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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) May 30, 1997
FINANCIAL ASSET SECURITIES CORP., (as depositor under the Sale and
Servicing Agreement, dated as of May 1, 1997, relating to the
Empire Funding Home Loan Owner Trust 1997-2, Home Loan Asset-Backed
Notes, Series 1997-2).
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 May 30, 1997, Financial Asset Securities Corp. (the "Company")
entered into (i) a Sale and Servicing Agreement, dated as of May 1, 1997, by
and among, the Company, as depositor, Empire, as transferor and servicer,
Empire Funding Home Loan Owner Trust 1997-2, as the Owner Trust, and First
Bank, as co-owner trustee and indenture trustee, relating to the Empire
Funding Home Loan Owner Trust 1997-2, Home Loan Asset-Backed Notes, Series
1997-2 (the "Notes"); and (ii) an Indenture dated as of May 1, 1997 (the
"Indenture"), by and among the Owner Trust and First Bank, as indenture
trustee, relating to the Notes. The Sale and Servicing Agreement and the
Indenture are annexed hereto as Exhibit 99.1 and Exhibit 99.2, 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
May 1, 1997 (the "Administration Agreement"). The Administration Agreement
is annexed hereto as Exhibit 99.3.
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 Sale and Servicing Agreement
99.2 Indenture
99.3 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:
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Name: Craig A. Braun
Title: Vice President
Dated: June 12, 1997
Exhibit Index
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Exhibit Page
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99.1 Sale and Servicing Agreement
99.2 Indenture
99.3 Administration Agreement
EXECUTION
SALE AND SERVICING AGREEMENT
Dated as of May 1, 1997
among
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-2
(Issuer)
FINANCIAL ASSET SECURITIES CORP.
(Depositor)
EMPIRE FUNDING CORP.
(Transferor and Servicer)
and
FIRST BANK NATIONAL ASSOCIATION
(Indenture Trustee and Co-Owner Trustee)
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-2
ASSET BACKED SECURITIES
SERIES 1997-2
TABLE OF CONTENTS
Page
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ARTICLE I.
DEFINITIONS
Section 1.01 Definitions . . . . . . . . . . . . . . . . . . . . . 1
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 the Indenture Trustee of the Home
Loans; Certain Substitutions; Initial Certification
by the Custodian . . . . . . . . . . . . . . . . . . 33
Section 2.07 Subsequent Transfers. . . . . . . . . . . . . . . . . 34
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Depositor . . . 38
Section 3.02 Representations and Warranties of the Transferor . . 40
Section 3.03 Representations, Warranties and Covenants of the
Servicer . . . . . . . . . . . . . . . . . . . . . . 42
Section 3.04 Representations and Warranties Regarding
Individual Home Loans . . . . . . . . . . . . . . . . 45
Section 3.05 (Reserved) . . . . . . . . . . . . . . . . . . . . . 52
Section 3.06 Purchase and Substitution . . . . . . . . . . . . . . 53
ARTICLE IV.
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 . . . . 57
Section 4.03 Fidelity Bond; Errors and Omissions Insurance . . . . 58
Section 4.04 Filing of Continuation Statements . . . . . . . . . . 58
Section 4.05 (Reserved) . . . . . . . . . . . . . . . . . . . . . 59
Section 4.06 Superior Liens . . . . . . . . . . . . . . . . . . . 59
Section 4.07 Subservicing . . . . . . . . . . . . . . . . . . . . 59
Section 4.08 Successor Servicers . . . . . . . . . . . . . . . . . 61
Section 4.09 Maintenance of Insurance . . . . . . . . . . . . . . 61
Section 4.10 (Reserved.) . . . . . . . . . . . . . . . . . . . . . 62
Section 4.11 Reports to the Securities and Exchange Commission . . 62
Section 4.12 Foreclosure . . . . . . . . . . . . . . . . . . . . . 62
Section 4.13 Title, Management and Disposition of Foreclosure
Property . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE V.
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01 Collection Account and Note Distribution Account . . . 67
Section 5.02 Certificate Distribution Account and Note
Distribution Account . . . . . . . . . . . . . . . . 71
Section 5.03 Trust Accounts; Trust Account Property . . . . . . . . 73
Section 5.04 Allocation of Losses . . . . . . . . . . . . . . . . . 76
Section 5.05 Pre-Funding Account . . . . . . . . . . . . . . . . . 76
Section 5.06 Capitalized Interest Account . . . . . . . . . . . . . 77
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.
(RESERVED)
ARTICLE IX.
THE SERVICER
Section 9.01 Indemnification; Third Party Claims . . . . . . . . . 89
Section 9.02 Merger or Consolidation of the Servicer . . . . . . . 91
Section 9.03 Limitation on Liability of the Servicer and Others . . 91
Section 9.04 Servicer Not to Resign; Assignment . . . . . . . . . . 91
Section 9.05 Relationship of Servicer to Issuer and the
Indenture Trustee . . . . . . . . . . . . . . . . . . 92
Section 9.06 Servicer May Own Securities . . . . . . . . . . . . . 92
ARTICLE X.
DEFAULT
Section 10.01 Events of Default . . . . . . . . . . . . . . . . . . 93
Section 10.02 Indenture Trustee to Act; Appointment of
Successor . . . . . . . . . . . . . . . . . . . . . . 94
Section 10.03 Waiver of Defaults . . . . . . . . . . . . . . . . . 96
Section 10.04 Accounting upon Termination of Servicer . . . . . . . 96
ARTICLE XI.
TERMINATION
Section 11.01 Termination . . . . . . . . . . . . . . . . . . . . . 98
Section 11.02 Optional Termination . . . . . . . . . . . . . . . . 98
Section 11.03 Notice of Termination . . . . . . . . . . . . . . . . 99
ARTICLE XII.
MISCELLANEOUS PROVISIONS
Section 12.01 Acts of Securityholders . . . . . . . . . . . . . . . 100
Section 12.02 Amendment . . . . . . . . . . . . . . . . . . . . . . 100
Section 12.03 Recordation of Agreement . . . . . . . . . . . . . . 101
Section 12.04 Duration of Agreement . . . . . . . . . . . . . . . . 101
Section 12.05 Governing Law . . . . . . . . . . . . . . . . . . . . 101
Section 12.06 Notices . . . . . . . . . . . . . . . . . . . . . . . 101
Section 12.07 Severability of Provisions . . . . . . . . . . . . . 102
Section 12.08 No Partnership . . . . . . . . . . . . . . . . . . . 102
Section 12.09 Counterparts . . . . . . . . . . . . . . . . . . . . 102
Section 12.10 Successors and Assigns . . . . . . . . . . . . . . . 102
Section 12.11 Headings . . . . . . . . . . . . . . . . . . . . . . 102
Section 12.12 Actions of Securityholders . . . . . . . . . . . . . 103
Section 12.13 Reports to Rating Agencies. . . . . . . . . . . . . . 103
Section 12.14 Holders of the Residual Interest Instruments . . . . 104
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 . . . . . . . . . . . . . . . . . . . . . . .
EXHIBIT E - Form of Subsequent Transfer Agreement . . . . . . . . . . . . .
This Sale and Servicing Agreement is entered into effective as of May 1,
1997, among EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-2, a Delaware business
trust (the "Issuer" or the "Trust"), FINANCIAL ASSET SECURITIES
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CORP., a Delaware corporation, as Depositor (the "Depositor"), EMPIRE FUNDING
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CORP., an Oklahoma corporation ("Empire Funding"), as Transferor (in such
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capacity, the "Transferor") and Servicer (in such capacity, the "Servicer"),
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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
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Certificateholders (in such capacity, the "Co-Owner Trustee").
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W I T N E S S E T H:
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In consideration of the mutual agreements herein contained, the Issuer,
the Depositor, Empire Funding, the Indenture Trustee and Co-Owner Trustee
hereby agree as follows for the benefit of each of them and for the benefit
of the holders of the Securities and the Residual Interest Instruments issued
hereunder:
ARTICLE I.
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 and 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.
Addition Notice: For any date during the Pre-Funding Period, a notice
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(which may be verbal or written) given to the Rating Agencies and the Trustee
pursuant to Section 2.07 hereof.
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Affiliate: With respect to any specified Person, any other Person
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controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, the term "control", when used
with respect to any specified 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 corresponding meanings.
Agreement: This Sale and Servicing Agreement and all amendments hereof
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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 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,
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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
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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) hereof and amounts permitted to be withdrawn by the Indenture
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Trustee from the Collection Account pursuant to Section 5.01(b)(3) hereof)
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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) any and all income or gain from investments in the
Collection Account, Note Distribution Account and Certificate Distribution
Account; (iii) with respect to the final Distribution Date or an early
redemption or termination of the Securities pursuant to Section 11.02 hereof,
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the Termination Price; (iv) the Purchase Price paid for any Home Loans
required to be purchased pursuant to Section 3.06 hereof prior to the related
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Determination Date and the Substitution Adjustment to be deposited in the
Collection Account in connection with any substitution, in each case prior to
the related Determination Date; and (v) the Capitalized Interest Requirement,
if any, with respect to such Distribution 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
Note Distribution Account pursuant to Section 5.01(c)(i), plus on the
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Distribution Date relating to the Due Period in which the termination of the
Pre-Funding Period shall have occurred, the amount on deposit in the Pre-
Funding Account at such time net of any Pre-Funded Earnings.
Business Day: Any day other than (i) a Saturday or Sunday, or (ii) a
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day on which banking institutions in The City of New York or in the city in
which the corporate trust office of the Indenture Trustee is located or the
city in which the Servicer's servicing operations are located are authorized
or obligated by law or executive order to be closed.
Certificate: Any certificate issued pursuant to the Trust Agreement.
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Capitalized Interest Account: The account designated as such,
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established and maintained pursuant to Section 5.06 hereof.
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Capitalized Interest Initial Deposit: $695,177.66.
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Capitalized Interest Requirement: With respect to the Distribution Date
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in June 1997, (i) the product of (a) the Pre-Funding Amount on the Closing
Date and (b) one-twelfth and (c) the weighted average of the applicable Note
Interest Rates for the Notes and the Class B Pass Through Rate minus (ii) in
the case of any Subsequent Loan transferred to the Trust during the related
Due Period, the amount of any interest collected after the Cut-Off Date
applicable to such Subsequent Loan and during such related Due Period.
With respect to the Distribution Date in July 1997, (i) the product of
(a) the Pre-Funding Amount on the first day of the related Due Period and (b)
one-twelfth and (c) the weighted average of the applicable Note Interest
Rates for the Notes and the Class B Pass Through Rate minus (ii) any Pre-
Funding Earnings for the related Due Period and minus (ii) in the case of any
Subsequent Loan transferred to the Trust during the related Due Period, the
amount of any interest collected after the Cut-Off Date applicable to such
Subsequent Loan and during such related Due Period.
With respect to the Distribution Date in August 1997, (i) the product of
(a) the Pre-Funding Amount on the first day of the related Due Period and (b)
one-twelfth and (c) the weighted average of the applicable Note Interest
Rates for the Notes and the Class B Pass Through Rate minus (ii) any Pre-
Funding Earnings for the related Due Period and minus (iii) in the case of
any Subsequent Loan transferred to the Trust during the related Due Period,
the amount of any interest collected after the Cut-Off Date applicable to
such Subsequent Loan and during such related Due Period.
Capitalized Interest Subsequent Deposit: As defined in Section
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2.07(b)(viii)(B)(IV).
Certificate Distribution Account: The account designated as such,
--------------------------------
established and maintained pursuant to Section 5.02 hereof.
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Certificate Register: The register established pursuant to Section 3.4
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of the Trust Agreement.
Certificateholder: A holder of any Certificate.
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Certificateholders' Interest Carry-Forward Amount: With respect to any
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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 would otherwise be applied to the Classes
of Mezzanine Notes on such date in the absence of this provision.
Certificateholders' Monthly Interest Distribution Amount: With respect
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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).
Class: With respect to the Notes, all Notes bearing the same class
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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
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A-5 Note, Class A-6 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
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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
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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
(prior to giving effect to distributions on such Distribution Date other than
any distributions in respect of the Pre-Funded Amount on the Distribution
Date on which a Pre-Funding Pro Rata Distribution Trigger shall have
occurred) over (y) the Senior Optimal Principal Balance for such Distribution
Date.
Class A-6 Priority Excess Spread Distribution Amount: With respect to
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any Distribution Date, the lesser of (A) the product of (x) the applicable
Class A-6 Priority Percentage for such Distribution Date and (y) the Class A-
6 Pro Rata Excess Spread Distribution Amount for such Distribution Date and
(B) the Class A Excess Spread Distribution Amount.
Class A-6 Pro Rata Excess Spread Distribution Amount: With respect to
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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-6 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-6 Priority Percentage: With respect to each Distribution Date,
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the percentage specified below:
Distribution Date Priority Percentage
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June 1997-May 2000 0%
June 2000-May 2002 45%
June 2002-May 2003 80%
June 2003-May 2004 100%
June 2004 and thereafter 300%
Class A-6 Priority Principal Distribution Amount: With respect to any
------------------------------------------------
Distribution Date, the lesser of (A) the product of (x) the applicable Class
A-6 Priority Percentage for such Distribution Date and (y) the Class A-6 Pro
Rata Principal Distribution Amount for such Distribution Date and (B) the
Class A Principal Distribution Amount.
Class A-6 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-6 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 rate of 8.68% per annum.
-------------------------
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)
31.54% 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 Maximum Collateral Amount; 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) 9.00% 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 Maximum Collateral Amount; 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.
Clean-up Call Date: The first Distribution Date on which the Pool
------------------
Principal Balance declines to 10% or less of the Maximum Collateral Amount.
Closing Date: May 29, 1997.
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Code: The Internal Revenue Code of 1986, as amended from time to time,
----
and Treasury Regulations promulgated thereunder.
Collection Account: The account designated as such, established and
------------------
maintained by the Servicer in accordance with Section 5.01 hereof.
------------
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.
Combined Loan-to-Value Ratio: With respect to any Home Loan that is a
----------------------------
Mortgage Loan, the fraction, expressed as a percentage, the numerator of
which is the principal balance of such Mortgage Loan at origination plus, in
the case of a junior lien Mortgage Loan, the aggregate outstanding principal
balance of each related Superior Lien on the date of origination of such
Mortgage Loan, and the denominator of which is the appraised value of the
related Mortgaged Property at the time of origination of such Mortgage Loan.
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 May 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 custodian 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
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5.01(c)(i) hereof equal to the fee, if any, set forth in the Custodial
- ----------
Agreement.
Cut-Off Date: With respect to the Initial Loans, the close of business
------------
on April 30, 1997, and, with respect to any Subsequent Loan, the date
designated as such in the related Subsequent Transfer Agreement.
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) foreclosure or similar proceedings have been
commenced; (b) any portion of a Monthly Payment becomes 180 days past due by
the related Obligor; or (c) 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 than one Qualified Substitute Home Loan.
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, and 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 14th
------------------
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 June 1997.
Distribution Statement: As defined in Section 6.01 hereof.
---------------------- ------------
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 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) has demonstrated the ability
-----------------
professionally and competently to service a portfolio of mortgage loans
similar to the Home Loans and (ii) has a net worth calculated in accordance
with GAAP of at least $500,000.
Empire Funding: Empire Funding Corp., an Oklahoma corporation.
--------------
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.
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 Scheduled Distribution Date: For each Class of Securities, the
---------------------------------
following Distribution Dates:
Class A-1: September 25, 2023;
Class A-2: September 25, 2023;
Class A-3: September 25, 2023;
Class A-4: September 25, 2023;
Class A-5: September 25, 2023;
Class A-6: September 25, 2023;
Class M-1: September 25, 2023;
Class M-2: September 25, 2023; and
Class B: September 25, 2023.
FNMA: The Federal National Mortgage Association and any successor
----
thereto.
Foreclosed Loan: As of any date of determination, any Mortgage Loan
---------------
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.
GAAP: Generally accepted accounting principles as in effect in the
----
United States.
Home Loan: Any Debt Consolidation Loan or Combination Loan that is
---------
included in the Home Loan Pool. As applicable, a Home Loan shall be deemed
to refer to the related Debt Instrument, the Mortgage, if any, and any
related Foreclosure Property. The term "Home Loan" includes each Subsequent
Loan.
Home Loan File: As defined in Section 2.05 hereof.
-------------- ------------
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 conveyed to the Issuer pursuant
--------------
to this Agreement on the Closing Date and Subsequent Transfer Dates, together
with the rights and obligations of a holder thereof, and the payments thereon
and proceeds therefrom received after the applicable Cut-Off Date, as
identified on the Home Loan Schedule annexed hereto as Exhibit A.
---------
Home Loan Purchase Agreement: The home loan purchase agreement between
----------------------------
the Transferor and the Depositor, dated as of May 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.
Indenture: The Indenture, dated as of May 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 0.028% 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 $10,000.
Indenture Trustee's Home Loan File: As defined in Section 2.05(f)
---------------------------------- ---------------
hereof.
Independent: When used with respect to any specified Person, such
-----------
Person (i) is in fact independent of Empire Funding, the Servicer, the
Depositor or any of their respective Affiliates, (ii) does not have any
direct financial interest in, or any material indirect financial interest in,
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 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
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 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.
Initial Loan: Each Home Loan conveyed to the Issuer pursuant to this
------------
Agreement on the Closing Date.
Insurance Policies: With respect to any Property, any related insurance
------------------
policy.
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.
Liquidated Home Loan: With respect to any date of determination, any
--------------------
Foreclosure Property or any Home Loan in respect of 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, however, that in any event such Home Loan or
the related Foreclosure Property shall be deemed uncollectible and therefore
be a Liquidated Home Loan upon the earliest to occur 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) hereof, 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 the 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; provided, however, that no
interest shall accrue on any amount of 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.
Mandatory Redemption Date: The Distribution Date immediately following
-------------------------
the end of the Pre-Funding Period.
Maximum Collateral Amount: The sum of the Original Pool Principal
-------------------------
Balance and the Original Pre-Funded Amount.
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 Distribution Amount
for such preceding Distribution Date; it being understood that the interest
of the Class M-1 Noteholders in the Mezzanine Notholders' Interest Carry-
Forward Amount is senior to that of the Class M-2 Noteholders.
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, 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) hereof.
---------------
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 Loans 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 Properties
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) hereof, 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.
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) hereof.
------------------
Noteholder: A holder of a Note.
----------
Note Interest Rate: With respect to each Class of Notes, the annual
------------------
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: 8.85%; Class A-2: 7.78%; Class A-3: 7.78%; Class A-4: 7.67%; Class A-
5: 7.96% through the last day of the month immediately preceding the Clean-
up Call Date and 8.46% thereafter; Class A-6: 7.74%; Class M-1: 7.80%; and
Class M-2: 8.03%.
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: $16,500,000; Class A-2: $16,500,000;
Class A-3: $25,500,000; Class A-4: $11,000,000; Class A-5: $24,016,000;
Class A-6: $7,000,000; Class M-1: $16,728,000; Class M-2: $15,683,000; and
the Class B Certificates: $6,273,000.
Original Pool Principal Balance: $104,432,425.04, which is the Pool
-------------------------------
Principal Balance as of the Cut-Off Date.
Original Pre-Funded Amount: $34,767,574.96.
--------------------------
Outstanding: As defined in the Indenture.
-----------
Overcollateralization Amount: With respect to any Distribution Date,
----------------------------
the amount equal to the excess of (A) the sum of the Pool Principal Balance
and the Pre-Funded Amount, each as of the end of the preceding Due Period,
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)) hereof.
- ---------------
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) 9% of the Maximum Collateral Amount and (y) the Net Delinquency
Calculation Amount; and (II) with respect to any other Distribution Date, an
amount equal to the greater of (x) 18% 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 Maximum Collateral Amount 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 which shall in turn pay such $4,000 to the Owner
Trustee on the Distribution Date occurring in May each year during the term
of this Agreement commencing in May 1998; provided, however, 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:
(A) it must be between the Indenture Trustee and either (x) 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 (y) banks rated in one of the two
highest categories for long-term unsecured debt obligations by each
Rating Agency; and (B) it must be in writing and include the following
terms: (a) the securities acceptable for transfer 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 by
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 simultaneously 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, however, 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, however, 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.
Pre-Funded Percentage: With respect to any Class of Notes and a
---------------------
Distribution Date, the percentage obtained from the fraction, the numerator
of which is the Class Principal Balance of such Class of Notes on the Closing
Date and the denominator of which is the Maximum Collateral Amount.
Pre-Funding Account: The account created and maintained by the
-------------------
Indenture Trustee pursuant to Section 5.05 hereof.
------------
Pre-Funding Amount: With respect to any date, the amount on deposit in
------------------
the Pre-Funding Account (net of any Pre-Funding Earnings).
Pre-Funding Earnings: With respect to the Distribution Date in July
--------------------
1997, the actual investment earnings earned on amounts on deposit in the Pre-
Funding Account during the period from May 29, 1997 through and including
June 30, 1997. With respect to the Distribution Date in August 1997, the
actual investment earnings earned on amounts on deposit in the Pre-Funding
Account from July 1, 1997 through and including July 31, 1997.
Pre-Funding Period: The period commencing on the Closing Date and
------------------
ending on the earliest to occur of (i) the date on which the amount on
deposit in the Pre-Funding Account (exclusive of any Pre-Funding Earnings) is
less than $100,000, (ii) the date on which any Event of Default relating to
the Servicer occurs and (iii) July 31, 1997.
Pre-Funding Pro Rata Distribution Trigger: With respect to the
-----------------------------------------
Distribution Date following the Due Period in which the termination of the
Pre-Funding Period occurs, a Pre-Funding Pro Rata Distribution Trigger will
be deemed to have occurred if, at such time, the Pre-Funded Amount is greater
than or equal to $100,000.
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 hereof.
-------------- ------------
Qualified Substitute Home Loan: A home loan or home loans substituted
------------------------------
for a Deleted Home Loan pursuant to Section 2.06 or Section 3.06 hereof,
------------ ------------
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 than,
and not more than one year earlier, than the maturity date of 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 or Balances of the Deleted Home
Loan or Loans as of such date, (iv) has or have a lien priority equal or
superior to that of the Deleted Home Loan or Loans, (v) has or have a
borrower or borrowers with a comparable credit grade classification to the
credit grade classification of the Obligor on the Deleted Home Loan or 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 hereof and
------------
is or are not more than 29 days delinquent as of the date of substitution for
such Deleted Home Loan or Loans. 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 Section 3.06 hereof 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 less than and not more
than two percentage points greater than the Home Loan Interest Rate for the
designated Deleted Home Loan or 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, (iii) the Regular Principal Distribution Amount
and (iv) if such Distribution Date relates to the Due Period in which the
Pre-Funding Period shall have ended and at the termination of such Pre-
Funding Period a Pre-Funding Pro Rata Distribution Trigger shall have
occurred, the amount on deposit in the Pre-Funding Account on such date.
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 full and partial
principal prepayments applied by the Servicer during such related Due
Period, (iii) the principal portion of all Net Liquidation Proceeds,
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, (vi) if such Distribution
Date relates to the Due Period in which the Pre-Funding Period shall
have ended and at the termination of such Pre-Funding Period a Pre-
Funding Pro Rata Distribution Trigger shall have occurred, the amount on
deposit in the Pre-Funding Account on such date and (vii) on the
Distribution Date on which the Trust is to be terminated pursuant to
Section 11.02 hereof, the Termination Price.
-------------
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 proceeds 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.
Residual Interest Instrument: The meaning assigned thereto in 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, Class A
------------
5, and Class A-6 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) 55.58% 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
Maximum Collateral Amount; 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 1997-2: Empire Funding Home Loan Asset Backed
------ -------------
Securities, Series 1997-2.
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) hereof.
----------------
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
------------
hereof.
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) hereof, 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 a 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 hereof, (iii) the conservation, management and sale or other disposition
- ----
of a Foreclosure Property pursuant to Section 4.13 hereof, (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 hereof; provided,
------------
however, 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 hereof.
------------
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 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.
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 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, a division of The McGraw-Hill
-----------------
Companies, or any successor thereto.
Stepdown Date: The first Distribution Date occurring after May 2000,
-------------
upon which all of the following conditions exist:
(1) the Pool Principal Balance has been reduced to 50.00% of the
Maximum Collateral Amount;
(2) the Net Delinquency Calculation Amount is less than 9% of the
Maximum Collateral Amount; 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) 55.58% 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 Maximum Collateral Amount.
Subsequent Cut-Off Date Deposit: With respect to any Subsequent
-------------------------------
Transfer Date and any Subsequent Loan transferred to the Trust during any
month which Subsequent Loan does not have a Monthly Payment due until the
second Due Period following such month, an amount equal to the product of (a)
the Loan Balance of such Subsequent Loan on the related Cut-Off Date and (b)
one-twelfth of the Net Loan Rate on such Subsequent Loan.
Subsequent Loan: Each Home Loan sold to the Trust for inclusion
---------------
pursuant to Section 2.07 hereof and the related Subsequent Transfer
------------
Agreement, which Home Loan shall be listed on the related Subsequent Loan
Schedule.
Subsequent Loan Schedule: The schedule of Subsequent Loans transferred
------------------------
to the Trust pursuant to the related Subsequent Transfer Agreement and
attached thereto.
Subsequent Transfer Agreement: Each Subsequent Transfer Agreement
-----------------------------
executed by the Owner Trustee, Indenture Trustee and the Transferor
substantially in the form of Exhibit E attached hereto by which Subsequent
---------
Loans are sold and assigned to the Trust.
Subsequent Transfer Date: The date specified in each Subsequent
------------------------
Transfer Agreement; provided, however, that in no event shall there be more
than three (3) such Subsequent Transfer Agreements.
Subservicer: Any Person with which the Servicer has entered into a
-----------
Subservicing Agreement and which is an Eligible Servicer and satisfies any
requirements set forth in Section 4.07(a) hereof 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) hereof, 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 Section 3.06 hereof, 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) having a superior
priority lien on the related Mortgaged Property .
Termination Date: The earlier of (a) the Distribution Date in September
----------------
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 hereof.
-------------
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.
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 Collection Account, the Pre-Funding Account and the
Capitalized Interest Account.
Trust Agreement: The Trust Agreement dated as of May 1, 1997, among the
---------------
Depositor, the Company, the Co-Owner Trustee and the Owner Trustee.
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 by the addition of Subsequent Loans, 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 and
all payments in respect of principal received after the Cut-Off Date (iv)
such assets as from time to time are identified as Foreclosure Property, (v)
such assets and funds as are from time to time are deposited in the
Collection Account, the Note Distribution Account and the Certificate
Distribution Account, including amounts on deposit in such accounts which are
invested in Permitted Investments, (vi) the Issuer's rights under all
insurance policies with respect to the Home Loans and any Insurance Proceeds,
(vii) Net Liquidation Proceeds and Released Mortgaged Property Proceeds, and
(viii) all right, title and interest of the Depositor in and to the
obligations of the Transferor under the Home Loan Purchase Agreement pursuant
to 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.
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 GAAP. To the extent that the definitions of accounting terms
in this Agreement or in any such certificate or other document are
inconsistent with the meanings of such terms under GAAP, the definitions
contained in this Agreement or in any such certificate or other document
shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement; Article, Section,
Schedule and Exhibit references contained in this Agreement are references to
Articles, Sections, Schedules and Exhibits in or to this Agreement unless
otherwise specified; and the term "including" shall mean "including without
limitation."
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such terms.
(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, the Class B Certificates and the 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, all of the right, title and interest of the
Depositor in and to the Trust Estate. 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 the Trust Estate to the Indenture Trustee, and the
Indenture Trustee, pursuant to the written instructions of the Issuer, has
executed and caused the Notes to be authenticated and delivered 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 the Class B Certificates and the Residual Interest Instruments to be
authenticated and delivered 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 hereof.
------------
Section 2.04 Books and Records.
-----------------
The sale of each Home Loan shall be reflected on the balance sheets and
other financial statements of the Depositor or the Transferor, as the case
may be, as a sale of assets by the Depositor or the Transferor, as the case
may be, under GAAP. Each of the Servicer and the Custodian shall be
responsible for maintaining, and shall maintain, a complete set of books and
records for each 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) hereof 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) hereof 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 this 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 hereof 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, the Transferor and/or the
Depositor, as applicable, shall, on the Closing Date, deliver 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 May 1, 1997, Empire
Funding Home Loan Owner Trust 1997-2, 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. The Assignment of
Mortgage may be a blanket assignment, to the extent such assignment is
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); and
(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.
(b) With respect to each Home Loan, the Transferor and the Depositor
shall, on the Closing Date, deliver 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"): (i)
--------------------------
an original or copy of truth-in-lending disclosure, (ii) an original or copy
of the credit application, (iii) an original or copy of the consumer credit
report, (iv) an original or copy of verification of employment and income, or
verification of self-employment income, (v) if the Home Loan is a home
improvement loan, an original or copy of contract of work or written
description with cost estimates, if any, (vi) if the Home Loan is a home
improvement loan for which the Transferor prepares an inspection report, an
original or copy of the report of inspection of improvements to the Property,
(vii) to the extent not included in (clause (ii) of this Section 2.05(b), an
original or copy of a written verification (or a notice of telephonic
verification, with written verification to follow) that the Obligor at the
time of origination was not more than 30 days delinquent on any Superior Lien
on the Mortgaged Property, (viii) if the Home Loan is 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 FHLMC 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, and (ix) 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.
(c) (Reserved).
(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 Securityholders in accordance with the terms hereof
and not as agent for the Transferor or any other party.
(e) Within 60 days after the Closing Date in the case of the Initial
Loans or, in the case of the Subsequent Loans, within 60 days after the
related Subsequent Transfer 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, that the Transferor need not record any such
Assignment of Mortgage 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 in the case of the Initial Loans or, in the case of the Subsequent
Loans, within 60 days after the related Subsequent Transfer 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 the Indenture Trustee of the Home Loans;
------------------------------------------------------
Certain Substitutions; Initial Certification by the 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 Subsequent Loan or
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 hereof), (ii) all documents delivered by the Depositor and the
- ----
Transferor to the Custodian pursuant to Section 2.05 hereof 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 hereof. 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)
------------------
hereof.
(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, determines that 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 hereof 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 hereof have
- ------ ------------
been received and further confirming that any and all documents delivered
pursuant to Section 2.05 hereof 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. 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.
------------
Section 2.07 Subsequent Transfers.
--------------------
(a) Subject to the satisfaction of the conditions set forth in this
Article II and pursuant to the terms of the related Subsequent Transfer
- ----------
Agreement, in consideration of the Indenture Trustee's delivery, on each
Subsequent Transfer Date to or upon the order of the Transferor, of all or a
portion of the balance of funds in the Pre-Funding Account, the Transferor
shall on such Subsequent Transfer Date sell, transfer, assign, set over and
otherwise convey without recourse to the Indenture Trustee and Co-Owner
Trustee, all of its right, title and interest in and to each Subsequent Loan
listed on the related Subsequent Loan Schedule delivered by the Transferor on
such Subsequent Transfer Date, including (i) the related Principal Balance,
all interest payments received after the related Cut-Off Date and all
collections in respect of principal received after the related Cut-Off Date;
(ii) any real property that secured such Subsequent Loan and that has been
acquired by foreclosure or deed in lieu of foreclosure; (iii) all of its
interest in any insurance policies in respect of such Subsequent Loan; and
(iv) all proceeds of the foregoing. The transfer by the Transferor to the
Indenture Trustee and Co-Owner Trustee of the Subsequent Loans set forth in
the related Subsequent Transfer Agreement shall be absolute and shall be
intended by all parties hereto to be treated as a sale by the Transferor to
the Trust. If the assignment and transfer of the Subsequent Loans and the
other property specified in this Section 2.07(a) from the Transferor to the
--------------
Trust pursuant to this Agreement is held or deemed not to be a sale or is
held or deemed to be a pledge of security for a loan, the Transferor intends
that the rights and obligations of the parties shall be established pursuant
to the terms of this Agreement and that, in such event, (i) the Transferor
shall be deemed to have granted and does hereby grant to the Indenture
Trustee and Co-Owner Trustee as of each Subsequent Transfer Date a perfected,
first priority security interest in the entire right, title and interest of
the Transferor in and to the related Subsequent Loans and all other property
conveyed to the Owner Trustee and Co-Owner Trustee pursuant to this Section
2.07(a) and all proceeds thereof, and (ii) this Agreement
---------------
shall constitute a security agreement under applicable law. The amount
released to the Transferor from the Pre-Funding Account shall be one hundred
percent (100%) of the aggregate Principal Balances of the Subsequent Loans as
of the related Cut-Off Date so transferred.
(b) The Indenture Trustee shall contribute from the Pre-Funding Account
funds in an amount equal to one hundred percent (100%) of the aggregate
Principal Balances of the Subsequent Loans as of the related Cut-Off Date so
transferred to the Trust and use such cash to purchase the Subsequent Loans
on behalf of the Trust, along with the other property and rights related
thereto described in paragraph (a) above only upon the satisfaction of each
-------------
of the following conditions on or prior to the related Subsequent Transfer
Date:
(i) the Transferor shall have provided the Indenture Trustee,
Owner Trustee, the Co-Owner Trustee and the Rating Agencies with an
Addition Notice, which notice shall be given no fewer than two Business
Days prior to the related Subsequent Transfer Date and shall designate
the Subsequent Loans to be sold to the Trust and the aggregate Principal
Balances of such Subsequent Loans as of the related Cut-Off Date;
(ii) the Transferor shall have deposited in the Collection Account
all principal collected after the related Cut-Off Date and interest
payments collected after the related Cut-Off Date in respect of each
Subsequent Loan and the related Subsequent Cut-Off Date Deposit;
(iii) the Transferor shall have delivered an Officer's
Certificate to the Indenture Trustee and the Co-Owner Trustee confirming
that, as of each Subsequent Transfer Date, the Transferor was not
insolvent, would not be made insolvent by such transfer and was not
aware of any pending insolvency;
(iv) the Pre-Funding Period shall not have ended;
(v) the Transferor shall have delivered to the Trustee an
Officer's Certificate confirming the satisfaction of each condition
precedent specified in this paragraph (b) and in the related Subsequent
-------------
Transfer Agreement;
(vi) the Transferor shall have delivered an Officer's Certificate
to the Indenture Trustee and the Co-Owner Trustee confirming that the
representations and warranties of the Transferor pursuant to Section
-------
3.04 hereof (other than to the extent representations and warranties relate
- ----
to statistical information as to the characteristics of the Initial Loans in
the aggregate) and pursuant to Section 3.02 hereof are true and correct with
------------
respect to the Subsequent Loans and the Transferor, as applicable, as of the
Subsequent Transfer Date;
(vii) the Transferor shall have provided the Indenture Trustee
and the Co-Owner Trustee with Opinions of Counsel relating to the sale
of the Subsequent Loans to the Trustee on any Subsequent Transfer Date
substantially in the form of the Opinions of Counsel delivered to the
Indenture Trustee and the Co-Owner Trustee on the Closing Date
(regarding bankruptcy, corporate and tax matters);
(viii) the Trust shall not purchase a Subsequent Loan unless
(A) the Rating Agencies shall consent thereto (which consent shall not
be unreasonably withheld and shall be evidenced by a letter from the
Rating Agencies) and (B) the following conditions shall have been
satisfied: (I) such Subsequent Loan may not be 30 or more days
contractually delinquent as of the related Cut-Off Date; (II) the lien
securing such Subsequent Loan must be no lower than third priority;
(III) such Subsequent Loan must have an outstanding Principal Balance of
at least $2,500 as of the related Cut-Off Date; (IV) the first payment
on such Subsequent Loan must be due no later than the last day of the
Due Period immediately succeeding the Due Period in which it is
transferred, unless the Transferor deposits into the Collection Account
an amount equal to 30 days' interest on any such Subsequent Loan at the
Home Loan Interest Rate less the applicable Servicing Fee (each such
amount, a "Capitalized Interest Subsequent Deposit"), in which event the
---------------------------------------
first payment on such Subsequent Loan must be due no later than the last day
of the second Due Period following the Due Period in which the transfer
occurs; (v) such Subsequent Loan must be a fully amortizing loan with level
payments over a remaining term of no fewer than 10 years and no more than 25
years; (VI) such Subsequent Loan must have a fixed Home Loan Interest Rate of
at least 11.75%; (VII) any such Subsequent Loan that is a Mortgage Loan must
have an original Combined Loan-to-Value Ratio of no more than 125%; and
(VIII) no more than 2% of the Subsequent Loans (by aggregate Principal
Balances as of the related Cut-Off Date) shall be other than Mortgage Loans.
(ix) in connection with the transfer and assignment of the
Subsequent Loans, the Transferor shall satisfy the document delivery
requirements set forth in Section 2.05 hereof; and
------------
(x) each proposed Subsequent Loan must be listed on Exhibit A
---------
hereto as the same may be amended from time to time with the approval of the
Depositor.
(c) In connection with each Subsequent Transfer Date and on the related
Distribution Date, the Indenture Trustee shall determine (i) the amount and
correct dispositions of the Capitalized Interest Requirement and Pre-Funding
Account Earnings for such Distribution Date in accordance with the provisions
of this Agreement and (ii) any other necessary matters in connection with the
administration of the Pre-Funding Account and the Capitalized Interest
Account. In the event that any amounts are released as a result of
calculation error by the Indenture Trustee from the Pre-Funding Account or
from the Capitalized Interest Account, the Indenture Trustee shall not be
liable therefor and the Transferor shall immediately repay such amounts to
the Indenture Trustee.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 3.01 Representations and Warranties of the Depositor.
-----------------------------------------------
The Depositor hereby represents and warrants to the Transferor, the
Servicer, 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 currently conducted, to enter into and
perform its obligations under this Agreement and to create the Trust
pursuant to the Trust Agreement;
(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 certificate 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 Owner Trustee,
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, 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 currently pending with regard to which the Depositor
has received service of process and no action or proceeding against, or
investigation of, the Depositor is, to the knowledge of the Depositor,
threatened or otherwise pending before any court, administrative agency
or other tribunal that (A) if determined adversely, would prohibit its
entering into this Agreement or render the Securities invalid, (B) seek
to prevent the issuance of the Securities or the consummation of any of
the transactions contemplated by this Agreement or (C) 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 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 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 Servicer, the
Indenture Trustee, the Owner Trustee, the Securityholders and the Depositor
that as of the Closing Date or the Subsequent Transfer Date, as the case may
be (except as otherwise 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 currently 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 Owner Trustee, 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 currently pending with regard to which the Transferor
has received service of process and no action or proceeding against, or
investigation of, the Transferor is, to the knowledge of the Transferor,
threatened or otherwise pending before any court, administrative agency
or other tribunal that (A) if determined adversely, would prohibit its
entering into this Agreement or render the Securities invalid, (B) seek
to prevent the issuance of the Securities or the consummation of any of
the transactions contemplated by this Agreement or (C) 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 issuance of the Securities, (3)
the sale of the Home Loans under the Home Loan Purchase Agreement or (4)
the consummation of the transactions required of it by this Agreement,
except such as shall have been obtained before 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 Officer's 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) (Reserved);
(m) (Reserved); 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, the Indenture Trustee or the
Owner 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 hereof to cure any
------------
breach or to substitute for or repurchase an affected Home Loan shall consti-
tute the sole remedies available to the Securityholders, the Depositor, the
Servicer, the Indenture Trustee or 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 Indenture 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 and the Depositor, 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, 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 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 currently pending with regard to which the Servicer has
received service of process and no action or proceeding against, or
investigation of, the Servicer is, to the knowledge of the Servicer,
threatened or otherwise pending before any court, administrative agency
or other tribunal that (A) if determined adversely, would prohibit its
entering into this Agreement or render the Securities invalid, (B) seek
to prevent the issuance of the Securities or the consummation of any of
the transactions contemplated by this Agreement or (C) 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 Officer's 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 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
(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 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, the
Indenture Trustee or the Owner 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 hereof to cure any breach or to purchase an affected Home Loan, (y)
Section 3.06 hereof to indemnify and hold harmless the Trust and (z) Section
9.01(a) hereof to indemnify and hold harmless the Trust, the Depositor, the
Transferor, the Owner Trustee, the Indenture Trustee and the Securityholders
shall constitute the sole remedies available to the Transferor, the
Securityholders, the Trust, the Depositor, the Transferor, the Owner Trustee
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
Initial Loan as of the Closing Date, and with respect to each Subsequent Loan
as of the related Subsequent Transfer Date, except as otherwise expressly
stated:
(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, none of the Initial Loans was 30 or
more 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 any
Home Loan;
(c) The terms of the Debt Instrument and any related Mortgage
contain the entire agreement of the parties thereto and have not been
impaired, waived, altered or modified in any respect, except by written
instruments reflected in the related Home Loan File and recorded, if
necessary, to maintain the lien priority of the any related Mortgage; no
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;
(d) The Debt Instrument and any related Mortgage are not subject
to any set-off, claims, counterclaim or defense, including the defense
of usury or of fraud in the inducement, and will not be so subject in
the future with respect to the goods and services provided under the
Debt Instrument; and neither the operation of any of the terms of the
Debt Instrument and any related Mortgage, nor the exercise of any right
thereunder, will 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) of this Section 3.04, 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 clause (b) of this
Section 3.04 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 thereunder and neither
the Transferor nor its predecessors have waived any such default, breach,
violation or event of acceleration;
(m) The Debt Instrument and any related Mortgage contain customary
and enforceable provisions so 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) (Reserved);
(o) Each Home Loan is a fixed rate loan; the Debt Instrument shall
mature within not more than 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 cause the Mortgage Loan to become
delinquent or otherwise be 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 is undertaken as set forth in Section 4.12
------------
hereof;
(t) (Reserved);
(u) (Reserved);
(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 hereof 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 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 Home Loan was underwritten by the Transferor in
accordance with the Transferor's underwriting guidelines;
(y) 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
Home 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 mortgagee 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 lender pursuant to the Debt Instrument or any related Mortgage;
(aa) 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
Superior Lien, if any, was certified by the Obligor as not being 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 each 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 Soldiers' and Sailors'
Civil Relief Act of 1940;
(af) (Reserved);
(ag) (Reserved);
(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 Mortgaged Property is vested at
least 50% in the related Obligor;
(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;
(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;
(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 United States Bankruptcy Code, and no
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) (Reserved);
(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
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, rule or regulation (whether local, state or federal) 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 its origination no Home Loan (other than no.
4035822) was secured by a Mortgage on a non-owner occupied Mortgaged
Property;
(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 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 lien
mortgage loan, either (i) no consent for the Home Loan was required by
the holder of the related Superior Lien or (ii) such consent has been
obtained and has been delivered to the Indenture Trustee;
(ba) Each Home Loan is a home improvement loan for goods or
services, a debt consolidation loan or a home equity loan.
(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 hereof 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 interests 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 Section 3.04(ag)
---------------- --------
hereof, 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)
hereof.
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. With respect to representations and warranties made by the
Transferor pursuant to Section 3.04 hereof 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 Home Loan, notwithstanding the
Transferor's lack of knowledge, such inaccuracy shall be deemed a breach of
the applicable representation and warranty.
(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 and Owner 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), the Indenture Trustee and Owner
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 hereof. 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 into 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 hereof. 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, Owner
Trustee and the Securityholders hereunder respecting a breach of the
representations and warranties contained in Section 3.04 hereof. 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 hereof
------------
or against the Transferor relating to or arising out of a breach of any
representations and warranties made in Section 3.04 hereof 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 and the ordinary
servicing practices of prudent mortgage lending institutions.
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
applicable law and the Debt Instruments and Mortgages.
(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 of such
Home Loan, 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.
(d) Instruments of Satisfaction or Release. Without limiting the
--------------------------------------
generality of subsection (c) of this Section 4.01, 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 (each, a "Servicing
Account") 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 Subservicing Agreement) out of related
collections for any advances with respect to taxes, assessments, hazard
insurance premiums and comparable items; (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 hereof. 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, Owner 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 Omissions 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 are customary for entities acting as servicers. The Servicer
agrees to notify the Indenture Trustee in writing within five (5) days after
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 that they 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 the 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 that is an
Eligible Servicer and in compliance with the laws of each state necessary to
enable it to perform its obligations under such Subservicing Agreement. 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 service the
related Home Loans directly 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 Subservicing 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 Subservicing 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 the Securityholders for the servicing and
administration 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 hereof, 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 which 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 subsection (c) of this Section 4.07.
------------
(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 "Subservicing
Account"). The Subservicing Account shall be an Eligible Account. The
Subservicer will be required to deposit into the Subservicing 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
subsection (f) to the contrary, the Subservicer shall only be able to
withdraw funds from the Subservicing 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, however,
-------------
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 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 Home 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 hereof, 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 hereof, 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 (Reserved.)
--------
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 reports on Form 8-K
and annual reports on Form 10-K required to be filed under the provisions of
the Securities Exchange Act of 1934, as amended, and the rules and regula-
tions 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 4.11.
- ------------
Section 4.12 Foreclosure.
-----------
(a) If any monthly payment due under any Home 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 Home 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 Home Loan. In the event that
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 to the Issuer and
the Indenture Trustee.
(b) (Reserved).
(c) In accordance with the criteria for proceeding against the
Mortgaged Property set forth in subsection (a) of this Section 4.12, 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 subsection (a) of this Section 4.12, 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 judgment
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).
Prior to acquiring any Foreclosure Property, however, 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, has 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.
(d) (Reserved).
(e) (Reserved).
(f) (Reserved).
(g) (Reserved).
(h) The Indenture Trustee shall furnish the Servicer, within 5 days
after request of the Servicer therefor, any powers of attorney and other
documents necessary and appropriate to carry out its duties hereunder,
including any documents or powers of attorney necessary to foreclose any
Mortgage. The forms of any such powers or documents shall be appended to
such requests.
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 the prudent and
prompt disposition and sale of such Foreclosure Property. 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 hereof, 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 as
shall meet 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 of 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, in a manner consistent with Accepted
Servicing Procedures, that such a sale would be in the best interests of the
Trust. 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 Superior Liens; 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, 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 hereof, 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.
The Servicer may contract with any independent contractor for the
operation and management of any Foreclosure Property; provided, however,
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 30 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 any fees owed by
it to any such independent contractor and 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 and 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 (collectively, the "Collection Account"),
which shall be separate Eligible Accounts and 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 1997-2". 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 hereof.
------------
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 (collectively, the "Note Distribution Account"),
which shall be separate Eligible Accounts and may be interest-bearing,
entitled "Note Distribution Account, First Bank National Association, as
Indenture Trustee, in trust for the Empire Funding Home Loan Asset Backed
Securities, Series 1997-2". Funds in the Note Distribution Account shall be
invested in accordance with Section 5.03 hereof.
------------
(3) (Reserved).
(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 after receipt thereof, into 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, including any amounts required to be deposited
in the Collection Account pursuant to Section 2.07(b)(viii)(B)(IV)
----------------------------
hereof;
(iii) all Net Liquidation Proceeds pursuant to Section 4.02
------------
hereof;
(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) hereof;
------------- ---- -------
(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 hereof or the deposit of the Termination Price under
------------
Section 11.01 hereof;
- -------------
(viii) (reserved);
(ix) any amount to be deposited from the Pre-Funding Account or
the Capitalized Interest Account; 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 hereof,
------------
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.
(2) (Reserved).
(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) to make the payments set forth in Section 9.01(e) hereof.
---------------
(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) 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, (b) to the Indenture Trustee, an amount equal
to the Indenture Trustee Fee and all unpaid Indenture Trustee Fees from
prior Distribution Dates, (c) 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 (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 Class B Certificates and the Residual Interest
calculated pursuant subsections (d) and (e) of this Section 5.01 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) if with respect to such Distribution Date the Pre-Funding Pro
Rata Distribution Trigger shall have occurred, the amount on deposit in
the Pre-Funding Account at the end of the Pre-Funding Period will be
distributed as principal to all Classes of Notes and the Class B
Certificates pro rata based on the Original Class Principal Balances
thereof;
(v) first, (A) to the Class A-6 Notes, an amount equal to the
Class A-6 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,
Class A-4 and Class A-5 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 Notes, Class
M-2 Notes and the 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;
(vi) sequentially, to the holders of the Class M-1 Notes and 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;
(vii) 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;
(viii) 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 Notes and Class M-2 Notes: first, to the reimbursement of
Allocable Loss Amounts, until completely reimbursed and then, to any
accrued interest thereon); and
(ix) any remaining amount to the holders of the Residual Interest
Instruments.
(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-6 Notes, an amount equal to the
Class A-6 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, Class A-4 and Class A-5 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 Notes 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 Notes 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 Instruments.
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 Certificate Distribution Accounts (collectively, the "Certificate
Distribution Account"), which shall be separate Eligible Accounts and may be
interest-bearing, 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 1997-2". Funds in the
Certificate Distribution Account shall be invested in accordance with Section
5.03 hereof.
(b) (Reserved).
(c) Distributions. On each Distribution Date the Indenture Trustee
-------------
shall withdraw from the Note Distribution Account all amounts required to be
deposited into the Certificate Distribution Account with respect to such
Distribution Date pursuant to Section 5.01(c)(ii) hereof and shall 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 Instruments.
(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 in 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 pro rata 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 in 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 Instruments on each
Distribution Date will be made pro rata among the holders of the Residual
Interest Instruments 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 Instrument in an original denomination aggregating at
least a 50% holding of the Residual Interest 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 Instrument will
be made in like manner, but only upon presentment and surrender of such
Residual Interest Instrument at the location specified in the notice to
holders of the Residual Interest Instruments of such final distribution. Any
amount distributed to the holders of the Residual Interest Instruments 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 and to 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 ten 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 shall also 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 for the benefit of the
Certificateholders all right, title and interest 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 their 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 Trustee 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) hereof shall also 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 subsections (d) and (e) of Section 5.02.
------------
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 duties hereunder or permitting the
Indenture Trustee or Owner Trustee to carry out their respective 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 subsection (b)(2) of this Section. 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 hereof. 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 1997-2". 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-
2".
(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 the 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 the 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) into 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 subsection (a) of this Section 5.03; 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" in Section 1.1 hereof 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" in Section 1.1 hereof and shall be maintained
by the Indenture Trustee, pending maturity or disposition, through
continued book-entry registration of such Trust Account Property as
described in such paragraph; and
(4) any Trust Account Property that is an "uncertificated
security" under Article 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" in Section
1.1 hereof and shall be maintained by the Indenture Trustee, pending
maturity or disposition, through continued registration of the Indenture
Trustee's (or its nominee's) ownership of such security.
(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 Notes and Class M-2 Notes in accordance with the
Allocable Loss Amount Priority.
Section 5.05 Pre-Funding Account.
-------------------
(a) The Servicer, for the benefit of the Securityholders, shall cause
to be established and maintained in the name of the Indenture Trustee a Pre-
Funding Account (the "Pre-Funding Account"), which shall be a separate
Eligible Account and may be interest-bearing, entitled "Pre-Funding Account,
First Bank National Association, as Indenture Trustee, in trust for the
Empire Funding Home Loan Asset Backed Securities, Series 1997-2." The Pre-
Funding 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 a Pre-Funding 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 Pre-Funding Account shall be invested in
accordance with Section 5.03 hereof.
------------
On the Closing Date, the Owner Trustee will deposit in the Pre-Funding
Account the Pre-Funded Amount from the net proceeds of the sale of the Notes.
On each Subsequent Transfer Date, upon satisfaction of the conditions set
forth in Section 2.07 hereof with respect to such transfer, the Indenture
------------
Trustee shall withdraw from the Pre-Funding Account an amount equal to the
Principal Balances of the Subsequent Loans transferred to the Issuer on such
Subsequent Transfer Date and distribute such amount to or upon the order of
the Transferor.
(b) If the Pre-Funded Amount has not been reduced to zero on the last
day of the Pre-Funding Period after giving effect to any reductions in the
Pre-Funded Amount on such date pursuant to paragraph (a) above, the Indenture
-------------
Trustee in writing shall withdraw from the Pre-Funding Account on the
Mandatory Redemption Date (i) if the Pre-Funded Amount is equal to or less
than $100,000, and deposit such amount in the Note Distribution Account to be
applied to reduce the Outstanding Amount of the Class of Notes then entitled
to distributions of principal and (ii) if the Pre-Funded Amount is greater
than $100,000, and deposit such amounts to the Note Distribution Account to
be applied in reduction of the Class Principal Balance of each Class of Notes
based on the related Pre-Funded Percentage.
(c) On the Business Day preceding each of the second and third
Distribution Dates, if applicable, the Indenture Trustee shall withdraw the
related Pre-Funding Earnings for the related Due Period and remit such
amounts to the Transferor.
Section 5.06 Capitalized Interest Account.
----------------------------
(a) The Servicer, for the benefit of the Securityholders, shall cause
to be established and maintained in the name of the Indenture Trustee a
Capitalized Interest Account (the "Capitalized Interest Account"), which
shall be a separate Eligible Account and may be interest-bearing, entitled
"Capitalized Interest Account, First Bank National Association, as Indenture
Trustee, in trust for the Home Loan Asset Backed Securities, Series 1997-2."
The Capitalized Interest 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 a Capitalized
Interest 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 Capitalized
Interest Account shall be invested in accordance with Section 5.03 hereof.
------------
On the Closing Date, the Owner Trustee will deposit in the Capitalized
Interest Account the Capitalized Interest Initial Deposit from the net
proceeds of the sale of the Notes and the Certificates and on each Subsequent
Transfer Date the Owner Trustee will deposit in the Capitalized Interest
Account any applicable Capitalized Interest Subsequent Deposit with respect
to each Subsequent Loan.
(b) On each Determination Date during the Pre-Funding Period (including
the Determination Date in the month following the Due Period during which the
Pre-Funding Period ends), the Indenture Trustee will withdraw from the
Capitalized Interest Account an amount equal to the Capitalized Interest
Requirement and deposit such amount into the Collection Account.
(c) On the Mandatory Redemption Date, any amounts remaining in the
Capitalized Interest Account shall be paid to the Transferor.
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 1997-2"), the Series designation of the Securities (i.e. "Series
1997-2") and the date of this Agreement, all in substantially the form set
out in Exhibit B hereto. 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 1997-2"), the Series designation of the Notes and the Class B
Certificates (i.e., "Series 1997-2"), 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 the definition
of "Six-Month Rolling Delinquency Average" in Section 1.01 hereof), as
set forth in the Servicer's Monthly Remittance Report;
(xi) (reserved);
(xii) (reserved);
(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 hereof as a
------------
result of such Deleted Home Loans being Defective Home Loans, and (D) that
became Deleted Home loans pursuant to Section 3.06 hereof 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 hereof as a result of such Deleted Home loans
------------
being Defective Home Loans, and (D) that became Deleted Home Loans pursuant
to Section 3.06 hereof 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) (reserved);
(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 30, 60 or 90 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 Instruments) pursuant to subclause
(b)(iv) of this Section 6.01, 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 into 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 that
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) of this Section 6.01,
------------
aggregated for such calendar year or applicable portion thereof during which
such Person was a Securityholder.
(d) (Reserved).
(e) On each Distribution Date, the Indenture Trustee shall forward to
the holders of the Residual Interest Instruments 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
Instruments 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 that
at any time during the calendar year was a holder of Residual Interest
Instruments, 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 Instruments.
(g) The Indenture Trustee shall forward to each Securityholder and the
holder of a Residual Interest Instruments, 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
Instruments, 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 holders of Residual Interest
Instruments, whether or not provided for herein, as shall be necessary,
reasonable, or appropriate with respect to the Securityholders or the holders
of Residual Interest Instruments, 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 holders of Residual Interest Instruments 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 related
lender'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 lender 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 lender 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 related
lender'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 lender 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 lender 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 hereof;
------------
(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 hereof;
-------------
(v) (reserved); or
(vi) the related Foreclosure Property has been sold pursuant to
Section 4.13 hereof.
------------
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, and 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, 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) of this Section 7.02, 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) of this Section 7.02 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 conditions 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 hereof and late payment
------------
charges shall be part of the Servicing Compensation payable to the Servicer
hereunder and shall be paid either by the Servicer's retaining such
additional servicing compensation prior to deposit into the Collection
Account pursuant to Section 5.01(b)(1) hereof 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
monitoring fees of the Rating Agencies.
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
of the Servicer (beginning in 1998), an Officer's Certificate stating 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 super-
vision and (ii) to the best of such officer's knowledge, based on such
review, the Servicer has fulfilled all of its obligations under this Agree-
ment throughout such year, or, if there has been a default in the fulfillment
of any such obligation, specifying each such default known to such officer
and the nature and status thereof and what action the Servicer proposes to
take with respect thereto.
Contemporaneously with the submission of the Officer's 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 to the Depositor on a reasonable
basis 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 of the
Servicer (beginning with fiscal year 1997), 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) hereof, the
------------------
aggregate of withdrawals from the Collection Account for each category of
withdrawal specified in Section 5.01(b)(2) and (3) hereof, 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.
(RESERVED)
--------
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 9.01 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) None the Transferor, the Depositor, the Servicer or 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, none of the Transferor, the
Depositor or 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, however, that the Servicer may merge
or consolidate with any other corporation upon the satisfaction of the
conditions set forth in the following paragraph.
Any Person into which the Servicer may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which
the Servicer shall be a party, or any Person succeeding to the business of
the Servicer, shall be an Eligible Servicer and shall be the successor of the
Servicer, as applicable hereunder, without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding. The Servicer shall send notice of
any such merger, conversion, consolidation or succession to the Indenture
Trustee and the Issuer.
Section 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 hereof, the Servicer shall have no obligation to appear
------------
with respect to, prosecute or defend any legal action which is not incidental
to the Servicer's duty to service the 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 hereof 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.
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, however, that any Securities owned by the Servicer or
any Affiliate thereof, during the time such Securities are owned by them,
shall be without voting rights for any purpose set forth in this Agreement.
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) hereof 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 in equity to
damages, including injunctive relief and specific performance, may terminate
all the rights and obligations of the Servicer under this Agreement and in
and to the 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
-------------
hereof, 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 hereof, 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 hereof, or the Servicer is removed
------------
as servicer pursuant to this Article X, then, subject to Section 4.08 hereof,
--------- ------------
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; and, provided further, 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 that 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) hereof as if the Servicer had continued to act as servicer
- ---------------
hereunder, together with other Servicing Compensation in the form of
assumption fees, late payment charges or otherwise as provided in Sections
--------
7.01 and 7.03 hereof. The Servicer shall not be entitled to any termination
- ---- ----
fee if it is terminated pursuant to Section 10.01 hereof 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 Fee, 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 30
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 effect 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 hereof, 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 Instrument without the
consent of the related Securityholder or holder of the Residual Interest
Instrument. 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 and to the Issuer and the Securityholders a full
accounting of all funds, including a statement showing the Monthly Payments
collected by it and a statement of monies held in trust by it for payments or
charges with respect to the 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 Maximum Collateral
Amount. 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) (reserved); 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 30 days prior to such Monthly Cut-Off Date.
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)
------------------
hereof and any amounts withdrawable therefrom by the Indenture Trustee
pursuant to Section 5.01(b)(3) hereof) shall be transferred to the Note
------------------
Distribution Account pursuant to Section 5.01(b)(2) hereof
------------------
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 (e) hereof.
--------------- ---
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 holders of Residual Interest
Instruments 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 action,
consent or approval of the Securityholders is required under this Agreement,
such action, consent or approval shall be deemed to have been taken or given
on behalf of, and shall be binding upon, all Securityholders if the Majority
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, the Indenture Trustee and the Issuer by written
agreement with notice thereof to the Securityholders, without the consent of
any of the Securityholders, to cure any error or ambiguity, to correct or
supplement any provisions hereof which may be defective or inconsistent with
any other provisions hereof or to add any other provisions with respect to
matters or questions arising under this Agreement; provided, however, that
such action will not adversely affect in any material respect the interests
of the Securityholders. 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, the Indenture Trustee 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 the Class B Certificates in any manner other than as
described in clause (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 consent of which is
required for 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
and the Indenture Trustee shall be entitled to receive and rely upon an
Opinion of Counsel stating that the execution of such amendment is authorized
or permitted by this Agreement. The Issuer and the Indenture Trustee may,
but shall not be obligated to, enter into any such amendment which affects
the Issuer's own rights, duties or immunities of the Issuer or the Indenture
Trustee, as the case may be, under this Agreement.
Section 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: Craig A. Braun, 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 1997-2, 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 and Servicer, 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 Indenture Trustee or Co-Owner Trustee, First Bank National
Association, 180 East Fifth Street, St. Paul, Minnesota 55101, Attention:
Structured Finance/Empire Funding 1997-2; and (v) 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 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 12.12.
-------------
(b) The fact and date of the execution by any Securityholder of any
such instrument or writing may be proved in any reasonable manner which the
Depositor, the Servicer or the Issuer 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 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 accountants' report delivered
pursuant to Section 7.05 hereof, and copies of any compliance reports
------------
delivered by the Servicer including under Section 7.04 hereof; and
------------
(vii) copies of any Distribution Date Statement pursuant to Section
-------
6.01(b) hereof.
- -------
(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 Instruments.
--------------------------------------------
(a) Any sums to be distributed or otherwise paid hereunder or under the
Trust Agreement to the holders of the Residual Interest Instruments 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 Instruments, 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 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 Sale and Servicing
Agreement.
EMPIRE FUNDING HOME LOAN
OWNER TRUST 1997-2,
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 and Servicer
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 1997-2 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 May, 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 May, 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 and Servicer, 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 May, 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 May, 1997.
------------------------------
Notary Public, State of ________
EXECUTION COPY
INDENTURE
between
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-2,
as Issuer,
and
FIRST BANK NATIONAL ASSOCIATION,
as Indenture Trustee,
Dated as of May 1, 1997
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-2
ASSET BACKED SECURITIES,
SERIES 1997-2
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . 3
Section 1.02. Incorporation by Reference of Trust Indenture Act . . 10
Section 1.03. Rules of Construction . . . . . . . . . . . . . . . . 10
ARTICLE II
THE NOTES
Section 2.01. Form . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.02. Execution, Authentication, Delivery and Dating . . . 12
Section 2.03. Registration; Registration of Transfer and Exchange. 13
Section 2.04. Mutilated, Destroyed, Lost or Stolen Notes. . . . . . 14
Section 2.05. Persons Deemed Note Owners . . . . . . . . . . . . . 15
Section 2.06. Payment of Principal and Interest; Defaulted Interest 15
Section 2.07. Cancellation . . . . . . . . . . . . . . . . . . . . 16
Section 2.08. Conditions Precedent to the Authentication of the
Notes . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.09. Release of Collateral . . . . . . . . . . . . . . . . 18
Section 2.10. Book-Entry Notes . . . . . . . . . . . . . . . . . . 19
Section 2.11. Notices to Clearing Agency . . . . . . . . . . . . . 19
Section 2.12. Definitive Notes . . . . . . . . . . . . . . . . . . 20
Section 2.13. Tax Treatment . . . . . . . . . . . . . . . . . . . . 20
ARTICLE III
COVENANTS
Section 3.01. Payment of Principal and Interest . . . . . . . . . . 21
Section 3.02. Maintenance of Office or Agency . . . . . . . . . . . 21
Section 3.03. Money for Payments to Be Held in Trust . . . . . . . 21
Section 3.04. Existence . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.05. Protection of Collateral . . . . . . . . . . . . . . 24
Section 3.06. Annual Opinions as to Collateral . . . . . . . . . . 24
Section 3.07. Performance of Obligations; Servicing of Home Loans . 24
Section 3.08. Negative Covenants . . . . . . . . . . . . . . . . . 26
Section 3.09. Annual Statement as to Compliance . . . . . . . . . . 27
Section 3.10. Covenants of the Issuer . . . . . . . . . . . . . . . 28
Section 3.11. Servicer's Obligations . . . . . . . . . . . . . . . 28
Section 3.12. Restricted Payments . . . . . . . . . . . . . . . . . 28
Section 3.13. Treatment of Notes as Debt for Tax Purposes . . . . . 28
Section 3.14. Notice of Events of Default . . . . . . . . . . . . . 28
Section 3.15. Further Instruments and Acts . . . . . . . . . . . . 29
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of Indenture . . . . . . . 30
Section 4.02. Application of Trust Money . . . . . . . . . . . . . 31
Section 4.03. Repayment of Moneys Held by Paying Agent . . . . . . 31
ARTICLE V
REMEDIES
Section 5.01. Events of Default . . . . . . . . . . . . . . . . . . 32
Section 5.02. Acceleration of Maturity; Rescission and
Annulment . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.03. Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee . . . . . . . . . . . . . . . . . 34
Section 5.04. Remedies; Priorities . . . . . . . . . . . . . . . . 36
Section 5.05. Optional Preservation of the Collateral . . . . . . . 37
Section 5.06. Limitation of Suits . . . . . . . . . . . . . . . . . 37
Section 5.07. Unconditional Rights of Noteholders to Receive
Principal and Interest . . . . . . . . . . . . . . . 38
Section 5.08. Restoration of Rights and Remedies . . . . . . . . . 38
Section 5.09. Rights and Remedies Cumulative . . . . . . . . . . . 38
Section 5.10. Delay or Omission Not a Waiver . . . . . . . . . . . 39
Section 5.11. Control by Noteholders . . . . . . . . . . . . . . . 39
Section 5.12. Waiver of Past Defaults . . . . . . . . . . . . . . . 39
Section 5.13. Undertaking for Costs . . . . . . . . . . . . . . . . 40
Section 5.14. Waiver of Stay or Extension Laws . . . . . . . . . . 40
Section 5.15. Action on Notes . . . . . . . . . . . . . . . . . . . 40
Section 5.16. Performance and Enforcement of Certain Obligations . 40
ARTICLE VI
THE INDENTURE TRUSTEE
Section 6.01. Duties of Indenture Trustee . . . . . . . . . . . . . 42
Section 6.02. Rights of Indenture Trustee . . . . . . . . . . . . . 43
Section 6.03. Individual Rights of Indenture Trustee . . . . . . . 44
Section 6.04. Indenture Trustee's Disclaimer . . . . . . . . . . . 44
Section 6.05. Notices of Default . . . . . . . . . . . . . . . . . 44
Section 6.06. Reports by Indenture Trustee to Holders . . . . . . . 44
Section 6.07. Compensation and Indemnity . . . . . . . . . . . . . 44
Section 6.08. Replacement of Indenture Trustee . . . . . . . . . . 45
Section 6.09. Successor Indenture Trustee by Merger . . . . . . . . 46
Section 6.10. Appointment of Co-Indenture Trustee or Separate
Indenture Trustee . . . . . . . . . . . . . . . . . . 46
Section 6.11. Eligibility; Disqualification . . . . . . . . . . . . 47
Section 6.12. Preferential Collection of Claims Against Issuer . . 47
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
Section 7.01. Issuer to Furnish Indenture Trustee Names and
Addresses of Noteholders . . . . . . . . . . . . . . 48
Section 7.02. Preservation of Information; Communications to
Noteholders . . . . . . . . . . . . . . . . . . . . . 48
Section 7.03. Reports by Issuer . . . . . . . . . . . . . . . . . . 48
Section 7.04. Reports by Indenture Trustee . . . . . . . . . . . . 49
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 8.01. Collection of Money . . . . . . . . . . . . . . . . . 50
Section 8.02. Trust Accounts; Distributions . . . . . . . . . . . . 50
Section 8.03. General Provisions Regarding Accounts . . . . . . . . 51
Section 8.04. Servicer's Monthly Statements. . . . . . . . . . . . 52
Section 8.05. Release of Collateral . . . . . . . . . . . . . . . . 52
Section 8.06. Opinion of Counsel . . . . . . . . . . . . . . . . . 52
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of Noteholders 53
Section 9.02. Supplemental Indentures with Consent of Noteholders . 54
Section 9.03. Execution of Supplemental Indentures . . . . . . . . 55
Section 9.04. Effect of Supplemental Indentures . . . . . . . . . . 55
Section 9.05. Conformity with Trust Indenture Act . . . . . . . . . 55
Section 9.06. Reference in Notes to Supplemental Indentures . . . . 56
Section 9.07. Amendments to Trust Agreement. . . . . . . . . . . . 56
ARTICLE X
REDEMPTION OF NOTES
Section 10.01. Redemption . . . . . . . . . . . . . . . . . . . . . 57
Section 10.02. Form of Redemption Notice . . . . . . . . . . . . . 57
Section 10.03. Notes Payable on Redemption Date . . . . . . . . . . 58
ARTICLE XI
MISCELLANEOUS
Section 11.01. Compliance Certificates and Opinions, etc. . . . . . 59
Section 11.02. Form of Documents Delivered to Indenture Trustee . . 60
Section 11.03. Acts of Noteholders . . . . . . . . . . . . . . . . 61
Section 11.04. Notices, etc., to Indenture Trustee, Issuer and
Rating Agencies . . . . . . . . . . . . . . . . . . 61
Section 11.05. Notices to Noteholders; Waiver . . . . . . . . . . . 62
Section 11.06. Conflict with Trust Indenture Act . . . . . . . . . 63
Section 11.07. Effect of Headings and Table of Contents . . . . . . 63
Section 11.08. Successors and Assigns . . . . . . . . . . . . . . . 63
Section 11.09. Separability . . . . . . . . . . . . . . . . . . . . 63
Section 11.10. Benefits of Indenture . . . . . . . . . . . . . . . 63
Section 11.11. Legal Holidays . . . . . . . . . . . . . . . . . . . 63
Section 11.12. Governing Law . . . . . . . . . . . . . . . . . . . 63
Section 11.13. Counterparts . . . . . . . . . . . . . . . . . . . . 63
Section 11.14. Recording of Indenture . . . . . . . . . . . . . . . 63
Section 11.15. Trust Obligation . . . . . . . . . . . . . . . . . . 64
Section 11.16. No Petition . . . . . . . . . . . . . . . . . . . . 64
Section 11.17. Inspection . . . . . . . . . . . . . . . . . . . . . 64
EXHIBITS
SCHEDULE A - Schedule of Home Loans
EXHIBIT A - Forms of Notes
This Indenture entered into effective May 1, 1997, between EMPIRE
FUNDING HOME LOAN OWNER TRUST 1997-2, a Delaware business trust, as Issuer
(the "Issuer"), and FIRST BANK NATIONAL ASSOCIATION, as Indenture Trustee
(the "Indenture Trustee"),
W I T N E S S E T H T H A T:
- - - - - - - - - - - - - -
In consideration of the mutual covenants herein contained, the Issuer
and the Indenture Trustee hereby agree as follows for the benefit of each of
them and for the equal and ratable benefit of the holders of the Issuer's
Class A-1 8.85% Home Loan Asset Backed Notes (the "Class A-1 Notes"), Class
---------------
A-2 7.78% Home Loan Asset Backed Notes (the "Class A-2 Notes"), Class A-3
---------------
7.78% Home Loan Asset Backed Notes (the "Class A-3 Notes"), Class A-4 7.67%
---------------
Home Loan Asset Backed Notes (the "Class A-4 Notes"), Class A-5 7.96% Home
---------------
Loan Asset Backed Notes (the "Class A-5 Notes"), Class A-6 7.74% Home Loan
---------------
Asset Backed Notes (the "Class A-6 Notes"), Class M-1 7.80% Home Loan Asset
---------------
Backed Notes (the "Class M-1 Notes") and Class M-2 8.03% 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, Class A-6 and Class M-1 Notes, the
"Notes"):
-----
GRANTING CLAUSE
Subject to the terms of this Indenture, the Issuer hereby Grants on the
Closing Date, to the Indenture Trustee, 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 and to 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 adequately and
effectively be 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) hereof.
--- ----------------
"Administration Agreement" means the Administration Agreement dated as
------------------------
of May 1, 1997, among the Administrator, the Issuer and the Company.
"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 herewith or 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 A-6, 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 hereof.
------------
"Business Day" means any day other than (i) a Saturday or a Sunday, or
------------
(ii) a day on which banking institutions in The City of New York 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 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 A-6 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 which from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with
the Clearing Agency.
"Closing Date" means May 29, 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.
"Commission" means the Securities and Exchange Commission.
----------
"Company" means Empire Funding Corp., an Oklahoma corporation, or any
-------
successor in interest thereto.
"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 hereof.
---------------- ------------
"Depositor" shall mean Financial Asset Securities Corp., a Delaware
---------
corporation, in its capacity as depositor under the Sale and Servicing
Agreement, or any successor in interest thereto.
"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 and DCR (or
comparable ratings if Standard & Poor's 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 June 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 hereof.
---------------- ------------
"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 September 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 hereunder.
"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 hereof, 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 1997-2 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 A-6 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 rate per annum specified below (computed on the basis of a 360-day
year assumed to consist of twelve 30-day months):
Class A-1: 8.85%
Class A-2: 7.78%
Class A-3: 7.78%
Class A-4: 7.67%
Class A-5: 7.96%;
provided, however, that, commencing on the first day
of the month in which the Clean-up Call Date occurs,
the Note Interest Rate for the Class A-5 Notes
shall be 8.46%
Class A-6: 7.74%
Class M-1: 7.80%
Class M-2: 8.03%
"Note Owner" means, with respect to a Book-Entry Note, the Person that
----------
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 hereof.
------------
"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 hereof, 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 an employee
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 hereof 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 cancelled 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 theretofore been 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 satisfactory to the Indenture Trustee has been
made);
(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, however, 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 owned in such manner shall be
disregarded. Notes owned in such manner that have been pledged in good
faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Indenture Trustee that the pledgee has the 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 hereof 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 hereof 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' prior notice thereof
(or such shorter period as is acceptable to each Rating Agency) 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 either or both of (i) Standard & Poor's or (ii)
-------------
DCR. If no such organization or successor thereto 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 hereof, the Distribution Date specified by the
-------------
Servicer or the Issuer pursuant to such Section 10.01.
-------------
"Registered Holder" means the Person in the name of which a Note is
-----------------
registered on the Note Register on the applicable Record Date.
"Residual Interest Instrument" has the meaning assigned to such term in
----------------------------
Section 1.1 of the Trust Agreement.
"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 May 1, 1997, among the Issuer, Financial Asset Securities Corp.,
as Depositor, and Empire Funding Corp., as Transferor and Servicer, 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 hereto, as supplemented as of (i) any Subsequent Transfer Date
----------
and (ii) 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, a division of The
-----------------
McGraw-Hill Companies 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)
------------------ ---------------
hereof.
"Termination Price" means, in the case of a redemption of the Notes
-----------------
pursuant to Section 10.01 hereof, 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 Agreement" means the Trust Agreement dated as of May 1, 1997,
---------------
among Financial Asset Securities Corp., as Depositor, Empire Funding Corp.,
as the Company, Wilmington Trust Company, as Owner Trustee, and First Bank
National Association, as Co-Owner Trustee.
"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 rule of the
Securities and Exchange Commission have the respective meanings 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 in the United States 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 1997-2 Asset Backed Notes, Series 1997-2".
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 hereto. 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
------------
hereof, the Indenture Trustee shall upon Issuer Order authenticate and
deliver the eight Classes of Notes for original issue in the following
principal amounts: Class A-1, $16,500,000; Class A-2, $16,500,000; Class A-
3, $25,500,000; Class A-4, $11,000,000; Class A-5, $24,016,000; Class A-6,
$7,000,000; Class M-1, $16,728,000; Class M-2, $15,683,000. 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 May 29,
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 hereof,
------------
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 Agents' 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 hereof not involving any transfer.
------------
The preceding provisions of this Section 2.03 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 reasonably be 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 which it was delivered
or any Person taking such replacement Note from such Person to which 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 2.04, 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 2.04 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 2.04 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 Note Owners. 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 the
name of which any Note is registered (as of the day of determination) as the
Note Owner 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 hereof. 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 the name of which 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 hereof, 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) hereof, 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 hereof.
------------
(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 shall have declared the Notes to be immediately due and
payable in the manner provided in Section 5.02 hereof.
------------
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 the name of which 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 hereof.
- -----
Section 2.07. Cancellation. All Notes surrendered for payment,
------------
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 promptly be cancelled 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 promptly
be cancelled by the Indenture Trustee. No Notes shall be authenticated in
lieu of or in exchange for any Notes canceled as provided in this Section
-------
2.07, 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, however, 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 hereof 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;
(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 or "blue sky" laws.
(e) An Officer's Certificate complying with the requirements of
Section 11.01 hereof and stating that:
- -------------
(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 and to 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, Class A-5 and Class A-6 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 Class B 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) of this Section 2.09, Section 11.01 hereof 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 temporarily to 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 with the provisions thereof; provided, however, 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 Note Owner will receive a
definitive Note representing such Note Owner's interest in such Note, except
as provided in Section 2.12 hereof. Unless and until definitive,
------------
fully registered Notes (the "Definitive Notes") have been issued to such Note
Owners pursuant to Section 2.12 hereof:
------------
(i) the provisions of this Section 2.10 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 2.10
------------
conflict with any other provisions of this Indenture, the provisions of this
Section 2.10 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
------------
hereof, 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 hereof, the Indenture Trustee shall give all such notices and
- ------------
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 each of them 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
-------------
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 paid duly and punctually) the
principal of and interest 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) hereof, 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 A-6 Notes, to the Class A-6
Noteholders, (vii) for the benefit of the Class M-1 Notes, to the Class M-1
Noteholders, and (viii) 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 in 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) hereof, all payments of amounts due and payable with
- --------------- -------
respect 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) hereof 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 3.03.
------------
On or before the Business Day preceding each Distribution Date and the
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 the 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 which would be eligible to be Indenture Trustee hereunder
as provided in Section 6.11 hereof. 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 of
general circulation in The City of New York customarily published in the
English language on each Business Day, 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 subparagraph (b) of this Section 3.04, 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 15th 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, in 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
to 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 to the Servicer
of the termination of the Servicer's rights and powers pursuant to Section
10.01 of the Sale and Servicing Agreement, the Indenture Trustee 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
shall not have 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 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
Indenture Trustee shall notify the Issuer 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 so be
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 expressly be 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 Obligors) 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
Instruments 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 hereof and the obligations of the
------------
Indenture Trustee under Section 4.02 hereof) 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 hereof and (ii) Notes
------------
for the payment of which 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 hereof)
------------
shall have been delivered to the Indenture Trustee for cancellation; or
(2) all Notes not theretofore delivered to the Indenture Trustee for
cancellation
a. shall have become due and payable, or
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 clause a. b. or c. above, has
-----------------
irrevocably deposited or caused irrevocably to be 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 the
Redemption Date (if Notes shall have been called for redemption pursuant to
Section 10.01 hereof), as the case may be; and
- -------------
(B) the latest of (a) 18 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 shall have 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) hereof and, subject to Section 11.02 hereof, 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 hereof 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, the
--------------------
status of such event 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 moneys 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 hereof.
------------
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, in its discretion, and shall at the direction of the majority of
the Holders of the Notes, as more particularly provided in Section 5.04
------------
hereof, 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,
attorneys and counsel, 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
------------
hereof):
(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) of this subsection (a)(iv), 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 Advance Reimbursement Amount under the Sale and Servicing
Agreement;
FIFTH: to the 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 the 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 Instruments.
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 hereof 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 Proceeding; 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, however, 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 hereof, 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 hereof 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
-------
5.11, subject to Section 6.01 hereof, 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) hereof.
---------------
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; provided, however, that 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 6.01;
------------
(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 hereof.
------------
(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 6.01.
- ------------
(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
provided, further, 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 hereof. 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 hereof.
------------
(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.
(i) The Indenture Trustee shall not be required to take notice or be
deemed to have notice or knowledge of any Event of Default (other than an
Event of Default pursuant to Section 5.01(a) or (b) hereof) unless a
-----------------------------
Responsible Officer of the Indenture Trustee shall have received written
notice thereof or otherwise shall have actual knowledge thereof. In the
absence of receipt of notice or such knowledge, the Indenture Trustee may
conclusively assume that there is no Event of Default.
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 hereof.
- -------------
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. Notices of Default. 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 by the Servicer 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 so to 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 6.07 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) hereof 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 6.08. 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
------------
hereof;
(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 hereof, 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 6.08, the Issuer's and the Administrator's obligations under
------------
Section 6.07 hereof 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, however, that such corporation or banking association shall
otherwise be qualified and eligible under Section 6.11 hereof. 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 hereof 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
anyportion 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
which 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 hereof 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 hereof.
---------
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, pursuant to Section
5.01(b)(2) of the Sale and Servicing Agreement, the Available Collection
Amount 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) hereof):
---------------
(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) hereof, 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 hereof 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 hereof 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 hereof, 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, to the Servicer pursuant to
Section 8.02(c)(i)(A) hereof, to the Indenture Trustee pursuant to Section
- ---------------------
8.02(c)(i)(B) hereof, to the Owner Trustee pursuant to Section 8.02(c)(i)(C)
hereof and to 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 hereof.
-------------
Section 8.06. Opinion of Counsel. The Indenture Trustee shall receive
------------------
at least seven days' prior notice when requested by the Issuer to take any
action pursuant to Section 8.05(a) hereof, accompanied by copies of any
---------------
instruments involved, and the Indenture Trustee may 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, however, 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 hereof; 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 hereof, 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 hereof;
------------
(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 9.02, 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 9.02
------------
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 hereof, 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.
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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 sum of the Original Pool Principal Balance and the
Original Pre-Funded Amount. 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. Eastern 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 hereof.
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Section 10.02. Form of Redemption Notice.
-------------------------
Notice of redemption under Section 10.01 hereof 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 hereof).
------------
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 to any Holder of any Note notice of redemption, or any defect
therein, 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 hereof (in the
-------------
case of redemption pursuant to Section 10.01) hereof, 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.
(b) 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)
----------------
hereof 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.
(c) 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 subsection (b) 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
subsection (b) above and this subsection (c), 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.
(d) 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.
(e) 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 subsection (d) 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 subsection (d) above and this subsection (e), 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 hereof.
----------
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 hereof) conclusive in favor of the Indenture Trustee and the Issuer, if
- ----
made in the manner provided in this Section 11.03.
-------------
(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:
(i) 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
(ii) 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 1997-2, 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 Co.,
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, 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 duly been
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 hereof, 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 expressly have 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 Articles 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 reasonably be
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 1997-2
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 1997-2, 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 May, 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 May, 1997.
--------------------------------------------
Notary Public in and for the State of New York
(Seal)
My commission expires:
- --------------------
SCHEDULE A
EXECUTION COPY
ADMINISTRATION AGREEMENT
dated as of May 1, 1997
among
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-2
(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 1997-2
ADMINISTRATION AGREEMENT dated as of May 1, 1997, among EMPIRE FUNDING
HOME LOAN OWNER TRUST 1997-2, 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 (the "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 May 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;
and
WHEREAS, the Issuer will issue Home Loan Asset Backed Notes (the
"Notes") and Home Loan Asset Backed Certificates (the "Certificates"), Series
----- ------------
1997-2 (collectively, the "Securities"); and
----------
WHEREAS, the Notes will be secured by certain collateral, as more
particularly set forth in the Indenture dated as of May 1, 1997 (the
"Indenture"), between the Issuer and First Bank National Association, as
---------
Indenture Trustee (in such capacity, the "Indenture Trustee"); and
-----------------
WHEREAS, the Certificates will be created pursuant to the Trust
Agreement and will represent undivided beneficial ownership interests in the
Trust; and
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 May 1, 1997 (the "Sale and Servicing Agreement"), among
----------------------------
the Issuer, Empire Funding Corp., as Transferor and Servicer, the Depositor
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 Indenture and (iv) the Trust Agreement (the
- --------------------
Sale and Servicing Agreement, the Note Depository Agreement, the Indenture
and the Trust Agreement being hereinafter referred to collectively as the
"Related Agreements"); and
------------------
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"); and
------
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 Note Depository Agreement, the Sale and
------------------------------------------------------------------
Servicing Agreement and the Indenture.
- -------------------------------------
(i) The Administrator agrees to perform all of the duties of the
Issuer under the Note Depository Agreement. 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 Note Depository
Agreement. 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
Note Depository Agreement. 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 2.03);
(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
2.03);
(C) the notification of Noteholders of the final principal payment
on the Notes or of the redemption of the Notes or the duty to cause the
Indenture Trustee to provide such notification (Sections 2.06(b) and
10.02);
(D) performing the function of the Issuer with respect to the
cancellation of the Notes (Section 2.01);
(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 2.08);
(F) the maintenance of an office in the City of St. Paul,
Minnesota, for registration of transfer or exchange of Notes (Section
3.02);
(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 3.03);
(I) directing the Indenture Trustee to deposit moneys with Paying
Agents, if any, other than the Indenture Trustee (Section 3.03);
(J) notifying 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
3.07(d)), and upon the termination of the Servicer, the appointment of a
Successor Servicer thereunder and the notifications in connection
therewith (Section 3.07(e) and (f));
(K) monitoring the Issuer's obligations as to the satisfaction and
discharge of the Indenture (Section 4.01);
(L) opening one or more accounts in the Trust's name (Section
8.02);
(M) notifying the Rating Agencies of a redemption of the Notes
and the duty to cause the Majority Residual Interestholders to deposit
the Termination Price into the Note Distribution Account and the
Certificate Distribution Account (Section 10.01);
(N) providing the Indenture Trustee with 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 3.03); and
(O) the preparation and filing of all documents and reports by the
Issuer on Forms 8-K and 10-K as required under the Exchange Act, the
rules and regulations of the Commission thereunder and the TIA (Section
7.03).
(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-1's necessary to
enable each Owner to prepare its federal and state income tax returns.
(b) (i) The Administrator shall perform the duties of the
Administrator specified in Section 10.02 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):
(i) preparing, obtaining or filing of the instruments, opinions
and certificates and other documents required for the release of Collateral
(Section 2.09);
(ii) preparation and execution of all supplements, amendments,
financing statements, continuation statements, instruments of further
assurance and other instruments, in accordance with Section 3.05 of the
Indenture, necessary to protect the Trust Estate (Section 3.05);
(iii) 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 3.09 of the Indenture, as to
compliance with the Indenture (Sections 3.06 and 3.09);
(iv) monitoring the Issuer's compliance with its negative covenants
(Section 3.08) and the compliance of the Servicer with certain of its
obligations under the Sale and Servicing Agreement (Section 3.11);
(v) 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 5.04);
(vi) causing one or more accounts to be opened in the Trust's name
and preparing 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 8.02 and 8.03);
(vii) preparing an Issuer Request and Officers' Certificate and
obtaining an Opinion of Counsel and Independent Certificates, if necessary,
for the release of the Indenture Trust Estate as defined in the Indenture
(Sections 8.05 and 8.06);
(viii) preparing Issuer Orders and 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 9.07); and
(ix) notifying the Rating Agencies, upon the failure of the
Indenture Trustee to give such notification, of the information required
pursuant to Section 11.04 of the Indenture (Section 11.04).
(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 hereof 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 5.02(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 hereof 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
----------------
(i) shall constitute the Administrator or the Servicer, respectively, and
either 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) hereof, 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) hereof, 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) hereof, the Issuer may remove the
------------
Administrator immediately upon written notice of termination from the Issuer
to the Administrator if any of the following events occurs:
(i) the Administrator defaults in the performance of any of its
duties under this Agreement and, after notice of such default, does not
cure such default within ten days (or, if such default cannot be cured in
such time, does 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 enters 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 appoints a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for the Administrator or any substantial
part of its property or orders the winding-up or liquidation of its affairs;
or
(iii) the Administrator commences a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, consents to the entry of an order for relief in an involuntary case
under any such law, consents to the appointment of a receiver, liquidator,
assignee, trustee, custodian, sequestrator or similar official for the
Administrator or any substantial part of its property, consents to the taking
of possession by any such official of any substantial part of its property,
makes any general assignment for the benefit of creditors or fails generally
to pay its debts as they become due.
The Administrator agrees that if any of the events specified in clause
------
(ii) or clause (iii) of this Section 9(d) 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 9(d) 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 Section 9(e) and (f) hereof, the Administrator
--------------------
acknowledges that upon the appointment of a successor Indenture Trustee
pursuant to Section 6.08 of the Indenture, the Administrator shall
immediately resign 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
------------------------------------------------------
Administrator. Promptly upon the effective date of termination of this
- -------------
Agreement pursuant to Section 9(a) 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 and, in the event of the
resignation or removal of the Administrator pursuant to Section 9(b), (c) or
--------------------
(d), the Administrator shall 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 1997-2
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 1997-2
(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 Certificateholder 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 of 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 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 percentages of the holders
of Notes and Certificates which are required to consent to any such
amendment, in the case of either clause (i) or clause (ii) hereof, 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
withheld unreasonably.
Section 13. Successor and Assigns.
---------------------
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, however, 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 that
- ----------------
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.
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, sequestra-
tor, 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 1997-2
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:
