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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 8, 1997
PALFED, Inc.
_______________________________________________________________
(Exact name of registrant as specified in its charter)
South Carolina 0-15334 57-0821925
________________________________________________________________
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
107 Chesterfield Street South
Aiken, South Carolina 29801
____________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (803) 642-1400
Page 1 of ________sequentially numbered pages
The Index to Exhibits is on page 4.
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Item 5. Other Events.
______________________
On September 23, 1997 PALFED, Inc. (the "Company"), PALFED and Regions
Financial Corporation ("Regions") entered into an Agreement and Plan of Merger
("Agreement") pursuant to which PALFED will merge with and into Regions (the
"Merger"). The Agreement is subject to PALFED shareholder approval, appropriate
regulatory approvals and other customary closing conditions.
In anticipation of the Merger, Regions Mortgage, Inc. ("Regions Mortgage")
a wholly-owned subsidiary of Regions Bank (a subsidiary of Regions), and
Palmetto Federal Savings Bank of South Carolina ("Palmetto Federal"), a
wholly-owned subsidiary of PALFED, entered into mortgage loan servicing
agreements pursuant to which Regions Mortgage will service approximately $490
million in first mortgage loans which Palmetto Federal either owns or services
for others. In the event the Merger is not consummated, Palmetto Federal has
the right to terminate the loan servicing agreements.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
____________________________________________________________________________
(a) Financial Statements
____________________
None.
(b) Pro Forma Financial Statements
______________________________
None.
(c) Exhibits
________
Exhibit Number Description
______________ ___________
Exhibit 10.1 Whole Loan Servicing Agreement dated as of
December 1, 1997 by and between Regions
Mortgage, Inc. and Palmetto Federal Savings
Bank of South Carolina.
Exhibit 10.2 Sub-Servicing Agreement dated as of December
1, 1997 by and between Regions Mortgage, Inc.
and Palmetto Federal Savings Bank of South
Carolina.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PALFED, INC.
By: /s/ John C. Troutman
_____________________
John C. Troutman
President and Chief Executive Officer
Date: December 12, 1997
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INDEX TO EXHIBITS
_________________
Sequentially
Exhibit Number Description Numbered Page
______________ ___________ _____________
Exhibit 10.1 Whole Loan Servicing Agreement dated as of
December 1, 1997 by and between Regions Mortgage,
Inc. and Palmetto Federal Savings Bank of South
Carolina.
Exhibit 10.2 Sub-Servicing Agreement dated as of December 1,
1997 by an between Regions Mortgage, Inc. and
Palmetto Federal Savings Bank of South Carolina.
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EXHIBIT 10.1
WHOLE LOAN SERVICING AGREEMENT
THIS AGREEMENT made this 1st day of December, 1997, (the "Agreement"), is
made in the State of Alabama by and between Regions Mortgage, Inc., a
wholly-owned subsidiary of Regions Bank, ("RMI", the "Servicer"), and Palmetto
Federal Savings Bank of South Carolina, a wholly-owned subsidiary of PALFED,
Inc., ("Palmetto", the "Owner"), for mutual consideration herein evidenced.
Whereas, pursuant to that certain Agreement and Plan of Merger dates as of
September 23, 1997 (the "Merger Agreement") between PALFED, Inc. ("PALFED") and
Regions Financial Corporation ("Regions"), Regions is acquiring all of the
issued and outstanding stock of PALFED.
Whereas, Sub-Servicer is engaged in the business activity of servicing
residential mortgages.
Whereas, Sub-Servicer has the capacity and the ability to service such
mortgages.
Whereas, the Owner desires Sub-Servicer, from time to time, to assume
responsibility for servicing residential mortgages and Sub-Servicer is
agreeable thereto.
Whereas, this Agreement governs the servicing of real estate mortgage loans
previously originated and serviced by Owner, and Owner now desires to transfer
such servicing duties to RMI.
Whereas, Owner warrants to RMI that the loans transferred under this
Agreement were made in compliance with all governmental laws and regulations of
whatever nature, and that the loans have been serviced in accordance with such
laws and regulations, and that Owner will hold RMI harmless from any and all
claims of whatever nature that may arise from the making or servicing of these
loans prior to the date of actual transfer of servicing from Owner to RMI.
Now, therefore, in consideration of the mutual recitals and covenants set forth
herein, and for good and valuable consideration as recited herein, the Parties
hereby warrant, covenant and agree as follows:
ARTICLE I
Definitions
Section 1.01. "Guaranteed Loan" means a loan that is guaranteed, including
a guarantee to repurchase, in whole or in part, or as to which a commitment to
guarantee has been made under the provisions, as time to time amended, of the
following:
(a) the Servicemen's Readjustment Act of 1994, or Chapter 37 to Title
38, United States Code;
(b) Section 221 or 222 of the Foreign Assistance Act of 1961;
(c) the Small Business Act; and ,
(d) the Rural Development Act of 1972.
Section 1.02. "Insured Loan" means a loan which is insured, in whole or in
part, by a private mortgage insurance company, other insurers or as to which a
commitment for any such insurance has been made under the provisions, as time to
time amended, of the National Housing Act of 1944, or Chapter 37 of Title 38,
United States Code.
Section 1.03. "Insured Institution" includes a federal savings and loan
association, a savings bank, a building and loan, savings and loan, or homestead
association, or a cooperative
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bank, whose accounts are insured by a state or national bank, or a savings
bank whose accounts are insured by the Federal Deposit Insurance Corporation
("FDIC").
Section 1.04. "Loan" and "Loans" include adjustable loans, and security
deeds, trust deeds, and deeds of trust relating to adjustable loans.
Section 1.05. "Loan Debtor" and "Loan Debtors" mean mortgagors, trustors
of trust deeds and deeds of trust, and the grantors or any security deeds
relating to adjustable loans.
Section 1.06. "Servicer" means the firm designated to be responsible for
doing the actual servicing and administration of the loans sold under this
Agreement.
ARTICLE II
Administration and Servicing of the Loan
Section 2.01. Identification of Servicer. The Servicer of the servicing
transferred pursuant to this Agreement is Regions Mortgage, Inc. ("RMI").
Section 2.02. Servicer's and Loan Debtor's Compliance with Law. RMI
hereby represents and warrants that it will comply with, and that it will use
its best efforts to cause each Loan Debtor to comply with, all applicable state
and federal laws, rules and regulations, or requirements of the private mortgage
insurance companies, including those requiring the giving of notices. Where
applicable, RMI warrants that it will comply with the following:
(a) the National Housing Act of 1934, as from time to time amended,
and with all applicable rules and regulations issued thereunder;
and,
(b) the requirements of private mortgage insurance companies,
including the giving of all notices and the submitting of all
claims required to be given or submitted to the Federal Housing
Administration, the Veterans Administration, or to the private
mortgage insurance company to the end that the full benefit of
either the Federal Housing Administration insurance, the guaranty
of the United States of America, or the private mortgage
insurance will inure to Owner.
RMI warrants that it will forward copies of all such notices or claims to Owner
if requested by Owner.
Section 2.03. Collection, Remittance and Accounting Warranties. Until the
principal and interest of each loan sold hereunder is paid in full, RMI warrants
that it shall:
(a) Proceed diligently to collect all payments due under the terms of
each loan as they become due;
(b) Keep a complete, accurate and separate account of and properly
apply all sums collected by it from the Loan Debtor on account of
each loan sold hereunder for principal and interest, taxes,
assessments and other public charges, hazard insurance premiums
and FHA insurance or mortgage insurance premiums, and any and all
other expenses and expenditures;
(c) Deposit all funds received in behalf of the loans sold under this
Agreement in a segregated trust or custodial demand deposit
account in a federally insured institution. Such account shall
be held by RMI as trustee or custodian which shall maintain
detailed records to show the respective interests of each
individual Loan Debtor in the account. Each such account shall
be established and maintained in a manner which complies with the
applicable rules and regulations of the FDIC;
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(d) From the funds so deposited,
(i) Pay promptly to the proper parties when and if due the FHA
insurance premiums, mortgage insurance premiums, taxes,
special assessments, ground rents, and premiums of hazard
insurance policies, and
(ii) On or before the 25th of each month and the 5th of each
month deliver to Owner or Owner's representative all amounts
of principal and interest collected under the loan.
(e) Provide to Owner a certification that the loans have been
serviced properly and in accordance with this Agreement and
customery practices in the mortgage industry.
Additionally, Owner will certify that all insurance, taxes, MIP
premiums, PMI premiums, etc., have been paid properly and
promptly and that all receipts have been posted properly and
promptly.
Section 2.04. Loan and Other Prepayments. RMI warrants that it will not
accept any prepayment of mortgage principal on any loan sold hereunder except as
authorized by applicable law and regulations, and provided by the terms of the
applicable mortgage instrument. Funds received on the account of the Loan
Debtor for the purpose of paying taxes, assessments, insurance premiums, or
other similar purpose will be retained and disbursed by RMI.
Section 2.05. Loan Adjustments. If the loan is an adjustable rate, it is
agreed by Owner that RMI is authorized and required to make loan adjustments in
compliance with this Agreement. Until the principal and interest of each loan
sold hereunder is paid in full, RMI warrants that it shall make loan adjustments
in compliance with the loan contract and applicable regulatory lending
requirements, and which reflect the movements of the applicable loan adjustment
index, combination or indices or moving average of index values, formula or
schedule. The applicable loan adjustments shall be implemented in accordance
with applicable lending regulations and loan contract. RMI shall execute and
deliver all appropriate notices required by the applicable lending regulations
and loan contract regarding such loan adjustments including but not by way of
limitation: timely notification to the Owner, or to the Owner's successors or
assigns, of all applicable data and information regarding such adjustments, and
new schedules of Owner's pro rata share of collections of principal and
interest. If the Loan Debtor on any loan hereunder is in default at the time
such notices are executed and delivered to such Loan Debtor, RMI shall timely
execute and deliver to such Loan Debtor notice that all contractual rights under
the applicable loan contract in regard to such default are reserved even though
the loan in adjusted.
Section 2.06. Loan Debtor's Failure to Perform. RMI warrants that in the
event any Loan Debtor fails to make a payment to RMI required to be made under
the terms of the applicable loan that RMI will notify Owner of such fact within
thirty (30) days after the payment shall have become due and payable, and RMI
will conduct due diligence to ascertain, and forthwith will notify Owner, of the
failure of any Loan Debtor to perform any other obligation under the applicable
loan, and also of any of the following which might come to the attention of RMI
, and in RMI's opinion material in fact and circumstances:
(a) the vacancy of or any change in the occupancy of any premises
securing a loan sold under this Agreement;
(b) the sale or transfer of any such premises;
(c) the death, bankruptcy, insolvency or other disability of any Loan
Debtor which might impair ability to repay the loan;
(d) any loss or damage to any such premises, in which event, in
addition to notifying Owner, RMI shall see to it that the
insurance companies
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concerned are promptly notified and proper claim made to
insurance company; and/or,
(e) any lack of repair or any other deterioration or waste suffered
or committed in respect to the premises securing the loan.
It is understood, however, that no notice need be given to the Owner of any
facts other than those of which RMI shall have actual notice, and those of which
RMI would, except for its negligence, have had notice.
Section 2.07. Foreclosure of Other Acquisition of Security Property. RMI
warrants that it will upon the request and under the direction of Owner process
the following:
(a) the foreclosure or other acquisition of the property securing a
loan sold hereunder;
(b) the transfer of such property to the FHA or VA where appropriate;
and,
(c) the collection of any applicable mortgage insurance.
Pending completion of these steps, RMI will protect such property from
waste and vandalism.
At the option of Owner, Owner may assign such mortgage to RMI which will
then conduct all such proceedings in its own name, promptly thereafter assigning
or conveying to the Owner any title, equity or other property or right acquired
by such proceedings. RMI warrants that it will have title to the property
conveyed in the name designated by Owner. Owner agrees to reimburse RMI for
its reasonable attorney's fees. In the case of voluntary deed in lieu of
foreclosure, and purchase by Owner, or for its account, RMI warrants that it
will protect the security property so owned. RMI warrants that it will manage,
operate, improve, rent and sell such real estate with notice to and the consent
of the Owner. All these operations shall be on terms and as determined and
directed by Owner. Upon the sale of such security property, on terms as
specified by Owner, if payments are deferred and payable under a loan contract,
RMI warrants that it will service such loan until completely liquidated, upon
the terms provided for the servicing of loans herein.
Section 2.08. Custody of Insurance Policies. RMI warrants that it shall
hold for Owner's account such insurance records required for servicing and shall
be responsible for the procurement of insurance records required for servicing.
Section 2.09. Records Maintenance. RMI warrants that it will keep records
satisfactory to Owner and keep records in accordance with standard accounting
and servicing procedures, pertaining to each loan sold hereunder, and such
records shall be the property of Owner and upon termination of this Agreement
shall be delivered to Owner.
Section 2.10. Other Servicer Duties. Until the principal and interest of
each loan sold hereunder is paid in full, RMI warrants that it shall perform
such other customary duties, furnish such reports and execute such other
documents in connection with its duties hereunder as Owner from time to time
reasonably may require. RMI shall be reasonably compensated for additional
duties and reports based upon the additional cost incurred by RMI in connection
with such request.
Section 2.11. Servicer's Fees. RMI shall retain as full compensation for
all services performed hereunder the earned portion of the servicing fee of 1/4
of 1% for fixed rate mortgages and 3/8 of 1% for adjustable rate mortgages. RMI
also shall retain any loan assumption fees, late charges, and other
miscellaneous fees collected from the Loan Debtor pursuant to the terms of the
loan, or any other HUD or VA allowable fees. No additional compensation shall
be payable to RMI provided that:
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(a) Sub-Servicer will be fully reimbursed for all foreclosure and
liquidation expenses related to the foreclosure and REO process.
(b) in the event Owner sells all or any part of its interest in the
loans covered by this Agreement to a third party or parties,
including the sale of participation ownership interest therein
(whether such resales are by Owner or Owner's successors or
assigns), then an additional service fee equal to the servicing
fee computed as provided hereinabove payable by each such
subsequent buyer thereof, and such fee shall be deducted from
each monthly remittance to each such subsequent buyer.
Section 2.13. Other Warranties and Representations. RMI warrants that it
will not waive, modify, release or consent to postponement on the part of the
Loan Debtor of any term or provision of the loan contract without the written
consent of Owner.
ARTICLE III
Sale of Loan or Participation
Interests to Third Parties
In the event Owner sells all or any part of its interests in loans covered
by this Agreement to a third party or parties, including the sale of
participation ownership interests therein, such third parties shall succeed to
all of the rights of Owner hereunder for the portion purchase and this Agreement
shall remain in full force and effect. In such event, RMI warrants that it will
remit all principal and interest installments collected under the loans directly
to such third party or parties by or before the 25th and 5th of each month,
after deduction of the service fee as provided in this Agreement. The
obligation to make direct remittances and to execute and deliver all appropriate
notices required by this Agreement to such third party or parties shall arise
upon sixty days (60) notice of such assignment delivered by such subsequent
buyers to RMI.
ARTICLE IV
Termination of This Agreement
Section 4.01. Loans Being Serviced. The Owner may, by delivering notice
to RMI, terminate this Agreement as to loans being serviced if:
(a) RMI in the sole opinion of the Owner, fails to take positive
action to correct any deficiency in the performance of its
obligations hereunder within ninety (90) days after the Owner has
given RMI written notice of such deficiency; or
(b) RMI becomes insolvent or bankrupt or is placed under
conservatorship or receivership, whether state or federal; or
(c) RMI assigns or attempts to assign its rights and obligations
hereunder, without the written consent of Owner; or
(d) If acquisition of Owner by Regions is not completed by April 30,
1998, in accordance with the Merger Agreement. Should PALFED and
Regions extend the Merger Agreement, this agreement shall
automatically be modified to continue in effect for the same
period as the Merger Agreement; or
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Section 4.02. Future Acceptance of Loans. This Agreement may be
terminated as to the future acceptance of loans by either party at any time upon
delivering sixty (60) days written notice of termination to the other party, but
such termination shall not in any respect change or modify the obligation of RMI
with respect to the servicing of loans already accepted, and RMI shall continue
to be responsible for the servicing of such loans unless Owner shall act to
terminate this Agreement in accordance with the provisions contained herein.
Section 4.03. Servicer's Duties. Upon termination of this Agreement, RMI
warrants that it will account for and turn over to Owner all funds collected
under each loans sold hereunder, less only the compensation then due RMI, and
deliver to Owner all records and documents that it may have in its possession
relating to each such loans within sixty (60) days from date of termination.
ARTICLE V
Miscellaneous Provisions
Section 5.01. Appointment or Trustees and/or Foreclosure Attorneys. It is
agreed by Owner and RMI that the appointment of any trustees and/or foreclosure
attorneys under any trust deeds, deeds of trust, and/or Mortgages shall be
subject to the approval of Owner.
Section 5.02. Effect of ARTICLE and Section headings. The ARTICLE and
section headings are for convenience only and shall not affect the construction
of this Agreement.
Section 5.03. Document Contains Entire Agreement. This document contains
the entire agreement between the parties hereto and cannot be modified in any
respect except by an agreement in writing signed by all the parties. The
invalidity of any portion of this Agreement shall in no way affect the balance
thereof. This Agreement shall remain in effect until Owner's interest in all of
the loans sold hereunder, including the underlying security, are liquidated
completely.
IN WITNESS WHEREOF, each party has caused its corporate seal to be affixed
hereto and this instrument to be signed in its corporate name on its behalf by
its proper officials duly authorized.
This 5th day of December, 1997.
PAMLETTO FEDERAL SAVGINS BANK
OF SOUTH CAROLINA, Owner ATTEST
BY: /s/ Darrell R. Rains BY: /s/ Howard M. Hickey, Jr.
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_ Darrell R. Rains Howard M. Hickey, Jr.
ITS: EVP and CFO ITS: Secretary
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(SEAL)
REGIONS MORTGAGE, INC., Servicer ATTEST
BY: /s/ A. H. Hethcox, Jr. BY: /s/ Debra Meefer
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ITS: Executive Vice President ITS: Vice President
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(SEAL)
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EXHIBIT 10.2
SUB-SERVICING AGREEMENT
This Agreement, made this 1st day of December, 1997, by and between Regions
Mortgage, Inc., a wholly-owned subsidiary of Regions Bank (hereinafter referred
to as "Sub-Servicer"), and Palmetto Federal Savings Bank of South Carolina, a
wholly-owned subsidiary of PALFED, Inc., (hereinafter referred to as "Owner").
RECITALS
Whereas, pursuant to that certain Agreement and Plan of Merger dated as of
September 23, 1997 (the Merger Agreement ) between PALFED, Inc. ( PALFED )
and Regions Financial Corporation ( Regions ), Regions is acquiring all of
the issued and outstanding stock of PALFED.
Whereas, Sub-Servicer is engaged in the business activity of servicing
residential mortgages.
Whereas, Sub-Servicer has the capacity and the ability to service such
mortgages.
Whereas, the Owner desires Sub-Servicer, from time to time, to assume
responsibility for servicing residential mortgages and Sub-Servicer is
agreeable thereto.
Now, therefore, in consideration of the mutual recitals and covenants set
forth herein, and for good and valuable consideration as recited herein,
the Parties hereby warrant, covenant and agree as follows:
ARTICLE I. TERMS AND DEFINITIONS
For purposes of this Agreement, each of the following terms shall have the
meaning specified with respect thereto.
Agreement shall mean this Agreement as the same may be from time to time
amended.
Agency shall mean FHLMC, FNMA, GNMA, FHA and VA or any successor thereto.
Business Day shall mean any day other than Saturdays, Sundays, or legal
holiday or a day or portion thereof during which Sub-Servicer is not open
for business.
Ancillary Income shall mean late charge fees, NSF fees, processing loan
assumptions, collecting mortgage insurance premiums and other fees commonly
connected with mortgage servicing.
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Escrow or Impound Charges shall mean all payments for whatever purpose
except for principal and interest, required by the terms of the Mortgage or
otherwise to be made by the Mortgagor.
FHA shall mean the Federal Housing Administration or any successor thereto.
FHLMC shall mean the Federal Home Loan Mortgage Corporation or any
successor thereto.
FNMA shall mean the Federal National Mortgage Association or any successor
thereto.
GNMA shall mean the Government National Mortgage Association or any
successor thereto.
HUD shall mean the Department of Housing and Urban Development or any
successor thereto.
Investor shall mean the owner and holder of a Mortgage Loan or of a
participation interest to whom Owner has servicing responsibilities.
Investor Cutoff Date shall mean the date of each month, for an Investor, as
of which Mortgage payments received through such date are to be remitted to
that Investor in accordance with that Investor's guidelines.
Lender shall mean the original lender of mortgagee or any successor
thereto.
Mortgage Mortgage, Mortgages, Loan, Mortgage Loan, or Loans shall mean the
Loans together with the Mortgages, security deeds, trust deeds, deeds of
trust and related Loan documents securing the same which comprise the
Mortgage Loans or pool of Mortgage Loans to be sub-serviced hereunder as
amended from time to time.
Mortgage Files shall mean the files containing the original and custodial
documents, as well as the other documents, relating to each Mortgage Loan.
Mortgagee shall mean the lender or Party receiving the Mortgage from the
Mortgagor.
Mortgagor shall mean mortgagors, trustors of trust deeds and deeds of
trust, and the grantors of any Mortgages.
Owner's Cutoff Date shall mean the last business day of each month.
Party or Parties shall mean Owner and/or Sub-Servicer.
Residential Mortgage Loan shall mean any Mortgage Loan secured by a 1-4
family residential property.
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Sale and Servicing Agreements shall mean the mortgage loan servicing
agreements by and between third Party Investors and the Owner governing the
servicing of certain Mortgage Loans, as the same may be amended or modified
from time to time.
Sub-Servicing shall mean servicing conducted under this Agreement where the
ownership rights of the servicing are held by the Owner.
Transfer Date shall mean the date that Sub-Servicer accepts the servicing
responsibilities contained in this Agreement, which shall be during
December, 1997, unless otherwise agreed to by the Parties hereto.
VA shall mean the Veterans Administration or any successor thereto.
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF OWNER
2.1 Due Organization and Good Standing. Owner is a federally chartered
stock savings bank duly organized, validly existing and in good standing under
the laws of the United States of America. Owner is qualified or registered to
transact business in each jurisdiction in which the ownership of property or the
conduct of its business requires such qualifications or registration (except
where the failure so to qualify or register would not have a material adverse
effect upon the consummation of the transaction contemplated hereby).
2.2 Authority and Capacity. Owner has the power, authority and legal
right to enter into and perform this Agreement and to perform the obligations
required of it hereunder, and this Agreement and any document or instrument to
be delivered to Sub-Servicer by Owner pursuant hereto has been duly authorized,
executed, and delivered.
2.3 Binding Obligations. This Agreement and any documents or instruments
now or hereafter executed and delivered to Sub-Servicer by Owner pursuant to
this Agreement constitute (or shall, when delivered to Sub-Servicer by Owner,
constitute) valid and legally binding obligations of Owner enforceable against
Owner in accordance with their respective terms except as may be limited by or
subject to (i) any bankruptcy, insolvency, reorganization, moratorium or other
laws affecting creditors' rights generally and (ii) general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
2.4 No Conflicts. The consummation of the transaction contemplated by
this Agreement will not result, in any material respect, in the breach of any
term or provision of, or conflict with or constitute a default under or result
in the acceleration of any obligation under, any agreement, indenture or loan or
credit agreement or other instrument to which Owner or its property is subject,
or result in the violation of any law, rule, regulation, order, judgment, or
decree to which Owner or its property is subject.
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2.5 Notice of Breach. Owner shall immediately notify Sub-Servicer of any
failure or, to the best of its knowledge, any anticipated failure on its part to
observe and perform any representation, warranty, covenant or agreement required
to be observed and performed by it hereunder.
2.6 Regulatory Approvals. Except as provided herein below, Owner has
received any and all necessary consents and approvals from (and has provided or
will provide on a timely basis all notice to) all regulatory authorities and
other entities, including without limitation, FNMA, GNMA, FHLMC, FHA, VA, HUD
and applicable private mortgage insurance companies and any private investors,
authorizing the performance of Sub-Servicer of the transactions contemplated by
this Agreement.
With respect to FNMA and FHLMC sub-servicing, the approvals will be secured
prior to December 15, 1997. Sub-Servicer will work with Owner to complete the
forms necessary for sub-servicing approval.
With respect to private investors, Owner will secure written approval for the
sub-servicing prior to December 15, 1997.
All other approvals, notifications, etc. will be secured by Owner prior to
December 15, 1997.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SUB-SERVICER
Sub-Servicer warrants and represents to, and agrees with, Owner as follows:
3.1 Due Organization and Good Standing. Sub-Servicer is a duly
organized, validly existing corporation and in good standing under the laws of
Alabama. Sub-Servicer is duly licensed, qualified and in good standing in each
state where the property subject to each Mortgage Loan sub-serviced pursuant to
this Agreement is located if the laws of such state require licensing or
qualification in order to service or sub-service such Mortgage Loan (except
where the failure so to qualify or register would not have a material adverse
effect upon the consummation of the transaction contemplated hereby).
3.2 Authority and Capacity. Sub-Servicer has the power, authority and
legal right to enter into and perform this Agreement, and this Agreement and any
document or instrument to be delivered by Sub-Servicer to Owner pursuant hereto
has been duly authorized, executed, and delivered.
3.3 Binding Obligations. This Agreement and any documents or
instruments now or hereafter executed and delivered to Owner by Sub-Servicer
pursuant to this Agreement constitute
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(or shall, when delivered to Owner by Sub-Servicer, constitute) valid and
legally binding obligations of Sub-Servicer enforceable against Sub-Servicer
in accordance with their respective terms except as may be limited by or
subject to (i) any bankruptcy, insolvency, reorganization, moratorium or
other laws affecting creditors' rights generally and (ii) general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
3.4 No Conflicts. The consummation of the transaction contemplated by
this Agreement will not result, in any material respect, (i) in the breach of
any term or provision of the charter or by-laws of Sub-Servicer or (ii) in the
breach of any term or provision of, or conflict with or constitute a default
under or result in the acceleration of any obligation under, any agreement,
indenture or loan or credit agreement or other instrument to which Sub-Servicer
is subject, or (iii) result in the violation of any law, rule, regulation,
order, judgment, or decree to which Sub-Servicer Owner or its property is
subject.
3.5 Notice of Breach. Sub-Servicer shall immediately notify Owner of any
failure or, to the best of its knowledge, any anticipated failure on its part to
observe and perform any representation, warranty, covenant or agreement required
to be observed and performed by it hereunder.
3.6 Regulatory Approvals. Sub-Servicer is an approved FNMA
Seller/Servicer, an approved FHLMC Seller/Servicer, an approved GNMA Issuer, an
approved HUD mortgagee and an approved VA mortgagee, and Sub-Servicer is in good
standing with each of such entities as required in order to service or
sub-service any Mortgage Loan covered by this Agreement.
3.7 Cooperation. Recognizing that Owner has an interest in the Mortgage
Loans and the servicing responsibilities with respect thereto that must be
performed, Sub-Servicer will use its best efforts during the term of this
Agreement to fully cooperate with the employees, agents and representatives of
Owner and to ensure that its employees, agents and representatives also
cooperate with such persons. Without limiting the generality of the foregoing,
throughout the term of this Agreement, Sub-Servicer will give representatives of
Owner full access, during normal business hours, to the Mortgage Files, and the
books, records, agreements, and other documents of Sub-Servicer relating to the
Mortgage Loans sub-serviced pursuant to this Agreement or to Sub-Servicer's
servicing procedures, and will furnish such representatives with such Mortgage
Files and other information concerning the affairs of Sub-Servicer as Owner may
reasonably request. Sub-Servicer shall furnish, or cause to be furnished, to
Owner such computer reports containing information regarding the Mortgage Loans
sub-serviced pursuant to this Agreement as Owner may reasonably request.
ARTICLE IV. COVENANTS OF OWNER
4.1 Investor Approval. Owner agrees to request and shall have the
responsibility to do all things appropriate and necessary to obtain the
approval of any Investor whose express
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approval is required for the transfer of servicer responsibilities to
Sub-Servicer except that Sub-Servicer shall have the responsibility of
becoming an approved sub-servicer for any such Investor.
4.2 Corporate Authority. Owner agrees to request and shall have the
responsibility to do all things appropriate and necessary to ensure that this
Agreement has been duly authorized by all requisite corporate action and is a
valid and subsisting obligation of Owner.
4.3 Custodial Bank Accounts. Sub-Servicer shall hold all funds owed to
Investors, as well as all Escrow or Impound Charges.
4.4 Compensation. Owner agrees to compensate Sub-Servicer for
sub-servicing the Mortgage Loans at a rate of $7 per loan per month for the
fixed rate loans and $10 per loan per month for the adjustable rate loans.
4.5 Ancillary Income. Sub-Servicer will retain all Ancillary Income as
defined herein, in addition to the sub-servicing compensation provided in
Article VI of this Agreement.
4.6 Notices. Owner agrees to provide prompt written notice to Mortgagors,
governmental agencies (as required), tax service companies, taxing authorities,
and insurance companies and Investors of the assumption of sub-servicing
responsibility by Sub-Servicer at least fifteen (15) days prior to the
assumption of those responsibilities by Sub-Servicer or earlier if required by
Agency/Investor guidelines or law.
4.7 Foreclosures and REO Losses. Notwithstanding any other provision of
this Agreement to the contrary, it is understood and agreed that the Owner shall
remain responsible for all loss, liability and damage resulting from net
foreclosure losses and REO losses relating to any of the Mortgages at all times
prior to and subsequent to the Transfer Date except for losses directly
attributable to the failure of Sub-Servicer to perform its obligations under
this Agreement which directly cause any such foreclosure loss and/or REO loss.
4.8 Custodial Advances. Owner agrees to advance funds monthly necessary
to pay security holders and/or Investor if there is a shortage of monthly
collections in the P&I custodial accounts.
4.9 Negative Service Fees. Owner shall be solely responsible for payment
of any negative service fees associated with the servicing of the Mortgage
Loans.
4.10 Payoffs. Owner shall incur the interest loss on payoffs received, to
the extent that said loss is not a result of a servicing deficiency by
Sub-Servicer.
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ARTICLE V. COVENANTS OF SUB-SERVICER
5.1 Assumption of Duties; Standard of Care. Sub-Servicer shall at all
times service the Mortgage Loans in accordance with prudent mortgage banking
standards and practices. It is understood and agreed that Sub-Servicer shall
exercise the same standard of care that it exercises in the servicing of
Mortgage Loans for its own account. Correspondingly, Owner does hereby grant to
Sub-Servicer the right to exercise and enjoy all of the rights, powers and
privileges granted to Owner in connection with the Mortgage Loans except as
otherwise provided herein, subject to applicable rules and regulations.
Sub-Servicer shall, consistent with Investor requirements, perform such duties
and responsibilities on behalf of Owner as permitted by Investor or Mortgage
Loans, as appropriate, during the period of this Agreement.
5.2 Mortgages. Without limiting any other provision of this Agreement,
from the Transfer Date hereof until the termination of this Agreement, with
respect to each Mortgage Loan sub-serviced pursuant to this Agreement,
Sub-Servicer covenants that it will:
5.2.1 Collect all payments due under the terms of such Mortgage
Loan as such payments become due in accordance with any
applicable laws and regulations and with prudent mortgage
banking standards and practices;
5.2.2 Keep a complete, accurate and separate accounting or and
properly apply all sums collected by it from the Mortgagor
of such Mortgage Loans, including without limitation,
payments for principal and interest, taxes, assessments and
other public charges, hazard insurance premiums, private mortgage
insurance premiums and any FHA insurance. Upon Owner's request,
Sub-Servicer shall furnish Owner with evidence of all expenditures for
taxes, assessments and other public charges, hazard insurance premiums,
private mortgage insurance premiums and any FHA insurance within a
reasonable time after all such expenditures are made;
5.2.3 From the funds received by Sub-Servicer with respect to such
Mortgage: (i) pay promptly to the proper Parties when and if due all
FHA insurance premiums, private mortgage insurance premiums, taxes,
and special assessments and premiums on fire, windstorm, hazard and
flood insurance policies, and (ii) pay promptly when due all amounts
of principal and interest collected with respect to such Mortgage Loan
to the entity entitled thereto;
5.2.4 On or before the fifth (5th) Business Day following the
applicable Investor Cutoff Date of each calendar month, including
without limitation the month in which the Transfer Date occurs with
respect to such Mortgage Loan, submit to Owner such reports with
respect to investor trial balances, loan activity, delinquent Mortgage
Loans and other information as Owner reasonably may request, each
certified to be true and correct by Sub-Servicer;
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5.2.5 Remit to Owner no later than the fifth (5th) Business Day
following the Owner's Cutoff Date of each calendar month end all
required funds.
5.3 Additional Duties. Sub-Servicer additionally covenants that until the
termination of this Agreement with respect to each Mortgage Loan sub-serviced
pursuant to this Agreement, it will (i) handle and apply all prepayments of
mortgage principal on such Mortgage Loan in accordance with all applicable laws
and regulations and the relevant loan documents, (ii) maintain records
pertaining to such Mortgage Loan in conformity with all applicable laws and
regulations and with prudent mortgage banking standards and practices, and
deliver such records to Owner following the termination of this Agreements,
(iii) maintain the Mortgage Files delivered to it for Owner, (iv) permit no
assumption or subordination of any Mortgage Loans unless expressly provided for
by the terms of the respective Mortgage Loans, (v) refrain from engaging in any
active solicitation of refinancing any Mortgage, (vi) pursue collection of any
Loan in default in accordance with prudent mortgage banking standards and
practices and submit appropriate claims with the proper Agency/Investor in
connection therewith, and (vii) perform such other duties, furnish such other
reports and execute such other documents in connection with its sub-servicing
duties hereunder as Owner from time to time reasonably may require.
ARTICLE VI. COMPENSATION
6.1 Sub-servicing Fee. Sub-Servicer is to retain the sub-servicing fees
as outlined in Article IV, Section 4.4.
6.2 Ancillary Income. Sub-Servicer shall retain, and not remit to Owner,
any Ancillary Income.
ARTICLE VII. BOOKS AND RECORDS
7.1 Audit and Access to Information. During the period of this Agreement,
Sub-Servicer shall give Owner and its authorized representatives reasonable
access to all books and records of Sub-Servicer relative to the Mortgage Loans
contemplated by this Agreement upon reasonable advance notice, and permit Owner
to make such inspections thereof as Owner may reasonable request during normal
business hours, provided, however, that such investigation
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or inspection shall be conducted in such a manner as to not interfere
unreasonably with Sub-Servicer's business.
7.2 Maintenance Of Books and Records. Sub-Servicer shall keep full and
complete records pertaining to (i) each Mortgage Loan and the collections made
thereon, and (ii) each check paid as distribution of principal and interest
collected, to appropriate entities (Investors, security holders, etc.) which
records are and shall be the property of Owner.
7.3 Transfer of Books and Records. All books, records, documents,
Mortgage Files, and other information and data in Sub-Servicer's possession,
pertaining to the Mortgage Loans, including all documents, records and reports
relating to any pool in which the Mortgage Loans are contained from the
inception of the pool are and shall at all times remain the property of Owner.
Upon termination of this Agreement, Sub-Servicer shall be obligated to transfer
in an orderly manner and in accordance with Owner's instructions at Owner's
expense, to Owner or a designee of Owner the records held by it. Sub-Servicer
shall also, following termination of this Agreement, account for and turn over
to Owner all funds collected and held by it for Owner, which are the property of
the Owner.
7.4 Confidentiality. In the event of the termination of this Agreement,
each Party shall hold confidential all information obtained hereunder with
respect to the other Party which is not otherwise public knowledge, and all
documents (including copies thereof) obtained hereunder by any Party from the
other Party shall be returned to such Party (unless readily available from
public information sources). The preceding sentence shall survive any
termination of this Agreement.
ARTICLE VIII. INDEMNIFICATION
8.1 Indemnification by Sub-Servicer.
(a) Sub-Servicer agrees to indemnify and hold Owner harmless from any
and all liability, claim, loss or damage to Owner directly
resulting from Sub-Servicer's failure:
(i) to observe and perform any or all of Sub-Servicer's
covenants, agreements, warranties or representations
contained in this Agreement in any material respect; or
(ii) to comply in all material respects with all applicable
Investor requirements with respect to the servicing of the
Mortgage Loans.
(b) Sub-Servicer's indemnification obligation under this Section 8.1,
and the representations, warranties and covenants of Article III
and IV hereof, shall
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be applicable only to the time Sub-Servicer services the Mortgages.
However, Sub-Servicer shall not be obligated to indemnify Owner nor
hold Owner harmless from any liability, claim, loss or damage to Owner
due in whole or in part to servicing or origination deficiencies which
occurred prior to Sub-Servicer assuming the servicing responsibilities
as described in this Agreement.
8.2 Indemnification by Owner. Owner shall indemnify and hold Sub-Servicer
harmless from any and all liability, claim, loss or damage incurred by
Sub-Servicer which result (i) from any representation or warranty of Owner made
in this Agreement or in any schedule, written statement, document or certificate
furnished by Owner pursuant to this Agreement's being not accurate in any
material respect at the time it was made by Owner, or the material non
fulfillment of any covenant or condition of Owner contained in the Agreement or
in any schedule, written statement, document or certificate furnished by Owner
pursuant to this Agreement, (iii) from errors or omissions in the origination or
servicing of any Mortgage Loan sub-serviced pursuant to this Agreement which
error occurred prior to the transfer of the Mortgage Loans to Sub-Servicer.
ARTICLE IX. TERMS AND TERMINATION
9.1 Term and Termination. This Agreement shall continue in full force and
effect commencing on the Transfer Date and continuing thereafter, unless earlier
terminated
(i) by mutual agreement of the Parties upon thirty (30) days written
notice; or
(ii) in the event of a material breach by either Party of this
Agreement, by the other Party upon thirty (30) days written
notice describing such breach, provided such other Party is not
then also in material breach of this Agreement; or
(iii) by Owner, if acquisition of Owner by Regions is not
completed by April 30, 1998, in accordance with the Merger
Agreement. Should PALFED and Regions extend the Merger
Agreement, this Agreement shall automatically be modified to
continue in effect for the same period as the Merger
Agreement; or
(iv) Upon termination, subject to Owner obtaining consents of any
Investor or regulatory authorities, as may be required by such
entities, Sub-Servicer shall comply with Owner's instructions to
transfer all books, records, and other documents related to the
sub-servicing of the Mortgage Loans pursuant to this Agreement to
Owner.
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9.2 If this Agreement is terminated pursuant to Article 9.1(iii),
Sub-Servicer shall reimburse Owner for any and all expenses reasonably and
actually incurred as a result of this agreement including, but not limited to,
any and all personnel costs occasioned by the effects of this Agreement.
ARTICLE X. CONVERSION
10.1 Conversion Procedures. Owner shall comply with Sub-Servicer's written
instructions for conversion of mortgage data to Sub-Servicer's data processing
and record keeping systems, at Owner's expense. Delivery of all documents and
data requested by Sub-Servicer shall be in accordance with procedures set forth
by Sub-Servicer.
10.2 Transfer of Records. Owner shall deliver, and bear the cost of the
transfer and deliver, to Sub-Servicer of all documents, Mortgage Files, reports,
and similar items, as set forth by Sub-Servicer. Owner shall comply with the
requirements of Sub-Servicer. Owner agrees to pay for overnight shipping of
Mortgage Files to be delivered to Sub-Servicer's offices within five (5)
Business Days after the sub-servicing period. Owner will arrange for inside
delivery of Mortgage Files to:
Regions Mortgage, Inc.
Attn: A. H. Hethcox, Jr.
Executive Vice President
605 South Perry Street
Montgomery, Alabama 36104
10.3 Custodial Files. Custodial Files shall be delivered to Sub-Servicer's
custodian within five (5) Business Days after the sub-servicing period. Owner
will make arrangements for inside delivery of the Custodial Files being
transferred. Custodial Files will be delivered to:
Regions Mortgage, Inc.
Attn: Garnett Eubanks
First Alabama Bank Custodian
605 South Perry Street
Montgomery, Alabama 36104
10.4 Notification to Mortgagors. Owner shall at its sole cost and expense
notify all Mortgagors advising them of the transfer of sub-servicing
responsibilities and when and where to make payments on and after the Transfer
Date. The letter affecting such notification shall be subject to review and
approval by Sub-Servicer prior to mailing out to Mortgagors.
10.5 Notification to Insurance Carriers. Owner shall notify all
appropriate insurance companies of the transfer of sub-servicing responsibility
and request that:
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(a) The fire and extended coverage policy with respect to the
property securing each Mortgage Loan name Sub-Servicer as an
insured and contain a lender's loss payable endorsement in favor
of Sub-Servicer and its successors and assigns, and
(b) When appropriate, the flood insurance policy and the catastrophe
insurance policy name Sub-Servicer as an insured and contain a
lender's loss payable endorsement in favor of Sub-Servicer and
its successors and assigns.
ARTICLE XI. CONDITIONS OF TRANSFER
11.1 Sub-Servicer Obligations. The obligations of the Sub-servicer
hereunder shall be subject to the following conditions:
(a) Delivery by Owner to Sub-Servicer of Investor's written approval
of the transfer of sub-servicing obligations for the Mortgage
Loans to Sub-Servicer if required by the applicable Sale and
Servicing Agreement;
(b) Compliance by Owner with all its obligations hereunder.
11.2 Owner Obligations. The obligations of Owner hereunder shall be
subject to the following conditions:
(a) Investor approval of Sub-Servicer, as required by the applicable
Sale and Servicing Agreement;
(b) Compliance by Sub-Servicer with all its obligations hereunder.
ARTICLE XII. MISCELLANEOUS PROVISIONS
12.1 Notices. All notices, requests, demands and other communications
which are required or permitted to be given under this Agreement shall be in
writing and shall be deemed to have been duly given when received, whether sent
by certified mail, return receipt requested, telex, telegram, telecopy or
overnight express mail:
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(a) If to Owner, to:
Palmetto Federal Savings Bank of South Carolina
Attn: Darrell Rains
107 Chesterfield Street
Second Floor
Aiken, South Carolina 29801
(803) 642-1328
(b) If to Sub-Servicer, to:
Regions Mortgage, Inc.
Attn: A. H. Hethcox, Jr.
Executive Vice President
605 South Perry Street
Montgomery, Alabama 36104
(334) 223-3418
12.2 Waivers. Either Owner or Sub-Servicer may upon mutual consent of the
Parties, evidenced by a writing signed by both Parties:
(a) Waive compliance with any of the terms, conditions, or covenants
required to be complied with by the other hereunder; and
(b) Waiver of modify performance of any of the obligations of the
other hereunder.
The waiver by either Party hereto of a breach of any provision of this Agreement
shall not operate or be construed as a waiver of any other subsequent breach.
12.3 Entire Agreement; Amendment. This Agreement constitutes the entire
agreement between the Parties with respect to sub-servicing of the Mortgages and
supersedes all prior agreements with respect thereto. This Agreement may be
amended and any provision hereof waived, but only in writing signed by the Party
against whom such enforcement is sought.
12.4 Binding Effect; Assignment. This Agreement shall inure to the benefit
of and be binding upon the Parties hereto and their successors and assigns.
Unless and until terminated as provided in accordance with Article IX, Owner may
not resign or assign its rights under this Agreement, and Sub-Servicer may not
assign its rights under this Agreement.
12.5 Headings. Headings of the Articles and Sections in this Agreement are
for reference purposed only and shall not be deemed to have any substantive
effect.
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12.6 Applicable Law. This Agreement shall be construed in accordance with
the laws of the State of Alabama without reference to the choice of law
provisions of the State of Alabama.
12.7 Relationship of Parties. Nothing herein contained shall be deemed or
construed to create a partnership or joint venture between the Parties. The
duties and responsibilities of Sub-Servicer shall be rendered by Sub-Servicer as
an agent or Sub-Servicer. Sub-Servicer shall have full control of all of its
acts, doings, proceedings, relating to or requisite in connection with the
discharge of its duties and responsibilities under this Agreement.
12.8 Further Acts. The Parties agree that each shall, at its own expense,
at any time and from time to time after the date hereof, upon the other's
request, do execute, acknowledge and deliver all such further acts, assignments,
transfer, conveyances and assurances as may be required or reasonably advisable
for the transactions provided for or contemplated by this Agreement.
12.9 Brokerage. Each of the Parties hereto represents and warrants that
all negotiations relative to this Agreement and the transactions contemplated
hereby have been carried on each with the other without intervention of any
person other than such Parties' respective employees, agents, and consultants,
and each Party agrees to indemnify the other and hold it harmless against and in
respect of any claims against it for brokerage or other commissions relative to
this Agreement by the indemnifying Party's employees, agents or consultants.
12.10 Counterparts. This Agreement may be exercised in any number of
counterparts, each of which shall be deemed an original.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of this 5th
day of Dec., 1997.
Regions Mortgage, Inc. Palmetto Federal Savings Bank of South Carolina
"Sub-Servicer" "Owner"
By: /s/ S.H. Helinger By: /s/ Darrell R. Rains
------------------------ ------------------------
Its: Executive Vice President Its: EVP and CFO
----------------------
Attest: /s/ Debra Meefer Attest: /s/ Howard M. Hickey, Jr.
---------------------- -------------------------
Its: Vice President Its: Secretary
-------------------------
[Corporate Seal] [Corporate Seal]
NOTARY ACKNOWLEDGMENTS ON FOLLOWING PAGE]
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ACKNOWLEDGMENTS
STATE OF ALABAMA )
)
COUNTY OF MONTGOMERY )
I, Jan M. Lemonds, a Notary Public, in and for said County and State,
hereby certify that A. H. Hethcox, Jr. and Lisa M. Farmer whose names as
Executive Vice President and Vice President of Regions Mortgage, Inc., a
corporation, are signed to the foregoing and are known to me, acknowledged
before me on this day that, being informed of the contents of this Agreement,
they, as officers and with full authority, executed the same voluntarily for and
as the act of said corporation.
Given under my hand this 5th day of December, 1997.
/s/ Jan M. Lemonds
--------------------------------------
NOTARY PUBLIC
Jan M. Lemonds
[SEAL] My Commission Expires September 26, 1999
STATE OF SOUTH CAROLINA )
)
COUNTY OF AIKEN )
I, Susan M. Beasley, a Notary Public, in and for said County and State,
hereby certify that Darrell R. Rains and Howard M. Hickey, Jr. whose names as
EVP and CFO and Secretary of Palmetto Federal Savings Bank of South Carolina,
Inc., a corporation, are signed to the foregoing and are known to me,
acknowledged before me on this day that, being informed of the contents of
this Agreement, they, as officers and with full authority, executed the same
voluntarily for and as the act of said corporation.
Given under my hand this 8th day of December, 1997.
/s/ Susan M. Beasley
--------------------------------------
NOTARY PUBLIC
[SEAL] My Commission Expires 7-29-2006
