party shall have the right to employ separate counsel in any such
action, suit or proceeding and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such Indemnified
Party unless the Servicer, the Special Servicer or the Servicing Advisor agrees
to pay such fees and expenses or the Servicer, the Special Servicer or the
Servicing Advisor fails to assume the defense of such action, suit or proceeding
or fails to employ counsel reasonably satisfactory to such Indemnified Party in
any such action, suit or proceeding; it being understood, however, that the
Servicer, the Special Servicer and the Servicing Advisor shall not, in
connection with any one such action or proceeding or separate but substantially
similar or related actions or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys at any time acting for all
Indemnified Parties unless the named parties to any such action, suit or
proceeding include more than one of any Indemnified Party and the Servicer, the
Special Servicer and the Servicing Advisor and the Indemnified Party shall have
been advised that there may be one or more defenses available to such
Indemnified Party which are different from those available to the Servicer, the
Special Servicer or the Servicing Advisor or any other Indemnified Party. The
Servicer, the Special Servicer and the Servicing Advisor shall not be liable for
any settlement of any action or claim effected without its consent. If the
Servicer, the Special Servicer or the Servicing Advisor has made any indemnity
payments to the Trustee or the Certificateholders pursuant to this Section and
such party thereafter collects any of such amounts from others, such party will
promptly repay such amounts collected to the Servicer, the Special Servicer or
the Servicing Advisor, as applicable, without interest. The provisions of this
Section 5.01 shall survive any expiration or termination of the Agreement.
Section 5.02 Corporate Existence; Reorganizations.
------------ -------------------------------------
(1) Each of the Servicer, the Special Servicer and the Servicing
Advisor shall keep in full effect its existence and good standing as a
corporation in the Servicer State of Incorporation, Special Servicer State of
Incorporation or the Servicing Advisor State of Incorporation, as applicable,
and will obtain and preserve its qualification to do business as a foreign
corporation in each jurisdiction in which such qualification is or shall be
necessary to enable such Servicer, Special Servicer or Servicing Advisor to
perform its duties under the Agreement, except where the failure to so qualify
would not have a material adverse effect on the Trust Estate or the ability of
the Servicer, the Special Servicer or the Servicing Advisor, as applicable, to
perform its duties hereunder; provided that the Servicer, the Special Servicer
--------
or the Servicing Advisor may reincorporate in another state if to do so would be
in the best interests of the Servicer, the Special Servicer
34
or the Servicing Advisor, as applicable, and would not have a material adverse
effect upon the Certificateholders as evidenced by an Opinion of Counsel
delivered to the Certificateholders and the Certificateholder Agent prior to
such reincorporation.
(b) Except as hereinafter provided, each of the Servicer, the Special
Servicer and the Servicing Advisor will keep in full effect its existence,
rights and franchises as a corporation or limited liability company, as
appropriate, and will obtain and preserve its qualification to do business as a
foreign corporation or limited liability company, as appropriate, in each
jurisdiction in which such qualification is or shall be necessary to protect the
validity and enforceability of this Agreement or any of the Loans and to perform
its duties hereunder. Any Person into which the Servicer, the Special Servicer
or the Servicing Advisor may be merged or consolidated, or to whom the Servicer,
the Special Servicer or the Servicing Advisor may sell substantially all of its
assets, or any Person resulting from any merger, conversion or consolidation to
which the Servicer, the Special Servicer or the Servicing Advisor shall be a
party, or any Person succeeding to the business of the Servicer, the Special
Servicer or the Servicing Advisor shall be the successor of such Servicer, the
Special Servicer or the Servicing Advisor, 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; provided that
--------
(i) immediately after giving effect to such transaction, no representation or
warranty made pursuant to Section 2.01, 2.02 or 2.03 shall have been breached,
(ii) such successor executes an agreement or assumption, in form reasonably
satisfactory to the Trustee, to perform every obligation under this Agreement,
(iii) such successor has a net worth that is sufficient to perform in accordance
with the Transaction Documents and at least approximately equivalent to the net
worth of the Servicer, the Special Servicer or the Servicing Advisor, as
applicable, immediately prior to such sale, merger or consolidation, (iv) the
Servicer, the Special Servicer or the Servicing Advisor, as applicable, shall
have delivered to the Depositor, the Trustee, the Certificateholder Agent and
each Certificateholder a certificate of an officer of the Servicer, the Special
Servicer or the Servicing Advisor, as applicable, and an Opinion of Counsel each
stating that such consolidation, merger, or succession and such agreement of
assumption complies with this Section 5.02 and that all conditions precedent, if
any, provided for in this Agreement relating to such transaction have been
complied with, and (v) the Servicer, the Special Servicer or the Servicing
Advisor, as appropriate, shall have delivered to the Depositor and the Trustee
an Opinion of Counsel either (A) stating that, in the opinion of such counsel,
all financing statements, continuation statements and amendments thereto have
been executed and filed and, if applicable, all other actions have been taken to
preserve fully the interest of the Depositor in the Loans and the Loan Assets
and reciting the details of such filings and, if applicable, such actions, or
(B) stating that, in the opinion of such counsel, no such action shall be
necessary to preserve and protect such interest. The Servicer, the Special
Servicer or the Servicing Advisor, as applicable, will provide written notice to
the Rating Agency prior to the effective date of any such transaction.
Section 5.03 Limitation on Liability of the Servicer the Special
------------ ----------------------------------------------------
Servicer, the Servicing Advisor and Others.
- ---------------------------------------------
Except as provided herein, none of the Servicer or the Special Servicer
or the Servicing Advisor or any of the officers, directors, employees or agents
of such Persons shall be under any liability for any action taken or for
refraining from the taking of any action in its capacity as Servicer, Special
Servicer or Servicing Advisor, as appropriate, pursuant to this Agreement;
provided that this provision shall not protect the Servicer, the Special
- --------
Servicer or the Servicing Advisor or any such person against any liability which
would otherwise be imposed by reason of breach of any provision of this
Agreement by such Person or willful misconduct, bad faith or gross negligence
(which includes negligence with respect to the duties of the Servicer, the
Special Servicer or the Servicing Advisor explicitly set forth in this
Agreement) in the performance of its duties hereunder. The Servicer, the Special
Servicer and the Servicing Advisor and any
35
officer, director, employee or agent of the Servicer, the Special Servicer or
the Servicing Advisor may rely in good faith on any document of any kind prima
-----
facie properly executed and submitted by any Person with respect to any matters
- -----
arising hereunder. The Servicer, the Special Servicer or the Servicing Advisor
may from time to time request such additional information and documentation from
each other as any of them deems reasonably necessary to perform such Person's
duties hereunder; the Person from whom the information or documentation is
requested shall provide such information or documentation to the requesting
Party, as available. No implied covenants or obligations shall be read into this
Agreement against the Servicer, the Special Servicer or the Servicing Advisor.
In the event the Servicer, the Special Servicer or the Servicing Advisor
performs any activities beyond the requirements hereof, such Servicer, Special
Servicer or Servicing Advisor shall have the option but will not be required to
perform such activities in the future.
Section 5.04 The Servicer, the Special Servicer and the Servicing
------------ ----------------------------------------------------
Advisor Not to Resign.
- ----------------------
(a) None of the Servicer, the Special Servicer or the Servicing Advisor
shall resign from the duties and obligations hereby imposed on it except upon a
determination by its respective Board of Directors that by reason of change in
applicable legal requirements, with which the Servicer, the Special Servicer or
the Servicing Advisor, as applicable, cannot reasonably comply, the continued
performance by the Servicer, the Special Servicer or the Servicing Advisor, as
applicable, of its duties hereunder would cause it to be in violation of such
legal requirements, said determination to be evidenced by a resolution from its
Board of Directors to such effect, accompanied by an Opinion of Counsel to such
effect and reasonably satisfactory to the Trustee.
(b) No such resignation shall become effective until a Successor
Servicer shall have assumed the responsibilities and obligations of the
Servicer, the Special Servicer or the Servicing Advisor, as appropriate,
hereunder.
(c) Except as provided in Sections 5.02 and 6.01, the duties and
obligations of the Servicer, the Special Servicer and the Servicing Advisor
under the Agreement shall continue until this Agreement shall have been
terminated as provided in Section 7.01, and shall survive the exercise by the
Depositor or the Trustee of any right or remedy under this Agreement, or the
enforcement by the Depositor, the Trustee or any Certificateholder of any
provision of the Certificates or this Agreement.
Section 5.05 Depositor Indemnification.
------------ --------------------------
The Depositor shall indemnify and hold harmless the Servicer, the
Special Servicer, the Servicing Advisor, the Certificateholder Agent and each
Certificateholder from and against any loss, liability, expense, damage or
injury suffered or sustained by the Servicer, the Special Servicer, the
Servicing Advisor, the Certificateholder Agent and each such Certificateholder,
including any judgment, award, settlement, reasonable attorneys' fees and other
costs and expenses incurred in connection with the defense of any actual or
threatened action, proceeding or claim, which arises out of the Service's, the
Special Servicer's or the Servicing Advisor's activities hereunder; provided
--------
that the Depositor shall not indemnify the Servicer, the Special Servicer, the
Servicing Advisor, the Certificateholder Agent or any such Certificateholder if
such Service's, Special Servicer's, Servicing Advisor's, Certificateholder
Agent's or Certificateholder's activities constituted fraud, willful misconduct,
gross negligence (which includes negligence with respect to the duties of the
Servicer, the Special Servicer or the Servicing Advisor which are explicitly set
forth herein) or breach of fiduciary duty by such Servicer, Special Servicer or
Servicing Advisor.
36
ARTICLE SIX
-----------
SERVICING TERMINATION
---------------------
Section 6.01 Events of Default.
- ------------ ------------------
(a) Any of the following acts or occurrences shall constitute an Event
of Default:
(i) any failure by a Person to deliver to the Trustee for
payment to Certificateholders any proceeds or payments received from an
Obligor or in respect of the Trust Estate and required to be so
delivered under the terms of the Trust Agreement and this Agreement
that continues unremedied until 10:00 a.m., California time, on the
following Business Day; provided that the Trustee, upon receiving
--------
actual knowledge of such failure, shall give such Person prompt
written, telecopied or telephonic notice of such failure.
Notwithstanding the foregoing, any failure by the Trustee to deliver
such notice to the Person shall not prevent the occurrence of an Event
of Default under this Section 6.01(a)(i); or
(ii) any failure by a Person to deliver a Report as required
under Section 4.01(a) or (b) that continues unremedied until 10:00
a.m., California time, the following Business Day; provided that, if
--------
the Person has not delivered the Report by 12:00 p.m., California time,
on the Determination Date, the Trustee shall give the Person notice of
such failure. Notwithstanding the foregoing, any failure by the Trustee
to deliver such notice to such Person shall not prevent the occurrence
of an Event of Default under this Section 6.01(a)(ii); or
(iii) any failure on the part of a Person duly to observe or
perform in any material respect any other covenants or agreements of
such Person set forth in this Agreement, or if any representation or
warranty of the Person set forth in Section 2.01 shall prove to be
incorrect or misleading in any material respect, which failure or
breach continues unremedied for a period of thirty (30) days after the
earlier of the date on which such Person becomes aware of such failure
or breach or written notice of such failure or breach, requiring the
situation giving rise to such breach or non-conformity to be remedied,
shall have been given to a Servicing Officer of such Person by the
Trustee, the Depositor, the Certificateholder Agent or any
Certificateholder; or
(iv) the entry of a decree or order for relief by a court
having jurisdiction in respect of a Person or a petition against a
Person in an involuntary case under any federal bankruptcy laws, as now
or hereafter in effect, or any other present or future federal or state
bankruptcy, insolvency or similar law, or appointing a receiver,
liquidator, assignee, trustee, sequestrator or other similar official
for such Person or for any substantial part of such Person's property,
or ordering the winding up or liquidation of the affairs of the Person
and the continuance of any such decree or order unstayed and in effect
for a period of sixty (60) consecutive days; or
(v) the commencement by a Person of a voluntary case under any
federal bankruptcy laws, as now or hereafter in effect, or any other
present or future federal or state bankruptcy, insolvency,
reorganization or similar law, or the consent by a Person to the
appointment of or taking possession by a conservator, receiver,
liquidator, assignee, trustee, sequestrator or other similar official
in any insolvency, readjustment of debt, marshaling of assets and
liabilities, bankruptcy or similar proceedings of or relating to a
Person or relating to a substantial part of its property, or the making
by the Person of an assignment for the benefit of creditors, or the
failure by the Person generally to pay its debts as such debts become
due or if the Person shall admit in writing its
37
inability to pay its debts as they become due, or the taking of
corporate action by the Person in furtherance of any of the foregoing.
(b) So long as an Event of Default shall not have been remedied within
the period set forth in (i), (ii), (iii) or (iv) above, as applicable, or if an
Event of Default described in (v) above occurs, the Trustee shall, at the
direction of the Controlling Holders or upon exercise by the Controlling Holders
of their rights under Section 6.02(b) of the Trust Agreement, give notice (the
"Termination Notice") in writing to the Person(s) to whom the Event of Default
concerns (or to any or all of such Persons if such notice is given pursuant to
Section 6.02(b) of the Trust Agreement) of the termination of all, but not less
than all, of the rights and the servicing obligations of such Person(s) under
this Agreement; provided that such Termination Notice shall not relieve or
--------
exculpate such Person(s) from any liability for any action or inaction of such
Person(s) hereunder prior to the delivery of such Termination Notice.
Notwithstanding the foregoing, no Termination Notice shall take effect until a
Successor Servicer has assumed its responsibilities.
(c) On or after the receipt by a Person of a Termination Notice, all
authority and power of such Person under this Agreement, whether with respect to
the Certificates or the Loans or otherwise, shall pass to and be vested in a
Successor Servicer appointed pursuant to Section 6.02, and, without limitation,
such Successor Servicer is hereby authorized and empowered to execute and
deliver, on behalf of the Outgoing Servicer, as attorney-in-fact or otherwise,
any and all documents and other instruments, and to do or accomplish all other
acts or things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer of the Loans and related
documents, or otherwise. The Outgoing Servicer agrees to cooperate with the
Trustee, the others of the Servicer, the Special Servicer and the Servicing
Advisor and the Successor Servicer in effecting the termination of the
responsibilities and rights of the Outgoing Servicer hereunder, including the
transfer to the Successor Servicer for administration by it of all cash amounts
that shall at the time be held by the Outgoing Servicer for deposit, or have
been deposited by the Outgoing Servicer, in the Collection Account or thereafter
received with respect to any of the Loans. To assist the Successor Servicer in
enforcing all rights under the Loans, the Outgoing Servicer, at its own expense,
shall transfer its records (electronic and otherwise) relating to such Loans to
the Successor Servicer in such form as the Successor Servicer may reasonably
request and shall transfer all other records, correspondence and documents
relating to the Loans that it may possess to the Successor Servicer in the
manner and at such times as the Successor Servicer shall reasonably request.
Section 6.02 Appointment of Successor Servicer; Taking of Bids.
------------ ---------------------------------------------------
(a) On and after the time any Servicer, the Special Servicer or
Servicing Advisor, as applicable, receives a Termination Notice hereunder, the
Depositor, by a Board Resolution, shall promptly appoint a Successor Servicer,
as applicable, reasonably satisfactory to the Trustee, on behalf of the
Certificateholders; provided that such appointment shall be subject to the prior
---------
approval of the Certificateholder Agent and, unless waived by the Controlling
Holders, the written confirmation from the Rating Agency that such appointment
would not result in a rating downgrade. If no such Successor Servicer shall have
been so appointed within thirty (30) days of notice of removal or resignation
and shall have accepted appointment, then the Trustee, on behalf of the
Certificateholders, shall appoint a Successor Servicer, as appropriate. If a
Depositor Event Default exists and is continuing, the Trustee, acting with the
advice of the Certificateholder Agent, shall appoint a Successor Servicer and
the Depositor shall have no right to make any such appointment. If the Trustee,
on behalf of the Certificateholders shall fail to appoint a Successor Servicer
within thirty (30) days, then any of the Controlling Holders or the Directing
Holders may petition any court of competent jurisdiction for the appointment of
a Successor Servicer.
(b) Any Successor Servicer shall be a Person experienced with
performing the responsibilities of the Outgoing Servicer it replaces. In the
case of the Successor Servicer replacing the Servicer, the
38
applicable experience required shall include experience in servicing either
commercial mortgage or other secured business loans. In the case of the
Successor Servicer replacing the Special Servicer, the applicable experience
required shall include experience in the management and disposition of
underperforming, non-performing and defaulted commercial mortgage or other
secured business loans. In the case of the Successor Servicer replacing the
Servicing Advisor, such Successor Servicer shall be a Person (i) that has as its
principal employees or officers one or more persons whose primary business for
at least ten (10) years has been providing advisory, valuation and consulting
services to funeral home and cemetery businesses and (ii) who is approved by the
Controlling Holders (which approval shall not be unreasonably withheld).
(c) The Successor Servicer shall be the successor in all respects to
the Servicer, the Special Servicer or the Servicing Advisor, as applicable, in
its capacity as Servicer, Special Servicer or Servicing Advisor, as applicable,
under the Transaction Documents and the transactions set forth or provided for
therein and shall be subject to all the responsibilities, duties and liabilities
relating thereto placed on the Successor Servicer, as appropriate, by the terms
and provisions hereof; provided that the Successor Servicer shall not be liable
--------
for any acts or omissions of the Outgoing Servicer or for any breach by the
Outgoing Servicer of any of its representations and warranties contained herein
or in any related document or agreement. The Successor Servicer shall be
entitled to the applicable Servicer Fee, Special Servicer Fee or Servicing
Advisor Fee and, as applicable, all Servicing Charges.
(d) The Servicer, the Special Servicer, the Servicing Advisor, the
Depositor, the Trustee and such Successor Servicer shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession. The Successor Servicer, as appropriate (or the Trustee or the
Certificateholders if such Certificateholders have previously reimbursed the
Successor Servicer therefor) shall be reimbursed for Transition Costs, if any,
incurred in connection with the assumption of responsibilities of the Successor
Servicer, upon receipt of documentation of such costs and expenses and in
accordance with Section 5.02 of the Trust Agreement. The Successor Servicer
shall have no claim against the Depositor or the Trust Estate for any costs and
expenses incurred in effecting such succession in excess of the amount specified
in the definition of "Transition Costs."
(e) Solely for purposes of establishing the fee to be paid to the
Successor Servicer, and only if the Successor Servicer would require a fee
higher than the fee previously paid, the Successor Servicer shall solicit
written bids, with a copy to the Certificateholders and the Certificateholder
Agent (such bids to include a proposed servicer fee and servicing transfer
costs) from not less than three (3) Persons experienced in the servicing of
loans similar to the Loans and that are not Affiliates of the Trustee, the
Servicer, the Special Servicer, the Servicing Advisor or the Depositor and are
reasonably acceptable to the Controlling Holders. The Depositor and the
Certificateholder Agent may also solicit additional bids from other such
entities. Any such written solicitation shall prominently indicate that bids
should specify any applicable Transition Costs and that any such transfer costs
in excess of the Servicer Fee, the Special Servicer Fee, or the Servicing
Advisor Fee shall be paid only pursuant to Section 5.02 of the Trust Agreement.
The Successor Servicer shall act as Servicer, Special Servicer, or Servicing
Advisor, as appropriate, hereunder and shall, subject to the availability of
sufficient funds in the Collection Account pursuant to Section 5.02 of the Trust
Agreement (up to the Servicer Fee, the Special Servicer Fee, or the Servicing
Advisor Fee, as applicable, and up to any Successor Servicer's Transition
Costs), receive as compensation therefor a fee equal to the fee proposed in the
bid so solicited which provides for the lowest combination of servicer fee and
transition costs, as reasonably determined by the Controlling Holders.
39
Section 603 Effects of Termination.
------------ -----------------------
(a) Upon the appointment of a Successor Servicer, the applicable
Outgoing Servicer shall remit any Scheduled Payments and any other payments or
proceeds that it may receive pursuant to any Loan or otherwise to the Successor
Servicer after such date of appointment.
(b) After the delivery of a Servicer Termination Notice, Special
Servicer Termination Notice or Servicing Advisor Termination Notice and the
acceptance of appointment by a Successor Servicer, the Outgoing Servicer shall
continue to have all of its obligations with respect to the management,
administration, servicing, enforcement, custody or collection of the Loans in
full until such time as the Successor Servicer has assumed its responsibilities.
Thereafter, the Successor Servicer shall have all of such obligations, except
that the Outgoing Servicer shall transmit or cause to be transmitted directly to
the Successor Servicer, promptly on receipt and in the same form in which
received, any amounts held or received by the Outgoing Servicer (properly
endorsed where required for the Successor Servicer to collect them) received as
payments upon or otherwise in connection with the Loans. The Outgoing Servicer's
indemnification obligations pursuant to Section 5.01 will survive the
termination of such Outgoing Servicer but will not extend to any acts or
omissions of a Successor Servicer.
Section 6.04 No Effect on Other Parties.
------------ ---------------------------
Upon any termination of the rights and powers of the Servicer, the
Special Servicer or the Servicing Advisor pursuant to Section 6.01 or Section
6.02, or upon any appointment of a Successor Servicer, all the rights, powers,
duties and obligations of the other parties under the Transaction Documents
shall remain unaffected by such termination or appointment and shall remain in
full force and effect thereafter.
Section 6.05 Waiver of Past Defaults.
------------ --------------------------
The Trustee shall, at the direction of the Controlling Holders, waive
any default by any of the Servicer, the Special Servicer or the Servicing
Advisor in the performance of its obligations hereunder and its consequences,
other than a default with respect to required deposits and payments in
accordance with Article Three or a default of the type set forth in clauses (iv)
or (v) of Section 6.01(a), which waiver shall require the consent of each
Certificateholder. Upon any such waiver of a past default, such default shall
cease to exist and any Servicer Event of Default, Special Servicer Event of
Default or Servicing Advisor Event of Default arising therefrom shall be deemed
to have been remedied for every purpose of this Agreement. No such waiver shall
extend to any subsequent or other default or impair any right consequent thereon
except to the extent expressly waived.
Section 6.06 Notification to Certificateholders and the
------------ -------------------------------------------
Certificateholder Agent.
- ------------------------
The Servicer, the Special Servicer or the Servicing Advisor, as
appropriate, shall promptly notify the Successor Servicer, the
Certificateholders, the Certificateholder Agent, the others of the Servicer, the
Special Servicer, and the Servicing Advisor, the Depositor, the Rating Agency
and the Trustee of any Servicer Event of Default, Special Servicer Event of
Default or Servicing Advisor Event of Default upon actual knowledge thereof by a
Servicing Officer. Upon any termination of, or appointment of a successor to,
the Servicer, the Special Servicer or the Servicing Advisor pursuant to this
Article 6, the Trustee shall give prompt written notice thereof to the Rating
Agency and the Certificateholder Agent and to the Certificateholders at their
respective addresses appearing on the Certificate Register.
40
ARTICLE SEVEN
-------------
GENERAL PROVISIONS
------------------
Section 7.01 Termination of the Agreement.
------------ -----------------------------
(a) Except with respect to a particular party under Sections 5.01,
5.02, 5.04, 6.01 or 6.03, the respective duties and obligations of the Servicer,
the Special Servicer, the Servicing Advisor, the Depositor and the Trustee
created by this Agreement shall terminate upon the discharge of the Trust
Agreement in accordance with its terms; provided that no resignation or removal
--------
of the Trustee and no appointment of a successor Trustee shall become effective
until the acceptance of appointment by the successor Trustee under Section 7.09
of the Trust Agreement. Upon the termination of this Agreement pursuant to this
Section 7.01(a), the Servicer and the Special Servicer shall pay to the
Depositor (or upon the Depositor's order) all monies with respect to the Loan
Assets held by the Servicer or the Special Servicer and to which such Person is
not entitled.
(b) This Agreement shall not be automatically terminated as a result of
an Event of Default under the Trust Agreement or any action taken by the Trustee
thereafter with respect thereto, and any liquidation or preservation of the
Trust Estate by the Trustee thereafter shall be subject to the rights of the
Servicer and Special Servicer to service the Loans and the Loan Collateral and
to collect servicing compensation as provided hereunder.
Section 7.02 Amendments.
----------- -----------
(a) This Agreement and the rights and obligations of the parties
hereunder may not be changed orally but only by an instrument in writing signed
by the party against whom enforcement is sought together with the prior written
consent of the Holders of not less than 51% of the Outstanding Principal Amount
of each affected Class (or, with respect to any affected Class during the
Funding Period applicable to such Class, of not less than 51% of the Maximum
Series Amount of such Class) of Rated Certificates; provided that no such
---------
amendment shall, without the consent of each Certificateholder, (i) alter the
method of computing any allocation of funds under this Agreement or the priority
of any funds to be allocated under this Agreement, (ii) permit the creation of
any Lien on the Trust Estate (other than the Lien of the Trust Agreement) or any
portion thereof or deprive any such Certificateholder of the benefit of this
Agreement with respect to the Trust Estate or any portion thereof, or (iii)
modify this Section 7.02.
(b) Promptly after the execution of any amendment hereto, the Special
Servicer shall send to the Servicer, the Servicing Advisor, the Depositor, the
Trustee, the Certificateholder Agent, each Certificateholder and each Rating
Agency a conformed copy of each such amendment.
(c) It shall be necessary, in obtaining the consent of a
Certificateholder under this Section 7.02, for the Certificateholder to approve
the particular form of any proposed amendment. The manner of obtaining such
consent and of evidencing the authorization of the execution thereof by
Certificateholders shall be subject to such reasonable regulations as the
Trustee may prescribe.
(d) Any amendment or modification effected contrary to the provisions
of this Section 7.02 shall be void.
41
Section 7.03 Governing Law.
------------ --------------
This Agreement shall be construed in accordance with the internal laws
of the State of New York without regard to conflict of laws principles and the
obligations, rights and remedies of the parties hereunder shall be determined in
accordance with such laws.
Section 7.04 Notices.
------------ --------
All demands, notices and communications hereunder shall be in writing,
shall be made in accordance with the provisions of the Trust Agreement, and
shall be addressed, if to the Depositor, at 1700 Montgomery Street, Suite 250B,
San Francisco, California 94111 Fax 415-394-6703, if to the Servicer, at 1700
Montgomery Street, Suite 250, San Francisco, California 94111 Fax 415-394-9471,
if to the Special Servicer at 1700 Montgomery Street, Suite 250, San Francisco,
California 94111 Fax 415-394-9471, if to the Servicing Advisor, at ***Fax ***,
if to the Certificateholders, to their address set forth on the Certificate
Register, and if to the Trustee, at One M&T Plaza, 7th Floor, Buffalo, New York
14203-2399 Fax 716-842-4474. All demands, notices and communications made in
accordance with the provisions hereof shall be deemed to have been received or
made (as applicable) as provided in the Trust Agreement. Any Person may change
the address for notices hereunder by giving notice of such change to the other
Persons (or in the case of a Certificateholder, by causing the Trustee to change
its address as provided on the Certificate Register).
Section 7.05 Severability of Provisions.
------------ ---------------------------
If one or more of the provisions of this Agreement shall be for any
reason whatsoever held invalid, such provisions shall be deemed severable from
the remaining covenants and provisions of this Agreement, and shall in no way
affect the validity or enforceability of such remaining provisions, the rights
of any parties hereto, or the rights of the Trustee or any Certificateholder. To
the extent permitted by law, the parties hereto waive any provision of law which
renders any provision of this Agreement prohibited or unenforceable in any
respect.
Section 7.06 Binding Effect.
------------ ---------------
All provisions of this Agreement shall be binding upon and inure to the
benefit of the respective successors and assigns of the parties hereto, and all
such provisions shall inure to the benefit of the Certificateholders. This
Agreement may not be modified except by a writing signed by all parties hereto.
Section 7.07 Article Headings and Captions.
------------ ------------------------------
The article headings and captions in this Agreement are for convenience
of reference only, and shall not limit or otherwise affect the meaning hereof.
Section 7.08 Legal Holidays.
------------ ---------------
In the event that where the date on which any action required to be
taken, document required to be delivered or payment required to be made is not a
Business Day, such action, delivery or payment need not be made on such date,
but may be made on the next succeeding Business Day.
***Confidential information omitted purusant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
42
Section 7.09 Assignment for Security for the Certificates.
------------ ---------------------------------------------
The Servicer, the Special Servicer, the Servicing Advisor and the
Trustee understand that the Depositor will assign to the Trustee all its right,
title and interest to this Agreement. The Servicer, the Special Servicer, the
Servicing Advisor and the Trustee consent to such assignment and further agree
that all representations, warranties, covenants and agreements of the Servicer,
the Special Servicer, and the Servicing Advisor made herein shall also be for
the benefit of and inure to the Trustee and all Certificateholders.
Section 7.10 No Servicing Assignment.
------------ ------------------------
Notwithstanding anything to the contrary contained herein, except as
provided in Sections 5.02 and 5.04, this Agreement may not be assigned by the
Depositor, the Servicer, the Special Servicer or the Servicing Advisor without
the prior written consent of the Controlling Holders.
Section 7.11 Notifications.
------------ --------------
Notwithstanding any provision to the contrary contained in this
Agreement, all reports, notices, consents and communications which are required,
by the terms of this Agreement, to be delivered by the Certificateholders, the
Certificateholder Agent or the Directing Holders to the Trustee, as the context
requires, shall be required to be delivered to the Trustee in writing.
Section 7.12 Successor Servicer.
------------ -------------------
(a) Notwithstanding anything contained in this Agreement to the
contrary, any Successor Servicer shall promptly after it assumes the role obtain
state and federal qualifications, licenses and franchises necessary for it to
perform its servicing responsibilities under this Agreement.
(b) Notwithstanding anything contained in this Agreement to the
contrary, the Successor Servicer shall only be required to perform its
obligations in the time and manner set forth in this Agreement if, and to the
extent, any information which is required to be delivered to the Successor
Servicer or any information on which the Successor Servicer is authorized to
rely on, is delivered to the Successor Servicer in accordance with provisions of
this Agreement; provided that nothing in this clause (b) shall be construed to
--------
relieve the Successor Servicer of its obligations under this Agreement if the
failure appropriately to deliver or provide any such information to the
Successor Servicer is remedied.
43
IN WITNESS WHEREOF, the Depositor, the Servicer, the Special Servicer,
the Servicing Advisor and the Trustee have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the date
and year first above written.
MANUFACTURERS AND TRADERS TRUST
COMPANY, as Trustee
By: /S/ Russell T. Whitley
--------------------------------
Name: Russell T. Whitley
Title: Assistant Vice President
ALLEGIANCE CAPITAL, LLC,
Special Servicer
By: /s/ Alan B. Perper
--------------------------------
Name: Alan B. Perper
Title: President
POINT WEST CAPITAL CORPORATION, as Servicer
By: /s/ Alan B. Perper
--------------------------------
Name: Alan B. Perper
Title: President
***
Servicing Advisor
By: /s/ ***
--------------------------------
Name: ***
Title: President
ALLEGIANCE FUNDING CORP. I,
Depositor
By: /s/ Alan B. Perper
--------------------------------
Name: Alan B. Perper
Title: President
***Confidential information omitted purusant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.