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: August 22, 1997
(Date of earliest event reported)
Commission File No. 333-30939
PAINEWEBBER MORTGAGE ACCEPTANCE CORPORATION IV (as depositor under the Sale and
Servicing Agreement, dated as of August 1, 1997, relating to the Empire Funding
Home Loan Owner Trust 1997-3, Home Loan Asset Backed Notes, Series 1997-3)
PAINEWEBBER MORTGAGE ACCEPTANCE CORPORATION IV
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Delaware 06-1204982
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(State of Incorporation) (I.R.S. Employer Identification No.)
1285 Avenue of the Americas
New York, New York 10019
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Address of principal executive offices (Zip Code)
(212) 713-2000
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Registrant's Telephone Number, including area code
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(Former name, former address and former fiscal year,
if changed since last report)
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ITEM 5. Other Events
On August 22, 1997, Empire Funding Home Loan Owner Trust 1997-3 (the
"Trust") issued Home Loan Asset Backed Notes, Series 1997-3, Class A-1, Class
A-2, Class A-3, Class A-4, Class A-5, Class A-7, Class M-1, Class M-2 and Class
B-1 (the "Offered Notes"), having an aggregate original principal balance of
$219,737,268. The Offered Notes were issued pursuant to an Indenture, dated as
of August 1, 1997 (the "Indenture") between Empire Funding Home Loan Owner Trust
1997-3 (the "Trust") and U.S. Bank National Association, d/b/a First Bank
National Association ("U.S. Bank," in such capacity, the "Indenture Trustee"), a
copy of which is filed as an exhibit hereto. Home Loan Asset Backed Notes,
Series 1997-3, Class B-2 having an aggregate initial principal balance of
$5,634,289 (the "Private Notes" and, together with the Offered Certificates, the
"Notes"), were also issued pursuant to the Indenture. The Trust was formed by
PaineWebber Mortgage Acceptance Corporation IV, a Delaware corporation (the
"Registrant"), pursuant to a Trust Agreement, dated as of August 1, 1997 (the
"Trust Agreement") among the Registrant, Empire Funding Corp. (the
"Transferor"), Wilmington Trust Company (the "Owner Trustee") and U.S. Bank (in
such capacity, the "Co-Owner Trustee"), a copy of which is filed as an exhibit
hereto. The Notes are secured by the assets of the Trust, consisting principally
of a pool of closed-end, fixed-rate home loans (the "Loans") which are either
secured primarily by junior-lien mortgages, deeds of trust or other similar
security instruments or unsecured. The Loans were transferred to the Trust by
the Registrant pursuant to a Sale and Servicing Agreement, dated as of August 1,
1997 (the "Sale and Servicing Agreement") among the Trust, the Registrant, the
Transferor and U.S. Bank, a copy of which is filed as an exhibit hereto.
In addition, the Trust, the Transferor and U.S. Bank, as administrator of
the Trust have entered into an Administration Agreement, dated as of August 1,
1997 (the "Administration Agreement"), a copy of which is filed as an exhibit
hereto.
Interest on the Offered Notes will be distributed on each Distribution
Date (as defined in the Sale and Servicing Agreement). Monthly distributions in
reduction of the principal balance of the Offered Notes will be allocated to the
Offered Notes in accordance with the priorities set forth in the Sale and
Servicing Agreement.
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ITEM 7. Financial Statements and Exhibits
(c) Exhibits
Item 601(a)
of Regulation S-K
Exhibit No. Description
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(EX-4.1) Indenture, dated as of August 1,
1997, between Empire Funding Home
Loan Owner Trust 1997-3 and U.S. Bank
National Association, d/b/a First
Bank National Association.
(EX-4.2) Sale and Servicing Agreement, dated
as of August 1, 1997, among
PaineWebber Mortgage Acceptance
Corporation IV, Empire Funding Home
Loan Owner Trust 1997-3, Empire
Funding Corp. and U.S. Bank National
Association, d/b/a First Bank
National Association.
(EX-99.1) Administration Agreement, dated as of
August 1, 1997, among Empire Funding
Home Loan Owner Trust 1997-3, Empire
Funding Corp. and U.S. Bank National
Association, d/b/a First Bank
National Association.
(EX-99.2) Trust Agreement, dated as of August
1, 1997, among PaineWebber Mortgage
Acceptance Corporation IV, Empire
Funding Corp., Wilmington Trust
Company and U.S. Bank National
Association, d/b/a First Bank
National Association.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PAINEWEBBER MORTGAGE
ACCEPTANCE CORPORATION IV
August 22, 1997
By: /s/ Barbara J. Dawson
--------------------------
Barbara J. Dawson
Senior Vice President
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INDEX TO EXHIBITS
Paper (P) or
Exhibit No. Description Electronic(E)
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(EX-4.1) Indenture, dated as of August 1, 1997, E
between Empire Funding Home Loan
Owner Trust 1997-3 and U.S. Bank
National Association, d/b/a First Bank
National Association.
(EX-4.2) Sale and Servicing Agreement, dated as of E
August 1, 1997, among PaineWebber
Mortgage Acceptance Corporation IV,
Empire Funding Home Loan Owner Trust
1997-3, Empire Funding Corp. and U.S.
Bank National Association, d/b/a First Bank
National Association.
(EX-99.1) Administration Agreement, dated as of E
August 1, 1997, among Empire Funding
Home Loan Owner Trust 1997-3, Empire
Funding Corp. and U.S. Bank National
Association, d/b/a First Bank National
Association.
(EX-99.2) Trust Agreement, dated as of August 1, 1997, E
among PaineWebber Mortgage Acceptance
Corporation IV, Empire Funding Corp.,
Wilmington Trust Company and U.S. Bank
National Association, d/b/a First Bank
National Association.
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INDENTURE
between
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-3,
as Issuer
and
U.S. BANK NATIONAL ASSOCIATION,
d/b/a FIRST BANK NATIONAL ASSOCIATION,
as Indenture Trustee
Dated as of August 1, 1997
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-3
Home Loan Asset Backed Notes,
Series 1997-3
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TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS
Section 1.01. Definitions....................................................2
Section 1.02. Incorporation by Reference of Trust Indenture Act..............9
Section 1.03. Rules of Construction.........................................10
ARTICLE II
THE NOTES
Section 2.01. Form..........................................................10
Section 2.02. Execution, Authentication, Delivery and Dating................11
Section 2.03. Registration; Registration of Transfer and Exchange...........11
Section 2.04. Mutilated, Destroyed, Lost or Stolen Notes....................13
Section 2.05. Persons Deemed Note Owners....................................13
Section 2.06. Payment of Principal and Interest; Defaulted Interest.........14
Section 2.07. Cancellation..................................................14
Section 2.08. Conditions Precedent to the Authentication of the Notes.......15
Section 2.09. Release of Collateral.........................................17
Section 2.10. Book-Entry Notes..............................................17
Section 2.11. Notices to Clearing Agency....................................18
Section 2.12. Definitive Notes..............................................18
Section 2.13. Tax Treatment.................................................20
Section 2.14. Limitations on Transfer of the Class B-2 Notes................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........................22
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...........25
Section 3.08. Negative Covenants............................................27
Section 3.09. Annual Statement as to Compliance.............................28
Section 3.10. Covenants of the Issuer.......................................28
Section 3.11. Servicer's Obligations........................................28
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Section 3.12. Restricted Payments...........................................28
Section 3.13. Treatment of Notes as Debt for Tax Purposes...................29
Section 3.14. Notice of Events of Default...................................29
Section 3.15. Further Instruments and Acts..................................29
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of Indenture.......................29
Section 4.02. Application of Trust Money....................................30
Section 4.03. Repayment of Moneys Held by Paying Agent......................31
ARTICLE V
REMEDIES
Section 5.01. Events of Default.............................................31
Section 5.02. Acceleration of Maturity; Rescission and Annulment............32
Section 5.03. Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee.............................................33
Section 5.04. Remedies; Priorities..........................................35
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................................38
Section 5.11. Control by Noteholders........................................38
Section 5.12. Waiver of Past Defaults.......................................39
Section 5.13. Undertaking for Costs.........................................39
Section 5.14. Waiver of Stay or Extension Laws..............................39
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...................................41
Section 6.02. Rights of Indenture Trustee...................................42
Section 6.03. Individual Rights of Indenture Trustee........................43
Section 6.04. Indenture Trustee's Disclaimer................................43
Section 6.05. Notices of Default............................................43
Section 6.06. Reports by Indenture Trustee to Holders.......................43
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Section 6.07. Compensation and Indemnity....................................43
Section 6.08. Replacement of Indenture Trustee..............................44
Section 6.09. Successor Indenture Trustee by Merger.........................45
Section 6.10. Appointment of Co-Indenture Trustee or Separate Indenture
Trustee.......................................................45
Section 6.11. Eligibility; Disqualification.................................46
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...................................................47
Section 7.02. Preservation of Information; Communications to Noteholders....47
Section 7.03. Reports by Issuer.............................................47
Section 7.04. Reports by Indenture Trustee..................................48
Section 7.05. 144A Information..............................................48
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 8.01. Collection of Money...........................................48
Section 8.02. Trust Accounts; Distributions.................................49
Section 8.03. General Provisions Regarding Accounts.........................50
Section 8.04. Servicer's Monthly Statements.................................50
Section 8.05. Release of Collateral.........................................50
Section 8.06. Opinion of Counsel............................................51
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of Noteholders........51
Section 9.02. Supplemental Indentures with Consent of Noteholders...........53
Section 9.03. Execution of Supplemental Indentures..........................54
Section 9.04. Effect of Supplemental Indentures.............................54
Section 9.05. Conformity with Trust Indenture Act...........................54
Section 9.06. Reference in Notes to Supplemental Indentures.................54
Section 9.07. Amendments to Trust Agreement.................................55
ARTICLE X
REDEMPTION OF NOTES
Section 10.01. Redemption....................................................55
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Section 10.02. Form of Redemption Notice.....................................55
Section 10.03. Notes Payable on Redemption Date; Provision for Payment of
Indenture Trustee.............................................56
ARTICLE XI
MISCELLANEOUS
Section 11.01. Compliance Certificates and Opinions, etc.....................56
Section 11.02. Form of Documents Delivered to Indenture Trustee..............58
Section 11.03. Acts of Noteholders...........................................58
Section 11.04. Notices, etc., to Indenture Trustee, Issuer and Rating
Agencies......................................................59
Section 11.05. Notices to Noteholders; Waiver................................60
Section 11.06. Conflict with Trust Indenture Act.............................60
Section 11.07. Effect of Headings and Table of Contents......................60
Section 11.08. Successors and Assigns........................................60
Section 11.09. Separability..................................................61
Section 11.10. Benefits of Indenture.........................................61
Section 11.11. Legal Holidays................................................61
Section 11.12. Governing Law.................................................61
Section 11.13. Counterparts..................................................61
Section 11.14. Recording of Indenture........................................61
Section 11.15. Trust Obligation..............................................61
Section 11.16. No Petition...................................................62
Section 11.17. Inspection....................................................62
EXHIBITS
EXHIBIT A - Forms of Notes
EXHIBIT B-1 - Form of Transferor Affidavit (144A)
EXHIBIT B-2 - Form of Transferee Affidavit (Accredited Investor)
EXHIBIT B-3 - Form of Transfer Affidavit
EXHIBIT C - Form of Securities Legend
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This Indenture entered into effective August 1, 1997, between EMPIRE
FUNDING HOME LOAN OWNER TRUST 1997-3, a Delaware business trust, as Issuer (the
"Issuer"), and U.S. BANK NATIONAL ASSOCIATION, d/b/a 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 9.09% Home Loan Asset Backed Notes (the "Class A-1 Notes"), Class A-2
7.75% Home Loan Asset Backed Notes (the "Class A-2 Notes"), Class A-3 7.35% Home
Loan Asset Backed Notes (the "Class A-3 Notes"), Class A-4 7.16% Home Loan Asset
Backed Notes (the "Class A-4 Notes"), Class A-5 7.21% Home Loan Asset Backed
Notes (the "Class A-5 Notes"), Class A-6 7.43% Home Loan Asset Backed Notes (the
"Class A-6 Notes"), Class A-7 7.62% Home Loan Asset Backed Notes (the "Class A-7
Notes"), Class M-1 7.45% Home Loan Asset Backed Notes (the "Class M-1 Notes"),
Class M-2 7.41% Home Loan Asset Backed Notes (the "Class M-2 Notes"), Class B-1
7.75% Home Loan Asset Backed Notes (the "Class B-1 Notes") and Class B-2 8.69%
Home Loan Asset Backed Notes (the "Class B-2 Notes" and, together with the Class
A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6, Class A-7, Class M-1
Notes, Class M-2 Notes and Class B-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").
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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 August 1, 1997, among the Administrator, the Issuer and the Company.
"Administrator" means U.S. Bank National Association, d/b/a 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
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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 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 A-7, Class M-1,
Class M-2, Class B-1 or Class B-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 C 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 A-7 Notes", "Class B-1
Notes", "Class B-2 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 August 22, 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
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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 PaineWebber Mortgage Acceptance Corporation
IV, 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 September 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 April 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
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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 U.S. Bank National Association, d/b/a
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 1997-3 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 A-7 Note, Class M-1 Note, Class
M-2 Note, Class B-1 Note or Class B-2 Note, as applicable.
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"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: 9.09%
Class A-2: 7.75%
Class A-3: 7.35%
Class A-4: 7.16%
Class A-5: 7.21%
Class A-6: 7.43%
Class A-7: 7.62%; 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-7
Notes shall be 8.12%
Class M-1: 7.45%
Class M-2: 7.41%
Class B-1: 7.75%
Class B-2: 8.69%
"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.
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"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.
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"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" 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.
"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.
"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 Certificate" 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.
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"Sale and Servicing Agreement" means the Sale and Servicing
Agreement dated as of August 1, 1997, among the Issuer, PaineWebber Mortgage
Acceptance Corporation IV, as Depositor, and Empire Funding Corp., as Transferor
and Servicer, and U.S. Bank National Association, d/b/a First Bank National
Association, as Indenture Trustee and Co-Owner Trustee.
"Securities Act" means the Securities Act of 1933, as amended.
"Servicer" shall mean Empire Funding Corp., in its capacity as
servicer under the Sale and Servicing Agreement, and any Successor Servicer
thereunder.
"Standard & Poor's" means Standard & Poor's Ratings Services, 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.
"Trust Agreement" means the Trust Agreement dated as of August 1,
1997, among PaineWebber Mortgage Acceptance Corporation IV, as Depositor, Empire
Funding Corp., as the Company, Wilmington Trust Company, as Owner Trustee, and
U.S. Bank National Association, d/b/a 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.
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"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 1997-3 Asset Backed Notes, Series 1997-3". 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.
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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 eleven Classes of Notes for original issue in the following
principal amounts: Class A-1, $17,215,000.00; Class A-2, $29,968,000.00; Class
A-3, $32,492,000.00; Class A-4, $21,015,000.00; Class A-5, $24,232,000.00; Class
A-6, $20,550,000.00; Class A-7, $12,851,519.41; Class M-1, $33,805,733.68; Class
M-2, $14,085,722.37; Class B-1, $13,522,293.47; Class B-2, $5,634,288.95. 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
August 22, 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.
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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.
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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
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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
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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 conditions precedent provided for in this Indenture relating
to the authentication of the Notes have been complied with;
(ii) the Owner Trustee and Co-Owner Trustee have power and authority
to execute, deliver and perform their obligations under the Trust
Agreement;
(iii) 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;
(iv) 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);
(v) the Notes, when executed and authenticated as provided herein
and delivered against payment therefor, will be the valid, legal and
binding obligations
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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);
(vi) the Trust Agreement authorizes the Issuer to Grant the
Collateral to the Indenture Trustee as security for the Notes;
(vii) this Indenture has been duly qualified under the Trust
Indenture Act;
(viii) 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; and
(ix) any other matters as the Indenture Trustee may reasonably
request.
(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, Class A-6 and Class A-7 Notes have been
rated "AAA" and letters signed by Standard & Poor's and DCR confirming
that the Class M-1 Notes have been rated
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"AA", the Class M-2 Notes have been rated "A-", the Class B-1 Notes have
been rated "BBB" and the Class B-2 Notes have been rated "BB"; 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 4.11 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
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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. (a) 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
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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.
(b) Notwithstanding the foregoing, (i) Holders of the Class B-2
Notes held as Book-Entry Notes, may transfer such Class B-2 Notes to transferees
who will hold such Class B-2 Notes as Definitive Notes and (ii) Holders of the
Class B-2 Notes held as Definitive Notes, may transfer the Class B-2 Notes to
transferees who will hold such Class B-2 Notes as Book-Entry Notes, if the
conditions set forth in this Section 2.12 are satisfied.
Any and all transfers from a Holder of a Class B-2 Book-Entry Note
to a transferee wishing to take delivery in the form of a Definitive Note will
require the transferee to take delivery subject to the restrictions on the
transfer of such Definitive Note described in the legend set forth on the face
of the Class B-2 Note substantially in the form of Exhibit C as attached hereto
(the "Legend"), and such transferee agrees that it will transfer such a Class
B-2 Note only as provided therein and herein. No such transfer shall be made and
the Indenture Trustee shall not register any such transfer unless such transfer
is made in accordance with Section 2.12(b) and Section 2.14.
Upon acceptance for exchange or transfer of a beneficial interest in
a Class B-2 Book-Entry Note for a Definitive Note as provided herein, the
Indenture Trustee shall endorse on (or cause the endorsement of) the schedule
affixed to the related Book-Entry Note (or on a continuation of such schedule
affixed to the such Book-Entry Note and made a part thereof) an appropriate
notation evidencing the date of such exchange or transfer and a decrease in the
principal balance of such Book-Entry Note equal to the principal balance of such
Definitive Note issued in exchange therefor or upon transfer thereof. Unless
determined otherwise by the Indenture Trustee in accordance with applicable law,
a Definitive Note issued upon transfer of or exchange for a beneficial interest
in a Class B-2 Book-Entry Note shall bear the Legend.
If a Holder of a Class B-2 Definitive Note wishes at any time to
transfer such Definitive Note to a Person who wishes to take delivery thereof in
the form of a beneficial interest in the Book-Entry Note, such transfer may be
effected only in accordance with the applicable procedures of the Depository
Institution, and Section 2.12(b) and Section 2.14. Upon receipt by the Indenture
Trustee at the Corporate Trust Office of (1) the Class B-2
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Definitive Note to be transferred with an assignment and transfer, (2) written
instructions given in accordance with the applicable procedures from a
participant directing the Indenture Trustee to credit or cause to be credited to
another specified participant's account a beneficial interest in the Book-Entry
Note, in an amount equal to the principal balance of such Definitive Note to be
so transferred, (3) a written order given in accordance with the applicable
procedures containing information regarding the account of the participant to be
credited with such beneficial interest, and (4) transfer documentation received
for a "Qualified Institutional Buyer" pursuant to Section 2.14, the Trustee
shall cancel such Definitive Note, execute and deliver a new Definitive Note for
the principal balance of the Definitive Note not so transferred, registered in
the name of the Holder or the Holder's transferee (as instructed by the Holder),
and the Indenture Trustee shall instruct the Depository Institution to increase
the principal balance of the Book-Entry Note, by the principal balance of the
Definitive Note to be so transferred, and to credit or cause to be credited to
the account of the Person specified in such instructions a corresponding
principal balance of the Book-Entry Note.
Under no circumstances may an institutional "accredited investor"
within Regulation D of the Securities Act take delivery in the form of a
beneficial interest in a Class B-2 Book-Entry Note if such purchaser is not a
"qualified institutional buyer" as defined under Rule 144A under the Securities
Act.
An exchange of a beneficial interest in a Class B-2 Book-Entry Note
for a Definitive Note or Notes, an exchange of a Class B-2 Definitive Note or
Notes for a beneficial interest in the Book-Entry Note and exchange of a Class
B-2 Definitive Note or Notes for another Definitive Note or Notes (in each case,
whether or not such exchange is made in anticipation of subsequent transfer, and
in the case of the Book-Entry Note, so long as the Book-Entry Note remains
outstanding and is held by or on behalf of the Depository Institution), may be
made only in accordance with Section 2.12(b) and Section 2.14 and in accordance
with the rules of the Depository Institution.
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.
SECTION 2.14. Limitations on Transfer of the Class B-2 Notes. The
Class B-2 Notes have not been and will not be registered under the Securities
Act and will not be listed on any exchange. No transfer of a Class B-2
Definitive Note or exchange of a Class B-2 Definitive Note for a Class B-2
Book-Entry Note (or vice versa) shall be made unless such transfer is made
pursuant to an effective registration statement under the Securities Act and any
applicable state securities laws or is exempt from the registration requirements
under the Securities Act and such state securities laws. In the event that a
transfer of Class B-2 Note in
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Definitive Note form is to be made in reliance upon an exemption from the
Securities Act and state securities laws, in order to assure compliance with the
Securities Act and such laws, the prospective transferee shall (A) in the event
that the transfer is made in reliance upon Rule 144A under the Securities Act,
the Indenture Trustee shall require that the transferor deliver a certification
substantially in the form of Exhibit B-1 hereto, or (B) in the event that the
transfer is made to an institutional "accredited investor" within the meaning of
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act that is
not a "qualified institutional buyer," the Indenture Trustee shall require that
the transferee deliver a certification substantially in the form of Exhibit B-2
hereto. In the event of a transfer of a Class B-2 Note pursuant to clause (A) or
(B) in the immediately preceding sentence, the Indenture Trustee shall require
that the transferee deliver a certification substantially in the form of Exhibit
B-3 hereto.
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 A-7 Notes, to the
Class A-7 Noteholders, (viii) for the benefit of the Class M-1 Notes, to the
Class M-1 Noteholders, (ix) for the benefit of the Class M-2 Notes, to the Class
M-2 Noteholders, (x) for the benefit of the Class B-1 Notes, to the Class B-1
Noteholders and (xi) for the benefit of the Class B-2 Notes, to the Class B-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
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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;
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(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
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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
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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.
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(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
4.07 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
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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
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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
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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 Noteholders and the
holders of the Residual Interest Certificate 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 Home 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
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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 B-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 Notes, (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.
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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 to the extent that amounts on deposit in the Note Distribution Account
are sufficient to make such payment due on the related Distribution Date; 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 to the extent
that amounts on deposit in the Note Distribution Account are sufficient to make
such payment due on the related Distribution Date; 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
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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
(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
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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
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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.
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(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
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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;
and
SEVENTH: 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 Certificate pursuant to the Trust Agreement.
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.
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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 30 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 30-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.
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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;
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(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
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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.
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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.
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(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.
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(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
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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
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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:
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(i) all rights, powers, duties and obligations conferred or imposed
upon the Indenture Trustee shall be conferred or imposed upon and
exercised or performed by the Indenture Trustee and such separate trustee
or co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Indenture
Trustee joining in such act), except to the extent that under any law of
any jurisdiction in which any particular act or acts are to be performed
the Indenture Trustee shall be incompetent or unqualified to perform such
act or acts, in which event such rights, powers, duties and obligations
(including the holding of title to the Collateral or any portion thereof
in any such jurisdiction) shall be exercised and performed singly by such
separate trustee or co-trustee, but solely at the direction of the
Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by reason of
any act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the resignation
of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture
Trustee shall be deemed to have been given to each of the then separate trustees
and co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, jointly with the Indenture
Trustee, subject to all the provisions of this Indenture, specifically including
every provision of this Indenture relating to the conduct of, affecting the
liability of, or affording protection to, the Indenture Trustee. Every such
instrument shall be filed with the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute
the Indenture Trustee its agent or attorney-in-fact with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Agreement on its behalf and in its name. If any separate trustee
or co-trustee shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
Section 6.11. Eligibility; Disqualification. The Indenture Trustee
shall at all times satisfy the requirements of TIA Section 310(a). The Indenture
Trustee shall have a combined capital and surplus of at least $50,000,000 as set
forth in its most recent published annual report of condition. The Indenture
Trustee shall comply with TIA Section 310(b), including the optional provision
permitted by the second sentence of TIA Section 310(b)(9); provided, however,
that there shall be excluded from the operation of TIA Section 310(b)(1) any
indenture or indentures under which other securities of the Issuer are
outstanding if the requirements for such exclusion set forth in TIA Section
310(b)(1) are met.
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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
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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.
Section 7.05. 144A Information. The Indenture Trustee shall provide
to any Holder of a Class B-2 Note and any prospective transferee designated by
any such Holder information regarding the Class B-2 Notes and the Home Loans and
such other information as shall be necessary to satisfy the condition to
eligibility set forth in Rule 144A(d)(4) under the Securities Act for transfer
of any such Note without registration thereof under the Securities Act pursuant
to the registration exemption provided by Rule 144A under the Securities Act.
Each Holder of a Class B-2 Note desiring to effect such a transfer shall, and
does hereby agree to, indemnify the Issuer, the Owner Trustee, the Indenture
Trustee and the Depositor against any liability that may result if the transfer
is not so exempt or is not made in accordance with federal and state securities
laws.
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
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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 Securityholders, 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 second 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. On 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 for distribution on such day or make the withdrawals from
the Note Distribution Account and deposits into the Certificate Distribution
Account 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 (i) 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
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 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
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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
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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(b) 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:
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(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.
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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
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(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
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Article IX may, and if required by the Indenture Trustee shall, bear a notation
in form approved by the Indenture Trustee as to any matter provided for in such
supplemental indenture. If the Issuer or the Indenture Trustee shall so
determine, new Notes so modified as to conform, in the opinion of the Indenture
Trustee and the Issuer, to any such supplemental indenture may be prepared and
executed by the Issuer and authenticated and delivered by the Indenture Trustee
in exchange for Outstanding Notes.
Section 9.07. Amendments to Trust Agreement.
Subject to Section 11.1 of the Trust Agreement, the Indenture
Trustee shall, upon Issuer Order, consent to any proposed amendment to the Trust
Agreement or an amendment to or waiver of any provision of any other document
relating to the Trust Agreement, such consent to be given without the necessity
of obtaining the consent of the Holders of any Notes upon satisfaction of the
requirements under Section 11.1 of the Trust Agreement. Nothing in this Section
shall be construed to require that any Person obtain the consent of the
Indenture Trustee to any amendment or waiver or any provision of any document
where the making of such amendment or the giving of such waiver without
obtaining the consent of the Indenture Trustee is not prohibited by this
Indenture or by the terms of the document that is the subject of the proposed
amendment or waiver.
ARTICLE X
REDEMPTION OF NOTES
Section 10.01. Redemption.
The Majority Residual Interestholders (as defined in the Trust
Agreement) may, at their option, effect an early redemption of the Notes on any
Distribution Date on or after the Distribution Date on which the Pool Principal
Balance declines to 10% or less of the Original Pool Principal Balance. The
Majority Residual Interestholders shall effect such early termination in the
manner specified in and subject to the provisions of Section 11.02(b) 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.
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;
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(ii) that on the Redemption Date Noteholders shall receive the Note
Redemption Amount; 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 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 Note Redemption Amount and (unless the Issuer shall default in the
payment of the Note Redemption Amount) no interest shall accrue thereon for any
period after the date to which accrued interest is calculated for purposes of
calculating the Note Redemption Amount. 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;
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(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
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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
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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 1997-3, 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., 55 East
Monroe Street, 38th Floor, Chicago, Illinois 60603 Attention of: MBS Monitoring,
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.
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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.
-60-
<PAGE>
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
-61-
<PAGE>
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.
-62-
<PAGE>
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused
this 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 1997-3
By: Wilmington Trust Company
not in its individual capacity but
solely as Owner Trustee
By: ______________________________________
Name:
Title:
U.S. BANK NATIONAL ASSOCIATION,
d/b/a FIRST BANK NATIONAL ASSOCIATION, as
Indenture Trustee
By: ______________________________________
Name:
Title:
-63-
<PAGE>
STATE OF __________
COUNTY OF __________
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 1997-3, 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 August,
1997.
______________________________________________
Notary Public in and for the State of New York
My commission expires:
_________________________________
-64-
<PAGE>
STATE OF __________
COUNTY OF __________
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 U.S.
BANK NATIONAL ASSOCIATION, d/b/a 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 August,
1997.
______________________________________________
Notary Public in and for the State of New York
(Seal)
My commission expires:
_________________________________
-65-
<PAGE>
Exhibit A
CLASS A-1 NOTE
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THIS NOTE MAY NOT BE TRANSFERRED UNLESS THE OWNER TRUSTEE HAS RECEIVED A
CERTIFICATE FROM THE TRANSFEREE TO THE EFFECT THAT EITHER (I) THE TRANSFEREE IS
NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"),
AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (II) IF THE
TRANSFEREE IS A PLAN, OR IS ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A
PLAN, THE RELEVANT CONDITIONS FOR EXEMPTIVE RELIEF UNDER AT LEAST ONE OF THE
FOLLOWING PROHIBITED TRANSACTION CLASS EXEMPTIONS HAVE BEEN SATISFIED:
PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23 (RELATING TO TRANSACTIONS
EFFECTED BY AN "IN-HOUSE ASSET MANAGER"), PTCE 95-60 (RELATING TO TRANSACTIONS
INVOLVING INSURANCE COMPANY GENERAL ACCOUNTS), PTCE 91-38 (RELATING TO
TRANSACTIONS INVOLVING BANK COLLECTIVE INVESTMENT FUNDS), PTCE 90-1 (RELATING TO
TRANSACTIONS INVOLVING INSURANCE COMPANY POOLED SEPARATE ACCOUNTS) AND PTCE
84-14 (RELATING TO TRANSACTIONS EFFECTED BY A "QUALIFIED PROFESSIONAL ASSET
MANAGER"). EACH TRANSFEREE OF A BENEFICIAL INTEREST HEREIN THAT IS A PLAN, OR IS
A PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN, SHALL BE DEEMED
TO MAKE THE REPRESENTATION SET FORTH UNDER (II) ABOVE.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
<PAGE>
$17,215,000.00
No. A-1-1 CUSIP NO. 291701 AT 7
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-3
CLASS A-1 9.09% ASSET BACKED NOTES
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-3, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum of Seventeen Million Two Hundred Fifteen
Thousand Dollars ($17,215,000.00) payable on each Distribution Date in an amount
equal to the result obtained by multiplying (i) a fraction the numerator of
which is the initial principal amount of this Class A-1 Note and the denominator
of which is the aggregate principal amount of all Class A-1 Notes by (ii) the
aggregate amount, if any payable from the Note Distribution Account in respect
of principal on the Class A-1 Notes pursuant to Section 5.01(d) and (e) of the
Sale and Servicing Agreement dated as of August 1, 1997; provided, however, that
the entire unpaid principal amount of this Note shall be due and payable on the
earlier of (i) the Final Scheduled Distribution Date, (ii) the Termination Date,
if any, pursuant to Section 11.01 of the Sale and Servicing Agreement or (iii)
the date on which an Event of Default shall have occurred and be continuing, if
the Indenture Trustee or the Holders of Notes representing not less than a
majority of the Outstanding Amount of the Notes have declared the Notes to be
immediately due and payable in the manner provided in Section 5.02 of the
Indenture. Capitalized terms used but not defined herein are defined in Article
I of the Indenture (the "Indenture") dated as of August 1, 1997 between the
Issuer and U.S. Bank National Association, a national banking association, which
also contains rules as to construction that shall be applicable herein.
The Issuer will pay interest on this Note at the rate per annum
shown above on each Distribution Date until the principal of this Note is paid
or made available for payment in full, on the principal amount of this Note
outstanding on the preceding Distribution Date (after giving effect to all
payments of principal made on the preceding Distribution Date). Interest on this
Note will accrue for each Distribution Date during the calendar month preceding
such Distribution Date (each, a "Due Period"). Interest will be computed on the
basis of a 360-day year of twelve 30-day months. Such principal of and interest
on this Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
A-1-2
<PAGE>
Reference is made to the further provisions of this Note set forth
on the reverse hereof, which shall have the same effect as though fully set
forth on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture referred to on the
reverse hereof, or be valid or obligatory for any purpose.
A-1-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer, as of the date set
forth below.
Date: August __, 1997
EMPIRE FUNDING HOME LOAN OWNER
TRUST 1997-3
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement
By:
---------------------------------
Authorized Signatory
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: August __, 1997
U.S. BANK NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Indenture Trustee
By:
---------------------------------
Authorized Signatory
A-1-4
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-1 9.09% Asset Backed Notes (herein called the "Class
A-1 Notes"), all issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class A-1 Notes are subject to all
terms of the Indenture.
The Class A-1 Notes, the Class A-2 Notes, Class A-3 Notes, Class A-4
Notes, Class A-5 Notes, Class A-6 Notes, Class A-7 Notes, Class M-1 Notes, Class
M-2 Notes, Class B-1 Notes and Class B-2 Notes (collectively, the "Notes") are
and will be equally and ratably secured by the collateral pledged as security
therefor as provided in the Indenture.
Principal of the Class A-1 Notes will be payable on each
Distribution Date in an amount described on the face hereof. "Distribution Date"
means the 25th day of each month, or, if any such date is not a Business Day,
the next succeeding Business Day, commencing in September 1997.
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Final Scheduled Distribution Date
and the Termination Date, if any, pursuant to Section 11.01 of the Sale and
Servicing Agreement. Notwithstanding the foregoing, the entire unpaid principal
amount of the Notes shall be due and payable on the date on which an Event of
Default shall have occurred and be continuing and the Indenture Trustee, at the
direction or upon the prior written consent of the Holders of the Notes
representing not less than a majority of the Outstanding Amount of the Notes has
declared the Notes to be immediately due and payable in the manner provided in
Section 5.02 of the Indenture. All principal payments on the Class A-1 Notes
shall be made pro rata to the holders of the Class A-1 Notes entitled thereto.
Payments of interest on this Note due and payable on each
Distribution Date, together with the installment of principal, if any, to the
extent not in full payment of this Note, shall be made by check mailed to the
Person whose name appears as the Registered Holder of this Note (or one or more
Predecessor Notes) on the Note Register as of the close of business on each
Record Date, except that 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.), payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Such checks shall be mailed to
the Person entitled thereto at the address of such Person as it appears on the
Note Register as of the applicable Record Date without requiring that this Note
be submitted for notation of payment. Any reduction in the principal amount of
this Note (or any one or more Predecessor Notes) effected by any payments made
on any Distribution Date shall be binding upon all future Holders of this Note
and of any Note issued upon the registration of transfer hereof or in exchange
hereof or in lieu hereof, whether or not noted hereon. If funds are expected to
be available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Distribution Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will
A-1-5
<PAGE>
notify the Person who was the Registered Holder hereof as of the Record Date
preceding such Distribution Date by notice mailed or transmitted by facsimile
prior to such Distribution Date, and the amount then due and payable shall be
payable only upon presentation and surrender of this Note at the Indenture
Trustee's principal Corporate Trust Office or at the office of the Indenture
Trustee's agent appointed for such purposes located in (St. Paul, Minnesota).
As provided in the Indenture and the Sale and Servicing Agreement,
the Class A-1 Notes may be redeemed (a) in whole, but not in part, at the option
of the holders of greater than 50% of the Residual Interest Certificates on any
Distribution Date on and after the date on which the Pool Principal Balance is
less than 10% of the Initial Pool Principal Balance.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the Issuer may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, covenants and agrees that
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 under the Indenture or any certificate or other writing delivered in
connection 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 or employee
of the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed 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.
Each Noteholder or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, covenants and agrees by
accepting the benefits of
A-1-6
<PAGE>
the Indenture that such Noteholder or Note Owner will not at any time institute
against the Seller or the Issuer, or join in any institution against the Seller
or the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Notes, the
Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued
with the intention that, for federal, state and local income, single business
and franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this
Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the
Indenture Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the 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
and thereunder shall be determined in accordance with such laws.
A-1-7
<PAGE>
No reference herein to the Indenture and no provision of this Note
or of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of the Issuer in its individual capacity,
the Owner Trustee in its individual capacity, any owner of a beneficial interest
in the Issuer, or any of their respective partners, beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on this Note or performance of, or omission to perform,
any of the covenants, obligations or indemnifications contained in the
Indenture. The Holder of this Note by its acceptance hereof agrees that, except
as expressly provided in the Basic Documents, in the case of an Event of Default
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
A-1-8
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto:
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated:_______________
*/
-----------------------------------------
Signature Guaranteed:
*/
-----------------------------------------
- ----------
*/NOTICE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in 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 Securities Exchange Act of 1934, as amended.
A-1-9
<PAGE>
CLASS A-2 NOTE
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THIS NOTE MAY NOT BE TRANSFERRED UNLESS THE OWNER TRUSTEE HAS RECEIVED A
CERTIFICATE FROM THE TRANSFEREE TO THE EFFECT THAT EITHER (I) THE TRANSFEREE IS
NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"),
AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (II) IF THE
TRANSFEREE IS A PLAN, OR IS ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A
PLAN, THE RELEVANT CONDITIONS FOR EXEMPTIVE RELIEF UNDER AT LEAST ONE OF THE
FOLLOWING PROHIBITED TRANSACTION CLASS EXEMPTIONS HAVE BEEN SATISFIED:
PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23 (RELATING TO TRANSACTIONS
EFFECTED BY AN "IN-HOUSE ASSET MANAGER"), PTCE 95-60 (RELATING TO TRANSACTIONS
INVOLVING INSURANCE COMPANY GENERAL ACCOUNTS), PTCE 91-38 (RELATING TO
TRANSACTIONS INVOLVING BANK COLLECTIVE INVESTMENT FUNDS), PTCE 90-1 (RELATING TO
TRANSACTIONS INVOLVING INSURANCE COMPANY POOLED SEPARATE ACCOUNTS) AND PTCE
84-14 (RELATING TO TRANSACTIONS EFFECTED BY A "QUALIFIED PROFESSIONAL ASSET
MANAGER"). EACH TRANSFEREE OF A BENEFICIAL INTEREST HEREIN THAT IS A PLAN, OR IS
A PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN, SHALL BE DEEMED
TO MAKE THE REPRESENTATION SET FORTH UNDER (II) ABOVE.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
<PAGE>
$29,968,000.00
No. A-2-1 CUSIP NO. 291701 AU 4
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-3
CLASS A-2 7.75% ASSET BACKED NOTES
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-3, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum of Twenty-Nine Million Nine Hundred
Sixty-Eight Thousand Dollars ($29,968,000.00) payable on each Distribution Date
in an amount equal to the result obtained by multiplying (i) a fraction the
numerator of which is the initial principal amount of this Class A-2 Note and
the denominator of which is the aggregate principal amount of all Class A-2
Notes by (ii) the aggregate amount, if any payable from the Note Distribution
Account in respect of principal on the Class A-2 Notes pursuant to Section
5.01(d) and (e) of the Sale and Servicing Agreement dated as of August 1, 1997;
provided, however, that the entire unpaid principal amount of this Note shall be
due and payable on the earlier of (i) the Final Scheduled Distribution Date,
(ii) the Termination Date, if any, pursuant to Section 11.01 of the Sale and
Servicing Agreement or (iii) the date on which an Event of Default shall have
occurred and be continuing, if the Indenture Trustee or the Holders of Notes
representing not less than a majority of the Outstanding Amount of the Notes
have declared the Notes to be immediately due and payable in the manner provided
in Section 5.02 of the Indenture. Capitalized terms used but not defined herein
are defined in Article I of the Indenture (the "Indenture") dated as of August
1, 1997 between the Issuer and U.S. Bank National Association, a national
banking association, which also contains rules as to construction that shall be
applicable herein.
The Issuer will pay interest on this Note at the rate per annum
shown above on each Distribution Date until the principal of this Note is paid
or made available for payment in full, on the principal amount of this Note
outstanding on the preceding Distribution Date (after giving effect to all
payments of principal made on the preceding Distribution Date). Interest on this
Note will accrue for each Distribution Date during the calendar month preceding
such Distribution Date (each, a "Due Period"). Interest will be computed on the
basis of a 360-day year of twelve 30-day months. Such principal of and interest
on this Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
A-2-2
<PAGE>
Reference is made to the further provisions of this Note set forth
on the reverse hereof, which shall have the same effect as though fully set
forth on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture referred to on the
reverse hereof, or be valid or obligatory for any purpose.
A-2-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer, as of the date set
forth below.
Date: August __, 1997
EMPIRE FUNDING HOME LOAN OWNER
TRUST 1997-3
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement
By:
-------------------------------------
Authorized Signatory
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: August __, 1997
U.S. BANK NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Indenture Trustee
By:
-------------------------------------
Authorized Signatory
A-2-4
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-2 7.75% Asset Backed Notes (herein called the "Class
A-2 Notes"), all issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class A-2 Notes are subject to all
terms of the Indenture.
The Class A-1 Notes, the Class A-2 Notes, Class A-3 Notes, Class A-4
Notes, Class A-5 Notes, Class A-6 Notes, Class A-7 Notes, Class M-1 Notes, Class
M-2 Notes, Class B-1 Notes and Class B-2 Notes (collectively, the "Notes") are
and will be equally and ratably secured by the collateral pledged as security
therefor as provided in the Indenture.
Principal of the Class A-2 Notes will be payable on each
Distribution Date in an amount described on the face hereof. "Distribution Date"
means the 25th day of each month, or, if any such date is not a Business Day,
the next succeeding Business Day, commencing in September 1997.
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Final Scheduled Distribution Date
and the Termination Date, if any, pursuant to Section 11.01 of the Sale and
Servicing Agreement. Notwithstanding the foregoing, the entire unpaid principal
amount of the Notes shall be due and payable on the date on which an Event of
Default shall have occurred and be continuing and the Indenture Trustee, at the
direction or upon the prior written consent of the Holders of the Notes
representing not less than a majority of the Outstanding Amount of the Notes has
declared the Notes to be immediately due and payable in the manner provided in
Section 5.02 of the Indenture. All principal payments on the Class A-2 Notes
shall be made pro rata to the holders of the Class A-2 Notes entitled thereto.
Payments of interest on this Note due and payable on each
Distribution Date, together with the installment of principal, if any, to the
extent not in full payment of this Note, shall be made by check mailed to the
Person whose name appears as the Registered Holder of this Note (or one or more
Predecessor Notes) on the Note Register as of the close of business on each
Record Date, except that 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.), payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Such checks shall be mailed to
the Person entitled thereto at the address of such Person as it appears on the
Note Register as of the applicable Record Date without requiring that this Note
be submitted for notation of payment. Any reduction in the principal amount of
this Note (or any one or more Predecessor Notes) effected by any payments made
on any Distribution Date shall be binding upon all future Holders of this Note
and of any Note issued upon the registration of transfer hereof or in exchange
hereof or in lieu hereof, whether or not noted hereon. If funds are expected to
be available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Distribution Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will
A-2-5
<PAGE>
notify the Person who was the Registered Holder hereof as of the Record Date
preceding such Distribution Date by notice mailed or transmitted by facsimile
prior to such Distribution Date, and the amount then due and payable shall be
payable only upon presentation and surrender of this Note at the Indenture
Trustee's principal Corporate Trust Office or at the office of the Indenture
Trustee's agent appointed for such purposes located in (St. Paul, Minnesota).
As provided in the Indenture and the Sale and Servicing Agreement,
the Class A-2 Notes may be redeemed (a) in whole, but not in part, at the option
of the holders of greater than 50% of the Residual Interest Certificates on any
Distribution Date on and after the date on which the Pool Principal Balance is
less than 10% of the Initial Pool Principal Balance.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the Issuer may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, covenants and agrees that
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 under the Indenture or any certificate or other writing delivered in
connection 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 or employee
of the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed 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.
Each Noteholder or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, covenants and agrees by
accepting the benefits of
A-2-6
<PAGE>
the Indenture that such Noteholder or Note Owner will not at any time institute
against the Seller or the Issuer, or join in any institution against the Seller
or the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Notes, the
Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued
with the intention that, for federal, state and local income, single business
and franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this
Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the
Indenture Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the 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
and thereunder shall be determined in accordance with such laws.
A-2-7
<PAGE>
No reference herein to the Indenture and no provision of this Note
or of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of the Issuer in its individual capacity,
the Owner Trustee in its individual capacity, any owner of a beneficial interest
in the Issuer, or any of their respective partners, beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on this Note or performance of, or omission to perform,
any of the covenants, obligations or indemnifications contained in the
Indenture. The Holder of this Note by its acceptance hereof agrees that, except
as expressly provided in the Basic Documents, in the case of an Event of Default
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
A-2-8
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto:
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated:__________________
*/
-----------------------------------------
Signature Guaranteed:
*/
-----------------------------------------
- ----------
*/NOTICE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in 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 Securities Exchange Act of 1934, as amended.
A-2-9
<PAGE>
CLASS A-3 NOTE
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THIS NOTE MAY NOT BE TRANSFERRED UNLESS THE OWNER TRUSTEE HAS RECEIVED A
CERTIFICATE FROM THE TRANSFEREE TO THE EFFECT THAT EITHER (I) THE TRANSFEREE IS
NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"),
AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (II) IF THE
TRANSFEREE IS A PLAN, OR IS ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A
PLAN, THE RELEVANT CONDITIONS FOR EXEMPTIVE RELIEF UNDER AT LEAST ONE OF THE
FOLLOWING PROHIBITED TRANSACTION CLASS EXEMPTIONS HAVE BEEN SATISFIED:
PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23 (RELATING TO TRANSACTIONS
EFFECTED BY AN "IN-HOUSE ASSET MANAGER"), PTCE 95-60 (RELATING TO TRANSACTIONS
INVOLVING INSURANCE COMPANY GENERAL ACCOUNTS), PTCE 91-38 (RELATING TO
TRANSACTIONS INVOLVING BANK COLLECTIVE INVESTMENT FUNDS), PTCE 90-1 (RELATING TO
TRANSACTIONS INVOLVING INSURANCE COMPANY POOLED SEPARATE ACCOUNTS) AND PTCE
84-14 (RELATING TO TRANSACTIONS EFFECTED BY A "QUALIFIED PROFESSIONAL ASSET
MANAGER"). EACH TRANSFEREE OF A BENEFICIAL INTEREST HEREIN THAT IS A PLAN, OR IS
A PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN, SHALL BE DEEMED
TO MAKE THE REPRESENTATION SET FORTH UNDER (II) ABOVE.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
<PAGE>
$32,492,000.00
No. A-3-1 CUSIP NO. 291701 AV 2
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-3
CLASS A-3 7.35% ASSET BACKED NOTES
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-3, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum of Thirty-Two Million Four Hundred
Ninety-Two Thousand Dollars ($32,492,000.00) payable on each Distribution Date
in an amount equal to the result obtained by multiplying (i) a fraction the
numerator of which is the initial principal amount of this Class A-3 Note and
the denominator of which is the aggregate principal amount of all Class A-3
Notes by (ii) the aggregate amount, if any payable from the Note Distribution
Account in respect of principal on the Class A-3 Notes pursuant to Section
5.01(d) and (e) of the Sale and Servicing Agreement dated as of August 1, 1997;
provided, however, that the entire unpaid principal amount of this Note shall be
due and payable on the earlier of (i) the Final Scheduled Distribution Date,
(ii) the Termination Date, if any, pursuant to Section 11.01 of the Sale and
Servicing Agreement or (iii) the date on which an Event of Default shall have
occurred and be continuing, if the Indenture Trustee or the Holders of Notes
representing not less than a majority of the Outstanding Amount of the Notes
have declared the Notes to be immediately due and payable in the manner provided
in Section 5.02 of the Indenture. Capitalized terms used but not defined herein
are defined in Article I of the Indenture (the "Indenture") dated as of August
1, 1997 between the Issuer and U.S. Bank National Association, a national
banking association, which also contains rules as to construction that shall be
applicable herein.
The Issuer will pay interest on this Note at the rate per annum
shown above on each Distribution Date until the principal of this Note is paid
or made available for payment in full, on the principal amount of this Note
outstanding on the preceding Distribution Date (after giving effect to all
payments of principal made on the preceding Distribution Date). Interest on this
Note will accrue for each Distribution Date during the calendar month preceding
such Distribution Date (each, a "Due Period"). Interest will be computed on the
basis of a 360-day year of twelve 30-day months. Such principal of and interest
on this Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
A-3-2
<PAGE>
Reference is made to the further provisions of this Note set forth
on the reverse hereof, which shall have the same effect as though fully set
forth on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture referred to on the
reverse hereof, or be valid or obligatory for any purpose.
A-3-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer, as of the date set
forth below.
Date: August __, 1997
EMPIRE FUNDING HOME LOAN OWNER
TRUST 1997-3
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement
By:
------------------------------------
Authorized Signatory
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: August __, 1997
U.S. BANK NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Indenture Trustee
By:
-------------------------------------
Authorized Signatory
A-3-4
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-3 7.35% Asset Backed Notes (herein called the "Class
A-3 Notes"), all issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class A-3 Notes are subject to all
terms of the Indenture.
The Class A-1 Notes, the Class A-2 Notes, Class A-3 Notes, Class A-4
Notes, Class A-5 Notes, Class A-6 Notes, Class A-7 Notes, Class M-1 Notes, Class
M-2 Notes, Class B-1 Notes and Class B-2 Notes (collectively, the "Notes") are
and will be equally and ratably secured by the collateral pledged as security
therefor as provided in the Indenture.
Principal of the Class A-3 Notes will be payable on each
Distribution Date in an amount described on the face hereof. "Distribution Date"
means the 25th day of each month, or, if any such date is not a Business Day,
the next succeeding Business Day, commencing in September 1997.
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Final Scheduled Distribution Date
and the Termination Date, if any, pursuant to Section 11.01 of the Sale and
Servicing Agreement. Notwithstanding the foregoing, the entire unpaid principal
amount of the Notes shall be due and payable on the date on which an Event of
Default shall have occurred and be continuing and the Indenture Trustee, at the
direction or upon the prior written consent of the Holders of the Notes
representing not less than a majority of the Outstanding Amount of the Notes has
declared the Notes to be immediately due and payable in the manner provided in
Section 5.02 of the Indenture. All principal payments on the Class A-3 Notes
shall be made pro rata to the holders of the Class A-3 Notes entitled thereto.
Payments of interest on this Note due and payable on each
Distribution Date, together with the installment of principal, if any, to the
extent not in full payment of this Note, shall be made by check mailed to the
Person whose name appears as the Registered Holder of this Note (or one or more
Predecessor Notes) on the Note Register as of the close of business on each
Record Date, except that 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.), payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Such checks shall be mailed to
the Person entitled thereto at the address of such Person as it appears on the
Note Register as of the applicable Record Date without requiring that this Note
be submitted for notation of payment. Any reduction in the principal amount of
this Note (or any one or more Predecessor Notes) effected by any payments made
on any Distribution Date shall be binding upon all future Holders of this Note
and of any Note issued upon the registration of transfer hereof or in exchange
hereof or in lieu hereof, whether or not noted hereon. If funds are expected to
be available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Distribution Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will
A-3-5
<PAGE>
notify the Person who was the Registered Holder hereof as of the Record Date
preceding such Distribution Date by notice mailed or transmitted by facsimile
prior to such Distribution Date, and the amount then due and payable shall be
payable only upon presentation and surrender of this Note at the Indenture
Trustee's principal Corporate Trust Office or at the office of the Indenture
Trustee's agent appointed for such purposes located in (St. Paul, Minnesota).
As provided in the Indenture and the Sale and Servicing Agreement,
the Class A-3 Notes may be redeemed (a) in whole, but not in part, at the option
of the holders of greater than 50% of the Residual Interest Certificates on any
Distribution Date on and after the date on which the Pool Principal Balance is
less than 10% of the Initial Pool Principal Balance.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the Issuer may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, covenants and agrees that
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 under the Indenture or any certificate or other writing delivered in
connection 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 or employee
of the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed 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.
Each Noteholder or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, covenants and agrees by
accepting the benefits of
A-3-6
<PAGE>
the Indenture that such Noteholder or Note Owner will not at any time institute
against the Seller or the Issuer, or join in any institution against the Seller
or the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Notes, the
Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued
with the intention that, for federal, state and local income, single business
and franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this
Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the
Indenture Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the 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
and thereunder shall be determined in accordance with such laws.
A-3-7
<PAGE>
No reference herein to the Indenture and no provision of this Note
or of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of the Issuer in its individual capacity,
the Owner Trustee in its individual capacity, any owner of a beneficial interest
in the Issuer, or any of their respective partners, beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on this Note or performance of, or omission to perform,
any of the covenants, obligations or indemnifications contained in the
Indenture. The Holder of this Note by its acceptance hereof agrees that, except
as expressly provided in the Basic Documents, in the case of an Event of Default
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
A-3-8
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of
assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto:
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated:__________________
*/
-----------------------------------------
Signature Guaranteed:
*/
-----------------------------------------
- ----------
*/NOTICE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in 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 Securities Exchange Act of 1934, as amended.
A-3-9
<PAGE>
CLASS A-4 NOTE
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THIS NOTE MAY NOT BE TRANSFERRED UNLESS THE OWNER TRUSTEE HAS RECEIVED A
CERTIFICATE FROM THE TRANSFEREE TO THE EFFECT THAT EITHER (I) THE TRANSFEREE IS
NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"),
AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (II) IF THE
TRANSFEREE IS A PLAN, OR IS ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A
PLAN, THE RELEVANT CONDITIONS FOR EXEMPTIVE RELIEF UNDER AT LEAST ONE OF THE
FOLLOWING PROHIBITED TRANSACTION CLASS EXEMPTIONS HAVE BEEN SATISFIED:
PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23 (RELATING TO TRANSACTIONS
EFFECTED BY AN "IN-HOUSE ASSET MANAGER"), PTCE 95-60 (RELATING TO TRANSACTIONS
INVOLVING INSURANCE COMPANY GENERAL ACCOUNTS), PTCE 91-38 (RELATING TO
TRANSACTIONS INVOLVING BANK COLLECTIVE INVESTMENT FUNDS), PTCE 90-1 (RELATING TO
TRANSACTIONS INVOLVING INSURANCE COMPANY POOLED SEPARATE ACCOUNTS) AND PTCE
84-14 (RELATING TO TRANSACTIONS EFFECTED BY A "QUALIFIED PROFESSIONAL ASSET
MANAGER"). EACH TRANSFEREE OF A BENEFICIAL INTEREST HEREIN THAT IS A PLAN, OR IS
A PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN, SHALL BE DEEMED
TO MAKE THE REPRESENTATION SET FORTH UNDER (II) ABOVE.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
<PAGE>
$21,015,000.00
No. A-4-1 CUSIP NO. 291701 AW 0
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-3
CLASS A-4 7.16% ASSET BACKED NOTES
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-3, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum of Twenty-One Million Fifteen Thousand
Dollars ($21,015,000.00) payable on each Distribution Date in an amount equal to
the result obtained by multiplying (i) a fraction the numerator of which is the
initial principal amount of this Class A-4 Note and the denominator of which is
the aggregate principal amount of all Class A-4 Notes by (ii) the aggregate
amount, if any payable from the Note Distribution Account in respect of
principal on the Class A-4 Notes pursuant to Section 5.01(d) and (e) of the Sale
and Servicing Agreement dated as of August 1, 1997; provided, however, that the
entire unpaid principal amount of this Note shall be due and payable on the
earlier of (i) the Final Scheduled Distribution Date, (ii) the Termination Date,
if any, pursuant to Section 11.01 of the Sale and Servicing Agreement or (iii)
the date on which an Event of Default shall have occurred and be continuing, if
the Indenture Trustee or the Holders of Notes representing not less than a
majority of the Outstanding Amount of the Notes have declared the Notes to be
immediately due and payable in the manner provided in Section 5.02 of the
Indenture. Capitalized terms used but not defined herein are defined in Article
I of the Indenture (the "Indenture") dated as of August 1, 1997 between the
Issuer and U.S. Bank National Association, a national banking association, which
also contains rules as to construction that shall be applicable herein.
The Issuer will pay interest on this Note at the rate per annum
shown above on each Distribution Date until the principal of this Note is paid
or made available for payment in full, on the principal amount of this Note
outstanding on the preceding Distribution Date (after giving effect to all
payments of principal made on the preceding Distribution Date). Interest on this
Note will accrue for each Distribution Date during the calendar month preceding
such Distribution Date (each, a "Due Period"). Interest will be computed on the
basis of a 360-day year of twelve 30-day months. Such principal of and interest
on this Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
A-4-2
<PAGE>
Reference is made to the further provisions of this Note set forth
on the reverse hereof, which shall have the same effect as though fully set
forth on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture referred to on the
reverse hereof, or be valid or obligatory for any purpose.
A-4-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer, as of the date set
forth below.
Date: August __, 1997
EMPIRE FUNDING HOME LOAN OWNER
TRUST 1997-3
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement
By:
------------------------------------
Authorized Signatory
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: August __, 1997
U.S. BANK NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Indenture Trustee
By:
-------------------------------------
Authorized Signatory
A-4-4
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-4 7.16% Asset Backed Notes (herein called the "Class
A-4 Notes"), all issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class A-4 Notes are subject to all
terms of the Indenture.
The Class A-1 Notes, the Class A-2 Notes, Class A-3 Notes, Class A-4
Notes, Class A-5 Notes, Class A-6 Notes, Class A-7 Notes, Class M-1 Notes, Class
M-2 Notes, Class B-1 Notes and Class B-2 Notes (collectively, the "Notes") are
and will be equally and ratably secured by the collateral pledged as security
therefor as provided in the Indenture.
Principal of the Class A-4 Notes will be payable on each
Distribution Date in an amount described on the face hereof. "Distribution Date"
means the 25th day of each month, or, if any such date is not a Business Day,
the next succeeding Business Day, commencing in September 1997.
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Final Scheduled Distribution Date
and the Termination Date, if any, pursuant to Section 11.01 of the Sale and
Servicing Agreement. Notwithstanding the foregoing, the entire unpaid principal
amount of the Notes shall be due and payable on the date on which an Event of
Default shall have occurred and be continuing and the Indenture Trustee, at the
direction or upon the prior written consent of the Holders of the Notes
representing not less than a majority of the Outstanding Amount of the Notes has
declared the Notes to be immediately due and payable in the manner provided in
Section 5.02 of the Indenture. All principal payments on the Class A-4 Notes
shall be made pro rata to the holders of the Class A-4 Notes entitled thereto.
Payments of interest on this Note due and payable on each
Distribution Date, together with the installment of principal, if any, to the
extent not in full payment of this Note, shall be made by check mailed to the
Person whose name appears as the Registered Holder of this Note (or one or more
Predecessor Notes) on the Note Register as of the close of business on each
Record Date, except that 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.), payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Such checks shall be mailed to
the Person entitled thereto at the address of such Person as it appears on the
Note Register as of the applicable Record Date without requiring that this Note
be submitted for notation of payment. Any reduction in the principal amount of
this Note (or any one or more Predecessor Notes) effected by any payments made
on any Distribution Date shall be binding upon all future Holders of this Note
and of any Note issued upon the registration of transfer hereof or in exchange
hereof or in lieu hereof, whether or not noted hereon. If funds are expected to
be available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Distribution Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will
A-4-5
<PAGE>
notify the Person who was the Registered Holder hereof as of the Record Date
preceding such Distribution Date by notice mailed or transmitted by facsimile
prior to such Distribution Date, and the amount then due and payable shall be
payable only upon presentation and surrender of this Note at the Indenture
Trustee's principal Corporate Trust Office or at the office of the Indenture
Trustee's agent appointed for such purposes located in (St. Paul, Minnesota).
As provided in the Indenture and the Sale and Servicing Agreement,
the Class A-4 Notes may be redeemed (a) in whole, but not in part, at the option
of the holders of greater than 50% of the Residual Interest Certificates on any
Distribution Date on and after the date on which the Pool Principal Balance is
less than 10% of the Initial Pool Principal Balance.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the Issuer may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, covenants and agrees that
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 under the Indenture or any certificate or other writing delivered in
connection 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 or employee
of the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed 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.
Each Noteholder or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, covenants and agrees by
accepting the benefits of
A-4-6
<PAGE>
the Indenture that such Noteholder or Note Owner will not at any time institute
against the Seller or the Issuer, or join in any institution against the Seller
or the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Notes, the
Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued
with the intention that, for federal, state and local income, single business
and franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this
Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the
Indenture Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the 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
and thereunder shall be determined in accordance with such laws.
A-4-7
<PAGE>
No reference herein to the Indenture and no provision of this Note
or of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of the Issuer in its individual capacity,
the Owner Trustee in its individual capacity, any owner of a beneficial interest
in the Issuer, or any of their respective partners, beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on this Note or performance of, or omission to perform,
any of the covenants, obligations or indemnifications contained in the
Indenture. The Holder of this Note by its acceptance hereof agrees that, except
as expressly provided in the Basic Documents, in the case of an Event of Default
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
A-4-8
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto:
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated:__________
*/
-----------------------------------------
Signature Guaranteed:
*/
-----------------------------------------
- ----------
*/NOTICE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in 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 Securities Exchange Act of 1934, as amended.
A-4-9
<PAGE>
CLASS A-5 NOTE
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THIS NOTE MAY NOT BE TRANSFERRED UNLESS THE OWNER TRUSTEE HAS RECEIVED A
CERTIFICATE FROM THE TRANSFEREE TO THE EFFECT THAT EITHER (I) THE TRANSFEREE IS
NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"),
AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (II) IF THE
TRANSFEREE IS A PLAN, OR IS ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A
PLAN, THE RELEVANT CONDITIONS FOR EXEMPTIVE RELIEF UNDER AT LEAST ONE OF THE
FOLLOWING PROHIBITED TRANSACTION CLASS EXEMPTIONS HAVE BEEN SATISFIED:
PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23 (RELATING TO TRANSACTIONS
EFFECTED BY AN "IN-HOUSE ASSET MANAGER"), PTCE 95-60 (RELATING TO TRANSACTIONS
INVOLVING INSURANCE COMPANY GENERAL ACCOUNTS), PTCE 91-38 (RELATING TO
TRANSACTIONS INVOLVING BANK COLLECTIVE INVESTMENT FUNDS), PTCE 90-1 (RELATING TO
TRANSACTIONS INVOLVING INSURANCE COMPANY POOLED SEPARATE ACCOUNTS) AND PTCE
84-14 (RELATING TO TRANSACTIONS EFFECTED BY A "QUALIFIED PROFESSIONAL ASSET
MANAGER"). EACH TRANSFEREE OF A BENEFICIAL INTEREST HEREIN THAT IS A PLAN, OR IS
A PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN, SHALL BE DEEMED
TO MAKE THE REPRESENTATION SET FORTH UNDER (II) ABOVE.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
<PAGE>
$24,232,000.00
No. A-5-1 CUSIP NO. 291701 AX 8
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-3
CLASS A-5 7.21% ASSET BACKED NOTES
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-3, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum of Twenty-Four Million Two Hundred
Thirty-Two Thousand Dollars ($24,232,000.00) payable on each Distribution Date
in an amount equal to the result obtained by multiplying (i) a fraction the
numerator of which is the initial principal amount of this Class A-5 Note and
the denominator of which is the aggregate principal amount of all Class A-5
Notes by (ii) the aggregate amount, if any payable from the Note Distribution
Account in respect of principal on the Class A-5 Notes pursuant to Section
5.01(d) and (e) of the Sale and Servicing Agreement dated as of August 1, 1997;
provided, however, that the entire unpaid principal amount of this Note shall be
due and payable on the earlier of (i) the Final Scheduled Distribution Date,
(ii) the Termination Date, if any, pursuant to Section 11.01 of the Sale and
Servicing Agreement or (iii) the date on which an Event of Default shall have
occurred and be continuing, if the Indenture Trustee or the Holders of Notes
representing not less than a majority of the Outstanding Amount of the Notes
have declared the Notes to be immediately due and payable in the manner provided
in Section 5.02 of the Indenture. Capitalized terms used but not defined herein
are defined in Article I of the Indenture (the "Indenture") dated as of August
1, 1997 between the Issuer and U.S. Bank National Association, a national
banking association, which also contains rules as to construction that shall be
applicable herein.
The Issuer will pay interest on this Note at the rate per annum
shown above on each Distribution Date until the principal of this Note is paid
or made available for payment in full, on the principal amount of this Note
outstanding on the preceding Distribution Date (after giving effect to all
payments of principal made on the preceding Distribution Date). Interest on this
Note will accrue for each Distribution Date during the calendar month preceding
such Distribution Date (each, a "Due Period"). Interest will be computed on the
basis of a 360-day year of twelve 30-day months. Such principal of and interest
on this Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
A-5-2
<PAGE>
Reference is made to the further provisions of this Note set forth
on the reverse hereof, which shall have the same effect as though fully set
forth on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture referred to on the
reverse hereof, or be valid or obligatory for any purpose.
A-5-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer, as of the date set
forth below.
Date: August __, 1997
EMPIRE FUNDING HOME LOAN OWNER
TRUST 1997-3
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement
By:
------------------------------------
Authorized Signatory
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: August __, 1997
U.S. BANK NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Indenture Trustee
By:
-------------------------------------
Authorized Signatory
A-5-4
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-5 7.21% Asset Backed Notes (herein called the "Class
A-5 Notes"), all issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class A-5 Notes are subject to all
terms of the Indenture.
The Class A-1 Notes, the Class A-2 Notes, Class A-3 Notes, Class A-4
Notes, Class A-5 Notes, Class A-6 Notes, Class A-7 Notes, Class M-1 Notes, Class
M-2 Notes, Class B-1 Notes and Class B-2 Notes (collectively, the "Notes") are
and will be equally and ratably secured by the collateral pledged as security
therefor as provided in the Indenture.
Principal of the Class A-5 Notes will be payable on each
Distribution Date in an amount described on the face hereof. "Distribution Date"
means the 25th day of each month, or, if any such date is not a Business Day,
the next succeeding Business Day, commencing in September 1997.
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Final Scheduled Distribution Date
and the Termination Date, if any, pursuant to Section 11.01 of the Sale and
Servicing Agreement. Notwithstanding the foregoing, the entire unpaid principal
amount of the Notes shall be due and payable on the date on which an Event of
Default shall have occurred and be continuing and the Indenture Trustee, at the
direction or upon the prior written consent of the Holders of the Notes
representing not less than a majority of the Outstanding Amount of the Notes has
declared the Notes to be immediately due and payable in the manner provided in
Section 5.02 of the Indenture. All principal payments on the Class A-5 Notes
shall be made pro rata to the holders of the Class A-5 Notes entitled thereto.
Payments of interest on this Note due and payable on each
Distribution Date, together with the installment of principal, if any, to the
extent not in full payment of this Note, shall be made by check mailed to the
Person whose name appears as the Registered Holder of this Note (or one or more
Predecessor Notes) on the Note Register as of the close of business on each
Record Date, except that 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.), payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Such checks shall be mailed to
the Person entitled thereto at the address of such Person as it appears on the
Note Register as of the applicable Record Date without requiring that this Note
be submitted for notation of payment. Any reduction in the principal amount of
this Note (or any one or more Predecessor Notes) effected by any payments made
on any Distribution Date shall be binding upon all future Holders of this Note
and of any Note issued upon the registration of transfer hereof or in exchange
hereof or in lieu hereof, whether or not noted hereon. If funds are expected to
be available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Distribution Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will
A-5-5
<PAGE>
notify the Person who was the Registered Holder hereof as of the Record Date
preceding such Distribution Date by notice mailed or transmitted by facsimile
prior to such Distribution Date, and the amount then due and payable shall be
payable only upon presentation and surrender of this Note at the Indenture
Trustee's principal Corporate Trust Office or at the office of the Indenture
Trustee's agent appointed for such purposes located in (St. Paul, Minnesota).
As provided in the Indenture and the Sale and Servicing Agreement,
the Class A-5 Notes may be redeemed (a) in whole, but not in part, at the option
of the holders of greater than 50% of the Residual Interest Certificates on any
Distribution Date on and after the date on which the Pool Principal Balance is
less than 10% of the Initial Pool Principal Balance.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the Issuer may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, covenants and agrees that
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 under the Indenture or any certificate or other writing delivered in
connection 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 or employee
of the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed 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.
Each Noteholder or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, covenants and agrees by
accepting the benefits of
A-5-6
<PAGE>
the Indenture that such Noteholder or Note Owner will not at any time institute
against the Seller or the Issuer, or join in any institution against the Seller
or the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Notes, the
Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued
with the intention that, for federal, state and local income, single business
and franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this
Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the
Indenture Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the 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
and thereunder shall be determined in accordance with such laws.
A-5-7
<PAGE>
No reference herein to the Indenture and no provision of this Note
or of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of the Issuer in its individual capacity,
the Owner Trustee in its individual capacity, any owner of a beneficial interest
in the Issuer, or any of their respective partners, beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on this Note or performance of, or omission to perform,
any of the covenants, obligations or indemnifications contained in the
Indenture. The Holder of this Note by its acceptance hereof agrees that, except
as expressly provided in the Basic Documents, in the case of an Event of Default
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
A-5-8
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto:
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated:__________
*/
-----------------------------------------
Signature Guaranteed:
*/
-----------------------------------------
- ----------
*/NOTICE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in 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 Securities Exchange Act of 1934, as amended.
A-5-9
<PAGE>
CLASS A-6 NOTE
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THIS NOTE MAY NOT BE TRANSFERRED UNLESS THE OWNER TRUSTEE HAS RECEIVED A
CERTIFICATE FROM THE TRANSFEREE TO THE EFFECT THAT EITHER (I) THE TRANSFEREE IS
NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"),
AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (II) IF THE
TRANSFEREE IS A PLAN, OR IS ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A
PLAN, THE RELEVANT CONDITIONS FOR EXEMPTIVE RELIEF UNDER AT LEAST ONE OF THE
FOLLOWING PROHIBITED TRANSACTION CLASS EXEMPTIONS HAVE BEEN SATISFIED:
PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23 (RELATING TO TRANSACTIONS
EFFECTED BY AN "IN-HOUSE ASSET MANAGER"), PTCE 95-60 (RELATING TO TRANSACTIONS
INVOLVING INSURANCE COMPANY GENERAL ACCOUNTS), PTCE 91-38 (RELATING TO
TRANSACTIONS INVOLVING BANK COLLECTIVE INVESTMENT FUNDS), PTCE 90-1 (RELATING TO
TRANSACTIONS INVOLVING INSURANCE COMPANY POOLED SEPARATE ACCOUNTS) AND PTCE
84-14 (RELATING TO TRANSACTIONS EFFECTED BY A "QUALIFIED PROFESSIONAL ASSET
MANAGER"). EACH TRANSFEREE OF A BENEFICIAL INTEREST HEREIN THAT IS A PLAN, OR IS
A PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN, SHALL BE DEEMED
TO MAKE THE REPRESENTATION SET FORTH UNDER (II) ABOVE.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
<PAGE>
$20,550,000.00
No. A-6-1 CUSIP NO. 291701 AY 6
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-3
CLASS A-6 7.43% ASSET BACKED NOTES
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-3, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum of Twenty Million Five Hundred Fifty
Thousand Dollars ($20,550,000.00) payable on each Distribution Date in an amount
equal to the result obtained by multiplying (i) a fraction the numerator of
which is the initial principal amount of this Class A-6 Note and the denominator
of which is the aggregate principal amount of all Class A-6 Notes by (ii) the
aggregate amount, if any payable from the Note Distribution Account in respect
of principal on the Class A-6 Notes pursuant to Section 5.01(d) and (e) of the
Sale and Servicing Agreement dated as of August 1, 1997; provided, however, that
the entire unpaid principal amount of this Note shall be due and payable on the
earlier of (i) the Final Scheduled Distribution Date, (ii) the Termination Date,
if any, pursuant to Section 11.01 of the Sale and Servicing Agreement or (iii)
the date on which an Event of Default shall have occurred and be continuing, if
the Indenture Trustee or the Holders of Notes representing not less than a
majority of the Outstanding Amount of the Notes have declared the Notes to be
immediately due and payable in the manner provided in Section 5.02 of the
Indenture. Capitalized terms used but not defined herein are defined in Article
I of the Indenture (the "Indenture") dated as of August 1, 1997 between the
Issuer and U.S. Bank National Association, a national banking association, which
also contains rules as to construction that shall be applicable herein.
The Issuer will pay interest on this Note at the rate per annum
shown above on each Distribution Date until the principal of this Note is paid
or made available for payment in full, on the principal amount of this Note
outstanding on the preceding Distribution Date (after giving effect to all
payments of principal made on the preceding Distribution Date). Interest on this
Note will accrue for each Distribution Date during the calendar month preceding
such Distribution Date (each, a "Due Period"). Interest will be computed on the
basis of a 360-day year of twelve 30-day months. Such principal of and interest
on this Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
A-6-2
<PAGE>
Reference is made to the further provisions of this Note set forth
on the reverse hereof, which shall have the same effect as though fully set
forth on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture referred to on the
reverse hereof, or be valid or obligatory for any purpose.
A-6-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer, as of the date set
forth below.
Date: August __, 1997
EMPIRE FUNDING HOME LOAN OWNER
TRUST 1997-3
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement
By:
------------------------------------
Authorized Signatory
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: August __, 1997
U.S. BANK NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Indenture Trustee
By:
-------------------------------------
Authorized Signatory
A-6-4
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-6 7.43% Asset Backed Notes (herein called the "Class
A-6 Notes"), all issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class A-6 Notes are subject to all
terms of the Indenture.
The Class A-1 Notes, the Class A-2 Notes, Class A-3 Notes, Class A-4
Notes, Class A-5 Notes, Class A-6 Notes, Class A-7 Notes, Class M-1 Notes, Class
M-2 Notes, Class B-1 Notes and Class B-2 Notes (collectively, the "Notes") are
and will be equally and ratably secured by the collateral pledged as security
therefor as provided in the Indenture.
Principal of the Class A-6 Notes will be payable on each
Distribution Date in an amount described on the face hereof. "Distribution Date"
means the 25th day of each month, or, if any such date is not a Business Day,
the next succeeding Business Day, commencing in September 1997.
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Final Scheduled Distribution Date
and the Termination Date, if any, pursuant to Section 11.01 of the Sale and
Servicing Agreement. Notwithstanding the foregoing, the entire unpaid principal
amount of the Notes shall be due and payable on the date on which an Event of
Default shall have occurred and be continuing and the Indenture Trustee, at the
direction or upon the prior written consent of the Holders of the Notes
representing not less than a majority of the Outstanding Amount of the Notes has
declared the Notes to be immediately due and payable in the manner provided in
Section 5.02 of the Indenture. All principal payments on the Class A-6 Notes
shall be made pro rata to the holders of the Class A-6 Notes entitled thereto.
Payments of interest on this Note due and payable on each
Distribution Date, together with the installment of principal, if any, to the
extent not in full payment of this Note, shall be made by check mailed to the
Person whose name appears as the Registered Holder of this Note (or one or more
Predecessor Notes) on the Note Register as of the close of business on each
Record Date, except that 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.), payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Such checks shall be mailed to
the Person entitled thereto at the address of such Person as it appears on the
Note Register as of the applicable Record Date without requiring that this Note
be submitted for notation of payment. Any reduction in the principal amount of
this Note (or any one or more Predecessor Notes) effected by any payments made
on any Distribution Date shall be binding upon all future Holders of this Note
and of any Note issued upon the registration of transfer hereof or in exchange
hereof or in lieu hereof, whether or not noted hereon. If funds are expected to
be available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Distribution Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will
A-6-5
<PAGE>
notify the Person who was the Registered Holder hereof as of the Record Date
preceding such Distribution Date by notice mailed or transmitted by facsimile
prior to such Distribution Date, and the amount then due and payable shall be
payable only upon presentation and surrender of this Note at the Indenture
Trustee's principal Corporate Trust Office or at the office of the Indenture
Trustee's agent appointed for such purposes located in (St. Paul, Minnesota).
As provided in the Indenture and the Sale and Servicing Agreement,
the Class A-6 Notes may be redeemed (a) in whole, but not in part, at the option
of the holders of greater than 50% of the Residual Interest Certificates on any
Distribution Date on and after the date on which the Pool Principal Balance is
less than 10% of the Initial Pool Principal Balance.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the Issuer may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, covenants and agrees that
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 under the Indenture or any certificate or other writing delivered in
connection 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 or employee
of the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed 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.
Each Noteholder or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, covenants and agrees by
accepting the benefits of
A-6-6
<PAGE>
the Indenture that such Noteholder or Note Owner will not at any time institute
against the Seller or the Issuer, or join in any institution against the Seller
or the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Notes, the
Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued
with the intention that, for federal, state and local income, single business
and franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this
Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the
Indenture Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the 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
and thereunder shall be determined in accordance with such laws.
A-6-7
<PAGE>
No reference herein to the Indenture and no provision of this Note
or of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of the Issuer in its individual capacity,
the Owner Trustee in its individual capacity, any owner of a beneficial interest
in the Issuer, or any of their respective partners, beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on this Note or performance of, or omission to perform,
any of the covenants, obligations or indemnifications contained in the
Indenture. The Holder of this Note by its acceptance hereof agrees that, except
as expressly provided in the Basic Documents, in the case of an Event of Default
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
A-6-8
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto:
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated:
*/
-----------------------------------------
Signature Guaranteed:
*/
-----------------------------------------
- ----------
*/NOTICE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in 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 Securities Exchange Act of 1934, as amended.
A-6-9
<PAGE>
CLASS A-7 NOTE
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THIS NOTE MAY NOT BE TRANSFERRED UNLESS THE OWNER TRUSTEE HAS RECEIVED A
CERTIFICATE FROM THE TRANSFEREE TO THE EFFECT THAT EITHER (I) THE TRANSFEREE IS
NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"),
AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (II) IF THE
TRANSFEREE IS A PLAN, OR IS ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A
PLAN, THE RELEVANT CONDITIONS FOR EXEMPTIVE RELIEF UNDER AT LEAST ONE OF THE
FOLLOWING PROHIBITED TRANSACTION CLASS EXEMPTIONS HAVE BEEN SATISFIED:
PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23 (RELATING TO TRANSACTIONS
EFFECTED BY AN "IN-HOUSE ASSET MANAGER"), PTCE 95-60 (RELATING TO TRANSACTIONS
INVOLVING INSURANCE COMPANY GENERAL ACCOUNTS), PTCE 91-38 (RELATING TO
TRANSACTIONS INVOLVING BANK COLLECTIVE INVESTMENT FUNDS), PTCE 90-1 (RELATING TO
TRANSACTIONS INVOLVING INSURANCE COMPANY POOLED SEPARATE ACCOUNTS) AND PTCE
84-14 (RELATING TO TRANSACTIONS EFFECTED BY A "QUALIFIED PROFESSIONAL ASSET
MANAGER"). EACH TRANSFEREE OF A BENEFICIAL INTEREST HEREIN THAT IS A PLAN, OR IS
A PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN, SHALL BE DEEMED
TO MAKE THE REPRESENTATION SET FORTH UNDER (II) ABOVE.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
<PAGE>
$12,851,519.41
No. A-7-1 CUSIP NO. 291701 AZ 3
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-3
CLASS A-7 ASSET BACKED NOTES
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-3, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum of Twelve Million Eight Hundred Fifty-One
Thousand Five Hundred Nineteen Dollars and Forty-One Cents ($12,851,519.41)
payable on each Distribution Date in an amount equal to the result obtained by
multiplying (i) a fraction the numerator of which is the initial principal
amount of this Class A-7 Note and the denominator of which is the aggregate
principal amount of all Class A-7 Notes by (ii) the aggregate amount, if any
payable from the Note Distribution Account in respect of principal on the Class
A-7 Notes pursuant to Section 5.01(d) and (e) of the Sale and Servicing
Agreement dated as of August 1, 1997; provided, however, that the entire unpaid
principal amount of this Note shall be due and payable on the earlier of (i) the
Final Scheduled Distribution Date, (ii) the Termination Date, if any, pursuant
to Section 11.01 of the Sale and Servicing Agreement or (iii) the date on which
an Event of Default shall have occurred and be continuing, if the Indenture
Trustee or the Holders of Notes representing not less than a majority of the
Outstanding Amount of the Notes have declared the Notes to be immediately due
and payable in the manner provided in Section 5.02 of the Indenture. Capitalized
terms used but not defined herein are defined in Article I of the Indenture (the
"Indenture") dated as of August 1, 1997 between the Issuer and U.S. Bank
National Association, a national banking association, which also contains rules
as to construction that shall be applicable herein.
The Issuer will pay interest on this Note at a rate per annum equal
to 7.62% on each Distribution Date until the principal of this Note is paid or
made available for payment in full, on the principal amount of this Note
outstanding on the preceding Distribution Date (after giving effect to all
payments of principal made on the preceding Distribution Date); provided,
however, that this Note shall accrue interest at a rate per annum equal to 8.12%
from and after the first day of the month in which the Clean-up Call Date (as
defined in the Sale and Servicing Agreement) occurs. Interest on this Note will
accrue for each Distribution Date during the calendar month preceding such
Distribution Date (each, a "Due Period"). Interest will be computed on the basis
of a 360-day year of twelve 30-day months. Such principal of and interest on
this Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied
A-7-2
<PAGE>
first to interest due and payable on this Note as provided above and then to the
unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth
on the reverse hereof, which shall have the same effect as though fully set
forth on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture referred to on the
reverse hereof, or be valid or obligatory for any purpose.
A-7-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer, as of the date set
forth below.
Date: August __, 1997
EMPIRE FUNDING HOME LOAN OWNER
TRUST 1997-3
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement
By:
------------------------------------
Authorized Signatory
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: August __, 1997
U.S. BANK NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Indenture Trustee
By:
-------------------------------------
Authorized Signatory
A-7-4
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-7 Asset Backed Notes (herein called the "Class A-7
Notes"), all issued under the Indenture, to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights and obligations thereunder of the Issuer, the Indenture Trustee and the
Holders of the Notes. The Class A-7 Notes are subject to all terms of the
Indenture.
The Class A-1 Notes, the Class A-2 Notes, Class A-3 Notes, Class A-4
Notes, Class A-5 Notes, Class A-6 Notes, Class A-7 Notes, Class M-1 Notes, Class
M-2 Notes, Class B-1 Notes and Class B-2 Notes (collectively, the "Notes") are
and will be equally and ratably secured by the collateral pledged as security
therefor as provided in the Indenture.
Principal of the Class A-7 Notes will be payable on each
Distribution Date in an amount described on the face hereof. "Distribution Date"
means the 25th day of each month, or, if any such date is not a Business Day,
the next succeeding Business Day, commencing in September 1997.
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Final Scheduled Distribution Date
and the Termination Date, if any, pursuant to Section 11.01 of the Sale and
Servicing Agreement. Notwithstanding the foregoing, the entire unpaid principal
amount of the Notes shall be due and payable on the date on which an Event of
Default shall have occurred and be continuing and the Indenture Trustee, at the
direction or upon the prior written consent of the Holders of the Notes
representing not less than a majority of the Outstanding Amount of the Notes has
declared the Notes to be immediately due and payable in the manner provided in
Section 5.02 of the Indenture. All principal payments on the Class A-7 Notes
shall be made pro rata to the holders of the Class A-7 Notes entitled thereto.
Payments of interest on this Note due and payable on each
Distribution Date, together with the installment of principal, if any, to the
extent not in full payment of this Note, shall be made by check mailed to the
Person whose name appears as the Registered Holder of this Note (or one or more
Predecessor Notes) on the Note Register as of the close of business on each
Record Date, except that 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.), payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Such checks shall be mailed to
the Person entitled thereto at the address of such Person as it appears on the
Note Register as of the applicable Record Date without requiring that this Note
be submitted for notation of payment. Any reduction in the principal amount of
this Note (or any one or more Predecessor Notes) effected by any payments made
on any Distribution Date shall be binding upon all future Holders of this Note
and of any Note issued upon the registration of transfer hereof or in exchange
hereof or in lieu hereof, whether or not noted hereon. If funds are expected to
be available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Distribution Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will
A-7-5
<PAGE>
notify the Person who was the Registered Holder hereof as of the Record Date
preceding such Distribution Date by notice mailed or transmitted by facsimile
prior to such Distribution Date, and the amount then due and payable shall be
payable only upon presentation and surrender of this Note at the Indenture
Trustee's principal Corporate Trust Office or at the office of the Indenture
Trustee's agent appointed for such purposes located in (St. Paul, Minnesota).
As provided in the Indenture and the Sale and Servicing Agreement,
the Class A-7 Notes may be redeemed (a) in whole, but not in part, at the option
of the holders of greater than 50% of the Residual Interest Certificates on any
Distribution Date on and after the date on which the Pool Principal Balance is
less than 10% of the Initial Pool Principal Balance.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the Issuer may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, covenants and agrees that
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 under the Indenture or any certificate or other writing delivered in
connection 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 or employee
of the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed 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.
Each Noteholder or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, covenants and agrees by
accepting the benefits of
A-7-6
<PAGE>
the Indenture that such Noteholder or Note Owner will not at any time institute
against the Seller or the Issuer, or join in any institution against the Seller
or the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Notes, the
Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued
with the intention that, for federal, state and local income, single business
and franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this
Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the
Indenture Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the 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
and thereunder shall be determined in accordance with such laws.
A-7-7
<PAGE>
No reference herein to the Indenture and no provision of this Note
or of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of the Issuer in its individual capacity,
the Owner Trustee in its individual capacity, any owner of a beneficial interest
in the Issuer, or any of their respective partners, beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on this Note or performance of, or omission to perform,
any of the covenants, obligations or indemnifications contained in the
Indenture. The Holder of this Note by its acceptance hereof agrees that, except
as expressly provided in the Basic Documents, in the case of an Event of Default
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
A-7-8
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto:
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated:
*/
-----------------------------------------
Signature Guaranteed:
*/
-----------------------------------------
- ----------
*/NOTICE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in 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 Securities Exchange Act of 1934, as amended.
A-7-9
<PAGE>
CLASS M-1 NOTE
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THIS NOTE MAY NOT BE TRANSFERRED UNLESS THE OWNER TRUSTEE HAS RECEIVED A
CERTIFICATE FROM THE TRANSFEREE TO THE EFFECT THAT EITHER (I) THE TRANSFEREE IS
NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"),
AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (II) IF THE
TRANSFEREE IS A PLAN, OR IS ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A
PLAN, THE RELEVANT CONDITIONS FOR EXEMPTIVE RELIEF UNDER AT LEAST ONE OF THE
FOLLOWING PROHIBITED TRANSACTION CLASS EXEMPTIONS HAVE BEEN SATISFIED:
PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23 (RELATING TO TRANSACTIONS
EFFECTED BY AN "IN-HOUSE ASSET MANAGER"), PTCE 95-60 (RELATING TO TRANSACTIONS
INVOLVING INSURANCE COMPANY GENERAL ACCOUNTS), PTCE 91-38 (RELATING TO
TRANSACTIONS INVOLVING BANK COLLECTIVE INVESTMENT FUNDS), PTCE 90-1 (RELATING TO
TRANSACTIONS INVOLVING INSURANCE COMPANY POOLED SEPARATE ACCOUNTS) AND PTCE
84-14 (RELATING TO TRANSACTIONS EFFECTED BY A "QUALIFIED PROFESSIONAL ASSET
MANAGER"). EACH TRANSFEREE OF A BENEFICIAL INTEREST HEREIN THAT IS A PLAN, OR IS
A PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN, SHALL BE DEEMED
TO MAKE THE REPRESENTATION SET FORTH UNDER (II) ABOVE.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
<PAGE>
$33,805,733.68
No. M-1-1 CUSIP NO. 291701 BA 7
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-3
CLASS M-1 7.45% ASSET BACKED NOTES
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-3, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum of Thirty-Three Million Eight Hundred Five
Thousand Seven Hundred Thirty-Three Dollars and Sixty-Eight Cents
($33,805,733.68) payable on each Distribution Date in an amount equal to the
result obtained by multiplying (i) a fraction the numerator of which is the
initial principal amount of this Class M-1 Note and the denominator of which is
the aggregate principal amount of all Class M-1 Notes by (ii) the aggregate
amount, if any payable from the Note Distribution Account in respect of
principal on the Class M-1 Notes pursuant to Section 5.01(d) and (e) of the Sale
and Servicing Agreement dated as of August 1, 1997; provided, however, that the
entire unpaid principal amount of this Note shall be due and payable on the
earlier of (i) the Final Scheduled Distribution Date, (ii) the Termination Date,
if any, pursuant to Section 11.01 of the Sale and Servicing Agreement or (iii)
the date on which an Event of Default shall have occurred and be continuing, if
the Indenture Trustee or the Holders of Notes representing not less than a
majority of the Outstanding Amount of the Notes have declared the Notes to be
immediately due and payable in the manner provided in Section 5.02 of the
Indenture. Capitalized terms used but not defined herein are defined in Article
I of the Indenture (the "Indenture") dated as of August 1, 1997 between the
Issuer and U.S. Bank National Association, a national banking association, which
also contains rules as to construction that shall be applicable herein.
The Issuer will pay interest on this Note at the rate per annum
shown above on each Distribution Date until the principal of this Note is paid
or made available for payment in full, on the principal amount of this Note
outstanding on the preceding Distribution Date (after giving effect to all
payments of principal made on the preceding Distribution Date). Interest on this
Note will accrue for each Distribution Date during the calendar month preceding
such Distribution Date (each, a "Due Period"). Interest will be computed on the
basis of a 360-day year of twelve 30-day months. Such principal of and interest
on this Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
M-1-2
<PAGE>
Reference is made to the further provisions of this Note set forth
on the reverse hereof, which shall have the same effect as though fully set
forth on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture referred to on the
reverse hereof, or be valid or obligatory for any purpose.
M-1-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer, as of the date set
forth below.
Date: August __, 1997
EMPIRE FUNDING HOME LOAN OWNER
TRUST 1997-3
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement
By:
------------------------------------
Authorized Signatory
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: August __, 1997
U.S. BANK NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Indenture Trustee
By:
-------------------------------------
Authorized Signatory
M-1-4
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class M-1 7.45% Asset Backed Notes (herein called the "Class
M-1 Notes"), all issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class M-1 Notes are subject to all
terms of the Indenture.
The Class A-1 Notes, the Class A-2 Notes, Class A-3 Notes, Class A-4
Notes, Class A-5 Notes, Class A-6 Notes, Class A-7 Notes, Class M-1 Notes, Class
M-2 Notes, Class B-1 Notes and Class B-2 Notes (collectively, the "Notes") are
and will be equally and ratably secured by the collateral pledged as security
therefor as provided in the Indenture.
Principal of the Class M-1 Notes will be payable on each
Distribution Date in an amount described on the face hereof. "Distribution Date"
means the 25th day of each month, or, if any such date is not a Business Day,
the next succeeding Business Day, commencing in September 1997.
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Final Scheduled Distribution Date
and the Termination Date, if any, pursuant to Section 11.01 of the Sale and
Servicing Agreement. Notwithstanding the foregoing, the entire unpaid principal
amount of the Notes shall be due and payable on the date on which an Event of
Default shall have occurred and be continuing and the Indenture Trustee, at the
direction or upon the prior written consent of the Holders of the Notes
representing not less than a majority of the Outstanding Amount of the Notes has
declared the Notes to be immediately due and payable in the manner provided in
Section 5.02 of the Indenture. All principal payments on the Class M-1 Notes
shall be made pro rata to the holders of the Class M-1 Notes entitled thereto.
Payments of interest on this Note due and payable on each
Distribution Date, together with the installment of principal, if any, to the
extent not in full payment of this Note, shall be made by check mailed to the
Person whose name appears as the Registered Holder of this Note (or one or more
Predecessor Notes) on the Note Register as of the close of business on each
Record Date, except that 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.), payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Such checks shall be mailed to
the Person entitled thereto at the address of such Person as it appears on the
Note Register as of the applicable Record Date without requiring that this Note
be submitted for notation of payment. Any reduction in the principal amount of
this Note (or any one or more Predecessor Notes) effected by any payments made
on any Distribution Date shall be binding upon all future Holders of this Note
and of any Note issued upon the registration of transfer hereof or in exchange
hereof or in lieu hereof, whether or not noted hereon. If funds are expected to
be available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Distribution Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will
M-1-5
<PAGE>
notify the Person who was the Registered Holder hereof as of the Record Date
preceding such Distribution Date by notice mailed or transmitted by facsimile
prior to such Distribution Date, and the amount then due and payable shall be
payable only upon presentation and surrender of this Note at the Indenture
Trustee's principal Corporate Trust Office or at the office of the Indenture
Trustee's agent appointed for such purposes located in (St. Paul, Minnesota).
As provided in the Indenture and the Sale and Servicing Agreement,
the Class M-1 Notes may be redeemed (a) in whole, but not in part, at the option
of the holders of greater than 50% of the Residual Interest Certificates on any
Distribution Date on and after the date on which the Pool Principal Balance is
less than 10% of the Initial Pool Principal Balance.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the Issuer may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, covenants and agrees that
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 under the Indenture or any certificate or other writing delivered in
connection 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 or employee
of the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed 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.
Each Noteholder or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, covenants and agrees by
accepting the benefits of
M-1-6
<PAGE>
the Indenture that such Noteholder or Note Owner will not at any time institute
against the Seller or the Issuer, or join in any institution against the Seller
or the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Notes, the
Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued
with the intention that, for federal, state and local income, single business
and franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this
Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the
Indenture Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the 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
and thereunder shall be determined in accordance with such laws.
M-1-7
<PAGE>
No reference herein to the Indenture and no provision of this Note
or of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of the Issuer in its individual capacity,
the Owner Trustee in its individual capacity, any owner of a beneficial interest
in the Issuer, or any of their respective partners, beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on this Note or performance of, or omission to perform,
any of the covenants, obligations or indemnifications contained in the
Indenture. The Holder of this Note by its acceptance hereof agrees that, except
as expressly provided in the Basic Documents, in the case of an Event of Default
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
M-1-8
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto:
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated:__________
*/
-----------------------------------------
Signature Guaranteed:
*/
-----------------------------------------
- ----------
*/NOTICE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in 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 Securities Exchange Act of 1934, as amended.
M-1-9
<PAGE>
CLASS M-2 NOTE
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THIS NOTE MAY NOT BE TRANSFERRED UNLESS THE OWNER TRUSTEE HAS RECEIVED A
CERTIFICATE FROM THE TRANSFEREE TO THE EFFECT THAT EITHER (I) THE TRANSFEREE IS
NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"),
AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (II) IF THE
TRANSFEREE IS A PLAN, OR IS ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A
PLAN, THE RELEVANT CONDITIONS FOR EXEMPTIVE RELIEF UNDER AT LEAST ONE OF THE
FOLLOWING PROHIBITED TRANSACTION CLASS EXEMPTIONS HAVE BEEN SATISFIED:
PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23 (RELATING TO TRANSACTIONS
EFFECTED BY AN "IN-HOUSE ASSET MANAGER"), PTCE 95-60 (RELATING TO TRANSACTIONS
INVOLVING INSURANCE COMPANY GENERAL ACCOUNTS), PTCE 91-38 (RELATING TO
TRANSACTIONS INVOLVING BANK COLLECTIVE INVESTMENT FUNDS), PTCE 90-1 (RELATING TO
TRANSACTIONS INVOLVING INSURANCE COMPANY POOLED SEPARATE ACCOUNTS) AND PTCE
84-14 (RELATING TO TRANSACTIONS EFFECTED BY A "QUALIFIED PROFESSIONAL ASSET
MANAGER"). EACH TRANSFEREE OF A BENEFICIAL INTEREST HEREIN THAT IS A PLAN, OR IS
A PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN, SHALL BE DEEMED
TO MAKE THE REPRESENTATION SET FORTH UNDER (II) ABOVE.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
<PAGE>
$14,085,722.37
No. M-2-1 CUSIP NO. 291701 BB 5
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-3
CLASS M-2 7.41% ASSET BACKED NOTES
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-3, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum of Fourteen Million Eighty-Fifty Thousand
Seven Hundred Twenty-Two Dollars and Thirty-Seven Cents ($14,085,722.37) payable
on each Distribution Date in an amount equal to the result obtained by
multiplying (i) a fraction the numerator of which is the initial principal
amount of this Class M-2 Note and the denominator of which is the aggregate
principal amount of all Class M-2 Notes by (ii) the aggregate amount, if any
payable from the Note Distribution Account in respect of principal on the Class
M-2 Notes pursuant to Section 5.01(d) and (e) of the Sale and Servicing
Agreement dated as of August 1, 1997; provided, however, that the entire unpaid
principal amount of this Note shall be due and payable on the earlier of (i) the
Final Scheduled Distribution Date, (ii) the Termination Date, if any, pursuant
to Section 11.01 of the Sale and Servicing Agreement or (iii) the date on which
an Event of Default shall have occurred and be continuing, if the Indenture
Trustee or the Holders of Notes representing not less than a majority of the
Outstanding Amount of the Notes have declared the Notes to be immediately due
and payable in the manner provided in Section 5.02 of the Indenture. Capitalized
terms used but not defined herein are defined in Article I of the Indenture (the
"Indenture") dated as of August 1, 1997 between the Issuer and U.S. Bank
National Association, a national banking association, which also contains rules
as to construction that shall be applicable herein.
The Issuer will pay interest on this Note at the rate per annum
shown above on each Distribution Date until the principal of this Note is paid
or made available for payment in full, on the principal amount of this Note
outstanding on the preceding Distribution Date (after giving effect to all
payments of principal made on the preceding Distribution Date). Interest on this
Note will accrue for each Distribution Date during the calendar month preceding
such Distribution Date (each, a "Due Period"). Interest will be computed on the
basis of a 360-day year of twelve 30-day months. Such principal of and interest
on this Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
M-2-2
<PAGE>
Reference is made to the further provisions of this Note set forth
on the reverse hereof, which shall have the same effect as though fully set
forth on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture referred to on the
reverse hereof, or be valid or obligatory for any purpose.
M-2-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer, as of the date set
forth below.
Date: August __, 1997
EMPIRE FUNDING HOME LOAN OWNER
TRUST 1997-3
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement
By:
------------------------------------
Authorized Signatory
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: August __, 1997
U.S. BANK NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Indenture Trustee
By:
-------------------------------------
Authorized Signatory
M-2-4
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class M-2 7.41% Asset Backed Notes (herein called the "Class
M-2 Notes"), all issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class M-2 Notes are subject to all
terms of the Indenture.
The Class A-1 Notes, the Class A-2 Notes, Class A-3 Notes, Class A-4
Notes, Class A-5 Notes, Class A-6 Notes, Class A-7 Notes, Class M-1 Notes, Class
M-2 Notes, Class B-1 Notes and Class B-2 Notes (collectively, the "Notes") are
and will be equally and ratably secured by the collateral pledged as security
therefor as provided in the Indenture.
Principal of the Class M-2 Notes will be payable on each
Distribution Date in an amount described on the face hereof. "Distribution Date"
means the 25th day of each month, or, if any such date is not a Business Day,
the next succeeding Business Day, commencing in September 1997.
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Final Scheduled Distribution Date
and the Termination Date, if any, pursuant to Section 11.01 of the Sale and
Servicing Agreement. Notwithstanding the foregoing, the entire unpaid principal
amount of the Notes shall be due and payable on the date on which an Event of
Default shall have occurred and be continuing and the Indenture Trustee, at the
direction or upon the prior written consent of the Holders of the Notes
representing not less than a majority of the Outstanding Amount of the Notes has
declared the Notes to be immediately due and payable in the manner provided in
Section 5.02 of the Indenture. All principal payments on the Class M-2 Notes
shall be made pro rata to the holders of the Class M-2 Notes entitled thereto.
Payments of interest on this Note due and payable on each
Distribution Date, together with the installment of principal, if any, to the
extent not in full payment of this Note, shall be made by check mailed to the
Person whose name appears as the Registered Holder of this Note (or one or more
Predecessor Notes) on the Note Register as of the close of business on each
Record Date, except that 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.), payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Such checks shall be mailed to
the Person entitled thereto at the address of such Person as it appears on the
Note Register as of the applicable Record Date without requiring that this Note
be submitted for notation of payment. Any reduction in the principal amount of
this Note (or any one or more Predecessor Notes) effected by any payments made
on any Distribution Date shall be binding upon all future Holders of this Note
and of any Note issued upon the registration of transfer hereof or in exchange
hereof or in lieu hereof, whether or not noted hereon. If funds are expected to
be available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Distribution Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will
M-2-5
<PAGE>
notify the Person who was the Registered Holder hereof as of the Record Date
preceding such Distribution Date by notice mailed or transmitted by facsimile
prior to such Distribution Date, and the amount then due and payable shall be
payable only upon presentation and surrender of this Note at the Indenture
Trustee's principal Corporate Trust Office or at the office of the Indenture
Trustee's agent appointed for such purposes located in (St. Paul, Minnesota).
As provided in the Indenture and the Sale and Servicing Agreement,
the Class M-2 Notes may be redeemed (a) in whole, but not in part, at the option
of the holders of greater than 50% of the Residual Interest Certificates on any
Distribution Date on and after the date on which the Pool Principal Balance is
less than 10% of the Initial Pool Principal Balance.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the Issuer may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, covenants and agrees that
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 under the Indenture or any certificate or other writing delivered in
connection 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 or employee
of the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed 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.
Each Noteholder or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, covenants and agrees by
accepting the benefits of
M-2-6
<PAGE>
the Indenture that such Noteholder or Note Owner will not at any time institute
against the Seller or the Issuer, or join in any institution against the Seller
or the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Notes, the
Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued
with the intention that, for federal, state and local income, single business
and franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this
Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the
Indenture Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the 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
and thereunder shall be determined in accordance with such laws.
M-2-7
<PAGE>
No reference herein to the Indenture and no provision of this Note
or of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of the Issuer in its individual capacity,
the Owner Trustee in its individual capacity, any owner of a beneficial interest
in the Issuer, or any of their respective partners, beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on this Note or performance of, or omission to perform,
any of the covenants, obligations or indemnifications contained in the
Indenture. The Holder of this Note by its acceptance hereof agrees that, except
as expressly provided in the Basic Documents, in the case of an Event of Default
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
M-2-8
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto:
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated:__________
*/
-----------------------------------------
Signature Guaranteed:
*/
-----------------------------------------
- ----------
*/NOTICE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in 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 Securities Exchange Act of 1934, as amended.
M-2-9
<PAGE>
CLASS B-1 NOTE
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THIS NOTE MAY NOT BE TRANSFERRED UNLESS THE OWNER TRUSTEE HAS RECEIVED A
CERTIFICATE FROM THE TRANSFEREE TO THE EFFECT THAT EITHER (I) THE TRANSFEREE IS
NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"),
AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (II) IF THE
TRANSFEREE IS A PLAN, OR IS ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A
PLAN, THE RELEVANT CONDITIONS FOR EXEMPTIVE RELIEF UNDER AT LEAST ONE OF THE
FOLLOWING PROHIBITED TRANSACTION CLASS EXEMPTIONS HAVE BEEN SATISFIED:
PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23 (RELATING TO TRANSACTIONS
EFFECTED BY AN "IN-HOUSE ASSET MANAGER"), PTCE 95-60 (RELATING TO TRANSACTIONS
INVOLVING INSURANCE COMPANY GENERAL ACCOUNTS), PTCE 91-38 (RELATING TO
TRANSACTIONS INVOLVING BANK COLLECTIVE INVESTMENT FUNDS), PTCE 90-1 (RELATING TO
TRANSACTIONS INVOLVING INSURANCE COMPANY POOLED SEPARATE ACCOUNTS) AND PTCE
84-14 (RELATING TO TRANSACTIONS EFFECTED BY A "QUALIFIED PROFESSIONAL ASSET
MANAGER"). EACH TRANSFEREE OF A BENEFICIAL INTEREST HEREIN THAT IS A PLAN, OR IS
A PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN, SHALL BE DEEMED
TO MAKE THE REPRESENTATION SET FORTH UNDER (II) ABOVE.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
<PAGE>
$13,522,293.47
No. B-1-1 CUSIP NO. 291701 BC 3
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-3
CLASS B-1 7.75% ASSET BACKED NOTES
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-3, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum of Thirteen Million Five Hundred
Twenty-Two Thousand Two Hundred Ninety-Three Dollars and Forty-Seven Cents
($13,522,293.47) payable on each Distribution Date in an amount equal to the
result obtained by multiplying (i) a fraction the numerator of which is the
initial principal amount of this Class B-1 Note and the denominator of which is
the aggregate principal amount of all Class B-1 Notes by (ii) the aggregate
amount, if any payable from the Note Distribution Account in respect of
principal on the Class B-1 Notes pursuant to Section 5.01(d) and (e) of the Sale
and Servicing Agreement dated as of August 1, 1997; provided, however, that the
entire unpaid principal amount of this Note shall be due and payable on the
earlier of (i) the Final Scheduled Distribution Date, (ii) the Termination Date,
if any, pursuant to Section 11.01 of the Sale and Servicing Agreement or (iii)
the date on which an Event of Default shall have occurred and be continuing, if
the Indenture Trustee or the Holders of Notes representing not less than a
majority of the Outstanding Amount of the Notes have declared the Notes to be
immediately due and payable in the manner provided in Section 5.02 of the
Indenture. Capitalized terms used but not defined herein are defined in Article
I of the Indenture (the "Indenture") dated as of August 1, 1997 between the
Issuer and U.S. Bank National Association, a national banking association, which
also contains rules as to construction that shall be applicable herein.
The Issuer will pay interest on this Note at the rate per annum
shown above on each Distribution Date until the principal of this Note is paid
or made available for payment in full, on the principal amount of this Note
outstanding on the preceding Distribution Date (after giving effect to all
payments of principal made on the preceding Distribution Date). Interest on this
Note will accrue for each Distribution Date during the calendar month preceding
such Distribution Date (each, a "Due Period"). Interest will be computed on the
basis of a 360-day year of twelve 30-day months. Such principal of and interest
on this Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
B-1-2
<PAGE>
Reference is made to the further provisions of this Note set forth
on the reverse hereof, which shall have the same effect as though fully set
forth on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture referred to on the
reverse hereof, or be valid or obligatory for any purpose.
B-1-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer, as of the date set
forth below.
Date: August __, 1997
EMPIRE FUNDING HOME LOAN OWNER
TRUST 1997-3
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement
By:
------------------------------------
Authorized Signatory
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: August __, 1997
U.S. BANK NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Indenture Trustee
By:
-------------------------------------
Authorized Signatory
B-1-4
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class B-1 7.75% Asset Backed Notes (herein called the "Class
B-1 Notes"), all issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class B-1 Notes are subject to all
terms of the Indenture.
The Class A-1 Notes, the Class A-2 Notes, Class A-3 Notes, Class A-4
Notes, Class A-5 Notes, Class A-6 Notes, Class A-7 Notes, Class M-1 Notes, Class
M-2 Notes, Class B-1 Notes and Class B-2 Notes (collectively, the "Notes") are
and will be equally and ratably secured by the collateral pledged as security
therefor as provided in the Indenture.
Principal of the Class B-1 Notes will be payable on each
Distribution Date in an amount described on the face hereof. "Distribution Date"
means the 25th day of each month, or, if any such date is not a Business Day,
the next succeeding Business Day, commencing in September 1997.
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Final Scheduled Distribution Date
and the Termination Date, if any, pursuant to Section 11.01 of the Sale and
Servicing Agreement. Notwithstanding the foregoing, the entire unpaid principal
amount of the Notes shall be due and payable on the date on which an Event of
Default shall have occurred and be continuing and the Indenture Trustee, at the
direction or upon the prior written consent of the Holders of the Notes
representing not less than a majority of the Outstanding Amount of the Notes has
declared the Notes to be immediately due and payable in the manner provided in
Section 5.02 of the Indenture. All principal payments on the Class B-1 Notes
shall be made pro rata to the holders of the Class B-1 Notes entitled thereto.
Payments of interest on this Note due and payable on each
Distribution Date, together with the installment of principal, if any, to the
extent not in full payment of this Note, shall be made by check mailed to the
Person whose name appears as the Registered Holder of this Note (or one or more
Predecessor Notes) on the Note Register as of the close of business on each
Record Date, except that 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.), payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Such checks shall be mailed to
the Person entitled thereto at the address of such Person as it appears on the
Note Register as of the applicable Record Date without requiring that this Note
be submitted for notation of payment. Any reduction in the principal amount of
this Note (or any one or more Predecessor Notes) effected by any payments made
on any Distribution Date shall be binding upon all future Holders of this Note
and of any Note issued upon the registration of transfer hereof or in exchange
hereof or in lieu hereof, whether or not noted hereon. If funds are expected to
be available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Distribution Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will
B-1-5
<PAGE>
notify the Person who was the Registered Holder hereof as of the Record Date
preceding such Distribution Date by notice mailed or transmitted by facsimile
prior to such Distribution Date, and the amount then due and payable shall be
payable only upon presentation and surrender of this Note at the Indenture
Trustee's principal Corporate Trust Office or at the office of the Indenture
Trustee's agent appointed for such purposes located in (St. Paul, Minnesota).
As provided in the Indenture and the Sale and Servicing Agreement,
the Class B-1 Notes may be redeemed (a) in whole, but not in part, at the option
of the holders of greater than 50% of the Residual Interest Certificates on any
Distribution Date on and after the date on which the Pool Principal Balance is
less than 10% of the Initial Pool Principal Balance.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the Issuer may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, covenants and agrees that
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 under the Indenture or any certificate or other writing delivered in
connection 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 or employee
of the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed 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.
Each Noteholder or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, covenants and agrees by
accepting the benefits of
B-1-6
<PAGE>
the Indenture that such Noteholder or Note Owner will not at any time institute
against the Seller or the Issuer, or join in any institution against the Seller
or the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Notes, the
Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued
with the intention that, for federal, state and local income, single business
and franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this
Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the
Indenture Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the 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
and thereunder shall be determined in accordance with such laws.
B-1-7
<PAGE>
No reference herein to the Indenture and no provision of this Note
or of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of the Issuer in its individual capacity,
the Owner Trustee in its individual capacity, any owner of a beneficial interest
in the Issuer, or any of their respective partners, beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on this Note or performance of, or omission to perform,
any of the covenants, obligations or indemnifications contained in the
Indenture. The Holder of this Note by its acceptance hereof agrees that, except
as expressly provided in the Basic Documents, in the case of an Event of Default
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
B-1-8
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto:
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated:
*/
-----------------------------------------
Signature Guaranteed:
*/
-----------------------------------------
- ----------
*/NOTICE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in 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 Securities Exchange Act of 1934, as amended.
B-1-9
<PAGE>
CLASS B-2 NOTE
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
ANY PERSON WHO PURCHASES THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN SHALL BE
DEEMED TO HAVE MADE, UPON SUCH PURCHASE, THE REPRESENTATIONS SET FORTH UNDER THE
HEADING "NOTICES TO INVESTORS" IN THE PRIVATE PLACEMENT MEMORANDUM DATED AUGUST
19, 1997 FOR THE EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-3 HOME LOAN ASSET
BACKED NOTES, SERIES 1997-3.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "1933 ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION, UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
REGISTRATION.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH NOTE ONLY (A) PURSUANT TO A REGISTRATION STATEMENT WHICH
HAS BEEN DECLARED EFFECTIVE UNDER THE 1933 ACT, (B) FOR SO LONG AS THIS NOTE IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE 1933 ACT, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
UNDER THE 1933 ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A OR (C) TO AN INSTITUTIONAL "ACCREDITED INVESTOR"
WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE
1933 ACT THAT IS ACQUIRING THE NOTE FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF
SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE 1933 ACT, IN EACH CASE IN COMPLIANCE WITH THE REQUIREMENTS OF
THE INDENTURE AND APPLICABLE STATE SECURITIES LAWS.
<PAGE>
THIS NOTE MAY NOT BE TRANSFERRED UNLESS THE OWNER TRUSTEE HAS RECEIVED A
CERTIFICATE FROM THE TRANSFEREE TO THE EFFECT THAT EITHER (I) THE TRANSFEREE IS
NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"),
AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (II) IF THE
TRANSFEREE IS A PLAN, OR IS ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A
PLAN, THE RELEVANT CONDITIONS FOR EXEMPTIVE RELIEF UNDER AT LEAST ONE OF THE
FOLLOWING PROHIBITED TRANSACTION CLASS EXEMPTIONS HAVE BEEN SATISFIED:
PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23 (RELATING TO TRANSACTIONS
EFFECTED BY AN "IN-HOUSE ASSET MANAGER"), PTCE 95-60 (RELATING TO TRANSACTIONS
INVOLVING INSURANCE COMPANY GENERAL ACCOUNTS), PTCE 91-38 (RELATING TO
TRANSACTIONS INVOLVING BANK COLLECTIVE INVESTMENT FUNDS), PTCE 90-1 (RELATING TO
TRANSACTIONS INVOLVING INSURANCE COMPANY POOLED SEPARATE ACCOUNTS) AND PTCE
84-14 (RELATING TO TRANSACTIONS EFFECTED BY A "QUALIFIED PROFESSIONAL ASSET
MANAGER"). EACH TRANSFEREE OF A BENEFICIAL INTEREST HEREIN THAT IS A PLAN, OR IS
A PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN, SHALL BE DEEMED
TO MAKE THE REPRESENTATION SET FORTH UNDER (II) ABOVE.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
B-2-2
<PAGE>
Note Principal Amount: See Schedule I Attached Hereto
No. B-2-1 CUSIP NO. 291701 BD 1
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-3
CLASS B-2 8.69% ASSET BACKED NOTES
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-3, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum set forth on Schedule I attached hereto
payable on each Distribution Date in an amount equal to the result obtained by
multiplying (i) a fraction the numerator of which is the initial principal
amount of this Class B-2 Note and the denominator of which is the aggregate
principal amount of all Class B-2 Notes by (ii) the aggregate amount, if any
payable from the Note Distribution Account in respect of principal on the Class
B-2 Notes pursuant to Section 5.01(d) and (e) of the Sale and Servicing
Agreement dated as of August 1, 1997; provided, however, that the entire unpaid
principal amount of this Note shall be due and payable on the earlier of (i) the
Final Scheduled Distribution Date, (ii) the Termination Date, if any, pursuant
to Section 11.01 of the Sale and Servicing Agreement or (iii) the date on which
an Event of Default shall have occurred and be continuing, if the Indenture
Trustee or the Holders of Notes representing not less than a majority of the
Outstanding Amount of the Notes have declared the Notes to be immediately due
and payable in the manner provided in Section 5.02 of the Indenture. Capitalized
terms used but not defined herein are defined in Article I of the Indenture (the
"Indenture") dated as of August 1, 1997 between the Issuer and U.S. Bank
National Association, a national banking association, which also contains rules
as to construction that shall be applicable herein.
The Issuer will pay interest on this Note at the rate per annum
shown above on each Distribution Date until the principal of this Note is paid
or made available for payment in full, on the principal amount of this Note
outstanding on the preceding Distribution Date (after giving effect to all
payments of principal made on the preceding Distribution Date). Interest on this
Note will accrue for each Distribution Date during the calendar month preceding
such Distribution Date (each, a "Due Period"). Interest will be computed on the
basis of a 360-day year of twelve 30-day months. Such principal of and interest
on this Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
B-2-3
<PAGE>
This Note is issued on August 22, 1997, and based on its issue price
of 91.45477%, including accrued interest, and a stated redemption price at
maturity equal to its initial principal balance, is issued with original issue
discount ("OID") for federal income tax purposes. Assuming that this Note pays
in accordance with projected cash flows reflecting the prepayment assumption of
100% of the Prepayment Assumption (as defined in the Prospectus Supplement dated
August 19, 1997 with respect to the offering of the Class A-1, Class A-2, Class
A-3, Class A-4, Class A-5, Class A-6, Class A-7, Class M-1, Class M-2 and Class
B-1 Notes) used to price this Note: (i) the amount of OID as a percentage of the
initial principal balance of this Note is approximately 8.54523%; and (ii) the
annual yield to maturity of this Note, compounded monthly, is approximately
10.19%. There is no short first accrual period.
Reference is made to the further provisions of this Note set forth
on the reverse hereof, which shall have the same effect as though fully set
forth on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture referred to on the
reverse hereof, or be valid or obligatory for any purpose.
B-2-4
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer, as of the date set
forth below.
Date: August __, 1997
EMPIRE FUNDING HOME LOAN OWNER
TRUST 1997-3
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement
By:
------------------------------------
Authorized Signatory
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: August __, 1997
U.S. BANK NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Indenture Trustee
By:
-------------------------------------
Authorized Signatory
B-2-5
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class B-2 8.69% Asset Backed Notes (herein called the "Class
B-2 Notes"), all issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class B-2 Notes are subject to all
terms of the Indenture.
The Class A-1 Notes, the Class A-2 Notes, Class A-3 Notes, Class A-4
Notes, Class A-5 Notes, Class A-6 Notes, Class A-7 Notes, Class M-1 Notes, Class
M-2 Notes, Class B-1 Notes and Class B-2 Notes (collectively, the "Notes") are
and will be equally and ratably secured by the collateral pledged as security
therefor as provided in the Indenture.
Principal of the Class B-2 Notes will be payable on each
Distribution Date in an amount described on the face hereof. "Distribution Date"
means the 25th day of each month, or, if any such date is not a Business Day,
the next succeeding Business Day, commencing in September 1997.
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Final Scheduled Distribution Date
and the Termination Date, if any, pursuant to Section 11.01 of the Sale and
Servicing Agreement. Notwithstanding the foregoing, the entire unpaid principal
amount of the Notes shall be due and payable on the date on which an Event of
Default shall have occurred and be continuing and the Indenture Trustee, at the
direction or upon the prior written consent of the Holders of the Notes
representing not less than a majority of the Outstanding Amount of the Notes has
declared the Notes to be immediately due and payable in the manner provided in
Section 5.02 of the Indenture. All principal payments on the Class B-2 Notes
shall be made pro rata to the holders of the Class B-2 Notes entitled thereto.
Payments of interest on this Note due and payable on each
Distribution Date, together with the installment of principal, if any, to the
extent not in full payment of this Note, shall be made by check mailed to the
Person whose name appears as the Registered Holder of this Note (or one or more
Predecessor Notes) on the Note Register as of the close of business on each
Record Date, except that 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.), payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Such checks shall be mailed to
the Person entitled thereto at the address of such Person as it appears on the
Note Register as of the applicable Record Date without requiring that this Note
be submitted for notation of payment. Any reduction in the principal amount of
this Note (or any one or more Predecessor Notes) effected by any payments made
on any Distribution Date shall be binding upon all future Holders of this Note
and of any Note issued upon the registration of transfer hereof or in exchange
hereof or in lieu hereof, whether or not noted hereon. If funds are expected to
be available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Distribution Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will
B-2-6
<PAGE>
notify the Person who was the Registered Holder hereof as of the Record Date
preceding such Distribution Date by notice mailed or transmitted by facsimile
prior to such Distribution Date, and the amount then due and payable shall be
payable only upon presentation and surrender of this Note at the Indenture
Trustee's principal Corporate Trust Office or at the office of the Indenture
Trustee's agent appointed for such purposes located in (St. Paul, Minnesota).
As provided in the Indenture and the Sale and Servicing Agreement,
the Class B-2 Notes may be redeemed (a) in whole, but not in part, at the option
of the holders of greater than 50% of the Residual Interest Certificates on any
Distribution Date on and after the date on which the Pool Principal Balance is
less than 10% of the Initial Pool Principal Balance.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the Issuer may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, covenants and agrees that
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 under the Indenture or any certificate or other writing delivered in
connection 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 or employee
of the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed 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.
Each Noteholder or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, covenants and agrees by
accepting the benefits of
B-2-7
<PAGE>
the Indenture that such Noteholder or Note Owner will not at any time institute
against the Seller or the Issuer, or join in any institution against the Seller
or the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Notes, the
Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued
with the intention that, for federal, state and local income, single business
and franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this
Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the
Indenture Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the 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
and thereunder shall be determined in accordance with such laws.
B-2-8
<PAGE>
No reference herein to the Indenture and no provision of this Note
or of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of the Issuer in its individual capacity,
the Owner Trustee in its individual capacity, any owner of a beneficial interest
in the Issuer, or any of their respective partners, beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on this Note or performance of, or omission to perform,
any of the covenants, obligations or indemnifications contained in the
Indenture. The Holder of this Note by its acceptance hereof agrees that, except
as expressly provided in the Basic Documents, in the case of an Event of Default
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
B-2-9
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto:
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated:__________
*/
-----------------------------------------
Signature Guaranteed:
*/
-----------------------------------------
- ----------
*/NOTICE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in STAMP or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP,
B-2-10
<PAGE>
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SCHEDULE I
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Amount Date Initial
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B-2-11
<PAGE>
EXHIBIT B-1
FORM OF RULE 144A TRANSFER CERTIFICATE
Re: Empire Funding Home Loan Owner Trust 1997-3
Asset-Backed Notes Series 1997-3
Reference is hereby made to the Indenture dated as of August 1, 1997
(the "Indenture") between Empire Funding Home Loan Owner Trust 1997-3 (the
"Trust") and U.S. Bank National Association (the "Indenture Trustee").
Capitalized terms used but not defined herein shall have the meanings given to
them in the Sale and Servicing Agreement dated as of August 1, 1997 among the
Trust, Empire Funding Corp. ("Empire Funding"), PaineWebber Mortgage Acceptance
Corporation IV (the "Depositor"), and U.S. Bank National Association as
Indenture Trustee and Co-Owner Trustee.
The undersigned (the "Transferor") has requested a transfer of
$_________ initial Class Principal Balance of Class B-2 Notes to [insert name of
transferee].
In connection with such request, and in respect of such Class B-2
Notes, the Transferor hereby certifies that such Class B-2 Notes are being
transferred in accordance with (i) the transfer restrictions set forth in the
Indenture and the Class B-2 Notes and (ii) Rule 144A under the Securities Act of
1933, as amended to a purchaser that the Transferor reasonably believes is a
"qualified institutional buyer" within the meaning of Rule 144A purchasing for
its own account or for the account of a "qualified institutional buyer," which
purchaser is aware that the sale to it is being made in reliance upon Rule 144A,
in a transaction meeting the requirements of Rule 144A and in accordance with
any applicable securities laws of any state of the United States or any other
applicable jurisdiction.
This certificate and the statements contained herein are made for
your benefit and the benefit of PaineWebber and the Depositor.
__________________________________
[Name of Transferor]
By:_______________________________
Name:
Title:
Dated: _______________, __
B-1-1
<PAGE>
EXHIBIT B-2
FORM OF PURCHASER'S LETTER FOR
INSTITUTIONAL ACCREDITED INVESTOR
__________________________
[Date]
Dear Sirs:
In connection with our proposed purchase of $_________________ initial Class
Principal Balance of Class B-2 Home Loan Asset Backed Notes, Series 1997-3 (the
"Offered Notes") issued by Empire Funding Home Loan Owner Trust 1997-3 (the
"Trust"), we confirm that:
(1) We have received a copy of the Private Placement Memorandum dated August
19, 1997 relating to the Offered Notes (the "Private Placement
Memorandum"), and we understand that the Offered Notes have not been, and
will not be, registered under the Securities Act of 1933, as amended (the
"1933 Act") or any state securities laws, and may not be sold except as
permitted in the following sentence. We agree, on our own behalf and on
behalf of any accounts for which we are acting as hereinafter stated, that
if we should sell any Offered Notes we will do so only (A) pursuant to a
registration statement which has been declared effective under the 1933
Act, (B) for so long as the Offered Notes are eligible for resale pursuant
to Rule 144A under the 1933 Act, to a Person we reasonably believe is a
"qualified institutional buyer" as defined in Rule 144A that purchases for
its own account or for the account of a qualified institutional buyer to
whom notice is given that the transfer is being made in reliance on Rule
144A, (C) to an institutional "accredited investor" within the meaning of
subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the 1933 Act (an
"Institutional Accredited Investor") that is acquiring the Offered Notes
for its own account, or for the account of such an Institutional
Accredited Investor, for investment purposes and not with a view to, or
for offer or sale in connection with, any distribution in violation of the
1933 Act, in each case in compliance with the requirements of the
Indenture dated as of August 1, 1997 between Empire Funding Home Loan
Owner Trust 1997-3 and U.S. Bank National Association, as Indenture
Trustee, and applicable state securities laws; and we further agree, in
the capacities stated above, to provide to any person purchasing any of
the Offered Notes from us a notice advising such purchaser that resales of
the Offered Notes are restricted as stated herein.
(2) We understand that, in connection with any proposed resale of any Offered
Notes to an Institutional Accredited Investor, we will be required to
furnish to the Indenture Trustee and the Depositor a certification from
such transferee in the form hereof to confirm that the proposed sale is
being made pursuant to an exemption from, or in a transaction not subject
to, the registration requirements of the 1933 Act and applicable state
securities laws. We further understand that the Offered Notes purchased by
us will bear a legend to the foregoing effect.
B-2-1
<PAGE>
(3) We are acquiring the Offered Notes for investment purposes and not with a
view to, or for offer or sale in connection with, any distribution in
violation of the 1933 Act. We have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits
and risks of our investment in the Offered Notes, and we and any account
for which we are acting are each able to bear the economic risk of such
investment.
(4) We are an Institutional Accredited Investor and we are acquiring the
Offered Notes purchased by us for our own account or for one or more
accounts (each of which is an Institutional Accredited Investor) as to
each of which we exercise sole investment discretion.
(5) We have received such information as we deem necessary in order to make
our investment decision.
Terms used in this letter which are not otherwise defined herein have the
respective meanings assigned thereto in the Private Placement Memorandum or, if
not defined therein, in the Indenture.
You and the Depositor are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
___________________________________
[Purchaser]
By:________________________________
Name:
Title:
B-2-2
<PAGE>
EXHIBIT B-3
[FORM OF TRANSFER AFFIDAVIT]
STATE OF ____________ )
) ss.:
COUNTY OF ___________ )
The undersigned, being first duly sworn, deposes and says as follows:
1. The undersigned is the _____________ of
________________________________ (the "Investor"), a [corporation duly
organized] and existing under the laws of _____________ on behalf of which he
makes this affidavit.
2. The Investor either (i) is not, and is not acquiring the Offered Notes
on behalf of or with the assets of, an employee benefit plan or other retirement
plan or arrangement subject to Title I of ERISA or Section 4975 of the Code, or
(b) is, or is acquiring the Offered Notes on behalf of or with the assets of, an
employee benefit plan or other retirement plan or arrangement subject to Title I
of ERISA of Section 4975 of the Code and the relevant conditions for exemptive
relief under at least one of the following prohibited transaction class
exemptions have been satisfied: Prohibited Transaction Class Exemption ("PTCE")
96-23 (relating to transactions effected by an "in-house asset manager"), PTCE
95-60 (relating to transactions involving insurance company general accounts,
PTCE 91-38 (relating to transactions involving bank collective investment
funds), PTCE 90-1 (relating to transactions involving insurance company pooled
separate accounts), and PTCE 84-14 (relating to transactions effected by a
"qualified professional asset manager").
3. The Investor hereby acknowledges that under the terms of the Indenture
(the "Agreement") between Empire Funding Home Loan Owner Trust 1997-3 and U.S.
Bank National Association, as co-owner trustee, dated as of August 1, 1997, no
transfer of the Definitive Notes (as defined in the Agreement) shall be
permitted to be made to any person unless the Depositor and Owner Trustee have
received a certificate from such transferee in the form hereof.
[FOR TRANSFERS IN RELIANCE UPON RULE 144A]
4. The Investor is a "qualified institutional buyer" (as such term is
defined under Rule 144A under the Securities Act of 1933, as amended (the "1933
Act"), and is acquiring the Offered Notes for its own account or as a fiduciary
or agent for others (which others also are "qualified institutional buyers").
The Investor is familiar with Rule 144A under the 1933 Act, and is aware that
the transferor of the Offered Notes and other parties intend to rely on the
statements made herein and the exemption from the registration requirements of
the 1933 Act provided by Rule 144A.
B-3-1
<PAGE>
IN WITNESS WHEREOF, the Investor has caused this instrument to be executed
on its behalf, pursuant to proper authority, by its duly authorized officer,
duly attested, this __ day of _____________, 199__.
_______________________________
[Investor]
By:____________________________
Name:
Title:
ATTEST:
____________________________
B-3-2
<PAGE>
STATE OF ____________ )
) ss.:
COUNTY OF ___________ )
Personally appeared before me the above-named _____________, known or
proved to me to be the same person who executed the foregoing instrument and to
be the ___________ of the Investor, and acknowledged that he executed the same
as his free act and deed and the free act and deed of the Investor.
Subscribed and sworn before me this ______ day of _______________, 199__.
_______________________________
NOTARY PUBLIC
My commission expires the
______ day of __________, 19__
b-3-3
<PAGE>
EXHIBIT C
ANY PERSON WHO PURCHASES THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN SHALL BE
DEEMED TO HAVE MADE, UPON SUCH PURCHASE, THE REPRESENTATIONS SET FORTH UNDER THE
HEADING "NOTICES TO INVESTORS" IN THE PRIVATE PLACEMENT MEMORANDUM DATED AUGUST
19, 1997 FOR THE EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-3 HOME LOAN ASSET
BACKED NOTES, SERIES 1997-3.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "1933 ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION, UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
REGISTRATION.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH NOTE ONLY (A) PURSUANT TO A REGISTRATION STATEMENT WHICH
HAS BEEN DECLARED EFFECTIVE UNDER THE 1933 ACT, (B) FOR SO LONG AS THIS NOTE IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE 1933 ACT, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
UNDER THE 1933 ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A OR (C) TO AN INSTITUTIONAL "ACCREDITED INVESTOR"
WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE
1933 ACT THAT IS ACQUIRING THE NOTE FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF
SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE 1933 ACT, IN EACH CASE IN COMPLIANCE WITH THE REQUIREMENTS OF
THE INDENTURE AND APPLICABLE STATE SECURITIES LAWS.
THIS NOTE MAY NOT BE TRANSFERRED UNLESS THE OWNER TRUSTEE HAS RECEIVED A
CERTIFICATE FROM THE TRANSFEREE TO THE EFFECT THAT EITHER (I) THE TRANSFEREE IS
NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"),
AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (II) IF THE
TRANSFEREE IS A PLAN, OR IS ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A
PLAN, THE RELEVANT CONDITIONS FOR EXEMPTIVE RELIEF UNDER AT LEAST ONE OF THE
FOLLOWING PROHIBITED TRANSACTION CLASS
C-1
<PAGE>
EXEMPTIONS HAVE BEEN SATISFIED: PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE")
96-23 (RELATING TO TRANSACTIONS EFFECTED BY AN "IN-HOUSE ASSET MANAGER"), PTCE
95-60 (RELATING TO TRANSACTIONS INVOLVING INSURANCE COMPANY GENERAL ACCOUNTS),
PTCE 91-38 (RELATING TO TRANSACTIONS INVOLVING BANK COLLECTIVE INVESTMENT
FUNDS), PTCE 90-1 (RELATING TO TRANSACTIONS INVOLVING INSURANCE COMPANY POOLED
SEPARATE ACCOUNTS) AND PTCE 84-14 (RELATING TO TRANSACTIONS EFFECTED BY A
"QUALIFIED PROFESSIONAL ASSET MANAGER"). EACH TRANSFEREE OF A BENEFICIAL
INTEREST HEREIN THAT IS A PLAN, OR IS A PERSON ACTING ON BEHALF OF OR INVESTING
THE ASSETS OF A PLAN, SHALL BE DEEMED TO MAKE THE REPRESENTATION SET FORTH UNDER
(II) ABOVE.
C-2
================================================================================
SALE AND SERVICING AGREEMENT
Dated as of August 1, 1997
among
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-3
(Issuer)
PAINEWEBBER MORTGAGE ACCEPTANCE CORPORATION IV
(Depositor)
EMPIRE FUNDING CORP.
(Transferor and Servicer)
and
U.S. BANK NATIONAL ASSOCIATION,
d/b/a FIRST BANK NATIONAL ASSOCIATION
(Indenture Trustee and Co-Owner Trustee)
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-3
HOME LOAN ASSET BACKED NOTES
SERIES 1997-3
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.01 Definitions.....................................................1
Section 1.02 Other Definitional Provisions..................................25
ARTICLE II
CONVEYANCE OF THE HOME LOANS
Section 2.01 Conveyance of the Home Loans...................................25
Section 2.02 Ownership and Possession of Home Loan Files....................26
Section 2.03 Books and Records..............................................26
Section 2.04 Delivery of Home Loan Documents................................27
Section 2.05 Acceptance by the Indenture Trustee of the Home Loans;
Certain Substitutions; Certification by the Custodian..........29
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Depositor................31
Section 3.02 Representations and Warranties of the Transferor...............33
Section 3.03 Representations, Warranties and Covenants of the Servicer......36
Section 3.04 Representations and Warranties Regarding Individual
Home Loans.....................................................38
Section 3.05 Purchase and Substitution......................................46
ARTICLE IV
ADMINISTRATION AND SERVICING OF THE HOME LOANS
Section 4.01 Duties of the Servicer.........................................48
Section 4.02 Payment of Taxes, Insurance and Other Charges..................50
Section 4.03 Fidelity Bond; Errors and Omissions Insurance..................50
Section 4.04 Filing of Continuation Statements..............................51
Section 4.05 Superior Liens.................................................52
Section 4.06 Subservicing...................................................52
Section 4.07 Successor Servicers............................................54
-i-
<PAGE>
Section 4.08 Maintenance of Insurance.......................................54
Section 4.09 Reports to the Securities and Exchange Commission;
144A Information...............................................55
Section 4.10 Foreclosure; Foreclosure Alternatives..........................55
Section 4.11 Title, Management and Disposition of Foreclosure Property......56
ARTICLE V
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01 Collection Account and Note Distribution Account...............59
Section 5.02 Certificate Distribution Account and Note
Distribution Account...........................................63
Section 5.03 Trust Accounts; Trust Account Property.........................64
Section 5.04 Allocation of Losses...........................................67
ARTICLE VI
STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS
Section 6.01 Statements.....................................................68
Section 6.02 Specification of Certain Tax Matters...........................71
ARTICLE VII
GENERAL SERVICING PROCEDURE
Section 7.01 Due-On-Sale; Due-on-Encumbrance................................71
Section 7.02 Release of Home Loan Files.....................................72
Section 7.03 Servicing Compensation.........................................73
Section 7.04 Statement as to Compliance and Financial Statements............73
Section 7.05 Independent Public Accountants' Servicing Report...............74
Section 7.06 Right to Examine Servicer Records..............................75
Section 7.07 Reports to the Indenture Trustee; Collection Account
Statements.....................................................75
Section 7.08 Financial Statements...........................................75
-ii-
<PAGE>
ARTICLE VIII
(RESERVED)
ARTICLE IX
THE SERVICER
Section 9.01 Indemnification; Third Party Claims............................76
Section 9.02 Merger or Consolidation of the Servicer........................78
Section 9.03 Limitation on Liability of the Servicer and Others.............78
Section 9.04 Servicer Not to Resign; Assignment.............................78
Section 9.05 Relationship of Servicer to Issuer and the Indenture
Trustee........................................................79
Section 9.06 Servicer May Own Securities....................................79
ARTICLE X
DEFAULT
Section 10.01 Events of Default..............................................79
Section 10.02 Indenture Trustee to Act; Appointment of Successor.............81
Section 10.03 Waiver of Defaults.............................................83
Section 10.04 Accounting upon Termination of Servicer........................83
ARTICLE XI
TERMINATION
Section 11.01 Termination....................................................84
Section 11.02 Auction Call; Optional Termination.............................84
Section 11.03 Notice of Termination..........................................85
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01 Acts of Noteholders............................................85
Section 12.02 Amendment......................................................85
Section 12.03 Recordation of Agreement.......................................86
Section 12.04 Duration of Agreement..........................................86
Section 12.05 Governing Law..................................................86
Section 12.06 Notices........................................................87
Section 12.07 Severability of Provisions.....................................87
Section 12.08 No Partnership.................................................87
-iii-
<PAGE>
Section 12.09 Counterparts...................................................87
Section 12.10 Successors and Assigns.........................................88
Section 12.11 Headings.......................................................88
Section 12.12 Actions of Securityholders.....................................88
Section 12.13 Reports to Rating Agencies.....................................88
Section 12.14 Holders of the Residual Interest Certificates..................89
EXHIBIT A - Home Loan Schedule
EXHIBIT B - Form of Servicer's Monthly Remittance Report to Trustee
-iv-
<PAGE>
This Sale and Servicing Agreement is entered into effective as of
August 1, 1997, among EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-3, a Delaware
business trust (the "Issuer" or the "Trust"), PAINEWEBBER MORTGAGE ACCEPTANCE
CORPORATION IV, a Delaware corporation, as Depositor (the "Depositor"), EMPIRE
FUNDING CORP., an Oklahoma corporation ("Empire Funding"), as Transferor (in
such capacity, the "Transferor") and Servicer (in such capacity, the
"Servicer"), and U.S. BANK NATIONAL ASSOCIATION, d/b/a First Bank National
Association, a national banking association, as Indenture Trustee on behalf of
the Noteholders (in such capacity, the "Indenture Trustee") and as Co-Owner
Trustee on behalf of the Certificateholders (in such capacity, the "Co-Owner
Trustee").
W I T N E S S E T H:
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 Notes and the Residual Interest Certificates
issued hereunder:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions.
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the meanings specified in this
Article. Unless otherwise specified, all calculations of interest described
herein shall be made on the basis of a 360-day year consisting of twelve 30-day
months.
Accepted Servicing Procedures: Servicing procedures that meet at
least the same standards the Servicer would follow in servicing mortgage loans
such as the Home Loans held for its own account, giving due consideration to
standards of practice of prudent mortgage lenders and loan servicers that
originate and service mortgage loans comparable to the Home Loans 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 Notes or the Residual Interest
Certificates by the Servicer or any Affiliate of the Servicer;
(iii) the Servicer's obligation to make Servicing Advances; or
1
<PAGE>
(iv) the Servicer's or any Subservicer's right to receive
compensation for its services hereunder with respect to any
particular transaction.
Affiliate: 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, 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 and supplements hereto.
Allocable Loss Amount: With respect to each Distribution Date, the
excess, if any, of (a) the aggregate of the Class Principal Balances of all
Classes of Notes (after giving effect to all distributions on such Distribution
Date) over (b) the Pool Principal Balance as of the end of the preceding Due
Period.
Allocable Loss Amount Priority: With respect to any Distribution
Date, sequentially, to the Class B-2 Notes, the Class B-1 Notes, the Class M-2
Notes and the Class M-1 Notes, in that order.
Assignment of Mortgage: With respect to each Home Loan secured by a
Mortgage, an assignment, notice of transfer or equivalent instrument sufficient
under the laws of the jurisdiction wherein the related Mortgaged Property is
located to reflect or record the sale of the related Home Loan which assignment,
notice of transfer or equivalent instrument may be in the form of one or more
blanket assignments covering Mortgages secured by Mortgaged Properties located
in the same county, if permitted by law.
Available Collection Amount: With respect to any Distribution Date,
an amount without duplication equal to the sum of: (i) all amounts received on
the Home Loans or required to be paid by the Servicer or the Transferor during
the related Due Period (exclusive of amounts not required to be deposited by the
Servicer in the Collection Account pursuant to Section 5.01(b)(1) hereof and
amounts permitted to be withdrawn by the Indenture Trustee from the Collection
Account pursuant to Section 5.01(b)(3) hereof) 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) upon exercise of optional termination of the Notes
pursuant to Section 11.02 hereof, the Termination Price; and (iv) the Purchase
Price paid for any Home Loans required to be purchased pursuant to Section 3.05
hereof prior to the related 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.
2
<PAGE>
Available Distribution Amount: With respect to any Distribution
Date, the Available Collection Amount minus the amount required to be paid from
the Note Distribution Account pursuant to Section 5.01(c)(i).
Business Day: Any day other than (i) a Saturday or Sunday, or (ii) a
day on which banking institutions in 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 and are authorized or
obligated by law or executive order to be closed.
Certificate Distribution Account: The account designated as such,
established and maintained pursuant to Section 5.02 hereof.
Certificate Register: The register established pursuant to Section
3.4 of the Trust Agreement.
Certificateholder: A holder of a Residual Interest Certificate.
Class: With respect to the Notes, all Notes bearing the same class
designation.
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 A-7 Note, Class M-1 Note, Class M-2 Note,
Class B-1 Note and Class B-2 Note: The respective meanings assigned thereto in
the Indenture.
Class B-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 and the Mezzanine 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 and Mezzanine Notes) and (ii) the
greater of (x) the sum of (1) 5.0% of the Pool Principal Balance as of the
related Determination Date and (2) the Overcollateralization Target Amount for
such Distribution Date (calculated without giving effect to the proviso in the
definition thereof) and (y) 0.50% of the Original Pool Principal Balance;
provided, however, that such amount shall never be less than zero or greater
than the Original Class Principal Balance of the Class B-1 Notes.
Class B-2 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, the Mezzanine Notes and the Class B-1 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, Mezzanine Notes and
Class B-1 Notes) 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-2
Notes.
3
<PAGE>
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) and (ii) the greater of (x) the sum of (1) 29.5% of the Pool
Principal Balance as of the related Determination Date and (2) the
Overcollateralization Target Amount for such Distribution Date (calculated
without giving effect to the proviso in the definition thereof) and (y) 0.50% of
the Original Pool Principal Balance; provided, however, that such amount shall
never be less than zero or greater than the Original Class Principal Balance of
the Class M-1 Notes.
Class M-2 Optimal Principal Balance: With respect to any
Distribution Date prior to the Stepdown Date, zero; with respect to any other
Distribution Date, the Pool Principal Balance as of the related Determination
Date minus the sum of (i) the aggregate Class Principal Balance of the Senior
Notes (after taking into account any distributions made on such Distribution
Date in reduction of the Class Principal Balances of the Classes of Senior
Notes) 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) and (ii) the greater of (x)
the sum of (1) 17.0% of the Pool Principal Balance as of the related
Determination Date and (2) the Overcollateralization Target Amount for such
Distribution Date (without giving effect to the proviso in the definition
thereof) and (y) 0.50% of the Original Pool Principal Balance; provided,
however, that such amount shall never be less than zero or greater than the
Original Class Principal Balance of the Class M-2 Notes.
Class Principal Balance: With respect to each Class and as of any
date of determination, the Original Class Principal Balance of such Class
reduced by the sum of (i) all amounts previously distributed in respect of
principal of such Class on all previous Distribution Dates and (ii) with respect
to the Class M-1, Class M-2, Class B-1 and Class B-2 Notes, 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 Original Pool Principal
Balance.
Closing Date: August 22, 1997.
Code: The Internal Revenue Code of 1986, as amended from time to
time, and Treasury Regulations promulgated thereunder.
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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 stated value of the related Mortgaged Property
at the time of origination of such Mortgage Loan.
Co-Owner Trustee: U.S. Bank National Association, d/b/a 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.
Credit Score: The credit evaluation scoring methodology developed by
Fair, Isaac and Company.
Custodial Agreement: The custodial agreement dated as of August 1,
1997 by and between the Issuer, the Depositor, Empire Funding, as the Transferor
and the Servicer, the Indenture Trustee and U.S. Bank National Association,
d/b/a First Bank National Association, a national banking association, as the
Custodian, providing for the retention of the Indenture Trustee's 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. U.S. Bank National
Association, d/b/a First Bank National Association, shall be the initial
Custodian pursuant to the terms of the Custodial Agreement.
Custodian Fee: If applicable, the annual fee payable to the
Custodian, calculated and payable monthly on each Distribution Date pursuant to
Section 5.01(c)(i) hereof equal to the fee, if any, set forth in the Custodial
Agreement.
Custodian's Final Certification: As defined in Section 2.05(c).
Custodian's Initial Certification: As defined in Section 2.05(c).
Custodian's Updated Certification: As defined in Section 2.05(c).
Cut-Off Date: The close of business on July 31, 1997.
DCR: Duff & Phelps Credit Rating Co.
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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 3.05 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)
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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: the making by a
Federal Reserve Bank of an appropriate entry crediting such Trust Account
property to an account of a financial intermediary that is also a
"participant" pursuant to applicable federal regulations; the making by
such financial intermediary of entries in its books and records crediting
such book-entry security held through the Federal Reserve System pursuant
to federal book-entry regulations to the securities account of 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 the sending by such
financial intermediary of confirmation of the purchase by the Indenture
Trustee or its nominee or custodian of such book-entry security; 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 including, without limitation, Article 8 of the UCC; 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
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books and records identifying such uncertificated certificates as
belonging to the Indenture Trustee or its nominee or custodian.
Denomination: With respect to a Note, the portion of the Original
Class Principal Balance represented by such Note as specified on the face
thereof.
Depositor: PaineWebber Mortgage Acceptance Corporation IV, 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 September 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, 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.
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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.
Fidelity Bond: As described in Section 4.03 hereof.
Final Scheduled Distribution Date: For each Class of Notes, the
following Distribution Dates:
Class A-1: April 25, 2023;
Class A-2: April 25, 2023;
Class A-3: April 25, 2023;
Class A-4: April 25, 2023;
Class A-5: April 25, 2023;
Class A-6: April 25, 2023;
Class A-7: April 25, 2023
Class M-1: April 25, 2023;
Class M-2: April 25, 2023;
Class B-1: April 25, 2023; and
Class B-2: April 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.
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Home Loan File: As to each Home Loan, the Indenture Trustee's Home
Loan File and the Servicer's Home Loan File.
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) or 4.10 hereof.
Home Loan Pool: The pool of Home Loans conveyed to the Issuer
pursuant to this Agreement on the Closing Date, together with the rights and
obligations of a holder thereof, and the payments thereon and proceeds therefrom
received after the 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 August 1, 1997.
Home Loan Schedule: The schedule of Home Loans set forth on Exhibit
A attached hereto, as amended or supplemented from time to time specifying, with
respect to each Home Loan, the following information: (i) the Transferor's Home
Loan number; (ii) the Obligor's name and the street address; (iii) the current
principal balance; (iv) the original principal amount with respect to any Home
Loan originated by the Transferor and the principal amount purchased by the
Transferor with respect to a Home Loan acquired by the Transferor subsequent to
its origination; (v) the combined loan-to-value ratio as of the date of the
origination of the related Home Loan; (vi) the paid through date; (vii) the Home
Loan Interest Rate; (viii) the final maturity date under the Debt Instrument;
(ix) the Monthly Payment; (x) the occupancy status of the Mortgaged Property, if
any; (xi) the lien priority of the Mortgage, if any; (xii) the original term of
the Debt Instrument; (xiii) the Credit Score, if applicable; and (xiv) the debt
to income ratio of the related Obligor.
Indenture: The Indenture, dated as of August 1, 1997, between the
Issuer and the Indenture Trustee.
Indenture Trustee: U.S. Bank National Association, d/b/a 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 0.01125% 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 2.04(a)
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
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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 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.
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, any
cash amounts received in connection with the management of the Mortgaged
Properties from Defaulted Home Loans 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, Class B-1 Notes or the Class B-2
Notes, 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 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.
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Majority Noteholders: 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.
Majority Residual Interestholders: The holder or holders of in
excess of 50% of the Residual Interest.
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 Noteholders' 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
interest accrued 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) after
giving effect to all payments of principal to the holders of such Classes of
Notes on or prior to such preceding Distribution 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.
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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 1.70 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,
Liquidation Proceeds received during the related Due Period, 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 4.11 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 Mezzanine Notes or the
Subordinate Notes.
Note Distribution Account: The account established and maintained
pursuant to Section 5.01(a)(2) hereof.
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:
9.09%; Class A-2: 7.75%; Class A-3: 7.35%; Class A-4: 7.16%; Class A-5: 7.21%;
Class A-6: 7.43%; Class A-7: 7.62% through the last day of the month immediately
preceding the Clean-up Call Date and 8.12% thereafter; Class M-1: 7.45%; Class
M-2: 7.41%; Class B-1: 7.75%; and Class B-2: 8.69%.
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Note Redemption Amount: 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) any Trust Fees and Expenses due and unpaid on such date and (iii) any
Servicing Advance Reimbursement Amount.
Noteholder: A holder of a Note.
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
Notes, as follows: Class A-1: $17,215,000.00; Class A-2: $29,968,000.00; Class
A-3: $32,492,000.00; Class A-4: $21,015,000.00; Class A-5: $24,232,000.00; Class
A-6: $20,550,000.00; Class A-7: $12,851,519.41; Class M-1: $33,805,733.68; Class
M-2: $14,085,722.37; Class B-1: $13,522,293.47; and Class B-2: $5,634,288.95.
Original Pool Principal Balance: $225,371,558, which is the Pool
Principal Balance as of the Cut-Off Date.
Outstanding: As defined in the Indenture.
Overcollateralization Amount: With respect to any Distribution Date,
the amount equal to the excess of (A) the Pool Principal Balance, as of the end
of the preceding Due Period, over (B) the aggregate of the Class Principal
Balances of the Notes (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 Notes and to any prior distribution on the
Residual Interest on such Distribution Date pursuant to Section 5.01(d) hereof).
Overcollateralization Target Amount: (I) With respect to any
Distribution Date occurring prior to the Stepdown Date, an amount equal to the
greater of (x) 4.5% of the Original Pool Principal Balance and (y) the Net
Delinquency Calculation Amount; and (II) with respect to any other Distribution
Date, an amount equal to the greater of (x) 9% 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
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no event be less than 0.50% of the Original Pool Principal Balance or greater
than the sum of the aggregate Class Principal Balances of all Classes of Notes.
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 August each year during the term
of this Agreement commencing in August 1998; provided, however, that the initial
Owner Trustee Fee shall be paid by the Transferor on the Closing Date.
Ownership Interest: As to any Note, any ownership or security
interest in such Note, including any interest in such Note as the holder thereof
and any other interest therein, whether direct or indirect, legal or beneficial,
as owner or as pledgee.
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 the 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
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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 the 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 the 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.
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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 Noteholders
will be deemed to have been equal to zero as of such date.
Principal Balance: With respect to any Home Loan or related
Foreclosure Property, (i) at the Cut-Off Date, the outstanding unpaid principal
balance of the Home Loan as of the Cut-Off Date and (ii) with respect to any
date of determination, the outstanding unpaid principal balance of the Home Loan
as of the last day of the preceding Due Period (after giving effect to all
payments received thereon and the allocation of any Net Loan Losses with respect
thereto for a Defaulted Home Loan which relates to such Due Period), without
giving effect to amounts received in respect of such Home Loan or related
Foreclosure Property after such Due Period; provided, however, that any
Liquidated Home Loan shall have a Principal Balance of zero.
Principal Prepayment: With respect to any Home Loan and any Due
Period, any principal amount received on a Home Loan in excess of the principal
of the Monthly Payment due in such Due Period.
Private Placement Memorandum: The Private Placement Memorandum to be
prepared by the Depositor in connection with the Class B-2 Notes.
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 Class A-1, Class
A-2, Class A-3, Class A-4, Class A-5, Class A-6, Class A-7, Class M-1, Class M-2
and Class B-1 Notes.
Purchase Price: With respect to a Defective Home Loan, the Principal
Balance thereof as of the date of purchase, plus all accrued and unpaid interest
on such Defective Home Loan to and including the date of repurchase computed at
the applicable Home Loan
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Interest Rate, plus the amount of any unreimbursed Servicing Advances made by
the Servicer with respect to such Defective Home Loan (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 date of repurchase).
Qualified Substitute Home Loan: A home loan or home loans
substituted for a Deleted Home Loan pursuant to Section 2.05 or Section 3.05
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 Credit Score equal to or
greater than such Deleted Home Loan, (vi) has or have a borrower or borrowers
with a debt-to-income ratio no higher than the debt-to-income ratio of the
Obligor with respect to the Deleted Loan, and (vii) 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 2.05 or Section 3.05 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 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.
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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 and (ii) the Regular Principal
Distribution Amount.
Regular Principal Distribution Amount: On each Distribution Date, an
amount equal to the lesser of:
(A) the aggregate of the Class Principal Balances of the Classes of
Notes 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, and (vi) on the Distribution Date on which the
Trust is to be terminated pursuant to Section 11.02 hereof, the
Termination Price (net of any accrued and unpaid interest, Trust Fees and
Expenses due and unpaid on such date and Servicing Advance Reimbursement
Amount).
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 Certificate: 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
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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 or Residual Interest Certificates.
Securityholder: Any Noteholder or Certificateholder.
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 interest
accrued 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) after giving
effect to all payments of principal to the holders of such Classes of Notes on
or prior to such preceding Distribution Date.
Senior Notes: The Class A-1, Class A-2, Class A-3, Class A-4, Class
A-5, Class A-6 and Class A-7 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) 59.5% of the Pool
Principal Balance as of the related Determination Date and (2) the
Overcollateralization Target Amount for such Distribution Date (without giving
effect to the proviso in the definition thereof) and (b) 0.50% of the Original
Pool Principal Balance; provided, however, that such amount shall never be less
than zero or greater than the sum of the Original Class Principal Balances of
the Notes.
Series or Series 1997-3: Empire Funding Home Loan Asset Backed
Notes, Series 1997-3.
Servicer: Empire Funding, in its capacity as the servicer hereunder,
or any successor appointed as herein provided.
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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 as specifically set forth in Section 2.04(b).
Servicer's Monthly Remittance Report: A report prepared and computed
by the Servicer in substantially the form of Exhibit B attached hereto.
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 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 4.10 hereof, (iii) the conservation,
management and sale or other disposition of a Foreclosure Property pursuant to
Section 4.11 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 4.05 hereof;
provided, however, that such Servicing Advances are reimbursable to the Servicer
out of Net Liquidation Proceeds.
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 Noteholders, as such list may from time to time be amended.
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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 August
2000, upon which all of the following conditions exist:
(1) the Pool Principal Balance has been reduced to 50.00% of the
Original Pool Principal Balance;
(2) the Net Delinquency Calculation Amount is less than 4.5% of the
Original Pool Principal Balance; and
(3) the aggregate of the Class Principal Balances of the Senior
Notes will be able to be reduced on such Distribution Date (such
determination to be made by the Indenture Trustee prior to giving effect
to distribution of principal on such Distribution Date) 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) 59.5% of the Pool Principal Balance as of
the related Determination Date and
(2) the Overcollateralization Target Amount for
such Distribution Date (such amount to be
calculated (x) without giving effect to the
proviso in the definition thereof and (y)
pursuant only to clause (II) of the
definition thereof); and
(b) 0.50% of the Original Pool Principal Balance.
Subordinate Noteholders' Interest Carry-Forward Amount: With respect
to any Distribution Date, the excess, if any, of (A) the Subordinate
Noteholders' Monthly Interest Distribution Amount for the preceding Distribution
Date plus any outstanding Subordinate 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
and the Mezzanine Noteholders' Interest Distribution Amount for such preceding
Distribution
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Date; it being understood that the interest of the Class B-1 Noteholders in the
Subordinate Noteholders' Interest Carry-Forward Amount is senior to that of the
Class B-2 Noteholders.
Subordinate Noteholders' Interest Distribution Amount: With respect
to any Distribution Date, the sum of the Subordinate Noteholders' Monthly
Interest Distribution Amount for such Distribution Date and the Subordinate
Noteholders' Interest Carry-Forward Amount for such Distribution Date.
Subordinate Noteholders' Monthly Interest Distribution Amount: With
respect to each Distribution Date and the Classes of Subordinate Notes, the
interest accrued 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) after
giving effect to all payments of principal to the holders of such Classes of
Notes on or prior to such preceding Distribution Date.
Subordinate Notes: The Class B-1 Notes and Class B-2 Notes.
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 4.06(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 4.06(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 2.05 or Section 3.05 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 April
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.
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Termination Price: As of any date of determination, an amount
without duplication equal to the greater of (A) the Note Redemption Amount and
(B) 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; and (iii) 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 Indenture Trustee as of
a date not more than 30 days prior to such Monthly Cut-Off Date.
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 and the Collection Account.
Trust Agreement: The Trust Agreement dated as of August 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 removal of Deleted Home Loans and the addition of
Qualified Substitute Home Loans, together with the Servicer's Home Loan Files
and the Indenture 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.
UCC: The Uniform Commercial Code as in effect in the State of New
York.
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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 and the Residual Interest Certificates 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
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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 Residual
Interest Certificates to be authenticated and delivered to the Depositor or its
designee, upon the order of the Depositor.
Section 2.02 Ownership and Possession of Home Loan Files.
Upon the issuance of the Notes, 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
2.05 hereof.
Section 2.03 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
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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 2.04 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 "Indenture Trustee's Home
Loan Files"):
(i) The original Debt Instrument, endorsed by the Transferor in
blank or in the following form: "Pay to the order of U.S. Bank National
Association, as Indenture Trustee and Co-Owner Trustee under the Sale and
Servicing Agreement, dated as of August 1, 1997, Empire Funding Home Loan
Owner Trust 1997-3, 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
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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 Indenture Trustee's 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 Combination Loan, an original
or copy of contract of work or written description with cost estimates, if any,
(vi) if the Home Loan is a Combination 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 2.04(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) 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.
(d) Within 60 days after the Closing Date, the Transferor, at its
own expense, shall record each Assignment of Mortgage (which may be a blanket
assignment if
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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 and the Certificateholder's interest in the related Mortgage
Loan. With respect to any Assignment of Mortgage as to which the related
recording information is unavailable within 60 days following the Closing Date,
such Assignment of Mortgage shall be submitted for recording within 30 days
after receipt of such information but in no event later than one year after the
Closing Date. The Indenture Trustee shall be required to retain a copy of each
Assignment of Mortgage submitted for recording. In the event that any such
Assignment of Mortgage is lost or returned unrecorded because of a defect
therein, the Transferor shall promptly prepare a substitute Assignment of
Mortgage or cure such defect, as the case may be, and thereafter the Transferor
shall be required to submit each such Assignment of Mortgage for recording.
(e) All recordings required pursuant to this Section 2.04 shall be
accomplished by and at the expense of the Transferor.
Section 2.05 Acceptance by the Indenture Trustee of the Home Loans;
Certain Substitutions; 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. The Indenture Trustee agrees to cause the Custodian
to review each Indenture Trustee's Home Loan File within 45 days after the
Closing Date (or, with respect to any Qualified Substitute Home Loan, within 45
days after the conveyance of the related Home Loan to the Trust) and to cause
the Custodian to deliver to the Transferor, the Depositor, the Indenture
Trustee, the Issuer and the Servicer a certification (the "Custodian's Initial
Certification") to the effect that, as to each Home Loan listed in the Home Loan
Schedule (other than any Home Loan paid in full or any Home Loan specifically
identified as an exception to such certification), (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 2.04 hereof), (ii) all documents delivered by the
Depositor and the Transferor to the Custodian pursuant to Section 2.04 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 2.04 hereof. Neither the Issuer nor the
Custodian
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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 2.04(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 Noteholders and the
Indenture Trustee as the owner thereof for so long as the Indenture continues in
full force and effect; after the Indenture is terminated in accordance with the
terms thereof, the Servicer's Home Loan File shall be held in the custody of the
Servicer for the benefit of, and as agent for, the Certificateholders. It is
intended that, by the Servicer's agreement pursuant to this Section 2.05(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 Securityholders 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) The Custodian shall, for the benefit of the Securityholders,
review each Indenture Trustee's Home Loan File within 60 days after the date it
delivered a Custodian's Initial Certification and deliver to the Transferor, the
Depositor, the Indenture Trustee, the Issuer and the Servicer an updated
certification (a "Custodian's Updated Certification"), setting forth those
exceptions listed on the Custodian's Initial Certification which continue to
exist on the date of such Custodian's Updated Certification. With respect to any
Home Loans which are set forth as exceptions in the Custodian's Updated
Certification because recorded assignments or original or certified copies of
Mortgages have not yet been delivered to the Custodian, the Transferor shall
cure such exceptions by delivering such missing documents to the Custodian no
later than 360 days after the Closing Date.
The Custodian agrees, for the benefit of the Securityholders, to
review each Indenture Trustee's Home Loan File within 360 days after the Closing
Date and to deliver to the Transferor, the Depositor, the Indenture Trustee, the
Issuer and the Servicer a final
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certification (a "Custodian's Final Certification"), setting forth those
exceptions listed on the Custodian's Updated Certification which continue to
exist on the date of such Custodian's Final Certification.
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. 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 3.05 hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Depositor.
The Depositor hereby represents and warrants to the Transferor, the
Servicer, the Indenture Trustee, the Owner Trustee and the Noteholders 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
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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 Notes invalid, (B) seek to
prevent the issuance of the Notes 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 Notes;
(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 Notes, 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 delivered to the Trust good title to, and the
Trust will be the sole owner of, each Home Loan free and clear of any
lien;
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(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 Noteholders and the Depositor
that as of the Closing Date (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
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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 Notes invalid, (B) seek to
prevent the issuance of the Notes 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 Notes;
(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 Notes, (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
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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 set
forth in the paragraph immediately preceding the final paragraph of the
cover of the Prospectus Supplement and the first sentence of the final
paragraph of the cover of the Prospectus Supplement 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", "FEDERAL INCOME 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) The Transferor has transferred the Home Loans without any intent
to hinder, delay or defraud any of its creditors; and
(m) The Private Placement Memorandum (other than (i) the statements
set forth in the first sentence of the second paragraph immediately
preceding the final paragraph of the cover of the Private Placement
Memorandum and (ii) the statements under the following captions:
"DESCRIPTION OF THE OFFERED NOTES", "FEDERAL INCOME TAX CONSEQUENCES",
"ERISA CONSIDERATIONS", "LEGAL INVESTMENT CONSIDERATIONS" and "PLAN OF
OFFERING", 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.
It is understood and agreed that the representations and warranties
set forth in this Section 3.02 shall survive delivery of the respective
Indenture Trustee's 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 3.05 hereof to cure any
breach or to substitute for or repurchase an affected Home Loan shall constitute
the sole remedies available hereunder to the Securityholders, the Depositor, the
Servicer, the Indenture Trustee or the
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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 Noteholders, 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, moratorium or other similar laws
relating to or affecting the rights of creditors generally, and by general
equity principles (regardless of whether such enforcement is considered in
a proceeding in equity or at law);
(d) The Servicer is not in violation of, and the execution and
delivery of this Agreement by the Servicer and its performance and
compliance with the terms of this Agreement will not constitute a
violation with respect to, any order or decree of any court or any order
or regulation of any federal, state, municipal or governmental agency
having jurisdiction, which violation would materially and adversely affect
the condition (financial or otherwise) or operations of the Servicer or
materially and adversely affect the performance of its duties hereunder;
(e) There are no actions or proceedings against, or investigations
of, the Servicer 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
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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
Notes invalid, (B) seek to prevent the issuance of the Notes 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 Notes;
(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 Notes, 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) 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;
(j) The Servicer is solvent and will not be rendered insolvent as a
result of the performance of its obligations pursuant to this Agreement;
(k) The Servicer has not waived any default, breach, violation or
event of acceleration existing under any Debt Instrument or the related
Mortgage;
(l) 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;
(m) The Servicer shall comply with, and shall service, or cause to
be serviced, each Home Loan, in accordance with all applicable laws; and
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(n) 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 Indenture Trustee's Home Loan Files to the Indenture Trustee and
shall inure to the benefit of the Depositor, the Noteholders 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 Noteholders 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.
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 Noteholders, with respect to each Loan as
of the Closing 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 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 Indenture Trustee's 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 Indenture Trustee's Home Loan
File and the payment terms of which are reflected in the related Home Loan
Schedule;
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(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, canceled,
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
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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 Indenture Trustee's
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) 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;
(o) 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;
(p) 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
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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;
(q) 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 Indenture Trustee's 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;
(r) 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 4.10 hereof;
(s) 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 2.04 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 Servicer for
the benefit of, and as agent for, the Securityholders and the Indenture
Trustee as their respective interest appear herein. 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;
(t) 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, unless such
manufactured home or mobile home is treated as real estate under
applicable law;
(u) Each Home Loan was underwritten by the Transferor in accordance
with the Transferor's underwriting guidelines;
(v) 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
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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;
(w) 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;
(x) 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;
(y) 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;
(z) 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;
(aa) 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;
(ab) 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;
(ac) The related Servicer's 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;
(ad) To the best of the Transferor's knowledge, each Property
(including each residential dwelling improvement thereon) is free of
damage which materially and adversely affects the value thereof and there
is no proceeding pending for the total or partial condemnation of any
Property;
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(ae) 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;
(af) 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;
(ag) 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;
(ah) 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;
(ai) As of the 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;
(aj) 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;
(ak) 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);
(al) Each Home Loan either complies with the Home Ownership and
Equity Protection Act of 1994 or is not subject to such act;
(am) 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;
(an) With respect to any Mortgage Loan, to the best of the
Transferor's knowledge, the Property is free from any and all toxic and
hazardous substances and 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
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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;
(ao) At the time of its origination no Home Loan was secured by a
Mortgage on a non-owner occupied Mortgaged Property;
(ap) 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 Section 301.7701(i) 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
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solely because the obligor is personally liable on the
obligation. For this purpose only, substantially all of
the proceeds of the obligations means 66 2/3% or more of
the gross proceeds.
(aq) No Home Loan was adversely selected as to credit risk from the
pool of home loans owned by the Transferor;
(ar) 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;
(as) Each Home Loan is a home improvement loan for goods or
services, a debt consolidation loan or a home equity loan;
(at) 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;
(au) To the best of the Transferor's knowledge, all improvements
which were considered in determining the appraised value of the Property
lay wholly within the boundaries and building restriction lines of the
Property and no improvements on adjoining properties encroach upon the
Mortgaged Property. No improvement located on or being part of the
Mortgaged Property is in violation of any applicable zoning law or
regulation;
(av) To the best of the Transferor's knowledge, all inspections,
licenses and certificates required to be made, obtained and issued as of
the Closing Date with respect to the improvements and the use and
occupancy of all occupied portions of all Properties have been made,
obtained or issued as applicable;
(aw) In the event that the Mortgage Loan was originated by an entity
(such entity, the "Originator") other than the Transferor or an affiliate
of the Transferor, the Indenture Trustee may enforce any remedies for
breach of representations and warranties made by the Transferor with
respect to such Mortgage Loan;
(ax) The Mortgage Loan does not contain provisions pursuant to which
Monthly Payments are paid or partially paid with funds deposited in any
separate account established by the Transferor, the Obligor or anyone on
behalf of the Obligor, or paid by any source other than the Obligor nor
does it contain any other similar provisions currently in effect which may
constitute a "buydown" provision. The Mortgage Loan is not a graduated
payment Mortgage Loan and the Mortgage Loan does not have a shared
appreciation or other contingent interest feature; and
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(ay) The Transferor has reviewed all of the documents constituting
the Mortgage File and has made such inquiries as it deems necessary to
make and confirm the accuracy of the representations set forth herein.
Section 3.05 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 Notes to the Noteholders. 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 or the representations and warranties set forth
in Section 3.02 which materially and adversely affects the value of the Home
Loans or the interests of the Securityholders in the related 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.
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 3.05 or (ii) purchase such Defective Home Loan at a
purchase price equal to the Purchase Price 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.
Any substitution of Home Loans pursuant to this Section 3.05(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 3.05 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 3.05 shall
constitute the sole remedy
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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
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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 3.05 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
hereunder of the Depositor, the Issuer, the Indenture Trustee, Owner Trustee and
the Securityholders respecting a breach of the representations and warranties
contained in Section 3.02 and 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 2.05 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 Noteholders 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
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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; Subordination. 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. The Servicer
may in its discretion enter in subordination agreements with respect to any Home
Loan, provided that the Servicer determines, consistent with this Agreement and
Accepted Servicing Procedures that the entering into of such subordination
agreement is in the best interests of the Trust.
(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
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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 with a responsible company, and at its
own expense, a blanket fidelity bond and an errors and omissions insurance
policy in such amounts as required by, and satisfying any other requirements of,
the Federal Housing Administration
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and the FHLMC, with broad coverage on all officers, employees or other persons
acting in any capacity requiring such persons to handle funds, money, documents
or papers relating to the Home Loans ("Servicer Employees"). Any such fidelity
bond and errors and omissions insurance shall protect and insure the Servicer
against losses, including losses resulting from forgery, theft, embezzlement,
fraud, errors and omissions and negligent acts (including acts relating to the
origination and servicing of loans of the same type as the Home Loans) of such
Servicer Employees. Such fidelity bond shall also protect and insure the
Servicer against losses in connection with the release or satisfaction of a Home
Loan without having obtained payment in full of the indebtedness secured
thereby. In the event of any loss of principal or interest on a Home Loan for
which reimbursement is received from the Servicer's fidelity bond or errors and
omissions insurance, the process from any such insurance will be deposited in
the Collection Account. No provision of this Section 4.03 requiring such
fidelity bond and errors and omission insurance shall diminish or relieve the
Servicer from its duties and obligations as set forth in this Agreement. Upon
the request of the Issuer or the Indenture Trustee, the Servicer shall cause to
be delivered to the requesting party a certified true copy of such fidelity bond
and insurance policy.
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 2.03 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.
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Section 4.05 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 4.05 shall comply with requirements
set forth in Section 4.01(b) hereof.
Section 4.06 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
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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 4.07 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 4.06.
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(f) In those cases where a Subservicer is servicing a Home Loan
pursuant to a Subservicing 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 4.07 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 4.08 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.
(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,
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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 4.10 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 4.09 Reports to the Securities and Exchange Commission; 144A
Information.
(a) 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 regulations
of the Securities and Exchange Commission thereunder. Upon the request of the
Indenture Trustee, each of the Servicer and the Transferor shall cooperate with
the Indenture Trustee in the preparation of any such report and shall provide to
the Indenture Trustee in a timely manner all such information or documentation
as the Indenture Trustee may reasonably request in connection with the
performance of its duties and obligations under this Section 4.09. The Indenture
Trustee shall indemnify and hold harmless each of the Issuer and the Depositor
for any costs, expenses or liability arising as a result of the failure of the
Indenture Trustee to perform its duties and obligations under this Section 4.09.
(b) The Servicer shall provide to the Indenture Trustee, if
requested, information regarding the Class B-2 Notes and the Home Loans and such
other information as the Indenture Trustee shall be required to deliver to any
holder of a Class B-2 Note and any prospective transferee designated by any such
holder to satisfy the condition of eligibility set forth in Rule 144A(d)(4)
under the Securities Act.
Section 4.10 Foreclosure; Foreclosure Alternatives.
(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, accepting short
pay-offs, short sales, entering into assumptions and modifications, pursuing
collection litigation or alternative court proceedings to foreclosure actions.
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.
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(b) In accordance with the criteria for proceeding against the
Mortgaged Property set forth in subsection (a) of this Section 4.10, 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 4.10, 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
Noteholders.
(c) 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 4.11 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
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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 4.10 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
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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 4.10 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 4.11 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.
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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, U.S. Bank National Association, as Indenture
Trustee, in trust for the Empire Funding Home Loan Asset Backed Notes,
Series 1997-3". 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 Noteholders, 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, U.S. Bank National
Association, as Indenture Trustee, in trust for the Empire Funding Home
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Loan Asset Backed Notes, Series 1997-3". Funds in the Note Distribution
Account shall be invested in accordance with Section 5.03 hereof.
(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 and interest on the
Home Loans collected after the Cut-Off Date;
(ii) all Net Liquidation Proceeds pursuant to Section 4.11
hereof;
(iii) all Insurance Proceeds;
(iv) all Released Mortgaged Property Proceeds;
(v) any amounts payable in connection with the repurchase of
any Home Loan and the amount of any Substitution Adjustment pursuant
to Sections 2.05 and 3.05 hereof;
(vi) the deposit of the Termination Price under Section 11.01
hereof; and
(vii) 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) Deposits to Note Distribution Account. On the second Business
Day prior to each Distribution Date, the Indenture Trustee (based on
information provided by the Servicer for such Distribution Date) shall
withdraw from the Collection Account the Available Collection Amount and
deposit such into the Note Distribution Account for such Distribution
Date.
(3) Withdrawals from Collection Account. The Indenture Trustee, at
the direction of the Servicer, shall also make the following withdrawals
from the Collection Account, in no particular order of priority:
(i) to withdraw any amount not required to be deposited in the
Collection Account or deposited therein in error;
(ii) to withdraw the Servicer Reimbursement Amount;
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(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 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 Notes 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;
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(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) sequentially, to the holders of the Class B-1 and Class
B-2 Notes, in that order, their respective portions of the
Subordinate Noteholders' Interest Distribution Amount for such
Distribution Date;
(iv) sequentially, to the holders of the Class A-1, Class A-2,
Class A-3, Class A-4, Class A-5, Class A-6 and Class A-7 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, Class B-1 Notes and the Class B-2 Notes to zero through the
application of Allocable Loss Amounts, amounts shall be distributed
among the remaining Senior Notes pro rata in accordance with their
outstanding Class Principal Balances and not sequentially;
(v) sequentially, to the holders of the Class M-1 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;
(vi) sequentially, to the holders of the Class B-1 and Class
B-2 Notes, in that order, the amount necessary to reduce the Class
Principal Balances thereof to the Class B-1 Optimal Principal
Balance and the Class B-2 Optimal Principal Balance, respectively,
for such Distribution Date;
(vii) sequentially, to the Class M-1 Notes, Class M-2 Notes,
Class B-1 and the Class B-2 Notes, 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
(viii) any remaining amount to the holders of the Residual
Interest Certificates.
(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:
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(i) in an amount equal to the Overcollateralization
Deficiency Amount, if any, as follows:
(A) sequentially, to the holders of the Class A-1,
Class A-2, Class A-3, Class A-4, Class A-5, Class
A-6 and Class A-7 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) (i) sequentially, to the holders of the Class B-1
Notes and Class B-2 Notes, until the respective
Class Principal Balances thereof have been reduced
to the Class B-1 Optimal Principal Balance and the
Class B-2 Optimal Principal Balance for such
Distribution Date; and
(ii) sequentially, to the Class M-1 Notes, the Class M-2
Notes, Class B-1 Notes and the Class B-2 Notes, 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 Certificates.
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, U.S. Bank National
Association, as Indenture Trustee and Co-Owner Trustee, in trust for the Empire
Funding Home Loan Owner Trust Series 1997-3". Funds in the Certificate
Distribution Account shall be invested in accordance with Section 5.03 hereof.
(b) Distributions. On each Distribution Date the Indenture Trustee
shall withdraw from the Note Distribution Account all amounts required to be
deposited into the
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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 Residual Interest
Certificates.
(c) 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.
(d) All distributions made on the Residual Interest Certificates on
each Distribution Date will be made pro rata among the holders of the Residual
Interest Certificates 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
Certificate 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 Certificate will be made in like manner, but only upon
presentment and surrender of such Residual Interest Certificate at the location
specified in the notice to holders of the Residual Interest Certificates of such
final distribution. Any amount distributed to the holders of the Residual
Interest Certificates on any Distribution Date shall not be subject to any claim
or interest of holders of the other Classes of Notes.
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
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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 Noteholders 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 5.01(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 (c) and (d) 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.
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(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. 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 "U.S. Bank National
Association, as Indenture Trustee, in trust for the Empire Funding Home
Loan Asset Backed Notes, Series 1997-3". 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 "U.S. Bank National Association, as
Co-Owner Trustee, in trust for the Empire Funding Home Loan Asset Backed
Notes, Series 1997- 3".
(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).
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(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 sole and exclusive dominion, custody and
control of the Indenture Trustee; and, without limitation on the
foregoing, 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.
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(b) On any Distribution Date, any Allocable Loss Amounts shall be
applied to the reduction of the Class Principal Balances of the Class B-2, the
Class B-1 Notes, the Class M-1 Notes and Class M-2 Notes in accordance with the
Allocable Loss Amount Priority.
ARTICLE VI
STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS
Section 6.01 Statements.
(a) No later than each Determination Date, the Servicer shall
deliver to the Indenture Trustee by facsimile, the receipt and legibility of
which shall be confirmed by telephone, and with hard copy thereof to be
delivered no later than one (1) Business Day after such Determination Date, the
Servicer's Monthly Remittance Report, setting forth the date of such Report
(day, month and year), the name of the Issuer (i.e. "Empire Funding Home Loan
Owner Trust 1997-3"), the Series designation of the Notes (i.e. "Series 1997-3")
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 Notes (day, month and
year), the name of the Issuer (i.e. "Empire Funding Home Loan Owner Trust
1997-3"), the Series designation of the Notes (i.e., "Series 1997-3"), 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 before
and after giving effect to distributions made to the holders of such
Notes 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 Notes
then outstanding;
(iv) the amount of principal, if any, and interest to be
distributed to each Class of Notes on the related Distribution Date;
(v) with respect to each Class of Notes, the Optimal Principal
Balance thereof;
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(vi) the Overcollateralization Deficiency Amount, and any
amount to be distributed to the Noteholders 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) 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;
(xii) 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;
(xiii) 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;
(xiv) during the related Due Period (and cumulatively, from
the Closing Date through the most current 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 3.05 hereof as a result of such Deleted Home Loans being
Defective Home Loans, and (D) that became Deleted Home loans
pursuant to Section 3.05 hereof as a result of such Deleted
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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);
(xv) the scheduled principal payments and the principal
prepayments received with respect to the Home Loans during the Due
Period; and
(xvi) 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 pursuant to
subclause (b)(iv) of this Section 6.01, the amounts shall be expressed as a
dollar amount per Note 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) On each Distribution Date, the Indenture Trustee shall forward
to the holders of the Residual Interest Certificates a copy of the Distribution
Statement in respect of such Distribution Date and a statement setting forth the
amounts actually distributed to such holders of the Residual Interest
Certificates on such Distribution Date, together with such other information as
the Indenture Trustee deems necessary or appropriate.
(e) 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
Certificates, if requested in writing by 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 Certificates.
(f) The Indenture Trustee shall forward to each Noteholder and each
holder of a Residual Interest Certificate, during the term of this Agreement,
such periodic, special or other reports, including information tax returns or
reports required with respect to the Notes and the Residual Interest
Certificates, as shall be necessary, reasonable, or appropriate with respect to
the Noteholders or the holders of Residual Interest Certificates, or otherwise
with respect to the purposes of this Agreement, all such reports or information
in the case of the
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Residual Interest Certificates to be provided by and in accordance with such
applicable instructions and directions as the Majority Residual Interestholders
may reasonably require.
(g) 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 Noteholder or Certificateholder of any applicable
withholding taxes imposed thereon and with respect to any applicable reporting
requirements in connection therewith, giving due effect to any applicable
exemptions from such withholding and effective certifications or forms provided
by the recipient. Any amounts withheld pursuant to this Section 6.02 shall be
deemed to have been distributed to the Noteholders or Certificateholders, as the
case may be, for all purposes of this Agreement or the Indenture.
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:
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(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 3.05 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; or
(v) the related Foreclosure Property has been sold pursuant to
Section 4.11 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 Indenture Trustee's 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 Indenture Trustee's Home Loan File has previously been
released), the related Indenture Trustee's Home Loan File to the Servicer and
execute and
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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 Indenture Trustee's Home Loan File (or any
requested portion thereof) to the Servicer in accordance with Section 3(a) of
the Custodial Agreement.
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 Rating Agencies 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 supervision
and (ii) to the best of such officer's knowledge, based on such review, the
Servicer has fulfilled all of its obligations under this Agreement throughout
such year, or, if there has been a default in the fulfillment of any such
obligation, specifying each such default known to such 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
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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 1998), the Servicer at its expense shall
cause any of Arthur Andersen & Co., Coopers & Lybrand LLP, Deloitte & Touche
LLP, Ernst & Young LLP, KPMG Peat Marwick LLP and Price Waterhouse & Co. or some
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, the Rating Agencies 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.
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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 Notes, Noteholders may request that the Servicer make available to the
Noteholders and to prospective Noteholders 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.
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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 (i) the employment of counsel by the Indemnified Party at its
expense has been authorized in writing by the Servicer, (ii) 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
(iii) 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
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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 of 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.
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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 4.07 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 and any agreement,
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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:
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(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 30 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 the Majority Noteholders; 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 Noteholders (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; or
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(d) as of any Determination Date, the total Expected
Loan Loss Percentage (as defined below) exceeds (1) up to the
fifth (5th) anniversary of the July 31, 1997 Cut-Off Date,
21.75%, or (2) thereafter 32.625% (where the "Expected Loan
Loss Percentage" shall be the sum of (A) the cumulative Net
Loan Losses divided by the Initial Pool Principal Balance,
plus (B) 25% of the aggregate Principal Balance of the Home
Loans which are then more than 30 but less than 60 days
delinquent divided by the Initial Pool Principal Balance, plus
(C) 50% of the aggregate Principal Balance of the Home Loans
which are then more than 60 but less than 90 days delinquent
divided by the Initial Pool Principal Balance, plus (D) 100%
of the aggregate Principal Balance of the Home Loans which are
then more than 90 days delinquent divided by the Initial Pool
principal Balance).
(b) then, and in each and every such case, so long as an Event of
Default shall not have been remedied, the Indenture Trustee, the Co-Owner
Trustee or the Majority Noteholders, 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 4.07 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
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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 Section 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
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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 Noteholders 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 Noteholders may waive any events permitting removal of
the Servicer as servicer pursuant to this Article X; provided, however, that the
Majority Noteholders may not waive a default in making a required distribution
on a Note or Residual Interest Certificate without the consent of the related
Noteholder or holder of the Residual Interest Certificate. 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;
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(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 Auction Call; Optional Termination.
The Majority Residual Interestholders may, at their option, effect
an early termination of the Trust on or after any Distribution Date on which the
Pool Principal Balance declines to 10% or less of the Original Pool Principal
Balance. The Majority Residual Interestholders shall effect such early
termination by providing notice thereof to the Indenture Trustee and Owner
Trustee and by purchasing all of the Home Loans at a purchase price, payable in
cash, equal to or greater than the Termination Price. 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 Noteholders 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
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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 in accordance with section 9.1(d) of the
Trust Agreement.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01 Acts of Noteholders.
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 Notes 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 Noteholders,
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
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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 affected thereby, (ii) adversely affect in any material
respect the interests of the holders of any Class of Notes in any manner other
than as described in clause (i), without the consent of the holders of 100% of
such Class of Notes, or (iii) reduce the percentage of any Class of Notes, the
consent of which is required for any such amendment, without the consent of the
holders of 100% of such Class of Notes.
(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 Noteholders'
expense on direction of the Majority Noteholders but only when accompanied by an
Opinion of Counsel to the effect that such recordation materially and
beneficially affects the interests of the Noteholders 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.
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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, PaineWebber Mortgage Acceptance
Corporation IV, 1285 Avenue of the Americas, New York, New York 10019,
Attention: John Fearey, Esq., 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
1997-3, 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, U.S. Bank National
Association, 180 East Fifth Street, St. Paul, Minnesota 55101, Attention:
Structured Finance/Empire Funding 1997-3; and (v) in the case of the
Securityholders, as set forth in the applicable Note 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.
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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 Noteholders 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;
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(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;
(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, 38th Floor, Chicago, Illinois 60603,
Attention: MBS Monitoring.
Section 12.14 Holders of the Residual Interest Certificates.
(a) Any sums to be distributed or otherwise paid hereunder or under
the Trust Agreement to the holders of the Residual Interest Certificates 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 Certificates,
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.
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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 1997-3,
By: Wilmington Trust Company, not in its
individual capacity but solely as Owner
Trustee
By:
---------------------------------------
Name:
Title:
PAINEWEBBER MORTGAGE ACCEPTANCE
CORPORATION IV, as Depositor
By:
---------------------------------------
Barbara J. Dawson
Senior Vice President
EMPIRE FUNDING CORP., as Transferor and
Servicer
By:
---------------------------------------
Name:
Title:
U.S. BANK NATIONAL ASSOCIATION,
as Indenture Trustee and Co-Owner Trustee
By:
---------------------------------------
Name:
Title:
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THE STATE OF ___________ )
)
COUNTY OF ______________ )
BEFORE ME, the undersigned authority, a Notary Public, on this _____
day of August 1997 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 1997-3 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 August, 1997.
-----------------------------------------
Notary Public, State of
------------------
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THE STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, a Notary Public, on this _____
day of August 1997 personally appeared Barbara J. Dawson, 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 PAINEWEBBER MORTGAGE
ACCEPTANCE CORPORATION IV, 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 August, 1997.
-----------------------------------------
Notary Public, State of
------------------
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THE STATE OF ___________ )
)
COUNTY OF ______________ )
BEFORE ME, the undersigned authority, a Notary Public, on this _____
day of August 1997 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 August, 1997.
-----------------------------------------
Notary Public, State of
------------------
3
<PAGE>
THE STATE OF ___________ )
)
COUNTY OF ______________ )
BEFORE ME, the undersigned authority, a Notary Public, on this _____
day of August 1997 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 U.S. 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 U.S. BANK NATIONAL ASSOCIATION, this
the ____ day of August, 1997.
-----------------------------------------
Notary Public, State of
------------------
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Exhibit A
Requests for a copy of the Home Loan Schedule should be made in writing to
Office of General Counsel of PaineWebber Mortgage Acceptance Corporation IV, at
1285 Avenue of the Americas, New York, New York 10019, Attention: JOHN FEAREY,
ESQ.
==============================================================================
ADMINISTRATION AGREEMENT
dated as of August 1, 1997
among
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-3
(the "Issuer")
and
U.S. BANK NATIONAL ASSOCIATION,
d/b/a FIRST BANK NATIONAL ASSOCIATION, as Administrator
(the "Administrator")
and
EMPIRE FUNDING CORP.
(the "Company")
Home Loan Asset Backed Notes, Series 1997-3
==============================================================================
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Duties of the Administrator......................................2
Section 2. Duties of the Company with Respect to the Indenture..............4
Section 3. Records..........................................................6
Section 4. Compensation.....................................................6
Section 5. Additional Information to Be Furnished to the Issuer.............6
Section 6. Independence of the Administrator................................6
Section 7. No Joint Venture.................................................6
Section 8. Other Activities of Administrator and Servicer...................7
Section 9. Term of Agreement; Resignation and Removal of Administrator
or Servicer......................................................7
Section 10. Action upon Termination, Resignation or Removal of the
Administrator....................................................8
Section 11. Notices..........................................................8
Section 12. Amendments.......................................................9
Section 13. Successor and Assigns...........................................10
Section 14. Governing Law...................................................10
Section 15. Headings........................................................10
Section 16. Counterparts....................................................11
Section 17. Severability....................................................11
Section 18. Not Applicable to U.S. Bank in Other Capacities.................11
Section 19. Limitation of Liability of Owner Trustee........................11
Section 20. Benefit of Agreement............................................11
Section 21. Bankruptcy Matters..............................................11
Section 22. Capitalized Terms...............................................12
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ADMINISTRATION AGREEMENT
ADMINISTRATION AGREEMENT dated as of August 1, 1997, among EMPIRE
FUNDING HOME LOAN OWNER TRUST 1997-3, a Delaware business trust, as Issuer (the
"Issuer"), U.S. BANK NATIONAL ASSOCIATION, d/b/a FIRST BANK NATIONAL
ASSOCIATION, a national banking corporation, not in its individual capacity but
solely as Administrator ("U.S. Bank" and in such capacity, 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 August 1, 1997 (the "Trust
Agreement"), among PaineWebber Mortgage Acceptance Corporation IV, as depositor
(the "Depositor"), Empire Funding Corp., as the Company, Wilmington Trust
Company, as Owner Trustee, and U.S. Bank, as Co-Owner Trustee; and
WHEREAS, the Issuer will issue Home Loan Asset Backed Notes (the
"Notes"), Series 1997-3; and
WHEREAS, the Notes will be secured by certain collateral, as more
particularly set forth in the Indenture dated as of August 1, 1997 (the
"Indenture"), between the Issuer and U.S. Bank, as Indenture Trustee (in such
capacity, the "Indenture Trustee"); and
WHEREAS, the Issuer has entered into certain agreements in
connection with the issuance of the Notes, including (i) a Sale and Servicing
Agreement dated as of August 1, 1997 (the "Sale and Servicing Agreement"), among
the Issuer, Empire Funding Corp., as Transferor and Servicer, the Depositor and
U.S. Bank, 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 the Notes and the collateral
therefor pledged pursuant to the Indenture (the "Collateral"); 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
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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);
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(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);
(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); and
(P) filing Internal Revenue Service Form 8811 within 30
days of the Closing Date, designating the officer of the Indenture
Trustee that
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Noteholders may contact for original issue discount information with
respect to the Notes, and updating such Form at the time or times
required by the Code.
(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);
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(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) appointing a successor Indenture Trustee pursuant to
Section 6.08 of the Indenture (Section 6.08);
(vii) 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);
(viii) 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);
(ix) 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
(x) 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
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expressly requested by the Owner Trustee and are reasonably within the
capability of the Company.
(ii) Notwithstanding anything in this Agreement or the Related
Agreements to the contrary, the Administrator shall be responsible for
promptly notifying the Owner Trustee in the event that any withholding tax
is imposed on the Trust's payments (or allocations of income) to an Owner
as contemplated in Section 5.2(c) of the Trust Agreement. Any such notice
shall specify the amount of any withholding tax required to be withheld by
the Owner Trustee pursuant to such provision.
Section 3. Records.
The Administrator shall maintain appropriate books of account and
records relating to services performed hereunder, which books of account and
records shall be accessible for inspection by the Issuer and the Servicer at any
time during normal business hours.
Section 4. Compensation.
The Administrator will perform the duties and provide the services
called for under Section 1 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
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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,
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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:
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(a) if to the Issuer, to
Empire Funding Home Loan Owner Trust 1997-3
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
U.S. Bank National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Structured Finance/Empire Funding
1997-3
(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, 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; provided, however,
that such amendment will not materially and adversely affect the interest of any
Noteholder. An amendment described above shall be deemed not to adversely affect
in any material respects the interests of any Noteholder if either (i) an
Opinion of Counsel is obtained to such effect or (ii) the party requesting the
amendment satisfies the Rating Agency Condition
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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 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; 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 (ii) reduce the aforesaid percentages of the holders of Notes
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. 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.
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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 U.S. Bank in Other Capacities.
Nothing in this Agreement shall affect any obligation that U.S. Bank
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 Notes as
well as for the benefit of the Trust, and that such obligations on the part of
the Administrator shall be enforceable at the instance of the Indenture Trustee
and the Trust.
Section 21. Bankruptcy Matters.
No party to this Agreement shall take any action to cause the Trust
to dissolve in whole or in part or file a voluntary petition or otherwise
initiate proceedings to have the Trust adjudicated bankrupt or insolvent, or
consent to the institution of bankruptcy or insolvency proceedings against the
Trust, or file a petition seeking or consenting to reorganization or relief of
the Trust as debtor under any applicable federal or state law relating to
bankruptcy, insolvency or other relief for debtors with respect to the Trust; or
seek or consent to the appointment of any trustee, receiver, conservator,
assignee, sequestrator,
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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.
[SIGNATURE PAGE FOLLOWS]
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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
1997-3
By: Wilmington Trust Company,
not in its individual capacity
but solely as Owner Trustee,
By:________________________________
Name:
Title:
U.S. BANK NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Administrator,
By:______________________________________
Name:
Title:
EMPIRE FUNDING CORP.,
as the Company,
By:______________________________________
Name:
Title:
================================================================================
TRUST AGREEMENT
among
PAINEWEBBER MORTGAGE ACCEPTANCE CORPORATION IV,
as Depositor,
EMPIRE FUNDING CORP.,
as the Company,
WILMINGTON TRUST COMPANY,
as Owner Trustee
and
U.S. BANK NATIONAL ASSOCIATION,
d/b/a FIRST BANK NATIONAL ASSOCIATION,
as Co-Owner Trustee
Dated as of August 1, 1997
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-3
Home Loan Asset Backed Notes, Series 1997-3
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
SECTION 1.1 Capitalized Terms................................................1
SECTION 1.2 Other Definitional Provisions....................................5
ARTICLE II
ORGANIZATION
SECTION 2.1 Name.............................................................6
SECTION 2.2 Office...........................................................6
SECTION 2.3 Purposes and Powers..............................................6
SECTION 2.4 Appointment of Owner Trustee.....................................7
SECTION 2.5 Initial Capital Contribution of Owner Trust Estate...............7
SECTION 2.6 Declaration of Trust.............................................7
SECTION 2.7 Title to Trust Property..........................................8
SECTION 2.8 Situs of Trust...................................................8
SECTION 2.9 Representations and Warranties of the Depositor and
the Company; Covenant of the Company.............................8
ARTICLE III
TRUST CERTIFICATES AND TRANSFER OF INTERESTS
SECTION 3.1 Initial Ownership...............................................10
SECTION 3.2 The Trust Certificates..........................................10
SECTION 3.3 Execution, Authentication and Delivery of Trust Certificates....10
SECTION 3.4 Registration of Transfer and Exchange of Trust Certificates.....11
SECTION 3.5 Mutilated, Destroyed, Lost or Stolen Trust Certificates.........12
SECTION 3.6 Persons Deemed Owners...........................................12
SECTION 3.7 Access to List of Owners' Names and Addresses...................12
SECTION 3.8 Maintenance of Office or Agency.................................12
SECTION 3.9 Appointment of Paying Agent.....................................12
SECTION 3.10 Restrictions on Transfer of Residual Interest Certificates......14
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
SECTION 4.1 Prior Notice to Owners with Respect to Certain Matters..........16
SECTION 4.2 Action by Owners with Respect to Certain Matters................17
SECTION 4.3 Action by Owners with Respect to Bankruptcy.....................18
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SECTION 4.4 Restrictions on Owners' Power...................................18
SECTION 4.5 Majority Control................................................18
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
SECTION 5.1 Establishment of Trust Account..................................19
SECTION 5.2 Application Of Trust Funds......................................19
SECTION 5.3 Method of Payment...............................................20
SECTION 5.4 Segregation of Moneys; No Interest..............................20
SECTION 5.5 Accounting and Reports to the Certificateholder,
Owners, the Internal Revenue Service and Others.................20
SECTION 5.6 Withholding...........................Error! Bookmark not defined.
ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
SECTION 6.1 General Authority...............................................21
SECTION 6.2 General Duties..................................................21
SECTION 6.3 Action upon Instruction.........................................22
SECTION 6.4 No Duties Except as Specified in this Agreement, the
Basic Documents or in Instructions..............................22
SECTION 6.5 No Action Except Under Specified Documents or Instructions......23
SECTION 6.6 Restrictions....................................................23
ARTICLE VII
CONCERNING THE OWNER TRUSTEE
SECTION 7.1 Acceptance of Trusts and Duties.................................23
SECTION 7.2 Furnishing of Documents.........................................25
SECTION 7.3 Representations and Warranties..................................25
SECTION 7.4 Reliance; Advice of Counsel.....................................26
SECTION 7.5 Not Acting in Individual Capacity...............................26
SECTION 7.6 Owner Trustee Not Liable for Trust Certificates or Home Loans...26
SECTION 7.7 Owner Trustee May Own Trust Certificates and Notes..............27
SECTION 7.8 Licenses........................................................27
SECTION 7.9 Rights of Co-Owner Trustee......................................27
ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE AND CO-OWNER TRUSTEE
SECTION 8.1 Fees and Expenses...............................................27
SECTION 8.2 Indemnification.................................................28
SECTION 8.3 Payments to the Owner Trustee and Co-Owner Trustee..............28
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ARTICLE IX
TERMINATION OF TRUST AGREEMENT
SECTION 9.1 Termination of Trust Agreement..................................28
ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
SECTION 10.1 Eligibility Requirements for Owner Trustee......................29
SECTION 10.2 Resignation or Removal of Owner Trustee or Co-Owner Trustee.....30
SECTION 10.3 Successor Owner Trustee or Co-Owner Trustee.....................31
SECTION 10.4 Merger or Consolidation of Owner Trustee........................31
SECTION 10.5 Appointment of Co-Owner Trustee or Separate Owner Trustee.......31
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Supplements and Amendments......................................33
SECTION 11.2 No Legal Title to Owner Trust Estate in Owners..................34
SECTION 11.3 Limitations on Rights of Others.................................34
SECTION 11.4 Notices.........................................................35
SECTION 11.5 Severability....................................................35
SECTION 11.6 Separate Counterparts...........................................35
SECTION 11.7 Successors and Assigns..........................................35
SECTION 11.8 No Petition.....................................................35
SECTION 11.9 No Recourse.....................................................35
SECTION 11.10 Headings........................................................36
SECTION 11.11 Governing Law...................................................36
SECTION 11.12 Residual Interest Transfer Restrictions.........................36
EXHIBIT A Form of Residual Interest Certificate
EXHIBIT B Form of Residual Interest issued to the Company
EXHIBIT C Form of Certificate of Trust
EXHIBIT D Form of Certificate of Non-Foreign Status
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TRUST AGREEMENT, dated as of August 1, 1997, among PAINEWEBBER
MORTGAGE ACCEPTANCE CORPORATION IV, a Delaware corporation, as Depositor (the
"Depositor"), EMPIRE FUNDING CORP., an Oklahoma corporation (the "Company"),
WILMINGTON TRUST COMPANY, a Delaware banking corporation, as Owner Trustee (the
"Owner Trustee"), and U.S. BANK NATIONAL ASSOCIATION, d/b/a FIRST BANK NATIONAL
ASSOCIATION, as Co-Owner Trustee (the "Co-Owner Trustee").
WITNESSETH:
In consideration of the mutual agreements and covenants herein
contained, the Depositor, the Company, the Owner Trustee and the Co-Owner
Trustee hereby agree for the benefit of each of them and the holders of the
Residual Interest Certificates as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Capitalized Terms. For all purposes of this Agreement,
the following terms shall have the meanings set forth below:
"Administration Agreement" shall mean the Administration Agreement,
dated as of August 1, 1997 among the Issuer, the Company, and U.S. Bank National
Association, d/b/a First Bank National Association, as Administrator.
"Administrator" shall mean U.S. Bank National Association, d/b/a
First Bank National Association, or any successor in interest thereto, in its
capacity as Administrator under the Administration Agreement.
"Agreement" shall mean this Trust Agreement, as the same may be
amended and supplemented from time to time.
"Basic Documents" shall mean this Agreement, the Sale and Servicing
Agreement, the Indenture, the Administration Agreement, the Custodial Agreement,
the Note Depository Agreement and the other documents and certificates delivered
in connection therewith.
"Benefit Plan Investor" shall have the meaning assigned to such term
in Section 3.10(b).
"Business Trust Statute" shall mean Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code ss. 3801 et seq., as the same may be amended from
time to time.
"Certificate Distribution Account" shall have the meaning assigned
to such term in Section 5.1.
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"Certificate of Trust" shall mean the Certificate of Trust in the
form of Exhibit C to be filed for the Trust pursuant to Section 3810(a) of the
Business Trust Statute.
"Certificate Register" and "Certificate Registrar" shall mean the
register mentioned and the registrar appointed pursuant to Section 3.4.
"Certificateholder" or "Holder" shall mean a Person in whose name a
Trust Certificate is registered.
"Co-Owner Trustee" shall mean U.S. Bank National Association, d/b/a
First Bank National Association.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
Treasury Regulations promulgated thereunder.
"Corporate Trust Office" shall mean, with respect to the Owner
Trustee, the principal corporate trust office of the Owner Trustee located at
Rodney Square North, 1100 North Market Street, Wilmington, DE 19890-0001,
Attention: Corporate Trust Administration; or at such other address in the State
of Delaware as the Owner Trustee may designate by notice to the Owners and the
Company, or the principal corporate trust office of any successor Owner Trustee
(the address (which shall be in the State of Delaware) of which the successor
owner trustee will notify the Owners and the Company).
"Definitive Certificate" means a certificated form of security that
represents a Residual Interest Certificate.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Expenses" shall have the meaning assigned to such term in Section
8.2.
"Indenture" shall mean the Indenture, dated as of August 1, 1997, by
and between the Issuer and the Indenture Trustee.
"Indenture Trustee" means U.S. Bank National Association, d/b/a
First Bank National Association, as Indenture Trustee under the Indenture.
"Insolvency Event" shall have occurred with respect to the Company
if:
(i) 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 Company
and such decree or order shall have remained in force, undischarged or
unstayed for a period of 60 days; or
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(ii) the Company 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 Company or of or relating to all or substantially all of the
Company's property; or
(iii) the board of the directors of the Company shall voluntarily
dissolve the Company; or
(iv) the Company 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;
provided however, that the substantive consolidation of the Company with an
entity in respect of which the events described in (i) - (iv) above have
occurred shall not constitute an Insolvency Event with respect to the Company.
"Issuer" shall mean Empire Funding Home Loan Owner Trust 1997-3, the
Delaware business trust created pursuant to this Agreement.
"Majority Residual Interestholders" shall mean the Holders of more
than an aggregate 50% Percentage Interest of the Residual Interest.
"Non-permitted Foreign Holder" shall have the meaning set forth in
Section 3.10.
"Non-U.S. Person" shall mean an individual, corporation, partnership
or other person other than a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, an estate that
is subject to United States federal income tax regardless of the source of its
income, or a trust if (A) for taxable years beginning after December 31, 1996
(or for taxable years ending after August 20, 1996, if the trustee has made an
applicable election), a court within the United States is able to exercise
primary supervision over the administration of the trust and one or more United
States fiduciaries have authority to control all substantial decisions of the
trust or (B) for all other taxable years, such trust is subject to United States
federal income tax regardless of the source of its income.
"Owner" shall mean each holder of a Residual Interest Certificate.
"Owner Trust Estate" shall mean the contribution of $1 referred to
in Section 2.5 and the Collateral (as defined in the Indenture).
"Owner Trustee" shall mean Wilmington Trust Company, a Delaware
banking corporation, not in its individual capacity but solely as owner trustee
under this Agreement, and any successor owner trustee hereunder.
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"Paying Agent" shall mean the Co-Owner Trustee or any successor in
interest thereto or any other paying agent or co-paying agent appointed pursuant
to Section 3.9 and authorized by the Issuer to make payments to and
distributions from the Certificate Distribution Account.
"Percentage Interest" shall mean with respect to each Residual
Interest Certificate, the percentage portion of all of the Residual Interest
evidenced thereby as stated on the face of such Residual Interest Certificate.
"Prospective Owner" shall have the meaning set forth in Section
3.10(a).
"Rating Agency Condition" means, with respect to any action to which
a Rating Agency Condition applies, that each Rating Agency shall have been given
10 days (or such shorter period as is acceptable to each Rating Agency) prior
notice thereof and that each of the Rating Agencies shall have notified the
Seller, the Servicer, the Owner Trustee and the Issuer in writing that such
action will not result in a reduction or withdrawal of the then current rating
of the Notes.
"Record Date" shall mean as to each Distribution Date the last
Business Day of the month immediately preceding the month in which such
Distribution Date occurs.
"Residual Interest" shall mean the right to receive distributions of
Excess Spread, if any, and certain other funds, if any, on each Distribution
Date, pursuant to Section 5.01(e) of the Sale and Servicing Agreement.
"Residual Interest Certificate" shall mean a certificate
substantially in the form attached as Exhibit A hereto and evidencing the
Residual Interest.
"Residual Interestholder" shall mean any Holder of a Percentage
Interest of the Residual Interest.
"Sale and Servicing Agreement" shall mean the Sale and Servicing
Agreement dated as of the date hereof, among the Trust as Issuer, PaineWebber
Mortgage Acceptance Corporation as Depositor, U.S. Bank National Association,
d/b/a First Bank National Association as Indenture Trustee and Co-Owner Trustee,
and the Company, as Transferor and Servicer, as the same may be amended from
time to time.
"Secretary of State" shall mean the Secretary of State of the State
of Delaware.
"Treasury Regulations" shall mean regulations, including proposed or
temporary regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
"Trust" shall mean the trust established by this Agreement.
"Trust Certificates" shall mean the Residual Interest Certificates.
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"Underwriter" shall mean PaineWebber Incorporated.
SECTION 1.2 Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined herein
have the meanings assigned to them in the Sale and Servicing Agreement or, if
not defined therein, in the Indenture.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Agreement or in any such certificate or other document, and
accounting terms partly defined in this Agreement or in any such certificate or
other document to the extent not defined, shall have the respective meanings
given to them under generally accepted accounting principles. To the extent that
the definitions of accounting terms in this Agreement or in any such certificate
or other document are inconsistent with the meanings of such terms under
generally accepted accounting principles, the definitions contained in this
Agreement or in any such certificate or other document shall control.
(d) The words "hereof", "herein", "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; Section and Exhibit
references contained in this Agreement are references to Sections 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
ORGANIZATION
SECTION 2.1 Name. The Trust created hereby shall be known as "Empire
Funding Home Loan Owner Trust 1997-3", in which name the Owner Trustee may
conduct
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the business of the Trust, make and execute contracts and other instruments on
behalf of the Trust and sue and be sued.
SECTION 2.2 Office. The office of the Trust shall be in care of the
Owner Trustee at the Corporate Trust Office or at such other address in Delaware
as the Owner Trustee may designate by written notice to the Owners and the
Company.
SECTION 2.3 Purposes and Powers. (a) The purpose of the Trust is to
engage in the following activities:
(i) to issue the Notes pursuant to the Indenture and to sell
such Notes;
(ii) with the proceeds of the sale of the Notes, to pay the
organizational, start-up and transactional expenses of the Trust and to
pay the balance to the Depositor and the Company, as their interests may
appear pursuant to the Sale and Servicing Agreement;
(iii) to purchase, hold, assign, grant, transfer, pledge,
mortgage and convey the Owner Trust Estate pursuant to the Indenture and
to hold, manage and distribute to the Owners pursuant to the terms of the
Sale and Servicing Agreement any portion of the Owner Trust Estate
released from the lien of, and remitted to the Trust pursuant to, the
Indenture;
(iv) to enter into and perform its obligations under the Basic
Documents to which it is to be a party;
(v) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish the
foregoing or are incidental thereto or connected therewith;
(vi) subject to compliance with the Basic Documents, to engage
in such other activities as may be required in connection with
conservation of the Owner Trust Estate and the making of distributions to
the Owners and the Noteholders; and
(vii) to issue the Residual Interest Certificates pursuant to
this Agreement.
The Trust is hereby authorized to engage in the foregoing activities. The Trust
shall not engage in any activity other than in connection with the foregoing or
other than as required or authorized by the terms of this Agreement or the Basic
Documents.
SECTION 2.4 Appointment of Owner Trustee. The Depositor hereby
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein.
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SECTION 2.5 Initial Capital Contribution of Owner Trust Estate. The
Depositor hereby sells, assigns, transfers, conveys and sets over to the Owner
Trustee, as of the date hereof, the sum of $1. The Owner Trustee hereby
acknowledges receipt in trust from the Depositor, as of the date hereof, of the
foregoing contribution, which shall constitute the initial Owner Trust Estate
and shall be deposited in the Certificate Distribution Account. The Depositor or
the Company shall pay reasonable organizational expenses of the Trust as they
may arise or shall, upon the request of the Owner Trustee, promptly reimburse
the Owner Trustee for any such expenses paid by the Owner Trustee.
SECTION 2.6 Declaration of Trust. The Owner Trustee hereby declares
that it will hold the Owner Trust Estate in trust upon and subject to the
conditions set forth herein for the use and benefit of the Owners, subject to
the obligations of the Trust under the Basic Documents. It is the intention of
the parties hereto that the Trust constitute a business trust under the Business
Trust Statute and that this Agreement constitute the governing instrument of
such business trust. It is the intention of the parties hereto that, solely for
federal, state and local income and franchise tax purposes (i) so long as there
is a sole Owner, the Trust shall be treated as a security arrangement, with the
assets of the Trust being the Home Loans and the other assets held by the Trust,
the owner of the Home Loans being the sole Owner and the Notes being
non-recourse debt of the sole Owner, and (ii) if there is more than one Owner,
the Trust shall be treated as a partnership, with the assets of the partnership
being the Home Loans and other assets held by the Trust, the partners of the
partnership being the holders of the Trust Certificates and the Notes being
non-recourse debt of the partnership. The Trust shall not elect to be treated as
an association under Section 301.7701-3(a) of the regulations of the United
States Department of the Treasury for federal income tax purposes. The parties
agree that, unless otherwise required by appropriate tax authorities, the Trust
will file or cause to be filed annual or other necessary returns, reports and
other forms consistent with the characterization of the Trust as provided in the
second preceding sentence for such tax purposes. Effective as of the date
hereof, the Owner Trustee shall have all rights, powers and duties set forth
herein and in the Business Trust Statute with respect to accomplishing the
purposes of the Trust.
SECTION 2.7 Title to Trust Property.
(a) Subject to the Indenture, legal title to all the Owner Trust
Estate shall be vested at all times in the Trust as a separate legal entity
except where applicable law in any jurisdiction requires title to any part of
the Owner Trust Estate to be vested in a trustee or trustees, in which case
title shall be deemed to be vested in the Owner Trustee, the Co-Owner Trustee
and/or a separate trustee, as the case may be.
(b) The Owners shall not have legal title to any part of the Owner
Trust Estate. No transfer by operation of law or otherwise of any interest of
the Owners shall operate to terminate this Agreement or the trusts hereunder or
entitle any transferee to an accounting or to the transfer to it of any part of
the Owner Trust Estate.
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SECTION 2.8 Situs of Trust. The Trust will be located and
administered in the State of Delaware. All bank accounts maintained by the Owner
Trustee on behalf of the Trust shall be located in the State of Delaware or the
State of New York, except with respect to the Co-Owner Trustee. The Trust shall
not have any employees; provided, however, that nothing herein shall restrict or
prohibit the Owner Trustee from having employees within or without the State of
Delaware. Payments will be received by the Trust only in Delaware or New York,
and payments will be made by the Trust only from Delaware or New York, except
with respect to the Co-Owner Trustee. The only office of the Trust will be at
the Corporate Trust Office in Delaware.
SECTION 2.9 Representations and Warranties of the Depositor and the
Company; Covenant of the Company.
(a) The Depositor hereby represents and warrants to the Owner
Trustee and the Co-Owner Trustee that:
(i) The Depositor is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware and
has all licenses necessary to carry on its business as now being
conducted. The Depositor has the power and authority to execute and
deliver this Agreement and to perform in accordance herewith; the
execution, delivery and performance of this Agreement (including all
instruments of transfer to be delivered pursuant to this Agreement) by the
Depositor and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all necessary action of the
Depositor; this Agreement evidences the valid, binding and enforceable
obligation of the Depositor; and all requisite action has been taken by
the Depositor to make this Agreement valid, binding and enforceable upon
the Depositor in accordance with its terms, subject to the effect of
bankruptcy, insolvency, reorganization, moratorium and other, similar laws
relating to or affecting creditors' rights generally or the application of
equitable principles in any proceeding, whether at law or in equity;
(ii) The consummation of the transactions contemplated by this
Agreement will not result in (i) the breach of any terms or provisions of
the Articles of Incorporation or Bylaws of the Depositor, (ii) the breach
of any term or provision of, or conflict with or constitute a default
under or result in the acceleration of any obligation under, any material
agreement, indenture or loan or credit agreement or other material
instrument to which the Depositor, or its property is subject, or (iii)
the violation of any law, rule, regulation, order, judgment or decree to
which the Depositor or its respective property is subject;
(iii) The Depositor is not in default with respect to any
order or decree of any court or any order, regulation or demand of any
federal, state, municipal or other governmental agency, which default
might have consequences that would materially and adversely affect the
condition (financial or otherwise) or operations of
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the Depositor or its properties or might have consequences that would
materially and adversely affect its performance hereunder.
(b) The Company hereby represents and warrants to the Owner Trustee
and the Co-Owner Trustee that:
(i) The Company is duly organized and validly existing as a
corporation in good standing under the laws of the State of Oklahoma, with
power and authority to own its properties and to conduct its business as
such properties are currently owned and such business is presently
conducted.
(ii) The Company is duly qualified to do business as a foreign
corporation in good standing, and has obtained all necessary licenses and
approvals in all jurisdictions in which the ownership or lease of property
or the conduct of its business shall require such qualifications.
(iii) The Company has the power and authority to execute and
deliver this Agreement and to carry out its terms; and the execution,
delivery and performance of this Agreement has been duly authorized by the
Company by all necessary corporate action.
(iv) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or constitute
(with or without notice or lapse of time) a default under, the articles of
incorporation or by-laws of the Company, or any indenture, agreement or
other instrument to which the Company is a party or by which it is bound;
nor result in the creation or imposition of any lien upon any of its
properties pursuant to the terms of any such indenture, agreement or other
instrument (other than pursuant to the Basic Documents); nor violate any
law or, to the best of the Company's knowledge, any order, rule or
regulation applicable to the Company of any court or of any Federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Company or its properties.
(v) There are no proceedings or investigations pending or, to
the Company's best knowledge, threatened, before any court, regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Company or its properties: (i) asserting the
invalidity of this Agreement, (ii) seeking to prevent the consummation of
any of the transactions contemplated by this Agreement or (iii) seeking
any determination or ruling that might materially and adversely affect the
performance by the Company of its obligations under, or the validity or
enforceability of, this Agreement.
(c) The Company covenants with the Owner Trustee and the Co-Owner
Trustee that during the continuance of this Agreement it will comply in all
respects with the provisions of its Articles of Incorporation in effect from
time to time.
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ARTICLE III
TRUST CERTIFICATES AND TRANSFER OF INTERESTS
SECTION 3.1 Initial Ownership. Upon the formation of the Trust by
the contribution by the Depositor pursuant to Section 2.5 and until the issuance
of the Trust Certificates, the Depositor shall be the sole Owner of the Trust.
SECTION 3.2 The Trust Certificates. The Residual Interest
Certificates shall not be issued with a principal amount. The Trust Certificates
shall be executed on behalf of the Trust by manual or facsimile signature of a
Trust Officer of the Owner Trustee. Trust Certificates bearing the manual or
facsimile signatures of individuals who were, at the time when such signatures
shall have been affixed, authorized to sign on behalf of the Trust, shall be
valid and binding obligations of the Trust, notwithstanding that such
individuals or any of them shall have ceased to be so authorized prior to the
authentication and delivery of such Trust Certificates or did not hold such
offices at the date of authentication and delivery of such Trust Certificates.
A transferee of a Trust Certificate shall become an Owner, and shall
be entitled to the rights and subject to the obligations of an Owner hereunder
and under the Sale and Servicing Agreement, upon such transferee's acceptance of
a Trust Certificate duly registered in such transferee's name pursuant to
Section 3.4.
SECTION 3.3 Execution, Authentication and Delivery of Trust
Certificates. Concurrently with the initial sale of the Home Loans to the Trust
pursuant to the Sale and Servicing Agreement, the Owner Trustee shall cause the
Residual Interest Certificates representing 100% of the Percentage Interests of
the Residual Interest to be executed on behalf of the Trust, authenticated and
delivered to or upon the written order of the Depositor, signed by its chairman
of the board, its president or any vice president, without further corporate
action by the Depositor, in authorized denominations. No Trust Certificate shall
entitle its holder to any benefit under this Agreement, or shall be valid for
any purpose, unless there shall appear on such Trust Certificate a certificate
of authentication substantially in the form set forth in Exhibit A, executed by
the Owner Trustee or the Administrator, as the Owner Trustee's authenticating
agent, by manual or facsimile signature; such authentication shall constitute
conclusive evidence that such Trust Certificate shall have been duly
authenticated and delivered hereunder. All Trust Certificates shall be dated the
date of their authentication.
SECTION 3.4 Registration of Transfer and Exchange of Trust
Certificates. The Certificate Registrar shall keep or cause to be kept, at the
office or agency maintained pursuant to Section 3.8 a Certificate Register in
which, subject to such reasonable regulations as it may prescribe, the Owner
Trustee shall provide for the registration of Trust Certificates and of
transfers and exchanges of Trust Certificates as herein provided. The
Administrator shall be the initial Certificate Registrar.
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Upon surrender for registration of transfer of any Trust Certificate
at the office or agency maintained pursuant to Section 3.8, the Owner Trustee
shall execute, authenticate and deliver (or shall cause the Administrator as its
authenticating agent to authenticate and deliver), in the name of the designated
transferee or transferees, one or more new Trust Certificates in authorized
denominations of a like aggregate amount dated the date of authentication by the
Owner Trustee or any authenticating agent provided that prior to such execution,
authentication and delivery, the Owner Trustee shall have received an Opinion of
Counsel to the effect that the proposed transfer will not cause the Trust to be
characterized as an association (or a publicly traded partnership) taxable as a
corporation or alter the tax characterization of the Notes for federal income
tax or Texas state law purposes. At the option of an Owner, Trust Certificates
may be exchanged for other Trust Certificates of authorized denominations of a
like aggregate amount upon surrender of the Trust Certificates to be exchanged
at the office or agency maintained pursuant to Section 3.8.
Every Trust Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
form satisfactory to the Owner Trustee and the Certificate Registrar duly
executed by the Owner or his attorney duly authorized in writing. In addition,
each Residual Interest Certificate presented or surrendered for registration of
transfer and exchange must be accompanied by a letter from the Prospective Owner
certifying as to the representations set forth in Sections 3.10(a) and (b). Each
Trust Certificate surrendered for registration of transfer or exchange shall be
canceled and disposed of by the Owner Trustee in accordance with its customary
practice.
No service charge shall be made for any registration of transfer or
exchange of Trust Certificates, but the Owner Trustee or the Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Trust Certificates.
The preceding provisions of this Section notwithstanding, the Owner
Trustee shall not make and the Certificate Registrar shall not register transfer
or exchanges of Trust Certificates for a period of 15 days preceding the due
date for any payment with respect to the Trust Certificates.
SECTION 3.5 Mutilated, Destroyed, Lost or Stolen Trust Certificates.
If (a) any mutilated Trust Certificate shall be surrendered to the Certificate
Registrar, or if the Certificate Registrar shall receive evidence to its
satisfaction of the destruction, loss or theft of any Trust Certificate and (b)
there shall be delivered to the Certificate Registrar and the Owner Trustee such
security or indemnity as may be required by them to save each of them harmless,
then in the absence of notice that such Trust Certificate shall have been
acquired by a bona fide purchaser, the Owner Trustee on behalf of the Trust
shall execute and the Owner Trustee, or the Administrator as the Owner Trustee's
authenticating agent, shall authenticate and deliver, in exchange for or in lieu
of any such mutilated, destroyed, lost or stolen Trust Certificate, a new Trust
Certificate of like tenor and denomination. In connection with the issuance of
any new Trust Certificate under this Section, the Owner Trustee or the
Certificate Registrar may require the payment of a sum sufficient to cover any
tax or other governmental
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charge that may be imposed in connection therewith. Any duplicate Trust
Certificate issued pursuant to this Section shall constitute conclusive evidence
of ownership in the Trust, as if originally issued, whether or not the lost,
stolen or destroyed Trust Certificate shall be found at any time.
SECTION 3.6 Persons Deemed Owners. Prior to due presentation of a
Trust Certificate for registration of transfer, the Owner Trustee or the
Certificate Registrar may treat the Person in whose name any Trust Certificate
shall be registered in the Certificate Register as the owner of such Trust
Certificate for the purpose of receiving distributions pursuant to Section 5.2
and for all other purposes whatsoever, and neither the Owner Trustee nor the
Certificate Registrar shall be bound by any notice to the contrary.
SECTION 3.7 Access to List of Owners' Names and Addresses. The Owner
Trustee shall furnish or cause to be furnished to the Servicer and the
Depositor, within 15 days after receipt by the Owner Trustee of a request
therefor from the Servicer, the Depositor or the Indenture Trustee in writing, a
list, in such form as the Servicer, the Depositor or the Indenture Trustee may
reasonably require, of the names and addresses of the Owners as of the most
recent Record Date. If a Certificateholder applies in writing to the Owner
Trustee, and such application states that the applicant desire to communicate
with other Certificateholders with respect to their rights under this Agreement
or under the Trust Certificates and such application is accompanied by a copy of
the communication that such applicants propose to transmit, then the Owner
Trustee shall, within five Business Days after the receipt of such application,
afford such applicants access during normal business hours to the current list
of Certificateholders. Each Owner, by receiving and holding a Trust Certificate,
shall be deemed to have agreed not to hold any of the Depositor, the Company,
the Certificate Registrar or the Owner Trustee accountable by reason of the
disclosure of its name and address, regardless of the source from which such
information was derived.
SECTION 3.8 Maintenance of Office or Agency. The Owner Trustee shall
maintain an office or offices or agency or agencies where Trust Certificates may
be surrendered for registration of transfer or exchange and where notices and
demands to or upon the Owner Trustee in respect of the Trust Certificates and
the Basic Documents may be served. The Owner Trustee initially designates the
Administrator's office in the Borough of Manhattan, The City of New York as its
principal corporate trust office for such purposes. The Owner Trustee shall give
prompt written notice to the Company and to the Certificateholders of any change
in the location of the Certificate Register or any such office or agency.
SECTION 3.9 Appointment of Paying Agent. The Owner Trustee hereby
appoints the Co-Owner Trustee as Paying Agent under this Agreement. The Paying
Agent shall make distributions to Residual Interestholders from the Certificate
Distribution Account pursuant to Section 5.2 hereof and Section 5.01 of the Sale
and Servicing Agreement and shall report the amounts of such distributions to
the Owner Trustee. The Paying Agent shall have the revocable power to withdraw
funds from the Certificate Distribution Account for the purpose of making the
distributions referred to above. In the event that the Co-Owner Trustee
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shall no longer be the Paying Agent hereunder, the Owner Trustee shall appoint a
successor to act as Paying Agent (which shall be a bank or trust company). The
Owner Trustee shall cause such successor Paying Agent or any additional Paying
Agent appointed by the Owner Trustee to execute and deliver to the Owner Trustee
an instrument in which such successor Paying Agent or additional Paying Agent
shall agree with the Owner Trustee that as Paying Agent, such successor Paying
Agent or additional Paying Agent will hold all sums, if any, held by it for
payment to the Owners in trust for the benefit of the Residual Interestholders
entitled thereto until such sums shall be paid to such Owners. The Paying Agent
shall return all unclaimed funds to the Owner Trustee, and upon removal of a
Paying Agent, such Paying Agent shall also return all funds in its possession to
the Owner Trustee. The provisions of Sections 7.1. 7.3. 7.4 and 8.1 shall apply
to the Co-Owner Trustee also in its role as Paying Agent, for so long as the
Co-Owner Trustee shall act as Paying Agent and, to the extent applicable, to any
other paying agent appointed hereunder. Any reference in this Agreement to the
Paying Agent shall include any co-paying agent unless the context requires
otherwise. Notwithstanding anything herein to the contrary, the Co-Owner Trustee
and the Paying Agent shall be the same entity as the Indenture Trustee under the
Indenture and the Sale and Servicing Agreement. If the Co-Owner Trustee and the
Paying Agent cease to be the same entity as the Indenture Trustee under the
Indenture and the Sale and Servicing Agreement, the Co-Owner Trustee and the
Paying Agent shall resign and the Owner Trustee shall assume the duties and
obligations of the Co-Owner Trustee and the Paying Agent hereunder and under the
Sale and Servicing Agreement.
SECTION 3.10 Restrictions on Transfer of Residual Interest
Certificates.
(a) Each prospective purchaser and any subsequent transferee of a
Residual Interest Certificate (each, a "Prospective Owner"), other than
the Company, shall represent and warrant, in writing, to the Owner Trustee
and the Certificate Registrar and any of their respective successors that:
(i) Such Person is (A) a "qualified institutional buyer" as
defined in Rule 144A under the Securities Act of 1933, as amended
(the "Securities Act"), and is aware that the seller of the Residual
Interest Certificate may be relying on the exemption from the
registration requirements of the Securities Act provided by Rule
144A and is acquiring such Residual Interest Certificate for its own
account or for the account of one or more qualified institutional
buyers for whom it is authorized to act, or (B) an institutional
"accredited investor" within the meaning of subparagraph (a)(1),
(2), (3) or (7) of Rule 501 under the Securities Act (an
"Institutional Accredited Investor") that is acquiring the Offered
Notes for its own account, or for the account of such an
Institutional Accredited Investor, for investment purposes and not
with a view to, or for offer or sale in connection with any
distribution in violation of the Security Act.
(ii) Such Person understands that the Residual Interest
Certificate have not been and will not be registered under the
Securities Act and may be offered, sold or otherwise transferred
only to a person whom the seller reasonably
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believes is (A) a qualified institutional buyer or (B) an
Institutional Accredited Investor, and in accordance with any
applicable securities laws of any state of the United States.
(iii) Such Person understands that the Residual Interest
Certificates bear a legend to the following effect:
"THE RESIDUAL INTEREST IN THE TRUST REPRESENTED BY THIS
RESIDUAL INTEREST CERTIFICATE HAS NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAWS. THIS RESIDUAL INTEREST
CERTIFICATE MAY BE DIRECTLY OR INDIRECTLY OFFERED OR SOLD OR
OTHERWISE DISPOSED OF BY THE HOLDER HEREOF ONLY TO (I) A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER
THE ACT, IN A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE ACT PURSUANT TO RULE 144A OR
(II) AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING
OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE
ACT (INCLUDING, BUT NOT LIMITED TO, EMPIRE FUNDING CORP.) IN A
TRANSACTION THAT IS REGISTERED UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND SUCH LAWS. NO PERSON IS OBLIGATED
TO REGISTER THIS RESIDUAL INTEREST CERTIFICATE UNDER THE ACT
OR ANY STATE SECURITIES LAWS."
(iv) Such Person shall comply with the provisions of Section
3.10(b), as applicable, relating to the ERISA restrictions with
respect to the acceptance or acquisition of such Residual Interest
Certificate.
(b) Each Prospective Owner, other than the Company, shall either:
(i) represent and warrant, in writing, to the Owner Trustee
and the Certificate Registrar and any of their respective successors
that the Prospective Owner is not (A) an "employee benefit plan"
within the meaning of Section 3(3) of ERISA, or (B) a "plan" within
the meaning of Section 4975(e)(1) of the Code or (C) an entity,
including an insurance company separate account or general account,
whose underlying assets include plan assets by reason of a
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plan's investment in the entity (each, a "Benefit Plan Investor")
and is not directly or indirectly purchasing such Residual Interest
Certificate on behalf of, as investment manager of, as named
fiduciary of, as trustee of, or with the assets of a Benefit Plan
Investor; or
(ii) furnish to the Owner Trustee and the Certificate
Registrar and any of their respective successors an opinion of
counsel acceptable to such persons that (A) the proposed transfer of
the Residual Interest Certificate to such Prospective Owner will not
cause any assets of the Trust to be deemed "plan assets" within the
meaning of United States Department of Labor Regulation Section
2510.3-101, or (B) the proposed transfer of the Residual Interest
Certificate will not give rise to a transaction described in Section
406 of ERISA or Section 4975(c)(1) of the Code for which a statutory
or administrative exemption is unavailable.
(c) By its acceptance of a Residual Interest Certificate, each
Prospective Owner agrees to execute a Certificate of Non-Foreign Status in the
form of Exhibit D hereto and acknowledges that no legal or beneficial interest
in all or any portion of the Residual Interest Certificate may be transferred
directly or indirectly to an individual, corporation, partnership or other
person unless such transferee is not a Non-U.S. Person, unless such person holds
the Residual Interest Certificate in connection with the conduct of a trade or
business within the United States, as evidenced by a duly completed and
submitted Form 4224 or successor form, updated at the time or times and in the
manner specified by the Code (any such person being referred to herein as a
"Non-permitted Foreign Holder"), and any such purported transfer shall be void
and have no effect.
(d) The Owner Trustee shall not execute, and shall not countersign
and deliver, a Residual Interest Certificate in connection with any transfer
thereof unless the transferor shall have provided to the Owner Trustee a
certificate, signed by the transferee, which certificate shall contain the
consent of the transferee to any amendments of this Agreement as may be required
to effectuate further the foregoing restrictions on transfer of the Residual
Interest Certificates to Non-permitted Foreign Holders, and an agreement by the
transferee that it will not transfer a Residual Interest Certificate without
providing to the Owner Trustee a substantially identical certificate, signed by
the Prospective Owner to whom the Residual Interest Certificate is to be
transferred.
(e) The Residual Interest Certificates shall bear an additional
legend referring to the foregoing restrictions contained in paragraphs (c) and
(d) above.
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ARTICLE IV
ACTIONS BY OWNER TRUSTEE
SECTION 4.1 Prior Notice to Owners with Respect to Certain Matters.
With respect to the following matters, the Owner Trustee shall not take action,
and the Owners shall not direct the Owner Trustee to take any action, unless at
least 30 days before the taking of such action, the Owner Trustee shall have
notified the Owners in writing of the proposed action and the Owners shall not
have notified the Owner Trustee in writing prior to the 30th day after such
notice is given that such Owners have withheld consent or the Owners have
provided alternative direction:
(a) the initiation of any claim or lawsuit by the Trust (except
claims or lawsuits brought in connection with the collection of the Home Loans)
and the compromise of any action, claim or lawsuit brought by or against the
Trust (except with respect to the aforementioned claims or lawsuits for
collection of the Home Loans);
(b) the election by the Trust to file an amendment to the
Certificate of Trust (unless such amendment is required to be filed under the
Business Trust Statute);
(c) the amendment or other change to this Agreement or any Basic
Document in circumstances where the consent of any Noteholder is required;
(d) the amendment or other change to this Agreement or any Basic
Document in circumstances where the consent of any Noteholder is not required
and such amendment materially adversely affects the interest of the Owners;
(e) the appointment pursuant to the Indenture of a successor Note
Registrar, Paying Agent or Indenture Trustee or pursuant to this Agreement of a
successor Certificate Registrar, or the consent to the assignment by the Note
Registrar, Paying Agent or Indenture Trustee or Certificate Registrar of its
obligations under the Indenture or this Agreement, as applicable;
(f) the consent to the calling or waiver of any default of any Basic
Document;
(g) the consent to the assignment by the Indenture Trustee or
Servicer of their respective obligations under any Basic Document;
(h) except as provided in Article IX hereof, dissolve, terminate or
liquidate the Trust in whole or in part;
(i) merge or consolidate the Trust with or into any other entity, or
convey or transfer all or substantially all of the Trust's assets to any other
entity;
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(j) cause the Trust to incur, assume or guaranty any indebtedness
other than as set forth in this Agreement;
(k) do any act that conflicts with any other Basic Document;
(1) do any act which would make it impossible to carry on the
ordinary business of the Trust;
(m) confess a judgment against the Trust;
(n) possess Trust assets, or assign the Trust's right to property,
for other than a Trust purpose;
(o) cause the Trust to lend any funds to any entity; or
(p) change the Trust's purpose and powers from those set forth in
this Trust Agreement.
In addition, the Trust shall not commingle its assets with those of
any other entity. The Trust shall maintain its financial and accounting books
and records separate from those of any other entity. Except as expressly set
forth herein, the Trust shall pay its indebtedness, operating expenses from its
own funds, and the Trust shall not pay the indebtedness, operating expenses and
liabilities of any other entity. The Trust shall maintain appropriate minutes or
other records of all appropriate actions and shall maintain its office separate
from the offices of the Company, the Depositor, and any of their respective
affiliates.
The Owner Trustee shall not have the power, except upon the
direction of the Owners, and to the extent otherwise consistent with the Basic
Documents, to (i) remove or replace the Servicer or the Indenture Trustee, (ii)
institute proceedings to have the Trust declared or adjudicated a bankrupt or
insolvent, (iii) consent to the institution of bankruptcy or insolvency
proceedings against the Trust, (iv) file a petition or consent to a petition
seeking reorganization or relief on behalf of the Trust under any applicable
federal or state law relating to bankruptcy, (v) consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or any similar official)
of the Trust or a substantial portion of the property of the Trust, (vi) make
any assignment for the benefit of the Trust's creditors, (vii) cause the Trust
to admit in writing its inability to pay its debts generally as they become due,
(viii) take any action, or cause the Trust to take any action, in furtherance of
any of the foregoing (any of the above, a "Bankruptcy Action"). So long as the
Indenture remains in effect, no Certificateholder shall have the power to take,
and shall not take, any Bankruptcy Action with respect to the Trust or the
Company or direct the Owner Trustee to take any Bankruptcy Action with respect
to the Trust or the Company.
SECTION 4.2 Action by Owners with Respect to Certain Matters. The
Owner Trustee shall not have the power, except upon the direction of the Owners,
to (a) remove the Administrator under the Administration Agreement pursuant to
Section 8 thereof, (b) appoint a successor Administrator pursuant to Section 8
of the Administration Agreement, (c) remove
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the Servicer under the Sale and Servicing Agreement pursuant to Section 10.01
thereof or (d) sell the Home Loans after the termination of the Indenture. The
Owner Trustee shall take the actions referred to in the preceding sentence only
upon written instructions signed by the Owners.
SECTION 4.3 Action by Owners with Respect to Bankruptcy. The Owner
Trustee shall not have the power to commence a voluntary proceeding in
bankruptcy relating to the Trust without the unanimous prior approval of all
Owners and the delivery to the Owner Trustee by each such Owner of a certificate
certifying that such Owner reasonably believes that the Trust is insolvent.
SECTION 4.4 Restrictions on Owners' Power. The Owners shall not
direct the Owner Trustee to take or refrain from taking any action if such
action or inaction would be contrary to any obligation of the Trust or the Owner
Trustee under this Agreement or any of the Basic Documents or would be contrary
to Section 2.3 nor shall the Owner Trustee be obligated to follow any such
direction, if given.
SECTION 4.5 Majority Control. Except as expressly provided herein,
any action that may be taken by the Owners under this Agreement may be taken by
the Majority Residual Interestholders. Except as expressly provided herein, any
written notice of the Owners delivered pursuant to this Agreement shall be
effective if signed by the Majority Residual Interestholders at the time of the
delivery of such notice.
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
SECTION 5.1 Establishment of Trust Account. The Owner Trustee shall
cause the Servicer, for the benefit of the Owners, to establish and maintain
with U.S. Bank National Association for the benefit of the Owner Trustee or
Co-Owner Trustee one or more Eligible Accounts which, so long as the Co-Owner
Trustee holds such Trust Account, shall be entitled "Certificate Distribution
Account, U.S. Bank National Association as Co-Owner Trustee, in trust for the
Empire Funding Home Loan Asset Backed Securities, Series 1997-3". Funds shall be
deposited in the Certificate Distribution Account as required by the Sale and
Servicing Agreement.
All of the right, title and interest of the Co-Owner Trustee or
Owner Trustee in all funds on deposit from time to time in the Certificate
Distribution Account and in all proceeds thereof shall be held for the benefit
of the Owners and such other persons entitled to distributions therefrom. Except
as otherwise expressly provided herein or in the Sale and Servicing Agreement,
the Certificate Distribution Account shall be under the sole dominion and
control of the Owner Trustee or Co-Owner Trustee for the benefit of the Owners
and the Servicer.
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In addition to the foregoing, the Certificate Distribution Account
is a Trust Account under the Sale and Servicing Agreement and constitutes part
of the Trust Estate pledged by the Trust to the Indenture Trustee under the
Indenture. The Certificate Distribution Account shall be subject to and
established and maintained in accordance with the applicable provisions of the
Sale and Servicing Agreement and the Indenture, including, without limitation,
the provisions of Section 5.02(c) of the Sale and Servicing Agreement regarding
distributions from the Certificate Distribution Account.
The Company agrees to direct and shall have the sole authority to
direct the Owner Trustee or Co-Owner Trustee, or their successor in interest, as
to the Permitted Investments in which the funds on deposit in the Trust Accounts
(as such term is defined in the Sale and Servicing Agreement) may be invested.
SECTION 5.2 Application Of Trust Funds.
(a) On each Distribution Date, the Owner Trustee or Co-Owner Trustee
shall direct the Paying Agent to distribute to the Servicer and the Residual
Interestholders from amounts on deposit in the Certificate Distribution Account
the distributions as provided in Section 5.02(b) of the Sale and Servicing
Agreement with respect to such Distribution Date.
(b) On each Distribution Date, the Owner Trustee shall cause the
Paying Agent to send to DTC and each Residual Interestholder the statement
provided to the Owner Trustee by the Servicer pursuant to Section 6.01 of the
Sale and Servicing Agreement with respect to such Distribution Date.
(c) In the event that any withholding tax is imposed on the Trust's
payment (or allocations of income) to an Owner, such tax shall reduce the amount
otherwise distributable to the Owner in accordance with this Section. The Owner
Trustee is hereby authorized and directed to retain from amounts otherwise
distributable to the Owners sufficient funds for the payment of any tax that is
legally owed by the Trust (but such authorization shall not prevent the Owner
Trustee from contesting any such tax in appropriate proceedings, and withholding
payment of such tax, if permitted by law, pending the outcome of such
proceedings). The amount of any withholding tax imposed with respect to an Owner
shall be treated as cash distributed to such Owner at the time it is withheld by
the Trust and remitted to the appropriate taxing authority. In the event of any
claimed overwithholding, Owners shall have no claim for recovery against the
Trust or other Owners. If the amount withheld was not withheld from actual
distributions, the Trust may, at its option, (i) require the Owner to reimburse
the Trust for such withholding (and each Owner agrees to reimburse the Trust
promptly following such request) or (ii) reduce any subsequent distributions by
the amount of such withholding. If there is a possibility that withholding tax
is payable with respect to a distribution (such as a distribution to a non-U.S.
Owner), the Owner Trustee may in its sole discretion withhold such amounts in
accordance with this paragraph (c). In the event that an Owner wishes to apply
for a refund of any such withholding tax, the Owner Trustee shall reasonably
cooperate with such owner in making such claim so long as such Owner agrees to
reimburse the Owner Trustee for any out-of-pocket expenses incurred.
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SECTION 5.3 Method of Payment. Subject to Section 3.10,
distributions required to be made to Owners on any Distribution Date shall be
made to each Owner of, record on the preceding Record Date either by wire
transfer, in immediately available funds, to the account of such Holder at a
bank or other entity having appropriate facilities therefor, if such Owner shall
have provided to the Certificate Registrar appropriate written instructions at
least five Business Days prior to such Distribution Date; or, if not, by check
mailed to such Owner at the address of such holder appearing in the Certificate
Register.
SECTION 5.4 Segregation of Moneys; No Interest. Subject to Sections
4.1 and 5.2, moneys received by the Owner Trustee hereunder and deposited into
the Certificate Distribution Account will be segregated except to the extent
required otherwise by law or the Sale and Servicing Agreement and shall be
invested in Permitted Investments at the direction of the Company. The Owner
Trustee shall not be liable for payment of any interest in respect of such
moneys.
SECTION 5.5 Accounting and Reports to the Certificateholder, Owners,
the Internal Revenue Service and Others. The Owner Trustee shall deliver to each
Owner, as may be required by the Code and applicable Treasury Regulations, or as
may be requested by such Owner, such information, reports or statements as may
be necessary to enable each Owner to prepare its federal and state income tax
returns. Consistent with the Trust's characterization for tax purposes as a
security arrangement for the issuance of non-recourse debt so long as the
Company or any other Person is the sole Owner, no federal income tax return
shall be filed on behalf of the Trust unless either (i) the Owner Trustee shall
receive an Opinion of Counsel that, based on a change in applicable law
occurring after the date hereof, or as a result of a transfer by the Company
permitted by Section 3.4, the Code requires such a filing or (ii) the Internal
Revenue Service shall determine that the Trust is required to file such a
return. In the event that there shall be two or more Owners of the Trust, (x)
the Owner Trustee shall prepare or shall cause to be prepared federal and, if
applicable, state or local partnership tax returns required to be filed by the
Trust and shall remit such returns to the Company (or if the Company no longer
owns any Trust Certificates, the Owner designated for such purpose by the
Company to the Owner Trustee in writing) at least (5) days before such returns
are due to be filed, and (y) capital accounts shall be maintained for each Owner
in accordance with the Treasury Regulations under Section 704(b) of the Code
reflecting each such Owner's pro rata share of the income, gains, deductions,
and losses of the Trust and contributions to, and distributions from, the Trust.
The Company (or such designee Owner, as applicable) shall promptly sign such
returns and deliver such returns after signature to the Owner Trustee and such
returns shall be filed by the Owner Trustee with the appropriate tax
authorities. In the event that a "tax matters partner" (within the meaning of
Code Section 6231(a)(7) is required to be appointed with respect to the Trust,
the Company is hereby designated as tax matters partner or, if the Company is
not an Owner, the Owner selected by a majority of the Owners (by Percentage
Interest) shall be designated as tax matters partner. In no event shall the
Owner Trustee or the Company (or such designee Owner, as applicable) be liable
for any liabilities, costs or expenses of the Trust or the Noteholders arising
out of the application of any tax law, including federal, state, foreign or
local income or excise taxes or any other tax imposed on or measured by income
(or any interest, penalty or addition with respect thereto or
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arising from a failure to comply therewith) except for any such liability, cost
or expense attributable to any act or omission by the Owner Trustee or the
Company (or such designee Owner, as applicable), as the case may be, in breach
of its obligations under this Agreement.
ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
SECTION 6.1 General Authority. The Owner Trustee is authorized and
directed to execute and deliver or cause to be executed and delivered the Notes,
the Trust Certificates and the Basic Documents to which the Trust is to be a
party and each certificate or other document attached as an exhibit to or
contemplated by the Basic Documents to which the Trust is to be a party and any
amendment or other agreement or instrument described in Article III, in each
case, in such form as the Company shall approve, as evidenced conclusively by
the Owner Trustee's execution thereof, and, on behalf of the Trust, to direct
the Indenture Trustee to authenticate and deliver Classes of Securities in the
following aggregate principal amounts: Class A-1 Notes, $17,215,000.00; Class
A-2 Notes, $29,968,000.00; Class A-3 Notes, $32,492,000.00; Class A-4 Notes,
$21,015,000.00; Class A-5 Notes, $24,232,000.00; Class A-6 Notes,
$20,550,000.00; Class A-7 Notes, $12,851,519.41; Class M-1 Notes,
$33,805,734.68; Class M-2 Notes, $14,085,722.37; Class B-1 Notes,
$13,522,293.47; and Class B-2 Notes, $5,634,289.95. The Administrator on behalf
of the Owner Trustee shall authenticate and deliver the Trust Certificates. In
addition to the foregoing, the Owner Trustee is authorized, but shall not be
obligated, to take all actions required of the Trust, pursuant to the Basic
Documents.
SECTION 6.2 General Duties. It shall be the duty of the Owner
Trustee:
(a) to discharge (or cause to be discharged) all of its
responsibilities pursuant to the terms of this Agreement and the Basic Documents
to which the Trust is a party and to administer the Trust in the interest of the
Owners, subject to the Basic Documents and in accordance with the provisions of
this Agreement. Notwithstanding the foregoing, the Owner Trustee shall be deemed
to have discharged its duties and responsibilities hereunder and under the Basic
Documents to the extent the Administrator or the Co-Owner Trustee has agreed in
the Administration Agreement or this Agreement, respectively, to perform any act
or to discharge any duty of the Owner Trustee or the Trust hereunder or under
any Basic Document, and the Owner Trustee shall not be held liable for the
default or failure of the Administrator or the Co-Owner Trustee to carry out its
obligations under the Administration Agreement or this Agreement, respectively;
and
(b) to obtain and preserve, the Issuer's qualification to do
business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of the Indenture, the
Notes, the Collateral and each other instrument and agreement included in the
Trust Estate.
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SECTION 6.3 Action upon Instruction.
(a) Subject to Article IV and in accordance with the terms of the
Basic Documents, the Owners may by written instruction direct the Owner Trustee
in the management of the Trust but only to the extent consistent with the
limited purpose of the Trust. Such direction may be exercised at any time by
written instruction of the Owners pursuant to Article IV.
(b) The Owner Trustee shall not be required to take any action
hereunder or under any Basic Document if the Owner Trustee shall have reasonably
determined, or shall have been advised by counsel, that such action is likely to
result in liability on the part of the Owner Trustee or is contrary to the terms
hereof or of any Basic Document or is otherwise contrary to law.
(c) Whenever the Owner Trustee is unable to decide between
alternative courses of action permitted or required by the terms of this
Agreement or under any Basic Document, the Owner Trustee shall promptly give
notice (in such form as shall be appropriate under the circumstances) to the
Owners requesting instruction from the Owners as to the course of action to be
adopted, and to the extent the Owner Trustee acts in good faith in accordance
with any written instruction of the Owners received, the Owner Trustee shall not
be liable on account of such action to any Person. If the Owner Trustee shall
not have received appropriate instruction within 10 days of such notice (or
within such shorter period of time as reasonably may be specified in such notice
or may be necessary under the circumstances) it may, but shall be under no duty
to, take or refrain from taking such action, not inconsistent with this
Agreement or the Basic Documents, as it shall deem to be in the best interests
of the Owners, and shall have no liability to any Person for such action or
inaction.
(d) In the event that the Owner Trustee is unsure as to the
application of any provision of this Agreement or any Basic Document or any such
provision is ambiguous as to its application, or is, or appears to be, in
conflict with any other applicable provision, or in the event that this
Agreement permits any determination by the Owner Trustee or is silent or is
incomplete as to the course of action that the Owner Trustee is required to take
with respect to a particular set of facts, the Owner Trustee may give notice (in
such form as shall be appropriate under the circumstances) to the Owners
requesting instruction and, to the extent that the Owner Trustee acts or
refrains from acting in good faith in accordance with any such instruction
received, the Owner Trustee shall not be liable, on account of such action or
inaction, to any Person. If the Owner Trustee shall not have received
appropriate instruction within 10 days of such notice (or within such shorter
period of time as reasonably may be specified in such notice or may be necessary
under the circumstances) it may, but shall be under no duty to, take or refrain
from taking such action, not inconsistent with this Agreement or the Basic
Documents, as it shall deem to be in the best interests of the Owners, and shall
have no liability to any Person for such action or inaction.
SECTION 6.4 No Duties Except as Specified in this Agreement, the
Basic Documents or in Instructions. The Owner Trustee shall not have any duty or
obligation to
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manage, make any payment with respect to, register, record, sell, dispose of, or
otherwise deal with the Owner Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated hereby
to which the Owner Trustee is a party, except as expressly provided by the terms
of this Agreement, any Basic Document or in any document or written instruction
received by the Owner Trustee pursuant to Section 6.3; and no implied duties or
obligations shall be read into this Agreement or any Basic Document against the
Owner Trustee. The Owner Trustee shall have no responsibility for filing any
financing or continuation statement in any public office at any time or to
otherwise perfect or maintain the perfection of any security interest or lien
granted to it hereunder or to prepare or file any Securities and Exchange
Commission filing for the Trust or to record this Agreement or any Basic
Document. The Owner Trustee nevertheless agrees that it will, at its own cost
and expense, promptly take all action as may be necessary to discharge any liens
on any part of the Owner Trust Estate that result from actions by, or claims
against, the Owner Trustee that are not related to the ownership or the
administration of the Owner Trust Estate.
SECTION 6.5 No Action Except Under Specified Documents or
Instructions. The Owner Trustee shall not manage, control, use, sell, dispose of
or otherwise deal with any part of the Owner Trust Estate except (i) in
accordance with the powers granted to and the authority conferred upon the Owner
Trustee pursuant to this Agreement, (ii) in accordance with the Basic Documents
and (iii) in accordance with any document or instruction delivered to the Owner
Trustee pursuant to Section 6.3.
SECTION 6.6 Restrictions. The Owner Trustee shall not take any
action (a) that is inconsistent with the purposes of the Trust set forth in
Section 2.3 or (b) that, to the actual knowledge of the Owner Trustee, would
result in the Trust's becoming taxable as a corporation for Federal income tax
purposes. The Owners shall not direct the Owner Trustee to take action that
would violate the provisions of this Section.
ARTICLE VII
CONCERNING THE OWNER TRUSTEE
SECTION 7.1 Acceptance of Trusts and Duties. The Owner Trustee
accepts the trusts hereby created and agrees to perform its duties hereunder
with respect to such trusts but only upon the terms of this Agreement and the
Basic Documents. The Owner Trustee also agrees to disburse all moneys actually
received by it constituting part of the Owner Trust Estate upon the terms of the
Basic Documents and this Agreement. The Owner Trustee shall not be answerable or
accountable hereunder or under any Basic Document under any circumstances,
except (i) for its own willful misconduct or gross negligence or (ii) in the
case of the inaccuracy of any representation or warranty contained in Section
7.3 expressly made by the Owner Trustee. In particular, but not by way of
limitation (and subject to the exceptions set forth in the preceding sentence):
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(a) the Owner Trustee shall not be liable for any error of judgment
made by a responsible officer of the Owner Trustee;
(b) the Owner Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in accordance with the instructions of the
Administrator or the Owners;
(c) no provision of this Agreement or any Basic Document shall
require the Owner Trustee to expend or risk funds or otherwise incur any
financial liability in the performance of any of its rights or powers hereunder
or under any Basic Document if the Owner Trustee shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured or provided to it;
(d) under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Basic Documents, including
the principal of and interest on the Notes;
(e) the Owner Trustee shall not be responsible for or in respect of
the validity or sufficiency of this Agreement or for the due execution hereof by
the Depositor or the Company or for the form, character, genuineness,
sufficiency, value or validity of any of the Owner Trust Estate or for or in
respect of the validity or sufficiency of the Basic Documents, other than the
certificate of authentication on the Trust Certificates, and the Owner Trustee
shall in no event assume or incur any liability, duty, or obligation to any
Noteholder or to any Owner, other than as expressly provided for herein and in
the Basic Documents;
(f) the Owner Trustee shall not be liable for the default or
misconduct of the Administrator, the Seller, the Company, the Indenture Trustee
or the Servicer under any of the Basic Documents or otherwise and the Owner
Trustee shall have no obligation or liability to perform the obligations of the
Trust under this Agreement or the Basic Documents that are required to be
performed by the Administrator under the Administration Agreement, the Indenture
Trustee under the Indenture or the Servicer under the. Sale and Servicing
Agreement; and
(g) the Owner Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Agreement, or to institute, conduct
or defend any litigation under this Agreement or otherwise or in relation to
this Agreement or any Basic Document, at the request, order or direction of any
of the Owners, unless such Owners have offered to the Owner Trustee security or
indemnity satisfactory to it against the costs, expenses and liabilities that
may be incurred by the Owner Trustee therein or thereby. The right of the Owner
Trustee to perform any discretionary act enumerated in this Agreement or in any
Basic Document shall not be construed as a duty, and the Owner Trustee shall not
be answerable for other than its gross negligence or willful misconduct in the
performance of any such act provided, that the Owner Trustee shall be liable for
its negligence or willful misconduct in the event that it assumes the duties and
obligations of the Co-Owner Trustee under the Sale and Servicing Agreement
pursuant to Section 10.5.
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SECTION 7.2 Furnishing of Documents. The Owner Trustee shall furnish
(a) to the Owners promptly upon receipt of a written request therefor,
duplicates or copies of all reports, notices, requests, demands, certificates,
financial statements and any other instruments furnished to the Owner Trustee
under the Basic Documents and (b) to Noteholders promptly upon written request
therefor, copies of the Sale and Servicing Agreement, the Administration
Agreement and the Trust Agreement.
SECTION 7.3 Representations and Warranties.
(a) The Owner Trustee hereby represents and warrants to the
Depositor and the Company, for the benefit of the Owners, that:
(i) It is a banking corporation duly organized and validly
existing in good standing under the laws of the State of Delaware. It has
all requisite corporate power and authority to execute, deliver and
perform its obligations under this Agreement.
(ii) It has taken all corporate action necessary to authorize
the execution and delivery by it of this Agreement, and this Agreement
will be executed and delivered by one of its officers who is duly
authorized to execute and deliver this Agreement on its behalf.
(iii) Neither the execution nor the delivery by it of this
Agreement nor the consummation by it of the transactions contemplated
hereby nor compliance by it with any of the terms or provisions hereof
will contravene any Federal or Delaware law, governmental rule or
regulation governing the banking or trust powers of the owner Trustee or
any judgment or order binding on it, or constitute any default under its
charter documents or by-laws or any indenture, mortgage, contract,
agreement or instrument to which it is a party or by which any of its
properties may be bound.
(b) The Co-Owner Trustee hereby represents and warrants to the
Depositor and the Company that:
(i) It is a national banking association duly organized and
validly existing in good standing under the laws of the United States. It
has all requisite corporate power and authority to execute, deliver and
perform its obligations under this Agreement.
(ii) It has taken all corporate action necessary to authorize
the execution and delivery by it of this Agreement, and this Agreement
will be executed and delivered by one of its officers who is duly
authorized to execute and deliver this Agreement on its behalf.
(iii) Neither the execution nor the delivery by it of this
Agreement nor the consummation by it of the transactions contemplated
hereby nor compliance by it with any of the terms or provisions hereof
will contravene any Federal or Minnesota
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law, governmental rule or regulation governing the banking or trust powers
of the Co-Owner Trustee or any judgment or order binding on it, or
constitute any default under its charter documents or by-laws or any
indenture, mortgage, contract, agreement or instrument to which it is a
party or by which any of its properties may be bound.
SECTION 7.4 Reliance; Advice of Counsel.
(a) The Owner Trustee shall incur no liability to anyone in acting
upon any signature, instrument, notice, resolution, request, consent, order,
certificate, report, opinion, bond, or other document or paper believed by it to
be genuine and believed by it to be signed by the proper party or parties. The
Owner Trustee may accept a certified copy of a resolution of the board of
directors or other governing body of any corporate party as conclusive evidence
that such resolution has been duly adopted by such body and that the same is in
full force and effect. As to any fact or matter the method of the determination
of which is not specifically prescribed herein, the Owner Trustee may for all
purposes hereof rely on a certificate, signed by the president or any vice
president or by the treasurer or other authorized officers of the relevant
party, as to such fact or matter and such certificate shall constitute full
protection to the Owner Trustee for any action taken or omitted to be taken by
it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in
the performance of its duties and obligations under this Agreement or the Basic
Documents, the Owner Trustee (i) may act directly or through its agents or
attorneys pursuant to agreements entered into with any of them, and the Owner
Trustee shall not be liable for the conduct or misconduct of such agents or
attorneys if such agents or attorneys shall have been selected by the Owner
Trustee with reasonable care, and (ii) may consult with counsel, accountants and
other skilled persons to be selected with reasonable care and employed by it.
The Owner Trustee shall not be liable for anything done, suffered or omitted in
good faith by it in accordance with the written opinion or advice of any such
counsel, accountants or other such persons and not contrary to this Agreement or
any Basic Document.
SECTION 7.5 Not Acting in Individual Capacity. Except as provided in
this Article VII, in accepting the trusts hereby created Wilmington Trust
Company acts solely as Owner Trustee hereunder and not in its individual
capacity and all Persons having any claim against the Owner Trustee by reason of
the transactions contemplated by this Agreement or any Basic Document shall look
only to the Owner Trust Estate for payment or satisfaction thereof.
SECTION 7.6 Owner Trustee Not Liable for Trust Certificates or Home
Loans. The recitals contained herein and in the Trust Certificates (other than
the signature and countersignature of the Owner Trustee on the Trust
Certificates) shall be taken as the statements of the Depositor and the Company,
and the Owner Trustee assumes no responsibility for the correctness thereof. The
Owner Trustee makes no representations as to the validity or sufficiency of this
Agreement, of any Basic Document or of the Trust Certificates (other than the
signature and countersignature of the Owner Trustee on the Trust
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Certificates and as specified in Section 7.3) or the Notes, or of any Home Loans
or related documents. The Owner Trustee shall at no time have any responsibility
or liability for or with respect to the legality, validity and enforceability of
any Home Loan, or the perfection and priority of any security interest created
by any Home Loan or the maintenance of any such perfection and priority, or for
or with respect to the sufficiency of the Owner Trust Estate or its ability to
generate the payments to be distributed to Owners under this Agreement or the
Noteholders under the Indenture, including, without limitation: the existence,
condition and ownership of any Mortgaged Property; the existence and
enforceability of any insurance thereon; the existence and contents of any Home
Loan on any computer or other record thereof, the validity of the assignment of
any Home Loan to the Trust or of any intervening assignment; the completeness of
any Home Loan; the performance or enforcement of any Home Loan; the compliance
by the Depositor, the Company or the Servicer with any warranty or
representation made under any Basic Document or in any related document or the
accuracy of any such warranty or representation or any action of the
Administrator, the Indenture Trustee or the Servicer or any subservicer taken in
the name of the Owner Trustee.
SECTION 7.7 Owner Trustee May Own Trust Certificates and Notes. The
Owner Trustee in its individual or any other capacity may become the owner or
pledgee of Trust Certificates or Notes and may deal with the Depositor, the
Company, the Administrator, the Indenture Trustee and the Servicer in banking
transactions with the same rights as it would have if it were not Owner Trustee.
SECTION 7.8 Licenses. The Owner Trustee shall cause the Trust to use
its best efforts to obtain and maintain the effectiveness of any licenses
required in connection with this Agreement and the Basic Documents and the
transactions contemplated hereby and thereby until such time as the Trust shall
terminate in accordance with the terms hereof.
SECTION 7.9 Rights of Co-Owner Trustee. The Co-Owner Trustee shall
be entitled to all the rights and benefits, but none of the liabilities,
conferred upon the Owner Trustee in Article VII of this Agreement.
ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE AND CO-OWNER TRUSTEE
SECTION 8.1 Fees and Expenses. The Owner Trustee shall receive as
compensation for its services hereunder such fees as have been separately agreed
upon before the date hereof between the Company and the Owner Trustee, and the
Owner Trustee shall be entitled to be reimbursed by the Company for its other
reasonable expenses hereunder, including the reasonable compensation, expenses
and disbursements of such agents, representatives, experts and counsel as the
Owner Trustee may employ in connection with the exercise and performance of its
rights and its duties hereunder. The Co-Owner Trustee shall receive as
compensation for its services hereunder such fees, if any, as have been
separately agreed upon before the date hereof between the Company and the
Co-Owner Trustee.
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SECTION 8.2 Indemnification. The Company shall be liable as primary
obligor, and the Servicer as secondary obligor pursuant to the Administration
Agreement, for, and shall indemnify the Owner Trustee, the Co-Owner Trustee and
their successors, assigns, agents and servants (collectively, the "Indemnified
Parties") from and against, any and all liabilities, obligations, losses,
damages, taxes, claims, actions and suits, and any and all reasonable costs,
expenses and disbursements (including reasonable legal fees and expenses) of any
kind and nature whatsoever (collectively, "Expenses") which may at any time be
imposed on, incurred by, or asserted against the Owner Trustee or any
Indemnified Party in any way relating to or arising out of this Agreement, the
Basic Documents, the Owner Trust Estate, the administration of the Owner Trust
Estate or the action or inaction of the Owner Trustee or the Co-Owner Trustee
hereunder, except only that the Company shall not be liable for or required to
indemnify an Indemnified Party from and against Expenses arising or resulting
from any of the matters described in the provisions of Section 9.01(d) of the
Sale and Servicing Agreement. The indemnities contained in this Section shall
survive the resignation or termination of the Owner Trustee or the termination
of this Agreement. In any event of any claim, action or proceeding for which
indemnity will be sought pursuant to this Section, the Owner Trustee's or
Co-Owner Trustee's choice of legal counsel shall be subject to the approval of
the Company, which approval shall not be unreasonably withheld.
SECTION 8.3 Payments to the Owner Trustee and Co-Owner Trustee. Any
amounts paid to the Owner Trustee and/or Co-Owner Trustee pursuant to this
Article VIII shall be deemed not to be a part of the Owner Trust Estate
immediately after such payment.
ARTICLE IX
TERMINATION OF TRUST AGREEMENT
SECTION 9.1 Termination of Trust Agreement.
(a) This Agreement (other than Article VIII) and the Trust shall
terminate and be of no further force or effect on the earlier of: (i) the
satisfaction and discharge of the Indenture pursuant to Section 4.01 of the
Indenture and the termination of the Sale and Servicing Agreement; and (ii) the
expiration of 21 years from the death of the last survivor of the descendants of
Joseph P. Kennedy (the late ambassador of the United States to the Court of St.
James's) alive on the date hereof. The bankruptcy, liquidation, dissolution,
death or incapacity of any Owner shall not (x) operate to terminate this
Agreement or the Trust, nor (y) entitle such Owner's legal representatives or
heirs to claim an accounting or to take any action or proceeding in any court
for a partition or winding up of all or any part of the Trust or Owner Trust
Estate nor (z) otherwise affect the rights, obligations and liabilities of the
parties hereto.
(b) The Trust Certificates shall be subject to an early redemption
or termination at the option of the Company in the manner and subject to the
provisions of Section 11.02 of the Sale and Servicing Agreement.
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(c) Except as provided in Sections 9.1(a) and (b) above, none of the
Depositor, the Company nor any Owner shall be entitled to revoke or terminate
the Trust.
(d) Notice of any termination of the Trust, specifying the
Distribution Date upon which the Certificateholders shall surrender their Trust
Certificates to the Paying Agent for payment of the final distributions and
cancellation, shall be given by the Owner Trustee to the Certificateholders and
the Rating Agencies mailed within five Business Days of receipt by the Owner
Trustee of notice of such termination pursuant to Section 9.1(a) or (b) above,
which notice given by the Owner Trustee shall state (i) the Distribution Date
upon or with respect to which final payment of the Trust Certificates shall be
made upon presentation and surrender of the Trust Certificates at the office of
the Paying Agent therein designated, (ii) the amount of any such final payment
and (iii) that the Record Date otherwise applicable to such Distribution Date is
not applicable, payments being made only upon presentation and surrender of the
Trust Certificates at the office of the Paying Agent therein specified. The
Owner Trustee shall give such notice to the Certificate Registrar (if other than
the Owner Trustee) and the Paying Agent at the time such notice is given to
Certificateholders. Upon presentation and surrender of the Trust Certificates,
the Paying Agent shall cause to be distributed to Certificateholders amounts
distributable on such Distribution Date pursuant to Section 5.02 of the Sale and
Servicing Agreement.
In the event that all of the Certificateholders shall not surrender
their Trust Certificates for cancellation within six months after the date
specified in the above mentioned written notice, the Owner Trustee shall give a
second written notice to the remaining Certificateholders to surrender their
Trust Certificates for cancellation and receive the final distribution with
respect thereto. If within one year after the second notice all the Trust
Certificates shall not have been surrendered for cancellation, the Owner Trustee
may take appropriate steps, or may appoint an agent to take appropriate steps,
to contact the remaining Certificateholders concerning surrender of their Trust
Certificates, and the cost thereof shall be paid out of the funds and other
assets that shall remain subject to this Agreement. Any funds remaining in the
Trust after exhaustion of such remedies shall be distributed by the Co-Owner
Trustee to the Residual Interestholders on a pro rata basis.
(e) Upon the winding up of the Trust and its termination, the Owner
Trustee shall cause the Certificate of Trust to be canceled by filing a
certificate of cancellation with the Secretary of State in accordance with the
provisions of Section 3820 of the Business Trust Statute.
ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
SECTION 10.1 Eligibility Requirements for Owner Trustee. The Owner
Trustee shall at all times be a corporation satisfying the provisions of Section
3807(a) of the Business Trust Statute; authorized to exercise corporate powers
having a combined capital and
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surplus of at least $50,000,000 and subject to supervision or examination by
Federal or state authorities; and having (or having a parent which has) a
long-term rating of at least "A" by Standard & Poor's and DCR. If such
corporation shall publish reports of condition at least annually, pursuant to
law or to the requirements of the aforesaid supervising or examining authority,
then for the purpose of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. In case at any time the
Owner Trustee shall cease to be eligible in accordance with the provisions of
this Section, the Owner Trustee shall resign immediately in the manner and with
the effect specified in Section 10.2.
SECTION 10.2 Resignation or Removal of Owner Trustee or Co-Owner
Trustee. The Owner Trustee or Co-Owner Trustee may at any time resign and be
discharged from the trusts hereby created by giving written notice thereof to
the Administrator and the Indenture Trustee. Upon receiving such notice of
resignation, the Administrator shall promptly appoint a successor Owner Trustee
or Co-Owner Trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the resigning Owner Trustee or Co-Owner Trustee
and one copy to the successor Owner Trustee or Co-Owner Trustee. If no successor
Owner Trustee or Co-Owner Trustee shall have been so appointed and have accepted
appointment within 30 days after the giving of such notice of resignation, the
resigning Owner Trustee or Co-Owner Trustee may petition any court of competent
jurisdiction for the appointment of a successor Owner Trustee or Co-Owner
Trustee.
If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 10.1 and shall fail to resign after
written request therefor by the Administrator, or if at any time the Owner
Trustee or Co-Owner Trustee shall be legally unable to act, or shall be adjudged
bankrupt or insolvent, or a receiver of the Owner Trustee or Co-Owner Trustee or
of its property shall be appointed, or any public officer shall take charge or
control of the Owner Trustee or Co-Owner Trustee or of its property or affairs
for the purpose of rehabilitation, conservation or liquidation, then the
Administrator may remove the Owner Trustee or Co-Owner Trustee. If the
Administrator shall remove the Owner Trustee or Co-Owner Trustee under the
authority of the immediately preceding sentence, the Administrator shall
promptly appoint a successor Owner Trustee or Co-Owner Trustee by written
instrument in duplicate, one copy of which instrument shall be delivered to the
outgoing Owner Trustee or Co-Owner Trustee so removed and one copy to the
successor Owner Trustee or Co-Owner Trustee and payment of all fees owed to the
outgoing Owner Trustee or Co-Owner Trustee.
Any resignation or removal of the Owner Trustee or Co-Owner Trustee
and appointment of a successor Owner Trustee or Co-Owner Trustee pursuant to any
of the provisions of this Section shall not become effective until acceptance of
appointment by the successor Owner Trustee or Co-Owner Trustee pursuant to
Section 10.3 and payment of all fees and expenses owed to the outgoing Owner
Trustee or Co-Owner Trustee. The Administrator shall provide notice of such
resignation or removal of the Owner Trustee or Co-Owner Trustee to each of the
Rating Agencies.
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SECTION 10.3 Successor Owner Trustee or Co-Owner Trustee. Any
successor Owner Trustee or Co-Owner Trustee appointed pursuant to Section 10.2
shall execute, acknowledge and deliver to the Administrator and to its
predecessor Owner Trustee or Co-Owner Trustee an instrument accepting such
appointment under this Agreement, and thereupon the resignation or removal of
the predecessor Owner Trustee or Co-Owner Trustee shall become effective and
such successor Owner Trustee or Co-Owner Trustee, without any further act, deed
or conveyance, shall become fully vested with all the rights, powers, duties,
and obligations of its predecessor under this Agreement, with like effect as if
originally named as Owner Trustee or Co-Owner Trustee. The predecessor Owner
Trustee or Co-Owner Trustee shall upon payment of its fees and expenses deliver
to the successor Owner Trustee or Co-Owner Trustee all documents and statements
and monies held by it under this Agreement; and the Administrator and the
predecessor Owner Trustee or Co-Owner Trustee shall execute and deliver such
instruments and do such other things as may reasonably be required for fully and
certainly vesting and confirming in the successor Owner Trustee or Co-Owner
Trustee all such rights, powers, duties, and obligations.
No successor Owner Trustee shall accept appointment as provided in
this Section unless at the time of such acceptance such successor Owner Trustee
shall be eligible pursuant to Section 10.1.
Upon acceptance of appointment by a successor Owner Trustee or
Co-Owner Trustee pursuant to this Section, the Administrator shall mail notice
of the successor of such Owner Trustee or Co-Owner Trustee to all Owners, the
Indenture Trustee, the Noteholders and the Rating Agencies. If the Administrator
fails to mail such notice within 10 days after acceptance of appointment by the
successor Owner Trustee or Co-Owner Trustee, the successor Owner Trustee or
Co-Owner Trustee shall cause such notice to be mailed at the expense of the
Administrator.
SECTION 10.4 Merger or Consolidation of Owner Trustee. Any
corporation into which the Owner Trustee may be merged or converted or with
which it may be consolidated or any corporation resulting from any merger,
conversion or consolidation to which the Owner Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Owner Trustee, shall be the successor of the Owner Trustee
hereunder, provided such corporation shall be eligible pursuant to Section 10.1,
without the execution or filing of any instrument or any further act on the part
of any of the parties hereto, anything herein to the contrary notwithstanding;
provided further that the Owner Trustee shall mail notice of such merger or
consolidation to the Rating Agencies.
SECTION 10.5 Appointment of Co-Owner Trustee or Separate Owner
Trustee. Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Owner Trust Estate or any Mortgaged Property may at the time be
located, and for the purpose of performing certain duties and obligations of the
Owner Trustee with respect to the Trust and the Trust Certificates under the
Sale and Servicing Agreement, the Administrator and the Owner Trustee acting
jointly shall have the power and shall execute and deliver all instruments to
appoint one
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or more Persons approved by the Owner Trustee to act as co-owner trustee,
jointly with the Owner Trustee, or separate trustee or separate trustees, of all
or any part of the Owner Trust Estate, and to vest in such Person, in such
capacity, such title to the Trust, or any part thereof, and, subject to the
other provisions of this Section, such powers, duties, obligations, rights and
trusts as the Administrator and the Owner Trustee may consider necessary or
desirable. If the Administrator shall not have joined in such appointment within
25 days after the receipt by it of a request so to do, the Owner Trustee shall
have the power to make such appointment. No co-owner trustee or separate owner
trustee under this Agreement shall be required to meet the terms of eligibility
as a successor trustee pursuant to Section 10.1 and no notice of the appointment
of any co-trustee or separate owner trustee shall be required pursuant to
Section 10.1.
The Owner Trustee hereby appoints the Indenture Trustee as Co-Owner
Trustee for the purpose of establishing and maintaining the Certificate
Distribution Account and making the distributions therefrom to the Persons
entitled thereto pursuant to Section 5.02 of the Sale and Servicing Agreement.
Each separate owner trustee and co-owner trustee shall, to the
extent permitted by law, be appointed and act subject to the following provision
and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Owner Trustee shall be conferred upon and exercised or
performed by the Owner Trustee and such separate owner trustee or co-owner
trustee jointly (it being understood that such separate owner trustee or
co-owner trustee is not authorized to act separately without the Owner
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 Owner Trustee shall be incompetent or unqualified to perform such act
or acts, in which event such rights, powers, duties, and obligations
(including the holding of title to the Trust or any portion thereof in any
such jurisdiction) shall be exercised and performed singly by such
separate owner trustee or co-owner trustee, but solely at the direction of
the Owner Trustee; provided that Co-Owner Trustee, in performing its
duties and obligations under the Sale and Servicing Agreement, may act
separately in its capacity as Co-Owner Trustee without the Owner Trustee
joining in such Acts;
(ii) no owner trustee under this Agreement shall be personally
liable by reason of any act or omission of any other owner trustee under
this Agreement; and
(iii) the Administrator and the Owner Trustee acting jointly
may at any time accept the resignation of or remove any separate owner
trustee or co-owner trustee.
Any notice, request or other writing given to the Owner Trustee
shall be deemed to have been given to the separate owner trustees and co-owner
trustees, as if given to each of them. Every instrument appointing any separate
owner trustee or co-owner trustee, other than this Agreement, shall refer to
this Agreement and to the conditions of this Article.
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Each separate owner trustee and co-owner trustee, upon its acceptance of
appointment, shall be vested with the estates specified in its instrument of
appointment, either jointly with the Owner Trustee or separately, as may be
provided therein, subject to all the provisions of this Agreement, specifically
including every provision of this Agreement relating to the conduct of,
affecting the liability of, or affording protection to, the Owner Trustee. Each
such instrument shall be filed with the Owner Trustee and a copy thereof given
to the Administrator.
Any separate owner trustee or co-owner trustee may at any time
appoint the Owner Trustee as 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 owner
trustee or co-owner 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 Owner Trustee, to the extent permitted by law,
without the appointment of a new or successor trustee.
The Co-Owner Trustee, in its capacity as Co-Owner Trustee, shall not
have any rights, duties or obligations except as expressly provided in this
Agreement and the Sale and Servicing Agreement.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Supplements and Amendments. This Agreement may be
amended by the Depositor, the Company and the Owner Trustee, with prior written
notice to the Rating Agencies, but without the consent of any of the Noteholders
or the Owners or the Indenture Trustee, to cure any ambiguity, to correct or
supplement any provisions in this Agreement or for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions in
this Agreement or of modifying in any manner the rights of the Noteholders or
the Owners provided, however, that such action shall not adversely affect in any
material respect the interests of any Noteholder or Owner. An amendment
described above shall be deemed not to adversely affect in any material respect
the interests of any Noteholder or Owner if (i) an opinion of counsel is
obtained to such effect, and (ii) the party requesting the amendment satisfies
the Rating Agency Condition with respect to such amendment.
This Agreement may also be amended from time to time by the
Depositor, the Company and the Owner Trustee, with the prior written consent of
the Rating Agencies and with the prior written consent of the Indenture Trustee,
the Holders (as defined in the Indenture) of Notes evidencing more than 50% of
the Outstanding Amount of the Notes and the Majority Residual Interestholders,
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 the Owners; provided, however, that no
such amendment shall (a) increase or reduce in any manner the amount of, or
accelerate or delay
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the timing of, collections of payments on the Home Loans or distributions that
shall be required to be made for the benefit of the Noteholders or the
Certificateholders or (b) reduce the aforesaid percentage of the Outstanding
Amount of the Notes or the Percentage Interests required to consent to any such
amendment, in either case of clause (a) or (b) without the consent of the
holders of all the outstanding Notes, and in the case of clause (b) without the
consent of the holders of all the outstanding Residual Interest Certificates.
Promptly after the execution of any such amendment or consent, the
Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder, the Indenture Trustee and each
of the Rating Agencies.
It shall not be necessary for the consent of Owners, the Noteholders
or the Indenture Trustee pursuant to this Section to approve the particular form
of any proposed amendment or consent, but it shall be sufficient if such consent
shall approve the substance thereof. The manner of obtaining such consents (and
any other consents of Owners provided for in this Agreement or in any other
Basic Document) and of evidencing the authorization of the execution thereof by
Certificateholders shall be subject to such reasonable requirements as the Owner
Trustee may prescribe.
Promptly after the execution of any amendment to the Certificate of
Trust, the Owner Trustee shall cause the filing of such amendment with the
Secretary of State.
Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner 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 Owner Trustee may, but shall not
be obligated to, enter into any such amendment which affects the Owner Trustee's
own rights, duties or immunities under this Agreement or otherwise.
SECTION 11.2 No Legal Title to Owner Trust Estate in Owners. The
Owners shall not have legal title to any part of the Owner Trust Estate. The
Owners shall be entitled to receive distributions with respect to their
undivided ownership interest therein only in accordance with Articles V and IX.
No transfer, by operation of law or otherwise, of any right, title, or interest
of the Owners to and in their ownership interest in the Owner Trust Estate shall
operate to terminate this Agreement or the trusts hereunder or entitle any
transferee to an accounting or to the transfer to it of legal title to any part
of the Owner Trust Estate.
SECTION 11.3 Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the Owner Trustee, the Depositor, the
Company, the Owners, the Administrator and, to the extent expressly provided
herein, the Indenture Trustee and the Noteholders, and nothing in this
Agreement, whether express or implied, shall be construed to give to any other
Person any legal or equitable right, remedy or claim in the Owner Trust Estate
or under or in respect of this Agreement or any covenants, conditions or
provisions contained herein.
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SECTION 11.4 Notices. (a) Unless otherwise expressly specified or
permitted by the terms hereof, all notices shall be in writing, mailed by
certified mail, postage prepaid, return receipt requested, and shall be deemed
given upon actual receipt by the intended recipient, at the following addresses:
(i) if to the Owner Trustee, its Corporate Trust Office; (ii) if to the
Depositor, PaineWebber Mortgage Acceptance Corporation IV, 1285 Avenue of the
Americas, New York, New York 10019, Attention: John Fearey, Esq., General
Counsel; (iii) if to the Company, Empire Funding Corp., 9737 Great Hills Trail,
Austin, Texas 78759, Attention: Richard N. Steed; (iv) if to the Co-Owner
Trustee, U.S. Bank National Association, 180 East Fifth Street, St. Paul,
Minnesota 55101, Attention: Structured Finance/Empire Funding 1997-3; or, as to
each such party, at such other address as shall be designated by such party in a
written notice to each other party.
(b) Any notice required or permitted to be given to an Owner shall
be given by first-class mail, postage prepaid, at the address of such Owner as
shown in the Certificate Register. Any notice so mailed within the time
prescribed in this Agreement shall be conclusively presumed to have been duly
given, whether or not the Owner receives such notice.
SECTION 11.5 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
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 11.6 Separate Counterparts. This Agreement may be executed
by the parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 11.7 Successors and Assigns. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, the
Depositor, the Company, the Owner Trustee and its successors and each owner and
its successors and permitted assigns, all as herein provided. Any request,
notice, direction, consent, waiver or other instrument or action by an Owner
shall bind the successors and assigns of such Owner.
SECTION 11.8 No Petition. The Owner Trustee, by entering into this
Agreement, each Owner, by accepting a Trust Certificate, and the Indenture
Trustee and each Noteholder by accepting the benefits of this Agreement, hereby
covenant and agree that they will not at any time institute against the Company,
the Depositor or the Trust, or join in any institution against the Company or
the Trust of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any United States Federal or
state bankruptcy or law in connection with any obligations relating to the Trust
Certificates, the Notes, this Agreement or any of the Basic Documents.
SECTION 11.9 No Recourse. Each Owner by accepting a Trust
Certificate acknowledges that such Owner's Trust Certificate represents a
beneficial interest in the Trust
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only and does not represent an interest in or an obligation of the Transferor,
the Servicer, the Company, the Depositor, the Administrator, the Owner Trustee,
the Co-Owner Trustee or any Affiliate thereof and no recourse may be had against
such parties or their assets, except as may be expressly set forth or
contemplated in this Agreement, the Trust Certificates or the Basic Documents.
SECTION 11.10 Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 11.11 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, 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 11.12 Residual Interest Transfer Restrictions. The Residual
Interest may not be acquired by or for the account of a Benefit Plan Investor or
a Non-Permitted Foreign Holder. By accepting and holding a Trust Certificate,
the Owner thereof shall be deemed to have represented and warranted that it is
not a Benefit Plan Investor or a Non-Permitted Foreign Holder.
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IN WITNESS OF, the parties hereto have caused this Trust Agreement
to be duly executed by their respective officers hereunto duly authorized, as of
the day and year first above written.
PAINEWEBBER MORTGAGE ACCEPTANCE
CORPORATION IV,
Depositor
By:
---------------------------------------
Barbara J. Dawson
Senior Vice President
EMPIRE FUNDING CORP.
By:
---------------------------------------
Name:
Title:
WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Owner Trustee
By:
---------------------------------------
Emmett R. Harmon
Vice President
U.S. BANK NATIONAL ASSOCIATION, not in its
individual capacity but solely as Co-Owner
Trustee and Paying Agent
By:
---------------------------------------
J. T. Kaufman
Assistant Vice President
<PAGE>
EXHIBIT A
TO THE TRUST AGREEMENT
FORM OF RESIDUAL INTEREST CERTIFICATE
THE RESIDUAL INTEREST IN THE TRUST REPRESENTED BY THIS RESIDUAL INTEREST
CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS. THIS RESIDUAL
INTEREST CERTIFICATE MAY BE DIRECTLY OR INDIRECTLY OFFERED OR SOLD OR OTHERWISE
DISPOSED OF BY THE HOLDER HEREOF ONLY TO (I) A "QUALIFIED INSTITUTIONAL BUYER"
AS DEFINED IN RULE 144A UNDER THE ACT, IN A TRANSACTION THAT IS REGISTERED UNDER
THE ACT AND APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE ACT PURSUANT TO RULE 144A OR (II) AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1),
(2), (3) OR (7) OF RULE 501 UNDER THE ACT (INCLUDING, BUT NOT LIMITED TO, EMPIRE
FUNDING CORP.) IN A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF
THE ACT AND SUCH LAWS. NO PERSON IS OBLIGATED TO REGISTER THIS RESIDUAL INTEREST
UNDER THE ACT OR ANY STATE SECURITIES LAWS.
EXCEPT AS PROVIDED IN SECTION 3.10(B) OF THE TRUST AGREEMENT, NO TRANSFER OF
THIS RESIDUAL INTEREST CERTIFICATE OR ANY BENEFICIAL INTEREST HEREIN SHALL BE
MADE UNLESS THE OWNER TRUSTEE HAS RECEIVED A CERTIFICATE FROM THE TRANSFEREE TO
THE EFFECT THAT SUCH TRANSFEREE (I) IS NOT (A) AN "EMPLOYEE BENEFIT PLAN" WITHIN
THE MEANING OF SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED, (B) A "PLAN" WITHIN THE MEANING OF SECTION 4975(E)(1) OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR (C) AN ENTITY WHOSE UNDERLYING
ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY (EACH,
A "BENEFIT PLAN INVESTOR"), AND (II) IS NOT DIRECTLY OR INDIRECTLY PURCHASING
SUCH RESIDUAL INTEREST CERTIFICATE ON BEHALF OF, AS INVESTMENT MANAGER OF, AS
NAMED FIDUCIARY OF, AS TRUSTEE OF, OR WITH THE ASSETS OF A BENEFIT PLAN
INVESTOR.
THE TRANSFEREE OF THIS CERTIFICATE SHALL BE SUBJECT TO UNITED STATES FEDERAL
WITHHOLDING TAX UNLESS THE CERTIFICATE REGISTRAR SHALL HAVE RECEIVED A
CERTIFICATE OF NON-FOREIGN STATUS CERTIFYING AS TO THE TRANSFEREE'S STATUS AS
A U.S. PERSON UNDER U.S. FEDERAL TAX LAW.
A-1
<PAGE>
THE OWNER TRUSTEE SHALL NOT EXECUTE, AND SHALL NOT COUNTERSIGN AND DELIVER, A
RESIDUAL INTEREST CERTIFICATE IN CONNECTION WITH ANY TRANSFER OF THIS RESIDUAL
INTEREST CERTIFICATE UNLESS THE TRANSFEROR SHALL HAVE PROVIDED TO THE OWNER
TRUSTEE A CERTIFICATE, SIGNED BY THE TRANSFEREE, WHICH CERTIFICATE SHALL CONTAIN
THE CONSENT OF THE TRANSFEREE TO ANY AMENDMENTS OF THE TRUST AGREEMENT AS MAY BE
REQUIRED TO EFFECTUATE FURTHER THE RESTRICTIONS ON TRANSFER OF THE RESIDUAL
INTEREST CERTIFICATES TO NON-PERMITTED FOREIGN HOLDERS, AND AN AGREEMENT BY THE
TRANSFEREE THAT IT WILL NOT TRANSFER THIS RESIDUAL INTEREST CERTIFICATE WITHOUT
PROVIDING TO THE OWNER TRUSTEE A SUBSTANTIALLY IDENTICAL CERTIFICATE, SIGNED BY
THE PROSPECTIVE OWNER TO WHOM THIS RESIDUAL INTEREST CERTIFICATE IS TO BE
TRANSFERRED.
A-2
<PAGE>
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-3
RESIDUAL INTEREST CERTIFICATE
No. ______
THIS CERTIFIES THAT _______________________________ (the "Owner") is
the registered owner of a ____% residual interest in Empire Funding Home Loan
Owner Trust 1997-3 (the "Trust") existing under the laws of the State of
Delaware and created pursuant to the Trust Agreement dated as of August 1, 1997
(the "Trust Agreement") between PaineWebber Mortgage Acceptance Corporation IV,
as Depositor, Empire Funding Corp., as the Company, Wilmington Trust Company,
not in its individual capacity but solely in its fiduciary capacity as owner
trustee under the Trust Agreement (the "Owner Trustee") and U.S. Bank National
Association, d/b/a First Bank National Association, as Co-Owner Trustee (the
"Co-Owner Trustee"). Initially capitalized terms used but not defined herein
have the meanings assigned to them in the Trust Agreement. The Owner Trustee, on
behalf of the Issuer and not in its individual capacity, has executed this
Residual Interest Certificate by one of its duly authorized signatories as set
forth below. This Residual Interest Certificate is one of the Residual Interest
Certificates referred to in the Trust Agreement and is issued under and is
subject to the terms, provisions and conditions of the Trust Agreement to which
the holder of this Residual Interest Certificate by virtue of the acceptance
hereof agrees and by which the holder hereof is bound. Reference is hereby made
to the Trust Agreement and the Sale and Servicing Agreement for the rights of
the holder of this Residual Interest Certificate, as well as for the terms and
conditions of the Trust created by the Trust Agreement.
The holder, by its acceptance hereof, agrees not to transfer this
Residual Interest Certificate except in accordance with terms and provisions of
the Trust Agreement.
A-3
<PAGE>
THIS RESIDUAL INTEREST CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF DELAWARE, 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.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and
not in its individual capacity, has caused this Residual Interest Certificate to
be duly executed.
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-3
By: Wilmington Trust Company, not in its
individual capacity but solely as Owner
Trustee under the Trust Agreement
By:
------------------------------------------
Authorized Signatory
DATED: August _, 1997
CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned
Trust Agreement.
----------------------------.
as Authenticating Agent
By:
---------------------------------------
Authorized Signatory
A-4
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
- --------------------------------------------------------------------------------
(Please print or type name and address, including postal zip code, of
assignee)
- --------------------------------------------------------------------------------
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
____________________________________________________________________ Attorney to
transfer said Certificate on the books of the Certificate Registrar, with full
power of substitution in the premises.
Dated: _______________
*/
------------------------------------
Signature Guaranteed:
*/
------------------------------------
- ----------
*/ NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
A-5
<PAGE>
EXHIBIT B
TO THE TRUST AGREEMENT
FORM OF RESIDUAL INTEREST ISSUED TO THE COMPANY
B-1
<PAGE>
EXHIBIT C
TO THE TRUST AGREEMENT
CERTIFICATE OF TRUST OF
EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-3
THIS Certificate of Trust of Empire Funding Home Loan Owner Trust
1997-3 (the "Trust"), dated August ___, 1997, is being duly executed and filed
by Wilmington Trust Company, a Delaware banking corporation, as trustee, and
U.S. Bank National Association, d/b/a First Bank National Association, as
co-owner trustee, to form a business trust under the Delaware Business Trust Act
(12 Del. Code, ss. 3801 et seq.).
1. Name. The name of the business trust formed hereby is Empire
Funding Home Loan Owner Trust 1997-3.
2. Delaware Trustee. The name and business address of the trustee of
the Trust in the State of Delaware is Wilmington Trust Company, Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention:
Corporate Trust Administration.
* * *
C-1
<PAGE>
IN WITNESS WHEREOF, the undersigned, being the owner trustee and
co-owner trustee of the Trust, have executed this Certificate of Trust as of the
date first above written.
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as owner
trustee under a Trust Agreement dated as
of August 1, 1997
By:
---------------------------------
Name:
Title:
U.S. BANK NATIONAL ASSOCIATION, not in
its individual capacity but solely as
Co-Owner Trustee and Paying Agent
By:
---------------------------------
Name:
Title:
C-2
<PAGE>
EXHIBIT D
TO THE TRUST AGREEMENT
CERTIFICATE OF NON-FOREIGN STATUS
This Certificate of Non-Foreign Status ("Certificate") is delivered
pursuant to Section 10(c) of the Trust Agreement, dated as of August 1, 1997
(the "Trust Agreement"), among PaineWebber Mortgage Acceptance Corporation IV,
as depositor, Empire Funding Corp., U.S. Bank National Association, d/b/a First
Bank National Association, and Wilmington Trust Company, as Owner Trustee, in
connection with the acquisition of, transfer to or possession by the
undersigned, whether as beneficial owner (the "Beneficial Owner"), or nominee on
behalf of the Beneficial Owner of the Empire Funding Home Loan Owner Trust
1997-3, Residual Interest Certificates RHS4 (the "Residual Certificate").
Capitalized terms used but not defined in this Certificate have the respective
meanings given them in the Trust Agreement.
Each holder must complete Part I, Part II (if the holder is a nominee), and in
all cases sign and otherwise complete Part III. In addition, each holder shall
submit with the Certificate an IRS Form W-9 relating to such holder.
To confirm to the Trust that the provisions of Sections 871, 881 or 1446 of the
Internal Revenue Code (relating to withholding tax on foreign partners) do not
apply in respect of the Certificate held by the undersigned, the undersigned
hereby certifies:
Part I - Complete Either A or B
A. Individual as Beneficial Owner
1. I am (The Beneficial Owner is) not a non-resident alien
for purposes of U.S. income taxation;
2. My (The Beneficial Owner's) name and home address
are:
_________________________________
_________________________________
_________________________________; and
3. My (The Beneficial Owner's) U.S. taxpayer identification
number (Social Security Number) is ___________________.
B. Corporate, Partnership or Other Entity as Beneficial Owner
1. ______________________ (Name of the Beneficial Owner)
EITHER (X) is not a foreign corporation, foreign
partnership, foreign trust or foreign estate (as those
terms are defined in the Code and Treasury Regulations
OR (Y) has furnished the Owner
D-1
<PAGE>
Trustee with a properly completed Internal Revenue
Service Form 4224 (or applicable successor form),
indicating that the Residual Certificate is held in
connection with the conduct of a trade or business of
the Beneficial Owner within the United States and that
the income therefrom will be included on the Beneficial
Owner's United States federal income tax return, and
shall update such Form 4224 at the time or times and in
the manner provided by the Code and Treasury
Regulations;
2. The Beneficial Owner's principal United States office
address and place of incorporation (if applicable) is
_______________________________________; and
3. The Beneficial Owner's U.S. employer identification
number is __________________.
Part II - Nominees
If the undersigned is the nominee for the Beneficial Owner, the
undersigned certifies that this certificate has been made in reliance upon
information contained in:
_____ an IRS Form W-9
_____ a form such as this or substantially similar
provided to the undersigned by an appropriate person and (i) the undersigned
agrees to notify the Trust at least thirty (30) days prior to the date that the
form relied upon becomes obsolete, and (ii) in connection with change in
Beneficial Owners, the undersigned agrees to submit a new Certificate of
Non-Foreign Status to the Trust promptly after such change.
Part III - Declaration
The undersigned, as the Beneficial Owner or a nominee thereof,
agrees to notify the Trust within sixty (60) days of the date that the
Beneficial Owner becomes a foreign person. The undersigned understands that this
certificate may be disclosed to the Internal Revenue Service by the Trust and
any false statement contained therein could be punishable by fines, imprisonment
or both.
Under penalties of perjury, I declare that I have examined this
certificate and to the best of my knowledge and belief it is true, correct and
complete and will further declare that I will inform the Trust of any change in
the information provided above, and, if applicable, I further declare that I
have the authority* to sign this document.
- --------
* Note: If signed pursuant to a power of attorney, the power of attorney must
accompany this certificate.
D-2
<PAGE>
- -------------------------------
Name
- -------------------------------
Title (if applicable)
- -------------------------------
Signature and Date
D-3
