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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event
Reported) April 8, 1997
FINANCIAL ASSET SECURITIES CORP., (as depositor under (i) the
Pooling and Servicing Agreement, amended and restated as of April
1, 1997, relating to the Empire Funding Home Loan REMIC Trust 1997-
A, Home Loan Asset-Backed Certificates, Series 1997-A and (ii) the
Sale and Servicing Agreement, amended and restated as of April 1,
1997, relating to the Empire Funding Home Loan Owner Trust 1997-1,
Home Loan Asset-Backed Notes, Series 1997-1).
FINANCIAL ASSET SECURITIES CORP.
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(Exact name of registrant as specified in its charter)
Delaware 333-21071 06-1442101
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
600 Steamboat Road
Greenwich, Connecticut 06830
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(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code (203) 625-2700
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Item 5. Other Events.
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On April 8, 1997, Financial Asset Securities Corp. (the "Company")
entered into (i) a Pooling and Servicing Agreement amended and restated as of
April 1, 1997 (the "Pooling and Servicing Agreement"), by and among, the
Company, as depositor, Empire Funding Corp. ("Empire"), as transferor,
servicer and claims administrator, EFC Securitized Assets, L.C. ("EFC"), as
contract of insurance holder, and First Bank National Association ("First
Bank"), as trustee relating to the Empire Funding Home Loan REMIC Trust 1997-
A, Home Loan Asset-Backed Certificates, Series 1997-A; (ii) a Sale and
Servicing Agreement amended and restated as of April 1, 1997, by and among,
the Company, as depositor, Empire, as transferor, servicer and claims
administrator, EFC, as contract of insurance holder, Empire Funding Home Loan
Owner Trust 1997-1, as the Owner Trust, and First Bank, as co-owner trustee
and indenture trustee, relating to the Empire Funding Home Loan Owner Trust
1997-1, Home Loan Asset-Backed Notes, Series 1997-1 (the "Notes"); and (iii)
an Indenture amended and restated as of April 1, 1997 (the "Indenture"), by
and among the Owner Trust and First Bank, as indenture trustee, relating to
the Notes. The Pooling and Servicing Agreement, the Sale and Servicing
Agreement and the Indenture are annexed hereto as Exhibit 99.1, Exhibit 99.2
and Exhibit 99.3, respectively.
In addition, the Owner Trust, Empire and First Bank, as administrator of
the Owner Trust have entered into an Administration Agreement, dated as of
March 1, 1997 (the "Administration Agreement"). The Administration Agreement
is annexed hereto as Exhibit 99.4.
Item 7. Financial Statements, Pro Forma Financial
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Information and Exhibits.
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(a) Not applicable.
(b) Not applicable.
(c) Exhibits:
99.1. Pooling and Servicing Agreement
99.2 Sale and Servicing Agreement
99.3 Indenture
99.4 Administration Agreement
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FINANCIAL ASSET SECURITIES CORP.
By: /s/ Craig A. Braun
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Name: Craig A. Braun
Title: Vice President
Dated: April 16, 1997
Exhibit Index
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Exhibit Page
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99.1. Pooling and Servicing Agreement
99.2 Sale and Servicing Agreement
99.3 Indenture
99.4 Administration Agreement
EXECUTION COPY
POOLING AND SERVICING AGREEMENT
Dated as of March 1, 1997
and
Amended and Restated as of April 1, 1997
among
FINANCIAL ASSET SECURITIES CORP.
(Depositor)
EMPIRE FUNDING CORP.
(Transferor, Servicer and Claims Administrator)
EFC SECURITIZED ASSETS, L.C.
(Contract of Insurance Holder)
and
FIRST BANK NATIONAL ASSOCIATION
(Trustee)
EMPIRE FUNDING HOME LOAN REMIC TRUST 1997-A
ASSET BACKED CERTIFICATES
SERIES 1997-A
TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS
Page
----
Section 1.01 Definitions . . . . . . . . . . . . . . . . . . . . . 2
Section 1.02 Other Definitional Provisions . . . . . . . . . . . . 29
ARTICLE III
TRANSFER AND ASSIGNMENT OF THE HOME LOANS;
ISSUANCE OF CERTIFICATES
Section 2.01 Transfer and Assignment of the Home Loans. . . . . . 31
Section 2.04 Books and Records . . . . . . . . . . . . . . . . . . 31
Section 2.05 Delivery of Home Loan Documents . . . . . . . . . . . 32
Section 2.06 Receipt of Home Loan Files; Certain Substitutions;
Initial
Certification by Custodian . . . . . . . . . . . . . . . . 34
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Depositor . . . 37
Section 3.02 Representations and Warranties of the Transferor . . 39
Section 3.03 Representations, Warranties and Covenants of the
Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 3.04 Representations and Warranties regarding Individual
Home
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 3.05 (Reserved) . . . . . . . . . . . . . . . . . . . . . 52
Section 3.06 Purchase and Substitution . . . . . . . . . . . . . . 52
ARTICLE V
ADMINISTRATION AND SERVICING OF THE HOME LOANS
Section 4.01 Duties of the Servicer . . . . . . . . . . . . . . . 56
Section 4.02 Payment of Taxes, Insurance and Other Charges . . . . 58
Section 4.03 Fidelity Bond; Errors and Omission Insurance . . . . 58
Section 4.04 Filing of Continuation Statements . . . . . . . . . . 58
Section 4.05 . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 4.06 Superior Liens . . . . . . . . . . . . . . . . . . . 59
Section 4.07 Subservicing . . . . . . . . . . . . . . . . . . . . 59
Section 4.08 Successor Servicers . . . . . . . . . . . . . . . . . 61
Section 4.09 Maintenance of Insurance . . . . . . . . . . . . . . 62
Section 4.10 Inspections . . . . . . . . . . . . . . . . . . . . . 62
Section 4.11 Reports to the Securities and Exchange Commission . . 62
Section 4.12 Claim for FHA Insurance and Foreclosure . . . . . . . 63
Section 4.13 Title, Management and Disposition of Foreclosure
Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
ARTICLE VI
ESTABLISHMENT OF ACCOUNTS
Section 5.01 Collection Account and Certificate Distribution
Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 5.02 Distributions to Certificateholders . . . . . . . . . 76
Section 5.03 Accounts; Trust Account Property . . . . . . . . . . 76
Section 5.04 Allocation of Losses . . . . . . . . . . . . . . . . 78
ARTICLE VI
THE CERTIFICATES
Section 6.01 The Certificates . . . . . . . . . . . . . . . . . . 83
Section 6.02 Registration of Transfer and Exchange of
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 6.03 Mutilated, Destroyed, Lost or Stolen Certificates . . 86
Section 6.04 Persons Deemed Owners . . . . . . . . . . . . . . . . 87
ARTICLE VII
GENERAL SERVICING PROCEDURE
Section 7.01 Due-On-Sale; Due-on-Encumbrance . . . . . . . . . . . 91
Section 7.02 Release of Home Loan Files . . . . . . . . . . . . . 92
Section 7.03 Servicing Compensation . . . . . . . . . . . . . . . 93
Section 7.04 Statement as to Compliance and Financial Statements . 93
Section 7.05 Independent Public Accountants' Servicing Report . . 94
Section 7.06 Right to Examine Servicer Records . . . . . . . . . . 94
Section 7.07 Reports to the Trustee; Collection Account
Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Section 7.08 Financial Statements . . . . . . . . . . . . . . . . 95
ARTICLE VIII
CONCERNING THE CONTRACT OF INSURANCE HOLDER
Section 8.01 Compliance with Title I and Filing of FHA Claims . . 96
Section 8.02 Contract of Insurance Holder . . . . . . . . . . . . 97
ARTICLE IX
THE SERVICER
Section 9.01 Indemnification; Third Party Claims . . . . . . . . . 99
Section 9.02 Merger or Consolidation of the Servicer . . . . . . . 100
Section 9.03 Limitation on Liability of the Servicer and Others . 101
Section 9.04 Servicer Not to Resign; Assignment . . . . . . . . . 101
Section 9.05 Relationship of Servicer to the Trustee . . . . . . . 102
Section 9.06 Servicer May Own Certificates . . . . . . . . . . . . 102
ARTICLE X
DEFAULT
Section 10.01 Events of Default . . . . . . . . . . . . . . . . . . 103
Section 10.02 Trustee to Act; Appointment of Successor . . . . . . 104
Section 10.03 Waiver of Defaults . . . . . . . . . . . . . . . . . 106
ARTICLE XI
CONCERNING THE TRUSTEE
Section 11.01 Duties of the Trustee and Contract of Insurance
Holder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Section 11.02 Certain Matters Affecting the Trustee. . . . . . . . 109
Section 11.03 Trustee Not Liable for Certificates or Home Loans. . 111
Section 11.04 Trustee May Own Certificates. . . . . . . . . . . . . 111
Section 11.05 Trustee's Fees and Expenses; Indemnification. . . . . 112
Section 11.06 Eligibility Requirements for Trustee. . . . . . . . 112
Section 11.07 Resignation and Removal of the Trustee. . . . . . . . 112
Section 11.08 Successor Trustee. . . . . . . . . . . . . . . . . . 113
Section 11.09 Merger or Consolidation of the Trustee. . . . . . . . 114
Section 11.10 Appointment of Co-Trustee or Separate Trustee. . . . 114
Section 11.11 Appointment of Custodians. . . . . . . . . . . . . . 115
Section 11.12 Certain Tax Matters. . . . . . . . . . . . . . . . . 116
Section 11.13 Representations and Warranties of the Trustee. . . . 118
Section 11.14 Streit Act. . . . . . . . . . . . . . . . . . . . . . 119
Section 11.15 Rights to Direct Trustee. . . . . . . . . . . . . . . 120
Section 11.16 Reports to the Securities and Exchange Commission. . 120
ARTICLE XII
TERMINATION
Section 12.01 Termination . . . . . . . . . . . . . . . . . . . . . 121
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.01 Acts of Certificateholders . . . . . . . . . . . . . 124
Section 13.02 Amendment . . . . . . . . . . . . . . . . . . . . . . 124
Section 13.03 Recordation of Agreement . . . . . . . . . . . . . . 125
Section 13.04 Duration of Agreement . . . . . . . . . . . . . . . . 125
Section 13.05 Governing Law . . . . . . . . . . . . . . . . . . . . 125
Section 13.06 Notices . . . . . . . . . . . . . . . . . . . . . . . 125
Section 13.07 Severability of Provisions . . . . . . . . . . . . . 126
Section 13.08 No Partnership . . . . . . . . . . . . . . . . . . . 126
Section 13.09 Counterparts . . . . . . . . . . . . . . . . . . . . 126
Section 13.10 Successors and Assigns . . . . . . . . . . . . . . . 126
Section 13.11 Headings . . . . . . . . . . . . . . . . . . . . . . 126
Section 13.12 Actions of Certificateholders . . . . . . . . . . . . 126
Section 13.13 Reports to Rating Agencies. . . . . . . . . . . . . . 127
EXHIBITS
EXHIBIT A Home Loan Schedule
EXHIBIT B Form of Servicer's Monthly Remittance Report to Trustee
EXHIBIT C (Reserved)
EXHIBIT D Form of Senior Certificate
EXHIBIT E Form of Mezzanine Certificate
EXHIBIT F Form of Class B Certificate
EXHIBIT G Form of Class R Certificate
EXHIBIT H Form of Agreement of Appointment and
Acceptance of Separate Trustee
This Pooling and Servicing Agreement is entered into effective as of
March 1, 1997, and amended and restated as of April 1, 1997 with effect from
and as of March 1, 1997, among EMPIRE FUNDING CORP., an Oklahoma corporation
("Empire Funding"), as Transferor (in such capacity, the "Transferor"),
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Servicer (in such capacity, the "Servicer") and as Claims Administrator (in
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such capacity, the "Claims Administrator"), FINANCIAL ASSET SECURITIES CORP.,
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a Delaware corporation, as Depositor (the "Depositor"), EFC SECURITIZED
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ASSETS, L.C., a Texas limited liability company, as Contract of Insurance
Holder (in such capacity, the "Contract of Insurance Holder"), and FIRST BANK
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NATIONAL ASSOCIATION, a national banking association, as Trustee (in such
capacity, the "Trustee").
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W I T N E S S E T H:
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WHEREAS, Empire Funding, as Transferor, Servicer and Claims
Administrator, the Depositor, the Trustee and the Contract of Insurance
Holder have heretofore executed and delivered a Pooling and Servicing
Agreement dated as of March 1, 1997 (the "Original Pooling and Servicing
Agreement"); and
WHEREAS, Section 13.02 of the Original Pooling and Servicing
Agreement provides that it may be amended from time to time by the Depositor,
the Servicer and the Transferor by written agreement, with the prior written
consent of the Majority Certificateholders, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions
thereof, or of modifying in any manner the rights of the Certificateholders
thereunder; and
WHEREAS, the Depositor, the Servicer and the Transfer or deem it
advisable to amend and restate the Original Pooling and Servicing Agreement;
and
WHEREAS, Empire Funding, as Transferor, Servicer and Claims
Administrator, the Depositor, the Trustee and the Contract of Insurance
Holder have duly authorized the execution and delivery of this amendment and
restatement of the Original Pooling and Servicing Agreement and have done all
things necessary to make this amended and restated Pooling and Servicing
Agreement a valid agreement of the parties hereto, in accordance with its
terms.
NOW THEREFORE, in consideration of the mutual agreements herein
contained, Empire Funding, as Transferor, Servicer and Claims Administrator,
the Depositor, the Trustee and the Contract of Insurance Holder agree as
follows for the benefit of each of them and for the benefit of the Holders
from time to time of the Empire Funding Home Loan REMIC Trust 1997-A, Asset
Backed Certificates, Series 1997-A, issued hereunder:
ARTICLE II
DEFINITIONS
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Section 1.01 Definitions. Whenever used in this Agreement, the
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following words and phrases, unless the context otherwise requires, shall
have the meanings specified in this Article. Unless otherwise specified, all
calculations of interest described herein shall be made on the basis of a
360-day year consisting of twelve 30-day months.
Accepted Servicing Procedures: Servicing procedures that meet at least
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the same standards the Servicer would follow in servicing mortgage loans such
as the Home Loans held for its own account, giving due consideration to
standards of practice of prudent mortgage lenders and loan servicers that
originate and service mortgage loans comparable to the Home Loans, applicable
FHA regulations and to the reliance placed by the Certificateholders on the
Servicer for the servicing of the Home Loans but without regard to:
(i) any relationship that the Servicer, any Subservicer or any
Affiliate of the Servicer or any Subservicer may have with the related
Obligor;
(ii) the ownership of any Certificates by the Servicer or any
Affiliate of the Servicer;
(iii) the Servicer's obligation to make Servicing Advances; or
(iv) the Servicer's or any Subservicer's right to receive
compensation for its services hereunder with respect to any particular
transaction.
Accounts: The Certificate Distribution Account, the FHA Premium Account
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and the Collection Account.
Acquisition Date: With respect to any Foreclosure Property, the first
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day on which such Foreclosure Property is considered to be acquired by the
Trust within the meaning of Treasury Regulation Section 1.856-6(b)(1) (i.e.,
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the first day on which the Trust is treated as the owner of such Foreclosure
Property for federal income tax purposes).
Aggregate Certificate Principal Balance: With respect to any
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Distribution Date, the aggregate of the Class Principal Balances of the
Certificates.
Agreement: This Pooling and Servicing Agreement and all amendments
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hereof and supplements hereto.
Allocable Loss Amount: With respect to each Distribution Date, the
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excess, if any, of (a) the aggregate of the Class Principal Balances of all
Classes of Certificates (after giving effect to all distributions on such
Distribution Date) over (b) the Pool Principal Balance as of the end of
the preceding Due Period.
Allocable Loss Amount Priority: With respect to any Distribution Date,
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sequentially, to the Class B Certificates, the Class M-2 Certificates and the
Class M-1 Certificates, in that order.
Anticipated Termination Date: The Distribution Date specified in a
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Notice of Termination delivered to the Trustee pursuant to Section 12.01.
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Assignment of Mortgage: With respect to each Home Loan secured by a
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Mortgage, an assignment, notice of transfer or equivalent instrument
sufficient under the laws of the jurisdiction wherein the related Mortgaged
Property is located to reflect or record the sale of the related Home Loan
which assignment, notice of transfer or equivalent instrument may be in the
form of one or more blanket assignments covering mortgages secured by
Mortgaged Properties located in the same county, if permitted by law.
Available Collection Amount: With respect to any Distribution Date, an
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amount without duplication equal to the sum of: (i) all amounts received on
the Home Loans or required to be paid by the Servicer, the Transferor or the
Depositor during the related Due Period (exclusive of amounts not required to
be deposited by the Servicer in the Collection Account pursuant to Section
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5.01(b)(1) and amounts permitted to be withdrawn by the Trustee from the
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Collection Account pursuant to Section 5.01(b)(3) of this Agreement) as
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reduced by any portion thereof that may not be withdrawn therefrom pursuant
to an order of a United States bankruptcy court of competent jurisdiction
imposing a stay pursuant to Section 362 of the United States Bankruptcy Code;
(ii) FHA Insurance Premiums in respect of FHA Loans received during the
related Due Period; (iii) payments of FHA Insurance in respect of FHA Loans
received during the related Due Period; (iv) with respect to the final
Distribution Date, the Termination Price; (v) any and all income or gain from
investments in the Collection Account; and (vi) the Purchase Price paid for
any Home Loans required to be purchased pursuant to Section 3.06 prior to the
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related Determination Date.
Available Distribution Amount: With respect to any Distribution Date,
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the Available Collection Amount minus the amount required to be paid from the
Certificate Distribution Account pursuant to Section 5.01(c)(i).
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Book-Entry Certificate: Any of the Certificates (other than the Class
----------------------
R Certificates), which shall be registered in the name of the Depository or
its nominee, the ownership of which is reflected on the books of the
Depository or on the books of a person maintaining an account with such
Depository (directly or as an indirect participant in accordance with the
rules of such Depository).
Business Day: Any day other than (i) a Saturday or Sunday, or (ii) a
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day on which banking institutions in New York City or in the city in which
the corporate trust office of the Trustee is located or the city in which the
Servicer's servicing operations are located and are authorized or obligated
by law or executive order to be closed.
Certificate: Any one of the Empire Funding Home Loan REMIC Trust 1997-A,
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Asset Backed Certificates, Series 1997-A, executed by the Trustee on behalf
of the Trust and countersigned by the Trustee.
Certificate Distribution Account: The account established and
--------------------------------
maintained pursuant to Section 5.01(a)(2).
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Certificate Interest Rate: With respect to each Class of Certificates
-------------------------
(other than the Class R Certificates), the per annum rate of interest payable
to the holders of such Class of Certificates. The Certificate Interest Rates
with respect to the Classes of Certificates (other than the Class R
Certificates) are as follows: Class A-1: 7.20%; Class A-2: 7.04%; Class A-3:
7.77%; Class M-1: 7.88%; Class M-2: 8.08%; and Class B: 8.47%.
Certificate Register and Certificate Registrar: The register
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established, and the registrar appointed, pursuant to Section 6.02.
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Certificateholder or Holder: A holder of a Certificate.
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Claims Administrator: Empire Funding, in its capacity as the claims
--------------------
administrator hereunder.
Class: With respect to the Certificates, all Certificates bearing the
-----
same class designation.
Class B Certificateholders' Interest Carry-Forward Amount: With respect
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to any Distribution Date, the excess, if any, of (A) the Class B
Certificateholders' Monthly Interest Distribution Amount for the preceding
Distribution Date plus any outstanding Class B Certificateholders' Interest
Carry-Forward Amount for preceding Distribution Dates, over (B) the amount in
respect of interest that is actually deposited in the Certificate
Distribution Account on such preceding Distribution Date net of the sum of
the Senior Certificateholders' Interest Carry-Forward Amount and the
Mezzanine Certificateholders' Interest Carry-Forward Amount for such
preceding Distribution Date.
Class B Certificateholders' Interest Distribution Amount: With respect
--------------------------------------------------------
to any Distribution Date, the sum of the Class B Certificateholders' Monthly
Interest Distribution Amount for such Distribution Date and the Class B
Certificateholders' Interest Carry-Forward Amount for such Distribution Date;
provided however, that on the Distribution Date, if any, on which the Class
Principal Balance of the Class B Certificates is reduced to zero through
application of an Allocable Loss Amount, the Class B Certificateholders'
Interest Distribution Amount shall be equal to the Class B
Certificateholders' Interest Distribution Amount calculated without giving
effect to this proviso, minus the portion, if any, of the Allocable Loss
Amount that otherwise would be applied to the Classes of Mezzanine
Certificates on such date in the absence of this proviso.
Class B Certificateholders' Monthly Interest Distribution Amount: With
----------------------------------------------------------------
respect to any Distribution Date, thirty (30) days' accrued interest at
applicable Certificate Interest Rate on the Class Principal Balance of the
Class B Certificates immediately preceding such Distribution Date (or, in
the case of the first Distribution Date, on the Closing Date).
Class B Optimal Principal Balance: With respect to any Distribution
---------------------------------
Date prior to the Stepdown Date, zero; and with respect to any other
Distribution Date, the Pool Principal Balance as of the related Determination
Date minus the sum of (i) the aggregate Class Principal Balance of the Senior
Certificates and the Mezzanine Certificates (after taking into account any
distributions made on such Distribution Date in reduction of the Class
Principal Balances of such Classes of Certificates prior to such
determination) and (ii) the Overcollateralization Target Amount for such
Distribution Date; provided however, that such amount shall never be less
than zero or greater than the Original Class Principal Balance of the Class B
Certificates.
Class Factor: With respect to each Class and any date of determination,
------------
the then applicable Class Principal Balance of such Class divided by the
Original Class Principal Balance thereof.
Class M-1 Optimal Principal Balance: With respect to any Distribution
-----------------------------------
Date prior to the Stepdown Date, zero; and with respect to any other
Distribution Date, the Pool Principal Balance as of the related Determination
Date minus the sum of (i) the aggregate Class Principal Balance of the Senior
Certificates (after taking into account distributions made on such
Distribution Date in reduction of the Class Principal Balances of the Classes
of Senior Certificates prior to such determination) and (ii) the greater of
(x) the sum of (1) 23.50% of the Pool Principal Balance as of the related
Determination Date and (2) the Overcollateralization Target Amount for such
Distribution Date (calculated without giving effect to the proviso in the
definition thereof) and (y) 0.50% of the Original Pool Principal Balance;
provided however, that such amount shall never be less than zero or greater
than the Original Class Principal Balance of the Class M-1 Certificates.
Class M-2 Optimal Principal Balance: With respect to any Distribution
-----------------------------------
Date prior to the Stepdown Date, zero; with respect to any other Distribution
Date, the Pool Principal Balance as of the related Determination Date minus
the sum of (i) the aggregate Class Principal Balance of the Senior
Certificates (after taking into account any distributions made on such
Distribution Date in reduction of the Class Principal Balances of the Classes
of Senior Certificates prior to such determination) plus the Class Principal
Balance of the Class M-1 Certificates (after taking into account any
distributions made on such Distribution Date in reduction of the Class
Principal Balance of the Class M-1 Certificates prior to such determination)
and (ii) the greater of (x) the sum of (1) 2.00% of the Pool Principal
Balance as of the related Determination Date and (2) the
Overcollateralization Target Amount for such Distribution Date (without
giving effect to the proviso in the definition thereof) and (y) 0.50% of the
Original Pool Principal Balance; provided, however, that such amount shall
never be less than zero or greater than the Original Class Principal Balance
of the Class M-2 Certificates.
Class Principal Balance: With respect to each Class (other than the
-----------------------
Class R Certificates) and as of any date of determination, the Original Class
Principal Balance of such Class reduced by the sum of (i) all amounts
previously distributed in respect of principal of such Class on all previous
Distribution Dates and (ii) with respect to the Class M-1, Class M-2 and
Class B Certificates, all Allocable Loss Amounts applied in reduction of
principal of such Classes on all previous Distribution Dates. The Class R
Certificates have no Class Principal Balance.
Class R Certificate: Any one of the Certificates designated on the face
-------------------
thereof as a Class R Certificate, executed, countersigned and delivered by
the Trustee, representing the right to distributions as set forth herein and
evidencing an interest designated as the "residual interest" in the Trust for
the purposes of the REMIC Provisions.
Class Vote: As long as Certificates of any Class of Senior, Mezzanine
----------
or Class B Certificates is Outstanding, a determination by the Holders of
Outstanding Certificates of such Class representing more than 50% of the
aggregate of the Percentage Interests of such Class (or such higher
percentage for such Classes as shall be specified in the applicable
provisions hereunder) with respect to which votes are cast on the issue on or
prior to 30 days after receipt of notice, and after all such Classes of
Certificates are no longer Outstanding, by the Holders of Outstanding Class R
Certificates representing more than 50% of the Residual Interests of such
Class R Certificates.
Clearing Agency: An organization registered as a "clearing agency"
---------------
pursuant to Section 17A of the Securities Exchange Act of 1934, as amended.
Closing Date: March 31, 1997.
------------
Code: The Internal Revenue Code of 1986, as amended from time to time,
----
and Treasury Regulations promulgated thereunder.
Collection Account: The account established and maintained by the
------------------
Servicer in accordance with Section 5.01.
------------
Combination Loan: A loan, the proceeds of which were used by the
----------------
Obligor in combination to finance property improvements and for debt
consolidation or other purposes.
Contract of Insurance: The contract of insurance under Title I covering
---------------------
the FHA Loans held under the name EFC Securitized Assets, L.C., or any
successor thereto, as Contract of Insurance Holder hereunder.
Contract of Insurance Holder: EFC Securitized Assets, L.C., its
----------------------------
successors in interest, and any successor thereto pursuant to the terms of
this Agreement.
Corporate Trust Office: The office of the Trustee at which at any
----------------------
particular time its corporate trust business shall be principally
administered, located on the Closing Date at First Bank National Association,
180 East 5th Street, St. Paul, Minnesota 55101, Attention: Structured
Finance.
Custodial Agreement: The custodial agreement dated as of March 1, 1997
-------------------
by and between the Depositor, Empire Funding, as the Transferor and the
Servicer, the Trustee, and First Bank National Association, a national
banking association, as the Custodian providing for the retention of the Home
Loan Files by the Custodian on behalf of the Trustee.
Custodian: Any custodian appointed by the Trustee pursuant to the
---------
Custodial Agreement, which shall not be affiliated with the Servicer, the
Transferor, any Subservicer, or the Depositor. First Bank National
Association shall be the initial Custodian pursuant to the terms of the
Custodial Agreement.
Custodian Fee: If applicable, the annual fee payable to the Custodian,
-------------
calculated and payable monthly on each Distribution Date pursuant to Section
5.01(c)(i) equal to the fee, if any, set forth in the Custodial Agreement.
Cut-Off Date: Close of business on February 28, 1997; except with
------------
respect to 12 Home Loans for which the latest Cut-Off Date is March 26, 1997.
DCR: Duff & Phelps Credit Rating Co.
---
Debt Consolidation Loan: A loan, the proceeds of which were primarily
-----------------------
used by the related Obligor for debt consolidation purposes or purposes other
than to finance property improvements.
Debt Instrument: The note or other evidence of indebtedness evidencing
---------------
the indebtedness of an Obligor under a Home Loan.
Defaulted Home Loan: With respect to any date of determination, any
-------------------
Home Loan, including without limitation any Liquidated Home Loan, with
respect to which any of the following has occurred as of the end of the
preceding Due Period: (a) a claim has been paid or finally rejected pursuant
to the Contract of Insurance; (b) foreclosure or similar proceedings have
been commenced; (c) any portion of a Monthly Payment becomes 180 days past
due by the related Obligor; or (d) the Servicer or any Subservicer has
determined in good faith and in accordance with customary servicing practices
that such Home Loan is in default or imminent default.
Defective Home Loan: As defined in Section 3.06 hereof.
------------------- ------------
Deleted Home Loan: A Home Loan replaced or to be replaced by one or
-----------------
more Qualified Substitute Home Loans.
Delinquent: A Home Loan is "Delinquent" if any Monthly Payment due
----------
thereon is not made by the close of business on the day such Monthly Payment
is scheduled to be paid. A Home Loan is "30 days Delinquent" if such Monthly
Payment has not been received by the close of business on the corresponding
day of the month immediately succeeding the month in which such Monthly
Payment was due, or, if there is no such corresponding day (e.g., as when a
----
30-day month follows a 31-day month in which a payment was due on the 31st
day of such month) then on the last day of such immediately succeeding month.
The determination of whether a Home Loan is "60 days Delinquent," "90 days
Delinquent", etc., shall be done in like manner.
Delivery: When used with respect to Trust Account Property means:
--------
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that constitute
"instruments" within the meaning of Section 9-105(1)(i) of the UCC and
are susceptible of physical delivery, transfer thereof to the Trustee or
its nominee or custodian by physical delivery to the Trustee or its
nominee or custodian endorsed to, or registered in the name of, the
Trustee or its nominee or custodian or endorsed in blank, and, with
respect to a certificated security (as defined in Section 8-102 of the
UCC) transfer thereof (i) by delivery of such certificated security
endorsed to, or registered in the name of, the Trustee or its nominee or
custodian or endorsed in blank to a financial intermediary (as defined
in Section 8-313 of the UCC) and the making by such financial
intermediary of entries on its books and records identifying such
certificated securities as belonging to the Trustee or its nominee or
custodian and the sending by such financial intermediary of a
confirmation of the purchase of such certificated security by the
Trustee or its nominee or custodian, or (ii) by delivery thereof to a
"clearing corporation" (as defined in Section 8-102(3) of the UCC) and
the making by such clearing corporation of appropriate entries on its
books reducing the appropriate securities account of the transferor and
increasing the appropriate securities account of a financial
intermediary by the amount of such certificated security, the
identification by the clearing corporation of the certificated
securities for the sole and exclusive account of the financial
intermediary, the maintenance of such certificated securities by such
clearing corporation or a "custodian bank" (as defined in
Section 8-102(4) of the UCC) or the nominee of either subject to the
clearing corporation's exclusive control, the sending of a confirmation
by the financial intermediary of the purchase by the Trustee or its
nominee or custodian of such securities and the making by such financial
intermediary of entries on its books and records identifying such
certificated securities as belonging to the Trustee or its nominee or
custodian (all of the foregoing, "Physical Property"), and, in any
event, any such Physical Property in registered form shall be in the
name of the Trustee or its nominee or custodian; and such additional or
alternative procedures as may hereafter become appropriate to effect the
complete transfer of ownership of any such Trust Account
Property (as defined herein) to the Trustee or its nominee or custodian,
consistent with changes in applicable law or regulations or the
interpretation thereof;
(b) with respect to any securities issued by the U.S. Treasury,
FNMA or FHLMC that is a book-entry security held through the Federal
Reserve System pursuant to federal book-entry regulations, the following
procedures, all in accordance with applicable law, including applicable
federal regulations and Articles 8 and 9 of the UCC: book-entry
registration of such Trust Account Property to an appropriate book-entry
account maintained with a Federal Reserve Bank by a financial
intermediary that is also a "depository" pursuant to applicable federal
regulations and issuance by such financial intermediary of a deposit
advice or other written confirmation of such book-entry registration to
the Trustee or its nominee or custodian of the purchase by the Trustee
or its nominee or custodian of such book-entry securities; the making by
such financial intermediary of entries in its books and records
identifying such book-entry security held through the Federal Reserve
System pursuant to federal book-entry regulations as belonging to the
Trustee or its nominee or custodian and indicating that such custodian
holds such Trust Account Property solely as agent for the Trustee or its
nominee or custodian; and such additional or alternative procedures as
may hereafter become appropriate to effect complete transfer of
ownership of any such Trust Account Property to the Trustee or its
nominee or custodian, consistent with changes in applicable law or
regulations or the interpretation thereof; and
(c) with respect to any item of Trust Account Property that is an
uncertificated security under Article 8 of the UCC and that is not
governed by clause (b) above, registration on the books and records of
the issuer thereof in the name of the financial intermediary, the
sending of a confirmation by the financial intermediary of the purchase
by the Trustee or its nominee or custodian of such uncertificated
security, the making by such financial intermediary of entries on its
books and records identifying such uncertificated certificates as
belonging to the Trustee or its nominee or custodian.
Denomination: With respect to the Certificates (other than the Class
------------
R Certificates), the portion of the Original Class Principal Balance
represented by such Certificate as specified on the face thereof.
Depositor: Financial Asset Securities Corp., a Delaware corporation,
---------
and any successor thereto.
Depository: The initial Depository shall be The Depository Trust
----------
Company, the nominee of which is CEDE & Co., as the registered Holder of the
Book-Entry Certificates. The Depository shall at all times be a "clearing
corporation" as defined in Section 8-102(3) of the Uniform Commercial Code of
the State of New York.
Depository Agreement: The agreement entered among the Depositor, the
--------------------
Trustee, and the Depository, in connection with the issuance of the
Certificates.
Depository Participant: A broker, dealer, bank or other financial
----------------------
institution or other Person for whom from time to time a Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
Determination Date: With respect to any Distribution Date, the
------------------
fourteenth calendar day of the month in which such Distribution Date occurs
or if such day is not a Business Day, the immediately preceding Business Day.
Distribution Date: The 25th day of any month or if such 25th day is not
-----------------
a Business Day, the first Business Day immediately following such day,
commencing in April 1997.
Distribution Statement: As defined in Section 5.05.
---------------------- ------------
DTC: The Depository Trust Company.
---
Due Date: The day of the month on which the Monthly Payment is due from
--------
the Obligor on a Home Loan.
Due Period: With respect to any Determination Date or Distribution
----------
Date, the calendar month immediately preceding such Determination Date or
Distribution Date, as the case may be.
Early Termination Notice Date: Any date on which the Aggregate
-----------------------------
Certificate Principal Balance is less than 10% of the aggregate of the Class
Principal Balances of the Certificates as of the Closing Date.
Eligible Account: At any time, an account which is any of the
----------------
following: (i) an account maintained with a depository institution (A) the
long-term debt obligations of which are at such time rated by each Rating
Agency in one of their two highest long-term rating categories, or (B) the
short-term debt obligations of which are then rated by each Rating Agency in
their highest short-term rating category; (ii) an account or accounts the
deposits in which are fully insured by either the Bank Insurance Fund or the
Savings Association Insurance Fund of the FDIC; (iii) a trust account (which
shall be a "segregated trust account") maintained with the corporate trust
department of a federal or state chartered depository institution or trust
company with trust powers and acting in its fiduciary capacity for the
benefit of the Trustee, which depository institution or trust company shall
have capital and surplus of not less than $50,000,000; or (iv) an account
that will not cause any Rating Agency to downgrade or withdraw its
then-current rating(s) assigned to the Certificates or the Class B
Certificates, as evidenced in writing by such Rating Agency. (Each reference
in this definition of "Eligible Account" to the Rating Agency shall be
construed as a reference to Standard & Poor's and DCR.)
Eligible Servicer: A Person that (i) is servicing a portfolio of Title
-----------------
I mortgage loans, (ii) is legally qualified to service, and is capable of
servicing, the FHA Loans and has all licenses required to service Title I
mortgage loans, (iii) has demonstrated the ability professionally and
competently to service a portfolio of FHA insured mortgage loans similar to
the FHA Loans with reasonable skill and care, (iv) has demonstrated the
ability professionally and competently to service a portfolio of mortgage
loans similar to the Home Loans, and (v) has a net worth calculated in
accordance with generally accepted accounting principles of at least
$500,000.
Empire Funding: Empire Funding Corp.
--------------
Event of Default: As described in Section 10.01 hereof.
---------------- -------------
Excess Spread: With respect to any Distribution Date, the excess of (a)
-------------
the Available Distribution Amount over (b) the Regular Distribution Amount.
FDIC: The Federal Deposit Insurance Corporation and any successor
----
thereto.
FHA: The Federal Housing Administration and any successor thereto.
---
FHA Insurance: Insurance issued by FHA pursuant to Title I of the
-------------
National Housing Act of 1934, as amended.
FHA Insurance Coverage Insufficiency: At the time of a prospective
------------------------------------
claim for reimbursement under the Contract of Insurance for an FHA Loan
pursuant to Section 4.12, the amount by which the sum of all claims
-------------
previously paid by the FHA in respect of all FHA Loans and the amount
expected to be received in respect of such prospective claim for such FHA
Loan exceeds the Trust Designated Insurance Amount.
FHA Insurance Coverage Reserve Account: The account established by the
--------------------------------------
FHA pursuant to the Contract of Insurance which is adjusted and maintained
under Title I (see 24 C.F.R. 201.32(a)).
FHA Insurance Payment Amount: With respect to any Distribution Date and
----------------------------
with respect to an FHA Loan for which an insurance claim has been made by the
Contract of Insurance Holder or the Claims Administrator and paid by the FHA
or rejected, in part, by the FHA, an amount equal to the sum of such of the
following as are appropriate: (i) the amount, if any, received from the FHA,
(ii) with respect to claims rejected in part, the amount, if any, received
from Empire Funding or the Servicer pursuant to Section 4.12 and (iii) the
------------
amount received from the sale of FHA Pending Claims sold pursuant to Section
-------
12.01(d).
- --------
FHA Loans: The Home Loans designated as FHA Loans on the Home Loan
---------
Schedule.
FHA Pending Claims: As defined in Section 12.01(d).
------------------ ----------------
FHA Premium Account: The account which is an Eligible Account
-------------------
established and maintained by the Trustee pursuant to Section 5.01(a)(3).
------------------
FHA Premium Account Deposit: With respect to any Distribution Date, an
---------------------------
amount equal to the greater of (i) 1/12 times 0.75% times the aggregate
Principal Balance of all FHA Loans, other than Invoiced Loans for which
premiums for FHA Insurance have been received, as of the first day of the
calendar month preceding the month of such Distribution Date (or the original
Principal Balance of such Loans as of the applicable Cut-Off Date with
respect to the first Distribution Date) and (ii) the positive excess, if any,
of (A) the projected amount of premium and other charges due under the
Contract of Insurance for the next succeeding Due Period over (B) the balance
in the FHA Premium Account as of the related Determination Date.
FHA Reserve Amount: As to each FHA Loan, 10% of the Principal Balance
------------------
as of the Cut-Off Date of such FHA Loan.
FHLMC: The Federal Home Loan Mortgage Corporation and any successor
-----
thereto.
FICO Score: The credit evaluation scoring methodology developed by
----------
Fair, Isaac and Company.
Fidelity Bond: As described in Section 4.03 hereof.
------------- ------------
Final Date: The later of:
----------
(i) two years after the last insurance claim with respect to
an FHA Loan filed with the FHA was certified for payment by FHA, or
(ii) the final settlement date with respect to any insurance
claim for an FHA Loan rejected by the FHA.
Final Residual Distribution Amount: With respect to the Distribution
----------------------------------
Date which coincides with the Termination Date, all amounts, if any,
remaining in the Certificate Distribution Account and the FHA Premium Account
and all other assets, if any, held by the Trust after all payments required
to be made pursuant to Section 5.01(d)(vii) through 5.01(e)(iii)) have been
-------------------- ------------
made or provided for on such Distribution Date.
Final Scheduled Distribution Date: For each Class of Certificates
---------------------------------
(other than the Class R Certificates), the following Distribution Dates:
Class A-1: February 25, 2002;
Class A-2: March 25, 2008
Class A-3: June 25, 2018
Class M-1: June 25, 2018
Class M-2: June 25, 2018
Class B: June 25, 2018
FNMA: The Federal National Mortgage Association and any successor
----
thereto.
Foreclosed Loan: As of any date of determination, any Mortgage Loan,
---------------
other than a Mortgage Loan for which a claim is pending under the Contract of
Insurance, that has been discharged as a result of (i) the completion of
foreclosure or comparable proceedings; (ii) the Trustee's acceptance of the
deed or other evidence of title to the related Property in lieu of
foreclosure or other comparable proceeding; or (iii) the acquisition by the
Trustee of title to the related Property by operation of law.
Foreclosure Property: Any real property securing a Foreclosed Loan that
--------------------
has been acquired by the Servicer through foreclosure, deed in lieu of
foreclosure or similar proceedings in respect of the related Home Loan.
Home Loan: An individual Home Loan that is conveyed to the Trust
---------
pursuant to this Agreement on the Closing Date, together with the rights and
obligations of a holder thereof and payments thereon and proceeds therefrom
received after the Cut-off Date, the Home Loans subject to this Agreement
being identified on the Home Loan Schedule annexed hereto as Exhibit A. As
---------
applicable, a Home Loan shall be deemed to refer to the related Debt
Instrument, the Mortgage, if any, and any related Foreclosure Property.
Home Loan File: As defined in Section 2.05.
-------------- ------------
Home Loan Interest Rate: The fixed annual rate of interest borne by a
-----------------------
Debt Instrument, as shown on the related Home Loan Schedule as the same may
be modified by the Servicer in accordance with Section 4.01(c) hereof.
---------------
Home Loan Pool: The pool of Home Loans.
--------------
Home Loan Purchase Agreement: The home loan purchase agreement between
----------------------------
the Transferor, EFC Securitized Assets, L.C., and the Depositor, dated as of
March 1, 1997.
Home Loan Schedule: The schedule of Home Loans specifying with respect
------------------
to each Home Loan, the information set forth on Exhibit A attached hereto, as
amended or supplemented from time to time.
HUD: The United States Department of Housing and Urban Development and
---
any successor thereto.
Independent: When used with respect to any specified Person, such
-----------
Person (i) is in fact independent of Empire Funding, the Servicer, the Claims
Administrator, the Depositor or any of their respective affiliates, (ii) does
not have any direct financial interest in or any material indirect financial
interest in any of Empire Funding, the Servicer, the Claims Administrator,
the Depositor or any of their respective affiliates and (iii) is not
connected with any of Empire Funding, the Servicer, the Claims Administrator,
the Depositor or any of their respective affiliates, as an officer, employee,
promoter, underwriter, trustee, partner, director or Person performing
similar functions; provided, however, that a Person shall not fail to be
Independent
-------- -------
of Empire Funding, the Servicer, the Claims Administrator, the Depositor or
any of their respective affiliates merely because such Person is the
beneficial owner of 1% or less of any class of securities issued by Empire
Funding, the Servicer, the Claims Administrator, the Depositor or any of
their respective affiliates, as the case may be.
Independent Accountants: A firm of nationally recognized certified
-----------------------
public accountants which is Independent.
Insurance Policies: With respect to any Property, any related insurance
------------------
policy other than the Contract of Insurance.
Insurance Proceeds: With respect to any Property, all amounts collected
------------------
in respect of Insurance Policies and not required to be applied to the
restoration of the related Property or paid to the related Obligor.
Insurance Record: The record established and maintained by the Claims
----------------
Administrator (in a manner consistent with the Title I provisions set forth
in 24 C.F.R. Section 201.32) setting forth the FHA insurance coverage and the
Trust Designated Insurance Amount attributable to the FHA Loans hereunder.
To the extent consistent with adjustments pursuant to Title I to the FHA
Insurance Coverage Reserve Account, the Insurance Record shall be reduced by
the amount of claims approved for payment by the FHA with respect to any FHA
Loan or Related Series Loan after the date of transfer of the related FHA
reserve account to the Contract of Insurance Holder.
Invoiced Loan: An FHA Loan with respect to which the related Obligor
-------------
is required to pay the FHA premium on FHA Insurance with respect to such FHA
Loan.
Liquidated Home Loan: With respect to any date of determination, any
--------------------
Home Loan or Foreclosure Property in respect of a Home Loan on which a
Monthly Payment is in excess of 30 days past due and as to which the Servicer
has determined that all amounts which it reasonably and in good faith expects
to collect have been recovered from or on account of such Home Loan or the
related Foreclosure Property; provided that, in any event, such Home Loan or
the related Foreclosure Property shall be deemed uncollectible and therefore
deemed a Liquidated Home Loan upon the earlier of: (a) the liquidation of
the related Foreclosure Property, (b) the determination by the Servicer in
accordance with customary servicing practices that no further amounts are
collectible from the Home Loan and any related Mortgaged Property, or (c) the
date on which any portion of a Monthly Payment on any Home Loan is in excess
of 180 days past due.
Liquidation Proceeds: With respect to a Liquidated Home Loan, any cash
--------------------
amounts received in connection with the liquidation of such Liquidated Home
Loan, whether through trustee's sale, foreclosure sale or other disposition,
and any other amounts required to be deposited in the Collection Account
pursuant to Section 5.01(b) other than Insurance Proceeds and Released
---------------
Mortgaged Property Proceeds.
Loss Reimbursement Deficiency: With respect to any Distribution Date
-----------------------------
and the Class M-1 Certificates, Class M-2 Certificates or Class B
Certificates, the amount of Allocable Loss Amounts applied to the reduction
of the Class Principal Balance of such Class and not reimbursed pursuant to
Section 5.01 hereof as of such Distribution Date plus, in the case of the
- ------------
Class M-1 Certificates and Class M-2 Certificates, interest accrued on the
unreimbursed portion thereof at the applicable Certificate Interest Rate
through the end of the Due Period immediately preceding such Distribution
Date; however, no interest shall accrue on any amount of any such accrued and
unpaid interest.
Majority Certificateholders: Until such time as the sum of the Class
---------------------------
Principal Balances of all Classes of Certificates has been reduced to zero,
the holder or holders of in excess of 50% of the Class Principal Balance of
all Classes of Certificates (accordingly, the holders of the Class R
Certificates shall be excluded from any rights or actions of the Majority
Certificateholders during such period); and thereafter, by the holder or
holders of Class R Certificates representing more than 50% of the Residual
Interests of the Class R Certificates.
Mezzanine Certificateholders' Interest Carry-Forward Amount: With
-----------------------------------------------------------
respect to any Distribution Date, the excess, if any, of (A) the Mezzanine
Certificateholders' Monthly Interest Distribution Amount for the preceding
Distribution Date plus any outstanding Mezzanine Certificateholders' Interest
Carry-Forward Amount for preceding Distribution Dates, over (B) the amount in
respect of interest that is actually deposited in the Certificate
Distribution Account on such preceding Distribution Date net of the Senior
Certificateholders' Interest Carry-Forward Amount for such preceding
Distribution Date.
Mezzanine Certificateholders' Interest Distribution Amount: With
----------------------------------------------------------
respect to any Distribution Date, the sum of the Mezzanine
Certificateholders' Monthly Interest Distribution Amount for such
Distribution Date and the Mezzanine Certificateholders' Interest Carry-
Forward Amount for such Distribution Date.
Mezzanine Certificateholders' Monthly Interest Distribution Amount:
------------------------------------------------------------------
With respect to each Distribution Date and the Classes of Mezzanine
Certificates, the aggregate amount of thirty (30) days' accrued interest at
the respective Certificate Interest Rates on the respective Class Principal
Balances of such Classes immediately preceding such Distribution Date (or,
in the case of the first Distribution Date, on the Closing Date).
Mezzanine Certificates: The Class M-1 Certificates and Class M-2
----------------------
Certificates.
Monthly Cut-Off Date: The last day of any calendar month, and with
--------------------
respect to any Distribution Date, the last day of the calendar month
immediately preceding such Distribution Date.
Monthly Payment: The scheduled monthly payment of principal and/or
---------------
interest required to be made by an Obligor on the related Home Loan,
including any premium for FHA Insurance included in such payment, as set
forth in the related Debt Instrument.
Mortgage: The mortgage, deed of trust or other security instrument
--------
creating a lien in accordance with applicable law on a Mortgaged Property to
secure the Debt Instrument which evidences a secured Home Loan.
Mortgage Loan: As of any date of determination, each of the Home Loans,
-------------
secured by an interest in a Property, transferred and assigned to the Trustee
pursuant to Section 2.01(a).
---------------
Mortgaged Property: The real property encumbered by the Mortgage which
------------------
secures the Debt Instrument evidencing a secured Home Loan.
Mortgaged Property States: Each state in which any Mortgaged Property
-------------------------
securing a Home Loan is located as set forth in the Home Loan Schedule.
Net Delinquency Calculation Amount: With respect to any Distribution
----------------------------------
Date, the excess, if any, of (x) the product of 2.5 and the Six-Month Rolling
Delinquency Average over (y) the aggregate of the amounts of Excess Spread
for the three preceding Distribution Dates.
Net Liquidation Proceeds: With respect to any Distribution Date, any
------------------------
cash amounts received from Liquidated Home Loan during the related Due
Period, whether through trustee's sale, foreclosure sale, disposition of
Mortgaged Properties or otherwise (other than Insurance Proceeds and Released
Mortgaged Property Proceeds), and any other cash amounts received in
connection with the management of the Mortgaged Properties from Defaulted
Home Loans, in each case, net of any reimbursements to the Servicer made from
such amounts for any unreimbursed Servicing Compensation and Servicing
Advances (including Nonrecoverable Servicing Advances) made and any other
fees and expenses paid in connection with the foreclosure, conservation and
liquidation of the related Liquidated Home Loans or Foreclosure Property
pursuant to Section 4.13 hereof.
------------
Net Loan Losses: With respect to any Defaulted Home Loan that is subject
---------------
to a modification pursuant to Section 4.01(c), an amount equal to the portion
---------------
of the Principal Balance, if any, released in connection with such
modification.
Net Loan Rate: With respect to each Home Loan, the related Home Loan
-------------
Interest Rate, less the rate at which the Servicing Fee is calculated.
Non-FHA Loans: The Home Loans designated as Non-FHA Loans on the Home
-------------
Loan Schedule.
Nonrecoverable Servicing Advance: With respect to any Foreclosure
--------------------------------
Property, (a) any Servicing Advance previously made and not reimbursed from
late collections, Liquidation
Proceeds, Insurance Proceeds or the Released Mortgaged Property Proceeds, or
(b) a Servicing Advance proposed to be made in respect of a Home Loan or
Foreclosure Property either of which, in the good faith business judgment of
the Servicer, as evidenced by an Officer's Certificate delivered to the
Trustee would not be ultimately recoverable.
Notice of Termination: Notice given to the Trustee by the Servicer
---------------------
pursuant to Section 12.01(e).
----------------
Obligor: Each obligor on a Debt Instrument.
-------
Officer's Certificate: A certificate delivered to the Trustee signed
---------------------
by the President or a Vice President or an Assistant Vice President of the
Depositor, the Servicer or the Transferor, in each case, as required by this
Agreement.
Opinion of Counsel: A written opinion of counsel (who is acceptable to
------------------
the Rating Agencies), who may be employed by Empire Funding, the Servicer,
the Depositor or any of their respective affiliates.
Original Class Principal Balance: With respect to the Classes of
--------------------------------
Certificates, as follows: Class A-1: $8,400,000.00; Class A-2:
$18,300,000.00; Class A-3: $11,442,000.00; Class M-1: $6,003,000.00; Class M-
2: $5,377,000.00; and Class B: $500,795.54.
Original Pool Principal Balance: $50,023,311.83, which is the Pool
-------------------------------
Principal Balance as of the Cut-Off Date.
Outstanding: With respect to any Class of Certificates as of any date
-----------
of determination, all Certificates of such Class theretofore executed,
countersigned and delivered pursuant to this Agreement except:
(i) Certificates theretofore cancelled by the Certificate
Registrar or delivered to the Certificate Registrar for cancellation;
(ii) Certificates or portions thereof for which the amount of
the final distribution to be made thereon has been previously deposited
with the Trustee in trust for the Holders of such Certificates;
(iii) Certificates in exchange for or in lieu of which other
Certificates have been executed, countersigned and delivered pursuant to
this Agreement; and
(iv) Certificates alleged to have been destroyed, lost or
stolen for which replacement Certificates have been issued as provided
for in Section 6.03;
------------
provided, however, that, in determining whether the Holders of the requisite
percentage of any Class of Certificates have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Certificates
owned by Empire Funding, the Depositor, any Holder of a Class R
Certificate or any affiliate of any of the foregoing shall be disregarded
and deemed not to be Outstanding, except that, in determining whether
the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent, or waiver, only Certificates
which the Trustee knows to be so owned shall be so disregarded; provided
further that in the event that 100% of the Certificates are owned by Empire
Funding, the Depositor or any affiliate of any of the foregoing, such
certificates shall be deemed to be Outstanding.
Overcollateralization Amount: With respect to any Distribution Date,
----------------------------
the amount equal to the excess of (A) the Pool Principal Balance over (B) the
aggregate of the Class Principal Balances of the Certificates (after giving
effect to the distributions made on such date pursuant to Section 5.01(d)).
---------------
Overcollateralization Deficiency Amount: With respect to any
---------------------------------------
Distribution Date, the excess, if any, of the Overcollateralization Target
Amount over the Overcollateralization Amount (after giving effect to all
prior distributions on the Classes of Certificates and to any prior
distributions on the Class R Certificates on such Distribution Date pursuant
to Section 5.01(d) hereof).
---------------
Overcollateralization Target Amount: With respect to any Distribution
-----------------------------------
Date occurring prior to the Stepdown Date, an amount equal to the greater of
(x) 8% of the Original Pool Principal Balance and (y) the Net Delinquency
Calculation Amount; with respect to any other Distribution Date, an amount
equal to the greater of (x) 16% of the Pool Principal Balance as of the end
of the related Due Period and (y) the Net Delinquency Calculation Amount;
provided, however, that the Overcollateralization Target Amount shall in no
event be less than 0.50% of the Original Pool Principal Balance or greater
than the sum of the aggregate Class Principal Balances of all Classes of
Certificates.
Ownership Interest: Any record or beneficial ownership interest in any
------------------
Class R Certificate.
Percentage Interest: As to any Certificate (other than a Class R
-------------------
Certificate), the percentage interest obtained by dividing the Denomination
of such Certificate by the Original Class Principal Balance of all
Certificates of such Class. As to any Class R Certificate, the percentage
interest set forth on the face of such Certificate.
Permitted Investments: Each of the following:
---------------------
(1) obligations of, or guaranteed as to principal and interest by,
the United States or any agency or instrumentality thereof when such
obligations are backed by the full faith and credit of the United
States;
(2) a repurchase agreement that satisfies the following criteria:
(1) must be between the Trustee and either (a) primary dealers on the
Federal Reserve reporting dealer list which are rated in one of the two
highest categories for long-term unsecured debt obligations by each
Rating Agency, or (b) banks rated in one of the two highest categories
for long-term unsecured debt obligations by each Rating Agency; and
(2) the written repurchase agreement must include the following:
(a) securities which are acceptable for transfer and are either
(I) direct U.S. government obligations, or (II) obligations of a federal
agency that are backed by the full faith and credit of the U.S.
government, or FNMA or FHLMC; (b) a term no greater than 60 days for
any repurchase transaction;
(c) the collateral must be delivered to the Trustee or a third party
custodian acting as agent for the Trustee by appropriate book entries
and confirmation statements, and must have been delivered before or
simultaneous with payment (i.e., perfection by possession of
certificated securities); and (d) the securities sold thereunder must be
valued weekly, marked-to-market at current market price plus accrued
interest and the value of the collateral must be equal to at least 104%
of the amount of cash transferred by the Trustee under the repurchase
agreement and if the value of the securities held as collateral declines
to an amount below 104% of the cash transferred by the Trustee plus
accrued interest (i.e., a margin call), then additional cash and/or
acceptable securities must be transferred to the Trustee to satisfy such
margin call; provided, however, that if the securities used as
collateral are obligations of FNMA or FHLMC, then the value of the
securities held as collateral must equal at least 105% of the cash
transferred by the Trustee under such repurchase agreement;
(3) certificates of deposit, time deposits and bankers acceptances
of any United States depository institution or trust company
incorporated under the laws of the United States or any state, including
the Trustee; provided that the debt obligations of such depository
institution or trust company at the date of the acquisition thereof have
been rated by each Rating Agency in one of its two highest long-term
rating categories;
(4) deposits, including deposits with the Trustee, which are fully
insured by the Bank Insurance Fund or the Savings Association Insurance
Fund of the FDIC, as the case may be;
(5) commercial paper of any corporation incorporated under the
laws of the United States or any state thereof, including corporate
affiliates of the Trustee, which at the date of acquisition is rated by
each Rating Agency in its highest short-term rating category and which
has an original maturity of not more than 365 days;
(6) debt obligations rated by each Rating Agency at the time at
which the investment is made in its highest long-term rating category
(or those investments specified in (3) above with depository
institutions which have debt obligations rated by each Rating Agency in
one of its two highest long-term rating categories);
(7) money market funds which are rated by each Rating Agency at
the time at which the investment is made in its highest long-term rating
category, any such money market funds which provide for demand
withdrawals being conclusively deemed to satisfy any maturity
requirements for Permitted Investments set forth in this Agreement; or
(8) any other demand, money market or time deposit obligation,
security or investment as may be acceptable to each Rating Agency at the
time at which the investment is made;
provided that no instrument described in the foregoing subparagraphs shall
evidence either the right to receive (a) only interest with respect to the
obligations underlying such instrument or (b) both principal and interest
payments derived from obligations underlying such instrument where the
interest and principal payments with respect to such instrument provide a
yield to maturity at par greater than 120% of the yield to maturity at par of
the underlying obligations; and provided, further, that no instrument
described in the foregoing subparagraphs may be purchased at a price greater
than par if such instrument may be prepaid or called at a price less than its
purchase price prior to stated maturity.
Each reference in this definition of "Permitted Investments" to the
Rating Agency shall be construed, in the case of each subparagraph above
referring to each Rating Agency, as a reference to each of Standard & Poor's
and DCR.
Permitted Transferee: Any Person other than (i) the United States, any
--------------------
state or any political subdivision thereof, any possession of the United
States, or any agency or instrumentality of any of the foregoing (other than
an instrumentality that is a corporation if all of its activities are subject
to tax and a majority of its board of directors is not selected by any such
governmental unit), (ii) a foreign government, international organization or
any agency or instrumentality of either of the foregoing (other than an
instrumentality that is a corporation if all of its activities are subject to
tax and a majority of its board of directors is not selected by any such
governmental unit), (iii) an organization (except certain farmers'
cooperatives described in Code Section 521) exempt from tax imposed by
Chapter 1 of the Code (including the tax imposed by Section 511 of the Code
on unrelated business taxable income) on any excess inclusions (as defined in
Code Section 860E(c)(1)) with respect to any Class R Certificate, (iv) rural
electric and telephone cooperatives described in Code Section 1381(a)(2)(c),
(v) any other Person so designated by the Trustee based upon an Opinion of
Counsel that the holding of an ownership interest in a Class R Certificate by
such Person may cause the Trust or any Person having an ownership interest in
any Class R Certificate, other than such Person, to incur a liability for any
tax imposed under the Code that would not otherwise be imposed but for the
transfer of an ownership interest in a Class R Certificate to such Person and
(vi) a Person that is not a citizen or resident of the United States, a
corporation, partnership, or other entity created or organized in or under
the laws of the United States or any political subdivision thereof, or an
estate the income of which is subject to United States federal income
taxation regardless of its source, or a trust if a court within the United
States is able to exercise primary supervision over the administration of the
trust and one or more United States trustees have authority to control all
substantial decisions of the trust, unless such person provides the Trustee
with a duly completed Internal Revenue Service Form 4224. The terms "United
States," "state" and "international organization" shall have the meanings
set forth in Code Section 7701 or successor provisions.
Person: Any individual, corporation, partnership, joint venture,
------
limited liability company, association, joint-stock company, trust, national
banking association, unincorporated organization or government or any agency
or political subdivision thereof.
Physical Property: As defined in the definition of "Delivery" above.
-----------------
Plan of Complete Liquidation: A written plan adopted by the Trustee,
----------------------------
as attorney-in-fact for the Certificateholders, authorizing and instructing
the Trustee to liquidate the REMIC Pool within the meaning of Section
860F(a)(4) of the Code by (i) selling all the Home Loans and Foreclosure
Properties then held by the REMIC Pool on the terms specified therein, and
(ii) making a final distribution to Certificateholders of the cash proceeds
of such sale and of all other cash then held by the REMIC Pool (less amounts
retained to meet any expenses of, and any claims against, the REMIC Pool),
all in accordance with the provisions of Section 12.01.
-------------
Pool Principal Balance: With respect to any date of determination, the
----------------------
aggregate Principal Balances of the Home Loans as of the end of the preceding
Due Period provided, however, that the Pool Principal Balance on any
Distribution Date on which the Termination Price is to be paid to
Certificateholders will be deemed to have been equal to zero as of such date.
Principal Balance: With respect to any Home Loan or related Foreclosure
-----------------
Property, (i) at the Cut-Off Date, the outstanding unpaid principal balance
of the Home Loan as of the Cut-Off Date and (ii) with respect to any date of
determination, the outstanding unpaid principal balance of the Home Loan as
of the last day of the preceding Due Period (after giving effect to all
payments received thereon and the allocation of any Net Loan Losses with
respect thereto for a Defaulted Home Loan which relates to such Due Period),
without giving effect to amounts received in respect of such Home Loan or
related Foreclosure Property after such Due Period; provided, however, that
any Liquidated Home Loan shall have a Principal Balance of zero.
Principal Prepayment: With respect to any Home Loan and any Due Period,
--------------------
any principal amount received on a Home Loan in excess of the principal of
the Monthly Payment due in such Due Period.
Property: The property (real, personal or mixed) encumbered by the
--------
Mortgage which secures the Debt Instrument evidencing a secured Home Loan.
Prospectus: The Depositor's final Prospectus as supplemented by the
----------
Prospectus Supplement.
Prospectus Supplement: The Prospectus Supplement to be prepared by the
---------------------
Depositor in connection with the issuance and sale of the Certificates.
Purchase Price: As defined in Section 3.06 herein.
-------------- ------------
Qualified Substitute Home Loan: A home loan or home loans substituted
------------------------------
for a Deleted Home Loan pursuant to Section 2.06 or 3.06, which (i) has or
------------ ----
have an interest rate or rates of not less than, and not more than two
percentage points greater than, the Home Loan Interest Rate for the Deleted
Home Loan, (ii) matures or mature not more than one year later than and not
more than one year earlier than the Deleted Home Loan, (iii) has or have a
principal balance or principal balances (after application of all payments
received on or prior to the date of substitution) equal to or less than the
Principal Balance of the Deleted Home Loan as of such date, (iv) has or have
a lien priority equal or superior to that of the Deleted Home Loan, (v) has a
borrower with a comparable credit grade classification to the credit grade
classification of the borrower with respect to the Deleted Home Loans,
including a FICO Score that is no more than 10 points below that of such
Deleted Home Loan; and (vi) complies or comply as of the date of substitution
with each representation and warranty set forth in Section 3.04 and is not
------------
more than 29 days delinquent as of the date of substitution for such loan.
For purposes of determining whether multiple mortgage loans proposed to be
substituted for one or more Deleted Home Loans pursuant to Section 2.06 or
------------
3.06 are in fact "Qualified Substitute Home Loans" as provided above, the
- ----
criteria specified in clauses (i) and (iii) above may be considered on an
aggregate or weighted average basis, rather than on a loan-by-loan basis
(i.e., so long as the weighted average Home Loan Interest Rate of any loans
proposed to be substituted is not less than two percentage points fewer than
and not more than two percentage points greater than the Home Loan Interest
Rate for the designated Deleted Home Loan or Home Loans, the requirements of
clause (i) above would be deemed satisfied).
Rating Agencies: Standard & Poor's and DCR. If no such organization
---------------
or successor is any longer in existence, "Rating Agency" shall be a
nationally recognized statistical rating organization or other comparable
person designated by the Servicer, notice of which designation shall have
been given to the Trustee.
Ratings: The ratings initially assigned to the Certificates by the
-------
Rating Agencies, as evidenced by letters from the Rating Agencies.
Record Date: With respect to each Distribution Date, the close of
-----------
business on the last Business Day of the month immediately preceding the
month in which such Distribution Date occurs.
Regular Distribution Amount: With respect to any Distribution Date, the
---------------------------
lesser of (a) the Available Distribution Amount and (b) the sum of (i) the
Senior Certificateholders' Interest Distribution Amount, (ii) the Mezzanine
Certificateholders' Interest Distribution Amount, (iii) the Class B
Certificateholders' Interest Distribution Amount and (iv) the Regular
Principal Distribution Amount.
Regular Principal Distribution Amount: On each Distribution Date, an
-------------------------------------
amount equal to the lesser of:
(A) the aggregate of the Class Principal Balances of the Classes of
Certificates immediately prior to such Distribution Date; and
(B) the sum of (i) each scheduled payment of principal collected by the
Servicer in the related Due Period, (ii) all partial and full principal
prepayments applied by the Servicer during such related Due Period, (iii) the
principal portion of all Net Liquidation Proceeds, FHA Insurance Payment
Amounts, Insurance Proceeds and Released Mortgaged Property Proceeds received
during the related Due Period, (iv) that portion of the Purchase Price of any
repurchased Home Loan which represents principal received prior to the
related Determination Date; (v) the principal portion of any Substitution
Adjustments required to be deposited in the Collection Account as of the
related Determination Date and (vi) on the Distribution Date on which the
Trust is to be terminated pursuant to Section 12.01 hereof, the Termination
-------------
Price.
Rejected Claim: With respect to any FHA Loan, a claim for payment made
--------------
to the FHA under the Contract of Insurance that has been finally rejected
after all appeals with FHA have been exhausted for any reason (including a
rejection of a previously paid claim and a demand by the FHA of a return of
the FHA Insurance Payment Amount for the related FHA Loan) other than a
refusal or rejection due to clerical error in computing the claim amount or
because the amount of the FHA Insurance Coverage Reserve Account as shown in
the Insurance Record is zero.
Related Series: Means (i) the Trust, (ii) Empire Funding Home Loan
--------------
Owner Trust 1997-1, Asset Backed Securities, Series 1997-1 and (iii) each of
the subsequent series of trusts, of which the Trustee is the trustee, to
which Related Series Loans are sold directly or indirectly by Empire Funding,
established pursuant to pooling and servicing agreements and/or trust
agreements and sale and servicing agreements.
Related Series Loans: Means FHA Loans related to a Related Series
--------------------
which: (i) are sold by Empire Funding, directly or indirectly, to a trust
and (ii) the Title I insurance coverage attributable to which is made
available to cover claims with respect to the FHA Loans and the Related
Series Loans in each other Related Series by virtue of terms relating to the
administration of the FHA Insurance Coverage Reserve Account substantially
similar to the terms hereof.
Released Mortgaged Property Proceeds: With respect to any secured Home
------------------------------------
Loan, proceeds received by the Servicer in connection with (i) a taking of an
entire Mortgaged Property by exercise of the power of eminent domain or
condemnation or (ii) any release of part of the Mortgaged Property from the
lien of the related Mortgage, whether by partial condemnation, sale or
otherwise; which in either case are not released to the Obligor in accordance
with applicable law, Accepted Servicing Procedures and this Agreement.
REMIC: A "real estate mortgage investment conduit," as defined in the
-----
REMIC Provisions.
REMIC Pool: The pool of assets consisting of the Trust Estate for which
----------
an election shall be made to be treated as a REMIC under the REMIC
Provisions.
REMIC Provisions: Provisions of the federal income tax law relating to
----------------
real estate mortgage investment conduits, which appear at Sections 860A
through 860G of Subchapter M of Chapter 1 of the Code, and related
provisions, and regulations (either proposed, temporary or final) and related
revenue rulings and procedures, as the foregoing may be in effect from time
to time.
Residual Interest: The fractional undivided interest evidenced by a
-----------------
Class R Certificate in all amounts distributable to holders of Class R
Certificates pursuant to Sections 5.01(d) and 5.01(e).
---------------- -------
Responsible Officer: When used with respect to the Trustee, any officer
-------------------
within the Corporate Trust Office of the Trustee, including any Vice
President, Assistant Vice President, Secretary, Assistant Secretary or any
other officer of the Trustee customarily performing functions similar to
those performed by any of the above designated officers and also, with
respect to a particular matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject. When used with respect to the Depositor, the Transferor,
the Servicer or the Custodian, the President or any Vice President, Assistant
Vice President, or any Secretary or Assistant Secretary.
Senior Certificateholders' Interest Carry-Forward Amount: With respect
--------------------------------------------------------
to any Distribution Date, the excess, if any, of (A) the Senior
Certificateholders' Monthly Interest Distribution Amount for the preceding
Distribution Date plus any outstanding Senior Certificateholders' Interest
Carry-Forward Amount for preceding Distribution Dates, over (B) the amount in
respect of interest that is actually deposited in the Certificate
Distribution Account on such preceding Distribution Date.
Senior Certificateholders' Interest Distribution Amount: With respect
-------------------------------------------------------
to any Distribution Date, the sum of the Senior Certificateholders' Monthly
Interest Distribution Amount for such Distribution Date and the Senior
Certificateholders' Interest Carry-Forward Amount for such Distribution Date.
Senior Certificateholders' Monthly Interest Distribution Amount: With
---------------------------------------------------------------
respect to each Distribution Date and the Classes of Senior Certificates, the
aggregate amount of thirty (30) days' accrued interest at the respective
Certificate Interest Rates on the respective Class Principal Balances of such
Classes immediately preceding such Distribution Date (or, in the case of the
first Distribution Date, on the Closing Date).
Senior Certificates: The Class A-1, Class A-2 and Class A-3
-------------------
Certificates.
Senior Optimal Principal Balance: With respect to any Distribution Date
--------------------------------
prior to the Stepdown Date, zero; with respect to any other Distribution
Date, an amount equal to the Pool Principal Balance as of the related
Determination Date minus the greater of (a) the sum of (1) 47.50% of the Pool
Principal Balance as of the related Determination Date and (2) the
Overcollateralization Target Amount for such Distribution Date (without
giving effect to the proviso in the definition thereof) and (b) 0.50% of the
Original Pool Principal Balance; provided however, that such amount shall
never be less than zero or greater than the sum of the Original Class
Principal Balances of the Senior Certificates.
Series or Series 1997-A: Empire Funding Home Loan REMIC Trust 1997-A,
------ -------------
Asset Backed Certificates, Series 1997-A.
Servicer: Empire Funding, in its capacity as the servicer hereunder,
--------
or any successor appointed as herein provided.
Servicer Termination Event: The termination of the Servicer pursuant
--------------------------
to Section 10.01(b).
----------------
Servicer's Fiscal Year: January 1st through December 31st of each year.
----------------------
Servicer's Home Loan Files: In respect of each Home Loan, all documents
--------------------------
customarily included in the servicer's loan file for the related type of Home
Loan in accordance with the servicing standard set forth in Section 4.01.
------------
Servicer's Monthly Remittance Report: A report prepared and computed
------------------------------------
by the Servicer in substantially the form of Exhibit B attached hereto.
---------
Servicing Advances: Subject to Section 4.01(b), all reasonable,
------------------ ---------------
customary and necessary "out of pocket" costs and expenses advanced or paid
by the Servicer with respect to the Home Loans in accordance with the
performance by the Servicer of its servicing obligations hereunder,
including, but not limited to, the costs and expenses for (i) the
preservation, restoration and protection of the Mortgaged Property, including
without limitation advances in respect of real estate taxes and assessments,
(ii) any collection, enforcement or judicial proceedings, including without
limitation foreclosures, collections and liquidations pursuant to Section
-------
4.12, (iii) the conservation, management and sale or other disposition of a
- ----
Foreclosure Property pursuant to Section 4.13, (iv) the preservation of the
------------
security for a Home Loan if any lienholder under a Superior Lien has
accelerated or intends to accelerate the obligations secured by such Superior
Lien pursuant to Section 4.06; provided that such Servicing Advances are
------------
reimbursable to the Servicer out of Net Liquidation Proceeds.
Servicing Advance Reimbursement Amount: With respect to any date of
--------------------------------------
determination, the amount of any Servicing Advances that have not been
reimbursed as of such date including, Nonrecoverable Servicing Advances.
Servicing Compensation: The Servicing Fee and other amounts to which
----------------------
the Servicer is entitled pursuant to Section 7.03.
------------
Servicing Fee: As to each Home Loan (including any Home Loan that has
-------------
been foreclosed and has become a Foreclosure Property, but excluding any
Liquidated Home Loan), the fee payable monthly to the Servicer on each
Distribution Date, which shall be the product of, in the case of any FHA
Loan, 1.00% (100 basis points) and, in the case of any Non-FHA Loan, 0.75%
(75 basis points) and the Principal Balance of such Home Loan as of the
beginning of the immediately preceding Due Period, divided by 12. The
Servicing Fee includes any servicing fees owed or payable to any Subservicer
which fees shall be paid from the Servicing Fee.
Servicing Officer: Any officer of the Servicer or Subservicer involved
-----------------
in, or responsible for, the administration and servicing of the Home Loans
whose name and specimen signature appears on a list of servicing officers
annexed to an Officer's Certificate furnished by the Servicer or the
Subservicer, respectively, to the Trustee, on behalf of the
Certificateholders, as such list may from time to time be amended.
Six-Month Rolling Delinquency Average: With respect to any Distribution
-------------------------------------
Date, the average of the applicable 60-Day Delinquency Amounts for each of
the six immediately preceding Due Periods, where the 60-Day Delinquency
Amount for any Due Period is the aggregate of the Principal Balances of all
Home Loans, other than FHA Loans covered by FHA Insurance, that are 60 or
more days delinquent, in foreclosure or Foreclosure Property as of the end of
such Due Period.
Standard & Poor's: Standard & Poor's Ratings Group, a division of The
-----------------
McGraw-Hill Companies, Inc., or any successor thereto.
Start-up Day: The day designated as such in Section 11.12.
------------ -------------
Stepdown Date: The first Distribution Date occurring after March 2000,
-------------
upon which all of the following conditions exist:
(1) the Pool Principal Balance has been reduced to 50.00% of the
Original Pool Principal Balance;
(2) the Net Delinquency Calculation Amount is less than 8% of the
Original Pool Principal Balance; and
(3) the aggregate of the Class Principal Balances of the Senior Notes
(after giving effect to distribution of principal on such Distribution
Date) has been reduced to the excess of:
(I) the Pool Principal Balance as of the related Determination
Date over
(II) the greater of (a) the sum of
(1) 47.50% of the Pool Principal Balance as of the
related Determination Date and
(2) the Overcollateralization Target Amount for such
Distribution Date (such amount to be calculated (x)
without giving effect to the proviso in the definition
thereof and (y) pursuant only to clause (II) of the
definition thereof); and
(b) 0.50% of the Original Pool Balance.
Subservicer: Any Person with whom the Servicer has entered into a
-----------
Subservicing Agreement and who is an Eligible Servicer and who satisfies any
requirements set forth in Section 4.07(a) in respect of the qualifications
---------------
of a Subservicer.
Subservicing Account: An account established by a Subservicer pursuant
--------------------
to a Subservicing Agreement, which account must be an Eligible Account.
Subservicing Agreement: Any agreement between the Servicer and any
----------------------
Subservicer relating to subservicing and/or administration of any or all Home
Loans as provided in Section 4.07(a), copies of which shall be made
---------------
available, along with any modifications thereto, to the Trustee.
Substitution Adjustment: As to any date on which a substitution occurs
-----------------------
pursuant to Sections 2.06 or 3.06, the amount, if any, by which (a) the sum
------------- ----
of the aggregate principal balance (after application of principal payments
received on or before the date of substitution) of any Qualified Substitute
Home Loans as of the date of substitution plus any accrued and unpaid
interest thereon to the date of substitution, is less than (b) the sum of the
aggregate of the Principal Balances, together with accrued and unpaid
interest thereon to the date of substitution, of the related Deleted Home
Loans.
Superior Lien: With respect to any Home Loan which is secured by a lien
-------------
other than a first priority lien, the mortgage loan(s) relating to the
corresponding Mortgaged Property having a superior priority lien.
Tax Return: The federal income tax return on Internal Revenue Service
----------
Form 1066, U.S. Real Estate Mortgage Investment Conduit Income Tax Return,
including Schedule Q thereto, Quarterly Notice to Residual Interest Holders
of REMIC Taxable Income or Net Loss Allocation, or any successor forms, to be
filed on behalf of the Trust due to its classification as a REMIC under the
REMIC Provisions, together with any and all other information, reports or
returns that may be required to be furnished to the Certificateholders or
filed with the Internal Revenue Service or any other governmental taxing
authority under any applicable provisions of federal, state or local
tax laws.
Termination Date: The earlier of (a) the Distribution Date in April
----------------
2018 and (b) the Distribution Date next following the Monthly Cut-Off Date
coinciding with or next following the date of the liquidation or disposition
of the last asset held by the Trust pursuant to Section 12.01.
-------------
Termination Price: As of any date of determination, an amount without
-----------------
duplication equal to the sum of (i) the then outstanding Class Principal
Balances of the Classes of Certificates plus all accrued and unpaid interest
thereon, (ii) any Trust Fees and Expenses due and unpaid on such date and
(iii) any Servicing Advance Reimbursement Amount.
Title Document. The evidence of title to or ownership of the Property
--------------
required by Title I. (See 24 C.F.R. 201.26(a)(1) and 201.20).
Title I: Section 2 of Title I of the National Housing Act of 1934, as
-------
amended, and the rules and regulations promulgated thereunder as each may be
amended from time to time and any successor statute, rules or regulations
thereto.
Transfer: Any direct or indirect purchase, transfer, sale, assignment
--------
or other form of disposition of any Ownership Interest in a Certificate other
than any pledge of such Certificate for security.
Transferee: Any Person who is acquiring by Transfer any Ownership
----------
Interest in a Certificate.
Transferor: Empire Funding, in its capacity as the transferor hereunder.
----------
Trust: The trust established hereby and evidenced by the Empire Funding
-----
Home Loan REMIC Trust 1997-A, Series 1997-A, Asset Backed Certificates,
designated as the "Empire Funding Home Loan REMIC Trust 1997-A."
Trust Account Property: The Accounts, all amounts and investments held
----------------------
from time to time in the Accounts and all proceeds of the foregoing.
Trust Designated Insurance Amount: $2,749,082.52.
---------------------------------
Trust Estate: The assets subject to this Agreement assigned to the
------------
Trust, which assets consist of: (i) such Home Loans as from time to time are
subject to this Agreement as listed in the Home Loan Schedule, as the same
may be amended or supplemented from time to time including the removal of
Deleted Home Loans and the addition of Qualified Substitute Home Loans,
together with the Servicer's Home Loan Files and the Trustee's Home Loan
Files relating thereto and all proceeds thereof, (ii) the Mortgages and
security interests in Mortgaged Properties, (iii) all payments in respect of
interest due with respect to the Home Loans on or after the Cut-
Off Date, all payments received with respect to principal after the Cut-Off
Date and all payments of premiums on FHA Insurance after the Cut-Off Date,
(iv) the rights to FHA Insurance reserves attributable to the FHA Loans as of
the Cut-Off Date, (v) such assets as from time to time are identified as
Foreclosure Property, (vi) such assets and funds as are from time to time are
deposited in the Collection Account, the Certificate Distribution Account and
the FHA Reserve Account, including amounts on deposit in such accounts which
are invested in Permitted Investments, (vii) the Trust's rights under all
insurance policies with respect to the Home Loans and any Insurance Proceeds,
(viii) Net Liquidation Proceeds and Released Mortgaged Property Proceeds, and
(ix) all right, title and interest of the Depositor in and to the obligations
of the Transferor under the Home Loan Purchase Agreement in which the
Depositor acquired the Home Loans from the Transferor, and all proceeds of
any of the foregoing.
Trust Fees and Expenses: As of each Distribution Date, an amount equal
-----------------------
to the Servicing Compensation, the Trustee Fee and the Custodian Fee, if any.
Trustee: First Bank National Association, its successors in interest
-------
or any successor trustee appointed as herein provided.
Trustee Fee: As to any Distribution Date, the greater of (a) one
-----------
twelfth of 0.04% times the Pool Principal Balance as of the opening of
business on the first day of the calendar month preceding the calendar month
of such Distribution Date (or, with respect to the first Distribution Date,
the Original Pool Principal Balance) and (b) one-twelfth of the annual fee
of $15,000.
Trustee's Home Loan File: As defined in Section 2.05(f).
------------------------ ---------------
Underwriter: Greenwich Capital Markets, Inc.
-----------
Voting Rights: The portion of the aggregate voting rights of all the
-------------
Certificates evidenced by a Class of Certificates. At all times during the
term of this Agreement, 99% of all of the Voting Rights shall be allocated
among Holders of the Class of Certificates (with such Voting Rights being
allocated among such Classes pro rata on the basis of their respective Class
--- ----
Principal Balances) and the Holders of the Class R Certificates shall be
entitled to 1% of all of the Voting Rights. Voting Rights allocated to a
Class of Certificates shall be allocated among the Certificates of each such
Class in accordance with their respective Percentage Interests.
Section 1.02 Other Definitional Provisions.
-----------------------------
(a) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant
hereto unless otherwise defined therein.
(b) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
this Agreement or in any such certificate or other document, and accounting
terms partly defined in this Agreement or in any such certificate or other
document to the extent not defined, shall have the respective meanings given
to them under generally accepted accounting principles. To the extent
that the definitions of accounting terms in this Agreement or in any
such certificate or other document are inconsistent with the meanings of
such terms under generally accepted accounting principles, the definitions
contained in this Agreement or in any such certificate or other document shall
control.
(c) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement; Article, Section,
Schedule and Exhibit references contained in this Agreement are references to
Articles, Sections, Schedules and Exhibits in or to this Agreement unless
otherwise specified; and the term "including" shall mean "including without
limitation."
(d) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such terms.
(e) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means
such agreement, instrument or statute as from time to time amended, modified
or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.
ARTICLE III
TRANSFER AND ASSIGNMENT OF THE HOME LOANS;
------------------------------------------
ISSUANCE OF CERTIFICATES
------------------------
Section 2.01 Transfer and Assignment of the Home Loans.
-----------------------------------------
The Depositor as of the Closing Date does hereby, sell, transfer, assign
and otherwise convey to the Trustee for the benefit of the Holders of the
Certificates, in accordance with their terms and the terms hereof, without
recourse other than as expressly provided herein, and in accordance with the
requirements for transfer of an insured loan in Title I and 24 C.F.R. Section
201.32(c), all the right, title and interest of the Depositor in and to the
Trust Estate.
Section 2.02 (Reserved).
----------
Section 2.03 Acceptance by the Trustee.
-------------------------
The Trustee hereby acknowledges conveyance of the Home Loans, each Debt
Instrument, any related Mortgage and the contents of the related Servicer's
Home Loan File and the Trustee's Home Loan File, and declares that it holds
and will hold the Home Loans, each Debt Instrument, any related Mortgage and
the contents of the related Servicer's Home Loan File and the Trustee's Home
Loan File, all proceeds of any of the foregoing and all other rights, titles
or interests of the Trustee in any asset included in the Trust Property from
time to time, in trust for the use and benefit of all present and future
Holders of the Certificates of each Class.
Section 2.04 Books and Records.
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The sale of each Home Loan shall be reflected on the Depositor's or the
Transferor's, as the case may be, balance sheets and other financial
statements as a sale of assets by the Depositor or the Transferor, as the
case may be, under generally accepted accounting principles ("GAAP"). Each
----
of the Servicer and the Custodian shall be responsible for maintaining, and
shall maintain, a complete set of books and records for each Home Loan which
shall be clearly marked to reflect the ownership of each Home Loan by the
Trustee.
It is the intention of the parties hereto that the transfers and
assignments contemplated by this Agreement shall constitute a sale of the
Home Loans and the other property specified in Section 2.01 from the
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Depositor to the Trust and such property shall not be property of the
Depositor. If the assignment and transfer of the Home Loans and the other
property specified in Section 2.01 to the Trustee pursuant to this Agreement
------------
or the conveyance of the Home Loans or any of such other property to the
Trustee is held or deemed not to be a sale or is held or deemed to be a
pledge of security for a loan, the Depositor intends that the rights and
obligations of the parties shall be established pursuant to the terms of the
Agreement and that, in such event, (i) the Depositor shall be deemed to have
granted and does hereby grant to the Trustee a first
priority security interest in the entire right, title and interest of the
Depositor in and to the Home Loans and all other property conveyed to the
Trustee pursuant to Section 2.01 and all proceeds thereof, and (ii) this
------------
Agreement shall constitute a security agreement under applicable law. Within
ten (10) days of the Closing Date, the Depositor shall cause to be filed UCC-
1 financing statements naming the Trustee as a "secured party" and describing
the Home Loans being sold by the Depositor to the Trust with the office of
the Secretary of State of the State in which the Depositor is located.
Section 2.05 Delivery of Home Loan Documents.
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(a) With respect to each Home Loan, on the Closing Date the Transferor
and/or the Depositor, as applicable, have delivered or caused to be delivered
to the Custodian as the designated agent of the Trustee each of the following
documents (collectively, the "Home Loan Files"):
---------------
(i) The original Debt Instrument, endorsed by the Transferor in
blank or in the following form: "Pay to the order of First Bank National
Association, as Trustee under the Pooling and Servicing Agreement, dated
as of March 1, 1997, Empire Funding Home Loan REMIC Trust 1997-A,
without recourse", with all prior and intervening endorsements showing a
complete chain of endorsement from origination of the Home Loan to the
Transferor;
(ii) If such Home Loan is a Mortgage Loan, the original Mortgage
with evidence of recording thereon (or, if the original Mortgage has not
been returned from the applicable public recording office or is not
otherwise available, a copy of the Mortgage certified by a Responsible
Officer of the Transferor or by the closing attorney or by an officer of
the title insurer or agent of the title insurer which issued the related
title insurance policy, if any, or commitment therefor to be a true and
complete copy of the original Mortgage submitted for recording) and, if
the Mortgage was executed pursuant to a power of attorney, the original
power of attorney with evidence of recording thereon (or, if the
original power of attorney has not been returned from the applicable
public recording office or is not otherwise available, a copy of the
power of attorney certified by a Responsible Officer of the Transferor
or by the closing attorney or by an officer of the title insurer or
agent of the title insurer which issued the related title insurance
policy, if any, or commitment therefor, to be a true and complete copy
of the original power of attorney submitted for recording);
(iii) If such Home Loan is a Mortgage Loan, the original
executed Assignment of Mortgage, in recordable form. Such assignments
may be blanket assignments, to the extent such assignments are effective
under applicable law, for Mortgages covering Mortgaged Properties
situated within the same county. If the Assignment of Mortgage is in
blanket form an assignment of Mortgage need not be included in the
individual Home Loan File;
(iv) If such Home Loan is a Mortgage Loan, all original intervening
Assignments of Mortgage, with evidence of recording thereon, showing a
complete chain of assignment from origination of the Home Loan to the
Transferor (or, if any such Assignment of Mortgage has not been returned
from the applicable public recording office or is not otherwise
available, a copy of such Assignment of Mortgage certified by a
Responsible Officer of the Transferor or by the closing attorney or by
an officer of the title insurer or agent of the title insurer which
issued the related title insurance policy, if any, or commitment
therefor to be a true and complete copy of the original Assignment
submitted for recording);
(v) The original, or a copy certified by the Transferor to be a
true and correct copy of the original, of each assumption, modification,
written assurance or substitution agreement, if any; and
(b) With respect to each Home Loan, on the Closing Date, the Transferor
and the Depositor have delivered or caused to be delivered to the Servicer,
as the designated agent of the Trustee each of the following documents
(collectively, the "Servicer's Home Loan Files"): (A) If such Home Loan is
--------------------------
an FHA Loan, an original or copy of notice signed by the Obligor
acknowledging HUD insurance, (B) an original or copy of truth-in-lending
disclosure, (C) an original or copy of the credit application, (D) an
original or copy of the consumer credit report, (E) an original or copy of
verification of employment and income, or verification of self-employment
income, (F) if such Home Loan is an FHA Loan, an original or copy of evidence
of the Obligor's interest in the Property, (G) an original or copy of
contract of work or written description with cost estimates, if any,
(H)(i) if such Home Loan is an FHA Loan either (a) an original or copy of the
completion certificate (or, if such certificate is not yet due, a notice to
that effect) or an original or copy of notice of non-compliance, if
applicable or (b) an original or copy of report of inspection of improvements
to the Property (or if such report is not yet due, a notice to that effect)
or an original or copy of notice of non-compliance, if applicable, or (ii) if
such Home Loan is a Non-FHA Loan in respect of a home improvement for which
the Transferor prepares an inspection report, an original or copy of report
of inspection of improvements to the Property, (I) to the extent not included
in (C), an original or a copy of a written verification (or a notice of
telephonic verification, written verification to follow) that the Mortgagor
at the time of origination was not more than 30 days delinquent on any senior
mortgage or deed of trust on the Mortgaged Property, (J) (i) if such Home
Loan is an FHA Loan for which an appraisal is required pursuant to the
applicable regulations, an original or a copy of an appraisal of the Property
as of the time of origination of such FHA Loan or (ii) if such Home Loan is a
Non-FHA Loan and secured by a Mortgage, a copy of the HUD-1 or HUD 1-A
Closing Statement indicating the sale price, or an existing Uniform
Residential Appraisal Report, or a Drive-by Appraisal documented on Freddie
Mac form 704, or a tax assessment in accordance with the Transferor's
guidelines, or a full Uniform Residential Appraisal Report prepared by a
national appraisal firm, (K) an original or a copy of a title search as of
the time of origination with respect to the Property in accordance with the
Transferor's guidelines, and (L) if such Home Loan is an FHA Loan, any other
documents required for the submission of a claim with respect to such FHA
Loan to the FHA.
(c) the Transferor, at the direction of the Depositor, concurrently
with the execution and delivery hereof, has delivered to the Trustee cash in
an amount equal to (i) the accrued annual FHA premium due on each FHA Loan to
the applicable Cut-Off Date, and (ii) the amount of FHA premium collected in
respect of the Invoiced Loans after the applicable Cut-Off Date. The Trustee
shall distribute the amount referred to in clause (i) of the previous
sentence into the FHA Premium Account and shall distribute the amount
referred to in clause (ii) of the previous sentence into the Certificate
Distribution Account.
(d) The Trustee shall cause the Custodian to take and maintain
continuous physical possession of the Trustee's Home Loan Files in the State
of Minnesota, and in connection therewith, shall act solely as agent for the
holders of the in accordance with the terms hereof and not as agent for the
Transferor or any other party.
(e) Within 60 days of the Closing Date, the Transferor, at its own
expense, shall record each Assignment of Mortgage (which may be a blanket
assignment if permitted by applicable law) in the appropriate real property
or other records; provided, however, the Transferor need not record any such
Assignment which relates to a Mortgage Loan in any jurisdiction under the
laws of which, as evidenced by an Opinion of Counsel delivered by the
Transferor (at the Transferor's expense) to the Trustee and the Rating
Agencies, the recordation of such Assignment of Mortgage is not necessary to
protect the Trustee's interest in the related Mortgage Loan. With respect to
any Assignment of Mortgage as to which the related recording information is
unavailable within 60 days following the Closing Date, such Assignment of
Mortgage shall be submitted for recording within 30 days after receipt of
such information but in no event later than one year after the Closing Date.
The Trustee shall be required to retain a copy of each Assignment of Mortgage
submitted for recording. In the event that any such Assignment of Mortgage
is lost or returned unrecorded because of a defect therein, the Transferor
shall promptly prepare a substitute Assignment of Mortgage or cure such
defect, as the case may be, and thereafter the Transferor shall be required
to submit each such Assignment of Mortgage Loan for recording.
(f) All Home Loan documents held by the Custodian on behalf of the
Trustee are referred to herein as the "Trustee's Home Loan File." All
------------------------
recordings required pursuant to this Section 2.05 shall be accomplished by
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and at the expense of the Transferor.
Section 2.06 Receipt of Home Loan Files; Certain Substitutions;
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Initial Certification by Custodian.
___________________________________
(a) The Trustee agrees to cause the Custodian to execute and deliver on
the Closing Date an acknowledgment of receipt of the Trustee's Home Loan File
for each Home Loan. The Trustee declares that it will cause the Custodian to
hold such documents and any amendments, replacements or supplements thereto,
as well as any other assets included in the Trust Estate and delivered to the
Custodian in trust, upon and subject to the conditions set forth herein for
the benefit of the Certificateholders. The Trustee agrees, for the benefit
of the Certificateholders, to cause the Custodian to review each Trustee's
Home Loan File within 45 days after the Closing Date (or, with respect to any
Qualified Substitute Home Loan, within 45 days after the conveyance of the
related Home Loan to the Trust) and to cause the Custodian to deliver to
the Transferor, the Depositor, the Trustee and the Servicer a certification
to the effect that, as to each Home Loan listed in the Home Loan Schedule,
(i) all documents required to be delivered to the Trustee pursuant to this
Agreement are in its possession or in the possession of the Custodian on its
behalf (other than as expressly permitted by Section 2.05), (ii) all documents
-------
delivered by the Depositor and the Transferor to ---- the Custodian pursuant to
Section 2.05 have been reviewed by the Custodian
- ------------
and have not been mutilated or damaged and appear regular on their face
(handwritten additions, changes or corrections shall not constitute
irregularities if initialed by the Obligor) and relate to such Home Loan,
(iii) based on the examination of the Custodian on behalf of the Trustee, and
only as to the foregoing documents, the information set forth on the Home
Loan Schedule accurately reflects the information set forth in the Trustee's
Home Loan File and (iv) each Debt Instrument has been endorsed as provided in
Section 2.05. The Custodian shall not be under any duty or obligation (i)
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to inspect, review or examine any such documents, instruments, certificates
or other papers to determine that they are genuine, enforceable, or
appropriate for the represented purpose or that they are other than what they
purport to be on their face or (ii) to determine whether any Trustee's Home
Loan File should include any of the documents specified in
Section 2.05(a)(v).
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(b) The Servicer's Home Loan File shall be held in the custody of the
Servicer for the benefit of, and as agent for, the Certificateholders and the
Trustee as the owner thereof. It is intended that by the Servicer's
agreement pursuant to this Section 2.06(b) the Trustee shall be deemed to
---------------
have possession of the Servicer's Home Loan Files for purposes of Section 9-
305 of the Uniform Commercial Code of the State in which such documents or
instruments are located. the Servicer shall promptly report to the Trustee
any failure by it to hold the Servicer's Home Loan File as herein provided
and shall promptly take appropriate action to remedy any such failure. In
acting as custodian of such documents and instruments, the Servicer agrees
not to assert any legal or beneficial ownership interest in the Home Loans or
such documents or instruments. The Servicer agrees to indemnify the
Certificateholders and the Trustee for any and all liabilities, obligations,
losses, damages, payments, costs, or expenses of any kind whatsoever which
may be imposed on, incurred by or asserted against the Certificateholders or
the Trustee as the result of any act or omission by the Servicer relating to
the maintenance and custody of such documents or instruments which have been
delivered to the Servicer; provided, however, that the Servicer will not be
-------- -------
liable for any portion of any such amount resulting from the negligence or
misconduct of any Certificateholder or the Trustee and provided, further,
-------- -------
that the Servicer will not be liable for any portion of any such amount
resulting from the Servicer's compliance with any instructions or directions
consistent with this Agreement issued to the Servicer by the Trustee. The
Trustee shall have no duty to monitor or otherwise oversee the Servicer's
performance as custodian hereunder.
(c) If the Custodian, during the process of reviewing the Trustee's
Home Loan Files, finds any document constituting a part of a Trustee's Home
Loan File which is not executed, has not been received, is unrelated to any
Home Loan identified in the Home Loan Schedule, does not conform to the
requirements of Section 2.05 or does not conform, in all material respects,
------------
to the description thereof as set forth in the Home Loan Schedule, then the
Custodian shall promptly so notify the Transferor, the Servicer, the Trustee
and the Depositor. In performing any such review, the Custodian may
conclusively rely on the Transferor as to the purported genuineness of any
such document and any signature thereon. It is understood that the scope of
the Custodian's review of the Trustee's Home Loan Files is limited solely to
-----------------
confirming that the documents listed in Section 2.05 have been received and
------------
further confirming that any and all documents delivered pursuant to Section
-------
2.05 have been executed and relate to the Home Loans identified in the Home
- ----
Loan Schedule. The Custodian shall not have any responsibility for
determining whether any document is valid and binding, whether the text of
any assignment or endorsement is in proper or recordable form, whether any
document has been recorded in accordance with the requirements of any
applicable jurisdiction, or whether a blanket assignment is permitted in any
applicable jurisdiction or whether the requirements for transfer of an
insured loan specified in Title I, 24 C.F.R. Section 201.32(c) or elsewhere
have been complied with. If a material defect in a document constituting
part of a Trustee's Home Loan File is discovered, then the Depositor and
Transferor shall comply with the cure, substitution and repurchase provisions
of Section 3.06 hereof.
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Section 2.07 Execution, Countersignature and Delivery of Certificates.
--------------------------------------------------------
Concurrently with, and in consideration for, the sale, transfer, assignment
and conveyance by the Depositor of the Home Loans listed in the Home Loan
Schedule on the Closing Date, the delivery by the Depositor of the related
Home Loan Files pursuant to Section 2.05(a), the delivery of the cash
---------------
required by Section 2.05(c) to be deposited in the Certificate Distribution
---------------
Account and the FHA Premium Account, the Trustee has executed, authenticated
and delivered to or upon the order of the Depositor, Class A-1 Certificates,
the Class A-2 Certificates, the Class A-3 Certificates, the Class M-1
Certificates, the Class M-2 Certificates, the Class B Certificates and the
Class R Certificates specified in Section 6.01.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 3.01 Representations and Warranties of the Depositor.
-----------------------------------------------
The Depositor hereby represents and warrants to the Transferor, the
Trustee, the Trustee and the Certificateholders that as of the Closing Date:
(a) The Depositor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and has, and had at all relevant times, full power to own its property,
to carry on its business as presently conducted, to enter into and
perform its obligations under this Agreement and to create the Trust
pursuant hereto;
(b) The execution and delivery of this Agreement by the Depositor
and its performance of and compliance with the terms of this Agreement
will not violate the Depositor's articles of incorporation or by-laws or
constitute a default (or an event which, with notice or lapse of time,
or both, would constitute a default) under, or result in the breach or
acceleration of, any material contract, agreement or other instrument to
which the Depositor is a party or which may be applicable to the
Depositor or any of its assets;
(c) The Depositor has the full power and authority to enter into
and consummate the transactions contemplated by this Agreement, has duly
authorized the execution, delivery and performance of this Agreement,
and has duly executed and delivered this Agreement. This Agreement,
assuming due authorization, execution and delivery by the Trustee, the
Transferor and the Servicer, constitutes a valid, legal and binding
obligation of the Depositor, enforceable against it in accordance with
the terms hereof, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, receivership, moratorium or
other similar laws relating to or affecting the rights of creditors
generally, and by general equity principles (regardless of whether such
enforcement is considered in a proceeding in equity or at law);
(d) The Depositor is not in violation of, and the execution and
delivery of this Agreement by the Depositor and its performance and
compliance with the terms of this Agreement will not constitute a
violation with respect to, any order or decree of any court or any order
or regulation of any federal, state, municipal or governmental agency
having jurisdiction, which violation would materially and adversely
affect the condition (financial or otherwise) or operations of the
Depositor or its properties or materially and adversely affect the
performance of its duties hereunder;
(e) There are no actions or proceedings against, or investigations
of, the Depositor pending with regard to which the Depositor has
received service of process, or, to the knowledge of the Depositor,
threatened, before any court, administrative agency or
other tribunal (A) that, if determined adversely, would prohibit its
entering into this Agreement or render the Certificates invalid, (B)
seeking to prevent the issuance of the Certificates or the consummation
of any of the transactions contemplated by this Agreement or (C) that,
if determined adversely, would prohibit or materially and adversely
affect the performance by the Depositor of its obligations under, or the
validity or enforceability of, this Agreement or the Certificates;
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Depositor of, or compliance by the Depositor with,
this Agreement or the Certificates, or for the consummation of the
transactions contemplated by this Agreement, except for such consents,
approvals, authorizations and orders, if any, that have been obtained
prior to the Closing Date;
(g) The Depositor is solvent, is able to pay its debts as they
become due and has capital sufficient to carry on its business and its
obligations hereunder; it will not be rendered insolvent by the
execution and delivery of this Agreement or its obligations hereunder;
no petition of bankruptcy (or similar insolvency proceeding) has been
filed by or against the Depositor prior to the date hereof;
(h) The Depositor did not sell the Home Loans to the Trust with
any intent to hinder, delay or defraud any of its creditors; the
Depositor will not be rendered insolvent as a result of the sale of the
Home Loans to the Trust;
(i) As of the Closing Date, the Depositor had good title to, and
was the sole owner of, each Home Loan free and clear of any Lien other
than any such Lien released simultaneously with the sale contemplated
herein, and, immediately upon each transfer and assignment herein
contemplated, the Depositor will have taken all steps necessary so that
the Trust will have good title to, and will be the sole owner of, each
Home Loan free and clear of any lien;
(j) The Depositor acquired title to each of the Home Loans in good
faith, without notice of any adverse claim;
(k) No Officers' Certificate, statement, report or other document
prepared by the Depositor and furnished or to be furnished by it
pursuant to this Agreement or in connection with the transactions
contemplated hereby contains any untrue statement of material fact or
omits to state a material fact necessary to make the statements
contained herein or therein not misleading;
(l) The Depositor is not required to be registered as an
"investment company" under the Investment Company Act of 1940, as
amended; and
(m) The transfer, assignment and conveyance of the Debt
Instruments and the Mortgages by the Depositor pursuant to this
Agreement are not subject to the bulk transfer laws or any similar
statutory provisions in effect in any applicable jurisdiction.
Section 3.02 Representations and Warranties of the Transferor.
------------------------------------------------
The Transferor hereby represents and warrants to the Trustee, the
Trustee, the Certificateholders and the Depositor that as of the Closing Date
or as of such date specifically provided herein:
(a) The Transferor is a corporation licensed as a mortgage lender
duly organized, validly existing and in good standing under the laws of
the State of Oklahoma and has, and had at all relevant times, full
corporate power to originate or purchase the Home Loans, to own its
property, to carry on its business as presently conducted and to enter
into and perform its obligations under this Agreement;
(b) The execution and delivery of this Agreement by the Transferor
and its performance of and compliance with the terms of this Agreement
will not violate the Transferor's articles of incorporation or by-laws
or constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, or result in the
breach or acceleration of, any material contract, agreement or other
instrument to which the Transferor is a party or which may be applicable
to the Transferor or any of its assets;
(c) The Transferor has the full power and authority to enter into
and consummate all transactions contemplated by this Agreement to be
consummated by it, has duly authorized the execution, delivery and
performance of this Agreement, and has duly executed and delivered this
Agreement. This Agreement, assuming due authorization, execution and
delivery by the Trustee and the Depositor, constitutes a valid, legal
and binding obligation of the Transferor, enforceable against it in
accordance with the terms hereof, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, receivership, mora-
torium or other similar laws relating to or affecting the rights of
creditors generally, and by general equity principles (regardless of
whether such enforcement is considered in a proceeding in equity or at
law);
(d) The Transferor is not in violation of, and the execution and
delivery of this Agreement by the Transferor and its performance and
compliance with the terms of this Agreement will not constitute a
violation with respect to, any order or decree of any court or any order
or regulation of any federal, state, municipal or governmental agency
having jurisdiction, which violation would materially and adversely
affect the condition (financial or otherwise) or operations of the
Transferor or its properties or materially and adversely affect the
performance of its duties hereunder;
(e) There are no actions or proceedings against, or investigations
of, the Transferor pending or, to the knowledge of the Transferor,
threatened, before any court, administrative agency or other tribunal
(A) that, if determined adversely, would prohibit its entering into
this Agreement or render the Certificates invalid, (B) seeking to
prevent the issuance of the Certificates or the consummation of any
of the transactions contemplated by this Agreement or (C) that, if
determined adversely, would prohibit or materially and adversely affect
the sale of the Home Loans to the Depositor, the performance by the
Transferor of its obligations under, or the validity or enforceability
of, this Agreement or the Certificates;
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for: (1) the execution, delivery
and performance by the Transferor of, or compliance by the Transferor
with, this Agreement, (2) the transfer of all FHA insurance reserves
relating to the FHA Loans to the Contract of Insurance Holder, (3) the
issuance of the Certificates, (4) the sale of the Home Loans under the
Home Loan Purchase Agreement or (5) the consummation of the transactions
required of it by this Agreement, except: (A) such as shall have been
obtained before the Closing Date and (B) the transfer of the FHA
insurance reserves by the FHA to the Contract of Insurance Holder with
respect to the FHA Loans as to which an FHA case number has not been
assigned as of the Closing Date;
(g) The Transferor acquired title to the Home Loans in good faith,
without notice of any adverse claim;
(h) The collection practices used by the Transferor with respect
to the Home Loans have been, in all material respects, legal, proper,
prudent and customary in the non-conforming mortgage servicing business;
(i) No Officers' Certificate, statement, report or other document
prepared by the Transferor and furnished or to be furnished by it
pursuant to this Agreement or in connection with the transactions
contemplated hereby contains any untrue statement of material fact or
omits to state a material fact necessary to make the statements
contained herein or therein not misleading;
(j) The Transferor is solvent, is able to pay its debts as they
become due and has capital sufficient to carry on its business and its
obligations hereunder; it will not be rendered insolvent by the
execution and delivery of this Agreement or by the performance of its
obligations hereunder; no petition of bankruptcy (or similar insolvency
proceeding) has been filed by or against the Transferor prior to the
date hereof;
(k) The Prospectus Supplement (other than (i) any statements on
the cover page and inside cover page relating to Greenwich Capital
Markets, Inc. and (ii) the statements under the following captions:
"SUMMARY - Securities Issued", "- Priority of Distributions", "- Final
Scheduled Distribution Date", "- Credit Enhancement," "- Certain Federal
Income Tax Considerations", "- ERISA", "- Legal Investment",
"DESCRIPTION OF THE OFFERED SECURITIES", "DESCRIPTION OF CREDIT
ENHANCEMENT",
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES", "STATE TAX CONSEQUENCES",
"ERISA CONSIDERATIONS", "LEGAL INVESTMENT MATTERS" and "METHOD OF
DISTRIBUTION", as to which the Transferor makes no representation) does
not contain an untrue statement of a material fact and does not omit to
state a material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(l) HUD has approved in writing the transfer to the Contract of
Insurance Holder of the FHA Reserve Amount relating to each FHA Loan and
all actions have been taken by the Transferor (other than the filing of
the Transfer of Note Report Form 27030 with HUD) and all required
consents have been obtained (other than approval upon HUD's receipt of
such Transfer of Note Report), in either case, necessary to effect
transfer to the Contract of Insurance Holder of the FHA Reserve Amount
relating to each FHA Loan (except for FHA Loans with respect to which a
case number has not been assigned as of the Closing Date). The FHA
Reserve Amounts with respect to the FHA Loans transferred to the
Contract of Insurance Holder both prior to and following the transfer of
the FHA Loans to the Trustee will be available to satisfy claims with
respect to such FHA Loans. The amount in the FHA Insurance Coverage
Reserve Account, together with all amounts to be requested for transfer
with respect to the FHA Loans, will equal $3,025,615.67. The amount to
be requested for transfer with respect to the FHA Loans is
$2,749,082.52, which is the sum of approximately 10% of the aggregate of
the Principal Balances of the FHA Loans as of the Cut-Off Date;
(m) the Transferor is a non-supervised lender in good standing
with HUD under 24 CFR Section202.5 and is authorized to originate,
purchase, hold, service and/or sell loans insured under 24 CFR Part 201
pursuant to a valid contract of insurance, Number 505842; and
(n) the Transferor has transferred the Home Loans without any
intent to hinder, delay or defraud any of its creditors.
It is understood and agreed that the representations and warranties set
forth in this Section 3.02 shall survive delivery of the respective Home Loan
Files to the Custodian (as the agent of the Trustee) and shall inure to the
benefit of the Certificateholders, the Depositor, the Servicer, the Trustee,
the Trustee and the Trust. Upon discovery by any of the Transferor, the
Depositor, the Servicer or the Trustee of a breach of any of the foregoing
representations and warranties that materially and adversely affects the
value of any Home Loan or the interests of the Certificateholders therein,
the party discovering such breach shall give prompt written notice (but in no
event later than two Business Days following such discovery) to the other
parties. The obligations of the Transferor set forth in Section 3.06 to cure
any breach or to substitute for or repurchase an affected Home Loan shall
constitute the sole remedies available to the Certificateholders, the
Depositor, to the Servicer, the Trustee, or to the Trustee respecting a
breach of the representations and warranties contained in this Section 3.02.
Section 3.03 Representations, Warranties and Covenants of the
------------------------------------------------
Servicer.
- ---------
The Servicer hereby represents and warrants to and covenants with the
Trustee, the Certificateholders, the Depositor and the Transferor that as of
the Closing Date or as of such date specifically provided herein:
(a) The Servicer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Oklahoma and is or
will be in compliance with the laws of each state in which any Mortgaged
Property is located to the extent necessary to ensure the enforceability
of each Home Loan in accordance with the terms of this Agreement;
(b) The execution and delivery of this Agreement by the Servicer
and its performance of and compliance with the terms of this Agreement
will not violate the Servicer's articles of incorporation or by-laws or
constitute a default (or an event which, with notice or lapse of time,
or both, would constitute a default) under, or result in the breach or
acceleration of, any material contract, agreement or other instrument to
which the Servicer is a party or which may be applicable to the Servicer
or any of its assets;
(c) The Servicer has the full power and authority to enter into
and consummate all transactions contemplated by this Agreement, has duly
authorized the execution, delivery and performance of this Agreement,
and has duly executed and delivered this Agreement. This Agreement,
assuming due authorization, execution and delivery by the Trustee, the
Trustee, constitutes a valid, legal and binding obligation of the Ser-
vicer, enforceable against it in accordance with the terms hereof,
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other similar laws relating
to or affecting the rights of creditors generally, and by general equity
principles (regardless of whether such enforcement is considered in a
proceeding in equity or at law);
(d) The Servicer is not in violation of, and the execution and
delivery of this Agreement by the Servicer and its performance and
compliance with the terms of this Agreement will not constitute a
violation with respect to, any order or decree of any court or any order
or regulation of any federal, state, municipal or governmental agency
having jurisdiction, which violation would materially and adversely
affect the condition (financial or otherwise) or operations of the
Servicer or materially and adversely affect the performance of its
duties hereunder;
(e) There are no actions or proceedings against, or investigations
of, the Servicer pending, or, to the knowledge of the Servicer,
threatened, before any court, administrative agency or other tribunal
(A) that, if determined adversely, would prohibit its entering into this
Agreement or render the Certificates invalid, (B) seeking to prevent the
issuance of the Certificates or the consummation of any of the transac-
tions contemplated by this Agreement or (C) that, if determined
adversely, would prohibit or materially and adversely affect the
performance by the Servicer of its obligations under, or the validity or
enforceability of, this Agreement or the Certificates;
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Servicer of, or compliance by the Servicer with, this
Agreement or the Certificates, or for the consummation of the
transactions contemplated by this Agreement, except for such consents,
approvals, authorizations and orders, if any, that have been obtained
prior to the Closing Date;
(g) The Servicer is duly licensed where required as a "Licensee"
or is otherwise qualified in each state in which it transacts business
and is not in default of such state's applicable laws, rules and
regulations, except where the failure to so qualify or such default
would not have a material adverse effect on the ability of the Servicer
to conduct its business or perform its obligations hereunder;
(h) The Servicer is an Eligible Servicer and services mortgage
loans in accordance with Accepted Servicing Procedures;
(i) (Reserved);
(j) No Officers' Certificate, statement, report or other document
prepared by the Servicer and furnished or to be furnished by it pursuant
to this Agreement or in connection with the transactions contemplated
hereby contains any untrue statement of material fact or omits to state
a material fact necessary to make the statements contained herein or
therein not misleading;
(k) The Servicer is solvent and will not be rendered insolvent as
a result of the performance of its obligations pursuant to this
Agreement;
(l) The Servicer has not waived any default, breach, violation or
event of acceleration existing under any Debt Instrument or the related
Mortgage;
(m) The Servicer will cause to be performed any and all acts
required to be performed by the Servicer to preserve the rights and
remedies of the Trust and the Trustee in any Insurance Policies
applicable to the Home Loans or with respect to any FHA Loan, any
Insurance Policy required to be maintained pursuant to Title I,
including, without limitation, in each case, any necessary notifications
of insurers, assignments of policies or interests therein, and
establishments of co-insured, joint loss payee and mortgagee rights in
favor of the Trust and the Trustee;
(n) The Servicer shall comply with, and shall service, or cause to
be serviced, each Home Loan, in accordance with all applicable laws,
and, in particular, in accordance with any applicable provisions of the
National Housing Act, as amended and supplemented, all rules and
regulations issued thereunder, and all administrative publications
published pursuant thereto including, in the case of the FHA Loans, all
FHA requirements of FHA Title I loans; and
(o) The Servicer agrees that, so long as it shall continue to
serve in the capacity contemplated under the terms of this Agreement, it
shall remain in good standing under the laws governing its creation and
existence and qualified under the laws of each state in which it is
necessary to perform its obligations under this Agreement or in which
the nature of its business requires such qualification, it shall
maintain all licenses, permits and other approvals required by any law
or regulations, including, without limitation Title I, as may be
necessary to perform its obligations under this Agreement and to retain
all rights to service the Loans, and it shall not dissolve or otherwise
dispose of all or substantially all of its assets.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.03 shall survive delivery of the
------------
respective Home Loan Files to the Trustee and shall inure to the benefit of
the Depositor, the Certificateholders and the Trustee. Upon discovery by any
of the Transferor, the Depositor, the Servicer or the Trustee of a breach of
any of the foregoing representations, warranties and covenants that mate-
rially and adversely affects the value of any Home Loan or the interests of
the Certificateholders therein, the party discovering such breach shall give
prompt written notice (but in no event later than two Business Days following
such discovery) to the other parties. The obligations of the Servicer set
forth in (x) Section 3.06 to cure any breach or to purchase an affected Home
------------
Loan, (y) Section 3.06 to indemnify and hold harmless the Trust and (z)
------------
Section 9.01(a) to indemnify and hold harmless the Trust, the Depositor, the
- ---------------
Transferor, the Trustee, and the Certificateholders shall constitute the sole
remedies available to the Transferor, the Certificateholders, the Trust, the
depositor, or the Trustee respecting a breach of the representations,
warranties and covenants contained in this Section 3.03.
------------
Section 3.04 Representations and Warranties regarding Individual Home
--------------------------------------------------------
Loans.
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The Transferor hereby represents and warrants to the Depositor, the
Trustee and the Certificateholders, with respect to each Home Loan, as of the
Closing Date:
(a) The information pertaining to each Home Loan set forth in the
Home Loan Schedule was true and correct in all material respects as of
the Cut-Off Date;
(b) As of the Cut-Off Date, not more than 0.96% of the Home Loans
(by aggregate initial Pool Principal Balance) are between 30 and 59 days
past due (without giving effect to any grace period), and none of the
Home Loans are between 60 and 89 days past due (without giving effect to
any grace period); the Transferor has not advanced funds, induced,
solicited or knowingly received any advance of funds from a party other
than the Obligor, directly or indirectly, for the payment of any amount
required by the Home Loan;
(c) The terms of the Debt Instrument and any related Mortgage
contain the entire agreement of the parties and have not been impaired,
waived, altered or modified in any respect, except by written
instruments reflected in the related File and recorded, if necessary, to
maintain the lien priority of the any related Mortgage; if such Home
Loan is an FHA Loan the substance of each such waiver, alteration and
modification has been approved by the FHA to the extent required under
Title I; no other instrument of waiver, alteration, expansion or
modification has been executed, and no Obligor has been released, in
whole or in part, except in connection with an assumption agreement
which assumption agreement is part of the related Home Loan File and the
payment terms of which are reflected in the related Home Loan Schedule
and; if such Home Loan is an FHA Loan, has been approved by the FHA to
the extent required under Title I;
(d) The Debt Instrument and any related Mortgage are not subject
to any set-off, claims, counterclaim or defense and will not have such
in the future with respect to the goods and services provided under the
Debt Instrument, including the defense of usury or of fraud in the
inducement, nor will the operation of any of the terms of the Debt
Instrument and any related Mortgage, or the exercise of any right
thereunder, render such Debt Instrument or Mortgage unenforceable, in
whole or in part, or subject to any right of rescission, set-off,
counterclaim or defense, including the defense of usury, and no such
right of rescission, set-off, counterclaim or defense has been asserted
with respect thereto;
(e) Any and all requirements of any federal, state or local law
applicable to the Home Loan (including any law applicable to the
origination, servicing and collection practices with respect thereto)
have been complied with;
(f) No Debt Instrument or Mortgage has been satisfied, cancelled,
rescinded or subordinated, in whole or part; and the Transferor has not
waived the performance by the Obligor of any action, if the Obligor's
failure to perform such action would cause the Debt Instrument or
Mortgage Loan to be in default, except as otherwise permitted by clause
(c); and with respect to a Mortgage Loan, the related 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
satisfaction, subordination, release, cancellation or rescission;
(g) Each related Mortgage is a valid, subsisting and enforceable
lien on the related Property, including the land and all buildings on
the Property;
(h) The Debt Instrument and any related Mortgage are genuine and
each is the legal, valid and binding obligation of the maker thereof,
enforceable in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization or other similar
laws affecting creditors' rights in general and by general principles of
equity;
(i) To the best of the Transferor's knowledge, all parties to the
Debt Instrument and any related Mortgage had legal capacity at the time
to enter into the Home Loan and to execute and deliver the Debt
Instrument and any related Mortgage, and the Debt Instrument and any
related Mortgage have been duly and properly executed by such parties;
(j) As of the applicable Cut-Off Date, the proceeds of the Home
Loan have been fully disbursed and there is no requirement for future
advances thereunder, and any and all applicable requirements set forth
in the Home Loan documents have been complied with; the Obligor is not
entitled to any refund of any amounts paid or due under the Debt
Instrument or any related Mortgage;
(k) Immediately prior to the sale, transfer and assignment to the
Depositor, the Transferor will have good and indefeasible legal title to
the Home Loan, the related Debt Instrument and any related Mortgage and
the full right to transfer such Home Loan, the related Debt Instrument
and any related Mortgage, and the Transferor will have been the sole
owner thereof, subject to no liens, pledges, charges, mortgages,
encumbrances or rights of others, except for such liens as will be
released simultaneously with the transfer and assignment of the Home
Loans to the Depositor (and the Home Loan File will contain no evidence
inconsistent with the foregoing); and immediately upon the sale,
transfer and assignment contemplated by the Home Loan Purchase
Agreement, the Depositor will hold good title to, and be the sole owner
of each Home Loan, the related Debt Instrument and any related Mortgage,
free of all liens, pledges, charges, mortgages, encumbrances or rights
of others;
(l) Except for those Home Loans referred to in Section 3.04(b)
---------------
above that are delinquent as of the Cut-Off Date, there is no
default, breach, violation or event of acceleration known to the
Transferor under the Home Loan, the related Debt Instrument and any
related Mortgage and there is no event known to the Transferor 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 Transferor nor its predecessors
have waived any default, breach, violation or event of acceleration;
(m) The Debt Instrument and any related Mortgage contain customary
and enforceable provisions such as to render the rights and remedies of
the holder thereof adequate for the realization against the Property of
the benefits of the security provided thereby, including, (A) in the
case of any Mortgage designated as a deed of trust, by trustee's sale,
and (B) otherwise by judicial foreclosure;
(n) Each FHA Loan is an FHA Title I property improvement loan (as
defined in 24 C.F.R. Section 201.2) underwritten by the Transferor in
accordance with FHA requirements for the Title I Loan program as set
forth in 24 C.F.R. Parts 201 and 202, and the Transferor has transmitted
a loan report with respect to such FHA Loan to FHA so that such FHA Loan
will be included in the Title I program;
(o) Each Home Loan is a fixed rate loan; the Debt Instrument shall
mature within not more than (a) for an FHA Loan, 20 years and 32 days
and (b) for a Non-FHA Loan, 25 years, from the date of origination of
the Home Loan; the Debt Instrument is payable in substantially equal
Monthly Payments, with interest payable in arrears, and requires a
Monthly Payment which is sufficient to fully amortize the original
principal balance over the original term and to pay interest at the
related Home Loan Interest Rate; interest on each Home Loan is
calculated on the basis of a 360 day year consisting of twelve 30-day
months, and the Debt Instrument does not provide for any extension of
the original term;
(p) The related Debt Instrument is not and has not been secured by
any collateral except, in the case of a Mortgage Loan, the lien of the
corresponding Mortgage;
(q) With respect to any Mortgage Loan, if the related 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, or a valid substitution of trustee
has been recorded, and no extraordinary fees or expenses are or will
become payable to the trustee under the deed of trust, except in
connection with default proceedings and a trustee's sale after default
by the Obligor;
(r) With respect to any Mortgage Loan, the Transferor has no
knowledge of any circumstances or conditions not reflected in the
representations set forth herein, or in the Home Loan Schedule, or in
the related Home Loan File with respect to the related Mortgage, the
related Property or the Obligor which could reasonably be expected to
materially and adversely affect the value of the related Property, or
the marketability of the Mortgage Loan or to cause the Mortgage Loan to
become delinquent or otherwise in default;
(s) Assuming no material change to the applicable law or
regulations in effect as of the Closing Date, after the consummation of
the transactions contemplated by this Agreement, the Trustee will have
the ability to foreclose or otherwise realize upon a Property, if the
Home Loan is a Mortgage Loan, or to enforce the provisions of the
related Home Loan against the Obligor thereunder, if the foreclosure
upon any such Property or enforcement of the provisions of the related
Home Loan against the Obligor are undertaken as set forth in Section
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4.12;
----
(t) With respect to any FHA Loan that is a Mortgage Loan, the
improvements to the Property relating to such FHA Loan, have been or
shall be completed and inspected by the Servicer within the time period
and to the extent required under the applicable Title I regulations, and
evidence of such inspection shall be placed in the Servicer's Home Loan
File or, if not, a letter of non-compliance shall be delivered to HUD
(with a copy placed in the Servicer's Home Loan File) promptly upon the
completion of such inspection;
(u) Each FHA Loan has been originated in compliance with the
provisions of 24 C.F.R. Section 201.20, and, if required by Title I, the
market value of the any related Property has been ascertained in
accordance with the procedures established by HUD;
(v) There exists a Home Loan File relating to each Home Loan and
such Home Loan File contains all of the original or certified
documentation listed in Section 2.05 for such Home Loan. Each Trustee's
------------
Home Loan File has been delivered to the Custodian and each Servicer's
Home Loan File is being held in trust by the Transferor for the benefit
of, and as agent for, the Certificateholders and the Trustee as the owner
thereof. Each document included in the Home Loan File which is required
to be executed by the Obligor has been executed by the Obligor in the
appropriate places. With respect to each Mortgage Loan, the related
Assignment of Mortgage to the Trustee is in recordable form and is
acceptable for recording under the laws of the jurisdiction in which the
Property is located. All blanks on any form required to be completed have
been so completed;
(w) Each FHA Loan is in respect of a home improvement loan or a
retail installment sale contract, and each Property is improved by a
residential dwelling and is not a Home Loan in respect of a manufactured
home or mobile home or the land on which a manufactured home or mobile
home has been placed;
(x) Each FHA Loan was underwritten by the Transferor in accordance
with the applicable underwriting criteria established by the FHA and
HUD; each Non-FHA Loan was underwritten by the Transferor in accordance
with the Transferor's underwriting guidelines;
(y) Any Property securing an FHA Loan is covered by any insurance
required by Title I; if the Property securing any Mortgage Loan is in an
area identified by the Federal Emergency Management Agency ("FEMA") as
having special flood hazards, unless the community in which the area is
situated is not participating in the National Flood Insurance Program
and the regulations thereunder or less than a year has passed since FEMA
notification regarding such hazards, a flood insurance policy is in
effect with respect to such Property with a generally acceptable carrier
which complies with Section 102(a) of the Flood Disaster Protection Act
of 1973; all improvements upon each Property securing a Non-FHA Loan are
insured by a generally acceptable insurer against loss by fire hazards
of extended coverage and such other hazards as are customary in the area
where the Property is located pursuant to insurance policies conforming
to the requirements of the Agreement; all such policies contain a
standard mortgage clause naming the Transferor or its predecessor in
interest, its successors and assigns, as loss payee;
(z) All costs, fees and expenses incurred in originating and
closing the Home Loan and in recording any related Mortgage were paid
and the Obligor is not entitled to any refund of any amounts, paid or
due to the Obligee pursuant to the Debt Instrument or any related
Mortgage;
(aa) Except for the related FHA Premium Amount, if applicable,
there is no obligation on the part of the Transferor or any other party
other than the Obligor to make payments with respect to the Home Loan;
(ab) At the time of origination of the Home Loan, each related
prior lien, if any, was certified by the Obligor as not 30 or more days
delinquent;
(ac) To the best of the Transferor's knowledge, all parties which
have had any interest in the Home Loan, whether as mortgagee, assignee,
pledgee or otherwise, are (or, during the period in which they held and
disposed of such interest, were) (i) in compliance with any and all
applicable licensing requirements of the laws of the state wherein the
Property is located, and (ii) (A) organized under the laws of such
state, or (B) qualified to do business in such state, or (C) federal
savings and loan associations or national banks having principal offices
in such state, or (D) not doing business in such state;
(ad) With respect to each Mortgage Loan, the related Mortgage
contains an enforceable provision requiring the consent of the Mortgagee
to assumption of the related Mortgage Loan upon sale of the Property;
(ae) With respect to any Mortgage Loan, there is no homestead or
other exemption available to the Mortgagor which would materially
interfere with the right to sell the related Property at a trustee's
sale or the right to foreclose the Mortgage; no relief has been
requested or allowed to the Mortgagor under the Civil Relief Act;
(af) Subject to Section 3.06, each FHA Loan has been submitted to
------------
the FHA for insurance pursuant to the FHA Title I loan program and each
FHA Loan has been or will be assigned a case number by the FHA for the
FHA Title I loan program;
(ag) Subject to Section 3.06, the FHA Reserve Amount with respect
------------
to each FHA Loan, has been or will be transferred to the FHA
Insurance Coverage Reserve Account;
(ah) The related Home Loan File for each Home Loan that is a
Mortgage Loan contains a Title Document with respect to such Home Loan
reflecting that title to the related Property is vested at least 50% in
the Obligor under such Home Loan;
(ai) To the best of the Transferor's knowledge, each Property
(including each residential dwelling improvement thereon) was at the
time the Home Loan was made free of damage which materially and
adversely affects the value thereof and, if the related Home Loan is an
FHA Loan, impairs the ability to insure the related Home Loan under
the Title I program;
(aj) Each Home Loan was originated in compliance with all
applicable laws and, to the best of the Transferor's knowledge, no fraud
or misrepresentation was committed by any Person in connection therewith
or, if the related loan is an FHA Loan, in the application for any
insurance required by Title I in relation to such FHA Loan;
(ak) Each Home Loan has been serviced in accordance with all
applicable laws and, to the best of the Transferor's knowledge, no fraud
or misrepresentation was committed by any Person in connection
therewith;
(al) The transfer, assignment and conveyance of the Debt
Instruments and the Mortgages by the Transferor to the Depositor were
not subject to the bulk transfer laws or any similar statutory
provisions in effect in any applicable jurisdiction;
(am) Any Home Loan originated in the State of Texas, was originated
pursuant to either Chapter 3 or Chapter 6 of the Texas Consumer Credit
Code;
(an) As of the applicable Cut-Off Date, no Obligor is a debtor
under proceedings under the Bankruptcy Code, and no such Obligor has
defaulted in payments on a Home Loan after the filing of such bankruptcy
case, whether under a plan or reorganization or otherwise;
(ao) To the best of the Transferor's knowledge, the Transferor has
not advanced funds, or induced, solicited or knowingly received any
advance of loan payments from a party other than, with respect to a
Mortgage Loan, the owner of the Property subject to the Mortgage;
(ap) The Home Loans were originated by the Transferor or through
the Transferor's network of dealers and correspondents (including Home
Loans acquired by such correspondents);
(aq) (Reserved);
(ar) With respect to FHA Loans secured by a Mortgage, the
representations and warranties of the Mortgagor in each mortgage loan
application and in connection with the related FHA Loan are true and
correct in all material respects (and it shall be deemed that a breach
is material only if a claim for payment made to the FHA under the
Contract of Insurance in respect of such FHA Loan is a Rejected Claim as
a result of such breach);
(as) Each Home Loan either complies with the Home Ownership and
Equity Protection Act of 1994 or is not subject to such act;
(at) the Transferor has caused to be performed or shall cause to be
performed within one month of the Closing Date any and all acts required
to preserve the rights and remedies of the Trust and the Trustee in any
insurance policies applicable to each Home Loan or, if such Home Loan is
an FHA Loan, only if required by Title I, including, without limitation,
any necessary notifications of insurers, assignments of policies or
interests therein, and establishment of coinsured, joint loss payee and
mortgagee rights in favor of the Trustee;
(au) With respect to any Mortgage Loan, to the best of the
Transferor's knowledge, there exists no violation of any environmental
law (either local, state or federal), rule or regulation in respect of
the Property which violation has or could have a material adverse effect
on the market value of such Property. The Transferor has no knowledge
of any pending action or proceeding directly involving the related
Property in which compliance with any environmental law, rule or
regulation is in issue; and, to the Transferor's best knowledge, nothing
further remains to be done to satisfy in full all requirements of each
such law, rule or regulation constituting a prerequisite to the use and
enjoyment of such Property;
(av) At the time of their origination, not more than 0.10% of the
FHA Loans (by aggregate Initial Principal Balance) and none of the Non-
FHA Loans were secured by Mortgages on non-owner occupied Mortgaged
Properties;
(aw) (Reserved);
(ax) (Reserved);
(ay) No Home Loan was selected from the Transferor's assets in a
manner which would cause it to be adversely selected as to credit risk
from the pool of home loans owned by the Transferor;
(az) With respect to each Home Loan that is not a first mortgage
loan, either (i) no consent for the Home Loan is required by the holder
of the related prior lien or (ii) such consent has been obtained and has
been delivered to the Trustee;
(ba) Each Home Loan is either a retail installment contract for
goods or services, home improvement loan for goods or services, debt
consolidation loan or a home equity loan. All Home Loans that are not
debt consolidation loans are either home equity loans, retail
installment sale contracts for goods and services or home improvement
loans for goods and services that are either "consumer credit contracts"
or "purchase money loans" as such terms are defined in 16 C.F.R. Part
433.1;
(bb) Each Debt Instrument is comprised of an original promissory
note and each promissory note constitutes an "instrument" or "chattel
paper" for purposes of Article 9 of the UCC. Each Debt Instrument has
been delivered to the Custodian; and
(bc) With respect to each Home Loan either (i) it has a combined
loan-to-value ratio less than 125% or (ii) substantially all the
proceeds thereof were used to acquire, improve or protect the related
Mortgaged Property. For purposes of this representation or warranty,
the term substantially all shall mean 80% or more.
Section 3.05 (Reserved).
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Section 3.06 Purchase and Substitution.
-------------------------
(a) It is understood and agreed that the representations and warranties
set forth in Section 3.04, shall survive the conveyance of the Home Loans to
------------
the Trust and the delivery of the Certificates to the Certificateholders.
Upon discovery by the Depositor, the Servicer, the Transferor, the Custodian,
the Trustee or any Certificateholder of a breach of any of such
representations and warranties which materially and adversely affects the
value of the Home Loans or the interest of the Certificateholders, or which
materially and adversely affects the interests of the Certificateholders in
the related Home Loan in the case of a representation and warranty relating
to a particular Home Loan (notwithstanding that such representation and
warranty was made to the Transferor's best knowledge), the party discovering
such breach shall give prompt written notice to the others. The Transferor
shall within 60 days of the earlier of its discovery or its receipt of notice
of any breach of a representation or warranty, promptly cure such breach in
all material respects. Except with respect to a breach of the
representations made by the Transferor pursuant to Section 3.04(af) and
----------------
3.04(ag), if within 60 days after the earlier of the Transferor's discovery
- --------
of such breach or the Transferor's receiving notice thereof such breach has
not been remedied by the Transferor and such breach materially and adversely
affects the interests of the Certificateholders or in the related Home Loan
(the "Defective Home Loan"), the Transferor shall on or before the
-------------------
Determination Date next succeeding the end of such 60-day period either
(i) remove such Defective Home Loan from the Trust (in which case it shall
become a Deleted Home Loan) and substitute one or more Qualified Substitute
Home Loans in the manner and subject to the conditions set forth in this
Section 3.06 or (ii) purchase such Defective Home Loan at a purchase price
- ------------
equal to the Purchase Price (as defined below) by depositing such Purchase
Price in the Collection Account. The Transferor shall provide the Servicer
and the Trustee with a certification of a Responsible Officer on the
Determination Date next succeeding the end of such 60-day period indicating
whether the Transferor is purchasing the Defective Home Loan or substituting
in lieu of such Defective Home Loan a Qualified Substitute Home Loan. With
respect to the purchase of a Defective Home Loan pursuant to this Section,
the "Purchase Price" shall be equal to the Principal Balance of such
--------------
Defective Home Loan as of the date of purchase, plus all accrued and unpaid
interest on such Defective Home Loan to but not including the Due Date in the
Due Period most recently ended prior to such Determination Date computed at
the applicable Home Loan Interest Rate, plus the amount of any unreimbursed
Servicing Advances made by the Servicer with respect to such Defective Home
Loan, which Purchase Price shall be deposited in the Collection Account
(after deducting therefrom any amounts received in respect of such
repurchased Defective Home Loan and being held in the Collection Account for
future distribution to the extent such amounts represent recoveries of
principal not yet applied to reduce the related Principal Balance or interest
(net of the Servicing Fee) for the period from and after the Due Date in the
Due Period most recently ended prior to such Determination Date).
Any substitution of Home Loans pursuant to this Section 3.06(a) shall
---------------
be accompanied by payment by the Transferor of the Substitution Adjustment,
if any, to be deposited in the Collection Account. For purposes of
calculating the Available Collection Amount for any Distribution Date,
amounts paid by the Transferor pursuant to this Section 3.06 in connection
------------
with the repurchase or substitution of any Defective Home Loan that are on
deposit in the Collection Account as of the Determination Date for such
Distribution Date shall be deemed to have been paid during the related Due
Period and shall be transferred to the Certificate Distribution Account as
part of the Available Collection Amount to be retained therein or transferred
to the Certificate Distribution Account, if applicable, pursuant to Section
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5.01(c).
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The Trustee on behalf of the Certificateholders agrees that if an FHA
Loan is a Defective Home Loan because a document is not included in the
Servicer's Home Loan File as of the 60th day after the discovery or receipt
of notice thereof, such defect shall be deemed to be cured if the Trustee
shall have received during the sixty-day period after such date a written
statement addressed to it from the Director of HUD Title I Insurance Division
that such document would not be required in connection with a claim for FHA
Insurance with respect to such FHA Loan. It is understood and agreed that
the obligation of the Transferor to repurchase or substitute any such Home
Loan pursuant to this Section 3.06 shall constitute the sole remedy against
------------
it with respect to such breach of the foregoing representations or warranties
or the existence of the foregoing conditions. For purposes of calculating 60
days with respect to a Defective Loan that is an FHA Loan because a document
is not included in the Servicer's Home Loan File, any day on which the FHA is
officially closed for reasons other than as specified in the definition of
Business Day shall not be counted in making such calculation. With respect
to representations and warranties made by the Transferor pursuant to Section
3.04 that are made to the Transferor's best knowledge,
------------
if it is discovered by any of the Depositor, the Transferor or the Trustee
that the substance of such representation and warranty is inaccurate and such
inaccuracy materially and adversely affects the value of the related Loan,
notwithstanding the Transferor's lack of knowledge, such inaccuracy shall be
deemed a breach of the applicable representation and warranty.
With respect to a breach of the representations made by the Transferor
pursuant to Section 3.04(af) and 3.04(ag), if the FHA has not assigned a case
---------------- --------
number under the Contract of Insurance to an FHA Loan to indicate that such
FHA Loan is eligible for Title I Insurance coverage under the Contract of
Insurance on or before the 120th day after the Closing Date, the Transferor
shall be obligated, on the last day of the Due Period next succeeding such
120th day, to repurchase such FHA Loan. If the FHA Reserve Amount with
respect to an FHA Loan has not been transferred to the FHA Insurance Coverage
Reserve Account on or before the 150th day after the Closing Date, the
Transferor shall be obligated, on the last day of the Due Period next
succeeding such 150th day, to repurchase such FHA Loan. The Claims
Administrator shall give notice in writing to each of the Depositor, the
Transferor and the Trustee of (i) any FHA Loan with respect
to which there has not been assigned a case number under the Contract of
Insurance on or before the 120th day after the Closing Date and (ii) any FHA
Loan that has not been transferred to the FHA Insurance Coverage Reserve
Account on or before the 150th day after the Closing Date. For purposes of
calculating either 120 or 150 days from the Closing Date in this Section
-------
3.06(a), any day on which the FHA is officially closed for reasons other than
- -------
such day being a Saturday, Sunday or a day on which banking institutions in
Washington, D.C. are authorized or obligated by law, executive order or
governmental decree to be closed, shall not be counted in making such
calculation.
(b) As to any Deleted Home Loan for which the Transferor substitutes a
Qualified Substitute Home Loan or Loans, the Transferor shall effect such
substitution by delivering to the Trustee (i) a certification executed by a
Responsible Officer of the Transferor to the effect that the Substitution
Adjustment has been credited to the Collection Account and (ii) the documents
constituting the Trustee's Home Loan File for such Qualified Substitute Home
Loan or Loans.
The Servicer shall deposit in the Collection Account all payments
received in connection with such Qualified Substitute Home Loan or Loans
after the date of such substitution. Monthly Payments received with respect
to Qualified Substitute Home Loans on or before the date of substitution will
be retained by the Transferor. The Trust will be entitled to all payments
received on the Deleted Home Loan on or before the date of substitution, and
the Transferor shall thereafter be entitled to retain all amounts
subsequently received in respect of such Deleted Home Loan. The Transferor
shall give written notice to the Servicer (if the Transferor is not then
acting as such) and the Trustee that such substitution has taken place and
the Servicer shall amend the Home Loan Schedule to reflect (i) the removal of
such Deleted Home Loan from the terms of this Agreement and (ii) the
substitution of the Qualified Substitute Home Loan. The Transferor shall
promptly deliver to the Servicer (if the Transferor is not then acting as
such) and the Trustee, a copy of the amended Home Loan Schedule. Upon such
substitution, such Qualified Substitute Home Loan or Loans shall be subject
to the terms of this Agreement in all respects, and the Transferor shall be
deemed to have made with respect to such Qualified Substitute Home Loan or
Loans, as of the date of substitution, the covenants, representations and
warranties set forth in Section 3.04. On the date of such substitution, the
------------
Transferor will deposit into the Collection Account an amount equal to the
related Substitution Adjustment, if any. In addition, on the date of such
substitution, the Servicer shall cause the Trustee to release the Deleted
Home Loan from the lien of the Trust and the Servicer will cause such
Qualified Substitute Home Loan to be assigned to the Trust as part of the
Trust Estate.
(c) With respect to all Defective Home Loans or other Home Loans
repurchased by the Transferor pursuant to this Agreement, upon the deposit of
the Purchase Price therefor to the Collection Account, the Trustee shall
assign to the Transferor, without recourse, representation or warranty, all
the Trustee's right, title and interest in and to such Defective Home Loans
or Home Loans, which right, title and interest were conveyed to the Trustee
pursuant to Section 2.01, including, without limitation, the rights to any
------------
FHA Insurance reserves attributable to such Home Loans. The Trustee shall
take any actions as shall be reasonably requested by the Transferor to effect
the repurchase of any such Home Loans.
(d) It is understood and agreed that the obligations of the Transferor
set forth in this Section 3.06 to cure, purchase or substitute for a
------------
Defective Home Loan (and to indemnify the Trust for certain losses as
described herein in connection with a Defective Home Loan) constitute the
sole remedies of the Depositor, the Trustee and the Certificateholders
hereunder respecting a breach of the representations and warranties contained
in Section 3.04. Any cause of action against the Transferor relating to or
------------
arising out of a defect in a Trustee's Home Loan File as contemplated by
Section 2.06 or against the Transferor relating to or arising out of a breach
- ------------
of any representations and warranties made in Section 3.04 shall accrue as
------------
to any Home Loan upon (i) discovery of such defect or breach by any party and
notice thereof to the Transferor or notice thereof by the Transferor to the
Trustee, (ii) failure by the Transferor to cure such defect or breach or
purchase or substitute such Home Loan as specified above, and (iii) demand
upon the Transferor, as applicable, by the Majority Certificateholders for
all amounts payable in respect of such Home Loan.
(e) The Trustee shall not have any duty to conduct any affirmative
investigation other than as specifically set forth in this Agreement as to
the occurrence of any condition requiring the repurchase or substitution of
any Home Loan pursuant to this Section or the eligibility of any Home Loan
for purposes of this Agreement.
(f) In connection with any Loan for which the Transferor elects to
substitute a Qualified Substitute Home Loan, the Transferor shall deliver to
the Trustee an Opinion of Counsel to the effect that such actions will not
cause (x) any federal tax to be imposed on the Trust, including without
limitation, any federal tax imposed on "prohibited transactions" under
Section 860F(a)(1) of the Code or on "contributions after the start-up day"
under Section 860G(d)(1) of the Code or (y) any portion of the Trust to fail
to qualify as a REMIC at any time that any Certificate is outstanding. In
the event that such opinion indicates that such substitution will result in
the imposition of a prohibited transaction tax, give rise to net taxable
income or be deemed a contribution to the REMIC after the "start-up day", the
Transferor shall not be permitted to substitute for such Home Loan but shall
repurchase such Home Loan in accordance with this Section 3.06.
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ARTICLE V
ADMINISTRATION AND SERVICING OF THE HOME LOANS
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Section 4.01 Duties of the Servicer.
----------------------
(a) Servicing Standard. The Servicer, as an independent contractor,
------------------
shall service and administer the Home Loans and shall have full power and
authority, acting alone, to do any and all things in connection with such
servicing and administration which the Servicer may deem necessary or
desirable and consistent with the terms of this Agreement. Notwithstanding
anything to the contrary contained herein, the Servicer, in servicing and
administering the Home Loans, shall employ or cause to be employed procedures
(including collection, foreclosure, liquidation and Foreclosure Property
management and liquidation procedures) and exercise the same care that it
customarily employs and exercises in servicing and administering loans of the
same type as the Home Loans for its own account, all in accordance with
Accepted Servicing Procedures of prudent lending institutions and servicers
of loans of the same type as the Home Loans and giving due consideration to
the Certificateholders' reliance on the Servicer. The Servicer has and shall
maintain the facilities, procedures and experienced personnel necessary to
comply with the servicing standard set forth in this subsection (a) and the
duties of the Servicer set forth in this Agreement relating to the servicing
and administration of the Home Loans.
In performing its obligations hereunder the Servicer shall at all times
act in good faith in a commercially reasonable manner in accordance with all
requirements of the FHA applicable to the servicing of the FHA Loans and
otherwise in accordance with applicable law and the Debt Instruments and
Mortgages. The Servicer shall at all times service and administer the FHA
Loans in accordance with Title I, and shall have full power and authority,
acting alone and/or through the Subservicer as provided in Section 4.07,
------------
subject only to this Agreement, the respective Home Loans, and, in the case
of the FHA Loans, the specific requirements and prohibitions of Title I, to
do any and all things in connection with such servicing and administration
which are consistent with the manner in which prudent servicers service FHA
Title I home improvement loans and which are consistent with the ordinary
practices of prudent mortgage lending institutions.
(b) Servicing Advances. In accordance with the preceding general
------------------
servicing standard, the Servicer, or any Subservicer on behalf of the
Servicer, shall make all Servicing Advances in connection with the servicing
of each Home Loan hereunder. Notwithstanding any provision to the contrary
herein, neither the Servicer, nor any Subservicer on behalf of the Servicer,
shall have any obligation to advance its own funds for any delinquent
scheduled payments of principal and interest on any Home Loan or to satisfy
or keep current the indebtedness secured by any Superior Liens on the related
Mortgaged Property. No costs incurred by the Servicer or any Subservicer in
respect of Servicing Advances shall, for the purposes of distributions to
Certificateholders, be added to the amount owing under the related Home Loan.
Notwithstanding any obligation by the Servicer to make a Servicing Advance
hereunder with respect to a Home Loan, before making any Servicing Advance
that is material in relation to the outstanding principal balance thereof,
the Servicer shall assess the reasonable likelihood of (i) recovering such
Servicing Advance and any prior Servicing Advances for such Home Loan, and
(ii) recovering any amounts attributable to outstanding interest and principal
owing on such Home Loan for the benefit of the Certificateholders in excess
of the costs, expenses and other deductions to obtain such recovery,
including without limitation any Servicing Advances therefor and, if
applicable, the outstanding indebtedness of all Superior Liens. The Servicer
shall only make a Servicing Advance with respect to a Home Loan to the
extent that the Servicer determines in its reasonable, good faith judgment
that such Servicing Advance would likely be recovered as aforesaid; provided,
however, that the Servicer will be entitled to be reimbursed for any
Nonrecoverable Servicing Advance pursuant to this Agreement.
(c) Waivers, Modifications and Extensions. The Servicer shall make
-------------------------------------
reasonably diligent efforts to collect all payments called for under the
terms and provisions of the Home Loans, and shall, to the extent such
procedures shall be consistent with this Agreement, follow Accepted Servicing
Procedures. The Servicer may in its discretion waive or permit to be waived
any penalty interest or any other fee or charge which the Servicer would be
entitled to retain hereunder as servicing compensation and extend the Due
Date on a Debt Instrument for a period (with respect to each payment as to
which the Due Date is extended) not greater than 90 days after the initially
scheduled due date for such payment. Notwithstanding anything in this
Agreement to the contrary, the Servicer shall not permit any additional
extension or modification with respect to any Home Loan other than that
permitted by the immediately preceding sentence unless the Home Loan is a
Defaulted Home Loan or, in the case of any FHA Loan, such extension or
modification complies with the requirements of Title I or is required by
Title I and such FHA Loan is a Defaulted Home Loan or a payment default is
reasonably foreseeable by the Servicer.
(d) Instruments of Satisfaction or Release. Without limiting the
--------------------------------------
generality of Section 4.01(c), the Servicer, in its own name or in the name
of a Subservicer, is hereby authorized and empowered when the Servicer
believes it appropriate in its best judgment to execute and deliver, on
behalf of the Certificateholders and the Trust or any of them, and upon
notice to the Trustee, any and all instruments of satisfaction or cancella-
tion, or of partial or full release or discharge, and all other comparable
instruments, with respect to the Home Loans and the Mortgaged Properties and
to institute foreclosure proceedings or obtain a deed-in-lieu of foreclosure
so as to convert the ownership of such properties, and to hold or cause to be
held title to such properties, on behalf of the Trust and Certificateholders.
The Servicer shall service and administer the Home Loans in accordance with
applicable state and federal law and shall provide to the Obligors any
reports required to be provided to them thereby. The Trustee shall execute,
at the written direction of the Servicer, any limited or special powers of
attorney and other documents reasonably acceptable to the Trustee to enable
the Servicer or any Subservicer to carry out their servicing and administra-
tive duties hereunder, including, without limitation, limited or special
powers of attorney with respect to any Foreclosure Property, and the Trustee
shall not be accountable for the actions of the Servicer or any Subservicers
under such powers of attorney and shall be indemnified by such parties with
respect to such actions.
Section 4.02 Payment of Taxes, Insurance and Other Charges.
---------------------------------------------
The Servicer may and, if required by the Servicer, the Subservicers
shall, establish and maintain one or more accounts (the "Servicing
Accounts"), into which any collections from the Obligors (or related advances
from Subservicers) for the payment of taxes, assessments, hazard insurance
premiums, and comparable items for the account of the Obligors shall be
deposited and retained. Servicing Accounts shall be Eligible Accounts.
Withdrawals of amounts so collected from a Servicing Account may be made only
to (i) effect timely payment of taxes, assessments, hazard insurance
premiums, and comparable items; (ii) reimburse the Servicer (or a Subservicer
to the extent provided in the related Sub-Servicing Agreement) out of related
collections for any advances with respect to taxes, assessments and insurance
premiums and with respect to hazard insurance; (iii) refund to Obligors any
sums as may be determined to be overages; (iv) pay interest, if required and
as described below, to Obligors on balances in the Servicing Account; or (v)
clear and terminate the Servicing Account at the termination of this
Agreement in accordance with Section 12.01. As part of its servicing duties,
-------------
the Servicer or Subservicers shall pay to the Obligors interest on funds in
Servicing Accounts, to the extent required by law and, to the extent that
interest earned on funds in the Servicing Accounts is insufficient, to pay
such interest from its or their own funds, without any reimbursement from the
Trust, the Trustee, the Depositor, or any Certificateholder therefor. Upon
request of the Trustee, the Transferor or the Servicer shall cause the bank,
savings association or other depository for each Servicing Account to forward
to the Trustee copies of such statements or reports as the Trustee, the
Depositor, or any Certificateholder shall reasonably request.
Section 4.03 Fidelity Bond; Errors and Omission Insurance.
--------------------------------------------
The Servicer shall maintain a fidelity bond in such form and amount as
is customary for entities acting as custodian of funds and documents in
respect of loans on behalf of institutional investors. The Servicer shall
obtain and maintain at all times during the term of this Agreement errors and
omissions insurance coverage covering the Servicer and its employees issued
by a responsible insurance company. The issuer, policy terms and forms and
amounts of coverage, including applicable deductibles, shall be in such form
and amount as is customary for entities acting as servicers. The Servicer
agrees to notify the Trustee in writing within five (5) days of the
Servicer's receipt of notice of the cancellation or termination of any such
errors and omissions insurance coverage. The Servicer shall provide to the
Trustee or any Certificateholder upon request written evidence of such
insurance coverage.
Section 4.04 Filing of Continuation Statements.
---------------------------------
On or before the fifth anniversary of the filing of any financing
statements by Empire Funding and the Depositor, respectively, with respect to
the assets conveyed to the Trust, Empire Funding and the Depositor shall
prepare, have executed by the necessary parties and file in the proper
jurisdictions all financing and continuation statements necessary to maintain
the liens, security interests, and priorities of such liens and security
interests that have been granted by Empire Funding and the Depositor,
respectively, and Empire Funding and the Depositor shall
continue to file on or before each fifth anniversary of the filing of any
financing and continuation statements such additional financing and
continuation statements until the Trust has terminated pursuant to Section
-------
12.01 hereof. The Trustee agrees to cooperate with Empire Funding and the
- -----
Depositor in preparing, executing and filing such statements. The Trustee
agrees to notify Empire Funding and the Depositor on the third Distribution
Date prior to each such fifth anniversary of the requirement to file such
financing and continuation statements. The filing of any such statement with
respect to Empire Funding and the Depositor shall not be construed as any
indication of an intent of any party contrary to the expressed intent set
forth in Section 2.04 hereof. If Empire Funding or the Depositor has ceased
------------
to do business whenever any such financing and continuation statements must
be filed or Empire Funding or the Depositor fails to file any such financing
statements or continuation statements at least one month prior to the
expiration thereof, each of Empire Funding and the Depositor does hereby
make, constitute and appoint the Trustee its attorney-in-fact, with full
power and authority to execute and file in its name and on its behalf any
such financing statements or continuation statements required under this
Section 4.04.
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Section 4.05 (Reserved).
Section 4.06 Superior Liens.
--------------
If the Servicer is notified that any lienholder under a Superior Lien
has accelerated or intends to accelerate the obligations secured by such
Superior Lien, or has declared or intends to declare a default under the
related mortgage or promissory note secured thereby, or has filed or intends
to file an election to have any Mortgaged Property sold or foreclosed, the
Servicer shall take, on behalf of the Trustee, all reasonable actions that
are necessary to protect the interests of the Certificateholders and/or to
preserve the security of the related Home Loan, including making any
Servicing Advances that are necessary to cure the default or reinstate the
Superior Lien. The Servicer shall promptly notify the Trustee if it takes
any such action. Any Servicing Advances by the Servicer pursuant to its
obligations in this Section 4.06 shall comply with requirements set forth in
------------
Section 4.01(b) hereof.
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Section 4.07 Subservicing.
------------
(a) The Servicer may enter into Subservicing Agreements for any
servicing and administration of Home Loans with any institution which is in
compliance with the laws of each state necessary to enable it to perform its
obligations under such Subservicing Agreement and is an Eligible Servicer.
The Servicer shall give prior written notice to the Trustee of the
appointment of any Subservicer. The Servicer shall be entitled to terminate
any Subservicing Agreement in accordance with the terms and conditions of
such Subservicing Agreement and to either directly service the related Home
Loans or enter into a Subservicing Agreement with a successor subservicer
which qualifies hereunder.
In the event of termination of any Subservicer, and unless a successor
Subservicer has otherwise been appointed, all servicing obligations of such
Subservicer shall be assumed simultaneously by the Servicer without any
additional act or deed on the part of such Subservicer or the Servicer, and
the Servicer shall service directly the related Home Loans.
Each Sub-Servicing Agreement shall include the provision that such
agreement may be immediately terminated by the Trustee in the event that the
Servicer shall, for any reason, no longer be the Servicer. In no event shall
any Sub-Servicing Agreement require the Trustee, as Successor Servicer, for
any reason whatsoever to pay compensation to a Subservicer in order to
terminate such Subservicer.
(b) Notwithstanding any Subservicing Agreement, any of the provisions
of this Agreement relating to agreements or arrangements between the Servicer
and a Subservicer or reference to actions taken through a Subservicer or
otherwise, the Servicer shall remain obligated and primarily liable to the
Trustee and Certificateholders for the servicing and administering of the
Home Loans in accordance with the provisions of this Agreement without
diminution of such obligation or liability by virtue of such Subservicing
Agreements or arrangements or by virtue of indemnification from the
Subservicer and to the same extent and under the same terms and conditions as
if the Servicer alone were servicing and administering the Home Loans. For
purposes of this Agreement, the Servicer shall be deemed to have received
payments on Home Loans when the Subservicer has actually received such
payments and, unless the context otherwise requires, references in this
Agreement to actions taken or to be taken by the Servicer in servicing the
Home Loans include actions taken or to be taken by a Subservicer on behalf of
the Servicer. The Servicer shall be entitled to enter into any agreement
with a Subservicer for indemnification of the Servicer by such Subservicer,
and nothing contained in this Agreement shall be deemed to limit or modify
such indemnification.
(c) In the event the Servicer shall for any reason no longer be the
Servicer (including by reason of an Event of Default), the successor
Servicer, on behalf of the Trustee and the Certificateholders pursuant to
Section 4.08, shall thereupon assume all of the rights and obligations of the
- ------------
Servicer under each Subservicing Agreement that the Servicer may have entered
into, unless the successor Servicer elects to terminate any Subservicing
Agreement in accordance with its terms. The successor Servicer shall be
deemed to have assumed all of the Servicer's interest therein and to have
replaced the Servicer as a party to each Subservicing Agreement to the same
extent as if the Subservicing Agreements had been assigned to the assuming
party, except that the Servicer shall not thereby be relieved of any
liability or obligations under the Subservicing Agreements which accrued
prior to the transfer of servicing to the successor Servicer. The Servicer
at its expense and without right of reimbursement therefor, shall, upon
request of the successor Servicer, deliver to the assuming party all
documents and records relating to each Subservicing Agreement and the Home
Loans then being serviced and an accounting of amounts collected and held by
it and otherwise use its best efforts to effect the orderly and efficient
transfer of the Subservicing Agreements to the assuming party.
(d) As part of its servicing activities hereunder, the Servicer, for
the benefit of the Trustee and the Certificateholders, shall enforce the
obligations of each Subservicer under the related Subservicing Agreement.
Such enforcement, including, without limitation, the legal
prosecution of claims and the pursuit of other appropriate remedies, shall be
in such form and carried out to such an extent and at such time as the
Servicer, in its good faith business judgment, would require were it the
owner of the related Home Loans. The Servicer shall pay the costs of such
enforcement at its own expense, and shall be reimbursed therefor only (i)
from a general recovery resulting from such enforcement to the extent, if
any, that such recovery exceeds all amounts due in respect of the related
Home Loan or (ii) from a specific recovery of costs, expenses or attorneys
fees against the party against whom such enforcement is directed.
(e) Any Subservicing Agreement that may be entered into and any other
transactions or services relating to the Home Loans involving a Subservicer
shall be deemed to be between the Subservicer and the Servicer alone and none
of the Trustee or the Certificateholders shall be deemed parties thereto or
shall have any claims, rights, obligations, duties or liabilities with
respect to the Subservicer in its capacity as such except as set forth in
Section 4.07(c) above.
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(f) In those cases where a Subservicer is servicing a Home Loan
pursuant to a Sub-Servicing Agreement, the Subservicer will be required to
establish and maintain one or more accounts (collectively, the "Sub-Servicing
Account"). The Sub-Servicing Account shall be an Eligible Account. The
Subservicer will be required to deposit into the Sub-Servicing Account no
later than the first Business Day after receipt all proceeds of Home Loans
received by the Subservicer and remit such proceeds to the Servicer for
deposit in the Collection Account not later than the Business Day following
receipt thereof by the Subservicer. Notwithstanding anything in this clause
(f) to the contrary, the Subservicer shall only be able to withdraw funds
from the Sub-Servicing Account for the purpose of remitting such funds to the
Servicer for deposit into the Collection Account. The Servicer shall require
the Subservicer to cause any collection agent of the Subservicer to send a
copy to the Servicer of each statement of monthly payments collected by or on
behalf of the Subservicer within five Business Days after the end of every
month, and the Servicer shall compare the information provided in such
reports with the deposits made by the Subservicer into the Collection Account
for the same period. The Servicer shall be deemed to have received payments
on the Home Loans on the date on which the Subservicer has received such
payments.
Section 4.08 Successor Servicers.
-------------------
In the event that the Servicer is terminated pursuant to Section 10.01
-------------
hereof, or resigns pursuant to Section 9.04 hereof or otherwise becomes
------------
unable to perform its obligations under this Agreement, the Trustee will
become the successor servicer or will appoint a successor servicer in
accordance with the provisions of Section 10.02 hereof; provided that any
-------------
successor servicer, excluding the Trustee, shall satisfy the requirements of
an Eligible Servicer and shall be approved by the Rating Agencies.
Section 4.09 Maintenance of Insurance.
------------------------
(a) The Servicer shall maintain or cause to be maintained with respect
to each Mortgaged Property securing an FHA Loan such insurance as is required
with respect thereto by Title I. The Servicer shall cause to be maintained
for each Foreclosure Property acquired by the Trust such types and amounts of
insurance coverage as the Servicer shall deem reasonable. The Servicer shall
cause to be maintained for each Mortgaged Property securing a Non-FHA Loan,
such fire and hazard insurance as the Servicer shall deem reasonable.
(b) Any amounts collected by the Servicer under any Insurance Policies,
shall be paid over or applied by the Servicer as follows:
(i) In the case of amounts received in respect of any Home
Loan:
(A) for the restoration or repair of the affected Property,
in which event such amounts shall be released to the Obligor in
accordance with the terms of the related Debt Instrument or
(B) to the extent not so used, in reduction of the Principal
Balance of the related Home Loan, in which event such amounts shall
be deposited into the Collection Account, unless the related
instruments require a different application, in which case such
amounts shall be applied in the manner provided therein; and
(ii) Subject to Section 4.12, in the case of amounts received
------------
in respect of any Foreclosure Property, for the restoration or repair of
such Foreclosure Property, unless the Servicer determines, consistent
with the servicing standard set forth in Section 4.01, that such
restoration or repair is not in the best economic interest of the Trust,
in which event such amounts shall be deposited into the Collection Account
as a Payment received from the operation of such Foreclosure Property.
Section 4.10 Inspections.
-----------
The Servicer shall inspect or cause to be inspected each Mortgaged
Property that secures any FHA Loan at such times and in such manner as are
consistent with Accepted Servicing Procedures.
Section 4.11 Reports to the Securities and Exchange Commission.
-------------------------------------------------
The Trustee shall, on behalf of the Trust, cause to be filed with the
Securities and Exchange Commission all monthly collateral reports on Forms 8-
K and 10-K required to be filed under the provisions of the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the
Securities and Exchange Commission thereunder. Upon the request of the
Trustee, each of the Servicer and the Transferor shall cooperate with the
Trustee in the preparation of any such report and shall provide to the
Trustee in a timely manner all such information or documentation as the
Trustee may reasonably request in connection with the performance of its
duties and obligations under this Section.
Section 4.12 Claim for FHA Insurance and Foreclosure.
---------------------------------------
(a) (x) If any Monthly Payment due under any FHA Loan is not paid when
the same becomes due and payable, or if the Obligor fails to perform any
other covenant or obligation under such FHA Loan and such failure continues
beyond any applicable grace period, the Servicer shall take such action
(consistent with Title I, including efforts to cure the default of such FHA
Loan pursuant to 24 C.F.R. Section 201.50) as it shall deem to be in the best
interest of the Trust. If the maturity of the related note has been
accelerated pursuant to the requirements under Title I following the
Servicer's efforts to cure the default of such FHA Loan (and such FHA Loan is
not required to be purchased pursuant to Section 2.06), and (i) if an FHA
------------
Insurance Coverage Insufficiency does not exist at the time, the Claims
Administrator, unless not in the best interests of the Trust, shall initiate,
on behalf of the Trust and the Contract of Insurance Holder, a claim under
the Contract of Insurance for reimbursement for loss on such FHA Loan
pursuant to Title I (see 24 C.F.R. Section 201.54), or (ii) if an FHA
Insurance Coverage Insufficiency exists at the time, the Servicer shall
determine within 90 days in accordance with Section 4.12(c) whether or not
---------------
to proceed against the Mortgaged Property securing such FHA Loan, if such FHA
Loan is a Mortgage Loan or against the Obligor, if such FHA Loan is
unsecured, and if thereafter an FHA Insurance Coverage Insufficiency does not
exist, the Claims Administrator may submit a claim under the Contract of
Insurance with respect to such FHA Loan if it has obtained the prior approval
of the Secretary of HUD pursuant to 24 C.F.R. Section 201.51; or (y) if any
monthly payment due under any Non-FHA Loan is not paid when the same is due
and payable, or if the Obligor fails to perform any other covenant or
obligation under such Non-FHA Loan and such failure continues beyond any
applicable grace period, the Servicer shall take such action as it shall deem
to be in the best interest of the Trust; including but not limited to
proceeding against the Property securing such Non-FHA Loan.
In the event that in accordance with clauses (a)(x)(ii) and (y) above
the Servicer determines not to proceed against the Mortgaged Property or
Obligor, as applicable, on or before the Determination Date following such
determination the Servicer shall determine in good faith in accordance with
customary servicing practices that all amounts which it expects to receive
with respect to such Home Loan have been received. If the Servicer makes such
a determination, it shall give notice to such effect pursuant to Section
-------
5.05.
- ----
(b) If the Claims Administrator initiates a claim for reimbursement for
loss on any FHA Loan under this Section, the Claims Administrator shall
comply with applicable provisions of Title I and diligently pursue such claim
and, in any event, shall initiate such claim no later than the last day
permitted under Title I (see 24 C.F.R. Section 201.54(b)). For purposes of
this Agreement, the term "initiate a claim for reimbursement" shall mean the
filing of the claim application pursuant to the requirements set forth in 24
C.F.R. Section 201.54, including the filing of all related assignments and
documents and materials required for file review. For the purposes of
such filing, the Claims Administrator shall request, and the Trustee within
5 calendar days of request shall deliver to the Claims Administrator, the
Debt Instrument and the related Mortgage for such FHA Loan and each other
item in the related File necessary to make such claim. Each Certificateholder
hereby consents to the assignment of such FHA Loan for the sole purpose of
initiating a claim under the Contract of Insurance for reimbursement with
respect to such FHA Loan. Pursuant to Section 4.12(h), the Contract of
Insurance Holder shall furnish the Claims ---------------
Administrator a power of attorney to file claims under the Contract of
Insurance. The Contract of Insurance Holder agrees to execute and deliver to
the Claims Administrator, within 5 Business Days of receipt from the Claims
Administrator, all documents, if any, necessary to initiate and file a claim
under the Contract of Insurance for such FHA Loan, which documents shall be
prepared by the Claims Administrator. If any claim to the FHA becomes a
Rejected Claim, upon receipt of the FHA's rejection notice by the Claims
Administrator directly from the FHA or from the Contract of Insurance Holder
pursuant to Section 4.12(e) and a determination by the Claims
---------------
Administrator that the rejection was not due to clerical error or lack of
insurance, then the Claims Administrator shall promptly notify the Contract
of Insurance Holder (if such notice has not already been given) and the
Trustee of the notice of a Rejected Claim.
If the FHA indicates in writing that the claim is a Rejected Claim due
to reasons other than a failure to service the related FHA Loan in accordance
with Title I after the Closing Date, Empire Funding shall repurchase the FHA
Loan on or before the Monthly Cut-Off Date next following the date of such
notice from the Claims Administrator to repurchase such FHA Loan, either
directly from FHA or from the Trust, for the Purchase Price. If FHA
indicates in writing that the claim is a Rejected Claim due to a failure to
service such FHA Loan in accordance with Title I after the Closing Date, the
Claims Administrator shall immediately notify the Servicer, the Contract of
Insurance Holder, the Trust and the Trustee of such determination, and the
Servicer shall on or before the later to occur of (i) the next succeeding
Monthly Cut-Off Date and (ii) ten Business Days from the date on which such
rejection notice is received by the Claims Administrator, purchase such FHA
Loan either directly from FHA or from the Trust, for the Purchase Price. In
the event that the FHA fails to indicate in writing why the claim is a
Rejected Claim, the Claims Administrator shall determine why the claim is a
Rejected Claim. If the Claims Administrator determines that the claim is a
Rejected Claim for reasons other than a servicing failure that occurred after
the Closing Date, Empire Funding shall be obligated to repurchase such FHA
Loan for the Purchase Price. If the Claims Administrator determines that the
claim is a Rejected Claim due to a servicing failure that occurred after the
Closing Date, the Servicer shall be obligated to repurchase such FHA Loan for
the Purchase Price. Notwithstanding any provisions herein to the contrary,
neither Empire Funding nor the Servicer shall be required to repurchase or
purchase, as applicable, any FHA Loan subject to a Rejected Claim as a result
of the depletion of the amount of the FHA Insurance Coverage Reserve Account
as shown in the Insurance Record.
(c) In accordance with the criteria for proceeding against the
Mortgaged Property set forth in Section 4.12(a), with respect to an FHA Loan
---------------
that is a Mortgage Loan that has been accelerated pursuant to the
requirements of Title I following the Servicer's efforts to cure the
default of the FHA Loan, and with respect to a Non-FHA Loan that is a
Mortgage Loan, unless otherwise prohibited by applicable law or court or
administrative order, the Servicer, on behalf of the Trust and the Trustee,
may, at any time, institute foreclosure proceedings to the extent permitted
by law, exercise any power of sale to the extent permitted by law, obtain a
deed in lieu of foreclosure, or otherwise acquire possession of or title to
the related Mortgaged Property, by operation of law or otherwise; provided,
--------
however, that the Servicer shall not acquire any personal property pursuant
- -------
to this Section 4.12 unless either:
------------
(x) such personal property is incident to real property (within
the meaning of section 856(e)(1) of the Code) so acquired by the
Servicer; or
(y) the Trustee shall have received an Opinion of Counsel not
employed by the Servicer, Empire Funding or its affiliates to the effect
that the holding of such personal property by the Trust will not cause
the imposition of a tax on the Trust under the REMIC Provisions or cause
the Trust to fail to qualify as a REMIC at any time that any Certificate
are outstanding.
In accordance with the criteria for proceeding against the Mortgaged
Property set forth in Section 4.12(a), with respect to FHA Loans that are
---------------
Mortgage Loans and with respect to the Non-FHA Loans, the Servicer shall
institute foreclosure proceedings, repossess, exercise any power of sale to
the extent permitted by law, obtain a deed in lieu of foreclosure, or
otherwise acquire possession of or title to any Property, by operation of law
or otherwise only in the event that in the Servicer's reasonable judgement
such action is likely to result in a positive economic benefit to the Trust
by creating net liquidation proceeds (after reimbursement of all amounts owed
with respect to such Home Loan to the Servicer) and provided that, with
respect to any Property, prior to taking title thereto, the Servicer has
requested that the Trustee obtain, and the Trustee shall have obtained, an
environmental review to be performed on such Property by a company with
recognized expertise, the scope of which is limited to the review of public
records and documents for information regarding whether such Mortgaged
Property has on it, under it or is near, hazardous or toxic material or
waste. If such review reveals that such Mortgaged Property has on it, under
it or is near hazardous or toxic material or waste or reveals any other
environmental problem, the Trustee shall provide a copy of the related report
to the Servicer.
In connection with any foreclosure proceeding on an FHA Loan, the
Servicer shall comply with the requirements under Title I, shall follow such
practices and procedures in a manner which is consistent with the Servicer's
procedure for foreclosure with respect to similar FHA Title I loans held in
the Servicer's portfolio for its own account or, if there are no such loans,
FHA Title I loans serviced by the Servicer for others. If, in following such
foreclosure procedures, title to the Foreclosure Property is acquired, the
deed or certificate of sale shall be issued to the Trustee.
(d) With respect to any FHA Loan, the Trustee and the Contract of
Insurance Holder shall deposit in the Certificate Distribution Account on the
day of receipt all amounts received from the FHA or any other Person with
respect to such FHA Loans or any other assets of the Trust and shall transmit
by facsimile, or such other method requested by the Servicer or Claims
Administrator, to the Servicer and Claims Administrator on each such day the
letter of transmittal received from the FHA and any other documents with
respect to such receipt. The Trustee and the Contract of Insurance Holder
shall also promptly deliver to the Claims Administrator copies of any other
correspondence received from the FHA or sent to the FHA by the Trustee or the
Contract of Insurance Holder, as the case may be, including, but not limited
to, any correspondence regarding the balance of the FHA Insurance Coverage
Reserve Account, premiums due and claims rejected.
(e) If the FHA rejects an insurance claim, in whole or part, under the
Contract of Insurance after previously paying such insurance claim and the
FHA demands that the Contract of Insurance Holder repurchase such FHA Loan,
the Claims Administrator shall pursue such appeals with the FHA as are
reasonable. If the FHA continues to demand that the Contract of Insurance
Holder repurchase such FHA Loan after the Claims Administrator exhausts such
administrative appeals as are reasonable, then notwithstanding that Empire
Funding, the Servicer or any other person is required to repurchase such FHA
Loan under this Agreement, the Claims Administrator shall notify the Contract
of Insurance Holder of such fact and the Trustee shall repurchase such FHA
Loan from funds available in the Certificate Distribution Account. The
Claims Administrator shall, to the extent possible, direct the Trustee to
make all such repurchases of FHA Loans once a month and to repurchase any and
all such FHA Loans from the FHA in that portion of the calendar month after
each Distribution Date. To the extent allowed by FHA, Empire Funding may
repurchase directly from the FHA any FHA Loan for which an insurance claim
has been paid and later rejected by the FHA. If the FHA indicates in writing
in connection with its rejection or refusal to pay a claim that such
rejection or refusal is due to other than (i) a failure to service the FHA
Loan in accordance with Title I after the Closing Date or (ii) the amount in
the FHA Insurance Coverage Reserve Account is insufficient to pay such claim,
or if the FHA does not indicate in writing the reason for its rejection or
refusal, Empire Funding shall be liable to reimburse the Trust for any
amounts paid by the Trustee to the FHA in order to repurchase such FHA Loan.
Subject to Section 4.12(b), if the FHA indicates in writing, or it is agreed
---------------
by the Servicer, in connection with its rejection or refusal to pay a claim
that such rejection or refusal is due to a failure to service such Loan in
accordance with Title I after the Closing Date, the Servicer shall be liable
to reimburse the Trust or Empire Funding for any amounts paid by the Trust or
Empire Funding, as the case may be, to FHA in order to repurchase FHA Loans
for which the FHA has rejected an insurance claim as a result of a failure to
service such FHA Loan in accordance with Title I.
(f) (Reserved).
(g) The Claims Administrator shall be entitled to reimbursement of
expenses associated with the filing of any FHA Insurance claim from and to
the extent that such amounts are reimbursed by HUD.
(h) The Trustee shall furnish the Claims Administrator or the Servicer,
as applicable, within 5 days of request of the Claims Administrator or the
Servicer therefor any powers of attorney and other documents necessary and
appropriate to carry out its respective duties hereunder, including any
documents or powers of attorney necessary to foreclose or file a claim
with respect to any FHA Loan and to file claims with the FHA under the
Contract of Insurance. The forms of any such powers or documents shall be
appended to such requests. The Contract of Insurance Holder shall furnish
the Claims Administrator or the Servicer, as applicable, within 5 days of
request of the Claims Administrator or the Servicer therefor any powers of
attorney and other documents necessary and appropriate to carry out its
administrative duties pursuant to Section 4.12.
------------
(i) In the event the Trust acquires any Foreclosure Property, the
Trustee shall elect to treat such Foreclosure Property as "foreclosure
property" within the meaning of Section 860G(a)(8) of the Code, in accordance
with such rules as are then applicable; and the Servicer, pursuant to Section
------------
4.13, shall sell such Foreclosure Property in its entirety prior to the date
which is two years after its Acquisition Date, unless, in any such case,
either (i) the Servicer on behalf of the REMIC Pool has applied for and
received an extension of such two-year period pursuant to Code Sections
856(e)(3) and 860G(a)(8)(A) in which case the Servicer shall sell such
Foreclosure Property within the applicable extension period or (ii) the
Servicer shall have provided and the Trustee shall have received an
opinion of counsel not employed by the Servicer, the Depositor or either
of their affiliates to the effect that the holding of such Foreclosure
Property (subject to any conditions set forth in such Opinion) for an
additional specified period will not cause such Foreclosure Property
to fail to qualify as "foreclosure property" within the meaning of
Section 860G(a)(8) of the Code (determined without regard to the exception
applicable for purposes of Section 860D(a) of the Code) at any time that
any Certificate is Outstanding, in which event such two-year period shall
be extended by such additional specified period, subject to any conditions
set forth in such Opinion of Counsel.
Section 4.13 Title, Management and Disposition of Foreclosure
-------------------------------------
Property.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure (a "Foreclosure Property"), the
--------------------
deed or certificate of sale shall be taken in the name of the Trustee for the
benefit of the Certificateholders. The Servicer shall manage, conserve,
protect and operate each Foreclosure Property for the Trustee and the
Certificateholders solely for the purpose of its prudent and prompt
disposition and sale. The Servicer shall, either itself or through an agent
selected by the Servicer, manage, conserve, protect and operate the
Foreclosure Property in the same manner that it manages, conserves, protects
and operates other foreclosure property for its own account.
Subject to Section 4.12, the Servicer shall, consistent with the
------------
servicing standards set forth herein, foreclose upon or otherwise comparably
convert the ownership of properties securing such of the Home Loans as come
into and continue in default and as to which no satisfactory arrangements can
be made for collection of delinquent payments. In connection with
realization upon defaulted Home Loans, the Servicer shall follow such
practices and procedures as it shall deem necessary or advisable, as shall be
normal and usual in accordance with Accepted Servicing Procedures and the
requirements of insurers under any insurance policy required to be maintained
hereunder with respect to the related Home Loan. The Servicer shall be
responsible for all costs and expenses incurred by it in any such
proceedings; provided, however, that such costs and expenses will be
-------- -------
recoverable as Servicing Advances by the Servicer as contemplated herein.
The Servicer shall not be required to make any Servicing Advance, to
foreclose upon any Mortgaged Property, or otherwise expend its own funds
toward the restoration of any Mortgaged Property that shall have suffered
damage from any cause of damage to a Mortgaged Property such that the
complete restoration of such property is not fully reimbursable by the hazard
insurance policies required to be maintained pursuant to this Agreement.,
unless it shall determine in its reasonable judgment, as evidenced by a
certificate of a Servicing Officer, that such foreclosure or restoration, as
the case may be, will increase the proceeds of liquidation of the related
Home Loan after reimbursement to itself for Servicing Advances. Any
Servicing Advances made with respect to a Home Loan shall be recoverable by
the Servicer only from recoveries on such Home Loan except to the extent such
Servicing Advance is deemed a Nonrecoverable Servicing Advance.
The Servicer may offer to sell to any Person any Foreclosure Property,
if and when the Servicer determines consistent with the Accepted Servicing
Procedures and that such a sale would be in the best interests of the Trust,
but shall, with respect to the FHA Loans, in any event, so offer to sell any
Foreclosure Property in accordance with the criteria set forth in Section
-------
4.12 and no later than the time determined by the Servicer to be sufficient
- ----
to result in the sale of such Foreclosure Property on or prior to the date
specified in Section 4.12(d). The Servicer shall give the Trustee not less
---------------
than five days' prior notice of its intention to sell any Foreclosure
Property, and shall accept the highest bid received from any Person for any
Foreclosure Property in an amount at least equal to the sum of:
(1) the Principal Balance of the related foreclosed Home Loan
plus the outstanding amount of any liens superior in priority, if any,
to the lien of the foreclosed Home Loan; and
(2) all unpaid interest accrued thereon at the related Home
Loan Interest Rate through the date of sale.
In the absence of any such bid, the Servicer shall accept the highest bid
received from any Person that is determined to be a fair price for such
Foreclosure Property by the Servicer, if the highest bidder is a Person other
than an Interested Person, or by an Independent appraiser retained by the
Servicer, if the highest bidder is an Interested Person. In the absence of
any bid determined to be fair as aforesaid, the Servicer shall offer the
affected Foreclosure Property for sale to any Person, other than an
Interested Person, in a commercially reasonable manner for a period of not
less than 10 or more than 30 days, and shall accept the highest cash bid
received therefor in excess of the highest bid previously submitted. If no
such bid is received, any Interested Person may resubmit its original bid,
and the Servicer shall accept the highest outstanding cash bid, regardless of
from whom received. No Interested Person shall be obligated to submit a bid
to purchase any Foreclosure Property, and notwithstanding anything to the
contrary herein, neither the Trustee, in its individual capacity, nor any of
its affiliates may bid for or purchase any Foreclosure Property pursuant
hereto.
In determining whether any bid constitutes a fair price for any
Foreclosure Property or to effectuate the payment of a claim under the
Contract of Insurance, the Servicer shall take into account, and any
appraiser or other expert in real estate matters shall be instructed to take
into account, as applicable, among other factors, the financial standing of
any tenant of the Foreclosure Property, the physical condition of the
Foreclosure Property, the state of the local and national economies and, with
respect to the FHA Loans which are Mortgage Loans, the Trust's obligation to
dispose of any Foreclosure Property within the time period specified in
Section 4.12(i).
- ---------------
Subject to the provisions of Section 4.12, the Servicer shall act on
------------
behalf of the Trustee in negotiating and taking any other action necessary or
appropriate in connection with the sale of any Foreclosure Property,
including the collection of all amounts payable in connection therewith. Any
sale of a Foreclosure Property shall be without recourse to the Trustee, the
Servicer or the Trust, and if consummated in accordance with the terms of
this Agreement, neither the Servicer nor the Trustee shall have any liability
to any Certificateholder with respect to the purchase price therefor accepted
by the Servicer or the Trustee.
Prior to acquiring any Foreclosure Property, the Servicer shall cause a
review to be performed, in accordance with Accepted Servicing Procedures, on
the related Mortgaged Property by a company such as Equifax, Inc. or
Toxicheck, and the scope of such review shall be limited to the review of
public records and documents for indications that such Mortgaged Property has
on it, under it or is near, hazardous or toxic material or waste. If such
review reveals that the Mortgaged Property has on it, under it or is near
hazardous or toxic material or waste or reveals any other environmental
problem, the Servicer shall provide a copy to the Trustee of the related
report with an attached certification of a Responsible Officer that based on
an analysis of all available information (including potential clean up costs
and liability claims) at the time it is the best judgment of such Responsible
Officer that such foreclosure shall increase Net Liquidation Proceeds to the
Trustee and the Trust shall take title to such Mortgaged Property. The
Trustee shall promptly forward such report and certification to the
Certificateholders.
Notwithstanding the foregoing, the Servicer will not manage, conserve,
protect and operate (or cause to be managed, conserved, protected and
operated) each Foreclosure Property for disposition and sale in a manner that
causes such Foreclosure Property to fail to qualify as "foreclosure property"
within the meaning of the REMIC Provisions (determined without regard to the
exception applicable for purposes of Section 860D(a) of the Code) or results
in the receipt by the REMIC of any "income from nonpermitted assets" within
the meaning of the REMIC Provisions or any "net income from foreclosure
property" subject to taxation under the REMIC Provisions.
The Servicer may contract with any independent contractor for the
operation and management of any Foreclosure Property, provided that:
(i) the terms and conditions of any such contract shall not be
inconsistent with this Agreement;
(ii) any such contract shall require, or shall be administered to
require, that the independent contractor pay all costs and expenses
incurred in connection with the operation and management of such
Foreclosure Property, remit all related revenues (net of such costs and
expenses) to the Servicer as soon as practicable, but in no event later
than thirty days following the receipt thereof by such independent
contractor;
(iii) none of the provisions of this Section 4.13 relating to any
------------
such contract or to actions taken through any such independent contractor
shall be deemed to relieve the Servicer of any of its duties and obligations
hereunder with respect to the operation and management of any such
Foreclosure Property; and
(iv) the Servicer shall be obligated with respect thereto to the
same extent as if it alone were performing all duties and obligations in
connection with the operation and management of such Foreclosure
Property.
The Servicer shall be entitled to enter into any agreement with any
Independent Contractor performing services for it related to its duties and
obligations hereunder for indemnification of the Servicer by such Independent
Contractor, and nothing in this Agreement shall be deemed to limit or modify
such indemnification. The Servicer shall not be liable for all fees owed by
it to any such Independent Contractor, and that any amounts so expended shall
be deemed Servicing Advances. Each liquidation of a Foreclosure Property
shall be carried by the Servicer at such price and upon such terms and
conditions as the Servicer shall deem necessary or advisable, as shall be
normal and usual in its several servicing activities, and the resulting
Liquidation Proceeds shall be distributed in accordance with Section 5.01
------------
hereof.
Section 4.14 Certain Tax Matters
-------------------
The Trustee shall maintain records as to investments and other assets of
the Trust sufficient to show compliance with the REMIC Provisions during each
taxable year of the Trust. Empire Funding shall maintain the information
necessary to prepare any Tax Returns, and any other federal, state or local
tax or information returns or reports that are required to be filed, or so
provided to Certificateholders, by the Trust and make such information
available as required by Section 11.12.
-------------
ARTICLE VI
ESTABLISHMENT OF ACCOUNTS
-------------------------
Section 5.01 Collection Account and Certificate Distribution Account.
-------------------------------------------------------
(a)(1) Establishment of Collection Account. The Servicer, for the
-----------------------------------
benefit of the Certificateholders, shall cause to be established and
maintained one or more Collection Accounts, which shall be separate Eligible
Accounts, which may be interest-bearing, entitled "Collection Account, First
Bank National Association, as Trustee, in trust for the Empire Funding Home
Loan Asset Backed Certificates, Series 1997-A". The Collection Account may
be maintained with the Trustee or any other depository institution which
satisfies the requirements set forth in the definition of Eligible Account.
The creation of any Collection Account other than one maintained with the
Trustee shall be evidenced by a letter agreement between the Servicer and the
depository institution acceptable to the Trustee. A copy of such letter
agreement shall be furnished to the Trustee and, upon request of any
Certificateholder, to such Certificateholder. Funds in the Collection
Account shall be invested in accordance with Section 5.03.
------------
The Collection Account shall be established, as of the Closing Date,
with the Trustee as an Eligible Account pursuant to the definition thereof.
The Collection Account may, upon written notice to the Trustee, be
transferred to a different depository institution so long as such transfer is
to an Eligible Account acceptable to the Trustee.
(2) Establishment of Certificate Distribution Account. No later than
-------------------------------------------------
the Closing Date, the Servicer, for the benefit of the Certificateholders,
shall cause to be established and maintained with the Trustee one or more
Certificate Distribution Accounts, which shall be separate Eligible Accounts,
which may be interest-bearing and which shall be entitled "Certificate
Distribution Account, First Bank National Association, as Trustee, in trust
for the Empire Funding Home Loan Asset Backed Certificates, Series 1997-A".
Funds in the Certificate Distribution Account shall be invested in accordance
with Section 5.03.
------------
(3) FHA Premium Account. No later than the Closing Date, the Servicer,
-------------------
for the benefit of the Certificateholders, shall cause to be established and
maintained with the Trustee in its trust capacity at its corporate trust
department a segregated trust account referred to herein as the "FHA Premium
Account" for the benefit of the Certificateholders. The Trustee shall at all
times maintain the FHA Premium Account as an Eligible Account and shall cause
such accounts to be designated as "FHA Premium Account, First Bank National
Association, as Trustee in trust for the Empire Funding Home Loan Asset
Backed Certificates, Series 1997-A". No later than the second Business Day
preceding each Distribution Date, all amounts on deposit in the Certificate
Distribution Account and Collection Account representing payments by Obligors
on Invoiced Loans in respect of premium on FHA Insurance shall be withdrawn
by the Trustee and deposited to the FHA Premium Account. Any and all moneys
transferred to the FHA Premium Account pursuant to this Section 5.01(a)(3)
------------------
shall be held by the Trustee in the FHA Premium Account subject to
disbursement and withdrawal as herein provided. Amounts deposited to an
FHA Premium Account shall be invested in accordance with Section 5.03.
------------
Amounts on deposit in an FHA Premium Account shall be withdrawn by the
Trustee, in the amounts required, for application as follows:
(i) to payment to the FHA of any premiums due on the Contract
of Insurance in respect of FHA Loans, in such amounts and on such dates
as directed by the Servicer or Empire Funding; the Trustee shall apply
all amounts on deposit in the related FHA Premium Account to payment to
the FHA of any premiums due under the Contract of Insurance as invoiced
by FHA and, if, in connection with an FHA Loan, the FHA Insurance with
respect to which shall not yet have been transferred to the Contract of
Insurance Holder, Empire Funding instructs the Trustee to pay FHA
insurance with respect to such FHA Loan to the related Contract of
Insurance Holder, the Trustee shall make such payment, and Empire
Funding and not the Trustee shall be liable in the event of the failure
of such funds to be applied to payment of the premium with respect to
such FHA Loan; and
(ii) on the Business Day preceding a Distribution Date that is
also the Termination Date, the Trustee shall withdraw from each FHA
Premium Account and deposit in the Certificate Distribution Account all
amounts then on deposit in the FHA Premium Account, whereupon the FHA
Premium Account shall terminate.
(b)(1) Deposits to Collection Account. The Servicer shall use its
------------------------------
best efforts to deposit or cause to be deposited (without duplication) within
two (2) Business Days, of receipt thereof in the Collection Account and
retain therein in trust for the benefit of the Certificateholders:
(i) all payments on account of principal on the Home Loans
collected after the Cut-Off Date;
(ii) all payments on account of interest on the Home Loans due
after the Cut-Off Date;
(iii) all Net Liquidation Proceeds pursuant to Section 4.02;
------------
(iv) all Insurance Proceeds;
(v) all Released Mortgaged Property Proceeds;
(vi) any amounts payable in connection with the repurchase of any
Home Loan and the amount of any Substitution Adjustment pursuant to
Sections 2.06, 3.06 and 4.12(b);
------------- ---- -------
(vii) any amount required to be deposited in the Collection
Account pursuant to the receipt of proceeds from any insurance policies
under Section 4.02 or the deposit of the Termination Price under Section
------------
12.01;
(viii) all payments by Obligors in respect of premiums on FHA
Insurance;
(ix) all FHA Insurance Payment Amounts; and
(x) interest and gains on funds held in the Collection Account.
The Servicer shall be entitled to retain and not deposit into the
Collection Account any amounts received with respect to a Home Loan that
constitute additional servicing compensation pursuant to Section 7.03, and
------------
such amounts retained by the Servicer during a Due Period shall be excluded
from the calculation of the Servicing Compensation that is distributable to
the Servicer from the Certificate Distribution Account on the next
Distribution Date following such Due Period. All Payments from Obligors
received on FHA Loans from or on behalf of an Obligor shall be allocated in
accordance with Title I.
(2) Deposits to Certificate Distribution Account. On the second
--------------------------------------------
Business Day prior to the Distribution Date, the Trustee (based on
information provided by the Servicer for such Distribution Date) shall
withdraw from the Collection Account the Available Collection Amount and
deposit such into the Certificate Distribution Account for such Distribution
Date.
(3) Withdrawals from Collection Account. The Trustee, at the direction
-----------------------------------
of the Servicer shall also make the following withdrawals from the Collection
Account, in no particular order of priority:
(i) to withdraw any amount not required to be deposited in the
Collection Account or deposited therein in error;
(ii) to withdraw the Servicer Reimbursement Amount;
(iii) to clear and terminate the Collection Account in
connection with the termination of this Agreement; and
(iv) make payments set forth in Section 9.01(e).
---------------
(c) Withdrawals from Certificate Distribution Account. To the extent
-------------------------------------------------
funds are available in the Certificate Distribution Account, the Trustee
(based on the information provided by the Servicer contained in the
Servicer's Monthly Remittance Report for such Distribution Date) shall make
withdrawals therefrom by 9:00 a.m. (New York City time) on each Distribution
Date, for application in the following order of priority:
(i) to distribute on such Distribution Date the following amounts
in the following order: (a) for deposit in the FHA Premium Account, an
amount equal to the FHA Premium Account Deposit for such Distribution
Date, (b) to the Servicer, an amount equal to (i) the Servicing
Compensation (net of any amounts retained prior to deposit into the
Collection Account pursuant to subsection (b)(1) above) and all unpaid
Servicing Compensation from prior Distribution Dates and (ii) all
Nonrecoverable Servicing Advances not previously reimbursed, (c) to the
Trustee, an amount equal to the Trustee Fee and all unpaid Trustee Fees
from prior Distribution Dates, and (d) to the Custodian, an amount equal
to the Custodian Fee, if any, and all unpaid Custodian Fees from prior
Distribution Dates; and
(ii) to deposit into the Certificate Distribution Account the
applicable portions of the Available Distribution Amount distributable
in respect of the Certificates calculated pursuant to 5.01(d) and (e)
below on such Distribution Date;
Notwithstanding that the Certificates have been paid in full, the
Trustee and the Servicer shall continue to maintain the Collection Account
and the Certificate Distribution Account hereunder until the Class Principal
Balance of each Class of Certificates has been reduced to zero.
(d) On each Distribution Date, the Trustee (based on the information
provided by the Servicer contained in the Servicer's Monthly Remittance
Report for such Distribution Date) shall distribute the Regular Distribution
Amount from the Certificate Distribution Account in the following order of
priority:
(i) to the holders of the Senior Certificates, pro rata, the
Senior Certificateholders Interest Distribution Amount for such
Distribution Date;
(ii) sequentially, to the holders of the Class M-1 and Class M-2
Certificates, in that order, their respective portions of the Mezzanine
Certificateholders' Interest Distribution Amount for such Distribution
Date;
(iii) to the holders of the Class B Certificates, the Class B
Certificateholders' Interest Distribution Amount for such Distribution
Date;
(iv) sequentially, to the holders of the Class A-1, Class A-2 and
Class A-3 Certificates, in that order, until the respective Class
Principal Balances thereof are reduced to zero, the amount necessary to
reduce the aggregate Class Principal Balance of the Senior Certificates
to the Senior Optimal Principal Balance for such Distribution Date,
provided, however, that on each Distribution Date occurring on or after
any reduction of the Class Principal Balances of the Mezzanine and Class
B Certificates to zero through the application of Allocable Loss
Amounts, amounts shall be distributed among the remaining Senior
Certificates pro rata in accordance with their outstanding Class
Principal Balances and not sequentially;
(v) sequentially, to the holders of the Class M-1 and the Class M-
2 Certificates in that order, the amount necessary to reduce the Class
Principal Balances thereof to the
Class M-1 Optimal Principal Balance and the Class M-2 Optimal Principal
Balance, respectively, for such Distribution Date;
(vi) to the holders of the Class B Certificates, the amount
necessary to reduce the Class Principal Balance thereof to the Class B
Optimal Principal Balance for such Distribution Date;
(vii) sequentially, to the Class M-1 Certificates, Class M-2
Certificates and the Class B Certificates, in that order, until their
respective Loss Reimbursement Deficiencies have been paid in full (in
the case of the Class M-1 and Class M-2 Certificates: first to the
reimbursement of Allocable Loss Amounts, until completely reimbursed,
and then to any accrued interest thereon); and
(viii) any remaining amount to the holders of the Class R
Certificates.
(e) On each Distribution Date, the Trustee (based on the information
provided by the Servicer contained in the Servicer's Monthly Remittance
Report for such Distribution Date) shall distribute the Excess Spread, if
any, in the following order of priority:
(i) in an amount equal to the Overcollateralization
Deficiency Amount, if any, as follows:
(A) sequentially, to the holders of the Class A-1, Class
A-2 and Class A-3 Certificates, in that order, until the
respective Class Principal Balances thereof are reduced to
zero, and until the aggregate of their Class Balances have
been reduced to the Senior Optimal Principal Balance for such
Distribution Date;
(B) sequentially, to the holders of the Class M-1 and
Class M-2 Certificates, in that order, until the respective
Class Principal Balances thereof have been reduced to the
Class M-1 Optimal Principal Balance and the Class M-2 Optimal
Principal Balance, respectively, for such Distribution Date;
and
(C) to the holders of the Class B Certificates, until
the Class Principal Balance thereof has been reduced to the
Class B Optimal Principal Balance for such Distribution Date;
and
(ii) sequentially, to the Class M-1 Certificates, the Class M-
2 Certificates and the Class B Certificates, in that order, until
their respective Loss Reimbursement Deficiencies, if any, have been
paid in full (in the case of the Class M-1 and Class M-2
Certificates: first to the reimbursement of Allocable Loss Amounts,
until completely reimbursed, and then to any accrued interest
thereon); and
(iii) any remaining amount to the holders of the Class R
Certificates.
Section 5.02 Distributions to Certificateholders
-----------------------------------
(a) All distributions made on each Class of Certificates (other than
the Class R Certificates) on each Distribution Date will be made on a pro
rata basis among the Certificateholders of record of such Class of
Certificates on the preceding Record Date based on the Percentage Interest
represented by their respective Certificates, without preference or priority
of any kind, and except as otherwise provided in the next succeeding
sentence, shall be made by wire transfer of immediately available funds to
the account of such Certificateholder, if such Certificateholder shall own of
record Certificates which have original denominations aggregating at least
$250,000 and shall have so notified the Trustee, and otherwise by check
mailed to the address of such Certificateholder appearing in the Certificate
Register. The final distribution on each Certificate will be made in like
manner, but only upon presentment and surrender of such Certificate at the
location specified in the notice to Certificateholders of such final
distribution.
(b) All distributions made on the Class R Certificates on each
Distribution Date will be made on a pro rata basis among the holders of the
Class R Certificates of record on the preceding Record Date based on their
respective Residual Interests, without preference or priority of any kind,
and except as otherwise provided in the next succeeding sentence, shall be
made by wire transfer of immediately available funds to the account of each
such holder, if such holder shall own of record Class R Certificates having
an original Denomination aggregating at least a 50% undivided interest
thereof and shall have so notified the Trustee, and otherwise by check mailed
to the address of such Class R Certificateholder appearing in the Certificate
Register. The final distribution on each Class R Certificates will be made
in like manner, but only upon presentment and surrender of the Class R
Certificates at the location specified in the notice to holders of the Class
R Certificates of such final distribution. Any amount distributed to the
holders of the Class R Certificates on any Distribution Date shall not be
subject to any claim or interest of holders of the other Classes of
Certificates.
Section 5.03 Accounts; Trust Account Property.
--------------------------------
(a) Control of Accounts. The Trustee shall possess all right, title
-------------------
and interest in all funds on deposit from time to time in the Accounts (other
than the Certificate Distribution Account) and in all proceeds thereof
(including all income thereon) and all such funds, investments, proceeds and
income shall be part of the Trust Account Property and the Trust Estate. If,
at any time, any Account ceases to be an Eligible Account, the Trustee (or
the Servicer on its behalf) shall within 10 Business Days (or such longer
period, not to exceed 30 calendar days, as to which each Rating Agency may
consent) (i) establish a new Account as an Eligible Account, (ii) terminate
the ineligible Account, and (iii) transfer any cash and investments from such
ineligible Account to such new Account.
With respect to the Accounts (other than the Certificate Distribution
Account), the Trustee agrees, by its acceptance hereof, that each such
Account shall be subject to the sole and exclusive
custody and control of the Trustee for the benefit of the Certificateholders,
and the Trustee shall have sole signature and withdrawal authority with
respect thereto.
Subject to rights of the Trustee hereunder, the Trustee shall possess
all right, title and interest for the benefit of the Certificateholders in
all funds on deposit from time to time in the Certificate Distribution
Account and in all proceeds thereof (including all income thereon) and all
such funds, investments, proceeds and income shall be part of the Trust
Account Property and the Trust Estate. Subject to the rights of the Trustee,
the Trustee agrees, by its acceptance hereof, that the Certificate
Distribution Account shall be subject to the sole and exclusive custody and
control of the Trustee for the benefit of the Trust and the parties entitled
to distributions therefrom, including without limitation, the
Certificateholders, and the Trustee shall have sole signature and withdrawal
authority with respect to the Certificate Distribution Account.
(b)(1) Investment of Funds. So long as no Event of Default shall
-------------------
have occurred and be continuing, the funds held in any Account may be
invested (to the extent practicable and consistent with any requirements of
the Code) in Permitted Investments, as directed by the Transferor in writing
or by telephone or facsimile transmission confirmed in writing by the
Servicer. In any case, funds in any Account must be available for withdrawal
without penalty, and any Permitted Investments must mature or otherwise be
available for withdrawal, not later than the Business Day immediately
preceding the Distribution Date next following the date of such investment
and shall not be sold or disposed of prior to its maturity subject to Section
-------
5.03(b)(2) below. All interest and any other investment earnings on amounts
- ----------
or investments held in any Account shall be deposited into such Account
immediately upon receipt by the Trustee and may be withdrawn from the
Collection Account pursuant to Section 5.01. All Permitted Investments in
------------
which funds in any Account (other than the Certificate Distribution Account)
are invested must be held by or registered in the name of "First Bank
National Association, as Trustee, in trust for the Empire Funding Home Loan
REMIC Trust, Asset Backed Certificates, Series 1997-A".
(2) Insufficiency and Losses in Accounts. If any amounts are needed
------------------------------------
for disbursement from any Account held by or on behalf of the Trustee and
sufficient uninvested funds are not available to make such disbursement, the
Trustee shall cause to be sold or otherwise converted to cash a sufficient
amount of the investments in such Account. The Trustee shall not be liable
for any investment loss or other charge resulting therefrom, unless such loss
or charge is caused by the failure of the Trustee to perform in accordance
with this Section 5.03.
------------
If any losses are realized in connection with any investment in any
Account pursuant to this Agreement, then the Transferor shall deposit the
amount of such losses (to the extent not offset by income from other
investments in such Account) in such Account immediately upon the realization
of such loss. All interest and any other investment earnings on amounts held
in any Account shall be taxed to the Trust and for federal and state income
tax purposes the Trust shall be deemed to be the owner of each Account.
(c) The Trustee shall not in any way be held liable by reason of any
insufficiency in any Account held by the Trustee resulting from any
investment loss on any Permitted Investment included therein (except to the
extent that the Trustee is the obligor and has defaulted thereon).
(d) With respect to the Trust Account Property, the Trustee
acknowledges and agrees that:
(1) any Trust Account Property that is held in deposit accounts
shall be held solely in the Eligible Accounts; and each such Eligible
Account, subject to Section 5.03(e), shall be subject to the exclusive
---------------
custody and control of the Trustee, and the Trustee shall have sole signature
authority with respect thereto;
(2) any Trust Account Property that constitutes Physical Property
shall be delivered to the Trustee in accordance with paragraph (a) of
the definition of "Delivery" and shall be held, pending maturity or
disposition, solely by the Trustee or a financial intermediary (as such
term is defined in Section 8-313(4) of the UCC) acting solely for the
Trustee;
(3) any Trust Account Property that is a book-entry security held
through the Federal Reserve System pursuant to federal book-entry
regulations shall be delivered in accordance with paragraph (b) of the
definition of "Delivery" and shall be maintained by the Trustee, pending
maturity or disposition, through continued book-entry registration of
such Trust Account Property as described in such paragraph; and
(4) any Trust Account Property that is an "uncertificated
security" under Article VIII of the UCC and that is not governed by
clause (3) above shall be delivered to the Trustee in accordance with
paragraph (c) of the definition of "Delivery" and shall be maintained by
the Trustee, pending maturity or disposition, through continued
registration of the Trustee's (or its nominee's) ownership of such
security.
(e) The Servicer shall have the power, revocable by the Trustee, to
instruct the Trustee to make withdrawals and payments from the Accounts for
the purpose of permitting the Servicer to carry out its duties hereunder.
Section 5.04 Allocation of Losses.
--------------------
(a) In the event that Net Liquidation Proceeds, Insurance Proceeds or
Released Mortgaged Property Proceeds on a Liquidated Home Loan are less than
the related Principal Balance plus accrued interest thereon, or any Obligor
makes a partial payment of any Monthly Payment due on a Home Loan, such Net
Liquidation Proceeds, Insurance Proceeds, Released Mortgaged Property
Proceeds or partial payment shall be applied to payment of the related Debt
Instrument, first to interest accrued at the Home Loan Interest Rate and then
to principal.
(b) On any Distribution Date, any Allocable Loss Amounts shall be
applied to the reduction of the Class Principal Balances of the Class B
Certificates, the Class M-1 and Class M-2 Certificates in accordance with the
Allocable Loss Amount Priority.
Section 5.05 Statements.
----------
(a) No later than each Determination Date, the Servicer shall deliver
to the Trustee by facsimile, the receipt and legibility of which shall be
confirmed by telephone, and with hard copy thereof to be delivered no later
than one (1) Business Day after such Determination Date, the Servicer's
Monthly Remittance Report, setting forth the date of such Report (day, month
and year), the name of the Trust (i.e. "Empire Funding Home Loan REMIC Trust
1997-A"), the Series designation of the Certificates (i.e. "Series 1997-A"),
and the date of this Agreement, all in substantially the form set out in
Exhibit B. Furthermore, no later than each Determination Date, the Servicer
shall deliver to the Trustee a magnetic tape or computer disk providing such
information regarding the Servicer's activities in servicing the Home Loans
during the related Due Period as the Trustee may reasonably require.
(b) On each Distribution Date, Trustee shall distribute, based on
information provided by the Servicer, a monthly statement (the "Distribution
------------
Statement"), to the Depositor, the Certificateholders and the Rating
- ---------
Agencies, stating the date of original issuance of the Certificates (day,
month and year), the name of the Trust (i.e. "Empire Funding Home Loan REMIC
Trust 1997-A"), the series designation of the Certificates (i.e. "Series
------
1997-A"), the date of this Agreement and the following information:
- ------
(i) the Available Collection Amount and Available Distribution
Amount for the related Distribution Date;
(ii) the Class Principal Balance of each Class of Certificates
before and after giving effect to distributions made to the holders of
such Certificates on such Distribution Date, and the Pool Principal
Balance as of the first and last day of the related Due Period;
(iii) the Class Factor with respect to each Class of the
Certificates then outstanding;
(iv) the amount of principal, if any, and interest to be
distributed to each Class of Certificates on the related Distribution
Date;
(v) with respect to each Class of Certificates, the Optimal
Principal Balance thereof;
(vi) the Overcollateralization Deficiency Amount, and any amount to
be distributed to the Certificateholders or the holders of the Class R
Certificates on such Distribution Date;
(vii) the Servicing Compensation, the Trustee Fee and the
Custodian Fee, if any, for such Distribution Date;
(viii) the Overcollateralization Amount on such Distribution Date,
the Overcollateralization Target Amount as of such Distribution Date,
the Net Loan Losses incurred during the related Due Period, the
cumulative Net Loan Losses as of such Distribution Date, the Allocable
Loss Amount for such Distribution Date and the application of the
Allocable Loss Amount in accordance with the Allocable Loss Amount
Priority for such Distribution Date;
(ix) the weighted average maturity of the Home Loans and the
weighted average Home Loan Interest Rate of the Home Loans;
(x) certain performance information, including, without
limitation, delinquency and foreclosure information with respect to the
Home Loans and 60-Day Delinquency Amounts (as defined in "Six-Month
Rolling Delinquency Average"), as set forth in the Servicer's Monthly
Remittance Report;
(xi) the amount deposited into the Collection Account for the
preceding Due Period representing payments by the related Obligors on
Invoiced Loans in respect of premium on FHA Insurance;
(xii) the amount remaining in the FHA Insurance Coverage Reserve
Account with respect to all FHA Loans and the Related Series Loans, if
any, and the number and amount of claims for FHA Insurance filed and/or
paid pursuant to Section 4.12;
------------
(xiii) the number of and aggregate Principal Balance of all Home
Loans in foreclosure proceedings and the percent of the aggregate
Principal Balances of such Home Loans to the aggregate Principal
Balances of all Home Loans, all as of the close of business on the last
day of the related Due Period;
(xiv) the number of and the aggregate Principal Balance of the
Home Loans in bankruptcy proceedings and the percent of the aggregate
Principal Balances of such Home Loans to the aggregate Principal
Balances of all Home Loans, all as of the close of business on the last
day of the related Due Period;
(xv) the number of Foreclosure Properties, the aggregate Principal
Balance of the related Home Loans, the book value of such Foreclosure
Properties and the percent of the aggregate Principal Balances of such
Home Loans to the aggregate Principal Balances of all Home Loans, all as
of the close of business on the last day of the related Due Period;
(xvi) during the related Due Period, the number and aggregate
Principal Balance of Home Loans for each of the following: (A) that
became Defaulted Home Loans, (B) that became Liquidated Home Loans, (C)
that became Deleted Home Loans pursuant to
Section 3.06 as a result of such Deleted Home loans being Defective Home
------------
Loans, and (D) that became Deleted Home loans pursuant to Section 3.06 as a
------------
result of such Deleted Home Loans being Defaulted Home Loans or a Home Loan
in default or imminent default, including the foregoing amounts by loan type
(i.e., Combination Loans, or Debt Consolidation Loans);
(xvii) from the Closing Date through the most current Due Period,
the number and cumulative aggregate Principal Balance of Home Loans for
each of the following: (A) that became Defaulted Home Loans, (B) that
became Liquidated Home Loans, (C) that became Deleted Home Loans
pursuant to Section 3.06 as a result of such Deleted Home loans being
------------
Defective Home Loans, and (D) that became Deleted Home Loans pursuant to
Section 3.06 as a result of such Deleted Home Loans being Defaulted Home
------------
Loans or a Home Loan in default or imminent default, including the
foregoing amounts by loan type (i.e. Combination Loans or Debt
Consolidation Loans);
(xviii) the Principal Balance of each FHA Loan with respect to
which the Servicer has determined under the circumstances described in
the penultimate sentence of Section 4.12(a) that in good faith in
---------------
accordance with customary mortgage loan servicing practices that all
amounts which it expects to receive with respect to such FHA Loans
have been received;
(xix) the scheduled principal payments and the principal
prepayments received with respect to the Home Loans during the Due
Period; and
(xx) the number and aggregate Principal Balance of Home Loans that
were thirty, sixty or ninety days delinquent as of the close of business
on the last day of the related Due Period.
In the case of information furnished to Certificateholders (other than
the holder or holders of the Class R Certificates) pursuant to subclause
(b)(iv) above, the amounts shall be expressed as a dollar amount per
Certificate with a $1,000 Denomination.
All reports prepared by the Trustee of the withdrawals from and deposits
in the Collection Account will be based in whole or in part upon the
information provided to the Trustee by the Servicer, and the Trustee may
fully rely upon and shall have no liability with respect to such information
provided by the Servicer.
(c) Within a reasonable period of time after the end of each calendar
year, the Trustee shall prepare and distribute to each Person who at any time
during the calendar year was a Certificateholder, such information as is
reasonably necessary to provide to such Person a statement containing the
information set forth in subclause (b)(iv) above, aggregated for such
calendar year or applicable portion thereof during which such Person was a
Certificateholder.
(d) On or before each Distribution Date, the Servicer will determine,
based on the date of origination of the FHA Loans as set forth in the Home
Loan Schedule, the amount of FHA insurance premium, if any, due on or prior
to the next succeeding Distribution Date with respect to each FHA Loan. On
or before such Distribution Date, the Servicer will compare such amounts with
respect to each FHA Loan against amounts invoiced by FHA with respect to the
Contract of Insurance as due on or prior to such next succeeding Distribution
Date and report all discrepancies to the Trustee.
(e) On each Distribution Date, the Trustee shall forward to the holder
or holders of the Class R Certificates a copy of the Distribution Statement
in respect of such Distribution Date and a statement setting forth the
amounts actually distributed to such holders of the Class R Certificates on
such Distribution Date, together with such other information as the Trustee
deems necessary or appropriate.
(f) Within a reasonable period of time after the end of each calendar
year, the Trustee shall prepare and distribute to each Person who at any time
during the calendar year was a holder of a Class R Certificate, if requested
in writing by such Person, such information as is reasonably necessary to
provide to such Person a statement containing the information provided
pursuant to the previous paragraph aggregated for such calendar year or
applicable portion thereof during which such Person was a holder of a Class R
Certificate
(g) The Trustee shall forward to each Certificateholder and the holder
of a Class R Certificate, during the term of this Agreement, such periodic,
special, or other reports, including information tax returns or reports
required with respect to the Certificates and the Class R Certificates,
including Internal Revenue Service Forms 1099 and (if instructed in writing
by the Depositor on the basis of the advice of legal counsel) Form 1066,
Schedule Q and other similar reports that are required to be filed by the
Trustee or its agent and the holder of a Class R Certificate, whether or not
provided for herein, as shall be necessary, reasonable, or appropriate with
respect to the Certificateholders or the holder of Class R Certificates, or
otherwise with respect to the purposes of this Agreement, all such reports or
information to be provided by and in accordance with such applicable
instructions and directions as the Certificateholders or the holder of Class
R Certificates may reasonably require.
(h) Reports and computer tapes furnished by the Servicer pursuant to
this Agreement shall be deemed confidential and of a proprietary nature, and
shall not be copied or distributed except in connection with the purposes and
requirements of this Agreement. No Person entitled to receive copies of such
reports or tapes shall use the information therein for the purpose of
soliciting the customers of the Depositor or the Servicer or for any other
purpose except as set forth in this Agreement.
Section 5.06 Specification of Certain Tax Matters.
------------------------------------
The Trustee shall comply with all requirements of the Code, and
applicable state and local law, with respect to the withholding from any
distributions made to any Certificateholder of any
applicable withholding taxes imposed thereon and with respect to any
applicable reporting requirements in connection therewith.
ARTICLE VI
THE CERTIFICATES
----------------
Section 6.01 The Certificates.
----------------
(a) Each Senior Certificate shall be substantially in the form of
Exhibit D hereto, each Mezzanine Certificate shall be substantially in the
form of Exhibit E hereto, each Class B Certificate shall be substantially in
the form of Exhibit F hereto and each Class R Certificate shall be
substantially in the form of Exhibit G hereto, in each case with such
appropriate insertions and substitutions as are required or permitted
hereunder, and shall, on original issue, be executed on behalf of the Trust
by manual or facsimile signature of a Responsible Officer of the Trustee
having such authority under the Trustee's seal imprinted or otherwise affixed
therein and attested on behalf of the Trustee by the manual or facsimile
signature of any other Responsible Officer of the Trustee. The maximum and
initial Class Principal Balance of each Class of Certificates authorized to
be issued hereunder shall be equal to the Original Class Principal Balance of
such Class of Certificates, and each Class of Certificates shall bear
interest at the applicable Certificate Interest Rate. The Certificates
(other than the Class R Certificates) shall be issued in minimum
denominations of $25,000 and integral multiples of $1,000 in excess thereof
(except that one Certificate may be issued in an amount that is not an
integral multiple of $1,000). One Class of residual certificates is
authorized to be issued hereunder, designated as the "Class R Certificates."
The Class R Certificates shall be issued in minimum denominations
representing a one twentieth (i.e., 5%) Residual Interest. No Certificate
----
shall be entitled to any benefit under this Agreement, or be valid for any
purpose, unless there appears on such Certificate a execution by the Trustee
by manual or facsimile signature, and such signature upon any Certificate
shall be conclusive evidence, and the only evidence, that such Certificate
has been duly executed and delivered hereunder. Each Certificate shall be
dated the date of its signature. Certificates of each Class shall be
numbered consecutively beginning with 0001 and each number shall be preceded
by an "A" for Class A Certificates, an "M" for Class M Certificates, an "B"
for Class B Certificates, and an "R" for Class R Certificates. The Trustee
shall cause to be executed and delivered to or upon the order of the
Depositor, in exchange for the Home Loans and the other property of the
Trust, simultaneously with the sale, assignment and transfer to the Trustee
of the Home Loans and the other property of the Trust, Certificates duly
executed by the Trustee evidencing the entire ownership of the Trust Estate.
(b) Any Certificate as to which the Trustee has made the final
distribution thereon shall be deemed cancelled and shall no longer be
Outstanding for any purpose of this Agreement, whether or not such
Certificate is ever returned to the Trustee.
Section 6.02 Registration of Transfer and Exchange of Certificates.
-----------------------------------------------------
(a) The Trustee shall keep or cause to be kept at an office or agency
in the city where the Corporate Trust Office is located, a Certificate
Register for each Class of Certificates in which, subject to such reasonable
regulations as it may prescribe, the Trustee shall provide for
the registration of Certificates of such Class and of transfers and exchanges
of such Certificates as herein provided. The Trustee shall also designate
and cause to be kept in the City of New York an office at and through which
Certificates may be delivered to and received from the Trustee for purposes
of transfers and exchanges as herein provided. The Trustee shall initially
serve as Certificate Registrar for the purpose of registering Certificates as
herein provided. The Trustee may appoint, by a written instrument delivered
to the Servicer, any other bank or trust company to act as Certificate
Registrar under such conditions as the Servicer may prescribe. If the
Trustee shall at any time not be the Certificate Registrar, the Trustee shall
have and maintain the right to inspect the Certificate Register or to obtain
a copy thereof at all reasonable times, and to rely conclusively upon a
certificate of the Certificate Registrar as to the information set forth in
the Certificate Register.
(b) (1) No transfer of a Class R Certificate shall be made unless such
transfer is exempt from the registration requirements of the Securities Act
of 1933, as amended, and any applicable state securities laws or is made in
accordance with said Act and laws. In the event of any such transfer, (i)
unless such transfer is made in reliance upon Rule 144A under the 1933 Act,
the Trustee or the Depositor may require a written Opinion of Counsel (which
may be in-house counsel) acceptable to and in form and substance reasonably
satisfactory to the Trustee and the Depositor that such transfer may be made
pursuant to an exemption, describing the applicable exemption and the basis
therefor, from said Act and laws or is being made pursuant to said Act and
laws, which Opinion of Counsel shall not be an expense of the Trustee or the
Depositor and (ii) the Trustee shall require the transferee to execute an
investment letter acceptable to and in form and substance reasonably
satisfactory to the Depositor and the Trustee certifying to the Depositor and
the Trustee the facts surrounding such transfer, which investment letter
shall not be an expense of the Trustee or the Depositor. The Holder of a
Class R Certificate desiring to effect such transfer shall, and does hereby
agree to, indemnify the Trustee and the Depositor against any liability that
may result if the transfer is not so exempt or is not made in accordance with
such federal and state laws.
(2) Except as provided below, the Book-Entry Certificates shall at
all times remain registered in the name of the Depository or its nominee and
at all times: (i) registration of the Book-Entry Certificates may not be
transferred by the Trustee except to another Depository; (ii) the Depository
shall maintain book-entry records with respect to the Certificateholders and
with respect to ownership and transfers of such Book-Entry Certificates;
(iii) ownership and transfers of registration of the Book-Entry Certificates
on the books of the Depository shall be governed by applicable rules
established by the Depository; (iv) the Depository may collect its usual and
customary fees, charges and expenses from its Depository Participants; (v)
the Trustee shall deal with the Depository, Depository Participants and
indirect participating firms as representatives of the Certificateholders of
the Book-Entry Certificates for purposes of exercising the rights of Holders
under this Agreement, and requests and directions for and votes of such
representatives shall not be deemed to be inconsistent if they are made with
respect to different Certificateholders; and (vi) the Trustee may rely and
shall be fully protected in relying upon information furnished by the
Depository with respect to its Depository Participants and furnished by the
Depository Participants with respect to indirect participating
firms and persons shown on the books of such indirect participating firms as
direct or indirect Certificateholders.
All transfers by Certificateholders of Book-Entry Certificates
shall be made in accordance with the procedures established by the Depository
Participant or brokerage firm representing such Certificateholder. Each
Depository Participant shall only transfer Book-Entry Certificates of
Certificateholders it represents or of brokerage firms for which it acts as
agent in accordance with the Depository's normal procedures.
If (x) (i) the Depository or the Depositor advises the Trustee in
writing that the Depository is no longer willing or able to properly
discharge its responsibilities as Depository, and (ii) the Trustee or the
Depositor is unable to locate a qualified successor, (y) the Depositor at its
option advises the Trustee in writing that it elects to terminate the book-
entry system through the Depository or (z) after the occurrence of an Event
of Default, Certificateholders representing at least 51% of the Voting Rights
evidenced by the Certificates advise the Trustee and the Depository through
the Depository Participants in writing that the continuation of a book-entry
system through the Depository is no longer in the best interests of the
Certificateholders, the Trustee shall notify all Certificateholders, through
the Depository, of the occurrence of any such event and of the availability
of definitive, fully-registered Certificates (the "Definitive Certificates")
to Certificateholders requesting the same. Upon surrender to the Trustee of
such Book-Entry Certificates by the Depository, accompanied by the
instructions from the Depository for registration, the Trustee shall issue
the Definitive Certificates. None of the Transferor, the Servicer, the
Depositor or the Trustee shall be liable for any delay in delivery of such
instruction and each may conclusively rely on, and shall be protected in
relying on, such instructions. Upon the issuance of Definitive Certificates
all references herein to obligations imposed upon or to be performed by the
Depository shall be deemed to be imposed upon and performed by the Trustee,
to the extent applicable with respect to such Definitive Certificates and the
Trustee shall recognize the Holders of the Definitive Certificates as
Certificateholders hereunder; provided that the Trustee shall not by virtue
--------
of its assumption of such obligations become liable to any party for any act
or failure to act of the Depository.
Neither the Trustee nor the Certificate Registrar shall have any
responsibility to monitor or restrict the transfer of beneficial ownership in
any Certificate an interest in which is transferable through the facilities
of the Depository.
(3) No Transfer of a Mezzanine Certificate, Class B Certificate or
Class R Certificate shall be made unless the Trustee shall have received
either (i) a representation letter from the transferee of such Certificate
acceptable to and in form and substance satisfactory to the Trustee, to the
effect that such transferee is not an employee benefit plan or arrangement
subject to Section 406 of ERISA or a plan subject to Section 4975 of the
Code, nor a person acting on behalf of any such plan or arrangement nor using
the assets of any such plan or arrangement to effect such Transfer, (ii) if
the purchaser is an insurance company, a representation that the purchaser is
an insurance company which is purchasing such Certificates with funds
contained in an "insurance company general account" (as such term is defined
in Section V(e) of Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60"
)) and that the purchase and holding of such Certificates are covered under
PTCE 95-60 or (iii) in the case of any such Class R Certificate presented
for registration in the name of an employee benefit plan subject to ERISA,
or a plan or arrangement subject to Section 4975 of the Code (or
comparable provisions of any subsequent enactments), or a trustee of any
such plan or any other person acting on behalf of any such plan or
arrangement or using such plan's or arrangement's assets, an Opinion of
Counsel satisfactory to the Trustee, which Opinion of Counsel shall not be
an expense of either the Trustee or the Trust, addressed to the Trustee, to
the effect that the purchase or holding of such Class R Certificate will not
result in the assets of the Trust being deemed to be "plan assets" and
subject to the prohibited transaction provisions of ERISA and the Code
and will not subject the Trustee to any obligation in addition to those
expressly undertaken in this Agreement or to any liability.
(c) Subject to subsection (b) of this Section, upon surrender for
registration of transfer of a Certificate of any Class at the office or
agency of the Trustee maintained for such purpose pursuant to Section
-------
6.02(a), the Trustee shall execute, authenticate and deliver, in the name of
- -------
the designated transferee or transferees, one or more new Certificates of the
same Class in authorized denominations of the same Percentage Interest.
(d) At the option of Certificateholders, Certificates of any Class may
be exchanged for other Certificates of the same Class and aggregate
Percentage Interests, upon surrender of the Certificates to be exchanged at
any such office or agency. Whenever any Certificates are so surrendered for
exchange, the Trustee shall execute, authenticate and deliver the
Certificates which the Certificateholder making the exchange is entitled to
receive. Every Certificate presented or surrendered for transfer or exchange
shall be duly endorsed by, or be accompanied by a written instrument of
transfer in form satisfactory to the Trustee duly executed by, the Holder
thereof or his attorney duly authorized in writing.
(e) No service charge shall be made for any transfer or exchange of
Certificates, but the Trustee may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with
any transfer or exchange of Certificates.
(f) All Certificates surrendered for transfer, exchange or payment
shall be disposed of by the Certificate Registrar in accordance with its
standard procedures.
Section 6.03 Mutilated, Destroyed, Lost or Stolen Certificates. If
-------------------------------------------------
(a) any mutilated Certificate is surrendered to the Certificate Registrar or
the Trustee, or the Certificate Registrar, the Trustee and the Depositor
receive evidence to their satisfaction of the destruction, loss or theft of
any Certificate, and (b) there is delivered to the Certificate Registrar, the
Trustee, the Transferor and the Depositor such security or indemnity as may
be required by them to save each of them harmless (which in the case of a
Certificateholder that is an institutional investor with a minimum net worth
of $250,000,000, will be deemed to be satisfied by a written agreement of
indemnity from such Certificateholder), then, in the absence of notice to the
Certificate Registrar or the Trustee that such Certificate has been acquired
by a bona fide purchaser, the Trustee shall execute on behalf of the Trust
and the Trustee shall countersign and deliver, in exchange for or in lieu of
any such mutilated, destroyed, lost or stolen Certificate, a new Certificate
of the same Class and Percentage Interest, as such mutilated, destroyed,
lost or stolen Certificate, in each case bearing a number not borne by any
then Outstanding Certificate of any Class. Upon the issuance of any new
Certificate under this Section 6.03, the
------------
Trustee may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Certificate Registrar)
connected therewith. Any Certificate issued pursuant to this Section 6.03
------------
shall constitute complete and indefeasible evidence of the same interest in
the Trust, and shall be entitled to the same benefits under this Agreement,
as if originally issued, whether or not the lost, stolen or destroyed
Certificate shall be found at any time.
Section 6.04 Persons Deemed Owners. Prior to due presentation of a
---------------------
Certificate for registration of transfer, the Trustee, the Certificate
Registrar and any agent of the Trustee or the Certificate Registrar may treat
the Person in whose name any Certificate is registered (i) on any Record Date
for purposes of making distributions on the following Distribution Date,
whether or not any distribution required to be made on such Certificate shall
have been made when scheduled, and (ii) on any date for any other purpose, as
the owner of such Certificate, and neither the Trustee, the Certificate
Registrar nor any agent of the Trustee or the Certificate Registrar shall be
affected by notice to the contrary, except, with respect to a Class R
Certificate, for notice by the Servicer pursuant to Section 6.06 that the
------------
record holder is not a Permitted Transferee, and in such case the provisions
of Section 6.06 shall apply.
------------
Section 6.05 Trustee to Make Payments From Trust Only. All
----------------------------------------
distributions to be made by the Trustee in respect of the Certificates or
under this Agreement shall be made only from the Trust Estate. Each
Certificateholder, by its acceptance of a Certificate, agrees that it will
look solely to the Trust Estate to the extent available for distribution to
it as herein provided and that the Trustee is not personally liable to it for
any amount distributable in respect of any Certificate or for any other
liability in respect of any Certificate. This Section is intended solely to
limit the liability of the Trustee and shall have no effect on the
obligations of the Depositor, Empire Funding or the Servicer under this
Agreement. This Section 6.05 does not limit the liability of the Trustee set
------------
forth elsewhere in this Agreement for violations of its representations,
warranties and covenants contained herein.
Section 6.06 Restrictions on Transfer. Each Person who has or who
------------------------
acquires any Ownership Interest in a Class R Certificate shall be deemed by
the acceptance or acquisition of such Ownership Interest to have agreed to be
bound by the following provisions and to have irrevocably appointed the
Trustee or its designee as its attorney-in-fact to direct under clause (iv)
below the delivery of payments to a Person other than such Person and to
negotiate the terms of any mandatory sale under clause (v) below and to
execute all instruments of transfer and to do all other things necessary in
connection with any such sale, and the rights of each Person acquiring any
Ownership Interest in a Class R Certificate are expressly subject to the
following provisions:
(i) Only a Permitted Transferee may hold or acquire any
Ownership Interest in a Class R Certificate. Each Person holding or
acquiring any Ownership Interest in a Class R Certificate shall promptly
notify the Trustee and the Servicer of any change or impending change in
its status as a Permitted Transferee.
(ii) In connection with any proposed Transfer of any Ownership
Interest in a Class R Certificate, the Trustee shall, as a condition to
such consent, require delivery to the Trustee of a properly completed,
sworn, executed and acknowledged affidavit from the Transferee (the
"Transfer Affidavit") in the form attached hereto as Exhibit H and from
the transferor (the "Transferor Representation"), in the form attached
hereto as Exhibit I.
(iii) Notwithstanding the delivery of a Transfer Affidavit by a
proposed Transferee under clause (ii) above, if the Responsible Officer
or Responsible Officers of the Trustee has or have actual knowledge that
the proposed Transferee is not a Permitted Transferee, the Trustee shall
not register and, if the Trustee is not the Certificate Registrar, shall
direct to the Certificate Registrar not to register a Class R
Certificate in the name of the proposed Transferee, no Transfer of an
Ownership Interest in the Residual Interest to such proposed Transferee
shall be effected and the Trustee, and Certificate Registrar, shall have
no liability for failing to effect the proposed registration.
(iv) Any attempted or purported Transfer of any Ownership
Interest in a Class R Certificate in violation of the provisions of this
Section 6.06 shall be absolutely null and void and shall vest no rights
------------
in the purported Transferee. If any purported Transferee shall, in
violation of the provisions of this Section 6.06, become a Holder of a
Class R ------------
Certificate, then the prior Holder of such Class R Certificate shall,
upon discovery that the registration of Transfer of such Class R
Certificate was not in fact permitted by this Section 6.06, notify the
Trustee and the ------------
Trustee, upon receipt of such notice and upon verification of the facts
set forth in such notice or upon discovery by other means that the
registration of Transfer of such Class R Certificate was not in fact
permitted by this Section 6.06, shall notify the Servicer and the
Certificate Registrar of such ------------ improper Transfer (such
notice to be accompanied by an Opinion of Counsel to the effect that
such Transfer was improper and the retroactive restoration of the rights
of the last preceding Permitted Transferee as described in this
clause (iv) shall not be invalid, illegal or unenforceable) and, subject
to clause (v) below, shall make payments due on such Class R Certificate
to the last preceding Holder that is a Permitted Transferee (as described
in such written notice) and the last Holder that is a Permitted Transferee
shall be restored to all rights as Holder thereof retroactive to the date
of registration of Transfer of such Class R Certificate. The Trustee
shall be entitled, but shall not be obligated, to recover from any Holder
of a Class R Certificate that was in fact not a Permitted Transferee at
the time it became a Holder all payments made on such Class R Certificate.
Any such payments so recovered by the Trustee shall be paid and delivered
by the Trustee to the last preceding Holder that is a Permitted
Transferee who was a Holder of such Class R Certificate.
(v) If any Person that is not a Permitted Transferee acquires
any Ownership Interest in a Class R Certificate in violation of the
restrictions in this Section 6.06, and (A) to the extent that the
------------ retroactive restoration of the rights
of the last preceding Holder that is a Permitted Transferee as
described in clause (iv) above shall be invalid, illegal or
unenforceable or (B) if the Trustee is unable within a reasonable period
to obtain the Opinion of Counsel required by clause (iv) above then the
Trustee shall have the right, without notice to the Holder of such
Class R Certificate or any other Person having an Ownership Interest
therein, to sell such Class R Certificate to a purchaser selected by the
Trustee on such terms as the Trustee may choose. The proceeds of such
sale, net of commissions, expenses and taxes due, if any, will be
remitted to the Holder of such Class R Certificate by the Trustee, except
that in the event that the Trustee determines that the Holder of such
Class R Certificate may be liable for any amount due under this Section
6.06 or any other provisions of this ------------ Agreement,
the Trustee may withhold a corresponding amount from such remittance
security for such claim. The terms and conditions of any sale under
this clause (v) shall be determined in the sole discretion of the
Trustee, and it shall not be liable to any Person having an
Ownership Interest in a Class R Certificate as a result of its
exercise of such discretion.
(vi) The Trustee shall make available, upon receipt of written
requests, all information necessary to compute any tax imposed (A) as a
result of the Transfer of an Ownership Interest in Class R Certificates
to any Person who is not a Permitted Transferee, and (B) as a result of
any regulated investment company, real estate investment trust, common
trust fund, partnership, trust, estate or organizations described in
Code section 1381 that holds an Ownership Interest in a Class R
Certificate and having as among its record holders at any time any
Person who is not a Permitted Transferee. Reasonable compensation for
providing such information may be charged by the Trustee. The
information furnished must be sufficient to compute the present value of
the anticipated excess inclusions as required by Treasury Department
regulations. The information must be furnished to the requesting party
or such later time period as allowed by Treasury Department regulations
or the Internal Revenue Service.
(vii) No undivided interest of the Residual Interest may be
transferred to any Person unless the entire interest and rights relating
to such undivided interest in the Residual Interest under this Agreement
are transferred to such Person.
(viii) The provisions of this Section 6.06 set forth prior to
------------
this clause (viii) may be eliminated upon execution by the Trustee of
a certificate stating that the Trustee has received an Opinion of Counsel,
in form and substance satisfactory to the Trustee, to the effect that
the absence of such provisions will not cause the REMIC Pool to cease to
qualify as a REMIC and will not create a risk that (A) the Trust or the
REMIC Pool may be subject to an entity-level tax caused by the Transfer of
any Ownership Interest in a Class R Certificate to a Person which is
not a Permitted Transferee or (B) a Holder of a Senior Certificate,
Mezzanine Certificate, Class B Certificate or another Person will be
subject to a REMIC-related tax caused by the Transfer of any Ownership
Interest in a Class R Certificate to a Person which is not a Permitted
Transferee.
ARTICLE VII
GENERAL SERVICING PROCEDURE
---------------------------
Section 7.01 Due-On-Sale; Due-on-Encumbrance.
-------------------------------
(a) If any Home Loan contains a provision, in the nature of a "due-on-
sale" clause, which by its terms:
(i) provides that such Home Loan shall (or may at the
Obligee's option) become due and payable upon the sale or other transfer
of an interest in the related Property; or
(ii) provides that such Home Loan may not be assumed without
the consent of the related Obligee in connection with any such sale or
other transfer, then, for so long as such Home Loan is included in the
Trust, the Servicer, on behalf of the Trustee, shall exercise any right
the Trust or the Trustee may have as the Obligee of record with respect
to such Home Loan (x) to accelerate the payments thereon, or (y) to
withhold its consent to any such sale or other transfer, in a manner
consistent with Accepted Servicing Procedures.
(b) If any Home Loan contains a provision, in the nature of a "due-on-
encumbrance" clause, which by its terms:
(i) provides that such Home Loan shall (or may at the
Obligee's option) become due and payable upon the creation of any lien
or other encumbrance on the related Property; or
(ii) requires the consent of the related Obligee to the
creation of any such lien or other encumbrance on the related Property,
then, for so long as such Home Loan is included in the Trust, the
Servicer, on behalf of the Trust or the Trustee, shall exercise any
right the Trustee may have as the Obligee of record with respect to
such Home Loan (x) to accelerae the payments thereon, or (y) to
withhold its consent to the creation of any such lien or other
encumbrance, in a manner consistent with Accepted Servicing Standards.
(c) Nothing in this Section 7.01 shall constitute a waiver of the
------------
Trustee's right to receive notice of any assumption of a Home Loan, any
sale or other transfer of the related Mortgaged Property or the creation
of any lien or other encumbrance with respect to such Mortgaged Property.
Section 7.02 Release of Home Loan Files.
--------------------------
(a) If with respect to any Home Loan:
(i) the outstanding Principal Balance of such Home Loan plus
all interest accrued thereon shall have been paid;
(ii) the Servicer shall have received, in escrow, payment in
full of such Home Loan in a manner customary for such purposes;
(iii) such Home Loan has become a Defective Loan and has been
repurchased or a Qualified Substitute Home Loan has been conveyed to the
Trust pursuant to Section 3.06;
------------
(iv) such Home Loan or the related Foreclosure Property has
been sold in connection with the termination of the Trust pursuant to
Section 12.01;
-------------
(v) the FHA has paid a claim with respect to such Home Loan
that is an FHA Loan under the Contract of Insurance; or
(vi) the related Foreclosure Property has been sold pursuant
to Section 4.13.
------------
In each such case, the Servicer shall deliver a certificate to the effect
that the Servicer has complied with all of its obligations under this
Agreement with respect to such Home Loan and requesting that the Trustee
release to the Servicer the related Home Loan File, then the Trustee shall,
within five Business Days or such shorter period as may be required by
applicable law, release, or cause the Custodian to release (unless such Home
Loan File has previously been released), the related Home Loan File to the
Servicer and execute and deliver such instruments of transfer or assignment,
in each case without recourse, as shall be necessary to vest ownership of
such Home Loan in the Servicer or such other Person as may be specified in
such certificate, the forms of any such instrument to be appended to such
certificate.
(b) From time to time and as appropriate for the servicing or
foreclosure of any Home Loan or to effectuate the payment of a claim under
the Contract of Insurance, the Trustee shall, upon request of the Servicer,
release the related Home Loan File (or any requested portion thereof) to the
Servicer. Such receipt shall obligate the Servicer, to return the Home Loan
File (or such portion thereof) to the Trustee when the need therefor by the
Servicer, no longer exists unless any of the conditions specified in
subsection (a) above, is satisfied prior thereto. The Trustee shall release
such receipt to the Servicer (i) upon the Servicer's return of the Servicer's
Home Loan File (or such portion thereof) to the Trustee or (ii) if any of the
conditions specified in subsection (a) has been satisfied, and the Servicer
has not yet returned the Servicer's Home Loan File (or such portion thereof)
to the Trustee, upon receipt of a certificate certifying that any of such
condition has been satisfied.
Section 7.03 Servicing Compensation.
----------------------
As compensation for its services hereunder, the Servicer shall be
entitled to receive from the Collection Account, the Servicing Fee out of
which the Servicer shall pay any servicing fees owed or payable to any
Subservicer. Additional servicing compensation in the form of assumption
fees, modification fees, and other administrative fees, insufficient funds
charges, amounts remitted pursuant to Section 7.01 and late payment charges
------------
shall be part of the Servicing Compensation payable to the Servicer hereunder
and shall be paid either by the Servicer retaining such additional servicing
compensation prior to deposit in the Collection Account pursuant to
Section 5.01(b)(1) or if deposited into the Collection Account as part of the
- ------------------
Servicing Compensation withdrawn from the Certificate Distribution Account
pursuant to Section 5.01(c)(i).
------------------
The Servicer shall be required to pay all expenses incurred by it in
connection with its servicing activities hereunder and shall not be entitled
to reimbursement therefor except as specifically provided for herein. The
Transferor also agrees to pay (i) all reasonable costs and expenses incurred
by any successor servicer or the Trustee in replacing the Servicer in the
event of a default by the Servicer in the performance of its duties under the
terms and conditions of this Agreement, and (ii) the annual Rating Agency
monitoring fees.
Section 7.04 Statement as to Compliance and Financial Statements.
---------------------------------------------------
The Servicer will deliver to the Trustee, the Depositor and the
Transferor not later than 90 days following the end of each fiscal year
(beginning in 1998) of the Servicer, an Officers' Certificate stating, as to
each signatory thereof, that (i) a review of the activities of the Servicer
during the preceding year and of performance under this Agreement has been
made under such officer's supervision and (ii) to the best of such officer's
knowledge, based on such review, the Servicer has fulfilled all of its
obligations under this Agreement throughout such year, or, if there has been
a default in the fulfillment of any such obligation, specifying each such
default known to such officers and the nature and status thereof and what
action the Servicer proposes to take with respect thereto.
Contemporaneously with the submission of the Officers' Certificate
required by the preceding paragraph, the Servicer shall deliver to the
Trustee a copy of its annual audited financial statements prepared in the
ordinary course of business. The Servicer shall, upon the request of the
Depositor, deliver to such party any unaudited quarterly financial statements
of the Servicer.
The Servicer agrees to make available on a reasonable basis to the
Depositor a knowledgeable officer of the Servicer for the purpose of
answering reasonable questions respecting recent developments affecting the
Servicer or the financial statements of the Servicer and to permit the
Depositor on reasonable notice to inspect the Servicer's servicing facilities
during normal business hours for the purpose of satisfying the Depositor that
the Servicer has the ability to service the Home Loans in accordance with
this Agreement.
The Servicer shall also furnish and certify to the requesting party such
other information as to (i) its organization, activities and personnel
relating to the performance of the obligations of the Servicer hereunder,
(ii) its financial condition, (iii) the Home Loans and (iv) the performance
of the obligations of any Subservicer under the related Subservicing
Agreement, in each case as the Trustee or the Depositor may reasonably
request from time to time.
Section 7.05 Independent Public Accountants' Servicing Report.
------------------------------------------------
Not later than 90 days following the end of each fiscal year (beginning
with fiscal year 1997) of the Servicer, the Servicer at its expense shall
cause any of Arthur Andersen & Co., Coopers & Lybrand, Deloitte & Touche,
Ernst & Young, KPMG Peat Marwick and Price Waterhouse & Co. or such other
nationally recognized firm of Independent Certified Public Accountants (which
may also render other services to the Servicer) to furnish a statement to the
Trustee and the Depositor to the effect that such firm has examined certain
documents and records relating to the servicing of the Home Loans under this
Agreement or of mortgage loans under pooling and servicing agreements
(including the Home Loans and this Agreement) substantially similar to one
another (such statement to have attached thereto a schedule setting forth the
pooling and servicing agreements covered thereby) and that, on the basis of
such examination conducted substantially in compliance with the Uniform
Single Attestation Program for Mortgage Bankers or the Audit Program for
Mortgages serviced for FHLMC, such firm confirms that such servicing has been
conducted in compliance with such pooling and servicing agreements except for
such significant exceptions or errors in records that, in the opinion of such
firm, the Uniform Single Attestation Program for Mortgage Bankers or the
Attestation Program for Mortgages serviced for FHLMC requires it to report,
each of which errors and omissions shall be specified in such statement. In
rendering such statement, such firm may rely, as to matters relating to
direct servicing of mortgage loans by Subservicers, upon comparable
statements for examinations conducted substantially in compliance with the
Uniform Single Attestation Program for Mortgage Bankers or the Audit Program
for Mortgages serviced for FHLMC (rendered within one year of such statement)
of independent public accountants with respect to the related Subservicer.
Section 7.06 Right to Examine Servicer Records.
---------------------------------
Each Certificateholder, the Trustee and each of their respective agents
shall have the right upon reasonable prior notice, during normal business
hours and as often as reasonably required, to examine, audit and copy, at the
expense of the Person making such examination, any and all of the books,
records or other information of the Servicer (including without limitation
any Subservicer to the extent provided in the related Subservicing Agreement)
whether held by the Servicer or by another on behalf of the Servicer, which
may be relevant to the performance or observance by the Servicer of the
terms, covenants or conditions of this Agreement. In the case of the
supervisory agents and examiners of the Trustee and the Certificateholders,
access to the documentation regarding the Home Loans required by applicable
state and federal regulations shall be afforded without charge but only upon
reasonable request and during normal business hours at the offices of the
Servicer designated by it. Each Certificateholder and the Trustee agree
that any information obtained pursuant to the terms of this Agreement shall
be held confidential.
The Servicer also agrees to make available on a reasonable basis to the
Certificateholders or any prospective Certificateholder a knowledgeable
financial or accounting officer for the purpose of answering reasonable
questions respecting recent developments affecting the Servicer or the
financial statements of the Servicer and to permit the Certificateholders and
any prospective Certificateholder to inspect the Servicer's servicing
facilities during normal business hours for the purpose of satisfying the
Certificateholders and such prospective Certificateholder that the Servicer
has the ability to service the Home Loans in accordance with this Agreement.
Section 7.07 Reports to the Trustee; Collection Account Statements.
-----------------------------------------------------
If the Collection Account is not maintained with the Trustee, then not
later than 25 days after each Record Date, the Servicer shall forward to the
Trustee a statement, certified by a Servicing Officer, setting forth the
status of the Collection Account as of the close of business on the preceding
Record Date and showing, for the period covered by such statement, the
aggregate of deposits into the Collection Account for each category of
deposit specified in Section 5.01(b)(1), the aggregate of withdrawals from
------------------
the Collection Account for each category of withdrawal specified in Section
-------
5.01(b)(2) and (3), in each case, for the related Due Period.
- ------------------
Section 7.08 Financial Statements.
--------------------
The Servicer understands that, in connection with the transfer of the
Certificates, Certificateholders may request that the Servicer make available
to the Certificateholders and to prospective Certificateholders annual
audited financial statements of the Servicer for one or more of the most
recently completed five fiscal years for which such statements are available,
which request shall not be unreasonably denied.
ARTICLE VIII
CONCERNING THE CONTRACT OF INSURANCE HOLDER
-------------------------------------------
Section 8.01 Compliance with Title I and Filing of FHA Claims.
------------------------------------------------
(a) The Contract of Insurance Holder shall at all times while any
Certificates are outstanding have a valid Contract of Insurance with the FHA
covering the FHA Loans. To the extent applicable to the duties of the
Contract of Insurance Holder hereunder, the Contract of Insurance Holder
shall comply with the requirements of Title I and shall take or refrain from
taking such actions as are necessary or appropriate to maintain a valid
Contract of Insurance for the Trust with the FHA covering the FHA Loans.
(b) If and for so long as the Contract of Insurance covers any loans
other than the FHA Loans, and if HUD shall not have earmarked the coverage of
the Contract of Insurance with respect to the FHA Loans, the Contract of
Insurance Holder covenants and agrees not to submit any claim to FHA with
respect to an FHA Loan if the effect of approval of such claim would result
in the amount of claims paid by the FHA in respect of the FHA Loans to exceed
the Trust Designated Insurance Amount. Notwithstanding the foregoing, the
Claims Administrator shall promptly notify the Trustee and the Servicer if
the amount of claims submitted to FHA in respect of the FHA Loans under the
Contract of Insurance exceeds the Trust Designated Insurance Amount. As of
the Closing Date and at all times thereafter until the termination of this
Agreement, the Contract of Insurance Holder covenants and agrees that the
Contract of Insurance will only apply to the FHA Loans and Related Series
Loans, exclusively. Empire Funding, as Claims Administrator and Servicer,
covenants and agrees that it shall not take any action that would result in
the Contract of Insurance applying to loans other than the FHA Loans and
Related Series Loans, exclusively, unless HUD shall have agreed pursuant to
24 C.F.R. Section201.32(d)(1) to "earmark" the FHA insurance relating to the
FHA Loans and Related Series Loans in a manner satisfactory to the Trustee,
in its sole and absolute discretion.
(c) The Trustee hereby appoints Empire Funding as Claims Administrator.
Empire Funding, as Claims Administrator, shall perform on behalf of the
Contract of Insurance Holder the duties associated with the submission of
claims under Title I in connection with the Contract of Insurance, except to
the extent that certain documents must be signed by the Contract of Insurance
Holder (in which case the Contract of Insurance Holder shall only sign such
documents at the direction of the Claims Administrator) and shall not, in its
capacity as Claims Administrator, take any action or omit to take any action
that would cause the Contract of Insurance Holder to violate this Section
-------
8.01 or otherwise fail to maintain a valid Contract of Insurance or cause any
- ----
denial by FHA of an insurance claim under Title I.
(d) The Contract of Insurance Holder shall not be deemed to have
violated this Section 8.01 and shall otherwise incur no liability hereunder
------------
if any failure to maintain a valid Contract of Insurance or to comply with
the requirements of Title I or any denial by FHA of an insurance claim under
Title I shall have been caused by any act or omission of the Servicer or
Claims
Administrator in the performance of its duties hereunder. The Contract of
Insurance Holder shall be permitted to replace the Claims Administrator for
any failure of the Claims Administrator to perform its duties hereunder.
(e) The Contract of Insurance Holder hereby represents and warrants to
the Depositor, the Servicer, the Transferor and the Trustee that it is an
investing lender in good standing with HUD having authority to purchase,
hold, and sell loans insured under 24 CFR Part 201, pursuant to a valid
Contract of Insurance, Lender Number 72117 0000 5.
(f) The Transferor shall forward to the Contract of Insurance Holder a
fully executed Transfer of Note Report for each FHA Loan within 20 days of
the receipt by the Transferor of such FHA Loan's case number under the
Contract of Insurance. The Contract of Insurance Holder shall execute each
Transfer of Note Report, as investing lender, and submit such Transfer of
Note Report to HUD within 31 days of the transfer of the FHA Loans to the
Trust.
Section 8.02 Contract of Insurance Holder.
----------------------------
(a) The Contract of Insurance Holder shall not resign from the
obligations and duties imposed on it by this Agreement as Contract of
Insurance Holder except (i) upon a determination that by reason of a change
in legal requirements or requirements imposed by the FHA the performance of
its duties under this Agreement would cause it to be in violation of such
legal requirements or FHA imposed requirements in a manner which would result
in a material adverse effect on the Contract of Insurance Holder or cause it
to become ineligible to hold the Contract of Insurance and (ii) the Majority
Certificateholders do not elect to waive the obligations of the Contract of
Insurance Holder to perform the duties which render it legally unable to act
or to delegate those duties to another Person or if the circumstances giving
rise to such illegality cannot be waived or delegated. Any such
determination permitting the resignation of the Contract of Insurance Holder
shall be evidenced by an Opinion of Counsel to such effect delivered and
acceptable to the Trustee. Upon receiving such notice of resignation, the
Contract of Insurance shall be transferred to a qualified successor by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the resigning Contract of Insurance Holder and one copy to the
successor Contract of Insurance Holder. Notwithstanding the foregoing, the
Contract of Insurance Holder may resign, with the prior written consent of
the Majority Certificateholders, which may be withheld in their sole and
absolute discretion, upon transfer of the FHA insurance and related reserves
with respect to the FHA Loans and any Related Series Loans to a contract of
insurance held by a successor Contract of Insurance Holder provided, however,
that any Contract of Insurance held by such successor Contract of Insurance
Holder shall satisfy the criteria set forth in Section 8.01(b), and, at the
---------------
time of succession, shall have an FHA insurance coverage reserve account
balance not less than that of the FHA Insurance Coverage Reserve Account at
the time of succession.
(b) If at any time (i) the Contract of Insurance shall be revoked,
suspended or otherwise terminated, or (ii) the Contract of Insurance Holder
shall become incapable of acting, or shall be adjudged as bankrupt or
insolvent, or a receiver of the Contract of Insurance Holder
or of its property shall be appointed, or any public officer shall take
charge or control of the Contract of Insurance Holder or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then,
in any such case the Majority Certificateholders may remove the Contract of
Insurance Holder and appoint a successor contract of insurance holder by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the Contract of Insurance Holder so removed and one copy to the
successor contract of insurance holder. Upon removal of the Contract of
Insurance Holder, the outgoing Contract of Insurance Holder shall take any
action required to transfer the benefits of the FHA Insurance Coverage
Reserve Account to the successor contract of insurance holder.
(c) Any resignation or removal of the Contract of Insurance Holder and
appointment of a successor contract of insurance holder pursuant to any of
the provisions of this Section 8.02 shall become effective upon acceptance
------------
of appointment by the successor contract of insurance holder.
ARTICLE IX
THE SERVICER
------------
Section 9.01 Indemnification; Third Party Claims.
-----------------------------------
(a) The Servicer shall indemnify the Transferor, the Trust, the
Depositor and the Trustee (each an "Indemnified Party") and hold harmless
each of them against any and all claims, losses, damages, penalties, fines,
forfeitures, reasonable legal fees and related costs, judgments, and other
costs and expenses resulting from any claim, demand, defense or assertion
based on or grounded upon, or resulting from, a breach of any of the
Servicer's representations and warranties and covenants contained in this
Agreement or in any way relating to the failure of the Servicer to perform
its duties and service the Home Loans in compliance with the terms of this
Agreement; provided, however, that if the Servicer is not liable pursuant to
-------- -------
the provisions of Section 9.01(d) hereof for its failure to perform its
---------------
duties and service the Home Loans in compliance with the terms of this
Agreement, then the provisions of this Section 9.01 shall have no force and
effect with respect to such failure.
(b) The Transferor, the Depositor or the Trustee, as the case may be,
shall promptly notify the Servicer if a claim is made by a third party with
respect to a breach of any of the Servicer's representations and warranties
and covenants contained in this Agreement or in any way relating to the
failure of the Servicer to perform its duties and service the Home Loans in
compliance with the terms of this Agreement. The Servicer shall promptly
notify the Trustee and the Depositor of any claim of which it has been
notified pursuant to this Section 9.01 by a Person other than the Depositor,
------------
and, in any event, shall promptly notify the Depositor of its intended course
of action with respect to any claim.
(c) The Servicer shall be entitled to participate in and, upon notice
to the Indemnified Party, assume the defense of any such action or claim in
reasonable cooperation with, and with the reasonable cooperation of, the
Indemnified Party. The Indemnified Party will have the right to employ its
own counsel in any such action in addition to the counsel of the Servicer,
but the fees and expenses of such counsel will be at the expense of such
Indemnified Party, unless (a) the employment of counsel by the Indemnified
Party at its expense has been authorized in writing by the Servicer, (b) the
Servicer has not in fact employed counsel to assume the defense of such
action within a reasonable time after receiving notice of the commencement of
the action, or (c) the named parties to any such action or proceeding
(including any impleaded parties) include both the Servicer and one or more
Indemnified Parties, and the Indemnified Parties shall have been advised by
counsel that there may be one or more legal defenses available to them which
are different from or additional to those available to the Servicer. The
Servicer shall not be liable for any settlement of any such claim or action
unless the Servicer shall have consented thereto or be in default on its
obligations hereunder. Any failure by an Indemnified Party to comply with
the provisions of this Section shall relieve the Servicer of liability only
if such failure is materially prejudicial to the position of the Servicer and
then only to the extent of such prejudice.
(d) Neither the Transferor, the Depositor or the Servicer nor any of
the directors, officers, employees or agents of the Transferor, the Depositor
or the Servicer, or members or affiliates of the Depositor shall be under any
liability to the Trust or the Certificateholders for any action taken or for
refraining from the taking of any action in good faith pursuant to this
Agreement, or for errors in judgment; provided, however, that this provision
-------- -------
shall not protect the Transferor, the Depositor, the Servicer or any such
person against the remedies provided herein for the breach of any warranties,
representations or covenants made herein, or against any specific liability
imposed on the Transferor, the Depositor or the Servicer herein, or against
any liability which would otherwise be imposed by reason of willful
misfeasance, bad faith or negligence in the performance of the duties of the
Servicer, the Depositor or the Transferor, as the case may be, or by reason
of reckless disregard of the obligations and duties of the Servicer, the
Depositor or the Transferor, as the case may be, hereunder. The Transferor,
the Depositor, the Servicer and any director, officer, employee or agent of
the Transferor, the Depositor or the Servicer, or any member or affiliate of
the Depositor may rely in good faith on any document of any kind which, prima
-----
facie, is properly executed and submitted by any Person respecting any
- -----
matters arising hereunder.
(e) The Servicer, the Transferor and the Depositor and any director,
officer, employee or agent of the Servicer, the Transferor or the Depositor
shall be indemnified by the Trust and held harmless against any loss,
liability or expense incurred in connection with any audit, controversy or
judicial proceeding relating to a governmental taxing authority or any legal
action relating to this Agreement or the Certificates, other than any loss,
liability or expense related to any specific Home Loan or Home Loans (except
as any such loss, liability or expense shall be otherwise reimbursable
pursuant to this Agreement) and any loss, liability or expense incurred by
reason of willful misfeasance, bad faith or negligence in the performance of
duties hereunder or by reason of reckless disregard of obligations and duties
hereunder. Except as otherwise provided herein, neither of the Transferor,
the Depositor nor the Servicer shall be under any obligation to appear in,
prosecute or defend any legal action that is not related to its respective
duties under this Agreement; provided, however, that, except as otherwise
-------- -------
provided herein, any of the Transferor, the Depositor, or the Servicer may,
with the prior consent of the Trustee, in its discretion undertake any such
action which it may deem necessary or desirable with respect to this
Agreement and the rights and duties of the parties hereto and the interests
of the Certificateholders hereunder. In such event, the legal expenses and
costs of such action and any liability resulting therefrom shall be,
expenses, costs and liabilities of the Trust, and the Transferor, the
Depositor and the Servicer shall be entitled to be reimbursed therefor out of
the Collection Account.
Section 9.02 Merger or Consolidation of the Servicer.
---------------------------------------
The Servicer shall keep in full effect its existence, rights and
franchises as a corporation, and will obtain and preserve its qualification
to do business as a foreign corporation and maintain such other licenses and
permits, in each jurisdiction necessary to protect the validity and
enforceability of this Agreement or any of the Home Loans and to perform its
duties under this Agreement; provided, that the Servicer may merge or
consolidate with any other corporation upon the satisfaction of the
conditions set forth in the following paragraph.
Any Person into which the Servicer may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which
the Servicer shall be a party, or any Person succeeding to the business of
the Servicer, shall be an Eligible Servicer and shall be the successor of the
Servicer, as applicable hereunder, without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding. The Servicer shall send notice of
any such merger, conversion, consolidation or succession to the Trustee.
Section 9.03 Limitation on Liability of the Servicer and Others.
--------------------------------------------------
The Servicer and any director, officer, employee or agent of the
Servicer may rely on any document of any kind which it in good faith
reasonably believes to be genuine and to have been adopted or signed by the
proper authorities respecting any matters arising hereunder. Subject to the
terms of Section 9.01 herein, the Servicer shall have no obligation to appear
------------
with respect to, prosecute or defend any legal action which is not incidental
to the Servicer's duty to service the Home Loans in accordance with this
Agreement.
Section 9.04 Servicer Not to Resign; Assignment.
----------------------------------
The Servicer shall not resign from the obligations and duties hereby
imposed on it except (a) with the consent of the Trustee or (b) upon
determination that its duties hereunder are no longer permissible under
applicable law. Any such determination pursuant to clause (b) of the
preceding sentence permitting the resignation of the Servicer shall be
evidenced by an independent opinion of counsel to such effect delivered (at
the expense of the Servicer) to the Trustee. No resignation of the Servicer
shall become effective until the Trustee or a successor servicer, appointed
pursuant to the provisions of Section 10.02 and satisfying the requirements
-------------
of Section 4.08 hereof with respect to the qualifications of a successor
------------
Servicer, shall have assumed the Servicer's responsibilities, duties,
liabilities (other than those liabilities arising prior to the appointment of
such successor) and obligations under this Agreement.
Except as expressly provided herein, the Servicer shall not assign or
transfer any of its rights, benefits or privileges hereunder to any other
Person, or delegate to or subcontract with, or authorize or appoint any other
Person to perform any of the duties, covenants or obligations to be performed
by the Servicer hereunder, without the prior written consent of the Trustee,
and absent such written consent any agreement, instrument or act purporting
to effect any such assignment, transfer, delegation or appointment shall be
void.
The Servicer agrees to cooperate with any successor Servicer in
effecting the transfer of the Servicer's servicing responsibilities and
rights hereunder pursuant to the first paragraph of this Section 9.04,
------------
including, without limitation, the transfer to such successor of all relevant
records and documents (including any Home Loan Files in the possession of the
Servicer) and all amounts received with respect to the Home Loans and not
otherwise permitted to be retained by the Servicer pursuant to this
Agreement. In addition, the Servicer, at its sole cost and expense, shall
prepare, execute and deliver any and all documents and instruments to the
successor Servicer including all Home Loan Files in its possession and do or
accomplish all other acts necessary or appropriate to effect such termination
and transfer of servicing responsibilities, including, without limitation,
assisting in obtaining any necessary approval under Title I from the FHA.
Section 9.05 Relationship of Servicer to the Trustee.
---------------------------------------
The relationship of the Servicer (and of any successor to the Servicer
as servicer under this Agreement) to the Trustee under this Agreement is
intended by the parties hereto to be that of an independent contractor and
not of a joint venturer, agent or partner of the Trustee.
Section 9.06 Servicer May Own Certificates.
-----------------------------
Each of the Servicer and any affiliate of the Servicer may in its
individual or any other capacity become the owner or pledgee of Certificates
with the same rights as it would have if it were not the Servicer or an
affiliate thereof except as otherwise specifically provided herein.
Certificates so owned by or pledged to the Servicer or such affiliate shall
have an equal and proportionate benefit under the provisions of this
Agreement, without preference, priority, or distinction as among all of the
Certificates, provided that any Certificates owned by the Servicer or any
affiliate thereof, during the time such Certificates are owned by them, shall
be without voting rights for any purpose set forth in this Agreement. The
Servicer shall notify the Trustee promptly after it or any of its affiliates
becomes the owner or pledgee of a Certificate.
ARTICLE X
DEFAULT
-------
Section 10.01 Events of Default.
-----------------
(a) In case one or more of the following Events of Default by the
Servicer shall occur and be continuing, that is to say:
(i) any failure by the Servicer to deposit in the Collection
Account in accordance with Section 5.01(b) any payments in respect of
---------------
the Home Loans received by the Servicer no later than the second Business Day
following the day on which such payments were received; or
(ii) failure by the Servicer duly to observe or perform, in any
material respect, any other covenants, obligations or agreements of the
Servicer as set forth in this Agreement, which failure continues
unremedied for a period of 60 days after the date on which written
notice of such failure, requiring the same to be remedied and stating
that such notice is a "Notice of Default" hereunder, shall have been
given (a) to the Servicer by the Trustee, or (b) to the Servicer or the
Trustee by any Majority Certificateholder; or
(iii) a decree or order of a court or agency or supervisory
authority having jurisdiction for the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceedings, or for the
winding-up or liquidation of its affairs, shall have been entered
against the Servicer and such decree or order shall have remained in
force, undischarged or unstayed for a period of 60 days; or
(iv) the Servicer shall consent to the appointment of a conservator
or receiver or liquidator in any insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceedings of or
relating to the Servicer or of or relating to all or substantially all
of the Servicer's property; or
(v) the Servicer shall admit in writing its inability to pay its
debts as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for
the benefit of its creditors, or voluntarily suspend payment of its
obligations; or
(vi) the Majority Certificateholders (A) shall receive notice from
the Servicer that the Servicer is no longer able to discharge its duties
under this Agreement or (B) shall determine, in their reasonable
judgment and based upon published reports (including wire services),
which they reasonably believe in good faith to be reliable, that the
Servicer
a) has experienced a material adverse change in its
business, assets, liabilities, operations, condition
(financial or otherwise) or prospects,
b) has defaulted on any of its material obligations, or
c) has ceased to conduct its business in the ordinary
course.
(b) then, and in each and every such case, so long as an Event of
Default shall not have been remedied, the Majority Certificateholders or the
Trustee by notice in writing to the Servicer may, in addition to whatever
rights such Person may have at law or equity to damages, including injunctive
relief and specific performance, may terminate all the rights and obligations
of the Servicer under this Agreement and in and to the Home Loans and the
proceeds thereof, as servicer under this Agreement. Upon receipt by the
Servicer of such written notice, all authority and power of the Servicer
under this Agreement, whether with respect to the Home Loans or otherwise,
shall, subject to Section 10.02, pass to and be vested in a successor
-------------
servicer, or the Trustee if a successor servicer cannot be retained in a
timely manner, and the successor servicer, or Trustee, as applicable, is
hereby authorized and empowered to execute and deliver, on behalf of the
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments and do or cause to be done all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, including,
but not limited to, the transfer and endorsement or assignment of the Home
Loans and related documents. The Servicer agrees to cooperate with the
successor servicer in effecting the termination of the Servicer's
responsibilities and rights hereunder, including, without limitation, the
transfer to the successor servicer for administration by it of all amounts
which shall at the time be credited by the Servicer to each Collection
Account or thereafter received with respect to the Home Loans.
Section 10.02 Trustee to Act; Appointment of Successor.
----------------------------------------
On and after the date the Servicer receives a notice of termination
pursuant to Section 10.01, or the Trustee receives the resignation of the
-------------
Servicer evidenced by an opinion of counsel or accompanied by the consents
required by Section 9.04, or the Servicer is removed as servicer pursuant to
------------
this Article X, then, subject to Section 4.08, the Trustee shall appoint a
--------- ------------
successor servicer to be the successor in all respects to the Servicer in its
capacity as Servicer under this Agreement and the transactions set forth or
provided for herein and shall be subject to all the responsibilities, duties
and liabilities relating thereto placed on the Servicer by the terms and
provisions hereof; provided, however, that the successor servicer shall not
be liable for any actions of any servicer prior to it; provided further,
however, that if a successor servicer cannot be retained in a timely manner,
the Trustee shall act as successor Servicer. In the event the Trustee
assumes the responsibilities of the Servicer pursuant to this Section 10.02,
-------------
the Trustee will make reasonable efforts consistent with applicable law to
become licensed, qualified and in good standing in each Mortgaged Property
State the laws of which require licensing or qualification, in order to
perform its obligations as Servicer hereunder or, alternatively, shall
retain an agent who is so licensed, qualified and in good standing in any
such Mortgaged Property State.
In the case that the Trustee serves as successor servicer, the Trustee
in such capacity shall not be liable for any servicing of the Home Loans
prior to its date of appointment, and shall not be subject to any obligations
to repurchase any Home Loans. The successor servicer shall be obligated to
make Servicing Advances hereunder. As compensation therefor, the successor
servicer appointed pursuant to the following paragraph, shall be entitled to
all funds relating to the Home Loans which the Servicer would have been
entitled to receive from the Certificate Distribution Account pursuant to
Section 5.01(c) as if the Servicer had continued to act as servicer
- ---------------
hereunder, together with other servicing compensation in the form of
assumption fees, late payment charges or otherwise as provided in Sections
--------
7.01 and 7.03. The Servicer shall not be entitled to any termination fee if
- ---- ----
it is terminated pursuant to Section 10.01, but shall be entitled to any
-------------
accrued and unpaid Servicing Fee to the date of termination.
Any collections received by the Servicer after removal or resignation
shall be endorsed by it to the Trustee and remitted directly to the Trustee
or, at the direction of the Trustee, to the successor servicer. The
compensation of any successor servicer (including, without limitation, the
Trustee) so appointed shall be the Servicing Fees, together with other
Servicing Compensation provided for herein. In the event the Trustee is
required to solicit bids to appoint a successor servicer, the Trustee shall
solicit, by public announcement, bids from Eligible Servicers. Such public
announcement shall specify that the successor servicer shall be entitled to
the full amount of the Servicing Fee and Servicing Compensation provided for
herein. Within thirty days after any such public announcement, the Trustee
shall negotiate and effect the sale, transfer and assignment of the servicing
rights and responsibilities hereunder to the qualified party submitting the
highest qualifying bid. The Trustee shall deduct from any sum received by
the Trustee from the successor to the Servicer in respect of such sale,
transfer and assignment all costs and expenses of any public announcement and
of any sale, transfer and assignment of the servicing rights and
responsibilities hereunder and the amount of any unpaid Servicing Fees and
unreimbursed Servicing Advances made by the Trustee. After such deductions,
the remainder of such sum shall be paid by the Trustee to the Servicer at the
time of such sale, transfer and assignment to the Servicer's successor. The
Trustee, any Custodian, the Servicer and any such successor servicer shall
take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession. The Servicer agrees to cooperate with the
Trustee and any successor servicer in effecting the termination of the
Servicer's servicing responsibilities and rights hereunder and shall promptly
provide the Trustee or such successor servicer, as applicable, all documents
and records reasonably requested by it to enable it to assume the Servicer's
functions hereunder and shall promptly also transfer to the Trustee or such
successor servicer, as applicable, all amounts which then have been or should
have been deposited in any Account maintained by the Servicer or which are
thereafter received with respect to the Home Loans. Neither the Trustee nor
any other successor servicer shall be held liable by reason of any failure to
make, or any delay in making, any distribution hereunder or any portion
thereof caused by (i) the failure of the Servicer to deliver, or any delay in
delivering, cash, documents or records to it, or (ii) restrictions imposed by
any regulatory authority having jurisdiction over the Servicer
hereunder. No appointment of a successor to the Servicer hereunder shall be
effective until written notice of such proposed appointment shall have been
provided by the Trustee to each Certificateholder and the Depositor and,
except in the case of the appointment of the Trustee as successor to the
Servicer (when no consent shall be required), the Depositor and the Majority
Certificateholders shall have consented thereto.
Pending appointment of a successor to the Servicer hereunder, the
Trustee shall act as servicer hereunder as hereinabove provided. In
connection with such appointment and assumption, the Trustee may make such
arrangements for the compensation of such successor servicer out of payments
on the Home Loans as it and such successor servicer shall agree; provided,
however, that no such compensation shall be in excess of that permitted the
Servicer pursuant to Section 7.03, together with other Servicing Compensation
------------
in the form of assumption fees, late payment charges or otherwise as provided
in this Agreement.
Section 10.03 Waiver of Defaults.
------------------
The Majority Certificateholders may waive any events permitting removal
of the Servicer as servicer pursuant to this Article X, provided, however,
---------
that the Majority Certificateholders may not waive a default in making a
required distribution on a Certificate without the consent of the related
Certificateholder. Upon any waiver of a past default, such default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been remedied for every purpose of this Agreement. No such waiver shall
extend to any subsequent or other default or impair any right consequent
thereto except to the extent expressly so waived.
Section 10.04 Accounting Upon Termination of Servicer.
---------------------------------------
Upon termination of the Servicer under this Article X, the Servicer
---------
shall, at its own expense:
(a) deliver to its successor or, if none shall yet have been appointed,
to the Trustee the funds in any Account maintained by the Servicer;
(b) deliver to its successor or, if none shall yet have been appointed,
to the Trustee all Home Loan Files and related documents and statements held
by it hereunder and a Home Loan portfolio computer tape;
(c) deliver to its successor or, if none shall yet have been appointed,
to the Trustee and the Certificateholders a full accounting of all funds,
including a statement showing the Monthly Payments collected by it and a
statement of monies held in trust by it for payments or charges with respect
to the Home Loans; and
(d) execute and deliver such instruments and perform all acts
reasonably requested in order to effect the orderly and efficient transfer of
servicing of the Home Loans to its successor
and to more fully and definitively vest in such successor all rights, powers,
duties, responsibilities, obligations and liabilities of the Servicer under
this Agreement.
ARTICLE XI
CONCERNING THE TRUSTEE
----------------------
Section 11.01 Duties of the Trustee and Contract of Insurance Holder.
------------------------------------------------------
(a) The Trustee, prior to the occurrence of a Servicer Termination
Event and after the curing of all Servicer Termination Events which may have
occurred, undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement. In case a Servicer Termination
Event has occurred and not been cured (the appointment of a successor
servicer (including the Trustee) shall for purposes of this Article be deemed
such a cure), the Trustee shall exercise such of the rights and powers vested
in it by this Agreement, and use the same degree of care and skill in its
exercise as a prudent person would exercise or use under the circumstances in
the conduct of such person's own affairs. The Trustee shall not, except as
otherwise provided in this Agreement, sell or otherwise transfer any of the
Trust Estate.
(b) The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, notices, orders or other
instruments furnished to the Trustee that are specifically required to be
furnished pursuant to any provision of this Agreement, shall examine them to
determine whether they conform to the requirements of this Agreement;
provided, however, that the Trustee, in its capacity as such, shall not be
- -------- -------
responsible for the accuracy or content of any such resolution, certificate,
statement, opinion, report, document, notice, order or other instrument
furnished to the Trustee pursuant to this Agreement.
(c) No provision of this Agreement shall be construed to relieve
the Trustee from liability for its own negligent action, its own negligent
failure to act or its own bad faith or willful misconduct; provided, however,
-------- -------
that:
(i) Prior to the occurrence of a Servicer Termination Event,
and after the curing of all such Servicer Termination Events which may
have occurred, the duties and obligations of the Trustee shall be
determined solely by the express provisions of this Agreement, the
Trustee shall not be liable except for the performance of such duties
and obligations as are specifically set forth in this Agreement, no
implied covenants or obligations shall be read into this Agreement
against the Trustee and, in the absence of bad faith, willful
misconduct, or negligence on the part of the Trustee or actual knowledge
to the contrary of a Responsible Officer of the Trustee assigned to and
working in the Trustee's Corporate Trustee Administration Department,
the Trustee may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon any certificates
or opinions furnished to the Trustee that conform to the requirements of
this Agreement;
(ii) The Trustee shall not be personally liable for an error
of judgment made in good faith by a Responsible Officer or Responsible
Officers of the Trustee, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts;
(iii) The Trustee shall not be personally liable with respect
to any action taken, suffered or omitted to be taken by it in good faith
in accordance with the direction given pursuant to a Class Vote,
relating to the time, method and place of conducting any proceeding for
any remedy available to the Trustee, or exercising any trust or power
conferred upon the Trustee, with respect to such Class of Certificates
under this Agreement;
(iv) The Trustee shall not be personally liable for any
failure to ascertain whether a Certificateholder is an affiliate of the
Servicer or the Depositor for purposes of obtaining Certificateholder
consent pursuant to the terms of this Agreement;
(v) For all purposes of this Agreement, the Trustee shall not
be deemed to have knowledge of any Servicer Termination Event unless a
Responsible Officer of the Trustee assigned to and working in the
Trustee's Corporate Trustee Administration Department shall have actual
knowledge thereof or if written notice thereof is received by the
Trustee in accordance herewith, and in the absence of such knowledge no
provision hereof requiring the taking of any action or the assumption of
any duties or responsibility by the Trustee following the occurrence of
any Servicer Termination Event shall be effective as to the Trustee; and
(vi) None of the provisions contained in this Agreement shall
in any event require the Trustee to perform, or to be responsible for
the manner of performance of, any of the obligations of the Servicer
under this Agreement or to supervise or monitor the performance of such
obligations (other than to determine that any notices, reports or
statements required to be delivered to it by the Servicer hereunder
comply with the provisions of this Agreement), except during such time,
if any, as the Trustee shall be the successor to, and be vested with the
rights, duties, powers and privileges of the Servicer in accordance with
the provisions of this Agreement.
(d) If the Trustee receives any funds from the FHA or any other
Person with respect to the Home Loans or any other assets of the Trust, the
provisions of Section 4.12(e) shall apply.
---------------
(e) In the event that any conservator or receiver shall be
appointed for the Transferor, the Trustee shall cause the Servicer to notify
the Obligors of the sale of the Home Loans to the Trust.
Section 11.02 Certain Matters Affecting the Trustee. Except as
-------------------------------------
otherwise provided in Section 11.01:
(i) The Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officer's Certificate,
certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval,
bond or other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;
(ii) The Trustee shall be under no obligation to exercise any
of the trusts or powers vested in it by this Agreement or to institute,
conduct or defend any litigation hereunder or in relation hereto at the
request, order or direction of any of the Certificateholders, pursuant
to the provisions of this Agreement, expend or use its own funds or
otherwise incur any financial liability in the performance of any of its
duties as Trustee hereunder, or in the exercise of any of its rights or
powers as such, unless either (A) payment within a reasonable time to
the Trustee of the costs, expenses or liabilities likely to be incurred
by it in taking such action is, in the opinion of the Trustee,
reasonably assured to the Trustee by the security afforded to it by the
terms of this Agreement, or (B) such Certificateholders shall have
offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which may be incurred therein or thereby
(which, in the case of a Certificateholder which is an institutional
investor, will be deemed satisfied by a written agreement of indemnity
from such Certificateholder); the right of the Trustee to perform any
discretionary act enumerated in this Agreement shall not be construed as
a duty, and the Trustee shall not be answerable for other than its
negligence, bad faith or willful misconduct in the performance of any
such act; nothing contained herein shall, however, relieve the Trustee
of the obligation, upon the occurrence of a Servicer Termination Event
which has not been cured, to exercise such of the rights and powers
vested in it by this Agreement, and to use the same degree of care and
skill in their exercise as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs;
(iii) The Trustee shall not be personally liable for any action
taken, suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Agreement;
(iv) The Trustee may consult with counsel and any Opinion of
Counsel or written advice of counsel shall be full and complete
authorization and protection in respect of any action taken or suffered
or omitted by it hereunder in good faith and in accordance with such
Opinion of Counsel or written advice;
(v) Prior to the occurrence of a Servicer Termination Event
hereunder and after the curing of all such Servicer Termination Events
which may have occurred, the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
consent, order, approval, bond or other paper or document, unless
requested in writing to do so pursuant to a Class Vote; provided,
--------
however, that if the payment within a reasonable time to the Trustee of
the ------- costs, expenses or liabilities likely to be incurred by it in
the making of such investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security afforded to it by the
terms of this Agreement, the Trustee may require reasonable indemnity
from the Certificateholders, as the case may be, giving such direction
against such expense or liability as a condition to so proceeding
(which, in the case of a Certificateholder which is an institutional
investor, will be deemed satisfied by a written agreement of indemnity
from such Certificateholder), except that, if a Servicer Termination
Event has occurred and is continuing, the expenses of any such
investigation shall be paid by the Servicer or, if paid by the
Trustee, shall be repaid by the Servicer upon demand, and the Trustee
shall not have any lien, claim or demand upon the Trust for the payment
thereof;
(vi) The Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or through
agents or attorneys; and
(vii) The Trustee shall not be required to give any bond or
surety in respect of the trust created hereby or the powers created
hereunder.
Section 11.03 Trustee Not Liable for Certificates or Home Loans. The
-------------------------------------------------
recitals contained herein and in the Certificates (other than the
countersignature of the Trustee on such Certificates) shall not be taken as
the statements of the Trustee, and the Trustee assumes no responsibility for
their correctness. The Trustee makes no representations as to the validity
or sufficiency of this Agreement (other than as to the execution and delivery
of this Agreement by the Trustee) or of the Certificates (other than the
countersignature of the Trustee on such Certificates) or of any Home Loan or
related document. The Trustee shall not be accountable for the use or
application by the Depositor of any of the Certificates or of the proceeds of
such Certificates, or for the use or application of any funds paid to the
Servicer (unless the Trustee is acting as such) in respect of the Home Loans
or deposited in or withdrawn by the Servicer from the Collection Account,
other than funds so withdrawn and thereafter deposited in the Certificate
Distribution Account. Except as otherwise expressly provided herein, the
Trustee shall have no obligation to inspect, insure or pay taxes on any
Property, to investigate the state of title with respect to any Property, to
ensure the priority or perfection of any Mortgage or security interest or to
file or record any assignment, lien, financing statement, continuation
statement or security interest in relation to any Home Loan or Property or to
ensure the priority or perfection of any security referred to in this
Agreement or to prepare, file or record any assignment, lien, financing
statement or continuation statement with respect thereto or to prepare or
file any Securities and Exchange Commission filings for the Trust or to
record this Agreement.
Section 11.04 Trustee May Own Certificates. The Trustee in its
----------------------------
individual or any other capacity may become the owner or pledgee of
Certificates of any Class with the same rights as it would have if it were
not Trustee, except that no determination, vote or request as Holder of such
Certificates shall be included in the determination of a Class Vote. The
Trustee, in its individual capacity, may deal with either the Depositor and
the Servicer, each in their individual capacities, with the same rights it
would have if it were not Trustee.
Section 11.05 Trustee's Fees and Expenses; Indemnification.
--------------------------------------------
(a) The Trustee will disburse to itself pursuant to Section
-------
5.01(c)(i), to the extent funds are available therefor, the Trustee Fee for
- ----------
all services rendered by it in the execution of the trusts hereby created and
in the exercise and performance of any of the powers and duties hereunder of
the Trustee.
(b) Empire Funding shall indemnify the Trustee and its agent for,
and hold them harmless against, any loss, liability or expense (including
reasonable expenses, disbursements and advances incurred or made by the
Trustee in accordance with any of the provisions of this Agreement (including
the reasonable compensation and the expenses and disbursements of its counsel
and of all Persons not regularly in its employ and the fees and expenses of
any co-trustee appointed hereunder)) incurred by the Trustee or such agent
without negligence, willful misfeasance or bad faith on the part of the
Trustee or any such agent and arising out of or in connection with the
acceptance or administration of the trusts created hereby, including without
limitation the costs and expenses of defending the Trustee or any such agent
against any claim or liability incurred by them in connection with the
exercise or performance of any of their powers or duties hereunder, including
the signing of any document pursuant to this Agreement, and including without
limitation any liability incurred by the Trustee arising from the Depositor's
bad faith, willful misfeasance or negligence. The obligations set forth in
this Section 11.05(b) shall survive the termination of this Agreement.
----------------
Section 11.06 Eligibility Requirements for Trustee. The Trustee
------------------------------------
hereunder shall at all times be a corporation or national banking association
organized and doing business under the laws of the United States or of any
state, authorized under such laws to exercise corporate trust powers, subject
to supervision or examination by federal or state authority and either
(i) having a combined capital and surplus of at least $50,000,000 or
(ii) being the wholly-owned subsidiary of a bank holding company having such
a capital and surplus. If such corporation or national banking association
publishes reports of condition at least annually, pursuant to law or the
requirements of the aforesaid supervising or examining authority, then for
the purpose of this Section 11.06 the combined capital and surplus of such
-------------
corporation or national banking association shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published. By executing and delivering this Agreement, the
Trustee represents and warrants that it meets such requirements as of the
date hereof. In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 11.06, the Trustee shall
-------------
resign immediately in the manner and with the effect specified in Section
-------
11.07. Neither the Servicer nor any affiliate thereof shall be eligible to
- -----
serve as Trustee at any time, except that the Trustee may serve as successor
servicer pursuant to Section 10.02.
-------------
Section 11.07 Resignation and Removal of the Trustee.
--------------------------------------
(a) The Trustee may resign and be discharged from the trust hereby
created by giving not less than 60 days' written notice thereof to the
Servicer. Upon receiving such notice of resignation, the Depositor shall
promptly appoint a successor trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered to the resigning
Trustee and one copy to the successor trustee. If no successor trustee shall
have been so appointed and have accepted appointment within sixty days after
the giving of such notice of resignation, the resigning Trustee may petition
any court of competent jurisdiction for the appointment of a successor
trustee.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 11.06, or if the Trustee has failed
-------------
to perform any obligation hereunder and such failure materially and adversely
affects Certificateholders of any Class, and, in either such case, the
Trustee shall fail to resign after written request therefor by the Depositor,
or if at any time the Trustee shall become incapable of acting, or shall be
adjudged as bankrupt or insolvent, or a receiver or other conservator of the
Trustee or of its property shall be appointed, or any public officer shall
take charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation, then, in any such
case the Depositor may remove the Trustee and appoint a successor trustee by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor trustee.
(c) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 11.07
-------------
shall become effective upon acceptance of appointment by the successor
trustee as provided in Section 11.08.
-------------
Section 11.08 Successor Trustee.
-----------------
(a) Any successor trustee appointed as provided in Section 11.07
-------------
shall execute, acknowledge and deliver to the Depositor and to its
predecessor trustee an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor trustee shall become
effective and the acceptance of such successor trustee shall become
effective, and such successor trustee, without any further act, deed or
conveyance, shall become fully vested with all rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as Trustee herein. The predecessor trustee shall upon payment of any
unpaid Trustee Fees deliver to the successor trustee all Files, related
documents, statements and funds held by it hereunder, including, without
limitation, the monies held in the Accounts and the Depositor and the
predecessor trustee shall execute and deliver such instruments and do such
other things as may reasonably be required more fully and certainly to vest
and confirm in the successor trustee all such rights, powers, duties and
obligations, provided, however, that the Trust shall remain liable to the
-------- -------
predecessor trustee for any unpaid outstanding fees and expenses of such
predecessor trustee.
(b) No successor trustee shall accept appointment as provided in
this Section 11.08 unless at the time of such acceptance such successor
-------------
trustee shall be eligible under the provisions of Section 11.06.
-------------
(c) Upon acceptance of appointment by a successor trustee as
provided in this Section 11.08, the Servicer shall mail notice of the
-------------
succession of such trustee hereunder to all Certifcateholders at their
respective addresses appearing in the Certificate Register and be entitled
to reimbursement of expenses for such mailing from Empire Funding.
Section 11.09 Merger or Consolidation of the Trustee. Any corporation
--------------------------------------
or national banking association into which the Trustee may be merged or
converted or with which it may be consolidated or any corporation or national
banking association resulting from any merger, conversion or consolidation to
which the Trustee shall be a party, or any corporation or national banking
association succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder
without the execution or filing of any paper or any further act on the part
of any of the parties hereto, anything herein to the contrary
notwithstanding, provided that such corporation or national banking
--------
association shall be eligible under the provisions of Section 11.06. The
-------------
Trustee or its successor hereunder shall provide the Depositor with prompt
notice of any such transaction.
Section 11.10 Appointment of Co-Trustee or Separate Trustee.
---------------------------------------------
(a) Notwithstanding any other provisions hereof at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust or property securing the same may at the time be
located, the Depositor and the Trustee acting jointly shall have the power
and shall execute and deliver all instruments to appoint one or more Persons
approved by the Trustee to act as co-trustee or co-trustees, jointly with the
Trustee, or separate trustee or separate trustees, of all or any part of the
Trust, and to vest in such Person or Persons, in such capacity, such title to
the Trust, or any part thereof, and, subject to the other provisions of this
Section 11.10, such powers, duties, obligations, rights and trusts as
-------------
the Servicer and the Trustee may consider necessary or desirable. If the
Servicer shall not have joined in such appointment within fifteen days after
the receipt by it of a request so to do, or in case an Event of Default shall
have occurred and be continuing, the Trustee shall have the power to make
such appointment. No co-trustee or separate trustee hereunder shall be
required to meet the terms of eligibility as a successor trustee under
Section 11.06, and no notice to Certificateholders of the appointment of co
- -------------
trustee(s) or separate trustee(s) shall be required under Section 11.08.
-------------
(b) In the case of any appointment of a co-trustee or separate
trustee pursuant to this Section 11.10, all rights, powers, duties and
-------------
obligations conferred or imposed upon the Trustee shall be conferred or
imposed upon and exercised or performed by the Trustee and such separate
trustee or co-trustee jointly, except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed (whether
as Trustee hereunder or as successor to the Servicer hereunder), the Trustee
shall be incompetent or unqualified to perform such act or acts, in which
event such rights, powers, duties and obligations (including the holding of
title to the Trust or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate trustee or co-trustee, but
solely at the direction of the Trustee.
(c) Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument of
appointment of any separate trustee or co-trustee shall refer
to this Agreement and the conditions of this Article XI. Each separate
trustee, and co-trustee, upon its acceptance of the trusts conferred, shall
be vested with the estates or property specified in its instrument of
appointment, either jointly with the Trustee or separately, as may be
provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the
conduct of, affecting the liability of, or affording protection to, the
Trustee. Every such instrument shall be filed with the Trustee.
(d) Any separate trustee or co-trustee may, at any time,
constitute the Trustee, its agent or attorney-in-fact, with full power and
authority, to the extent not prohibited by law, to do any lawful act under or
in respect of this Agreement on its behalf and in its name. If any separate
trustee or co-trustee shall die, become incapable of acting, resign or be
removed, all of its estates, properties, rights, remedies and trusts shall
vest in and be exercised by the Trustee, to the extent permitted by law,
without the appointment of a new or successor trustee.
(e) No trustee hereunder shall be held personally liable by reason
of any act or omission of any other trustee hereunder.
(f) The Trustee may at any time accept the resignation of or
remove any separate trustee or co-trustee.
(g) Notwithstanding any provision in this section to the contrary
and in order to comply with regulations promulgated by HUD, the Depositor and
the Trustee shall execute and deliver the Agreement of Appointment and
Acceptance of Separate Trustee in the form of Exhibit J hereto to appoint
EFC Securitized Assets, L.C., as separate trustee solely for the purpose of
holding record ownership of each FHA Loan for which an Assignment of Mortgage
is required to be recorded pursuant to Section 2.05. Beneficial ownership
------------
shall remain with the Trustee of any FHA Loan for which an Assignment of
Mortgage is recorded in the name of EFC Securitized Assets, L.C..
Section 11.11 Appointment of Custodians.
-------------------------
(a) Any provision of this Agreement notwithstanding, the Trustee
may, with the consent of the Servicer, appoint, as agents for the Trustee,
one or more Custodians to hold all or a portion of the Files, and to take
such other action with respect thereto as shall be consistent with the terms
of this Agreement, by entering into a Custodial Agreement, provided that none
--------
of the provisions of this Section 11.11 relating to agreements or
-------------
arrangements between the Trustee and any Custodian or to actions taken
through any such Custodian or otherwise shall be deemed to relieve the
Trustee of any of its duties and obligations hereunder, and the Trustee shall
be obligated with respect thereto to the same extent and under the same terms
and conditions as if it alone were performing all such duties and
obligations. Any Custodian shall have a combined capital and surplus of at
least $10,000,000. The Trustee shall be entitled to enter into any agreement
with any Custodian performing services on behalf of the Trustee related to
its duties and obligations hereunder for indemnification of the Trustee by
such Custodian, and nothing contained in this Agreement shall be deemed to
limit or modify such indemnification.
(b) The Custodian in its individual or any other capacity may
become the owner or pledgee of Certificates of any Class with the same rights
it would have if it were not Custodian.
(c) Subject to the provisions of this Article XI, the Trustee
agrees to comply with the terms of each such Custodial Agreement and to
enforce the terms and provisions thereof against the Custodian for the
benefit of Certificateholders. The Trustee shall be solely liable for all
fees owed by it to any Custodian performing services on behalf of the
Trustee, irrespective of whether the Trustee's compensation pursuant to this
Agreement is sufficient to pay such fees. Any Custodial Agreement shall
require that the Custodian thereunder maintain continuous custody of each
Home Loan File in the State of Minnesota, unless the Trustee shall obtain an
Opinion of Counsel from a firm of attorneys licensed to practice law in the
State in which custody of the Home Loan Files will be maintained to the
effect that, in the event that the intended transfer and sale to the Trustee
by the Depositor of the Home Loans is deemed to be the grant of a security
interest in the Trust rather than a sale, the Trustee will have a perfected
first priority security interest in the related notes despite the fact that
custody of the Home Loan Files no longer is maintained in the State of
Minnesota.
Section 11.12 Certain Tax Matters.
-------------------
(a) The Trustee is hereby authorized and directed by Empire
Funding to elect to treat the REMIC Pool, including the Collection Account,
the Certificate Distribution Account and the FHA Premium Account, as a REMIC
in accordance with the REMIC Provisions. In connection with such election,
(i) the Class R Certificates are hereby designated as the sole class of
"residual interests" in the REMIC Pool, (ii) the Certificates (other than the
Class R Certificates) are hereby designated as classes of "regular interests"
in the REMIC Pool, (iii) the latest possible maturity date of the
Certificates (other than the Class R Certificates) is the Final Scheduled
Distribution Date, and (iv) the Closing Date is hereby designated as the
"Start-Up Day" of the REMIC Pool, all within the meaning of the REMIC
Provisions. The taxable year of the REMIC Pool shall be the calendar year
and the first taxable year shall begin on the Closing Date. The books of the
REMIC Pool shall be maintained on an accrual basis for federal income tax
purposes.
(b) The Trustee as agent for Empire Funding, so long as it shall
be a Holder of a Class R Certificate, and otherwise the Residual Holder
appointed in accordance with the provisions of the Code, shall:
(i) in a timely manner, prepare, file with the Internal
Revenue Service or other appropriate authorities, and cause the Trustee
to mail to Certificateholders, as required, any Tax Returns, and any
other federal, state or local tax or information returns or reports that
are required to be so filed, or provided to Certificateholders, with
respect to the REMIC Pool;
(ii) in the first Tax Return, elect to treat the REMIC Pool,
as a REMIC;
(iii) in the Tax Return for each taxable year of the REMIC
Pool, designate as the tax matters person for the REMIC Pool (x) Empire
Funding or an affiliate thereof, if Empire Funding or such affiliate, as
the case may be, owned a Class R Certificate at any time during such
taxable year, or (y) if neither Empire Funding nor an affiliate thereof
owned a Class R Certificate at any time during such taxable year,
(A) the Holder of a Class R Certificate designated in a notice delivered
to the Trustee prior to the date of completion of such Tax Return by
Holders of Class R Certificates representing a majority of the Residual
Interests, or (B) if no such notice is received, the Person holding, at
the end of such taxable year, Class R Certificates representing, in the
aggregate, a greater percentage of the Residual Interests than Class R
Certificates then held by any other Person;
(iv) maintain or instruct the Trustee to maintain records as
to investments and other assets of the REMIC Pool sufficient to show
compliance with the REMIC Provisions during each taxable year of the
REMIC Pool; and
(v) take all actions necessary to ensure that the Tax Return
and such other returns or reports are signed by a Person that is both
authorized to sign such returns or reports hereunder and is an
appropriate Person to sign such returns or reports under the law
applicable to such returns or reports (including in the case of the Tax
Return, the Code, Treasury Regulations, and any official pronouncements
of the Internal Revenue Service).
The Trustee is hereby authorized under this Agreement to sign on behalf of
the REMIC Pool the Tax Return and any such other returns and reports. Each
Holder of a Class R Certificate hereby irrevocably appoints and authorizes
the Trustee to be its attorney-in-fact for purposes of signing any such
returns and reports. The Trustee shall (i) give notice to the Internal
Revenue Service on Internal Revenue Service Form 56 that it is acting in a
fiduciary capacity on behalf of the REMIC Pool in accordance with Treasury
Regulation Section 1.860F-4(c), and (ii) sign such return or report, provided
--------
that the Trustee shall be protected in signing such return or report to the
extent provided in Section 11.05(b). The Trustee shall cause the REMIC Pool
----------------
accountants to include in the first federal income tax return the information
required by Treasury Regulation Section 1.860D-1(d)(2) and Treasury
Regulation Section 1.860F-4(b)(2).
(c) This Agreement shall be construed so as to carry out the
intention of the parties that the REMIC Pool be a REMIC at all times from the
Start-up Day to the Termination Date. Neither the Servicer nor the Trustee
shall knowingly or intentionally take any action or omit to take any action
that would cause the imposition of a tax on the REMIC Pool or Trust under the
REMIC Provisions or cause the REMIC Pool to fail to qualify as a REMIC at any
time that any Certificate is outstanding. Without limiting the generality of
the foregoing, after the Start-up Day the Trustee shall not accept any
contribution of assets to the REMIC Pool unless the Trustee shall have
received an Opinion of Counsel to the effect that such contribution will
not cause the imposition of a tax on the REMIC Pool under the REMIC
Provisions or cause the REMIC Pool to fail to qualify as a REMIC at any time
that any Certificate is outstanding. There is no requirement for any holder
of a Residual Interest to contribute any amount to the Trust.
(d) The Trustee is hereby authorized and directed to make
information available to the Internal Revenue Service and to any Holder or
transferor of a Class R Certificate necessary for compliance with Section
860E(e) of the Code. The Servicer shall maintain records and information
related to the Home Loans and Monthly Payments sufficient to make any
calculations that may be required pursuant to such section and shall provide
such information to the Trustee; provided, however, that any calculations
-------- -------
necessary to provide such information to any Holder or the Internal Revenue
Service shall be performed by the accountants for the REMIC Pool. The
provisions of Section 11.02(vi) shall also apply.
-----------------
(e) The Trustee shall apply promptly to the Internal Revenue
Service for a Taxpayer Identification Number for the REMIC Pool and, promptly
upon receipt thereof, shall forward to the Servicer a copy of the "Notice of
New Employer Identification Number Assigned."
(f) In connection with assisting Empire Funding (or such other
Residual Holder as is referred to in Section 11.12(a) above) in the
----------------
preparation of, and in filing of, any Tax Returns or other returns or reports
pursuant to this Section, the Trustee may rely on information provided by
Empire Funding and the Servicer and Empire Funding or the Servicer, as
appropriate, shall indemnify and hold harmless the Trustee for any loss,
liability or expense incurred in connection with such preparation and filing
arising by reason of such person's bad faith, willful misfeasance or
negligence in providing or failing to provide such information. The Trustee
shall be entitled to reimbursement from Empire Funding for its reasonable
out-of-pocket expenses and disbursements except any such expenses or
disbursements as may arise from its negligence, willful misfeasance or bad
faith and except as provided in the following sentence.
(g) The Trustee shall file IRS Form 8811 within the time
prescribed by law and make available on a timely basis all information
required to be provided pursuant to Temporary Treasury Regulation Section
1.6049-7T(e) (or any successor provision) to persons entitled to receive
information pursuant thereto.
Section 11.13 Representations and Warranties of the Trustee.
---------------------------------------------
The Trustee represents and warrants to, and agrees with, the
parties hereto and Certificateholders that:
(a) The Trustee is duly organized as a national banking
association under the laws of the United States of America, is validly
existing and in good standing in such state and has the corporate power and
authority under United States law to conduct its corporate trust business as
now conducted.
(b) The Trustee has full corporate power and authority under
United States law to enter into and perform all transactions contemplated
herein and no consent, approval, authorization or order of any federal court
or governmental agency or body governing or having jurisdiction with respect
to the Trustee's trust powers is required for the Trustee to enter into this
Agreement and to perform its obligations hereunder.
(c) The Certificates when countersigned by the Trustee shall have
been duly and validly countersigned in accordance with this Agreement.
(d) The execution, delivery and performance by it of this
Agreement (a) do not violate any provision of any law or regulation governing
the banking and trust powers of the Trustee or any order, writ, judgment, or
decree of any court, arbitrator, or governmental authority applicable to the
Trustee or any of its assets, (b) do not violate any provision of its
corporate charter or by-laws, (c) do not violate any provision of, or
constitute, with or without notice or lapse of time, a default under, any
mortgage, indenture, contract, agreement or other undertaking other than this
Agreement to which it is a party and (d) have been duly authorized by the
Trustee.
(e) This Agreement has been duly executed and delivered by the
Trustee and constitutes the legal, valid and binding agreement of the
Trustee, enforceable in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors' rights generally and by
equitable limitations on the availability of specific remedies, regardless of
whether such enforceability is considered in a proceeding in equity or at
law.
(f) The Trustee has taken actual possession of the Debt
Instruments, Mortgages and any other related documents delivered pursuant to
Section 2.03 in good faith, and without notice or knowledge: (i) of any
- ------------
adverse claims, lien, or encumbrance against any of the same; (ii) that any
Debt Instrument was overdue (except for those Home Loans that are delinquent
as of the Closing Date) or had been dishonored or subject to the
circumstances described in Section 3.304 of the Uniform Commercial Code as in
effect in the State of New York; or, (iii) of any other defense against or
claim to the Debt Instruments by any other person or entity. For purposes of
this subsection (f), the Trustee shall not be deemed to have had notice or
knowledge of the foregoing matters unless a Responsible Officer assigned to
and working in the Trustee's Corporate Trustee Administration Department
shall have actual knowledge thereof or written notice thereof is received by
the Trustee in accordance herewith.
(g) The Trustee has taken actual possession of the Debt
Instruments, Mortgages and other items in the Home Loan Files in the ordinary
course of its business.
Section 11.14 Streit Act. Any provisions required to be contained in
----------
this Agreement by Section 126 Article 4-A of the New York Real Property law
are hereby incorporated, and such provisions shall be in addition to those
conferred or imposed by this Agreement; provided, however, that to the extent
-------- -------
that such Section 126 shall not apply to this Agreement, said Section 126
shall not have any effect, and if said Section 126 should at any time
be repealed or cease to apply to this Agreement, or be construed by judicial
decision to be inapplicable, said Section 126 shall cease to have any further
effect upon the provisions of this Agreement. In case of a conflict between
the provisions of this Agreement and any mandatory provisions of Article 4-A
of the New York Real Property law, such mandatory provisions of said Article
4-A shall prevail, provided that if said Article 4-A shall not apply to this
--------
Agreement, should at any time be repealed, or cease to apply to this
Agreement, or be construed by judicial decision to be inapplicable, such
mandatory provision of such Article 4-A shall cease to have any further
effect upon the provisions of this Agreement; provided, however, that the
-------- -------
Trustee agrees to act in good faith in the exercise of its rights and powers
hereunder.
Section 11.15 Rights to Direct Trustee. Subject to Section 11.02(ii),
------------------------ -----------------
the Certificateholders pursuant to a Class Vote shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee; provided, however, that subject to Section 11.01, the Trustee shall
-------- ------- -------------
have the right to decline to follow any such direction if the Trustee being
advised by counsel determines that the action so directed may not lawfully be
taken, or if the Trustee in good faith shall, by a Responsible Officer,
determine that the proceedings so directed would be in violation of this
Agreement or would subject it to personal liability against which it has not
been provided reasonable indemnity (which, in the case of a Certificateholder
which is an institutional investor, will be deemed satisfied by a written
agreement of indemnity from such Certificateholder) or (in the case of
directions provided by a Class Vote) be unduly prejudicial to the rights of
Certificateholders not parties to such direction; and provided further that
nothing in this Agreement shall impair the right of the Trustee to take any
action deemed proper by the Trustee and which is not inconsistent with such
direction by the Certificateholders.
Section 11.16 Reports to the Securities and Exchange Commission. The
-------------------------------------------------
Trustee shall, on behalf of the Trust, cause to be filed with the Securities
and Exchange Commission any periodic reports required to be filed under the
provisions of the Securities Exchange Act of 1934, as amended, and the rules
and regulations of the Securities and Exchange Commission thereunder. Upon
the request of the Trustee, each of the Transferor, the Depositor and the
Servicer shall cooperate with the Trustee in the preparation of any such
report and shall provide to the Trustee in a timely manner all such
information or documentation as the Trustee may reasonable request in
connection with the performance of its duties and obligations under this
Section.
ARTICLE XII
TERMINATION
-----------
Section 12.01 Termination.
-----------
(a) The respective obligations and responsibilities of Empire
Funding, the Servicer, the Depositor and the Trustee created hereby with
respect to the Certificates (other than the obligation to make certain
payments and to send certain notices to Certificateholders as hereinafter set
forth) shall terminate immediately following the occurrence of the last
action required to be taken by the Trustee pursuant to this Article XII on
the Termination Date; provided, however, that in no event shall the trust
-------- -------
created hereby, i.e., the Trust, continue beyond the expiration of twenty-one
----
years from the death of the last survivor of the descendants of Joseph P.
Kennedy, the late ambassador of the United States to the Court of St.
James's, living on the Closing Date.
(b) The REMIC Pool shall be terminated and the assets of the REMIC
Pool shall be sold or otherwise disposed of in connection therewith, only
pursuant to a Plan of Complete Liquidation adopted by the Trustee at the
direction of the Depositor and having the terms set forth in Section
-------
12.01(c). Each Holder of a Certificate hereby irrevocably approves and
- --------
appoints the Trustee, acting at the direction of the Depositor as its
attorney-in-fact for the purposes of the adoption of the Plan of Complete
Liquidation. The Trustee, acting at the direction of the Depositor, shall
adopt a Plan of Complete Liquidation promptly following the Trustee's receipt
of a Notice of Termination.
(c) The Plan of Complete Liquidation shall be adopted on the
earliest practicable date occurring not more than 90 days prior to the
Anticipated Termination Date specified in the Notice of Termination, and
shall provide:
(i) for the actions contemplated by the provisions hereof
pursuant to which the applicable Notice of Termination is given;
(ii) that the REMIC Pool shall terminate as a REMIC as
required by Section 860F(a)(4) of the Code on a Distribution Date
occurring not more than 90 days following the date of adoption of the
Plan of Complete Liquidation; and
(iii) that all assets of the REMIC Pool required to be sold
pursuant to the Plan of Complete Liquidation shall be sold after the
date of adoption thereof, such sale to be conducted by the Servicer on
behalf of the Trustee; provided that the Plan of Complete Liquidation may
be adopted prior to the -------- ninetieth day prior to the Anticipated
Termination Date and, to the extent consistent with the actions contem
plated by the provisions hereof pursuant to which the applicable Notice
of Termination is given, may provide for actions different from those set
forth in clauses (ii) or (iii) if an Opinion of Counsel shall have been
previously delivered to the Trustee to the effect that the adoption of a
Plan of Complete Liquidation that provides for such alternative actions as
are set forth in such Opinion of Counsel will not result in the
imposition of a tax on the REMIC Pool or pursuant to the REMIC
Provisions cause the REMIC Pool to fail to qualify as a REMIC at any
time that any Certificate is Outstanding. The Trustee shall deliver to
the Servicer a copy of the Plan of Complete Liquidation promptly
following its adoption.
(d) Subject to the provisions of the following sentence, the
holder or holders of Class R Certificates representing more than 50% of the
Residual Interests of the Class R Certificates may, at their option, upon not
less than thirty days' prior notice given to the Trustee at any time on or
after the Distribution Date on which the Pool Principal Balance declines to
10% or less of the Original Pool Principal Balance, purchase on the Monthly
Cut-Off Date specified in such notice, all, but not less than all, the Home
Loans, all claims made under the Contract of Insurance with respect to FHA
Loans that are pending with FHA ("FHA Pending Claims") and Foreclosed
Properties then included in the Trust, at a purchase price, payable in cash,
equal to the greater of the Termination Price or the sum of:
(i) the Principal Balance of each Home Loan included in the
Trust as of such Monthly Cut-Off Date;
(ii) all unpaid interest accrued on the Principal Balance of
each such Loan at the related Net Loan Rate to such Monthly Cut-Off
Date;
(iii) the aggregate fair market value of the FHA Pending Claims
for which a claim has been filed with the FHA included in the Trust on
such Monthly Cut-Off Date, as determined by an Independent appraiser
acceptable to the Trustee as of a date not more than thirty days prior
to such Monthly Cut-Off Date; and
(iv) the aggregate fair market value of each Foreclosure
Property included in the Trust on such Monthly Cut-Off Date, as
determined by an Independent appraiser acceptable to the Trustee as of a
date not more than thirty days prior to such Monthly Cut-Off Date.
Any amount received from such sale with respect to FHA Pending Claims shall
be considered FHA Insurance Payment Amounts. The expense of any Independent
appraiser required under this Section 12.01(d) shall be a nonreimbursable
----------------
expense of Empire Funding. Empire Funding or the Servicer shall effect the
purchase referred to in this Section 12.01(d) by deposit of the purchase
----------------
price into the Certificate Distribution Account.
(e) If the Trust has not been previously terminated pursuant to
subsection (d) of this Section 12.01 the Servicer shall give the Trustee
-------------
notice as soon as practicable (at least 45 days before the Distribution Date)
of the Distribution Date which is the earlier of (i) the Final Scheduled
Distribution Date and (ii) the Distribution Date on which the Servicer
anticipates the latest of the maturity or other liquidation of the last Home
Loan.
(f) Notice of any termination of the Trust pursuant to this
Section 12.01 shall be mailed, via first class mail, postage prepaid, by the
- -------------
Trustee to affected Certificateholders at their addresses shown in the
Certificate Register as soon as practicable after the Trustee shall have
received a Notice of Termination, but in any event, not more than thirty
days, and not less than five days, prior to the Anticipated Termination Date
except that notice to Holders of Class R Certificates shall be made within
two Business Days after the Trustee shall have received a Notice of
Termination. The notice mailed by the Trustee to affected Certificateholders
shall:
(i) specify the Anticipated Termination Date on which the
final distribution is anticipated to be made to Holders of Certificates
of the Classes specified therein; and
(ii) specify the amount of any such final distribution, if
known.
If the Trust is not terminated on any Anticipated Termination Date for any
reason, the Trustee shall promptly mail, via first class mail, postage
prepaid, notice thereof to each affected Certificateholder.
(g) On the Termination Date, amounts on deposit in the Certificate
Distribution Account will be withdrawn and applied in the manner set forth in
Section 5.01.
------------
ARTICLE XIII
MISCELLANEOUS PROVISIONS
------------------------
Section 13.01 Acts of Certificateholders.
--------------------------
Except as otherwise specifically provided herein, whenever
Certificateholder action, consent or approval is required under this
Agreement, such action, consent or approval shall be deemed to have been
taken or given on behalf of, and shall be binding upon, all
Certificateholders if the Majority Certificateholders agree to take such
action or give such consent or approval.
Section 13.02 Amendment.
---------
(a) This Agreement may be amended from time to time by the Depositor,
the Servicer and the Transferor by written agreement with notice thereof to
the Certificateholders, without the consent of any of the Certificateholders,
to cure any error or ambiguity, to correct or supplement any provisions
hereof which may be defective or inconsistent with any other provisions
hereof or to add any other provisions with respect to matters or questions
arising under this Agreement; provided, however, that such action will not
adversely affect in any material respect the interests of the
Certificateholders. An amendment described above shall be deemed not to
adversely affect in any material respect the interests of the
Certificateholders if either (i) an opinion of counsel is obtained to such
effect, and (ii) the party requesting the amendment obtains a letter from
each of the Rating Agencies confirming that the amendment, if made, would not
result in the downgrading or withdrawal of the rating then assigned by the
respective Rating Agency to any Class of Certificates then outstanding.
(b) This Agreement may also be amended from time to time by the
Depositor, the Servicer and the Transferor by written agreement, with the
prior written consent of the Majority Certificateholders, for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement, or of modifying in any manner the rights of the
Certificateholders; provided, however, that no such amendment shall (i)
reduce in any manner the amount of, or delay the timing of, collections of
payments on Home Loans or distributions which are required to be made on any
Certificate, without the consent of the holders of 100% of each Class of
Certificates affected thereby, (ii) adversely affect in any material respect
the interests of the holders of any Class of Certificates in any manner other
than as described in (i), without the consent of the holders of 100% of such
Class of Certificates, or (iii) reduce the percentage of any Class of
Certificates, the holders of which are required to consent to any such
amendment, without the consent of the holders of 100% of such Class of
Certificates.
(c) It shall not be necessary for the consent of Certificateholders
under this Section to approve the particular form of any proposed amendment,
but it shall be sufficient if such consent shall approve the substance
thereof.
Prior to the execution of any amendment to this Agreement, the Trustee
shall be entitled to receive and rely upon an opinion of counsel stating that
the execution of such amendment is authorized or permitted by this Agreement.
The Trustee may, but shall not be obligated to, enter into any such amendment
which affects the Trustee's own rights, duties or immunities under this
Agreement.
Section 13.03 Recordation of Agreement.
------------------------
To the extent permitted by applicable law, this Agreement, or a
memorandum thereof if permitted under applicable law, is subject to
recordation in all appropriate public offices for real property records in
all of the counties or other comparable jurisdictions in which any or all of
the Mortgaged Properties are situated, and in any other appropriate public
recording office or elsewhere, such recordation to be effected by the
Servicer at the Certificateholders' expense on direction of the Majority
Certificateholders but only when accompanied by an opinion of counsel to the
effect that such recordation materially and beneficially affects the
interests of the Certificateholders or is necessary for the administration or
servicing of the Home Loans.
Section 13.04 Duration of Agreement.
---------------------
This Agreement shall continue in existence and effect until terminated
as herein provided.
Section 13.05 Governing Law.
-------------
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
Section 13.06 Notices.
-------
All demands, notices and communications hereunder shall be in writing
and shall be deemed to have been duly given if personally delivered at or
mailed by overnight mail, certified mail or registered mail, postage prepaid,
to: (i) in the case of the Depositor, Financial Asset Securities Corp., 600
Steamboat Road, Greenwich, Connecticut 06830 Attention: Peter McMullin, or
such other addresses as may hereafter be furnished to the Certificateholders
and the other parties hereto in writing by the Depositor, (ii) in the case of
the Transferor, Servicer and Claims Administrator, Empire Funding Corp., 9737
Great Hills Trail, Austin, Texas 78759 Attention: Richard N. Steed, or such
other address as may hereafter be furnished to the Certificateholders and the
other parties hereto in writing by the Transferor, Servicer or Claims
Administrator, (iii) in the case of the Contract of Insurance Holder, EFC
Securitized Assets, L.C., 9737 Great Hills Trail, Austin, Texas 78759
Attention: Richard N. Steed, or such other address as may hereafter be
furnished to the Certificateholders and the other parties hereto in writing
by the Contract of Insurance Holder, (iv) in the case of the Trustee, First
Bank National Association, 180 East Fifth Street, St. Paul, Minnesota
55101, Attention: Structured Finance/Empire Funding 1997-A, and (v) in the
case of the Certificateholders, as set forth in the applicable Certificate
Register and Certificate Register. Any such notices shall be deemed to be
effective with respect to any party hereto upon the receipt of such
noticeby such party, except that notices to the Certificateholders shall be
effective upon mailing or personal delivery.
Section 13.07 Severability of Provisions.
--------------------------
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be held invalid for any reason whatsoever, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other covenants,
agreements, provisions or terms of this Agreement.
Section 13.08 No Partnership.
--------------
Nothing herein contained shall be deemed or construed to create any
partnership or joint venture between the parties hereto and the services of
the Servicer shall be rendered as an independent contractor.
Section 13.09 Counterparts.
------------
This Agreement may be executed in one or more counterparts and by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together,
shall constitute one and the same Agreement.
Section 13.10 Successors and Assigns.
----------------------
This Agreement shall inure to the benefit of and be binding upon the
Servicer, the Transferor, the Depositor, the Claims Administrator, the
Contract of Insurance Holder, the Trustee and the Certificateholders and
their respective successors and permitted assigns.
Section 13.11 Headings.
--------
The headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be part
of this Agreement.
Section 13.12 Actions of Certificateholders.
-----------------------------
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement to be given or taken by
Certificateholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Certificateholders
in person or by agent duly appointed in writing; and except as herein
otherwise expressly provided, such action shall become effective when such
instrument or instruments are
delivered to the Depositor or the Servicer. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for
any purpose of this Agreement and conclusive in favor of the Depositor and
the Servicer if made in the manner provided in this Section.
(b) The fact and date of the execution by any Certificateholder of any
such instrument or writing may be proved in any reasonable manner which the
Depositor or the Servicer deems sufficient.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other act by a Certificateholder shall bind every holder of every
Certificate issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done, or omitted to be
done, by the Depositor or the Servicer in reliance thereon, whether or not
notation of such action is made upon such Certificate.
(d) The Depositor or the Servicer may require additional proof of any
matter referred to in this Section 13.12 as it shall deem necessary.
-------------
Section 13.13 Reports to Rating Agencies.
--------------------------
(a) The Trustee shall provide to each Rating Agency copies of
statements, reports and notices, to the extent received or prepared in
connection herewith, as follows:
(i) copies of amendments to this Agreement;
(ii) notice of any substitution or repurchase of any Home Loans;
(iii) notice of any termination, replacement, succession,
merger or consolidation of either the Servicer or any Custodian;
(iv) notice of final payment on the Certificates;
(v) notice of any Event of Default;
(vi) copies of the annual independent auditor s report delivered
pursuant to Section 7.05, and copies of any compliance reports delivered
------------
by the Servicer hereunder including Section 7.04; and
------------
(vii) copies of any Distribution Date Statement pursuant to
Section 5.05(b); and
---------------
(b) With respect to the requirement of the Trustee to provide
statements, reports and notices to the Rating Agencies such statements,
reports and notices shall be delivered to the Rating Agencies at the
following addresses: (i) if to Standard & Poor's, 26 Broadway, 15th Floor,
New York, New York 10004-1064, Attention: Asset-Backed Monitoring Department
and (ii) if to Duff & Phelps, 55 East Monroe Street, 35th Floor, Chicago,
Illinois 60603, Attention: MBS Monitoring.
* * *
IN WITNESS WHEREOF, the Depositor, the Transferor, the Servicer, the
Contract of Insurance Holder and the Trustee have caused their names to be
signed by their respective officers thereunto duly authorized, as of the day
and year first above written, to this amended and restated Pooling and
Servicing Agreement .
FINANCIAL ASSET SECURITIES CORP., as
Depositor
By:
-----------------------------------------
Name:
Title:
EMPIRE FUNDING CORP., as
Transferor, Servicer and Claims Administrator
By:
-----------------------------------------
Name:
Title:
EFC SECURITIZED ASSETS, L.C., as
Contract of Insurance Holder
By:
-----------------------------------------
Name:
Title:
FIRST BANK NATIONAL ASSOCIATION, as
Trustee
By:
-----------------------------------------
Name:
Title:
THE STATE OF ________ )
)
COUNTY OF ________ )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared _______________________, known to me to be a person and
officer whose name is subscribed to the foregoing instrument and acknowledged
to me that the same was the act of the said FINANCIAL ASSET SECURITIES CORP.,
as the Depositor, and that he executed the same as the act of such
corporation for the purpose and consideration therein expressed, and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF FINANCIAL ASSET SECURITIES CORP., this
the ____ day of April, 1997.
--------------------------------------------
Notary Public, State of ________
THE STATE OF ________ )
)
COUNTY OF ________ )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared _______________________, known to me to be the person and
officer whose name is subscribed to the foregoing instrument and acknowledged
to me that the same was the act of the said EMPIRE FUNDING CORP., as the
Transferor, Servicer and Claims Administrator, and that he executed the same
as the act of such corporation for the purposes and consideration therein
expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF EMPIRE FUNDING CORP., this the ____ day
of April, 1997.
------------------------------
Notary Public, State of ________
THE STATE OF ________ )
)
COUNTY OF ________ )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared _______________________, known to me to be the person and
officer whose name is subscribed to the foregoing instrument and acknowledged
to me that the same was the act of the said EFC SECURITIZED ASSETS, L.C., as
the Contract of Insurance Holder, and that he executed the same as the act of
such corporation for the purposes and consideration therein expressed, and in
the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF EFC SECURITIZED ASSETS, L.C., this the
____ day of April, 1997.
------------------------------
Notary Public, State of ________
THE STATE OF ________ )
)
COUNTY OF ________ )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared ____________________, known to me to be the person and
officer whose name is subscribed to the foregoing instrument and acknowledged
to me that the same was the act of the said FIRST BANK NATIONAL ASSOCIATION,
a national banking association, as the Trustee, and that she executed the
same as the act of such entity for the purposes and consideration therein
expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF FIRST BANK NATIONAL ASSOCIATION, this
the ____ day of April, 1997.
------------------------------
Notary Public, State of ________
EXHIBIT A
HOME LOAN SCHEDULE
EXHIBIT B
FORM OF SERVICER'S MONTHLY REMITTANCE
EXHIBIT C
(Reserved)
EXHIBIT D
FORM OF SENIOR CERTIFICATE
EXHIBIT E
FORM OF MEZZANINE CERTIFICATE
EXHIBIT F
FORM OF CLASS B CERTIFICATE
EXHIBIT G
FORM OF CLASS R CERTIFICATE
EXHIBIT H
FORM OF AGREEMENT OF APPOINTMENT AND
ACCEPTANCE OF SEPARATE TRUSTEE
This AGREEMENT OF APPOINTMENT AND ACCEPTANCE OF SEPARATE TRUSTEE (the
Agreement) dated as of March 1, 1997, among FINANCIAL ASSET SECURITIES CORP.,
as Depositor (the "Company"), FIRST BANK NATIONAL ASSOCIATION, as Trustee
(the "Trustee"), and EFC SECURITIZED ASSETS, L.C., as Separate Trustee (the
"Separate Trustee").
RECITALS
--------
A. The Company and the Trustee have entered into a certain pooling and
servicing agreement (the "Pooling Agreement") dated as of March 1, 1997 with
Empire Funding Corp., as transferor, servicer and claims administrator, and
EFC Securitized Assets, L.C., as contract of insurance holder relating to the
Empire Funding Home Loan REMIC Trust 1997-A (the "Trust").
B. Pursuant to the terms and conditions of the Pooling Agreement, the
Company will assign and deliver to the Trustee certain loans and the
mortgages related thereto comprising part of the Trust.
C. Pursuant to the terms and conditions of the Pooling Agreement, the
Trustee shall act as trustee for, and on behalf and for the benefit of, the
Certificateholders (as defined in the Pooling Agreement).
D. Regulations promulgated by the United States Department of Housing
and Urban Development ("HUD") prohibit the transfer of mortgage loans insured
by the Federal Housing Administration of HUD except to certain transferees,
which transferees would not include the Trustee but would include a HUD
approved contract of insurance holder, such as the Separate Trustee.
E. In order to permit the Company to transfer to the Trust certain FHA
Loans secured by Mortgages, the parties hereto intend to appoint, pursuant to
Section 11.10 of the Pooling Agreement, the Separate Trustee who, as a
separate trustee with and on behalf of the Trustee under the Pooling
Agreement, will be the assignee of the mortgage assignments in connection
with the formation of the Trust (the "Assignments"), and the Separate Trustee
is so named in the Pooling Agreement and in the Assignments, for the limited
purpose of holding record ownership of the FHA Loans secured by Mortgages and
consequently exercising such duties and functions as may be prescribed herein
and under the Pooling Agreement.
NOW, THEREFORE, the Company, the Trustee and the Separate Trustee do
hereby agree as follows:
1. Appointment of the Separate Trustee: Acceptance of Appointment.
--------------------------------------------------------------
To the extent that the Trust consists of FHA Loans secured by Mortgages, the
Company and the Trustee hereby appoint the Separate Trustee, as of the date
hereof, as separate trustee under the Pooling Agreement, of that part of the
Trust consisting of such FHA Loans and the Separate Trustee is hereby vested
with legal title to such FHA Loans, as of such date, the power of the
Separate Trustee to be exercised subject to the provisions of this Agreement
and Section 11.10 of the Pooling Agreement.
The Separate Trustee hereby accepts the foregoing appointment and agrees
to act as separate trustee with the Trustee, its successors and assigns under
the Pooling Agreement and the Assignments, and to exercise its duties as
separate trustee, in and only in the event of a written request by the
Trustee.
2. Limited Scope of Appointment and Duties. The Separate Trustee
---------------------------------------
shall act as separate trustee under the Pooling Agreement and the Assignments
only upon, and to the extent of, written instructions from the Trustee and no
other party. The Separate Trustee shall not be required to take, nor shall
it be responsible for taking, any action as separate trustee under the
Pooling Agreement or the Assignments unless it has received such written
instructions from the Trustee. The Separate Trustee shall hold only the
record, and not the beneficial, ownership of the FHA Loans secured by
Mortgages.
The Separate Trustee shall owe no duty as separate trustee under the
Pooling Agreement and the Assignments to any party other than the Trustee and
the Certificateholders. The Trustee shall consult with the Separate Trustee
with respect to decisions deemed by the Trustee to be significant to be made
with respect to the exercise of any powers to be exercised by the Separate
Trustee and, upon request of the Separate Trustee, will provide the Separate
Trustee with copies of all notices and other documents pursuant to which it
exercises its duties as the Trustee.
Any provision of this Agreement or the Pooling Agreement or the
Assignments to the contrary notwithstanding, the Separate Trustee shall have
no power to act in any manner inconsistent with the terms of the Pooling
Agreement with respect to, or to vary the investment in, the trust created
hereby.
3. Appointment of the Trustee as Attorney-in-Fact. Wherever and to
----------------------------------------------
the fullest extent permitted by law, the Separate Trustee hereby irrevocably
appoints the Trustee as its agent and Attorney-in-Fact for the purpose of
executing any and all documents which the Separate Trustee may be required,
as separate trustee under the Pooling Agreement and the Assignments, to
execute; provided, however, that nothing in this Agreement shall be deemed an
admission that the Separate Trustee is required to execute any of such
documents in its capacity as separate trustee under the Pooling Agreement and
the Assignments.
4. Notices. Notices and instructions under this Agreement shall be
-------
deemed given under this Agreement when sent by overnight courier or when
mailed by Certified Mail, Return Receipt Requested, to the parties at their
addresses provided below or at such other addresses as the parties may
direct:
If to the Trustee:
-----------------
First Bank National Association
First Trust Center
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: _______________
---------
If to the Separate Trustee:
--------------------------
EFC Securitized Assets, L.C.
9737 Great Hills Trail
Austin, Texas 78759
Attention: ____________
---------
(with copy to the Trustee)
If to the Company:
-----------------
Financial Asset Securities Corp.
600 Steamboat Road
Greenwich, Connecticut 06830
Attention: _______________
5. Choice of Law. This Agreement shall be governed by, and construed
-------------
in accordance with, the laws of the State of New York.
6. Counterparts. This Agreement may be executed in one or more
------------
counterparts and by the different parties hereto on separate counterparts,
each of which, when so executed, shall be deemed to be an original; such
counterparts, together, shall constitute one and the same agreement.
* * *
IN WITNESS WHEREOF, the Company and the Trustee and the Separate Trustee
hereby execute this Agreement as of the date first set forth above.
COMPANY:
FINANCIAL ASSET SECURITIES CORP..
By:
---------------------------------------
Name:
Title:
TRUSTEE:
FIRST BANK NATIONAL ASSOCIATION,
as Trustee
By:
---------------------------------------
Name:
Title:
SEPARATE TRUSTEE:
EFC SECURITIZED ASSETS, L.C.,
By:
---------------------------------------
Name:
Title:
EXECUTION COPY
SALE AND SERVICING AGREEMENT
Dated as of March 1, 1997
and
Amended and Restated as of April 1, 1997
among
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-1
(Issuer)
FINANCIAL ASSET SECURITIES CORP.
(Depositor)
EMPIRE FUNDING CORP.
(Transferor, Servicer and Claims Administrator)
EFC SECURITIZED ASSETS, L.C.
(Contract of Insurance Holder)
and
FIRST BANK NATIONAL ASSOCIATION
(Indenture Trustee and Co-Owner Trustee)
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-1
ASSET BACKED SECURITIES
SERIES 1997-1
TABLE OF CONTENTS
Page
----
ARTICLE I.
DEFINITIONS
Section 1.01 Definitions . . . . . . . . . . . . . . . . . . . . . 2
Section 1.02 Other Definitional Provisions . . . . . . . . . . . . 27
ARTICLE II.
CONVEYANCE OF THE HOME LOANS
Section 2.01 Conveyance of the Home Loans. . . . . . . . . . . . . 29
Section 2.02 (Reserved) . . . . . . . . . . . . . . . . . . . . . 29
Section 2.03 Ownership and Possession of Home Loan Files . . . . . 29
Section 2.04 Books and Records . . . . . . . . . . . . . . . . . . 30
Section 2.05 Delivery of Home Loan Documents . . . . . . . . . . . 30
Section 2.06 Acceptance by Indenture Trustee of the Home Loans;
Certain Substitutions; Initial Certification by
Custodian . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Depositor . . . 35
Section 3.02 Representations and Warranties of the Transferor . . 37
Section 3.03 Representations, Warranties and Covenants of the
Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 3.04 Representations and Warranties regarding Individual
Home Loans . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 3.05 (Reserved) . . . . . . . . . . . . . . . . . . . . . 51
Section 3.06 Purchase and Substitution . . . . . . . . . . . . . . 51
ARTICLE IV.
ADMINISTRATION AND SERVICING OF THE HOME LOANS
Section 4.01 Duties of the Servicer . . . . . . . . . . . . . . . 55
Section 4.02 Payment of Taxes, Insurance and Other Charges . . . . 57
Section 4.03 Fidelity Bond; Errors and Omission Insurance . . . . 57
Section 4.04 Filing of Continuation Statements . . . . . . . . . . 57
Section 4.05 (Reserved) . . . . . . . . . . . . . . . . . . . . . 58
Section 4.06 Superior Liens . . . . . . . . . . . . . . . . . . . 58
Section 4.07 Subservicing . . . . . . . . . . . . . . . . . . . . 58
Section 4.08 Successor Servicers . . . . . . . . . . . . . . . . . 60
Section 4.09 Maintenance of Insurance . . . . . . . . . . . . . . 61
Section 4.10 Inspections . . . . . . . . . . . . . . . . . . . . . 61
Section 4.11 Reports to the Securities and Exchange Commission . . 61
Section 4.12 Claim for FHA Insurance and Foreclosure . . . . . . . 62
Section 4.13 Title, Management and Disposition of Foreclosure
Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE V.
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01 Collection Account and Note Distribution Account . . 69
Section 5.02 Certificate Distribution Account and Note
Distribution Account . . . . . . . . . . . . . . . . . . . . . 74
Section 5.03 Trust Accounts; Trust Account Property . . . . . . . 75
Section 5.04 Allocation of Losses . . . . . . . . . . . . . . . . 78
ARTICLE VI.
STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS
Section 6.01 Statements . . . . . . . . . . . . . . . . . . . . . 79
Section 6.02 Specification of Certain Tax Matters . . . . . . . . 82
ARTICLE VII.
GENERAL SERVICING PROCEDURE
Section 7.01 Due-On-Sale; Due-on-Encumbrance . . . . . . . . . . . 83
Section 7.02 Release of Home Loan Files . . . . . . . . . . . . . 84
Section 7.03 Servicing Compensation . . . . . . . . . . . . . . . 85
Section 7.04 Statement as to Compliance and Financial Statements . 85
Section 7.05 Independent Public Accountants' Servicing Report . . 86
Section 7.06 Right to Examine Servicer Records . . . . . . . . . . 86
Section 7.07 Reports to the Indenture Trustee; Collection Account
Statements . . . . . . . . . . . . . . . . . . . . . . . . 87
Section 7.08 Financial Statements . . . . . . . . . . . . . . . . 87
ARTICLE VIII.
CONCERNING THE CONTRACT OF INSURANCE HOLDER
Section 8.01 Compliance with Title I and Filing of FHA Claims . . 88
Section 8.02 Contract of Insurance Holder . . . . . . . . . . . . 89
ARTICLE IX.
THE SERVICER
Section 9.01 Indemnification; Third Party Claims . . . . . . . . . 91
Section 9.02 Merger or Consolidation of the Servicer . . . . . . . 92
Section 9.03 Limitation on Liability of the Servicer and Others . 93
Section 9.04 Servicer Not to Resign; Assignment . . . . . . . . . 93
Section 9.05 Relationship of Servicer to Issuer and the
Indenture Trustee . . . . . . . . . . . . . . . . . . . . 94
Section 9.06 Servicer May Own Securities . . . . . . . . . . . . . 94
ARTICLE X.
DEFAULT
Section 10.01 Events of Default . . . . . . . . . . . . . . . . . . 95
Section 10.02 Indenture Trustee to Act; Appointment of Successor . 96
Section 10.03 Waiver of Defaults . . . . . . . . . . . . . . . . . 98
Section 10.04 Accounting Upon Termination of Servicer . . . . . . . 98
ARTICLE XI.
TERMINATION
Section 11.01 Termination . . . . . . . . . . . . . . . . . . . . . 100
Section 11.02 Optional Termination . . . . . . . . . . . . . . . . 100
Section 11.03 Notice of Termination . . . . . . . . . . . . . . . . 101
ARTICLE XII.
MISCELLANEOUS PROVISIONS
Section 12.01 Acts of Securityholders . . . . . . . . . . . . . . . 102
Section 12.02 Amendment . . . . . . . . . . . . . . . . . . . . . . 102
Section 12.03 Recordation of Agreement . . . . . . . . . . . . . . 103
Section 12.04 Duration of Agreement . . . . . . . . . . . . . . . . 103
Section 12.05 Governing Law . . . . . . . . . . . . . . . . . . . . 103
Section 12.06 Notices . . . . . . . . . . . . . . . . . . . . . . . 103
Section 12.07 Severability of Provisions . . . . . . . . . . . . . 104
Section 12.08 No Partnership . . . . . . . . . . . . . . . . . . . 104
Section 12.09 Counterparts . . . . . . . . . . . . . . . . . . . . 104
Section 12.10 Successors and Assigns . . . . . . . . . . . . . . . 104
Section 12.11 Headings . . . . . . . . . . . . . . . . . . . . . . 104
Section 12.12 Actions of Securityholders . . . . . . . . . . . . . 105
Section 12.13 Reports to Rating Agencies. . . . . . . . . . . . . . 105
Section 12.14 Holders of the Residual Interest . . . . . . . . . . 106
EXHIBIT A - Home Loan Schedule . . . . . . . . . . . . . . . . . . . . . .
EXHIBIT B - Form of Servicer's Monthly Remittance Report to Trustee . . . .
EXHIBIT C - (Reserved) . . . . . . . . . . . . . . . . . . . . . . . . . .
EXHIBIT D - Form of Agreement of Appointment and Acceptance
of Separate Trustee . . . . . . . . . . . . . . . . . . . . . .
This Sale and Servicing Agreement is entered into effective as of March
1, 1997, and amended and restated as of April 1, 1997 with effect from and as
of March 1, 1997, among EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-1, a
Delaware business trust (the "Issuer" or the "Trust"), FINANCIAL ASSET
------ -----
SECURITIES CORP., a Delaware corporation, as Depositor (the "Depositor"),
---------
EMPIRE FUNDING CORP., an Oklahoma corporation ("Empire Funding"), as
--------------
Transferor (in such capacity, the "Transferor"), Servicer (in such capacity,
----------
the "Servicer") and Claims Administrator (in such capacity, the "Claims
--------
Administrator"), EFC SECURITIZED ASSETS, L.C., a Texas limited liability
company, as Contract of Insurance Holder (in such capacity, the "Contract of
-----------
Insurance Holder"), and FIRST BANK NATIONAL ASSOCIATION, a national banking
- ----------------
association, as Indenture Trustee on behalf of the Noteholders (in such
capacity, the "Indenture Trustee") and as Co-Owner Trustee on behalf of the
-----------------
Certificateholders (in such capacity, the "Co-Owner Trustee").
----------------
PRELIMINARY STATEMENT
WHEREAS, the Issuer, the Depositor, Empire Funding, the Contract of
Insurance Holder and the Indenture Trustee and Co-Owner Trustee have
heretofore executed and delivered a Sale and Servicing Agreement dated as of
March 1, 1997 (the "Original Sale and Servicing Agreement"); and
WHEREAS, Section 12.02 of the Original Sale and Servicing Agreement
provides that it may be amended from time to time by the Depositor, the
Servicer, the Transferor and the Issuer by written agreement, with the prior
written consent of the Majority Securityholders, for the purpose of adding
any provisions to or changing in any manner or eliminating any of the
provisions thereof, or of modifying in any manner the rights of the
Securityholders thereunder; and
WHEREAS, the Depositor, the Servicer, the Transferor and the Issuer deem
it advisable to amend and restate the Original Sale and Servicing Agreement;
and
WHEREAS, the Depositor, Empire Funding, the Contract of Insurance Holder
and the Indenture Trustee and Co-Owner Trustee have duly authorized the
execution and delivery of this amendment and restatement and have done all
things necessary to make this amended and restated Sale and Servicing
Agreement a valid agreement of the parties hereto, in accordance with its
terms.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
-----------
Section 1.01 Definitions. Whenever used in this Agreement, the
-----------
following words and phrases, unless the context otherwise requires, shall
have the meanings specified in this Article. Unless otherwise specified, all
calculations of interest described herein shall be made on the basis of a
360-day year consisting of twelve 30-day months.
Accepted Servicing Procedures: Servicing procedures that meet at least
-----------------------------
the same standards the Servicer would follow in servicing mortgage loans such
as the Home Loans held for its own account, giving due consideration to
standards of practice of prudent mortgage lenders and loan servicers that
originate and service mortgage loans comparable to the Home Loans, applicable
FHA regulations and to the reliance placed by the Securityholders on the
Servicer for the servicing of the Home Loans but without regard to:
(i) any relationship that the Servicer, any Subservicer or any
Affiliate of the Servicer or any Subservicer may have with the related
Obligor;
(ii) the ownership of any Securities by the Servicer or any
Affiliate of the Servicer;
(iii) the Servicer's obligation to make Servicing Advances; or
(iv) the Servicer's or any Subservicer's right to receive
compensation for its services hereunder with respect to any particular
transaction.
Agreement: This Sale and Servicing Agreement and all amendments hereof
---------
and supplements hereto.
Allocable Loss Amount: With respect to each Distribution Date, the
---------------------
excess, if any, of (a) the aggregate of the Class Principal Balances of all
Classes of Securities (after giving effect to all distributions on such
Distribution Date) over (b) the Pool Principal Balance as of the end of the
preceding Due Period.
Allocable Loss Amount Priority: With respect to any Distribution Date,
------------------------------
sequentially, to the Class B Certificates, the Class M-2 Notes and the Class
M-1 Notes, in that order.
Assignment of Mortgage: With respect to each Home Loan secured by a
----------------------
Mortgage, an assignment, notice of transfer or equivalent instrument
sufficient under the laws of the jurisdiction wherein the related Mortgaged
Property is located to reflect or record the sale of the related Home Loan
which assignment, notice of transfer or equivalent instrument may be in the
form of one or more blanket assignments covering mortgages secured by
Mortgaged Properties located in the same county, if permitted by law.
Available Collection Amount: With respect to any Distribution Date, an
---------------------------
amount without duplication equal to the sum of: (i) all amounts received on
the Home Loans or required to be paid by the Servicer, the Transferor or the
Depositor during the related Due Period (exclusive of amounts not required to
be deposited by the Servicer in the Collection Account pursuant to Section
-------
5.01(b)(1) and amounts permitted to be withdrawn by the Indenture Trustee
- ----------
from the Collection Account pursuant to Section 5.01(b)(3) of this Agreement)
------------------
as reduced by any portion thereof that may not be withdrawn therefrom
pursuant to an order of a United States bankruptcy court of competent
jurisdiction imposing a stay pursuant to Section 362 of the United States
Bankruptcy Code; (ii) FHA Insurance Premiums in respect of FHA Loans received
during the related Due Period; (iii) payments of FHA Insurance in respect of
FHA Loans received during the related Due Period; (iv) with respect to the
final Distribution Date or an early redemption or termination of the
Securities pursuant to Section 11.02, the Termination Price; (v) any and all
-------------
income or gain from investments in the Collection Account; and (vi) the
Purchase Price paid for any Home Loans required to be purchased pursuant to
Section 3.06 prior to the related Determination Date.
- ------------
Available Distribution Amount: With respect to any Distribution Date,
-----------------------------
the Available Collection Amount minus the amount required to be paid from the
Note Distribution Account pursuant to Section 5.01(c)(i).
------------------
Business Day: Any day other than (i) a Saturday or Sunday, or (ii) a
------------
day on which banking institutions in New York City or in the city in which
the corporate trust office of the Indenture Trustee is located or the city in
which the Servicer's servicing operations are located and are authorized or
obligated by law or executive order to be closed.
Certificate: Any Certificate issued pursuant to the Trust Agreement.
-----------
Certificate Distribution Account: The Account established and
--------------------------------
maintained pursuant to Section 5.02.
------------
Certificate Register: The register established pursuant to Section 3.4
--------------------
of the Trust Agreement.
Certificateholder or Holder: A holder of any Certificate.
---------------------------
Certificateholders' Interest Carry-Forward Amount: With respect to any
-------------------------------------------------
Distribution Date, the excess, if any, of (A) the Certificateholders' Monthly
Interest Distribution Amount for the preceding Distribution Date plus any
outstanding Certificateholders' Interest Carry-Forward Amount for preceding
Distribution Dates, over (B) the amount in respect of interest that is
actually deposited in the Certificate Distribution Account on such preceding
Distribution Date.
Certificateholders' Interest Distribution Amount: With respect to any
------------------------------------------------
Distribution Date, the sum of the Certificateholders' Monthly Interest
Distribution Amount for such Distribution
Date and the Certificateholders' Interest Carry-Forward Amount for such
Distribution Date; provided however, that on the Distribution Date, if any,
on which the Class Principal Balance of the Class B Certificates is reduced
to zero through application of an Allocable Loss Amount, the
Certificateholders' Interest Distribution Amount shall be equal to the
Certificateholders' Interest Distribution Amount calculated without giving
effect to this proviso, minus the portion, if any, of the Allocable Loss
Amount that otherwise would be applied to the Classes of Mezzanine Notes on
such date in the absence of this proviso.
Certificateholders' Monthly Interest Distribution Amount: With respect
--------------------------------------------------------
to any Distribution Date, thirty (30) days' accrued interest at the Class B
Pass Through Rate on the Class Principal Balance of the Class B Certificates
immediately preceding such Distribution Date (or, in the case of the first
Distribution Date, on the Closing Date).
Claims Administrator: Empire Funding, in its capacity as the claims
--------------------
administrator hereunder.
Class: With respect to the Notes, all Notes bearing the same class
-----
designation, and with respect to the Certificates, the Class B Certificates.
Class A-1 Note, Class A-2 Note, Class A-3 Note, Class A-4 Note, Class
-------------- -------------- -------------- --------------
A-5 Note, Class M-1 Note and Class M-2 Note: The respective meanings
_______________
assigned thereto in the Indenture. --------
- ------
Class A Excess Spread Distribution Amount: With respect to any
-----------------------------------------
Distribution Date, the least of (i) the excess of (x) the Class Principal
Balance of all Senior Notes over (y) the Senior Optimal Principal Balance for
such Distribution Date, (ii) the Overcollateralization Deficiency Amount for
such Distribution Date, and (iii) the Excess Spread for such Distribution
Date.
Class A Principal Distribution Amount: With respect to any Distribution
-------------------------------------
Date, the lesser of (i) the Regular Principal Distribution Amount and (ii)
the excess of (x) the aggregate Class Principal Balance of all Senior Notes
over (y) the Senior Optimal Principal Balance for such Distribution Date.
Class A-5 Priority Excess Spread Distribution Amount: With respect to
----------------------------------------------------
any Distribution Date, the lesser of (A) the product of (x) the applicable
Class A-5 Priority Percentage for such Distribution Date and (y) the Class A-
5 Pro Rata Excess Spread Distribution Amount for such Distribution Date and
(B) the Class A Excess Spread Distribution Amount.
Class A-5 Pro Rata Excess Spread Distribution Amount: With respect to
----------------------------------------------------
any Distribution Date, an amount equal to the product of (x) a fraction, the
numerator of which is the Class Principal Balance of the Class A-5 Notes
immediately prior to such Distribution Date and the denominator of which is
the aggregate of the Class Principal Balances of all Senior Notes immediately
prior to such Distribution Date and (y) the Class A Excess Spread
Distribution Amount.
Class A-5 Priority Percentage: With respect to each Distribution Date,
-----------------------------
the percentage specified below:
Distribution Date Priority Percentage
- ----------------- -------------------
April 1997-March 2000 0%
April 2000-March 2002 45%
April 2002-March 2003 80%
April 2003-March 2004 100%
April 2004 and thereafter 300%
Class A-5 Priority Principal Distribution Amount: With respect to any
------------------------------------------------
Distribution Date, the lesser of (A) the product of (x) the applicable Class
A-5 Priority Percentage for such Distribution Date and (y) the Class A-5 Pro
Rata Principal Distribution Amount for such Distribution Date and (B) the
Class A Principal Distribution Amount.
Class A-5 Pro Rata Principal Distribution Amount: With respect to any
------------------------------------------------
Distribution Date, an amount equal to the product of (x) a fraction, the
numerator of which is the Class Principal Balance of the Class A-5 Notes
immediately prior to such Distribution Date and the denominator of which is
the aggregate of the Class Principal Balances of all Senior Notes immediately
prior to such Distribution Date and (y) the Class A Principal Distribution
Amount.
Class B Certificate: Any Certificate in the form attached to the Trust
-------------------
Agreement as Exhibit A.
Class B Optimal Principal Balance: With respect to any Distribution
---------------------------------
Date prior to the Stepdown Date, zero; and with respect to any other
Distribution Date, the Pool Principal Balance as of the related Determination
Date minus the sum of (i) the aggregate Class Principal Balance of the Notes
(after taking into account any distributions made on such Distribution Date
in reduction of the Class Principal Balances of the Notes prior to such
determination) and (ii) the Overcollateralization Target Amount for such
Distribution Date; provided however, that such amount shall never be less
than zero or greater than the Original Class Principal Balance of the Class B
Certificates.
Class B Pass-Through Rate: The per annum rate of 8.82%.
-------------------------
Class Factor: With respect to each Class and any date of determination,
------------
the then applicable Class Principal Balance of such Class divided by the
Original Class Principal Balance thereof.
Class M-1 Optimal Principal Balance: With respect to any Distribution
-----------------------------------
Date prior to the Stepdown Date, zero; and with respect to any other
Distribution Date, the Pool Principal Balance as of the related Determination
Date minus the sum of (i) the aggregate Class Principal Balance of the Senior
Notes (after taking into account distributions made on such Distribution Date
in reduction of the Class Principal Balances of the Classes of Senior Notes
prior to such determination) and (ii) the greater of (x) the sum of (1)
25.50% of the Pool Principal Balance as of the related Determination Date and
(2) the Overcollateralization Target Amount for such Distribution Date
(calculated without giving effect to the proviso in the definition thereof)
and (y) 0.50% of the Original Pool Principal Balance; provided however, that
such amount shall never be less than zero or greater than the Original Class
Principal Balance of the Class M-1 Notes.
Class M-2 Optimal Principal Balance: With respect to any Distribution
-----------------------------------
Date prior to the Stepdown Date, zero; with respect to any other Distribution
Date, the Pool Principal Balance as of the related Determination Date minus
the sum of (i) the aggregate Class Principal Balance of the Senior Notes
(after taking into account any distributions made on such Distribution Date
in reduction of the Class Principal Balances of the Classes of Senior Notes
prior to such determination) plus the Class Principal Balance of the Class M-
1 Notes (after taking into account any distributions made on such
Distribution Date in reduction of the Class Principal Balance of the Class M-
1 Notes prior to such determination) and (ii) the greater of (x) the sum of
(1) 4.00% of the Pool Principal Balance as of the related Determination Date
and (2) the Overcollateralization Target Amount for such Distribution Date
(without giving effect to the proviso in the definition thereof) and (y)
0.50% of the Original Pool Principal Balance; provided, however, that such
amount shall never be less than zero or greater than the Original Class
Principal Balance of the Class M-2 Notes.
Class Principal Balance: With respect to each Class and as of any date
-----------------------
of determination, the Original Class Principal Balance of such Class reduced
by the sum of (i) all amounts previously distributed in respect of principal
of such Class on all previous Distribution Dates and (ii) with respect to the
Class M-1 and Class M-2 Notes and the Class B Certificates, all Allocable
Loss Amounts applied in reduction of principal of such Classes on all
previous Distribution Dates.
Closing Date: March 31, 1997.
------------
Code: The Internal Revenue Code of 1986, as amended from time to time,
----
and Treasury Regulations promulgated thereunder.
Collection Account: The account established and maintained by the
------------------
Servicer in accordance with Section 5.01.
------------
Combination Loan: A loan, the proceeds of which were used by the
----------------
Obligor in combination to finance property improvements and for debt
consolidation or other purposes.
Contract of Insurance: The contract of insurance under Title I covering
---------------------
the FHA Loans held under the name EFC Securitized Assets, L.C., or any
successor thereto, as Contract of Insurance Holder hereunder.
Contract of Insurance Holder: EFC Securitized Assets, L.C., its
----------------------------
successors in interest, and any successor thereto pursuant to the terms of
this Agreement.
Co-Owner Trustee: First Bank National Association, a national banking
----------------
association, in its capacity as the Co-Owner Trustee under the Trust
Agreement acting on behalf of the Certificateholders, or any successor co-
owner trustee under the Trust Agreement.
Custodial Agreement: The custodial agreement dated as of March 1, 1997
-------------------
by and between the Issuer, the Depositor, Empire Funding, as the Transferor
and the Servicer, the Indenture Trustee, and First Bank National Association,
a national banking association, as the Custodian providing for the retention
of the Home Loan Files by the Custodian on behalf of the Indenture Trustee.
Custodian: Any custodian appointed by the Indenture Trustee pursuant
---------
to the Custodial Agreement, which shall not be affiliated with the Servicer,
the Transferor, any Subservicer, or the Depositor. First Bank National
Association shall be the initial Custodian pursuant to the terms of the
Custodial Agreement.
Custodian Fee: If applicable, the annual fee payable to the Custodian,
-------------
calculated and payable monthly on each Distribution Date pursuant to Section
5.01(c)(i) equal to the fee, if any, set forth in the Custodial Agreement.
Cut-Off Date: Close of business on February 28, 1997; except with
------------
respect to one Home Loan of $11,154 for which the Cut-Off Date is March 10,
1997.
DCR: Duff & Phelps Credit Rating Co.
---
Debt Consolidation Loan: A loan, the proceeds of which were primarily
-----------------------
used by the related Obligor for debt consolidation purposes or purposes other
than to finance property improvements.
Debt Instrument: The note or other evidence of indebtedness evidencing
---------------
the indebtedness of an Obligor under a Home Loan.
Defaulted Home Loan: With respect to any date of determination, any
-------------------
Home Loan, including without limitation any Liquidated Home Loan, with
respect to which any of the following has occurred as of the end of the
preceding Due Period: (a) a claim has been paid or finally rejected pursuant
to the Contract of Insurance; (b) foreclosure or similar proceedings have
been commenced; (c) any portion of a Monthly Payment becomes 180 days past
due by the related Obligor; or (d) the Servicer or any Subservicer has
determined in good faith and in accordance with customary servicing practices
that such Home Loan is in default or imminent default.
Defective Home Loan: As defined in Section 3.06 hereof.
------------------- ------------
Deleted Home Loan: A Home Loan replaced or to be replaced by one or
-----------------
more Qualified Substitute Home Loans.
Delinquent: A Home Loan is "Delinquent" if any Monthly Payment due
----------
thereon is not made by the close of business on the day such Monthly Payment
is scheduled to be paid. A Home Loan is "30 days Delinquent" if such Monthly
Payment has not been received by the close of business on the corresponding
day of the month immediately succeeding the month in which such Monthly
Payment was due, or, if there is no such corresponding day (e.g., as when a
----
30-day month follows a 31-day month in which a payment was due on the 31st
day of such month) then on the last day of such immediately succeeding month.
The determination of whether a Home Loan is "60 days Delinquent," "90 days
Delinquent", etc., shall be done in like manner.
Delivery: When used with respect to Trust Account Property means:
--------
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that constitute
"instruments" within the meaning of Section 9-105(1)(i) of the UCC and
are susceptible of physical delivery, transfer thereof to the Indenture
Trustee or its nominee or custodian by physical delivery to the
Indenture Trustee or its nominee or custodian endorsed to, or registered
in the name of, the Indenture Trustee or its nominee or custodian or
endorsed in blank, and, with respect to a certificated security (as
defined in Section 8-102 of the UCC) transfer thereof (i) by delivery of
such certificated security endorsed to, or registered in the name of,
the Indenture Trustee or its nominee or custodian or endorsed in blank
to a financial intermediary (as defined in Section 8-313 of the UCC) and
the making by such financial intermediary of entries on its books and
records identifying such certificated securities as belonging to the
Indenture Trustee or its nominee or custodian and the sending by such
financial intermediary of a confirmation of the purchase of such
certificated security by the Indenture Trustee or its nominee or
custodian, or (ii) by delivery thereof to a "clearing corporation" (as
defined in Section 8-102(3) of the UCC) and the making by such clearing
corporation of appropriate entries on its books reducing the appropriate
securities account of the transferor and increasing the appropriate
securities account of a financial intermediary by the amount of such
certificated security, the identification by the clearing corporation of
the certificated securities for the sole and exclusive account of the
financial intermediary, the maintenance of such certificated securities
by such clearing corporation or a "custodian bank" (as defined in
Section 8-102(4) of the UCC) or the nominee of either subject to the
clearing corporation's exclusive control, the sending of a confirmation
by the financial intermediary of the purchase by the Indenture Trustee
or its nominee or custodian of such securities and the making by such
financial intermediary of entries on its books and records identifying
such certificated securities as belonging to the Indenture Trustee or
its nominee or custodian (all of the foregoing, "Physical Property"),
and, in any event, any such Physical Property in registered form shall
be in the name of the Indenture Trustee or its nominee or custodian; and
such additional or alternative procedures as may hereafter become
appropriate to effect the complete transfer of ownership of any such
Trust Account Property (as defined herein) to the Indenture Trustee or
its nominee or custodian, consistent with changes in applicable law or
regulations or the interpretation thereof;
(b) with respect to any securities issued by the U.S. Treasury,
FNMA or FHLMC that is a book-entry security held through the Federal
Reserve System pursuant to federal book-entry regulations, the following
procedures, all in accordance with applicable law, including applicable
federal regulations and Articles 8 and 9 of the UCC: book-entry
registration of such Trust Account Property to an appropriate book-entry
account maintained with a Federal Reserve Bank by a financial
intermediary that is also a "depository" pursuant to applicable federal
regulations and issuance by such financial intermediary of a deposit
advice or other written confirmation of such book-entry registration to
the Indenture Trustee or its nominee or custodian of the purchase by the
Indenture Trustee or its nominee or custodian of such book-entry
securities; the making by such financial intermediary of entries in its
books and records identifying such book-entry security held through the
Federal Reserve System pursuant to federal book-entry regulations as
belonging to the Indenture Trustee or its nominee or custodian and
indicating that such custodian holds such Trust Account Property solely
as agent for the Indenture Trustee or its nominee or custodian; and such
additional or alternative procedures as may hereafter become appropriate
to effect complete transfer of ownership of any such Trust Account
Property to the Indenture Trustee or its nominee or custodian,
consistent with changes in applicable law or regulations or the
interpretation thereof; and
(c) with respect to any item of Trust Account Property that is an
uncertificated security under Article 8 of the UCC and that is not
governed by clause (b) above, registration on the books and records of
the issuer thereof in the name of the financial intermediary, the
sending of a confirmation by the financial intermediary of the purchase
by the Indenture Trustee or its nominee or custodian of such
uncertificated security, the making by such financial intermediary of
entries on its books and records identifying such uncertificated
certificates as belonging to the Indenture Trustee or its nominee or
custodian.
Denomination: With respect to the Notes and Certificates, the portion
------------
of the Original Class Principal Balance represented by such Notes and
Certificate as specified on the face thereof.
Depositor: Financial Asset Securities Corp., a Delaware corporation,
---------
and any successor thereto.
Determination Date: With respect to any Distribution Date, the
------------------
fourteenth calendar day of the month in which such Distribution Date occurs
or if such day is not a Business Day, the immediately preceding Business Day.
Distribution Date: The 25th day of any month or if such 25th day is not
-----------------
a Business Day, the first Business Day immediately following such day,
commencing in April 1997.
Distribution Statement: As defined in Section 6.01.
---------------------- ------------
Due Date: The day of the month on which the Monthly Payment is due from
--------
the Obligor on a Home Loan.
Due Period: With respect to any Determination Date or Distribution
----------
Date, the calendar month immediately preceding such Determination Date or
Distribution Date, as the case may be.
Eligible Account: At any time, an account which is any of the
----------------
following: (i) an account maintained with a depository institution (A) the
long-term debt obligations of which are at such time rated by each Rating
Agency in one of their two highest long-term rating categories, or (B) the
short-term debt obligations of which are then rated by each Rating Agency in
their highest short-term rating category; (ii) an account or accounts the
deposits in which are fully insured by either the Bank Insurance Fund or the
Savings Association Insurance Fund of the FDIC; (iii) a trust account (which
shall be a "segregated trust account") maintained with the corporate trust
department of a federal or state chartered depository institution or trust
company with trust powers and acting in its fiduciary capacity for the
benefit of the Indenture Trustee and the Issuer, which depository institution
or trust company shall have capital and surplus of not less than $50,000,000;
or (iv) an account that will not cause any Rating Agency to downgrade or
withdraw its then-current rating(s) assigned to the Notes or the Class B
Certificates, as evidenced in writing by such Rating Agency. (Each reference
in this definition of "Eligible Account" to the Rating Agency shall be
construed as a reference to Standard & Poor's and DCR.)
Eligible Servicer: A Person that (i) is servicing a portfolio of Title
-----------------
I mortgage loans, (ii) is legally qualified to service, and is capable of
servicing, the FHA Loans and has all licenses required to service Title I
mortgage loans, (iii) has demonstrated the ability professionally and
competently to service a portfolio of FHA insured mortgage loans similar to
the FHA Loans with reasonable skill and care, (iv) has demonstrated the
ability professionally and competently to service a portfolio of mortgage
loans similar to the Home Loans, and (v) has a net worth calculated in
accordance with generally accepted accounting principles of at least
$500,000.
Empire Funding: Empire Funding Corp.
--------------
Event of Default: As described in Section 10.01 hereof.
---------------- -------------
Excess Spread: With respect to any Distribution Date, the excess of (a)
-------------
the Available Distribution Amount over (b) the Regular Distribution Amount.
FDIC: The Federal Deposit Insurance Corporation and any successor
----
thereto.
FHA: The Federal Housing Administration and any successor thereto.
---
FHA Insurance: Insurance issued by FHA pursuant to Title I of the
-------------
National Housing Act of 1934, as amended.
FHA Insurance Coverage Insufficiency: At the time of a prospective
------------------------------------
claim for reimbursement under the Contract of Insurance for an FHA Loan
pursuant to Section 4.12, the amount by which the sum of all claims
-------------
previously paid by the FHA in respect of all FHA Loans and the amount
expected to be received in respect of such prospective claim for such FHA
Loan exceeds the Trust Designated Insurance Amount.
FHA Insurance Coverage Reserve Account: The account established by the
--------------------------------------
FHA pursuant to the Contract of Insurance which is adjusted and maintained
under Title I (see 24 C.F.R. 201.32(a)).
FHA Insurance Payment Amount: With respect to any Distribution Date and
----------------------------
with respect to an FHA Loan for which an insurance claim has been made by the
Contract of Insurance Holder or the Claims Administrator and paid by the FHA
or rejected, in part, by the FHA, an amount equal to the sum of such of the
following as are appropriate: (i) the amount, if any, received from the FHA,
(ii) with respect to claims rejected in part, the amount, if any, received
from Empire Funding or the Servicer pursuant to Section 4.12 and (iii) the
------------
amount received from the sale of FHA Pending Claims sold pursuant to Section
-------
11.02.
- -----
FHA Loans: The Home Loans designated as FHA Loans on the Home Loan
---------
Schedule.
FHA Pending Claims: As defined in Section 11.02.
------------------ -------------
FHA Premium Account: The account which is an Eligible Account
-------------------
established and maintained by the Indenture Trustee pursuant to
Section 5.01(a)(3).
- ------------------
FHA Premium Account Deposit: With respect to any Distribution Date, an
---------------------------
amount equal to the greater of (i) 1/12 times 0.75% times the aggregate
Principal Balance of all FHA Loans, other than Invoiced Loans for which
premiums for FHA Insurance have been received, as of the first day of the
calendar month preceding the month of such Distribution Date (or the original
Principal Balance of such Loans as of the applicable Cut-Off Date with
respect to the first Distribution Date) and (ii) the positive excess, if any,
of (A) the projected amount of premium and other charges due under the
Contract of Insurance for the next succeeding Due Period over (B) the balance
in the FHA Premium Account as of the related Determination Date.
FHA Reserve Amount: As to each FHA Loan, 10% of the Principal Balance
------------------
as of the Cut-Off Date of such FHA Loan.
FHLMC: The Federal Home Loan Mortgage Corporation and any successor
-----
thereto.
FICO Score: The credit evaluation scoring methodology developed by
----------
Fair, Isaac and Company.
Fidelity Bond: As described in Section 4.03 hereof.
------------- ------------
Final Date: The later of:
----------
(i) two years after the last insurance claim with respect to
an FHA Loan filed with the FHA was certified for payment by FHA, or
(ii) the final settlement date with respect to any insurance
claim for an FHA Loan rejected by the FHA.
Final Scheduled Distribution Date: For each Class of Securities, the
---------------------------------
following Distribution Dates:
Class A-1: March 27, 2023;
Class A-2: March 27, 2023;
Class A-3: March 27, 2023;
Class A-4: March 27, 2023;
Class A-5: March 27, 2023;
Class M-1: March 27, 2023;
Class M-2: March 27, 2023; and
Class B: March 27, 2023.
FNMA: The Federal National Mortgage Association and any successor
----
thereto.
Foreclosed Loan. As of any date of determination, any Mortgage Loan,
---------------
other than a Mortgage Loan for which a claim is pending under the Contract of
Insurance, that has been discharged as a result of (i) the completion of
foreclosure or comparable proceedings; (ii) the Owner Trustee's acceptance of
the deed or other evidence of title to the related Property in lieu of
foreclosure or other comparable proceeding; or (iii) the acquisition by the
Owner Trustee of title to the related Property by operation of law.
Foreclosure Property: Any real property securing a Foreclosed Loan that
--------------------
has been acquired by the Servicer through foreclosure, deed in lieu of
foreclosure or similar proceedings in respect of the related Home Loan.
Home Loan: An individual Home Loan that is conveyed to the Issuer
---------
pursuant to this Agreement on the Closing Date, together with the rights and
obligations of a holder thereof and payments thereon and proceeds therefrom
received after the Cut-off Date, the Home Loans subject to this Agreement
being identified on the Home Loan Schedule annexed hereto as Exhibit A. As
---------
applicable, a Home Loan shall be deemed to refer to the related Debt
Instrument, the Mortgage, if any, and any related Foreclosure Property.
Home Loan File: As defined in Section 2.05.
-------------- ------------
Home Loan Interest Rate: The fixed annual rate of interest borne by a
-----------------------
Debt Instrument, as shown on the related Home Loan Schedule as the same may
be modified by the Servicer in accordance with Section 4.01(c) hereof.
---------------
Home Loan Pool: The pool of Home Loans.
--------------
Home Loan Purchase Agreement: The home loan purchase agreement between
----------------------------
the Transferor, EFC Securitized Assets, L.C., and the Depositor, dated as of
March 1, 1997.
Home Loan Schedule: The schedule of Home Loans specifying with respect
------------------
to each Home Loan, the information set forth on Exhibit A attached hereto, as
amended or supplemented from time to time.
HUD: The United States Department of Housing and Urban Development and
---
any successor thereto.
Indenture: The Indenture, dated as of March 1, 1997, between the Issuer
---------
and the Indenture Trustee.
Indenture Trustee: First Bank National Association, a national banking
-----------------
association, as Indenture Trustee under the Indenture and this Agreement
acting on behalf of the Noteholders, or any successor indenture trustee under
the Indenture or this Agreement.
Indenture Trustee Fee: As to any Distribution Date, the greater of (a)
---------------------
one-twelfth of 0.03% times the Pool Principal Balance as of the opening of
business on the first day of the calendar month preceding the calendar month
of such Distribution Date (or, with respect to the first Distribution Date,
the Original Pool Principal Balance) and (b) one-twelfth of the annual fee of
$10,000.
Indenture Trustee's Home Loan File: As defined in Section 2.05(f).
---------------------------------- ---------------
Independent: When used with respect to any specified Person, such
-----------
Person (i) is in fact independent of Empire Funding, the Servicer, the Claims
Administrator, the Depositor or any of their respective affiliates, (ii) does
not have any direct financial interest in or any material indirect financial
interest in any of Empire Funding, the Servicer, the Claims Administrator,
the Depositor or any of their respective affiliates and (iii) is not
connected with any of Empire Funding, the Servicer, the Claims Administrator,
the Depositor or any of their respective affiliates, as an officer, employee,
promoter, underwriter, trustee, partner, director or Person performing
similar functions; provided, however, that a Person shall not fail to be
-------- -------
Independent of Empire Funding, the Servicer, the Claims Administrator, the
Depositor or any of their respective affiliates merely because such Person is
the beneficial owner of 1% or less of any class of securities issued by
Empire Funding, the Servicer, the Claims Administrator, the Depositor or any
of their respective affiliates, as the case may be.
Independent Accountants: A firm of nationally recognized certified
-----------------------
public accountants which is Independent.
Insurance Policies: With respect to any Property, any related insurance
------------------
policy other than the Contract of Insurance.
Insurance Proceeds: With respect to any Property, all amounts collected
------------------
in respect of Insurance Policies and not required to be applied to the
restoration of the related Property or paid to the related Obligor.
Insurance Record: The record established and maintained by the Claims
----------------
Administrator (in a manner consistent with the Title I provisions set forth
in 24 C.F.R. Section 201.32) setting forth the FHA insurance coverage and the
Trust Designated Insurance Amount attributable to the FHA Loans hereunder.
To the extent consistent with adjustments pursuant to Title I to the FHA
Insurance Coverage Reserve Account, the Insurance Record shall be reduced by
the amount of claims approved for payment by the FHA with respect to any FHA
Loan or Related Series Loan after the date of transfer of the related FHA
reserve account to the Contract of Insurance Holder.
Invoiced Loan: An FHA Loan with respect to which the related Obligor
-------------
is required to pay the FHA premium on FHA Insurance with respect to such FHA
Loan.
Liquidated Home Loan: With respect to any date of determination, any
--------------------
Home Loan or Foreclosure Property in respect of a Home Loan on which a
Monthly Payment is in excess of 30 days past due and as to which the Servicer
has determined that all amounts which it reasonably and in good faith expects
to collect have been recovered from or on account of such Home Loan or the
related Foreclosure Property; provided that, in any event, such Home Loan or
the related Foreclosure Property shall be deemed uncollectible and therefore
deemed a Liquidated Home Loan upon the earlier of: (a) the liquidation of
the related Foreclosure Property, (b) the determination by the Servicer in
accordance with customary servicing practices that no further amounts are
collectible from the Home Loan and any related Mortgaged Property, or (c) the
date on which any portion of a Monthly Payment on any Home Loan is in excess
of 180 days past due.
Liquidation Proceeds: With respect to a Liquidated Home Loan, any cash
--------------------
amounts received in connection with the liquidation of such Liquidated Home
Loan, whether through trustee's sale, foreclosure sale or other disposition,
and any other amounts required to be deposited in the Collection Account
pursuant to Section 5.01(b), in each case other than Insurance Proceeds and
---------------
Released Mortgaged Property Proceeds.
Loss Reimbursement Deficiency: With respect to any Distribution Date
-----------------------------
and the Class M-1 Notes, Class M-2 Notes or Class B Certificates, the amount
of Allocable Loss Amounts applied to the reduction of the Class Principal
Balance of such Class and not reimbursed pursuant to Section 5.01 hereof as
of such Distribution Date plus, in the case of the Class M-1 Notes and
Class M-2 Notes, interest accrued on the unreimbursed portion thereof at the
applicable Note Interest Rate through the end of the Due Period immediately
preceding such Distribution Date; however, no interest shall accrue on any
amount of any such accrued and unpaid interest.
Majority Securityholders: Until such time as the sum of the Class
------------------------
Principal Balances of all Classes of Notes has been reduced to zero, the
holder or holders of in excess of 50% of the Class Principal Balance of all
Classes of Notes (accordingly, the holders of the Class B Certificates shall
be excluded from any rights or actions of the Majority Securityholders during
such period); and thereafter, the holder or holders of in excess of 50% of
the Class Principal Balance of the Class B Certificates.
Mezzanine Noteholders' Interest Carry-Forward Amount: With respect to
----------------------------------------------------
any Distribution Date, the excess, if any, of (A) the Mezzanine Noteholders'
Monthly Interest Distribution Amount for the preceding Distribution Date plus
any outstanding Mezzanine Noteholders' Interest Carry-Forward Amount for
preceding Distribution Dates, over (B) the amount in respect of interest that
is actually deposited in the Note Distribution Account on such preceding
Distribution Date net of the Senior Noteholders' Interest Carry-Forward
Amount for such preceding Distribution Date.
Mezzanine Noteholders' Interest Distribution Amount: With respect to
---------------------------------------------------
any Distribution Date, the sum of the Mezzanine Noteholders' Monthly Interest
Distribution Amount for such Distribution Date and the Mezzanine Noteholders'
Interest Carry-Forward Amount for such Distribution Date.
Mezzanine Noteholders' Monthly Interest Distribution Amount: With
-----------------------------------------------------------
respect to each Distribution Date and the Classes of Mezzanine Notes, the
aggregate amount of thirty (30) days' accrued interest at the respective Note
Interest Rates on the respective Class Principal Balances of such Classes
immediately preceding such Distribution Date (or, in the case of the first
Distribution Date, on the Closing Date).
Mezzanine Notes: The Class M-1 Notes and Class M-2 Notes.
---------------
Monthly Cut-Off Date: The last day of any calendar month, and with
--------------------
respect to any Distribution Date, the last day of the calendar month
immediately preceding such Distribution Date.
Monthly Payment: The scheduled monthly payment of principal and/or
---------------
interest required to be made by an Obligor on the related Home Loan,
including any premium for FHA Insurance included in such payment, as set
forth in the related Debt Instrument.
Mortgage: The mortgage, deed of trust or other security instrument
--------
creating a lien in accordance with applicable law on a Mortgaged Property to
secure the Debt Instrument which evidences a secured Home Loan.
Mortgage Loan: As of any date of determination, each of the Home Loans,
-------------
secured by an interest in a Property, transferred and assigned to the
Indenture Trustee pursuant to Section 2.01(a).
---------------
Mortgaged Property: The real property encumbered by the Mortgage which
------------------
secures the Debt Instrument evidencing a secured Home Loan.
Mortgaged Property States: Each state in which any Mortgaged Property
-------------------------
securing a Home Loan is located as set forth in the Home Loan Schedule.
Net Delinquency Calculation Amount: With respect to any Distribution
----------------------------------
Date, the excess, if any, of (x) the product of 2.50 and the Six-Month
Rolling Delinquency Average over (y) the aggregate of the amounts of Excess
Spread for the three preceding Distribution Dates.
Net Liquidation Proceeds: With respect to any Distribution Date, any
------------------------
cash amounts received from Liquidated Home Loan during the related Due
Period, whether through trustee's sale, foreclosure sale, disposition of
Mortgaged Properties or otherwise (other than Insurance Proceeds and Released
Mortgaged Property Proceeds), and any other cash amounts received in
connection with the management of the Mortgaged Properties from Defaulted
Loans, in each case, net of any reimbursements to the Servicer made from such
amounts for any unreimbursed Servicing Compensation and Servicing Advances
(including Nonrecoverable Servicing Advances) made and any other fees and
expenses paid in connection with the foreclosure, conservation and
liquidation of the related Liquidated Home Loans or Foreclosure Property
pursuant to Section 4.13 hereof.
------------
Net Loan Losses: With respect to any Defaulted Home Loan that is subject
---------------
to a modification pursuant to Section 4.01(c), an amount equal to the portion
---------------
of the Principal Balance, if any, released in connection with such
modification.
Net Loan Rate: With respect to each Home Loan, the related Home Loan
-------------
Interest Rate, less the rate at which the Servicing Fee is calculated.
Non-FHA Loans: The Home Loans designated as Non-FHA Loans on the Home
-------------
Loan Schedule.
Nonrecoverable Servicing Advance: With respect to any Foreclosure
--------------------------------
Property, (a) any Servicing Advance previously made and not reimbursed from
late collections, Liquidation Proceeds, Insurance Proceeds or the Released
Mortgaged Property Proceeds, or (b) a Servicing Advance proposed to be made
in respect of a Home Loan or Foreclosure Property either of which, in the
good faith business judgment of the Servicer, as evidenced by an Officer's
Certificate delivered to the Indenture Trustee would not be ultimately
recoverable.
Note: Any of the Senior Notes, the Class M-1 Notes and the Class M-2
----
Notes.
Note Distribution Account: The account established and maintained
-------------------------
pursuant to Section 5.01(a)(2).
------------------
Noteholder: A holder of a Note.
----------
Note Interest Rate: With respect to each Class of Notes, the per annum
------------------
rate of interest payable to the holders of such Class of Notes. The Note
Interest Rates with respect to the Classes of Notes are as follows: Class A-
1: 7.00%; Class A-2: 7.06%; Class A-3: 7.17%; Class A-4: 7.77%; Class A-5:
7.51%; Class M-1: 7.89%; and Class M-2: 8.08%.
Obligor: Each obligor on a Debt Instrument.
-------
Officer's Certificate: A certificate delivered to the Indenture Trustee
---------------------
or the Issuer signed by the President or a Vice President or an Assistant
Vice President of the Depositor, the Servicer or the Transferor, in each
case, as required by this Agreement.
Opinion of Counsel: A written opinion of counsel (who is acceptable to
------------------
the Rating Agencies), who may be employed by Empire Funding, the Servicer,
the Depositor or any of their respective affiliates.
Original Class Principal Balance: With respect to the Classes of
--------------------------------
Securities, as follows: Class A-1: $21,750,000; Class A-2: $7,400,000; Class
A-3: $8,500,000; Class A-4: $11,791,000; Class A-5: $4,250,000; Class M-1:
$8,978,000; Class M-2: $7,721,000; and the Class B Certificates:
$1,437,188.84.
Original Pool Principal Balance: $71,827,144.69, which is the Pool
-------------------------------
Principal Balance as of the Cut-Off Date.
Outstanding: As defined in the Indenture.
-----------
Overcollateralization Amount: With respect to any Distribution Date,
----------------------------
the amount equal to the excess of (A) the Pool Principal Balance over (B) the
aggregate of the Class Principal Balances of the Securities (after giving
effect to the distributions made on such date pursuant to Section 5.01(d)).
Overcollateralization Deficiency Amount: With respect to any
---------------------------------------
Distribution Date, the excess, if any, of the Overcollateralization Target
Amount over the Overcollateralization Amount (after giving effect to all
prior distributions on the Classes of Securities and to any prior
distribution on the Residual Interest on such Distribution Date pursuant to
Section 5.01(d) hereof).
Overcollateralization Target Amount: With respect to any Distribution
-----------------------------------
Date occurring (I) prior to the Stepdown Date, an amount equal to the greater
of (x) 8% of the Original Pool Principal Balance and (y) the Net Delinquency
Calculation Amount; and (II) with respect to any
other Distribution Date, an amount equal to the greater of (x) 16% of the
Pool Principal Balance as of the end of the related Due Period and (y) the
Net Delinquency Calculation Amount; provided, however, that the
Overcollateralization Target Amount shall in no event be less than 0.50% of
the Original Pool Principal Balance or greater than the sum of the aggregate
Class Principal Balances of all Classes of Securities.
Ownership Interest: As to any Security, any ownership or security
------------------
interest in such Security, including any interest in such Security as the
holder thereof and any other interest therein, whether direct or indirect,
legal or beneficial, as owner or as pledgee.
Owner Trustee: Wilmington Trust Company, as owner trustee under the
-------------
Trust Agreement, and any successor owner trustee under the Trust Agreement.
Owner Trustee Fee: The annual fee of $4,000 in equal monthly
-----------------
installments to the Servicer who shall in turn pay such $4,000 to the Owner
Trustee on the Distribution Date occurring in March each year during the term
of this Agreement commencing in March 1998; provided that the initial Owner
Trustee Fee shall be paid by the Transferor on the Closing Date.
Percentage Interest: As defined in the Trust Agreement.
-------------------
Permitted Investments: Each of the following:
---------------------
(1) obligations of, or guaranteed as to principal and interest by,
the United States or any agency or instrumentality thereof when such
obligations are backed by the full faith and credit of the United
States;
(2) a repurchase agreement that satisfies the following criteria:
(1) must be between the Indenture Trustee and either (a) primary
dealers on the Federal Reserve reporting dealer list which are rated in
one of the two highest categories for long-term unsecured debt
obligations by each Rating Agency, or (b) banks rated in one of the two
highest categories for long-term unsecured debt obligations by each
Rating Agency; and (2) the written repurchase agreement must include the
following: (a) securities which are acceptable for transfer and are
either (I) direct U.S. government obligations, or (II) obligations of a
federal agency that are backed by the full faith and credit of the U.S.
government, or FNMA or FHLMC; (b) a term no greater than 60 days for any
repurchase transaction; (c) the collateral must be delivered to the
Indenture Trustee or a third party custodian acting as agent for the
Indenture Trustee by appropriate book entries and confirmation
statements, and must have been delivered before or simultaneous with
payment (i.e., perfection by possession of certificated securities); and
(d) the securities sold thereunder must be valued weekly,
marked-to-market at current market price plus accrued interest and the
value of the collateral must be equal to at least 104% of the amount of
cash transferred by the Indenture Trustee under the repurchase agreement
and if the value of the securities held as collateral declines to an
amount below 104% of the cash transferred by the Indenture Trustee plus
accrued interest (i.e., a margin call), then
additional cash and/or acceptable securities must be transferred to the
Indenture Trustee to satisfy such margin call; provided, however, that
if the securities used as collateral are obligations of FNMA or FHLMC,
then the value of the securities held as collateral must equal at least
105% of the cash transferred by the Indenture Trustee under such
repurchase agreement;
(3) certificates of deposit, time deposits and bankers acceptances
of any United States depository institution or trust company
incorporated under the laws of the United States or any state, including
the Indenture Trustee; provided that the debt obligations of such
depository institution or trust company at the date of the acquisition
thereof have been rated by each Rating Agency in one of its two highest
long-term rating categories;
(4) deposits, including deposits with the Indenture Trustee, which
are fully insured by the Bank Insurance Fund or the Savings Association
Insurance Fund of the FDIC, as the case may be;
(5) commercial paper of any corporation incorporated under the
laws of the United States or any state thereof, including corporate
affiliates of the Indenture Trustee, which at the date of acquisition is
rated by each Rating Agency in its highest short-term rating category
and which has an original maturity of not more than 365 days;
(6) debt obligations rated by each Rating Agency at the time at
which the investment is made in its highest long-term rating category
(or those investments specified in (3) above with depository
institutions which have debt obligations rated by each Rating Agency in
one of its two highest long-term rating categories);
(7) money market funds which are rated by each Rating Agency at
the time at which the investment is made in its highest long-term rating
category, any such money market funds which provide for demand
withdrawals being conclusively deemed to satisfy any maturity
requirements for Permitted Investments set forth in this Agreement; or
(8) any other demand, money market or time deposit obligation,
security or investment as may be acceptable to each Rating Agency at the
time at which the investment is made;
provided that no instrument described in the foregoing subparagraphs shall
evidence either the right to receive (a) only interest with respect to the
obligations underlying such instrument or (b) both principal and interest
payments derived from obligations underlying such instrument where the
interest and principal payments with respect to such instrument provide a
yield to maturity at par greater than 120% of the yield to maturity at par of
the underlying obligations; and provided, further, that no instrument
described in the foregoing subparagraphs may be purchased at a price greater
than par if such instrument may be prepaid or called at a price less than its
purchase price prior to stated maturity.
Each reference in this definition of "Permitted Investments" to the
Rating Agency shall be construed, in the case of each subparagraph above
referring to each Rating Agency, as a reference to each of Standard & Poor's
and DCR.
Person: Any individual, corporation, partnership, joint venture,
------
limited liability company, association, joint-stock company, trust, national
banking association, unincorporated organization or government or any agency
or political subdivision thereof.
Physical Property: As defined in the definition of "Delivery" above.
-----------------
Pool Principal Balance: With respect to any date of determination, the
----------------------
aggregate Principal Balances of the Home Loans as of the end of the preceding
Due Period provided, however, that the Pool Principal Balance on any
Distribution Date on which the Termination Price is to be paid to
Securityholders will be deemed to have been equal to zero as of such date.
Principal Balance: With respect to any Home Loan or related Foreclosure
-----------------
Property, (i) at the Cut-Off Date, the outstanding unpaid principal balance
of the Home Loan as of the Cut-Off Date and (ii) with respect to any date of
determination, the outstanding unpaid principal balance of the Home Loan as
of the last day of the preceding Due Period (after giving effect to all
payments received thereon and the allocation of any Net Loan Losses with
respect thereto for a Defaulted Home Loan which relates to such Due Period),
without giving effect to amounts received in respect of such Home Loan or
related Foreclosure Property after such Due Period; provided, however, that
any Liquidated Home Loan shall have a Principal Balance of zero.
Principal Prepayment: With respect to any Home Loan and any Due Period,
--------------------
any principal amount received on a Home Loan in excess of the principal of
the Monthly Payment due in such Due Period.
Property: The property (real, personal or mixed) encumbered by the
--------
Mortgage which secures the Debt Instrument evidencing a secured Home Loan.
Prospectus: The Depositor's final Prospectus as supplemented by the
----------
Prospectus Supplement.
Prospectus Supplement: The Prospectus Supplement to be prepared by the
---------------------
Depositor in connection with the issuance and sale of the Securities.
Purchase Price: As defined in Section 3.06 herein.
-------------- ------------
Qualified Substitute Home Loan: A home loan or home loans substituted
------------------------------
for a Deleted Home Loan pursuant to Section 2.06 or 3.06, which (i) has or
------------ ----
have an interest rate or rates of not less than, and not more than two
percentage points greater than, the Home Loan Interest Rate for the Deleted
Home Loan, (ii) matures or mature not more than one year later than and not
more than one year earlier than the Deleted Home Loan, (iii) has or have a
principal balance or principal balances (after application of all payments
received on or prior to the date of substitution) equal to or less than the
Principal Balance of the Deleted Home Loan as of such date, (iv) has or have
a lien priority equal or superior to that of the Deleted Home Loan, (v)
has a borrower with a comparable credit grade classification to the credit
grade classification of the borrower with respect to the Deleted Home Loans,
including a FICO Score that is no more than 10 points below that of such
Deleted Home Loan; and (vi) complies or comply as of the date of
substitution with each representation and warranty set forth in Section
3.04 and is not more than 29 days ------------
delinquent as of the date of substitution for such loan. For purposes of
determining whether multiple mortgage loans proposed to be substituted for
one or more Deleted Home Loans pursuant to Section 2.06 or 3.06 are in fact
------------ ----
"Qualified Substitute Home Loans" as provided above, the criteria specified
in clauses (i) and (iii) above may be considered on an aggregate or weighted
average basis, rather than on a loan-by-loan basis (i.e., so long as the
weighted average Home Loan Interest Rate of any loans proposed to be
substituted is not less than two percentage points fewer than and not more
than two percentage points greater than the Home Loan Interest Rate for the
designated Deleted Home Loan or Home Loans, the requirements of clause (i)
above would be deemed satisfied).
Rating Agencies: Standard & Poor's and DCR. If no such organization
---------------
or successor is any longer in existence, "Rating Agency" shall be a
nationally recognized statistical rating organization or other comparable
person designated by the Servicer, notice of which designation shall have
been given to the Indenture Trustee and the Issuer.
Ratings: The ratings initially assigned to the Notes and the Class B
-------
Certificates by the Rating Agencies, as evidenced by letters from the Rating
Agencies.
Record Date: With respect to each Distribution Date, the close of
-----------
business on the last Business Day of the month immediately preceding the
month in which such Distribution Date occurs.
Regular Distribution Amount: With respect to any Distribution Date, the
---------------------------
lesser of (a) the Available Distribution Amount and (b) the sum of (i) the
Noteholders' Interest Distribution Amount, (ii) the Certificateholders'
Interest Distribution Amount and (iii) the Regular Principal Distribution
Amount.
Regular Principal Distribution Amount: On each Distribution Date, an
-------------------------------------
amount equal to the lesser of:
(A) the aggregate of the Class Principal Balances of the Classes of
Securities immediately prior to such Distribution Date; and
(B) the sum of (i) each scheduled payment of principal collected by the
Servicer in the related Due Period, (ii) all partial and full principal
prepayments applied by the Servicer during such related Due Period, (iii) the
principal portion of all Net Liquidation Proceeds, FHA Insurance Payment
Amounts, Insurance Proceeds and Released Mortgaged Property Proceeds
received during the related Due Period, (iv) that portion of the Purchase
Price of any repurchased Home Loan which represents principal received prior
to the related Determination Date; (v) the principal portion of any
Substitution Adjustments required to be deposited in the Collection Account
as of the related Determination Date and (vi) on the Distribution Date on
which the Trust is to be terminated pursuant to Section 11.02 hereof, the
Termination Price.
Rejected Claim: With respect to any FHA Loan, a claim for payment made
--------------
to the FHA under the Contract of Insurance that has been finally rejected
after all appeals with FHA have been exhausted for any reason (including a
rejection of a previously paid claim and a demand by the FHA of a return of
the FHA Insurance Payment Amount for the related FHA Loan) other than a
refusal or rejection due to clerical error in computing the claim amount or
because the amount of the FHA Insurance Coverage Reserve Account as shown in
the Insurance Record is zero.
Related Series: Means (i) the Trust, (ii) Empire Funding Home Loan
--------------
REMIC Trust 1997-A, Asset Backed Certificates, Series 1997-A and (iii) each
of the subsequent series of trusts, of which the Trustee is the trustee, to
which Related Series Loans are sold directly or indirectly by Empire Funding,
established pursuant to pooling and servicing agreements and/or trust
agreements and sale and servicing agreements.
Related Series Loans: Means FHA Loans related to a Related Series
--------------------
which: (i) are sold by Empire Funding, directly or indirectly, to a trust
and (ii) the Title I insurance coverage attributable to which is made
available to cover claims with respect to the FHA Loans and the Related
Series Loans in each other Related Series by virtue of terms relating to the
administration of the FHA Insurance Coverage Reserve Account substantially
similar to the terms hereof.
Released Mortgaged Property Proceeds: With respect to any secured Home
------------------------------------
Loan, proceeds received by the Servicer in connection with (i) a taking of an
entire Mortgaged Property by exercise of the power of eminent domain or
condemnation or (ii) any release of part of the Mortgaged Property from the
lien of the related Mortgage, whether by partial condemnation, sale or
otherwise; which in either case are not released to the Obligor in accordance
with applicable law, Accepted Servicing Procedures and this Agreement.
Residual Interest: The interest which represents the right to the amount
-----------------
remaining, if any, after all prior distributions have been made under this
Agreement, the Indenture and the Trust Agreement on each Distribution Date
and certain other rights to receive amounts hereunder and under the Trust
Agreement.
Responsible Officer: When used with respect to the Indenture Trustee,
-------------------
any officer within the Corporate Trust Office of the Indenture Trustee,
including any Vice President, Assistant Vice President, Secretary, Assistant
Secretary or any other officer of the Indenture Trustee customarily
performing functions similar to those performed by any of the above
designated officers and also, with respect to a particular matter, any other
officer to whom such matter is referred because of such officer's knowledge
of and familiarity with the particular subject. When used with respect
to the Issuer, any officer in the Corporate Trust Administration Department
of the Owner Trustee with direct responsibility for the administration of the
Trust Agreement and this Agreement on behalf of the Issuer. When used with
respect to the Depositor, the Transferor, the Servicer or the Custodian, the
President or any Vice President, Assistant Vice President, or any Secretary
or Assistant Secretary.
Securities: The Notes and/or the Class B Certificates, as applicable.
----------
Securityholder: A holder of a Note or Certificate, as applicable.
--------------
Senior Noteholders' Interest Carry-Forward Amount: With respect to any
-------------------------------------------------
Distribution Date, the excess, if any, of (A) the Senior Noteholders' Monthly
Interest Distribution Amount for the preceding Distribution Date plus any
outstanding Senior Noteholders' Interest Carry-Forward Amount for preceding
Distribution Dates, over (B) the amount in respect of interest that is
actually deposited in the Note Distribution Account on such preceding
Distribution Date.
Senior Noteholders' Interest Distribution Amount: With respect to any
------------------------------------------------
Distribution Date, the sum of the Senior Noteholders' Monthly Interest
Distribution Amount for such Distribution Date and the Senior Noteholders'
Interest Carry-Forward Amount for such Distribution Date.
Senior Noteholders' Monthly Interest Distribution Amount: With respect
--------------------------------------------------------
to each Distribution Date and the Classes of Senior Notes, the aggregate
amount of thirty (30) days' accrued interest at the respective Note Interest
Rates on the respective Class Principal Balances of such Classes immediately
preceding such Distribution Date (or, in the case of the first Distribution
Date, on the Closing Date).
Senior Notes: The Class A-1, Class A-2, Class A-3, Class A-4 and Class
------------
A-5 Notes.
Senior Optimal Principal Balance: With respect to any Distribution Date
--------------------------------
prior to the Stepdown Date, zero; with respect to any other Distribution
Date, an amount equal to the Pool Principal Balance as of the related
Determination Date minus the greater of (a) the sum of (1) 50.50% of the Pool
Principal Balance as of the related Determination Date and (2) the
Overcollateralization Target Amount for such Distribution Date (without
giving effect to the proviso in the definition thereof) and (b) 0.50% of the
Original Pool Principal Balance; provided however, that such amount shall
never be less than zero or greater than the sum of the Original Class
Principal Balances of the Notes.
Series or Series 1997-1: Empire Funding Home Loan Asset Backed
------ -------------
Securities, Series 1997-1.
Servicer: Empire Funding, in its capacity as the servicer hereunder,
--------
or any successor appointed as herein provided.
Servicer Termination Event: The termination of the Servicer pursuant
--------------------------
to Section 10.01(b).
----------------
Servicer's Fiscal Year: January 1st through December 31st of each year.
----------------------
Servicer's Home Loan Files: In respect of each Home Loan, all documents
--------------------------
customarily included in the servicer's loan file for the related type of Home
Loan in accordance with the servicing standard set forth in Section 4.01.
------------
Servicer's Monthly Remittance Report: A report prepared and computed
------------------------------------
by the Servicer in substantially the form of Exhibit B attached hereto.
---------
Servicing Advances: Subject to Section 4.01(b), all reasonable,
------------------ ---------------
customary and necessary "out of pocket" costs and expenses advanced or paid
by the Servicer with respect to the Home Loans in accordance with the
performance by the Servicer of its servicing obligations hereunder,
including, but not limited to, the costs and expenses for (i) the
preservation, restoration and protection of the Mortgaged Property, including
without limitation advances in respect of real estate taxes and assessments,
(ii) any collection, enforcement or judicial proceedings, including without
limitation foreclosures, collections and liquidations pursuant to Section 4.12
, (iii)
------------
the conservation, management and sale or other disposition of a Foreclosure
Property pursuant to Section 4.13, (iv) the preservation of the security for
------------
a Home Loan if any lienholder under a Superior Lien has accelerated or
intends to accelerate the obligations secured by such Superior Lien pursuant
to Section 4.06; provided that such Servicing Advances are reimbursable to
------------
the Servicer out of Net Liquidation Proceeds.
Servicing Advance Reimbursement Amount: With respect to any date of
--------------------------------------
determination, the amount of any Servicing Advances that have not been
reimbursed as of such date including, Nonrecoverable Servicing Advances.
Servicing Compensation: The Servicing Fee and other amounts to which
----------------------
the Servicer is entitled pursuant to Section 7.03.
------------
Servicing Fee: As to each Home Loan (including any Home Loan that has
-------------
been foreclosed and has become a Foreclosure Property, but excluding any
Liquidated Home Loan), the fee payable monthly to the Servicer on each
Distribution Date, which shall be the product of, in the case of any FHA
Loan, 1.00% (100 basis points) and, in the case of any Non-FHA Loan, 0.75%
(75 basis points) and the Principal Balance of such Home Loan as of the
beginning of the immediately preceding Due Period, divided by 12. The
Servicing Fee includes any servicing fees owed or payable to any Subservicer
which fees shall be paid from the Servicing Fee.
Servicing Officer: Any officer of the Servicer or Subservicer involved
-----------------
in, or responsible for, the administration and servicing of the Home Loans
whose name and specimen signature appears on a list of servicing officers
annexed to an Officer's Certificate furnished by the Servicer or the
Subservicer, respectively, to the Issuer and the Indenture Trustee, on behalf
of the Securityholders, as such list may from time to time be amended.
Settlement Date: On or about April 8, 1997.
---------------
Six-Month Rolling Delinquency Average: With respect to any Distribution
-------------------------------------
Date, the average of the applicable 60-Day Delinquency Amounts for each of
the six immediately preceding Due Periods, where the 60-Day Delinquency
Amount for any Due Period is the aggregate of the Principal Balances of all
Home Loans, other than FHA Loans covered by FHA Insurance, that are 60 or
more days delinquent, in foreclosure or Foreclosure Property as of the end of
such Due Period.
Standard & Poor's: Standard & Poor's Ratings Group, a division of The
-----------------
McGraw-Hill Companies, Inc., or any successor thereto.
Stepdown Date: The first Distribution Date occurring after March 2000,
-------------
upon which all of the following conditions exist:
(1) the Pool Principal Balance has been reduced to 50.00% of the
Original Pool Principal Balance;
(2) the Net Delinquency Calculation Amount is less than 8% of the
Original Pool Principal Balance; and
(3) the aggregate of the Class Principal Balances of the Senior Notes
(after giving effect to distribution of principal on such Distribution
Date) has been reduced to the excess of:
(I) the Pool Principal Balance as of the related Determination
Date over
(II) the greater of (a) the sum of
(1) 50.50% of the Pool Principal Balance as of the
related Determination Date and
(2) the Overcollateralization Target Amount for such
Distribution Date (such amount to be calculated (x)
without giving effect to the proviso in the definition
thereof and (y) pursuant only to clause (II) of the
definition thereof); and
(b) 0.50% of the Original Pool Balance.
Subservicer: Any Person with whom the Servicer has entered into a
-----------
Subservicing Agreement and who is an Eligible Servicer and who satisfies any
requirements set forth in Section 4.07(a) in respect of the qualifications
---------------
of a Subservicer.
Subservicing Account: An account established by a Subservicer pursuant
--------------------
to a Subservicing Agreement, which account must be an Eligible Account.
Subservicing Agreement: Any agreement between the Servicer and any
----------------------
Subservicer relating to subservicing and/or administration of any or all Home
Loans as provided in Section 4.07(a), copies of which shall be made
---------------
available, along with any modifications thereto, to the Issuer and the
Indenture Trustee.
Substitution Adjustment: As to any date on which a substitution occurs
-----------------------
pursuant to Sections 2.06 or 3.06, the amount, if any, by which (a) the sum
------------- ----
of the aggregate principal balance (after application of principal payments
received on or before the date of substitution) of any Qualified Substitute
Home Loans as of the date of substitution plus any accrued and unpaid
interest thereon to the date of substitution, is less than (b) the sum of the
aggregate of the Principal Balances, together with accrued and unpaid
interest thereon to the date of substitution, of the related Deleted Home
Loans.
Superior Lien: With respect to any Home Loan which is secured by a lien
-------------
other than a first priority lien, the mortgage loan(s) relating to the
corresponding Mortgaged Property having a superior priority lien.
Termination Date: The earlier of (a) the Distribution Date in February
----------------
2023 and (b) the Distribution Date next following the Monthly Cut-Off Date
coinciding with or next following the date of the liquidation or disposition
of the last asset held by the Trust pursuant to Section 11.01.
-------------
Termination Price: As of any date of determination, an amount without
-----------------
duplication equal to the sum of (i) the then outstanding Class Principal
Balances of the Classes of Notes plus all accrued and unpaid interest
thereon, (ii) the then outstanding Class Principal Balance of the Class B
Certificates plus all accrued and unpaid interest thereon, (iii) any Trust
Fees and Expenses due and unpaid on such date and (iv) any Servicing Advance
Reimbursement Amount.
Title Document. The evidence of title to or ownership of the Property
--------------
required by Title I. (See 24 C.F.R. 201.26(a)(1) and 201.20).
Title I: Section 2 of Title I of the National Housing Act of 1934, as
-------
amended, and the rules and regulations promulgated thereunder as each may be
amended from time to time and any successor statute, rules or regulations
thereto.
Transferor: Empire Funding, in its capacity as the transferor hereunder.
----------
Trust: The Issuer.
-----
Trust Account Property: The Trust Accounts, all amounts and investments
----------------------
held from time to time in the Trust Accounts and all proceeds of the
foregoing.
Trust Accounts: The Note Distribution Account, the Certificate
--------------
Distribution Account, the FHA Premium Account and the Collection Account.
Trust Agreement: The Trust Agreement dated as of March 1, 1997, among
---------------
the Depositor, the Company, the Co-Owner Trustee and the Owner Trustee.
Trust Designated Insurance Amount: $276,533.15.
---------------------------------
Trust Estate: The assets subject to this Agreement, the Trust Agreement
------------
and the Indenture and assigned to the Trust, which assets consist of: (i)
such Home Loans as from time to time are subject to this Agreement as listed
in the Home Loan Schedule, as the same may be amended or supplemented from
time to time including the removal of Deleted Home Loans and the addition of
Qualified Substitute Home Loans, together with the Servicer's Home Loan
Files and the Trustee's Home Loan Files relating thereto and all proceeds
thereof, (ii) the Mortgages and security interests in Mortgaged Properties,
(iii) all payments in respect of interest due with respect to the Home Loans
on or after the Cut-Off Date, all payments received with respect to principal
after the Cut-Off Date and all payments of premiums on FHA Insurance after
the Cut-Off Date, (iv) the rights to FHA Insurance reserves attributable to
the FHA Loans as of the Cut-Off Date, (v) such assets as from time to time
are identified as Foreclosure Property, (vi) such assets and funds as are
from time to time are deposited in the Collection Account, the Note
Distribution Account, the Certificate Distribution Account and the FHA
Reserve Account, including amounts on deposit in such accounts which are
invested in Permitted Investments, (vii) the Issuer's rights under all
insurance policies with respect to the Home Loans and any Insurance Proceeds,
(viii) Net Liquidation Proceeds and Released Mortgaged Property Proceeds, and
(ix) all right, title and interest of the Depositor in and to the obligations
of the Transferor under the Home Loan Purchase Agreement in which the
Depositor acquired the Home Loans from the Transferor, and all proceeds of
any of the foregoing.
Trust Fees and Expenses: As of each Distribution Date, an amount equal
-----------------------
to the Servicing Compensation, the Indenture Trustee Fee, the Owner Trustee
Fee and the Custodian Fee, if any.
Underwriter: Greenwich Capital Markets, Inc.
-----------
Section 1.02 Other Definitional Provisions.
-----------------------------
(a) Capitalized terms used herein and not otherwise defined herein have
the meanings assigned to them in the Indenture and the Trust Agreement.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant
hereto unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
this Agreement or in any such certificate or other document, and accounting
terms partly defined in this Agreement or in any such certificate or other
document to the extent not defined, shall have the respective meanings given
to them under generally accepted accounting principles. To the extent that
the definitions of accounting terms in this Agreement or in any such
certificate or other document are inconsistent with the meanings of such
terms under generally accepted accounting principles, the definitions
contained in this Agreement or in any such certificate or other document
shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement; Article, Section,
Schedule and Exhibit references contained in this Agreement are references to
Articles, Sections, Schedules and Exhibits in or to this Agreement unless
otherwise specified; and the term "including" shall mean "including without
limitation."
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means
such agreement, instrument or statute as from time to time amended, modified
or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.
ARTICLE II.
CONVEYANCE OF THE HOME LOANS
----------------------------
Section 2.01 Conveyance of the Home Loans.
----------------------------
(a) As of the Closing Date, in consideration of the Issuer's delivery
of the Notes, Class B Certificates and Residual Interest Instruments to the
Depositor or its designee, upon the order of the Depositor, the Depositor, as
of the Closing Date and concurrently with the execution and delivery hereof,
does hereby sell, transfer, assign, set over and otherwise convey to the
Issuer, without recourse, but subject to the other terms and provisions of
this Agreement, and in accordance with the requirements for transfer of an
insured loan in Title I and 24 C.F.R. Section 201.32(c), all of the right,
title and interest of the Depositor in and to the Trust Estate and the Issuer
hereby agrees to grant, transfer, assign, set over and otherwise convey to
the Indenture Trustee, on the Settlement Date, the sum of $44.15 for deposit
by the Indenture Trustee in the Note Distribution Account. The foregoing
sale, transfer, assignment, set over and conveyance does not and is not
intended to result in a creation or an assumption by the Issuer of any
obligation of the Depositor, the Transferor or any other person in connection
with the Trust Estate or under any agreement or instrument relating thereto
except as specifically set forth herein.
(b) As of the Closing Date, the Issuer acknowledges the conveyance to
it of the Trust Estate, including all right, title and interest of the
Depositor in and to the Trust Estate, receipt of which is hereby acknowledged
by the Issuer. Concurrently with such delivery and in exchange therefor, the
Issuer has pledged to the Indenture Trustee the Trust Estate and the
Indenture Trustee, pursuant to the written instructions of the Issuer, has
executed and caused to be authenticated and delivered the Notes to the
Depositor or its designee, upon the order of the Issuer. In addition,
concurrently with such delivery and in exchange therefor, the Owner Trustee,
pursuant to the instructions of the Depositor, has executed (not in its
individual capacity, but solely as Owner Trustee on behalf of the Issuer) and
caused to be authenticated and delivered the Class B Certificates and the
Residual Interest to the Depositor or its designee, upon the order of the
Depositor.
Section 2.02 (Reserved).
----------
Section 2.03 Ownership and Possession of Home Loan Files.
-------------------------------------------
Upon the issuance of the Securities, with respect to the Home Loans, the
ownership of each Debt Instrument, the related Mortgage and the contents of
the related Servicer's Home Loan File and the Indenture Trustee's Home Loan
File shall be vested in the Owner Trustee and the Co-Owner Trustee and
pledged to the Indenture Trustee for the benefit of the Securityholders,
although possession of the Servicer's Home Loan Files (other than items
required to be maintained in the Indenture Trustee's Home Loan Files) on
behalf of and for the benefit of the
Securityholders shall remain with the Servicer, and the Custodian shall take
possession of the Indenture Trustee's Home Loan Files as contemplated in
Section 2.06.
- ------------
Section 2.04 Books and Records.
-----------------
The sale of each Home Loan shall be reflected on the Depositor's or the
Transferor's, as the case may be, balance sheets and other financial
statements as a sale of assets by the Depositor or the Transferor, as the
case may be, under generally accepted accounting principles ("GAAP"). Each
----
of the Servicer and the Custodian shall be responsible for maintaining, and
shall maintain, a complete set of books and records for each Home Loan which
shall be clearly marked to reflect the ownership of each Home Loan by the
Owner Trustee and the Co-Owner Trustee and pledged to the Indenture Trustee
for the benefit of the Securityholders.
It is the intention of the parties hereto that the transfers and
assignments contemplated by this Agreement shall constitute a sale of the
Home Loans and the other property specified in Section 2.01(a) from the
Depositor to the Trust and such property shall not be property of the
Depositor. If the assignment and transfer of the Home Loans and the other
property specified in Section 2.01(a) to the Owner Trustee and Co-Owner
Trustee pursuant to this Agreement or the conveyance of the Home Loans or any
of such other property to the Owner Trustee and Co-Owner Trustee is held or
deemed not to be a sale or is held or deemed to be a pledge of security for a
loan, the Depositor intends that the rights and obligations of the parties
shall be established pursuant to the terms of the Agreement and that, in such
event, (i) the Depositor shall be deemed to have granted and does hereby
grant to the Owner Trustee and Co-Owner Trustee a first priority security
interest in the entire right, title and interest of the Depositor in and to
the Home Loans and all other property conveyed to the Owner Trustee and Co-
Owner Trustee pursuant to Section 2.01 and all proceeds thereof, and (ii)
this Agreement shall constitute a security agreement under applicable law.
Within ten (10) days of the Closing Date, the Depositor shall cause to be
filed UCC-1 financing statements naming the Owner Trustee and Co-Owner
Trustee as "secured parties" and describing the Home Loans being sold by the
Depositor to the Trust with the office of the Secretary of State of the State
in which the Depositor is located.
Section 2.05 Delivery of Home Loan Documents.
-------------------------------
(a) With respect to each Home Loan, on the Closing Date the Transferor
and/or the Depositor, as applicable, have delivered or caused to be delivered
to the Custodian as the designated agent of the Indenture Trustee each of the
following documents (collectively, the "Home Loan Files"):
---------------
(i) The original Debt Instrument, endorsed by the Transferor in
blank or in the following form: "Pay to the order of First Bank National
Association, as Indenture Trustee and Co-Owner Trustee under the Sale
and Servicing Agreement, dated as of March 1, 1997, Empire Funding Home
Loan Owner Trust 1997-1, without recourse", with all prior and
intervening endorsements showing a complete chain of endorsement from
origination of the Home Loan to the Transferor;
(ii) If such Home Loan is a Mortgage Loan, the original Mortgage
with evidence of recording thereon (or, if the original Mortgage has not
been returned from the applicable public recording office or is not
otherwise available, a copy of the Mortgage certified by a Responsible
Officer of the Transferor or by the closing attorney or by an officer of
the title insurer or agent of the title insurer which issued the related
title insurance policy, if any, or commitment therefor to be a true and
complete copy of the original Mortgage submitted for recording) and, if
the Mortgage was executed pursuant to a power of attorney, the original
power of attorney with evidence of recording thereon (or, if the
original power of attorney has not been returned from the applicable
public recording office or is not otherwise available, a copy of the
power of attorney certified by a Responsible Officer of the Transferor
or by the closing attorney or by an officer of the title insurer or
agent of the title insurer which issued the related title insurance
policy, if any, or commitment therefor, to be a true and complete copy
of the original power of attorney submitted for recording);
(iii) If such Home Loan is a Mortgage Loan, the original
executed Assignment of Mortgage, in recordable form. Such assignments
may be blanket assignments, to the extent such assignments are effective
under applicable law, for Mortgages covering Mortgaged Properties
situated within the same county. If the Assignment of Mortgage is in
blanket form an assignment of Mortgage need not be included in the
individual Home Loan File;
(iv) If such Home Loan is a Mortgage Loan, all original intervening
Assignments of Mortgage, with evidence of recording thereon, showing a
complete chain of assignment from origination of the Home Loan to the
Transferor (or, if any such Assignment of Mortgage has not been returned
from the applicable public recording office or is not otherwise
available, a copy of such Assignment of Mortgage certified by a
Responsible Officer of the Transferor or by the closing attorney or by
an officer of the title insurer or agent of the title insurer which
issued the related title insurance policy, if any, or commitment
therefor to be a true and complete copy of the original Assignment
submitted for recording);
(v) The original, or a copy certified by the Transferor to be a
true and correct copy of the original, of each assumption, modification,
written assurance or substitution agreement, if any; and
(b) With respect to each Home Loan, on the Closing Date, the Transferor
and the Depositor have delivered or caused to be delivered to the Servicer,
as the designated agent of the Indenture Trustee each of the following
documents (collectively, the "Servicer's Home Loan Files"): (A) If such Home
--------------------------
Loan is an FHA Loan, an original or copy of notice signed by the Obligor
acknowledging HUD insurance, (B) an original or copy of truth-in-lending
disclosure, (C) an original or copy of the credit application, (D) an
original or copy of the consumer credit report, (E) an original or copy of
verification of employment and income, or verification of self-
employment income, (F) if such Home Loan is an FHA Loan, an original or copy
of evidence of the Obligor's interest in the Property, (G) an original or
copy of contract of work or written description with cost estimates, if any,
(H)(i) if such Home Loan is an FHA Loan either (a) an original or copy of the
completion certificate (or, if such certificate is not yet due, a notice to
that effect) or an original or copy of notice of non-compliance, if
applicable or (b) an original or copy of report of inspection of improvements
to the Property or if such report is not yet due a notice to that effect or
an original or copy of notice of non-compliance, if applicable, or (ii) if
such Home Loan is a Non-FHA Loan in respect of a home improvement for which
the Transferor prepares an inspection report, an original or copy of report
of inspection of improvements to the Property, (I) to the extent not included
in (C), an original or a copy of a written verification (or a notice of
telephonic verification, with written verification to follow) that the
Mortgagor at the time of origination was not more than 30 days delinquent on
any senior mortgage or deed of trust on the Mortgaged Property, (J) (i) if
such Home Loan is an FHA Loan for which an appraisal is required pursuant to
the applicable regulations, an original or a copy of an appraisal of the
Property as of the time of origination of such FHA Loan or (ii) if such Home
Loan is a Non-FHA Loan and secured by a Mortgage, a copy of the HUD-1 or HUD
1-A Closing Statement indicating the sale price, or an existing Uniform
Residential Appraisal Report, or a Drive-by Appraisal documented on Freddie
Mac form 704, or a tax assessment, or a full Uniform Residential Appraisal
Report prepared by a national appraisal firm in accordance with the
Transferor's guidelines, (K) an original or a copy of a title search as of
the time of origination with respect to the Property in accordance with the
Transferor's guidelines, and (L) if such Home Loan is an FHA Loan, any other
documents required for the submission of a claim with respect to such FHA
Loan to the FHA.
(c) the Transferor, at the direction of the Depositor, concurrently
with the execution and delivery hereof, has delivered to the Indenture
Trustee cash in an amount equal to (i) the accrued annual FHA premium due on
each FHA Loan to the applicable Cut-Off Date, and (ii) the amount of FHA
premium collected in respect of the Invoiced Loans after the applicable Cut-
Off Date. The Indenture Trustee shall distribute the amount referred to in
clause (i) of the previous sentence into the FHA Premium Account and shall
distribute the amount referred to in clause (ii) of the previous sentence
into the Note Distribution Account.
(d) The Indenture Trustee shall cause the Custodian to take and
maintain continuous physical possession of the Indenture Trustee's Home Loan
Files in the State of Minnesota, and in connection therewith, shall act
solely as agent for the holders of the in accordance with the terms hereof
and not as agent for the Transferor or any other party.
(e) Within 60 days of the Closing Date, the Transferor, at its own
expense, shall record each Assignment of Mortgage (which may be a blanket
assignment if permitted by applicable law) in the appropriate real property
or other records; provided, however, the Transferor need not record any such
Assignment which relates to a Mortgage Loan in any jurisdiction under the
laws of which, as evidenced by an Opinion of Counsel delivered by the
Transferor (at the Transferor's expense) to the Indenture Trustee and the
Rating Agencies, the recordation of such Assignment of Mortgage is not
necessary to protect the Indenture Trustee's interest in the related Mortgage
Loan. With respect to any Assignment of Mortgage as to which the related
recording information is unavailable within 60 days following the Closing
Date, such Assignment of Mortgage shall be submitted for recording within 30
days after receipt of such information but in no event later than one year
after the Closing Date. The Indenture Trustee shall be required to retain a
copy of each Assignment of Mortgage submitted for recording. In the event
that any such Assignment of Mortgage is lost or returned unrecorded because
of a defect therein, the Transferor shall promptly prepare a substitute
Assignment of Mortgage or cure such defect, as the case may be, and
thereafter the Transferor shall be required to submit each such Assignment of
Mortgage Loan for recording.
(f) All Home Loan documents held by the Custodian on behalf of the
Indenture Trustee are referred to herein as the "Indenture Trustee's Home
------------------------
Loan File." All recordings required pursuant to this Section 2.05 shall be
- --------- ------------
accomplished by and at the expense of the Transferor.
Section 2.06 Acceptance by Indenture Trustee of the Home Loans;
--------------------------------------------------
Certain Substitutions; Initial Certification by Custodian.
- ----------------------------------------------------------
(a) The Indenture Trustee agrees to cause the Custodian to execute and
deliver on the Closing Date an acknowledgment of receipt of the Indenture
Trustee's Home Loan File for each Home Loan. The Indenture Trustee declares
that it will cause the Custodian to hold such documents and any amendments,
replacements or supplements thereto, as well as any other assets included in
the Trust Estate and delivered to the Custodian in trust, upon and subject to
the conditions set forth herein for the benefit of the Securityholders. The
Indenture Trustee agrees, for the benefit of the Securityholders, to cause
the Custodian to review each Indenture Trustee's Home Loan File within 45
days after the Closing Date (or, with respect to any Qualified Substitute
Home Loan, within 45 days after the conveyance of the related Home Loan to
the Trust) and to cause the Custodian to deliver to the Transferor, the
Depositor, the Indenture Trustee, the Issuer and the Servicer a certification
to the effect that, as to each Home Loan listed in the Home Loan Schedule,
(i) all documents required to be delivered to the Indenture Trustee pursuant
to this Agreement are in its possession or in the possession of the Custodian
on its behalf (other than as expressly permitted by Section 2.05), (ii) all
------------
documents delivered by the Depositor and the Transferor to the Custodian
pursuant to Section 2.05 have been reviewed by the Custodian and have not
------------
been mutilated or damaged and appear regular on their face (handwritten
additions, changes or corrections shall not constitute irregularities if
initialed by the Obligor) and relate to such Home Loan, (iii) based on the
examination of the Custodian on behalf of the Indenture Trustee, and only as
to the foregoing documents, the information set forth on the Home Loan
Schedule accurately reflects the information set forth in the Indenture
Trustee's Home Loan File and (iv) each Debt Instrument has been endorsed as
provided in Section 2.05. Neither the Issuer nor the Custodian shall be
------------
under any duty or obligation (i) to inspect, review or examine any such
documents, instruments, certificates or other papers to determine that they
are genuine, enforceable, or appropriate for the represented purpose or that
they are other than what they purport to be on their face or (ii) to
determine whether any Indenture Trustee's Home Loan File should include any
of the documents specified in Section 2.05(a)(v).
------------------
(b) The Servicer's Home Loan File shall be held in the custody of the
Servicer for the benefit of, and as agent for, the Securityholders and the
Indenture Trustee as the owner thereof. It is intended that by the
Servicer's agreement pursuant to this Section 2.06(b) the Indenture Trustee
---------------
shall be deemed to have possession of the Servicer's Home Loan Files for
purposes of Section 9-305 of the Uniform Commercial Code of the State in
which such documents or instruments are located. the Servicer shall promptly
report to the Indenture Trustee any failure by it to hold the Servicer's Home
Loan File as herein provided and shall promptly take appropriate action to
remedy any such failure. In acting as custodian of such documents and
instruments, the Servicer agrees not to assert any legal or beneficial
ownership interest in the Home Loans or such documents or instruments. the
Servicer agrees to indemnify the Securityholders and the Indenture Trustee
for any and all liabilities, obligations, losses, damages, payments, costs,
or expenses of any kind whatsoever which may be imposed on, incurred by or
asserted against the Securityholders or the Indenture Trustee as the result
of any act or omission by the Servicer relating to the maintenance and
custody of such documents or instruments which have been delivered to the
Servicer; provided, however, that the Servicer will not be liable for any
-------- -------
portion of any such amount resulting from the negligence or misconduct of any
Securityholder or the Indenture Trustee and provided, further, that the
-------- -------
Servicer will not be liable for any portion of any such amount resulting from
the Servicer's compliance with any instructions or directions consistent with
this Agreement issued to the Servicer by the Indenture Trustee. The
Indenture Trustee shall have no duty to monitor or otherwise oversee the
Servicer's performance as custodian hereunder.
(c) If the Custodian, during the process of reviewing the Indenture
Trustee's Home Loan Files, finds any document constituting a part of a
Indenture Trustee's Home Loan File which is not executed, has not been
received, is unrelated to any Home Loan identified in the Home Loan Schedule,
does not conform to the requirements of Section 2.05 or does not conform, in
------------
all material respects, to the description thereof as set forth in the Home
Loan Schedule, then the Custodian shall promptly so notify the Transferor,
the Servicer, the Indenture Trustee, the Issuer and the Depositor. In
performing any such review, the Custodian may conclusively rely on the
Transferor as to the purported genuineness of any such document and any
signature thereon. It is understood that the scope of the Custodian's review
of the Indenture Trustee's Home Loan Files is limited solely to confirming
-----------------
that the documents listed in Section 2.05 have been received and further
------------
confirming that any and all documents delivered pursuant to Section 2.05 have
------------
been executed and relate to the Home Loans identified in the Home Loan
Schedule. Neither the Issuer nor the Custodian shall have any responsibility
for determining whether any document is valid and binding, whether the text
of any assignment or endorsement is in proper or recordable form, whether any
document has been recorded in accordance with the requirements of any
applicable jurisdiction, or whether a blanket assignment is permitted in any
applicable jurisdiction or whether the requirements for transfer of an
insured loan specified in Title I, 24 C.F.R. Section 201.32(c) or elsewhere
have been complied with. If a material defect in a document constituting
part of a Indenture Trustee's Home Loan File is discovered, then the
Depositor and Transferor shall comply with the cure, substitution and
repurchase provisions of Section 3.06 hereof.
------------
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 3.01 Representations and Warranties of the Depositor.
-----------------------------------------------
The Depositor hereby represents and warrants to the Transferor, the
Indenture Trustee, the Owner Trustee and the Securityholders that as of the
Closing Date:
(a) The Depositor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and has, and had at all relevant times, full power to own its property,
to carry on its business as presently conducted, to enter into and
perform its obligations under this Agreement and to create the Trust
pursuant hereto;
(b) The execution and delivery of this Agreement by the Depositor
and its performance of and compliance with the terms of this Agreement
will not violate the Depositor's articles of incorporation or by-laws or
constitute a default (or an event which, with notice or lapse of time,
or both, would constitute a default) under, or result in the breach or
acceleration of, any material contract, agreement or other instrument to
which the Depositor is a party or which may be applicable to the
Depositor or any of its assets;
(c) The Depositor has the full power and authority to enter into
and consummate the transactions contemplated by this Agreement, has duly
authorized the execution, delivery and performance of this Agreement,
and has duly executed and delivered this Agreement. This Agreement,
assuming due authorization, execution and delivery by the Indenture
Trustee, the Transferor and the Servicer, constitutes a valid, legal and
binding obligation of the Depositor, enforceable against it in
accordance with the terms hereof, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, receivership, mora-
torium or other similar laws relating to or affecting the rights of
creditors generally, and by general equity principles (regardless of
whether such enforcement is considered in a proceeding in equity or at
law);
(d) The Depositor is not in violation of, and the execution and
delivery of this Agreement by the Depositor and its performance and
compliance with the terms of this Agreement will not constitute a
violation with respect to, any order or decree of any court or any order
or regulation of any federal, state, municipal or governmental agency
having jurisdiction, which violation would materially and adversely
affect the condition (financial or otherwise) or operations of the
Depositor or its properties or materially and adversely affect the
performance of its duties hereunder;
(e) There are no actions or proceedings against, or investigations
of, the Depositor pending with regard to which the Depositor has
received service of process, or, to the knowledge of the Depositor,
threatened, before any court, administrative agency or
other tribunal (A) that, if determined adversely, would prohibit its
entering into this Agreement or render the Securities invalid, (B)
seeking to prevent the issuance of the Securities or the consummation of
any of the transactions contemplated by this Agreement or (C) that, if
determined adversely, would prohibit or materially and adversely affect
the performance by the Depositor of its obligations under, or the
validity or enforceability of, this Agreement or the Securities;
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Depositor of, or compliance by the Depositor with,
this Agreement or the Certificates, or for the consummation of the
transactions contemplated by this Agreement, except for such consents,
approvals, authorizations and orders, if any, that have been obtained
prior to the Closing Date;
(g) The Depositor is solvent, is able to pay its debts as they
become due and has capital sufficient to carry on its business and its
obligations hereunder; it will not be rendered insolvent by the
execution and delivery of this Agreement or its obligations hereunder;
no petition of bankruptcy (or similar insolvency proceeding) has been
filed by or against the Depositor prior to the date hereof;
(h) The Depositor did not sell the Home Loans to the Trust with
any intent to hinder, delay or defraud any of its creditors; the
Depositor will not be rendered insolvent as a result of the sale of the
Home Loans to the Trust;
(i) As of the Closing Date, the Depositor had good title to, and
was the sole owner of, each Home Loan free and clear of any Lien other
than any such Lien released simultaneously with the sale contemplated
herein, and, immediately upon each transfer and assignment herein
contemplated, the Depositor will have taken all steps necessary so that
the Trust will have good title to, and will be the sole owner of, each
Home Loan free and clear of any lien;
(j) The Depositor acquired title to each of the Home Loans in good
faith, without notice of any adverse claim;
(k) No Officers' Certificate, statement, report or other document
prepared by the Depositor and furnished or to be furnished by it
pursuant to this Agreement or in connection with the transactions
contemplated hereby contains any untrue statement of material fact or
omits to state a material fact necessary to make the statements
contained herein or therein not misleading;
(l) The Depositor is not required to be registered as an
"investment company" under the Investment Company Act of 1940, as
amended; and
(m) The transfer, assignment and conveyance of the Debt
Instruments and the Mortgages by the Depositor pursuant to this
Agreement are not subject to the bulk transfer laws or any similar
statutory provisions in effect in any applicable jurisdiction.
Section 3.02 Representations and Warranties of the Transferor.
------------------------------------------------
The Transferor hereby represents and warrants to the Indenture Trustee,
the Owner Trustee, the Securityholders and the Depositor that as of the
Closing Date or as of such date specifically provided herein:
(a) The Transferor is a corporation licensed as a mortgage lender
duly organized, validly existing and in good standing under the laws of
the State of Oklahoma and has, and had at all relevant times, full
corporate power to originate or purchase the Home Loans, to own its
property, to carry on its business as presently conducted and to enter
into and perform its obligations under this Agreement;
(b) The execution and delivery of this Agreement by the Transferor
and its performance of and compliance with the terms of this Agreement
will not violate the Transferor's articles of incorporation or by-laws
or constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, or result in the
breach or acceleration of, any material contract, agreement or other
instrument to which the Transferor is a party or which may be applicable
to the Transferor or any of its assets;
(c) The Transferor has the full power and authority to enter into
and consummate all transactions contemplated by this Agreement to be
consummated by it, has duly authorized the execution, delivery and
performance of this Agreement, and has duly executed and delivered this
Agreement. This Agreement, assuming due authorization, execution and
delivery by the Indenture Trustee and the Depositor, constitutes a
valid, legal and binding obligation of the Transferor, enforceable
against it in accordance with the terms hereof, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium or other similar laws relating to or affecting
the rights of creditors generally, and by general equity principles
(regardless of whether such enforcement is considered in a proceeding in
equity or at law);
(d) The Transferor is not in violation of, and the execution and
delivery of this Agreement by the Transferor and its performance and
compliance with the terms of this Agreement will not constitute a
violation with respect to, any order or decree of any court or any order
or regulation of any federal, state, municipal or governmental agency
having jurisdiction, which violation would materially and adversely
affect the condition (financial or otherwise) or operations of the
Transferor or its properties or materially and adversely affect the
performance of its duties hereunder;
(e) There are no actions or proceedings against, or investigations
of, the Transferor pending or, to the knowledge of the Transferor,
threatened, before any court, administrative agency or other tribunal
(A) that, if determined adversely, would prohibit its entering into this
Agreement or render the Securities invalid, (B) seeking to prevent the
issuance of the Securities or the consummation of any of the transac-
tions contemplated by this Agreement or (C) that, if determined
adversely, would prohibit or materially and adversely affect the sale of
the Home Loans to the Depositor, the performance by the Transferor of
its obligations under, or the validity or enforceability of, this
Agreement or the Securities;
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for: (1) the execution, delivery
and performance by the Transferor of, or compliance by the Transferor
with, this Agreement, (2) the transfer of all FHA insurance reserves
relating to the FHA Loans to the Contract of Insurance Holder, (3) the
issuance of the Certificates, (4) the sale of the Home Loans under the
Home Loan Purchase Agreement or (5) the consummation of the transactions
required of it by this Agreement, except: (A) such as shall have been
obtained before the Closing Date and (B) the transfer of the FHA
insurance reserves by the FHA to the Contract of Insurance Holder with
respect to the FHA Loans as to which an FHA case number has not been
assigned as of the Closing Date;
(g) The Transferor acquired title to the Home Loans in good faith,
without notice of any adverse claim;
(h) The collection practices used by the Transferor with respect
to the Home Loans have been, in all material respects, legal, proper,
prudent and customary in the non-conforming mortgage servicing business;
(i) No Officers' Certificate, statement, report or other document
prepared by the Transferor and furnished or to be furnished by it
pursuant to this Agreement or in connection with the transactions
contemplated hereby contains any untrue statement of material fact or
omits to state a material fact necessary to make the statements
contained herein or therein not misleading;
(j) The Transferor is solvent, is able to pay its debts as they
become due and has capital sufficient to carry on its business and its
obligations hereunder; it will not be rendered insolvent by the
execution and delivery of this Agreement or by the performance of its
obligations hereunder; no petition of bankruptcy (or similar insolvency
proceeding) has been filed by or against the Transferor prior to the
date hereof;
(k) The Prospectus Supplement (other than (i) the statements on
the cover page and inside cover page relating to Greenwich Capital
Markets, Inc. and (ii) the statements under the following captions:
"SUMMARY - Securities Issued", "- Priority of Distributions", "- Final
Scheduled Distribution Date", "- Credit Enhancement", "- Tax
Status", "- ERISA", "- Legal Investment", "DESCRIPTION OF THE OFFERED
SECURITIES", "DESCRIPTION OF CREDIT ENHANCEMENT", "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES", "STATE TAX CONSEQUENCES", "ERISA
CONSIDERATIONS", "LEGAL INVESTMENT MATTERS" and "METHOD OF
DISTRIBUTION", as to which the Transferor makes no statement) does not
contain an untrue statement of a material fact and does not omit to
state a material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(l) HUD has approved in writing the transfer to the Contract of
Insurance Holder of the FHA Reserve Amount relating to each FHA Loan and
all actions have been taken by the Transferor (other than the filing of
the Transfer of Note Report Form 27030 with HUD) and all required
consents have been obtained (other than approval upon HUD's receipt of
such Transfer of Note Report), in either case, necessary to effect
transfer to the Contract of Insurance Holder of the FHA Reserve Amount
relating to each FHA Loan (except for FHA Loans with respect to which a
case number has not been assigned as of the Closing Date). The FHA
Reserve Amounts with respect to the FHA Loans transferred to the
Contract of Insurance Holder both prior to and following the transfer of
the FHA Loans to the Co-Owner Trustee and Owner Trustee will be
available to satisfy claims with respect to such FHA Loans. The amount
in the FHA Insurance Coverage Reserve Account, together with all amounts
to be requested for transfer with respect to the FHA Loans, will equal
$3,025,615.67. The amount to be requested for transfer with respect to
the FHA Loans is $276,533.15, which is the sum of approximately 10% of
the aggregate of the Principal Balances of the FHA Loans as of the Cut-
Off Date;
(m) the Transferor is a non-supervised lender in good standing
with HUD under 24 CFR Section202.5 and is authorized to originate,
purchase, hold, service and/or sell loans insured under 24 CFR Part 201
pursuant to a valid contract of insurance, Number 505842; and
(n) the Transferor has transferred the Home Loans without any
intent to hinder, delay or defraud any of its creditors;
It is understood and agreed that the representations and warranties set
forth in this Section 3.02 shall survive delivery of the respective Home Loan
Files to the Custodian (as the agent of the Indenture Trustee) and shall
inure to the benefit of the Securityholders, the Depositor, the Servicer, the
Indenture Trustee, the Owner Trustee and the Trust. Upon discovery by any of
the Transferor, the Depositor, the Servicer or the Trustee of a breach of any
of the foregoing representations and warranties that materially and adversely
affects the value of any Home Loan or the interests of the Securityholders
therein, the party discovering such breach shall give prompt written notice
(but in no event later than two Business Days following such discovery) to
the other parties. The obligations of the Transferor set forth in Section
3.06 to cure any breach or to substitute for or repurchase an affected Home
Loan shall constitute the sole remedies available to the Securityholders,
the Depositor, to the Servicer, the Indenture Trustee, or to the Owner
Trustee respecting a breach of the representations and warranties contained
in this Section 3.02.
Section 3.03 Representations, Warranties and Covenants of the
------------------------------------------------
Servicer.
- ---------
The Servicer hereby represents and warrants to and covenants with the
Owner Trustee, the Securityholders, the Depositor and the Transferor that as
of the Closing Date or as of such date specifically provided herein:
(a) The Servicer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Oklahoma and is or
will be in compliance with the laws of each state in which any Mortgaged
Property is located to the extent necessary to ensure the enforceability
of each Home Loan in accordance with the terms of this Agreement;
(b) The execution and delivery of this Agreement by the Servicer
and its performance of and compliance with the terms of this Agreement
will not violate the Servicer's articles of incorporation or by-laws or
constitute a default (or an event which, with notice or lapse of time,
or both, would constitute a default) under, or result in the breach or
acceleration of, any material contract, agreement or other instrument to
which the Servicer is a party or which may be applicable to the Servicer
or any of its assets;
(c) The Servicer has the full power and authority to enter into
and consummate all transactions contemplated by this Agreement, has duly
authorized the execution, delivery and performance of this Agreement,
and has duly executed and delivered this Agreement. This Agreement,
assuming due authorization, execution and delivery by the Indenture
Trustee, the Owner Trustee, constitutes a valid, legal and binding
obligation of the Servicer, enforceable against it in accordance with
the terms hereof, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, receivership, moratorium or
other similar laws relating to or affecting the rights of creditors
generally, and by general equity principles (regardless of whether such
enforcement is considered in a proceeding in equity or at law);
(d) The Servicer is not in violation of, and the execution and
delivery of this Agreement by the Servicer and its performance and
compliance with the terms of this Agreement will not constitute a
violation with respect to, any order or decree of any court or any order
or regulation of any federal, state, municipal or governmental agency
having jurisdiction, which violation would materially and adversely
affect the condition (financial or otherwise) or operations of the
Servicer or materially and adversely affect the performance of its
duties hereunder;
(e) There are no actions or proceedings against, or investigations
of, the Servicer pending, or, to the knowledge of the Servicer,
threatened, before any court, administrative agency or other tribunal
(A) that, if determined adversely, would prohibit its entering into
this Agreement or render the Securities invalid, (B) seeking to prevent
the issuance of the Securities or the consummation of any of the
transactions contemplated by this Agreement or (C) that, if determined
adversely, would prohibit or materially and adversely affect the
performance by the Servicer of its obligations under, or the
validity or enforceability of, this Agreement or the Securities;
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Servicer of, or compliance by the Servicer with, this
Agreement or the Securities, or for the consummation of the transactions
contemplated by this Agreement, except for such consents, approvals,
authorizations and orders, if any, that have been obtained prior to the
Closing Date;
(g) The Servicer is duly licensed where required as a "Licensee"
or is otherwise qualified in each state in which it transacts business
and is not in default of such state's applicable laws, rules and
regulations, except where the failure to so qualify or such default
would not have a material adverse effect on the ability of the Servicer
to conduct its business or perform its obligations hereunder;
(h) The Servicer is an Eligible Servicer and services mortgage
loans in accordance with Accepted Servicing Procedures;
(i) (Reserved);
(j) No Officers' Certificate, statement, report or other document
prepared by the Servicer and furnished or to be furnished by it pursuant
to this Agreement or in connection with the transactions contemplated
hereby contains any untrue statement of material fact or omits to state
a material fact necessary to make the statements contained herein or
therein not misleading;
(k) The Servicer is solvent and will not be rendered insolvent as
a result of the performance of its obligations pursuant to this
Agreement;
(l) The Servicer has not waived any default, breach, violation or
event of acceleration existing under any Debt Instrument or the related
Mortgage;
(m) The Servicer will cause to be performed any and all acts
required to be performed by the Servicer to preserve the rights and
remedies of the Trust and the Indenture Trustee in any Insurance
Policies applicable to the Home Loans or with respect to any FHA Loan,
any Insurance Policy required to be maintained pursuant to Title I,
including, without limitation, in each case, any necessary notifications
of insurers, assignments of policies or interests therein, and
establishments of co-insured, joint loss payee and mortgagee rights in
favor of the Trust and the Indenture Trustee;
(n) The Servicer shall comply with, and shall service, or cause to
be serviced, each Home Loan, in accordance with all applicable laws,
and, in particular, in accordance with any applicable provisions of the
National Housing Act, as amended and supplemented, all rules and
regulations issued thereunder, and all administrative publications
published pursuant thereto including, in the case of the FHA Loans, all
FHA requirements of FHA Title I loans; and
(o) The Servicer agrees that, so long as it shall continue to
serve in the capacity contemplated under the terms of this Agreement, it
shall remain in good standing under the laws governing its creation and
existence and qualified under the laws of each state in which it is
necessary to perform its obligations under this Agreement or in which
the nature of its business requires such qualification, it shall
maintain all licenses, permits and other approvals required by any law
or regulations, including, without limitation Title I, as may be
necessary to perform its obligations under this Agreement and to retain
all rights to service the Loans, and it shall not dissolve or otherwise
dispose of all or substantially all of its assets.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.03 shall survive delivery of the
------------
respective Home Loan Files to the Indenture Trustee and shall inure to the
benefit of the Depositor, the Securityholders and the Indenture Trustee.
Upon discovery by any of the Transferor, the Depositor, the Servicer or the
Indenture Trustee of a breach of any of the foregoing representations,
warranties and covenants that materially and adversely affects the value of
any Home Loan or the interests of the Securityholders therein, the party
discovering such breach shall give prompt written notice (but in no event
later than two Business Days following such discovery) to the other parties.
The obligations of the Servicer set forth in (x) Section 3.06 to cure any
------------
breach or to purchase an affected Home Loan, (y) Section 3.06 to indemnify
------------
and hold harmless the Trust and (z) Section 9.01(a) to indemnify and hold
---------------
harmless the Trust, the Depositor, the Transferor, the Trustee, and the
Securityholders shall constitute the sole remedies available to the
Transferor, the Securityholders, the Trust, the depositor, or the Indenture
Trustee respecting a breach of the representations, warranties and covenants
contained in this Section 3.03.
------------
Section 3.04 Representations and Warranties regarding Individual Home
--------------------------------------------------------
Loans.
- -----
The Transferor hereby represents and warrants to the Depositor, the
Issuer, the Indenture Trustee and the Securityholders, with respect to each
Home Loan, as of the Closing Date:
(a) The information pertaining to each Home Loan set forth in the
Home Loan Schedule was true and correct in all material respects as of
the Cut-Off Date;
(b) As of the Cut-Off Date, not more than 0.30% of the Home Loans
(by aggregate initial Pool Principal Balance) are between 30 and 59 days
past due (without giving effect to any grace period), and none of the
Home Loans are between 60 and 89 days past due (without giving effect to
any grace period); the Transferor has not advanced
funds, induced, solicited or knowingly received any advance of funds
from a party other than the Obligor, directly or indirectly, for the
payment of any amount required by the Home Loan;
(c) The terms of the Debt Instrument and any related Mortgage
contain the entire agreement of the parties and have not been impaired,
waived, altered or modified in any respect, except by written
instruments reflected in the related File and recorded, if necessary, to
maintain the lien priority of the any related Mortgage; if such Home
Loan is an FHA Loan the substance of each such waiver, alteration and
modification has been approved by the FHA to the extent required under
Title I; no other instrument of waiver, alteration, expansion or
modification has been executed, and no Obligor has been released, in
whole or in part, except in connection with an assumption agreement
which assumption agreement is part of the related Home Loan File and the
payment terms of which are reflected in the related Home Loan Schedule
and; if such Home Loan is an FHA Loan, has been approved by the FHA to
the extent required under Title I;
(d) The Debt Instrument and any related Mortgage are not subject
to any set-off, claims, counterclaim or defense and will not have such
in the future with respect to the goods and services provided under the
Debt Instrument, including the defense of usury or of fraud in the
inducement, nor will the operation of any of the terms of the Debt
Instrument and any related Mortgage, or the exercise of any right
thereunder, render such Debt Instrument or Mortgage unenforceable, in
whole or in part, or subject to any right of rescission, set-off,
counterclaim or defense, including the defense of usury, and no such
right of rescission, set-off, counterclaim or defense has been asserted
with respect thereto;
(e) Any and all requirements of any federal, state or local law
applicable to the Home Loan (including any law applicable to the
origination, servicing and collection practices with respect thereto)
have been complied with;
(f) No Debt Instrument or Mortgage has been satisfied, cancelled,
rescinded or subordinated, in whole or part; and the Transferor, except
as otherwise permitted by clause (c), has not waived the performance by
the Obligor of any action, if the Obligor's failure to perform such
action would cause the Debt Instrument or Mortgage Loan to be in
default; and with respect to a Mortgage Loan, the related 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
satisfaction, subordination, release, cancellation or rescission;
(g) Each related Mortgage is a valid, subsisting and enforceable
lien on the related Property, including the land and all buildings on
the Property;
(h) The Debt Instrument and any related Mortgage are genuine and
each is the legal, valid and binding obligation of the maker thereof,
enforceable in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting creditors' rights in
general and by general principles of equity;
(i) To the best of the Transferor's knowledge, all parties to the
Debt Instrument and any related Mortgage had legal capacity at the time
to enter into the Home Loan and to execute and deliver the Debt
Instrument and any related Mortgage, and the Debt Instrument and any
related Mortgage have been duly and properly executed by such parties;
(j) As of the applicable Cut-Off Date, the proceeds of the Home
Loan have been fully disbursed and there is no requirement for future
advances thereunder, and any and all applicable requirements set forth
in the Home Loan documents have been complied with; the Obligor is not
entitled to any refund of any amounts paid or due under the Debt
Instrument or any related Mortgage;
(k) Immediately prior to the sale, transfer and assignment to the
Depositor, the Transferor will have good and indefeasible legal title to
the Home Loan, the related Debt Instrument and any related Mortgage and
the full right to transfer such Home Loan, the related Debt Instrument
and any related Mortgage, and the Transferor will have been the sole
owner thereof, subject to no liens, pledges, charges, mortgages,
encumbrances or rights of others, except for such liens as will be
released simultaneously with the transfer and assignment of the Home
Loans to the Depositor (and the Home Loan File will contain no evidence
inconsistent with the foregoing); and immediately upon the sale,
transfer and assignment contemplated by the Home Loan Purchase
Agreement, the Depositor will hold good title to, and be the sole owner
of each Home Loan, the related Debt Instrument and any related Mortgage,
free of all liens, pledges, charges, mortgages, encumbrances or rights
of others;
(l) Except for those Home Loans referred to in Section 3.04(b)
---------------
above that are delinquent as of the Cut-Off Date, there is no
default, breach, violation or event of acceleration known to the
Transferor under the Home Loan, the related Debt Instrument and any
related Mortgage and there is no event known to the Transferor 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 Transferor nor its
predecessors have waived any default, breach, violation or event of
acceleration;
(m) The Debt Instrument and any related Mortgage contain customary
and enforceable provisions such as to render the rights and remedies of
the holder thereof adequate for the realization against the Property of
the benefits of the security provided thereby, including, (A) in the
case of any Mortgage designated as a deed of trust, by trustee's sale,
and (B) otherwise by judicial foreclosure;
(n) Each FHA Loan is an FHA Title I property improvement loan (as
defined in 24 C.F.R. Section 201.2) underwritten by the Transferor in
accordance with FHA requirements for the Title I Loan program as set
forth in 24 C.F.R. Parts 201 and 202, and the Transferor has transmitted
a loan report with respect to such FHA Loan to FHA so that such FHA Loan
will be included in the Title I program;
(o) Each Home Loan is a fixed rate loan; the Debt Instrument shall
mature within not more than (a) for an FHA Loan, 20 years and 32 days
and (b) for a Non-FHA Loan, 25 years, from the date of origination of
the Home Loan; the Debt Instrument is payable in substantially equal
Monthly Payments, with interest payable in arrears, and requires a
Monthly Payment which is sufficient to fully amortize the original
principal balance over the original term and to pay interest at the
related Home Loan Interest Rate; interest on each Home Loan is
calculated on the basis of a 360 day year consisting of twelve 30-day
months, and the Debt Instrument does not provide for any extension of
the original term;
(p) The related Debt Instrument is not and has not been secured by
any collateral except, in the case of a Mortgage Loan, the lien of the
corresponding Mortgage;
(q) With respect to any Mortgage Loan, if the related 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, or a valid substitution of trustee
has been recorded, and no extraordinary fees or expenses are or will
become payable to the trustee under the deed of trust, except in
connection with default proceedings and a trustee's sale after default
by the Obligor;
(r) With respect to any Mortgage Loan, the Transferor has no
knowledge of any circumstances or conditions not reflected in the
representations set forth herein, or in the Home Loan Schedule, or in
the related Home Loan File with respect to the related Mortgage, the
related Property or the Obligor which could reasonably be expected to
materially and adversely affect the value of the related Property, or
the marketability of the Mortgage Loan or to cause the Mortgage Loan to
become delinquent or otherwise in default;
(s) Assuming no material change to the applicable law or
regulations in effect as of the Closing Date, after the consummation of
the transactions contemplated by this Agreement, the Indenture Trustee
will have the ability to foreclose or otherwise realize upon a Property,
if the Home Loan is a Mortgage Loan, or to enforce the provisions of the
related Home Loan against the Obligor thereunder, if the foreclosure
upon any such Property or enforcement of the provisions of the related
Home Loan against the Obligor are undertaken as set forth in Section
-------
4.12;
----
(t) With respect to any FHA Loan that is a Mortgage Loan, the
improvements to the Property relating to such FHA Loan, have been or
shall be completed and inspected by the Servicer within the time period
and to the extent required under the applicable Title I regulations, and
evidence of such inspection shall be placed in the Servicer's Home
Loan File or, if not, a letter of non-compliance shall be delivered to
HUD (with a copy placed in the Servicer's Home Loan File) promptly upon
the completion of such inspection;
(u) Each FHA Loan has been originated in compliance with the
provisions of 24 C.F.R. Section 201.20, and, if required by Title I, the
market value of the any related Property has been ascertained in
accordance with the procedures established by HUD;
(v) There exists a Home Loan File relating to each Home Loan and
such Home Loan File contains all of the original or certified
documentation listed in Section 2.05 for such Home Loan. Each Indenture
------------
Trustee's Home Loan File has been delivered to the Custodian and
each Servicer's Home Loan File is being held in trust by the Transferor
for the benefit of, and as agent for, the Securityholders and the
Indenture Trustee as the owner thereof. Each document included in the
Home Loan File which is required to be executed by the Obligor has been
executed by the Obligor in the appropriate places. With respect to
each Mortgage Loan, the related Assignment of Mortgage to the Indenture
Trustee is in recordable form and is acceptable for recording under
the laws of the jurisdiction in which the Property is located.
All blanks on any form required to be completed have been so completed;
(w) Each FHA Loan is in respect of a home improvement loan or a
retail installment sale contract, and each Property is improved by a
residential dwelling and is not a Home Loan in respect of a manufactured
home or mobile home or the land on which a manufactured home or mobile
home has been placed;
(x) Each FHA Loan was underwritten by the Transferor in accordance
with the applicable underwriting criteria established by the FHA and
HUD; each Non-FHA Loan was underwritten by the Transferor in accordance
with the Transferor's underwriting guidelines;
(y) Any Property securing an FHA Loan is covered by any insurance
required by Title I; if the Property securing any Mortgage Loan is in an
area identified by the Federal Emergency Management Agency ("FEMA") as
having special flood hazards, unless the community in which the area is
situated is not participating in the National Flood Insurance Program
and the regulations thereunder or less than a year has passed since FEMA
notification regarding such hazards, a flood insurance policy is in
effect with respect to such Property with a generally acceptable carrier
which complies with Section 102(a) of the Flood Disaster Protection Act
of 1973; all improvements upon each Property securing a Non-FHA Loan are
insured by a generally acceptable insurer against loss by fire hazards
of extended coverage and such other hazards as are customary in the area
where the Property is located pursuant to insurance policies conforming
to the requirements of the Agreement; all such policies contain a
standard mortgage clause naming the Transferor or its predecessor in
interest, its successors and assigns, as loss payee;
(z) All costs, fees and expenses incurred in originating and
closing the Home Loan and in recording any related Mortgage were paid
and the Obligor is not entitled to any refund of any amounts, paid or
due to the Obligee pursuant to the Debt Instrument or any related
Mortgage;
(aa) Except for the related FHA Premium Amount, if applicable,
there is no obligation on the part of the Transferor or any other party
other than the Obligor to make payments with respect to the Home Loan;
(ab) At the time of origination of the Home Loan, each related
prior lien, if any, was certified by the Obligor as not 30 or more days
delinquent;
(ac) To the best of the Transferor's knowledge, all parties which
have had any interest in the Home Loan, whether as mortgagee, assignee,
pledgee or otherwise, are (or, during the period in which they held and
disposed of such interest, were) (i) in compliance with any and all
applicable licensing requirements of the laws of the state wherein the
Property is located, and (ii) (A) organized under the laws of such
state, or (B) qualified to do business in such state, or (C) federal
savings and loan associations or national banks having principal offices
in such state, or (D) not doing business in such state;
(ad) With respect to each Mortgage Loan, the related Mortgage
contains an enforceable provision requiring the consent of the Mortgagee
to assumption of the related Mortgage Loan upon sale of the Property;
(ae) With respect to any Mortgage Loan, there is no homestead or
other exemption available to the Mortgagor which would materially
interfere with the right to sell the related Property at a trustee's
sale or the right to foreclose the Mortgage; no relief has been
requested or allowed to the Mortgagor under the Civil Relief Act;
(af) Subject to Section 3.06, each FHA Loan has been submitted to
------------
the FHA for insurance pursuant to the FHA Title I loan program and each
FHA Loan has been or will be assigned a case number by the FHA for the
FHA Title I loan program;
(ag) Subject to Section 3.06, the FHA Reserve Amount with respect
------------
to each FHA Loan, has been or will be transferred to the FHA
Insurance Coverage Reserve Account;
(ah) The related Home Loan File for each Home Loan that is a
Mortgage Loan contains a Title Document with respect to such Home Loan
reflecting that title to the related Property is vested at least 50% in
the Obligor under such Home Loan;
(ai) To the best of the Transferor's knowledge, each Property
(including each residential dwelling improvement thereon) was at the
time the Home Loan was made free of damage which materially and
adversely affects the value thereof and, if the related Home Loan is an
FHA Loan, impairs the ability to insure the related Home Loan under the
Title I program;
(aj) Each Home Loan was originated in compliance with all
applicable laws and, to the best of the Transferor's knowledge, no fraud
or misrepresentation was committed by any Person in connection therewith
or, if the related loan is an FHA Loan, in the application for any
insurance required by Title I in relation to such FHA Loan;
(ak) Each Home Loan has been serviced in accordance with all
applicable laws and, to the best of the Transferor's knowledge, no fraud
or misrepresentation was committed by any Person in connection
therewith;
(al) The transfer, assignment and conveyance of the Debt
Instruments and the Mortgages by the Transferor to the Depositor were
not subject to the bulk transfer laws or any similar statutory
provisions in effect in any applicable jurisdiction;
(am) Any Home Loan originated in the State of Texas, was originated
pursuant to either Chapter 3 or Chapter 6 of the Texas Consumer Credit
Code;
(an) As of the applicable Cut-Off Date, no Obligor is a debtor
under proceedings under the Bankruptcy Code, and no such Obligor has
defaulted in payments on a Home Loan after the filing of such bankruptcy
case, whether under a plan or reorganization or otherwise;
(ao) To the best of the Transferor's knowledge, the Transferor has
not advanced funds, or induced, solicited or knowingly received any
advance of loan payments from a party other than, with respect to a
Mortgage Loan, the owner of the Property subject to the Mortgage;
(ap) The Home Loans were originated by the Transferor or through
the Transferor's network of dealers and correspondents (including Home
Loans acquired by such correspondents);
(aq) (Reserved);
(ar) With respect to FHA Loans secured by a Mortgage, the
representations and warranties of the Mortgagor in each mortgage loan
application and in connection with the related FHA Loan are true and
correct in all material respects (and it shall be deemed that a breach
is material only if a claim for payment made to the FHA under the
Contract of Insurance in respect of such FHA Loan is a Rejected Claim as
a result of such breach);
(as) Each Home Loan either complies with the Home Ownership and
Equity Protection Act of 1994 or is not subject to such act;
(at) the Transferor has caused to be performed or shall cause to be
performed within one month of the Closing Date any and all acts required
to preserve the rights and remedies of the Trust and the Indenture
Trustee in any insurance policies applicable to each Home Loan or, if
such Home Loan is an FHA Loan, only if required by Title I, including,
without limitation, any necessary notifications of insurers, assignments
of policies or interests therein, and establishment of coinsured, joint
loss payee and mortgagee rights in favor of the Indenture Trustee;
(au) With respect to any Mortgage Loan, to the best of the
Transferor's knowledge, there exists no violation of any environmental
law (either local, state or federal), rule or regulation in respect of
the Property which violation has or could have a material adverse effect
on the market value of such Property. The Transferor has no knowledge
of any pending action or proceeding directly involving the related
Property in which compliance with any environmental law, rule or
regulation is in issue; and, to the Transferor's best knowledge, nothing
further remains to be done to satisfy in full all requirements of each
such law, rule or regulation constituting a prerequisite to the use and
enjoyment of such Property;
(av) At the time of their origination, none of the FHA Loans and
none of the Non-FHA Loans were secured by Mortgages on non-owner
occupied Mortgaged Properties;
(aw) On the Closing Date, 55% or more (by aggregate Principal
Balance) of the Home Loans do not constitute "real estate mortgages" for
---
the purpose of Treasury Regulation Section301.7701 under the Code.
For this purpose a Home Loan does not constitute a "real estate
mortgage" if:
---
(i) The Home Loan is not secured by an interest in real
---
property, or
(ii) The Home Loan is not an "obligation principally secured
---
by an interest in real property." For this purpose an "obligation
is principally secured by an interest in real property" if it satisfies
either ------ test set out in paragraph (1) or paragraph (2) below.
(1) The 80-percent test. An obligation is principally
secured by an interest in real property if the fair
market value of the interest in real property securing
the obligation
(A) was at least equal to 80 percent of the adjusted
issue price of the obligation at the time the
obligation was originated
(or, if later, the time the obligation was
significantly modified); or
(B) is at least equal to 80 percent of the adjusted
issue price of the obligation on the Closing Date.
For purposes of this paragraph (1), the fair market value of
the real property interest must be first reduced by the amount
of any lien on the real property interest that is senior to
the obligation being tested, and must be further reduced by a
proportionate amount of any lien that is in parity with the
obligation being tested, in each case before the percentages
set forth in (1)(A) and (1)(B) are determined. The adjusted
issue price of an obligation is its issue price plus the
amount of accrued original issue discount, if any, as of the
date of determination.
(2) Alternative test. An obligation is principally secured
by an interest in real property if substantially all of
the proceeds of the obligation were used to acquire or to
improve or protect an interest in real property that, at
the origination date, is the only security for the
obligation. For purposes of this test, loan guarantees
made by the United States or any state (or any political
subdivision, agency, or instrumentality of the United
States or of any state), or other third party credit
enhancement are not viewed as additional security for a
loan. An obligation is not considered to be secured by
property other than real property solely because the
obligor is personally liable on the obligation. For this
purpose only, substantially all of the proceeds of the
obligations means 662/3% or more of the gross proceeds.
(ax) (Reserved);
(ay) No Home Loan was selected from the Transferor's assets in a
manner which would cause it to be adversely selected as to credit risk
from the pool of home loans owned by the Transferor;
(az) With respect to each Home Loan that is not a first mortgage
loan, either (i) no consent for the Home Loan is required by the holder
of the related prior lien or (ii) such consent has been obtained and has
been delivered to the Indenture Trustee;
(ba) Each Home Loan is either a retail installment contract for
goods or services, home improvement loan for goods or services, debt
consolidation loan or a home equity loan. All Home Loans that are not
debt consolidation loans are either home equity loans, retail
installment sale contracts for goods and services or home improvement
loans
for goods and services that are either "consumer credit contracts" or
"purchase money loans" as such terms are defined in 16 C.F.R. Part
433.1; and
(bb) Each Debt Instrument is comprised of an original promissory
note and each promissory note constitutes an "instrument" or "chattel
paper" for purposes of Article 9 of the UCC. Each Debt Instrument has
been delivered to the Custodian.
Section 3.05 (Reserved).
----------
Section 3.06 Purchase and Substitution.
-------------------------
(a) It is understood and agreed that the representations and warranties
set forth in Section 3.04, shall survive the conveyance of the Home Loans to
------------
the Issuer, the Grant of the Home Loans to the Indenture Trustee and the
delivery of the Securities to the Securityholders. Upon discovery by the
Depositor, the Servicer, the Transferor, the Custodian, the Issuer, the
Indenture Trustee or any Securityholder of a breach of any of such
representations and warranties which materially and adversely affects the
value of the Home Loans or the interest of the Securityholders, or which
materially and adversely affects the interests of the Securityholders in the
related Home Loan in the case of a representation and warranty relating to a
particular Home Loan (notwithstanding that such representation and warranty
was made to the Transferor's best knowledge), the party discovering such
breach shall give prompt written notice to the others. The Transferor shall
within 60 days of the earlier of its discovery or its receipt of notice of
any breach of a representation or warranty, promptly cure such breach in all
material respects. Except with respect to a breach of the representations
made by the Transferor pursuant to Section 3.04(af) and 3.04(ag), if within
---------------- --------
60 days after the earlier of the Transferor's discovery of such breach or the
Transferor's receiving notice thereof such breach has not been remedied by
the Transferor and such breach materially and adversely affects the interests
of the Securityholders or in the related Home Loan (the "Defective Home
--------------
Loan"), the Transferor shall on or before the Determination Date next
- ----
succeeding the end of such 60-day period either (i) remove such Defective
Home Loan from the Trust (in which case it shall become a Deleted Home Loan)
and substitute one or more Qualified Substitute Home Loans in the manner and
subject to the conditions set forth in this Section 3.06 or (ii) purchase
------------
such Defective Home Loan at a purchase price equal to the Purchase Price (as
defined below) by depositing such Purchase Price in the Collection Account.
The Transferor shall provide the Servicer, the Indenture Trustee and the
Issuer with a certification of a Responsible Officer on the Determination
Date next succeeding the end of such 60-day period indicating whether the
Transferor is purchasing the Defective Home Loan or substituting in lieu of
such Defective Home Loan a Qualified Substitute Home Loan. With respect to
the purchase of a Defective Home Loan pursuant to this Section, the "Purchase
--------
Price" shall be equal to the Principal Balance of such Defective Home Loan
- -----
as of the date of purchase, plus all accrued and unpaid interest on such
Defective Home Loan to but not including the Due Date in the Due Period most
recently ended prior to such Determination Date computed at the applicable
Home Loan Interest Rate, plus the amount of any unreimbursed Servicing
Advances made by the Servicer with respect to such Defective Home Loan, which
Purchase Price shall be deposited in the Collection Account (after deducting
therefrom any amounts received in respect of such repurchased Defective Home
Loan and being held in the Collection Account for future distribution to
the extent such amounts represent recoveries of principal not yet applied
to reduce the related Principal Balance or interest (net of the Servicing
Fee) for the period from and after the Due Date in the Due Period most
recently ended prior to such Determination Date).
Any substitution of Home Loans pursuant to this Section 3.06(a) shall
---------------
be accompanied by payment by the Transferor of the Substitution Adjustment,
if any, to be deposited in the Collection Account. For purposes of
calculating the Available Collection Amount for any Distribution Date,
amounts paid by the Transferor pursuant to this Section 3.06 in connection
------------
with the repurchase or substitution of any Defective Home Loan that are on
deposit in the Collection Account as of the Determination Date for such
Distribution Date shall be deemed to have been paid during the related Due
Period and shall be transferred to the Note Distribution Account as part of
the Available Collection Amount to be retained therein or transferred to the
Certificate Distribution Account, if applicable, pursuant to Section 5.01(c).
---------------
The Indenture Trustee on behalf of the Securityholders agrees that if an
FHA Loan is a Defective Home Loan because a document is not included in the
Servicer's Home Loan File as of the 60th day after the discovery or receipt
of notice thereof, such defect shall be deemed to be cured if the Indenture
Trustee shall have received during the sixty-day period after such date a
written statement addressed to it from the Director of HUD Title I Insurance
Division that such document would not be required in connection with a claim
for FHA Insurance with respect to such FHA Loan. It is understood and agreed
that the obligation of the Transferor to repurchase or substitute any such
Home Loan pursuant to this Section 3.06 shall constitute
------------
the sole remedy against it with respect to such breach of the foregoing
representations or warranties or the existence of the foregoing conditions.
For purposes of calculating 60 days with respect to a Defective Loan that is
an FHA Loan because a document is not included in the Servicer's Home Loan
File, any day on which the FHA is officially closed for reasons other than as
specified in the definition of Business Day shall not be counted in making
such calculation. With respect to representations and warranties made by the
Transferor pursuant to Section 3.04 that are made to the Transferor's best
------------
knowledge, if it is discovered by any of the Depositor, the Transferor, the
Indenture Trustee or the Owner Trustee that the substance of such
representation and warranty is inaccurate and such inaccuracy materially and
adversely affects the value of the related Loan, notwithstanding the
Transferor's lack of knowledge, such inaccuracy shall be deemed a breach of
the applicable representation and warranty.
With respect to a breach of the representations made by the Transferor
pursuant to Section 3.04(af) and 3.04(ag), if the FHA has not assigned a case
---------------- --------
number under the Contract of Insurance to an FHA Loan to indicate that such
FHA Loan is eligible for Title I Insurance coverage under the Contract of
Insurance on or before the 120th day after the Closing Date, the Transferor
shall be obligated, on the last day of the Due Period next succeeding such
120th day, to repurchase such FHA Loan. If the FHA Reserve Amount with
respect to an FHA Loan has not been transferred to the FHA Insurance Coverage
Reserve Account on or before the 150th day after the Closing Date, the
Transferor shall be obligated, on the last day of the Due Period next
succeeding such 150th day, to repurchase such FHA Loan. The Claims
Administrator shall give notice in writing to each of the Depositor, the
Indenture Trustee and the Owner Trustee of (i) any FHA Loan with respect
to which there has not been assigned a case number under the Contract of
Insurance on or before the 120th day after the Closing Date and (ii) any
FHA Loan that has not been transferred to the FHA Insurance Coverage
Reserve Account on or before the 150th day after the Closing Date.
For purposes of calculating either 120 or 150 days from the Closing
Date in this Section 3.06(a), any day on which the
---------------
FHA is officially closed for reasons other than such day being a Saturday,
Sunday or a day on which banking institutions in Washington, D.C. are
authorized or obligated by law, executive order or governmental decree to be
closed, shall not be counted in making such calculation.
(b) As to any Deleted Home Loan for which the Transferor substitutes a
Qualified Substitute Home Loan or Loans, the Transferor shall effect such
substitution by delivering to the Issuer (i) a certification executed by a
Responsible Officer of the Transferor to the effect that the Substitution
Adjustment has been credited to the Collection Account and (ii) the documents
constituting the Indenture Trustee's Home Loan File for such Qualified
Substitute Home Loan or Loans.
The Servicer shall deposit in the Collection Account all payments
received in connection with such Qualified Substitute Home Loan or Loans
after the date of such substitution. Monthly Payments received with respect
to Qualified Substitute Home Loans on or before the date of substitution will
be retained by the Transferor. The Issuer will be entitled to all payments
received on the Deleted Home Loan on or before the date of substitution, and
the Transferor shall thereafter be entitled to retain all amounts
subsequently received in respect of such Deleted Home Loan. The Transferor
shall give written notice to the Issuer, the Servicer (if the Transferor is
not then acting as such), the Indenture Trustee that such substitution has
taken place and the Servicer shall amend the Home Loan Schedule to reflect
(i) the removal of such Deleted Home Loan from the terms of this Agreement
and (ii) the substitution of the Qualified Substitute Home Loan. The
Transferor shall promptly deliver to the Issuer, the Servicer (if the
Transferor is not then acting as such) and the Indenture Trustee, a copy of
the amended Home Loan Schedule. Upon such substitution, such Qualified
Substitute Home Loan or Loans shall be subject to the terms of this Agreement
in all respects, and the Transferor shall be deemed to have made with respect
to such Qualified Substitute Home Loan or Loans, as of the date of
substitution, the covenants, representations and warranties set forth in
Section 3.04. On the date of such substitution, the Transferor will deposit
- ------------ into the Collection Account an amount equal to the related
Substitution Adjustment, if any. In addition, on the date of such
substitution, the Servicer shall cause the Indenture Trustee to release the
Deleted Home Loan from the lien of the Indenture and the Servicer will cause
such Qualified Substitute Home Loan to be pledged to the Indenture Trustee
under the Indenture as part of the Trust Estate.
(c) With respect to all Defective Home Loans or other Home Loans
repurchased by the Transferor pursuant to this Agreement, upon the deposit of
the Purchase Price therefor to the Collection Account, the Indenture Trustee
shall assign to the Transferor, without recourse, representation or warranty,
all the Indenture Trustee's right, title and interest in and to such
Defective Home Loans or Home Loans, which right, title and interest were
conveyed to the Indenture Trustee pursuant to Section 2.01, including,
------------
without limitation, the rights to any FHA Insurance reserves attributable to
such Home Loans. The Indenture Trustee shall take any actions as shall be
reasonably requested by the Transferor to effect the repurchase of any such
Home Loans.
(d) It is understood and agreed that the obligations of the Transferor
set forth in this Section 3.06 to cure, purchase or substitute for a
------------
Defective Home Loan (and to indemnify the Trust for certain losses as
described herein in connection with a Defective Home Loan) constitute the
sole remedies of the Depositor, the Issuer, the Indenture Trustee and the
Securityholders hereunder respecting a breach of the representations and
warranties contained in Section 3.04. Any cause of action against the
------------
Transferor relating to or arising out of a defect in a Indenture Trustee's
Home Loan File as contemplated by Section 2.06 or against the Transferor
------------
relating to or arising out of a breach of any representations and warranties
made in Section 3.04 shall accrue as to any Home Loan upon (i) discovery of
------------
such defect or breach by any party and notice thereof to the Transferor or
notice thereof by the Transferor to the Indenture Trustee, (ii) failure by
the Transferor to cure such defect or breach or purchase or substitute such
Home Loan as specified above, and (iii) demand upon the Transferor, as
applicable, by the Issuer or the Majority Securityholders for all amounts
payable in respect of such Home Loan.
(e) Neither the Issuer nor the Indenture Trustee shall have any duty to
conduct any affirmative investigation other than as specifically set forth in
this Agreement as to the occurrence of any condition requiring the repurchase
or substitution of any Home Loan pursuant to this Section or the eligibility
of any Home Loan for purposes of this Agreement.
ARTICLE IV.
ADMINISTRATION AND SERVICING OF THE HOME LOANS
----------------------------------------------
Section 4.01 Duties of the Servicer.
----------------------
(a) Servicing Standard. The Servicer, as an independent contractor,
------------------
shall service and administer the Home Loans and shall have full power and
authority, acting alone, to do any and all things in connection with such
servicing and administration which the Servicer may deem necessary or
desirable and consistent with the terms of this Agreement. Notwithstanding
anything to the contrary contained herein, the Servicer, in servicing and
administering the Home Loans, shall employ or cause to be employed procedures
(including collection, foreclosure, liquidation and Foreclosure Property
management and liquidation procedures) and exercise the same care that it
customarily employs and exercises in servicing and administering loans of the
same type as the Home Loans for its own account, all in accordance with
Accepted Servicing Procedures of prudent lending institutions and servicers
of loans of the same type as the Home Loans and giving due consideration to
the Securityholders' reliance on the Servicer. The Servicer has and shall
maintain the facilities, procedures and experienced personnel necessary to
comply with the servicing standard set forth in this subsection (a) and the
duties of the Servicer set forth in this Agreement relating to the servicing
and administration of the Home Loans.
In performing its obligations hereunder the Servicer shall at all times
act in good faith in a commercially reasonable manner in accordance with all
requirements of the FHA applicable to the servicing of the FHA Loans and
otherwise in accordance with applicable law and the Debt Instruments and
Mortgages. The Servicer shall at all times service and administer the FHA
Loans in accordance with Title I, and shall have full power and authority,
acting alone and/or through the Subservicer as provided in Section 4.07,
------------
subject only to this Agreement, the respective Home Loans, and, in the case
of the FHA Loans, the specific requirements and prohibitions of Title I, to
do any and all things in connection with such servicing and administration
which are consistent with the manner in which prudent servicers service FHA
Title I home improvement loans and which are consistent with the ordinary
practices of prudent mortgage lending institutions.
(b) Servicing Advances. In accordance with the preceding general
------------------
servicing standard, the Servicer, or any Subservicer on behalf of the
Servicer, shall make all Servicing Advances in connection with the servicing
of each Home Loan hereunder. Notwithstanding any provision to the contrary
herein, neither the Servicer, nor any Subservicer on behalf of the Servicer,
shall have any obligation to advance its own funds for any delinquent
scheduled payments of principal and interest on any Home Loan or to satisfy
or keep current the indebtedness secured by any Superior Liens on the related
Mortgaged Property. No costs incurred by the Servicer or any Subservicer in
respect of Servicing Advances shall, for the purposes of distributions to
Securityholders, be added to the amount owing under the related Home Loan.
Notwithstanding any obligation by the Servicer to make a Servicing Advance
hereunder with respect to a Home Loan, before making any Servicing Advance
that is material in relation to the outstanding principal balance thereof,
the Servicer shall assess the reasonable likelihood of (i) recovering such
Servicing Advance and any prior Servicing Advances for such Home Loan, and
(ii) recovering any amounts attributable to outstanding interest and
principal owing on such Home Loan for the benefit of the Securityholders
in excess of the costs, expenses and other deductions to obtain such
recovery, including without limitation any Servicing Advances therefor
and, if applicable, the outstanding indebtedness of all Superior Liens.
The Servicer shall only make a Servicing Advance with respect to a Home
Loan to the extent that the Servicer determines in its reasonable, good
faith judgment that such Servicing Advance would likely be recovered as
aforesaid; provided, however, that the Servicer will be entitled to be
reimbursed for any Nonrecoverable Servicing Advance pursuant to
this Agreement.
(c) Waivers, Modifications and Extensions. The Servicer shall make
-------------------------------------
reasonably diligent efforts to collect all payments called for under the
terms and provisions of the Home Loans, and shall, to the extent such
procedures shall be consistent with this Agreement, follow Accepted Servicing
Procedures. The Servicer may in its discretion waive or permit to be waived
any penalty interest or any other fee or charge which the Servicer would be
entitled to retain hereunder as servicing compensation and extend the Due
Date on a Debt Instrument for a period (with respect to each payment as to
which the Due Date is extended) not greater than 90 days after the initially
scheduled due date for such payment. Notwithstanding anything in this
Agreement to the contrary, the Servicer shall not permit any additional
extension or modification with respect to any Home Loan other than that
permitted by the immediately preceding sentence unless the Home Loan is a
Defaulted Home Loan or, in the case of any FHA Loan, such extension or
modification complies with the requirements of Title I or is required by
Title I and such FHA Loan is a Defaulted Home Loan or a payment default is
reasonably foreseeable by the Servicer.
(d) Instruments of Satisfaction or Release. Without limiting the
--------------------------------------
generality of Section 4.01(c), the Servicer, in its own name or in the name
of a Subservicer, is hereby authorized and empowered when the Servicer
believes it appropriate in its best judgment to execute and deliver, on
behalf of the Securityholders and the Trust or any of them, and upon notice
to the Indenture Trustee, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge, and all other
comparable instruments, with respect to the Home Loans and the Mortgaged
Properties and to institute foreclosure proceedings or obtain a deed-in-lieu
of foreclosure so as to convert the ownership of such properties, and to hold
or cause to be held title to such properties, on behalf of the Trust and
Securityholders. The Servicer shall service and administer the Home Loans in
accordance with applicable state and federal law and shall provide to the
Obligors any reports required to be provided to them thereby. The Indenture
Trustee shall execute, at the written direction of the Servicer, any limited
or special powers of attorney and other documents reasonably acceptable to
the Indenture Trustee to enable the Servicer or any Subservicer to carry out
their servicing and administrative duties hereunder, including, without
limitation, limited or special powers of attorney with respect to any
Foreclosure Property, and the Indenture Trustee shall not be accountable for
the actions of the Servicer or any Subservicers under such powers of attorney
and shall be indemnified by such parties with respect to such actions.
Section 4.02 Payment of Taxes, Insurance and Other Charges.
---------------------------------------------
The Servicer may and, if required by the Servicer, the Subservicers
shall, establish and maintain one or more accounts (the "Servicing
Accounts"), into which any collections from the Obligors (or related advances
from Subservicers) for the payment of taxes, assessments, hazard insurance
premiums, and comparable items for the account of the Obligors shall be
deposited and retained. Servicing Accounts shall be Eligible Accounts.
Withdrawals of amounts so collected from a Servicing Account may be made only
to (i) effect timely payment of taxes, assessments, hazard insurance
premiums, and comparable items; (ii) reimburse the Servicer (or a Subservicer
to the extent provided in the related Sub-Servicing Agreement) out of related
collections for any advances with respect to taxes, assessments and insurance
premiums and with respect to hazard insurance; (iii) refund to Obligors any
sums as may be determined to be overages; (iv) pay interest, if required and
as described below, to Obligors on balances in the Servicing Account; or (v)
clear and terminate the Servicing Account at the termination of this
Agreement in accordance with Section 11.01. As part of its servicing duties,
-------------
the Servicer or Subservicers shall pay to the Obligors interest on funds in
Servicing Accounts, to the extent required by law and, to the extent that
interest earned on funds in the Servicing Accounts is insufficient, to pay
such interest from its or their own funds, without any reimbursement from the
Trust, the Indenture Trustee, the Depositor, or any Securityholder therefor.
Upon request of the Indenture Trustee, the Transferor or the Servicer shall
cause the bank, savings association or other depository for each Servicing
Account to forward to the Indenture Trustee copies of such statements or
reports as the Indenture Trustee, the Depositor, or any Securityholder shall
reasonably request.
Section 4.03 Fidelity Bond; Errors and Omission Insurance.
--------------------------------------------
The Servicer shall maintain a fidelity bond in such form and amount as
is customary for entities acting as custodian of funds and documents in
respect of loans on behalf of institutional investors. The Servicer shall
obtain and maintain at all times during the term of this Agreement errors and
omissions insurance coverage covering the Servicer and its employees issued
by a responsible insurance company. The issuer, policy terms and forms and
amounts of coverage, including applicable deductibles, shall be in such form
and amount as is customary for entities acting as servicers. The Servicer
agrees to notify the Indenture Trustee in writing within five (5) days of the
Servicer's receipt of notice of the cancellation or termination of any such
errors and omissions insurance coverage. The Servicer shall provide to the
Indenture Trustee or any Securityholder upon request written evidence of such
insurance coverage.
Section 4.04 Filing of Continuation Statements.
---------------------------------
On or before the fifth anniversary of the filing of any financing
statements by Empire Funding and the Depositor, respectively, with respect to
the assets conveyed to the Trust, Empire Funding and the Depositor shall
prepare, have executed by the necessary parties and file in the proper
jurisdictions all financing and continuation statements necessary to maintain
the liens, security interests, and priorities of such liens and security
interests that have been granted by Empire Funding and the Depositor,
respectively, and Empire Funding and the Depositor shall
continue to file on or before each fifth anniversary of the filing of any
financing and continuation statements such additional financing and
continuation statements until the Trust has terminated pursuant to Section
9.1 of the Trust Agreement. The Indenture Trustee agrees to cooperate with
Empire Funding and the Depositor in preparing, executing and filing such
statements. The Indenture Trustee agrees to notify Empire Funding and the
Depositor on the third Distribution Date prior to each such fifth anniversary
of the requirement to file such financing and continuation statements. The
filing of any such statement with respect to Empire Funding and the Depositor
shall not be construed as any indication of an intent of any party contrary
to the expressed intent set forth in Section 2.04 hereof. If Empire Funding
------------
or the Depositor has ceased to do business whenever any such financing and
continuation statements must be filed or Empire Funding or the Depositor
fails to file any such financing statements or continuation statements at
least one month prior to the expiration thereof, each of Empire Funding and
the Depositor does hereby make, constitute and appoint the Indenture Trustee
its attorney-in-fact, with full power and authority to execute and file in
its name and on its behalf any such financing statements or continuation
statements required under this Section 4.04.
------------
Section 4.05 (Reserved).
Section 4.06 Superior Liens.
--------------
If the Servicer is notified that any lienholder under a Superior Lien
has accelerated or intends to accelerate the obligations secured by such
Superior Lien, or has declared or intends to declare a default under the
related mortgage or promissory note secured thereby, or has filed or intends
to file an election to have any Mortgaged Property sold or foreclosed, the
Servicer shall take, on behalf of the Issuer and the Indenture Trustee, all
reasonable actions that are necessary to protect the interests of the
Securityholders and/or to preserve the security of the related Home Loan,
including making any Servicing Advances that are necessary to cure the
default or reinstate the Superior Lien. The Servicer shall promptly notify
the Issuer and the Indenture Trustee if it takes any such action. Any
Servicing Advances by the Servicer pursuant to its obligations in this
Section 4.06 shall comply with requirements set forth in Section 4.01(b)
- ------------ ---------------
hereof.
Section 4.07 Subservicing.
------------
(a) The Servicer may enter into Subservicing Agreements for any
servicing and administration of Home Loans with any institution which is in
compliance with the laws of each state necessary to enable it to perform its
obligations under such Subservicing Agreement and is an Eligible Servicer.
The Servicer shall give prior written notice to the Issuer and the Indenture
Trustee of the appointment of any Subservicer. The Servicer shall be
entitled to terminate any Subservicing Agreement in accordance with the terms
and conditions of such Subservicing Agreement and to either directly service
the related Home Loans or enter into a Subservicing Agreement with a
successor subservicer which qualifies hereunder.
In the event of termination of any Subservicer, and unless a successor
Subservicer has otherwise been appointed, all servicing obligations of such
Subservicer shall be assumed simultaneously by the Servicer without any
additional act or deed on the part of such Subservicer or the Servicer, and
the Servicer shall service directly the related Home Loans.
Each Sub-Servicing Agreement shall include the provision that such
agreement may be immediately terminated by the Indenture Trustee in the event
that the Servicer shall, for any reason, no longer be the Servicer. In no
event shall any Sub-Servicing Agreement require the Indenture Trustee, as
Successor Servicer, for any reason whatsoever to pay compensation to a
Subservicer in order to terminate such Subservicer.
(b) Notwithstanding any Subservicing Agreement, any of the provisions
of this Agreement relating to agreements or arrangements between the Servicer
and a Subservicer or reference to actions taken through a Subservicer or
otherwise, the Servicer shall remain obligated and primarily liable to the
Issuer, the Indenture Trustee and Securityholders for the servicing and
administering of the Home Loans in accordance with the provisions of this
Agreement without diminution of such obligation or liability by virtue of
such Subservicing Agreements or arrangements or by virtue of indemnification
from the Subservicer and to the same extent and under the same terms and
conditions as if the Servicer alone were servicing and administering the Home
Loans. For purposes of this Agreement, the Servicer shall be deemed to have
received payments on Home Loans when the Subservicer has actually received
such payments and, unless the context otherwise requires, references in this
Agreement to actions taken or to be taken by the Servicer in servicing the
Home Loans include actions taken or to be taken by a Subservicer on behalf of
the Servicer. The Servicer shall be entitled to enter into any agreement
with a Subservicer for indemnification of the Servicer by such Subservicer,
and nothing contained in this Agreement shall be deemed to limit or modify
such indemnification.
(c) In the event the Servicer shall for any reason no longer be the
Servicer (including by reason of an Event of Default), the successor
Servicer, on behalf of the Issuer, the Indenture Trustee and the
Securityholders pursuant to Section 4.08, shall thereupon assume all of the
------------
rights and obligations of the Servicer under each Subservicing Agreement that
the Servicer may have entered into, unless the successor Servicer elects to
terminate any Subservicing Agreement in accordance with its terms. The
successor Servicer shall be deemed to have assumed all of the Servicer's
interest therein and to have replaced the Servicer as a party to each
Subservicing Agreement to the same extent as if the Subservicing Agreements
had been assigned to the assuming party, except that the Servicer shall not
thereby be relieved of any liability or obligations under the Subservicing
Agreements which accrued prior to the transfer of servicing to the successor
Servicer. The Servicer at its expense and without right of reimbursement
therefor, shall, upon request of the successor Servicer, deliver to the
assuming party all documents and records relating to each Subservicing
Agreement and the Home Loans then being serviced and an accounting of amounts
collected and held by it and otherwise use its best efforts to effect the
orderly and efficient transfer of the Subservicing Agreements to the assuming
party.
(d) As part of its servicing activities hereunder, the Servicer, for
the benefit of the Issuer, the Indenture Trustee and the Securityholders,
shall enforce the obligations of each Subservicer under the related
Subservicing Agreement. Such enforcement, including, without limitation, the
legal prosecution of claims and the pursuit of other appropriate remedies,
shall be in such form and carried out to such an extent and at such time as
the Servicer, in its good faith business judgment, would require were it the
owner of the related Home Loans. The Servicer shall pay the costs of such
enforcement at its own expense, and shall be reimbursed therefor only (i)
from a general recovery resulting from such enforcement to the extent, if
any, that such recovery exceeds all amounts due in respect of the related
Home Loan or (ii) from a specific recovery of costs, expenses or attorneys
fees against the party against whom such enforcement is directed.
(e) Any Subservicing Agreement that may be entered into and any other
transactions or services relating to the Home Loans involving a Subservicer
shall be deemed to be between the Subservicer and the Servicer alone and none
of the Issuer, the Indenture Trustee or the Securityholders shall be deemed
parties thereto or shall have any claims, rights, obligations, duties or
liabilities with respect to the Subservicer in its capacity as such except as
set forth in Section 4.07(c) above.
---------------
(f) In those cases where a Subservicer is servicing a Home Loan
pursuant to a Sub-Servicing Agreement, the Subservicer will be required to
establish and maintain one or more accounts (collectively, the "Sub-Servicing
Account"). The Sub-Servicing Account shall be an Eligible Account. The
Subservicer will be required to deposit into the Sub-Servicing Account no
later than the first Business Day after receipt all proceeds of Home Loans
received by the Subservicer and remit such proceeds to the Servicer for
deposit in the Collection Account not later than the Business Day following
receipt thereof by the Subservicer. Notwithstanding anything in this clause
(f) to the contrary, the Subservicer shall only be able to withdraw funds
from the Sub-Servicing Account for the purpose of remitting such funds to the
Servicer for deposit into the Collection Account. The Servicer shall require
the Subservicer to cause any collection agent of the Subservicer to send a
copy to the Servicer of each statement of monthly payments collected by or on
behalf of the Subservicer within five Business Days after the end of every
month, and the Servicer shall compare the information provided in such
reports with the deposits made by the Subservicer into the Collection Account
for the same period. The Servicer shall be deemed to have received payments
on the Home Loans on the date on which the Subservicer has received such
payments.
Section 4.08 Successor Servicers.
-------------------
In the event that the Servicer is terminated pursuant to Section 10.01
-------------
hereof, or resigns pursuant to Section 9.04 hereof or otherwise becomes
------------
unable to perform its obligations under this Agreement, the Indenture Trustee
will become the successor servicer or will appoint a successor servicer in
accordance with the provisions of Section 10.02 hereof; provided that any
-------------
successor servicer, excluding the Indenture Trustee, shall satisfy the
requirements of an Eligible Servicer and shall be approved by the Rating
Agencies.
Section 4.09 Maintenance of Insurance.
------------------------
(a) The Servicer shall maintain or cause to be maintained with respect
to each Mortgaged Property securing an FHA Loan such insurance as is required
with respect thereto by Title I. The Servicer shall cause to be maintained
for each Foreclosure Property acquired by the Trust such types and amounts of
insurance coverage as the Servicer shall deem reasonable. The Servicer shall
cause to be maintained for each Mortgaged Property securing a Non-FHA Loan,
such fire and hazard insurance as the Servicer shall deem reasonable.
(b) Any amounts collected by the Servicer under any Insurance Policies,
shall be paid over or applied by the Servicer as follows:
(i) In the case of amounts received in respect of any Home
Loan:
(A) for the restoration or repair of the affected Property,
in which event such amounts shall be released to the Obligor in
accordance with the terms of the related Debt Instrument or
(B) to the extent not so used, in reduction of the Principal
Balance of the related Home Loan, in which event such amounts shall
be deposited into the Collection Account,
unless the related instruments require a different application, in which case
such amounts shall be applied in the manner provided therein; and
(ii) Subject to Section 4.12, in the case of amounts received
------------
in respect of any Foreclosure Property, for the restoration or repair of such
Foreclosure Property, unless the Servicer determines, consistent with the
servicing standard set forth in Section 4.01, that such restoration or repair
is not in the best economic interest of the Trust, in which event such
amounts shall be deposited into the Collection Account as a Payment received
from the operation of such Foreclosure Property.
Section 4.10 Inspections.
-----------
The Servicer shall inspect or cause to be inspected each Mortgaged
Property that secures any FHA Loan at such times and in such manner as are
consistent with Accepted Servicing Procedures.
Section 4.11 Reports to the Securities and Exchange Commission.
-------------------------------------------------
The Indenture Trustee shall, on behalf of the Trust, cause to be filed
with the Securities and Exchange Commission all monthly collateral reports on
Forms 8-K and 10-K required to be filed under the provisions of the Securi-
ties Exchange Act of 1934, as amended, and the rules and
regulations of the Securities and Exchange Commission thereunder. Upon the
request of the Indenture Trustee, each of the Servicer and the Transferor
shall cooperate with the Indenture Trustee in the preparation of any such
report and shall provide to the Indenture Trustee in a timely manner all such
information or documentation as the Indenture Trustee may reasonably request
in connection with the performance of its duties and obligations under this
Section.
Section 4.12 Claim for FHA Insurance and Foreclosure.
---------------------------------------
(a) (x) If any Monthly Payment due under any FHA Loan is not paid when
the same becomes due and payable, or if the Obligor fails to perform any
other covenant or obligation under such FHA Loan and such failure continues
beyond any applicable grace period, the Servicer shall take such action
(consistent with Title I, including efforts to cure the default of such FHA
Loan pursuant to 24 C.F.R. Section 201.50) as it shall deem to be in the best
interest of the Trust. If the maturity of the related Debt Instrument has
been accelerated pursuant to the requirements under Title I following the
Servicer's efforts to cure the default of such FHA Loan (and such FHA Loan is
not required to be purchased pursuant to Section 2.06), and (i) if an FHA
------------
Insurance Coverage Insufficiency does not exist at the time, the Claims
Administrator, unless not in the best interests of the Trust, shall initiate,
on behalf of the Trust and the Contract of Insurance Holder, a claim under
the Contract of Insurance for reimbursement for loss on such FHA Loan
pursuant to Title I (see 24 C.F.R. Section 201.54), or (ii) if an FHA
Insurance Coverage Insufficiency exists at the time, the Servicer shall
determine within 90 days in accordance with Section 4.12(c) whether or not
---------------
to proceed against the Mortgaged Property securing such FHA Loan, if such FHA
Loan is a Mortgage Loan or against the Obligor, if such FHA Loan is
unsecured, and if thereafter an FHA Insurance Coverage Insufficiency does not
exist, the Claims Administrator may submit a claim under the Contract of
Insurance with respect to such FHA Loan if it has obtained the prior approval
of the Secretary of HUD pursuant to 24 C.F.R. Section 201.51; or (y) if any
monthly payment due under any Non-FHA Loan is not paid when the same is due
and payable, or if the Obligor fails to perform any other covenant or
obligation under such Non-FHA Loan and such failure continues beyond any
applicable grace period, the Servicer shall take such action as it shall deem
to be in the best interest of the Trust; including but not limited to
proceeding against the Property securing such Non-FHA Loan.
In the event that in accordance with clauses (a)(x)(ii) and (y) above
the Servicer determines not to proceed against the Mortgaged Property or
Obligor, as applicable, on or before the Determination Date following such
determination the Servicer shall determine in good faith in accordance with
customary servicing practices that all amounts which it expects to receive
with respect to such Home Loan have been received. If the Servicer makes
such a determination, it shall give notice to such effect pursuant to Section
-------
5.05.
- ----
(b) If the Claims Administrator initiates a claim for reimbursement for
loss on any FHA Loan under this Section, the Claims Administrator shall
comply with applicable provisions of Title I and diligently pursue such claim
and, in any event, shall initiate such claim no later than the last day
permitted under Title I (see 24 C.F.R. Section 201.54(b)). For purposes of
this Agreement, the term "initiate a claim for reimbursement" shall mean the
filing of the claim application pursuant to the requirements set forth in
24 C.F.R. Section 201.54, including the filing of all related assignments
and documents and materials required for file review. For the purposes of
such filing, the Claims Administrator shall request, and the Co-Owner
Trustee within 5 calendar days of request shall deliver to the Claims
Administrator, the Debt Instrument and the related Mortgage for such FHA
Loan and each other item in the related File necessary to make such claim.
Each Securityholder hereby consents to the assignment of such FHA Loan
for the sole purpose of initiating a claim under the Contract of
Insurance for reimbursement with respect to such FHA Loan. Pursuant to
Section 4.12(h), the Contract of
- ---------------
Insurance Holder shall furnish the Claims Administrator a power of attorney
to file claims under the Contract of Insurance. The Co-Owner Trustee and
Contract of Insurance Holder agree to execute and deliver to the Claims
Administrator, within 5 Business Days of receipt from the Claims
Administrator, all documents, if any, necessary to initiate and file a claim
under the Contract of Insurance for such FHA Loan, which documents shall be
prepared by the Claims Administrator. If any claim to the FHA becomes a
Rejected Claim, upon receipt of the FHA's rejection notice by the Claims
Administrator directly from the FHA or from the Contract of Insurance Holder
pursuant to Section 4.12(e) and a determination by the Claims Administrator
---------------
that the rejection was not due to clerical error or lack of insurance, then
the Claims Administrator shall promptly notify the Contract of Insurance
Holder (if such notice has not already been given) and the Indenture Trustee
of the notice of a Rejected Claim.
If the FHA indicates in writing that the claim is a Rejected Claim due
to reasons other than a failure to service the related FHA Loan in accordance
with Title I after the Closing Date, Empire Funding shall repurchase the FHA
Loan on or before the Monthly Cut-Off Date next following the date of such
notice from the Claims Administrator to repurchase such FHA Loan, either
directly from FHA or from the Trust, for the Purchase Price. If FHA
indicates in writing that the claim is a Rejected Claim due to a failure to
service such FHA Loan in accordance with Title I after the Closing Date, the
Claims Administrator shall immediately notify the Servicer, the Contract of
Insurance Holder, the Trust and the Indenture Trustee of such determination,
and the Servicer shall on or before the later to occur of (i) the next
succeeding Monthly Cut-Off Date and (ii) ten Business Days from the date on
which such rejection notice is received by the Claims Administrator, purchase
such FHA Loan either directly from FHA or from the Trust, for the Purchase
Price. In the event that the FHA fails to indicate in writing why the claim
is a Rejected Claim, the Claims Administrator shall determine why the claim
is a Rejected Claim. If the Claims Administrator determines that the claim
is a Rejected Claim for reasons other than a servicing failure that occurred
after the Closing Date, Empire Funding shall be obligated to repurchase such
FHA Loan for the Purchase Price. If the Claims Administrator determines that
the claim is a Rejected Claim due to a servicing failure that occurred after
the Closing Date, the Servicer shall be obligated to repurchase such FHA Loan
for the Purchase Price. Notwithstanding any provisions herein to the
contrary, neither Empire Funding nor the Servicer shall be required to
repurchase or purchase, as applicable, any FHA Loan subject to a Rejected
Claim as a result of the depletion of the amount of the FHA Insurance
Coverage Reserve Account as shown in the Insurance Record.
(c) In accordance with the criteria for proceeding against the
Mortgaged Property set forth in Section 4.12(a), with respect to an FHA Loan
---------------
that is a Mortgage Loan that has been accelerated pursuant to the
requirements of Title I following the Servicer's efforts to cure the default
of the FHA Loan, and with respect to a Non-FHA Loan that is a Mortgage Loan,
unless otherwise prohibited by applicable law or court or administrative
order, the Servicer, on behalf of the Trust and the Indenture Trustee, may,
at any time, institute foreclosure proceedings to the extent permitted by
law, exercise any power of sale to the extent permitted by law, obtain a deed
in lieu of foreclosure, or otherwise acquire possession of or title to the
related Mortgaged Property, by operation of law or otherwise.
In accordance with the criteria for proceeding against the Mortgaged
Property set forth in Section 4.12(a), with respect to FHA Loans that are
---------------
Mortgage Loans and with respect to the Non-FHA Loans, the Servicer shall
institute foreclosure proceedings, repossess, exercise any power of sale to
the extent permitted by law, obtain a deed in lieu of foreclosure, or
otherwise acquire possession of or title to any Property, by operation of law
or otherwise only in the event that in the Servicer's reasonable judgement
such action is likely to result in a positive economic benefit to the Trust
by creating net liquidation proceeds (after reimbursement of all amounts owed
with respect to such Home Loan to the Servicer) and provided that, with
respect to any Property, prior to taking title thereto, the Servicer has
requested that the Indenture Trustee obtain, and the Indenture Trustee shall
have obtained, an environmental review to be performed on such Property by a
company with recognized expertise, the scope of which is limited to the
review of public records and documents for information regarding whether such
Mortgaged Property has on it, under it or is near, hazardous or toxic
material or waste. If such review reveals that such Mortgaged Property has
on it, under it or is near hazardous or toxic material or waste or reveals
any other environmental problem, the Indenture Trustee shall provide a copy
of the related report to the Servicer.
In connection with any foreclosure proceeding on an FHA Loan, the
Servicer shall comply with the requirements under Title I, shall follow such
practices and procedures in a manner which is consistent with the Servicer's
procedure for foreclosure with respect to similar FHA Title I loans held in
the Servicer's portfolio for its own account or, if there are no such loans,
FHA Title I loans serviced by the Servicer for others. If, in following such
foreclosure procedures, title to the Foreclosure Property is acquired, the
deed or certificate of sale shall be issued to the Co-Owner Trustee and the
Indenture Trustee.
(d) With respect to any FHA Loan, each of the Co-Owner Trustee, Owner
Trustee, Indenture Trustee and the Contract of Insurance Holder shall deposit
in the Note Distribution Account on the day of receipt all amounts received
from the FHA or any other Person with respect to such FHA Loans or any other
assets of the Trust and shall transmit by facsimile, or such other method
requested by the Servicer or Claims Administrator, to the Servicer and Claims
Administrator on each such day the letter of transmittal received from the
FHA and any other documents with respect to such receipt. Each of the Co-
Owner Trustee, Owner Trustee, Indenture Trustee and the Contract of Insurance
Holder shall also promptly deliver to the Claims Administrator copies of any
other correspondence received from the FHA or sent to the FHA by
the Co-Owner Trustee, Owner Trustee, Indenture Trustee or the Contract of
Insurance Holder, as the case may be, including, but not limited to, any
correspondence regarding the balance of the FHA Insurance Coverage Reserve
Account, premiums due and claims rejected.
(e) If the FHA rejects an insurance claim, in whole or part, under the
Contract of Insurance after previously paying such insurance claim and the
FHA demands that the Contract of Insurance Holder repurchase such FHA Loan,
the Claims Administrator shall pursue such appeals with the FHA as are
reasonable. If the FHA continues to demand that the Contract of Insurance
Holder repurchase such FHA Loan after the Claims Administrator exhausts such
administrative appeals as are reasonable, then notwithstanding that Empire
Funding, the Servicer or any other person is required to repurchase such FHA
Loan under this Agreement, the Claims Administrator shall notify the Contract
of Insurance Holder of such fact and the Co-Owner Trustee and the Indenture
Trustee shall repurchase such FHA Loan from funds available in the Note
Distribution Account. The Claims Administrator shall, to the extent
possible, direct the Indenture Trustee to make all such repurchases of FHA
Loans once a month and to repurchase any and all such FHA Loans from the FHA
in that portion of the calendar month after each Distribution Date. To the
extent allowed by FHA, Empire Funding may repurchase directly from the FHA
any FHA Loan for which an insurance claim has been paid and later rejected by
the FHA. If the FHA indicates in writing in connection with its rejection or
refusal to pay a claim that such rejection or refusal is due to other than
(i) a failure to service the FHA Loan in accordance with Title I after the
Closing Date or (ii) the amount in the FHA Insurance Coverage Reserve Account
is insufficient to pay such claim, or if the FHA does not indicate in writing
the reason for its rejection or refusal, Empire Funding shall be liable to
reimburse the Trust for any amounts paid by the Indenture Trustee to the FHA
in order to repurchase such FHA Loan. Subject to Section 4.12(b), if the FHA
indicates in writing, or it is agreed by the Servicer, in connection with
its--------------- rejection or refusal to pay a claim that such rejection or
refusal is due to a failure to service such Loan in accordance with Title I
after the Closing Date, the Servicer shall be liable to reimburse the Trust
or Empire Funding for any amounts paid by the Trust or Empire Funding, as the
case may be, to FHA in order to repurchase FHA Loans for which the FHA has
rejected an insurance claim as a result of a failure to service such FHA Loan
in accordance with Title I.
(f) (Reserved).
(g) The Claims Administrator shall be entitled to reimbursement of
expenses associated with the filing of any FHA Insurance claim from and to
the extent that such amounts are reimbursed by HUD.
(h) The Indenture Trustee shall furnish the Claims Administrator or the
Servicer, as applicable, within 5 days of request of the Claims Administrator
or the Servicer therefor any powers of attorney and other documents necessary
and appropriate to carry out its respective duties hereunder, including any
documents or powers of attorney necessary to foreclose or file a claim with
respect to any FHA Loan and to file claims with the FHA under the Contract of
Insurance. The forms of any such powers or documents shall be appended to
such requests. The Contract of Insurance Holder shall furnish the Claims
Administrator or the Servicer, as applicable, within 5 days of request of
the Claims Administrator or the Servicer therefor any powers of attorney and
other documents necessary and appropriate to carry out its administrative
duties pursuant to Section
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4.12.
- ----
Section 4.13 Title, Management and Disposition of Foreclosure
-------------------------------------
Property.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure (a "Foreclosure Property"), the
--------------------
deed or certificate of sale shall be taken in the name of the Indenture
Trustee for the benefit of the Securityholders. The Servicer shall manage,
conserve, protect and operate each Foreclosure Property for the Indenture
Trustee and the Securityholders solely for the purpose of its prudent and
prompt disposition and sale. The Servicer shall, either itself or through an
agent selected by the Servicer, manage, conserve, protect and operate the
Foreclosure Property in the same manner that it manages, conserves, protects
and operates other foreclosure property for its own account.
Subject to Section 4.12, the Servicer shall, consistent with the
------------
servicing standards set forth herein, foreclose upon or otherwise comparably
convert the ownership of properties securing such of the Home Loans as come
into and continue in default and as to which no satisfactory arrangements can
be made for collection of delinquent payments. In connection with
realization upon defaulted Home Loans, the Servicer shall follow such
practices and procedures as it shall deem necessary or advisable, as shall be
normal and usual in accordance with Accepted Servicing Procedures and the
requirements of insurers under any insurance policy required to be maintained
hereunder with respect to the related Home Loan. The Servicer shall be
responsible for all costs and expenses incurred by it in any such
proceedings; provided, however, that such costs and expenses will be
-------- -------
recoverable as Servicing Advances by the Servicer as contemplated herein.
The Servicer shall not be required to make any Servicing Advance, to
foreclose upon any Mortgaged Property, or otherwise expend its own funds
toward the restoration of any Mortgaged Property that shall have suffered
damage from any cause of damage to a Mortgaged Property such that the
complete restoration of such property is not fully reimbursable by the hazard
insurance policies required to be maintained pursuant to this Agreement.,
unless it shall determine in its reasonable judgment, as evidenced by a
certificate of a Servicing Officer, that such foreclosure or restoration, as
the case may be, will increase the proceeds of liquidation of the related
Home Loan after reimbursement to itself for Servicing Advances. Any
Servicing Advances made with respect to a Home Loan shall be recoverable by
the Servicer only from recoveries on such Home Loan except to the extent such
Servicing Advance is deemed a Nonrecoverable Servicing Advance.
The Servicer may offer to sell to any Person any Foreclosure Property,
if and when the Servicer determines consistent with the Accepted Servicing
Procedures and that such a sale would be in the best interests of the Trust,
but shall, with respect to the FHA Loans, in any event, so offer to sell any
Foreclosure Property in accordance with the criteria set forth in Section
-------
4.12 and no later than the time determined by the Servicer to be sufficient
- ----
to result in the sale of such
Foreclosure Property on or prior to the date specified in Section 4.12(d).
---------------
The Servicer shall give the Indenture Trustee not less than five days' prior
notice of its intention to sell any Foreclosure Property, and shall accept
the highest bid received from any Person for any Foreclosure Property in an
amount at least equal to the sum of:
(1) the Principal Balance of the related foreclosed Home Loan
plus the outstanding amount of any liens superior in priority, if any,
to the lien of the foreclosed Home Loan; and
(2) all unpaid interest accrued thereon at the related Home
Loan Interest Rate through the date of sale.
In the absence of any such bid, the Servicer shall accept the highest bid
received from any Person that is determined to be a fair price for such
Foreclosure Property by the Servicer, if the highest bidder is a Person other
than an Interested Person, or by an Independent appraiser retained by the
Servicer, if the highest bidder is an Interested Person. In the absence of
any bid determined to be fair as aforesaid, the Servicer shall offer the
affected Foreclosure Property for sale to any Person, other than an
Interested Person, in a commercially reasonable manner for a period of not
less than 10 or more than 30 days, and shall accept the highest cash bid
received therefor in excess of the highest bid previously submitted. If no
such bid is received, any Interested Person may resubmit its original bid,
and the Servicer shall accept the highest outstanding cash bid, regardless of
from whom received. No Interested Person shall be obligated to submit a bid
to purchase any Foreclosure Property, and notwithstanding anything to the
contrary herein, neither the Indenture Trustee, in its individual capacity,
nor any of its affiliates may bid for or purchase any Foreclosure Property
pursuant hereto.
In determining whether any bid constitutes a fair price for any
Foreclosure Property or to effectuate the payment of a claim under the
Contract of Insurance, the Servicer shall take into account, and any
appraiser or other expert in real estate matters shall be instructed to take
into account, as applicable, among other factors, the financial standing of
any tenant of the Foreclosure Property, the physical condition of the
Foreclosure Property and the state of the local and national economies.
Subject to the provisions of Section 4.12, the Servicer shall act on
------------
behalf of the Indenture Trustee in negotiating and taking any other action
necessary or appropriate in connection with the sale of any Foreclosure
Property, including the collection of all amounts payable in connection
therewith. Any sale of a Foreclosure Property shall be without recourse to
the Indenture Trustee, the Servicer or the Trust, and if consummated in
accordance with the terms of this Agreement, neither the Servicer nor the
Indenture Trustee shall have any liability to any Securityholder with respect
to the purchase price therefor accepted by the Servicer or the Indenture
Trustee.
Prior to acquiring any Foreclosure Property, the Servicer shall cause a
review to be performed, in accordance with Accepted Servicing Procedures, on
the related Mortgaged Property by a company such as Equifax, Inc. or Toxicheck
, and the scope of such review shall be limited to the review of public
records and documents for indications that such Mortgaged Property has on
it, under it, or is near, hazardous or toxic material or waste. If such
review reveals that the Mortgaged Property has on it, under it or is near
hazardous or toxic material or waste or reveals any other environmental
problem, the Servicer shall provide a copy to the Indenture Trustee of
the related report with an attached certification of a Responsible Officer
that based on an analysis of all available information (including potential
clean up costs and liability claims) at the time it is the best judgment of
such Responsible Officer that such foreclosure shall increase Net
Liquidation Proceeds to the Indenture Trustee and the Trust shall take
title to such Mortgaged Property. The Indenture Trustee shall promptly
forward such report and certification to the Securityholders.
The Servicer may contract with any independent contractor for the
operation and management of any Foreclosure Property, provided that:
(i) the terms and conditions of any such contract shall not be
inconsistent with this Agreement;
(ii) any such contract shall require, or shall be administered to
require, that the independent contractor pay all costs and expenses
incurred in connection with the operation and management of such
Foreclosure Property, remit all related revenues (net of such costs and
expenses) to the Servicer as soon as practicable, but in no event later
than thirty days following the receipt thereof by such independent
contractor;
(iii) none of the provisions of this Section 4.13 relating to any
------------
such contract or to actions taken through any such independent
contractor shall be deemed to relieve the Servicer of any of its duties
and obligations hereunder with respect to the operation and
management of any such Foreclosure Property; and
(iv) the Servicer shall be obligated with respect thereto to the
same extent as if it alone were performing all duties and obligations in
connection with the operation and management of such Foreclosure
Property.
The Servicer shall be entitled to enter into any agreement with
any Independent Contractor performing services for it related to
its duties and obligations hereunder for indemnification of the Servicer
by such Independent Contractor, and nothing in this Agreement shall be
deemed to limit or modify such indemnification. The Servicer shall not
be liable for all fees owed by it to any such Independent Contractor, and
that any amounts so expended shall be deemed Servicing Advances. Each
liquidation of a Foreclosure Property shall be carried by the Servicer
at such price and upon such terms and conditions as the Servicer
shall deem necessary or advisable, as shall be normal and usual in its
several servicing activities, and the resulting Liquidation Proceeds
shall be distributed in accordance with Section 5.01
------------
hereof.
ARTICLE V.
ESTABLISHMENT OF TRUST ACCOUNTS
-------------------------------
Section 5.01 Collection Account and Note Distribution Account.
------------------------------------------------
(a)(1) Establishment of Collection Account. The Servicer, for the
-----------------------------------
benefit of the Securityholders, shall cause to be established and maintained
one or more Collection Accounts, which shall be separate Eligible Accounts,
which may be interest-bearing, entitled "Collection Account, First Bank
National Association, as Indenture Trustee, in trust for the Empire Funding
Home Loan Asset Backed Securities, Series 1997-1". The Collection Account
may be maintained with the Indenture Trustee or any other depository
institution which satisfies the requirements set forth in the definition of
Eligible Account. The creation of any Collection Account other than one
maintained with the Indenture Trustee shall be evidenced by a letter
agreement between the Servicer and the depository institution acceptable to
the Indenture Trustee. A copy of such letter agreement shall be furnished to
the Indenture Trustee and, upon request of any Securityholder, to such
Securityholder. Funds in the Collection Account shall be invested in
accordance with Section 5.03.
------------
The Collection Account shall be established, as of the Closing Date,
with the Indenture Trustee as an Eligible Account pursuant to the definition
thereof. The Collection Account may, upon written notice to the Issuer and
the Indenture Trustee, be transferred to a different depository institution
so long as such transfer is to an Eligible Account acceptable to the
Indenture Trustee.
(2) Establishment of Note Distribution Account. No later than the
------------------------------------------
Closing Date, the Servicer, for the benefit of the Securityholders, shall
cause to be established and maintained with the Indenture Trustee one or more
Note Distribution Accounts, which shall be separate Eligible Accounts, which
may be interest-bearing and which shall be entitled "Note Distribution
Account, First Bank National Association, as Indenture Trustee, in trust for
the Empire Funding Home Loan Asset Backed Securities, Series 1997-1". Funds
in the Note Distribution Account shall be invested in accordance with Section
-------
5.03.
- ----
(3) FHA Premium Account. No later than the Closing Date, the Servicer,
-------------------
for the benefit of the Securityholders, shall cause to be established and
maintained with the Indenture Trustee in its trust capacity at its corporate
trust department a segregated trust account referred to herein as the "FHA
Premium Account" for the benefit of the Securityholders. The Indenture
Trustee shall at all times maintain the FHA Premium Account as an Eligible
Account and shall cause such accounts to be designated as "FHA Premium
Account, First Bank National Association, as Indenture Trustee in trust for
the Empire Funding Home Loan Asset Backed Securities, Series 1997-1". No
later than the second Business Day preceding each Distribution Date, all
amounts on deposit in the Note Distribution Account and Collection Account
representing payments by Obligors on Invoiced Loans in respect of premium on
FHA Insurance shall be withdrawn by the Indenture Trustee and deposited to
the FHA Premium Account. Any and all moneys transferred to the FHA
Premium Account pursuant to this Section 5.01(a)(3) shall be held by the
------------------
Indenture Trustee in the FHA Premium Account subject to disbursement and
withdrawal as herein provided. Amounts deposited to an FHA Premium Account
shall be invested in accordance with Section 5.03. Amounts on deposit in an
FHA Premium Account shall be ------------ withdrawn by the Indenture
Trustee, in the amounts required, for application as follows:
(i) to payment to the FHA of any premiums due on the Contract
of Insurance in respect of FHA Loans, in such amounts and on such dates
as directed by the Servicer or Empire Funding; the Indenture Trustee
shall apply all amounts on deposit in the related FHA Premium Account to
payment to the FHA of any premiums due under the Contract of Insurance
as invoiced by FHA and, if, in connection with an FHA Loan, the FHA
Insurance with respect to which shall not yet have been transferred to
the Contract of Insurance Holder, Empire Funding instructs the Indenture
Trustee to pay FHA insurance with respect to such FHA Loan to the
related Contract of Insurance Holder, the Indenture Trustee shall make
such payment, and Empire Funding and not the Indenture Trustee shall be
liable in the event of the failure of such funds to be applied to
payment of the premium with respect to such FHA Loan; and
(ii) on the Business Day preceding a Distribution Date that is
also the Termination Date, the Indenture Trustee shall withdraw from
each FHA Premium Account and deposit in the Note Distribution Account
all amounts then on deposit in the FHA Premium Account, whereupon the
FHA Premium Account shall terminate.
(b)(1) Deposits to Collection Account. The Servicer shall use its
------------------------------
best efforts to deposit or cause to be deposited (without duplication) within
two (2) Business Days, of receipt thereof in the Collection Account and
retain therein in trust for the benefit of the Securityholders:
(i) all payments on account of principal on the Home Loans
collected after the Cut-Off Date;
(ii) all payments on account of interest on the Home Loans due
after the Cut-Off Date;
(iii) all Net Liquidation Proceeds pursuant to Section 4.02;
------------
(iv) all Insurance Proceeds;
(v) all Released Mortgaged Property Proceeds;
(vi) any amounts payable in connection with the repurchase of any
Home Loan and the amount of any Substitution Adjustment pursuant to
Sections 2.06, 3.06 and 4.12(b);
------------- ---- -------
(vii) any amount required to be deposited in the Collection
Account pursuant to the receipt of proceeds from any insurance policies
under Section 4.02 or the deposit of the Termination Price under Section
------------
11.01;
(viii) all payments by Obligors in respect of premiums on FHA
Insurance;
(ix) all FHA Insurance Payment Amounts; and
(x) interest and gains on funds held in the Collection Account.
The Servicer shall be entitled to retain and not deposit into the
Collection Account any amounts received with respect to a Home Loan that
constitute additional servicing compensation pursuant to Section 7.03, and
------------
such amounts retained by the Servicer during a Due Period shall be excluded
from the calculation of the Servicing Compensation that is distributable to
the Servicer from the Note Distribution Account on the next Distribution Date
following such Due Period. All Payments from Obligors received on FHA Loans
from or on behalf of an Obligor shall be allocated in accordance with Title
I.
(2) Deposits to Note Distribution Account. On the Settlement Date, the
-------------------------------------
Indenture Trustee shall deposit into the Note Distribution Account the sum of
$44.15. On the second Business Day prior to each Distribution Date, the
Indenture Trustee (based on information provided by the Servicer for such
Distribution Date) shall withdraw from the Collection Account the Available
Collection Amount and deposit such into the Note Distribution Account for
such Distribution Date.
(3) Withdrawals from Collection Account. The Indenture Trustee, at the
-----------------------------------
direction of the Servicer shall also make the following withdrawals from the
Collection Account, in no particular order of priority:
(i) to withdraw any amount not required to be deposited in the
Collection Account or deposited therein in error;
(ii) to withdraw the Servicer Reimbursement Amount;
(iii) to clear and terminate the Collection Account in
connection with the termination of this Agreement; and
(iv) make payments set forth in Section 9.01(e).
---------------
(c) Withdrawals from Note Distribution Account. To the extent funds
------------------------------------------
are available in the Note Distribution Account, the Indenture Trustee (based
on the information provided by the Servicer contained in the Servicer's
Monthly Remittance Report for such Distribution Date) shall make withdrawals
therefrom by 9:00 a.m. (New York City time) on each Distribution Date, for
application in the following order of priority:
(i) to distribute on such Distribution Date the following amounts
pursuant to the Indenture in the following order: (a) for deposit in
the FHA Premium Account, an amount equal to the FHA Premium Account
Deposit for such Distribution Date, (b) to the Servicer, an amount equal
to (i) the Servicing Compensation (net of any amounts retained prior to
deposit into the Collection Account pursuant to subsection (b)(1) above)
and all unpaid Servicing Compensation from prior Distribution Dates and
(ii) all Nonrecoverable Servicing Advances not previously reimbursed,
(c) to the Indenture Trustee, an amount equal to the Indenture Trustee
Fee and all unpaid Indenture Trustee Fees from prior Distribution Dates,
(d) to the Servicer, in trust for the Owner Trustee, an amount equal to
the Owner Trustee Fee and all unpaid Owner Trustee Fees from prior Due
Periods, and (e) to the Custodian, an amount equal to the Custodian Fee,
if any, and all unpaid Custodian Fees from prior Distribution Dates; and
(ii) to deposit into the Certificate Distribution Account the
applicable portions of the Available Distribution Amount distributable
in respect of the Class B Certificates and the Residual Interest
calculated pursuant to 5.01(d) and (e) below on such Distribution Date;
Notwithstanding that the Notes have been paid in full, the Indenture
Trustee and the Servicer shall continue to maintain the Collection
Account and the Note Distribution Account hereunder until the Class
Principal Balance of each Class of Securities has been reduced to zero.
(d) On each Distribution Date, the Indenture Trustee (based on the
information provided by the Servicer contained in the Servicer's Monthly
Remittance Report for such Distribution Date) shall distribute the Regular
Distribution Amount from the Note Distribution Account (in the case of all
amounts distributable to Noteholders) and from the Certificate Distribution
Account (in the case of all amounts distributable to Certificateholders), in
the following order of priority:
(i) to the holders of the Senior Notes, pro rata, the Senior
Noteholders Interest Distribution Amount for such Distribution Date;
(ii) sequentially, to the holders of the Class M-1 and Class M-2
Notes, in that order, their respective portions of the Mezzanine
Noteholders' Interest Distribution Amount for such Distribution Date;
(iii) to the holders of the Class B Certificates, the
Certificateholders' Interest Distribution Amount for such Distribution
Date;
(iv) first (A) to the Class A-5 Notes, an amount equal to the Class
A-5 Priority Principal Distribution Amount until the Class Principal
Balance thereof is reduced to zero; and second (B) sequentially, to the
holders of the Class A-1, Class A-2, Class A-3 and Class A-4 Notes, in
that order, until the respective Class Principal Balances thereof are
reduced to zero, the amount necessary to reduce the aggregate Class
Principal Balance of the Senior Notes to the Senior Optimal Principal
Balance for such Distribution Date, provided, however, that on each
Distribution Date occurring on or after any reduction of the Class
Principal Balances of the Class M-1, Class M-2 Notes and Class B
Certificates to zero through the application of Allocable Loss Amounts,
amounts shall be distributed among the remaining Senior Notes pro rata
in accordance with their outstanding Class Principal Balances and not
sequentially;
(v) sequentially, to the holders of the Class M-1 and the Class M-
2 Notes in that order, the amount necessary to reduce the Class
Principal Balances thereof to the Class M-1 Optimal Principal Balance
and the Class M-2 Optimal Principal Balance, respectively, for such
Distribution Date;
(vi) to the holders of the Class B Certificates, the amount
necessary to reduce the Class Principal Balance thereof to the Class B
Optimal Principal Balance for such Distribution Date;
(vii) sequentially, to the Class M-1 Notes, Class M-2 Notes and
the Class B Certificates, in that order, until their respective Loss
Reimbursement Deficiencies have been paid in full (in the case of the
Class M-1 and Class M-2 Notes: first to the reimbursement of Allocable
Loss Amounts, until completely reimbursed, and then to any accrued
interest thereon); and
(viii) any remaining amount to the holders of the Residual
Interest.
(e) On each Distribution Date, the Indenture Trustee (based on the
information provided by the Servicer contained in the Servicer's Monthly
Remittance Report for such Distribution Date) shall distribute the Excess
Spread, if any, in the following order of priority:
(i) in an amount equal to the Overcollateralization
Deficiency Amount, if any, as follows:
(A) first (x) to the Class A-5 Notes, an amount equal to the Class
A-5 Priority Excess Spread Distribution Amount until the Class Principal
Balance thereof is reduced to zero; and second (y) sequentially, to the
holders of the Class A-1, Class A-2, Class A-3 and Class A-4 Notes, in
that order, until the respective Class Principal Balances thereof are
reduced to zero, and until the aggregate of their Class Balances have
been reduced to the Senior Optimal Principal Balance for such
Distribution Date;
(B) sequentially, to the holders of the Class M-1 and Class M-2
Notes, in that order, until the respective Class Principal Balances
thereof have been reduced to the Class M-1 Optimal Principal Balance and
Class M-2 Optimal Principal Balance, respectively, for such Distribution
Date; and
(C) to the holders of the Class B Certificates, until the Class
Principal Balance thereof has been reduced to the Class B Optimal
Principal Balance for such Distribution Date; and
(ii) sequentially, to the Class M-1 Notes, the Class M-2 Notes
and the Class B Certificates, in that order, until their respective
Loss Reimbursement Deficiencies, if any, have been paid in full (in
the case of the Class M-1 and Class M-2 Notes: first to the
reimbursement of Allocable Loss Amounts, until completely
reimbursed, and then to any accrued interest thereon); and
(iii) any remaining amount to the holders of the Residual
Interest.
Section 5.02 Certificate Distribution Account and Note Distribution
------------------------------------------------------
Account.
- -------
(a) Establishment of Certificate Distribution Account. No later than
-------------------------------------------------
the Closing Date, the Servicer, for the benefit of the Certificateholders,
shall cause to be established and maintained with the Indenture Trustee for
the benefit of the Owner Trustee on behalf of the Certificateholders one or
more separate Eligible Accounts and which Trust Account shall be entitled
"Certificate Distribution Account, First Bank National Association, as
Indenture Trustee and Co-Owner Trustee, in trust for the Empire Funding Home
Loan Owner Trust Series 1997-1". Funds in the Certificate Distribution
Account shall be invested in accordance with Section 5.03.
------------
(b) (Reserved)
(c) Distributions. On each Distribution Date the Indenture Trustee
-------------
shall withdraw from the Note Distribution Account all amounts required to be
deposited in the Certificate Distribution Account with respect to such
Distribution Date pursuant to Section 5.01(c)(ii) and will remit such amount
-------------------
to the Owner Trustee or the Co-Owner Trustee for deposit into the Certificate
Distribution Account. The Indenture Trustee shall distribute all remaining
amounts on deposit in the Note Distribution Account to the holders of the
Notes to the extent of amounts due and unpaid on the Notes for principal
thereof and interest thereon. The Owner Trustee or the Co-Owner Trustee
shall distribute all amounts on deposit in the Certificate Distribution
Account to the holders of the Class B Certificates to the extent of amounts
due and unpaid on the Class B Certificates for principal thereof and interest
thereon and to the holders of the Residual Interest.
(d) All distributions made on each Class of Notes on each Distribution
Date will be made on a pro rata basis among the Noteholders of record of such
Class of Notes on the next preceding Record Date based on the Percentage
Interest represented by their respective Notes, without preference or
priority of any kind, and except as otherwise provided in the next succeeding
sentence, shall be made by wire transfer of immediately available funds to
the account of such Noteholder, if such Noteholder shall own of record Notes
which have original Denominations aggregating at least $250,000 and shall
have so notified the Indenture Trustee, and otherwise by check mailed to the
address of such Noteholder appearing in the Notes Register.
The final distribution on each Note will be made in like manner, but only
upon presentment and surrender of such Note at the location specified in the
notice to Noteholders of such final distribution.
(e) All distributions made on the Class B Certificates on each
Distribution Date will be made on a pro rata basis among the
Certificateholders of record on the preceding Record Date based on the
Percentage Interest represented by their respective Class B Certificates,
without preference or priority of any kind, and except as otherwise provided
in the next succeeding sentence, shall be made by wire transfer of
immediately available funds to the account of such Certificateholder, if such
Certificateholder shall own of record Class B Certificates which have
original Denominations aggregating at least $250,000 and shall have so
notified the Owner Trustee or Co-Owner Trustee, and otherwise by check mailed
to the address of such Certificateholder appearing in the Certificate
Register. The final distribution on each Certificate will be made in like
manner, but only upon presentment and surrender of such Certificate at the
location specified in the notice to Certificateholders of such final
distribution.
(f) All distributions made on the Residual Interest on each
Distribution Date will be made on a pro rata basis among the holders of the
Residual Interest of record on the next preceding Record Date based on their
percentage holdings in the Residual Interest, without preference or priority
of any kind, and except as otherwise provided in the next succeeding
sentence, shall be made by wire transfer of immediately available funds to
the account of each such holder, if such holder shall own of record a
Residual Interest having an original denomination aggregating at least a 50%
percentage holding thereof and shall have so notified the Owner Trustee or
Co-Owner Trustee, and otherwise by check mailed to the address of such
Residual Interest holder appearing in the Certificate Register. The final
distribution on each Residual Interest will be made in like manner, but only
upon presentment and surrender of such Residual Interest at the location
specified in the notice to holders of the Residual Interest of such final
distribution. Any amount distributed to the holders of the Residual Interest
on any Distribution Date shall not be subject to any claim or interest of
holders of the other Classes of Securities.
Section 5.03 Trust Accounts; Trust Account Property.
--------------------------------------
(a) Control of Trust Accounts. Each of the Trust Accounts established
-------------------------
hereunder has been pledged by the Issuer to the Indenture Trustee under the
Indenture and shall be subject to the lien of the Indenture. In addition to
the provisions hereunder, each of the Trust Accounts shall also be
established and maintained pursuant to the Indenture. Amounts distributed
from each Trust Account in accordance with the Indenture and this Agreement
shall be released from the lien of the Indenture upon such distribution
thereunder or hereunder. The Indenture Trustee shall possess all right,
title and interest in all funds on deposit from time to time in the Trust
Accounts (other than the Certificate Distribution Account) and in all
proceeds thereof (including all income thereon) and all such funds,
investments, proceeds and income shall be part of the Trust Account Property
and the Trust Estate. If, at any time, any Trust Account ceases to be an
Eligible Account, the Indenture Trustee (or the Servicer on its behalf) shall
within 10 Business Days (or such longer period, not to exceed 30 calendar
days, as to which each Rating Agency may consent) (i) establish a new Trust
Account as an Eligible Account, (ii) terminate the ineligible Trust Account,
and (iii) transfer any cash and investments from such ineligible Trust
Account to such new Trust Account.
With respect to the Trust Accounts (other than the Certificate
Distribution Account), the Indenture Trustee agrees, by its acceptance
hereof, that each such Trust Account shall be subject to the sole and
exclusive custody and control of the Indenture Trustee for the benefit of the
Securityholders and the Issuer, as the case may be, and the Indenture Trustee
shall have sole signature and withdrawal authority with respect thereto.
In addition to this Agreement and the Indenture, the Certificate
Distribution Account established hereunder also shall be subject to and
established and maintained in accordance with the Trust Agreement. Subject
to rights of the Indenture Trustee hereunder and under the Indenture, the
Owner Trustee or Co-Owner Trustee shall possess all right, title and interest
for the benefit of the Certificateholders in all funds on deposit from time
to time in the Certificate Distribution Account and in all proceeds thereof
(including all income thereon) and all such funds, investments, proceeds and
income shall be part of the Trust Account Property and the Trust Estate.
Subject to the rights of the Indenture Trustee, the Owner Trustee and Co-
Owner Trustee agree, by its acceptance hereof, that such Certificate
Distribution Account shall be subject to the sole and exclusive custody and
control of the Owner Trustee and Co-Owner for the benefit of the Issuer and
the parties entitled to distributions therefrom, including without
limitation, the Certificateholders, and the Owner Trustee and the Co-Owner
Trustee shall have sole signature and withdrawal authority with respect to
the Certificate Distribution Account. Notwithstanding the preceding, the
distribution of amounts from the Certificate Distribution Account in
accordance with Section 5.02(c)(ii) also shall be made for the benefit of the
-------------------
Indenture Trustee (including without limitation with respect to its duties
under the Indenture and this Agreement relating to the Trust Estate), and the
Indenture Trustee (in its capacity as Indenture Trustee) shall have the
right, but not the obligation to take custody and control of the Certificate
Distribution Account and to cause the distribution of amounts therefrom in
the event that the Owner Trustee fails to distribute such amounts in
accordance with Section 5.02(d) and (e).
-----------------------
The Servicer shall have the power, revocable by the Indenture Trustee or
by the Owner Trustee or Co-Owner Trustee with the consent of the Indenture
Trustee, to instruct the Indenture Trustee or Owner Trustee to make
withdrawals and payments from the Trust Accounts for the purpose of
permitting the Servicer to carry out its respective duties hereunder or
permitting the Indenture Trustee or Owner Trustee to carry out its duties
herein or under the Indenture or the Trust Agreement, as applicable.
(b)(1) Investment of Funds. So long as no Event of Default shall
-------------------
have occurred and be continuing, the funds held in any Trust Account may be
invested (to the extent practicable and consistent with any requirements of
the Code) in Permitted Investments, as directed by the Transferor in writing
or by telephone or facsimile transmission confirmed in writing by the
Servicer. In any case, funds in any Trust Account must be available for
withdrawal without penalty, and any Permitted Investments must mature or
otherwise be available for withdrawal, not later than the Business Day
immediately preceding the Distribution Date next following the date of
such investment and shall not be sold or disposed of prior to its maturity
subject to Section 5.03(b)(2)
------------------
below. All interest and any other investment earnings on amounts or
investments held in any Trust Account shall be deposited into such Trust
Account immediately upon receipt by the Indenture Trustee and may be
withdrawn from the Collection Account pursuant to Section 5.01. All
Permitted Investments in which funds in any Trust Account (other than the
Certificate Distribution Account) are invested must be held by or registered
in the name of "First Bank National Association, as Indenture Trustee, in
trust for the Empire Funding Home Loan Asset Backed Securities, Series 1997-
1". While the Co-Owner Trustee holds the Certificate Distribution Account,
all Permitted Investments in which funds in the Certificate Distribution
Account are invested shall be held by or registered in the name of "First
Bank National Association, as Co-Owner Trustee, in trust for the Empire
Funding Home Loan Asset Backed Securities, Series 1997-1".
(2) Insufficiency and Losses in Trust Accounts. If any amounts are
------------------------------------------
needed for disbursement from any Trust Account held by or on behalf of the
Indenture Trustee and sufficient uninvested funds are not available to make
such disbursement, the Indenture Trustee, or Owner Trustee or Co-Owner
Trustee in the case of the Certificate Distribution Account, shall cause to
be sold or otherwise converted to cash a sufficient amount of the investments
in such Trust Account. The Indenture Trustee, or Owner Trustee or Co-Owner
Trustee in the case of the Certificate Distribution Account, shall not be
liable for any investment loss or other charge resulting therefrom, unless
such loss or charge is caused by the failure of the Indenture Trustee or
Owner Trustee or Co-Owner Trustee, respectively, to perform in accordance
with this Section 5.03.
------------
If any losses are realized in connection with any investment in any
Trust Account pursuant to this Agreement and the Indenture, then the
Transferor shall deposit the amount of such losses (to the extent not offset
by income from other investments in such Trust Account) in such Trust Account
immediately upon the realization of such loss. All interest and any other
investment earnings on amounts held in any Trust Account shall be taxed to
the Issuer and for federal and state income tax purposes the Issuer shall be
deemed to be the owner of each Trust Account.
(c) Subject to Section 6.01 of the Indenture, the Indenture Trustee
shall not in any way be held liable by reason of any insufficiency in any
Account held by the Indenture Trustee resulting from any investment loss on
any Permitted Investment included therein (except to the extent that the
Indenture Trustee is the obligor and has defaulted thereon).
(d) With respect to the Trust Account Property, the Indenture Trustee
acknowledges and agrees that:
(1) any Trust Account Property that is held in deposit accounts
shall be held solely in the Eligible Accounts, subject to the last
sentence of Section 5.03(a); and each
---------------
such Eligible Account shall be subject to the exclusive custody and
control of the Indenture Trustee, and the Indenture Trustee shall have
sole signature authority with respect thereto;
(2) any Trust Account Property that constitutes Physical Property
shall be delivered to the Indenture Trustee in accordance with paragraph
(a) of the definition of "Delivery" and shall be held, pending maturity
or disposition, solely by the Indenture Trustee or a financial
intermediary (as such term is defined in Section 8-313(4) of the UCC)
acting solely for the Indenture Trustee;
(3) any Trust Account Property that is a book-entry security held
through the Federal Reserve System pursuant to federal book-entry
regulations shall be delivered in accordance with paragraph (b) of the
definition of "Delivery" and shall be maintained by the Indenture
Trustee, pending maturity or disposition, through continued book-entry
registration of such Trust Account Property as described in such
paragraph; and
(4) any Trust Account Property that is an "uncertificated
security" under Article VIII of the UCC and that is not governed by
clause (3) above shall be delivered to the Indenture Trustee in
accordance with paragraph (c) of the definition of "Delivery" and shall
be maintained by the Indenture Trustee, pending maturity or disposition,
through continued registration of the Indenture Trustee's (or its
nominee's) ownership of such security.
(e) The Servicer shall have the power, revocable by the Indenture
Trustee or by the Issuer with the consent of the Indenture Trustee, to
instruct the Indenture Trustee to make withdrawals and payments from the
Trust Accounts for the purpose of permitting the Servicer or the Issuer to
carry out their respective duties hereunder or permitting the Indenture
Trustee to carry out its duties under the Indenture.
Section 5.04 Allocation of Losses.
--------------------
(a) In the event that Net Liquidation Proceeds, Insurance Proceeds or
Released Mortgaged Property Proceeds on a Liquidated Home Loan are less than
the related Principal Balance plus accrued interest thereon, or any Obligor
makes a partial payment of any Monthly Payment due on a Home Loan, such Net
Liquidation Proceeds, Insurance Proceeds, Released Mortgaged Property
Proceeds or partial payment shall be applied to payment of the related Debt
Instrument, first to interest accrued at the Home Loan Interest Rate and then
to principal.
(b) On any Distribution Date, any Allocable Loss Amounts shall be
applied to the reduction of the Class Principal Balances of the Class B
Certificates, the Class M-1 and Class M-2 Notes in accordance with the
Allocable Loss Amount Priority.
ARTICLE VI.
STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS
----------------------------------------------------
Section 6.01 Statements.
----------
(a) No later than each Determination Date, the Servicer shall deliver
to the Indenture Trustee by facsimile, the receipt and legibility of which
shall be confirmed by telephone, and with hard copy thereof to be delivered
no later than one (1) Business Day after such Determination Date, the
Servicer's Monthly Remittance Report, setting forth the date of such Report
(day, month and year), the name of the Issuer (i.e. "Empire Funding Home Loan
Owner Trust 1997-1"), the Series designation of the Securities (i.e. "Series
1997-1"), and the date of this Agreement, all in substantially the form set
out in Exhibit B. Furthermore, no later than each Determination Date, the
Servicer shall deliver to the Indenture Trustee a magnetic tape or computer
disk providing such information regarding the Servicer's activities in
servicing the Home Loans during the related Due Period as the Indenture
Trustee may reasonably require.
(b) On each Distribution Date, Indenture Trustee shall distribute,
based on information provided by the Servicer, a monthly statement (the
"Distribution Statement"), to the Depositor, the Securityholders and the
----------------------
Rating Agencies, stating the date of original issuance of the Securities
(day, month and year), the name of the Issuer (i.e. "Empire Funding Home Loan
Owner Trust 1997-1"), the series designation of the Notes and Class B
Certificates (i.e. "Series 1997-1"), the date of this Agreement and the
-------------
following information:
(i) the Available Collection Amount and Available Distribution
Amount for the related Distribution Date;
(ii) the Class Principal Balance of each Class of Notes and the
Class B Certificates before and after giving effect to distributions
made to the holders of such Securities on such Distribution Date, and
the Pool Principal Balance as of the first and last day of the related
Due Period;
(iii) the Class Factor with respect to each Class of the
Securities then outstanding;
(iv) the amount of principal, if any, and interest to be
distributed to each Class of Securities on the related Distribution
Date;
(v) with respect to each Class of Securities, the Optimal
Principal Balance thereof;
(vi) the Overcollateralization Deficiency Amount, and any amount to
be distributed to the Securityholders or the holders of the Residual
Interest on such Distribution Date;
(vii) the Servicing Compensation, the Indenture Trustee Fee, the
Owner Trustee Fee and, the Custodian Fee, if any, for such Distribution
Date;
(viii) the Overcollateralization Amount on such Distribution Date,
the Overcollateralization Target Amount as of such Distribution Date,
the Net Loan Losses incurred during the related Due Period, the
cumulative Net Loan Losses as of such Distribution Date, the Allocable
Loss Amount for such Distribution Date and the application of the
Allocable Loss Amount Priority for such Distribution Date;
(ix) the weighted average maturity of the Home Loans and the
weighted average Home Loan Interest Rate of the Home Loans;
(x) certain performance information, including, without
limitation, delinquency and foreclosure information with respect to the
Home Loans and 60-Day Delinquency Amounts (as defined in "Six-Month
Rolling Delinquency Average"), as set forth in the Servicer's Monthly
Remittance Report;
(xi) the amount deposited into the Collection Account for the
preceding Due Period representing payments by the related Obligors on
Invoiced Loans in respect of premium on FHA Insurance;
(xii) the amount remaining in the FHA Insurance Coverage Reserve
Account with respect to all FHA Loans and the Related Series Loans, if
any, and the number and amount of claims for FHA Insurance filed and/or
paid pursuant to Section 4.12;
------------
(xiii) the number of and aggregate Principal Balance of all Home
Loans in foreclosure proceedings and the percent of the aggregate
Principal Balances of such Home Loans to the aggregate Principal
Balances of all Home Loans, all as of the close of business on the last
day of the related Due Period;
(xiv) the number of and the aggregate Principal Balance of the
Home Loans in bankruptcy proceedings and the percent of the aggregate
Principal Balances of such Home Loans to the aggregate Principal
Balances of all Home Loans, all as of the close of business on the last
day of the related Due Period;
(xv) the number of Foreclosure Properties, the aggregate Principal
Balance of the related Home Loans, the book value of such Foreclosure
Properties and the percent of the aggregate Principal Balances of such
Home Loans to the aggregate Principal Balances of all Home Loans, all as
of the close of business on the last day of the related Due Period;
(xvi) during the related Due Period, the number and aggregate
Principal Balance of Home Loans for each of the following: (A) that
became Defaulted Home Loans, (B) that became Liquidated Home Loans, (C)
that became Deleted Home Loans pursuant to Section 3.06 as a result of
such Deleted Home loans being Defective Home Loans, and
(D) that became Deleted Home loans pursuant to Section 3.06 as a result
of such Deleted Home Loans being Defaulted Home Loans or a Home Loan in
default or imminent default, including the foregoing amounts by loan
type (i.e., Combination Loans, or Debt Consolidation Loans);
(xvii) from the Closing Date through the most current Due Period,
the number and cumulative aggregate Principal Balance of Home Loans for
each of the following: (A) that became Defaulted Home Loans, (B) that
became Liquidated Home Loans, (C) that became Deleted Home Loans
pursuant to Section 3.06 as a result of such Deleted Home loans being
Defective Home Loans, and (D) that became Deleted Home Loans pursuant to
Section 3.06 as a result of such Deleted Home Loans being Defaulted Home
Loans or a Home Loan in default or imminent default, including the
foregoing amounts by loan type (i.e. Combination Loans or Debt
Consolidation Loans);
(xviii) the Principal Balance of each FHA Loan with respect to
which the Servicer has determined under the circumstances described in
the penultimate sentence of Section 4.12(a) that in good faith in
accordance with customary mortgage loan servicing practices that all
amounts which it expects to receive with respect to such FHA Loans have
been received;
(xix) the scheduled principal payments and the principal
prepayments received with respect to the Home Loans during the Due
Period; and
(xx) the number and aggregate Principal Balance of Home Loans that
were thirty, sixty or ninety days delinquent as of the close of business
on the last day of the related Due Period.
In the case of information furnished to Securityholders (other than the
holder or holders of the Residual Interest) pursuant to subclause (b)(iv)
above, the amounts shall be expressed as a dollar amount per Note or
Certificate, as applicable, with a $1,000 Denomination.
All reports prepared by the Indenture Trustee of the withdrawals from
and deposits in the Collection Account will be based in whole or in part upon
the information provided to the Indenture Trustee by the Servicer, and the
Indenture Trustee may fully rely upon and shall have no liability with
respect to such information provided by the Servicer.
(c) Within a reasonable period of time after the end of each calendar
year, the Indenture Trustee shall prepare and distribute to each Person who
at any time during the calendar year was a Securityholder, such information
as is reasonably necessary to provide to such Person a statement containing
the information set forth in subclause (b)(iv) above, aggregated for such
calendar year or applicable portion thereof during which such Person was a
Securityholder.
(d) On or before each Distribution Date, the Servicer will determine,
based on the date of origination of the FHA Loans as set forth in the Home
Loan Schedule, the amount of FHA
insurance premium, if any, due on or prior to the next succeeding
Distribution Date with respect to each FHA Loan. On or before such
Distribution Date, the Servicer will compare such amounts with respect to
each FHA Loan against amounts invoiced by FHA with respect to the Contract of
Insurance as due on or prior to such next succeeding Distribution Date and
report all discrepancies to the Indenture Trustee.
(e) On each Distribution Date, the Indenture Trustee shall forward to
the holder of the Residual Interest a copy of the Distribution Statement in
respect of such Distribution Date and a statement setting forth the amounts
actually distributed to such holders of the Residual Interest on such
Distribution Date, together with such other information as the Indenture
Trustee deems necessary or appropriate.
(f) Within a reasonable period of time after the end of each calendar
year, the Indenture Trustee shall prepare and distribute to each Person who
at any time during the calendar year was a holder of Residual Interest, if
requested in writing by such Person, such information as is reasonably
necessary to provide to such Person a statement containing the information
provided pursuant to the previous paragraph aggregated for such calendar year
or applicable portion thereof during which such Person was a holder of
Residual Interest.
(g) The Indenture Trustee shall forward to each Securityholder and the
holder of a Residual Interest, during the term of this Agreement, such
periodic, special, or other reports, including information tax returns or
reports required with respect to the Securities and the Residual Interest,
including Internal Revenue Service Forms 1099 and (if instructed in writing
by the Depositor on the basis of the advice of legal counsel) Form 1066,
Schedule Q and other similar reports that are required to be filed by the
Indenture Trustee or its agent and the holder of a Residual Interest, whether
or not provided for herein, as shall be necessary, reasonable, or appropriate
with respect to the Securityholders or the holder of Residual Interest, or
otherwise with respect to the purposes of this Agreement, all such reports or
information to be provided by and in accordance with such applicable
instructions and directions as the Securityholders or the holder of Residual
Interest may reasonably require.
(h) Reports and computer tapes furnished by the Servicer and the
Indenture Trustee pursuant to this Agreement shall be deemed confidential and
of a proprietary nature, and shall not be copied or distributed except in
connection with the purposes and requirements of this Agreement. No Person
entitled to receive copies of such reports or tapes shall use the information
therein for the purpose of soliciting the customers of the Depositor or the
Servicer or for any other purpose except as set forth in this Agreement.
Section 6.02 Specification of Certain Tax Matters.
------------------------------------
The Indenture Trustee shall comply with all requirements of the Code,
and applicable state and local law, with respect to the withholding from any
distributions made to any Securityholder of any applicable withholding taxes
imposed thereon and with respect to any applicable reporting requirements in
connection therewith.
ARTICLE VII.
GENERAL SERVICING PROCEDURE
---------------------------
Section 7.01 Due-On-Sale; Due-on-Encumbrance.
-------------------------------
(a) If any Home Loan contains a provision, in the nature of a "due-on-
sale" clause, which by its terms:
(i) provides that such Home Loan shall (or may at the
Obligee's option) become due and payable upon the sale or other transfer
of an interest in the related Property; or
(ii) provides that such Home Loan may not be assumed without
the consent of the related Obligee in connection with any such sale or
other transfer,
then, for so long as such Home Loan is included in the Trust, the Servicer,
on behalf of the Indenture Trustee, shall exercise any right the Trust or the
Indenture Trustee may have as the Obligee of record with respect to such Home
Loan (x) to accelerate the payments thereon, or (y) to withhold its consent
to any such sale or other transfer, in a manner consistent with Accepted
Servicing Procedures.
(b) If any Home Loan contains a provision, in the nature of a "due-on-
encumbrance" clause, which by its terms:
(i) provides that such Home Loan shall (or may at the
Obligee's option) become due and payable upon the creation of any lien
or other encumbrance on the related Property; or
(ii) requires the consent of the related Obligee to the
creation of any such lien or other encumbrance on the related Property,
then, for so long as such Home Loan is included in the Trust, the Servicer,
on behalf of the Trust or the Indenture Trustee, shall exercise any right the
Indenture Trustee may have as the Obligee of record with respect to such Home
Loan (x) to accelerate the payments thereon, or (y) to withhold its consent
to the creation of any such lien or other encumbrance, in a manner consistent
with Accepted Servicing Standards.
(c) Nothing in this Section 7.01 shall constitute a waiver of the
------------
Indenture Trustee's right to receive notice of any assumption of a Home Loan,
any sale or other transfer of the related Mortgaged Property or the creation
of any lien or other encumbrance with respect to such Mortgaged Property.
Section 7.02 Release of Home Loan Files.
--------------------------
(a) If with respect to any Home Loan:
(i) the outstanding Principal Balance of such Home Loan plus
all interest accrued thereon shall have been paid;
(ii) the Servicer shall have received, in escrow, payment in
full of such Home Loan in a manner customary for such purposes;
(iii) such Home Loan has become a Defective Loan and has been
repurchased or a Qualified Substitute Home Loan has been conveyed to the
Trust pursuant to Section 3.06;
------------
(iv) such Home Loan or the related Foreclosure Property has
been sold in connection with the termination of the Trust pursuant to
Section 11.01;
-------------
(v) the FHA has paid a claim with respect to such Home Loan
that is an FHA Loan under the Contract of Insurance; or
(vi) the related Foreclosure Property has been sold pursuant
to Section 4.13.
------------
In each such case, the Servicer shall deliver a certificate to the effect
that the Servicer has complied with all of its obligations under this
Agreement with respect to such Home Loan and requesting that the Indenture
Trustee release to the Servicer the related Home Loan File, then the
Indenture Trustee shall, within five Business Days or such shorter period as
may be required by applicable law, release, or cause the Custodian to release
(unless such Home Loan File has previously been released), the related Home
Loan File to the Servicer and execute and deliver such instruments of
transfer or assignment, in each case without recourse, as shall be necessary
to vest ownership of such Home Loan in the Servicer or such other Person as
may be specified in such certificate, the forms of any such instrument to be
appended to such certificate.
(b) From time to time and as appropriate for the servicing or
foreclosure of any Home Loan or to effectuate the payment of a claim under
the Contract of Insurance, the Indenture Trustee shall, upon request of the
Servicer, release the related Home Loan File (or any requested portion
thereof) to the Servicer. Such receipt shall obligate the Servicer, to
return the Home Loan File (or such portion thereof) to the Indenture Trustee
when the need therefor by the Servicer, no longer exists unless any of the
conditions specified in subsection (a) above, is satisfied prior thereto.
The Indenture Trustee shall release such receipt to the Servicer (i) upon the
Servicer's return of the Servicer's Home Loan File (or such portion thereof)
to the Indenture Trustee or (ii) if any of the conditions specified in
subsection (a) has been satisfied, and the Servicer has not yet returned the
Servicer's Home Loan File (or such portion thereof) to the Indenture Trustee,
upon receipt of a certificate certifying that any of such condition has been
satisfied.
Section 7.03 Servicing Compensation.
----------------------
As compensation for its services hereunder, the Servicer shall be
entitled to receive from the Collection Account, the Servicing Fee out of
which the Servicer shall pay any servicing fees owed or payable to any
Subservicer. Additional servicing compensation in the form of assumption
fees, modification fees, and other administrative fees, insufficient funds
charges, amounts remitted pursuant to Section 7.01 and late payment charges
------------
shall be part of the Servicing Compensation payable to the Servicer hereunder
and shall be paid either by the Servicer retaining such additional servicing
compensation prior to deposit in the Collection Account pursuant to
Section 5.01(b)(1) or if deposited into the Collection Account as part of the
- ------------------
Servicing Compensation withdrawn from the Note Distribution Account pursuant
to Section 5.01(c)(1) hereof.
------------------
The Servicer shall be required to pay all expenses incurred by it in
connection with its servicing activities hereunder and shall not be entitled
to reimbursement therefor except as specifically provided for herein. The
Transferor also agrees to pay (i) all reasonable costs and expenses incurred
by any successor servicer or the Indenture Trustee in replacing the Servicer
in the event of a default by the Servicer in the performance of its duties
under the terms and conditions of this Agreement, and (ii) the annual Rating
Agency monitoring fees.
Section 7.04 Statement as to Compliance and Financial Statements.
---------------------------------------------------
The Servicer will deliver to the Indenture Trustee, the Depositor and
the Transferor not later than 90 days following the end of each fiscal year
(beginning in 1998) of the Servicer, an Officers' Certificate stating, as to
each signatory thereof, that (i) a review of the activities of the Servicer
during the preceding year and of performance under this Agreement has been
made under such officer's supervision and (ii) to the best of such officer's
knowledge, based on such review, the Servicer has fulfilled all of its
obligations under this Agreement throughout such year, or, if there has been
a default in the fulfillment of any such obligation, specifying each such
default known to such officers and the nature and status thereof and what
action the Servicer proposes to take with respect thereto.
Contemporaneously with the submission of the Officers' Certificate
required by the preceding paragraph, the Servicer shall deliver to the
Indenture Trustee a copy of its annual audited financial statements prepared
in the ordinary course of business. The Servicer shall, upon the request of
the Depositor, deliver to such party any unaudited quarterly financial
statements of the Servicer.
The Servicer agrees to make available on a reasonable basis to the
Depositor a knowledgeable officer of the Servicer for the purpose of
answering reasonable questions respecting recent developments affecting the
Servicer or the financial statements of the Servicer and to permit the
Depositor on reasonable notice to inspect the Servicer's servicing facilities
during normal business hours for the purpose of satisfying the Depositor that
the Servicer has the ability to service the Home Loans in accordance with
this Agreement.
The Servicer shall also furnish and certify to the requesting party such
other information as to (i) its organization, activities and personnel
relating to the performance of the obligations of the Servicer hereunder,
(ii) its financial condition, (iii) the Home Loans and (iv) the performance
of the obligations of any Subservicer under the related Subservicing
Agreement, in each case as the Indenture Trustee or the Depositor may
reasonably request from time to time.
Section 7.05 Independent Public Accountants' Servicing Report.
------------------------------------------------
Not later than 90 days following the end of each fiscal year (beginning
with fiscal year 1997) of the Servicer, the Servicer at its expense shall
cause any of Arthur Andersen & Co., Coopers & Lybrand, Deloitte & Touche,
Ernst & Young, KPMG Peat Marwick and Price Waterhouse & Co. or such other
nationally recognized firm of Independent Certified Public Accountants (which
may also render other services to the Servicer) to furnish a statement to the
Indenture Trustee and the Depositor to the effect that such firm has examined
certain documents and records relating to the servicing of the Home Loans
under this Agreement or of mortgage loans under pooling and servicing
agreements (including the Home Loans and this Agreement) substantially
similar to one another (such statement to have attached thereto a schedule
setting forth the pooling and servicing agreements covered thereby) and that,
on the basis of such examination conducted substantially in compliance with
the Uniform Single Attestation Program for Mortgage Bankers or the Audit
Program for Mortgages serviced for FHLMC, such firm confirms that such
servicing has been conducted in compliance with such pooling and servicing
agreements except for such significant exceptions or errors in records that,
in the opinion of such firm, the Uniform Single Attestation Program for
Mortgage Bankers or the Attestation Program for Mortgages serviced for FHLMC
requires it to report, each of which errors and omissions shall be specified
in such statement. In rendering such statement, such firm may rely, as to
matters relating to direct servicing of mortgage loans by Subservicers, upon
comparable statements for examinations conducted substantially in compliance
with the Uniform Single Attestation Program for Mortgage Bankers or the Audit
Program for Mortgages serviced for FHLMC (rendered within one year of such
statement) of independent public accountants with respect to the related
Subservicer.
Section 7.06 Right to Examine Servicer Records.
---------------------------------
Each Securityholder, the Indenture Trustee, the Issuer and each of their
respective agents shall have the right upon reasonable prior notice, during
normal business hours and as often as reasonably required, to examine, audit
and copy, at the expense of the Person making such examination, any and all
of the books, records or other information of the Servicer (including without
limitation any Subservicer to the extent provided in the related Subservicing
Agreement) whether held by the Servicer or by another on behalf of the
Servicer, which may be relevant to the performance or observance by the
Servicer of the terms, covenants or conditions of this Agreement. In the
case of the supervisory agents and examiners of the Issuer, Indenture Trustee
and the Securityholders, access to the documentation regarding the Home Loans
required by applicable state and federal regulations shall be afforded
without charge but only upon reasonable request and during normal business
hours at the offices of the Servicer designated by it. Each Securityholder,
the Indenture Trustee and the Issuer agree that any information obtained
pursuant to the terms of this Agreement shall be held confidential.
The Servicer also agrees to make available on a reasonable basis to the
Securityholders or any prospective Securityholder a knowledgeable financial
or accounting officer for the purpose of answering reasonable questions
respecting recent developments affecting the Servicer or the financial
statements of the Servicer and to permit the Securityholders and any
prospective Securityholder to inspect the Servicer's servicing facilities
during normal business hours for the purpose of satisfying the
Securityholders and such prospective Securityholder that the Servicer has the
ability to service the Home Loans in accordance with this Agreement.
Section 7.07 Reports to the Indenture Trustee; Collection Account
----------------------------------------------------
Statements.
- ----------
If the Collection Account is not maintained with the Indenture Trustee,
then not later than 25 days after each Record Date, the Servicer shall
forward to the Indenture Trustee a statement, certified by a Servicing
Officer, setting forth the status of the Collection Account as of the close
of business on the preceding Record Date and showing, for the period covered
by such statement, the aggregate of deposits into the Collection Account for
each category of deposit specified in Section 5.01(b)(1), the aggregate of
------------------
withdrawals from the Collection Account for each category of withdrawal
specified in Section 5.01(b)(2) and (3), in each case, for the related Due
--------------------------
Period.
Section 7.08 Financial Statements.
--------------------
The Servicer understands that, in connection with the transfer of the
Securities, Securityholders may request that the Servicer make available to
the Securityholders and to prospective Securityholders annual audited
financial statements of the Servicer for one or more of the most recently
completed five fiscal years for which such statements are available, which
request shall not be unreasonably denied.
ARTICLE VIII.
CONCERNING THE CONTRACT OF INSURANCE HOLDER
-------------------------------------------
Section 8.01 Compliance with Title I and Filing of FHA Claims.
------------------------------------------------
(a) The Contract of Insurance Holder shall at all times while any
Securities are outstanding have a valid Contract of Insurance with the FHA
covering the FHA Loans. To the extent applicable to the duties of the
Contract of Insurance Holder hereunder, the Contract of Insurance Holder
shall comply with the requirements of Title I and shall take or refrain from
taking such actions as are necessary or appropriate to maintain a valid
Contract of Insurance for the Trust with the FHA covering the FHA Loans.
(b) If and for so long as the Contract of Insurance covers any loans
other than the FHA Loans, and if HUD shall not have earmarked the coverage of
the Contract of Insurance with respect to the FHA Loans, the Contract of
Insurance Holder covenants and agrees not to submit any claim to FHA with
respect to an FHA Loan if the effect of approval of such claim would result
in the amount of claims paid by the FHA in respect of the FHA Loans to exceed
the Trust Designated Insurance Amount. Notwithstanding the foregoing, the
Claims Administrator shall promptly notify the Owner Trustee, the Indenture
Trustee and the Servicer if the amount of claims submitted to FHA in respect
of the FHA Loans under the Contract of Insurance exceeds the Trust Designated
Insurance Amount. As of the Closing Date and at all times thereafter until
the termination of this Agreement, the Contract of Insurance Holder covenants
and agrees that the Contract of Insurance will only apply to the FHA Loans
and Related Series Loans, exclusively. Empire Funding, as Claims
Administrator and Servicer, covenants and agrees that it shall not take any
action that would result in the Contract of Insurance applying to loans other
than the FHA Loans and Related Series Loans, exclusively, unless HUD shall
have agreed pursuant to 24 C.F.R. Section201.32(d)(1) to "earmark" the FHA
insurance relating to the FHA Loans and Related Series Loans in a manner
satisfactory to the Indenture Trustee, in its sole and absolute discretion.
(c) The Owner Trustee and Co-Owner Trustee hereby appoint Empire
Funding as Claims Administrator and the Indenture Trustee hereby consents to
such appointment. Empire Funding, as Claims Administrator, shall perform on
behalf of the Contract of Insurance Holder the duties associated with the
submission of claims under Title I in connection with the Contract of
Insurance, except to the extent that certain documents must be signed by the
Contract of Insurance Holder (in which case the Contract of Insurance Holder
shall only sign such documents at the direction of the Claims Administrator)
and shall not, in its capacity as Claims Administrator, take any action or
omit to take any action that would cause the Contract of Insurance Holder to
violate this Section 8.01 or otherwise fail to maintain a valid Contract of
Insurance or cause any denial by FHA of an insurance claim under Title I.
(d) The Contract of Insurance Holder shall not be deemed to have
violated this Section 8.01 and shall otherwise incur no liability hereunder
------------
if any failure to maintain a valid Contract of Insurance or to comply with
the requirements of Title I or any denial by FHA of an insurance claim under
Title I shall have been caused by any act or omission of the Servicer or
Claims Administrator in the performance of its duties hereunder. The Contract
of Insurance Holder shall be permitted to replace the Claims Administrator for
any failure of the Claims Administrator to perform its duties hereunder.
(e) The Contract of Insurance Holder hereby represents and warrants to
the Depositor, the Servicer, the Transferor the Owner Trustee and the
Indenture Trustee that it is an investing lender in good standing with HUD
having authority to purchase, hold, and sell loans insured under 24 CFR Part
201, pursuant to a valid Contract of Insurance, Lender Number 72117 0000 5.
(f) The Transferor shall forward to the Contract of Insurance Holder a
fully executed Transfer of Note Report for each FHA Loan within 20 days of
the receipt by the Transferor of such FHA Loan's case number under the
Contract of Insurance. The Contract of Insurance Holder shall execute each
Transfer of Note Report, as investing lender, and submit such Transfer of
Note Report to HUD within 31 days of the transfer of the FHA Loans to the
Trust.
Section 8.02 Contract of Insurance Holder.
----------------------------
(a) The Contract of Insurance Holder shall not resign from the
obligations and duties imposed on it by this Agreement as Contract of
Insurance Holder except (i) upon a determination that by reason of a change
in legal requirements or requirements imposed by the FHA the performance of
its duties under this Agreement would cause it to be in violation of such
legal requirements or FHA imposed requirements in a manner which would result
in a material adverse effect on the Contract of Insurance Holder or cause it
to become ineligible to hold the Contract of Insurance and (ii) the Majority
Securityholders do not elect to waive the obligations of the Contract of
Insurance Holder to perform the duties which render it legally unable to act
or to delegate those duties to another Person or if the circumstances giving
rise to such illegality cannot be waived or delegated. Any such
determination permitting the resignation of the Contract of Insurance Holder
shall be evidenced by an Opinion of Counsel to such effect delivered and
acceptable to the Indenture Trustee. Upon receiving such notice of
resignation, the Contract of Insurance shall be transferred to a qualified
successor by written instrument, in duplicate, one copy of which instrument
shall be delivered to the resigning Contract of Insurance Holder and one copy
to the successor Contract of Insurance Holder. Notwithstanding the
foregoing, the Contract of Insurance Holder may resign, with the prior
written consent of the Majority Securityholders, which may be withheld in
their sole and absolute discretion, upon transfer of the FHA insurance and
related reserves with respect to the FHA Loans and any Related Series Loans
to a contract of insurance held by a successor Contract of Insurance Holder
provided, however, that any Contract of Insurance held by such successor
Contract of Insurance Holder shall satisfy the criteria set forth in Section
-------
8.01(b), and, at the time of succession, shall have an FHA insurance coverage
- -------
reserve account balance not less than that of the FHA Insurance Coverage
Reserve Account at the time of succession.
(b) If at any time (i) the Contract of Insurance shall be revoked,
suspended or otherwise terminated, or (ii) the Contract of Insurance Holder
shall become incapable of acting, or shall be adjudged as bankrupt or
insolvent, or a receiver of the Contract of Insurance Holder or of its
property shall be appointed, or any public officer shall take charge or
control of the Contract of Insurance Holder or of its property or affairs for
the purpose of rehabilitation, conservation or liquidation, then, in any such
case the Majority Securityholders may remove the Contract of Insurance Holder
and appoint a successor contract of insurance holder by written instrument,
in duplicate, one copy of which instrument shall be delivered to the Contract
of Insurance Holder so removed and one copy to the successor contract of
insurance holder. Upon removal of the Contract of Insurance Holder, the
outgoing Contract of Insurance Holder shall take any action required to
transfer the benefits of the FHA Insurance Coverage Reserve Account to the
successor contract of insurance holder.
(c) Any resignation or removal of the Contract of Insurance Holder and
appointment of a successor contract of insurance holder pursuant to any of
the provisions of this Section 8.02 shall become effective upon acceptance
------------
of appointment by the successor contract of insurance holder.
ARTICLE IX.
THE SERVICER
------------
Section 9.01 Indemnification; Third Party Claims.
-----------------------------------
(a) The Servicer shall indemnify the Transferor, the Owner Trustee, the
Co-Owner Trustee, the Trust, the Depositor and the Indenture Trustee (each an
"Indemnified Party") and hold harmless each of them against any and all
claims, losses, damages, penalties, fines, forfeitures, reasonable legal fees
and related costs, judgments, and other costs and expenses resulting from any
claim, demand, defense or assertion based on or grounded upon, or resulting
from, a breach of any of the Servicer's representations and warranties and
covenants contained in this Agreement or in any way relating to the failure
of the Servicer to perform its duties and service the Home Loans in
compliance with the terms of this Agreement; provided, however, that if the
-------- -------
Servicer is not liable pursuant to the provisions of Section 9.01(d) hereof
for its failure to perform its duties and service the Home Loans in
compliance with the terms of this Agreement, then the provisions of this
Section 9.01 shall have no force and effect with respect to such failure.
(b) The Transferor, the Depositor or the Indenture Trustee, as the case
may be, shall promptly notify the Servicer if a claim is made by a third
party with respect to a breach of any of the Servicer's representations and
warranties and covenants contained in this Agreement or in any way relating
to the failure of the Servicer to perform its duties and service the Home
Loans in compliance with the terms of this Agreement. The Servicer shall
promptly notify the Indenture Trustee and the Depositor of any claim of which
it has been notified pursuant to this Section 9.01 by a Person other than the
Depositor, and, in any event, shall promptly notify the Depositor of its
intended course of action with respect to any claim.
(c) The Servicer shall be entitled to participate in and, upon notice
to the Indemnified Party, assume the defense of any such action or claim in
reasonable cooperation with, and with the reasonable cooperation of, the
Indemnified Party. The Indemnified Party will have the right to employ its
own counsel in any such action in addition to the counsel of the Servicer,
but the fees and expenses of such counsel will be at the expense of such
Indemnified Party, unless (a) the employment of counsel by the Indemnified
Party at its expense has been authorized in writing by the Servicer, (b) the
Servicer has not in fact employed counsel to assume the defense of such
action within a reasonable time after receiving notice of the commencement of
the action, or (c) the named parties to any such action or proceeding
(including any impleaded parties) include both the Servicer and one or more
Indemnified Parties, and the Indemnified Parties shall have been advised by
counsel that there may be one or more legal defenses available to them which
are different from or additional to those available to the Servicer. The
Servicer shall not be liable for any settlement of any such claim or action
unless the Servicer shall have consented thereto or be in default on its
obligations hereunder. Any failure by an Indemnified Party to comply with
the provisions of this Section shall relieve the Servicer of liability only
if such failure is materially prejudicial to the position of the Servicer and
then only to the extent of such prejudice.
(d) Neither the Transferor, the Depositor or the Servicer nor any of
the directors, officers, employees or agents of the Transferor, the Depositor
or the Servicer, or members or affiliates of the Depositor shall be under any
liability to the Trust or the Securityholders for any action taken or for
refraining from the taking of any action in good faith pursuant to this
Agreement, or for errors in judgment; provided, however, that this provision
-------- -------
shall not protect the Transferor, the Depositor, the Servicer or any such
person against the remedies provided herein for the breach of any warranties,
representations or covenants made herein, or against any specific liability
imposed on the Transferor, the Depositor or the Servicer herein, or against
any liability which would otherwise be imposed by reason of willful
misfeasance, bad faith or negligence in the performance of the duties of the
Servicer, the Depositor or the Transferor, as the case may be, or by reason
of reckless disregard of the obligations and duties of the Servicer, the
Depositor or the Transferor, as the case may be, hereunder. The Transferor,
the Depositor, the Servicer and any director, officer, employee or agent of
the Transferor, the Depositor or the Servicer, or any member or affiliate of
the Depositor may rely in good faith on any document of any kind which, prima
-----
facie, is properly executed and submitted by any Person respecting any
- -----
matters arising hereunder.
(e) The Servicer, the Transferor and the Depositor and any director,
officer, employee or agent of the Servicer, the Transferor or the Depositor
shall be indemnified by the Trust and held harmless against any loss,
liability or expense incurred in connection with any audit, controversy or
judicial proceeding relating to a governmental taxing authority or any legal
action relating to this Agreement or the Securities, other than any loss,
liability or expense related to any specific Home Loan or Home Loans (except
as any such loss, liability or expense shall be otherwise reimbursable
pursuant to this Agreement) and any loss, liability or expense incurred by
reason of willful misfeasance, bad faith or negligence in the performance of
duties hereunder or by reason of reckless disregard of obligations and duties
hereunder. Except as otherwise provided herein, neither of the Transferor,
the Depositor nor the Servicer shall be under any obligation to appear in,
prosecute or defend any legal action that is not related to its respective
duties under this Agreement; provided, however, that, except as otherwise
-------- -------
provided herein, any of the Transferor, the Depositor, or the Servicer may,
with the prior consent of the Indenture Trustee, in its discretion undertake
any such action which it may deem necessary or desirable with respect to this
Agreement and the rights and duties of the parties hereto and the interests
of the Securityholders hereunder. In such event, the legal expenses and
costs of such action and any liability resulting therefrom shall be,
expenses, costs and liabilities of the Trust, and the Transferor, the
Depositor and the Servicer shall be entitled to be reimbursed therefor out of
the Collection Account.
Section 9.02 Merger or Consolidation of the Servicer.
---------------------------------------
The Servicer shall keep in full effect its existence, rights and
franchises as a corporation, and will obtain and preserve its qualification
to do business as a foreign corporation and maintain such other licenses and
permits, in each jurisdiction necessary to protect the validity and
enforceability of this Agreement or any of the Home Loans and to perform its
duties under this Agreement; provided, that the Servicer may merge or
consolidate with any other corporation upon the satisfaction of the
conditions set forth in the following paragraph.
Any Person into which the Servicer may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which
the Servicer shall be a party, or any Person succeeding to the business of
the Servicer, shall be an Eligible Servicer and shall be the successor of the
Servicer, as applicable hereunder, without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding. The Servicer shall send notice of
any such merger, conversion, consolidation or succession to the Indenture
Trustee and the Issuer.
Section 9.03 Limitation on Liability of the Servicer and Others.
--------------------------------------------------
The Servicer and any director, officer, employee or agent of the
Servicer may rely on any document of any kind which it in good faith
reasonably believes to be genuine and to have been adopted or signed by the
proper authorities respecting any matters arising hereunder. Subject to the
terms of Section 9.01 herein, the Servicer shall have no obligation to appear
------------
with respect to, prosecute or defend any legal action which is not incidental
to the Servicer's duty to service the Home Loans in accordance with this
Agreement.
Section 9.04 Servicer Not to Resign; Assignment.
----------------------------------
The Servicer shall not resign from the obligations and duties hereby
imposed on it except (a) with the consent of the Indenture Trustee or (b)
upon determination that its duties hereunder are no longer permissible under
applicable law. Any such determination pursuant to clause (b) of the
preceding sentence permitting the resignation of the Servicer shall be
evidenced by an independent opinion of counsel to such effect delivered (at
the expense of the Servicer) to the Indenture Trustee. No resignation of the
Servicer shall become effective until the Indenture Trustee or a successor
servicer, appointed pursuant to the provisions of Section 10.02 and
satisfying the requirements of Section 4.08 hereof with respect to the
------------
qualifications of a successor Servicer, shall have assumed the Servicer's
responsibilities, duties, liabilities (other than those liabilities arising
prior to the appointment of such successor) and obligations under this
Agreement.
Except as expressly provided herein, the Servicer shall not assign or
transfer any of its rights, benefits or privileges hereunder to any other
Person, or delegate to or subcontract with, or authorize or appoint any other
Person to perform any of the duties, covenants or obligations to be performed
by the Servicer hereunder, without the prior written consent of the Indenture
Trustee, and absent such written consent any agreement, instrument or act
purporting to effect any such assignment, transfer, delegation or appointment
shall be void.
The Servicer agrees to cooperate with any successor Servicer in
effecting the transfer of the Servicer's servicing responsibilities and
rights hereunder pursuant to the first paragraph of this Section 9.04,
------------
including, without limitation, the transfer to such successor of all relevant
records and documents (including any Home Loan Files in the possession of the
Servicer) and all amounts received with respect to the Home Loans and not
otherwise permitted to be retained by the Servicer pursuant to this
Agreement. In addition, the Servicer, at its sole cost and expense, shall
prepare, execute and deliver any and all documents and instruments to the
successor Servicer including all Home Loan Files in its possession and do or
accomplish all other acts necessary or appropriate to effect such termination
and transfer of servicing responsibilities, including, without limitation,
assisting in obtaining any necessary approval under Title I from the FHA.
Section 9.05 Relationship of Servicer to Issuer and the Indenture
----------------------------------------------------
Trustee.
- -------
The relationship of the Servicer (and of any successor to the Servicer
as servicer under this Agreement) to the Issuer and the Indenture Trustee
under this Agreement is intended by the parties hereto to be that of an
independent contractor and not of a joint venturer, agent or partner of the
Issuer or the Indenture Trustee.
Section 9.06 Servicer May Own Securities.
---------------------------
Each of the Servicer and any affiliate of the Servicer may in its
individual or any other capacity become the owner or pledgee of Securities
with the same rights as it would have if it were not the Servicer or an
affiliate thereof except as otherwise specifically provided herein.
Securities so owned by or pledged to the Servicer or such affiliate shall
have an equal and proportionate benefit under the provisions of this
Agreement, without preference, priority, or distinction as among all of the
Securities, provided that any Securities owned by the Servicer or any
affiliate thereof, during the time such Securities are owned by them, shall
be without voting rights for any purpose set forth in this Agreement. The
Servicer shall notify the Indenture Trustee promptly after it or any of its
affiliates becomes the owner or pledgee of a Security.
ARTICLE X.
DEFAULT
-------
Section 10.01 Events of Default.
-----------------
(a) In case one or more of the following Events of Default by the
Servicer shall occur and be continuing, that is to say:
(i) any failure by the Servicer to deposit in the Collection
Account in accordance with Section 5.01(b) any payments in respect of
---------------
the Home Loans received by the Servicer no later than the second Business Day
following the day on which such payments were received; or
(ii) failure by the Servicer duly to observe or perform, in any
material respect, any other covenants, obligations or agreements of the
Servicer as set forth in this Agreement, which failure continues
unremedied for a period of 60 days after the date on which written
notice of such failure, requiring the same to be remedied and stating
that such notice is a "Notice of Default" hereunder, shall have been
given (a) to the Servicer by the Indenture Trustee or the Issuer, or (b)
to the Servicer, the Indenture Trustee or the Issuer by any Majority
Securityholder; or
(iii) a decree or order of a court or agency or supervisory
authority having jurisdiction for the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceedings, or for the
winding-up or liquidation of its affairs, shall have been entered
against the Servicer and such decree or order shall have remained in
force, undischarged or unstayed for a period of 60 days; or
(iv) the Servicer shall consent to the appointment of a conservator
or receiver or liquidator in any insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceedings of or
relating to the Servicer or of or relating to all or substantially all
of the Servicer's property; or
(v) the Servicer shall admit in writing its inability to pay its
debts as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for
the benefit of its creditors, or voluntarily suspend payment of its
obligations; or
(vi) the Majority Securityholders (A) shall receive notice from the
Servicer that the Servicer is no longer able to discharge its duties
under this Agreement or (B) shall determine, in their reasonable
judgment and based upon published reports (including wire services),
which they reasonably believe in good faith to be reliable, that the
Servicer
a) has experienced a material adverse change in its
business, assets, liabilities, operations, condition
(financial or otherwise) or prospects,
b) has defaulted on any of its material obligations, or
c) has ceased to conduct its business in the ordinary
course.
(b) then, and in each and every such case, so long as an Event of
Default shall not have been remedied, the Majority Securityholders, the
Indenture Trustee or the Issuer by notice in writing to the Servicer may, in
addition to whatever rights such Person may have at law or equity to damages,
including injunctive relief and specific performance, may terminate all the
rights and obligations of the Servicer under this Agreement and in and to the
Home Loans and the proceeds thereof, as servicer under this Agreement. Upon
receipt by the Servicer of such written notice, all authority and power of
the Servicer under this Agreement, whether with respect to the Home Loans or
otherwise, shall, subject to Section 10.02, pass to and be vested in a
-------------
successor servicer, or the Indenture Trustee if a successor servicer cannot
be retained in a timely manner, and the successor servicer, or Indenture
Trustee, as applicable, is hereby authorized and empowered to execute and
deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, any and
all documents and other instruments and do or cause to be done all other acts
or things necessary or appropriate to effect the purposes of such notice of
termination, including, but not limited to, the transfer and endorsement or
assignment of the Home Loans and related documents. The Servicer agrees to
cooperate with the successor servicer in effecting the termination of the
Servicer's responsibilities and rights hereunder, including, without
limitation, the transfer to the successor servicer for administration by it
of all amounts which shall at the time be credited by the Servicer to each
Collection Account or thereafter received with respect to the Home Loans.
Section 10.02 Indenture Trustee to Act; Appointment of Successor.
--------------------------------------------------
On and after the date the Servicer receives a notice of termination
pursuant to Section 10.01, or the Indenture Trustee receives the resignation
-------------
of the Servicer evidenced by an opinion of counsel or accompanied by the
consents required by Section 9.04, or the Servicer is removed as servicer
------------
pursuant to this Article X, then, subject to Section 4.08, the Indenture
--------- ------------
Trustee shall appoint a successor servicer to be the successor in all
respects to the Servicer in its capacity as Servicer under this Agreement and
the transactions set forth or provided for herein and shall be subject to all
the responsibilities, duties and liabilities relating thereto placed on the
Servicer by the terms and provisions hereof; provided, however, that the
successor servicer shall not be liable for any actions of any servicer prior
to it; provided further, however, that if a successor servicer cannot be
retained in a timely manner, the Indenture Trustee shall act as successor
Servicer. In the event the Indenture Trustee assumes the responsibilities of
the Servicer pursuant to this Section 10.02, the Indenture Trustee will
-------------
make reasonable efforts consistent with applicable law to become licensed,
qualified and in good standing in each Mortgaged Property State the laws of
which require licensing or qualification, in order to perform its obligations
as Servicer hereunder or, alternatively, shall retain an agent who is
so licensed, qualified and in good standing in any such Mortgaged Property
State.
In the case that the Indenture Trustee serves as successor servicer, the
Indenture Trustee in such capacity shall not be liable for any servicing of
the Home Loans prior to its date of appointment, and shall not be subject to
any obligations to repurchase any Home Loans. The successor servicer shall
be obligated to make Servicing Advances hereunder. As compensation therefor,
the successor servicer appointed pursuant to the following paragraph, shall
be entitled to all funds relating to the Home Loans which the Servicer would
have been entitled to receive from the Note Distribution Account pursuant to
Section 5.01(c) as if the Servicer had continued to act as servicer
- ---------------
hereunder, together with other servicing compensation in the form of
assumption fees, late payment charges or otherwise as provided in Sections
--------
7.01 and 7.03. The Servicer shall not be entitled to any termination fee if
- ---- ----
it is terminated pursuant to Section 10.01, but shall be entitled to any
-------------
accrued and unpaid Servicing Fee to the date of termination.
Any collections received by the Servicer after removal or resignation
shall be endorsed by it to the Indenture Trustee and remitted directly to the
Indenture Trustee or, at the direction of the Indenture Trustee, to the
successor servicer. The compensation of any successor servicer (including,
without limitation, the Indenture Trustee) so appointed shall be the
Servicing Fees, together with other Servicing Compensation provided for
herein. In the event the Indenture Trustee is required to solicit bids to
appoint a successor servicer, the Indenture Trustee shall solicit, by public
announcement, bids from Eligible Servicers. Such public announcement shall
specify that the successor servicer shall be entitled to the full amount of
the Servicing Fee and Servicing Compensation provided for herein. Within
thirty days after any such public announcement, the Indenture Trustee shall
negotiate and effect the sale, transfer and assignment of the servicing
rights and responsibilities hereunder to the qualified party submitting the
highest qualifying bid. The Indenture Trustee shall deduct from any sum
received by the Indenture Trustee from the successor to the Servicer in
respect of such sale, transfer and assignment all costs and expenses of any
public announcement and of any sale, transfer and assignment of the servicing
rights and responsibilities hereunder and the amount of any unpaid Servicing
Fees and unreimbursed Servicing Advances made by the Indenture Trustee.
After such deductions, the remainder of such sum shall be paid by the
Indenture Trustee to the Servicer at the time of such sale, transfer and
assignment to the Servicer's successor. The Indenture Trustee, the Issuer,
any Custodian, the Servicer and any such successor servicer shall take such
action, consistent with this Agreement, as shall be necessary to effectuate
any such succession. The Servicer agrees to cooperate with the Indenture
Trustee and any successor servicer in effecting the termination of the
Servicer's servicing responsibilities and rights hereunder and shall promptly
provide the Indenture Trustee or such successor servicer, as applicable, all
documents and records reasonably requested by it to enable it to assume the
Servicer's functions hereunder and shall promptly also transfer to the
Indenture Trustee or such successor servicer, as applicable, all amounts
which then have been or should have been deposited in any Trust Account
maintained by the Servicer or which are thereafter received with respect to
the Home Loans. Neither the Indenture Trustee nor any other successor
servicer shall be held liable by reason of any failure to make, or any delay
in making, any distribution hereunder or any portion thereof caused by (i)
the failure of the Servicer to deliver, or any delay in delivering, cash,
documents or records to it, or (ii) restrictions imposed by any regulatory
authority having jurisdiction over the Servicer hereunder. No appointment
of a successor to the Servicer hereunder shall be effective until written
notice of such proposed appointment shall have been provided by the
Indenture Trustee to each Securityholder, the Issuer and the Depositor
and, except in the case of the appointment of the Indenture Trustee as
successor to the Servicer (when no consent shall be required), the
Depositor, the Majority Securityholders and the Issuer shall have consented
thereto.
Pending appointment of a successor to the Servicer hereunder, the
Indenture Trustee shall act as servicer hereunder as hereinabove provided.
In connection with such appointment and assumption, the Indenture Trustee may
make such arrangements for the compensation of such successor servicer out of
payments on the Home Loans as it and such successor servicer shall agree;
provided, however, that no such compensation shall be in excess of that
permitted the Servicer pursuant to Section 7.03, together with other
------------
Servicing Compensation in the form of assumption fees, late payment charges
or otherwise as provided in this Agreement.
Section 10.03 Waiver of Defaults.
------------------
The Majority Securityholders may waive any events permitting removal of
the Servicer as servicer pursuant to this Article X, provided, however, that
---------
the Majority Securityholders may not waive a default in making a required
distribution on a Security or Residual Interest without the consent of the
related Securityholder or holders of the Residual Interest. Upon any waiver
of a past default, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been remedied for every
purpose of this Agreement. No such waiver shall extend to any subsequent or
other default or impair any right consequent thereto except to the extent
expressly so waived.
Section 10.04 Accounting Upon Termination of Servicer.
---------------------------------------
Upon termination of the Servicer under this Article X, the Servicer
---------
shall, at its own expense:
(a) deliver to its successor or, if none shall yet have been appointed,
to the Indenture Trustee the funds in any Trust Account maintained by the
Servicer;
(b) deliver to its successor or, if none shall yet have been appointed,
to the Indenture Trustee all Home Loan Files and related documents and
statements held by it hereunder and a Home Loan portfolio computer tape;
(c) deliver to its successor or, if none shall yet have been appointed,
to the Indenture Trustee, the Issuer and the Securityholders a full
accounting of all funds, including a statement showing the Monthly Payments
collected by it and a statement of monies held in trust by it for payments or
charges with respect to the Home Loans; and
(d) execute and deliver such instruments and perform all acts
reasonably requested in order to effect the orderly and efficient transfer of
servicing of the Home Loans to its successor and to more fully and
definitively vest in such successor all rights, powers, duties,
responsibilities, obligations and liabilities of the Servicer under this
Agreement.
ARTICLE XI.
TERMINATION
-----------
Section 11.01 Termination.
-----------
This Agreement shall terminate upon notice to the Indenture Trustee of
either: (a) the later of (i) the satisfaction and discharge of the Indenture
and the provisions thereof or (ii) the disposition of all funds with respect
to the last Home Loan and the remittance of all funds due hereunder and the
payment of all amounts due and payable to the Indenture Trustee, the Owner
Trustee, the Co-Owner Trustee, the Issuer and the Custodian; or (b) the
mutual consent of the Servicer, the Depositor, the Transferor and all
Securityholders in writing.
Section 11.02 Optional Termination
--------------------
The Majority Residual Interestholders may, at their option, effect an
early termination of the Trust on or after any Distribution Date on which the
Pool Principal Balance declines to 10% or less of the Original Pool Principal
Balance. The Majority Residual Interestholders shall effect such early
termination by providing notice thereof to the Indenture Trustee and Owner
Trustee and by purchasing all of the Home Loans at a purchase price, payable
in cash, equal to the greater of the Termination Price or the sum of:
(i) the Principal Balance of each Home Loan included in the
Trust as of the applicable Monthly Cut-Off Date;
(ii) all unpaid interest accrued on the Principal Balance of
each such Home Loan at the related Net Loan Rate to such Monthly Cut-Off
Date;
(iii) the aggregate fair market value of all claims made under
the Contract of Insurance with respect to FHA Loans that are pending
with FHA ("FHA Pending Claims") for which a claim has been filed with
the FHA included in the Trust on such Monthly Cut-Off Date, as
determined by an Independent appraiser acceptable to the Indenture
Trustee as of a date not more than thirty days prior to such Monthly
Cut-Off Date; and
(iv) the aggregate fair market value of each Foreclosure
Property included in the Trust on such Monthly Cut-Off Date, as
determined by an Independent appraiser acceptable to the Trustee as of a
date not more than thirty days prior to such Monthly Cut-Off Date.
Any amount received from such sale with respect to FHA Pending Claims shall
be considered FHA Insurance Payment Amounts. The expense of any Independent
appraiser required under this Section 11.02 shall be a nonreimbursable
-------------
expense of Majority Residual Interestholders.
Any such early termination by the Majority Residual Interestholders
shall be accomplished by depositing into the Collection Account on the third
Business Day prior to the Distribution Date on which the purchase is to occur
the amount of the termination price to be paid. The termination price and
any amounts then on deposit in the Collection Account (other than any amounts
not required to have been deposited therein pursuant to Section 5.01(b)(1)
------------------
and any amounts withdrawable therefrom by the Indenture Trustee pursuant to
Section 5.01(b)(3)) shall be transferred to the Note Distribution Account
- ------------------
pursuant to Section 5.01(b)(2) for distribution to Securityholders on the
------------------
succeeding Distribution Date; and any amounts received with respect to the
Home Loans and Foreclosure Properties subsequent to the Due Period
immediately preceding such final Distribution Date shall belong to the
purchaser thereof. For purposes of calculating the Available Distribution
Amount for such final Distribution Date, amounts transferred to the Note
Distribution Account immediately preceding such final Distribution Date shall
in all cases be deemed to have been received during the related Due Period,
and amounts so transferred shall be applied pursuant to Section 5.01(d) and
---------------
5.01(e).
- -------
Section 11.03 Notice of Termination.
---------------------
Notice of termination of this Agreement or of early redemption and
termination of the Trust shall be sent (i) by the Indenture Trustee to the
Noteholders in accordance with Section 10.02 of the Indenture and (ii) by the
Owner Trustee to the Certificateholders and the Residual Interestholder in
accordance with Section 9.1(d) of the Trust Agreement.
ARTICLE XII.
MISCELLANEOUS PROVISIONS
------------------------
Section 12.01 Acts of Securityholders.
-----------------------
Except as otherwise specifically provided herein, whenever
Securityholder action, consent or approval is required under this Agreement,
such action, consent or approval shall be deemed to have been taken or given
on behalf of, and shall be binding upon, all Securityholders if the Majority
Securityholders agree to take such action or give such consent or approval.
Section 12.02 Amendment.
---------
(a) This Agreement may be amended from time to time by the Depositor,
the Servicer, the Transferor and the Issuer by written agreement with notice
thereof to the Securityholders, without the consent of any of the
Securityholders, to cure any error or ambiguity, to correct or supplement
any provisions hereof which may be defective or inconsistent with any other
provisions hereof or to add any other provisions with respect to matters or
questions arising under this Agreement; provided, however, that such action
will not adversely affect in any material respect the interests of the
Securityholders. An amendment described above shall be deemed not to
adversely affect in any material respect the interests of the Securityholders
if either (i) an opinion of counsel is obtained to such effect, and (ii) the
party requesting the amendment obtains a letter from each of the Rating
Agencies confirming that the amendment, if made, would not result in the
downgrading or withdrawal of the rating then assigned by the respective
Rating Agency to any Class of Securities then outstanding.
(b) This Agreement may also be amended from time to time by the
Depositor, the Servicer, the Transferor and the Issuer by written agreement,
with the prior written consent of the Majority Securityholders, for the
purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Agreement, or of modifying in any manner the
rights of the Securityholders; provided, however, that no such amendment
shall (i) reduce in any manner the amount of, or delay the timing of,
collections of payments on Home Loans or distributions which are required to
be made on any Security, without the consent of the holders of 100% of each
Class of Notes or the Class B Certificates affected thereby, (ii) adversely
affect in any material respect the interests of the holders of any Class of
Notes or Class B Certificates in any manner other than as described in (i),
without the consent of the holders of 100% of such Class of Notes or the
Class B Certificates, or (iii) reduce the percentage of any Class of Notes or
the Class B Certificates, the holders of which are required to consent to any
such amendment, without the consent of the holders of 100% of such Class of
Notes or the Class B Certificates.
(c) It shall not be necessary for the consent of Securityholders under
this Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent shall approve the substance thereof.
Prior to the execution of any amendment to this Agreement, the Issuer
shall be entitled to receive and rely upon an opinion of counsel stating that
the execution of such amendment is authorized or permitted by this Agreement.
The Issuer may, but shall not be obligated to, enter into any such amendment
which affects the Issuer's own rights, duties or immunities under this
Agreement.
Section 12.03 Recordation of Agreement.
------------------------
To the extent permitted by applicable law, this Agreement, or a
memorandum thereof if permitted under applicable law, is subject to
recordation in all appropriate public offices for real property records in
all of the counties or other comparable jurisdictions in which any or all of
the Mortgaged Properties are situated, and in any other appropriate public
recording office or elsewhere, such recordation to be effected by the
Servicer at the Securityholders' expense on direction of the Majority
Securityholders but only when accompanied by an opinion of counsel to the
effect that such recordation materially and beneficially affects the
interests of the Securityholders or is necessary for the administration or
servicing of the Home Loans.
Section 12.04 Duration of Agreement.
---------------------
This Agreement shall continue in existence and effect until terminated
as herein provided.
Section 12.05 Governing Law.
-------------
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
Section 12.06 Notices.
-------
All demands, notices and communications hereunder shall be in writing
and shall be deemed to have been duly given if personally delivered at or
mailed by overnight mail, certified mail or registered mail, postage prepaid,
to: (i) in the case of the Depositor, Financial Asset Securities Corp., 600
Steamboat Road, Greenwich, Connecticut 06830 Attention: Peter McMullin, or
such other addresses as may hereafter be furnished to the Securityholders and
the other parties hereto in writing by the Depositor, (ii) in the case of the
Issuer, Empire Funding Home Loan Owner Trust 1997-1, c/o Wilmington Trust
Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware
19890, Attention: Emmett R. Harmon, or such other address as may hereafter be
furnished to the Securityholders and the other parties hereto, (iii) in the
case of the Transferor, Servicer and Claims Administrator, Empire Funding
Corp., 9737 Great Hills Trail, Austin, Texas 78759 Attention: Richard N.
Steed, or such other address as may hereafter be furnished to the
Securityholders and the other parties hereto in writing by the Servicer or
the Transferor, (iv) in the case of the Contract of Insurance Holder, EFC
Securitized Assets, L.C.,
9737 Great Hills Trail, Austin, Texas 78759 Attention: Richard N. Steed, or
such other address as may hereafter be furnished to the Securityholders and
the other parties hereto in writing by the Servicer or the Transferor, (v) in
the case of the Indenture Trustee or Co-Owner Trustee, First Bank National
Association, 180 East Fifth Street, St. Paul, Minnesota 55101, Attention:
Structured Finance/Empire Funding 1997-1, and (vi) in the case of the
Securityholders, as set forth in the applicable Note Register and Certificate
Register. Any such notices shall be deemed to be effective with respect to
any party hereto upon the receipt of such notice by such party, except that
notices to the Securityholders shall be effective upon mailing or personal
delivery.
Section 12.07 Severability of Provisions.
--------------------------
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be held invalid for any reason whatsoever, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other covenants,
agreements, provisions or terms of this Agreement.
Section 12.08 No Partnership.
--------------
Nothing herein contained shall be deemed or construed to create any
partnership or joint venture between the parties hereto and the services of
the Servicer shall be rendered as an independent contractor.
Section 12.09 Counterparts.
------------
This Agreement may be executed in one or more counterparts and by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together,
shall constitute one and the same Agreement.
Section 12.10 Successors and Assigns.
----------------------
This Agreement shall inure to the benefit of and be binding upon the
Servicer, the Transferor, the Depositor, the Claims Administrator, the
Contract of Insurance Holder, the Indenture Trustee, the Issuer and the
Securityholders and their respective successors and permitted assigns.
Section 12.11 Headings.
--------
The headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be part
of this Agreement.
Section 12.12 Actions of Securityholders.
--------------------------
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement to be given or taken by
Securityholders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Securityholders in person or by
agent duly appointed in writing; and except as herein otherwise expressly
provided, such action shall become effective when such instrument or
instruments are delivered to the Depositor, the Servicer or the Issuer.
Proof of execution of any such instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Agreement and conclusive in
favor of the Depositor, the Servicer and the Issuer if made in the manner
provided in this Section.
(b) The fact and date of the execution by any Securityholder of any
such instrument or writing may be proved in any reasonable manner which the
Depositor, the Servicer or the Issuer deems sufficient.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other act by a Securityholder shall bind every holder of every
Security issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done, or omitted to be
done, by the Depositor, the Servicer or the Issuer in reliance thereon,
whether or not notation of such action is made upon such Security.
(d) The Depositor, the Servicer or the Issuer may require additional
proof of any matter referred to in this Section 12.12 as it shall deem
-------------
necessary.
Section 12.13 Reports to Rating Agencies.
--------------------------
(a) The Indenture Trustee shall provide to each Rating Agency copies of
statements, reports and notices, to the extent received or prepared in
connection herewith, as follows:
(i) copies of amendments to this Agreement;
(ii) notice of any substitution or repurchase of any Home Loans;
(iii) notice of any termination, replacement, succession,
merger or consolidation of either the Servicer, any Custodian or the
Issuer;
(iv) notice of final payment on the Notes and the Class B
Certificates;
(v) notice of any Event of Default;
(vi) copies of the annual independent auditor's report delivered
pursuant to Section 7.05, and copies of any compliance reports delivered
------------
by the Servicer hereunder including Section 7.04; and
------------
(vii) copies of any Distribution Date Statement pursuant to Section
-------
6.01(b); and
- -------
(b) With respect to the requirement of the Indenture Trustee to provide
statements, reports and notices to the Rating Agencies such statements,
reports and notices shall be delivered to the Rating Agencies at the
following addresses: (i) if to Standard & Poor's, 26 Broadway, 15th Floor,
New York, New York 10004-1064, Attention: Asset-Backed Monitoring Department,
and (ii) if to Duff & Phelps, 55 East Monroe Street, 35th Floor, Chicago,
Illinois 60603, Attention: MBS Monitoring.
Section 12.14 Holders of the Residual Interest.
--------------------------------
(a) Any sums to be distributed or otherwise paid hereunder or under the
Trust Agreement to the holders of the Residual Interest shall be paid to such
holders pro rata based on their percentage holdings in the Residual Interest;
(b) Where any act or event hereunder is expressed to be subject to the
consent or approval of the holders of the Residual Interest, such consent or
approval shall be capable of being given by the holder or holders of not less
than 51% of the Residual Interest in aggregate.
* * *
IN WITNESS WHEREOF, the Issuer, the Depositor, the Servicer, the
Transferor, the Claims Administrator, the Contract of Insurance Holder, the
Indenture Trustee and the Co-Owner Trustee have caused their names to be
signed by their respective officers thereunto duly authorized, as of the day
and year first above written, to this amended and restated Sale and Servicing
Agreement.
EMPIRE FUNDING HOME LOAN
OWNER TRUST 1997-1,
By: Wilmington Trust Company, not in its
individual
capacity but solely as Owner Trustee
By:
-----------------------------------------
Name:
Title:
FINANCIAL ASSET SECURITIES CORP., as
Depositor
By:
-----------------------------------------
Name:
Title:
EMPIRE FUNDING CORP., as
Transferor, Servicer and Claims Administrator
By:
-----------------------------------------
Name:
Title:
EFC SECURITIZED ASSETS, L.C., as
Contract of Insurance Holder
By:
-----------------------------------------
Name:
Title:
FIRST BANK NATIONAL ASSOCIATION, as
Indenture Trustee and Co-Owner Trustee
By:
-----------------------------------------
Name:
Title:
THE STATE OF ________ )
)
COUNTY OF ________ )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared _______________, known to me to be a person and officer
whose name is subscribed to the foregoing instrument and acknowledged to me
that the same was the act of the said WILMINGTON TRUST COMPANY, not in its
individual capacity but in its capacity as Owner Trustee of EMPIRE FUNDING
HOME LOAN OWNER TRUST 1997-1 as Issuer, and that he executed the same as the
act of such corporation for the purpose and consideration therein expressed,
and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF WILMINGTON TRUST COMPANY, this the ____
day of April, 1997.
--------------------------------------------
Notary Public, State of ________
THE STATE OF ________ )
)
COUNTY OF ________ )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared _______________________, known to me to be a person and
officer whose name is subscribed to the foregoing instrument and acknowledged
to me that the same was the act of the said FINANCIAL ASSET SECURITIES CORP.,
as the Depositor, and that he executed the same as the act of such
corporation for the purpose and consideration therein expressed, and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF FINANCIAL ASSET SECURITIES CORP., this
the ____ day of April, 1997.
--------------------------------------------
Notary Public, State of ________
THE STATE OF ________ )
)
COUNTY OF ________ )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared _______________________, known to me to be the person and
officer whose name is subscribed to the foregoing instrument and acknowledged
to me that the same was the act of the said EMPIRE FUNDING CORP., as the
Transferor, Servicer and Claims Administrator, and that he executed the same
as the act of such corporation for the purposes and consideration therein
expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF EMPIRE FUNDING CORP., this the ____ day
of April, 1997.
------------------------------
Notary Public, State of ________
THE STATE OF ________ )
)
COUNTY OF ________ )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared _______________________, known to me to be the person and
officer whose name is subscribed to the foregoing instrument and acknowledged
to me that the same was the act of the said EFC SECURITIZED ASSETS, L.C., as
the Contract of Insurance Holder, and that he executed the same as the act of
such corporation for the purposes and consideration therein expressed, and in
the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF EFC SECURITIZED ASSETS, L.C., this the
____ day of April, 1997.
------------------------------
Notary Public, State of ________
THE STATE OF ________ )
)
COUNTY OF ________ )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared ____________________, known to me to be the person and
officer whose name is subscribed to the foregoing instrument and acknowledged
to me that the same was the act of the said FIRST BANK NATIONAL ASSOCIATION,
a national banking association, as the Indenture Trustee and Co-Owner
Trustee, and that she executed the same as the act of such entity for the
purposes and consideration therein expressed, and in the capacity therein
stated.
GIVEN UNDER MY HAND AND SEAL OF FIRST BANK NATIONAL ASSOCIATION, this
the ____ day of April, 1997.
------------------------------
Notary Public, State of ________
EXECUTION COPY
INDENTURE
between
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-1,
as Issuer
and
FIRST BANK NATIONAL ASSOCIATION,
as Indenture Trustee
Dated as of March 1, 1997
and
Amended and Restated as of April 1, 1997
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-1
Asset Backed Securities, Series 1997-1
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . 3
Section 1.02. Incorporation by Reference of Trust Indenture Act . . 9
Section 1.03. Rules of Construction . . . . . . . . . . . . . . . . 10
ARTICLE II
THE NOTES
Section 2.01. Form . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.02. Execution, Authentication, Delivery and Dating . . . 11
Section 2.03. Registration; Registration of Transfer and
Exchange. . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.04. Mutilated, Destroyed, Lost or Stolen Notes. . . . . . 13
Section 2.05. Persons Deemed Owner . . . . . . . . . . . . . . . . 14
Section 2.06. Payment of Principal and Interest; Defaulted
Interest. . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.07. Cancellation . . . . . . . . . . . . . . . . . . . . 14
Section 2.08. Conditions Precedent to the Authentication of the
Notes . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.09. Release of Collateral . . . . . . . . . . . . . . . . 17
Section 2.10. Book-Entry Notes . . . . . . . . . . . . . . . . . . 18
Section 2.11. Notices to Clearing Agency . . . . . . . . . . . . . 18
Section 2.12. Definitive Notes . . . . . . . . . . . . . . . . . . 19
Section 2.13. Tax Treatment . . . . . . . . . . . . . . . . . . . . 19
ARTICLE III
COVENANTS
Section 3.01. Payment of Principal and Interest . . . . . . . . . . 20
Section 3.02. Maintenance of Office or Agency . . . . . . . . . . . 20
Section 3.03. Money for Payments To Be Held in Trust . . . . . . . 20
Section 3.04. Existence . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.05. Protection of Collateral . . . . . . . . . . . . . . 22
Section 3.06. Annual Opinions as to Collateral . . . . . . . . . . 23
Section 3.07. Performance of Obligations; Servicing of Home Loans . 23
Section 3.08. Negative Covenants . . . . . . . . . . . . . . . . . 25
Section 3.09. Annual Statement as to Compliance . . . . . . . . . . 26
Section 3.10. Covenants of the Issuer . . . . . . . . . . . . . . . 27
Section 3.11. Servicer's Obligations . . . . . . . . . . . . . . . 27
Section 3.12. Restricted Payments . . . . . . . . . . . . . . . . . 27
Section 3.13. Treatment of Notes as Debt for Tax Purposes . . . . . 27
Section 3.14. Notice of Events of Default . . . . . . . . . . . . . 27
Section 3.15. Further Instruments and Acts . . . . . . . . . . . . 27
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of Indenture . . . . . . . 28
Section 4.02. Application of Trust Money . . . . . . . . . . . . . 29
Section 4.03. Repayment of Moneys Held by Paying Agent . . . . . . 29
ARTICLE V
REMEDIES
Section 5.01. Events of Default . . . . . . . . . . . . . . . . . . 30
Section 5.02. Acceleration of Maturity; Rescission and Annulment . 31
Section 5.03. Collection of Indebtedness and Suits for Enforcement
by Indenture Trustee . . . . . . . . . . . . . . . . 32
Section 5.04. Remedies; Priorities . . . . . . . . . . . . . . . . 34
Section 5.05. Optional Preservation of the Collateral . . . . . . . 35
Section 5.06. Limitation of Suits . . . . . . . . . . . . . . . . . 35
Section 5.07. Unconditional Rights of Noteholders To Receive
Principal and Interest . . . . . . . . . . . . . . . 36
Section 5.08. Restoration of Rights and Remedies . . . . . . . . . 36
Section 5.09. Rights and Remedies Cumulative . . . . . . . . . . . 36
Section 5.10. Delay or Omission Not a Waiver . . . . . . . . . . . 37
Section 5.11. Control by Noteholders . . . . . . . . . . . . . . . 37
Section 5.12. Waiver of Past Defaults . . . . . . . . . . . . . . . 37
Section 5.13. Undertaking for Costs . . . . . . . . . . . . . . . . 38
Section 5.14. Waiver of Stay or Extension Laws . . . . . . . . . . 38
Section 5.15. Action on Notes . . . . . . . . . . . . . . . . . . . 38
Section 5.16. Performance and Enforcement of Certain Obligations . 38
ARTICLE VI
THE INDENTURE TRUSTEE
Section 6.01. Duties of Indenture Trustee . . . . . . . . . . . . . 40
Section 6.02. Rights of Indenture Trustee . . . . . . . . . . . . . 41
Section 6.03. Individual Rights of Indenture Trustee . . . . . . . 41
Section 6.04. Indenture Trustee's Disclaimer . . . . . . . . . . . 42
Section 6.05. Notice of Defaults . . . . . . . . . . . . . . . . . 42
Section 6.06. Reports by Indenture Trustee to Holders . . . . . . . 42
Section 6.07. Compensation and Indemnity . . . . . . . . . . . . . 42
Section 6.08. Replacement of Indenture Trustee . . . . . . . . . . 42
Section 6.09. Successor Indenture Trustee by Merger . . . . . . . . 43
Section 6.10. Appointment of Co-Indenture Trustee or Separate
Indenture Trustee . . . . . . . . . . . . . . . . . 44
Section 6.11. Eligibility; Disqualification . . . . . . . . . . . . 45
Section 6.12. Preferential Collection of Claims Against Issuer . . 45
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
Section 7.01. Issuer To Furnish Indenture Trustee Names and
Addresses of Noteholders . . . . . . . . . . . . . . 46
Section 7.02. Preservation of Information; Communications to
Noteholders . . . . . . . . . . . . . . . . . . . . 46
Section 7.03. Reports by Issuer . . . . . . . . . . . . . . . . . . 46
Section 7.04. Reports by Indenture Trustee . . . . . . . . . . . . 47
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 8.01. Collection of Money . . . . . . . . . . . . . . . . . 48
Section 8.02. Trust Accounts; Distributions . . . . . . . . . . . . 48
Section 8.03. General Provisions Regarding Accounts . . . . . . . . 49
Section 8.04. Servicer's Monthly Statements. . . . . . . . . . . . 50
Section 8.05. Release of Collateral . . . . . . . . . . . . . . . . 50
Section 8.06. Opinion of Counsel . . . . . . . . . . . . . . . . . 50
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of
Noteholders . . . . . . . . . . . . . . . . . . . . 51
Section 9.02. Supplemental Indentures with Consent of Noteholders . 52
Section 9.03. Execution of Supplemental Indentures . . . . . . . . 53
Section 9.04. Effect of Supplemental Indentures . . . . . . . . . . 53
Section 9.05. Conformity with Trust Indenture Act . . . . . . . . . 53
Section 9.06. Reference in Notes to Supplemental Indentures . . . . 54
Section 9.07. Amendments to Trust Agreement. . . . . . . . . . . . 54
ARTICLE X
REDEMPTION OF NOTES
Section 10.01. Redemption . . . . . . . . . . . . . . . . . . . . . 55
Section 10.02. Form of Redemption Notice . . . . . . . . . . . . . 55
Section 10.03. Notes Payable on Redemption Date . . . . . . . . . . 56
ARTICLE XI
MISCELLANEOUS
Section 11.01. Compliance Certificates and Opinions, etc. . . . . . 57
Section 11.02. Form of Documents Delivered to Indenture Trustee . . 58
Section 11.03. Acts of Noteholders . . . . . . . . . . . . . . . . 59
Section 11.04. Notices, etc., to Indenture Trustee, Issuer and
Rating Agencies . . . . . . . . . . . . . . . . . . 59
Section 11.05. Notices to Noteholders; Waiver . . . . . . . . . . . 60
Section 11.06. Conflict with Trust Indenture Act . . . . . . . . . 60
Section 11.07. Effect of Headings and Table of Contents . . . . . . 61
Section 11.08. Successors and Assigns . . . . . . . . . . . . . . . 61
Section 11.09. Separability . . . . . . . . . . . . . . . . . . . . 61
Section 11.10. Benefits of Indenture . . . . . . . . . . . . . . . 61
Section 11.11. Legal Holidays . . . . . . . . . . . . . . . . . . . 61
Section 11.12. GOVERNING LAW . . . . . . . . . . . . . . . . . . . 61
Section 11.13. Counterparts . . . . . . . . . . . . . . . . . . . . 61
Section 11.14. Recording of Indenture . . . . . . . . . . . . . . . 61
Section 11.15. Trust Obligation . . . . . . . . . . . . . . . . . . 62
Section 11.16. No Petition . . . . . . . . . . . . . . . . . . . . 62
Section 11.17. Inspection . . . . . . . . . . . . . . . . . . . . . 62
EXHIBITS
SCHEDULE A - Schedule of Home Loans
EXHIBIT A - Form of Notes
This Indenture, dated as of March 1, 1997, and amended and restated as
of April 1, 1997, with effect from and as of March 1, 1997 between EMPIRE
FUNDING HOME LOAN OWNER TRUST 1997-1, a Delaware business trust, as Issuer
(the "Issuer"), and FIRST BANK NATIONAL ASSOCIATION, as Indenture Trustee
(the "Indenture Trustee"),
WITNESSETH THAT:
WHEREAS, the Issuer and the Indenture Trustee have heretofore executed
and delivered an Indenture dated as of March 1, 1997 (the "Original
Indenture"); and
WHEREAS, Section 9.02 of the Original Indenture provides that the Issuer
and the Indenture Trustee, when authorized by an Issuer Order, may, with
prior consent of the Rating Agencies, and with the consent of the Holders of
not less than a majority of the Outstanding Amount of the Notes, enter into
an indenture or indentures supplemental thereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
thereof, or of modifying in any manner the rights of the Holders of the Notes
thereunder; and
WHEREAS, the Issuer and the Indenture Trustee deem it advisable to amend
and restate the Original Indenture; and
WHEREAS, the Issuer and the Indenture Trustee have duly authorized the
execution and delivery of this amendment and restatement of the Original
Indenture and have done all things necessary to make this amended and
restated Indenture a valid agreement of the parties hereto, in accordance
with its terms.
NOW THEREFORE, each party hereto agrees as follows for the benefit of
the other party and for the equal and ratable benefit of the holders of the
Issuer's Class A-1 7.00% Home Loan Asset Backed Notes (the "Class A-1
---------
Notes"), Class A-2 7.06% Home Loan Asset Backed Notes (the "Class A-2
- -----
Notes"), Class A-3 7.17% Home Loan Asset Backed Notes (the "Class A-3
----------
Notes"), Class A-4 7.77% Home Loan Asset Backed Notes (the "Class A-4
- ----- ---------
Notes"), Class A-5 7.51% Home Loan Asset Backed Notes (the "Class A-5
- ----- ----------
Notes"), Class M-1 7.89% Home Loan Asset Backed Notes (the "Class M-1 Notes")
- ----- ---------------
and Class M-2 8.08% Home Loan Asset Backed Notes (the "Class M-2 Notes" and,-
---------------
together with the Class A-1, Class A-2, Class A-3, Class A-4, Class A-5 and
Class M-1 Notes, the "Notes"):
-----
GRANTING CLAUSE
Subject to the terms of this Indenture, the Issuer hereby Grants to the
Indenture Trustee at the Closing Date, as Indenture Trustee for the benefit
of the holders of the Notes, all of the Issuer's right, title and interest in
and to: (i) the Trust Estate (as defined in the Sale and Servicing
Agreement); (ii) all right, title and interest of the Issuer in the Sale and
Servicing Agreement (including the Issuer's right to cause the Transferor to
repurchase Home Loans from the Issuer under certain circumstances described
therein); (iii) all present and future claims, demands, causes of action and
choses in action in respect of any or all of the foregoing and all payments
on or under and all proceeds of every kind and nature whatsoever in respect
of any or all of the foregoing, including all proceeds of the conversion
thereof, voluntary or involuntary, into cash or other liquid property, all
cash proceeds, accounts, accounts receivable, notes, drafts,
acceptances, chattel paper, checks, deposit accounts, insurance proceeds,
condemnation awards, rights to payment of any and every kind and other forms
of obligations and receivables, instruments and other property which at any
time constitute all or part of or are included in the proceeds of any of the
foregoing; (iv) all funds on deposit from time to time in the Trust Accounts
(including the Certificate Distribution Account); and (v) all other property
of the Trust from time to time (collectively, the "Collateral").
----------
The foregoing Grant is made in trust to secure the payment of principal
of and interest on, and any other amounts owing in respect of, the Notes, and
to secure compliance with the provisions of this Indenture, all as provided
in this Indenture.
The Indenture Trustee, as Indenture Trustee on behalf of the holders of
the Notes, acknowledges such Grant, accepts the trusts hereunder and agrees
to perform its duties required in this Indenture to the best of its ability
to the end that the interests of the holders of the Notes may be adequately
and effectively protected. The Indenture Trustee agrees and acknowledges
that the Indenture Trustee's Home Loan Files will be held by the Custodian
for the benefit of the Indenture Trustee in St. Paul, Minnesota. The
Indenture Trustee further agrees and acknowledges that each other item of
Collateral that is physically delivered to the Indenture Trustee will be held
by the Indenture Trustee in St. Paul, Minnesota.
ARTICLE I
Definitions
Section 1.01. Definitions. (a) Except as otherwise specified herein
-----------
or as the context may otherwise require, the following terms have the
respective meanings set forth below for all purposes of this Indenture.
"Act" has the meaning specified in Section 11.03(a).
--- ----------------
"Administration Agreement" means the Administration Agreement dated as
------------------------
of March 1, 1997, among the Administrator, the Issuer and the Indenture
Trustee.
"Administrator" means First Bank National Association, a national
-------------
banking association, or any successor Administrator under the Administration
Agreement.
"Affiliate" means, with respect to any specified Person, any other
---------
Person controlling or controlled by or under common control with such
specified Person. For the purposes of this definition, "control" when used
with respect to any Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Authorized Officer" means, with respect to the Issuer, any officer of
------------------
the Owner Trustee who is authorized to act for the Owner Trustee in matters
relating to the Issuer and who is identified on the list of Authorized
Officers delivered by the Owner Trustee to the Indenture Trustee on the
Closing Date (as such list may be modified or supplemented from time to time
thereafter) and, so long as the Administration Agreement is in effect, any
Vice President or more senior officer of the Administrator who is authorized
to act for the Administrator in matters relating to the Issuer and to be
acted upon by the Administrator pursuant to the Administration Agreement and
who is identified on the list of Authorized Officers delivered by the
Administrator to the Indenture Trustee on the Closing Date (as such list may
be modified or supplemented from time to time thereafter).
"Basic Documents" means the Certificate of Trust, the Trust Agreement,
---------------
this Indenture, the Sale and Servicing Agreement, the Administration
Agreement, the Custodial Agreement, the Note Depository Agreement, the
Certificate Depository Agreement and other documents and certificates
delivered in connection therewith.
"Book-Entry Notes" means a beneficial interest in the Class A-1, Class
----------------
A-2, Class A-3, Class A-4, Class A-5, Class M-1 or Class M-2 Notes, ownership
and transfers of which shall be made through book entries by a Clearing
Agency as described in Section 2.10.
------------
"Business Day" means any day other than (i) a Saturday or a Sunday, or
------------
(ii) a day on which banking institutions in New York City or the city in
which the corporate trust office of the Indenture Trustee is located are
authorized or obligated by law or executive order to be closed.
"Certificate Depository Agreement" has the meaning specified in Section
--------------------------------
1.01 of the Trust Agreement.
"Certificate of Trust" means the certificate of trust of the Issuer
--------------------
substantially in the form of Exhibit B to the Trust Agreement.
---------
"Class A-1 Notes", "Class A-2 Notes", "Class A-3 Notes", "Class A-4
--------------- --------------- --------------- ---------
Notes", "Class A-5 Notes", "Class M-1 Notes" and "Class M-2 Notes" shall each
_____ _______________ --------------- ---------------
have the meaning assigned thereto in the "WITNESSETH THAT" Clause of this
Indenture.
"Clearing Agency" means an organization registered as a "clearing
---------------
agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank, other
---------------------------
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with
the Clearing Agency.
"Closing Date" means March 31, 1997.
------------
"Code" means the Internal Revenue Code of 1986, as amended from time to
----
time, and Treasury Regulations promulgated thereunder.
"Collateral" has the meaning specified in the Granting Clause of this
----------
Indenture.
"Company" means Empire Funding Corp., an Oklahoma corporation or any
-------
successor in interest thereto.
"Contract of Insurance Holder" shall mean EFC Securitized Assets, L.C..
----------------------------
in its capacity as contract of insurance holder under the Sale and Servicing
Agreement.
"Corporate Trust Office" means the principal office of the Indenture
----------------------
Trustee at which at any particular time its corporate trust business shall be
administered, which office at date of execution of this Agreement is located
at 180 East Fifth Street, St. Paul, Minnesota 55101; Attention: Corporate
Trust Department, or at such other address as the Indenture Trustee may
designate from time to time by notice to the Noteholders and the Issuer, or
the principal corporate trust office of any successor Indenture Trustee at
the address designated by such successor Indenture Trustee by notice to the
Noteholders and the Issuer.
"DCR" means, Duff & Phelps Credit Rating Co., or any successor thereto.
---
"Default" means any occurrence that is, or with notice or the lapse of
-------
time or both would become, an Event of Default.
"Definitive Notes" has the meaning specified in Section 2.12.
---------------- ------------
"Depositor" shall mean Financial Asset Securities Corp., a Delaware
---------
corporation, in its capacity as depositor under the Sale and Servicing
Agreement, and its successor in interest.
"Depository Institution" means any depository institution or trust
----------------------
company, including the Indenture Trustee, that (a) is incorporated under the
laws of the United States of America or any State thereof, (b) is subject to
supervision and examination by federal or state banking authorities and
(c) has outstanding unsecured commercial paper or other short-term unsecured
debt obligations that are rated A-1 by Standard & Poor's, Fitch and DCR (or
comparable ratings if S&P, Fitch and DCR are not the Rating Agencies).
"Distribution Date" means the 25th day of any month or if such 25th day
-----------------
is not a Business Day, the first Business Day immediately following such day,
commencing in April 1997.
"Due Period" means, with respect to any Distribution Date and any Class
----------
of Notes, the calendar month immediately preceding the month of such
Distribution Date.
"Event of Default" has the meaning specified in Section 5.01.
---------------- ------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Executive Officer" means, with respect to any corporation, the Chief
-----------------
Executive Officer, Chief Operating Officer, Chief Financial Officer,
President, Executive Vice President, any Vice President, the Secretary or the
Treasurer of such corporation; and with respect to any partnership, any
general partner thereof.
"Final Scheduled Distribution Date" means with respect to any Class of
---------------------------------
Notes, the Distribution Date in March 2023.
"Grant" means mortgage, pledge, bargain, sell, warrant, alienate,
-----
remise, release, convey, assign, transfer, create, and grant a lien upon and
a security interest in and right of set-off against, deposit, set over and
confirm pursuant to this Indenture. A Grant of the Collateral or of any
other agreement or instrument shall include all rights, powers and options
(but none of the obligations) of the granting party thereunder, including the
immediate and continuing right to claim for, collect, receive and give
receipt for principal and interest payments in respect of the Collateral and
all other moneys payable thereunder, to give and receive notices and other
communications, to make waivers or other agreements, to exercise all rights
and options, to bring Proceedings in the name of the granting party or
otherwise, and generally to do and receive anything that the granting party
is or may be entitled to do or receive thereunder or with respect thereto.
"Holder" or "Noteholder" means the Person in whose name a Note is
------ ----------
registered on the Note Register.
"Indenture Trustee" means First Bank National Association, a national
-----------------
banking corporation, as Indenture Trustee under this Indenture, or any
successor Indenture Trustee under this Indenture.
"Independent" means, when used with respect to any specified Person,
-----------
that the Person (a) is in fact independent of the Issuer, any other obligor
on the Notes, the Transferor and any Affiliate of any of the foregoing
Persons, (b) does not have any direct financial interest or any material
indirect financial interest in the Issuer, any such other obligor, the
Transferor or any Affiliate of any of the foregoing Persons and (c)
is not connected with the Issuer, any such other obligor, the Transferor
or any Affiliate of any of the foregoing Persons as an officer, employee,
promoter, underwriter, trustee, partner, director or person performing
similar functions.
"Independent Certificate" means a certificate or opinion to be delivered
-----------------------
to the Indenture Trustee under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01, made by an
-------------
Independent appraiser or other expert appointed by an Issuer Order and
approved by the Indenture Trustee in the exercise of reasonable care, and
such opinion or certificate shall state that the signer has read the
definition of "Independent" in this Indenture and that the signer is
Independent within the meaning thereof.
"Issuer" means Empire Funding Home Loan Owner Trust 1997-1 until a
------
successor replaces it and, thereafter, means the successor and, for purposes
of any provision contained herein and required by the TIA, each other obligor
on the Notes.
"Issuer Order" and "Issuer Request" mean a written order or request
------------ --------------
signed in the name of the Issuer by any one of its Authorized Officers and
delivered to the Indenture Trustee.
"Note" means a Class A-1 Note, Class A-2 Note, Class A-3 Note, Class A-4
----
Note, Class A-5 Note, Class M-1 Note or Class M-2 Note, as applicable.
"Note Depository Agreement" means the agreement to be entered into among
-------------------------
the Issuer, the Administrator, the Indenture Trustee and The Depository Trust
Company, as the initial Clearing Agency relating to the Book Entry Notes.
"Note Interest Rate" means, with respect to any Class of Notes, the
------------------
applicable per annum rate specified below (computed on the basis of a 360-day
year assumed to consist of twelve 30-day months):
Class A-1: 7.00%
Class A-2: 7.06%
Class A-3: 7.17%
Class A-4: 7.77%
Class A-5: 7.51%
Class M-1: 7.89%
Class M-2: 8.08%
"Note Owner" means, with respect to a Book-Entry Note, the Person who
----------
is the beneficial owner of such Book-Entry Note, as reflected on the books of
the Clearing Agency or on the books of a Person maintaining an account with
such Clearing Agency (directly as a Clearing Agency Participant or as an
indirect participant, in each case in accordance with the rules of such
Clearing Agency).
"Note Register" and "Note Registrar" have the respective meanings
------------- --------------
specified in Section 2.03.
------------
"Officer's Certificate" means a certificate signed by any Authorized
---------------------
Officer of the Issuer or the Administrator, under the circumstances described
in, and otherwise complying with, the applicable requirements of Section
-------
11.01, and delivered to the Indenture Trustee. Unless otherwise specified,
- -----
any reference in this Indenture to an Officer's Certificate shall be to an
Officer's Certificate of any Authorized Officer of the Issuer or the
Administrator.
"Opinion of Counsel" means one or more written opinions of counsel who
------------------
may, except as otherwise expressly provided in this Indenture, be employees
of or counsel to the Issuer and who shall be satisfactory to the Indenture
Trustee, and which opinion or opinions shall be addressed to the Indenture
Trustee, as Indenture Trustee, and shall comply with any applicable
requirements of Section 11.01 and shall be in form and substance satisfactory
-------------
to the Indenture Trustee.
"Outstanding" means, with respect to any Note and as of the date of
-----------
determination, any Note theretofore authenticated and delivered under this
Indenture except:
(i) Notes theretofore canceled by the Note Registrar or delivered
to the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in the
necessary amount has been theretofore deposited with the Indenture
Trustee or any Paying Agent in trust for the Holders of such Notes
(provided, however, that if such Notes are to be redeemed, notice of
such redemption has been duly given pursuant to this Indenture or
provision for such notice has been made, satisfactory to the Indenture
Trustee);
(iii) Notes in exchange for or in lieu of which other Notes
have been authenticated and delivered pursuant to this Indenture unless
proof satisfactory to the Indenture Trustee is presented that any such
Notes are held by a bona fide purchaser; provided, that in determining
whether the Holders of the requisite Outstanding Amount of the Notes
have given any request, demand, authorization, direction, notice,
consent, or waiver hereunder or under any Basic Document, Notes owned by
the Issuer, any other obligor upon the Notes, the Transferor or any
Affiliate of any of the foregoing Persons shall be disregarded and
deemed not to be Outstanding, except that, in determining whether the
Indenture Trustee shall be protected in relying upon any such request,
demand, authorization, direction, notice, consent, or waiver, only Notes
that the Indenture Trustee knows to be so owned shall be so disregarded.
Notes so owned that have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the
Indenture Trustee the pledgee's right so to act with respect to such
Notes and that the pledgee is not the Issuer, any other obligor upon the
Notes, the Transferor or any Affiliate of any of the foregoing Persons;
and
(iv) Notes for which the related Final Scheduled Distribution Date
has occurred.
"Outstanding Amount" means the aggregate principal amount of all Notes,
------------------
or Class of Notes, as applicable, Outstanding at the date of determination.
"Owner Trustee" means Wilmington Trust Company, not in its individual
-------------
capacity but solely as Owner Trustee under the Trust Agreement, or any
successor Owner Trustee under the Trust Agreement.
"Paying Agent" means the Indenture Trustee or any other Person that
------------
meets the eligibility standards for the Indenture Trustee specified in
Section 6.11 and is authorized by the Issuer to make payments to and
- ------------
distributions from the Note Distribution Account, including payment of
principal of or interest on the Notes on behalf of the Issuer.
"Payment Date" means any Distribution Date.
------------
"Person" means any individual, corporation, estate, partnership, joint
------
venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated organization, limited liability company, limited
liability partnership, or government or any agency or political subdivision
thereof.
"Predecessor Note" means, with respect to any particular Note, every
----------------
previous Note evidencing all or a portion of the same debt as that evidenced
by such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.04 in lieu of a mutilated, lost,
------------
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"Proceeding" means any suit in equity, action at law or other judicial
----------
or administrative proceeding.
"Rating Agency Condition" means, with respect to any applicable action,
-----------------------
that each Rating Agency shall have been given 10 days (or such shorter period
as is acceptable to each Rating Agency) prior notice thereof and that each of
the Rating Agencies shall have notified the Depositor, the Servicer and the
Issuer in writing that such action will not result in a reduction or
withdrawal of the then current rating of the Notes.
"Rating Agency" means any or all of (i) Standard & Poor's or (ii) DCR.
-------------
If no such organization or successor is any longer in existence, "Rating
Agency" shall be a nationally recognized statistical rating organization or
other comparable Person rating the Notes.
"Record Date" means, as to each Distribution Date, the last Business Day
-----------
of the month immediately preceding the month in which such Distribution Date
occurs.
"Redemption Date" means in the case of a redemption of the Notes
---------------
pursuant to Section 10.01, the Distribution Date specified by the Servicer
-------------
or the Issuer pursuant to Section 10.01.
-------------
"Registered Holder" means the Person in whose name a Note is registered
-----------------
on the Note Register on the applicable Record Date.
"Responsible Officer" means, with respect to the Indenture Trustee, any
-------------------
officer within the Corporate Trust Office of the Indenture Trustee, including
any Vice President, Assistant Vice President, Assistant Treasurer, Assistant
Secretary or any other officer of the Indenture Trustee customarily performing
functions similar to those performed by any of the above designated officers
and also, with respect to a particular matter, any other officer to whom
such matter is referred because of such officer's knowledge of and
familiarity with the particular subject.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement
----------------------------
dated as of March 1, 1997, and amended and restated as of April 1, 1997,
among the Issuer, Financial Asset Securities Corp., as Depositor, and Empire
Funding Corp., as Transferor, Servicer and Claims Administrator, EFC
Securitized Assets, L.C., as Contract of Insurance Holder, and First Bank
National Association, as Indenture Trustee and Co-Owner Trustee.
"Schedule of Home Loans" means the listing of the Home Loans set forth
----------------------
in Schedule A, as supplemented as of any date on which a Deleted Home Loan
----------
has been repurchased from the Trust or substituted with a Qualified Home Loan
pursuant to Section 3.06 of the Sale and Servicing Agreement.
------------
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Servicer" shall mean Empire Funding Corp. in its capacity as servicer
--------
under the Sale and Servicing Agreement, and any Successor Servicer
thereunder.
"Standard & Poor's means Standard & Poor's Ratings Group, a division of
-----------------
The McGraw-Hill Companies, Inc or any successor thereto.
"State" means any one of the States of the United States of America or
-----
the District of Columbia.
"Successor Servicer" has the meaning specified in Section 3.07(e).
------------------ ---------------
"Termination Price" means in the case of a redemption of the Notes
-----------------
pursuant to Section 10.01, an amount equal to the aggregate of the Class
-------------
Principal Balances of the Notes plus accrued and unpaid interest thereon at
the respective Interest Rates thereof to but excluding the Redemption Date,
plus any unpaid Trust Fees and Expenses.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 as
------------------- ---
in force on the date hereof, unless otherwise specifically provided.
"UCC" means, unless the context otherwise requires, the Uniform
---
Commercial Code, as in effect in the relevant jurisdiction, as amended from
time to time.
(b) Except as otherwise specified herein or as the context may
otherwise require, capitalized terms used but not otherwise defined herein
have the respective meanings set forth in the Sale and Servicing Agreement
for all purposes of this Indenture.
Section 1.02. Incorporation by Reference of Trust Indenture Act. (a)
-------------------------------------------------
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes.
--------------------
"indenture security holder" means a Noteholder.
-------------------------
"indenture to be qualified" means this Indenture.
-------------------------
"indenture trustee" or "institutional trustee" means the Indenture
----------------- ---------------------
Trustee.
"obligor" on the indenture securities means the Issuer and any other
-------
obligor on the indenture securities.
(b) All other TIA terms used in this Indenture that are defined in the
TIA, defined by TIA reference to another statute or defined by Commission
rule have the meaning assigned to them by such definitions.
Section 1.03. Rules of Construction. Unless the context otherwise
---------------------
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles as in
effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
(v) words in the singular include the plural and words in the plural
include the singular; and
(vi) any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means
such agreement, instrument or statute as from time to time amended, modified
or supplemented (as provided in such agreements) and includes (in the case of
agreements or instruments) references to all attachments thereto and
instruments incorporated therein; references to a Person are also to its
permitted successors and assigns.
ARTICLE II
THE NOTES
Section 2.01. Form. The Notes shall be designated as the "Empire
----
Funding Home Loan Owner Trust 1997-1 Asset Backed Notes, Series 1997-1".
Each Class of Notes shall be in substantially the form set forth in Exhibit
-------
A hereto, with such appropriate insertions, omissions, substitutions and
- -
other variations as are required or permitted by this Indenture, and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may, consistently herewith, be determined by
the officers executing such Notes, as evidenced by their execution thereof.
Any portion of the text of any Note may be set forth on the reverse thereof,
with an appropriate reference thereto on the face of the Note.
The Definitive Notes shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods, all as determined
by the officers executing such Notes, as evidenced by their execution of such
Notes.
Each Note shall be dated the date of its authentication. The terms of
the Notes are set forth in Exhibit A. The terms of each Class of Notes are
---------
part of the terms of this Indenture.
Section 2.02. Execution, Authentication, Delivery and Dating. The
----------------------------------------------
Notes shall be executed on behalf of the Issuer by an Authorized Officer of
the Owner Trustee or the Administrator. The signature of any such Authorized
Officer on the Notes may be manual or facsimile.
Notes bearing the manual or facsimile signature of individuals who were
at any time Authorized Officers of the Owner Trustee or the Administrator
shall bind the Issuer, notwithstanding that such individuals or any of them
have ceased to hold such offices prior to the authentication and delivery of
such Notes or did not hold such offices at the date of such Notes.
Subject to the satisfaction of the conditions set forth in Section 2.08,
------------
the Indenture Trustee shall upon Issuer Order authenticate and deliver the
seven Classes of Notes for original issue in the following principal amounts:
Class A-1, $21,750,000; Class A-2, $7,400,000; Class A-3, $8,500,000; Class
A-4, $11,791,000; Class A-5, $4,250,000; Class M-1, $8,978,000; Class M-2,
$7,721,000. The aggregate principal amounts of such Classes of Notes
outstanding at any time may not exceed such respective amounts.
The Notes that are authenticated and delivered by the Indenture Trustee
to or upon the order of the Issuer on the Closing Date shall be dated March
31, 1997. All other Notes that are authenticated after the Closing Date for
any other purpose under the Indenture shall be dated the date of their
authentication. The Notes shall be issuable as registered Notes in the
minimum denomination of $25,000 and integral multiples of $1,000 in excess
thereof.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Indenture Trustee by the manual signature of one of
its authorized signatories, and such certificate upon any Note shall be
conclusive evidence, and the only evidence, that such Note has been duly
authenticated and delivered hereunder.
Section 2.03. Registration; Registration of Transfer and Exchange. The
---------------------------------------------------
Issuer shall cause to be kept a register (the "Note Register") in which,
-------------
subject to such reasonable regulations as it may prescribe, the Issuer shall
provide for the registration of Notes and the registration of transfers of
Notes. The Indenture Trustee initially shall be the "Note Registrar" for the
purpose of registering Notes and transfers of Notes as herein provided. Upon
any resignation of any Note Registrar, the Issuer shall promptly appoint a
successor or, if it elects not to make such an appointment, assume the duties
of Note Registrar.
If a Person other than the Indenture Trustee is appointed by the Issuer
as Note Registrar, the Issuer will give the Indenture Trustee prompt written
notice of the appointment of such Note Registrar and of the location, and any
change in the location, of the Note Register, and the Indenture Trustee shall
have the right to inspect the Note Register at all reasonable times and to
obtain copies thereof, and the Indenture Trustee shall have the right to rely
upon a certificate executed on behalf of the Note Registrar by an Executive
Officer thereof as to the names and addresses of the Holders of the Notes and
the principal amounts and number of such Notes.
Upon surrender for registration of transfer of any Note at the office or
agency of the Issuer to be maintained as provided in Section 3.02, the
------------
Issuer shall execute, and the Indenture Trustee shall authenticate and the
Noteholder shall obtain from the Indenture Trustee, in the name of the
designated transferee or transferees, one or more new Notes of the same Class
in any authorized denominations, of a like aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes of
the same Class in any authorized denominations, of a like aggregate principal
amount, upon surrender of the Notes to be exchanged at such office or agency.
Whenever any Notes are so surrendered for exchange, the Issuer shall execute,
and the Indenture Trustee shall authenticate and the Noteholder shall obtain
from the Indenture Trustee, the Notes which the Noteholder making the
exchange is entitled to receive.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument
of transfer in form satisfactory to the Indenture Trustee duly executed by,
the Holder thereof or such Holder's attorney duly authorized in writing, with
such signature guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in the Securities Transfer Agent's Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the Note
Registrar in addition to, or in substitution for, STAMP, all in accordance
with the Exchange Act.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Issuer may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration of transfer or exchange of Notes, other
than exchanges pursuant to Section 9.06 not involving any transfer.
------------
The preceding provisions of this Section notwithstanding, the Issuer
shall not be required to make and the Note Registrar need not register
transfers or exchanges of Notes selected for redemption or of any Note for a
period of 15 days preceding the due date for any payment with respect to such
Note.
Section 2.04. Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
------------------------------------------
mutilated Note is surrendered to the Indenture Trustee, or the Indenture
Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Note, and (ii) there is delivered to the Indenture Trustee such
security or indemnity as may be reasonably required by it to hold the Issuer
and the Indenture Trustee harmless, then, in the absence of notice to the
Issuer, the Note Registrar or the Indenture Trustee that such Note has been
acquired by a bona fide purchaser, an Authorized Officer of the Owner Trustee
or the Administrator on behalf of the Issuer shall execute, and upon its
request the Indenture Trustee shall authenticate and deliver, in exchange for
or in lieu of any such mutilated, destroyed, lost or stolen Note, a
replacement Note of the same Class; provided, however, that if any such
destroyed, lost or stolen Note, but not a mutilated Note, shall have become
or within seven days shall be due and payable, or shall have been called for
redemption, instead of issuing a replacement Note, the Issuer may pay such
destroyed, lost or stolen Note when so due or payable or upon the Redemption
Date without surrender thereof. If, after the delivery of such replacement
Note or payment of a destroyed, lost or stolen Note pursuant to the proviso
to the preceding sentence, a bona fide purchaser of the original Note in lieu
of which such replacement Note was issued presents for payment such original
Note, the Issuer and the Indenture Trustee shall be entitled to recover such
replacement Note (or such payment) from the Person to whom it was delivered
or any Person taking such replacement Note from such Person to whom such
replacement Note was delivered or any assignee of such Person, except a bona
fide purchaser, and shall be entitled to recover upon the security or
indemnity provided therefor to the extent of any loss, damage, cost or
expense incurred by the Issuer or the Indenture Trustee in connection
therewith.
Upon the issuance of any replacement Note under this Section, the Issuer
may require the payment by the Holder of such Note of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other reasonable expenses (including the fees and expenses of
the Indenture Trustee) connected therewith.
Every replacement Note issued pursuant to this Section in replacement of
any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the
mutilated, destroyed, lost or stolen Note shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally
and proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
Section 2.05. Persons Deemed Owner. Prior to due presentment for
--------------------
registration of transfer of any Note, the Issuer, the Indenture Trustee and
any agent of the Issuer or the Indenture Trustee may treat the Person in
whose name any Note is registered (as of the day of determination) as the
owner of such Note for the purpose of receiving payments of principal of and
interest, if any, on such Note and for all other purposes whatsoever, whether
or not such Note be overdue, and none of the Issuer, the Indenture Trustee or
any agent of the Issuer or the Indenture Trustee shall be affected by notice
to the contrary.
Section 2.06. Payment of Principal and Interest; Defaulted Interest.
-----------------------------------------------------
(a) Each Class of Notes shall accrue interest at the related Note Interest
Rate, and such interest shall be payable on each Distribution Date as
specified in Exhibit A hereto, subject to Section 3.01. Any installment of
------------
interest or principal, if any, payable on any Note that is punctually paid or
duly provided for by the Issuer on the applicable Distribution Date shall be
paid to the Person in whose name such Note (or one or more Predecessor Notes)
is registered on the Record Date by check mailed first-class postage prepaid
to such Person's address as it appears on the Note Register on such Record
Date, except that, unless Definitive Notes have been issued pursuant to
Section 2.12, with respect to Notes registered on the Record Date in the
------------
name of the nominee of the Clearing Agency (initially, such nominee to be
Cede & Co.), payment will be made by wire transfer in immediately available
funds to the account designated by such nominee and except for the final
installment of principal payable with respect to such Note on a Distribution
Date or on the applicable Final Scheduled Distribution Date for such Class of
Notes (and except for the Termination Price for any Note called for
redemption pursuant to Section 10.01), which shall be payable as provided in
-------------
Section 2.06(b) below. The funds represented by any such checks returned
- ---------------
undelivered shall be held in accordance with Section 3.03.
------------
(b) The principal of each Note shall be payable in installments on each
Distribution Date as provided in the forms of the Notes set forth in Exhibit
-------
A hereto. Notwithstanding the foregoing, the entire unpaid principal amount
- -
of the Notes of a Class of Notes shall be due and payable, if not previously
paid, on the earlier of (i) the applicable Final Scheduled Distribution Date
of such Class, (ii) the Redemption Date or (iii) the date on which an Event
of Default shall have occurred and be continuing, if the Indenture Trustee or
the Holders of Notes representing not less than a majority of the Outstanding
Amount of the Notes have declared the Notes to be immediately due and payable
in the manner provided in Section 5.02. All principal payments
------------
on each Class of Notes shall be made pro rata to the Noteholders of such
Class entitled thereto. The Indenture Trustee shall notify the Person in
whose name a Note is registered at the close of business on the Record Date
preceding the Distribution Date on which the Issuer expects that the final
installment of principal of and interest on such Note will be paid. Such
notice shall be mailed or transmitted by facsimile prior to such final
Distribution Date and shall specify that such final installment will be
payable only upon presentation and surrender of such Note and shall specify
the place where such Note may be presented and surrendered for payment of
such installment. Notices in connection with redemptions of Notes shall be
mailed to Noteholders as provided in Section 10.02.
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Section 2.07. Cancellation. All Notes surrendered for payment,
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registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Indenture Trustee, be delivered to the Indenture
Trustee and shall be promptly canceled by the Indenture Trustee. The Issuer
may at any time deliver to the Indenture Trustee for cancellation any Notes
previously authenticated and delivered hereunder which the Issuer may have
acquired in any manner whatsoever, and all Notes so delivered shall be
promptly canceled by the Indenture Trustee. No Notes shall be authenticated
in lieu of or in exchange for any Notes canceled as provided in this
Section, except as expressly permitted by this Indenture. All canceled
Notes may be held or disposed of by the Indenture Trustee in accordance
with its standard retention or disposal policy as in effect at the time
unless the Issuer shall direct by an Issuer Order that they be destroyed or
returned to it; provided, that such Issuer Order is timely and the Notes
have not been previously disposed of by the Indenture Trustee.
Section 2.08. Conditions Precedent to the Authentication of the Notes.
-------------------------------------------------------
The Notes may be authenticated by the Indenture Trustee, upon Issuer
Request and upon receipt by the Indenture Trustee of the following:
(a) An Issuer Order authorizing the execution and authentication of
such Notes by the Issuer.
(b) All of the items of Collateral which shall be delivered to the
Indenture Trustee or its designee.
(c) An executed counterpart of the Trust Agreement.
(d) An Opinion of Counsel addressed to the Indenture Trustee to the
effect that:
(i) all instruments furnished to the Indenture Trustee as
conditions precedent to the authentication of the Notes by the Indenture
Trustee pursuant to the Indenture conform to the requirements of this
Indenture and constitute all the documents required to be delivered
hereunder for the Indenture Trustee to authenticate the Notes;
(ii) all conditions precedent provided for in this Indenture
relating to the authentication of the Notes have been complied with;
(iii) the Owner Trustee and Co-Owner Trustee have power and
authority to execute, deliver and perform their obligations under the
Trust Agreement;
(iv) the Issuer has been duly formed, is validly existing as a
business trust under the laws of the State of Delaware, 12 Del. C.
Section 3801, et seq., and has power, authority and legal right to
execute and deliver this Indenture, the Administration Agreement and the
Sale and Servicing Agreement;
(v) assuming due authorization, execution and delivery thereof by
the Indenture Trustee, the Indenture is the valid, legal and binding
obligation of the Issuer, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, arrangement,
moratorium, fraudulent or preferential conveyance and other similar laws
of general application affecting the rights of creditors generally and
to general principles of equity (regardless of whether such enforcement
is considered in a proceeding in equity or at law);
(vi) the Notes, when executed and authenticated as provided herein
and delivered against payment therefor, will be the valid, legal and
binding obligations of the Issuer pursuant to the terms of this
Indenture, entitled to the benefits of this Indenture, and will be
enforceable in accordance with their terms, subject to bankruptcy,
insolvency, reorganization, arrangement, moratorium, fraudulent or
preferential conveyance and other similar laws of general application
affecting the rights of creditors generally and to general principles of
equity (regardless of whether such enforcement is considered in a
proceeding in equity or at law);
(vii) the Trust Agreement authorizes the Issuer to Grant the
Collateral to the Indenture Trustee as security for the Notes and the
Owner Trustee has taken all necessary action under the Trust Agreement
to Grant the Collateral to the Indenture Trustee;
(viii) this Indenture has been duly qualified under the Trust
Indenture Act of 1939;
(ix) this Indenture, together with the Grant of the Collateral to
the Indenture Trustee, creates a valid security interest in the
Collateral in favor of the Indenture Trustee for the benefit of the
Noteholders;
(x) such action has been taken with respect to delivery of
possession of the Collateral, and with respect to the execution and
filing of this Indenture and any financing statements as are necessary
to make effective and to perfect a first priority security interest
created by this Indenture in the Collateral in favor of the Indenture
Trustee, except that with respect to the Debt Instruments, possession of
such Debt Instruments must be maintained by the Indenture Trustee or an
agent of the Indenture Trustee (other than the Issuer), an Affiliate of
the Issuer, or a "securities intermediary," as defined in Section 8.102
of the UCC, an agent of the Indenture Trustee; and
(xi) no authorization, approval or consent of any governmental body
having jurisdiction in the premises which has not been obtained by the
Issuer is required to be obtained by the Issuer for the valid issuance
and delivery of the Notes, except that no opinion need be expressed with
respect to any such authorizations, approvals or consents as may be
required under any state securities "blue sky" laws.
(e) An Officer's Certificate complying with the requirements of
Section 11.01 and stating that:
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(i) the Issuer is not in Default under this Indenture and the
issuance of the Notes applied for will not result in any breach of any
of the terms, conditions or provisions of, or constitute a default
under, the Trust Agreement, any indenture, mortgage, deed of trust or
other agreement or instrument to which the Issuer is a party or by which
it is bound, or any order of any court or administrative agency entered
in any proceeding to which the Issuer is a party or by which it may be
bound or to which it may be subject, and that all conditions precedent
provided in this Indenture relating to the authentication and delivery
of the Notes applied for have been complied with;
(ii) the Issuer is the owner of all of the Home Loans, has not
assigned any interest or participation in the Home Loans (or, if any
such interest or participation has been assigned, it has been released)
and has the right to Grant all of the Home Loans to the Indenture
Trustee;
(iii) the Issuer has Granted to the Indenture Trustee all of
its right, title, and interest in the Collateral, and has delivered or
caused the same to be delivered to the Indenture Trustee;
(iv) attached thereto are true and correct copies of letters signed
by Standard & Poor's and DCR confirming that the Class A-1, Class A-2,
Class A-3, Class A-4 and Class A-5 Notes have been rated "AAA" and
letters signed by Standard & Poor's and DCR confirming that the Class M-
1 Notes have been rated "AA", the Class M-2 Notes have been rated "A"
and the Certificates have been rated "BBB+"; and
(v) all conditions precedent provided for in this Indenture
relating to the authentication of the Notes have been complied with.
Section 2.09. Release of Collateral. (a) Except as otherwise provided
---------------------
in subsections (b) and (c) hereof and Section 11.01 and the terms of the
--------------
Basic Documents, the Indenture Trustee shall release property from the lien
of this Indenture only upon receipt of an Issuer Request accompanied by an
Officer's Certificate, an Opinion of Counsel and Independent Certificates in
accordance with TIA Sections 314(c) and 314(d)(l) or an Opinion of Counsel in
lieu of such Independent Certificates to the effect that the TIA does not
require any such Independent Certificates.
(b) The Servicer, on behalf of the Issuer, shall be entitled to obtain
a release from the lien of this Indenture for any Home Loan and the related
Mortgaged Property at any time (i) after a payment by the Transferor or the
Issuer of the Purchase Price of the Home Loan, (ii) after a Qualified
Substitute Home Loan is substituted for such Home Loan and payment of the
Substitution Adjustment, if any, (iii) after liquidation of the Home Loan in
accordance with Section 4.13 of the Sale and Servicing Agreement and the
deposit of all Recoveries thereon in the Collection Account, or (iv) upon the
termination of a Home Loan (due to, among other causes, a prepayment in full
of the Home Loan and sale or other disposition of the related Mortgaged
Property), if the Issuer delivers to the Indenture Trustee an Issuer Request
(A) identifying the Home Loan and the related Mortgaged Property to be
released, (B) requesting the release thereof, (C) setting forth the amount
deposited in the Collection Account with respect thereto, and (D) certifying
that the amount deposited in the Collection Account (x) equals the Purchase
Price of the Home Loan, in the event a Home Loan and the related Mortgaged
Property are being released from the lien of this Indenture pursuant to item
(i) above, (y) equals the Substitution Adjustment related to the Qualified
Substitute Home Loan and the Deleted Home Loan released from the lien of the
Indenture pursuant to item (ii) above, or (z) equals the entire amount of
Recoveries received with respect to such Home Loan and the related Mortgaged
Property in the event of a release from the lien of this Indenture pursuant
to items (iii) or (iv) above.
(c) The Indenture Trustee shall, if requested by the Servicer,
temporarily release or cause the Custodian to temporarily release to the
Servicer the Indenture Trustee's Home Loan File pursuant to the provisions of
Section 7.02 of the Sale and Servicing Agreement upon compliance by the
Servicer of the provisions thereof provided that the Indenture Trustee's Home
Loan File shall have been stamped to signify the Issuer's pledge to the
Indenture Trustee under the Indenture.
Section 2.10. Book-Entry Notes. The Notes, when authorized by an
----------------
Issuer Order, will be issued in the form of typewritten Notes representing
the Book-Entry Notes, to be delivered to The Depository Trust Company, the
initial Clearing Agency, by, or on behalf of, the Issuer. The Book-Entry
Notes shall be registered initially on the Note Register in the name of Cede
& Co., the nominee of the initial Clearing Agency, and no Owner thereof will
receive a definitive Note representing such Note Owner's interest in such
Note, except as provided in Section 2.12. Unless and until definitive, fully
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registered Notes (the "Definitive Notes") have been issued to such Note
Owners pursuant to Section 2.12:
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(i) the provisions of this Section shall be in full force and
effect;
(ii) the Note Registrar and the Indenture Trustee shall be entitled
to deal with the Clearing Agency for all purposes of this Indenture
(including the payment of principal of and interest on the Notes and the
giving of instructions or directions hereunder) as the sole holder of
the Notes, and shall have no obligation to the Note Owners;
(iii) to the extent that the provisions of this Section
conflict with any other provisions of this Indenture, the provisions of
this Section shall control;
(iv) the rights of Note Owners shall be exercised only through the
Clearing Agency and shall be limited to those established by law and
agreements between such Note Owners and the Clearing Agency and/or the
Clearing Agency Participants pursuant to the Note Depository Agreement.
Unless and until Definitive Notes are issued pursuant to Section 2.12,
------------
the initial Clearing Agency will make book-entry transfers among the
Clearing Agency Participants and receive and transmit payments of
principal of and interest on the Notes to such Clearing Agency
Participants; and
(v) whenever this Indenture requires or permits actions to be
taken based upon instructions or directions of Holders of Notes
evidencing a specified percentage of the Outstanding Amount of the
Notes, the Clearing Agency shall be deemed to represent such percentage
only to the extent that it has received instructions to such effect from
Note Owners and/or Clearing Agency Participants owning or representing,
respectively, such required percentage of the beneficial interest in the
Notes and has delivered such instructions to the Indenture Trustee.
Section 2.11. Notices to Clearing Agency. Whenever a notice or other
--------------------------
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to such Note Owners pursuant to
Section 2.12, the Indenture Trustee shall give all such notices and
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communications specified herein to be given to Holders of the Notes to the
Clearing Agency, and shall have no obligation to such Note Owners.
Section 2.12. Definitive Notes. If (i) the Administrator advises the
----------------
Indenture Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities with respect to the
Book-Entry Notes and the Administrator is unable to locate a qualified
successor, (ii) the Administrator at its option advises the Indenture Trustee
in writing that it elects to terminate the book-entry system through the
Clearing Agency or (iii) after the occurrence of an Event of Default, Owners
of the Book-Entry Notes representing beneficial interests aggregating at
least a majority of the Outstanding Amount of such Notes advise the Clearing
Agency in writing that the continuation of a book-entry system through the
Clearing Agency is no longer in the best interests of such Note Owners, then
the Clearing Agency shall notify all Note Owners and the Indenture Trustee of
the occurrence of such event and of the availability of Definitive Notes to
Note Owners requesting the same. Upon surrender to the Indenture Trustee of
the typewritten Notes representing the Book-Entry Notes by the Clearing
Agency, accompanied by registration instructions, the Issuer shall execute
and the Indenture Trustee shall authenticate the Definitive Notes in
accordance with the instructions of the Clearing Agency. None of the Issuer,
the Note Registrar or the Indenture Trustee shall be liable for any delay in
delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon the issuance of Definitive
Notes, the Indenture Trustee shall recognize the Holders of the Definitive
Notes as Noteholders.
Section 2.13. Tax Treatment. The Issuer has entered into this
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Indenture, and the Notes will be issued, with the intention that for all
purposes, including federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Collateral. The Issuer, by entering into this Indenture, and
each Noteholder, by its acceptance of a Note (and each Note Owner by its
acceptance of an interest in the applicable Book-Entry Note), agree to treat
the Notes for all purposes, including federal, state and local income, single
business and franchise tax purposes, as indebtedness of the Issuer.
ARTICLE III
COVENANTS
Section 3.01. Payment of Principal and Interest. The Issuer will duly
---------------------------------
and punctually pay (or will cause to be duly and punctually paid) the
principal of and interest, if any, on the Notes in accordance with the terms
of the Notes and this Indenture. Without limiting the foregoing, subject to
and in accordance with Section 8.02(c), the Issuer will cause to be
---------------
distributed all amounts on deposit in the Note Distribution Account on each
Distribution Date deposited therein pursuant to the Sale and Servicing
Agreement (i) for the benefit of the Class A-1 Notes, to the Class A-1
Noteholders, (ii) for the benefit of the Class A-2 Notes, to the Class A-2
Noteholders, (iii) for the benefit of the Class A-3 Notes, to the Class A-3
Noteholders, (iv) for the benefit of the Class A-4 Notes, to the Class A-4
Noteholders, (v) for the benefit of the Class A-5 Notes, to the Class A-5
Noteholders, (vi) for the benefit of the Class M-1 Notes, to the Class M-1
Noteholders, and (vii) for the benefit of the Class M-2 Notes, to the Class
M-2 Noteholders. Amounts properly withheld under the Code by any Person from
a payment to any Noteholder of interest and/or principal shall be considered
as having been paid by the Issuer to such Noteholder for all purposes of this
Indenture.
The Notes shall be non-recourse obligations of the Issuer and shall be
limited in right of payment to amounts available from the Collateral, as
provided in this Indenture. The Issuer shall not otherwise be liable for
payments on the Notes. If any other provision of this Indenture shall be
deemed to conflict with the provisions of this Section 3.01, the provisions
------------
of this Section 3.01 shall control.
------------
Section 3.02. Maintenance of Office or Agency. The Issuer will or will
-------------------------------
cause the Administrator to maintain in the Borough of Manhattan, The City of
New York, an office or agency where Notes may be surrendered for registration
of transfer or exchange, and where notices and demands to or upon the Issuer
in respect of the Notes and this Indenture may be served. The Issuer hereby
initially appoints the Administrator to serve as its agent for the foregoing
purposes and to serve as Paying Agent with respect to the Notes and the
Certificates. The Issuer will give prompt written notice to the Indenture
Trustee of the location, and of any change in the location, of any such
office or agency. If at any time the Issuer shall fail to maintain any such
office or agency or shall fail to furnish the Indenture Trustee with the
address thereof, such surrenders, notices and demands may be made or served
at the Corporate Trust Office, and the Issuer hereby appoints the Indenture
Trustee as its agent to receive all such surrenders, notices and demands.
Section 3.03. Money for Payments To Be Held in Trust. As provided in
--------------------------------------
Section 8.02(a) and (b), all payments of amounts due and payable with respect
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to any Notes that are to be made from amounts withdrawn from the Collection
Account and the Note Distribution Account pursuant to Section 8.02(c) shall
---------------
be made on behalf of the Issuer by the Indenture Trustee or by the Paying
Agent, and no amounts so withdrawn from the Collection Account and the Note
Distribution Account for payments of Notes shall be paid over to the Issuer
except as provided in this Section.
On or before the Business Day preceding each Distribution Date and
Redemption Date, the Paying Agent shall deposit or cause to be deposited in
the Note Distribution Account an aggregate sum sufficient to pay the amounts
due on such Distribution Date or Redemption Date under the Notes, such sum to
be held in trust for the benefit of the Persons entitled thereto, and (unless
the Paying Agent is the Indenture Trustee) shall promptly notify the
Indenture Trustee of its action or failure so to act.
Any Paying Agent shall be appointed by Issuer Order with written notice
thereof to the Indenture Trustee. Any Paying Agent appointed by the Issuer
shall be a Person who would be eligible to be Indenture Trustee hereunder as
provided in Section 6.11. The Issuer shall not appoint any Paying Agent
------------
(other than the Indenture Trustee) which is not, at the time of such
appointment, a Depository Institution.
The Issuer will cause each Paying Agent other than the Administrator to
execute and deliver to the Indenture Trustee an instrument in which such
Paying Agent shall agree with the Indenture Trustee (and if the Indenture
Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions
of this Section, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and pay such sums to such Persons as
herein provided;
(ii) give the Indenture Trustee notice of any default by the Issuer
(or any other obligor upon the Notes) of which it has actual knowledge
in the making of any payment required to be made with respect to the
Notes;
(iii) at any time during the continuance of any such default,
upon the written request of the Indenture Trustee, forthwith pay to the
Indenture Trustee all sums so held in trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and forthwith pay to the
Indenture Trustee all sums held by it in trust for the payment of Notes
if at any time it ceases to meet the standards required to be met by a
Paying Agent at the time of its appointment; and
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any applicable
withholding taxes imposed thereon and with respect to any applicable
reporting requirements in connection therewith; provided, however, that
with respect to withholding and reporting requirements applicable to
original issue discount (if any) on the Notes, the Issuer shall have
first provided the calculations pertaining thereto to the Indenture
Trustee.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by
Issuer Order direct any Paying Agent to pay to the Indenture Trustee all sums
held in trust by such Paying Agent, such sums to be held by the Indenture
Trustee upon the same trusts as those upon which the sums were held by such
Paying Agent; and upon such payment by any Paying Agent to the Indenture
Trustee, such Paying Agent shall be released from all further liability
with respect to such money.
Subject to applicable laws with respect to escheat of funds or abandoned
property, any money held by the Indenture Trustee or any Paying Agent in
trust for the payment of any amount due with respect to any Note and
remaining unclaimed for two years after such amount has become due and
payable shall be discharged from such trust and be paid to the Issuer on
Issuer Request; and the Holder of such Note shall thereafter, as an unsecured
general creditor, look only to the Issuer for payment thereof (but only to
the extent of the amounts so paid to the Issuer), and all liability of the
Indenture Trustee or such Paying Agent with respect to such trust money shall
thereupon cease; provided, however, that the Indenture Trustee or such Paying
Agent, before being required to make any such repayment, shall at the expense
and direction of the Issuer cause to be published once, in a newspaper
published in the English language, customarily published on each Business Day
and of general circulation in The City of New York, notice that such money
remains unclaimed and that, after a date specified therein, which shall not
be less than 30 days from the date of such publication, any unclaimed balance
of such money then remaining will be repaid to the Issuer. The Indenture
Trustee shall also adopt and employ, at the expense and direction of the
Issuer, any other reasonable means of notification of such repayment
(including, but not limited to, mailing notice of such repayment to Holders
whose Notes have been called but have not been surrendered for redemption or
whose right to or interest in moneys due and payable but not claimed is
determinable from the records of the Indenture Trustee or of any Paying
Agent, at the last address of record for each such Holder).
Section 3.04. Existence. (a) Subject to Section 3.04(b), the Issuer
--------- ---------------
will keep in full effect its existence, rights and franchises as a business
trust under the laws of the State of Delaware (unless it becomes, or any
successor Issuer hereunder is or becomes, organized under the laws of any
other State or of the United States of America, in which case the Issuer will
keep in full effect its existence, rights and franchises under the laws of
such other jurisdiction) and will obtain and preserve its qualification to do
business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Indenture, the
Notes and the Collateral.
(b) Any successor to the Owner Trustee or Co-Owner Trustee appointed
pursuant to Section 10.2 of the Trust Agreement shall be the successor Owner
Trustee or Co-Owner Trustee, respectively, under this Indenture without the
execution or filing of any paper, instrument or further act to be done on the
part of the parties hereto.
(c) Upon any consolidation or merger of or other succession to the
Owner Trustee, the Person succeeding to the Owner Trustee under the Trust
Agreement may exercise every right and power of the Owner Trustee under this
Indenture with the same effect as if such Person had been named as the Owner
Trustee herein.
Section 3.05. Protection of Collateral. The Issuer will from time to
------------------------
time execute and deliver all such reasonable supplements and amendments
hereto and all such financing statements, continuation statements,
instruments of further assurance and other instruments, and will take such
other action necessary or advisable to:
(i) provide further assurance with respect to the Grant of all or
any portion of the Collateral;
(ii) maintain or preserve the lien and security interest (and the
priority thereof) of this Indenture or carry out more effectively the
purposes hereof;
(iii) perfect, publish notice of or protect the validity of any
Grant made or to be made by this Indenture;
(iv) enforce any rights with respect to the Collateral; or
(v) preserve and defend title to the Collateral and the rights of
the Indenture Trustee and the Noteholders in such Collateral against the
claims of all persons and parties.
The Issuer hereby designates the Administrator its agent and
attorney-in-fact to execute any financing statement, continuation statement
or other instrument required to be executed pursuant to this Section 3.05.
------------
Section 3.06. Annual Opinions as to Collateral.
--------------------------------
On or before March 15 in each calendar year, beginning in 1998, the
Issuer shall furnish to the Indenture Trustee an Opinion of Counsel either
stating that, in the opinion of such counsel, such action has been taken with
respect to the recording, filing, re-recording and refiling of this
Indenture, any indentures supplemental hereto and any other requisite
documents and with respect to the execution and filing of any financing
statements and continuation statements as is necessary to maintain the lien
and security interest created by this Indenture and reciting the details of
such action or stating that in the opinion of such counsel no such action is
necessary to maintain such lien and security interest. Such Opinion of
Counsel shall also describe the recording, filing, re-recording and refiling
of this Indenture, any indentures supplemental hereto and any other requisite
documents and the execution and filing of any financing statements and
continuation statements that will, in the opinion of such counsel, be
required to maintain the lien and security interest of this Indenture until
March 15th of the following calendar year.
Section 3.07. Performance of Obligations; Servicing of Home Loans. (a)
---------------------------------------------------
The Issuer will not take any action and will use its best efforts not to
permit any action to be taken by others that would release any Person from
any of such Person's material covenants or obligations under any instrument
or agreement included in the Collateral or that would result in the
amendment, hypothecation, subordination, termination or discharge of, or
impair the validity or effectiveness of, any such instrument or agreement,
except as expressly provided in this Indenture, the Sale and Servicing
Agreement or such other instrument or agreement.
(b) The Issuer may contract with or otherwise obtain the assistance of
other Persons (including, without limitation, the Administrator under the
Administration Agreement) to assist it in performing its duties under this
Indenture, and any performance of such duties by a Person identified to the
Indenture Trustee in an Officer's Certificate of the Issuer shall be deemed
to be action taken by the Issuer. Initially, the Issuer has contracted with
the Servicer and the Administrator to assist the Issuer in performing its
duties under this Indenture. The Administrator must at all times be the
same person as the Indenture Trustee.
(c) The Issuer will punctually perform and observe all of its
obligations and agreements contained in this Indenture, the Basic Documents
and in the instruments and agreements included in the Collateral, including
but not limited to (i) filing or causing to be filed all UCC financing
statements and continuation statements required to be filed by the terms of
this Indenture and the Sale and Servicing Agreement and (ii) recording or
causing to be recorded all Mortgages, Assignments of Mortgage, all
intervening Assignments of Mortgage and all assumption and modification
agreements required to be recorded by the terms of the Sale and Servicing
Agreement, in accordance with and within the time periods provided for in
this Indenture and/or the Sale and Servicing Agreement, as applicable.
Except as otherwise expressly provided therein, the Issuer shall not waive,
amend, modify, supplement or terminate any Basic Document or any provision
thereof without the consent of the Indenture Trustee and the Holders of at
least a majority of the Outstanding Amount of the Notes.
(d) If the Issuer shall have knowledge of the occurrence of an Event of
Default under the Sale and Servicing Agreement, the Issuer shall promptly
notify the Indenture Trustee and the Rating Agencies thereof, and shall
specify in such notice the action, if any, the Issuer is taking with respect
of such default. If such an Event of Default shall arise from the failure of
the Servicer to perform any of its duties or obligations under the Sale and
Servicing Agreement with respect to the Home Loans, the Issuer shall take all
reasonable steps available to it to remedy such failure.
(e) As promptly as possible after the giving of notice of termination
to the Servicer of the Servicer's rights and powers pursuant to Section 10.01
of the Sale and Servicing Agreement, the Issuer shall appoint a successor
servicer (the "Successor Servicer"), and such Successor Servicer shall accept
------------------
its appointment by a written assumption in a form acceptable to the Indenture
Trustee. In the event that a Successor Servicer has not been appointed and
accepted its appointment at the time when the Servicer ceases to act as
Servicer, the Indenture Trustee without further action shall automatically be
appointed the Successor Servicer. The Indenture Trustee may resign as the
Servicer by giving written notice of such resignation to the Issuer and in
such event will be released from such duties and obligations, such release
not to be effective until the date a new servicer enters into a servicing
agreement with the Issuer as provided below. Upon delivery of any such
notice to the Issuer, the Issuer shall obtain a new servicer as the Successor
Servicer under the Sale and Servicing Agreement. Any Successor Servicer
other than the Indenture Trustee shall (i) satisfy the criteria specified in
Section 4.08 of the Sale and Servicing Agreement and (ii) enter into a
servicing agreement with the Issuer having substantially the same provisions
as the provisions of the Sale and Servicing Agreement applicable to the
Servicer. If within 30 days after the delivery of the notice referred to
above, the Issuer shall not have obtained such a new servicer, the Indenture
Trustee may appoint, or may petition a court of competent jurisdiction to
appoint, a Successor Servicer. In connection with any such appointment, the
Indenture Trustee may make such arrangements for the compensation of such
successor as it and such successor shall agree, subject to the limitations
set forth below and in the Sale and Servicing Agreement, and in accordance
with Section 10.02 of the Sale and Servicing Agreement, the Issuer shall
-------------
enter into an agreement with such successor for the servicing of the Home
Loans (such agreement to be in form and substance satisfactory to the
Indenture Trustee). The servicing fee paid to any Successor Servicer shall
not be in excess of the Servicing Fee being paid to the initial Servicer. If
the Indenture Trustee shall succeed to the Servicer's duties as servicer of
the Home Loans as provided herein, it shall do so in its individual capacity
and not in its capacity as Indenture Trustee and, accordingly, the provisions
of Article VI hereof shall be inapplicable to the Indenture
----------
Trustee in its duties as successor Servicer and the servicing of the Home
Loans. In case the Indenture Trustee shall become successor Servicer under
the Sale and Servicing Agreement, the Indenture Trustee shall be entitled to
appoint as Servicer any one of its Affiliates, provided that it shall be
fully liable for the actions and omissions of such Affiliate in such capacity
as Successor Servicer.
(f) Upon any termination of the Servicer's rights and powers pursuant
to the Sale and Servicing Agreement, the Issuer shall promptly notify the
Indenture Trustee. As soon as a successor Servicer is appointed, the Issuer
shall notify the Indenture Trustee of such appointment, specifying in such
notice the name and address of such successor Servicer.
(g) Without derogating from the absolute nature of the assignment
granted to the Indenture Trustee under this Indenture or the rights of the
Indenture Trustee hereunder, the Issuer agrees (i) that it will not, without
the prior written consent of the Indenture Trustee, amend, modify, waive,
supplement, terminate or surrender, or agree to any amendment, modification,
supplement, termination, waiver or surrender of, the terms of any Collateral
(except to the extent otherwise provided in the Sale and Servicing Agreement)
or the Basic Documents, or waive timely performance or observance by the
Servicer or the Depositor under the Sale and Servicing Agreement; and (ii)
that any such amendment shall not (A) increase or reduce in any manner the
amount of, or accelerate or delay the timing of, distributions that are
required to be made for the benefit of the Noteholders or (B) reduce the
aforesaid percentage of the Notes that is required to consent to any such
amendment, without the consent of the Holders of all the Outstanding Notes.
If any such amendment, modification, supplement or waiver shall be so
consented to by the Indenture Trustee, the Issuer agrees, promptly following
a request by the Indenture Trustee to do so, to execute and deliver, in its
own name and at its own expense, such agreements, instruments, consents and
other documents as the Indenture Trustee may deem necessary or appropriate in
the circumstances.
Section 3.08. Negative Covenants. So long as any Notes are
------------------
Outstanding, the Issuer shall not:
(i) except as expressly permitted by this Indenture or the Sale
and Servicing Agreement, sell, transfer, exchange or otherwise dispose
of any of the properties or assets of the Issuer, including those
included in the Collateral, unless directed to do so by the Indenture
Trustee;
(ii) claim any credit on, or make any deduction from the principal
or interest payable in respect of, the Notes (other than amounts
properly withheld from such payments under the Code) or assert any claim
against any present or former Noteholder by reason of the payment of the
taxes levied or assessed upon any part of the Collateral;
(iii) engage in any business or activity other than as
permitted by the Trust Agreement or other than in connection with, or
relating to, the issuance of Notes pursuant to this Indenture, or amend
the Trust Agreement as in effect on the Closing Date other than in
accordance with Section 11.1 thereof,
------------
(iv) issue debt obligations under any other indenture;
(v) incur or assume any indebtedness or guaranty any indebtedness
of any Person, except for such indebtedness as may be incurred by the
Issuer in connection with the issuance of the Notes pursuant to this
Indenture;
(vi) dissolve or liquidate in whole or in part or merge or
consolidate with any other Person;
(vii) (A) permit the validity or effectiveness of this
Indenture to be impaired, or permit the lien of this Indenture to be
amended, hypothecated, subordinated, terminated or discharged, or permit
any Person to be released from any covenants or obligations with respect
to the Notes under this Indenture except as may be expressly permitted
hereby, (B) permit any lien, charge, excise, claim, security interest,
mortgage or other encumbrance (other than the lien of this Indenture)
to be created on or extend to or otherwise arise upon or burden the
Collateral or any part thereof or any interest therein or the proceeds
thereof (other than tax liens, mechanics' liens and other liens that
arise by operation of law, in each case on any of the Mortgaged
Properties and arising solely as a result of an action or omission of
the related Obligor) or (C) permit the lien of this Indenture not to
constitute a valid first priority (other than with respect to any such
tax, mechanics' or other lien) security interest in the Collateral;
(viii) remove the Administrator without cause unless the Rating
Agency Condition shall have been satisfied in connection with such
removal; or
(ix) take any other action or fail to take any action which may
cause the Issuer to be taxable as (a) an association pursuant to Section
7701 of the Code and the corresponding regulations or (b) as a taxable
mortgage pool pursuant to Section 7701(i) of the Code and the
corresponding regulations.
Section 3.09. Annual Statement as to Compliance. The Issuer will
---------------------------------
deliver to the Indenture Trustee, within 120 days after the end of each
fiscal year of the Issuer (commencing in the fiscal year 1998), an Officer's
Certificate stating, as to the Authorized Officer signing such Officer's
Certificate, that:
(i) a review of the activities of the Issuer during such year and
of its performance under this Indenture has been made under such
Authorized Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge, based on
such review, the Issuer has complied with all conditions and covenants
under this Indenture throughout such year, or, if there has been a
default in its compliance with any such condition or
covenant, specifying each such default known to such Authorized Officer
and the nature and status thereof.
Section 3.10. Covenants of the Issuer. All covenants of the Issuer in
-----------------------
this Indenture are covenants of the Issuer and are not covenants of the Owner
Trustee. The Owner Trustee is, and any successor Owner Trustee under the
Trust Agreement will be, entering into this Indenture solely as Owner Trustee
under the Trust Agreement and not in its respective individual capacity, and
in no case whatsoever shall the Owner Trustee or any such successor Owner
Trustee be personally liable on, or for any loss in respect of, any of the
statements, representations, warranties or obligations of the Issuer
hereunder, as to all of which the parties hereto agree to look solely to the
property of the Issuer.
Section 3.11. Servicer's Obligations. The Issuer shall cause the
----------------------
Servicer to comply with the Sale and Servicing Agreement.
Section 3.12. Restricted Payments. The Issuer shall not, directly or
-------------------
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or
security in or of the Issuer or to the Servicer, (ii) redeem, purchase,
retire or otherwise acquire for value any such ownership or equity interest
or security or (iii) set aside or otherwise segregate any amounts for any
such purpose; provided, however, that the Issuer may make, or cause to be
made, (x) distributions to the Servicer, the Indenture Trustee, the Owner
Trustee, the Securityholders and the holders of the Residual Interest as
contemplated by, and to the extent funds are available for such purpose
under, the Sale and Servicing Agreement or the Trust Agreement and (y)
payments to the Indenture Trustee pursuant to Section 1(a)(ii) of the
Administration Agreement. The Issuer will not, directly or indirectly, make
or cause to be made payments to or distributions from the Collection Account
except in accordance with this Indenture and the Basic Documents.
Section 3.13. Treatment of Notes as Debt for Tax Purposes. The Issuer
-------------------------------------------
shall, and shall cause the Administrator to, treat the Notes as indebtedness
for all purposes.
Section 3.14. Notice of Events of Default. The Issuer shall give the
---------------------------
Indenture Trustee and the Rating Agencies prompt written notice of each Event
of Default hereunder, each default on the part of the Servicer or the
Transferor of its obligations under the Sale and Servicing Agreement and each
default on the part of the Transferor of its obligations under the Loan
Purchase Agreement.
Section 3.15. Further Instruments and Acts. Upon request of the
----------------------------
Indenture Trustee, the Issuer will execute and deliver such further
instruments and do such further acts as may be reasonably necessary or proper
to carry out more effectively the purpose of this Indenture.
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of Indenture. This Indenture
---------------------------------------
shall cease to be of further effect with respect to the Notes (except as to
(i) rights of registration of transfer and exchange, (ii) substitution of
mutilated, destroyed, lost or stolen Notes, (iii) rights of Noteholders to
receive payments of principal thereof and interest thereon, (iv) Sections
--------
3.03, 3.04, 3.05, 3.08 and 3.10 hereof, (v) the rights, obligations and
- -------------------------------
immunities of the Indenture Trustee hereunder (including the rights of the
Indenture Trustee under Section 6.07 and the obligations of the Indenture
------------
Trustee under Section 4.02) and (vi) the rights of Noteholders as
------------
beneficiaries hereof with respect to the property so deposited with the
Indenture Trustee payable to all or any of them), and the Indenture Trustee,
on demand of and at the expense of the Issuer, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture with
respect to the Notes, when all of the following have occurred:
(A) either
(1) all Notes theretofore authenticated and delivered (other than (i) Notes
that have been destroyed, lost or stolen and that have been replaced or
paid as provided in Section 2.04 and (ii) Notes for whose payment money
------------
has theretofore been deposited in trust or segregated and held in
trust by the Issuer and thereafter repaid to the Issuer or discharged
from such trust, as provided in Section 3.03) have been delivered to the
------------
Indenture Trustee for cancellation; or
(2) all Notes not theretofore delivered to the Indenture Trustee for
cancellation
a. have become due and payable,
b. will become due and payable within one year following the Final
Scheduled Distribution Date applicable to the Class M-2 Notes, or
c. are to be called for redemption within one year under arrangements
satisfactory to the Indenture Trustee for the giving of notice of
redemption by the Indenture Trustee in the name, and at the
expense, of the Issuer,
d. and the Issuer, in the case of a. or b. above, has irrevocably
deposited or caused to be irrevocably deposited with the Indenture
Trustee cash or direct obligations of or obligations guaranteed by
the United States of America (which will mature prior to the date
such amounts are payable), in trust for such purpose, in an amount
sufficient to pay and discharge the entire indebtedness on such
Notes not theretofore delivered to the Indenture Trustee for
cancellation when due to the applicable Final Scheduled
Distribution Date of such Class of Notes or Redemption Date (if
Notes shall have been called for redemption pursuant to Section
-------
10.01), as the case may be; and
-----
(B) the later of (a) eighteen months after payment in full of all
outstanding obligations under the Securities, (b) the payment in full of all
unpaid Trust Fees and Expenses and (c) the date on which the Issuer has paid
or caused to be paid all other sums payable hereunder by the Issuer; and
(C) the Issuer has delivered to the Indenture Trustee an Officer's
Certificate, an Opinion of Counsel and (if required by the TIA or the
Indenture Trustee) an Independent Certificate from a firm of certified public
accountants, each meeting the applicable requirements of Section 11.01(a)
----------------
and, subject to Section 11.02, each stating that all conditions precedent
-------------
herein provided for relating to the satisfaction and discharge of this
Indenture with respect to the Notes have been complied with.
Section 4.02. Application of Trust Money. All moneys deposited with
--------------------------
the Indenture Trustee pursuant to Sections 3.03 and 4.01 hereof shall be
-----------------------
held in trust and applied by it, in accordance with the provisions of the
Notes and this Indenture, to the payment, either directly or through any
Paying Agent, as the Indenture Trustee may determine, to the Holders of the
particular Notes for the payment or redemption of which such moneys have been
deposited with the Indenture Trustee, of all sums due and to become due
thereon for principal and interest; but such moneys need not be segregated
from other funds except to the extent required herein or in the Sale and
Servicing Agreement or required by law.
Section 4.03. Repayment of Moneys Held by Paying Agent. In connection
----------------------------------------
with the satisfaction and discharge of this Indenture with respect to the
Notes, all moneys then held by any Paying Agent other than the Indenture
Trustee under the provisions of this Indenture with respect to such Notes
shall, upon demand of the Issuer, be paid to the Indenture Trustee to be held
and applied according to Section 3.03 and thereupon such Paying Agent shall
------------
be released from all further liability with respect to such moneys.
ARTICLE V
REMEDIES
Section 5.01. Events of Default. "Event of Default," wherever used
-----------------
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body):
(a) default in the payment of any interest on any Note when the
same becomes due and payable, and continuance of such default for a period of
five (5) days; or
(b) default in the payment of the principal of or any installment
of the principal of any Note when the same becomes due and payable; or
(c) default in the observance or performance of any covenant or
agreement of the Issuer made in this Indenture (other than a covenant or
agreement, a default in the observance or performance of which is elsewhere
in this Section specifically dealt with), or any representation or warranty
of the Issuer made in this Indenture, the Sale and Servicing Agreement or in
any certificate or other writing delivered pursuant hereto or in connection
herewith proving to have been incorrect in any material respect as of the
time when the same shall have been made, and such default shall continue or
not be cured, or the circumstance or condition in respect of which such
misrepresentation or warranty was incorrect shall not have been eliminated or
otherwise cured, for a period of 30 days after there shall have been given,
by registered or certified mail, to the Issuer by the Indenture Trustee or to
the Issuer and the Indenture Trustee by the Holders of at least 25% of the
Outstanding Amount of the Notes, a written notice specifying such default or
incorrect representation or warranty and requiring it to be remedied and
stating that such notice is a notice of Default hereunder; or
(d) default in the observance or performance of any covenant or
agreement of the Company made in the Trust Agreement or any representation or
warranty of the Company made in the Trust Agreement, proving to have been
incorrect in any material respect as of the time when the same shall have
been made, and such default shall continue or not be cured, or the
circumstance or condition in respect of which such misrepresentation or
warranty was incorrect shall not have been eliminated or otherwise cured, for
a period of 30 days after there shall have been given, by registered or
certified mail, to the Issuer by the Indenture Trustee or to the Issuer and
the Indenture Trustee by the Holders of at least 25% of the Outstanding
Amount of the Notes, a written notice specifying such default or incorrect
representation or warranty and requiring it to be remedied and stating that
such notice is a notice of Default hereunder;
(e) the filing of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Issuer or any substantial part
of the Collateral in an involuntary case under any applicable federal or
state bankruptcy, insolvency or other similar law now or hereafter in effect,
or appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Issuer or for any substantial part of
the Collateral, or ordering the winding-up or liquidation of the Issuer's
affairs, and such decree or order shall remain unstayed and in effect for a
period of 60 consecutive days; or
(f) the commencement by the Issuer of a voluntary case under any
applicable federal or state bankruptcy, insolvency or other similar law now
or hereafter in effect, or the consent by the Issuer to the entry of an order
for relief in an involuntary case under any such law, or the consent by the
Issuer to the appointment or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the Issuer
or for any substantial part of the Collateral, or the making by the Issuer of
any general assignment for the benefit of creditors, or the failure by the
Issuer generally to pay its debts as such debts become due, or the taking of
any action by the Issuer in furtherance of any of the foregoing.
The Issuer shall deliver to the Indenture Trustee, within five days
after the occurrence thereof, written notice in the form of an Officer's
Certificate of any event which with the giving of notice and the lapse of
time would become an Event of Default under clauses (c) and (d) above, its
-------------------
status and what action the Issuer is taking or proposes to take with respect
thereto.
Section 5.02. Acceleration of Maturity; Rescission and Annulment. If
--------------------------------------------------
an Event of Default should occur and be continuing, then and in every such
case the Indenture Trustee, at the direction or upon the prior written
consent of the Holders of Notes representing not less than a majority of the
Outstanding Amount of the Notes may declare all the Notes to be immediately
due and payable, by a notice in writing to the Issuer (and to the Indenture
Trustee if given by Noteholders), and upon any such declaration the unpaid
principal amount of such Notes, together with accrued and unpaid interest
thereon through the date of acceleration, shall become immediately due and
payable.
At any time after such declaration of acceleration of maturity has been
made and before a judgment or decree for payment of the money due has been
obtained by the Indenture Trustee as hereinafter in this Article V provided,
---------
the Holders of Notes representing a majority of the Outstanding Amount of the
Notes, by written notice to the Issuer and the Indenture Trustee, may rescind
and annul such declaration and its consequences if:
(a) the Issuer has paid or deposited with the Indenture Trustee a sum
sufficient to pay:
1. all payments of principal of and interest on all Notes and all
other amounts that would then be due hereunder or upon such
Notes if the Event of Default giving rise to such acceleration
had not occurred; and
2. all sums paid or advanced by the Indenture Trustee hereunder
and the reasonable compensation, expenses, disbursements and
advances of the Indenture Trustee and its agents and counsel;
and
(b) all Events of Default, other than the nonpayment of the principal
of the Notes that has become due solely by such acceleration, have been cured
or waived as provided in Section 5.12.
------------
No such rescission shall affect any subsequent default or impair any
right consequent thereto.
Section 5.03. Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Indenture Trustee.
- -----------------
(a) The Issuer covenants that if (i) default is made in the
payment of any interest on any Note when the same becomes due and
payable, and such default continues for a period of five days, or (ii)
default is made in the payment of the principal of or any installment of
the principal of any Note when the same becomes due and payable, the
Issuer will, upon demand of the Indenture Trustee, pay to the Indenture
Trustee, for the benefit of the Holders of the Notes, the whole amount
then due and payable on such Notes for principal and interest, with
interest upon the overdue principal and, to the extent payment at such
rate of interest shall be legally enforceable, upon overdue installments
of interest at the rate borne by the Notes and in addition thereto such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses,
disbursements and advances of the Indenture Trustee and its agents and
counsel.
(b) In case the Issuer shall fail forthwith to pay such amounts
upon such demand, the Indenture Trustee may and shall at the direction
of the majority of the Holders of the Notes, institute a Proceeding for
the collection of the sums so due and unpaid, and may prosecute such
Proceeding to judgment or final decree, and may enforce the same against
the Issuer or other obligor upon such Notes and collect in the manner
provided by law out of the property of the Issuer or other obligor upon
such Notes, wherever situated, the moneys adjudged or decreed to be
payable.
(c) If an Event of Default occurs and is continuing, the Indenture
Trustee may and shall at the direction of the majority of the Holders of
the Notes, as more particularly provided in Section 5.04, in its
------------
discretion, proceed to protect and enforce its rights and the rights of
the Noteholders, by such appropriate Proceedings as the Indenture
Trustee shall deem most effective to protect and enforce any such
rights, whether for the specific enforcement of any covenant or agreement
in this Indenture or in aid of the exercise of any power granted herein,
or to enforce any other proper remedy or legal or equitable right
vested in the Indenture Trustee by this Indenture or by law.
(d) In case there shall be pending, relative to the Issuer or any
other obligor upon the Notes or any Person having or claiming an
ownership interest in the Collateral, Proceedings under Title 11 of the
United States Code or any other applicable federal or state bankruptcy,
insolvency or other similar law, or in case a receiver, assignee or
trustee in bankruptcy or reorganization, liquidator, sequestrator or
similar official shall have been appointed for or taken possession of
the Issuer or its property or such other obligor or Person, or in case
of any other comparable judicial Proceedings relative to the Issuer or
other obligor upon the Notes, or to the creditors or property of the
Issuer or such other obligor, the Indenture Trustee, irrespective of
whether the principal of any Notes shall then be due and payable as
therein expressed or by declaration or otherwise and irrespective of
whether the Indenture Trustee shall have made any demand pursuant to the
provisions of this Section, shall be entitled and empowered by
intervention in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the Notes and to file
such other papers or documents as may be necessary or advisable in order to
have the claims of the Indenture Trustee (including any claim for reasonable
compensation to the Indenture Trustee, each predecessor Indenture Trustee,
and its agents, attorneys and counsel, and for reimbursement of all expenses
and liabilities incurred, and all advances made, by the Indenture Trustee and
each predecessor Indenture Trustee, except as a result of negligence or bad
faith) and of the Noteholders allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations, to vote on
behalf of the Holders of Notes in any election of a trustee, a standby
trustee or Person performing similar functions in any such Proceedings;
(iii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute all amounts received with
respect to the claims of the Noteholders and the Indenture Trustee on their
behalf; and
(iv) to file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have the claims of the Indenture
Trustee or the Holders of Notes allowed in any judicial proceedings relative
to the Issuer, its creditors and its property; and any trustee, receiver,
liquidator, custodian or other similar official in any such Proceeding is
hereby authorized by each of such Noteholders to make payments to the
Indenture Trustee and, in the event that the Indenture Trustee shall consent
to the making of payments directly to such Noteholders, to pay to the
Indenture Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Indenture Trustee, each predecessor Indenture Trustee and
their respective agents, attorneys and counsel, and all other expenses and
liabilities incurred, and all advances made, by the Indenture Trustee and
each predecessor Indenture Trustee except as a result of negligence or bad
faith.
(e) Nothing herein contained shall be deemed to authorize the
Indenture Trustee to authorize or consent to or vote for or accept or
adopt on behalf of any Noteholder any plan of reorganization,
arrangement, adjustment or composition affecting the Notes or the rights
of any Holder thereof or to authorize the Indenture Trustee to vote in
respect of the claim of any Noteholder in any such proceeding except, as
aforesaid, to vote for the election of a trustee in bankruptcy or
similar Person.
(f) All rights of action and of asserting claims under this
Indenture, or under any of the Notes, may be enforced by the Indenture
Trustee without the possession of any of the Notes or the production
thereof in any trial or other Proceedings relative thereto, and any such
action or Proceedings instituted by the Indenture Trustee shall be
brought in its own name as trustee of an express trust, and any recovery
of judgment, subject to the payment of the expenses, disbursements and
compensation of the Indenture Trustee, each predecessor Indenture
Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Holders of the Notes.
(g) In any Proceedings brought by the Indenture Trustee (and also
any Proceedings involving the interpretation of any provision of this
Indenture to which the Indenture Trustee shall be a party), the
Indenture Trustee shall be held to represent all the Noteholders, and it
shall not be necessary to make any Noteholder a party to any such
Proceedings.
Section 5.04. Remedies; Priorities.
--------------------
(a) If an Event of Default shall have occurred and be continuing,
the Indenture Trustee may and at the direction of a majority of the
Holders of the Notes shall do one or more of the following (subject to
Section 5.05):
------------
(i) institute Proceedings in its own name and as trustee of an express
trust for the collection of all amounts then payable on the Notes or under
this Indenture with respect thereto, whether by declaration or otherwise,
enforce any judgment obtained, and collect from the Issuer and any other
obligor upon such Notes moneys adjudged due;
(ii) institute Proceedings from time to time for the complete or partial
foreclosure of this Indenture with respect to the Collateral;
(iii) exercise any remedies of a secured party under the UCC and
take any other appropriate action to protect and enforce the rights and
remedies of the Indenture Trustee or the Noteholders; and
(iv) sell the Collateral or any portion thereof or rights or interest
therein in a commercially reasonable manner, at one or more public or private
sales called and conducted in any manner permitted by law; provided,
however, that the Indenture Trustee may not sell or otherwise liquidate the
Collateral following an Event of Default, unless (A) the Holders of 100% of
the Outstanding Amount of the Notes consent thereto, (B) the proceeds of such
sale or liquidation distributable to the Noteholders are sufficient to
discharge in full all amounts then due and unpaid upon such Notes for
principal and interest or (C) the Indenture Trustee determines that the
Collateral will not continue to provide sufficient funds for the payment of
principal of and interest on the Notes as they would have become due if the
Notes had not been declared due and payable, and the Indenture Trustee
obtains the consent of Holders of 66-2/3% of the Outstanding Amount of the
Notes. In determining such sufficiency or insufficiency with respect to
clause (B) and (C), the Indenture Trustee may, but need not, obtain and rely
upon an opinion of an Independent investment banking or accounting firm of
national reputation as to the feasibility of such proposed action and as to
the sufficiency of the Collateral for such purpose.
(b) If the Indenture Trustee collects any money or property
pursuant to this Article V, it shall pay out the money or property in
---------
the following order:
FIRST: to the Indenture Trustee for the Indenture Trustee Fee then
due and any costs or expenses incurred by it in connection with the
enforcement of the remedies provided for in this Article V and to the
Owner Trustee for the Owner Trustee Fee then due;
SECOND: to the Servicer for the Servicing Fee then due and unpaid;
THIRD: to the Custodian for the Custodian Fee then due and unpaid;
FOURTH: to the Servicer for any amounts then due and payable as
the Servicing Advances and the Reimbursement Amount under the Sale and
Servicing Agreement;
FIFTH: to Noteholders for amounts due and unpaid on the Notes for
interest, pro rata, according to the amounts due and payable on the
Notes for interest;
SIXTH: to Noteholders for amounts due and unpaid on the Notes for
principal, pro rata among the Holders of each Class of Notes, according
to the amounts due and payable and in the order and priorities set forth
in Sections 5.01(d) and (e) of the Sale and Servicing Agreement, until
the Class Principal Balance of each such Class is reduced to zero;
SEVENTH: to the Owner Trustee or Co-Owner Trustee, as applicable,
for amounts required to be distributed to the Certificateholders
pursuant to the Trust Agreement; and
EIGHTH: to the Owner Trustee or Co-Owner Trustee, as applicable,
for any amounts to be distributed, pro rata, to the holders of the
Residual Interest.
The Indenture Trustee may fix a record date and payment date for any
payment to be made to the Noteholders pursuant to this Section. At least 15
days before such record date, the Indenture Trustee shall mail to each
Noteholder and the Issuer a notice that states the record date, the payment
date and the amount to be paid.
Section 5.05. Optional Preservation of the Collateral. If the Notes
---------------------------------------
have been declared to be due and payable under Section 5.02 following an
------------
Event of Default and such declaration and its consequences have not been
rescinded and annulled, the Indenture Trustee may, but need not, elect to
maintain possession of the Collateral. It is the desire of the parties
hereto and the Noteholders that there be at all times sufficient funds for
the payment of principal of and interest on the Notes, and the Indenture
Trustee shall take such desire into account when determining whether or not
to maintain possession of the Collateral. In determining whether to maintain
possession of the Collateral, the Indenture Trustee may, but need not, obtain
and rely upon an opinion of an Independent investment banking or accounting
firm of national reputation as to the feasibility of such proposed action and
as to the sufficiency of the Collateral for such purpose.
Section 5.06. Limitation of Suits. No Holder of any Note shall have
-------------------
any right to institute any Proceeding, judicial or otherwise, with respect to
this Indenture or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless:
(a) such Holder has previously given written notice to the
Indenture Trustee of a continuing Event of Default;
(b) the Holders of not less than 25% of the Outstanding Amount of
the Notes have made written request to the Indenture Trustee to
institute such Proceeding in respect of such Event of Default in its own
name as Indenture Trustee hereunder;
(c) such Holder or Holders have offered to the Indenture Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in complying with such request;
(d) the Indenture Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute such
Proceedings; and
(e) no direction inconsistent with such written request has been
given to the Indenture Trustee during such 60-day period by the Holders
of a majority of the Outstanding Amount of the Notes.
It is understood and intended that no one or more Holders of Notes shall
have any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Notes or to obtain or to seek to obtain priority or
preference over any other Holders or to enforce any right under this
Indenture, except in the manner herein provided.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of
Notes, each representing less than a majority of the Outstanding Amount of
the Notes, the Indenture Trustee in its sole discretion may determine what
action, if any, shall be taken, notwithstanding any other provisions of this
Indenture.
Section 5.07. Unconditional Rights of Noteholders To Receive Principal
--------------------------------------------------------
and Interest. Notwithstanding any other provisions in this Indenture, the
- ------------
Holder of any Note shall have the right, which is absolute and unconditional,
to receive payment of the principal of and interest, if any, on such Note on
or after the applicable Final Scheduled Distribution Date thereof expressed
in such Note or in this Indenture (or, in the case of redemption, on or after
the Redemption Date) and to institute suit for the enforcement of any such
payment, and such right shall not be impaired without the consent of such
Holder.
Section 5.08. Restoration of Rights and Remedies. If the Indenture
----------------------------------
Trustee or any Noteholder has instituted any Proceeding to enforce any right
or remedy under this Indenture and such Proceeding has been discontinued or
abandoned for any reason or has been determined adversely to the Indenture
Trustee or to such Noteholder, then and in every such case the Issuer, the
Indenture Trustee and the Noteholders shall, subject to any determination in
such Proceeding, be restored severally and respectively to their former
positions hereunder, and thereafter all rights and remedies of the Indenture
Trustee and the Noteholders shall continue as though no such Proceeding had
been instituted.
Section 5.09. Rights and Remedies Cumulative. No right or remedy
------------------------------
herein conferred upon or reserved to the Indenture Trustee or to the
Noteholders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy.
Section 5.10. Delay or Omission Not a Waiver. No delay or omission of
------------------------------
the Indenture Trustee or any Holder of any Note to exercise any right or
remedy accruing upon any Default or Event of Default shall impair any such
right or remedy or constitute a waiver of any such Default or Event of
Default or an acquiescence therein. Every right and remedy given by this
Article V or by law to the Indenture Trustee or to the Noteholders may be
exercised from time to time, and as often as may be deemed expedient, by the
Indenture Trustee or by the Noteholders, as the case may be.
Section 5.11. Control by Noteholders. The Holders of a majority of the
----------------------
Outstanding Amount of the Notes shall have the right to direct the time,
method and place of conducting any Proceeding for any remedy available to the
Indenture Trustee with respect to the Notes or exercising any trust or power
conferred on the Indenture Trustee; provided that:
(a) such direction shall not be in conflict with any rule of law
or with this Indenture;
(b) subject to the express terms of Section 5.04, any direction
------------
to the Indenture Trustee to sell or liquidate the Collateral shall be by
Holders of Notes representing not less than 100% of the Outstanding Amount of
the Notes;
(c) if the conditions set forth in Section 5.05 have been
------------
satisfied and the Indenture Trustee elects to retain the Collateral pursuant
to such Section, then any direction to the Indenture Trustee by Holders of
Notes representing less than 100% of the Outstanding Amount of the Notes to
sell or liquidate the Collateral shall be of no force and effect; and
(d) the Indenture Trustee may take any other action deemed proper
by the Indenture Trustee that is not inconsistent with such direction.
Notwithstanding the rights of the Noteholders set forth in this Section,
subject to Section 6.01, the Indenture Trustee need not take any action that
------------
it determines might involve it in liability or might materially adversely
affect the rights of any Noteholders not consenting to such action.
Section 5.12. Waiver of Past Defaults. The Holders of Notes
-----------------------
representing not less than a majority of the Outstanding Amount of the Notes
may waive any past Default or Event of Default and its consequences, except a
Default (a) in the payment of principal of or interest on any of the Notes or
(b) in respect of a covenant or provision hereof that cannot be modified or
amended without the consent of the Holder of each Note. In the case of any
such waiver, the Issuer, the Indenture Trustee and the Holders of the Notes
shall be restored to their former positions and rights hereunder,
respectively; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereto.
Upon any such waiver, such Default shall cease to exist and be deemed to
have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right
consequent thereto.
Section 5.13. Undertaking for Costs. All parties to this Indenture
---------------------
agree, and each Holder of any Note by such Holder's acceptance thereof shall
be deemed to have agreed, that any court may in its discretion require, in
any suit for the enforcement of any right or remedy under this Indenture, or
in any suit against the Indenture Trustee for any action taken, suffered or
omitted by it as Indenture Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may
in its discretion assess reasonable costs, including reasonable attorneys'
fees, against any party litigant in such suit, having due regard to the
merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section shall not apply to (a) any suit instituted
by the Indenture Trustee, (b) any suit instituted by any Noteholder, or group
of Noteholders, in each case holding in the aggregate more than 10% of the
Outstanding Amount of the Notes or (c) any suit instituted by any Noteholder
for the enforcement of the payment of principal of or interest on any Note on
or after the respective due dates expressed in such Note and in this
Indenture (or, in the case of redemption, on or after the Redemption Date).
Section 5.14. Waiver of Stay or Extension Laws. The Issuer covenants
--------------------------------
(to the extent that it may lawfully do so) that it will not at any time
insist upon, or plead or in any manner whatsoever, claim or take the benefit
or advantage of, any stay or extension law wherever enacted, now or at any
time hereafter in force, that may affect the covenants or the performance of
this Indenture; and the Issuer (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not hinder, delay or impede the execution of any power
herein granted to the Indenture Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
Section 5.15. Action on Notes. The Indenture Trustee's right to seek
---------------
and recover judgment on the Notes or under this Indenture shall not be
affected by the seeking, obtaining or application of any other relief under
or with respect to this Indenture. Neither the lien of this Indenture nor
any rights or remedies of the Indenture Trustee or the Noteholders shall be
impaired by the recovery of any judgment by the Indenture Trustee against the
Issuer or by the levy of any execution under such judgment upon any portion
of the Collateral or upon any of the assets of the Issuer. Any money or
property collected by the Indenture Trustee shall be applied in accordance
with Section 5.04(b).
---------------
Section 5.16. Performance and Enforcement of Certain Obligations.
--------------------------------------------------
(a) Promptly following a request from the Indenture Trustee to do so
and at the Administrator's expense, the Issuer shall take all such lawful
action as the Indenture Trustee may request to compel or secure the
performance and observance by the Transferor and the Servicer, as applicable,
of each of their obligations to the Issuer under or in connection with the
Sale and Servicing Agreement, and to exercise any and all rights, remedies,
powers and privileges lawfully available to the Issuer under or in connection
with the Sale and Servicing Agreement to the extent and in the manner
directed by the Indenture Trustee, including the transmission of
notices of default on the part of the Transferor or the
Servicer thereunder and the institution of legal or administrative actions or
proceedings to compel or secure performance by the Transferor or the Servicer
of each of their obligations under the Sale and Servicing Agreement.
(b) If an Event of Default has occurred and is continuing, the
Indenture Trustee may, and at the direction (which direction shall be in
writing or by telephone, confirmed in writing promptly thereafter) of the
Holders of 66-2/3% of the Outstanding Amount of the Notes shall, exercise all
rights, remedies, powers, privileges and claims of the Issuer against the
Transferor or the Servicer under or in connection with the Sale and Servicing
Agreement, including the right or power to take any action to compel or
secure performance or observance by the Transferor or the Servicer, as the
case may be, of each of their obligations to the Issuer thereunder and to
give any consent, request, notice, direction, approval, extension, or waiver
under the Sale and Servicing Agreement, and any right of the Issuer to take
such action shall be suspended.
ARTICLE VI
THE INDENTURE TRUSTEE
Section 6.01. Duties of Indenture Trustee. (a) If an Event of Default
---------------------------
has occurred and is continuing, the Indenture Trustee shall exercise the
rights and powers vested in it by this Indenture and use the same degree of
care and skill in their exercise as a prudent person would exercise or use
under the circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Indenture Trustee and conforming to the requirements of this Indenture;
however, the Indenture Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this Indenture.
(c) The Indenture Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section;
(ii) the Indenture Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer unless it is proved that the
Indenture Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Indenture Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 5.11.
------------
(d) Every provision of this Indenture that in any way relates to the
Indenture Trustee is subject to paragraphs (a), (b), (c) and (g) of this
--------------------------------
Section.
(e) The Indenture Trustee shall not be liable for interest on any money
received by it except as the Indenture Trustee may agree in writing with the
Issuer.
(f) Money held in trust by the Indenture Trustee shall be segregated
from other funds except to the extent permitted by law or the terms of this
Indenture or the Sale and Servicing Agreement.
(g) No provision of this Indenture shall require the Indenture Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that
repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it; provided, however, that the Indenture Trustee
-------- -------
shall not refuse or fail to perform any of its duties hereunder solely as a
result of nonpayment of its normal fees and expenses and further provided
that nothing in this Section 6.01(g) shall be construed to limit the exercise
---------------
by the Indenture Trustee of any right or remedy permitted under this
Indenture or otherwise in the event of the Issuer's failure to pay the
Indenture Trustee's fees and expenses pursuant to Section 6.07. In
------------
determining that such repayment or indemnity is not reasonably assured to
it, the Indenture Trustee must consider not only the likelihood of repayment
or indemnity by or on behalf of the Issuer but also the likelihood of
repayment or indemnity from amounts payable to it from the Collateral
pursuant to Section 6.07.
------------
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Indenture Trustee
shall be subject to the provisions of this Section and to the provisions of
the TIA.
Section 6.02. Rights of Indenture Trustee.
---------------------------
(a) The Indenture Trustee may rely on any document believed by it to
be genuine and to have been signed or presented by the proper person. The
Indenture Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel. The Indenture
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on an Officer's Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee.
(d) The Indenture Trustee shall not be liable for (i) any action it
takes or omits to take in good faith which it believes to be authorized or
within its rights or powers; provided, however, that such action or omission
by the Indenture Trustee does not constitute willful misconduct, negligence
or bad faith; or (ii) any willful misconduct or gross negligence on the part
of the Custodian.
(e) The Indenture Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture
and the Notes shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder
in good faith and in accordance with the advice or opinion of such counsel.
Section 6.03. Individual Rights of Indenture Trustee. The Indenture
--------------------------------------
Trustee in its individual or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with the Issuer or its Affiliates
with the same rights it would have if it were not Indenture Trustee. Any
Paying Agent, Note Registrar, co-registrar or co-paying agent may do the same
with like rights. However, the Indenture Trustee must comply with Sections
--------
6.11 and 6.12.
- -------------
Section 6.04. Indenture Trustee's Disclaimer. The Indenture Trustee
------------------------------
shall not be responsible for and makes no representation as to the validity
or adequacy of this Indenture or the Notes, shall not be accountable for the
Issuer's use of the proceeds from the Notes, or responsible for any statement
of the Issuer in the Indenture or in any document issued in connection with
the sale of the Notes or in the Notes other than the Indenture Trustee's
certificate of authentication.
Section 6.05. Notice of Defaults. If a Default occurs and is
------------------
continuing and if it is known to a Responsible Officer of the Indenture
Trustee, the Indenture Trustee shall mail to each Noteholder notice of the
Default within 90 days after it occurs. Except in the case of a Default in
payment of principal of or interest on any Note (including payments pursuant
to the mandatory redemption provisions of such Note), the Indenture Trustee
may withhold the notice if and so long as a committee of its Responsible
Officers in good faith determines that withholding the notice is in the
interests of Noteholders.
Section 6.06. Reports by Indenture Trustee to Holders. The Indenture
---------------------------------------
Trustee shall deliver to each Noteholder such information as may be required
to enable such holder to prepare its federal and state income tax returns.
Section 6.07. Compensation and Indemnity. As compensation for its
--------------------------
services hereunder, the Indenture Trustee shall be entitled to receive, on
each Distribution Date, the Indenture Trustee's Fee pursuant to Section
-------
8.02(c) hereof (which compensation shall not be limited by any law on
- -------
compensation of a trustee of an express trust) and shall be entitled to
reimbursement for all reasonable out-of-pocket expenses incurred or made by
it, including costs of collection, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and
expenses, disbursements and advances of the Indenture Trustee's agents,
counsel, accountants and experts. The Issuer agrees to cause the Transferor
to indemnify the Indenture Trustee against any and all loss, liability or
expense (including attorneys' fees) incurred by it in connection with the
administration of this trust and the performance of its duties hereunder.
The Indenture Trustee shall notify the Issuer and the Servicer promptly of
any claim for which it may seek indemnity. Failure by the Indenture Trustee
to so notify the Issuer and the Servicer shall not relieve the Issuer of its
obligations hereunder. The Issuer shall or shall cause the Servicer to
defend any such claim, and the Indenture Trustee may have separate counsel
reasonably acceptable to the Servicer and the Issuer shall or shall cause the
Servicer to pay the reasonable fees and expenses of such counsel. Neither
the Issuer nor the Servicer need reimburse any expense or indemnify against
any loss, liability or expense incurred by the Indenture Trustee through the
Indenture Trustee's own willful misconduct, negligence or bad faith.
The Issuer's payment obligations to the Indenture Trustee pursuant to
this Section shall survive the discharge of this Indenture. When the
Indenture Trustee incurs expenses after the occurrence of a Default specified
in Section 5.01(e) or (f) with respect to the Issuer, the expenses are
----------------------
intended to constitute expenses of administration under Title 11 of the
United States Code or any other applicable federal or state bankruptcy,
insolvency or similar law.
Section 6.08. Replacement of Indenture Trustee. No resignation or
--------------------------------
removal of the Indenture Trustee and no appointment of a successor Indenture
Trustee shall become effective until the acceptance of appointment by the
successor Indenture Trustee pursuant to this Section.
The Indenture Trustee may resign at any time by so notifying the Issuer. The
Holders of a majority in Outstanding Amount of the Notes may remove the
Indenture Trustee by so notifying the Indenture Trustee and may appoint a
successor Indenture Trustee. The Issuer shall remove the Indenture Trustee
if:
(a) the Indenture Trustee fails to comply with Section 6.11;
------------
(b) the Indenture Trustee is adjudged a bankrupt or insolvent;
(c) a receiver or other public officer takes charge of the
Indenture Trustee or its property; or
(d) the Indenture Trustee otherwise becomes incapable of acting.
If the Indenture Trustee resigns or is removed or if a vacancy exists in
the office of Indenture Trustee for any reason (the Indenture Trustee in such
event being referred to herein as the retiring Indenture Trustee), the Issuer
shall promptly appoint a successor Indenture Trustee.
A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and to the Issuer. Thereupon
the resignation or removal of the retiring Indenture Trustee shall become
effective, and the successor Indenture Trustee shall have all the rights,
powers and duties of the Indenture Trustee under this Indenture. The
successor Indenture Trustee shall mail a notice of its succession to
Noteholders. The retiring Indenture Trustee shall promptly transfer all
property held by it as Indenture Trustee to the successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Issuer or the Holders of a majority in Outstanding
Amount of the Notes may petition any court of competent jurisdiction for the
appointment of a successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11, any
------------
Noteholder may petition any court of competent jurisdiction for the removal
of the Indenture Trustee and the appointment of a successor Indenture
Trustee.
Notwithstanding the replacement of the Indenture Trustee pursuant to
this Section, the Issuer's and the Administrator's obligations under Section
-------
6.07 shall continue for the benefit of the retiring Indenture Trustee.
- ----
Section 6.09. Successor Indenture Trustee by Merger. If the Indenture
-------------------------------------
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another
corporation or banking association, the resulting, surviving or transferee
corporation without any further act shall be the successor Indenture Trustee;
provided, that such corporation or banking association shall be otherwise
qualified and eligible under Section 6.11. The Indenture Trustee shall
------------
provide the Rating Agencies prior written notice of any such transaction.
In case at the time such successor or successors by merger, conversion
or consolidation to the Indenture Trustee shall succeed to the trusts created
by this Indenture any of the Notes shall have been authenticated but not
delivered, any such successor to the Indenture Trustee may adopt the
certificate of authentication of any predecessor trustee, and deliver such
Notes so authenticated; and in case at that time any of the Notes shall not
have been authenticated, any successor to the Indenture Trustee may
authenticate such Notes either in the name of any predecessor hereunder or in
the name of the successor to the Indenture Trustee; and in all such cases
such certificates shall have the full force which it is anywhere in the Notes
or in this Indenture provided that the certificate of the Indenture Trustee
shall have.
Section 6.10. Appointment of Co-Indenture Trustee or Separate Indenture
---------------------------------------------------------
Trustee.
- -------
(a) Notwithstanding any other provisions of this Indenture, at any
time, for the purpose of meeting any legal requirement of any jurisdiction in
which any part of the Collateral may at the time be located, the Indenture
Trustee shall have the power and may execute and deliver all instruments to
appoint one or more Persons to act as a co-trustee or co-trustees, or
separate trustee or separate trustees, of all or any part of the Trust, and
to vest in such Person or Persons, in such capacity and for the benefit of
the Noteholders, such title to the Collateral, or any part hereof, and,
subject to the other provisions of this Section, such powers, duties,
obligations, rights and trusts as the Indenture Trustee may consider
necessary or desirable. No co-trustee or separate trustee hereunder shall be
required to meet the terms of eligibility as a successor trustee under
Section 6.11 and no notice to Noteholders of the appointment of any
- ------------
co-trustee or separate trustee shall be required under Section 6.08 hereof.
------------
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions
and conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Indenture Trustee shall be conferred or imposed upon and exercised
or performed by the Indenture Trustee and such separate trustee or co-trustee
jointly (it being understood that such separate trustee or co-trustee is not
authorized to act separately without the Indenture Trustee joining in such
act), except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed the Indenture Trustee shall be
incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding of title to the
Collateral or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate trustee or co-trustee, but
solely at the direction of the Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by reason of any
act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the resignation
of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement
and the conditions of this Article VI. Each separate trustee and co-trustee,
----------
upon its acceptance of the trusts conferred, shall be vested with the
estates or property specified in its instrument of appointment, jointly
with the Indenture Trustee, subject to all the provisions of this
Indenture, specifically including every provision of this Indenture
relating to the conduct of, affecting the liability of, or affording
protection to, the Indenture Trustee. Every such instrument shall be
filed with the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee its agent or attorney-in-fact with full power and
authority, to the extent not prohibited by law, to do any lawful act under or
in respect of this Agreement on its behalf and in its name. If any separate
trustee or co-trustee shall die, become incapable of acting, resign or be
removed, all of its estates, properties, rights, remedies and trusts shall
vest in and be exercised by the Indenture Trustee, to the extent permitted by
law, without the appointment of a new or successor trustee.
Section 6.11. Eligibility; Disqualification. The Indenture Trustee
-----------------------------
shall at all times satisfy the requirements of TIA Section 310(a). The
Indenture Trustee shall have a combined capital and surplus of at least
$50,000,000 as set forth in its most recent published annual report of
condition. The Indenture Trustee shall comply with TIA Section 310(b),
including the optional provision permitted by the second sentence of TIA
Section 310(b)(9); provided, however, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which
other securities of the Issuer are outstanding if the requirements for such
exclusion set forth in TIA Section 310(b)(1) are met.
Section 6.12. Preferential Collection of Claims Against Issuer. The
------------------------------------------------
Indenture Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). An Indenture Trustee who
has resigned or been removed shall be subject to TIA Section 311(a) to the
extent indicated.
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
Section 7.01. Issuer To Furnish Indenture Trustee Names and Addresses
-------------------------------------------------------
of Noteholders. The Issuer will furnish or cause to be furnished to the
- --------------
Indenture Trustee (a) not more than five days after the earlier of (i) each
Record Date and (ii) three months after the last Record Date, a list, in such
form as the Indenture Trustee may reasonably require, of the names and
addresses of the Holders of Notes as of such Record Date, (b) at such other
times as the Indenture Trustee may request in writing, within 30 days after
receipt by the Issuer of any such request, a list of similar form and content
as of a date not more than 10 days prior to the time such list is furnished;
provided, however, that so long as the Indenture Trustee is the Note
Registrar, no such list shall be required to be furnished.
Section 7.02. Preservation of Information; Communications to
----------------------------------------------
Noteholders.
- -----------
(a) The Indenture Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of the Holders of Notes
contained in the most recent list furnished to the Indenture Trustee as
provided in Section 7.01 and the names and addresses of Holders of Notes
------------
received by the Indenture Trustee in its capacity as Note Registrar. The
Indenture Trustee may destroy any list furnished to it as provided in such
Section 7.01 upon receipt of a new list so furnished.
- ------------
(b) Noteholders may communicate pursuant to TIA Section 312(b) with
other Noteholders with respect to their rights under this Indenture or under
the Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall have
the protection of TIA Section 312(c).
Section 7.03. Reports by Issuer.
-----------------
(a) The Issuer shall:
(i) file with the Indenture Trustee, within 15 days after the Issuer is
required to file the same with the Commission, copies of the annual reports
and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may from time to time by
rules and regulations prescribe) that the Issuer may be required to file with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act;
(ii) file with the Indenture Trustee and the Commission in accordance
with the rules and regulations prescribed from time to time by the Commission
such additional information, documents and reports with respect to compliance
by the Issuer with the conditions and covenants of this Indenture as may be
required from time to time by such rules and regulations; and
(iii) supply to the Indenture Trustee (and the Indenture Trustee
shall transmit by mail to all Noteholders described in TIA Section 313(c))
such summaries of any information, documents and reports required to be filed
by the Issuer pursuant to clauses (i) and (ii) of this Section 7.03(a) and
---------------
by rules and regulations prescribed from time to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the
Issuer shall end on December 31 of each year.
Section 7.04. Reports by Indenture Trustee. If required by TIA Section
----------------------------
313(a), within 60 days after each March 1, beginning with March 1, 1998, the
Indenture Trustee shall mail to each Noteholder as required by TIA Section
313(c) a brief report dated as of such date that complies with TIA Section
313(a). The Indenture Trustee also shall comply with TIA Section 313(b).
A copy of each report at the time of its mailing to Noteholders shall be
filed by the Indenture Trustee with the Commission and each securities
exchange, if any, on which the Notes are listed. The Issuer shall notify the
Indenture Trustee if and when the Notes are listed on any securities
exchange.
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 8.01. Collection of Money.
-------------------
General. Except as otherwise expressly provided herein, the Indenture
-------
Trustee may demand payment or delivery of, and shall receive and collect,
directly and without intervention or assistance of any fiscal agent or other
intermediary, all money and other property payable to or receivable by the
Indenture Trustee pursuant to this Indenture. The Indenture Trustee shall
apply all such money received by it as provided in this Indenture. Except as
otherwise expressly provided in this Indenture, if any default occurs in the
making of any payment or performance under any agreement or instrument that
is part of the Collateral, the Indenture Trustee may take such action as may
be appropriate to enforce such payment or performance, including the
institution and prosecution of appropriate Proceedings. Any such action
shall be without prejudice to any right to claim a Default or Event of
Default under this Indenture and any right to proceed thereafter as provided
in Article V.
---------
Section 8.02. Trust Accounts; Distributions.
-----------------------------
(a) On or prior to the Closing Date, the Issuer shall cause the
Servicer to establish and maintain, in the name of the Indenture Trustee for
the benefit of the Noteholders, or the Co-Owner Trustee for the benefit of
the Certificateholders, the Trust Accounts as provided in Article V of the
---------
Sale and Servicing Agreement. The Indenture Trustee or Co-Owner Trustee
shall deposit amounts into each of the Trust Accounts in accordance with the
terms hereof, the Sale and Servicing Agreement and the Servicer's Monthly
Remittance Report.
(b) On the Business Day prior to each Distribution Date, the Indenture
Trustee shall withdraw from the Collection Account, the Available Collection
Amount pursuant to Section 5.01(b)(2) of the Sale and Servicing Agreement and
shall deposit such amount into the Note Distribution Account. No later than
the second Business Day prior to each Distribution Date, to the extent funds
are available in the Note Distribution Account, the Indenture Trustee shall
either retain funds in the Note Distribution Account or make the withdrawals
from the Note Distribution Account and deposits into the other Trust Accounts
for distribution on such Distribution Date as required pursuant to Section
5.01(c) of the Sale and Servicing Agreement.
(c) On each Distribution Date and Redemption Date, to the extent funds
are available in the Note Distribution Account, the Indenture Trustee shall
make the following distributions from the amounts on deposit in the Note
Distribution Account in the following order of priority (except as otherwise
provided in Section 5.04(c)):
---------------
(i) (A) to the Servicer, an amount equal to the Servicing
Compensation (net of any amounts retained prior to deposit into the
Collection Account pursuant to Section 5.01(b)(1) of the Sale and
Servicing Agreement) and all unpaid Servicing Compensation from prior
due periods, (B) to the Indenture Trustee, an amount equal to the
Indenture Trustee Fee and all unpaid Indenture Trustee Fees from prior
Due Periods, (C) to the Owner Trustee, an amount equal to the Owner
Trustee Fee and all unpaid Owner Trustee Fees from prior Due Periods,
and (D) to the Custodian, an amount equal to the Custodian Fee and all
unpaid Custodian Fees from prior Due Periods; and
(ii) to the Noteholders, the amounts set forth in Sections 5.01(d)
and (e) of the Sale and Servicing Agreement.
(d) On each Distribution Date and each Redemption Date, to the extent
of the interest of the Indenture Trustee in the Certificate Distribution
Account (as described in Section 5.03(a) of the Sale and Servicing
Agreement), the Indenture Trustee hereby authorizes the Owner Trustee, the
Co-Owner Trustee or the Paying Agent, as applicable, to make the
distributions from the Certificate Distribution Account as required pursuant
to Sections 5.01(d) and (e) of the Sale and Servicing Agreement.
Section 8.03. General Provisions Regarding Accounts.
-------------------------------------
(a) So long as no Default or Event of Default shall have occurred and
be continuing, all or a portion of the funds in the Trust Accounts shall be
invested in Permitted Investments and reinvested by the Indenture Trustee at
the direction of the Servicer in accordance with the provisions of Article V
---------
of the Sale and Servicing Agreement. All income or other gain from
investments of moneys deposited in the Trust Accounts shall be deposited by
the Indenture Trustee into the Note Distribution Account, and any loss
resulting from such investments shall be charged to such account. The Issuer
will not direct the Indenture Trustee to make any investment of any funds or
to sell any investment held in any of the Trust Accounts unless the security
interest Granted and perfected in such account will continue to be perfected
in such investment or the proceeds of such sale, in either case without any
further action by any Person, and, in connection with any direction to the
Indenture Trustee to make any such investment or sale, if requested by the
Indenture Trustee, the Issuer shall deliver to the Indenture Trustee an
Opinion of Counsel, acceptable to the Indenture Trustee, to such effect.
(b) Subject to Section 6.01(c), the Indenture Trustee shall not in any
---------------
way be held liable by reason of any insufficiency in any of the Trust
Accounts resulting from any loss on any Eligible Investment included therein
except for losses attributable to the Indenture Trustee's failure to make
payments on such Eligible Investments issued by the Indenture Trustee, in its
commercial capacity as principal obligor and not as trustee, in accordance
with their terms.
(c) If (i) the Issuer shall have failed to give investment directions
for any funds on deposit in the Trust Accounts to the Indenture Trustee by
11:00 a.m. Eastern Time (or such other time as may be agreed by the Issuer
and Indenture Trustee) on any Business Day or (ii) a Default or Event of
Default shall have occurred and be continuing with respect to the Notes but
the Notes shall not have been declared due and payable pursuant to Section
-------
5.02 or (iii) if such Notes shall have been declared due and payable
- ----
following an Event of Default, amounts collected or receivable from the
Collateral are being applied in accordance with Section 5.05 as if there had
------------
not been such a declaration, then the Indenture Trustee shall, to the fullest
extent practicable, invest and reinvest funds in the Trust Accounts in one or
more Eligible Investments.
Section 8.04. Servicer's Monthly Statements.
-----------------------------
On each Distribution Date, the Indenture Trustee shall deliver the
Servicer's Monthly Remittance Report (as defined in the Sale and Servicing
Agreement) with respect to such Distribution Date to DTC and the Rating
Agencies.
Section 8.05. Release of Collateral.
---------------------
(a) Subject to the payment of its fees and expenses pursuant to Section
-------
6.07, the Indenture Trustee may, and when required by the provisions of this
- ----
Indenture shall, execute instruments to release property from the lien of
this Indenture, or convey the Indenture Trustee's interest in the same, in a
manner and under circumstances that are not inconsistent with the provisions
of this Indenture. No party relying upon an instrument executed by the
Indenture Trustee as provided in this Article VIII shall be bound to
------------
ascertain the Indenture Trustee's authority, inquire into the satisfaction of
any conditions precedent or see to the application of any moneys.
(b) The Indenture Trustee shall, at such time as there are no Notes
Outstanding and all sums due to the Certificateholders pursuant to Section
5.02(c) of the Sale and Servicing Agreement, the Servicer pursuant to Section
-------
8.02(c)(i)(A) hereof, the Indenture Trustee pursuant to Section 8.02(c)(i)(B)
- ------------- ---------------------
hereof, the Owner Trustee pursuant to Section 8.02(c)(i)(C) hereof and the
---------------------
Custodian pursuant to Section 8.02(c)(i)(D) hereof have been paid, release
---------------------
any remaining portion of the Collateral that secured the Notes from the lien
of this Indenture and release to the Issuer or any other Person entitled
thereto any funds then on deposit in the Trust Accounts. The Indenture
Trustee shall release property from the lien of this Indenture pursuant to
this Subsection (b) only upon receipt of an Issuer Request accompanied by an
--------------
Officer's Certificate, an Opinion of Counsel and (if required by the TIA)
Independent Certificates in accordance with TIA Sections 314(c) and 314(d)(1)
meeting the applicable requirements of Section 11.01.
-------------
Section 8.06. Opinion of Counsel. The Indenture Trustee shall receive
------------------
at least seven days notice when requested by the Issuer to take any action
pursuant to Section 8.05(a), accompanied by copies of any instruments
---------------
involved, and the Indenture Trustee shall also require, as a condition to
such action, an Opinion of Counsel, in form and substance satisfactory to the
Indenture Trustee, stating the legal effect of any such action, outlining the
steps required to complete the same, and concluding that all conditions
precedent to the taking of such action have been complied with and such
action will not materially and adversely impair the security for the Notes or
the rights of the Noteholders in contravention of the provisions of this
Indenture; provided, however, that such Opinion of Counsel shall not be
required to express an opinion as to the fair value of the Collateral.
Counsel rendering any such opinion may rely, without independent
investigation, on the accuracy and validity of any certificate or other
instrument delivered to the Indenture Trustee in connection with any such
action.
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of Noteholders.
------------------------------------------------------
(a) Without the consent of the Holders of any Notes but with prior
notice to the Rating Agencies, the Issuer and the Indenture Trustee, when
authorized by an Issuer Order, at any time and from time to time, may enter
into one or more indentures supplemental hereto (which shall conform to the
provisions of the Trust Indenture Act as in force at the date of the
execution thereof), in form satisfactory to the Indenture Trustee, for any of
the following purposes:
(i) to correct or amplify the description of any property at any time
subject to the lien of this Indenture, or better to assure, convey and
confirm unto the Indenture Trustee any property subject or required to be
subjected to the lien of this Indenture, or to subject to the lien of this
Indenture additional property;
(ii) to evidence the succession, in compliance with the applicable
provisions hereof, of another person to the Issuer, and the assumption by any
such successor of the covenants of the Issuer herein and in the Notes
contained;
(iii) to add to the covenants of the Issuer, for the benefit of the
Holders of the Notes, or to surrender any right or power herein conferred
upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property to or
with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any provision
herein or in any supplemental indenture that may be inconsistent with any
other provision herein or in any supplemental indenture or to make any other
provisions with respect to matters or questions arising under this Indenture
or in any supplemental indenture; provided, that such action shall not
adversely affect the interests of the Holders of the Notes;
(vi) to evidence and provide for the acceptance of the appointment
hereunder by a successor trustee with respect to the Notes and to add to or
change any of the provisions of this Indenture as shall be necessary to
facilitate the administration of the trusts hereunder by more than one
trustee, pursuant to the requirements of Article VI; or
----------
(vii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the qualification of
this Indenture under the TIA or under any similar federal statute hereafter
enacted and to add to this Indenture such other provisions as may be
expressly required by the TIA.
The Indenture Trustee is hereby authorized to join in the execution of
any such supplemental indenture and to make any further appropriate
agreements and stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized by an Issuer
Order, may, also without the consent of any of the Holders of the Notes but
with prior consent of the Rating Agencies, enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions to,
or changing in any manner or eliminating any of the provisions of, this
Indenture or of modifying in any manner the rights of the Holders of the
Notes under this Indenture; provided, however, that such action shall not, as
evidenced by (i) an Opinion of Counsel or (ii) satisfaction of the Rating
Agency Condition, adversely affect in any material respect the interests of
any Noteholder.
Section 9.02. Supplemental Indentures with Consent of Noteholders. The
---------------------------------------------------
Issuer and the Indenture Trustee, when authorized by an Issuer Order, also
may, with prior consent of the Rating Agencies, and with the consent of the
Holders of not less than a majority of the Outstanding Amount of the Notes,
by Act of such Holders delivered to the Issuer and the Indenture Trustee,
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture or of modifying in any manner the rights of the
Holders of the Notes under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Note affected thereby:
(a) change the date of payment of any installment of principal of or
interest on any Note, or reduce the principal amount thereof, the interest
rate thereon or the Termination Price with respect thereto, change the
provisions of this Indenture relating to the application of collections on,
or the proceeds of the sale of, the Collateral to payment of principal of or
interest on the Notes, or change any place of payment where, or the coin or
currency in which, any Note or the interest thereon is payable, or impair the
right to institute suit for the enforcement of the provisions of this
Indenture requiring the application of funds available therefor, as provided
in Article V, to the payment of any such amount due on the Notes on or after
the respective due dates thereof (or, in the case of redemption, on or after
the Redemption Date);
(b) reduce the percentage of the Outstanding Amount of the Notes, the
consent of the Holders of which is required for any such supplemental
indenture, or the consent of the Holders of which is required for any waiver
of compliance with certain provisions of this Indenture or certain defaults
hereunder and their consequences provided for in this Indenture;
(c) modify or alter the provisions of the proviso to the definition of
the term "Outstanding";
(d) reduce the percentage of the Outstanding Amount of the Notes
required to direct the Indenture Trustee to direct the Issuer to sell or
liquidate the Collateral pursuant to Section 5.04;
------------
(e) modify any provision of this Section except to increase any
percentage specified herein or to provide that certain additional provisions
of this Indenture or the Basic Documents cannot be modified or waived without
the consent of the Holder of each Outstanding Note affected thereby;
(f) modify any of the provisions of this Indenture in such manner as to
affect the calculation of the amount of any payment of interest or principal
due on any Note on any Distribution Date (including the calculation of any of
the individual components of such calculation) or to affect the rights of the
Holders of Notes to the benefit of any provisions for the mandatory
redemption of the Notes contained herein; or
(g) permit the creation of any lien ranking prior to or on a parity
with the lien of this Indenture with respect to any part of the Collateral
or, except as otherwise permitted or contemplated herein, terminate the lien
of this Indenture on any property at any time subject hereto or deprive the
Holder of any Note of the security provided by the lien of this Indenture.
The Indenture Trustee may in its discretion determine whether or not any
Notes would be affected by any supplemental indenture and any such
determination shall be conclusive upon the Holders of all Notes, whether
theretofore or thereafter authenticated and delivered hereunder. The
Indenture Trustee shall not be liable for any such determination made in good
faith.
In connection with requesting the consent of the Noteholders pursuant to
this Section, the Indenture Trustee shall mail to the Holders of the Notes to
which such amendment or supplemental indenture relates a notice setting forth
in general terms the substance of such supplemental indenture. It shall not
be necessary for any Act of Noteholders under this Section to approve the
particular form of any proposed supplemental indenture, but it shall be
sufficient if such Act shall approve the substance thereof.
Section 9.03. Execution of Supplemental Indentures. In executing, or
------------------------------------
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modification thereby of the trusts
created by this Indenture, the Indenture Trustee shall be entitled to
receive, and subject to Sections 6.01 and 6.02, shall be fully protected in
----------------------
relying upon, an Opinion of Counsel stating that the execution of such
supplemental indenture is authorized or permitted by this Indenture. The
Indenture Trustee may, but shall not be obligated to, enter into any such
supplemental indenture that affects the Indenture Trustee's own rights,
duties, liabilities or immunities under this Indenture or otherwise.
Section 9.04. Effect of Supplemental Indentures. Upon the execution
---------------------------------
of any supplemental indenture pursuant to the provisions hereof, this
Indenture shall be and shall be deemed to be modified and amended in
accordance therewith with respect to the Notes affected thereby, and the
respective rights, limitations of rights, obligations, duties, liabilities
and immunities under this Indenture of the Indenture Trustee, the Issuer and
the Holders of the Notes shall thereafter be determined, exercised and
enforced hereunder subject in all respects to such modifications and
amendments, and all the terms and conditions of any such supplemental
indenture shall be and be deemed to be part of the terms and conditions of
this Indenture for any and all purposes.
Section 9.05. Conformity with Trust Indenture Act. Every amendment of
-----------------------------------
this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act as
- ----------
then in effect so long as this Indenture shall then be qualified under the
Trust Indenture Act.
Section 9.06. Reference in Notes to Supplemental Indentures. Notes
---------------------------------------------
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee
----------
shall, bear a notation in form approved by the Indenture Trustee as to any
matter provided for in such supplemental indenture. If the Issuer or the
Indenture Trustee shall so determine, new Notes so modified as to conform, in
the opinion of the Indenture Trustee and the Issuer, to any such supplemental
indenture may be prepared and executed by the Issuer and authenticated and
delivered by the Indenture Trustee in exchange for Outstanding Notes.
Section 9.07. Amendments to Trust Agreement.
-----------------------------
Subject to Section 11.1 of the Trust Agreement, the Indenture Trustee
shall, upon Issuer Order, consent to any proposed amendment to the Trust
Agreement or an amendment to or waiver of any provision of any other document
relating to the Trust Agreement, such consent to be given without the
necessity of obtaining the consent of the Holders of any Notes upon
satisfaction of the requirements under Section 11.1 of the Trust Agreement.
Nothing in this Section shall be construed to require that any Person
obtain the consent of the Indenture Trustee to any amendment or waiver or any
provision of any document where the making of such amendment or the giving of
such waiver without obtaining the consent of the Indenture Trustee is not
prohibited by this Indenture or by the terms of the document that is the
subject of the proposed amendment or waiver.
ARTICLE X
REDEMPTION OF NOTES
Section 10.01. Redemption.
----------
The Majority Residual Interest Holders (as defined in the Trust
Agreement) may, at their option, effect an early redemption of the Notes on
or after any Distribution Date on which the Pool Principal Balance declines
to 10% or less of the Original Pool Principal Balance. The Majority Residual
Interest Holders shall effect such early redemption by directing the
Indenture Trustee to sell all of the Home Loans to a person that is not an
Affiliate of any of the Majority Residual Interest Holders, the Transferor or
the Servicer at a price not less than the Termination Price. In connection
with any such optional termination, to the extent that sufficient proceeds
are not available from the sale of the Home Loans or the termination of the
Trust, the Majority Residual Interest Holders will pay the outstanding fees
and expenses, if any, of the Indenture Trustee, the Owner Trustee, the Co-
Owner Trustee, the Issuer, the Custodian and the Servicer.
Any such redemption by the Majority Residual Interest Holders shall be
accomplished by the Majority Residual Interest Holders' depositing or causing
to be deposited into the Collection Account by 10:00 A.M. New York City time
on the third Business Day prior to the Redemption Date the amount of the
Termination Price. On the same day that the Termination Price is deposited
into the Collection Account, the Termination Price and any amounts then on
deposit in the Collection Account (other than any amounts not required to
have been deposited therein pursuant to Section 5.01(b)(1) of the Sale and
Servicing Agreement) shall be transferred to the Note Distribution Account
for distribution to the Noteholders on the Redemption Date; and any amounts
received with respect to the Home Loans and Foreclosure Properties subsequent
to such transfer shall belong to the Servicer. For purposes of calculating
the Regular Distribution Amount for the Redemption Date, amounts transferred
to the Note Distribution Account pursuant to the immediately preceding
sentence on the Determination Date immediately preceding such final
Distribution Date shall in all cases be deemed to have been received during
the related Due Period, and such transfer shall be applied pursuant to
Sections 5.01(d) and 5.01(e) of the Sale and Servicing Agreement.
The Servicer or the Issuer shall furnish the Rating Agencies notice of
any such redemption in accordance with Section 10.02.
-------------
Section 10.02. Form of Redemption Notice.
-------------------------
(a) Notice of redemption under Section 10.01 shall be given by the
-------------
Indenture Trustee by first-class mail, postage prepaid, or by facsimile
mailed or transmitted not later than 10 days prior to the applicable
Redemption Date to each Holder of Notes, as of the close of business on the
Record Date preceding the applicable Redemption Date, at such Holder's
address or facsimile number appearing in the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Termination Price; and
(iii) the place where such Notes are to be surrendered for payment
of the Termination Price (which shall be the office or agency of the Issuer
to be maintained as provided in Section 3.02).
------------
Notice of redemption of the Notes shall be given by the Indenture
Trustee in the name of the Issuer and at the expense of the Servicer.
Failure to give notice of redemption, or any defect therein, to any Holder of
any Note shall not impair or affect the validity of the redemption of any
other Note.
Section 10.03. Notes Payable on Redemption Date; Provision for Payment
-------------------------------------------------------
of Indenture Trustee. The Notes or portions thereof to be redeemed shall,
- --------------------
following notice of redemption as required by Section 10.02 (in the case of
-------------
redemption pursuant to Section 10.01), on the Redemption Date become due and
-------------
payable at the Termination Price and (unless the Issuer shall default in the
payment of the Termination Price) no interest shall accrue on the Termination
Price for any period after the date to which accrued interest is calculated
for purposes of calculating the Termination Price. The Issuer may not redeem
the Notes unless, (i) all outstanding obligations under the Notes have been
paid in full and (ii) the Indenture Trustee has been paid all amounts to
which it is entitled hereunder.
ARTICLE XI
MISCELLANEOUS
Section 11.01. Compliance Certificates and Opinions, etc.
------------------------------------------
(a) Upon any application or request by the Issuer to the Indenture
Trustee to take any action under any provision of this Indenture (except with
respect to the Servicer's servicing activity in the ordinary course of its
business), the Issuer shall furnish to the Indenture Trustee (i) an Officer's
Certificate stating that all conditions precedent, if any, provided for in
this Indenture relating to the proposed action have been complied with, (ii)
an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with and (iii) (if required
by the TIA) an Independent Certificate from a firm of certified public
accountants meeting the applicable requirements of this Section, except that,
in the case of any such application or request as to which the furnishing of
such documents is specifically required by any provision of this Indenture,
no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(1) a statement that each signatory of such certificate or opinion has
read or has caused to be read such covenant or condition and the
definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(3) a statement that, in the opinion of each such signatory, such
signatory has made such examination or investigation as is
necessary to enable such signatory to express an informed opinion
as to whether or not such covenant or condition has been complied
with; and
(4) a statement as to whether, in the opinion of each such signatory,
such condition or covenant has been complied with.
(i) Prior to the deposit of any Collateral or other property or
securities with the Indenture Trustee that is to be made the basis for the
release of any property or securities subject to the lien of this Indenture,
the Issuer shall, in addition to any obligation imposed in Section 11.01(a)
----------------
or elsewhere in this Indenture, furnish to the Indenture Trustee an Officer's
Certificate certifying or stating the opinion of each person signing such
certificate as to the fair value (within 90 days of such deposit) to the
Issuer of the Collateral or other property or securities to be so deposited.
(ii) Whenever the Issuer is required to furnish to the Indenture Trustee
an Officer's Certificate certifying or stating the opinion of any signer
thereof as to the matters described in clause (i) above, the Issuer shall
also deliver to the Indenture Trustee an Independent Certificate as to the
same matters, if the fair value to the Issuer of the securities to be so
deposited and of all other such securities made the basis of any such
withdrawal or release since the commencement of the then-current fiscal
year of the Issuer, as set forth in the certificates delivered pursuant to
clause (i) above and this clause (ii), is 10% or more of the Outstanding
Amount of the Notes, but such a certificate need not be furnished with
respect to any securities so deposited, if the fair value thereof to the
Issuer as set forth in the related Officer's Certificate is less than
$25,000 or less than one percent of the Outstanding Amount of the Notes.
(iii) Whenever any property or securities are to be released from
the lien of this Indenture, the Issuer shall also furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of each
person signing such certificate as to the fair value (within 90 days of such
release) of the property or securities proposed to be released and stating
that in the opinion of such person the proposed release will not impair the
security under this Indenture in contravention of the provisions hereof.
(iv) Whenever the Issuer is required to furnish to the Indenture Trustee
an Officer's Certificate certifying or stating the opinion of any signer
thereof as to the matters described in clause (iii) above, the Issuer shall
also furnish to the Indenture Trustee an Independent Certificate as to the
same matters if the fair value of the property or securities and of all other
property, other than securities released from the lien of this Indenture
since the commencement of the then-current calendar year, as set forth in the
certificates required by clause (iii) above and this clause (iv), equals 10%
or more of the Outstanding Amount of the Notes, but such certificate need not
be furnished in the case of any release of property or securities if the fair
value thereof as set forth in the related Officer's Certificate is less than
$25,000 or less than one percent of the then Outstanding Amount of the Notes.
Section 11.02. Form of Documents Delivered to Indenture Trustee. In
------------------------------------------------
any case where several matters are required to be certified by, or covered by
an opinion of, any specified Person, it is not necessary that all such
matters be certified by, or covered by the opinion of, only one such Person,
or that they be so certified or covered by only one document, but one such
Person may certify or give an opinion with respect to some matters and one or
more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which such officer's
certificate or opinion is based are erroneous. Any such certificate of an
Authorized Officer or Opinion of Counsel may be based, insofar as it relates
to factual matters, upon a certificate or opinion of, or representations by,
an officer or officers of the Servicer, the Transferor, the Issuer or the
Administrator, stating that the information with respect to such factual
matters is in the possession of the Servicer, the Transferor, the Issuer or
the Administrator, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the
Issuer shall deliver any document as a condition of the granting of such
application, or as evidence of the Issuer's compliance with any term hereof,
it is intended that the truth and accuracy, at the time of the granting of
such application or at the effective date of such certificate or report (as
the case may be), of the facts and opinions stated in such document shall in
such case be conditions precedent to the right of the Issuer to have such
application granted or to the sufficiency of such certificate or report. The
foregoing shall not, however, be construed to affect the Indenture Trustee's
right to rely upon the truth and accuracy of any statement or opinion
contained in any such document as provided in Article VI.
----------
Section 11.03. Acts of Noteholders. (a) Any request, demand,
-------------------
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Noteholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Noteholders in person or by agents duly appointed in writing; and except
as herein otherwise expressly provided such action shall become effective
when such instrument or instruments are delivered to the Indenture Trustee,
and, where it is hereby expressly required, to the Issuer. Such instrument
or instruments (and the action embodied therein and evidenced thereby) are
herein sometimes referred to as the "Act" of the Noteholders signing such
instrument or instruments. Proof of execution of any such instrument or of a
writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 6.01) conclusive in
------------
favor of the Indenture Trustee and the Issuer, if made in the manner provided
in this Section.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Indenture Trustee
deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder of
every Note issued upon the registration thereof or in exchange therefor or in
lieu thereof, in respect of anything done, omitted or suffered to be done by
the Indenture Trustee or the Issuer in reliance thereon, whether or not
notation of such action is made upon such Note.
Section 11.04. Notices, etc., to Indenture Trustee, Issuer and Rating
------------------------------------------------------
Agencies. Any request, demand, authorization, direction, notice, consent,
- --------
waiver or Act of Noteholders or other documents provided or permitted by this
Indenture shall be in writing and if such request, demand, authorization,
direction, notice, consent, waiver or act of Noteholders is to be made upon,
given or furnished to or filed with:
(a) the Indenture Trustee by any Noteholder or by the Issuer shall be
sufficient for every purpose hereunder if made, given, furnished or filed in
writing to or with the Indenture Trustee at its Corporate Trust Office, or
(b) the Issuer by the Indenture Trustee or by any Noteholder shall be
sufficient for every purpose hereunder if in writing and made, given,
furnished or filed with the Issuer addressed to: Empire Funding Home Loan
Owner Trust 1997-1, in care of Wilmington Trust Company, Rodney Square North,
1100 North Market Street, Wilmington, Delaware 19890, Attention: Emmett R.
Harmon, or at any other address previously furnished in writing to the
Indenture Trustee by the Issuer or the Administrator. The Issuer shall
promptly transmit any notice received by it from the Noteholders to the
Indenture Trustee.
Notices required to be given to the Rating Agencies by the Issuer, the
Indenture Trustee or the Owner Trustee shall be in writing, personally
delivered or mailed by certified mail, return receipt requested, to (i) in
the case of DCR, at the following address: Duff & Phelps Credit Rating, 17
State Street (12th Floor), New York, New York 10004, and (ii) in the case of
Standard & Poor's, at the following address: Standard & Poor's Ratings Group,
26 Broadway (15th Floor), New York, New York 10004, Attention of Asset Backed
Surveillance Department; or as to each of the foregoing, at such other
address as shall be designated by written notice to the other parties.
Section 11.05. Notices to Noteholders; Waiver. Where this Indenture
------------------------------
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the
giving of such notice. In any case where notice to Noteholders is given by
mail, neither the failure to mail such notice nor any defect in any notice so
mailed to any particular Noteholder shall affect the sufficiency of such
notice with respect to other Noteholders, and any notice that is mailed in
the manner herein provided shall conclusively be presumed to have been duly
given.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a result
of a strike, work stoppage or similar activity, it shall be impractical to
mail notice of any event to Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Indenture Trustee shall be deemed
to be a sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies, failure
to give such notice shall not affect any other rights or obligations created
hereunder, and shall not under any circumstance constitute a Default or Event
of Default.
Section 11.06. Conflict with Trust Indenture Act. If any provision
---------------------------------
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this Indenture by any of the provisions of the
Trust Indenture Act, such required provision shall control.
The provisions of TIA Sections 310 through 317 that impose duties on any
person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this
Indenture, whether or not physically contained herein.
Section 11.07. Effect of Headings and Table of Contents. The Article
----------------------------------------
and Section headings herein and the Table of Contents are for convenience
only and shall not affect the construction hereof.
Section 11.08. Successors and Assigns. All covenants and agreements
----------------------
in this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not. All agreements of the Indenture
Trustee in this Indenture shall bind its successors, co-trustees and agents.
Section 11.09. Separability. In case any provision in this Indenture
------------
or in the Notes shall be invalid, illegal or unenforceable, the validity,
legality, and enforceability of the remaining provisions shall not in any way
be affected or impaired thereby.
Section 11.10. Benefits of Indenture. Nothing in this Indenture or in
---------------------
the Notes, express or implied, shall give to any Person, other than the
parties hereto and their successors hereunder, and the Noteholders, and any
other party secured hereunder, and any other Person with an ownership
interest in any part of the Collateral, any benefit or any legal or equitable
right, remedy or claim under this Indenture.
Section 11.11. Legal Holidays. In any case where the date on which any
--------------
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the date on which nominally due, and no interest
shall accrue for the period from and after any such nominal date.
Section 11.12. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 11.13. Counterparts. This Indenture may be executed in any
------------
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section 11.14. Recording of Indenture. If this Indenture is subject
----------------------
to recording in any appropriate public recording offices, such recording is
to be effected by the Issuer and at its expense accompanied by an Opinion of
Counsel (which may be counsel to the Indenture Trustee or any other counsel
reasonably acceptable to the Indenture Trustee) to the effect that such
recording is necessary either for the protection of the Noteholders or any
other Person secured hereunder or for the enforcement of any right or remedy
granted to the Indenture Trustee under this Indenture.
Section 11.15. Trust Obligation. No recourse may be taken, directly
----------------
or indirectly, with respect to the obligations of the Issuer, the Owner
Trustee or the Indenture Trustee on the Notes or, except as expressly
provided for in Article VI, under this Indenture or any certificate or other
----------
writing delivered in connection herewith or therewith, against (i) the
Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any
owner of a beneficial interest in the Issuer or (iii) any partner, owner,
beneficiary, agent, officer, director, employee or agent of the Indenture
Trustee or the Owner Trustee in its individual capacity, any holder of a
beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee
or of any successor or assign of the Indenture Trustee or the Owner Trustee
in its individual capacity, except as any such Person may have expressly
agreed (it being understood that the Indenture Trustee and the Owner Trustee
have no such obligations in their individual capacity) and except that any
such partner, owner or beneficiary shall be fully liable, to the extent
provided by applicable law, for any unpaid consideration for stock, unpaid
capital contribution or failure to pay any installment or call owing to such
entity. For all purposes of this Indenture, in the performance of any duties
or obligations of the Issuer hereunder, the Owner Trustee shall be subject
to, and entitled to the benefits of, the terms and provisions of Article VI,
VII and VIII of the Trust Agreement.
Section 11.16. No Petition. The Indenture Trustee, by entering into
-----------
this Indenture, and each Noteholder, by accepting a Note, hereby covenant and
agree that they will not at any time institute against the Transferor, the
Servicer, or the Issuer, or join in any institution against the Transferor,
the Servicer, or the Issuer of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any United
States federal or state bankruptcy or similar law in connection with any
obligations relating to the Notes, this Indenture or any of the Basic
Documents.
Section 11.17. Inspection. The Issuer agrees that, on reasonable prior
----------
notice, it will permit any representative of the Indenture Trustee, during
the Issuer's normal business hours, to examine all the books of account,
records, reports and other papers of the Issuer, to make copies and extracts
therefrom, to cause such books to be audited by Independent certified public
accountants, and to discuss the Issuer's affairs, finances and accounts with
the Issuer's officers, employees, and Independent certified public
accountants, all at such reasonable times and as often as may be reasonably
requested. The Indenture Trustee shall and shall cause its representatives
to hold in confidence all such information except to the extent disclosure
may be required by law (and all reasonable applications for confidential
treatment are unavailing) and except to the extent that the Indenture Trustee
may reasonably determine that such disclosure is consistent with its
obligations hereunder.
* * *
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused
this amended and restated Indenture to be duly executed by their respective
officers, thereunto duly authorized and duly attested, all as of the day and
year first above written.
EMPIRE FUNDING HOME LOAN
OWNER TRUST 1997-1
By: Wilmington Trust Company
not in its individual capacity but
solely as Owner Trustee
By:
----------------------------------------------
Name:
Title:
FIRST BANK NATIONAL ASSOCIATION,
as Indenture Trustee
By:
----------------------------------------------
Name:
Title:
STATE OF NEW YORK
COUNTY OF NEW YORK
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared
___________________________, known to me to be the person and officer whose
name is subscribed to the foregoing instrument and acknowledged to me that
the same was the act of the said WILMINGTON TRUST COMPANY, not in its
individual capacity, but solely as Owner Trustee on behalf of EMPIRE FUNDING
HOME LOAN OWNER TRUST 1997-1, a Delaware business trust, and that such person
executed the same as the act of said business trust for the purpose and
consideration therein expressed, and in the capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ____ day of April, 1997.
--------------------------------------------
Notary Public in and for the State of New York
(Seal)
My commission expires:
- --------------------
STATE OF NEW YORK
COUNTY OF NEW YORK
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared __________________________,
known to me to be the person and officer whose name is subscribed to the
foregoing instrument and acknowledged to me that the same was the act of
FIRST BANK NATIONAL ASSOCIATION, a national banking association, and that
such person executed the same as the act of said corporation for the purpose
and consideration therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ____ day of April, 1997.
--------------------------------------------
Notary Public in and for the State of New York
(Seal)
My commission expires:
- --------------------
SCHEDULE A
(To be Provided at the Closing)
EXEUCTION COPY
ADMINISTRATION AGREEMENT
dated as of March 1, 1997
among
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-1
(the "Issuer")
and
FIRST BANK NATIONAL ASSOCIATION, as Administrator
(the "Administrator")
and
EMPIRE FUNDING CORP.
(the "Company")
Home Loan Asset Backed Notes and Certificates, Series 1997-1
ADMINISTRATION AGREEMENT dated as of March 1, 1997, among EMPIRE FUNDING
HOME LOAN OWNER TRUST 1997-1, a Delaware business trust, as Issuer (the
"Issuer"), FIRST BANK NATIONAL ASSOCIATION, a national banking corporation,
------
not in its individual capacity but solely as Administrator (the
"Administrator"), and EMPIRE FUNDING CORP., an Oklahoma corporation as the
-------------
Company (the "Company").
-------
W I T N E S S E T H:
WHEREAS, the Issuer is a business trust under the Delaware Business
Trust Act (12 Del. C. Section 3801 et seq.) created by a Trust Agreement
-- ---
relating to the Trust dated as of March 1, 1997 (the "Trust Agreement"),
---------------
among Financial Asset Securities Corp., as depositor (the "Depositor"),
---------
Empire Funding Corp., as the Company, Wilmington Trust Company, as Owner
Trustee, and First Bank National Association, as Co-Owner Trustee;
WHEREAS, the Issuer will issue Home Loan Asset Backed Notes (the
"Notes") and Home Loan Asset Backed Certificates (the "Certificates"), Series
----- ------------
1997-1 (collectively, the "Securities");
----------
WHEREAS, the Notes will be secured by certain collateral, as more
particularly set forth in the Indenture dated as of March 1, 1997 (the
"Indenture"), between the Issuer and First Bank National Association, as
---------
Indenture Trustee (in such capacity, the "Indenture Trustee");
-----------------
WHEREAS, the Certificates will be created pursuant to the Trust
Agreement and will represent undivided beneficial ownership interests in the
Trust;
WHEREAS, the Issuer has entered into certain agreements in connection
with the issuance of the Securities, including (i) a Sale and Servicing
Agreement dated as of March 1, 1997 (the "Sale and Servicing Agreement"),
----------------------------
among the Issuer, Empire Funding Corp., as Transferor, Servicer and Claims
Administrator, the Depositor, EFC Securitized Assets, L.C., as Contract of
Insurance Holder and First Bank National Association, as Indenture Trustee
and Co-Owner Trustee, (ii) the Letter of Representations, among the Issuer,
the Indenture Trustee and The Depository Trust Company relating to the Notes
(the "Note Depository Agreement"), (iii) the Letter of Representations, among
-------------------------
the Issuer, the Administrator and The Depository Trust Company relating to
the Certificates (the "Certificate Depository Agreement", and together with
--------------------------------
the Note Depository Agreement, the "Depository Agreements"), (iv) the
---------------------
Indenture and (v) the Trust Agreement (the Sale and Servicing Agreement, the
Depository Agreements, the Indenture and the Trust Agreement being
hereinafter referred to collectively as the "Related Agreements");
------------------
WHEREAS, pursuant to the Related Agreements, the Issuer is required to
perform certain duties in connection with (a) the Notes and the collateral
therefor pledged pursuant to the Indenture (the "Collateral") and (b) the
----------
beneficial ownership interests in the Issuer represented by the Certificates
(the registered holders of such interests being referred to herein as the
"Owners");
------
WHEREAS, the Issuer desires to have the Administrator and the Servicer,
respectively, perform certain of the duties of the Issuer referred to in the
preceding clause, and to provide such additional services consistent with the
terms of this Agreement and the Related Agreements as the Issuer may from
time to time request; and
WHEREAS, the Administrator and the Servicer have the capacity to provide
the respective services required hereby and are willing to perform such
services for the Issuer on the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties agree as follows:
Section 1. Duties of the Administrator.
---------------------------
(a) Duties with Respect to the Depository Agreements, the Sale and
--------------------------------------------------------------
Servicing Agreement and the Indenture.
- -------------------------------------
(i) The Administrator agrees to perform all of the duties of the
Issuer under the Depository Agreements. In addition, the Administrator shall
consult with the Owner Trustee regarding the duties of the Issuer under the
Sale and Servicing Agreement, the Indenture and the Depository Agreements.
The Administrator shall monitor the performance of the Issuer and shall
notify the Owner Trustee when action is necessary to comply with the Issuer's
duties under the Sale and Servicing Agreement, the Indenture and the
Depository Agreements. In addition to the foregoing, the Administrator shall
take all appropriate action that is the duty of the Issuer to take with
respect to the following matters under the Sale and Servicing Agreement and
the Indenture (parenthetical section references are to sections of the
Indenture):
(A) the preparation of the Notes and the execution of the Notes
upon their issuance and upon the registration of any transfer or
exchange of the Notes (Sections 2.02, and 2.3);
----------------------
(B) the duty to cause the Note Register to be kept and to give the
Indenture Trustee notice of any appointment of a new Note Registrar and
the location, or change in location, of the Note Register (Section 2.3);
-----------
(C) the notification of Noteholders of the final principal payment
on their Notes or of the redemption of the Notes or duty to cause the
Indenture Trustee to provide such notification (Sections 2.6(b) and
-------------------
10.2);
----
(D) performing the function of the Issuer with respect to the
cancellation of the Notes (Section 2.1);
-----------
(E) the preparation of or obtaining of the documents and
instruments required for authentication of the Notes and delivery of the
same to the Indenture Trustee (Section 2.8);
-----------
(F) the maintenance of an office in the City of St. Paul,
Minnesota, for registration of transfer or exchange of Notes (Section
-------
3.2);
---
(G) the delivery to the Indenture Trustee and the Rating Agencies
of prompt written notice of each Event of Default under the Indenture
(Section 3.14);
------------
(H) the duty to act as Paying Agent for the Issuer and the duty to
cause newly appointed Paying Agents, if any, to deliver to the Indenture
Trustee the instrument specified in the Indenture regarding funds held
in trust (Section 3.3);
-----------
(I) the direction to the Indenture Trustee to deposit moneys with
Paying Agents, if any, other than the Indenture Trustee (Section 3.3);
-----------
(J) the notification of the Indenture Trustee and the Rating
Agencies of the occurrence of an Event of Default under the Sale and
Servicing Agreement by the Servicer or the Transferor and, if such an
Event of Default arises from the failure of the Servicer or the
Transferor to perform any of their respective duties under the Sale and
Servicing Agreement, the taking of all reasonable steps available to
remedy such failure (Section 3.7(d)), and upon the termination of the
--------------
Servicer, the appointment of a Successor Servicer thereunder and
the notifications in connection therewith (Sections 3.7(e) and (f));
-----------------------
(K) the monitoring of the Issuer's obligations as to the
satisfaction and discharge of the Indenture (Section 4.1);
-----------
(L) the opening of one or more accounts in the Trust's name
(Section 8.2);
-----------
(M) the notification of the Rating Agencies of a redemption of
the Notes and the duty to cause Majority Residual Interestholders to
deposit the Termination Price into the Note Distribution Account and the
Certificate Distribution Account (Section 10.1);
------------
(N) the provision to the Indenture Trustee of calculations
pertaining to original issue discount, if any, on the Notes and, if
applicable, the accrual of market discount or the amortization of
premium on the Notes to the extent the Administrator has received from
the Servicer sufficient information to calculate such amounts (Section
-------
3.3);
---
(O) the preparation and filing of all documents and reports by the
Issuer of Forms 8-K and 10-K as required under the Exchange Act, the
rules and regulations of the Commission and the TIA (Section 7.3).
-----------
(ii) Notwithstanding anything in this Agreement or the Related
Agreements to the contrary, the Administrator shall be responsible for
performance of the duties of the Owner Trustee set forth in the Trust
Agreement with respect to, among other things, accounting and reports to
Owners; provided, however, that the Owner Trustee shall retain
-------- -------
responsibility for the distribution of the Schedule K-1s necessary to
enable each owner to prepare its federal and state income tax returns.
<PAGE>
(b) (i) The Administrator shall perform the duties of the
Administrator specified in Section 10.2 of the Trust Agreement required to
------------
be performed in connection with the resignation or removal of the Owner
Trustee, and any other duties expressly required to be performed by the
Administrator under the Trust Agreement.
(ii) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Administrator may enter into
transactions with or otherwise deal with any of its affiliates; provided,
--------
however, that the terms of any such transactions or dealings shall be in
- -------
accordance with any directions received from the Issuer and shall be, in the
Administrator's opinion, no less favorable to the Issuer than would be
available from unaffiliated parties.
Section 2. Duties of the Company With Respect to the Indenture.
---------------------------------------------------
(a) The Company shall take all appropriate action that is the duty of
the Issuer to take with respect to the following matters under the Indenture
(parenthetical section references are to sections of the Indenture):
(A) the preparation, obtaining or filing of the instruments,
opinions and certificates and other documents required for the release
of collateral (Section 2.9);
-----------
(B) the preparation and execution of all supplements, amendments,
financing statements, continuation statements, instruments of further
assurance and other instruments, in accordance with Section 3.5 of the
-----------
Indenture, necessary to protect the Trust Estate (Section 3.5);
-----------
(C) the delivery of the annual delivery of Opinions of Counsel, in
accordance with Section 3.6 of the Indenture, as to the Trust Estate,
-----------
and the annual delivery of the Officers' Certificate and certain other
statements, in accordance with Section 3.9 of the Indenture, as to
-----------
compliance with the Indenture (Sections 3.6 and 3.9);
--------------------
(D) the monitoring of the Issuer's compliance with its negative
covenants (Section 3.8); and the compliance of the Servicer with certain
-----------
of its obligations under the Sale and Servicing Agreement (Section 3.11);
------------
(E) the compliance with any directive of the Indenture Trustee
with respect to the sale of the Indenture Trust Estate in a commercially
reasonable manner if an Event of Default shall have occurred and be
continuing under the Indenture (Section 5.4);
-----------
(F) cause the opening of one or more accounts in the Trust's name,
the preparation of Issuer Orders, Officers' Certificates and Opinions of
Counsel and all other actions necessary with respect to investment and
reinvestment of funds in the Trust Accounts (Sections 8.2 and 8.3);
--------------------
(G) the preparation of an Issuer Request and Officers' Certificate
and the obtaining of an Opinion of Counsel and Independent Certificates,
if necessary, for the release of the Indenture Trust Estate as defined
in the Indenture (Sections 8.5 and 8.6);
--------------------
(H) the preparation of Issuer Orders and the obtaining of Opinions
of Counsel with respect to any proposed amendment of the Trust Agreement
or amendment to or waiver of any provision of any other document
relating to the Trust Agreement (Section 9.7); and
-----------
(I) the notification of the Rating Agencies, upon the failure of
the Indenture Trustee to give such notification, of the information
required pursuant to Section 11.4 of the Indenture (Section 11.4).
------------ ------------
(b) The Company will indemnify the Owner Trustee and the Co-Owner
Trustee and its agents for, and hold them harmless against, any losses,
liability or expense incurred without negligence or bad faith on their part,
arising out of or in connection with the acceptance or administration of the
transactions contemplated by the Trust Agreement, including the reasonable
costs and expenses of defending themselves against any claim or liability in
connection with the exercise or performance of any of their powers or duties
under the Trust Agreement.
(i) Additional Duties. In addition to the duties of the Company
-----------------
set forth above, the Company shall prepare for execution by the Issuer
or shall cause the preparation by other appropriate persons of all
such documents, reports, filings, instruments, certificates and opinions
as it shall be the duty of the Issuer to prepare, file or deliver pursuant
to the Related Agreements, and at the request of the Owner Trustee shall
take all appropriate action that it is the duty of the Issuer to take
pursuant to the Related Agreements. Subject to Section 5 of
---------
this Agreement, and in accordance with the directions of the Owner
Trustee, the Company shall administer, perform or supervise the
performance of such other activities in connection with the
Collateral (including the Related Agreements) as are not covered by any of
the foregoing provisions and as are expressly requested by the Owner Trustee
and are reasonably within the capability of the Company.
(ii) Notwithstanding anything in this Agreement or the Related
Agreements to the contrary, the Administrator shall be responsible for
promptly notifying the Owner Trustee in the event that any withholding tax is
imposed on the Trust's payments (or allocations of income) to an Owner as
contemplated in Section 5.2(c) of the Trust Agreement. Any such notice shall
--------------
specify the amount of any withholding tax required to be withheld by the
Owner Trustee pursuant to such provision.
Section 3. Records. The Administrator shall maintain appropriate
-------
books of account and records relating to services performed
hereunder, which books of account and records shall be accessible for
inspection by the Issuer and the Servicer at any time during normal
business hours.
Section 4. Compensation. The Administrator will perform the duties
------------
and provide the services called for under Section 1 above without any
separate compensation therefor for so long as the Indenture and
the Sale and Servicing Agreement remain in effect, and thereafter for such
compensation as shall be agreed upon among the Administrator, the Owner
Trustee and the Servicer. The Administrator agrees to perform all its duties
under this Agreement regardless of any non-payment of fees or expenses by the
Company or the Owner Trustee, as applicable.
Section 5. Additional Information to be Furnished to the Issuer.
----------------------------------------------------
The Administrator shall furnish to the Issuer from time to time
such additional information regarding the Collateral as the Issuer shall
reasonably request.
Section 6. Independence of the Administrator. For all purposes of
---------------------------------
this Agreement, the Administrator shall be an independent
contractor and shall not be subject to the supervision of the Issuer or the
Owner Trustee with respect to the manner in which it accomplishes the
performance of its obligations hereunder. Unless expressly authorized by the
Issuer, the Administrator shall have no authority to act for or represent the
Issuer or the Owner Trustee in any way and shall not otherwise be deemed an
agent of the Issuer or the Owner Trustee.
Section 7. No Joint Venture. Nothing contained in this Agreement
----------------
shall constitute the Administrator or the Servicer, respectively, and
either of the Issuer or the Owner Trustee as members of any partnership,
joint venture, association, syndicate, unincorporated business
or other separate entity, (ii) shall be construed to impose any liability
as such on any of them or (iii) shall be deemed to confer on any of them
any express, implied or apparent authority to incur any obligation or
liability on behalf of the others.
Section 8. Other Activities of Administrator and Servicer. Nothing
----------------------------------------------
herein shall prevent the Administrator, the Servicer or their
respective Affiliates from engaging in other businesses or, in its sole
discretion, from acting in a similar capacity as an administrator for any
other person or entity even though such person or entity may engage in
business activities similar to those of the Issuer or the Owner Trustee.
Section 9. Term of Agreement; Resignation and Removal of
---------------------------------------------
Administrator or Servicer. (a) This Agreement shall continue in force
- -------------------------
until the termination of the Trust Agreement in accordance with its terms,
upon which event this Agreement shall automatically terminate.
(b) Subject to Section 9(e), the Administrator or the Servicer may
------------
resign their respective duties hereunder by providing the Issuer with
at least 60 days' prior written notice.
(c) Subject to Section 9(e), the Issuer may remove the Administrator
------------
without cause by providing the Administrator with at least 60 days' prior
written notice.
(d) Subject to Section 9(e), the Issuer may remove the Administrator
------------
immediately upon written notice of termination from the Issuer to
the Administrator if any of the following events shall occur:
(i) the Administrator shall default in the performance of any of
its duties under this Agreement and, after notice of such default, shall
not cure such default within ten days (or, if such default cannot be cured in
such time, shall not give within ten days such assurance of cure as shall be
reasonably satisfactory to the Issuer);
(ii) a court having jurisdiction in the premises shall enter a
decree or order for relief, and such decree or order shall not have been
vacated within 60 days, in respect of the Administrator in any involuntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appoint a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official for the Administrator or any
substantial part of its property or order the winding-up or liquidation of
its affairs; or
(iii) the Administrator shall commence a voluntary case under
any applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, shall consent to the entry of an order for relief in an
involuntary case under any such law, shall consent to the appointment of a
receiver, liquidator, assignee, trustee, custodian, sequestrator or similar
official for the Administrator or any substantial part of its property, shall
consent to the taking of possession by any such official of any substantial
part of its property, shall make any general assignment for the benefit of
creditors or shall fail generally to pay its debts as they become due.
The Administrator agrees that if any of the events specified in clauses
(ii) or (iii) of this Section shall occur, it shall give written notice
thereof to the Issuer and the Indenture Trustee within seven days after the
happening of such event.
(e) No resignation or removal of the Administrator or Servicer,
respectively, pursuant to this Section shall be effective until (i) a
successor Administrator or Servicer, as the case may be, shall have been
appointed by the Issuer and (ii) such successor Administrator or Servicer
shall have agreed in writing to be bound by the terms of this Agreement in
the same manner as the Administrator or Servicer is bound hereunder.
(f) The appointment of any successor Administrator shall be effective
only after satisfaction of the Rating Agency Condition with respect to the
proposed appointment.
(g) Subject to Sections 9(e) and (f), the Administrator acknowledges
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that upon the appointment of a successor Indenture Trustee pursuant to
Section 6.08 of Indenture, the Administrator shall immediately resign
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and such successor Indenture Trustee shall automatically become the
Administrator under this Agreement. Any such successor Indenture Trustee
shall be required to agree to assume the duties of the Administrator
under the terms and conditions of this Agreement in its acceptance
of appointment as successor Indenture Trustee.
(h) The Servicer's appointment hereunder will terminate automatically
on the Servicer's resignation or removal under the Sale and Servicing
Agreement.
Section 10. Action upon Termination, Resignation or Removal of the
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Administrator. Promptly upon the effective date of termination of this
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Agreement pursuant to Section 9(b) or the resignation or removal of the
------------
Administrator pursuant to Section 9(b) or (c), respectively, the
-------------------
Administrator shall be entitled to be paid all reimbursable expenses
accruing to it to the date of such termination, resignation or
removal. The Administrator shall forthwith upon such termination
pursuant to Section 9(a) deliver to the Issuer all property and documents
------------
of or relating to the Collateral then in the custody of the Administrator
in the event of the resignation or removal of the Administrator pursuant to
Section 9(b), (c) or (d), respectively, and the Administrator shall
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cooperate with the Issuer and take all reasonable steps requested to
assist the Issuer in making an orderly transfer of the duties of the
Administrator.
Section 11. Notices. Any notice, report or other communication given
-------
hereunder shall be in writing and addressed as follows:
(a) if to the Issuer, to
Empire Funding Home Loan Owner Trust 1997-1
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Attention: Corporate Trust Department
with a copy to the Company at
Empire Funding Corp.
9737 Great Hills Trail
Austin, Texas 78759
Attention: Richard N. Steed
(b) if to the Administrator, to
First Bank National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Structured Finance/Empire Funding 1997-1
(c) if to the Servicer, to
Empire Funding Corp.
9737 Great Hills Trail
Austin, Texas 78759
Attention: Richard N. Steed
or to such other address as any party shall have provided to the other
parties in writing. Any notice required to be in writing hereunder shall be
deemed given if such notice is mailed by certified mail, postage prepaid, or
hand delivered to the address of such party as provided above.
Section 12. Amendments. This Agreement may be amended from time to
----------
time by a written amendment duly executed and delivered by the Issuer, the
Administrator and the Servicer, with the prior written consent of the Owner
Trustee without the consent of the Noteholders and the Certificateholders,
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or of modifying in any
manner, the rights of the Noteholders or Certificateholders; provided,
--------
however, that such amendment will not materially and adversely
- --------
affect the interest of any Noteholder or Certificateholder. An
amendment described above shall be deemed not to adversely affect in any
material respects the interests of any Noteholder or Certificateholders if
either (i) an Opinion of Counsel is obtained to such effect, or (ii) the
party requesting the amendment satisfies the Rating Agency Condition with
respect to such amendment. This Agreement may also be amended by the Issuer,
the Administrator and the Servicer with the prior written consent of the
Owner Trustee and the holders of Notes evidencing at least a majority in the
Outstanding Amount of the Notes and the holders of Certificates evidencing at
least a majority of the Class Principal Balance of the Certificates for the
purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Agreement or of modifying in any manner the
rights of Noteholders or the Certificateholders; provided, however, that no
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such amendment may (i) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, collections of payments in respect of
the Home Loans or distributions that are required to be made for the benefit
of the Noteholders or Certificateholders or (ii) reduce the aforesaid
percentage of the holders of Notes and Certificates which are required
to consent to any such amendment, in either case of clause (i) or (ii)
without the consent of the holders of all the outstanding Notes and
Certificates. Notwithstanding the foregoing, the Administrator may not
amend this Agreement without the permission of the Servicer, which
permission shall not be unreasonably withheld.
Section 13. Successor and Assigns.
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This Agreement may not be assigned by the Administrator unless such
assignment is previously consented to in writing by the Owner Trustee and the
Servicer, subject to the satisfaction of the Rating Agency Condition in
respect thereof. An assignment with such consent and satisfaction, if
accepted by the assignee, shall bind the assignee hereunder in the same
manner as the Administrator is bound hereunder. Notwithstanding the
foregoing, this Agreement may be assigned by the Administrator without the
consent of the Owner Trustee or the Servicer to a corporation or other
organization that is a successor (by merger, consolidation or purchase of
assets) to the Administrator, provided that such successor organization
executes and delivers to the Issuer, the Owner Trustee and the Servicer
an agreement in which such corporation or other organization agrees to be
bound hereunder by the terms of said assignment in the same manner
as the Administrator is bound hereunder. Subject to the foregoing, this
Agreement shall bind any successors or assigns of the parties hereto.
Section 14. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
Section 15. Headings. The section headings hereof have been inserted
--------
for convenience of reference only and shall not be construed to
affect the meaning, construction or effect of this Agreement.
Section 16. Counterparts. This Agreement may be executed in
------------
counterparts, each of which when so executed shall together
constitute but one and the same agreement.
Section 17. Severability. Any provision of this Agreement that is
------------
prohibited or unenforceable in any jurisdiction shall be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 18. Not Applicable to First Bank National Association in
----------------------------------------------------
Other Capacities. Nothing in this Agreement shall affect any obligation
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First Bank National Association may have in any other capacity.
Section 19. Limitation of Liability of Owner Trustee.
----------------------------------------
Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by Wilmington Trust Company not in its
individual capacity but solely in its capacity as Owner Trustee of the Issuer
and in no event shall Wilmington Trust Company in its individual capacity or
any beneficial owner of the Issuer have any liability for the
representations, warranties, covenants, agreements or other obligations of
the Issuer hereunder, as to all of which recourse shall be had solely to the
assets of the Issuer. For all purposes of this Agreement, in the performance
of any duties or obligations of the Issuer hereunder, the Owner Trustee shall
be subject to, and entitled to the benefits of, the terms and provisions of
Articles VI, VII and VIII of the Trust Agreement.
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Section 20. Benefit of Agreement. It is expressly agreed that in
--------------------
performing its duties under this Agreement, the Administrator
will act for the benefit of holders of the Securities as well as for the
benefit of the Trust, and that such obligations on the part of the
Administrator shall be enforceable at the instance of the Indenture Trustee
and the Trust.
Section 21. Bankruptcy Matters. No party to this Agreement shall
-------------------
take any action to cause the Trust to dissolve in whole or in
part or file a voluntary petition or otherwise initiate proceedings to have
the Trust adjudicated bankrupt or insolvent, or consent to the institution of
bankruptcy or insolvency proceedings against the Trust, or file a
petition seeking or consenting to reorganization or relief of the Trust
as debtor under any applicable federal or state law relating to
bankruptcy, insolvency or other relief for debtors with respect to the Trust;
or seek or consent to the appointment of any trustee, receiver, conservator,
assignee, sequestrator, custodian, liquidator (or other similar official) of
the Trust or of all or any substantial part of the properties and assets of
the Trust, or cause the Trust to make any general assignment for the benefit
of creditors of the Trust or take any action in furtherance of any of the
above actions.
Section 22. Capitalized Terms. Capitalized terms used and not
-----------------
defined herein have the meanings assigned to them in the
Indenture. Capitalized terms used and not defined herein or in the Indenture
have the meanings assigned to them in the Sale and Servicing Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed and delivered as of the day and year first
above written.
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-1
By: Wilmington Trust Company,
not in its individual
capacity but solely as
Owner Trustee,
By: ----------------------------
Name:
Title:
FIRST BANK NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Administrator,
By:
------------------------------
Name:
Title:
EMPIRE FUNDING CORP.,
as the Company,
By:
-------------------------------
Name:
Title:
