United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-K
Amendment No. 1
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED) FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1994
TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED) FOR THE TRANSITION PERIOD FROM
to
Commission file number 0-15083
CAROLINA FIRST CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
South Carolina 57-0824914
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
</TABLE>
102 South Main Street, Greenville, South Carolina 29601
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (803) 255-7900
Securities registered pursuant to Section 12(b) of the Act:
None None
(Title of Class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 par value; 7.50% Noncumulative Convertible
Preferred Stock Series 1993; 7.32% Noncumulativc Convertible
Preferred Stock Series 1994
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by
nonaffiliates (shareholders holding less than 5% of an outstanding
class of stock, excluding directors and executive officers),
computed by reference to the closing price of such stock, as of
March 1, 1995 was $98,199,000.
The number of shares outstanding of the Registrant's common stock,
$1.00 Par Value was 4,616,705 at March 24, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
Incorporated Document Location in Form 10-K
Portions of 1994 Annual Report to Shareholders Part II; IV
Portions of Proxy Statement dated March 8, 1995 Part III
The Exhibit Index appears on Page 4 hereof.
1
<PAGE>
The Carolina First Corporation Annual Report on Form 10-K is
hereby amended to include as Exhibit 10.17, the Servicing
Rights Purchase Agreement between Bank of America, F.S.B. and
Carolina First Bank dated as of March 31, 1995. In the
initial filing of this Form 10-K, it was noted that this
agreement would be filed as soon as it was available.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d)
of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Signature Title Date
/s/ Mack I. Whittle, Jr. President, Chief April 20, 1995
Mack I. Whittle, Jr. Executive Officer and Director
/s/ William S. Hummers III Executive Vice President and April 20, 1995
William S. Hummers, III Secretary (Principal Accounting
and Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the
capacities on the dates indicated:
Signature Title Date
/s/William R. Timmons, Jr. Director April 20, 1995
William R. Timmons, Jr.
/s/Mack I. Whittle, Jr. Director April 20, 1995
Mack I. Whittle, Jr.
/s/William S. Hummers III Director April 20, 1995
William S. Hummers III
/s/Judd B. Farr Director April 20, 1995
Judd B. Farr
/s/ C. Claymon Grimes, Jr. Director April 20, 1995
C. Claymon Grimes, Jr.
/s/Robert E. Hamby, Jr. Director April 20, 1995
Robert E. Hamby, Jr.
/s/M. Dexter Hagy Director April 20, 1995
M. Dexter Hagy
/s/ R. Glenn Hilliard Director April 20, 1995
R. Glenn Hilliard
/s/Richard E. Ingram Director April 20, 1995
Richard E. Ingram
/s/ Charles B. Schooler Director April 20, 1995
Charles B. Schooler
/s/Elizabeth P. Stall Director April 20, 1995
Elizabeth P. Stall
/s/William W. Webster III Director April 20, 1995
William W. Webster III
3
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
10.17 Servicing Rights Purchase
Agreement be tween Bank of
America, F.S.B. and Carolina
First Bank dated as of March
31, 1995
4
EXHIBIT 10.17 SERVICING RIGHTS PURCHASE AGREEMENT
This Servicing Rights Purchase Agreement, dated as of
March 31, 1995, between Bank of America, FSB, a federal
savings bank (the "Purchaser"), and Carolina First Bank, a
South Carolina banking corporation (the "Seller").
R E C I T A L S
A. The Seller is the owner of the Servicing Rights with
respect to certain pools (identified on Exhibit A hereto) of
conventional fixed rate residential first mortgage loans
having an aggregate unpaid principal balance as of
December 31, 1994, of approximately $441.5 million.
B. The Seller desires to sell and transfer the Servicing
Rights associated with the Mortgage Loans, and the Purchaser
desires to purchase and assume the Servicing Rights to such
Mortgage Loans.
NOW, THEREFORE, in consideration of the mutual agreements
hereinafter set forth, and for other good and reasonable
consideration, the receipt and adequacy of which are hereby
acknowledged, the Seller and the Purchaser hereby agree as
follows:
A G R E E M E N T
ARTICLE I
DEFINITIONS
Whenever used herein, the following words and phrases shall
have the following meanings:
Act: The Cranston-Gonzales National Affordable Housing Act
of 1990, as amended from time to time.
Advances: Amounts that, as of the Closing Date have been
advanced by Seller in connection with servicing the Mortgage
Loans (including, without limitation, principal, interest,
taxes and insurance premiums) and which have been paid by
Seller as the servicer of the Mortgage Loans in strict
accordance with the Guides.
Agency: FHLMC or FNMA, as applicable.
Agency Agreement: The agreement or agreements (including
all exhibits and schedules thereto and all amendments and
supplements thereof) between the Seller and the related
Agency, relating to Mortgage Loans owned by such Agency and
the servicing thereof by the Seller or otherwise affecting the
Servicing Rights, that are identified on Exhibit B hereto.
Agency Consent: The written consent or approval of an
Agency to the transfer of the Servicing Rights from the Seller
to the Purchaser, provided that, in the sole judgment of the
Purchaser exercised in good faith, such consent or approval
does not materially reduce or limit the rights or compensation
of the servicer under the applicable Agency Agreements.
Agency Requirements: The applicable rules, regulations,
directives and instructions of an Agency, including, without
limitation, the applicable requirements of the Guides and the
Agency Agreements.
Agreement: This Servicing Rights Purchase Agreement,
including all Exhibits and Schedules attached hereto or
delivered pursuant hereto, and all amendments hereof and
supplements hereto.
ALTA: The American Land Title Association or any successor
thereto.
Ancillary Income: Late fees, bad check charges,
telefacsimile fees, optional insurance premiums,
administrative fees, "junk fees" and all other ancillary
income due under the terms of the Mortgage Loans.
Assignment of Mortgage: An assignment of a Mortgage,
notice of transfer or equivalent instrument in recordable
typewritten form, sufficient under the laws of the
jurisdiction wherein the related Mortgaged Property is located
to reflect the sale of the Mortgage, which assignment, notice
of transfer or equivalent instrument shall pertain to an
individual Mortgage Loan and shall contain complete recording
information (including legal descriptions where needed)
pertaining to the related Mortgage. Blanket assignments
covering the Mortgage Loans secured by Mortgaged Properties
located in the same jurisdiction may be used to the extent
permitted by applicable law.
Bankruptcy Loan: A Mortgage Loan that is affected in any
way by reason of a voluntary or involuntary bankruptcy case
having been commenced by or against the related Mortgagor.
Best Efforts: Efforts that are reasonably diligent in
light of the relevant circumstances; provided, however, that
such efforts shall not require the Seller or the Purchaser, as
the case may be, to enter into any litigation, arbitration
5
<PAGE>
or other legal or quasi-legal proceeding, nor do they require the
Seller or the Purchaser, as the case may be, to advance or
expend fees or sums of money in addition to those specifically
set forth in this Agreement.
Business Day: Any day other than (i) a Saturday or Sunday,
or (ii) a day on which banking and savings and loan
institutions, in the states of South Carolina, California or
Virginia, are authorized or obligated by law or executive
order to be closed.
Closing Date: March 31, 1995, unless the parties otherwise
agree.
Condemnation Proceeds: All awards or settlements in
respect of a Mortgaged Property, whether permanent or
temporary, partial or entire, by exercise of the power of
eminent domain or condemnation, to the extent not required to
be released to a Mortgagor in accordance with the terms of the
related Mortgage Loan Documents, applicable law or Agency
Requirements.
Consent Date: The date on which the Purchaser notifies the
Seller pursuant to Section 2.01 hereof that the Agency
Consents are acceptable to the Purchaser.
Custodial Account: An account or accounts maintained for
the deposit of principal and interest payments received in
respect of one or more Mortgage Loans.
Custodial Agreement: The agreement or agreements governing
the retention of the originals of each Mortgage Note and the
originals or copies of the Assignment of Mortgage and such
other Mortgage Loan Documents as referred to and in accordance
with the Agency Requirements.
Custodian: An entity acting as a Mortgage Loan Document
custodian under any Custodial Agreement or pursuant to Agency
Requirements, or any successor in interest to the Custodian.
Delinquent Loan: Any Mortgage Loan in respect of which any
Monthly Payment is more than ninety (90) days past due. For
example, a Mortgage Loan with respect to which a Monthly
Payment due on August 1 remains unpaid as of November 1 of the
same year shall be deemed a Delinquent Loan.
Due Date: The first day of the month, on which day the
Monthly Payment is due on each Mortgage Loan, exclusive of any
days of grace.
Eligible Mortgage Loans: Mortgage Loans which are not
Delinquent Loans, Bankruptcy Loans, Foreclosure Loans,
Litigation Loans or Payoff Loans.
Escrow Account: An account maintained for the deposit of
Escrow Payments received in respect of one or more Mortgage
Loans.
Escrow Payments: With respect to any Mortgage Loan, the
amounts constituting ground rents, taxes, assessments, water
rates, sewer rents, municipal charges, mortgage insurance
premiums, fire and hazard insurance premiums, condominium
charges, buy-down funds, optional insurance funds and any
other payments required to be escrowed by the Mortgagor with
the mortgagee pursuant to the requirements of the Mortgage,
the Agency Requirements or any other document.
Federal Funds Rate: "Federal Funds Rate" on any day means
the per annum rate of interest (rounded upward to the nearest
1/100 of 1%) which is the weighted average of the rates on
overnight federal funds transactions arranged on such day or,
if such day is not a Business Day, the previous Business Day,
by federal funds brokers computed and released by the Federal
Reserve Bank of New York (or any successor) in substantially
the same manner as such Federal Reserve Bank currently
computes and releases the weighted average it refers to as the
"Federal Funds Effective Rate" at the date of this Agreement.
FHA: The Federal Housing Administration, an agency within
the United States Department of Housing and Urban Development,
or any successor thereto and including the Federal Housing
Commissioner and the Secretary of Housing and Urban
Development where appropriate under the FHA Regulations.
FHLMC: The Federal Home Loan Mortgage Corporation or any
successor thereto.
FHLMC Guide: The FHLMC Sellers' and Servicers Guide and
any amendments or additions thereto.
Final Payment Date: The date, which shall be not be
earlier than thirty (30) days following the Transfer Date, and
which shall occur as soon thereafter as Purchaser and Seller
shall have reached a mutually satisfactory resolution of all
then-outstanding disputes between the parties which shall have
arisen in connection with this Agreement and the transactions
contemplated hereby.
FNMA: The Federal National Mortgage Association, or any
successor thereto.
FNMA Guides: The FNMA Selling Guide and the FNMA Servicing
Guide, and any amendments or additions thereto.
Foreclosure Loan: A Mortgage Loan with respect to which,
as of Closing Date, the Sale Date or the Transfer Date, either
(i) foreclosure proceedings have been referred to an attorney
or have been instituted and are pending or have been
completed, (ii) a deed in lieu of foreclosure has been
accepted or is pending, or (iii) the relevant portions of the
Mortgage File have been delivered to an attorney with
instructions to commence foreclosure proceedings.
Guides: The FNMA Guides or FHLMC Guide, as applicable.
6
<PAGE>
Hart-Scott-Rodino Act: The Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, 15 U.S.C. Section 18a,
and the regulations promulgated thereunder.
Insurance Proceeds: With respect to each Mortgage Loan,
proceeds of insurance policies, other than FHA mortgage
insurance, insuring the Mortgage Loan or the related Mortgaged
Property.
Liquidation Proceeds: Cash received in connection with the
liquidation of a defaulted Mortgage Loan, whether through the
sale or assignment of such Mortgage Loan, trustee's sale,
foreclosure sale or otherwise, or the sale of the related
Mortgaged Property.
Litigation Loan: A Mortgage Loan which is the subject of a
pending litigation, investigation or inquiry involving Seller
or any Prior Servicer.
Loan-to-Value Ratio or LTV: With respect to any Mortgage
Loan, the ratio of the outstanding principal amount of the
Mortgage Loan (a) in the case of a Mortgage Loan other than a
refinanced Mortgage Loan, to the lower of the sales price or
appraised value of the Mortgaged Property as of the
origination date expressed as a percentage or (b) in the case
of a refinanced Mortgage Loan the appraised value of the
Mortgaged Property as of such date, expressed as a percentage.
Monthly Payment: The scheduled monthly payment of
principal and interest on a Mortgage Loan.
Mortgage: The mortgage, deed of trust or other instrument
securing a Mortgage Note, which creates a first lien on an
unsubordinated estate in fee simple in real property securing
the Mortgage Note.
Mortgage File: The file containing those Mortgage Loan
Documents pertaining to a particular Mortgage Loan as required
by the related Agency or pursuant to this Agreement.
Mortgage Interest Rate: The annual rate of interest borne
on a Mortgage Note, in accordance with the provisions of the
Mortgage Note.
Mortgage Loan: An individual fixed rate conventional
mortgage loan which is subject to the related Agency
Agreement, the Servicing Rights associated therewith being the
subject of this Agreement. Each Mortgage Loan is identified
in the Mortgage Loan Schedule provided by the Seller to the
Purchaser, and each Mortgage Loan includes without limitation
the Mortgage File, the Monthly Payments, Principal
Prepayments, Liquidation Proceeds, Condemnation Proceeds,
Insurance Proceeds, REO Disposition Proceeds, amounts in any
buydown account related to such Mortgage Loan and all other
rights, benefits, proceeds and obligations arising from or in
connection with such Mortgage Loan.
Mortgage Loan Documents: The documents pertaining to any
Mortgage Loan required by the related Agency to be included in
the related Mortgage File plus, where record title on the Sale
Date rests with the Seller, an original Assignment of Mortgage
from the Seller to the Purchaser and, if required by the
applicable Agency, the original Mortgage Note endorsed to the
Purchaser.
Mortgage Loan Schedule: The mortgage loan schedule,
provided by the Seller to the Purchaser in computer tape form,
in the form of Exhibit I hereto, setting forth information
with respect to each Mortgage Loan.
Mortgage Note: The note or other evidence of the
indebtedness of a Mortgagor secured by a Mortgage.
Mortgaged Property: The real property securing repayment
of the debt evidenced by a Mortgage Note.
Mortgagor: The obligor on a Mortgage Note.
Net Escrow Payments: Escrow Payment balances remaining
after Advances by Seller to the extent reimbursable and made
in accordance with Agency Requirements and the Guides.
Officer's Certificate: A certificate signed by the
Chairman of the Board or the Vice Chairman of the Board or the
President or a Vice President and by the Treasurer or the
Secretary or one of the Assistant Treasurers or Assistant
Secretaries of the Seller or the Purchaser.
Opinion of Counsel: A written opinion of independent
counsel reasonably acceptable to the Purchaser in the form of
Exhibit F hereto.
Payment Obligation: The aggregate of the amounts to be
paid by the Purchaser to the Seller pursuant to Section 3.01
of this Agreement.
Payment Obligation Percentage: The fraction equal to
207/10,000.
Payoff Loan: A Mortgage Loan for which a payoff statement
has been provided by the Seller to the related Mortgagor
within 30 days prior to the Closing Date.
Person: Any individual, corporation, partnership, joint
venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or
political subdivision thereof.
PMI Policy: A policy of primary mortgage guaranty
insurance issued by an insurance company duly authorized and
licensed where required by law to transact mortgage guaranty
insurance business and approved by the relevant Agency under
the Agency Guides.
Pool: A group of Mortgage Loans, as identified on
Exhibit A, which is segregated on the basis of applicable
Agency Requirements and which is considered to be aggregated
for the purposes of servicing.
7
<PAGE>
Principal Prepayment: Any payment or other recovery of
principal on a Mortgage Loan which is received in advance of
its scheduled Due Date, including any prepayment penalty or
premium thereon, and which is not accompanied by an amount of
interest representing scheduled interest due on any date or
dates in any month or months subsequent to the month of
prepayment.
Prior Servicer: Any Person who acted at any time as
originator, servicer or subservicer of a Mortgage Loan, other
than Seller.
Purchased Mortgage: A Mortgage relating to a Purchased
Mortgage Loan.
Purchased Mortgage Loan: A Mortgage Loan, with respect to
which the Agency Consent has been obtained and this Agreement
continues to be effective after April 30, 1995 in accordance
with Section 2.01 hereof.
Reimbursement Amount: The Reimbursement Amount with
respect to the Servicing Rights of each Mortgage Loan shall
equal (a) the outstanding unpaid principal balance of such
Mortgage Loan as of the date of repurchase, multiplied by the
Payment Obligation Percentage, plus (b) the amount of any
advances, out-of-pocket costs or other expenses incurred by
the Purchaser related thereto through the date of such
reimbursement.
REO Disposition: The final sale
of any REO Property.
REO Disposition Proceeds: All amounts received with
respect to an REO Disposition.
Servicing File: The documents, files and other items
pertaining to a particular Mortgage Loan including, but not
limited to, the computer files, data disks, books, records,
data tapes, notes, and all additional documents generated as a
result of or utilized in originating and/or servicing each
Mortgage Loan.
Servicing Rights: With respect to each Mortgage Loan, any
and all of the following as defined and permitted in the
related Agency Agreement: (a) all rights to service the
Mortgage Loans; (b) any payments or monies payable or received
for servicing the Mortgage Loans; (c) any late fees,
assumption fees, penalties or similar payments with respect to
the Mortgage Loans; (d) all agreements or documents creating,
defining or evidencing any such Servicing Rights, including,
but not limited to, all Agency Agreements, to the extent they
relate to such Servicing Rights and all rights of the Seller
thereunder, including, but not limited to, any clean-up calls
and termination options; (e) Escrow Payments or other similar
payments with respect to the Mortgage Loans and any amounts
actually collected with respect thereto; (f) all accounts and
other rights to payment related to any of the property
described in this paragraph; (g) possession and use of any and
all Servicing Files pertaining to the Mortgage Loans or
pertaining to the past, present or prospective servicing of
the Mortgage Loans; and (h) all rights, powers and privileges
incident to any of the foregoing.
Servicing Transfer Procedures Manual: A manual detailing
the procedures pursuant to which the Seller shall effect the
transfer of the Servicing Rights, the Servicing Files and the
Agency Agreements to the Purchaser, which manual shall be
attached hereto as Exhibit C.
Tax Service Company: Each Person who provides tax services
with respect to the Mortgage Loans under contract with the
Seller.
Transfer Date: Any date on which the Purchaser assumes the
actual servicing of the related Mortgage Loans in accordance
with the terms hereof. A Transfer Date must be after the
Consent Date. The Transfer Date for each Agency portfolio
shall coincide with such Agency's cutoff date. Unless
otherwise agreed by the parties, and provided the conditions
set forth herein have been satisfied or waived, the Transfer
Date for all Mortgage Loans owned by FHLMC will be June 15,
1995 and the Transfer Date for all Mortgage Loans owned by
FNMA will be June 30, 1995.
ARTICLE II
CONVEYANCE FROM SELLER TO PURCHASER
ASSUMPTION OF SERVICING BY PURCHASER
Section 2.01 Conveyance of Servicing Rights; Possession of
Servicing Files; Assumption of Servicing.
(a) Sale. Subject to the terms and conditions hereof,
including, without limitation, Section 2.01(b) hereof, the
Seller, with the execution and delivery of this Agreement,
does hereby sell, transfer, assign, set over and convey to the
Purchaser all right, title and interest of the Seller in and
to the Servicing Rights and Servicing Files related to the
Mortgage Loans, effective as of the Closing Date.
(b) Condition Subsequent. Notwithstanding anything else in
this Agreement to the contrary, it shall be a condition
subsequent to the sale described in Section 2.01(a) hereof
that the Seller obtain both Agency Consents, as
8
<PAGE>
provided in Section 2.01(c) hereof, on or before April 30, 1995. If by
April 30, 1995 the Seller has not obtained the Agency
Consents, then, at the option of the Purchaser, such sale
shall be void ab initio and of no effect whatsoever, and all
right, title and interest of the Seller in and to the
Servicing Rights and Servicing Files relating to the Mortgage
Loans shall remain with the Seller, and the parties shall
comply with the provisions of Section 6.07 hereof; provided,
however, that if by April 30, 1995 the Seller has obtained, as
provided below, one but not both of the Agency Consents, then,
at the option of the Purchaser, the sale described in Section
2.01(a) hereof shall be effective only with respect to
Mortgage Loans for which the related Agency Consent has been
obtained, and such sale shall in all other respects be void ab
initio and of no effect whatsoever, and all right, title and
interest of the Seller in and to the Servicing Rights and
Servicing Files relating to the Mortgage Loans for which the
related Agency Consent has not been obtained shall remain with
the Seller.
(c) Seller's Covenant to Obtain Agency Consents. The
Seller shall use Best Efforts to obtain the Agency Consents;
provided, however, that the Seller shall obtain the Agency
Consents no later than April 30, 1995. The Seller shall
notify the Purchaser immediately upon obtaining an Agency
Consent and provide a copy of such Agency Consent to the
Purchaser. The Purchaser shall notify the Seller as soon as
reasonably practicable after receipt of such copy whether such
Agency Consent is acceptable to the Purchaser in accordance
with the definition of Agency Consent in Article I of this
Agreement; provided, that if an Agency Consent is not so
acceptable to the Purchaser, such Agency Consent shall not be
effective as an Agency Consent for purposes of this Agreement.
(d) Transfer. Following the Consent Date, and on or before
the Transfer Date, and in accordance with the requirements and
time table provided in the Servicing Transfer Procedures
Manual, the Seller shall transfer the Servicing Files relating
to Purchased Mortgage Loans to the Purchaser. On the Transfer
Date, the Purchaser shall verify that such Servicing Files are
in its possession and that the Seller has complied in all
material respects with all requirements of the Servicing
Transfer Procedures Manual and this Agreement, whereupon the
Purchaser shall assume actual servicing of the Purchased
Mortgage Loans in accordance with the terms of this Agreement.
The Seller shall continue to service and administer the
Purchased Mortgage Loans through the day prior to the Transfer
Date in accordance with Section 2.05 and Article IV.
Section 2.02. Record Title.
Following the Consent Date, and on or prior to the Transfer
Date, record title to each Purchased Mortgage and the related
Mortgage Note (a) if in the name of the related Agency or its
designee, shall remain in the name of the related Agency or in
such name as the related Agency shall designate, or (b) if in
the name of the Seller or any other Person, shall be
transferred by the Seller to the Purchaser or its designee, or
shall be transferred in accordance with the provisions of the
related Agency Requirements. The Seller shall bear the cost
and expense of providing Assignments of Mortgages (including
the recording thereof), any related Agency assignments and
endorsements of Mortgage Notes for any transfer of record
title required hereunder or under the Agency Requirements with
respect to each Purchased Mortgage Loan.
Section 2.03. Assignment of Custodial
Agreements.
From the Closing Date through the Transfer Date, Seller
shall continue the same arrangements with the Custodian,
including pricing, currently in effect with respect to the
Mortgage Loans. The Seller agrees to arrange for the
substitution, effective as of the Transfer Date, of First
Chicago National Processing Corporation, as Custodian under
any and all Custodial Agreements with respect to the Servicing
Rights and the Purchased Mortgage Loans. On the Transfer
Date, Seller shall assign, transfer and convey to the
Purchaser, as of the Transfer Date, any and all of its rights
and obligations under any and all Custodial Agreements with
respect to the Purchased Mortgage Loans. The Seller shall pay
all fees due to the Custodian for services performed prior to
the Closing Date. Purchaser shall reimburse Seller for all
reasonable fees due the Custodian relating to services
performed (except for any fees charged by Seller's custodian
for release of documents to First Chicago National Processing
Corporation), with respect to all Mortgage Loans, from the
Closing Date to the Consent Date and, with respect only to
Purchased Mortgage Loans, from the Consent Date to the
Transfer Date.
Section 2.04. Seller's Covenants Regarding
Transfer of Servicing.
On the Transfer Date the Seller shall transfer the actual
servicing of the Purchased Mortgage Loans to the
9
<PAGE>
Purchaser, in accordance with the Servicing Transfer Procedures Manual,
including without limitation the following:
(a) Notice to Mortgagors. The Seller shall, in accordance
with the relevant provisions of the Act, at least 15 days
prior to the Transfer Date (or on such earlier date as the
Seller and the Purchaser may mutually agree), mail to the
Mortgagor of each Mortgage a letter (which in form and
substance complies with the Act and is mutually acceptable to
the Purchaser and the Seller) advising the Mortgagor of the
transfer of the servicing thereof and the Escrow Account
therefor to the Purchaser. The Seller shall provide the
Purchaser with a copy of the form of such notice, together
with a certification that a notice in such form was sent to
each Mortgagor in accordance with the Act.
(b) Taxes and Premiums. The Seller shall pay all real
estate taxes, hazard and flood insurance and PMI Policy
premiums as described in the Servicing Transfer Procedures
Manual, and shall indemnify the Purchaser against any tax
penalties incurred on bills that fall delinquent within 45
days after the Transfer Date, provided that the bill was
issued prior to the Transfer Date.
(c) Notice to Custodian(s) and Others. No later than the
date 15 days prior to the Transfer Date, the Seller shall
transmit notification of transfer and assignment of the
Servicing Rights, the Escrow Accounts and the Custodial
Agreements to Purchaser to (i) the applicable insurance
companies and/or agents (including PMI Policy insurers),
(ii) each financial institution at which an Escrow Account is
maintained, (iii) any Tax Service Company (iv) any bankruptcy
or foreclosure attorney working on a Mortgage Loan, and
(v) each Custodian. Such notification shall be sent by first
class mail and shall contain instructions to the relevant
party to deliver all payments, notices, tax bills, insurance
statements, the escrow account statements, tax payment records
and copies of legal files, as the case may be, to the
Purchaser, all as set forth in the Servicing Transfer
Procedures Manual, from and after the Transfer Date. All
notifications to insurance companies and/or agents shall be
sent in compliance with the requirements of all master
policies. Copies of all such notices shall be provided to the
Purchaser.
(d) Delivery of Agency Agreements, Servicing Files and
Records. At the times and in the manner provided in this
Agreement and the Servicing Transfer Procedures Manual, the
Seller shall forward to the Purchaser all Agency Agreements
(either duly executed originals or certified true copies), all
Servicing Files and any other Mortgage Loan Documents in the
Seller's possession relating to each Mortgage Loan.
(e) Escrow and Other Payments. In accordance with the
terms of the Servicing Transfer Procedures Manual and this
Agreement, on the Transfer Date the Seller shall (i) transfer
to the Purchaser an amount equal to the Net Escrow Payments,
impound and suspense balances, buydown funds, and all loss
draft balances, unearned fees, principal and interest payments
not yet paid to the applicable Agency as outlined in the
Servicing Transfer Procedures Manual, and all other amounts
held by the Seller with respect to the Mortgage Loans other
than any amounts which the Seller is entitled to retain
hereunder; and (ii) provide the Purchaser with an accounting
statement of Escrow Payments, suspense balances and loss draft
balances sufficient to enable the Purchaser to reconcile the
amount of such payment with the accounts of the related
Mortgage Loans. On or prior to the tenth Business Day
following the Transfer Date, the Seller and the Purchaser
shall resolve any discrepancies between the Seller's
accounting statement and the Purchaser's reconciliation with
respect thereto and, not later than such tenth Business Day,
the Seller or the Purchaser, as the case may be, shall
transfer to the other, in immediately available funds by wire
transfer, any amounts to which the other party is entitled.
(f) Payoffs. Not later than the date 15 days subsequent to
the Closing Date, the Seller shall provide to the Purchaser
copies of all payoff statements generated by the Seller or any
Prior Servicer within 30 days prior to the Closing Date with
respect to any Mortgage Loan. In addition, the Seller shall
provide to the Purchaser copies of all payoff statements
generated by the Seller or any Prior Servicer subsequent to
the Closing Date within 15 days of the generation thereof.
(g) Mortgage Payments Received Prior to Transfer Date. The
Seller shall properly apply, or cause to be applied, all
payments received by it with respect to each Mortgage Loan
prior to the Transfer Date to reduce the outstanding principal
balance of the related Mortgage Loan in accordance with the
provisions of the Mortgage Loan Documents and the related
Agency Requirements.
(h) Mortgage Payments Received After Transfer Date. The
Seller shall forward any Monthly Payments
10
<PAGE>
received by it, and in the original form of remittance, on or after the
Transfer Date to the Purchaser in accordance with the Servicing
Transfer Procedures Manual. The Seller shall notify the
Purchaser of the particulars of the payment in accordance with
the applicable provisions of the Servicing Transfer Procedures
Manual, which notification shall set forth sufficient
information to permit appropriate processing of the payment by
the Purchaser. The Seller shall assume full responsibility
for the necessary and appropriate legal application of Monthly
Payments received by it on or after the Closing Date but prior
to the Transfer Date.
(i) Misapplied Payments. Misapplied payments shall be
processed as follows:
(i) All parties shall cooperate in correcting
misapplication errors;
(ii) The party receiving notice of a misapplied payment
occurring prior to the Transfer Date and discovered after the
Transfer Date shall immediately notify the other party and
shall accompany such notification with a copy of the
applicable cancelled check or similar supporting
documentation;
(iii) If a misapplied payment which occurred prior to
the Transfer Date cannot be identified and said misapplied
payment has resulted in a shortage in a Custodial Account or
Escrow Account, the Seller shall be liable for the amount of
such shortage; the Seller shall reimburse the Purchaser for
the amount of such shortage within five (5) Business Days
after receipt of written demand therefor from the Purchaser;
(iv) If a misapplied payment which occurred prior to
the Transfer Date has created an improper Payment Obligation
as the result of an inaccurate outstanding principal balance,
a check shall be issued to the party shorted by the improper
payment application within five (5) Business Days after notice
thereof by the other party;
(v) Any check issued under the provisions of this
Section 2.04(i) shall be accompanied by a statement indicating
the corresponding Seller and/or Purchaser Mortgage Loan
identification number and an explanation of the allocation of
any such payments; and
(vi) The Seller shall advance funds to reconcile any
misapplied payment, brought to the Seller's attention, that
cannot be reconciled within ten (10) days of notification in
the case of a shortage to a Mortgagor's loan account status.
(j) Books and Records. On the Transfer Date, the books,
records and accounts of the Seller with respect to the
Servicing Rights and the Mortgage Loans shall be in accordance
with the Purchaser requirements as provided in the Servicing
Transfer Procedures Manual as well as all Agency Requirements
and generally accepted accounting practices. The Seller
shall, on or prior to the Transfer Date, reconcile all
balances and accounts and make any monetary adjustments
reasonably required by Purchaser.
(k) IRS Forms. The Seller shall file all IRS Forms 1098,
1099 or 1041 and K-1 which are required by the IRS to be filed
as a result of events occurring prior to the Transfer Date,
not later than the date on which such forms are required by
law to be filed in relation to the servicing and ownership of
the Mortgage Loans. The Seller shall provide copies of such
forms to the Purchaser upon the Purchaser's request and shall
reimburse the Purchaser for any costs or penalties incurred by
the Purchaser due to the Seller's failure to comply with this
paragraph. The Seller shall provide an IRS Form W-9 executed
by the Mortgagor (or equivalent documentation satisfactory to
Purchaser), on all Mortgage Loans on which such form is
currently required by the IRS and for which such form is not
in the Servicing File. The Seller shall reimburse the
Purchaser for any costs or penalties incurred by the Purchaser
due to the Seller's failure to provide each such IRS Form W-9.
(l) Agency and Other Approvals. On or prior to the Closing
Date, the Seller shall, at its own expense, obtain all
approvals and consents, give or cause to be given notice, and
make or cause to be made all filings required under applicable
law, regulation or order, Agency Requirement or otherwise with
respect to the transfer of the related Servicing Rights
pursuant to this Agreement (other than the Agency Consents,
which shall be obtained in accordance with Section 2.01 of
this Agreement) and shall pay (i) all of the costs, if any,
incurred to give such notices, secure such approvals and
consents and make such filings, and (ii) any transfer fees.
Copies of all such notices, approvals, consents and filings
shall be delivered by Seller to Purchaser on or prior to the
Closing Date.
11
<PAGE>
(m) Record Title. The Seller shall, following the Consent
Date and on or before the Transfer Date, deliver to the
Purchaser the appropriate endorsements and assignments to
evidence the transfer of all of the Seller's right, title and
interest in and to the Servicing Rights and the Pools,
Mortgage Notes and Mortgages related to the Servicing Rights
as required by Agency Requirements, applicable laws and
regulations and the Servicing Transfer Procedures Manual. The
Seller shall record such assignments and shall provide the
Purchaser, no later than Transfer Date, with a copy of such
assignments, a copy of the checks sent with such assignments
for recordation costs, and a certification that such
assignments have been sent for recording. Seller shall
provide Purchaser with all recorded Mortgage assignment
documents returned to it prior to the Transfer Date. As to
Mortgages for which the recorded Mortgage assignment document
has not been returned to the Seller on or before the Transfer
Date, Seller shall have until the date specified in the
Servicing Transfer Procedures Manual to provide the recorded
Mortgage assignment document to Purchaser. The Seller shall
also, on or before the Transfer Date, prepare assignments of
mortgages from the Purchaser to the Agency in blank, as may be
required. Prior to delivery of any mortgage document to the
Purchaser, the Seller shall be responsible for retaining from
such mortgage document any information required by Seller for
preparation of assignments in accordance with this Agreement.
All costs incurred in connection with this Section 2.04(m)
shall be paid by Seller. The Purchaser shall cooperate with
the Seller in providing any additional information Seller may
require in connection with its obligations under this section.
(n) Tax Contracts. Prior to the Closing Date, Seller shall
provide Purchaser with a list of all Tax Service Companies and
tax contracts with respect to the Mortgage Loans for approval.
The Seller shall cause each acceptable Tax Service Company
following the Consent Date to transfer to the Purchaser all of
the Seller's rights under all tax contracts relating to the
Mortgage Loans, in accordance with the Servicing Transfer
Procedures Manual. In the event that Purchaser shall
disapprove a Tax Service Company or tax contract, Seller shall
obtain a replacement tax contract acceptable to Purchaser.
All costs of such transfer shall be paid by Seller.
(o) No Solicitation. From and after the date of this
Agreement, the Seller shall not directly or indirectly
solicit, and the Seller shall exercise reasonable efforts to
prevent any of its affiliates from directly or indirectly
soliciting, by means of direct mail, or telephonic or personal
solicitation, the Mortgagors of any of the Mortgages (a) for
purposes of prepayment or refinance or modification of such
Mortgages, or (b) for any financial services or products,
including, but not limited to, (i) checking and savings
accounts, certificates of deposit, safe deposit boxes,
automatic teller machines, second mortgage loans, equity
source accounts, personal loans and credit cards, and
(ii) ordinary life, ordinary health, credit life, credit
health, credit unemployment and any other forms of group or
individual insurance coverages; it being understood and agreed
that all rights and benefits relating to the direct
solicitation of such Mortgagors and attendant rights, title
and interest in and to the list of such Mortgagors and data
relating to their Mortgages (including insurance renewal
dates) shall be transferred to the Purchaser pursuant hereto
on the Closing Date, but if the purchase and sale transaction
contemplated by this Agreement is consummated, the benefits of
such transfer shall inure to the Purchaser from the date of
this Agreement, and the Seller shall take no action after the
date hereof to undermine these rights and benefits. It is
understood and agreed that (i) promotions undertaken by the
Seller or any affiliate of the Seller which are directed to
the general public at large, including without limitation mass
mailings based on commercially acquired mailing lists,
newspaper, radio and television advertisements, and
(ii) unsolicited calls made by customers to retail branches of
the Seller, shall not constitute solicitation under this
section.
(p) Foreclosure Loans, Delinquent Loans, Bankruptcy Loans
and Litigation Loans. The Seller shall cause to be
repurchased from the applicable Agency prior to the Transfer
Date, any and all Foreclosure Loans, Delinquent Loans,
Bankruptcy Loans and Litigation Loans included in a Pool which
were such as of the Closing Date, such that each such Mortgage
Loan shall be excluded from the related Pool and from coverage
under any and all related Agency Agreements. Notwithstanding
anything in this Agreement to the contrary, the Purchaser
shall not purchase the Servicing Rights, nor be required to
make any payments or take any other actions, with respect to
Mortgage Loans not included in a Pool that are not Eligible
Mortgage Loans.
(q) Servicing Transfer Procedures Manual. The Seller shall
be in compliance with and shall fulfill its obligations under
the Servicing Transfer Procedures Manual prior to, on and
subsequent to the Transfer Date.
(r) Certification of Pools. Except with respect to those
Pools identified on Schedule 2.04(r) hereto as uncertified on
the Closing Date (all of which will become certified between
the Closing Date and the Transfer Date), all Pools shall be
properly balanced, fully funded and certified by the
applicable Agency, if subject to an Agency
12
<PAGE>
Agreement, prior to the Closing Date.
(s) Performance. The Seller shall perform in all material
respects all other agreements contained herein that are
required to be performed by it on or prior to the Transfer
Date.
(t) Transport Costs. The Seller shall be responsible for
all costs, expenses and risk of loss in connection with the
transfer of all Servicing Files and other documents and
materials to be delivered hereunder to the Purchaser or
Purchaser's custodian by the Seller or the Custodian. The
Seller shall cause such Servicing Files and other documents
and materials to be delivered to the locations designated by
the Purchaser to the Seller, in accordance with the
requirements set by the Purchaser and the applicable Agency.
(u) Computer Records. The Seller shall deliver to the
Purchaser all computer records relating to Mortgage Loans on
the Mortgage Loan Schedule not later than the third Business
Day following the Transfer Date for such Mortgage Loans.
(v) Additional Documents. The Seller shall deliver, on or
before the Transfer Date, such other appropriately executed
and authenticated instruments of sale, assignment, transfer
and conveyance to the Purchaser, including limited powers of
attorney, as the Purchaser or its counsel may reasonably
request in order to accomplish the transfer to the Purchaser
of all of the Seller's rights related to the Servicing Rights.
Such instruments provided by the Seller shall be satisfactory
in form and substance to the Purchaser and its counsel.
Section 2.05 Servicing.
(a) Seller to Act as Servicer. From and after the Closing
Date until the Consent Date, with respect to all Mortgage
Loans, and from and after the Consent Date until the Transfer
Date, with respect only to Purchased Mortgage Loans, the
Seller shall continue to service the Mortgage Loans in
compliance with all of the terms and provisions of the related
Agency Requirements, including, without limitation:
(i) with respect to any FNMA Pool, the FNMA Guides;
and
(ii) with respect to any FHLMC Pool, the FHLMC Guide.
The Seller, from and after the Closing Date until the
Consent Date, with respect to all Mortgage Loans, and from and
after the Consent Date until the Transfer Date, with respect
only to Purchased Mortgage Loans, shall make any and all
remittances to Agencies, as appropriate, in accordance with
the related Agency Requirements and the terms of any tri-party
agreements which may be entered into by and among the Seller,
the Purchaser and any Agency. With respect to such tri-party
agreements, if any, the Seller shall use Best Efforts to
ensure that the related Agency shall acquiesce to the
servicing by the Seller with respect to Purchased Mortgage
Loans from and after the Consent Date. The Seller shall
indemnify, defend and hold harmless the Purchaser for any
failures by the Seller to service the Mortgage Loans properly
as provided herein. Additionally, the Seller shall indemnify,
defend and hold harmless the Purchaser against any and all
losses and damages which the Purchaser may sustain as a result
of any breach by the Seller of any of its servicing
obligations hereunder.
(b) Payments to Purchaser. From and after the Closing Date
until the Consent Date, with respect to all Mortgage Loans,
and from and after the Consent Date until the Transfer Date,
with respect only to Purchased Mortgage Loans, the Seller
shall, as set forth in this section, pay to the Purchaser
(i) an amount equal to the aggregate servicing fee relating to
the Mortgage Loans serviced for each such Agency less the
subservicing fee provided for in Section 2.05(c), (ii) all
Ancillary Income relating to the Mortgage Loans, and (iii) an
amount equal to interest at the Federal Funds Rate, calculated
daily, on all funds held by the Seller with respect to the
Mortgage Loans, which funds consist of principal and interest,
tax and insurance, escrows and buydown funds. For the period
from and after the Closing Date and concluding on the Transfer
Date, payments due to the Purchaser shall be paid monthly by
the Seller within 3 Business Days after each Agency cut-off
date. In addition, the Seller shall pay to the Purchaser
fifteen-thirtieths (15/30) of the servicing fee relating to
the Mortgage Loans in the FHLMC Pool for the period beginning
the day after the FHLMC cut-off date immediately preceding the
Closing Date and ending on the first FHLMC cut-off date
following the Closing Date.
(c) Seller's Fee. In its capacity as servicer, the Seller
shall be entitled to receive from the Purchaser, with
13
<PAGE>
respect to each Mortgage Loan serviced by the Seller pursuant to
Section 2.05(a) above, a fee in an aggregate amount equal to:
(i) $6.50 per month for each calendar month in which the
Seller completes a full remittance cycle, and (ii) $0.21 per
day for each day in a calendar month in which the Seller does
not complete a full remittance cycle. Such fee shall be
payable by the Purchaser to the Seller monthly, on the third
Business Day after the related Agency cut-off date; provided,
however, that the Purchaser may set off against such payments
any amounts then owing from Seller to Purchaser.
(d) No Assignment. The Seller shall not sell, assign or
transfer any or all of its rights or obligations under this
Section 2.05 without the prior written consent of the
Purchaser, which consent the Purchaser may grant, deny or
condition in its sole and absolute discretion. Any purported
sale, transfer or assignment in violation of this paragraph
shall be void.
Section 2.06. Commissions to Third Parties.
The Seller shall be responsible for any and all fees,
commissions and other compensation to which any broker, agent
or other Person (including, without limitation, Hamilton,
Carter, Smith & Co., Incorporated) may be entitled in
connection with the transactions contemplated by this
Agreement. The Purchaser represents that it has taken no
action that would result in parties other than Hamilton,
Carter, Smith & Co., Incorporated being entitled to brokerage
or similar fees.
Section 2.07. Secured Creditors.
The Seller shall cause any secured creditor of the Seller
to give to the Purchaser an acknowledgment of notice and a
release in respect of any and all security interests, claims
or liens which such secured creditor may have in connection
with the Servicing Rights to be transferred by the Seller to
the Purchaser hereunder.
ARTICLE III
PURCHASER'S PAYMENT OBLIGATION
Section 3.01. Calculation of the Estimated and
Actual Payment Obligation.
On the Closing Date, the Payment Obligation shall be equal
to the sum of the outstanding unpaid principal balance of each
Eligible Mortgage Loan as of the close of business on the
Closing Date multiplied by the Payment Obligation Percentage;
provided, however, that on the Consent Date the Payment
Obligation shall be recalculated to be equal to the sum of the
outstanding principal balance of each Purchased Mortgage Loan
as of the close of business on the Closing Date multiplied by
the Payment Obligation Percentage.
Section 3.02. Amount Payable on the Closing
Date.
Subject to the terms and conditions hereof, eighty percent
(80%) of the Payment Obligation shall be paid by the Purchaser
to the Seller on the Closing Date, and an additional ten
percent (10%) of the Payment Obligation shall be paid by the
Purchaser to the Seller on the Transfer Date, in each case
recalculated, if applicable as provided in this Article III.
Each such payment shall be made by wire transfer of
immediately available federal funds to the account designated
by the Seller. The balance of the Payment Obligation (as so
recalculated) shall be paid by the Purchaser to the Seller on
the Final Payment Date. For purposes of calculating the
Payment Obligation on the Closing Date, the Payment Obligation
shall be estimated. If, on the Transfer Date or the Final
Payment Date, the Seller and the Purchaser determine the
actual Payment Obligation differs from the Payment Obligation
calculated on the Closing Date, the outstanding balance of the
Payment Obligation shall be adjusted to reflect the difference
between the amount calculated on the Closing Date and the
amount of the actual Payment Obligation. In addition, the
Seller agrees that the Purchaser may set off against the
amounts payable to the Seller as described above any amounts
then due and owing from the Seller to the Purchaser hereunder.
Section 3.03. Missing Documents.
14
<PAGE>
The Purchaser shall deliver to the Seller within 15 days of
the Transfer Date a list specifying in reasonable detail any
Mortgage Files or Servicing Files that the Seller has failed
to deliver to the Purchaser, provided, however, that the
Purchaser's failure to deliver such a list or omission of one
or more items from the list shall not affect the Seller's
obligation hereunder to provide the documents and records
required by this Agreement.
ARTICLE IV
SERVICING OF THE MORTGAGE LOANS
Section 4.01. Purchaser to Service Pursuant to
the Agency Requirements.
On and after the Closing Date, and subject to the
conditions precedent set forth in Section 7.01 and the
condition subsequent set forth in Section 2.01(b), all of the
Seller's rights and obligations with respect to the Servicing
Rights relating to the Mortgage Loans shall be transferred to
the Purchaser. On and after the Closing Date, until the
Transfer Date relating to such Mortgage Loans, the Seller
shall subservice such Mortgage Loans in accordance with
Section 2.05. From and after the Transfer Date the Purchaser
shall have full power and authority, acting alone, to do any
and all things in connection with such servicing and
administration which the Purchaser may deem necessary or
desirable, consistent with the terms of this Agreement and the
terms of the related Agency Requirements.
On and after the Transfer Date, the Purchaser shall remit
to the Agencies all funds due such Agencies in accordance with
the related Agency Requirements, and the Purchaser shall
furnish the Agencies with such statements at such times as
required by the related Agency Requirements; provided,
however, that this paragraph shall not affect any rights the
Purchaser may have against the Seller under the terms of this
Agreement.
On and after the Transfer Date, the Purchaser shall only be
required to make such advances from its own funds as are
required to be made by the servicer pursuant to the Agency
Requirements, and the Purchaser shall collect all fees for
servicing the Purchased Mortgage Loans and such other amounts
as are allowed the servicer under the Agency Requirements.
ARTICLE V
REPRESENTATIONS, WARRANTIES
AND AGREEMENTS
Section 5.01. Representations, Warranties and
Agreements of the Purchaser.
The Purchaser, as a condition to the consummation of the
transactions contemplated hereby, hereby makes the following
representations and warranties to the Seller as of the Closing Date:
(a) Due Organization and Authority. The Purchaser is a
federal savings bank duly organized, validly existing and in
good standing under the laws of the United States of America
and has all licenses necessary to carry on its business as now
being conducted and is licensed, qualified and in good
standing in each state where a Mortgaged Property is located
if the laws of such state require licensing or qualification
in order to conduct business of the type conducted by the
Purchaser, and in any event the Purchaser is in compliance
with the laws of any such state to the extent necessary to
ensure the enforceability of the terms of this Agreement; the
Purchaser has the full corporate power and authority to
execute and deliver this Agreement and to perform in
accordance herewith; the execution, delivery and performance
of this Agreement (including all instruments of transfer to be
delivered pursuant to this Agreement) by the Purchaser and the
consummation of the transactions contemplated hereby have been
duly and validly authorized; this Agreement evidences the
valid, binding and enforceable obligation of the Purchaser
(subject, as to enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium or other
laws affecting creditors' rights generally from time to time
in effect); and all requisite corporate action has been taken
by the Purchaser to make this Agreement valid and binding upon
the Purchaser in accordance with its terms.
15
<PAGE>
(b) Ordinary Course of Business. The consummation of the
transactions contemplated by this Agreement is in the ordinary
course of business of the Purchaser.
(c) No Conflicts. Neither the execution and delivery of
this Agreement, the acquisition of the Servicing Rights by the
Purchaser or the transactions contemplated hereby, nor the
fulfillment of or compliance with the terms and conditions of
this Agreement, will conflict with or result in a breach of
any of the terms, conditions or provisions of the Purchaser's
charter or by-laws or a material breach of any agreement or
instrument to which the Purchaser is now a party or by which
it is bound, or constitute a material default or result in an
acceleration under any of the foregoing, or result in the
violation of any material law, rule, regulation, order,
judgment or decree to which the Purchaser or its property is
subject, or materially impair the ability of the Purchaser to
service the Mortgage Loans, or impair the value of the
Servicing Rights.
(d) No Consent Required. No consent, approval,
authorization or order of any court or governmental agency or
body is required for the execution, delivery and performance
by the Purchaser of or compliance by the Purchaser with this
Agreement other than the Agency Consents, which are to be
obtained by the Seller pursuant to Section 2.1 of this
Agreement, or if required, such approval has been obtained
prior to the Closing Date.
(e) No Commissions to Third Parties. The Purchaser has not
(i) engaged any broker, agent or other Person in connection
with this transaction and (ii) is not responsible for the
payment of fees to any broker, agent or other Person in
connection with this transaction.
(f) Approvals. The Purchaser is an FHLMC-approved
Seller/Servicer and an FNMA-approved Lender.
Section 5.02. Representations and Warranties
of Seller.
Seller, as a condition to the consummation of the
transactions contemplated hereby, makes the following
representations and warranties to the Purchaser as of the
Closing Date:
(a) Due Organization and Authority. The Seller is a
banking corporation duly chartered, validly existing and in
good standing under the laws of South Carolina and was at all
times and now is qualified to do business and is duly licensed
to carry on its business as is now being conducted in all
states in which the Mortgaged Property is located; the Seller
has the full corporate power and authority to execute and
deliver this Agreement and to perform in accordance herewith;
the execution, delivery and performance of this Agreement
(including all instruments of transfer to be delivered
pursuant to this Agreement) by the Seller and the consummation
of the transactions contemplated hereby have been duly and
validly authorized; this Agreement evidences the valid,
binding and enforceable obligation of the Seller (subject as
to enforcement of remedies to applicable bankruptcy,
reorganization, insolvency, moratorium or other laws affecting
creditors' rights generally from time to time in effect); and
all requisite corporate action has been taken by the Seller to
make this Agreement valid and binding upon the Seller in
accordance with its terms.
(b) Ordinary Course of Business. The consummation of the
transactions contemplated by this Agreement is in the ordinary
course of business of the Seller, and the transfer, assignment
and conveyance of the Servicing Rights by the Seller pursuant
to this Agreement are not subject to the bulk transfer or any
similar statutory provisions in effect in any applicable
jurisdiction.
(c) No Conflicts. Neither the execution and delivery of
this Agreement, the sale of the Servicing Rights to the
Purchaser or the transactions contemplated hereby, nor the
fulfillment of or compliance with the terms and conditions of
this Agreement, will conflict with or result in a breach of
any of the terms, conditions or provisions of the Seller's
charter, by-laws or other governing documents or any legal
restriction or any agreement or instrument to which the Seller
is now a party or by which it is bound, or constitute a
default or result in an acceleration under any of the
foregoing, or result in the violation of any law, rule,
regulation, order, judgment or decree to which the Seller or
its property is subject, or impair the value of the Servicing
Rights.
(d) Ability to Perform. The Seller does not believe, nor
does it have any reason or cause to believe, that it cannot
perform in all material respects each and every covenant
contained in this Agreement.
16
<PAGE>
(e) No Litigation Pending. There is no action, suit,
proceeding or investigation (including, but not limited to,
any regulatory enforcement actions, letters of consent or
takeover actions) pending or threatened against the Seller
which, either in any one instance or in the aggregate, may
result in any material adverse change in the business,
operations, financial condition, properties or assets of the
Seller, or in any material impairment of the right or ability
of the Seller to carry on its business substantially as now
conducted, or in any material liability on the part of the
Seller, or which would draw into question the validity of this
Agreement or of any action taken or to be taken in connection
with the obligations of the Seller contemplated herein, or
which would be likely to impair the value of the Servicing
Rights or the ability of the Seller to perform under the terms
of this Agreement.
(f) No Consent or Notice Required. No notice, consent,
approval, authorization or order of any court or governmental
agency or body is required for the execution, delivery and
performance by the Seller of or compliance by the Seller with
this Agreement, or if required, such approval has been
obtained or notice has been given prior to the Closing Date,
except one Agency Consent of FNMA and one Agency Consent of
FHLMC, which will be obtained by the Seller in accordance with
Section 2.1 of this Agreement.
(g) Ownership. Seller is the sole owner and holder of the
Servicing Rights. The Servicing Rights have not been assigned
or pledged, and the Seller has good and marketable interest
therein, and has full right to transfer and sell the Servicing
Rights to the Purchaser free and clear of any encumbrance,
equity, interest, lien, pledge, charge, claim or security
interest, and has full right and authority subject to no
interest, or agreement with, any other party, to sell and
assign the Servicing Rights pursuant to this Agreement.
(h) No Untrue Information and Agency Requirements.
Neither this Agreement nor any statement, report or other
document which is within the control of the Seller furnished
or to be furnished pursuant to this Agreement or any Agency
Requirement or in connection with the transactions
contemplated hereby contains any untrue statement of a
material fact or omits to state a material fact necessary in
order to make the statements contained therein not misleading.
Each of the Agency Agreements delivered to the Purchaser
represents an executed original or is a certified true and
correct copy of the original and in either case represents
true, correct and complete copies of the same. Each of the
Agency Agreements is in full force and effect and has not been
amended, modified or altered except as the same shall have
been provided to the Purchaser.
(i) Commissions to Third Parties. Except for Hamilton,
Carter, Smith & Co., Incorporated, the Seller (i) has not
engaged any broker, agent or other Person in connection with
this transaction and (ii) is not responsible for the payment
of fees to any broker, agent or other Person in connection
with this transaction.
(j) Prior Servicers. All Prior Servicers of the Mortgage
Loans and the Seller, were, at all material times, FHLMC- and
FNMA-approved mortgagees, lenders and seller/servicers, as
applicable, to the extent required to be so approved in order
to originate, sell or service the Mortgage Loans. All Prior
Servicers of the Mortgage Loans and the Seller have
originated, underwritten and serviced the Mortgage Loans in
compliance with all laws, rules, regulations and requirements
in connection therewith, including without limitation
licensing statutes and regulations and the requirements set
forth in the related Agency Requirements and the Mortgage
Loans. The representations and warranties made in
Section 5.02 with respect to the Mortgage Loans and the
Servicing Rights and all of the representations and warranties
set forth in Section 5.03 are true with respect to Prior
Servicers and agents of the Seller. There has been no
occurrence as of the Closing Date of any event that could
obligate the Seller to repurchase any Mortgage Loans or cause
an event of default under the Agency Requirements, the
cancellation of the Servicing Rights or any material changes
in procedures with respect to the Mortgage Loans.
(k) No Inquiries. The Seller has not been the subject of
an audit by an Agency or any other agency of a state or the
federal government or any provider of a PMI Policy, which
audit (i) included material allegations of failure to comply
with applicable loan origination, servicing or claims
procedures, or (ii) resulted in a request for repurchase of
Mortgage Loans or indemnification in connection with the Mortgage Loans.
(l) No Accrued Liabilities. There are no accrued
liabilities of the Seller with respect to the Mortgage Loans
or the Servicing Rights or circumstances under which such
accrued liabilities will arise against the Purchaser as
successor to the Servicing Rights with respect to occurrences
prior to the Closing Date.
17
<PAGE>
(m) Agency Requirements. The Seller has performed all
obligations to be performed under the Agency Requirements, and
no event has occurred and is continuing which, but for the
passage of time or the giving of notice or both, would
constitute an event of default under the Agency Agreements.
The Seller has serviced the Mortgage Loans (including escrow
practices and administration of custodial accounts) and has
kept and maintained complete and accurate books and records in
connection therewith, all in accordance with Agency
Requirements, the terms of the Mortgage Loan Documents and
applicable law, and the Seller has remitted to each Agency, if
applicable, all distributions to which it is entitled under
the relevant Agency Requirements.
(n) Compliance with Insurance Contracts. The Seller has
complied with all obligations under all applicable insurance
contracts, including, without limitation, the obligations
under any PMI Policy with respect to, and which might
materially and adversely affect, the Mortgage Loans, the Loan
Pools and any of the Servicing Rights. The Seller has not
taken any action or failed to take any action which might
cause the cancellation of or otherwise affect any of the PMI
Policies.
(o) Compliance with Custodial Agreements. The Custodial
Agreements are in full force and effect, and the Seller (and,
where applicable, all Prior Servicers) has complied with all
obligations under the Custodial Agreements and all Agency
Requirements in respect thereof, including, but not limited
to, the payment of any and all fees due and payable to the
Custodian(s) thereunder as of the Closing Date.
(p) Notice of Relief Requested Pursuant to the Soldiers and
Sailors Relief Act of 1940. The Seller has not received any
currently effective notice from any Mortgagor or other party
with respect to any Mortgage Loan of a request for relief
pursuant to or invoking any of the provisions of the Soldiers
and Sailors Relief Act of 1940.
(q) Compliance with Law. Seller has complied in all
material respects with any and all requirements of any
federal, state or local law including, without limitation, the
provisions of any law or regulation governing or pertaining to
permissible charges, whether in a commercial transaction or
for personal, family or household purposes, in connection with
the extension of credit or the billing or collection of
obligations arising from the extension of credit, including,
but not limited to, laws relating to usury, installment sales,
truth-in-lending (including, without limitation, Regulation Z
thereunder), fair housing, real estate settlement procedures,
escrow practices, unlawful discrimination in residential
lending (including, without limitation, anti-redlining, equal
credit opportunity and fair credit reporting), debt
collection, loan disclosures or other consumer protection
matters (including, without limitation, laws regulating unfair
or deceptive acts or practices), and all other federal,
foreign, state or local laws, regulations and ordinances
pertaining to the business or mortgage lending or to the
provision of services relating to mortgage lending. The
Seller shall deliver to the Purchaser upon demand, reasonable
evidence of compliance with all such requirements.
(r) Origination and Servicing Practices. There has been no
improper act or omission or alleged improper act or omission,
or material error by the Seller, any Prior Servicer, any
originating mortgagee, or any employee, agent or
representative acting on their behalf, with respect to the
origination or servicing of any of the Mortgage Loans or Pools
or any document, agreement or instrument contained therein or
relating thereto.
(s) Payoffs. The Seller has not received, within 30 days
prior to the Closing Date, any requests for payoff quotes
which have not expired with respect to the Mortgage Loans.
(t) Financial Condition of Seller. The Seller is not in
receivership or conservatorship, nor are any of its
subsidiaries or affiliates. The Seller is not operating
pursuant to any restrictive operating agreement, memorandum or
order mandated by the Office of the Comptroller of the
Currency, the Federal Deposit Insurance Corporation or any
other federal or state regulatory body.
(u) Transfer From Single Servicing Site. All Servicing
Rights transferred from the Seller to the Purchaser hereunder
shall relate to Mortgage Loans serviced by the Seller at a
single site owned and controlled by the Seller.
(v) Disclosure. All information provided by Hamilton,
Carter, Smith & Co., Incorporated, in its Offering Number
EC-0510, or otherwise provided by the Seller or known to the
Seller to have been provided to the Purchaser in connection
with the transaction contemplated by this Agreement, was true
and accurate as of the date or dates on which provided to the
Purchaser.
18
<PAGE>
Section 5.03. Representations and Warranties
of the Seller as to Mortgage
Loans and Agency Requirements.
As further inducement to the Purchaser to enter into this
Agreement, the Seller represents and warrants to the
Purchaser, as of the Closing Date, with respect to each
Mortgage Loan, as follows:
(a) Mortgage Loans as Described. The information set forth
in the Mortgage Loan Schedule and in each Servicing File is
complete, true and correct. None of the Agency Agreements
contain any uncustomary, unusual or burdensome servicing
obligations with respect to the Servicing Rights or contain
provisions which vary from published Agency Requirements, and
no waivers with respect to any published or unpublished Agency
Requirements have been obtained which adversely affect the
credit quality of any Mortgage Loan. None of the Mortgage
Loans are VA Vendee loans, loans subject to interest rate
subsidies or special escrow arrangements, or loans secured by
manufactured housing or mobile homes.
(b) Payments Current. Except as set forth on the Mortgage
Loan Schedule, all payments required to be made up to, but not
including, the Closing Date for each Mortgage Loan under the
terms of the related Mortgage Note have been made.
(c) No Outstanding Charges. There are no defaults in
complying with the terms of the Mortgages, and all taxes,
governmental assessments, insurance premiums, water, sewer and
municipal charges, leasehold payments or ground rents which
previously became due and owing have been paid, or an escrow
of funds with respect to taxes and insurance premiums has been
established in an amount sufficient to pay for every such item
which remains unpaid and which has been assessed but is not
yet due and payable. The Seller has not advanced funds (other
than in strict accordance with applicable Agency
Requirements), or induced, solicited or knowingly received any
advance of funds by a party other than the Mortgagor, directly
or indirectly, for the payment of any amount required under
the Mortgage Loan, except for interest accruing from the date
of the Mortgage Note or date of disbursement of the Mortgage
Loan proceeds, whichever is greater, to the day which precedes
by one month the Due Date of the first installment of
principal and interest. All Advances are valid and subsisting
amounts owed to Seller and are not subject to setoffs or
claims arising from acts or omissions of Seller or any Prior
Servicer.
(d) Original Terms Unmodified. The terms of the Mortgage
Note and Mortgage have not been impaired, waived, altered or
modified in any respect from the date of origination except by
a written instrument which has been recorded, if necessary to
protect the interests of the Agencies. The substance of any
such waiver, alteration or modification has been approved by
the related Agencies to the extent required by the related
Agency Requirements and by the issuer of any related PMI
Policy and the title insurer, if any, to the extent required
by the policy, and its terms are reflected on the Mortgage
Loan Schedule. No Mortgagor has been released, in whole or in
part, except in connection with an assumption agreement
approved by the related Agencies to the extent required by the
related Agency Requirements and by the issuer of any related
PMI Policy and the title insurer, to the extent required by
the policy, and which assumption agreement is part of the
Servicing File and the terms of which are reflected in the
Mortgage Loan Schedule.
(e) Enforceability. Each of the Mortgage and the Mortgage
Note is a genuine, valid, binding and enforceable document
according to its terms, and conforms to all applicable laws
and regulations, including without limitation the federal
Truth-in-Lending Act as amended and Regulation Z.
(f) No Defenses. The Mortgage Loan is not subject to any
right of rescission, setoff, counterclaim or defense,
including without limitation the defense of usury, nor will
the operation of any of the terms of the Mortgage Note or the
Mortgage, or the exercise of any right thereunder, render
either the Mortgage Note or the Mortgage unenforceable, in
whole or in part, and no such right of rescission, setoff,
counterclaim or defense has been asserted with respect
thereto.
(g) No Recourse. None of the Servicing Rights are subject
to any repurchase or indemnity obligations which would, under
either generally accepted accounting principles or regulatory
accounting principles applicable to federal savings banks or
national banks, constitute "recourse" to the Purchaser or any
servicer upon the occurrence of default, non-payment,
foreclosure or other events relating to the underlying
Mortgage Loan. There are no provisions applicable to any
Mortgage Loan in any Agency Agreement, master commitment, pool
purchase contract, conversion
19
<PAGE>
or other Agency Requirement, whether described as a limited repurchase
requirement, limited recourse, credit support obligation, indemnification,
or otherwise, which would subject the Purchaser to losses on the
liquidation of a Mortgage Loan or which would entitle an Agency
to demand the repurchase of a Mortgage Loan for any
circumstances other than those which are permitted under (i)
the "Special Servicing Option" as set forth in Part II,
Chapter 2, Section 201 of the FNMA Selling Guide in the case
of FNMA Pools and (ii) the "Without Recourse" provisions set
forth in Section 5306(b) of the FHLMC Guide in the case of
FHLMC Pools.
(h) Hazard Insurance. Pursuant to the terms of the
Mortgage, all buildings or other improvements upon the
Mortgaged Property are insured by an insurer acceptable to the
related Agency in accordance with the related Agency
Requirements against loss by fire, earthquakes, hazards of
extended coverage and such other hazards as are customary in
the area where the Mortgaged Property is located. If upon
origination of the Mortgage Loan, the Mortgaged Property was
in an area identified in the Federal Register by the Federal
Emergency Management Agency as having special flood hazards
(and such flood insurance was required by federal regulation
and such flood insurance has been made available), a flood
insurance policy meeting the requirements of the current
guidelines of the Federal Insurance Administration is in
effect. All individual insurance policies contain a standard
mortgagee clause naming the Seller and its successors and
assigns as mortgagee, and all premiums thereon have been paid.
The Mortgage obligates the Mortgagor thereunder to maintain
the hazard insurance policy at the Mortgagor's cost and
expense, and on the Mortgagor's failure to do so, authorizes
the holder of the Mortgage to obtain and maintain such
insurance at such Mortgagor's cost and expense, and to seek
reimbursement therefor from the Mortgagor. The hazard
insurance policy is the valid and binding obligation of the
insurer, is in full force and effect, and will be in full
force and effect and inure to the benefit of the Purchaser on
behalf of the Agencies upon the consummation of the
transactions contemplated by this Agreement. The Seller has
not engaged in, and has no knowledge of the Mortgagor's having
engaged in, any act or omission which would impair the
coverage of any such policy, the benefits of the endorsement
provided for herein, or the validity and binding effect of
either.
(i) Coinsurance Claims. There are no uninsured casualty
losses or casualty losses where coinsurance has been (and the
Seller has no reason to believe, will be) claimed by an
insurance company or where the loss, exclusive of contents, is
greater than the recovery, less actual expenses incurred in
such recovery from the insurance carrier. No casualty
insurance proceeds have been used to make repairs to the
property subject to the Mortgage (other than with the consent
of applicable Agencies). All damage with respect to which
casualty insurance proceeds have been received by or through
the Seller or any Prior Servicer has been properly repaired or
is in the process of such repair with such proceeds.
(j) Condemnation. There is no proceeding pending or
threatened for the partial or total condemnation of the
property subject to the Mortgage, and no part of the property
subject to the Mortgage has been or will be condemned.
(k) Compliance with Applicable Laws. Any and all
requirements of any federal, state or local law, including,
without limitation, usury, truth-in-lending, real estate
settlement procedures, consumer credit protection, equal
credit opportunity, escrow practices or disclosure laws
applicable to the Mortgage Loan and the servicing thereof,
have been complied with.
(l) No Satisfaction of Mortgage. The Mortgage has not been
satisfied, cancelled, subordinated or rescinded, in whole or
in part, and the Mortgaged Property has not been released from
the lien of the Mortgage, in whole or in part, nor has any
instrument been executed that would effect any such release,
cancellation, subordination or rescission.
(m) Location and Type of Mortgaged Property. The Mortgaged
Property is located in the state identified in the Mortgage
Loan Schedule and consists of a parcel of real property with a
detached single family residence erected thereon, or a two- to
four-family dwelling, or an individual condominium unit, or an
individual unit in a planned unit development, and no
residence or dwelling is a mobile home or a manufactured
dwelling.
(n) Valid First Lien. The Mortgage is a valid, subsisting
and enforceable first lien on the Mortgaged Property,
including all buildings on the Mortgaged Property and, to the
extent permitted by applicable law, all installations and
mechanical, electrical, plumbing, heating and air conditioning
systems located in or annexed to such buildings, and all
additions, alterations and replacements made at any time with
respect to the foregoing. The
20
<PAGE>
lien of the Mortgage is subject only to:
(i) the lien of current real property taxes and
assessments not yet due and payable;
(ii) covenants, conditions and restrictions, rights of
way, easements and other matters of the public record as of
the date of recording acceptable to the related Agencies in
accordance with the related Agency Agreements and prudent
mortgage lending institutions generally and which are
specifically referred to in the lender's title insurance
policy delivered to the originator of the Mortgage Loan and
(a) referred to or otherwise considered in the appraisal made
for the originator of the Mortgage Loan or (b) which do not
adversely affect the appraised value of the Mortgaged Property
set forth in such appraisal; and
(iii) other matters to which like properties are
commonly subject which do not materially interfere with the
benefits of the security intended to be provided by the
mortgage or the use, enjoyment, value or marketability of the
related Mortgaged Property.
Any security agreement, chattel mortgage or equivalent
document related to and delivered in connection with the
Mortgage Loan establishes and creates a valid, subsisting and
enforceable first lien and first priority security interest on
the property described therein, and the Seller has full right
to sell and assign the same to the Agencies. The Mortgaged
Property was not, as of the date of origination of the
Mortgage Loan, subject to a mortgage, deed of trust, deed to
secured debt or other security instrument creating a lien
subordinate to the lien of the Mortgage except for a
subordinate lien permitted by the applicable Agency.
(o) Validity of Mortgage Documents. The Mortgage Note and
the Mortgage are genuine, and each is the legal, valid and
binding obligation of the maker thereof enforceable in
accordance with its terms. All parties to the Mortgage Note
and the Mortgage had legal capacity to enter into the Mortgage
Loan and to execute and deliver the Mortgage Note and the
Mortgage, and the Mortgage Note and the Mortgage have been
duly and properly executed by such parties.
(p) Pools. Exhibit A sets forth a true and complete list
of all Pools. Each Mortgage included in a Pool meets all
eligibility requirements for inclusion in such Pool, in
accordance with all applicable Agency standards of eligibility
for loan pooling. All of the Pools have been finally and
properly certified or recertified in accordance with
applicable laws, regulations and Agency Requirements. The
Servicing Rights in respect of each Pool are eligible under
all applicable laws, regulations and Agency Requirements to be
transferred to the Purchaser. No Mortgage has been bought out
of a Pool without all required prior written approvals of the
applicable Agency. The Mortgage Files to be delivered as
directed by the Purchaser will include all documents necessary
in order for the appropriate Custodian to recertify the Pools
in accordance with Agency Requirements. The securities backed
by each Pool have been issued on uniform documents,
promulgated in the applicable Guide without any material
deviation therefrom.
(q) Limitations on Mortgage Loan Characteristics. Except
as specifically described in the Mortgage Loan Schedule, each
Mortgage Loan is an Eligible Mortgage Loan. None of the
Mortgage Loans will contain provisions for graduated payment
mortgages, shared appreciation or contingent interest
features, or interest rate buydowns or other interest rate
subsidies, wherein Monthly Payments are paid or partially paid
with funds deposited in a separate account established by the
Seller, the Mortgagor or anyone on behalf of the Mortgagor, or
paid by any source other than the Mortgagor. In addition,
each Mortgage Loan is a conventional first mortgage loan
secured by a Mortgage. Each Mortgage Loan is amortized on a
level yield basis at a fixed rate of interest over its term,
and the due date for Monthly Payments thereon is the first day
of each calendar month. Interest on each Mortgage Loan is
payable in arrears.
(r) Full Disbursement of Proceeds. The proceeds of the
Mortgage Loan have been fully disbursed, including any
requirement for future advances thereunder, and any and all
requirements as to completion of any on-site or off-site
improvement and as to disbursements of any escrow funds
therefor have been complied with. All costs, fees and
expenses incurred in making or closing the Mortgage Loan and
the recording of the Mortgage were paid, and the Mortgagor is
not entitled to any refund of any amounts paid or due under
the Mortgage Note or Mortgage.
(s) Custodial and Escrow Accounts Current. All Custodial
Accounts and Escrow Accounts are maintained
21
<PAGE>
by the Seller and have been maintained in accordance with applicable
law, the terms of the Mortgage Loans and the Agency Requirements
related thereto. The Escrow Payments required by the
Mortgages which have been paid to the Seller for the account
of the Mortgagor are on deposit in the appropriate Escrow
Account. All funds received by the Seller in connection with
the Mortgage Loans, including, without limitation, Liquidation
Proceeds, Insurance Proceeds, Condemnation Proceeds and
Principal Prepayments, have promptly been deposited in the
appropriate Custodial Account or Escrow Account, and all such
funds have been applied to reduce the principal balance of the
Mortgage Loans in question, or for reimbursement of repairs to
the Mortgaged Property or as otherwise required by applicable
law and the Agency Requirements.
(t) Doing Business. The Seller, each Prior Servicer and
all other Persons which have had any interest in the Mortgage
Loan, whether as mortgagee, assignee, pledgee or otherwise,
are (or, during the period in which they held and disposed of
such interest, were) (1) in compliance with any and all
applicable licensing requirements of the laws of the state
wherein the Mortgaged Property is located, and (2) organized
under the laws of such state, or (3) qualified to do business
in such state, or (4) federal savings and loan associations or
national banks having principal offices in such state, or (5)
not doing business in such state.
(u) LTV, PMI Policy. The LTV of each Mortgage Loan
conforms to Agency Requirements for such Mortgage Loan. To
the extent required by each Agency, each Mortgage Loan is and
will be insured as to payment defaults by a PMI Policy until
the LTV of such Mortgage Loan is amortized, as appropriate to
80%. All provisions of such PMI Policy have been and are
being complied with, such policy is in full force and effect,
and all premiums due thereunder have been paid. Any Mortgage
Loan subject to a PMI Policy obligates the Mortgagor
thereunder to maintain the PMI Policy and to pay all premiums
and charges in connection therewith. The Mortgage Interest
Rate for each Mortgage Loan as set forth on the Mortgage Loan
Schedule is net of any such insurance premium.
(v) Title Insurance. The Mortgage Loan is covered by
either (i) an attorney's opinion of title and abstract of
title, the form and substance of which are acceptable to the
related Agency and to prudent mortgage lending institutions
making mortgage loans in the area where the Mortgaged Property
is located; or (ii) an ALTA lender's title insurance policy or
other generally acceptable form of policy or insurance
acceptable to the applicable Agency, and each such title
insurance policy is issued by a title insurer acceptable to
the related Agency and qualified to do business in the
jurisdiction where the Mortgaged Property is located, insuring
the Seller, its successors and assigns, as to the first
priority lien of the Mortgage in the original principal amount
of the Mortgage Loan. The Agencies are the sole insured of
such lender's title insurance policy, and such lender's title
insurance policy is in full force and effect and will be in
full force and effect upon the consummation of the
transactions contemplated by this Agreement. No claims have
been made under such lender's title insurance policy, and no
prior holder of the Mortgage, including the Seller, has done,
by act or omission, anything which would impair the coverage
of such lender's title insurance policy.
(w) No Defaults. Except as listed on Schedule 5.03(w)
hereto, other than payment delinquencies, there is no default,
breach, violation or event of acceleration existing under the
Mortgage, the Mortgage Note or any contract or document
relating to the Mortgage Loan and no event which, with the
passage of time or with notice and the expiration of any grace
or cure period, would constitute a default, breach, violation
or event of acceleration, and neither the Seller nor its
predecessors have waived any default, breach, violation or
event of acceleration.
(x) No Mechanics' Liens. There are no mechanics or similar
liens or claims which have been filed for work, labor or
material (and no rights are outstanding that under the law
could give rise to such liens) affecting the related Mortgaged
Property which are or may be liens prior to, or equal or
coordinate with, the lien of the related Mortgage.
(y) Location of Improvements; No Encroachments. All
improvements which were considered in determining the
appraised value of the Mortgaged Property lay wholly within
the boundaries and building restriction lines of the Mortgaged
Property, and no improvements on adjoining properties encroach
upon the Mortgaged Property. No improvement located on or
being part of the Mortgaged Property is in violation of any
applicable zoning law or regulation.
(z) Customary Provisions. The Mortgage contains customary
and enforceable provisions such as to render the rights and
remedies of the holder thereof adequate for the realization
against the Mortgaged Property of the
22
<PAGE>
material benefits of the security provided thereby, including, (i) in
the case of a Mortgage designated as a deed of trust, by trustee's sale,
and (ii) otherwise by judicial foreclosure. There is no homestead
or other exemption available to a Mortgagor which would
interfere with the right to sell the Mortgaged Property by
trustee's sale or the right to foreclose the Mortgage.
(aa) Conformance with Agency Standards. Each Mortgage
Loan was underwritten and funded in accordance with applicable
Agency underwriting standards in effect at the time the
Mortgage Loan was originated, and each such Mortgage Loan is
in conformity with the applicable underwriting standards, and
the Mortgage Note and Mortgage are on forms acceptable to the
applicable Agency.
(bb) Occupancy of the Mortgaged Property. The
Mortgaged Property is lawfully occupied under applicable law.
All inspections, licenses and certificates required to be made
or issued with respect to all occupied portions of the
Mortgaged Property and, with respect to the use and occupancy
of the same, including but not limited to certificates of occupancy
and fire underwriting certificates, have been made
or obtained from the appropriate authorities.
(cc) No Additional Collateral. The Mortgage Note is
not and has not been secured by any collateral except the lien
of the corresponding Mortgage and the security interest of any
applicable security agreement or chattel mortgage.
(dd) Deeds of Trust. In the event the Mortgage
constitutes a deed of trust, a trustee, duly qualified under
applicable law to serve as such, has been properly designated
and currently so serves and is named in the Mortgage, and no
fees or expenses are or will become payable by the Purchaser,
or the related Agency, or their respective successors and
assigns to the trustee under the deed of trust, except in
connection with a trustee's sale after default by the
Mortgagor.
(ee) FNMA and FHLMC Representations. Each Mortgage
Loan complied with all representations and warranties made to
the applicable Agency at the time that such representations
and warranties were made.
(ff) Delivery of Mortgage Documents. The Mortgage
Note, the Assignment of Mortgage and any other documents
required to be delivered to the Custodian under the Custodial
Agreement or to FHLMC, as the case may be, for any Mortgage
Loan have been segregated by the Custodian or delivered to
FHLMC, as the case may be.
(gg) Condominiums/Planned Unit Developments. If the
Mortgaged Property is a condominium unit in a planned unit
development (other than a de minimis planned unit
development), such condominium or planned unit development
project meets the related Agency Requirement in accordance
with the related Agency Agreements or is located in a
condominium or planned unit development project which has
received project approval by the related Agency, and the
representations and warranties required by the related Agency
with respect to such condominium or planned unit development
have been made and remain true and correct in all respects.
Each Mortgage File contains all required condominium and
planned unit development riders to the Mortgage Documents.
(hh) Consolidation of Future Advances. Any future
advances made prior to the Closing Date have been consolidated
with the outstanding principal amount secured by the Mortgage,
and the secured principal amount, as consolidated, bears a
single interest rate and single repayment term. The lien of
the Mortgage securing the consolidated principal amount is
expressly insured as having first lien priority by a title
insurance policy, an endorsement to the policy insuring the
mortgagee's consolidated interest or by other title evidence
acceptable to the related Agency. The consolidated principal
amount does not exceed the original principal amount of the
Mortgage Loan.
(ii) Mortgaged Property Undamaged. The Mortgaged
Property is undamaged by waste, fire, earthquake or earth
movement, windstorm, flood, tornado, or other casualty, so as
to affect adversely the value of the Mortgaged Property as
security for the Mortgage Loan or the use for which the
premises were intended except to the extent that damage is
fully covered by in-place hazard insurance.
(jj) Collection Practices; Escrow Deposits. The
origination and collection practices used with respect to each
Mortgage Loan have been in accordance with the related
Mortgage Note and other related Agency
23
<PAGE>
Requirements, and have been in all respects legal and proper. With
respect to escrow deposits and Escrow Payments, there exist no
deficiencies in connection therewith for which customary arrangements
for repayment thereof have not been made. No escrow deposits or
Escrow Payments or other charges or payments due the Seller
have been capitalized under the Mortgage or the Mortgage Note.
(kk) FNMA/FHLMC Approvals. At all relevant times, the
Seller has been and will be a FNMA-approved lender and FHLMC-
approved seller/servicer, as applicable, to the extent
required to be approved and fully authorized to originate,
sell or service the Mortgage Loans. The Seller has serviced
all of the Mortgage Loans on its own behalf, and Seller is in
compliance with the terms thereof and with all laws, rules,
regulations and requirements in connection therewith. There
has been no occurrence as of the Closing Date of any event
that could obligate the Purchaser to repurchase any Mortgage
Loans in accordance with Agency Requirements or cause the
cancellation of the Servicing Rights or any material changes
in procedures with respect to the Mortgage Loans.
(ll) Hart-Scott-Rodino Act. The purchase and sale of
the Servicing Rights contemplated by this Agreement is exempt
from the notification and disclosure provisions of the Hart-
Scott-Rodino Act.
ARTICLE VI
REMEDIES AND INDEMNIFICATION;
FAILURE TO OBTAIN AGENCY CONSENTS
Section 6.01. Remedies for Breach of
Representations and Warranties
of the Purchaser.
It is understood and agreed that the representations and
warranties set forth in Section 5.01 shall survive the Closing
Date and the sale of the Servicing Rights to the Purchaser and
the delivery of the Servicing Files to the Purchaser and shall
inure to the benefit of the Seller.
Upon the earlier of either discovery by or notice to the
Purchaser of any breach of a representation or warranty set
forth in Section 5.01, the Purchaser shall use its Best
Efforts promptly to cure such breach in all material respects
within thirty (30) days of such discovery or notice.
The Purchaser shall indemnify the Seller and hold it
harmless against any losses, damages, penalties, fines,
forfeitures, reasonable and necessary legal fees and related
costs, judgments, and other costs and expenses resulting from
any claim, demand, defense or assertion based on or grounded
upon, or resulting from, a material breach of the Purchaser
representations and warranties contained in Section 5.01 or
the breach of any obligations set forth in Section 4.01,
provided that such indemnification shall include only out-of-
pocket losses due to such breach and shall not include any
consequential damages resulting therefrom, and provided
further that the obligations of the Purchaser to reimburse and
indemnify the Seller pursuant to this Section 6.01 as a result
of a breach of a representation or warranty shall apply only
with respect to breaches of representation or warranty for
which the Seller delivers or the Purchaser receives notice on
or before the date ten (10) years after the Closing Date. It
is understood and agreed that the obligation of the Purchaser
to indemnify the Seller set forth in this Section 6.01
constitutes the sole remedy of the Seller respecting a breach
of the foregoing representations and warranties.
Any cause of action against the Purchaser relating to or
arising out of the breach of any representations and
warranties made in Section 5.01 or the breach of any general
obligations set forth in Section 4.01 shall accrue upon the
last of (i) discovery of such breach by the Purchaser or
notice thereof by the Seller to the Purchaser, (ii) failure by
the Purchaser to cure such breach within thirty (30) days of
such discovery or notice, and (iii) demand upon the Purchaser
by the Seller for compliance with this Agreement.
Notwithstanding anything to the contrary in this Agreement,
the Seller shall not be liable for, and the Purchaser shall
indemnify the Seller against, any liabilities arising solely
from actions taken by the Purchaser after the Transfer Date
not in compliance with the terms of this Agreement with
respect to Purchased Mortgage Loans; provided, however, that
this shall not limit Seller's liability for actions taken or
required to be taken on or prior to the Transfer Date.
Section 6.02. Remedies for Breach of
Representations and Warranties
and Other Obligations of the
Seller.
24
<PAGE>
It is understood and agreed that the representations and
warranties set forth in Sections 5.02 and 5.03 and the
obligations set forth in Article II shall survive the Closing
Date and the sale of the Servicing Rights to the Purchaser and
the delivery of the Servicing Files to the Purchaser and shall
inure to the benefit of the Purchaser, its successors and
assigns. Upon discovery by either the Purchaser or the Seller
of a breach of any of the foregoing representations,
warranties or obligations, the party discovering such breach
shall give prompt written notice to the other.
Upon the earlier of either discovery by or notice to the
Seller of any breach of a representation or warranty set forth
in Section 5.02 or Section 5.03 or obligations set forth in
Article II (other than Seller's covenant to obtain Agency
Consents), the Seller shall use its Best Efforts promptly to
cure such breach, and if in the reasonable opinion of the
Purchaser such breach cannot be cured within thirty (30) days
after such discovery or notice or any shorter period
prescribed by the applicable Agency, the Seller shall, subject
to Section 6.05, within three (3) Business Days following
receipt by the Seller of notice thereof, reimburse the
Purchaser for the Purchase Price of the Servicing Rights with
respect to the related Mortgage Loan or Loans at the
Reimbursement Amount. Notwithstanding the foregoing, however,
in the event that the Seller wishes to repurchase the related
Mortgage Loan in lieu of reimbursing the Purchaser for the
Purchaser Price of the related Servicing Rights, the Seller
shall so notify the Purchaser. The Purchaser then shall
attempt to repurchase such Mortgage Loan from the related
Agency. If the Purchaser is able so to repurchase such
Mortgage Loan, the Seller shall repurchase such Mortgage Loan
from the Purchaser, at the price and in the manner set forth
in Section 6.03, including payment of the Reimbursement
Amount.
In addition to such reimbursement obligation, the Seller
shall, subject to Section 6.05, indemnify, defend and hold
harmless the Purchaser against any losses, damages,
penalties, fines, forfeitures, reasonable and necessary legal
fees and related costs (including allocated fees of in-house
counsel), judgments, and other out-of-pocket costs and
expenses resulting from any claim, demand, defense or
assertion based on or grounded upon, or resulting from, a
breach of the Seller's representations, warranties or
obligations contained in this Agreement.
Any cause of action against the Seller relating to or
arising out of the breach of any representations and
warranties made in Section 5.02 or Section 5.03 or the
obligations set forth in Article II shall accrue upon the last
of (i) discovery of such breach by the Seller or notice
thereof by the Purchaser to the Seller, (ii) failure by the
Purchaser to cure such breach within thirty (30) days of such
discovery or notice, and (iii) demand upon the Seller by the
Purchaser for compliance with this Agreement.
For purposes of indemnification under this Section 6.02,
any breach of any representation or warranty or omission by
the Seller of any fact or set of facts in the representations
and warranties contained in this Agreement (including any
misrepresentation in or omission of any item required to be
disclosed on any certificate, schedule, exhibit or other
agreement, instrument or document delivered or to be delivered
pursuant to the terms of this Agreement) shall be deemed to
constitute a breach of such representation or warranty
notwithstanding (i) any limitation or qualification as to
materiality set forth in such representation, warranty,
certificate, schedule, exhibit or other agreement, instrument
or document on the scope, accuracy or completeness thereof,
(ii) any limitation or qualification as to knowledge set forth
therein or (iii) with respect to any representation or
warranty relating to Litigation Loans, any pending litigation,
investigation or inquiry, existing on the Closing Date but
excluded from such representation or warranty, it being the
intention of the parties hereto that the Purchaser and each of
its directors, officers, employees and agents shall, to the
extent permitted in this Section 6.02, be indemnified and held
harmless from and against any and all losses to the extent
resulting from the failure of any such representation,
warranty, certificate, schedule, exhibit or other agreement,
instrument or document to be true, correct and complete in any
respect.
Section 6.03. Seller's Additional Repurchase
and Indemnification Obligations.
Upon receipt by the Purchaser of notice from any Agency of
a breach of any representation or warranty contained in any
Agency Agreement and/or a request for the repurchase of any
Mortgage Loan pursuant to any Agency Requirement, the
Purchaser shall promptly notify the Seller of same and shall
use its Best Efforts to cure and correct any such breach and
to satisfy any Agency's requests or concerns related to such
deficiencies of the related Mortgage Loans.
The Seller shall, subject to Section 6.05, repurchase from
the Purchaser any Mortgage Loan with respect to
25
<PAGE>
which the Purchaser has been required by any Agency to repurchase due to
a breach of a representation or warranty made in any Agency
Agreement or pursuant to any Agency Requirement and not due to
a breach of the Purchaser's obligations thereunder arising
after the Closing Date or pursuant to this Agreement. The
repurchase price to be paid by the Seller to the Purchaser
shall equal that repurchase price paid by the Purchaser to the
related Agency plus all reasonable out-of-pocket costs and
expenses borne by the Purchaser in connection with the
repurchase of such Mortgage Loan from the related Agency,
including, but not limited to, all out-of-pocket costs and
expenses of the Purchaser incurred in efforts to cure said
breach and reasonable attorneys' fees (including allocated
costs of in-house counsel). In addition, and further subject
to Section 6.05, the Seller shall repurchase the Servicing
Rights with respect to such Mortgage Loan from the Purchaser
at the Reimbursement Amount. The repurchase price and
Reimbursement Amount shall be paid by the Seller to the
Purchaser by wire transfer of immediately available funds to
an account designated by the Purchaser, within three (3)
Business Days of Purchaser's request therefor.
At the time of repurchase, the Custodian and the Purchaser
shall arrange for the timely reassignment of the repurchased
Mortgage Loan to the Seller and the delivery to the Custodian
of any documents held by the related Agency with respect to
the repurchased Mortgage Loan pursuant to the related Agency
Requirement. In the event of a repurchase, the Purchaser
shall, simultaneously with such reassignment, give written
notice to the Seller that such repurchase has taken place, and
amend the Mortgage Loan Schedule to reflect the deletion of
the repurchased Mortgage Loan from this Agreement.
In addition, and further subject to Section 6.05, the
Seller shall indemnify the Purchaser and hold it harmless
against any out-of-pocket costs and expenses and losses,
damages, penalties, fines, forfeitures, reasonable and
necessary legal fees (including allocated costs of in-house
counsel) and related costs, judgments, and other out-of-pocket
costs and expenses incurred by Purchaser in accordance with
this Section 6.03.
Section 6.04. Special Indemnification for the
Seller's Escrow Practices.
The Seller shall indemnify and hold harmless the Purchaser
against, and shall reimburse it for any losses, damages,
deficiencies, claims, causes of action or expenses of any
nature (including reasonable attorneys' fees) to the extent
relating to or resulting from any of the Seller's or any Prior
Servicer's escrow practices, including any periods during
which the Purchaser continues such practices until such time,
not to exceed one (1) year from the Transfer Date, as the
Purchaser has completed, and payments have changed as a result
of, the Purchaser's regular annual escrow analysis cycle. The
indemnification set forth in this Section 6.04 shall apply to
any claim, cause of action or proceeding which results in any
such damages, deficiencies, claims, causes of action or
expenses attributable to such escrow practices. The Purchaser
shall promptly provide the Seller with notice of any claim
that could involve the indemnification set forth in this
Section 6.05.
With respect to any litigation, investigation or inquiry
that (i) is subject to this Section 6.04, and (ii) includes
any of the Mortgage Loans (whether or not such action was
brought by a Mortgagor whose Servicing Rights were purchased
under this Agreement), the Purchaser shall have the sole
right, with counsel of its choice (and the Seller shall not be
entitled), to defend , settle or otherwise dispose of any such
claims, causes of action or proceedings at the Seller's
expense; provided, however, that the Purchaser shall consult
with the Seller, in good faith, to attempt to avoid any double
payment by the Seller with respect to such claims, causes of
action or proceeding.
Section 6.05. Limitations on Obligations of
the Seller.
The obligations of the Seller to reimburse and indemnify
the Purchaser pursuant to Section 6.02 as a result of a breach
of any representation or warranty (but not as a result of the
obligations set forth in Article II) shall apply only with
respect to breaches of representation and warranty for which
the Purchaser delivers or of which the Seller receives notice
on or before the date ten (10) years after the Closing Date,
and the Seller's obligation to repurchase Mortgage Loans and
the related Servicing Rights and to indemnify the Purchaser
pursuant to Section 6.03 shall apply only with respect to
breaches of representation or warranty for which the Purchaser
delivers or of which the Seller receives notice during the
life of the related Mortgage Loan(s); provided, however, that
such limitations shall not apply with respect to any breach
resulting in a class action lawsuit or government
investigation or inquiry; provided, further, that such
limitations shall not operate to reduce, limit or otherwise
affect in any manner the Seller's obligations with respect to
breaches of representations and warranties of which the
Purchaser has notified the Seller in writing prior to the
passage of the applicable period.
26
<PAGE>
Section 6.06. No Effect of Knowledge.
The obligations of the Seller under this Agreement for the
breach of any representation or warranty made by the Seller
hereunder shall not be affected in any manner or to any extent
by any knowledge obtained by (or which could have been
obtained by) the Purchaser prior to the Transfer Date, whether
in the course of the Purchaser's due diligence activities or
otherwise.
Section 6.07. Failure to Obtain Agency Consents.
Notwithstanding anything in this Agreement to the contrary,
in the event the Seller does not obtain the Agency Consents on
or prior to April 30, 1995, then this Agreement (including,
without limitation, the sale described in Section 2.01 and the
obligations to make payments pursuant to Section 2.05 hereof),
immediately upon notice from the Purchaser to the Seller,
shall terminate and become void and have no effect; provided,
however, that this Article VI and Sections 2.06, 8.02, 8.04,
8.06, 8.07, 8.09, 8.13, 8.18 and 8.19 hereof shall survive any
such termination of this Agreement; provided, further, that no
such termination shall relieve any party from liability for
any willful breach of this Agreement; and provided, further,
that if the Seller obtains one but not both of the Agency
Consents and the Purchaser elects pursuant to Section 2.01
hereof to purchase the Servicing Rights with respect to the
Mortgage Loans to which the obtained Agency Consent relates,
then this Agreement shall terminate as aforesaid only with
respect to obligations relating to the Mortgage Loans that are
not Purchased Mortgage Loans.
Immediately upon receipt of the notice from the Purchaser
described in the first paragraph of this Section 6.07, (a) the
Seller shall reimburse the Purchaser for (1) the Payment
Obligation with respect to all Mortgage Loans that are not
Purchased Mortgage Loans by paying to Purchaser an amount
equal to (i) the portion of the Payment Obligation paid on the
Closing Date with respect to such Mortgage Loans, plus
(ii) interest on such amount calculated from the Closing Date
to the date such reimbursement is paid at the Federal Funds
Rate, plus (iii) the amount of any advances, out-of-pocket
costs or other expenses incurred by the Purchaser related
thereto and (2) all other amounts paid by the Purchaser
pursuant to this Agreement in connection with Mortgage Loans
that are not Purchased Mortgage Loans, including, without
limitation, all amounts paid by the Purchaser to the Seller
under Section 2.03 or 2.05(c); and (b) following receipt of
such payment, the Purchaser shall reimburse the Seller for all
amounts paid by the Seller to the Purchaser with respect to
Mortgage Loans that are not Purchased Mortgage Loans pursuant
to Section 2.05(b) hereof. In addition, the Seller shall
indemnify, defend and hold harmless the Purchaser against any
losses, damages, penalties, fines, forfeitures, reasonable and
necessary legal fees and related costs (including allocated
fees of in-house counsel), judgments, and other out-of-pocket
costs and expenses resulting from any claim, demand, defense
or assertion based on or grounded upon, or resulting from, the
Seller's failure to obtain any Agency Consent in accordance
with this Agreement.
ARTICLE VII
CLOSING CONDITIONS
Section 7.01. Purchaser's Conditions.
The Purchaser's obligation to pay the Payment Obligation
and otherwise consummate the transactions contemplated
hereunder on the Closing Date is subject to the satisfaction,
or waiver by the Purchaser, of the following conditions
precedent:
(a) The Seller shall have performed in all material
respects all of its covenants and agreements contained herein
which are required to be performed by it on or prior to the
Closing Date;
(b) All of the representations and warranties of the Seller
contained in this Agreement shall be true and correct in all
material respects as of the Closing Date;
(c) Prior to the Closing Date, the completion of a due
diligence review relating to the Mortgage Loans and the
contents of the related Servicing Files and the operations of
the Seller in connection and the determination by the
Purchaser, in its discretion, that, among other things:
(i) the books, records and accounts of the Seller with respect
27
<PAGE>
to the Mortgage Loans, Pools and the Agencies are in order;
(ii) the Mortgage Loans comply with applicable laws,
regulations and all Agency Requirements; (iii) there is no
missing or improper documentation; (iv) the Seller's loan
acquisition procedures and controls are acceptable to the
Purchaser; (v) the information provided in the Mortgage Loan
Schedule is true and correct; and (vi) any servicing being
performed by the Seller or a Prior Servicer is being performed
in compliance with the Guides and Agency Requirements and in a
manner acceptable to the Purchaser. Notwithstanding the
foregoing, the completion by the Purchaser of its due
diligence review and audits shall in no manner limit or
compromise the Purchaser's rights and remedies in the event of
any breach by the Seller of its obligations, representations
and warranties hereunder. During the conduct of the
Purchaser's due diligence and audits, the Seller will provide
access to servicing records, loan files and other Seller books
and records and its officers and employees and the books and
records and will cooperate with the Purchaser in completing
such due diligence and audits.
(d) The Purchaser's reasonable determination in its
discretion that the Seller has the financial ability to
discharge its indemnity obligations as set forth herein.
(e) The Seller's strict compliance with and fulfillment of
its obligations under the Servicing Transfer Procedures Manual
and the Guide.
(f) The delivery of the acknowledgment of notice and
security release of any secured creditors of the Seller
referenced in Section 2.07 hereof in a form reasonably
acceptable to the Purchaser.
(g) All Pools are fully funded, certified, and recertified
(if required) by the applicable Custodian or Agency.
(h) The Purchaser shall have approved, in its sole and
absolute discretion, all documentation, tri-party agreements
and such other agreements which may be required to effectuate
the transfer of the Servicing Rights by the Seller to the
Purchaser in accordance with the applicable Agency Agreements
and Agency Requirements and procedures (other than the Agency
Consents), and the Seller and the Purchaser shall have entered
into and executed all such documentation, tri-party agreements
and other agreements with any and all Agencies or other
Persons in respect of the transfer of the Servicing Rights by
the Seller to the Purchaser (other than the Agency Consents);
(i) The Seller shall have delivered to the Purchaser on or
before the Closing Date all written approvals of the transfer
of Servicing Rights and servicing responsibilities from any
Person from whom approval is required under applicable law or
Agency Requirements (other than the Agency Consents);
(j) There shall not have been commenced or, to the
knowledge of either party hereto, threatened any action, suit
or proceeding which is likely to adversely affect the
consummation of the transactions contemplated hereby or
adversely affect the value of the Servicing Rights or on the
business, operations, financial condition, property or assets
of the Seller;
(k) No current or former officer, loan originator or other
personnel of the Seller or any Prior Servicer shall have been
indicted, arraigned, convicted or shall be under investigation
for any criminal offenses or any fraudulent activity related
to the origination, servicing and sale of the Mortgage Loans;
(l) The Seller shall have delivered all documents described
in Section 8.01, and such other documents as the Purchaser
shall have reasonably requested from the Seller on or before
the Closing Date, in form and content acceptable to the Purchaser.
If the Closing Date has not occurred by March 31, 1995, at
the option of the Purchaser, as evidenced by written notice
given by the Purchaser to the Seller, this Agreement shall
terminate and be of no further force or effect.
Section 7.02. Seller's Conditions.
The Seller's obligation to consummate the transactions
contemplated hereunder on the Closing Date is subject to the
satisfaction or waiver by the Seller of the following
conditions precedent:
28
<PAGE>
(a) The Purchaser shall have performed in all material
respects all of its covenants and agreements contained herein
which are required to be performed by it on or prior to the
Closing Date;
(b) All of the representations and warranties of the
Purchaser contained in this Agreement shall be true and
correct in all material respects as of the Closing Date;
(c) The Purchaser shall have approved, in its sole and
absolute discretion, all documentation, tri-party agreements
and such other agreements which may be required to effectuate
the transfer of the Servicing Rights by the Seller to the
Purchaser in accordance with the applicable Agency Agreements
and Agency Requirements and procedures, and the Seller and on
or before the Closing Date the Purchaser shall have entered
into and executed all necessary tri-party agreements with any
and all Agencies in respect of the transfer of the Servicing
Rights by the Seller to the Purchaser;
(d) The Purchaser shall have paid 80% of the estimated
Payment Obligation in the manner prescribed in Article III;
and
(e) There shall not have been commenced or, to the
knowledge of either party hereto, threatened any action, suit
or proceeding which is likely to materially and adversely
affect the consummation of the transactions contemplated
hereby.
Section 7.03. Consummation.
The final consummation and satisfactory conclusion by the
parties of the transactions contemplated herein in respect of
the Closing Date shall be accomplished by the execution and
delivery of this Agreement by the Seller and by the Purchaser.
The final consummation and satisfactory conclusion by the
parties of the transactions contemplated herein in respect of
the Transfer Date shall be accomplished through the exchange,
via facsimile transmission, of written acknowledgments by the
appropriate officer of each of the Seller and the Purchaser on
the Transfer Date.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.01. Closing Documents.
The closing documents shall consist of fully executed
originals of the following documents:
a) this Agreement;
b) an Officer's Certificate of the Seller, in the form of
Exhibit E hereto, including all attachments thereto;
c) a copy of corporate resolutions of the Seller
authorizing the execution and delivery of this
Agreement and the consummation of the transactions
contemplated hereby, certified as of the Closing Date
by an appropriate officer of the Seller together with
such other certificates of incumbency and other
evidences of corporate authority as Purchaser or its
counsel may reasonably request;
d) unless the Closing Date is also the date this Agreement
is executed, a certificate, dated as of the Closing
Date, signed by an authorized officer of the Seller to
the effect that each of the Seller's representations
and warranties made in Article V hereof is true and
correct and that all of the terms, covenants and
conditions of this Agreement required to be complied
with and performed by the Seller at or prior to the
Closing Date have been duly complied with and performed
in all material respects;
e) an Opinion of Counsel of the Seller, in the form
attached as Exhibit F hereto;
29
<PAGE>
f) a copy of each Agency Agreement with respect to each
Mortgage Loan and an updated Mortgage Loan Schedule as
of the Closing Date for each Agency Agreement;
g) any and all Agency Consents (to be delivered in
accordance with the schedule described in Section
2.01); and
h) a telecopy of each UCC-3, if applicable, executed by
the lien holder, to be filed to release any liens on
the Servicing Rights (to be delivered on the Transfer
Date).
Section 8.02. Costs.
In addition to the other costs expressly assumed by the
Seller hereunder, the Seller shall pay any commissions due its
sales force, any legal fees and expenses of its attorneys, and
any costs and expenses associated with delivery or transport
of the Servicing Files to the Purchaser, securing Agency
Consents to the transfer of the Servicing Rights and the
preparation and recording of Assignments of Mortgages to the
Purchaser.
Section 8.03. Cooperation.
To the extent reasonably possible, the parties hereto shall
cooperate with and assist each other, as requested, in
carrying out the purposes of this Agreement, and they shall
comply with all material laws and regulations governing the
Servicing Rights.
Section 8.04. Protection of Confidential
Information.
Each party hereto shall keep confidential and shall not
divulge to any party, without the other party's prior written
consent, the purchase price paid for the Servicing Rights, any
information pertaining to the Mortgage Loans or any borrower
thereunder, except to the extent that it is appropriate for
such party to do so in working with legal counsel, auditors,
affiliates, taxing authorities or other governmental agencies
or as required by law.
Section 8.05. Publicity.
The Purchaser and the Seller agree to consult with each
other and to coordinate the issuance of any press release or
similar public announcement or communication containing the
other's name and relating to the execution or performance of
this Agreement and the transactions contemplated hereby;
provided, however, that no party shall be restrained, after
consultation with the other party, from making such disclosure
as it shall be advised by counsel is required by law or by the
applicable regulations of any regulatory body or securities
exchange to be made.
Section 8.06. Notices.
All demands, notices and communications hereunder shall be
in writing and shall be deemed to have been duly given if
mailed, by registered or certified mail, return receipt
requested, or, if by other means, when received by the other
party at the following address, or such other address as may
hereafter be furnished to the other party by like notice:
PURCHASER: BankAmerica Mortgage, a Division
of Bank of America, FSB
50 California Street, 11th Floor
San Francisco, CA 94111
Attention: Claus Lund, Senior
Vice President
SELLER: Carolina First Bank
P.O. Box 1029
Greenville, South Carolina 29602
Attention: William S. Hummers III,
Executive Vice President
30
<PAGE>
or Carolina First Bank
102 South Main
Greenville, South Carolina 29601
Attention: William S. Hummers III,
Executive Vice President
All demands, notices and communications hereunder shall be
in writing and shall be deemed to have been duly given if
mailed, by registered or certified mail, return receipt
requested, or, if by other means, when received by the other
party at the address shown below, or such other address as may
hereafter be furnished to the other party by like notice. Any
such demand, notice or communication hereunder shall be deemed
to have been received on the date delivered to or received at
the premises of the addressee (as evidenced, in the case of
registered or certified mail, by the date noted on the return
receipt in the case of overnight delivery service by the date
such delivery was acknowledged at the premises of the
addressee and in the case of notice by facsimile transmission
the date of confirmation of such transmission).
Section 8.07. Severability Clause.
Any part, provision, representation or warranty of this
Agreement which is prohibited or which is held to be void or
unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions hereof. Any part, provision,
representation or warranty of this Agreement which is
prohibited or unenforceable or is held to be void or
unenforceable in any jurisdiction shall be ineffective, as to
such jurisdiction, to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof. To the extent permitted by applicable law, the
parties hereto waive any provision of law which prohibits or
renders void or unenforceable any provision hereof. If the
invalidity of any part, provision, representation or warranty
of this Agreement shall deprive any party of the economic
benefit intended to be conferred by this Agreement, the
parties shall negotiate, in good faith, to develop a structure
the economic effect of which is as close as possible to the
economic effect of this Agreement without regard to such
invalidity.
Section 8.08. Counterparts.
This Agreement may be executed simultaneously in any number
of counterparts. Each counterpart shall be deemed to be an
original, and all such counterparts shall constitute one and
the same instrument.
Section 8.09. Place of Delivery and Governing
Law.
This Agreement shall be deemed in effect when a fully
executed counterpart hereof is received by the Purchaser in
the State of California, and shall be deemed to have been made
in the State of California. The Agreement shall be construed
in accordance with the laws of the State of California, and
the obligations, rights and remedies of the parties hereunder
shall be determined in accordance with the laws of the State
of California, except to the extent preempted by Federal law.
Section 8.10. Further Agreements.
The Seller and the Purchaser each agree to execute and
deliver to the other such reasonable and appropriate
additional documents, instruments or agreements as may be
necessary or appropriate to effectuate the purposes of this
Agreement (including but not limited to updates of Exhibits
and Schedules to be attached hereto and incorporated herein).
Section 8.11. Intention of the Parties.
It is the intention of the parties that Seller is selling,
and the Purchaser is purchasing, only the Servicing Rights to
the Mortgage Loans. Accordingly, the parties hereby
acknowledge that the related Agencies will remain the sole and
absolute owners of the Mortgage Loans.
31
<PAGE>
Section 8.12. Successors and Assigns;
Assignment of Servicing Rights
Purchase Agreement.
This Agreement shall bind and inure to the benefit of and
be enforceable by the Purchaser and the Seller and the
respective successors and assigns of the Purchaser and the
Seller. This Agreement may not be assigned, pledged or
hypothecated by the Seller to any Person, whether by operation
of law or otherwise, without the prior written consent of the
Purchaser. This Agreement may be freely assigned, pledged or
hypothecated by the Purchaser to any Person without the prior
written consent of the Seller, subject only to restrictions on
the assignment of the Servicing Rights which may exist in the
Agency Requirements.
Section 8.13. Waivers.
No term or provision of this Agreement may be waived or
modified unless such waiver or modification is in writing and
signed by the party against whom such waiver or modification
is sought to be enforced.
Section 8.14. Exhibits; Schedules.
The exhibits and schedules to this Agreement are hereby
incorporated and made a part hereof and are an integral part
of this Agreement.
Section 8.15. General Interpretive Principles.
For purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(a) the terms defined in this Agreement have the meanings
assigned to them in this Agreement and include the plural as
well as the singular, and the use of any gender herein shall
be deemed to include the other gender;
(b) accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally
accepted accounting principles;
(c) references herein to "Articles", "Sections",
"Subsections", "Paragraphs", and other subdivisions without
reference to a document are to designated Articles, Sections,
Subsections, Paragraphs and other subdivisions of this
Agreement;
(d) a reference to a Subsection without further reference
to a Section is a reference to such Subsection as contained in
the same Section in which the reference appears, and this rule
shall also apply to Paragraphs and other subdivisions;
(e) the words "herein", "hereof", "hereunder" and other
words of similar import refer to this Agreement as a whole and
not to any particular provision; and
(f) the term "include" or "including" shall mean by reason
of enumeration.
Section 8.16. Reproduction of Documents.
This Agreement and all documents relating hereto,
including, without limitation, (a) consents, waivers and
modifications which may hereafter be executed, (b) documents
received by any party at the closing, and (c) financial
statements, certificates and other information previously or
hereafter furnished, may be reproduced by any photographic,
photostatic, microfilm, micro-card, miniature photographic or
other similar process. The parties agree that any such
reproduction shall be admissible in evidence as the original
itself in any judicial or administrative proceeding, whether
or not the original is in existence and whether or not such
reproduction was made by a party in the regular course of
business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible
in evidence.
Section 8.17. Conflicts Between This Agreement
and the Servicing Transfer
Procedures Manual.
32
<PAGE>
In the event of any conflict between this Agreement and the
Servicing Transfer Procedures Manual, this Agreement shall
prevail.
Section 8.18. Method of Payment.
Any payment by a party hereto to be made to the other party
hereunder shall be made by wire transfer of immediately
available funds to the account designated by the recipient.
Section 8.19. Arbitration
Any controversy or claim between Purchaser and Seller
arising out of or relating to this Agreement or any agreements
or instruments relating hereto or delivered in connection
herewith, including, but not limited to a claim based on or
arising from an alleged tort, will, at the request of any
party be determined by arbitration. The arbitration shall be
conducted in Richmond, Virginia in accordance with the United
States Arbitration Act (Title 9, U.S. Code), notwithstanding
any choice of law provision in this Agreement, and under the
Commercial Rules of the American Arbitration Association. The
arbitrator(s) shall give effect to statutes of limitation in
determining any claim. Any controversy concerning whether an
issue is arbitrable shall be determined by the arbitrator(s).
The award rendered by the arbitrator(s) shall set forth in
writing the reasons for the award, which shall be final, and
judgment upon the arbitration award may be entered in any
court having jurisdiction thereof. The institution and
maintenance of an action for judicial relief or pursuit of a
provisional or ancillary remedy shall not constitute a waiver
of the right of any party, including the plaintiff, to submit
the controversy or claim to arbitration if any other party
contests such action for judicial relief. In any arbitration
proceeding, the arbitrator(s) is(are) authorized to apportion
costs and expenses, including investigation, legal and other
expense, which will include, if applicable, a reasonable
estimate of allocated costs and expenses of in-house counsel
and legal staff. Such costs and expenses are to be awarded
only after the conclusion of the arbitration and will not be
advanced during the course of such arbitration.
IN WITNESS WHEREOF, the Purchaser and the Seller have
caused their names to be signed hereto by their respective
officers thereunto duly authorized as of the date first above
written.
BANK OF AMERICA, FSB ("PURCHASER")
By: /s/ David M. Grout
Name: David M. Grout
Title: Vice President
CAROLINA FIRST BANK ("SELLER")
By: /s/ William S. Hummers
Name: William S. Hummers III
Title: Executive Vice President
33
