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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
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Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 24, 1998
BANC ONE ABS CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
United States 333-59845 None Available
(State or Other (Commission File Number) (IRS Employer
Jurisdiction of Identification Nos.)
Incorporation)
100 East Broad Street Columbus, Ohio 43271-0158
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (614) 248-5700
Not Applicable
(Former Name or Former Address if Changed Since Last Report)
Exhibit Index located at Page 2
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Items 1 through 4 and Items 6, 8 and 9 are not included because they are not
applicable.
Item 5. Other Events.
On September 24, 1998, Banc One ABS Corporation, as Depositor and Bank
One, N.A., as Servicer (the "Depositor" and "Servicer") entered into a Pooling
and Servicing Agreement, dated as of August 31, 1998 (the "Pooling and Servicing
Agreement"), with The Bank of New York, as trustee (the "Trustee"). Pursuant to
the Pooling and Servicing Agreement, a Trust was created into which the
Depositor deposited the Mortgage Loans listed in the Mortgage Loan Schedule
attached as Exhibit C to the Pooling and Servicing Agreement. The Trust issued
$850,000,000 HELOC Asset-Backed Certificates, Series 1998-1 (the
"Certificates"). The Underwriting Agreement between the Depositor and Credit
Suisse First Boston Corporation, as representative of the several underwriters
(the "Underwriters") relating to the sales of the Certificates, the Pooling and
Servicing Agreement and the Mortgage Loan Purchase Agreement among Bank One,
N.A., Bank One, Arizona, N.A., Bank One, Colorado, N.A., Bank One Illinois,
N.A., Bank One, Indiana, N.A., Bank One, Kentucky, N.A., Bank One, Utah, N.A.,
Bank One, West Virginia, N.A., Bank One, Wisconsin, (each a "Seller," and
collectively, the "Sellers") and the Depositor, are attached as Exhibits.
The aggregate Cut-Off Date Pool Balance of the Mortgage Loans was
approximately $867,346,931, as indicated in more detail in the Mortgage Loan
Schedule attached as Exhibit C to the Pooling and Servicing Agreement.
Capitalized terms used herein and not defined herein have the same
meaning ascribed to such terms in the Pooling and Servicing Agreement.
Item 7. Exhibits.
(a) Executed exhibits - The following exhibits to the Form S-3
Registration Statement of the Registrant are hereby filed:
<TABLE>
<CAPTION>
Exhibit Sequentially
Number Numbered
Exhibit Page
---------------------------------------------------------------------------------------------
<S> <C>
1.1 Underwriting Agreement
4.1 Pooling and Servicing Agreement
10.1 Mortgage Loan Purchase Agreement
</TABLE>
2
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BANC ONE ABS CORPORATION
(Registrant)
September 24, 1998 By: /s/ Suzanne Bachman
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Name: Suzanne Bachman
Title: Securitization Manager
3
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Exhibit Index
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<TABLE>
<CAPTION>
Exhibit Sequentially
Number Numbered
Exhibit Page
---------------------------------------------------------------------------------------------
<S> <C>
1.1 Underwriting Agreement
4.1 Pooling and Servicing Agreement
10.1 Mortgage Loan Purchase Agreement
</TABLE>
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EXHIBIT 1.1
Banc One HELOC Trust 1998-1
$850,000,000
HELOC ASSET-BACKED CERTIFICATES, Series 1998-1
Banc One ABS Corporation
(DEPOSITOR)
UNDERWRITING AGREEMENT
September 16, 1998
CREDIT SUISSE FIRST BOSTON CORPORATION
as Representative (the
"Representative") of the
Several Underwriters named herein
11 Madison Avenue
New York, NY 10010
Ladies and Gentlemen:
1. Introductory. Banc One ABS Corporation, an Ohio corporation (the
"Depositor") and a wholly-owned subsidiary of BANC ONE CORPORATION, proposes to
cause Banc One HELOC Trust 1998-1 (the "Trust") to issue and sell $850,000,000
principal amount of its HELOC Asset-Backed Certificates, Series 1998-1 (the
"Certificates") to the several underwriters named in Schedule I attached hereto
(the "Underwriters"), for whom you (the "Representative") are acting as
representative. The assets of the Trust include, among other things, a pool of
adjustable rate home equity revolving credit line loans made or to be made in
the future (the "Mortgage Loans"), under certain home equity revolving credit
line loan agreements (the "Credit Line Agreements") and secured by either first
or second deeds of trust or mortgages on primarily one- to four-family
residential properties (the "Mortgaged Properties"); the collections in respect
of the Mortgage Loans received after August 31, 1998 (the "Cut-off Date");
property that secured a Mortgage Loan which has been acquired by foreclosure or
deed in lieu of foreclosure; an irrevocable and unconditional certificate
guaranty insurance policy (the "Policy") to be issued by MBIA Insurance
Corporation (the "Insurer"); an assignment of the Depositor's rights under the
Mortgage Loan Purchase Agreement (as defined herein); rights under certain
hazard insurance policies covering the Mortgaged Properties; and certain other
property.
The Trust will be formed, and the Certificates will be issued, pursuant
to a Pooling and Servicing Agreement to be dated as of August 31, 1998 (the
"Pooling and Servicing Agreement") among the Depositor, Bank One, N.A., a
national banking association, as servicer (the "Servicer") and The Bank of New
York, as trustee (the "Trustee"). The Mortgage Loans and
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certain other assets of the Trust Fund will be sold by each of Bank One, N.A.,
Bank One, Arizona, N.A., Bank One, Wisconsin, Bank One, Indiana, N.A., Bank One,
Illinois, N.A., Bank One, Kentucky, N.A., Bank One, Colorado, N.A., Bank One,
Utah, N.A. and Bank One, West Virginia, N.A. (each, a "Seller" and together the
"Sellers") to the Depositor pursuant to the Mortgage Loan Purchase Agreement to
be dated as of August 31, 1998 (the "Mortgage Loan Purchase Agreement") among
the Depositor and the Sellers and, by the Depositor to the Trust pursuant to the
Pooling and Servicing Agreement.
This Agreement, the Pooling and Servicing Agreement, the Mortgage Loan
Purchase Agreement, the letter agreement (the "Letter Agreement") attached as
Exhibit A hereto and each agreement to which the Depositor and the Insurer are
parties (the "Insurance Agreements") are collectively referred to herein as the
"Basic Documents."
Capitalized terms used and not otherwise defined herein shall have the
meanings given them in the Pooling and Servicing Agreement.
2. Representations and Warranties of the Depositor. (a) The Depositor
represents and warrants to and agrees with the Underwriters that:
(i) The Depositor has filed with the Securities and Exchange
Commission (the "Commission"), a registration statement (No. 333-59845)
on Form S-3, including a prospectus, relating to the Certificates,
which has become effective. Such registration statement, as amended as
of the date of this Agreement, is hereinafter referred to as the
"Registration Statement," and the prospectus included in such
Registration Statement, as supplemented to reflect the terms of the
Certificates as first filed with the Commission after the date of this
Agreement pursuant to and in accordance with Rule 424(b) ("Rule
424(b)") under the Securities Act of 1933, as amended (the "Act"),
including all material incorporated by reference therein, is
hereinafter referred to as the "Prospectus." A "preliminary prospectus"
means any form of prospectus, including any prospectus supplement,
relating to the Certificates used prior to the date of this Agreement
that is subject to completion.
(ii) On September 11, 1998, the effective date of the
Registration Statement, such Registration Statement conformed in all
material respects to the requirements of the Act and the rules and
regulations of the Commission thereunder (the "Rules and Regulations")
and did not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading, and on the date of this
Agreement the Registration Statement conform, and at the time of the
filing of the Prospectus in accordance with Rule 424(b), the
Registration Statement and the Prospectus will conform, in all material
respects to the requirements of the Act and the Rules and Regulations,
and neither of such documents will include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, except
that the foregoing does not apply to
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statements in or omissions from any of such documents based upon (i)
written information furnished to the Depositor by any Underwriter
through the Representative specifically for use therein, it being
understood that the only such information consists of the Underwriters'
Information (as defined in Section 2(b)) or (ii) the Derived
Information (as defined in Section 7 below) contained in the Current
Report (as defined in Section 5(n) below) or in any amendment thereof
or supplement thereto, incorporated by reference in such Registration
Statement or such Prospectus (or any amendment thereof or supplement
thereto). The Depositor acknowledges that any information furnished by
any of the Underwriters specifically for use in the Registration
Statement, any preliminary prospectus or the Prospectus is the
Underwriters' Information (as defined in Section 2(b) below).
(iii) The Certificates meet the requirements for use of Form
S-3 under the Act.
(iv) This Agreement has been duly authorized, executed and
delivered by the Depositor. The execution, delivery and performance of
this Agreement and each of the other Basic Documents to which it is a
party and the issuance and sale of the Certificates and compliance with
the terms and provisions hereof will not result in a breach or
violation of any of the terms and provisions of, or constitute a
default under, any agreement or instrument to which the Depositor is a
party or by which the Depositor is bound or to which any of the
properties of the Depositor is subject which could reasonably be
expected to have a material adverse effect on the transactions
contemplated herein. The Depositor has full corporate power and
authority to cause the Trust to (a) authorize, the Trustee to execute
and deliver the Certificates to the Seller and (b) sell the
Certificates to the Underwriters, all as contemplated by this
Agreement.
(v) Other than as contemplated by this Agreement or as
disclosed in the Prospectus, there is no broker, finder or other party
that is entitled to receive from or on behalf of the Depositor any
brokerage or finder's fee or other fee or commission as a result of any
of the transactions contemplated by this Agreement.
(vi) All material legal or governmental proceedings, contracts
or documents of a character required to be described in the
Registration Statement or the Prospectus or to be filed as an exhibit
to the Registration Statement have been so described or filed as
required.
(vii) The documents incorporated by reference in the
Registration Statement and Prospectus, at the time they were or
hereafter are filed with the Commission, complied and will comply in
all material respects with the requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations of the Commission thereunder.
(viii) As of the Closing Date (as defined below), the
representations and warranties of (a) the Depositor herein shall be
true and correct in all material respects and (b) the Depositor, the
Sellers and the Servicer in the Basic Documents to which each is a
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party will be true and correct in all material respects and each such
representation and warranty is so incorporated herein by reference.
(ix) The Certificates, when duly and validly authorized by the
Depositor, and, when executed and authenticated as specified in the
Pooling and Servicing Agreement, and delivered and paid for pursuant
hereto will be validly issued and outstanding and will be entitled to
the benefits of the Pooling and Servicing Agreement.
(x) As of the Closing Date, the Mortgage Loans and related
property will have been duly and validly assigned to the Trustee in
accordance with the Basic Documents; and when such assignment is
effected, a duly and validly perfected transfer of all such Mortgage
Loans will have occurred, subject to no prior lien, mortgage, security
interest, pledge, charge or other encumbrance created by the Depositor
or the Sellers.
(xi) Neither the transfer from the Depositor to the Trustee,
acting on behalf of the Trust, of the Mortgage Loans and other Trust
Assets conveyed by it to the Trust pursuant to the Pooling and
Servicing Agreement, nor the issuance, sale and delivery of the
Certificates, nor the fulfillment of the terms of the Certificates,
will conflict with, or result in a breach, violation or acceleration
of, or constitute a default under, any term or provision of the
organizational documents of the Depositor or any material indenture or
other material agreement or instrument to which the Depositor is a
party or by which it or its properties is bound or result in a
violation of or contravene the terms of any statute, order or
regulation applicable to the Depositor of any court, regulatory body,
administrative agency, governmental body or arbitrator having
jurisdiction over the Depositor or will result in the creation of any
lien upon any material property or assets of the Depositor.
(xii) The Depositor has caused the Servicer to deliver to the
Underwriters or to counsel for the Underwriters complete and correct
copies of publicly available portions of the Consolidated Reports of
Condition and Income of the Servicer for the close of business June 30,
1998, as submitted to the Board of Governors of the Federal Reserve
System; except as set forth in or contemplated in the Registration
Statement and the Prospectus, there has been no material adverse change
in the financial condition or results of operations of the Servicer
since June 30, 1998.
(xiii) Any taxes, fees and other governmental charges in
connection with the execution, delivery and performance by the
Depositor of the Basic Documents and the execution, delivery and sale
of the Certificates shall have been paid or will be paid by or on
behalf of the Depositor at or prior to the Closing Date to the extent
then due.
(xiv) The Depositor has filed the preliminary prospectus
supplement relating to the Certificates pursuant to and in accordance
with Rule 424(b).
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(b) The Depositor hereby agrees with the Underwriters that, for all
purposes of this Agreement, the only information furnished to the Depositor by
the Underwriters specifically for use in the Registration Statement, the
Prospectus, or any amendment or supplement thereto, or any related preliminary
prospectus, are the final two paragraphs on the cover page of, statements with
respect to stabilization on the second page of, and the statements under the
caption "Underwriting" in, the preliminary prospectus and the Prospectus
(collectively, the "Underwriters' Information").
3. Purchase, Sale and Delivery of the Certificates. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Depositor agrees to sell to the
Underwriters, and the Underwriters agree, severally and not jointly, to purchase
from the Depositor, the entire principal amount of the Certificates set forth
opposite the name of such Underwriter in Schedule I hereto at a purchase price
of 99.75% of the principal amount thereof. The Investor Certificate Rate for
each Interest Period shall equal one-month LIBOR for such Interest Period
(determined in accordance with the Pooling and Servicing Agreement) plus 0.25%.
The Depositor will deliver the Certificates to the Representative, for
the account of the Underwriters, against payment of the purchase price to or
upon the order of the Depositor by wire transfer or check in Federal (same day)
Funds, at the office of Orrick, Herrington & Sutcliffe, LLP, 666 Fifth Avenue,
New York, New York 10103 at 10:00 a.m., New York time on September 24, 1998, or
at such other time not later than seven full business days thereafter as the
Representative and the Depositor determine, such time being herein referred to
as the "Closing Date." The Certificates to be so delivered will be initially
represented by one or more Certificates registered in the name of Cede & Co., as
the nominee of The Depository Trust Company ("DTC") or one of the relevant
depositories. The interests of beneficial owners of the Certificates will be
represented by book entries on the records of, as directed by the
Representative, DTC in the United States or Cedel Bank, societe anonyme or the
Euroclear System in Europe, and participating members thereof. Definitive
Certificates will be available only under the limited circumstances specified in
the Pooling and Servicing Agreement.
4. Offering by the Underwriters. It is understood that, the several
Underwriters propose to offer the Certificates for sale to the public (which may
include selected dealers) on the terms set forth in the Prospectus.
5. Covenants of the Depositor. The Depositor covenants and agrees with
the several Underwriters that:
(a) The Depositor will file the Prospectus, properly completed, with
the Commission pursuant to and in accordance with subparagraph (2) (or, if
applicable and if consented to by the Representative, subparagraph (5)) of Rule
424(b) not later than the second business day following the execution and
delivery of this Agreement. The Depositor will advise the Representative
promptly of any such filing pursuant to Rule 424(b).
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(b) The Depositor will advise the Representative promptly of any
proposal (on or prior to any date within 90 days of the date of the Prospectus)
to amend or supplement the Registration Statement as filed or the related
prospectus or the Registration Statement or the Prospectus and will not effect
such amendment or supplementation without the consent of the Representative,
which consent shall not be unreasonably withheld or delayed; the Depositor will
also advise the Representative promptly of any request by the Commission (on or
prior to any date within 90 days of the date of the Prospectus) for any
amendment of or supplement to the Registration Statement or the Prospectus or
for any additional information; and the Depositor will also advise the
Representative promptly of the effectiveness of the Registration Statement (if
the effective time is subsequent to the execution of this Agreement) and of any
amendment or supplement to the Registration Statement or the Prospectus and of
the issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or the institution or threat of any proceeding for
that purpose and the Depositor will use its reasonable best efforts to prevent
the issuance of any such stop order and to obtain as soon as possible the
lifting of any issued stop order.
(c) If, at any time when a prospectus relating to the Certificates is
required to be delivered under the Act, any event occurs as a result of which
the Prospectus as then amended or supplemented would contain an untrue statement
of a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend or supplement
the Prospectus to comply with the Act, the Depositor promptly will prepare and
file with the Commission an amendment or supplement which will correct such
statement or omission, or an amendment or supplement which will effect such
compliance. Neither the consent of the Representative to, nor the delivery by
the Representative of, any such amendment or supplement shall constitute a
waiver of any of the conditions set forth in Section 6.
(d) The Depositor will timely prepare and file all periodic reports
required to be filed pursuant to Section 15(d) of the Exchange Act as
interpreted by the Commission through certain No-Action Letters, on behalf of
the Trust, with the Commission until no longer required to do so as permitted by
Section 15(d) of the Exchange Act.
(e) The Depositor will furnish to the Representative and its counsel
copies of the Registration Statement (including all exhibits), each related
preliminary prospectus supplement, the Prospectus and all amendments and
supplements to such documents, in each case as soon as available and in such
quantities as the Representative reasonably requests.
(f) The Depositor will take all actions which are reasonably necessary
to arrange for the qualification of the Certificates for sale under the laws of
such jurisdictions as the Representative designates and will continue such
qualifications in effect so long as required for the distribution; provided,
however, that in no event shall the Depositor be obligated to qualify as a
foreign corporation or to execute a general or unlimited consent to service of
process in any such jurisdiction.
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(g) For a period from the date of this Agreement until the retirement
of the Certificates, or until such time as the Underwriters shall cease to
maintain a secondary market in the Certificates, whichever occurs first, the
Depositor will deliver to the Representative, if requested, the annual
statements of compliance and the annual independent certified public
accountants' reports furnished to the Trustee pursuant to the Pooling and
Servicing Agreement, as soon as such statements and reports are furnished to the
Trustee.
(h) So long as any of the Certificates are outstanding, the Depositor
will furnish to the Representative (i) as soon as practicable after the end of
the fiscal year all documents required to be distributed to Certificateholders
or filed with the Commission on behalf of the Trust pursuant to the Exchange
Act, or any order of the Commission thereunder and (ii) from time to time, any
other information concerning the Depositor as the Representative may reasonably
request only insofar as such information reasonably relates to the Registration
Statement or the transactions contemplated by the Basic Documents.
(i) On or before the Closing Date, the Depositor shall and shall cause
each Seller to mark each of its respective books and records (including any
computer records) relating to the Mortgage Loans to show the absolute ownership
by the Trustee on behalf of the Trust of the Mortgage Loans, and from and after
the Closing Date none of the Depositor, the Sellers or the Servicer, shall take
any action inconsistent with the ownership by the Trustee on behalf of the Trust
of such Mortgage Loans, other than as permitted by the Pooling and Servicing
Agreement.
(j) To the extent, if any, that any of the ratings provided with
respect to the Certificates by the rating agency or agencies that initially rate
the Certificates are conditional upon the furnishing of documents or the taking
of any other actions by the Depositor, on or prior to the Closing Date, the
Depositor shall furnish such documents and take any such other actions. A copy
of any such document shall be provided to the Representative at the time it is
delivered to the rating agencies.
(k) For the period beginning on the date of this Agreement and ending
on the Closing Date, neither the Depositor nor any Affiliate or trust
originated, directly or indirectly, by the Depositor or any Affiliate (or any
trust, partnership or other entity sponsored by the Depositor or any Affiliate
or in which the Depositor or any Affiliate is a partner or a stockholder) will,
without the prior written consent of the Representative, offer to issue or issue
notes collateralized by, or certificates (other than the Certificates)
evidencing an ownership interest in, Mortgage Loans; provided, however, that
except as otherwise provided by the Basic Documents, this shall not be construed
to prevent (i) the sale of Mortgage Loans by any Affiliate of the Depositor to
any person or (ii) any sales or grants of participations in and to Mortgage
Loans by one or more Affiliates of the Depositor to one or more other Affiliates
of the Depositor.
(l) The Depositor will apply the net proceeds of the sale of the
Certificates that it receives in the manner set forth in the Prospectus under
the caption "Use of Proceeds."
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(m) The Depositor will pay or cause to be paid all costs and expenses
incident to the performance of its obligations under this Agreement, including
but not limited to (i) the printing and filing of the documents (including the
Registration Statement, preliminary prospectuses and Prospectus), (ii) the
preparation, issuance and delivery of the Certificates to the Representative,
(iii) the fees and disbursements of the Depositor's counsel and accountants,
(iv) the qualification of the Certificates under securities laws in accordance
with the provisions of Section 5(f), including filing fees and the fees and
disbursements of counsel for the Representative in connection therewith and in
connection with the preparation of any blue sky or legal investment survey, if
any is requested, (v) the printing and delivery to the Underwriters, of copies
of the Registration Statement as originally filed and of each amendment thereto,
(vi) the printing and delivery to the Underwriters of copies of any blue sky or
legal investment survey prepared in connection with the Certificates, (vii) any
fees charged by rating agencies for the rating of the Certificates, and (viii)
the fees and expenses of Orrick, Herrington & Sutcliffe, LLP.
(n) To the extent that any Underwriter (i) has provided Collateral Term
Sheets to the Depositor that such Underwriter has provided to a prospective
investor, the Depositor has filed such Collateral Term Sheets (as defined in
Section 7 below) as an Exhibit to a Current Report on Form 8-K within two
business days of its receipt thereof, (ii) has provided Structural Term Sheets
or Computational Materials to the Depositor that such Underwriter has provided
to a prospective investor, the Depositor will file or cause to be filed with the
Commission a report on a Current Report on Form 8-K containing such Structural
Term Sheets and Computational Materials, as soon as reasonably practicable after
the date of this Agreement, but in any event, not later than the date on which
the Prospectus is filed with the Commission pursuant to Rule 424 under the Act,
or (iii) has provided Series Term Sheets (as defined in Section 7 below) to the
Depositor that such Underwriter has provided to a prospective investor, the
Depositor has filed such Series Term Sheets as an Exhibit to a Current Report on
Form 8-K within two business days of its receipt thereof. The Current Reports on
Form 8-K referred to in the preceding sentence are collectively referred to
herein as the "Current Report."
(o) On or prior to the date of issuance of the Certificates, the
Depositor will obtain one or more certificate insurance policies (each, a
"Policy") issued by the Insurer for the benefit of the holders of the
Certificates.
6. Conditions of the Obligations of the Underwriters. The obligations
of the several Underwriters to purchase and pay for the Certificates will be
subject to the accuracy, as of the date hereof and as of the Closing Date, of
the representations and warranties contained or incorporated herein, to the
accuracy of the written statements of officers of the Depositor, made pursuant
to the provisions of this Section, to the performance by the Depositor, of its
obligations hereunder and to the following additional conditions precedent:
(a) The Prospectus and any supplements thereto shall have been filed
with the Commission in accordance with the Rules and Regulations and Section
5(a) hereof. Prior to the Closing Date, no stop order suspending the
effectiveness of the Registration Statement shall have
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been issued and no proceedings for that purpose shall have been instituted or,
to the knowledge of the Depositor or the Representative, shall be contemplated
by the Commission.
(b) The Representative shall have received a letter, on or prior to the
date of this Agreement of Arthur Andersen LLP with respect to certain
agreed-upon procedures, confirming that such accountants are independent public
accountants within the meaning of the Act and the Rules and Regulations, and
substantially in the form of the draft to which the Representative has
previously agreed and otherwise in form and substance reasonably satisfactory to
the Representative and counsel for the Underwriters.
(c) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) any change, or any development involving a
prospective change materially and adversely affecting (A) the property of the
Trust taken as a whole or (B) the business or properties of the Depositor, the
Sellers, the Servicer or BANC ONE CORPORATION which, in the reasonable judgment
of a majority in interest of the Underwriters (including the Representative) in
the case of either (A) or (B) makes it impractical or inadvisable to market the
Certificates on the terms and in the manner contemplated in the Prospectus; (ii)
any downgrading (other than a downgrade by Standard & Poor's, in connection with
the "CreditWatch with negative implication" previously announced on September 3,
1998) in the rating of any debt securities of BANC ONE CORPORATION or any of its
Affiliates by any "nationally recognized statistical rating organization" (as
defined for purposes of Rule 436(g) under the Act), or any public announcement
that any such organization has under surveillance or review its rating of any
such debt securities (other than an announcement with positive implications of a
possible upgrading, and no implication of a possible downgrading, of such
rating); (iii) any suspension or limitation of trading in securities generally
on the New York Stock Exchange, or any setting of minimum prices for trading on
such exchange; (iv) any suspension of trading of any securities of BANC ONE
CORPORATION on any exchange or in the over-the-counter market; (v) any banking
moratorium declared by Federal or New York authorities; or (vi) any outbreak or
escalation of major hostilities in which the United States is involved, any
declaration of war by Congress, or any other substantial national or
international calamity or emergency if, in the judgment of a majority in
interest of the Underwriters (including the Representative), the effect of any
such outbreak, escalation, declaration, calamity or emergency makes it
impractical or inadvisable to proceed with completion of the sale of and payment
for the Certificates. It is understood that on or about October 1, 1998, BANC
ONE CORPORATION will be merged with and into its wholly owned subsidiary, BANK
ONE CORPORATION (the "Merger"). As a result, following such Merger, all
references to BANC ONE CORPORATION as set forth in this Section 6(c) shall be
deemed to be references to BANK ONE CORPORATION.
(d) The Representative shall have received an opinion of counsel to the
Depositor acceptable to the Representative and counsel for the Underwriters,
dated the Closing Date, satisfactory in form and substance to the Representative
and counsel for the Underwriters, to the effect that:
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(i) The Depositor has been duly organized and is validly
existing as a corporation in good standing under the laws of the State
of Ohio, with corporate power and authority to own its properties and
to conduct its business as such properties are currently owned and such
business is currently conducted and to enter into and perform its
obligations under the Basic Documents to which it is a party.
(ii) The Depositor has duly authorized, executed and delivered
the written order to the Trustee to execute and deliver the
Certificates.
(iii) The Depositor has duly authorized, executed, and
delivered the Basic Documents to which it is a party.
(iv) Neither the transfer of the property of the Trust by the
Depositor to the Trustee on behalf of the Trust, nor the execution and
delivery by the Depositor of the Basic Documents to which it is a
party, nor the consummation by the Depositor of the transactions
contemplated by the Basic Documents to which it is a party nor the
performance by the Depositor of its obligations thereunder will (i)
violate the articles of incorporation or the by-laws, each as amended,
of the Depositor or (ii) violate or contravene the terms of applicable
provisions of statutory law or regulation.
(v) To such counsel's knowledge, there are no actions,
proceedings or investigations pending against the Depositor or
threatened against the Depositor before any court, administrative
agency, or tribunal (i) asserting the invalidity of the Trust or any of
the Basic Documents, (ii) seeking to prevent the consummation of any of
the transactions contemplated by the Basic Documents or the execution
and delivery thereof, or (iii) that could reasonably be expected to
materially and adversely affect the enforceability of the Basic
Documents against the Depositor or the ability of the Depositor to
perform its obligations thereunder.
(vi) No consent, license, approval, authorization or order of,
or filing with, any court or governmental agency or body is required of
the Depositor for the consummation of the transactions contemplated in
the Basic Documents, except such consents, licenses, approvals,
authorizations or orders as have been obtained or such filings as have
been made and except where the failure to obtain the same would not
have a material adverse effect upon the rights of the
Certificateholders.
Such opinion may contain such assumptions, qualifications and
limitations as are customary in opinions of this type and are reasonably
acceptable to counsel to the Underwriters. In rendering such opinion, such
counsel may state that they are admitted to practice only in the State of Ohio
and that they are not admitted to the Bar in any other State, that they express
no opinion as to the laws of any jurisdiction other than the federal law of the
United States of America and the laws of the State of Ohio.
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(e) The Representative shall have received the opinion of Orrick,
Herrington & Sutcliffe, special counsel to the Sellers and the Servicer, or such
other counsel acceptable to the Representative and counsel for the Underwriters,
dated the Closing Date, satisfactory in form and substance to the Representative
and counsel for the Underwriters, to the effect that:
(i) When the Certificates have been duly executed, delivered
and authenticated in accordance with the Pooling and Servicing
Agreement and delivered and paid for pursuant to the Underwriting
Agreement, the Certificates will be validly issued, outstanding and
entitled to the benefits of the Pooling and Servicing Agreement,
subject as to enforceability to the effects of applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium and
similar laws now or hereafter in effect relating to creditors' rights
generally and subject to general principles of equity (whether in a
proceeding at law or in equity).
(ii) The Basic Documents are legal, valid, and binding
obligations of the Depositor, enforceable against the Depositor in
accordance with their respective terms, subject as to enforceability to
the effects of applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium and similar laws now or hereafter in
effect relating to creditors' rights generally and subject to general
principles of equity (whether applied in a proceeding at law or in
equity).
(iii) The Depositor is not, and will not as a result of the
offer and sale of the Certificates as contemplated in the Prospectus
and the Underwriting Agreement become, an "investment company" as
defined in the Investment Company Act or a company "controlled by" an
"investment company" within the meaning of the Investment Company Act.
(iv) The Pooling and Servicing Agreement need not be qualified
under the Trust Indenture Act and the Trust is not required to register
under the Investment Company Act.
(v) The statements in the Prospectus under the headings
"Summary -- Federal Tax Considerations," "Certain Federal Income Tax
Consequences," "State Taxes," "ERISA Considerations," "Summary of Terms
-- Federal Income Tax Considerations," "Federal Income Tax
Considerations," "State Tax Considerations," "Summary of Terms--ERISA
Considerations" and "ERISA Considerations," to the extent that they
constitute statements of matters of law or legal conclusions with
respect thereto, have been reviewed by such counsel and accurately
describe the material consequences to holders of the Certificates under
the Code and ERISA.
(vi) Such counsel shall state that they have participated in
the preparation of the Registration Statement and that nothing has come
to their attention to cause them to believe that the Registration
Statement, as of the Effective Time, contained an untrue
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<PAGE> 12
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein not misleading or that the Prospectus, as of its
date or the Closing Date, contains any untrue statement of a material
fact or omitted to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which
they were made, not misleading; provided that such counsel need not
express any view with respect to the financial, statistical or
computational material contained in the Registration Statement or the
Prospectus.
Such opinion may contain such assumptions, qualifications and
limitations as are customary in opinions of this type and are reasonably
acceptable to counsel to the Underwriters. In rendering such opinion, such
counsel may state that they are admitted to practice only in the State of New
York and that they are not admitted to the Bar in any other State, that they
express no opinion as to the laws of any jurisdiction other than the federal law
of the United States of America, the General Corporate Law of the State of
Delaware and the laws of the State of New York.
(f) The Representative shall have received the opinion of counsel to
the Sellers and the Servicer acceptable to the Representative and counsel for
the Underwriters, dated the Closing Date, satisfactory in form and substance to
the Representative and counsel for the Underwriters, to the effect that:
(i) Each of the Sellers and the Servicer has been duly
organized and is validly existing as a national banking association
(except in the case of Bank One, Wisconsin which is a Wisconsin state
bank) in good standing under the laws of the United States of America
(or in the case of Bank One, Wisconsin the laws of the state of
Wisconsin), with corporate power and authority to own its properties,
to conduct its business as now conducted and as proposed to be
conducted by it and to enter into and perform its obligations under the
Basic Documents to which it is a party and the Servicer has the power,
authority and legal right to service the Mortgage Loans.
(ii) The Servicer has obtained all necessary licenses and
approvals in each jurisdiction in which the failure to obtain such
licenses or approvals would materially and adversely affect the
performance by the Servicer of its obligations under, or the validity
or enforceability of, any Basic Documents to which it is a party.
(iii) Each of the Sellers and the Servicer has duly
authorized, executed and delivered the Basic Documents to which it is a
party, and the Basic Documents to which it is a party are the legal,
valid and binding obligations of each of the Sellers and the Servicer,
as applicable, enforceable against each of the Sellers and the
Servicer, as applicable, in accordance with the respective terms
thereof, subject as to enforceability, to the effects of applicable
insolvency, receivership, conservatorship and other similar laws
affecting the rights of creditors' generally or the rights of creditors
of institutions the deposits in which are insured by the Federal
Deposit Insurance Corporation ("FDIC") and
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<PAGE> 13
subject to general principles of equity (whether applied in a
proceeding at law or in equity).
(iv) Neither the execution and delivery by any of the Sellers
or the Servicer of any Basic Documents to which it is a party nor the
consummation by any of the Sellers or the Servicer of the transactions
contemplated therein nor the fulfillment of the terms thereof by any of
the Sellers or the Servicer will conflict with, result in a breach,
violation or acceleration of, or constitute a default under, any term
or provision of the articles of association or by-laws of any of the
Sellers or the Servicer or result in a violation of or contravene the
terms of any statute, order or regulation applicable to any of the
Sellers or the Servicer of any court, regulatory body, administrative
agency or governmental body having jurisdiction over it.
(v) To such counsel's knowledge, there are no actions,
proceedings or investigations pending or threatened against any of the
Sellers or the Servicer before or by any governmental authority that
could reasonably be expected to materially and adversely affect the
performance by any of the Sellers or the Servicer of its obligations
under, or the validity or enforceability of, any Basic Documents to
which any of the Sellers or the Servicer is a party.
(vi) Neither the execution and delivery by any of the Sellers
or the Servicer nor the consummation by any of the Sellers or the
Servicer of the transactions contemplated therein nor the fulfillment
of the terms thereof by any of the Sellers or the Servicer will result
in a breach, violation or acceleration of, or constitute a default
under, any term or provision of any indenture or other agreement or
instrument of which such counsel has knowledge after due inquiry to
which any of the Sellers or the Servicer is a party or by which it is
bound.
Such opinion may contain such assumptions, qualifications and
limitations as are customary in opinions of this type and are reasonably
acceptable to counsel to the Underwriters. In rendering such opinion, such
counsel may state that they express no opinion as to the laws of any
jurisdiction other than the federal law of the United States of America and the
laws of the States of Wisconsin and New York.
(g) The Representative shall have received an opinion addressed to it
of Stroock & Stroock & Lavan LLP, in its capacity as special counsel to the
Underwriters, dated the Closing Date, with respect to the validity of the
Certificates and such other related matters as the Representative shall
reasonably require and the Depositor shall have furnished or caused to be
furnished to such counsel such documents as they may reasonably request for the
purpose of enabling them to pass upon such matters.
(h) The Policy shall have been duly authorized, executed, issued and
delivered by the Insurer, all fees due and payable to the Insurer as of the
Closing Date shall have been paid in full at or prior to the Closing Date, and
the Policy shall conform in all material respects to the
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<PAGE> 14
description thereof in the Registration Statement and the Prospectus (and any
supplements thereto).
(i) The Representative shall have received the opinion of Shaw,
Pittman, Potts & Trowbridge, counsel to the Insurer, or such other counsel
acceptable to the Representative and counsel to the Underwriters, dated the
Closing Date, satisfactory in form and substance to the Representative and
counsel to the Underwriters, to the effect that:
(i) The Insurer is duly organized and validly existing under
the laws of the jurisdiction of its incorporation, is duly qualified
and/or licensed to do business in all jurisdictions where the nature of
its operations as contemplated in the Insurance Agreements requires
such qualification, and has the power and authority (corporate and
other) to issue the Policy and to enter into the Insurance Agreements
and to perform its obligations under the Insurance Agreements.
(ii) The execution, delivery and performance by the Insurer of
the Insurance Agreements and the Policy have been duly authorized by
all necessary corporate action on the part of the Insurer.
(iii) The execution, delivery and performance by the Insurer
of the Insurance Agreements and the Policy do not require the consent
or approval of, the giving of notice to, the registration with, or the
taking of any other action in respect of any state or other
governmental agency or authority which has not previously been
effected.
(iv) The Insurance Agreements and the Policy have been duly
authorized, executed and delivered by the Insurer, and constitute
legal, valid and binding obligations of the Insurer, enforceable
against the Insurer in accordance with their respective terms, except
to the extent that the enforceability thereof may be subject to
bankruptcy, insolvency, reorganization, conservatorship, moratorium or
other similar laws now or hereafter in effect relating to creditors'
rights as such laws would apply in the event of the insolvency,
liquidation or reorganization or other similar occurrence with respect
to the Insurer or the event of any moratorium or similar occurrence
affecting the Insurer.
(v) The obligations of the Insurer under the Policy will rank
equally with the general obligations and all other unsecured
indebtedness of the Insurer outstanding on the Closing Date or
thereafter that are not contractually subordinated to the payment of
such obligations under the Policy.
(vi) The Policy is not required to be registered under the Act
in connection with the offer and sale of the Certificates in the manner
contemplated in the Prospectus.
Such opinions may be subject to such counsel's customary practices and
limitations relating to the scope of such counsel's participation in the
preparation of the Registration Statement and the Prospectus and its
investigation or verification of information
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<PAGE> 15
contained therein, such counsel also shall state that it has no reason to
believe that as of the Closing Date any of the information contained in the
Prospectus in (x) the paragraph titled "The Certificate Insurer" under the
heading "Summary" or (y) under the heading "The Certificate Insurer" includes
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading (other than financial,
numerical and statistical information contained therein as to which such counsel
need express no opinion).
(j) The Representative shall have received a certificate, dated the
Closing Date, of a Vice President or more senior officer of the Insurer stating
that such officer had no reason to believe that as of the Effective Date any of
the information contained in the Prospectus in (x) the paragraph titled
"Certificate Insurer" under the heading "Summary" or (y) under the heading "The
Certificate Insurer" includes any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(k) On or prior to the Closing Date, there has been no downgrading, nor
shall any notice have been given of (i) any intended or potential downgrading or
(ii) any review or possible change in rating, the direction of which has not
been indicated, in the rating accorded the Insurer's claims paying ability by
any "nationally recognized statistical rating organization" (as such term is
defined for purposes of the Exchange Act).
(l) The Representative shall have received from counsel an opinion or
opinions of counsel dated the Closing Date and satisfactory in form and
substance to the Representative and counsel for the Underwriters, as to the
income tax treatment of the Certificates in Ohio.
(m) The Representative shall have received an opinion of counsel to the
Trustee acceptable to the Representative and counsel for the Underwriters, dated
the Closing Date, in form and in substance satisfactory to the Representative
and counsel for the Underwriters, to the effect that:
(i) The Certificates have been duly executed, authenticated
and delivered by the Trustee in accordance with the terms of the
Pooling & Servicing Agreement.
(ii) The Trustee is a banking corporation validly existing
under the laws of the state of New York and has the full power and
authority to enter into, and to take all action required of it, under
the Pooling and Servicing Agreement.
(iii) The Pooling and Servicing Agreement has been duly
authorized, executed and delivered by the Trustee and, assuming due
authorization, execution and delivery of such document by all other
parties thereto, constitutes the legal, valid and binding agreement of
the Trustee, except as enforceability thereof may be limited by
bankruptcy, insolvency, liquidation, reorganization, moratorium or
other similar laws affecting the
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enforcement of rights of creditors against the Trustee generally, as
such laws would apply in the event of bankruptcy, insolvency,
liquidation, receivership or reorganization or any moratorium or
similar occurrence affecting the Trustee, and the application of
general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or law).
(iv) To the best of such counsel's knowledge, there are no
actions, proceedings or investigations pending or threatened against
the Trustee under the Pooling and Servicing Agreement before any court,
administrative agency or other tribunal (A) asserting the invalidity of
the Pooling and Servicing Agreement or the Certificates, or (B) seeking
to prevent the issuance of the Certificates or consummation of any of
the transactions contemplated by the Pooling and Servicing Agreement or
the Certificates, or (C) that might materially or adversely affect the
performance by the Trustee of its obligations under, or the validity or
enforceability of the Pooling and Servicing Agreement and the
Certificates.
(v) The execution and delivery of the Pooling and Servicing
Agreement by the Trustee and the performance by the Trustee of its
terms do not conflict with or result in a violation of (a) any law or
regulation of the United States of America or the State of New York
governing the banking or trust powers of the Trustee, or (b) the
articles of association and by-laws of the Trustee.
(vi) No consent, approval or authorization of, filing or
registration with, or notice to, any court or governmental agency or
regulatory authority is required for the Trustee in connection with the
execution and delivery of, performance under, or compliance with, the
Pooling and Servicing Agreement or the Certificates.
(n) The Representative shall have received copies of each opinion
(including without limitation, opinions with respect to true sale, FDIA and
perfection in Mortgage Loans) of counsel delivered to either rating agency or
the Insurer, together with a letter addressed to the Representative, dated the
Closing Date, to the effect that each Underwriter may rely on each such opinion
to the same extent as though such opinion was addressed to each as of its date.
(o) The Underwriters shall have received certificates dated the Closing
Date of each of the Depositor, the Sellers, and the Servicer, executed by any
one of the Chairman of the Board, the President, any Executive Vice President,
Senior Vice President or Vice President, the Treasurer, any Assistant Treasurer,
the Secretary, the principal financial officer or the principal accounting
officer of each of the Depositor, the Sellers, and the Servicer, in which such
officer of the Depositor, the Sellers, and the Servicer, as the case may be,
shall state that, (i) to the best of its knowledge after reasonable
investigation, the representations and warranties of the Depositor, the Sellers,
and the Servicer, as applicable, contained in the Basic Documents to which each
is a party, are true and correct in all material respects, (ii) that the
Depositor, the Sellers, or the Servicer, as the case may be, has complied with
all agreements and satisfied all conditions on its respective part to be
performed or satisfied under such agreements at or prior to
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<PAGE> 17
the Closing Date, (iii) in the case of the certificate from the Depositor only,
that no stop order suspending the effectiveness of the Registration Statement
has been issued and no proceedings for that purpose have been instituted or are
contemplated by the Commission, and (iv) since June 30, 1998, except as may be
disclosed in the Prospectus or in such certificate and except with respect to
Standard & Poor's placing the debt securities of BANC ONE CORPORATION on
"CreditWatch with negative implication," no material adverse change, or any
development involving a prospective material adverse change, in or affecting
particularly the business or properties of the Depositor, the Sellers, or the
Servicer, has occurred.
(p) The Underwriters shall have received evidence satisfactory
to it that, on or before the Closing Date, UCC-1 financing statements have been
or are being filed in the appropriate filing offices reflecting the transfer of
the interest in the Mortgage Loans and the proceeds thereof from the Sellers to
the Depositor and from the Depositor to the Trustee on behalf of the Trust.
(q) The Certificates shall be rated at least "AAA" or its
equivalent by Moody's Investors Services, Inc. and Standard & Poor's, a division
of The McGraw Hill Companies, Inc., and neither corporation shall have placed
the Certificates under surveillance or review with possible negative
implications.
(r) The issuance of the Certificates shall not have resulted
in a reduction or withdrawal by any Rating Agency of the current rating of any
outstanding securities issued or originated by the Depositor.
(s) The Representative shall have received, upon execution
hereof, the duly executed agreement of Bank One, N.A. in the form attached as
Exhibit A.
(t) The Depositor will provide or cause to be provided to the
Representative such conformed copies of such of the foregoing opinions,
certificates, letters and documents as the Representative shall reasonably
request.
7. Computational Materials. Each Underwriter represents,
warrants, covenants and agrees with the Depositor that:
(a) It either (A) has not provided any potential investor with
a Collateral Term Sheet (that is required to be filed with the Commission within
two business days of first use under the terms of the Public Securities
Association Letter as described below), or (B) has, substantially
contemporaneously with its first delivery of such Collateral Term Sheet to a
potential investor, delivered such Collateral Term Sheet (in hard copy and on
computer disk) to the Depositor or its counsel.
(b) It either (A) has not provided any potential investor with
a Structural Term Sheet, Series Term Sheets or Computational Materials, or (B)
has promptly provided any such
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Structural Term Sheet, Series Term Sheets or Computational Materials (in hard
copy and on computer disk) to the Depositor or its counsel.
(c) Each Collateral Term Sheet bears a legend indicating that
the information contained therein will be superseded by the description of the
collateral contained in the Prospectus Supplement and, except in the case of the
initial Collateral Term Sheet, that such information supersedes the information
in all prior Collateral Term Sheets.
(d) Each Structural Term Sheet, Series Term Sheet and all
Computational Materials bear a legend substantially as follows (or in such other
form as may be agreed prior to the date of the this Agreement):
This information does not constitute either an offer to sell
or a solicitation of an offer to buy any of the securities
referred to herein. Information contained herein is
confidential and provided for information only, does not
purport to be complete and should not be relied upon in
connection with any decision to purchase the securities. This
information supersedes any prior versions hereof and will be
deemed to be superseded by any subsequent versions including,
with respect to any description of the securities or the
underlying assets, the information contained in the final
Prospectus and accompanying Prospectus Supplement. Offers to
sell and solicitations of offers to buy the securities are
made only by the final Prospectus and the related Prospectus
Supplement.
(e) It (at its own expense) agrees to obtain and provide to
the Depositor one or more accountants' letters relating to the Collateral Term
Sheets, Structural Term Sheets, Series Term Sheets and Computational Materials,
which accountants' letters shall be addressed to the Depositor.
(f) It has not, and will not, without the prior written
consent of the Depositor, provide any Collateral Term Sheets, Structural Term
Sheets, Series Term Sheets or Computational Materials to any investor after the
date of this Agreement.
(g) Any Series Term Sheets, Collateral Term Sheet, Structural
Term Sheet, Series Term Sheet or Computational Materials do not contain any
untrue statement of a material fact and do not omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
except to the extent that any such misstatement or omission results from a
Depositor Error (as defined in Section 8 below).
For purposes of this Agreement, "Series Term Sheets,"
"Collateral Term Sheets" and "Structural Term Sheets" shall have the respective
meanings assigned to them (a) in the case of Series Term Sheets, in the
no-action letter addressed to Greenwood Trust Depositor, Discover Card Master
Trust I dated April 5, 1996, and (b) in the case of Collateral Term Sheets and
Structural Term Sheets, in the February 13, 1995 letter of Cleary, Gottlieb,
Steen & Hamilton on
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behalf of the Public Securities Association (which letter, and the SEC staff's
response thereto, are publicly available February 17, 1995). The term
"Collateral Term Sheet" as used herein includes any subsequent Collateral Term
Sheet that reflects a substantive change in the information presented.
"Computational Materials" has the meaning assigned to it in the no-action letter
dated May 20, 1994 issued by the Division of Corporation Finance of the
Commission to Kidder, Peabody Acceptance Corporation I, Kidder, Peabody & Co.
Incorporated, and Kidder Structured Asset Corporation, the no-action letter
dated May 27, 1994 issued by the Division of Corporation Finance of the
Commission to the Public Securities Association and the no-action letter of
February 17, 1995 issued by the Commission to the Public Securities Association.
For purposes of this Agreement, as to each Underwriter, the
term "Derived Information" means such information, if any, in the Series Term
Sheets, Collateral Term Sheets, Structural Term Sheets and/or Computational
Materials that is not contained in either (i) the final Prospectus taking into
account information incorporated therein by reference (other than information
incorporated by reference from the Series Term Sheets, Collateral Term Sheets,
Structural Term Sheets and/or Computational Materials) or (ii) any computer tape
furnished by the Depositor (the "Computer Tape").
(h) It has not delivered any Series Term Sheets, Collateral
Term Sheets, Structural Term Sheets and/or Computational Materials to any
investors in the Certificates.
8. Indemnification and Contribution.
(a) The Depositor will indemnify and hold each Underwriter
harmless against any losses, claims, damages or liabilities, joint or several,
to which such Underwriter may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, the
Prospectus, or any amendment or supplement thereto, or any related preliminary
prospectus or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse each Underwriter for
any legal or other expenses reasonably incurred by such Underwriter in
connection with investigating or defending any such loss, claim, damage,
liability or action as such expenses are incurred; provided, however, that the
Depositor will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement in or omission or alleged omission from any of such
documents (x) in reliance upon and in conformity with the Underwriters'
Information or (y) with respect to Derived Information included in any Current
Report or any amendment or supplement thereof, except to the extent that any
untrue statement or alleged untrue statement therein results (or is alleged to
have resulted) from an error or material omission in the information concerning
the characteristics of the Mortgage Loans furnished by or on behalf of the
Depositor to the Underwriters for use in the preparation of any Collateral Term
Sheet, Structural Term Sheet, Series Term Sheet or Computational Materials (the
"Depositor Provided Information"), which error was not superseded or corrected
by the delivery to the Underwriters of corrected written or
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electronic information, or for which the Depositor provided written notice of
such error to the Underwriters prior to the confirmation of the sale of the
applicable Certificates (any such uncorrected information a "Depositor Error");
provided, further, that the Depositor shall not be liable to any Underwriter to
the extent that any such loss, claim, damage or liability of such Underwriter
arises as a result of a misstatement or omission or alleged misstatement or
omission in any related preliminary prospectus that was corrected in the
Prospectus (and copies of which Prospectus were furnished to the Underwriters)
and such Underwriter, if required by law, failed to give or send to the
purchaser, at or prior to the written confirmation of sale, a copy of the
Prospectus.
(b) (i) Each Underwriter, severally and not jointly, agrees to
indemnify and hold harmless the Depositor against any and all losses, claims,
damages or liabilities to which the Depositor may become subject, under the Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, the Prospectus or any amendment or supplement thereto, or any related
preliminary prospectus or preliminary prospectus supplement, or arise out of or
are based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Depositor by such Underwriter through the Representative specifically for
use therein, and will reimburse any legal or other expenses reasonably incurred
by the Depositor in connection with investigating or defending any such loss,
claim, damage, liability or action as such expenses are incurred, it being
understood and agreed that the only such information furnished by any
Underwriter consists of the Underwriters' Information.
(ii) Each Underwriter severally agrees, assuming (a) all
information provided by the Depositor (including the Computer Tape and any other
Depositor Provided Information) is accurate and complete in all material
respects and (b) the Depositor's independent public accountants have determined
that the Derived Information agrees with the Computer Tape, to indemnify and
hold harmless the Depositor, against any and all losses, claims, damages or
liabilities, joint or several, to which they may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement of a
material fact contained in the Derived Information prepared by such Underwriter
and incorporated by reference into the Registration Statement, or arise out of
or are based upon the omission or alleged omission to state in such Derived
Information a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading (except that no such indemnity shall be available for any
losses, claims, damages or liabilities, or actions in respect thereof to the
extent any such untrue statement or alleged untrue statement therein results
directly from an error in the information on the Computer Tape or in any other
information concerning the Mortgage Loans provided by the Depositor to any
Underwriter in writing or through electronic transmission) and agrees to
reimburse each such indemnified party for any legal or other
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expenses reasonably incurred by it in connection with investigating or defending
or preparing to defend any such loss, claim, damage, liability or action as such
expenses are incurred.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under subsection (a) or (b) above, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under subsection (a) or (b). In case any such action is brought
against any indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party (who shall not, except with the consent
of the indemnified party, be counsel to the indemnifying party), and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof and approval by the indemnified party of the
counsel appointed by the indemnifying party, the indemnifying party will not be
liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation; provided, however,
that (i) if the indemnified party or parties reasonably determine that there may
be a conflict between the positions of the indemnifying party or parties and of
the indemnified party or parties in conducting the defense of such action, suit,
investigation, inquiry or proceeding or that there may be legal defenses
available to such indemnified party or parties different from or in addition to
those available to the indemnifying party or parties, then counsel for the
indemnified party or parties shall be entitled to conduct the defense to the
extent reasonably determined by such counsel to be necessary to protect the
interests of the indemnified party or parties, except that in no event shall the
indemnifying party be liable for the expenses of more than one separate counsel
representing the indemnified parties who are parties to such action, suit,
investigation, inquiry or proceeding and (ii) in any event, the indemnified
party or parties shall be entitled, at its or their own expense to have counsel
chosen by such indemnified party or parties participate in, but not conduct, the
defense. No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened action in
respect of which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified party unless such
settlement includes an unconditional release of such indemnified party from all
liability from any claims that are the subject matter of such action.
(d) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnifying party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Depositor on the one hand and the Underwriters on the other from the
offering of the Certificates or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the
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<PAGE> 22
relative fault of the Depositor on the one hand and the Underwriters on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities as well as any other relevant equitable
considerations. The relative benefits received by the Depositor on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering of the Certificates (before
deducting expenses) received by the Depositor bear to the total underwriting
discounts and commissions received by the Underwriters. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Depositor or by the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities referred to in the first sentence of this
subsection (d) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any action or claim which is the subject of this subsection (d). Notwithstanding
the provisions of this subsection (d), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total underwriting
discounts and or commissions received by the related Underwriter exceeds the
amount of any damages which such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(e) The obligations of the Depositor under this Section shall
be in addition to any liability which the Depositor may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who controls
any Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section shall be in addition to any liability which the
respective Underwriters may otherwise have and shall extend, upon the same terms
and conditions, to each director of the Depositor, to each officer of the
Depositor who has signed the Registration Statement and to each person, if any,
who controls the Depositor within the meaning of the Act.
9. Survival of Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Depositor or its officers and of the Underwriters set forth in or made pursuant
to this Agreement or contained in certificates of officers of the Depositor
submitted pursuant hereto shall remain operative and in full force and effect,
regardless of any investigation or statement as to the results thereof, made by
or on behalf of any Underwriter, the Depositor or any of their respective
representatives, officers or directors or any controlling person, and will
survive delivery of and payment for the Certificates. If for any reason the
purchase of the Certificates by the Underwriters is not consummated, the
Depositor shall remain responsible for the expenses to be paid or reimbursed by
the Depositor pursuant to Section 5(m) hereof and the respective obligations of
the Depositor and the Underwriters pursuant to Section 8 shall remain in effect.
If for any reason the purchase of the Certificates by the Underwriters is not
consummated (other than because of a failure to satisfy
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<PAGE> 23
the conditions set forth in items (iii), (v) and (vi) of Section 6(c) or Section
6(k), the Depositor will reimburse the Underwriters for all out-of-pocket
expenses (including fees and disbursements of counsel) reasonably incurred by
them in connection with the offering of the Certificates.
10. Failure to Purchase the Certificates. If any Underwriter
or Underwriters default in its obligations to purchase the principal amount of
Certificates opposite such Underwriter's name on Schedule I hereto, and the
aggregate principal amount that such defaulting Underwriter or Underwriters
agreed but failed to purchase does not exceed 10% of the total principal amount
of the Certificates, the Representative may make arrangements satisfactory to
the Depositor for the purchase of such Certificates by other persons, including
any of the Underwriters, but if no such arrangements are made by the Closing
Date, the nondefaulting Underwriters shall be obligated severally, in proportion
to their respective commitments hereunder, to purchase the Certificates that
such defaulting Underwriters agreed but failed to purchase. If any Underwriter
or Underwriters so default and the aggregate principal amount of the
Certificates with respect to such default or defaults exceed 10% of the total
principal amount of the Certificates, and arrangements satisfactory to the
Representative are not made by the Depositor for the purchase of such
Certificates by other persons within 48 hours after such default, this Agreement
will terminate without liability on the part of any nondefaulting Underwriter or
the Depositor, except as provided in Section 9. As used in this Agreement, the
term "Underwriter" includes any person substituted for an Underwriter under this
Section. Nothing herein will relieve a defaulting Underwriter or Underwriters
from liability for its default.
11. Notices. Any written request, demand, authorization,
direction, notice, consent or waiver shall be personally delivered or mailed
certified mail, return receipt requested (or in the form of telex or facsimile
notice, followed by written notice as aforesaid) and shall be deemed to have
been duly given upon receipt, if sent to the Representative, when delivered to
11 Madison Avenue, 20th Floor, New York, New York 10010, Attention: Investment
Banking Department -- Transactions Advisory Group (fax # (212) 318-0532), and
if sent to the Depositor, when delivered to 150 East Gay Street, 20th Floor,
Columbus, Ohio 43215, Attention: Dan Long (fax # (614) 248-9544).
12. Successors. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and the
officers and directors and controlling persons referred to in Section 8, and no
other person will have any right or obligations hereunder.
13. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. Representation of Underwriters. The Representative will
act for the several Underwriters in connection with the transactions described
in this Agreement, and any action taken by Representative under this Agreement
will be binding upon all the Underwriters.
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<PAGE> 24
15. Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York without regard
to the choice of law provisions thereof.
-24-
<PAGE> 25
If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return to us one of the counterparts hereof,
whereupon it will become a binding agreement between the Depositor and the
Underwriters in accordance with its terms.
Very truly yours,
BANC ONE ABS CORPORATION
By:_________________________________
Name: Daniel A. Long, Jr.
Title: Vice President
The foregoing Underwriting
Agreement is hereby
confirmed and accepted as
of the date first written above.
CREDIT SUISSE FIRST BOSTON CORPORATION
By:_____________________________
Name: Nita S. Cherry
Title: Director
Acting on behalf of itself
and as Representative of
the several Underwriters
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<PAGE> 26
SCHEDULE I
<TABLE>
<CAPTION>
INITIAL PRINCIPAL
UNDERWRITER AMOUNT OF CERTIFICATES
----------- ----------------------
<S> <C>
Credit Suisse First Boston Corporation $170,000,000
Banc One Capital Markets, Inc. $170,000,000
First Chicago Capital Markets, Inc. $170,000,000
Lehman Brothers Inc. $170,000,000
Salomon Smith Barney Inc. $170,000,000
</TABLE>
-1-
<PAGE> 27
EXHIBIT A
September 16, 1998
Credit Suisse First Boston Corporation
as Representative of
the Several Underwriters
11 Madison Avenue
New York, NY 10010
Re: Underwriting Agreement dated September 16, 1998 (the
"Underwriting Agreement") between Banc One ABS Corporation
(the "Company") and Credit Suisse First Boston Corporation, as
representative (the "Representative") of the Several
Underwriters named therein (the "Underwriters")
Ladies and Gentlemen:
Pursuant to the Underwriting Agreement, the Company has
undertaken certain financial obligations to the Underwriters. Any financial
obligations of the Company (including all fees to be paid) under the
Underwriting Agreement, whether or not specifically enumerated in this
paragraph, are hereinafter referred to as the "Joint and Several Obligations";
provided, however, that "Joint and Several Obligations" shall mean only the
financial obligations of the Company under the Underwriting Agreement (including
without limitation the payment of money damages for a breach of any of the
Company's representations, warranties or obligations, whether financial or
otherwise).
As a condition of its execution of the Underwriting Agreement,
the Representative has required the undersigned to acknowledge its
joint-and-several liability with the Company for the payment of the Joint and
Several Obligations under the Underwriting Agreement.
Now, therefore, the Representative on behalf of the
Underwriters and BANC ONE CORPORATION, do hereby agree that:
A-1
<PAGE> 28
(i) BANC ONE CORPORATION hereby agrees to be absolutely
and unconditionally jointly and severally liable with
the Company to the Underwriters for the payment of
the Joint and Several Obligations.
(ii) BANC ONE CORPORATION may honor its obligations
hereunder either by direct payment of any Joint and
Several Obligations or by causing any Joint and
Several Obligations to be paid to the Underwriters by
the Company or another affiliate of BANC ONE
CORPORATION
(iii) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York
without regard to the choice of law provisions
thereof.
(iv) This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together
constitute one and the same Agreement.
(v) This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective
successors and the officers and directors and
controlling persons referred to in Section 8 of the
Underwriting Agreement, and no other person will have
any right or obligations hereunder.
(vi) Any written request, demand, authorization,
direction, notice, consent, or waiver shall be
personally delivered or mailed certified mail, return
receipt requested (or in the form of telex or
facsimile notice, followed by written notice as
aforesaid) and shall be deemed to have been duly
given upon receipt, if sent to the Representative,
when delivered to 11 Madison Avenue, New York, NY
10010, Attention: Investment Banking
Department--Transactions Advisory Group (fax # (212)
318-0532); and if sent to BANC ONE CORPORATION, when
delivered to 150 East Gay Street, 20th Floor,
Columbus, Ohio 43215, Attention: Dan Long (fax #
(614) 248-9544).
A-2
<PAGE> 29
Capitalized terms used herein and not defined herein shall
have their respective meanings as set forth in the Agreement.
Very truly yours,
BANC ONE CORPORATION
By:______________________________
Name: Peter W. Atwater
Title: Treasurer
Acknowledged and Agreed:
CREDIT SUISSE FIRST BOSTON CORPORATION
By:_____________________________
Name: Nita S. Cherry
Title: Director
Acting on behalf of itself and as
Representative of the several
Underwriters.
A-3
<PAGE> 1
Exhibit 4.1
EXECUTION COPY
BANC ONE ABS CORPORATION,
as Depositor,
BANK ONE, N.A.,
as Servicer,
and
THE BANK OF NEW YORK,
as Trustee
------------------------
POOLING AND SERVICING AGREEMENT
Dated as of August 31, 1998
------------------------
HELOC Asset-Backed Certificates
Series 1998-1
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
Definition
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 1.01. Definitions...........................................................................1
Section 1.02. Interest Calculations................................................................17
ARTICLE II
Conveyance of Mortgage Loans; Original Issuance
of Investor Certificates; Tax Treatment
Section 2.01. Conveyance of Mortgage Loans; Retention of Obligation to Fund Advances Under
Credit Line Agreements...............................................................18
Section 2.02. Acceptance by Trustee; Retransfer of Mortgage Loans..................................21
Section 2.03. Representations and Warranties Regarding the Servicer................................23
Section 2.04. Assignment of Representations and Warranties of the Sellers Regarding the
Mortgage Loans; Retransfer of Certain Mortgage Loans.................................24
Section 2.05. Covenants of the Depositor...........................................................26
Section 2.06. Retransfers of Mortgage Loans at Election of the Holder of the Transferor
Interest.............................................................................27
Section 2.07. Execution and Authentication of Investor Certificates................................28
Section 2.09. Representations and Warranties of the Depositor......................................29
ARTICLE III
Administration and Servicing of Mortgage Loans
Section 3.01. The Servicer.........................................................................29
Section 3.02. Collection of Certain Mortgage Loan Payments.........................................31
Section 3.03. Withdrawals from the Collection Account..............................................32
Section 3.04. Maintenance of Hazard Insurance; Property Protection Expenses........................33
Section 3.05. Assumption and Modification Agreements...............................................34
Section 3.06. Realization Upon Defaulted Mortgage Loans............................................34
Section 3.07. Trustee to Cooperate.................................................................35
Section 3.08. Servicing Compensation; Payment of Certain Expenses by Servicer......................35
Section 3.09. Annual Statement as to Compliance....................................................36
Section 3.10. Annual Servicing Report..............................................................36
Section 3.11. RESERVED.............................................................................36
</TABLE>
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<PAGE> 3
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 3.12. Access to Certain Documentation and Information Regarding the Mortgage Loans.........36
Section 3.13. Maintenance of Certain Servicing Insurance Policies..................................37
Section 3.14. Reports to the Securities and Exchange Commission....................................37
Section 3.15. Tax Returns..........................................................................37
Section 3.16. Information Required by the Internal Revenue Service Generally and Reports of
Foreclosures and Abandonments of Mortgaged Property..................................37
ARTICLE IV
Servicing Certificate
Section 4.01. Servicing Certificate................................................................38
Section 4.02. Claims upon the Policy; Policy Payments Account......................................41
Section 4.03. Spread Account.......................................................................42
Section 4.04. Effect of Payments by the Credit Enhancer; Subrogation...............................43
ARTICLE V..............................Payments and Statements to Certificateholders; Rights of Certificateholders
Section 5.01. Distributions........................................................................44
Section 5.02. Calculation of the Investor Certificate Rate.........................................46
Section 5.03. Statements to Certificateholders.....................................................46
Section 5.04. Rights of Certificateholders and holder of the Transferor Interest...................48
ARTICLE VI
The Certificates
Section 6.01. The Certificates.....................................................................48
Section 6.02. Registration of Transfer and Exchange of Investor Certificates; Appointment of
Registrar............................................................................49
Section 6.03. Mutilated, Destroyed, Lost or Stolen Certificates....................................51
Section 6.04. Persons Deemed Owners................................................................51
Section 6.05. Restrictions on Transfer of Transferor Interest......................................51
Section 6.06. Appointment of Paying Agent..........................................................53
Section 6.07. Acceptance of Obligations............................................................54
ARTICLE VII
The Servicer, the Seller and the Depositor
Section 7.01. Liability of the Servicer and the Depositor..........................................54
</TABLE>
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<PAGE> 4
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 7.02. Merger or Consolidation of, or Assumption of the Obligations of, the Servicer
or the Depositor; Assignment of Servicing to an Affiliate............................54
Section 7.03. Limitation on Liability of the Servicer and Others...................................54
Section 7.04. Servicer Not to Resign...............................................................55
Section 7.05. Delegation of Duties.................................................................55
Section 7.06. Indemnification of the Trust by the Servicer.........................................55
Section 7.07. RESERVED.............................................................................56
Section 7.08. Limitation on Liability of the holder of the Transferor Interest.....................56
ARTICLE VIII
Servicing Termination
Section 8.01. Events of Servicing Termination......................................................56
Section 8.02. Trustee to Act; Appointment of Successor.............................................58
Section 8.03. Notification to Certificateholders...................................................59
ARTICLE IX
The Trustee
Section 9.01. Duties of Trustee....................................................................59
Section 9.02. Certain Matters Affecting the Trustee................................................60
Section 9.03. Trustee Not Liable for Certificates or Mortgage Loans................................62
Section 9.04. Trustee May Own Certificates.........................................................62
Section 9.05. Servicer to Pay Trustee's Fees and Expenses; Servicer to Indemnify...................63
Section 9.06. Eligibility Requirements for Trustee.................................................63
Section 9.07. Resignation or Removal of Trustee....................................................63
Section 9.08. Successor Trustee....................................................................64
Section 9.09. Merger or Consolidation of Trustee...................................................65
Section 9.10. Appointment of Co-Trustee or Separate Trustee........................................65
Section 9.11. Limitation of Liability..............................................................66
Section 9.12. Trustee May Enforce Claims Without Possession of Certificates........................66
Section 9.13. Suits for Enforcement................................................................66
</TABLE>
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<PAGE> 5
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
PAGE
ARTICLE X
Termination
<S> <C>
Section 10.01. Termination..........................................................................67
ARTICLE XI
Rapid Amortization Event
Section 11.01. Rapid Amortization Events............................................................69
Section 11.02. Additional Rights Upon the Occurrence of Certain Events..............................70
ARTICLE XII
Miscellaneous Provisions
Section 12.01. Amendment............................................................................71
Section 12.02. Recordation of Agreement.............................................................73
Section 12.03. Limitation on Rights of Investor Certificateholders..................................73
Section 12.04. Governing Law........................................................................74
Section 12.05. Notices..............................................................................74
Section 12.06. Severability of Provisions...........................................................75
Section 12.07. Assignment...........................................................................75
Section 12.08. Investor Certificates Nonassessable and Fully Paid...................................75
Section 12.09. Third-Party Beneficiaries............................................................75
Section 12.10. Counterparts.........................................................................75
Section 12.11. Effect of Headings and Table of Contents.............................................75
Section 12.12. Insurance Agreement..................................................................75
</TABLE>
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<PAGE> 6
TABLE OF CONTENTS
(continued)
PAGE
EXHIBITS
Exhibit A Form of Investor Certificate A-1
Exhibit B Form of Transferor Interest B-1
Exhibit C Mortgage Loan Schedule C-1
Exhibit D Letter of Representations D-1
Exhibit E Form of Investor Letter E-1
Exhibit F Request for Release F-1
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<PAGE> 7
This Pooling and Servicing Agreement, dated as of August 31, 1998, among Banc
One ABS Corporation, as Depositor (the "Depositor"), Bank One, N.A., as Servicer
(the "Servicer"), and The Bank of New York, as Trustee (the "Trustee"),
W I T N E S S E T H T H A T:
In consideration of the mutual agreements herein contained, the parties
hereto agree as follows:
ARTICLE I
Definition
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.
Accelerated Principal Distribution Amount: With respect to any
Distribution Date, the amount, if any, required to reduce the Investor
Certificate Principal Balance (after giving effect to the distribution of all
other amounts actually distributed on the Investor Certificates on such
Distribution Date) so that the Invested Amount immediately following such
Distribution Date exceeds the Investor Certificate Principal Balance (as so
reduced) by the Required Overcollateralization Amount.
Additional Balance: As to any Mortgage Loan and any date of
determination, the aggregate amount of all Draws conveyed to the Trust
pursuant to Section 2.01.
Affiliate: With respect to any Person, any other Person controlling,
controlled by or under common control with such Person. For purposes of this
definition, "control" means the power to direct the management and policies of a
Person, directly or indirectly, whether through ownership of voting securities,
by contract or otherwise and "controlling" and "controlled" shall have meanings
correlative to the foregoing.
Agreement: This Pooling and Servicing Agreement and all amendments
hereof and supplements hereto.
Alternative Principal Payment: As to any Distribution Date, the amount
(but not less than zero) equal to Principal Collections for such Distribution
Date minus the aggregate of Draws made during the related Collection Period.
Appointment Day: As defined in Section 11.02.
Assignment of Mortgage: With respect to any Mortgage, an assignment,
notice of transfer or equivalent instrument, in recordable form, sufficient
under the laws of the jurisdiction in which the related Mortgaged Property is
located to reflect the sale of the Mortgage to the Trustee, which assignment,
notice of transfer or equivalent instrument may be in the form of one or more
blanket assignments covering the Mortgage Loans secured by Mortgaged Properties
located in the same jurisdiction.
<PAGE> 8
Authorized Newspaper: A newspaper of general circulation in the Borough of
Manhattan, The City of New York, printed in the English language and customarily
published on each Business Day, whether or not published on Saturdays, Sundays
and holidays.
BIF: The Bank Insurance Fund, as from time to time constituted, created
under the Financial Institutions Reform, Recovery and Enhancement Act of 1989,
or if at any time after the execution of this instrument the Bank Insurance Fund
is not existing and performing duties now assigned to it, the body performing
such duties on such date.
Billing Cycle: With respect to any Mortgage Loan, the calendar month
ending on the day that is 25 days prior to the related Due Date.
Book-Entry Certificate: Any Investor Certificate registered in the name of
the Depository or its nominee, ownership of which is reflected on the books of
the Depository or on the books of a Person maintaining an account with such
Depository (directly or as an indirect participant in accordance with the rules
of such Depository).
Business Day: Any day other than (i) a Saturday or a Sunday or (ii) a day
on which banking institutions in the State of New York or Ohio are required or
authorized by law to be closed.
Certificate Owner: The Person who is the beneficial owner of a
Book-Entry Certificate.
Certificate Register and Certificate Registrar: The register
maintained and the registrar appointed pursuant to Section 6.02.
Certificateholder or Holder: The Person in whose name an Investor
Certificate is registered in the Certificate Register, except that, solely for
the purpose of giving any consent, direction, waiver or request pursuant to this
Agreement, (x) any Investor Certificate registered in the name of the Servicer,
or any Person known to a Responsible Officer to be an Affiliate of either the
Depositor or the Servicer and (y) any Investor Certificate for which the
Servicer, or any Person known to a Responsible Officer to be an Affiliate of
either the Servicer or the Depositor is the Certificate Owner shall be deemed
not to be outstanding (unless to the knowledge of a Responsible Officer (i) the
Servicer or the Depositor, or such Affiliate is acting as trustee or nominee for
a Person who is not an Affiliate of the Servicer or the Depositor and who makes
the voting decision with respect to such Investor Certificate or (ii) the
Servicer or the Depositor or such Affiliate is the Certificate Owner of all the
Investor Certificates) and the Percentage Interest evidenced thereby shall not
be taken into account in determining whether the requisite amount of Percentage
Interests necessary to effect any such consent, direction, waiver or request has
been obtained.
Closing Date: September 24, 1998.
Code: The Internal Revenue Code of 1986, as the same may be amended
from time to time (or any successor statute thereto).
Collection Account: The custodial account or accounts created and
maintained for the benefit of the Investor Certificateholders and the Credit
Enhancer pursuant to Section 3.02(b).
2
<PAGE> 9
Collection Period: With respect to any Distribution Date (other than the
first Distribution Date) and any Mortgage Loan, the calendar month preceding
such Distribution Date. With respect to the first Distribution Date, the period
beginning on the day immediately following the Cut-Off Date and ending on
September 30, 1998.
Combined Loan-to-Value Ratio: With respect to any Mortgage Loan as of any
date of determination, the percentage equivalent of a fraction, the numerator of
which is the sum of (i) the Credit Limit as of origination and (ii) the
outstanding principal balance of any senior mortgage loan as of the origination
of such Mortgage Loan, and the denominator of which is the value, based on
appraised value or other acceptable valuation method in accordance with the
applicable Seller's underwriting guidelines, for the related Mortgaged Property
determined at origination of such Mortgage Loan.
Corporate Trust Office: The principal office of the Trustee at which at
any particular time its corporate business shall be administered, which office
on the Closing Date is located at 101 Barclay Street, Floor 12E, New York, New
York 10286, Attention: Franklin Austin.
Credit Enhancement Draw Amount: As to any Distribution Date, an amount
equal to the sum of (x) the amount by which the amount to be distributed to
Investor Certificateholders on such Distribution Date pursuant to Section
5.01(a)(ii) exceeds the amount of Investor Interest Collections, Reallocated
Investor Principal Collections and amounts deposited from the Spread Account on
deposit in the Collection Account on the Business Day preceding such
Distribution Date, (y) the Guaranteed Principal Distribution Amount for such
Distribution Date and (z) any Preference Claim for such Distribution Date.
Credit Enhancer: MBIA Insurance Corporation, a New York domiciled
insurance company, or any successor thereto.
Credit Enhancer Default: The failure by the Credit Enhancer to make a
payment required under the Policy in accordance with the terms thereof.
Credit Limit: As to any Mortgage Loan, the maximum Principal Balance
permitted under the terms of the related Credit Line Agreement.
Credit Limit Utilization Rate: As to any Mortgage Loan, the percentage
equivalent of a fraction the numerator of which is the Cut-Off Date Principal
Balance of such Mortgage Loan, and the denominator of which is the related
Credit Limit.
Credit Line Agreement: With respect to any Mortgage Loan, the related
credit line account agreement executed by the related Mortgagor and any
amendment or modification thereto.
Custodial Agreement: Any Custodial Agreement between any Custodian and the
Trustee relating to the custody of the Mortgage Loans and the Related Documents,
which is reasonably acceptable in form and substance to the Credit Enhancer.
3
<PAGE> 10
Custodian: Any custodian appointed by the Trustee under a Custodial
Agreement (subject to the approval of the Rating Agencies and the Credit
Enhancer) to maintain all or a portion of the Mortgage Files pursuant to Section
2.01(b).
Cut-Off Date: The end of business on August 31, 1998.
Cut-Off Date Pool Balance: The Pool Balance calculated as of the
Cut-Off Date.
Cut-Off Date Principal Balance: With respect to any Mortgage Loan, the
unpaid principal balance thereof as of the Cut-Off Date.
Cut-Off Date Weighted Average Gross Margin: 1.38%.
Defective Mortgage Loan: A Mortgage Loan subject to retransfer
pursuant to Section 2.02 or 2.04.
Definitive Certificates: As defined in Section 6.02(c).
Depositor: Banc One ABS Corporation, or its successor in interest.
Depository: The initial Depository shall be The Depository Trust Company,
the nominee of which is Cede & Co., as the registered Holder of Investor
Certificates evidencing $850,000,000 in initial aggregate principal amount of
the Investor Certificates. The Depository shall at all times be a "clearing
corporation" as defined in Section 8-102(3) of the UCC of the State of New York.
Depository Participant: A broker, dealer, bank or other financial
institution or other Person for whom from time to time the Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
Determination Date: With respect to any Distribution Date, the third
Business Day prior to such Distribution Date.
Distribution Date: The twentieth day of each month, or if such day is
not a Business Day, then on the next Business Day, commencing on October 20,
1998.
Draw: With respect to any Mortgage Loan, an additional borrowing by
the Mortgagor subsequent to the Cut-Off Date in accordance with the related
Mortgage Note.
Due Date: As to any Mortgage Loan, the day of the month (either the 5th,
10th, 15th, 20th or 25th) on which payments under such Mortgage Loan are due.
Electronic Ledger: The electronic master record of home equity
revolving credit line mortgage loans maintained by the Servicer or any
Seller, as appropriate.
Eligible Account: An account that is (i) maintained with a depository
institution whose short-term debt obligations at the time of any deposit therein
are rated in the highest short-term debt rating category by the Rating Agencies,
(ii) an account or accounts maintained with a
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depository institution with a minimum long term unsecured debt rating of Baa1 by
Moody's and BBB+ by Standard & Poor's, provided that the deposits in such
account or accounts are fully insured by either the BIF or the SAIF, (iii) a
segregated trust account maintained with the corporate trust department of the
Trustee or an Affiliate of the Trustee, in either case in its fiduciary
capacity, or (iv) an account otherwise acceptable to each Rating Agency, as
evidenced as of the Closing Date by delivery of a rating letter by each Rating
Agency, and otherwise acceptable to the Credit Enhancer, as evidenced as of the
Closing Date by delivery of the Policy by the Credit Enhancer and, thereafter,
within 30 days of receipt of notice to each Rating Agency and to the Credit
Enhancer of such deposit, by written consent of the Credit Enhancer.
Eligible Affiliate Servicer: Any Affiliate of Bank One, N.A. to whom
the Servicer assigns its rights and obligations hereunder, subject to
approval by the Rating Agencies and the Credit Enhancer.
Eligible Investment: One or more of the following:
(i) direct obligations of, or obligations fully guaranteed as to
timely payment of principal and interest by, the United States or any
agency or instrumentality thereof; provided that such obligations are
backed by the full faith and credit of the United States;
(ii) repurchase agreements on obligations specified in clause (i)
maturing not more than three months from the date of acquisition thereof;
provided that the short-term unsecured debt obligations of the party
agreeing to repurchase such obligations are at the time rated by each
Rating Agency in its highest short-term rating category (which is A-l+ for
Standard & Poor's and P-1 for Moody's);
(iii) certificates of deposit, time deposits and bankers'
acceptances, each with an original maturity of not more than 90 days and,
in the case of bankers' acceptances, an original maturity of no more than
365 days, of any U.S. depository institution or trust company incorporated
under the laws of the United States or any state thereof and subject to
supervision and examination by federal and/or state banking authorities
(including Bank One, N.A., or any Affiliate thereof); provided that the
unsecured short-term debt obligations of such depository institution or
trust company at the date of acquisition thereof have been rated by each
of Moody's and Standard & Poor's in its highest unsecured short-term debt
rating category;
(iv) commercial paper, with original maturities of not more than 270
days, of any corporation incorporated under the laws of the United States
or any state thereof (including Bank One, N.A. or any Affiliate thereof)
which on the date of acquisition has been rated by Standard & Poor's and
Moody's in their highest short-term debt rating categories;
(v) short term investment funds sponsored by any trust company or
national banking association incorporated under the laws of the United
States or any state thereof (including Bank One, N.A., or any Affiliate
thereof) that as of the date of acquisition have been rated by Standard &
Poor's and Moody's in their respective highest applicable rating category;
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(vi) interests in any money market fund that, as of the date of
acquisition of the interests in such fund and throughout the time such
interests are held in such fund, has a rating of Aaa by Moody's and either
AAAm or AAAm-G by Standard & Poor's, or such lower rating as will not
result in the qualification, downgrading or withdrawal of the then-current
rating assigned to the Investor Certificates by each Rating Agency without
regard to the Policy; and
(vii) other obligations or securities with respect to which the
Trustee has notified the Credit Enhancer and each Rating Agency, that (A)
are acceptable to the Credit Enhancer as an Eligible Investment hereunder
as evidenced by a letter to such effect from the Credit Enhancer, (B) that
will not result in a reduction in the then current rating of the Investor
Certificates without regard to the Policy and (C) with respect to which
the Servicer has received confirmation that, for tax purposes, the
investment complies with the last clause of this definition; and
(viii) in the case of amounts on deposit in the Spread Account only,
in the commercial paper or other short-term debt obligation of Bank One,
N.A. or any of its Affiliates; provided that the rating assigned to such
commercial paper or other short-term debt obligation is at least "A2" and
"P2" by Standard & Poor's and Moody's, respectively, and the long-term
unsecured debt of Bank One, N.A. is rated at least "Baa2" and "BBB" by
Moody's and Standard & Poor's, respectively, or such lower rating as is
agreed to by the Rating Agencies as evidenced by a letter from each such
Rating Agency;
provided that no instrument described hereunder 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 and the interest and principal payments with respect
to such instrument provided 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 hereunder 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 its stated maturity.
Eligible Substitute Mortgage Loan: A Mortgage Loan substituted by the
applicable Seller for a Defective Mortgage Loan that, as of the date of such
substitution, (i) has an outstanding Principal Balance (or in the case of a
substitution of more than one Mortgage Loan for a Defective Mortgage Loan, an
aggregate Principal Balance) approximately equal to any Transfer Deficiency
relating to such Defective Mortgage Loan; (ii) has a Loan Rate not less than the
Loan Rate of the Defective Mortgage Loan and not more than l.0% higher than the
Loan Rate of such Defective Mortgage Loan; (iii) has a Loan Rate based on the
Index and has the same Interest Rate Adjustment Date as that of the Defective
Mortgage Loan; (iv) has a Gross Margin that is not less than the Gross Margin of
the Defective Mortgage Loan and not more than l00 basis points higher than the
Gross Margin of the Defective Mortgage Loan; (v) has a Mortgage of the same or
higher level of priority as the Mortgage securing the Defective Mortgage Loan at
the time such Mortgage was transferred to the Trust; (vi) has a remaining term
to maturity not more than six months earlier and not more than sixty months
later than the remaining term to maturity of the Defective Mortgage Loan; (vii)
complies with each representation and warranty set forth in Section 2.04 (deemed
to be made as of the date of substitution); and (viii) has an
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original Combined Loan-to-Value Ratio not greater than that of the Defective
Mortgage Loan. More than one Eligible Substitute Mortgage Loan may be
substituted for a Defective Mortgage Loan if such Eligible Substitute Mortgage
Loans meet the foregoing attributes in the aggregate and such substitution is
approved in writing in advance by the Credit Enhancer. No Mortgage Loan may be
substituted for a Defective Mortgage Loan on any date more than 120 days after
the Closing Date.
ERISA: Employee Retirement Income Security Act of 1974, as amended.
Event of Servicing Termination: As defined in Section 8.01.
FDIC: The Federal Deposit Insurance Corporation or any successor
thereto.
Fiscal Agent: As defined in the Policy.
Foreclosure Profit: With respect to any Liquidated Mortgage Loan, any
amount, by which (i) aggregate Net Liquidation Proceeds exceeds (ii) the related
Principal Balance of such Liquidated Mortgage Loan immediately prior to the
final recovery of Liquidation Proceeds, plus accrued and unpaid interest thereon
at the applicable Loan Rate from the date interest was last paid through the
date of receipt of the final Liquidation Proceeds.
Gross Margin: As to any Mortgage Loan (other than the Locked Balance
relating to any Mortgage Loan as to which the Lock Feature has been exercised),
the percentage set forth as the "Gross Margin" for such Mortgage Loan on Exhibit
C hereto.
Guaranteed Distribution: With respect to any Distribution Date, the sum of
the (i) the Guaranteed Principal Distribution Amount and (ii) the amount to be
distributed to Investor Certificateholders pursuant to Section 5.01(a)(ii) for
such Distribution Date.
Guaranteed Principal Distribution Amount: With respect to (i) any
Distribution Date, other than the Distribution Date in January 2020, the amount
by which the Investor Certificate Principal Balance (after giving effect to all
distributions allocable to principal on the Investor Certificates on such
Distribution Date, including without limitation any withdrawals from the Spread
Account) exceeds the Invested Amount as of such Distribution Date and (ii) the
Distribution Date in January 2020 the amount by which the outstanding Investor
Certificate Principal Balance (after giving effect to all distributions
allocable to principal on the Investor Certificates on such Distribution Date,
including without limitation any withdrawals from the Spread Account) exceeds
the aggregate amount on deposit in the Collection Account available to be
distributed to the Investor Certificateholders pursuant to Section 5.01(b).
HELOC Balance: With respect to any Mortgage Loan, the portion, if any, of
the Principal Balance thereof subject to a variable Loan Rate.
Index: With respect to each Mortgage Loan (other than any Locked Balance)
and any Interest Rate Adjustment Date, the average weekly Bank Prime Loan Rate
as published by the Board of Governors of the Federal Reserve System in
Statistical Release H.15 for the week that includes the 15th day of the related
month.
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Insolvency Event: As defined in Section 11.02.
Insurance Agreement: The insurance and reimbursement agreement dated as of
the Closing Date among the Depositor, the Servicer, the Trustee and the Credit
Enhancer, including any amendments and supplements thereto.
Insurance Proceeds: Proceeds paid by any insurer (other than the Credit
Enhancer) pursuant to any insurance policy covering a Mortgage Loan, or amounts
required to be paid by the Servicer pursuant to the last sentence of Section
3.04, net of any component thereof (i) covering any expenses incurred by or on
behalf of the Servicer in connection with obtaining such proceeds, (ii) that is
applied to the restoration or repair of the related Mortgaged Property, (iii)
released to the Mortgagor in accordance with the Servicer's normal servicing
procedures or (iv) required to be paid to any holder of a mortgage senior to
such Mortgage Loan.
Interest Collections: With respect to any Distribution Date, (i) all
payments by or on behalf of Mortgagors and any other amounts constituting
interest (including without limitation any portion of Insurance Proceeds and Net
Liquidation Proceeds allocable to interest on the applicable Mortgage Loan)
collected by the Servicer under the Mortgage Loans (excluding any fees
(including annual fees) or late charges or similar administrative fees paid by
Mortgagors) plus (ii) any gains and investment earnings from amounts on deposit
in the Collection Account during the related Collection Period minus (iii) the
Servicing Fee payable to the Servicer with respect to the related Collection
Period. The portion of each payment with respect to a Mortgage Loan that
constitutes principal or interest shall be determined in accordance with the
terms of the related Credit Line Agreement.
Interest Period: With respect to any Distribution Date, the period
beginning on the preceding Distribution Date (or, in the case of the first
Distribution Date, on the Closing Date) and ending on the day preceding such
Distribution Date.
Interest Rate Adjustment Date: With respect to any Mortgage Loan, the date
on which the Loan Rate is adjusted in accordance with the related Credit Line
Agreement.
Invested Amount: With respect to any Distribution Date, an amount equal to
the Original Invested Amount minus the sum of (i) the amount of Investor
Principal Collections previously distributed to Investor Certificateholders and
(ii) any Investor Loss Amounts applied on prior Distribution Dates and not
reimbursed.
Investor Certificate: Any certificate executed and authenticated by the
Trustee substantially in the form set forth in Exhibit A hereto.
Investor Certificate Distribution Amount: As to any Distribution Date, the
sum of all amounts to be distributed to the Holders of Investor Certificates
pursuant to Article V and Article XI hereof.
Investor Certificate Interest: With respect to any Distribution Date,
interest for the related Interest Period at the applicable Investor Certificate
Rate on the Investor Certificate Principal Balance as of the first day of such
Interest Period (after giving effect to the distributions made on the first day
of such Interest Period).
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Investor Certificate Principal Balance: With respect to any
Distribution Date, (a) the Original Investor Certificate Principal Balance
minus (b) the aggregate of amounts actually distributed as principal on the
Investor Certificates.
Investor Certificate Rate: With respect to each Interest Period, a per
annum rate equal to the lesser of (i) the sum of (a) LIBOR as of the second
LIBOR Business Day prior to the first day of such Interest Period and (b) 0.25%
per annum and (ii) the Net Funds Cap Rate for such Interest Period.
Investor Certificateholder: The Holder of an Investor Certificate.
Investor Floating Allocation Percentage: With respect to any Distribution
Date, the percentage equivalent of a fraction, the numerator of which is the
Invested Amount at the close of business on the preceding Distribution Date (or
on the Closing Date, in the case of the first Distribution Date), and the
denominator of which is the Pool Balance, calculated as of the beginning of the
related Collection Period.
Investor Fixed Allocation Percentage: 98%.
Investor Interest Collections: With respect to any Distribution Date, the
product of (i) the Interest Collections for such Distribution Date and (ii) the
Investor Floating Allocation Percentage for such Distribution Date.
Investor Loss Amount: With respect to any Distribution Date, an amount
equal to the product of (i) the Investor Floating Allocation Percentage for such
Distribution Date and (ii) the aggregate of any Liquidation Loss Amounts for
such Distribution Date.
Investor Loss Reduction Amount: With respect to any Distribution Date, the
portion, if any, of the Investor Loss Amount for such Distribution Date and all
prior Distribution Dates that has not been distributed to Investor
Certificateholders on such Distribution Date pursuant to Section 5.01(a)(iii) or
5.01(a)(iv) or by way of the Credit Enhancement Draw Amount.
Investor Principal Collections: As to any Distribution Date, the
Investor Fixed Allocation Percentage of Principal Collections in respect of
such Distribution Date.
LIBOR: With respect to any date, the rate for one month United States
dollar deposits that appears on the Telerate Screen Page 3750 as of 11:00 A.M.,
London time on such date. If such rate does not appear on such page (or such
other page as may replace that page on that service, or if such service is no
longer offered, such other service for displaying LIBOR or comparable rates as
may be reasonably selected by or at the direction of the Depositor after
consultation with the Trustee), the rate will be the Reference Bank Rate. If no
such quotations can be obtained and no Reference Bank Rate is available, LIBOR
shall be LIBOR applicable to the preceding Distribution Date.
LIBOR Business Day: Any day other than (i) a Saturday or a Sunday or (ii)
a day on which banking institutions in the State of New York or in the City of
London, England are required or authorized by law to be closed.
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LIBOR Interest Carryover: With respect to any Distribution Date on or
prior to the date on which the Principal Balance of the Certificates has been
reduced to zero, if the Investor Certificate Rate is equal to the Net Funds Cap
Rate, an amount equal to (i) the excess of (a) an amount equal to the Investor
Certificate Interest for such Distribution Date calculated as set forth in the
definition of Investor Certificate Rate, but without regard to the Net Funds Cap
Rate proviso thereto, over (b) the amount of Investor Certificate Interest
payable to the Investor Certificates on such Distribution Date at the Net Funds
Cap Rate, plus (ii) the portion of the amount calculated pursuant to clause (i)
remaining unpaid from prior Distribution Dates and interest accrued thereon at
the then applicable Certificate Rate.
Lien: Any mortgage, deed of trust, pledge, conveyance, hypothecation,
assignment, participation, deposit arrangement, encumbrance, lien (statutory or
other), preference, priority right or interest or other security agreement or
preferential arrangement of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing and the filing of any financing statement under the UCC (other than
any such financing statement filed for informational purposes only) or
comparable law of any jurisdiction to evidence any of the foregoing; provided,
however, that any assignment pursuant to Section 7.02 hereof shall not be deemed
to constitute a Lien.
Lifetime Rate Cap: With respect to each Mortgage Loan with respect to
which the related Mortgage Note provides for a lifetime rate cap, the maximum
Loan Rate permitted over the life of such Mortgage Loan under the terms of the
related Credit Line Agreement, as set forth on Exhibit C hereto.
Liquidated Mortgage Loan: With respect to any Distribution Date, any
Mortgage Loan in respect of which the Servicer has determined, in accordance
with the servicing procedures specified herein, that all Liquidation Proceeds
which it expects to recover with respect to the disposition of the related
Mortgaged Property or the related REO have been recovered as of the end of the
related Collection Period.
Liquidation Expenses: Out-of-pocket expenses (exclusive of overhead) that
are incurred by the Servicer in connection with the liquidation of any Mortgage
Loan and not recovered under any insurance policy, including, without
limitation, legal fees and expenses, any unreimbursed expenditures pursuant to
Section 3.06 (including, without limitation, amounts advanced to correct
defaults on any mortgage loan which is senior to such Mortgage Loan and amounts
advanced to keep current or pay off a mortgage loan that is senior to such
Mortgage Loan) with respect to the related Mortgage Loan and any related and
unreimbursed expenditures with respect to real estate property taxes, water or
sewer taxes, condominium association dues, property restoration or preservation
or insurance against casualty, loss or damage.
Liquidation Loss Amount: With respect to any Distribution Date and any
Mortgage Loan that becomes a Liquidated Mortgage Loan during the related
Collection Period, the unrecovered Principal Balance thereof at the end of such
Collection Period, after giving effect to the Net Liquidation Proceeds applied
in reduction of such Principal Balance.
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Liquidation Proceeds: Proceeds (including Insurance Proceeds but not
including amounts drawn under the Policy) received in connection with the
liquidation of any Mortgage Loan or related REO, whether through trustee's sale,
foreclosure sale or otherwise.
Loan Rate: With respect to any Mortgage Loan and any date of
determination, the variable per annum rate of interest applicable under the
related Credit Line Agreement to the calculation of interest or, if the Lock
Feature has been exercised, the resulting fixed per annum rate for such date on
the Principal Balance of such Mortgage Loan.
Lock Feature: An option available to a Mortgagor under a Credit Line
Agreement that permits the Mortgagor to convert either the entire outstanding
balance due or any portion thereof to a fixed rate closed-end loan.
Locked Balance: With respect to any Mortgage Loan as to which the Lock
Feature has been exercised, the portion of the Principal Balance thereof subject
to a fixed Loan Rate.
Managed Amortization Period: The period from the Closing Date to and
including the Rapid Amortization Commencement Date.
Maximum Principal Payment: With respect to any Distribution Date, the
product of the Investor Fixed Allocation Percentage and the Principal
Collections for such Distribution Date.
Minimum Monthly Payment: With respect to any Mortgage Loan and any
month, the minimum amount required to be paid by the related Mortgagor in
that month.
Minimum Transferor Interest: With respect to any date of determination, an
amount equal to the lesser of (a) 5% of the Pool Balance on such date and (b)
the Transferor Principal Balance as of the Closing Date.
Moody's: Moody's Investors Service, Inc., or its successor in interest.
Mortgage: The mortgage, deed of trust or other instrument creating a first
or second lien on a fee simple interest in real property securing a Mortgage
Loan.
Mortgage File: The mortgage documents listed in Section 2.01 pertaining to
a particular Mortgage Loan and any additional documents required to be added to
the Mortgage File pursuant to this Agreement.
Mortgage Loan Schedule: With respect to any date, the schedule of Mortgage
Loans included in the Trust on such date. The initial schedule of Mortgage Loans
as of the Cut-Off Date is the schedule set forth herein as Exhibit C, which
schedule sets forth as to each Mortgage Loan (i) the Cut-Off Date Principal
Balance, separately indicating any Locked Balance and any HELOC Balance, (ii)
the Credit Limit, (iii) the Gross Margin, (iv) the Lifetime Rate Cap, (v) the
account number, (vi) the current Loan Rate, separately indicating the Loan Rates
applicable to any Locked Balance, and any HELOC Balance, (vii) the date of
origination, (viii) the original term to maturity or maturity date, (ix) the
State in which the Mortgaged Property is located and (x) the related Seller. The
Mortgage Loan Schedule will be deemed to be amended from time to time to reflect
Additional Balances.
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Mortgage Loans: The mortgage loans that are transferred and assigned to
the Trustee pursuant to Section 2.01, including Additional Balances with respect
thereto, together with the Related Documents, exclusive of Mortgage Loans that
are retransferred to the applicable Seller or the holder of the Transferor
Interest from time to time pursuant to Section 2.02, 2.04 or 2.06. The mortgage
loans originally so held are identified in the Mortgage Loan Schedule delivered
on the Closing Date. The Mortgage Loans also shall include any Eligible
Substitute Mortgage Loan substituted by the applicable Seller for a Defective
Mortgage Loan pursuant to Sections 2.02 and 2.04.
Mortgage Note: With respect to a Mortgage Loan, the Credit Line Agreement
pursuant to which the related Mortgagor agrees to pay the indebtedness evidenced
thereby and secured by the related Mortgage.
Mortgaged Property: The underlying property, including any real
property and improvements thereon, securing a Mortgage Loan.
Mortgagor: The obligor or obligors under a Credit Line Agreement.
Net Funds Cap Rate: With respect to any Interest Period, a per annum rate
equal to the weighted average of the Loan Rates on the Mortgage Loans as of the
first day of the related Billing Cycle (or, in the case of the first Interest
Period, the weighted average of the Loan Rates on the Mortgage Loans as of the
Cut-Off Date), less 0.65% per annum (adjusted to an effective rate reflecting
accrued interest calculated on the basis of the actual number of days in the
Collection Period commencing in the month in which such Interest Period
commences and a year assumed to consist of 360 days).
Net Liquidation Proceeds: With respect to any Liquidated Mortgage
Loan, Liquidation Proceeds net of Liquidation Expenses.
Officer's Certificate: A certificate signed by the President, an Executive
Vice President, a Senior Vice President, a Vice President, an Assistant Vice
President, the Treasurer, Assistant Treasurer, Controller or Assistant
Controller of the Depositor or the Servicer, as the case may be, and delivered
to the Trustee.
Opinion of Counsel: A written opinion of counsel acceptable to the
Trustee, who may be in-house counsel for the Depositor, a Seller or the Servicer
(except that any opinion pursuant to Section 2.06, Section 7.04 or relating to
taxation must be an opinion of independent outside counsel) and who, in the case
of opinions delivered to the Credit Enhancer and the Rating Agencies, is
reasonably acceptable to each such entity.
Original Invested Amount: $850,000,000.
Original Investor Certificate Principal Balance: $850,000,000.
Overcollateralization Amount: With respect to any date of
determination, the amount, if any, by which the Invested Amount exceeds the
Investor Certificate Principal Balance on such date.
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Overcollateralization Release Amount: With respect to any Distribution
Date, the amount, if any, by which the Overcollateralization Amount exceeds
the Required Overcollateralization Amount.
Paying Agent: Any paying agent appointed pursuant to Section 6.06.
Percentage Interest: As to any Investor Certificate, the percentage
obtained by dividing the denomination of such Investor Certificate by the
Original Investor Certificate Principal Balance.
Person: Any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
Policy: The financial guaranty insurance policy number 27577, dated as of
the Closing Date, issued by the Credit Enhancer to the Trustee for the benefit
of the Investor Certificateholders.
Policy Payments Account: As defined in Section 4.02(b).
Pool Balance: With respect to any date of determination, the aggregate
of the Principal Balances of all Mortgage Loans as of such date.
Pool Factor: With respect to any Distribution Date, the decimal, carried
to seven places, obtained by dividing the Investor Certificate Principal Balance
for such Distribution Date by the Original Investor Certificate Principal
Balance.
Preference Claim: As defined in Section 4.02(d).
Premium Fee Rate: As described in the Insurance Agreement.
Principal Balance: As to any Mortgage Loan (other than a Liquidated
Mortgage Loan) and any date of determination, the related Cut-Off Date Principal
Balance, plus (i) any Additional Balances in respect of such Mortgage Loan,
minus (ii) all collections credited as principal against the Principal Balance
of such Mortgage Loan in accordance with the related Credit Line Agreement. For
purposes of this definition, a Liquidated Mortgage Loan shall be deemed to have
a Principal Balance of zero.
Principal Collections: With respect to any Distribution Date, (i) all
payments by or on behalf of Mortgagors and any other amounts constituting
principal (including but not limited to any portion of Insurance Proceeds or Net
Liquidation Proceeds allocable to principal of the applicable Mortgage Loan
collected by the Servicer under the Mortgage Loans during the related Collection
Period, but excluding Foreclosure Profits) and (ii) any Transfer Deposit
Amounts. The portion of each payment with respect to a Mortgage Loan that
constitutes principal or interest shall be determined in accordance with the
terms of the related Credit Line Agreement.
Purchase Agreement: The Mortgage Loan Purchase Agreement, dated as of the
Closing Date, among Bank One, N.A., Bank One, Arizona, N.A., Bank One, Colorado,
N.A., Bank One,
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Illinois, N.A., Bank One, Indiana, N.A., Bank One, Kentucky, N.A., Bank One,
Utah, N.A., Bank One, West Virginia, N.A. and Bank One, Wisconsin, as Sellers,
and the Depositor, as purchaser, with respect to the Mortgage Loans.
Rapid Amortization Commencement Date: The earlier of (i) the date
immediately following the September 2003 Distribution Date and (ii) the
Distribution Date next succeeding the Collection Period in which a Rapid
Amortization Event is deemed to occur pursuant to Section 11.01.
Rapid Amortization Event: As defined in Section 11.01.
Rapid Amortization Period: The period following the Managed
Amortization Period until the termination of the Trust pursuant to Section
10.01.
Rating Agency: Any statistical credit rating agency, or its successor,
that rated the Investor Certificates at the request of the Depositor at the time
of the initial issuance of the Certificates. If such agency or a successor is no
longer in existence, "Rating Agency" shall be such statistical credit rating
agency, or other comparable Person, designated by the Depositor and the Credit
Enhancer, notice of which designation shall be given to the Trustee. References
herein to the highest short-term unsecured rating category of a Rating Agency
shall mean P-1 or better in the case of Moody's and A-1+ or better in the case
of Standard & Poor's and in the case of any other Rating Agency shall mean the
ratings such other Rating Agency deems equivalent to the foregoing ratings.
References herein to the highest long-term rating category of a Rating Agency
shall mean "Aaa" in the case of Moody's and "AAA" in the case of Standard &
Poor's and in the case of any other Rating Agency, the rating such other Rating
Agency deems equivalent to the foregoing ratings.
Reallocated Investor Principal Collections: With respect to any
Distribution Date, any Investor Principal Collections applied to amounts payable
pursuant to Sections 5.01(a)(i) and (ii), in an amount up to the lesser of (a)
the Overcollateralization Amount for such Distribution Date (prior to giving
effect to such Reallocated Investor Principal Collections), (b) the Scheduled
Principal Collections Distribution Amount for such Distribution Date and (c) the
excess, if any, of the aggregate amount payable pursuant to Sections 5.01(a)(i)
and (ii) over the amount of Investor Interest Collections for such Distribution
Date.
Recalculated Weighted Average Gross Margin: With respect to any date of
determination, a weighted average calculated as (I) the sum of (a) the weighted
average Gross Margin of the HELOC Balances as of such date multiplied by the
aggregate outstanding HELOC Balance, plus (b) the product of (i) the difference
between the weighted average Loan Rate on all Locked Balances as of such date
minus the Index as of such date, multiplied by (ii) the aggregate outstanding
Locked Balance, divided by (II) the Pool Balance as of such date.
Record Date: The last day preceding the related Distribution Date;
provided, however, that following the date on which the Definitive Certificates
are available pursuant to Section 6.02(c), the Record Date shall be the last day
of the calendar month preceding the month in which the related Distribution Date
occurs.
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Recordation Event: The rating of the Servicer's long-term unsecured
debt obligations is reduced below Baa1 by Moody's and BBB+ by Standard &
Poor's.
Reference Bank Rate: With respect to any Interest Period, the arithmetic
mean (rounded upwards, if necessary, to the nearest one sixteenth of a percent)
of the offered rates for one month United States dollar deposits that are
offered by the Reference Banks as of 11:00 A.M., London time, on the day that is
two LIBOR Business Days prior to the immediately preceding Distribution Date to
prime banks in the London interbank market for a period of one month in amounts
approximately equal to the outstanding Investor Certificate Principal Balance;
provided that at least two such Reference Banks provide such rate. If fewer than
two offered rates appear, the Reference Bank Rate will be the arithmetic mean of
the rates quoted by one or more major banks in New York City, selected by the
Depositor after consultation with the Trustee, as of 11:00 A.M., New York City
time, on such date for loans in U.S. Dollars to leading European Banks for a
period of one month in amounts approximately equal to the outstanding Investor
Certificate Principal Balance.
Reference Banks: Three major banks that are engaged in transactions in
the London interbank market, selected by the Depositor after consultation
with the Trustee.
Related Documents: As defined in Section 2.01.
REO: A Mortgaged Property that is acquired by the Trust in foreclosure
or by deed in lieu of foreclosure.
Required Enhancement Amount: With respect to any date on or prior to the
thirtieth Distribution Date, an amount equal to the greater of (i) 1.25% of the
Invested Amount as of the Cut-Off Date and (ii) 60% of the aggregate Principal
Balance of all Mortgage Loans with respect to which any payment is, as of the
end of the most recent Collection Period, 90 days or more contractually past
due, including all Mortgage Loans 90 days or more contractually past due and in
bankruptcy or foreclosure proceedings or REO property, multiplied by the
Investor Floating Allocation Percentage and, with respect to any date
thereafter, an amount equal to the greater of (i) the lesser of (a) 1.25% of the
Invested Amount as of the Cut-Off Date and (b) 2.5% of the Invested Amount as of
such Distribution Date and (ii) 60% of the aggregate Principal Balance of all
Mortgage Loans with respect to which any payment is, as of the end of the most
recent Collection Period, 90 days or more contractually past due, including all
Mortgage Loans 90 days or more contractually past due and in bankruptcy or
foreclosure proceedings or REO property, multiplied by the Investor Floating
Allocation Percentage; provided, however, that in no event shall the Required
Enhancement Amount be less than 0.50% of the Invested Amount as of the
Cut-Off Date. The Required Enhancement Amount may be amended or modified at any
time in accordance with the requirements of the Rating Agencies, to maintain the
rating of the Investor Certificates and to maintain the rating of the
transactions contemplated herein and in the Pooling and Servicing Agreement,
without giving consideration to the Policy, at not less than investment grade,
as defined by the Rating Agencies, provided that such Rating Agencies'
requirement arises out of the provision of Section 3.01 of this Agreement
pursuant to which the Servicer is permitted to enter into modifications of the
Credit Line Agreements, including consent to senior liens. The Required
Enhancement Amount also may be amended or modified
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at any time at the request of the Depositor with the prior written approvals of
the Credit Enhancer and each Rating Agency.
Required Overcollateralization Amount: With respect to any date, the
excess of the Required Enhancement Amount over the aggregate amounts on
deposit in the Spread Account as of such date.
Required Spread Account Amount: With respect to any date, 0.25% of the
Invested Amount as of such date.
Responsible Officer: When used with respect to the Trustee, any officer of
the Trustee with direct responsibility for the administration of this Agreement
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.
Revolving Period: With respect to each Mortgage Loan, the period specified
for such Mortgage Loan in the related Credit Line Agreement, during which the
Mortgagor is permitted to make Draws.
SAIF: The Savings Association Insurance Fund, as from time to time
constituted, created under the Financial Institutions Reform, Recovery and
Enhancement Act of 1989, or if at any time after the execution of this
instrument the Savings Association Insurance Fund is not existing and performing
duties now assigned to it, the body performing such duties on such date.
Scheduled Principal Collections Distribution Amount: With respect to any
Distribution Date during the Managed Amortization Period and the Investor
Certificates, an amount equal to the lesser of (i) the Maximum Principal Payment
and (ii) the Alternative Principal Payment.
Seller: Each of Bank One, N.A., Bank One, Arizona, N.A., Bank One,
Colorado, N.A., Bank One, Illinois, N.A., Bank One, Indiana, N.A., Bank One,
Kentucky, N.A., Bank One, Utah, N.A., Bank One, West Virginia, N.A. and Bank
One, Wisconsin, and any successors thereto.
Servicer: Bank One, N.A., a national banking association, and any
successor hereunder.
Servicing Certificate: A certificate completed and executed by a
Servicing Officer in accordance with Section 4.01.
Servicing Fee: With respect to any Distribution Date, the product of (i)
1/12th of the Servicing Fee Rate and (ii) the aggregate Principal Balance of the
Mortgage Loans on the first day of the Collection Period preceding such
Distribution Date (or at the Cut-Off Date with respect to the first Distribution
Date).
Servicing Fee Rate: 0.50% per annum.
Servicing Officer: Any officer of the Servicer involved in, or responsible
for, the administration and servicing of the Mortgage Loans whose name and
specimen signature appear on a list of servicing officers furnished to the
Trustee (with a copy to the Credit Enhancer) by the Servicer on the Closing
Date, as such list may be amended from time to time.
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Standard & Poor's: Standard & Poor's, a Division of the McGraw-Hill
Companies, Inc., or its successor in interest.
Telerate Screen Page 3750: The display designated as page 3750 on the
Telerate Service (or such other page as may replace page 3750 on that service
for the purpose of displaying London interbank offered rates of major banks).
Transfer Date: As defined in Section 2.06.
Transfer Deficiency: As defined in Section 2.02.
Transfer Deposit Amount: As defined in Section 2.02.
Transfer Notice Date: As defined in Section 2.06.
Transferor Collections: With respect to any Distribution Date, the sum
of the Transferor Interest Collections and the Transferor Principal
Collections for such Distribution Date.
Transferor Interest: The undivided interest in the Trust not
represented by the Investor Certificates, which is issued by the Trustee
pursuant to Section 6.01.
Transferor Interest Collections: With respect to any Distribution Date,
the Interest Collections received during the related Collection Period minus the
Investor Interest Collections for such Distribution Date.
Transferor Principal Balance: With respect to any Distribution Date, an
amount equal to (i) the Pool Balance at the related Collection Period minus (ii)
the Invested Amount as of such Distribution Date.
Transferor Principal Collections: With respect to any Distribution Date,
the Principal Collections received during the related Collection Period minus
the portion of such Principal Collections required to be distributed to Investor
Certificateholders pursuant to Section 5.01(b).
Trust: The trust created by this Agreement, the corpus of which consists
of (i) the Mortgage Loans, (ii) such other assets as shall from time to time be
deposited in the Collection Account in accordance with this Agreement, (iii)
property that secured any Mortgage Loan and that has become REO, (iv) the
interest of the Depositor in certain hazard insurance policies maintained by the
Mortgagors or the Servicer in respect of the Mortgage Loans, (v) the Policy,
(vi) amounts on deposit in the Spread Account, (vii) an assignment of the
Depositor's rights under the Purchase Agreement and (viii) all proceeds of each
of the foregoing.
Trustee: The Bank of New York or any successor Trustee appointed in
accordance with this Agreement that has accepted such appointment in accordance
with this Agreement.
Trustee Fee: The fee paid to the Trustee for its services hereunder,
which fee is separately agreed to between the Servicer and the Trustee.
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UCC: The Uniform Commercial Code, as amended from time to time, as in
effect in any specified jurisdiction.
Unpaid Investor Certificate Interest Shortfall: With respect to any
Distribution Date, the aggregate amount of any Investor Certificate Interest
that was due on a prior Distribution Date and has not been distributed to
Investor Certificateholders.
Valuation: With respect to any Mortgaged Property and valuation made prior
to the Closing Date, either (a) an appraisal (Uniform Residential Appraisal
Report or FHLMC 704/Single Page/Short Form/FNMA 2055) conducted by an
independent appraiser or (b) a valuation based upon any one of the following (in
order of priority): (i) HUD-1 Settlement Statement (if prepared within the
twelve months preceding the date of origination, (ii) tax assessment, (iii)
electronic valuation and (iv) any other valuation (for example, based on
comparable sales, broker's opinion, drive-by appraisal and/or interior
inspection).
Section 1.02. Interest Calculations. All calculations of interest
hereunder that are made in respect of the Principal Balance of a Mortgage Loan
shall be made on a daily basis using a 365-day year. All calculations of
interest on the Investor Certificates shall be made on the basis of the actual
number of days in an Interest Period and a year assumed to consist of 360 days.
The calculation of the Servicing Fee shall be made on the basis of a 360-day
year consisting of twelve 30-day months. All dollar amounts calculated hereunder
shall be rounded to the nearest penny with one-half of one penny being rounded
down.
ARTICLE II
Conveyance of Mortgage Loans;
Original Issuance of Investor Certificates;
Tax Treatment
Section 2.01. Conveyance of Mortgage Loans; Retention of Obligation to
Fund Advances Under Credit Line Agreements. (a) The Depositor, concurrently with
the execution and delivery of this Agreement, does hereby transfer, assign, set
over and otherwise convey to the Trust without recourse (subject to Sections
2.02 and 2.04) all of its right, title and interest in and to (i) each Mortgage
Loan, including its Principal Balance (including all Additional Balances) and
all collections in respect thereof received after the Cut-Off Date; (ii)
property that secured a Mortgage Loan that is acquired by foreclosure or deed in
lieu of foreclosure; (iii) the Depositor's rights (but none of its obligations)
under the Purchase Agreement; (iv) the Depositor's rights under the hazard
insurance policies, (v) the amounts on deposit in the Spread Account and (vi)
all other assets included or to be included in the Trust for the benefit of
Investor Certificateholders; provided, however, that neither the Trustee nor the
Trust assumes the obligation under any Credit Line Agreement that provides for
the funding of future advances to the Mortgagor thereunder, and neither the
Trust nor the Trustee shall be obligated or permitted to fund any such future
advances. Additional Balances shall be part of the related Principal Balance and
are hereby transferred to the Trust on the Closing Date pursuant to this Section
2.01, and therefore part of the Trust property. In addition, on or prior to the
Closing Date, the
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Depositor shall cause the Credit Enhancer to deliver the Policy to the Trustee
for the benefit of the Investor Certificateholders. The foregoing transfer,
assignment and conveyance to the Trust shall be made to the Trustee on behalf of
the Trust, and each reference in this Agreement to such transfer, assignment and
conveyance shall be construed accordingly.
The Depositor agrees to take or cause to be taken such actions and execute
such documents (including without limitation the filing of all necessary
continuation statements for the UCC-1 financing statements filed in the States
of Arizona, California, Colorado, Illinois, Indiana, Kentucky, New York, Ohio,
Utah, West Virginia and Wisconsin (which shall have been filed within 90 days of
the Closing Date) describing the Cut-Off Date Principal Balances and Additional
Balances and naming the Depositor as debtor and the Trustee as secured party,
and any amendments to UCC-1 financing statements required to reflect a change in
the name or corporate structure of the Depositor or the filing of any additional
UCC-1 financing statements due to the change in the principal office of the
Depositor (within 30 days of any event necessitating such filing) as are
necessary to perfect and protect the Investor Certificateholders' and Credit
Enhancer's interests in each Cut-Off Date Principal Balance and Additional
Balance and the proceeds thereof (including maintaining possession by the
Trustee of the Mortgage Loans and the Mortgage Files).
(b) In connection with such transfer and assignment by the Depositor, and
pursuant to Section 2.04 of the Purchase Agreement, each Seller will deliver or
cause to be delivered within 90 days of the Closing Date to the Trustee (or any
Custodian on behalf of the Trustee) with respect to each Mortgage Loan, the
original Mortgage Note, endorsed on its face or by allonge attached thereto in
blank or to the order of the Trustee in the following form: "Pay to the order of
The Bank of New York, as trustee for the registered holders of Banc One HELOC
Trust 1998-1, HELOC Asset-Backed Certificates, Series 1998-1, without recourse,
representation or warranty, express or implied," and an original Assignment of
Mortgage endorsed in blank prepared in recordable form; provided, however, that
as to any Mortgage Loan, if (a) as evidenced by an Opinion of Counsel delivered
to and in form and substance satisfactory to the Trustee and the Credit
Enhancer, (x) an optical image or other representation of the related documents
specified above are enforceable in the relevant jurisdictions to the same extent
as the original of such document and (y) such optical image or other
representation does not impair the ability of an owner of such Mortgage Loan to
transfer its interest in such Mortgage Loan, and (b) the retention of such
documents in such format will not result in a reduction in the then current
rating of the Investor Certificates, without regard to the Policy, such optical
image or other representation may be delivered to the Trustee (or any Custodian
on behalf of the Trustee) or assignee in lieu of the physical documents
specified above.
Within 90 days following delivery of the Mortgage Files to the Trustee (or
any Custodian on behalf of the Trustee) pursuant to the preceding paragraph, the
Trustee (or any Custodian on behalf of the Trustee) shall review each such
Mortgage File to ascertain that all required documents set forth in this Section
2.01 have been executed and received, and that such documents relate to the
Mortgage Loans identified on the Mortgage Loan Schedule and in so doing the
Trustee (or any Custodian on behalf of the Trustee) may rely on the purported
due execution and genuineness of any signature thereon. The Trustee shall notify
the Servicer in writing upon completion of such review. If within such 90-day
period the Trustee (or any Custodian on behalf of the Trustee) finds any
document constituting a part of a Mortgage File
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not to have been executed or received or to be unrelated to the Mortgage Loans
identified in said Mortgage Loan Schedule or, if in the course of its review,
the Trustee (or any Custodian on behalf of the Trustee) determines that such
Mortgage File is otherwise defective in any material respect, the Trustee shall
promptly upon the conclusion of such review notify the Depositor, the applicable
Seller and the Credit Enhancer, and the related Seller shall have a period of 90
days pursuant to Section 3.03 of the Purchase Agreement after such notice to
correct or cure any such defect.
The Trustee shall have no responsibility for reviewing any Mortgage File
except as expressly provided in this Section 2.01. In reviewing any Mortgage
File pursuant to this Section, the Trustee shall have no responsibility for
determining the content of any document, whether any document is valid and
binding or enforceable, whether the text of any assignment or endorsement is in
proper or recordable form (except, if applicable, to determine if the Trustee is
the assignee or endorsee), 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, whether any Person
executing any document is authorized to do so or whether any signature thereon
is genuine, but shall only be required to determine whether a document has been
executed, that it appears to be what it purports to be, and, where applicable,
that it purports to be recorded.
The Depositor hereby confirms to the Trustee that it has made the
appropriate entries in its general accounting records to indicate that such
Mortgage Loans have been transferred to the Trust at its direction. The Servicer
hereby confirms to the Trustee that it has clearly and unambiguously made
appropriate entries in its general accounting records indicating that such
Mortgage Loans constitute part of the Trust and are serviced by it on behalf of
the Trust in accordance with the terms hereof.
The Servicer agrees not to notify the obligors on the Mortgage Loans of
the transfer of the Mortgage Loans to the Trust unless required to do so by the
terms of the Mortgage Loans or applicable law.
It is the express intent of the parties hereto that the conveyance of the
Mortgage Loans by the Depositor to the Trustee as provided in this Agreement be,
and be construed as, a sale of all of the Depositor's right, title and interest
in the Mortgage Loans by the Depositor to the Trustee. Further, it is not the
intention of the parties that such conveyance be deemed a pledge of the Mortgage
Loans by the Depositor to the Trustee to secure a debt or other obligation of
the Depositor; however, in the event that, notwithstanding the intent of the
parties, the Mortgage Loans are held to be property of the Depositor, or if for
any reason this Agreement is held or deemed to create a security interest in the
Mortgage Loans, then, (a) this Agreement also shall be deemed to be, and hereby
is, a security agreement within the meaning of Articles 8 and 9 of the Uniform
Commercial Code in effect in the applicable state; (b) the conveyance provided
for in this Agreement shall be deemed to be, and hereby is, a grant by the
Depositor to the Trustee of a security interest in and to all of the Depositor's
right, title, and interest, whether now owned or hereafter acquired, in and to:
(I) All accounts, contract rights, general intangibles,
chattel paper, instruments, documents, money, deposit accounts,
certificates of deposit, goods,
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letters of credit, advices of credit, certificated securities and
uncertificated securities consisting of, arising from or relating to
any of the property described in (A) through (D) below: (A) each
Mortgage Loan, including (a) the Mortgage Note and the related
Mortgage and (b) its Principal Balance and all Additional Balances
and all collections in respect thereof received on or after the
Cut-Off Date, identified on the Mortgage Loan Schedule as defined
herein, including all Eligible Substitute Mortgage Loans, (B)
property that secured a Mortgage Loan that is acquired by
foreclosure or deed in lieu of foreclosure; (C) the Purchase
Agreement, (D) any hazard insurance policies in respect of the
Mortgage Loans; and (E) the amounts on deposit in the Spread
Account; and
(II) All proceeds of the collateral described in (I).
(c) The possession by the Trustee or its designee of the Mortgage Notes,
Assignments of Mortgages and such other goods, letters of credit, advices of
credit, instruments, money, documents, chattel paper or certificated securities
shall be deemed to be "possession by the secured party," or possession by a
purchaser or a person designated by him or her, for purposes of perfecting the
security interest pursuant to the Uniform Commercial Code (including, without
limitation, Sections 9-305, 8-313 or 8-321 thereof) as in force in the relevant
jurisdiction; and (d) notifications to persons holding such property, and
acknowledgments, receipts or confirmations from persons holding such property,
shall be deemed to be notifications to, or acknowledgments, receipts or
confirmations from, financial intermediaries, bailees or agents (as applicable)
of the Trustee or its designee for the purpose of perfecting such security
interest under applicable law. Subject to the provisions herein permitting the
Servicer to commingle amounts collected with respect to the Mortgage Loans with
other general collections of the Servicer, the Depositor and the Trustee at the
direction of the Depositor to the extent consistent with this Agreement, shall
take such actions as may be necessary to ensure that, if this Agreement were
deemed to create a security interest in the Mortgage Loans and the proceeds
thereof, such security interest would be deemed to be a perfected security
interest of first priority under applicable law and will be maintained as such
throughout the term of the Agreement. In connection herewith, the Trustee shall
have all of the rights and remedies of a secured party and creditor under the
Uniform Commercial Code as in force in the relevant jurisdiction.
Following the occurrence of a Recordation Event, the Trustee shall, as
promptly as practicable but in no event more than 90 days after receiving notice
of such event, at the Servicer's expense, record an Assignment of Mortgage for
each Mortgage Loan in favor of the Trustee (which may be a blanket assignment if
permitted by applicable law) in the appropriate real property or other records
in the jurisdiction in which the Mortgaged Property is located, or the Depositor
shall deliver to the Trustee an Opinion of Counsel addressed to the Trustee and
the Credit Enhancer to the effect that recording is not required to protect the
Trustee's right, title and interest in and to the related Mortgage Loan or, in
case a court should recharacterize the sale of the Mortgage Loans as a
financing, to perfect a first priority security interest in favor of the Trustee
in the related Mortgage Loan, which Opinion of Counsel also shall be reasonably
acceptable to each of the Rating Agencies (as evidenced in writing) and the
Credit Enhancer. The Trustee is hereby appointed as the attorney-in-fact of the
Servicer with the power to prepare, execute and record Assignments of Mortgages
in the event that the Servicer fails to do so on a timely basis as provided in
this paragraph.
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Section 2.02. Acceptance by Trustee; Retransfer of Mortgage Loans. (a) The
Trustee hereby acknowledges its receipt of the Policy, and declares that the
Trustee will hold the Policy and the Mortgage Loans delivered to it pursuant to
Section 2.01 and all amounts received by it thereunder and hereunder, in trust,
upon the terms herein set forth, for the use and benefit of all present and
future Certificateholders and the Credit Enhancer. If the time to cure any
defect in respect of any Mortgage Loan of which the Trustee has notified the
applicable Seller and the Depositor following the review pursuant to Section
2.01 has expired or if at any time any loss is suffered by the Trustee on behalf
of the Certificateholders or the Credit Enhancer, in respect of any Mortgage
Loan as a result of (i) a defect in any document constituting a part of its
Mortgage File or (ii) an Assignment of Mortgage to the Trustee not having been
recorded as required by Section 2.01(b), then on the next succeeding Business
Day upon the deposit to the Collection Account of the Transfer Deposit Amount,
if any, and upon satisfaction of the applicable conditions described herein, all
right, title and interest of the Trust in and to such Mortgage Loan shall be
deemed to be retransferred, reassigned and otherwise reconveyed, without
recourse, representation or warranty, to the applicable Seller on such Business
Day, and the Principal Balance of such Mortgage Loan shall be deducted from the
Pool Balance; provided, however, that interest accrued on the Principal Balance
of such Mortgage Loan to the end of the related Collection Period shall be the
property of the Trust. The Trustee shall determine if the reduction of such
Principal Balance from the Pool Balance in accordance with the preceding
sentence would cause the Transferor Principal Balance to be less than the
Minimum Transferor Interest (a "Transfer Deficiency"), in which event the
Trustee shall deliver written notice of such deficiency to the applicable
Seller, and within five Business Days after the Business Day of such retransfer
the applicable Seller shall either (i) substitute an Eligible Substitute
Mortgage Loan or (ii) deposit into the Collection Account an amount (the
"Transfer Deposit Amount") in immediately available funds equal to the Transfer
Deficiency or a combination of both (i) and (ii) above. Such reduction or
substitution and the actual payment of any Transfer Deposit Amount, if any,
shall be deemed to be payment in full for such Mortgage Loan. Upon receipt of
any Eligible Substitute Mortgage Loan or of written notification signed by a
Servicing Officer to the effect that the Transfer Deposit Amount in respect of a
Defective Mortgage Loan has been deposited into the Collection Account or, if
the Transferor Principal Balance is not reduced below the Minimum Transferor
Interest as a result of the deemed retransfer of a Defective Mortgage Loan, then
as promptly as practicable following such deemed transfer, the Trustee shall
execute such documents and instruments of transfer presented by the applicable
Seller, in each case without recourse, representation or warranty, and take such
other actions as shall reasonably be requested by the applicable Seller to
effect such transfer by the Trust of such Defective Mortgage Loan pursuant to
this Section 2.02. It is understood and agreed that the obligation of the
applicable Seller to accept a transfer of a Defective Mortgage Loan and to
either convey an Eligible Substitute Mortgage Loan or to make a deposit of any
related Transfer Deposit Amount into the Collection Account shall constitute the
sole remedy respecting such defect available to Certificateholders, the Trustee
and the Credit Enhancer against the Depositor or the applicable Seller.
The Servicer, promptly following the transfer of a Defective Mortgage Loan
from or the transfer of an Eligible Substitute Mortgage Loan to the Trust
pursuant to this Section, shall amend the Mortgage Loan Schedule and make
appropriate entries in its general account records to reflect such transfer. The
Servicer shall, following such retransfer, appropriately mark its records to
indicate that it is no longer servicing such Mortgage Loan on behalf of the
Trust.
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Pursuant to the Purchase Agreement, the applicable Seller, promptly following
such transfer, shall appropriately mark its Electronic Ledger and make
appropriate entries in its general account records to reflect such retransfer.
Notwithstanding any other provision of this Section, a retransfer of a
Defective Mortgage Loan to the applicable Seller pursuant to this Section and
Section 3.03 of the Purchase Agreement that would cause the Transferor Principal
Balance to be less than the Minimum Transferor Interest shall not occur if the
applicable Seller fails to convey an Eligible Substitute Mortgage Loan or to
deposit into the Collection Account any related Transfer Deposit Amount required
by this Section with respect to the transfer of such Defective Mortgage Loan.
(b) As to any Eligible Substitute Mortgage Loan or Loans, pursuant to
Section 2.05 of the Purchase Agreement each Seller shall deliver to the Trustee
with respect to such Eligible Substitute Mortgage Loan or Loans such documents
and agreements as are required to be held by the Trustee in accordance with
Section 2.01(b). For any Collection Period during which a Seller substitutes one
or more Eligible Substitute Mortgage Loans, the Servicer shall determine the
Transfer Deposit Amount, which amount shall be deposited by the applicable
Seller in the Collection Account at the time of substitution. Any amounts
received in respect of the Eligible Substitute Mortgage Loan or Loans during the
Collection Period in which the circumstances giving rise to such substitution
occur shall not be a part of the Trust Fund and shall not be deposited by the
Servicer in the Collection Account. All amounts received by the Servicer during
the Collection Period in which the circumstances giving rise to such
substitution occur in respect of any Defective Mortgage Loan so removed by the
Trust Fund shall be deposited by the Servicer in the Collection Account. Upon
such substitution, the Eligible Substitute Mortgage Loan or Loans shall be
subject to the terms of this Agreement in all respects, and the applicable
Seller shall be deemed to have made with respect to such Eligible Substitute
Mortgage Loan or Loans, as of the date of substitution, the covenants,
representations and warranties set forth in Section 2.04. The procedures applied
by a Seller in selecting each Eligible Substitute Mortgage Loan shall not be
materially adverse to the interests of the Trustee, the Certificateholders and
the Credit Enhancer.
Section 2.03. Representations and Warranties Regarding the Servicer. The
Servicer represents and warrants to the Trustee and the Credit Enhancer that as
of the Closing Date:
(i) The Servicer is duly organized and validly existing as a
national banking association and has the corporate power to own its assets
and to transact the business in which it is currently engaged. The
Servicer is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction in which the character of the
business transacted by it or any properties owned or leased by it requires
such qualification and in which the failure so to qualify would have a
material adverse effect on the business, properties, assets, or financial
condition (or other) of the Servicer;
(ii) The Servicer has the corporate power and authority to make,
execute, deliver and perform this Agreement and all of the transactions
contemplated under the Agreement, and has taken all necessary corporate
action to authorize the execution, delivery and performance of this
Agreement. When executed and delivered, this Agreement will constitute the
legal, valid and binding obligation of the Servicer
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enforceable in accordance with its terms, except as enforcement of such
terms may be limited by bankruptcy, insolvency moratorium, fraudulent
conveyance, reorganization and similar laws affecting the enforcement of
the rights of creditors of national banking associations, the deposits of
which are insured by the FDIC, and subject to general principles of
equity, (whether applied in a proceeding at law or in equity or of
creditors' rights generally);
(iii) The Servicer is not required to obtain the consent of any
other party or any consent, license, approval or authorization from, or
registration or declaration with, any governmental authority, bureau or
agency in connection with the execution, delivery, performance, validity
or enforceability of this Agreement (other than such consents, licenses,
approvals or authorizations from, or registrations or declarations with,
any governmental authority, bureau or agency that, individually or in the
aggregate, would not have a material adverse effect on the transactions
contemplated by this Agreement), except for such consent, license,
approval or authorization, or registration or declaration, as shall have
been obtained or filed, as the case may be, prior to the Closing Date;
(iv) The execution, delivery and performance of this Agreement by
the Servicer will not violate any provision of any existing law or
regulation or any order or decree of any court applicable to the Servicer
or any provision of the articles of association or bylaws of the Servicer,
or constitute a material breach of any mortgage, indenture, contract or
other agreement to which the Servicer is a party or by which the Servicer
may be bound (other than violations of such laws, regulations, orders,
decrees, mortgages, contracts or other agreements that, individually or in
the aggregate, would not have a material adverse effect on the
transactions contemplated by this Agreement); and
(v) No litigation or administrative proceeding of or before any
court, tribunal or governmental body is currently pending, or to the
knowledge of the Servicer threatened, against the Servicer or any of its
properties or with respect to this Agreement or the Investor Certificates
or the Transferor Interest, which in the opinion of the Servicer has a
reasonable likelihood of resulting in a material adverse effect on the
transactions contemplated by this Agreement.
The representations and warranties set forth in this Section shall survive the
sale and assignment of the Mortgage Loans to the Trust. Upon discovery of a
breach of any representations and warranties which materially and adversely
affects the interests of the Certificateholders or the Credit Enhancer, the
person discovering such breach shall give prompt written notice to the other
parties and to the Credit Enhancer. Within 90 days of its discovery or its
receipt of notice of breach, or, with the prior written consent of a Responsible
Officer of the Trustee, such longer period specified in such consent, the
Servicer shall cure such breach in all material respects.
Section 2.04. Assignment of Representations and Warranties of the Sellers
Regarding the Mortgage Loans; Retransfer of Certain Mortgage Loans. (a) The
Depositor hereby assigns to the Trustee, for the benefit of the Investor
Certificateholders and the Credit Enhancer, each representation and warranty
with respect to the Mortgage Loans made by the Sellers in Section 3.02 of the
Purchase Agreement, including without limitation the Depositor's right to
require the Sellers to repurchase or substitute for any such Mortgage Loan
subject to breach of any such
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representation and warranty. With respect to any representations and warranties
set forth in Section 3.02 of the Purchase Agreement that are made to the best
knowledge of a Seller, if it is discovered by such Seller, the Depositor, the
Servicer or a Responsible Officer of the Trustee that the substance of such
representation and warranty is inaccurate and such inaccuracy materially and
adversely affects the value of the related Mortgage Loan then, notwithstanding
such Seller's lack of knowledge with respect to the substance of such
representation and warranty being inaccurate at the time the representation or
warranty was made, such inaccuracy shall be deemed a breach of the applicable
representation or warranty and subject such Seller to the obligations set forth
in Section 3.03 of the Purchase Agreement.
(b) The Depositor hereby represents and warrants to the Trustee and
the Credit Enhancer that as of the Cut-Off Date, except as otherwise specified
below:
(i) No more than 0.65% of the Mortgage Loans, by Cut-Off Date Pool
Balance, are secured by Mortgaged Properties located in one United States
postal zip code;
(ii) The weighted average remaining term to maturity of the Mortgage
Loans on a contractual basis for the Mortgage Loans is approximately 204
months and no Mortgage Loan will mature according to its terms later than
December 2018. Over the term of each Mortgage Loan, the Loan Rate may not
exceed the related Loan Rate Cap, if any. The Loan Rate Caps range between
18% and 25% per annum. The Gross Margins range between 0.00% and 10.00%.
The Loan Rates on such Mortgage Loans range between 5.50% and 18.50% per
annum and the weighted average Loan Rate is approximately 9.87% per annum;
(iii) No more than 0.23% (by Cut-Off Date Pool Balance) of the
Mortgage Loans are secured by real property improved by individual
condominium units, planned development units, townhouses or two-to-four
family residences erected thereon, and at least 99.77% (by Cut-Off Date
Pool Balance) of the Mortgage Loans are secured by real property with a
detached one-family residence erected thereon;
(iv) The Credit Limits on the Mortgage Loans range between $5,000.01
and $250,000.00 with an average Credit Limit of approximately $40,574.42.
No Mortgage Loan had a principal balance in excess of approximately
$245,304.00 and the average principal balance of the Mortgage Loans is
equal to approximately $24,249.00; and
(v) Approximately 26.58%, and 73.42% of the Mortgage Loans, by
aggregate principal balance as of the Cut-Off Date for the Mortgage Loans,
are first or second liens, respectively; and
(vi) The inclusion of newly Locked Balances in any Collection Period
will not cause the aggregate amount of the Locked Balances to exceed 10%
of total outstanding Pool Balance as of the end of such Collection Period.
(c) It is understood and agreed that Depositor's assignment of the
representations and warranties set forth in Section 3.02 of the Purchase
Agreement and its representations and warranties set forth in Section 2.04(a)
and (b) hereof shall survive delivery of
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the respective Mortgage Files to the Trustee pursuant to Section 2.01 and the
termination of the rights and obligations of the Servicer pursuant to Section
7.04 or Section 8.02. Upon discovery by any Seller, the Depositor, the Servicer,
the Credit Enhancer or a Responsible Officer of the Trustee of (a) a breach of
any of the representations and warranties referred to in this Section 2.04(c)
that materially and adversely affects the interests of the Trust or the Investor
Certificateholders or the Credit Enhancer in the related Mortgage Loan or (b) a
breach of the representation and warranty set forth in Section 2.04(b) (vi), the
party discovering such breach shall give prompt written notice to the other
parties and the Credit Enhancer. Within 90 days of its discovery or its receipt
of notice of such breach, pursuant to Section 3.03 of the Purchase Agreement,
the applicable Seller shall use all reasonable efforts to cure such breach in
all material respects or shall, not later than the Business Day next preceding
the Distribution Date in the month following the Collection Period in which any
such cure period expired (or such later date that is acceptable to the Trustee
and the Credit Enhancer as evidenced by their written consents), either (a)
accept a transfer of such Mortgage Loan from the Trust or (b) except in the case
of a breach of the representation and warranty set forth in Section 2.04(b)(vi),
substitute an Eligible Substitute Mortgage Loan in the same manner and subject
to the same conditions as set forth in Section 2.02; provided, however, that the
cure for any breach of a representation and warranty relating to the
characteristics of the Mortgage Loans in the aggregate shall be a repurchase of
or substitution for only the Mortgage Loans necessary to cause such
characteristics to be in compliance with the related representation and
warranty. Upon accepting such transfer and making any required deposit into the
Collection Account or substitution of an Eligible Substitute Mortgage Loan, as
the case may be, the applicable Seller shall be entitled to receive an
instrument of assignment or transfer from the Trustee to the same extent as set
forth in Section 2.02 with respect to the transfer of Mortgage Loans under that
Section.
It is understood and agreed that the obligation of a Seller to accept a
transfer of a Mortgage Loan as to which a breach has occurred and is continuing
and to make any required deposit in the Collection Account or to substitute an
Eligible Substitute Mortgage Loan, as the case may be, shall constitute the sole
remedy against the Depositor or such Seller respecting such breach available to
Investor Certificateholders, the Trustee on behalf of Investor
Certificateholders and the Credit Enhancer. Notwithstanding the foregoing, with
regard to any breach of the representation and warranty set forth in Section
3.02(e) of the Purchase Agreement, the sale and assignment of the affected
Mortgage Loans to the Trust shall be deemed void and the applicable Seller shall
pay to the Trust the sum of the amount of the related Principal Balances, plus
unpaid accrued interest on each such Principal Balance at the applicable Loan
Rate to the date of payment.
Section 2.05. Covenants of the Depositor. The Depositor hereby covenants
that:
(a) Security Interests. Except for the transfer hereunder, the Depositor
will not sell, pledge, assign or transfer to any other Person, or grant, create,
incur, assume or suffer to exist any Lien on any Mortgage Loan, whether now
existing or hereafter created, or any interest therein; the Depositor will
notify the Trustee of the existence of any Lien on any Mortgage Loan immediately
upon discovery thereof; and the Depositor will defend the right, title and
interest of the Trust in, to and under the Mortgage Loans, whether now existing
or hereafter created, against all claims of third parties claiming through or
under the Depositor; provided, however, that nothing in this Section 2.05(a)
shall prevent or be deemed to prohibit the Depositor from
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suffering to exist upon any of the Mortgage Loans any Liens for municipal or
other local taxes and other governmental charges if such taxes or governmental
charges shall not at the time be due and payable or if the Depositor shall
currently be contesting the validity thereof in good faith by appropriate
proceedings and shall have set aside on its books adequate reserves with respect
thereto.
(b) Negative Pledge. The Depositor hereby agrees not to transfer, assign,
exchange, pledge, finance, hypothecate, grant a security interest in or
otherwise convey the Transferor Interest except in accordance with Sections 6.05
and 7.02.
(c) Additional Indebtedness. So long as the Investor Certificates are
outstanding the Depositor shall not incur any debt other than debt that (i) is
non-recourse to the assets of the Depositor other than the Mortgage Loans
specifically pledged as security for such debt or (ii) is subordinated in right
of payment to the rights of the Investor Certificateholders or (iii) is assigned
a rating by each of the Rating Agencies that is the same as the then current
rating of the Investor Certificates.
(d) Downgrading. The Depositor shall not engage in an activity which would
result in a downgrading of the Investor Certificates.
(e) Amendment to Certificate of Incorporation. The Depositor shall not
amend its Certificate of Incorporation without prior written notice to the
Rating Agencies and the Credit Enhancer.
(f) Principal Place of Business. The Depositor's principal place of
business is in Ohio and it will not change its principal place of business
without prior written notice to the Rating Agencies.
Section 2.06. Retransfers of Mortgage Loans at Election of the Holder of
the Transferor Interest. Subject to the conditions set forth below, the holder
of the Transferor Interest may, but shall not be obligated to, require the
retransfer of Mortgage Loans from the Trust to the holder of the Transferor
Interest as of the close of business on a Distribution Date (the "Transfer
Date"). On the fifth Business Day (the "Transfer Notice Date") prior to the
Transfer Date designated in such notice, the holder of the Transferor Interest
shall give the Trustee and the Servicer a notice of the proposed retransfer that
contains a list of the Mortgage Loans to be retransferred. Such retransfers of
Mortgage Loans shall be permitted upon satisfaction of the following conditions:
(i) No Rapid Amortization Event has occurred;
(ii) On the Transfer Notice Date the Transferor Principal Balance
(after giving effect to the removal from the Trust of the Mortgage Loans
proposed to be retransferred) is at least equal to the Minimum Transferor
Interest;
(iii) The retransfer of any Mortgage Loans on any Transfer Date
during the Managed Amortization Period shall not, in the reasonable belief
of the holder of the Transferor Interest, cause a Rapid Amortization Event
to occur or an event which with notice or lapse of time or both would
constitute a Rapid Amortization Event;
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(iv) On or before the Transfer Date, the holder of the Transferor
Interest shall have delivered to the Trustee and the Depositor an Opinion
of Counsel to the effect that such removal of Mortgage Loans, upon
satisfaction of any additional conditions imposed by the Department of
Labor, should not result in the unavailability of the exemptive relief
under Prohibited Transaction Exemption ("PTE") 89-90, 54 Fed. Reg. 42597
(Oct. 17, 1989) (as amended by PTE 97-34, 62 Fed. Reg. 39021 (July 21,
1997), including any amendments thereto, and the holder of the Transferor
Interest shall have satisfied any such additional conditions;
(v) On or before the Transfer Date, the holder of the Transferor
Interest shall have delivered to the Trustee a revised Mortgage Loan
Schedule, reflecting the proposed retransfer and the Transfer Date, and
the Servicer shall have marked the Electronic Ledger to show that the
Mortgages Loans transferred to the holder of the Transferor Interest are
no longer owned by the Trust;
(vi) The holder of the Transferor Interest shall represent and
warrant that no selection procedures reasonably believed by the holder of
the Transferor Interest to be adverse to the interests of the Investor
Certificateholders or the Credit Enhancer were utilized in the selection
of the Mortgage Loans to be removed from the Trust;
(vii) In connection with the first retransfer of Mortgage Loans
pursuant to this Section, each Rating Agency shall have received on or
prior to the related Transfer Notice Date notice from the holder of the
Transferor Interest of such proposed retransfer of Mortgage Loans;
(viii) The holder of the Transferor Interest shall have delivered to
the Trustee and the Credit Enhancer an officer's certificate certifying
that the items set forth in subparagraphs (i) through (vii), inclusive,
have been performed or are true and correct, as the case may be. The
Trustee may conclusively rely on such Officer's Certificate, shall have no
duty to make inquiries with regard to the matters set forth therein and
shall incur no liability in so relying.
The holder of the Transferor Interest shall not be permitted to require the
retransfer of any Mortgage Loan (including any delinquent Mortgage Loan) except
under the conditions specified above; provided however, that the holder of the
Transferor Interest may be required to accept retransfer of certain Mortgage
Loans pursuant to Section 2.04 hereof, to the extent a Seller is the holder of
the Transferor Interest. Upon receiving the requisite information from the
holder of the Transferor Interest, the Servicer shall perform in a timely manner
those acts required of it, as specified above. Upon satisfaction of the above
conditions, on the Transfer Date the Trustee shall deliver, or cause to be
delivered, to the holder of the Transferor Interest a written itemization of
each Mortgage Loan being transferred, together with the Mortgage File for each
such Mortgage Loan, and the Trustee shall execute and deliver to the holder of
the Transferor Interest such other documents prepared by the holder of the
Transferor Interest as shall be reasonably necessary to transfer such Mortgage
Loans to the holder of the Transferor Interest. Any such transfer of the Trust's
right, title and interest in and to Mortgage Loans shall be without recourse,
representation or warranty by or of the Trustee or the Trust to the holder of
the Transferor Interest.
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Section 2.07. Execution and Authentication of Investor Certificates. The
Trustee, on behalf of the Trust, has caused to be executed, authenticated and
delivered to or upon the order of the Depositor, in exchange for the corpus of
the Trust, concurrently with the sale, assignment and conveyance to the Trustee
of the corpus of the Trust, Investor Certificates in authorized denominations
and the Transferor Interest, together evidencing the ownership of the entire
Trust.
Section 2.08. Tax Treatment. It is the intention of the Depositor, the
holder of the Transferor Interest and the Investor Certificateholders that the
Investor Certificates will be indebtedness for federal, state and local income
and franchise tax purposes and for purposes of any other tax imposed on or
measured by income. The terms of the Agreement shall be interpreted to further
the intent of the parties hereto. The holder of the Transferor Interest, the
Depositor, the Trustee and each Investor Certificateholder (or Certificate
Owner) by acceptance of its Investor Certificate (or, in the case of a
Certificate Owner, by virtue of such Certificate Owner's acquisition of a
beneficial interest therein) agrees to treat the Investor Certificates (or
beneficial interest therein), for purposes of federal, state and local income or
franchise taxes and any other tax imposed on or measured by income, as
indebtedness of the holder of the Transferor Interest secured by the assets of
the Trust and to report the transactions contemplated by this Agreement on all
applicable tax returns in a manner consistent with such treatment. Each Investor
Certificateholder agrees that it will cause any Certificate Owner acquiring an
interest in an Investor Certificate through it to comply with this Agreement as
to treatment of the Investor Certificates as indebtedness for federal, state and
local income and franchise tax purposes and for purposes of any other tax
imposed on or measured by income. The Trustee will prepare and file all tax
reports required hereunder.
Section 2.09. Representations and Warranties of the Depositor. The
Depositor represents and warrants to the Trustee on behalf of the
Certificateholders and the Credit Enhancer as follows:
(i) The Depositor has full corporate power and authority to enter
into this Agreement. The execution, delivery and performance of this
Agreement and compliance with the terms and provisions hereof will not
result in a violation of any of the terms and provisions of, or constitute
a default under, the Certificate of Incorporation or By-Laws of the
Depositor.
(ii) This Agreement constitutes a legal, valid and binding
obligation of the Depositor, enforceable against the Depositor in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect affecting the enforcement of
creditors' rights in general and except as such enforceability may be
limited by general principles of equity (whether considered in a
proceeding at law or in equity);
(iii) Immediately prior to the sale and assignment by the Depositor
to the Trustee of each Mortgage Loan, the Depositor was the sole
beneficial owner of each Mortgage Loan (insofar as such title was conveyed
to it by the applicable Seller) subject to no prior lien, claim,
participation interest, mortgage, security interest, pledge, charge or
other encumbrance or other interest of any nature;
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(iv) As of the Closing Date, the Depositor has transferred all
right, title and interest in the Mortgage Loans to the Trustee; and
(v) The Depositor has not transferred the Mortgage Loans to the
Trustee with any intent to hinder, delay or defraud any of its creditors.
ARTICLE III
Administration and Servicing
of Mortgage Loans
Section 3.01. The Servicer.
(a) The Servicer shall service and administer the Mortgage Loans in a
manner consistent with the terms of this Agreement and with general industry
practice and shall have full power and authority, acting alone or through a
subservicer, to do any and all things in connection with such servicing and
administration which it may deem necessary or desirable, it being understood,
however, that the Servicer shall at all times remain responsible to the Trustee,
the Certificateholders, the holder of the Transferor Interest and the Credit
Enhancer for the performance of its duties and obligations hereunder in
accordance with the terms hereof. Any amounts received by any subservicer in
respect of a Mortgage Loan shall be deemed to have been received by the Servicer
whether or not actually received by it. Without limiting the generality of the
foregoing, the Servicer shall continue, and is hereby authorized and empowered
by the Trustee, to execute and deliver, on behalf of itself, the
Certificateholders and the Trustee, or any of them, 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 Mortgage Loans and with
respect to the Mortgaged Properties. The Trustee shall, upon the written request
of a Servicing Officer, furnish the Servicer with any powers of attorney and
other documents necessary or appropriate to enable the Servicer to carry out its
servicing and administrative duties hereunder.
(b) The Servicer in such capacity may consent to the placing of a lien
senior to that of any Mortgage on the related Mortgaged Property, provided that
(i) such Mortgage became a first lien mortgage after the related
Mortgage Loan was conveyed to the Trust and, immediately following the
placement of such senior lien, such Mortgage is a second lien mortgage and
the outstanding principal amount of the mortgage loan secured by such
senior lien is no greater than the outstanding principal amount of the
senior mortgage loan secured by the Mortgaged Property as of the date the
related Mortgage Loan was originated; or
(ii) the Mortgage relating to such Mortgage Loan was in a second
lien position as of the Cut-Off Date and the new senior lien secures a
mortgage loan that refinances an existing first mortgage loan and the
outstanding principal amount of the replacement first mortgage loan
immediately following such refinancing is not greater than the outstanding
principal amount of such existing first mortgage loan at the date of
origination of such Mortgage Loan; and provided, further, that such senior
mortgage does not secure a note that provides for negative amortization.
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The Servicer also may, without prior approval from the Rating Agencies or
the Credit Enhancer, increase the Credit Limits on Mortgage Loans provided that
(i) based upon a new valuation (if required), the Combined Loan-to-Value Ratio
of each such Mortgage Loan after giving effect to such increase is no greater
than 100%, (ii) such increases are consistent with the Servicer's underwriting
policies and (iii) the weighted average Combined Loan to Value Ratio of such
Mortgage Loans does not exceed 81.18% as of the last day of any Collection
Period.
The Servicer also may, without prior approval from the Rating Agencies and
the Credit Enhancer, solicit or accept requests from Mortgagors for a reduction
in Loan Rates; provided that the aggregate of such reductions shall not cause
the difference between the Cut-Off Date Weighted Average Gross Margin and the
Recalculated Weighted Average Gross Margin to exceed 0.50%.
The Servicer also may, without prior approval from the Rating Agencies and
the Credit Enhancer, on each occasion on which the "Skip-a-Pay Program" is
offered, permit Mortgagors representing up to 50% of the Pool Balance to forego
certain monthly payments under the "Skip-a-Pay Program," provided that such
option is not offered more than twice each year and no Mortgagor foregoes a
monthly payment under the "Skip-a-Pay Program" more than seven times during the
related Mortgage term.
The Servicer also may extend the Draw term of any Mortgage Loan.
Upon the prior written consent of each of the Rating Agencies and the
Credit Enhancer, each of the percentages contained in the immediately preceding
five paragraphs may be modified.
In addition, the Servicer may agree to changes in the terms of a Mortgage
Loan at the request of the Mortgagor, or may solicit Mortgagors to change the
terms of Mortgage Loans, provided that such changes (i) do not materially and
adversely affect the interests of Certificateholders or the Credit Enhancer and
(ii) are consistent with prudent and customary business practice as evidenced by
a Certificate signed by a Servicing Officer delivered to the Trustee and the
Credit Enhancer. Nothing herein shall limit the right of the Servicer to solicit
Mortgagors with respect to new loans (including mortgage loans) that are not
Mortgage Loans.
The relationship of the Servicer (and of any successor to the Servicer as
servicer under this Agreement) to the Trustee under this Agreement is intended
by the parties to be that of an independent contractor and not that of a joint
venturer, partner or agent.
(c) In the event that the rights, duties and obligations of the Servicer
are terminated hereunder, any successor to the Servicer in its sole discretion
may, to the extent permitted by applicable law, terminate the existing
subservicer arrangements with any subservicer or assume the terminated
Servicer's rights under such subservicing arrangements which termination or
assumption will not violate the terms of such arrangements.
Section 3.02. Collection of Certain Mortgage Loan Payments.
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(a) The Servicer shall make reasonable efforts to collect all payments
called for under the terms and provisions of the Mortgage Loans, and shall, to
the extent such procedures shall be consistent with this Agreement, follow such
collection procedures as it follows with respect to mortgage loans in its
servicing portfolio comparable to the Mortgage Loans. Consistent with, and
without limiting the generality of, the foregoing, the Servicer may in its
discretion (i) waive any late payment charge or any assumption fees or other
fees which may be collected in the ordinary course of servicing such Mortgage
Loan and (ii) arrange with a Mortgagor a schedule for the payment of interest
due and unpaid; provided that such arrangement is consistent with the Servicer's
policies with respect to the mortgage loans it owns and services; and provided,
further, that notwithstanding such arrangement such Mortgage Loans will be
included in the information regarding delinquent Mortgage Loans set forth in the
Servicing Certificate and monthly statement to Certificateholders pursuant to
Section 5.03.
(b) The Servicer shall establish and maintain a trust account (the
"Collection Account") titled "The Bank of New York, as Trustee, in trust for the
registered holders of Banc One ABS Corporation HELOC Asset-Backed Certificates,
Series 1998-1 and MBIA." The Collection Account shall be an Eligible Account. On
the Closing Date, the Servicer shall deposit any amounts representing payments
on, and any collections in respect of, the Mortgage Loans received after the
Cut-off Date and prior to the Closing Date, and thereafter the Servicer, or the
Seller, as the case may be, shall deposit within two Business Days following
receipt thereof the following payments and collections received or made by it
(without duplication):
(i) all collections on and in respect of the Mortgage Loans;
(ii) Net Liquidation Proceeds net of any related Foreclosure Profit;
(iii) Insurance Proceeds (including, for this purpose any amount
required to be credited by the Servicer pursuant to the last sentence of
Section 3.04 and excluding the portion thereof, if any, that has been
applied to the restoration or repair of the related Mortgaged Property or
released to the related Mortgagor in accordance with the normal servicing
procedures of the Servicer); and
(iv) any amounts required to be deposited therein pursuant to
Section 10.01;
provided, however, that with respect to each Collection Period, the Servicer
shall be permitted to retain the Servicing Fee for such Collection Period from
payments in respect of interest on the Mortgage Loans. The foregoing
requirements with respect to deposits to the Collection Account are exclusive,
it being understood that, without limiting the generality of the foregoing, the
Servicer need not deposit in the Collection Account amounts representing
Foreclosure Profits, fees or late charge penalties payable by Mortgagors, or
amounts received by the Servicer for the accounts of Mortgagors for application
towards the payment of taxes, insurance premiums, assessments, excess pay off
amounts and similar items. The Servicer shall remit all Foreclosure Profits to
the applicable Seller.
Notwithstanding the foregoing, so long as the Servicer's short-term debt
obligations are rated at least "A1" and "P1" by Standard & Poor's and Moody's,
respectively, all amounts collected by the Servicer may be commingled with other
general collections of the Servicer and
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amounts collected on the Mortgage Loans for each Collection Period shall be
deposited in same-day funds into the Collection Account no later than one
Business Day prior to the related Distribution Date.
The Trustee shall hold amounts deposited in the Collection Account as trustee
for the Certificateholders and for the Credit Enhancer. Such funds may be
invested in Eligible Investments maturing no later than one Business Day prior
to the date on which the amount the deposit therein is required to be deposited
to the Collection Account, or on such Distribution Date if approved by the
Rating Agencies and the Credit Enhancer. In addition, the Servicer shall notify
the Trustee and the Credit Enhancer in writing on each Determination Date of the
amount of payments and collections in the Collection Account allocable to
Interest Collections and Principal Collections for the related Distribution
Date.
All income and gain, if any, realized from any investment in Eligible
Investments of funds in the Collection Account shall be for the benefit of the
Investor Certificateholders. The amount of any losses incurred in respect of the
principal amount of any such investments shall be deemed not to be on deposit in
the Collection Account.
Section 3.03. Withdrawals from the Collection Account. From time to
time, withdrawals may be made from the Collection Account by the Servicer for
the following purposes:
(i) To the Servicer as payment for its Servicing Fee pursuant
to Section 3.08;
(ii) To pay to the Servicer amounts on deposit in the
Collection Account that are not to be included in the distributions and
payments pursuant to Section 5.01 to the extent provided by the second
to the last and the last paragraph of Section 3.02(b);
(iii) To make or to permit the Paying Agent to make
distributions and payments pursuant to Section 5.01; and
(iv) Prior to the Collection Period preceding the Rapid
Amortization Commencement Date, to pay to the applicable Seller, an
amount equal to the Principal Balance of any Additional Balances as and
when created during the related Collection Period; provided that the
aggregate amount so paid to such Seller in respect of Additional
Balances at any time during any Collection Period shall not exceed the
amount of Principal Collections theretofore received for such
Collection Period.
If the Servicer deposits in the Collection Account any amount not
required to be deposited therein or any amount in respect of payments by
Mortgagors made by checks subsequently returned for insufficient funds or other
reason for non-payment it may at any time withdraw such amount from the
Collection Account, and any such amounts shall not be included in the amounts to
be deposited in the Collection Account pursuant to Section 3.02(b), any
provision herein to the contrary notwithstanding.
Section 3.04. Maintenance of Hazard Insurance; Property Protection
Expenses. The Servicer shall not be obligated to monitor the maintenance of
hazard insurance subsequent to the
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origination of a Mortgage Loan. The Servicer shall maintain on property acquired
upon foreclosure, or by deed in lieu of foreclosure, hazard insurance with
extended coverage in an amount that is at least equal to the lesser of (i) the
maximum insurable value from time to time of the improvements which are a part
of such Mortgaged Property or (ii) the combined principal balance owing on such
Mortgage Loan and any mortgage loan senior to such Mortgage Loan at the time of
such foreclosure or deed in lieu of foreclosure plus accrued interest and the
good-faith estimate of the Servicer of related Liquidation Expenses to be
incurred in connection therewith. Amounts collected by the Servicer under any
such policies shall be deposited in the Collection Account to the extent called
for by Section 3.02. In cases in which any Mortgaged Property is located in a
federally designated flood area, the hazard insurance to be maintained for the
related Mortgage Loan shall include flood insurance. All such flood insurance
shall be in such amounts as are required under applicable guidelines of the
Federal Flood Emergency Act. The Servicer shall be under no obligation to
require that any Mortgagor maintain earthquake or other additional insurance and
shall be under no obligation itself to maintain any such additional insurance on
property acquired in respect of a Mortgage Loan, other than pursuant to such
applicable laws and regulations as shall at any time be in force and as shall
require such additional insurance. If the Servicer shall obtain and maintain a
blanket insurance policy consistent with prudent industry standards insuring
against hazard losses on all of the Mortgage Loans in an aggregate amount
prudent under industry standards, it shall conclusively be deemed to have
satisfied its obligations as set forth in the first sentence of this Section
3.04. Such blanket insurance policy may provide for a deductible. In the event a
loss on a Mortgage Property occurs which would have been covered by the hazard
insurance policy required by the first sentence of this Section 3.04, the
Servicer shall deposit into the Collection Account, the amount not payable under
the blanket policy because of such deductible.
Section 3.05. Assumption and Modification Agreements. In any case in
which a Mortgaged Property has been or is about to be conveyed by the Mortgagor,
the Servicer shall exercise its right to accelerate the maturity of such
Mortgage Loan consistent with the then current practice of the Servicer and
without regard to the inclusion of such Mortgage Loan in the Trust. If it elects
not to enforce its right to accelerate or if it is prevented from doing so by
applicable law, the Servicer (so long as such action conforms with the
underwriting standards generally acceptable in the industry at the time for new
origination) is authorized to take or enter into an assumption and modification
agreement from or with the Person to whom such Mortgaged Property has been or is
about to be conveyed, pursuant to which such Person becomes liable under the
Credit Line Agreement and, to the extent permitted by applicable law, the
Mortgagor remains liable thereon. The Servicer shall notify the Trustee that any
assumption and modification agreement has been completed by delivering to the
Trustee an Officer's Certificate certifying that such agreement is in compliance
with this Section 3.05 and by forwarding to the applicable Custodian, as agent
for the Trustee, the original copy of such assumption and modification
agreement. Any such assumption and modification agreement shall, for all
purposes, be considered a part of the related Mortgage File to the same extent
as all other documents and instruments constituting a part thereof. No change in
the terms of the related Credit Line Agreement may be made by the Servicer in
connection with any such assumption to the extent that such change would not be
permitted to be made in respect of the original Credit Line Agreement pursuant
to the fourth paragraph of Section 3.01(a). Any fee collected by the Servicer
for entering into any such agreement will be retained by the Servicer as
additional servicing compensation.
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Section 3.06. Realization Upon Defaulted Mortgage Loans. The Servicer
shall foreclose upon or otherwise comparably convert to ownership Mortgaged
Properties securing such of the Mortgage Loans as come into and continue in
default when, in the opinion of the Servicer based upon the practices and
procedures referred to in the following sentence, no satisfactory arrangements
can be made for collection of delinquent payments pursuant to Section 3.02;
provided that if the Servicer has actual knowledge or reasonably believes that
any Mortgaged Property is affected by hazardous or toxic wastes or substances
and that the acquisition of such Mortgaged Property would not be commercially
reasonable, then the Servicer will not cause the Trust to acquire title to such
Mortgaged Property in a foreclosure or similar proceeding. In connection with
such foreclosure or other conversion, the Servicer shall follow such practices
(including, in the case of any default on a related senior mortgage loan, the
advancing of funds to correct such default) and procedures as it shall deem
necessary or advisable and as shall be normal and usual in its general mortgage
servicing activities. The foregoing is subject to the proviso that the Servicer
shall not be required to expend its own funds in connection with any foreclosure
or towards the correction of any default on a related senior mortgage loan or
restoration of any property unless it shall determine that such expenditure will
increase Net Liquidation Proceeds.
If title to any Mortgaged Property is acquired in foreclosure or by
deed in lieu of foreclosure, the deed or Certificate of sale shall be issued to
the Trustee, or to its nominee on behalf of Certificateholders.
Section 3.07. Trustee to Cooperate. On or before each Distribution
Date, the Servicer shall notify the Trustee of the payment in full of the
Principal Balance of any Mortgage Loan during the preceding Collection Period,
which notification shall be by a certification (which certification shall
include a statement to the effect that all amounts received in connection with
such payment which are required to be deposited in the Collection Account
pursuant to Section 3.02 have been so deposited or credited) of a Servicing
Officer. Upon any such payment in full, the Servicer is authorized to execute,
pursuant to the authorization contained in Section 3.01, if the assignments of
Mortgage have been recorded as required hereunder, an instrument of satisfaction
regarding the related Mortgage, which instrument of satisfaction shall be
recorded by the Servicer if required by applicable law and be delivered to the
Person entitled thereto. It is understood and agreed that no expenses incurred
in connection with such instrument of satisfaction or transfer shall be
reimbursed from amounts deposited in the Collection Account. From time to time
and as appropriate for the servicing or foreclosure of any Mortgage Loan, or in
connection with the payment in full of the Principal Balance of any Mortgage
Loan, the Trustee shall, upon request of the Servicer and delivery to the
Trustee of a Request for Release substantially in the form attached hereto as
Exhibit F signed by a Servicing officer, release the related Mortgage File to
the Servicer, and the Trustee shall execute such documents, in the forms
provided by the Servicer, as shall be necessary to the prosecution of any such
proceedings or the taking of other servicing actions. Such trust receipt shall
obligate the Servicer to return the Mortgage File to the Trustee when the need
therefor by the Servicer no longer unless the Mortgage Loan shall be liquidated,
in which case, upon receipt of a Certificate of a Servicing Officer similar to
that hereinabove specified, the trust receipt shall be released by the Trustee
or such Custodian to the Servicer.
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In order to facilitate the foreclosure of the Mortgage securing any
Mortgage Loan that is in default following recordation of the assignments of
Mortgage in accordance with the provisions hereof, the Trustee shall, if so
requested in writing by the Servicer, execute an appropriate assignment in the
form provided to the Trustee by the Servicer to assign such Mortgage Loan for
the purpose of collection to the Servicer or to the related subservicer (any
such assignment shall unambiguously indicate that the assignment is for the
purpose of collection only), and, upon such assignment, the Servicer shall
thereupon bring all required actions in its own name and otherwise enforce the
terms of the Mortgage Loan and deposit the Net Liquidation Proceeds, exclusive
of Foreclosure Profits, received with respect thereto in the Collection Account.
In the event that all delinquent payments due under any such Mortgage Loan are
paid by the Mortgagor and any other defaults are cured, then the Servicer shall
promptly reassign such Mortgage Loan to the Trustee and return the related
Mortgage File to the place where it was being maintained.
Section 3.08. Servicing Compensation; Payment of Certain Expenses by
Servicer. The Servicer shall be entitled to receive the Servicing Fee pursuant
to Section 3.03 as compensation for its services in connection with servicing
the Mortgage Loans. Moreover, additional servicing compensation in the form of
late payment charges or other receipts not required to be deposited in the
Collection Account (other than Foreclosure Profits) shall be retained by the
Servicer. The Servicer shall be required to pay all expenses incurred by it in
connection with its activities hereunder (including payment of all other fees
and expenses not expressly stated hereunder to be for the account of the
Certificateholders) and shall not be entitled to reimbursement therefor except
as specifically provided herein. Liquidation Expenses are reimbursable to the
Servicer solely from related Liquidation Proceeds.
Section 3.09. Annual Statement as to Compliance.
(a) The Servicer shall deliver to the Trustee, the Credit Enhancer and
the Rating Agencies, on or before May 31 of each year, beginning May 31, 1999,
an Officer's Certificate stating that (i) a review of the activities of the
Servicer during the preceding fiscal year (or such shorter period as is
applicable in the case of the first report) and of its 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 material obligations under this Agreement throughout such fiscal 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.
(b) The Servicer shall deliver to the Trustee, the Credit Enhancer and
each of the Rating Agencies, promptly after having obtained knowledge thereof,
but in no event later than five Business Days thereafter, written notice by
means of an Officer's Certificate of any event which with the giving of notice
or the lapse of time or both, would become an Event of Servicing Termination.
Section 3.10. Annual Servicing Report. On or before May 31 of each
year, beginning May 31, 1999, the Servicer, at its expense, shall cause a firm
of nationally recognized independent public accountants (who may also render
other services to the Servicer) to furnish a report to the Trustee, the Credit
Enhancer and each Rating Agency to the effect that such firm
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has examined certain documents and records relating to the servicing of mortgage
loans during the most recent fiscal year then ended under pooling and servicing
agreements (substantially similar to this Agreement, including this Agreement)
that such examination, was conducted substantially in compliance with the
Uniform Single Audit Program for Mortgage Bankers and that such examination has
disclosed no items of noncompliance with the provisions of this Agreement which,
in the opinion of such firm, are material, except for such items of
noncompliance as shall be set forth in such report.
Section 3.11. RESERVED
Section 3.12. Access to Certain Documentation and Information Regarding
the Mortgage Loans.
(a) The Servicer shall provide to the Trustee, the Credit Enhancer, any
Investor Certificateholders that are federally insured savings and loan
associations, the Office of Thrift Supervision, successor to the Federal Home
Loan Bank Board, the FDIC and the supervisory agents and examiners of the office
of Thrift Supervision access to the documentation regarding the Mortgage Loans
required by applicable regulations of the office of Thrift Supervision and the
FDIC (acting as operator of the SAIF or the BIF), such access being afforded
without charge but only upon reasonable request and during normal business hours
at the offices of the Servicer. Nothing in this Section 3.12 shall derogate from
the obligation of the Servicer to observe any applicable law prohibiting
disclosure of information regarding the Mortgagors and the failure of the
Servicer to provide access as provided in this Section 3.12 as a result of such
obligation shall not constitute a breach of this Section 3.12.
(b) The Servicer shall supply information in such form as the Trustee
shall reasonably request to the Trustee and the Paying Agent, on or before the
start of the Determination Date preceding the related Distribution Date, as is
required in the Trustee's reasonable judgment to enable the Paying Agent or the
Trustee, as the case may be, to make required distributions and to furnish the
required reports to Certificateholders and to make any claim under the Policy.
Section 3.13. Maintenance of Certain Servicing Insurance Policies.
During the term of its service as servicer, the Servicer shall maintain in force
(i) a policy or policies of insurance (which may be self-insurance) covering
errors and omissions in the performance of its obligations as master servicer
hereunder and (ii) a fidelity bond (or self-insurance) in respect of its
officers, employees or agents. Each such policy or policies and bond together
shall comply with the requirements from time to time of the Federal National
Mortgage Association for persons performing servicing for mortgage loans
purchased by such Association.
Section 3.14. Reports to the Securities and Exchange Commission. The
Trustee shall, on behalf of the Trust, cause to be filed with the Securities and
Exchange Commission any periodic reports required to be filed under the
provisions of the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Securities and Exchange Commission thereunder. Upon the
request of the Trustee, each of the Seller, the Servicer, the Depositor and the
holder of the Transferor Interest shall cooperate with the Trustee in the
preparation of any such report and shall provide to the Trustee in a timely
manner all such information or
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documentation as the Trustee may reasonably request in connection with the
performance of its duties and obligations under this Section.
Section 3.15. Tax Returns. In accordance with Section 2.08 hereof, the
Trustee shall prepare and file any Federal, State or local income and franchise
tax return for the Trust as well as any other applicable return and apply for a
taxpayer identification number on behalf of the Trust. The holder of the
Transferor Interest shall treat the Mortgage Loans as its property for all
Federal, State or local tax purposes and shall report all income earned thereon
(including amounts payable as fees to the Servicer) as its income for income tax
purposes. In the event the Trust shall be required pursuant to an audit or
administrative proceeding or change in applicable regulations to file Federal,
State or local tax returns, the Trustee shall prepare and file or shall cause to
be prepared and filed any tax returns required to be filed by the Trust; the
Trustee shall promptly sign such returns and deliver such returns after
signature to the Servicer and such returns shall be filed by the Servicer. The
Trustee shall also prepare or shall cause to be prepared all tax information
required by law to be distributed to Investor Certificateholders. In no event
shall the Trustee or the Servicer be liable for any liabilities, costs or
expenses of the Trust, the Investor Certificateholders, the holder of the
Transferor Interest or the Certificate Owners arising under any tax law,
including without limitation Federal, State or local income and franchise or
excise taxes or any other tax imposed on or measured by income (or any interest
or penalty with respect thereto or arising from a failure to comply therewith.
Section 3.16. Information Required by the Internal Revenue Service
Generally and Reports of Foreclosures and Abandonments of Mortgaged Property.
The Trustee shall prepare and deliver all federal and state information reports
when and as required by all applicable state and federal income tax laws
including without limitation those under Sections 6050M, 6050J and 6050P of the
Code. In particular, with respect to the requirement under Section 6050J of the
Code to the effect that the Servicer shall make reports of foreclosures and
abandonments of any mortgaged property for each year beginning in 1999, the
Servicer shall file reports relating to each instance occurring during the
previous calendar year in which the Servicer (i) on behalf of the Trustee
acquires an interest in any Mortgaged Property through foreclosure or other
comparable conversion in full or partial satisfaction of a Mortgage Loan, or
(ii) knows or has reason to know that any Mortgaged Property has been abandoned.
The report from the Servicer shall be in form and substance sufficient to meet
the reporting requirements imposed by Section 6050J.
ARTICLE IV
Servicing Certificate
Section 4.01. Servicing Certificate. Not later than each Determination
Date, the Servicer shall deliver (a) to the Trustee, the Statement to
Certificateholders required to be prepared pursuant to Section 5.03 and (b) to
the Trustee, the Seller, the Depositor, the Paying Agent, the Credit Enhancer
and each Rating Agency a Servicing Certificate (in written form or the form of
computer readable media or such other form as may be agreed to by the Trustee
and the Servicer), together with an Officer's Certificate to the effect that
such Servicing Certificate is true and correct in all material respects, stating
the related Collection Period, Distribution Date, the series number of the
Certificates, the date of this Agreement, and:
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(i) the aggregate amount of collections received from the
Mortgage Loans on or prior to the Determination Date in respect of such
Collection Period;
(ii) the aggregate amount of (a) Interest Collections and (b)
Principal Collections for such Collection Period;
(iii) the Investor Floating Allocation Percentage and the
Investor Fixed Allocation Percentage for such Collection Period;
(iv) the Investor Interest Collections and Investor Principal
Collections for such Collection Period;
(v) the Transferor Interest Collections and Transferor
Principal Collections for such Collection Period;
(vi) the Investor Certificate Interest and the Investor
Certificate Rate for the related Interest Period;
(vii) the amount, if any, of such Investor Certificate
Interest that is not payable on account of insufficient Investor
Interest Collections;
(viii) the portion of the Unpaid Investor Certificate Interest
Shortfall, if any, the amount of interest on such shortfall at the
Certificate Rate applicable from time to time (separately stated) to be
distributed on such Distribution Date;
(ix) the Unpaid Investor Certificate Interest Shortfall, if
any, to remain after the distribution on such Distribution Date;
(x) the Accelerated Principal Distribution Amount and the
portion thereof that will be distributed pursuant to Section
5.01(a)(viii);
(xi) the Scheduled Principal Collections Distribution Amount,
separately stating the components thereof;
(xii) the amount of any Transfer Deposit Amount paid by the
Seller or the Depositor pursuant to Section 2.02 or 2.04;
(xiii) any accrued and unpaid Servicing Fees for previous
Collection Periods and the Servicing Fee for such Collection Period;
(xiv) the Investor Loss Amount for such Collection Period;
(xv) the aggregate amount, if any, of Investor Loss Reduction
Amounts for previous Distribution Dates that have not been previously
reimbursed to Investor Certificateholders pursuant to 5.01(a)(iv);
(xvi) the aggregate Principal Balance of the Mortgage Loans as
of the end of the related Collection Period and as of the end of the
Collection Period preceding the related
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Collection Period, separately identifying the aggregate Locked Balances
and HELOC Balances, together with the percentage of Locked Balances as
of the end of the related Collection Period (calculated by dividing the
aggregate Locked Balances by the Pool Balance as of such date);
(xvii) the Pool Balance as of the end of the related
Collection Period and as of the end of the Collection Period preceding
the related Collection Period;
(xviii) the Invested Amount as of the end of the related
Collection Period;
(xix) the Investor Certificate Principal Balance and Pool
Factor after giving effect to the distribution on such Distribution
Date and to any reduction on account of the Investor Loss Amount;
(xx) the Transferor Principal Balance after giving effect to
the distribution on such Distribution Date;
(xxi) the aggregate amount of Additional Balances created
during the related Collection Period;
(xxii) the number and aggregate Principal Balances of Mortgage
Loans (x) as to which the Minimum Monthly Payment is delinquent for
30-59 days, 60-89 days and 90 or more days, respectively and (y) that
have become REO, in each case as of the end of the related Collection
Period;
(xxiii) whether a Rapid Amortization Event has occurred since
the prior Determination Date, specifying each such Rapid Amortization
Event if one has occurred; and
(xxiv) whether an Event of Servicing Termination has occurred
since the prior Determination Date, specifying each such Event of
Servicing Termination if one has occurred;
(xxv) the amount to be distributed to the Credit Enhancer
pursuant to Section 5.01(a)(vi) and Section 5.01(a)(ix), stated
separately;
(xxvi) the amount to be distributed to the Spread Account
pursuant to Section 5.01(a)(vii);
(xxvii) the Guaranteed Principal Distribution Amount for such
Distribution Date;
(xxviii) the Credit Enhancement Draw Amount, if any, for such
Distribution Date;
(xxix) the amount to be distributed to the holder of the
Transferor Interest pursuant to Section 5.01(a)(xii);
(xxx) the amount to be paid to the Servicer pursuant to
Section 5.01(a)(x);
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(xxxi) the weighted average Loan Rate as of the end of the
related Collection Period;
(xxxii) the total amount of funds on deposit in the Spread
Account (after giving effect to any deposit thereto and withdrawals
therefrom), the applicable Required Spread Account Amount and the
aggregate amount of any withdrawals from the Spread Account for such
Distribution Date;
(xxxiii) the Overcollateralization Amount after giving to the
distribution to be made on such Distribution Date;
(xxxiv) the number and Principal Balances of any Mortgage
Loans retransferred to the holder of the Transferor Interest pursuant
to Section 2.06;
(xxxv) the Recalculated Weighted Average Gross Margin;
(xxxvi) the weighted Combined Loan-to-Value Ratio as of the
last day of the related Collection Period; and
(xxxvii) the number and aggregate Principal Balance of all
Mortgage Loans that did not receive a monthly payment during such
Collection Period pursuant to the "Skip-a-Pay Program".
The Trustee shall conclusively rely upon the information contained in a
Servicing Certificate for purposes of making distributions pursuant to Section
5.01, shall have no duty to inquire into such information and shall have no
liability in so relying. The format and content of the Servicing Certificate may
be modified by the mutual agreement of the Servicer, the Trustee and the Credit
Enhancer. The Servicer shall give notice of any such change to the Rating
Agencies.
Section 4.02. Claims upon the Policy; Policy Payments Account.
(a) If, by the close of business on the third Business Day prior to a
Distribution Date, the Servicer notifies the Trustee that on such Distribution
Date the sum of (i) the funds that will be on deposit in the Collection Account
for the related Collection Period which are payable to the Investor
Certificateholders pursuant to Sections 5.01(a) and (b) (after giving effect to
the distribution of the Trustee Fee and the Premium) and (ii) the amount that
will be on deposit in the Spread Account will be insufficient to pay the
Guaranteed Distribution on such Distribution Date, then the Trustee shall give
notice to the Credit Enhancer by telephone or telecopy of the amount equal to
the Credit Enhancement Draw Amount. Such notice of such sum shall be confirmed
in writing in the form set forth as Exhibit A to the Policy, to the Credit
Enhancer and the Fiscal Agent, if any, at or before 10:00 a.m., New York City
time, on the second Business Day prior to such Distribution Date. Following
receipt by the Credit Enhancer of such notice in such form, the Credit Enhancer
or the Fiscal Agent will pay any amount payable under the Policy on the later to
occur of (i) 12:00 noon, New York City time, on the Business Day next succeeding
presentation to the Fiscal Agent and (ii) 12:00 noon, New York City time, on the
Distribution Date to which such deficiency relates, as provided in the Policy.
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(b) The Trustee shall establish a separate special purpose trust
account, which account shall be an Eligible Account, for the benefit of Holders
of the Investor Certificates and the Credit Enhancer referred to herein as the
"Policy Payments Account" over which the Trustee shall have exclusive control
and sole right of withdrawal. The Trustee shall deposit any amount paid under
the Policy in the Policy Payments Account and distribute such amount only for
purposes of payment to Holders of the Investor Certificates of the Guaranteed
Distribution for which a claim was made and such amount may not be applied to
satisfy any costs, expenses or liabilities of the Servicer, the Trustee or the
Trust Fund. Amounts paid under the Policy shall be transferred to the Collection
Account in accordance with the next succeeding paragraph and disbursed by the
Trustee to Holders of Investor Certificates in accordance with Section 5.01. It
shall not be necessary for such payments to be made by checks or wire transfers
separate from the checks or wire transfers used to pay the Guaranteed
Distribution with other funds available to make such payment. However, the
amount of any payment of principal of or interest on the Investor Certificates
to be paid from funds transferred from the Policy Payments Account shall be
noted as provided in paragraph (c) below in the Certificate Register and in the
statement to be furnished to Holders of the Investor Certificates pursuant to
Section 5.03. Funds held in the Policy Payments Account shall not be invested.
On any Distribution Date with respect to which a claim has been made
under the Policy, the amount of any funds received by the Trustee as a result of
any claim under the Policy, to the extent required to make the Guaranteed
Distribution on such Distribution Date, shall be withdrawn from the Policy
Payments Account and deposited in the Collection Account and applied by the
Trustee, together with the other funds to be withdrawn from the Collection
Account pursuant to Section 5.01 directly to the payment in full of the
Guaranteed Distribution due on the Investor Certificates. Any funds received by
the Trustee shall be used solely for payment to the Holders of Investor
Certificates and may not be applied to satisfy any costs, expenses or
liabilities of the Servicer, the Trustee or the Trust. Any funds remaining in
the Policy Payments Account on the first Business Day following a Distribution
Date shall be remitted to the Credit Enhancer, pursuant to the instructions of
the Credit Enhancer, by the end of such Business Day.
(c) The Trustee shall keep a complete and accurate record of the amount
of interest and principal paid in respect of any Investor Certificate from
moneys received under the Policy. The Credit Enhancer shall have the right to
inspect such records at reasonable times during normal business hours upon one
Business Day's prior notice to the Trustee.
(d) The Trustee shall promptly notify the Credit Enhancer and Fiscal
Agent of any proceeding or the institution of any action, of which a Responsible
Officer of the Trustee has actual knowledge, seeking the avoidance as a
preferential transfer under applicable bankruptcy, insolvency, receivership or
similar law with respect to a proceeding against or by the Sellers, the Servicer
or the Trust (a "Preference Claim") of any distribution made with respect to the
Investor Certificates. Each Investor Certificateholder, by its purchase of
Investor Certificates, the Servicer and the Trustee hereby agree that, the
Credit Enhancer (so long as no Credit Enhancer Default exists) may at any time
during the continuation of any proceeding relating to a Preference Claim direct
all matters relating to such Preference Claim, including, without limitation,
(i) the direction of any appeal of any order relating to such Preference Claim
and (ii) the posting of any surety, supersede as or performance bond pending any
such appeal. In
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addition and without limitation of the foregoing, the Credit Enhancer shall be
subrogated to the rights of the Servicer, the Trustee and each Investor
Certificateholder in the conduct of any such Preference Claim, including,
without limitation, all rights of any party to an adversary proceeding action
with respect to any court order issued in connection with any such Preference
Claim.
Section 4.03. Spread Account.
(a) The Trustee shall establish and maintain a separate trust account
(the "Spread Account") titled "The Bank of New York, as Trustee, in trust for
the registered holders of Banc One ABS Corporation HELOC Asset-Backed
Certificates, Series 1998-1 and MBIA." The Spread Account shall be an Eligible
Account. Amounts on deposit in the Spread Account will, at the direction of the
holder of the Transferor Interest, be invested in Eligible Investments maturing
no later than the day before the next Distribution Date.
All income and gain realized from any investment of funds in the Spread
Account shall be for the benefit of the holder of the Transferor Interest and
shall be subject to its withdrawal from time to time. The amount of any losses
incurred in respect of the principal amount of any such investments shall be
deemed not to be on deposit in the Spread Account.
(b) On each Determination Date the Trustee shall determine (i) the
extent to which Investor Interest Collections and Reallocated Investor Principal
Collections applied in the order specified in Section 5.01(a) are insufficient
to make distributions as provided in clauses (i) and (ii) of Section 5.01(a) or
Investor Interest Collections applied in the order specified in Section 5.01(a)
are insufficient to make distributions as provided in clauses (i), (ii) and
(iii) of Section 5.01(a) and (ii) with respect to the Distribution Date in
January 2020, the Guaranteed Principal Distribution Amount for the related
Distribution Date. On each Distribution Date, the Trustee shall withdraw from
the Spread Account and deposit into the Collection Account the lesser of the
amount on deposit in the Spread Account and an amount equal to the sum of the
amounts, if any, determined in clauses (i) and (ii) of the preceding sentence.
In addition, on each Distribution Date the Trustee shall withdraw the amount, if
any, on deposit in the Spread Account (after giving effect to all deposits
thereto and withdrawals therefrom on such Distribution Date) in excess of the
Required Spread Account Amount and shall deposit such funds in the Collection
Account.
(c) Following the termination of the Trust pursuant to Section 10.01 or
11.02 hereof, the Trustee shall withdraw all amounts then on deposit in the
Spread Account and distribute such amounts, first to any amounts due and owing
to the Credit Enhancer, and then to the holder of the Transferor Interest. If on
any Distribution Date the amount on deposit in the Spread Account exceeds the
Required Spread Account Amount, the Trustee shall withdraw such excess and
distribute it to the holder of the Transferor Interest.
Section 4.04. Effect of Payments by the Credit Enhancer; Subrogation.
Anything herein to the contrary notwithstanding, any payment with respect to
principal of or interest on any of the Investor Certificates which is made with
monies received pursuant to the terms of the Policy shall not be considered
payment of such Investor
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Certificates from the Trust and shall not result in the payment of or the
provision for the payment of the principal of or interest on such Investor
Certificates within the meaning of Section 5.01. The Depositor, the Servicer and
the Trustee acknowledge, and each Holder by its acceptance of an Investor
Certificate agrees, that without the need for any further action on the part of
the Credit Enhancer, the Depositor, the Servicer, the Trustee or the Certificate
Registrar (a) to the extent the Credit Enhancer makes payments, directly or
indirectly, on account of principal of or interest on any Investor Certificates
to the Holders of such Certificates, the Credit Enhancer will be fully
subrogated to the rights of such Holders to receive such principal and interest
from the Trust and (b) the Credit Enhancer shall be paid such principal and
interest but only from the sources and in the manner provided herein for the
Payment of such principal and interest.
The Trustee and the Servicer shall cooperate in all respects with any
reasonable request by the Credit Enhancer for action to preserve or enforce the
Credit Enhancer's rights or interests under this Agreement without limiting the
rights or affecting the interests of the Holders as otherwise set forth herein.
Section 4.05. Reallocated Investor Principal Collections. On each
Determination Date the Trustee shall determine the extent to which Investor
Interest Collections applied in the order specified in Section 5.01(a) are
insufficient to make distributions as provided in clauses (i) and (ii) of
Section 5.01(a). On each Distribution Date, the Trustee shall apply any
Reallocated Investor Principal Collections to make the distribution as provided
in clauses (i) and (ii) of Section 5.01(a), and such Reallocated Investor
Principal Collections shall no longer be available for distributions of
principal as provided in Section 5.01(b).
ARTICLE V
Payments and Statements to
Certificateholders; Rights of Certificateholders
Section 5.01. Distributions.
(a) Distributions of Investor Interest Collections and Investment
Proceeds. Subject to Section 11.02(b), on each Distribution Date, the Trustee or
the Paying Agent, as the case may be, shall distribute out of the Collection
Account to the extent of (A) Investor Interest Collections collected during the
related Collection Period, (B) any Reallocated Investor Principal Collections as
determined pursuant to Section 4.05 and (C) any amounts transferred from the
Spread Account as determined pursuant to Section 4.03(b), the following amounts
and in the following order of priority to the following Persons (based on the
information set forth in the Servicing Certificate):
(i) the Trustee Fee for such Distribution Date to the Trustee;
(ii) the sum of (A) the Investor Certificate Interest for such
Distribution Date to the Investor Certificateholders plus (B) any
Unpaid Investor Certificate Interest Shortfall, for such Distribution
Date to the Investor Certificateholders plus, (C) to the extent legally
permissible, interest thereon at the Investor Certificate Rate plus 2%
per annum;
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(iii) any Investor Loss Amount for such Collection Period, to
the Investor Certificateholders as payment of principal in reduction of
the Investor Certificate Principal Balance;
(iv) the aggregate amount of any Investor Loss Reduction
Amounts for previous Distribution Dates that have not been previously
reimbursed to Investor Certificateholders, to the Investor
Certificateholders as payment of principal in reduction of the Investor
Certificate Principal Balance;
(v) the premium pursuant to the Insurance Agreement to the
Credit Enhancer;
(vi) to reimburse the Credit Enhancer for previously
unreimbursed Credit Enhancement Draw Amounts together with interest
thereon, calculated as set forth in the Insurance Agreement;
(vii) to deposit into the Spread Account, until the aggregate
amount of funds therein is equal to the Required Spread Account Amount;
(viii) any Accelerated Principal Distribution Amount for such
Distribution Date, to the Investor Certificateholders;
(ix) to the Credit Enhancer for any amounts owed to the Credit
Enhancer pursuant to the Insurance Agreement;
(x) to the Servicer for any amount required to be paid to the
Servicer pursuant to Section 7.03 that has not been previously paid to
the Servicer;
(xi) any LIBOR Interest Carryover for such Distribution Date
to the Investor Certificateholders; and
(xii) any remaining amount to the holder of the Transferor
Interest.
(b) Distribution of Principal Collections. Subject to Section 11.02(b)
and on each Distribution Date other than the Distribution Date in January 2020,
the Trustee shall distribute out of the Collection Account to the Investor
Certificateholders the Investor Principal Collections (including amounts
transferred thereto from the Spread Account pursuant to Section 4.03(b) in
respect of the amount determined pursuant to Section 4.03(b)(ii)), up to the
Scheduled Principal Collections Distribution Amount (less any Reallocated
Investor Principal Collections for such Distribution Date and any
Overcollateralization Release Amount for such Distribution Date), but not in
excess of the Investor Certificate Principal Balance. On the Distribution Date
in January 2020 the Trustee shall distribute to Investor Certificateholders the
Investor Principal Collections (including amounts transferred thereto from the
Spread Account pursuant to Section 4.03(b) in respect of the amount determined
pursuant to Section 4.03(b)(ii)) up to the Investor Certificate Principal
Balance.
(c) Distribution of Overcollateralization Release Amount. On each
Distribution Date, the Trustee shall distribute out of the Collection Account to
the holder of the Transferor Interest the Overcollateralization Release Amount,
if any, for such Distribution Date.
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(d) Distribution of the Credit Enhancement Draw Amount. With respect to
any Distribution Date, to the extent that Investor Interest Collections,
Reallocated Investor Principal Collections and amounts transferred from the
Spread Account on the related Distribution Date in respect of the amount
determined pursuant to Section 4.03(b)(i) applied in the order specified in
Section 5.01(a) are insufficient to make distributions as provided in clause
(ii) of Section 5.01(a) above, the Trustee will make such payments from the
amount drawn under the Policy for such Distribution Date pursuant to Section
4.02. For any Distribution Date as to which there is a Guaranteed Principal
Distribution Amount, the Trustee shall distribute the Guaranteed Principal
Distribution Amount to Certificateholders from the amount drawn under the Policy
for such Distribution Date pursuant to Section 4.02.
The aggregate amount of principal distributed to the Investor
Certificateholders under this Agreement shall not exceed the Original Investor
Certificate Principal Balance.
(e) Method of Distribution. The Trustee shall make distributions in
respect of a Distribution Date to each Investor Certificateholder of record on
the related Record Date (other than as provided in Section 10.01 respecting the
final distribution) by check or money order mailed to such Investor
Certificateholder at the address appearing in the Certificate Register, or upon
written request by an Investor Certificateholder delivered to the Trustee at
least five Business Days prior to such Record Date, by wire transfer (but only
if such Certificateholder is the Depository or such Certificateholder owns of
record one or more Investor Certificates having principal denominations
aggregating at least $1,000,000), or by such other means of payment as such
Investor Certificateholder and the Trustee shall agree. Distributions among
Investor Certificateholders shall be made in proportion to the Percentage
Interests evidenced by the Investor Certificates held by such Investor
Certificateholders.
(f) Distributions on Book-Entry Certificates. Each distribution with
respect to a Book-Entry Certificate shall be paid to the Depository, which shall
credit the amount of such distribution to the accounts of its Depository
Participants in accordance with its normal procedures. Each Depository
Participant shall be responsible for disbursing such distribution to the
Certificate Owners that it represents and to each indirect participating
brokerage firm (a "brokerage firm" or "indirect participating firm") for which
it acts as agent. Each brokerage firm shall be responsible for disbursing funds
to the Certificate Owners that it represents. All such credits and disbursements
with respect to a Book-Entry Certificate are to be made by the Depository and
the Depository Participants in accordance with the provisions of the Investor
Certificates. None of the Trustee, the Paying Agent, the Certificate Registrar,
the Depositor, the Credit Enhancer or the Servicer shall have any responsibility
therefor except as otherwise provided by applicable law.
(g) Distributions to holder of the Transferor Interest. On each
Distribution Date, the Trustee shall, based upon the information set forth in
the Servicing Certificate for such Distribution Date, distribute to the holder
of the Transferor Interest (i) the Transferor Interest Collections for the
related Collection Period and (ii) the portion of Transferor Principal
Collections for the related Collection Period in excess of Additional Balances
created during such Collection Period; provided that collections allocable to
the Transferor Interest will be distributed to the holder of the Transferor
Interest only to the extent that such distribution will not reduce the amount of
the Transferor Principal Balance as of the related Distribution Date
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below the Minimum Transferor Interest. Amounts not distributed to the holder of
the Transferor Interest because of such limitations will be retained in the
Collection Account until the Transferor Principal Balance exceeds the Minimum
Transferor Interest, at which time such excess shall be released to the holder
of the Transferor Interest.
Section 5.02. Calculation of the Investor Certificate Rate. On the
second LIBOR Business Day immediately preceding each Distribution Date, the
Trustee shall determine LIBOR for the Interest Period commencing on such
Distribution Date and inform the Servicer (at the facsimile number given to the
Trustee in writing) of such rates. On each Determination Date, the Trustee shall
determine the applicable Investor Certificate Rate for the related Distribution
Date.
Section 5.03. Statements to Certificateholders. Concurrently with each
distribution to Investor Certificateholders, the Trustee shall forward to each
Investor Certificateholder, the Servicer and each Rating Agency a statement
prepared by the Servicer pursuant to Section 4.01 with respect to such
distribution setting forth:
(i) the Investor Floating Allocation Percentage for the
preceding Collection Period;
(ii) the Investor Certificate Distribution Amount;
(iii) the amount of Investor Certificate Interest in such
distribution and the related Investor Certificate Rate;
(iv) the amount, if any, of any Unpaid Investor Certificate
Interest Shortfall in such distribution;
(v) the amount, if any, of the remaining Unpaid Investor
Certificate Interest Shortfall after giving effect to such
distribution;
(vi) the amount, if any, of principal in such distribution,
separately stating the components thereof;
(vii) the amount, if any, of the reimbursement of previous
Investor Loss Reduction Amounts in such distribution;
(viii) the amount, if any, of the aggregate of unreimbursed
Investor Loss Reduction Amounts after giving effect to such
distribution;
(ix) the Servicing Fee for such Distribution Date;
(x) the Invested Amount, the Investor Certificate Principal
Balance and the Pool Factor, each after giving effect to such
distribution;
(xi) the Pool Balance as of the end of the preceding
Collection Period and the aggregate of the Principal Balances of the
Mortgage Loans at the close of business on the last day of the related
Collection Period;
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(xii) the Credit Enhancement Draw Amount, if any;
(xiii) the number and aggregate Principal Balances of Mortgage
Loans as to which the Minimum Monthly Payment is delinquent for 30-59
days, 60-89 days and 90 or more days, respectively, as of the end of
the preceding Collection Period;
(xiv) the book value (within the meaning of 12 C.F.R ? 571.13
or comparable provision) of any real estate acquired through
foreclosure or grant of a deed in lieu of foreclosure;
(xv) the Investor Certificate Rate applicable to the
distribution on the following Distribution Date;
(xvi) the Required Spread Account Amount and the amount of
funds on deposit in the Spread Account (after giving effect to any
deposits thereto and withdrawals therefrom) on such Distribution Date;
(xvii) the number and principal balances of any Mortgage Loans
retransferred to the Transferor pursuant to (a) Section 2.04 and (b)
Section 2.06;
(xviii) any LIBOR Interest Carryover for such Distribution
Date; and
(xix) the Required Overcollateralization Amount for such
Distribution Date and the amount of Overcollateralization remaining
after giving effect to all distributions on such Distribution Date.
In the case of information furnished pursuant to clauses (ii), (iii) in
respect of Investor Certificate Interest, (iv) and (viii) above, the amounts
shall be expressed as a dollar amount per Investor Certificate with a $1,000
denomination.
Within 60 days after the end of each calendar year, the Servicer shall
prepare or cause to be prepared and shall forward to the Trustee the information
set forth in clauses (iii) and (vi) above aggregated for such calendar year.
Such obligation of the Servicer shall be deemed to have been satisfied to the
extent that substantially comparable information shall be provided by the
Servicer or a Paying Agent pursuant to any requirements of the Code.
The Trustee shall prepare or cause to be prepared (in a manner
consistent with the treatment of the Investor Certificates as indebtedness of
the holder of the Transferor Interest, or as may be otherwise required by
Section 3.15) Internal Revenue Service Form 1099 (or any successor form) and any
other tax forms required to be filed or furnished to Certificateholders in
respect of distributions by the Trustee (or the Paying Agent) on the Investor
Certificates and shall file and distribute such forms as required by law.
Section 5.04. Rights of Certificateholders and holder of the Transferor
Interest. The Investor Certificates shall represent fractional undivided
interests in the Trust, including the benefits of the Collection Account and the
right to receive Investor Interest Collections, Principal
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Collections and other amounts at the times and in the amounts specified in this
Agreement; the Transferor Interest shall represent the remaining interest in the
Trust.
ARTICLE VI
The Certificates
Section 6.01. The Certificates. The Investor Certificates shall be
substantially in the form set forth in Exhibit A and shall, on original issue,
be executed, authenticated and delivered by the Trustee to or upon the order of
the Depositor concurrently with the sale and assignment to the Trustee of the
Trust. The Investor Certificates shall be initially evidenced by one or more
Certificates representing the entire original Investor Certificate Principal
Balance and shall be held in minimum dollar denominations of $1,000 and integral
dollar multiples in excess thereof, except that one Investor Certificate may be
in a different denomination of less than $1,000 so that the sum of the
denominations of all outstanding Investor Certificates shall equal the Original
Investor Certificate Principal Balance. The sum of the denominations of all
outstanding Investor Certificates shall equal the Original Investor Certificate
Principal Balance. The Transferor Interest initially shall be an uncertificated
interest issued upon the order of the Depositor to the Trustee concurrently with
the sale and assignment to the Trustee of the Trust. The Transferor Interest may
be certificated pursuant to Section 6.02(a). The Transferor Interest shall
represent the entire interest in the assets of the Trust other than that
represented by the Investor Certificates and shall initially be issued to the
Seller.
The Certificates shall be executed by manual or facsimile signature on
behalf of the Trustee by an authorized officer under its seal imprinted thereon.
Certificates bearing the manual or facsimile signatures of individuals who were,
at the time when such signatures were affixed, authorized to sign on behalf of
the Trustee shall bind the Trust, notwithstanding that such individuals or any
of them have ceased to be so authorized prior to the authentication and delivery
of such Certificates or did not hold such offices at the date of such
Certificates. No Certificate shall be entitled to any benefit under this
Agreement, or be valid for any purpose, unless such Certificate shall have been
manually authenticated by the Trustee substantially in the form provided for
herein, and such authentication upon any Certificate shall be conclusive
evidence, and the only evidence, that such Certificate has been duly
authenticated and delivered hereunder. All Certificates shall be dated the date
of their authentication. Subject to Section 6.02(c), the Investor Certificates
shall be Book-Entry Certificates. The Transferor Interest shall not be
Book-Entry Certificates.
Section 6.02. Registration of Transfer and Exchange of Investor
Certificates; Appointment of Registrar.
(a) The Certificate Registrar shall cause to be kept at the Corporate
Trust Office a Certificate Register in which, subject to such reasonable
regulations as it may prescribe, the Certificate Registrar shall provide for the
registration of Investor Certificates and the Transferor Interest and of
transfers and exchanges of Investor Certificates and the Transferor Interest as
herein provided. The First National Bank of Chicago shall initially serve as
Certificate Registrar for the purpose of registering Investor Certificates and
the Transferor Interest and transfers and exchanges of Investor Certificates and
the Transferor Interest as herein provided.
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Upon surrender for registration of transfer of any Investor Certificate
at any office or agency of the Certificate Registrar maintained for such purpose
pursuant to the foregoing paragraph, the Trustee on behalf of the Trust shall
execute, authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Investor Certificates of the same aggregate
Percentage Interest. Upon direction by the holder of the Transferor Interest to
the Trustee and the Certificate Registrar, the Trustee shall issue the
Transferor Interest in a Certificated form substantially in a form as set forth
in Exhibit B. Upon notification by the holder of the Transferor Interest to the
Certificate Registrar of a transfer of the Transferor Interest and subject to
Section 6.05, the Trustee on behalf of the Trust shall note on the Certificate
Register the transfer of the Transferor Interest.
At the option of the Investor Certificateholders, Investor Certificates
may be exchanged for other Investor Certificates in authorized denominations and
the same aggregate Percentage Interests, upon surrender of the Investor
Certificates to be exchanged at any such office or agency. Whenever any Investor
Certificates are so surrendered for exchange, the Trustee shall execute and
authenticate and deliver the Investor Certificates which the Investor
Certificateholder making the exchange is entitled to receive. Every Investor
Certificate presented or surrendered for transfer or exchange shall (if so
required by the Trustee or the Certificate Registrar) be duly endorsed by, or be
accompanied by a written instrument of transfer in form satisfactory to the
Trustee and the Certificate Registrar duly executed by, the Holder thereof or
his attorney duly authorized in writing.
(b) Except as provided in paragraph (c) below, the Book-Entry
Certificates shall at all times remain registered in the name of the Depository
or its nominee and at all times: (i) registration of the Investor Certificates
may not be transferred by the Trustee except to another Depository; (ii) the
Depository shall maintain book-entry records with respect to the Certificate
Owners and with respect to ownership and transfers of such Investor
Certificates; (iii) ownership and transfers of registration of the Investor
Certificates on the books of the Depository shall be governed by applicable
rules established by the Depository; (iv) the Depository may collect its usual
and customary fees, charges and expenses from its Depository Participants; (v)
the Trustee shall deal with the Depository as representative of the Certificate
Owners of the Investor Certificates for purposes of exercising the rights of
Holders under this Agreement, and requests and directions for and votes of such
representative shall not be deemed to be inconsistent if they are made with
respect to different Certificate Owners; and (vi) the Trustee may rely and shall
be fully protected in relying upon information furnished by the Depository with
respect to its Depository Participants and furnished by the Depository
Participants with respect to indirect participating firms and Persons shown on
the books of such indirect participating firms as direct or indirect Certificate
Owners.
All transfers by Certificate Owners of Book-Entry Certificates shall be
made in accordance with the procedures established by the Depository Participant
or brokerage firm representing such Certificate Owners. Each Depository
Participant shall only transfer Book-Entry Certificates of Certificate Owners
that it represents or of brokerage firms for which it acts as agent in
accordance with the Depository's normal procedures. The parties hereto are
hereby authorized to execute a Letter of Representations with the Depository or
take such other action as may be necessary or desirable to register a Book-Entry
Certificate to the Depository. In the
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event of any conflict between the terms of any such Letter of Representation and
this Agreement the terms of this Agreement shall control.
(c) If (i)(x) the Depository or the Depositor advises the Trustee in
writing that the Depository is no longer willing or able to discharge properly
its responsibilities as Depository, and (y) the Trustee or the Depositor is
unable to locate a qualified successor, (ii) the Depositor, at its sole option,
with the consent of the Trustee, elects to terminate the book-entry system
through the Depository or (iii) after the occurrence of an Event of Servicing
Termination, the Depository, at the direction of Certificate Owners representing
Percentage Interests aggregating not less than 51% advises the Trustee in
writing that the continuation of a book-entry system through the Depository to
the exclusion of definitive, fully registered Investor Certificates (the
"Definitive Certificates") to Certificate Owners is no longer in the best
interests of the Certificate Owners. Upon surrender to the Certificate Registrar
of the Investor Certificates by the Depository, accompanied by registration
instructions from the Depository for registration, the Trustee shall execute and
authenticate the Definitive Certificates. Neither the Depositor nor the Trustee
shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Certificates, all references herein to
obligations imposed upon or to be performed by the Depository shall be deemed to
be imposed upon and performed by the Trustee, to the extent applicable with
respect to such Definitive Certificates and the Trustee, the Certificate
Registrar, the Servicer and the Depositor shall recognize the Holders of the
Definitive Certificates as Certificateholders hereunder.
No service charge shall be made for any registration of transfer or
exchange of Investor Certificates, but 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 Certificates.
All Investor Certificates surrendered for registration of transfer or
exchange shall be cancelled by the Certificate Registrar and disposed of
pursuant to its standard procedures.
Section 6.03. Mutilated, Destroyed, Lost or Stolen Certificates. If (i)
any mutilated Certificate is surrendered to the Certificate Registrar or the
Certificate Registrar receives evidence to its satisfaction of the destruction,
loss or theft of any Certificate, and (ii) there is delivered to the Trustee,
the Depositor and the Certificate Registrar such security or indemnity as may be
required by them to save each of them harmless, then, in the absence of notice
to the Trustee or the Certificate Registrar that such Certificate has been
acquired by a bona fide purchaser, the Trustee shall execute, authenticate and
deliver in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Certificate, a new Certificate of like tenor and Percentage Interest.
Upon the issuance of any new Certificate under this Section 6.03, the Trustee or
the Certificate Registrar may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other expenses (including the fees and expenses of the Trustee and the
Certificate Registrar) connected therewith. Any duplicate Certificate issued
pursuant to this Section 6.03, shall constitute complete and indefeasible
evidence of ownership in the Trust, as if originally issued, whether or not the
lost, stolen or destroyed Certificate shall be found at any time.
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Section 6.04. Persons Deemed Owners. Prior to due presentation of a
Certificate or the Transferor Interest for registration of transfer, the
Servicer, the Depositor, the Trustee, the Certificate Registrar, any Paying
Agent and any agent of the Servicer, the Depositor, the Trustee, any Paying
Agent or the Certificate Registrar may treat the Person, including a Depository,
in whose name any Certificate or the Transferor Interest is registered as the
owner of such Certificate or Transferor Interest for the purpose of receiving
distributions pursuant to Section 5.01 and for all other purposes whatsoever,
and none of the Servicer, the Depositor, the Trustee the Certificate Registrar,
any Paying Agent or any agent of any of them shall be affected by notice to the
contrary.
Section 6.05. Restrictions on Transfer of Transferor Interest.
(a) The Transferor Interest shall be assigned, transferred, exchanged,
pledged, financed, hypothecated or otherwise conveyed (collectively, for
purposes of this Section 6.05 and any other Section referring to the Transferor
Interest, "transferred" or a "transfer") only in accordance with this Section
6.05.
(b) No transfer of a Transferor Interest shall be made unless such
transfer is exempt from the registration requirements of the Securities Act of
1933, as amended, and any applicable state securities laws or is made in
accordance with said Act and laws. Except for the initial issuance of the
Transferor Interest to the Holder thereof, the Trustee shall require (i) the
transferee to execute an investment letter acceptable to and in form and
substance satisfactory to the Trustee certifying to the Trustee the facts
surrounding such transfer, which investment letter shall not be an expense of
the Trustee or (ii) if the investment letter is not delivered, a written Opinion
of Counsel acceptable to and in form and substance satisfactory to the Trustee
and the Depositor that such transfer may be made pursuant to an exemption,
describing the applicable exemption and the basis therefor, from said Act or is
being made pursuant to said Act, which Opinion of Counsel shall not be an
expense of the Trustee or the Depositor. The Holder of a Transferor Interest
desiring to effect such transfer shall, and does hereby agree to, indemnify the
Trustee against any liability that may result if the transfer is not so exempt
or is not made in accordance with such federal and state laws.
(c) The Transferor Interest and any interest therein shall not be
transferred except upon satisfaction of the following conditions precedent: (i)
the Person that acquires a Transferor Interest shall (A) be organized and
existing under the laws of the United States of America or any state or the
District of Columbia thereof, (B) expressly assume, by an agreement supplemental
hereto, executed and delivered to the Trustee, the performance of every covenant
and obligation of the holder of the Transferor Interest hereunder and (C) as
part of its acquisition of a Transferor Interest, acquire all rights of the
holder of the Transferor Interest or any transferee under this Section 6.05(c)
to amounts payable to such holder of the Transferor Interest or such transferee
under Sections 5.01(a)(xii) and 5.01(g); (ii) the holder of the Transferor
Interest shall deliver to the Trustee an Officer's Certificate stating that such
transfer and such supplemental agreement comply with this Section 6.05(c) and
that all conditions precedent provided by this subsection 6.05(c) have been
complied with and an Opinion of Counsel stating that all conditions precedent
provided by this subsection 6.05(c) have been complied with, and the Trustee may
conclusively rely on such Officer's Certificate, shall have no duty to make
inquiries with regard to the matters set forth therein and shall incur no
liability in so relying; (iii)
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the holder of the Transferor Interest shall deliver to the Trustee a letter
indicating that each Rating Agency and the Credit Enhancer have been notified of
such transfer; (iv) the transferee of the Transferor Interest shall deliver to
the Trustee an Opinion of Counsel to the effect that (a) such transfer will not
adversely affect the treatment of the Investor Certificates after such transfer
as debt for federal and applicable state income tax purposes, (b) such transfer
will not result in the Trust being subject to tax at the entity level for
federal or applicable state tax purposes, (c) such transfer will not have any
material adverse impact on the federal or applicable state income taxation of an
Investor Certificateholder or any Certificate Owner and (d) such transfer will
not result in the arrangement created by this Agreement or any "portion" of the
Trust, being treated as a taxable mortgage pool as defined in Section 7701(i) of
the Code; (v) all filings and other actions necessary to continue the perfection
of the interest of the Trust in the Mortgage Loans and the other property
conveyed hereunder shall have been taken or made and (vi) the transferee shall
have assumed the obligations of the holder of the Transferor Interest pursuant
to Section 7.07 hereof. Notwithstanding the foregoing, the requirement set forth
in subclause (i)(A) of this Section 6.05(c) shall not apply in the event the
Trustee shall have received a letter from each Rating Agency confirming that its
rating of the Investor Certificates, after giving effect to a proposed transfer
to a Person that does not meet the requirement set forth in subclause (i)(A),
shall not be reduced or withdrawn. Notwithstanding the foregoing, the
requirements set forth in this paragraph (c) shall not apply to the initial
issuance of the Transferor Interest to the Transferor.
(d) Except for the initial issuance of the Transferor Interest, no
transfer of a Transferor Interest shall be made unless the Trustee shall have
received either (i) a representation letter from the transferee of such
Transferor Interest, acceptable to and in form and substance satisfactory to the
Trustee, to the effect that such transferee is not an employee benefit or other
plan subject to Section 406 of ERISA or Section 4975 of the Code, nor a Person
acting on behalf of any such plan, which representation letter shall not be an
expense of the Trustee, (ii) if the purchaser is an insurance company, a
representation that the purchaser is an insurance company which is purchasing
such Transferor Interest with funds contained in an "insurance company general
account" (as such term is defined in Section V(e) of Prohibited Transaction
Class Exemption 95-60 ("PTCE 95-60")) and that the purchase and holding of such
Transferor Interest are covered under PTCE 95-60, or (iii) in the case of any
Transferor Interest presented for registration in the name of an employee
benefit or other plan subject to ERISA or Section 4975 of the Code (or
comparable provisions of any subsequent enactment's), or a trustee of any such
plan, an Opinion of Counsel to the effect that the purchase or holding of such
Transferor Interest will not result in the assets of the Trust being deemed to
be "plan assets" and subject to the prohibited transaction provisions of ERISA
and Section 4975 of the Code and will not subject the Trustee to any obligation
in addition to those undertaken in this Agreement, which Opinion of Counsel
shall not be an expense of the Trustee or the Depositor.
Section 6.06. Appointment of Paying Agent.
(a) The Paying Agent shall make distributions to Investor
Certificateholders from the Collection Account pursuant to Section 5.01 and
shall report the amounts of such distributions to the Trustee. The duties of the
Paying Agent may include the obligation (i) to withdraw funds from the
Collection Account pursuant to Section 3.03 and for the purpose of making the
distributions referred to above and (ii) to distribute statements and provide
information to
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Certificateholders as required hereunder. The Paying Agent hereunder shall at
all times be a corporation duly incorporated and validly existing under the laws
of the United States of America or any state thereof, authorized under such laws
to exercise corporate trust powers and subject to supervision or examination by
federal or state authorities. The Paying Agent shall initially be The First
National Bank of Chicago. The Trustee may appoint a successor to act as Paying
Agent, which appointment shall be reasonably satisfactory to the Depositor.
(b) The Trustee shall cause the Paying Agent (if other than the
Trustee) to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee that such Paying Agent shall hold all
sums, if any, held by it for payment to the Investor Certificateholders in trust
for the benefit of the Investor Certificateholders entitled thereto until such
sums shall be paid to such Certificateholders and shall agree that it shall
comply with all requirements of the Code regarding the withholding of payments
in respect of Federal income taxes due from Certificate Owners and otherwise
comply with the provisions of this Agreement applicable to it.
Section 6.07. Acceptance of Obligations. The holder of the Transferor
Interest, by its acceptance of the Transferor Interest, agrees to be bound by
and to perform all the duties of the holder of the Transferor Interest set forth
in this Agreement.
ARTICLE VII
The Servicer, the Seller and the Depositor
Section 7.01. Liability of the Servicer and the Depositor. The Servicer
shall be liable in accordance herewith only to the extent of the obligations
specifically imposed upon and undertaken by the Servicer, herein. The Depositor
shall be liable in accordance herewith only to the extent of the obligations
specifically imposed upon and undertaken by the Depositor.
Section 7.02. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer or the Depositor; Assignment of Servicing to an
Affiliate. Any corporation into which the Servicer or the Depositor may be
merged or consolidated, or any corporation resulting from any merger, conversion
or consolidation to which the Servicer or the Depositor shall be a party, or any
corporation succeeding to the business of the Servicer or the Depositor, shall
be the successor of the Servicer or the Depositor, as the case may be,
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. In addition, so long as Bank One, N.A. or an Affiliate thereof
is the Servicer, upon delivery of prior written notice to the Rating Agencies
and the Credit Enhancer, the Servicer may assign all of its rights and
obligations hereunder to any Eligible Affiliate Servicer provided that such
Eligible Affiliate Servicer agrees to be bound by the obligations of the
Servicer under the Insurance Agreement.
Section 7.03. Limitation on Liability of the Servicer and Others.
Neither the Servicer nor any of the directors or officers or employees or agents
of the Servicer shall be under any liability to the Trust or the
Certificateholders for any action taken or for refraining from the taking of any
action by the Servicer in good faith pursuant to this Agreement, or for errors
in judgment; provided, however, that this provision shall not protect the
Servicer or any such
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Person against any liability which would otherwise be imposed by reason of
willful misfeasance, bad faith or gross negligence in the performance of duties
of the Servicer or by reason of reckless disregard of obligations and duties of
the Servicer hereunder. The Servicer and any director or officer or employee or
agent of the Servicer may rely in good faith on any document of any kind prima
facie properly executed and submitted by any Person respecting any matters
arising hereunder. The Servicer and any director or officer or employee or agent
of the Servicer shall be indemnified by the Trust and held harmless against any
loss, liability or expense incurred in connection with any legal action relating
to this Agreement or the Certificates, other than any loss, liability or expense
related to any specific Mortgage Loan or Mortgage 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 its willful
misfeasance, bad faith or gross negligence in the performance of duties
hereunder or by reason of its reckless disregard of obligations and duties
hereunder. The Servicer shall not be under any obligation to appear in,
prosecute or defend any legal action which is not incidental to duties to
service the Mortgage Loans in accordance with this Agreement, and which in its
opinion may involve it in any expense or liability; provided, however, that the
Servicer may in its sole discretion undertake any such action which it may deem
necessary or desirable in respect of this Agreement, and the rights and duties
of the parties hereto and the interests of the Certificateholders hereunder. In
such event, the reasonable legal expenses and costs of such action and any
liability resulting therefrom shall be expenses, costs and liabilities of the
Trust and the Servicer shall only be entitled to be reimbursed therefor pursuant
to Section 5.01(a)(x). The Servicer's right to indemnity or reimbursement
pursuant to this Section 7.03 shall survive any resignation or termination of
the Servicer pursuant to Section 7.04 or 8.01 with respect to any losses,
expenses, costs or liabilities arising prior to such resignation or termination
(or arising from events that occurred prior to such resignation or termination).
Section 7.04. Servicer Not to Resign. Subject to the provisions of
Section 7.02, the Servicer shall not resign from the obligations and duties
hereby imposed on it except (i) upon determination that the performance of its
obligations or duties hereunder are no longer permissible under applicable law
or are in material conflict by reason of applicable law with any other
activities carried on by it or its subsidiaries or Affiliates, the other
activities of the Servicer so causing such a conflict being of a type and nature
carried on by the Servicer or its subsidiaries or Affiliates at the date of this
Agreement, (ii) appointment of an Eligible Affiliate Servicer pursuant to
Section 7.02, or (iii) upon satisfaction of the following conditions: (a) the
Servicer has proposed a successor servicer to the Trustee and the Credit
Enhancer in writing and such proposed successor servicer is reasonably
acceptable to the Trustee; (b) each Rating Agency has been notified of the
proposed appointment of such successor servicer as Servicer hereunder will not
result in the reduction or withdrawal of the then current rating of the Investor
Certificates without regard to the Policy; and (c) such proposed successor
servicer is reasonably acceptable to the Credit Enhancer, as evidenced by a
letter to the Trustee; provided, however, that no such resignation by the
Servicer shall become effective until the Trustee or successor servicer
designated by the Servicer as provided above shall have assumed the Servicer's
responsibilities and obligations hereunder or the Trustee shall have designated
a successor servicer in accordance with Section 8.02. Any such resignation shall
not relieve the Servicer of responsibility for any of the obligations specified
in Sections 8.01 and 8.02 as obligations that survive the resignation or
termination of the Servicer. Any such determination permitting the resignation
of the Servicer pursuant to clause (i) above shall be evidenced by an Opinion of
Counsel to such effect delivered
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to the Trustee and the Credit Enhancer. The Servicer shall have no claim
(whether by subrogation or otherwise) or other action against any
Certificateholders or the Credit Enhancer for any amounts paid by the Servicer
pursuant to any provision of this Agreement.
Section 7.05. Delegation of Duties. In the ordinary course of business,
the Servicer at any time may delegate any of its duties hereunder to any Person,
including any of its Affiliates, or any subservicer referred to in Section 3.01,
who agrees to conduct such duties in accordance with standards comparable to
those with which the Servicer complies pursuant to Section 3.01. Such delegation
shall not relieve the Servicer of its liabilities and responsibilities with
respect to such duties and shall not constitute a resignation within the meaning
of Section 7.04.
Section 7.06. Indemnification of the Trust by the Servicer. The
Servicer shall indemnify and hold harmless the Trust and the Trustee from and
against any loss, liability, expense, damage or injury suffered or sustained by
reason of the Servicer's activities or omissions in servicing or administering
the Mortgage Loans that are not in accordance with this Agreement, including,
but not limited to, any judgment, award, settlement, reasonable attorneys' fees
and other costs or expenses incurred in connection with the defense of any
actual or threatened action, proceeding or claim; provided, however, that a
successor Servicer shall provide such indemnification only against such a loss,
liability, expense, damage or injury described in this Section 7.06 that is
further caused by the successor Servicer's willful malfeasance, bad faith or
gross negligence. Any such indemnification shall not be payable from the assets
of the Trust. The provisions of this indemnity shall run directly to and be
enforceable by an injured party subject to the limitations hereof. The
provisions of this Section 7.06 shall survive the resignation or removal of the
Servicer and termination of this Agreement.
Section 7.07. RESERVED.
Section 7.08. Limitation on Liability of the holder of the Transferor
Interest. None of the directors or officers or employees or agents of the holder
of the Transferor Interest shall be under any liability to the Trust, the
Trustee or the Certificateholders, it being expressly understood that all such
liability is expressly waived and released as a condition of, and as
consideration for, the execution of this Agreement and the issuance of the
Certificates; provided, however, that this provision shall not protect any such
Person against any liability which would otherwise be imposed by reason of
willful misfeasance, bad faith or gross negligence in the performance of the
duties hereunder. Except as provided in Section 7.07, the Transferor shall not
be under any liability to the Trust, the Trustee or the Certificateholders for
any action taken or for refraining from the taking of any action in its capacity
as holder of the Transferor Interest pursuant to this Agreement whether arising
from express or implied duties under this Agreement; provided, however, that
this provision shall not protect the Transferor against any liability which
would otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of reckless disregard
of its obligations and duties hereunder. The Transferor and any director or
officer or employee or agent of the Transferor may rely in good faith on any
document of any kind prima facie properly executed and submitted by any Person
respecting any matters arising hereunder.
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ARTICLE VIII
Servicing Termination
Section 8.01. Events of Servicing Termination. If any one of the
following events ("Events of Servicing Termination") shall occur and be
continuing:
(i) Any failure by the Servicer to deposit in the Collection
Account any deposit required to be made under the terms of this
Agreement which continues unremedied for a period of five Business Days
after the date upon which written notice of such failure shall have
been given to the Servicer by the Trustee or to the Servicer and the
Trustee by the Credit Enhancer or Holders of Investor Certificates
evidencing Percentage Interests aggregating not less than 25%; or
(ii) Failure on the part of the Servicer duly to observe or
perform in any material respect any other covenants or agreements of
the Servicer set forth in the Certificates or in this Agreement, which
failure continues unremedied for a period of 60 days after the date on
which written notice of such failure, requiring the same to be
remedied, and stating that such notice is a "Notice of Default"
hereunder, shall have been given to the Servicer by the Trustee or to
the Servicer and the Trustee by the Credit Enhancer or the Holders of
Investor Certificates evidencing Percentage Interests aggregating not
less than 25%; or
(iii) The entry against the Servicer of a decree or order by a
court or agency or supervisory authority having jurisdiction in the
premises for the appointment of a trustee, conservator, receiver or
liquidator in any insolvency, conservatorship, receivership,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings, or for the winding up or liquidation of its affairs, and
the continuance of any such decree or order unstayed and in effect for
a period of 60 consecutive days; or
(iv) The consent by the Servicer to the appointment of a
trustee, conservator, receiver or liquidator in any insolvency,
conservatorship, receivership, readjustment of debt, marshalling of
assets and liabilities or similar proceedings of or relating to the
Servicer or of or relating to substantially all of its property; or the
Servicer shall admit in writing its inability to pay its debts
generally 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;
then, and in each and every such case, so long as an Event of Servicing
Termination shall not have been remedied by the Servicer, either the Trustee,
the Credit Enhancer or the Holders of Investor Certificates evidencing
Percentage Interests aggregating not less than 51% (with the consent of the
Credit Enhancer), by notice then given in writing to the Servicer (and to the
Trustee if given by the Credit Enhancer or the Holders of Investor Certificates)
may terminate all of the rights and obligations of the Servicer as servicer
under this Agreement. Any such notice to the Servicer shall also be given to
each Rating Agency and the Credit Enhancer. On or after the receipt by the
Servicer of such written notice, all authority and power of the Servicer under
this Agreement, whether with respect to the Certificates or the Mortgage Loans
or otherwise,
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shall pass to and be vested in the Trustee pursuant to and under this Section
8.01; and, without limitation, the Trustee 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 to do or accomplish
all other acts or things necessary or appropriate to effect the purposes of such
notice of termination, whether to complete the transfer and endorsement of each
Mortgage Loan and related documents, or other-wise. The Servicer agrees to
cooperate with the Trustee in effecting the termination of the responsibilities
and rights of the Servicer hereunder, including, without limitation, the
transfer to the Trustee for the administration by it of all cash amounts that
shall at the time be held by the Servicer and to be deposited by it in the
Collection Account, or that have been deposited by the Servicer in the
Collection Account or thereafter received by the Servicer with respect to the
Mortgage Loans. All reasonable costs and expenses (including attorneys' fees)
incurred in connection with transferring the Mortgage Files to the successor
Servicer and amending this Agreement to reflect such succession as Servicer
pursuant to this Section 8.01 shall be paid by the predecessor Servicer (or if
the predecessor Servicer is the Trustee, the initial Servicer) upon presentation
of reasonable documentation of such costs and expenses.
Notwithstanding the foregoing, a delay in or failure of performance
under Section 8.01(i) for a period of ten Business Days or under Section
8.01(ii) for a period of 60 Business Days, shall not constitute an Event of
Servicing Termination if such delay or failure could not be prevented by the
exercise of reasonable diligence by the Servicer and such delay or failure was
caused by an act of God or the public enemy, acts of declared or undeclared war,
public disorder, rebellion or sabotage, epidemics, landslides, lightning, fire,
hurricanes, earthquakes, floods or similar causes. The preceding sentence shall
not relieve the Servicer from using its best efforts to perform its respective
obligations in a timely manner in accordance with the terms of this Agreement
and the Servicer shall provide the Trustee, the holder of the Transferor
Interest, the Credit Enhancer and the Investor Certificateholders with an
Officers' Certificate giving prompt notice of such failure or delay by it,
together with a description of its efforts to so perform its obligations. The
Servicer shall immediately notify the Trustee in writing of any Events of
Servicing Termination.
Section 8.02. Trustee to Act; Appointment of Successor.
(a) On and after the time the Servicer receives a notice of termination
pursuant to Section 8.01 or 7.04, the Trustee shall 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. Notwithstanding the above, if the
Trustee becomes the Servicer hereunder, it shall have no responsibility or
obligation (i) of repurchase or substitution with respect to any Mortgage Loan,
(ii) with respect to any representation or warranty of the Servicer, and (iii)
for any act or omission of either a predecessor or successor Servicer other than
the Trustee. As compensation therefor, the Trustee shall be entitled to such
compensation as the Servicer would have been entitled to hereunder if no such
notice of termination had been given. In addition, the Trustee will be entitled
to compensation with respect to its expenses in connection with conversion of
certain information, documents and record keeping, as provided in Section
7.04(b). Notwithstanding the above, (i) if the Trustee is unwilling to act as
successor Servicer, or (ii) if the Trustee is legally unable so to act, the
Trustee may (in the situation
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described in clause (i)) or shall (in the situation described in clause (ii))
appoint or petition a court of competent jurisdiction to appoint, any
established housing and home finance institution, bank or other mortgage loan or
home equity loan servicer having a net worth of not less than $15,000,000 as the
successor to the Servicer hereunder in the assumption of all or any part of the
responsibilities, duties or liabilities of the Servicer hereunder; provided that
any such successor Servicer shall be acceptable to the Credit Enhancer, as
evidenced by the Credit Enhancer's prior written consent, which consent shall
not be unreasonably withheld; and provided further that the appointment of any
such successor Servicer will not result in the qualification, reduction or
withdrawal of the ratings assigned to the Certificates by the Rating Agencies
without regard to the Policy. Pending appointment of a successor to the Servicer
hereunder, unless the Trustee is prohibited by law from so acting, the Trustee
shall act in such capacity as hereinabove provided. In connection with such
appointment and assumption, the successor shall be entitled to receive
compensation out of payments on Mortgage Loans in an amount equal to the
compensation which the Servicer would otherwise have received pursuant to
Section 3.08 (or such lesser compensation as the Trustee and such successor
shall agree). The Trustee and such successor shall take such action, consistent
with this Agreement, as shall be necessary to effectuate any such succession.
(b) Any successor, including the Trustee, to the Servicer as servicer
shall during the term of its service as servicer (i) continue to service and
administer the Mortgage Loans for the benefit of Certificateholders and the
Credit Enhancer and (ii) maintain in force a policy or policies of insurance
covering errors and omissions in the performance of its obligations as Servicer
hereunder and a fidelity bond in respect of its officers, employees and agents
to the same extent as the Servicer is so required pursuant to Section 3.12. The
appointment of a successor Servicer shall not affect any liability of the
predecessor Servicer which may have arisen under this Agreement prior to its
termination as Servicer (including, without limitation, any deductible under an
insurance policy pursuant to Section 3.04), nor shall any successor Servicer be
liable for an acts or omissions of the predecessor Servicer or for any breach by
such Servicer of any of their representations or warranties contained herein.
Section 8.03. Notification to Certificateholders. Upon any termination
or appointment of a successor to the Servicer pursuant to this Article VIII or
Section 7.04, the Trustee shall give prompt written notice thereof to the
Certificateholders at their respective addresses appearing in the Certificate
Register, the Credit Enhancer and each Rating Agency.
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ARTICLE IX
The Trustee
Section 9.01. Duties of Trustee. The Trustee, prior to the occurrence
of an Event of Servicing Termination and after the curing or waiver of all
Events of Servicing Termination which may have occurred, undertakes to perform
such duties and only such duties as are specifically set forth in this
Agreement. If an Event of Servicing Termination has occurred (which has not been
cured or waived) of which a Responsible Officer has knowledge, the Trustee shall
exercise such of the rights and powers vested in it by this Agreement, and use
the same degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs;
provided, however, that if the Trustee is acting as Servicer it shall use the
same degree of care and skill as is required of the Servicer under this
Agreement.
The Trustee, upon receipt of all resolutions, Certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement.
No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct; provided, however, that:
(i) prior to the occurrence of an Event of Servicing
Termination of which a Responsible Officer of the Trustee has
knowledge, and after the curing or waiver of all such Events of
Servicing Termination which may have occurred, the duties and
obligations of the Trustee shall be determined solely by the express
provisions of this Agreement, the Trustee shall not be liable except
for the performance of such duties and obligations as are specifically
set forth in this Agreement, no implied covenants or obligations shall
be read into this Agreement against the Trustee and, in the absence of
bad faith on the part of the Trustee, the Trustee may conclusively
rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon any Certificates or opinions furnished
to the Trustee and conforming to the requirements of this Agreement;
(ii) the Trustee shall not be personally liable for an error
of judgment made in good faith by a Responsible Officer of the Trustee,
unless it shall be proved that the Trustee was negligent in
ascertaining or investigating the facts related thereto;
(iii) the Trustee shall not be personally liable with respect
to any action taken, suffered or omitted to be taken by it in good
faith in accordance with the consent or direction of the Credit
Enhancer or in accordance with the direction of the Holders of Investor
Certificates evidencing Percentage Interests aggregating not less than
51% relating to the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee, under this Agreement; and
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(iv) the Trustee shall not be charged with knowledge of any
failure by the Servicer to comply with the obligations of the Servicer
referred to in clauses (i) and (ii) of Section 8.01 or of the
occurrence of a Rapid Amortization Event unless a Responsible Officer
of the Trustee at the Corporate Trust Office obtains actual knowledge
of such failure or the Trustee receives written notice of such failure
from the Servicer, the Credit Enhancer or the Holders of Investor
Certificates evidencing Percentage Interests aggregating not less than
51%.
The Trustee shall not be required 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 there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it. None
of the provisions contained in this Agreement shall in any event require the
Trustee to perform, or be responsible for the manner of performance of, any of
the obligations of the Servicer under this Agreement, except during such time,
if any, as the Trustee shall be the successor to, and be vested with the rights,
duties, powers and privileges of, the Servicer in accordance with the terms of
this Agreement and in no event shall it be required to perform or accept
responsibility for the obligations of the Depositor, the Seller or the
Transferor.
Section 9.02. Certain Matters Affecting the Trustee. Except as
otherwise provided in Section 9.01:
(i) the Trustee may request and rely upon, and shall be
protected in acting or refraining from acting upon, any resolution,
Officer's Certificate, Certificate of auditors or any other
Certificate, statement, instrument, opinion, report, notice, request,
consent, order, appraisal, bond or other paper or document reasonably
believed by it to be genuine and to have been signed or presented by
the proper party or parties;
(ii) the Trustee may consult with counsel and any written
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken or
suffered or omitted by it hereunder in good faith and in accordance
with such advice or Opinion of Counsel;
(iii) the 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 hereunder or in relation
hereto, at the request, order or direction of any of the
Certificateholders or the Credit Enhancer, pursuant to the provisions
of this Agreement, unless such Certificateholders or the Credit
Enhancer shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be
incurred therein or thereby; the right of the Trustee to perform any
discretionary act enumerated in this Agreement shall not be construed
as a duty, and the Trustee shall not be answerable for other than its
negligence or willful misconduct in the performance of any such act;
nothing contained herein shall, however, relieve the Trustee of the
obligations, upon the occurrence of an Event of Servicing Termination
(which has not been cured or waived) of which a Responsible Officer has
knowledge, to exercise such of the rights and powers vested in it by
this Agreement, and to use the same degree of care
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and skill in their exercise as a prudent man would exercise or use
under the circumstances in the conduct of his own affairs, unless it is
acting as Servicer;
(iv) the Trustee shall not be personally liable for any action
taken, suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Agreement;
(v) prior to the occurrence of an Event of Servicing
Termination of which a Responsible Officer has knowledge and after the
curing or waiver of all Events of Servicing Termination which may have
occurred, the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, Certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
bond or other paper or documents, unless requested in writing to do so
by Holders of Investor Certificates evidencing Percentage Interests
aggregating not less than 51%; provided, however, that if the payment
within a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured
to the Trustee by the security afforded to it by the terms of this
Agreement, the Trustee may require reasonable indemnity against such
cost, expense or liability as a condition to such proceeding. The
reasonable expense of every such examination shall be paid by the
Servicer or, if paid by the Trustee, shall be reimbursed by the
Servicer upon demand. Nothing in this clause (v) shall derogate from
the obligation of the Servicer to observe any applicable law
prohibiting disclosure of information regarding the Mortgagors;
(vi) the Trustee shall not be accountable, shall have no
liability and makes no representation as to any acts or omissions
hereunder of the Servicer until such time as the Trustee may be
required to act as Servicer pursuant to Section 8.02; and
(vii) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through an Affiliate, agents or attorneys or a custodian and the
Trustee shall not be responsible for any misconduct or negligence on
the part of any such Affiliate, agent, attorney or custodian appointed
with due care by it hereunder.
Section 9.03. Trustee Not Liable for Certificates or Mortgage Loans.
The recitals contained herein and in the Certificates (other than the
authentication of the Trustee on the Certificates) shall be taken as the
statements of the Depositor, and the Trustee assumes no responsibility for the
correctness of the same. The Trustee makes no representations as to the validity
or sufficiency of this Agreement or of the Certificates (other than the
signature and authentication of the Trustee on the Certificates) or of any
Mortgage Loan or Related Document. The Trustee shall not be accountable for the
use or application by the Depositor of any of the Certificates or of the
proceeds of such Certificates, or for the use or application of any funds paid
to the Depositor or the Servicer in respect of the Mortgage Loans or deposited
in or withdrawn from the Collection Account by the Servicer. The Trustee shall
at no time have any responsibility or liability for or with respect to the
legality, validity and enforceability of any Mortgage or any Mortgage Loan, or
the perfection and priority of any Mortgage or the maintenance of any such
perfection and priority, or for or with respect to the sufficiency of the
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Trust or its ability to generate the payments to be distributed to
Certificateholders under this Agreement, including, without limitation: the
existence, condition and ownership of any Mortgaged Property; the existence and
enforceability of any hazard insurance thereon (other than if the Trustee shall
assume the duties of the Servicer pursuant to Section 8.02); the validity of the
assignment of any Mortgage Loan to the Trustee or of any intervening assignment;
the completeness of any Mortgage Loan; the performance or enforcement of any
Mortgage Loan (other than if the Trustee shall assume the duties of the Servicer
pursuant to Section 8.02); the compliance by the Depositor, the Seller or the
Servicer with any warranty or representation made under this Agreement or in any
related document or the accuracy of any such warranty or representation prior to
the Trustee's receipt of notice or other discovery of any non-compliance
therewith or any breach thereof; any investment of monies by or at the direction
of the Servicer or any loss resulting therefrom, it being understood that the
Trustee shall remain responsible for any Trust property that it may hold in its
individual capacity; the acts or omissions of any of the Depositor, the Servicer
(other than if the Trustee shall assume the duties of the Servicer pursuant to
Section 8.02), any subservicer or any Mortgagor; any action of the Servicer
(other than if the Trustee shall assume the duties of the Servicer pursuant to
Section 8.02), or any subservicer taken in the name of the Trustee; the failure
of the Servicer or any subservicer to act or perform any duties required of it
as agent of the Trustee hereunder; or any action by the Trustee taken at the
instruction of the Servicer (other than if the Trustee shall assume the duties
of the Servicer pursuant to Section 8.02); provided, however, that the foregoing
shall not relieve the Trustee of its obligation to perform its duties under this
Agreement. The 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 (unless the Trustee shall have become the successor Servicer) or to
prepare or file any Securities and Exchange Commission filing for the Trust or
to record this Agreement.
Section 9.04. Trustee May Own Certificates. The Trustee in its
individual or any other capacity may become the owner or pledgee of Certificates
with the same rights as it would have if it were not Trustee and may transact
any banking and trust business with the Seller, the Servicer, the Credit
Enhancer or the Depositor.
Section 9.05. Servicer to Pay Trustee's Fees and Expenses; Servicer to
Indemnify. To the extent not otherwise paid pursuant to Section 5.01(a)(i), the
Servicer covenants and agrees to pay to the Trustee from time to time, and the
Trustee shall be entitled to, reasonable compensation (which shall not be
limited by any provision of law in regard to the compensation of a trustee of an
express trust) for all services rendered by it in the execution of the trusts
hereby created and in the exercise and performance of any of the powers and
duties hereunder of the Trustee, and the Servicer will pay or reimburse the
Trustee upon its request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any of the provisions of this
Agreement (including the reasonable compensation and the expenses and
disbursements of its counsel and of all Persons not regularly in its employ)
except any such expense, disbursement or advance as may arise from its
negligence or bad faith or which is the responsibility of Certificateholders
hereunder. The Servicer covenants and agrees to indemnify the Trustee from, and
hold it harmless against, any and all losses, liabilities, damages, claims or
expenses other than those resulting from the gross negligence or bad faith of
the Trustee. This section shall survive termination of this Agreement or the
resignation or removal of any Trustee hereunder.
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Section 9.06. Eligibility Requirements for Trustee. The Trustee
hereunder shall at all times be a corporation duly incorporated and validly
existing under the laws of the United States of America or any state thereof,
authorized under such laws to exercise corporate trust powers, having a combined
capital and surplus of at least $50,000,000, subject to supervision or
examination by federal or state authority. If such corporation publishes reports
of condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section 9.06, 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. The principal office of the Trustee (other
than the initial Trustee) shall be in a state with respect to which an Opinion
of Counsel has been delivered to such Trustee at the time such Trustee is
appointed Trustee to the effect that the Trust will not be a taxable entity
under the laws of such state. In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 9.06, the Trustee
shall resign immediately in the manner and with the effect specified in Section
9.07.
Section 9.07. Resignation or Removal of Trustee. The Trustee may at any
time resign and be discharged from the trusts hereby created by giving written
notice thereof to the Transferor, the Depositor, the Servicer, the Credit
Enhancer and each Rating Agency. Upon receiving such notice of resignation, the
Transferor shall promptly appoint a successor Trustee (approved in writing by
the Credit Enhancer, so long as such approval is not unreasonably withheld) by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the resigning Trustee (who shall deliver a copy to the Servicer)
and one copy to the successor Trustee; provided, however, that any such
successor Trustee shall be subject to the prior written approval of the
Transferor. If no successor Trustee shall have been so appointed and have
accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 9.06 and shall fail to resign after written
request therefor by the Transferor or the Credit Enhancer, or if at any time the
Trustee shall be legally unable to act, or shall be adjudged a bankrupt or
insolvent, or a receiver of the Trustee or of its property shall be appointed,
or any public officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, or if a tax is imposed or threatens with respect to the Trust Fund
by any state in which the Trustee or the Trust Fund is located (which tax cannot
be vacated by the appointment of a co-Trustee or separate trustee pursuant to
Section 9.10), then the Transferor or the Credit Enhancer may remove the
Trustee. If the Transferor or the Credit Enhancer removes the Trustee under the
authority of the immediately preceding sentence, the Transferor shall promptly
appoint a successor Trustee (approved in writing by the Credit Enhancer, which
approval shall not be unreasonably withheld) by written instrument, in
duplicate, one copy of which instrument shall be delivered to the Trustee so
removed and one copy to the successor Trustee.
The Holders of Investor Certificates evidencing Percentage Interests
aggregating over 50% of all Investor Certificates may at any time remove the
Trustee by written instrument or instruments delivered to the Servicer, the
Transferor and the Trustee; the Transferor shall thereupon use its best efforts
to appoint a successor trustee in accordance with this Section.
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Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section 9.07 shall
not become effective until acceptance of appointment by the successor Trustee as
provided in Section 9.08.
Section 9.08. Successor Trustee. Any successor Trustee appointed as
provided in Section 9.07 shall execute, acknowledge and deliver to the
Transferor, the Depositor, the Servicer, the Credit Enhancer and to its
predecessor Trustee an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as Trustee. The Transferor, the Depositor, the Servicer and the
predecessor 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 Trustee all such rights, powers, duties and
obligations.
No successor Trustee shall accept appointment as provided in this
Section 9.08 unless at the time of such acceptance such successor Trustee shall
be eligible under the provisions of Section 9.06.
Upon acceptance of appointment by a successor Trustee as provided in
this Section 9.08, the successor Trustee shall mail notice of the succession of
such Trustee hereunder to all Holders of Certificates at their addresses as
shown in the Certificate Register and to each Rating Agency. If the Servicer
fails to mail such notice within 30 days after acceptance of appointment by the
successor Trustee, the successor Trustee shall cause such notice to be mailed at
the expense of the Servicer.
Section 9.09. Merger or Consolidation of Trustee. Any Person into which
the Trustee may be merged or converted or with which it may be consolidated, or
any Person resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any Person succeeding to all or substantially all
of the business of the Trustee, shall be the successor of the Trustee hereunder,
provided such Person shall be eligible under the provisions of Section 9.06,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, any thing herein to the contrary notwithstanding.
Section 9.10. Appointment of Co-Trustee or Separate 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 Trust or any Mortgaged Property may at the time be located, the
Transferor and the Trustee acting jointly shall have the power and shall execute
and deliver all instruments necessary to appoint one or more Persons approved by
the Credit Enhancer to act as co-trustee or co-trustees, jointly with the
Trustee, or separate trustee or separate trustees, of all or any part of the
Trust, and to vest in such Person or Persons, in such capacity and for the
benefit of the Certificateholders, such title to the Trust, or any part thereof,
and, subject to the other provisions of this Section 9.10, such powers, duties,
obligations, rights and trusts as the Transferor and the Trustee may consider
necessary or desirable. Any such co-trustee or separate trustee shall be subject
to the written approval of the Servicer and the Credit Enhancer. If the
Transferor shall not have joined in such appointment within 15 days after the
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receipt by it of a request so to do, or in the case an Event of Servicing
Termination shall have occurred and be continuing, the Trustee alone shall have
the power to make such appointment. No co-trustee or separate trustee hereunder
shall be required to meet the terms of eligibility as a successor trustee under
Section 9.06 and no notice to Certificateholders of the appointment of any
co-trustee or separate trustee shall be required under Section 9.08. The
Servicer shall be responsible for the fees of any co-trustee or separate trustee
appointed hereunder.
Every separate trustee and co-trustee shall, to the extent permitted by law, be
appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the 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 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
(whether as Trustee hereunder or as successor to the Servicer
hereunder), the Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Trust or any portion
thereof in any such jurisdiction) shall be exercised and performed
singly by such separate trustee or co-trustee, but solely at the
direction of the Trustee;
(ii) no trustee hereunder shall be held personally liable by
reason of any act or omission of any other trustee hereunder; and
(iii) the Servicer and the Trustee acting jointly may at any
time accept the resignation of or remove any separate trustee or
co-trustee except that following the occurrence of an Event of
Servicing Termination, the Trustee acting alone may accept the
resignation or remove any separate trustee or co-trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article IX. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be provide therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Transferor and the Servicer.
Any separate trustee or co-trustee may, at any time, constitute the
Trustee, its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of it estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor Trustee.
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Section 9.11. Limitation of Liability. The Certificates are executed by
the Trustee, not in its individual capacity but solely as Trustee of the Trust,
in the exercise of the powers an authority conferred and vested in it by the
Trust Agreement. Each of the undertakings and agreements made on the part of the
Trustee in the Certificates is made and intended not as a personal undertaking
or agreement by the Trustee but is made and intended for the purpose of binding
only the Trust.
Section 9.12. Trustee May Enforce Claims Without Possession of
Certificates. All rights of action and claims under this Agreement or the
Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceeding relating thereto, and such proceeding instituted by the Trustee shall
be brought in it own name or in its capacity as Trustee. Any recovery of
judgment shall, after provision for the payment of the reasonable compensation,
expenses, disbursement and advances of the Trustee, its agents and counsel, be
for the ratable benefit or the Certificateholders in respect of which such
judgment has been recovered.
Section 9.13. Suits for Enforcement. In case an Event of Servicing
Termination or other default by the Servicer, the Transferor, the Depositor or
the Seller hereunder shall occur an be continuing, the Trustee, in its
discretion, may proceed to protect and enforce its rights and the rights of the
Investor Certificateholders under this Agreement by a suit, action or proceeding
in equity or at law or otherwise, whether for the specific performance of any
covenant or agreement contained in this Agreement or in aid of the execution of
any power granted in this Agreement or for the enforcement of any other legal,
equitable or other remedy, as the Trustee, being advised by counsel, shall deem
most effectual to protect and enforce any of the rights of the Trustee and the
Certificateholder.
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ARTICLE X
Termination
Section 10.01. Termination.
(a) The respective obligations and responsibilities of the Servicer,
the Depositor, the Transferor and the Trustee created hereby (other than the
obligation of the Trustee to make certain payments to Certificateholders after
the final Distribution Date and the obligation of the Servicer to send certain
notices as hereinafter set forth) shall terminate upon the last action required
to be taken by the Trustee on the final Distribution Date pursuant to this
Article X following the later of (A) payment in full of all amounts owing to the
Credit Enhancer and (B) the earliest of (i) the transfer, under the conditions
specified in Section 10.01(b), to the holder of the Transferor Interest of each
Mortgage Loan and all property acquired in respect of any Mortgage Loan
remaining in the Trust for an amount equal to the sum of (w) the Investor
Certificate Principal Balance, (x) accrued and unpaid Investor Certificate
Interest through the day preceding the final Distribution Date, (y) interest
accrued on any Unpaid Investor Certificate Interest Shortfall, to the extent
legally permissible and (z) any unpaid LIBOR Interest Carryover, (ii) the day
following the Distribution Date on which the distribution made to Investor
Certificateholders has reduced the Investor Certificate Principal Balance to
zero, (iii) the final payment or other liquidation of the last Mortgage Loan
remaining in the Trust or the disposition of all property acquired upon
foreclosure or deed in lieu of foreclosure of any Mortgage Loan and (iv) the
Distribution Date in January 2020; provided, however, that in no event shall the
trust created hereby continue beyond the expiration of 21 years from the date of
the last survivor descendants of Joseph P. Kennedy, the late ambassador of the
United States to the Court of St. James, living on the date hereof. Upon
termination in accordance with clause (i) or (ii) of this Section 10.01, the
Trustee shall execute such documents and instruments of transfer presented by
the holder of the Transferor Interest, in each case without recourse,
representation or warranty, and take such other actions as the holder of the
Transferor Interest may reasonably request to effect the transfer of the
Mortgage Loans to the holder of the Transferor Interest.
(b) The holder of the Transferor Interest shall have the right to
exercise the option to effect the transfer to the holder of the Transferor
Interest of each Mortgage Loan pursuant to Section 10.01(a) above on any
Distribution Date on or after the Distribution Date immediately prior to which
the Investor Certificate Principal Balance is less than 5 percent (5%) of the
Original Investor Certificate Principal Balance and all amounts due and owing to
the Credit Enhancer for unpaid premiums and unreimbursed draws on the Policy,
together with interest thereon as provided under the Insurance Agreement, have
been paid.
(c) Notice of any termination, specifying the Distribution Date (which
shall be a date that would otherwise be a Distribution Date) upon which the
Investor Certificateholders may surrender their Investor Certificates to the
Trustee for payment of the final distribution and cancellation, shall be given
promptly by the Trustee (upon receipt of written directions from the holder of
the Transferor Interest, if the holder of the Transferor Interest is exercising
its right to transfer of the Mortgage Loans, given not later than the first day
of the month preceding the month of such final distribution) to the Credit
Enhancer and to the Servicer by letter to Investor Certificateholders mailed not
earlier than the 15th day and not later than the 25th day of the
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month next preceding the month of such final distribution specifying (i) the
Distribution Date upon which final distribution of the Investor Certificates
will be made upon presentation and surrender of Investor Certificates at the
office or agency of the Trustee therein designated, (ii) the amount of any such
final distribution and (iii) that the Record Date otherwise applicable to such
Distribution Date is not applicable, distributions being made only upon
presentation and surrender of the Investor Certificates at the office or agency
of the Trustee therein specified. In the event written directions are delivered
by the holder of the Transferor Interest to the Trustee as described in the
preceding sentence, the holder of the Transferor Interest shall deposit in the
Collection Account on or before the Distribution Date for such final
distribution in immediately available funds an amount which, when added to the
funds on deposit in the Collection Account that are payable to the Investor
Certificateholders, will be equal to the retransfer amount for the Mortgage
Loans computed as above provided.
(d) Upon presentation and surrender of the Investor Certificates, the
Trustee shall cause to be distributed to the Holders of Investor Certificates on
the Distribution Date for such final distribution, in proportion to the
Percentage Interests of their respective Investor Certificates and to the extent
that funds are available for such purpose, an amount equal to (i) if such final
distribution is not being made pursuant to the transfer to the holder of the
Transferor Interest pursuant to Section 10.01(a)(i), the amount required to be
distributed to Investor Certificateholders pursuant to Section 5.01 for such
Distribution Date and (ii) if such final distribution is being made pursuant to
such retransfer, the amount specified in Section 10.01(a)(i). The distribution
on such final Distribution Date pursuant to a retransfer pursuant to Section
10.01(a)(i) shall be in lieu of the distribution otherwise required to be made
on such Distribution Date in respect of the Certificates. On the final
Distribution Date prior to having made the distributions called for above, the
Trustee shall, based upon the information set forth in the Servicing Certificate
for such Distribution Date, withdraw from the Collection Account and remit to
the Credit Enhancer the lesser of (x) the amount available for distribution on
such final Distribution Date, net of any portion thereof necessary to pay the
amounts described in clauses (d)(i) and (ii) above and (y) the unpaid amounts
due and owing to the Credit Enhancer for unpaid premiums and unreimbursed draws
on the Policy, together with interest thereon as provided under the Insurance
Agreement.
(e) In the event that all of the Investor Certificateholders shall not
surrender their Investor Certificates for final payment and cancellation on or
before such final Distribution Date, the Trustee shall on such date cause all
funds in the Collection Account not distributed in final distribution to
Investor Certificateholders to be withdrawn therefrom and credited to the
remaining Investor Certificateholders by depositing such funds in a separate
escrow account for the benefit of such Investor Certificateholders and the
holder of the Transferor Interest (if the holder of the Transferor Interest has
exercised its right to transfer the Mortgage Loans) or the Trustee (in any other
case) shall give a second written notice to the remaining Investor
Certificateholders to surrender their Investor Certificates for cancellation and
receive the final distribution with respect thereto. If within one year after
the second notice all the Investor Certificates shall not have been surrendered
for cancellation, the Trustee may take appropriate steps, or may appoint an
agent to take appropriate steps, to contact the remaining Investor
Certificateholders concerning surrender of their Investor Certificates, and the
cost thereof shall be aid out of the funds on deposit in such escrow account.
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(f) Upon payment of all amounts owed under the Policy and cancellation
of the Investor Certificates, the Trustee shall provide the Credit Enhancer
notice of cancellation of the Investor Certificates and surrender the Policy to
the Credit Enhancer.
ARTICLE XI
Rapid Amortization Event
Section 11.01. Rapid Amortization Events. If any one of the following
events shall occur during the Managed Amortization Period:
(a) failure on the part of the Servicer (i) to make any payment or
deposit required by the terms of this Agreement, on or before the date occurring
three Business Days after the date such payment or deposit is required to be
made herein, or (ii) duly to observe or perform in any material respect the
covenants of the Servicer set forth in this Agreement, which failure, in each
case, materially and adversely affects the interests of the Certificateholders
or the Credit Enhancer and which, in the case of clause (ii), continues
unremedied and continues to affect materially and adversely the interests of the
Certificateholders for a period of 60 days after the date on which written
notice of such failure, requiring the same to be remedied, shall have been given
to the Seller by the Trustee, or to the Seller and the Trustee by the Holders of
Investor Certificates evidencing Percentage Interests aggregating not less than
51%;
(b) any representation or warranty made by the Servicer in this
Agreement or the Sellers in the Purchase Agreement shall prove to have been
incorrect in any material respect when made, as a result of which the interests
of the Investor Certificateholders or the Credit Enhancer are materially and
adversely affected and which continues to be incorrect in any material respect
and continues to affect materially and adversely the interests of the Investor
Certificateholders or the Credit Enhancer for a period of 60 days after the date
on which written notice of such failure, requiring the same to be remedied,
shall have been given to the Sellers or the Servicer, as the case may be, by the
Trustee, or to the Sellers, the Servicer and the Trustee by either the Credit
Enhancer or the Holders of Certificates evidencing Percentage Interests
aggregating not less than 51%; provided, however, that a Rapid Amortization
Event pursuant to this subparagraph (b) shall not be deemed to have occurred
hereunder if a Seller has accepted retransfer of the related Mortgage Loan or
Mortgage Loans during such period (or such longer period (not to exceed an
additional 60 days) as the Trustee may specify) in accordance with the
provisions hereof;
(c) any Seller or Bank One, as holder of the Transferor Interest shall
go into liquidation, consent to the appointment of a conservator or receiver or
liquidator or similar person in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of or relating to
any Seller or Bank One, as holder of the Transferor Interest, or of or relating
to all or substantially all of such Person's property, or a decree or order of a
court or agency or supervisory authority having jurisdiction in the premises for
the appointment of a conservator, receiver, liquidator or similar person in any
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings, or for the winding-up or liquidation of its affairs, shall
have been entered against any Seller or Bank One, as holder of the Transferor
Interest and such decree or order shall have remained in force undischarged or
unstayed for a period of 30 days; or any Seller or Bank One, as holder of the
Transferor Interest shall admit in writing its
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inability to pay its debts generally 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;
(d) the Trust shall become subject to registration as an "investment
company" under the Investment Company Act of 1940, as amended; or
(e) the aggregate of all draws under the Policy exceeds 1% of the
Cut-Off Date Pool Balance;
then, in the case of any event described in subparagraph (a) or (b) after the
applicable grace period, if any, set forth in such subparagraphs, either the
Trustee, the Credit Enhancer or the Holders of Certificates evidencing
Percentage Interests aggregating more than 51%, by notice given in writing to
the holder of the Transferor Interest, the Depositor and the Servicer (and to
the Trustee if given by either the Credit Enhancer or the Certificateholders)
may declare that an early amortization event (a "Rapid Amortization Event") has
occurred as of the date of such notice, and in the case of any event described
in subparagraph (c), (d) or (e), a Rapid Amortization Event shall occur without
any notice or other action on the part of the Trustee, the Credit Enhancer or
the Certificateholders, immediately upon the occurrence of such event.
Section 11.02. Additional Rights Upon the Occurrence of Certain Events.
(a) If Bank One, as holder of the Transferor Interest, goes into
liquidation or consents to the appointment of a conservator or receiver or
liquidator or similar person in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of or relating to
Bank One, as holder of the Transferor Interest or of or relating to all or
substantially all its property, or a decree or order of a court or agency or
supervisory authority having jurisdiction in the premises for the appointment of
a conservator or receiver or liquidator or similar person in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall have
been entered against Bank One, as holder of the Transferor Interest and such
decree shall have remained in force undischarged or unstayed for a period of 30
days; or Bank One, as holder of the Transferor Interest shall admit in writing
its inability to pay its debts generally 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 (such voluntary liquidation, appointment, entering of such
decree, admission, filing, making, suspension or violation or other event
described above, an "Insolvency Event"), Bank One, as holder of the Transferor
Interest shall on the day of such appointment, liquidation, entering of such
decree, admission, filing, making, suspension or inability, as the case may be
(the "Appointment Day"), promptly give notice to the Trustee, the Servicer and
the Credit Enhancer of such Insolvency Event. Within 15 days of the receipt by
the Trustee of Bank One's notice of an Insolvency Event, the Trustee, upon the
direction of the Credit Enhancer or of the Certificateholders representing more
than 51% of the aggregate Principal Balance of the Certificates, with the
consent of the Credit Enhancer shall (i) publish a notice in Authorized
Newspapers that an Insolvency Event has occurred and that the Trustee intends to
direct the Servicer to sell, dispose of or otherwise liquidate the Mortgage
Loans in a commercially reasonable manner and (ii) send written notice to the
Certificateholders describing the provisions of this Section 11.02, which
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notice shall inform Certificateholders that unless more than 51% of all
Certificateholders advise the Trustee in writing that they wish the Trustee to
instruct the Servicer not to sell, dispose of or otherwise liquidate the
Mortgage Loans within 90 days from the day notice pursuant to clause (i) above
is first published (the "Publication Date"), the Trustee shall instruct the
Servicer to proceed to sell, dispose of, or otherwise liquidate the Mortgage
Loans in a commercially reasonable manner and on commercially reasonable terms,
which shall include the solicitation of competitive bids, and shall proceed to
consummate the sale, liquidation or disposition of the Mortgage Loans as
provided above with the highest bidder for the Mortgage Loans. Bank One, as
holder of the Transferor Interest shall be permitted to bid for the Mortgage
Loans. The Trustee may obtain a prior determination from such conservator or
receiver that the terms and manner of any proposed sale, disposition or
liquidation are commercially reasonable. The provisions of Sections 11.01 and
11.02 shall not be deemed to be mutually exclusive.
(b) The proceeds from the sale, disposition or liquidation of the
Mortgage Loans pursuant to Section 11.02(a) above shall be treated as
collections on the Mortgage Loans received during the Rapid Amortization Period;
provided, however, that such proceeds will, based on amounts specified in
writing by the Servicer to the Trustee, first be paid to the Credit Enhancer to
reimburse the Credit Enhancer for previously unreimbursed Credit Enhancement
Draw Amounts and other amounts owing under the Insurance Agreement; and
provided, further, that the Investor Certificateholders, Fixed Allocation
Percentage of such remaining proceeds shall be paid to Certificateholders in the
following amounts and order of priority:
(i) all accrued and unpaid interest on the Certificate
Principal Balance through the Interest Period immediately preceding the
Distribution Date on which such proceeds are distributed to the
Certificateholders; and
(ii) an amount of principal up to the Certificate Principal
Balance.
The Policy shall cover any shortfall in the event such proceeds are insufficient
to make the distributions to Certificateholders pursuant to Section 11.02(b). On
the day following the Distribution Date on which such proceeds are distributed
to the Certificateholders the Trust shall terminate.
ARTICLE XII
Miscellaneous Provisions
Section 12.01. Amendment. This Agreement may be amended from time to
time by the Servicer, the Depositor and the Trustee, in each case without the
consent of any of the Investor Certificateholders, but only with the consent of
the Credit Enhancer (which consent shall not be unreasonably withheld), (i) to
cure any ambiguity, (ii) to correct any defective provisions or to correct or
supplement any provisions herein that may be inconsistent with any other
provisions herein, (iii) to add to the duties of the Depositor or the Servicer,
(iv) to add any other provisions with respect to matters or questions arising
under this Agreement or the Policy, as the case may be, which shall not be
inconsistent with the provisions of this Agreement, (v) to add or amend any
provisions of this Agreement as required by any Rating Agency or any other
nationally recognized statistical rating organization in order to maintain or
improve any rating of the
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Certificates (it being understood that, after obtaining the ratings in effect on
the Closing Date, neither the Trustee, the Depositor nor the Servicer is
obligated to obtain, maintain or improve any such rating), (vi) to add or amend
any provisions of this Agreement to correct or cure any defective provision or
ambiguity as a result of a transfer of the Transferor Interest pursuant to
Section 6.05, or (vii) to comply with any requirement imposed by the Code or
(viii) to add any other provisions with respect to matters or questions arising
under this Agreement that are not inconsistent with the provisions of this
Agreement; provided, however, that such action shall not, as evidenced by an
Opinion of Counsel, materially and adversely affect the interests of any
Investor Certificateholder or the Credit Enhancer; and provided, further, that
the amendment shall not be deemed to adversely affect in any material respect
the interests of the Investor Certificateholders and no opinion referred to in
the preceding proviso shall be required to be delivered if the Person requesting
the amendment obtains a letter from each Rating Agency stating that the
amendment would not result in the downgrading or withdrawal of the respective
ratings then assigned to the Certificates without regard to the Policy.
Notwithstanding the foregoing, any amendment pursuant to clause (viii) above
shall be permissible only upon receipt of a letter from each Rating Agency
stating that the amendment would not result in the downgrading or withdrawal of
the respective ratings then assigned to the Certificateholders without regard to
the Policy.
This Agreement also may be amended from time to time by the Servicer,
the Seller, the Depositor and the Trustee, and the Servicer and the Credit
Enhancer, may from time to time consent to the amendment of the Policy with the
consent of the Holders of the Certificates evidencing Percentage Interests
aggregating not less than 51%, and in the case of an amendment to this
Agreement, with the consent of the Credit Enhancer 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 Investor
Certificateholders; provided, however, that no such amendment shall (i) reduce
in any manner the amount of, or delay the timing of, payments on the Investor
Certificates or distributions or payments under the Policy which are required to
be made on any Investor Certificate without the consent of the Holder of such
Investor Certificate or (ii) reduce the aforesaid percentage required to consent
to any such amendment, without the consent of the Holders of all Investor
Certificates then outstanding or (iii) adversely effect in any material respect
the interests of the Credit Enhancer.
In the event that Treasury Regulations Sections 301-7701 et. seq. are
amended to permit the Trust to qualify as other than an association taxable as a
corporation (if the Trust is not otherwise treated as a security device) and the
Trustee receives an Officer's Investor Certificate from the Servicer of such
amendment, the Trust will make an election and Sections 7.07 and 11.02(a) shall
not be given effect.
Notwithstanding the foregoing, the Agreement may not be amended unless,
in connection with such amendment, an Opinion of Counsel is furnished to the
Trustee that such amendment will not (i) adversely affect the status of the
Certificates as debt; (ii) result in the Trust being taxable at the entity
level; or (iii) result in the Trust being classified as a taxable mortgage pool
(as defined in Section 7701(i) of the Code).
Following the execution and delivery of any such amendment hereto or to
the Policy to which the Credit Enhancer was require to consent, either the
holder of the Transferor Interest, if
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the holder of the Transferor Interest requested the amendment, or the Servicer,
if the Servicer requested the amendment, shall reimburse the Credit Enhancer for
the reasonable out-of-pocket costs and expenses incurred by the Credit Enhancer
in connection with such amendment.
Prior to the execution of any such amendment, the party hereto
requesting any such amendment shall furnish written notification of the
substance of such amendment to each Rating Agency. In addition, promptly after
the execution of any such amendment made with the consent of the
Certificateholders, the Trustee shall furnish written notification of the
substance of such amendment to each Certificateholder and fully executed
original counterparts of the instruments effecting such amendment to the Credit
Enhancer.
It shall not be necessary for the consent of Certificateholders under
this Section 12.01 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 of evidencing the
authorization of the execution thereof by Investor Certificateholders shall be
subject to such reasonable requirements as the Trustee may prescribe.
In executing any amendment permitted by this Section 12.01, the Trustee
shall be entitled to receive, and shall be fully protected in relying upon, an
Opinion of Counsel stating that such amendment is authorized or permitted hereby
and that all conditions precedent to the execution and delivery of such
amendment have been satisfied. The Trustee may, but shall not be obligated to,
enter into any such amendment which affects the Trustee's own rights, duties or
immunities under this Agreement or otherwise.
Section 12.02. Recordation of Agreement. This Agreement is subject to
recordation in all appropriate public offices for real property records in all
the counties or other comparable jurisdictions in which any or all of the
properties subject to the Mortgages are situated, and in any other appropriate
public recording office or elsewhere, such recordation to be effected by the
Trustee, but only upon direction of Certificateholders accompanied by an Opinion
of Counsel to the effect that such recordation materially and beneficially
affects the interests of Certificateholders. The Certificateholders requesting
such recordation shall bear all costs and expenses of such recordation. The
Trustee shall have no obligation to ascertain whether such recordation so
affects the interests of the Investor Certificateholders.
For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counter-parts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.
Section 12.03. Limitation on Rights of Investor Certificateholders. The
death or incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust,
nor otherwise affect the rights, obligations and liabilities of the parties
hereto or any of them.
No Investor Certificateholder shall have any right to vote (except as
provided in Sections 8.01, 9.01, 9.02, 11.01 and 12.01) or in any manner
otherwise control the operation and
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management of the Trust, or the obligations of the parties hereto, nor shall any
thing herein set forth, or contained in the terms of the Investor Certificates,
be construed so as to constitute the Investor Certificateholders from time to
time as partners or members of an association; nor shall any Certificateholder
be under any liability to any third person by reason of any action taken by the
parties to this Agreement pursuant to any provision hereof.
No Investor Certificateholder shall have any right by virtue or by
availing itself of any provisions of this Agreement to institute any suit,
action or proceeding in equity or at law upon or under or with respect to this
Agreement, unless such Holder previously shall have given to the Trustee a
written notice of default and of the continuance thereof, as hereinbefore
provided, and unless also the Holders of Certificates evidencing Percentage
Interests aggregating not less than 51% shall have made written request upon the
Trustee to institute such action, suit or proceeding in its own name as Trustee
hereunder and shall have offered to the Trustee such reasonable indemnity as it
may require against the costs, expenses and liabilities to be incurred therein
or thereby, and the Trustee, for 60 days after its receipt of such notice,
request and offer of indemnity, shall have neglected or refused to institute any
such action, suit or proceeding; it being understood and intended, and being
expressly covenanted by each Investor Certificateholder with every other
Investor Certificateholder and the Trustee, that no one or more Holders of
Investor Certificates shall have any right in any manner whatever by virtue or
by availing itself or themselves of any provisions of this Agreement to affect,
disturb or prejudice the rights of the Holders of any other of the Investor
Certificates, or to obtain or seek to obtain priority over or preference to any
other such Holder, or to enforce any right under this Agreement, except in the
manner herein provided and for the equal, ratable and common benefit of all
Investor Certificateholders. For the protection and enforcement of the
provisions of this Section 12.03, each and every Investor Certificateholder and
the Trustee shall be entitled to such relief as can be given either at law or in
equity.
By accepting its Certificate, each Certificateholder agrees that unless
a Credit Enhancer Default exists, the Credit Enhancer shall have the right to
exercise all rights of the Certificateholders under this Agreement without an
further consent of the Certificateholders.
Section 12.04. 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.
Section 12.05. 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 certified mail, return receipt requested,
to (a) in the case of the Depositor, 100 East Broad Street, Columbus, OH
43271-0138, Attention: Structured Finance, (b) in the case of the Servicer, Bank
One, N.A., 100 East Broad Street, Columbus, OH 43271-0138, (c) in the case of
the Trustee, at the Corporate Trust Office, (d) in the case of the Credit
Enhancer, MBIA Insurance Corporation, 113 King Street, Armonk, New York 10504,
Attention: Insured Portfolio Management, Structured Finance, (e) in the case of
Moody's, Residential Loan Monitoring Group, 4th Floor, 99 Church Street, New
York, New York 10007, and (f) in the case of Standard & Poor's, 26 Broadway, New
York, New York 10004, or, as to each party, at such other address as shall be
designated by such party in a written notice to each other party. Any notice
required or
75
<PAGE> 82
permitted to be mailed to a Investor Certificateholder shall be given by first
class mail, postage prepaid, at the address of such Holder as shown in the
Investor 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 Investor Certificateholder receives such notice. Any notice
or other document required to be delivered or mailed by the Trustee to any
Rating Agency shall be given on a best efforts basis and only as a matter of
courtesy and accommodation and the Trustee shall have no liability for failure
to deliver such notice or document to any Rating Agency.
Section 12.06. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, 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 provisions of this Agreement or of the Investor
Certificates or the rights of the Holders thereof.
Section 12.07. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 6.05, 7.02 and 7.04, this
Agreement may not be assigned by the Depositor or the Servicer without the prior
written consent of the Credit Enhancer and Holders of the Certificates
evidencing Percentage Interests aggregating not less than 66%.
Section 12.08. Investor Certificates Nonassessable and Fully Paid. The
parties agree that the Certificateholders shall not be personally liable for
obligations of the Trust, that the beneficial ownership interests represented by
the Investor Certificates shall be nonassessable for any losses or expenses of
the Trust or for any reason whatsoever, and that the Investor Certificates upon
execution, authentication and delivery thereof by the Trustee pursuant to
Section 2.08 or 6.02 are and shall be deemed full paid.
Section 12.09. Third-Party Beneficiaries. This Agreement will inure to
the benefit of and be binding upon the parties hereto, the Investor
Certificateholders, the Investor Certificate Owners, the Credit Enhancer and
their respective successors and permitted assigns. Except as otherwise provided
in this Agreement, no other Person will have any right or obligation hereunder.
Section 12.10. Counterparts. This instrument 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 12.11. 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 12.12. Insurance Agreement. The Trustee is authorized and
directed to execute and deliver the Insurance Agreement and to perform the
obligations of the Trustee thereunder.
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<PAGE> 83
IN WITNESS WHEREOF, the Depositor, the Seller, the Servicer and the
Trustee have caused this Agreement to be duly executed by their respective
officers all as of the day and year first above written.
BANC ONE ABS CORPORATION,
As Depositor
By _______________________________
Name: Daniel A. Long, Jr.
Title: Vice President
BANK ONE, N.A.,
As Servicer
By _______________________________
Name: Daniel A. Long, Jr.
Title: Assistant Vice President -
Funds Management
THE BANK OF NEW YORK
As Trustee
By _______________________________
Name: Franklin Austin
Title:
77
<PAGE> 84
State of NEW YORK )
) ss.:
County of NEW YORK )
On the 24th day of September, 1998 before me, a notary public in and
for the State of New York, personally appeared Daniel A. Long, Jr., known to me
who, being by me duly sworn, did depose and say that he resides at Banc One ABS
Corporation, 100 East Broad Street, Columbus, Ohio 43271; that he is Vice
President of Banc One ABS Corporation, an Ohio corporation, one of the parties
that executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the Board of Directors of said corporation;
and that he signed his name thereto by like order.
--------------------------------
Notary Public
[Notarial Seal]
78
<PAGE> 85
State of NEW YORK )
) ss.:
County of NEW YORK )
On the 24th day of September, 1998 before me, a notary public in and
for the State of New York, personally appeared Daniel A. Long, Jr., known to me
who, being by me duly sworn, did depose and say that he resides at Bank One, 100
East Broad Street, Columbus, Ohio 43271-0138; that he is the Assistant Vice
President - Funds Management of Bank One, N.A., a national banking association,
one of the parties that executed the foregoing instrument; that he knows the
seal of said corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by order of the Board of Directors of
said corporation; and that he signed his name thereto by like order.
--------------------------------
Notary Public
[Notarial Seal]
79
<PAGE> 86
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 24th day of September, 1998 before me, a notary public in and
for the State of New York, personally appeared Daniel A. Long, Jr., known to me
who, being by me duly sworn, did depose and say that he is the Assistant Vice
President - Funds Management of Bank of New York, N.A., a national banking
association, one of the parties that executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by order of the Board of Directors
of said corporation; and that he signed his name thereto by like order.
--------------------------------
Notary Public
[Notarial Seal]
80
<PAGE> 1
EXHIBIT 10.1
EXECUTION COPY
MORTGAGE LOAN PURCHASE AGREEMENT
AMONG
BANK ONE, N.A.
BANK ONE, ARIZONA, N.A.
BANK ONE, COLORADO, N.A.
BANK ONE, ILLINOIS, N.A.
BANK ONE, INDIANA, N.A.
BANK ONE, KENTUCKY, N.A.
BANK ONE, UTAH, N.A.
BANK ONE, WEST VIRGINIA, N.A.
BANK ONE, WISCONSIN
SELLERS
AND
BANC ONE ABS CORPORATION
PURCHASER
DATED AS OF SEPTEMBER 24, 1998
BANC ONE HELOC TRUST 1998-1
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I CERTAIN DEFINITIONS ...................................... 2
ARTICLE II CONVEYANCE OF THE MORTGAGE LOANS ......................... 2
Section 2.01. Conveyance of Mortgage Loans .................... 2
Section 2.02. Possession of Mortgage Files .................... 4
Section 2.03. Books and Records ............................... 4
Section 2.04. Delivery of Mortgage Loan Documents ............. 4
Section 2.05. Acceptance by Purchaser of the Mortgage Loans;
Certain Substitutions; Certification by the
Trustee ......................................... 5
Section 2.06. Acceptance by the Purchaser ..................... 6
Section 2.07. The Closing ..................................... 7
ARTICLE III REPRESENTATIONS AND WARRANTIES ........................... 7
Section 3.01. Representations and Warranties of the Sellers ... 7
Section 3.02. Representations and Warranties as to the
Mortgage Loans .................................. 8
Section 3.03. Purchase and Substitution ....................... 11
ARTICLE IV CONDITIONS ............................................... 12
Section 4.01. Conditions to Obligation of the Purchaser ....... 12
Section 4.02. Conditions To Obligation of each Seller ......... 13
ARTICLE V THE SELLERS .............................................. 13
Section 5.01. [Reserved] ...................................... 13
Section 5.02. Enforceability; Merger or Consolidation of the
Sellers ......................................... 13
Section 5.03. Mandatory Sale; Grant of Security Interest ...... 13
ARTICLE VI ADDITIONAL AGREEMENTS .................................... 14
Section 6.01. Conflicts With Pooling and Servicing
Agreement ....................................... 14
Section 6.02. Protection of Title to Trust .................... 14
Section 6.03. Other Liens or Interests ........................ 14
Section 6.04. Purchase Events ................................. 14
Section 6.05. Indemnification ................................. 15
Section 6.06. Trust ........................................... 15
ARTICLE VII MISCELLANEOUS PROVISIONS ................................. 15
Section 7.01. Amendment ....................................... 15
Section 7.02. Waivers ......................................... 15
Section 7.03. Costs and Expenses .............................. 16
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 7.04. Survival ........................................ 16
Section 7.05. Confidential Information ........................ 16
Section 7.06. Severability Clause ............................. 16
Section 7.07. Headings and Cross-References ................... 16
Section 7.08. Recordation of Agreement ........................ 16
Section 7.09. Governing Law ................................... 16
Section 7.10. Notices ......................................... 17
Section 7.11. Counterparts .................................... 17
Section 7.12. The Credit Enhancer ............................. 17
EXHIBIT A [RESERVED] ............................................... 1
EXHIBIT B-1 MORTGAGE LOANS TRANSFERRED BY Bank One, N.A. ............. 1
EXHIBIT B-2 MORTGAGE LOANS TRANSFERRED BY Bank One, Arizona, N.A. .... 2
EXHIBIT B-3 MORTGAGE LOANS TRANSFERRED BY Bank One, Colorado, N.A. ... 3
EXHIBIT B-4 MORTGAGE LOANS TRANSFERRED BY Bank One, Illinois, N.A. ... 4
EXHIBIT B-5 MORTGAGE LOANS TRANSFERRED BY Bank One, Indiana, N.A. .... 5
EXHIBIT B-6 MORTGAGE LOANS TRANSFERRED BY Bank One, Kentucky, N.A. ... 6
EXHIBIT B-7 MORTGAGE LOANS TRANSFERRED BY Bank One, Utah, N.A. ....... 7
EXHIBIT B-8 MORTGAGE LOANS TRANSFERRED BY Bank One, West Virginia,
N.A. ..................................................... 8
EXHIBIT B-9 MORTGAGE LOANS TRANSFERRED BY Bank One, Wisconsin ........ 9
</TABLE>
-ii-
<PAGE> 4
THIS MORTGAGE LOAN PURCHASE AGREEMENT is made as of September 24, 1998,
by and among THE SELLERS LISTED ON THE SIGNATURE PAGE HERETO (the "Sellers"),
and BANC ONE ABS CORPORATION, its successors and assigns (the "Purchaser").
WHEREAS, the Sellers and the Purchaser wish to set forth the terms
pursuant to which the Mortgage Loans are to be sold by the Sellers to the
Purchaser and purchased by the Purchaser from the Sellers;
NOW, THEREFORE, in consideration of the foregoing, the other good and
valuable consideration and the mutual terms and covenants contained herein, the
parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.01. Certain capitalized terms used in this Agreement are
defined in and shall have the respective meanings assigned them in Article I to
the Pooling and Servicing Agreement, dated as of August 31, 1998, among the
Purchaser, as Depositor, Bank One, N.A., as Servicer and The Bank of New York,
as Trustee (the "Trustee") (the "Pooling and Servicing Agreement"). All
references herein to "the Agreement" or "this Agreement" are to this Mortgage
Loan Purchase Agreement, and all references herein to Articles, Sections and
subsections are to Articles, Sections or subsections of this Mortgage Loan
Purchase Agreement unless otherwise specified.
ARTICLE II
CONVEYANCE OF THE MORTGAGE LOANS
Section 2.01. Conveyance of Mortgage Loans
(a) Immediately prior to consummation on the Closing Date of the
transactions contemplated by the Pooling and Servicing Agreement, in
consideration of the Purchaser's delivery of cash in the amount of $847,875,000
(which is net of underwriting commission), the Transferor Interest and other
consideration, each Seller does hereby transfer, assign, set over and convey to
the Purchaser without recourse, all of the right, title and interest of such
Seller in and to each Mortgage Loan, including its Principal Balance (including
all Additional Balances) set forth in the applicable Mortgage Loan Schedules
attached hereto as Exhibits B-1, B-2, B-3, B-4, B-5, B-6, B-7, B-8 and B-9,
together with the Mortgage Files relating thereto and all proceeds thereof
received after the Cut-Off Date.
(b) It is the express intent of the parties hereto that the conveyance
of the Mortgage Loans by the Sellers to the Purchaser as provided in this
Agreement be, and be construed as, a sale of all of the Sellers' right, title
and interest in the Mortgage Loans by the Sellers to the Purchaser and to the
Trustee, as its successor and assignee hereunder. Further, it is not the
intention of the parties that such conveyance be deemed a pledge of the Mortgage
Loans by the Sellers to the Purchaser and to the Trustee, as its successor and
assignee hereunder, to secure a debt or other obligation of the Sellers;
however, in the event that, notwithstanding the
2
<PAGE> 5
intent of the parties, the Mortgage Loans are held to be property of the
Sellers, or if for any reason this Agreement is held or deemed to create a
security interest in the Mortgage Loans, then, (a) this Agreement also shall be
deemed to be, and hereby is, a security agreement within the meaning of Articles
8 and 9 of the Uniform Commercial Code in effect in the applicable state; (b)
the conveyance provided for in this Agreement shall be deemed to be, and hereby
is, a grant by the Sellers to the Purchaser and to the Trustee as its successor
and assignee hereunder of a security interest in and to all of the Sellers'
right, title, and interest, whether now owned or hereafter acquired, in and to:
(I) All accounts, contract rights, general intangibles,
chattel paper, instruments, documents, money, deposit accounts,
certificates of deposit, goods, letters of credit, advices of credit,
certificated securities and uncertificated securities consisting of,
arising from or relating to any of the property described in (A)
through (D) below: (A) each Mortgage Loan, including (a) the Mortgage
Note and the related Mortgage and (b) its Principal Balance and all
Additional Balances and all collections in respect thereof received on
or after the Cut-Off Date, identified on the Mortgage Loan Schedule as
defined herein, including all Eligible Substitute Mortgage Loans, (B)
property that secured a Mortgage Loan that is acquired by foreclosure
or deed in lieu of foreclosure; (C) the Purchase Agreement, (D) any
hazard insurance policies in respect of the Mortgage Loans; and (E) the
amounts on deposit in the Spread Account; and
(II) All proceeds of the collateral described in (I).
(c) The possession by the Trustee or its designee of the Mortgage
Notes, Assignments of Mortgages and such other goods, letters of credit, advices
of credit, instruments, money, documents, chattel paper or certificated
securities shall be deemed to be "possession by the secured party," or
possession by a purchaser or a person designated by him or her, for purposes of
perfecting the security interest pursuant to the Uniform Commercial Code
(including, without limitation, Sections 9-305, 8-313 or 8-321 thereof) as in
force in the relevant jurisdiction; and (d) notifications to persons holding
such property, and acknowledgments, receipts or confirmations from persons
holding such property, shall be deemed to be notifications to, or
acknowledgments, receipts or confirmations from, financial intermediaries,
bailees or agents (as applicable) of the Trustee or its designee for the purpose
of perfecting such security interest under applicable law. Subject to the
provisions of the Pooling and Servicing Agreement permitting the Servicer to
commingle amounts collected with respect to the Mortgage Loans with other
general collections of the Servicer, the Sellers and the Trustee at the
direction of the Purchaser to the extent consistent with this Agreement, shall
take such actions as may be necessary to ensure that, if this Agreement were
deemed to create a security interest in the Mortgage Loans and the proceeds
thereof, such security interest would be deemed to be a perfected security
interest of first priority under applicable law and will be maintained as such
throughout the term of the Agreement. In connection herewith, the Trustee shall
have all of the rights and remedies of a secured party and creditor under the
Uniform Commercial Code as in force in the relevant jurisdiction.
3
<PAGE> 6
Section 2.02. Possession of Mortgage Files
(a) Upon the delivery to each Seller of the consideration set forth in
Section 2.01, the ownership of each Seller's Mortgage Notes, related Mortgages
and the contents of the related Mortgage Files are vested in the Purchaser.
(b) Pursuant to Section 2.04, each Seller has delivered or caused to be
delivered each Mortgage File with respect to the Mortgage Loans transferred by
it to the Purchaser.
Section 2.03. Books and Records
The transfer of each Mortgage Loan to the Purchaser shall be reflected
on the related Seller's balance sheets and other financial statements as a sale
of assets by such Seller. Each Seller shall be responsible for maintaining, and
shall maintain, a complete set of books and records for each Mortgage Loan which
shall be clearly marked to reflect the ownership of each Mortgage Loan by the
Purchaser.
Each Seller hereby confirms to the Trustee that it has caused the
portions of the Electronic Ledgers relating to the Mortgage Loans to be clearly
and unambiguously marked, and has made the appropriate entries in its general
accounting records, to indicate that such Mortgage Loans have been transferred
to or at the direction of the Purchaser.
Section 2.04. Delivery of Mortgage Loan Documents
Each Seller shall deliver or cause to be delivered within 90 days of
the Closing Date to the Purchaser or its designee, in accordance with the
instructions of the Purchaser, and pursuant to Section 2.01 of the Pooling and
Servicing Agreement, each original Mortgage Note, endorsed at the direction of
the Purchaser by the applicable Seller, on its face or by allonge attached
thereto, without recourse, in blank or to the order of the Trustee in the
following form: "Pay to the order of The Bank of New York, as trustee for the
registered holders of Banc One HELOC Trust 1998-1, HELOC Asset-Backed
Certificates, Series 1998-1, without recourse, representation or warranty,
express or implied," and an original Assignment of Mortgage endorsed in blank
prepared in recordable form; provided, however, that as to any Mortgage Loan, if
(a) as evidenced by an Opinion of Counsel delivered to and in form and substance
satisfactory to the Trustee and the Credit Enhancer, (x) an optical image or
other representation of the related documents specified above are enforceable in
the relevant jurisdictions to the same extent as the original of such document
and (y) such optical image or other representation does not impair the ability
of an owner of such Mortgage Loan to transfer its interest in such Mortgage
Loan, and (b) the retention of such documents in such format will not result in
a reduction in the then current rating of the Investor Certificates, without
regard to the Policy, such optical image or other representation may be
delivered to the Trustee or assignee in lieu of the physical documents specified
above.
Each Seller agrees not to notify the obligors on the Mortgage Loans of
the transfer of the Mortgage Loans to the Purchaser, unless required by the
terms of the Mortgage Loans or applicable law.
4
<PAGE> 7
Section 2.05. Acceptance by Purchaser of the Mortgage Loans; Certain
Substitutions; Certification by the Trustee
(a) The Purchaser agrees to execute and deliver on the Closing Date for
each Mortgage Loan an acknowledgment of receipt of the Mortgage Loans, in the
form attached as Exhibit C hereto, and declares that it will hold the documents
delivered to it pursuant to Section 2.04 and any amendments, replacements or
supplements thereto, as well as any other assets transferred pursuant to the
terms hereof. Pursuant to the Pooling and Servicing Agreement, any Custodial
Agreement and this Agreement, the Trustee (or any Custodian on behalf of the
Trustee) will, for the benefit of the Purchaser and the Credit Enhancer, review
(or cause to be reviewed) each of the documents set forth in Section 2.04 within
90 days following delivery to ascertain that all required documents set forth in
this Section 2.04 have been executed and received, and that such documents
relate to the Mortgage Loans identified on the Mortgage Loan Schedule, and in so
doing the Trustee may rely on the purported due execution and genuineness of any
signature thereon.
(b) If the Trustee (or any Custodian on behalf of the Trustee) during
the process of reviewing the Mortgage Files finds any document constituting a
part of a Mortgage File which is not executed, has not been received, is
unrelated to the Mortgage Loan identified in the Mortgage Loan Schedule, or
determines that such Mortgage File is otherwise defective in any material
respect, the Trustee is required by the Pooling and Servicing Agreement to
promptly give notice of the same to the Purchaser, the applicable Seller and the
Credit Enhancer to correct or cure such defect. It is understood that the scope
of the Trustee's review of the Mortgage Files is limited solely to confirming
that the documents listed in Section 2.04 have been executed and received and
relate to the Mortgage Files identified in the Mortgage Loan Schedule. The
applicable Seller agrees to use its reasonable efforts to cause to be remedied
any material defect in a document constituting part of a Mortgage File of which
such Seller is so notified by the Purchaser, the Trustee or the Credit Enhancer.
If, however, within 90 days after notice to it respecting such defect, the
applicable Seller has not caused to be remedied the defect or if at any time any
loss is suffered by the Trustee on behalf of the Certificateholders or the
Credit Enhancer, in respect of any Mortgage Loan as a result of a defect in any
document constituting a part of its Mortgage File, then on the next succeeding
Business Day upon the deposit to the Collection Account of the Transfer Deposit
Amount, if any, and upon satisfaction of the applicable conditions described
herein, all right, title and interest of the Trust in and to such Mortgage Loan
shall be deemed to be retransferred, reassigned and otherwise reconveyed,
without recourse, representation or warranty, to the Seller on such Business Day
and the Principal Balance of such Mortgage Loan shall be deducted from the Pool
Balance; provided, however, that interest accrued on the Principal Balance of
such Mortgage Loan to the end of the related Collection Period shall be the
property of the Trust. If the Trustee determines pursuant to the Pooling and
Servicing Agreement that the reduction of such Principal Balance from the Pool
Balance in accordance with the preceding sentence would cause the Transferor
Principal Balance to be less than the Minimum Transferor Interest (a "Transfer
Deficiency") and delivers written notice of such deficiency to the applicable
Seller, then within five Business Days after the Business Day of such retransfer
the applicable Seller shall either (i) substitute an Eligible Substitute
Mortgage Loan or (ii) deposit into the Collection Account an amount (the
"Transfer Deposit Amount") in immediately available funds equal to the Transfer
Deficiency or a combination of both (i) and (ii) above. Such reduction or
substitution and the actual payment of any Transfer Deposit Amount, if any,
shall be deemed to be payment in full for such Mortgage
5
<PAGE> 8
Loan. It is understood and agreed that the obligation of a Seller to accept a
transfer of a Defective Mortgage Loan and to either convey an Eligible
Substitute Mortgage Loan or to make a deposit of any related Transfer Deposit
Amount into the Collection Account shall constitute the sole remedy respecting
such defect available to Certificateholders, the Trustee and the Credit Enhancer
against such Seller.
Each Seller, promptly following the transfer of a Defective Mortgage
Loan from or the transfer of an Eligible Substitute Mortgage Loan pursuant to
this Section 2.05(b), shall appropriately mark its Electronic Ledger and make
appropriate entries in its general account records to reflect such retransfer.
Notwithstanding any other provision of this Section 2.05(b), a
retransfer of a Defective Mortgage Loan to a Seller pursuant to this Section
2.05(b) that would cause the Transferor Principal Balance to be less than the
Minimum Transferor Interest shall not occur if such Seller either fails to
convey an Eligible Substitute Mortgage Loan or to deposit into the Collection
Account any related Transfer Deposit Amount required by this Section 2.05(b)
with respect to the transfer of such Defective Mortgage Loan.
(c) As to any Eligible Substitute Mortgage Loan or Loans, the Seller
shall deliver to the Trustee with respect to such Eligible Substitute Mortgage
Loan or Loans such documents and agreements as are required to be held by the
Trustee in accordance with Section 2.04. For any Collection Period during which
the Seller substitutes one or more Eligible Substitute Mortgage Loans, the
Transfer Deposit Amount (as determined by the Servicer pursuant to the Pooling
and Servicing Agreement) shall be deposited by the Seller in the Collection
Account at the time of substitution. Any amounts received in respect of the
Eligible Substitute Mortgage Loan or Loans during the Collection Period in which
the circumstances giving rise to such substitution occur shall not be a part of
the Trust Fund and shall not be deposited by the Seller in the Collection
Account. All amounts received by the Servicer during the Collection Period in
which the circumstances giving rise to such substitution occur in respect of any
Defective Mortgage Loan so removed by the Trust Fund shall be deposited by the
Servicer in the Collection Account. Upon such substitution, the Eligible
Substitute Mortgage Loan or Loans shall be subject to the terms of this
Agreement in all respects, and the Seller shall be deemed to have made with
respect to such Eligible Substitute Mortgage Loan or Loans, as of the date of
substitution, the covenants, representations and warranties set forth in Section
3.02. The procedures applied by the Seller in selecting each Eligible Substitute
Mortgage Loan shall not be materially adverse to the interests of the Trustee,
the Certificateholders and the Credit Enhancer.
Section 2.06. Acceptance by the Purchaser
The Purchaser acknowledges the assignment to it of the Mortgage Loans
being transferred hereby by the related Sellers and the delivery of the Mortgage
Files to it or upon its order and, concurrently with such delivery, has
delivered to or upon the order of the related Sellers, in exchange for such
Mortgage Loans and the related Mortgage Files, cash and other consideration as
set forth in Section 2.01.
6
<PAGE> 9
Section 2.07. The Closing
The conveyance of the Mortgage Loans shall take place at the offices of
Orrick, Herrington & Sutcliffe LLP, 666 Fifth Avenue, New York, New York 10103,
on the Closing Date, immediately prior to the closing of the transactions
contemplated by the Pooling and Servicing Agreement and the Underwriting
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties of the Sellers
Each Seller hereby represents and warrants to the Purchaser as of the Closing
Date:
(a) Such Seller is duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its organization and has all
licenses necessary to carry on its business as now being conducted and is
licensed, qualified and in good standing in each State in which a Mortgaged
Property is located if the laws of such state require licensing or qualification
in order to conduct business of the type conducted by such Seller and perform
its obligations as a Seller hereunder; such Seller 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 such Seller and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary action; this Agreement is the valid, binding and
enforceable obligation of such Seller; and all requisite action has been taken
by such Seller to make this Agreement valid, binding and enforceable upon such
Seller 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;
(b) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required to be
taken, given or obtained, as the case may be, by or from any federal, state or
other governmental authority or agency (other than any such actions, approvals,
etc. under any state securities laws, real estate syndication or "Blue Sky"
statutes, as to which such Seller makes no such representation or warranty),
that are necessary in connection with the origination of the Mortgage Loans and
the execution and delivery by such Seller of this Agreement, have been duly
taken, given or obtained, as the case may be, are in full force and effect, are
not subject to any pending proceedings or appeals (administrative, judicial or
otherwise) and either the time within which any appeal therefrom may be taken or
review thereof may be obtained has expired or no review thereof may be obtained
or appeal therefrom taken, and are adequate to authorize the consummation of the
transactions contemplated by this Agreement and the other documents on the part
of such Seller and the performance by such Seller of its obligations as a Seller
under this Agreement;
(c) The consummation of the transactions contemplated by this Agreement
will not result in the breach of any terms or provisions of the bylaws of such
Seller or result in the breach of any term or provision of, or conflict with or
constitute a default under or result in
7
<PAGE> 10
the acceleration of any obligation under, any material agreement, indenture or
loan or credit agreement or other material instrument to which such Seller or
its property is subject, or result in the violation of any law, rule,
regulation, order, judgment or decree to which such Seller or its property is
subject;
(d) There is no action, suit, proceeding or investigation pending or,
to the best of such Seller's knowledge, threatened against such Seller which,
either in any one instance or in the aggregate, may result in any material
adverse change in the business, operations, financial condition, properties or
assets of such Seller or in any material impairment of the right or ability of
such Seller to carry on its business substantially as now conducted, or in any
material liability on the part of such Seller or which would draw into question
the validity of this Agreement or the Mortgage Loans or of any action taken or
to be taken in connection with the obligations of such Seller contemplated
herein, or which would be likely to impair materially the ability of the Seller
to perform under the terms of this Agreement;
(e) Such Seller 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 governmental agency, which default might have consequences that would
materially and adversely affect the condition (financial or other) or operations
of such Seller or its properties or might have consequences that would
materially and adversely affect its performance hereunder;
(f) The transfer, assignment and conveyance of the Mortgage Notes and
the Mortgages by such Seller pursuant to this Agreement are not subject to the
bulk transfer laws or any similar statutory provisions in effect in any
applicable jurisdiction;
(g) Such Seller is solvent and such Seller will not be rendered
insolvent as a result of the transfer of the Mortgage Loans to the Purchaser;
and
(h) The origination and collection practices used by such Seller with
respect to each Mortgage Note and Mortgage have been in all material respects
legal, proper, prudent and customary in the home equity line of credit loan
origination and servicing business.
Section 3.02. Representations and Warranties as to the Mortgage Loans
Each Seller hereby represents and warrants to the Purchaser, with
respect to each Mortgage Loan sold by it pursuant to this Agreement that:
(a) As of the Closing Date with respect to the Mortgage Loans and as of
the applicable Transfer Date with respect to any Eligible Substitute Mortgage
Loan, this Agreement constitutes a valid transfer and assignment to the
Purchaser of all right, title and interest of such Seller in and to each related
Mortgage Loan (including its Cut-Off Date Principal Balance), all monies due or
to become due with respect thereto, and all proceeds of such Cut-Off Date
Principal Balances with respect to the Mortgage Loans and such funds as are from
time to time deposited in the Collection Account (excluding any investment
earnings thereon) and all other property specified in Section 2.01 of this
Agreement as being conveyed to the Purchaser by such Seller, and (upon payment
for the Additional Balances), will constitute a valid transfer and assignment to
the Trustee of all right, title and interest of the Seller in and to the
Additional Balances, all monies due or to become due with respect thereto, and
all proceeds of such
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<PAGE> 11
Additional Balances and all other property specified in Section 2.01 of this
Agreement relating to the Additional Balances.
(b) As of the Closing Date with respect to the Mortgage Loans and the
applicable Transfer Date with respect to any Eligible Substitute Mortgage Loan
and as of the date any Additional Balance is created, the information set forth
in the Mortgage Loan Schedule for such Mortgage Loans is true and correct in all
material respects;
(c) The applicable Cut-Off Date Principal Balance has not been assigned
or pledged, and such Seller is the sole owner and holder of such Cut-Off Date
Principal Balance free and clear of any and all liens, claims, encumbrances,
participation interests, equities, pledges, charges or security interests of any
nature, and has full right and authority, to sell, assign or transfer the same
pursuant to this Agreement;
(d) As of the Closing Date with respect to the Mortgage Loans and the
applicable Transfer Date with respect to any Eligible Substitute Mortgage Loan,
the related Mortgage Note and the Mortgage with respect to each Mortgage Loan
have not been assigned or pledged, and such Seller is the sole owner and holder
of the Mortgage Loan free and clear of any and all liens, claims, encumbrances,
participation interests, equities, pledges, charges or security interests of any
nature, and has full right and authority, under all governmental and regulatory
bodies having jurisdiction over the ownership of the applicable Mortgage Loans,
to sell, assign or transfer the same pursuant to this Agreement;
(e) As of the Closing Date with respect to the Mortgage Loans and the
applicable Transfer Date with respect to any Eligible Substitute Mortgage Loan,
the related Mortgage is a valid and subsisting first or second lien, as set
forth on the Mortgage Loan Schedule with respect to each related Mortgage Loan,
on the property therein described, and as of the applicable Cut-off Date the
related Mortgaged Property is free and clear of all encumbrances and liens
having priority over the first, or second lien, as applicable, of such Mortgage
except for liens for (i) real estate taxes and special assessments not yet
delinquent; (ii) income taxes, (iii) any first or similar mortgage loan secured
by such Mortgaged Property and specified on the Mortgage Loan Schedule; (iv)
covenants, conditions and restrictions, rights of way, easements and other
matters of public record as of the date of recording that are acceptable to
mortgage lending institutions generally; and (v) other matters to which like
properties are commonly subject that do not materially interfere with the
benefits of the security intended to be provided by such Mortgage;
(f) As of the Closing Date with respect to the Mortgage Loans and the
applicable Transfer Date with respect to any Eligible Substitute Mortgage Loan,
there is no valid offset, defense or counterclaim of any obligor under any
Credit Line Agreement or Mortgage that has been asserted or threatened;
(g) To the best knowledge of such Seller, as of the Closing Date with
respect to the Mortgage Loans and the applicable Transfer Date with respect to
any Eligible Substitute Mortgage Loan, there are no delinquent recordings or
other tax or fee or assessment liens against any related Mortgaged Property;
(h) As of the Closing Date with respect to the Mortgage Loans and the
applicable Transfer Date with respect to any Eligible Substitute Mortgage Loan,
there is no
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<PAGE> 12
proceeding pending nor has the Seller received notice of such proceeding being
threatened for the total or partial condemnation of the related Mortgaged
Property, and to the best knowledge of the Seller, such property is free of
material damage;
(i) To the best knowledge of such Seller, as of the Closing Date with
respect to the Mortgage Loans and the applicable Transfer Date with respect to
any Eligible Substitute Mortgage Loan, there are no mechanics' or similar liens
or claims which have been filed for work, labor or material affecting the
related Mortgaged Property which are, or may be, liens prior or equal to the
lien of the related Mortgage, except liens which are fully insured against by
the title insurance policy;
(j) No Minimum Monthly Payment is more than 29 days delinquent
(measured on a contractual basis);
(k) As of the Closing Date with respect to the Mortgage Loans and the
applicable Transfer Date with respect to any Eligible Substitute Mortgage Loan,
for each Mortgage Loan, the related Mortgage File contains each of the documents
and instruments specified to be included therein;
(l) To the best knowledge of such Seller, the related Mortgage at
origination complied in all material respects with applicable state and federal
laws, including, without limitation, usury, truth in lending, real estate
settlement procedures, consumer credit protection, equal credit opportunity or
disclosure laws applicable to the Mortgage Loan;
(m) To the best knowledge of such Seller, either a lender's title
insurance policy or binder was issued on the date of origination of the Mortgage
Loan and each such policy is valid and remains in full force and effect, or a
title search or guaranty of title customary in the relevant jurisdiction was
obtained with respect to a Mortgage Loan and to which no title insurance policy
or binder was issued;
(n) As of the Closing Date with respect to the Mortgage Loans and the
applicable Transfer Date with respect to any Eligible Substitute Mortgage Loan,
none of the Mortgaged Properties is a mobile home or a manufactured housing unit
that is not considered or classified as part of the real estate under the laws
of the jurisdiction in which it is located;
(o) The Combined Loan-to-Value Ratio for each Mortgage Loan was not in
excess of 100%;
(p) No selection procedure reasonably believed by such Seller to be
adverse to the interests of the Certificateholders or the Credit Enhancer was
utilized in selecting the Mortgage Loans;
(q) Such Seller has not transferred the Mortgage Loans to the Trust
with any intent to hinder, delay or defraud any of its creditors;
(r) The Minimum Monthly Payment with respect to any Mortgage Loan is
not less than the interest accrued at the applicable Loan Rate on the daily
Principal Balance during the interest period relating to the date on which such
Minimum Monthly Payment is due;
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<PAGE> 13
(s) Within 30 days of the Closing Date with respect to the Mortgage
Loans and, to the extent not already included in such filing with respect to the
Mortgage Loans, the applicable Transfer Date with respect to any Eligible
Substitute Mortgage Loan, such Seller will file UCC-1 financing statements with
respect to the Mortgage Loans;
(t) As of the Closing Date with respect to the Mortgage Loans and the
applicable Transfer Date with respect to any Eligible Substitute Mortgage Loan,
each Credit Line Agreement and each Mortgage Loan is an enforceable obligation
of the related Mortgagor, except as the enforceability thereof may be limited by
the bankruptcy, insolvency or similar laws affecting creditors' rights
generally;
(u) As of the Closing Date with respect to the Mortgage Loans and the
applicable Transfer Date with respect to any Eligible Substitute Mortgage Loan,
such Seller has not received a notice of default of any senior mortgage loan
related to a Mortgaged Property that has not been cured by any party other than
the Servicer;
(v) The definition of the applicable index in each Credit Line
Agreement relating to each Mortgage Loan does not differ materially from the
Index as set forth on Exhibit B;
(w) As of the Closing Date with respect to the Mortgage Loans and the
applicable Transfer Date with respect to any Eligible Substitute Mortgage Loan,
each Mortgaged Property consists of a single parcel of real property with a
one-to-four unit single family residence erected thereon, an individual
condominium unit, planned unit development unit or townhouse; and
(x) At the time of origination of each Mortgage Loan, the Seller caused
hazard insurance to be obtained for such Mortgage Loan, naming the Servicer or
the related subservicer as loss payee thereunder and providing extended coverage
in an amount which is at least equal to the lesser of (i) the replacement value
of the improvements securing such Mortgage Loan from time to time or (ii) the
combined principal balance owing on such Mortgage Loan and any mortgage loan
senior to such Mortgage Loan from time to time.
With respect to the representations and warranties set forth in this
Section 3.02 that are made to the best knowledge of a Seller, if it is
discovered by such Seller, the Purchaser, the Servicer or a Responsible Officer
of the Trustee that the substance of such representation and warranty is
inaccurate and such inaccuracy materially and adversely affects the value of the
related Mortgage Loan then, notwithstanding such Seller's lack of knowledge with
respect to the substance of such representation and warranty being inaccurate at
the time the representation or warranty was made, such inaccuracy shall be
deemed a breach of the applicable representation or warranty and subject such
Seller to the obligations set forth in Section 3.03.
Section 3.03. Purchase and Substitution
It is understood and agreed that the representations and warranties set
forth in Sections 3.01 and 3.02 shall survive delivery of the Mortgage Loans to
the Purchaser. It is understood and agreed that the Purchaser is making certain
representations and warranties with respect to the Mortgage Loans in the Pooling
and Servicing Agreement and that the Sellers have agreed to cure any breach of
such representations and warranties or to repurchase or substitute
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<PAGE> 14
for any affected Mortgage Loan as set forth herein. Upon discovery by a Seller,
the Purchaser, the Servicer or a Responsible Officer of the Trustee of (i) any
breach of the representation and warranty set forth in Section 2.04(b)(vi) of
the Pooling and Servicing Agreement or (ii) a breach of any of the
representations and warranties in Sections 3.01 and 3.02 or the representations
and warranties of the Purchaser with respect to the Mortgage Loans in Section
2.04 of the Pooling and Servicing Agreement that materially and adversely
affects the interests of the Trust or the Investor Certificateholders or the
Credit Enhancer in the related Mortgage Loan, the party discovering such breach
shall give prompt written notice to the other parties and the Credit Enhancer.
Within 90 days of the earlier of its discovery or its receipt of notice of any
breach of a representation or warranty, the applicable Seller shall cure, such
breach in all material respects, or shall, not later than the Business Day next
preceding the Distribution Date in the month following the Collection Period in
which any such cure period expired (or such later date that is acceptable to the
Trustee and the Credit Enhancer as evidenced by their written consents), either
(a) accept a transfer of such Mortgage Loan from the Trust or (b) substitute an
Eligible Substitute Mortgage Loan in the same manner and subject to the same
conditions as set forth in Section 2.05; provided, however, that the cure for
any breach of a representation and warranty of the Purchaser in Section 2.04 of
the Pooling and Servicing Agreement relating to the characteristics of the
Mortgage Loans in the aggregate shall be a repurchase of or substitution for
only the Mortgage Loans necessary to cause such characteristics to be in
compliance with the related representation and warranty and provided, further,
that each Seller shall contribute proportionally to the repurchase or
substitution of such Mortgage Loans, allocated according to the proportion of
Mortgage Loans contributed by each such Seller to the Trust. Upon accepting such
transfer and making any required deposit into the Collection Account or
substitution of an Eligible Substitute Mortgage Loan, as the case may be, each
Seller shall be entitled to receive an instrument of assignment or transfer from
the Trustee to the same extent as set forth in Section 2.05 with respect to the
transfer of Mortgage Loans under that Section.
It is understood and agreed that the obligations of any Seller to
accept a transfer of a Mortgage Loan as to which a breach has occurred and is
continuing and to make any required deposit in the Collection Account or to
substitute an Eligible Substitute Mortgage Loan, as the case may be, shall
constitute the sole remedy against such Seller respecting such breach available
to Investor Certificateholders, the Trustee on behalf of Investor
Certificateholders and the Credit Enhancer. Notwithstanding the foregoing, with
regard to any breach of the representation and warranty set forth in Section
3.02(d), the sale and assignment of the affected Mortgage Loans to the Trust
shall be deemed void and the applicable Seller shall pay to the Trust the sum of
the amount of the related Principal Balances, plus unpaid accrued interest on
each such Principal Balance at the applicable Loan Rate to the date of payment.
ARTICLE IV
CONDITIONS
Section 4.01. Conditions to Obligation of the Purchaser The obligation
of the Purchaser to purchase the Mortgage Loans is subject to the satisfaction
of the following conditions:
(a) Representations and Warranties True. The representations and
warranties of the Sellers hereunder shall be true and correct on the Closing
Date with the same effect as if
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<PAGE> 15
then made, and the Sellers shall have performed all obligations to be performed
by them hereunder on or prior to the Closing Date.
(b) Documents to be Delivered By the Sellers at the Closing.
(i) The Mortgage Loan Schedule specifying the Mortgage Loans to be
transferred hereunder, one copy to be attached to each counterpart of the
Pooling and Servicing Agreement as the Mortgage Loan Schedule thereto;
(ii) An Officer's Certificate with respect to each Seller, dated as of
the Closing Date, with the resolutions of such Seller, authorizing the
transactions contemplated by this Agreement attached thereto, together with
copies of the charter, by-laws and a Certificate of Good Standing dated as of
recent date (acceptable to the Purchaser and its counsel) of such Seller;
(iii) An Opinion of Counsel to the Sellers dated as of the Closing Date
in the form attached to the Underwriting Agreement and any Opinion of Counsel
required to be delivered to any Rating Agency or the Credit Enhancer;
(c) Other Documents. On the Closing Date, each Seller shall provide
such other documents as the Purchaser may reasonably request.
(d) Other Transactions. The transactions contemplated by the Pooling
and Servicing Agreement shall be consummated on the Closing Date.
Section 4.02. Conditions To Obligation of each Seller
The obligation of the Sellers to transfer the Mortgage Loans to the
Purchaser is subject to the satisfaction of the condition that at the Closing
Date, the Purchaser shall deliver to each Seller the consideration set forth on
Exhibit A hereto, as provided in Section 2.01.
ARTICLE V
THE SELLERS
Section 5.01. [Reserved]
Section 5.02. Enforceability; Merger or Consolidation of the Sellers
(a) Each Seller (other than Bank One, Wisconsin, which is a Wisconsin
state bank) will keep in full effect its respective existence, rights and
franchises as a national bank (or state bank, in the case of Bank One,
Wisconsin), and will obtain and preserve its qualification to do business as a
foreign corporation in each jurisdiction in which such qualification is or shall
be necessary to protect the validity and enforceability of this Agreement, the
Pooling and Servicing Agreement, and any of the Mortgage Loans and to perform
its duties under such agreements.
(b) Any Person into which any Seller may be merged or consolidated, or
any corporation resulting from any merger, conversion or consolidation to which
any Seller shall be a party, or any Person succeeding to the business of any
Seller, shall be the successor of any Seller hereunder, without the execution or
filing of any paper or any further act on the part of any of the
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<PAGE> 16
parties hereto, anything herein to the contrary notwithstanding.
Section 5.03. Mandatory Sale; Grant of Security Interest
The sale on the Closing Date by each Seller of its Mortgage Loans is
mandatory, it being specifically understood and agreed that each Mortgage Loan
is unique and identifiable on the date hereof and that an award of money damages
would be insufficient to compensate the Purchaser for the loss and damages
incurred by the Purchaser (including damages to prospective purchasers of the
Certificates) in the event of such Seller's failure to deliver the Mortgage
Loans on or before the Closing Date. Each Seller hereby grants to the Purchaser
and to the Trustee as its successor and assignee a lien on and continuing
security interest in each Mortgage Loan and each document and instrument
evidencing such Mortgage Loan to secure the performance by such Seller of its
obligations hereunder. All rights and remedies of the Purchaser under this
Agreement are distinct from, and cumulative with, any other rights or remedies
under this Agreement or afforded by law or equity, and all such rights and
remedies may be exercised concurrently, independently or successively.
ARTICLE VI
ADDITIONAL AGREEMENTS
The Sellers agree with the Purchaser as follows:
Section 6.01. Conflicts With Pooling and Servicing Agreement
To the extent that any provision of Sections 6.02 through 6.04 of this
Agreement conflicts with any provision of the Pooling and Servicing Agreement,
the Pooling and Servicing Agreement shall govern.
Section 6.02. Protection of Title to Trust
(a) The Sellers shall from time to time execute and deliver all such
supplements and amendments hereto and all such financing statements,
continuation statements, instruments of further assurance and other instruments,
and shall take such other action necessary or advisable to:
(i) maintain or preserve the transfer evidenced by this Agreement or
carry out more effectively the purposes hereof; or
(ii) preserve and defend the Purchaser's title to the Mortgage Loans
and the rights of the Purchaser in such assets against the claims of all persons
and parties, and the Sellers hereby designate the Purchaser its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required by the Purchaser pursuant to this Section 6.02.
Section 6.03. Other Liens or Interests
Except for the conveyances hereunder and pursuant to this Agreement,
the Sellers shall not sell, pledge, assign or transfer the Mortgage Loans to any
other Person, or grant, create, incur, assume or suffer to exist any Lien on any
interest therein, and the Sellers shall defend the
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<PAGE> 17
right, title and interest of the Purchaser in, to and under such Mortgage Loans
against all claims of third parties claiming through or under the Sellers.
Section 6.04. Purchase Events
The Sellers acknowledge that the Purchaser has assigned all of its
right, title and interest in, to and under this Agreement, including the
Purchaser's right to cause the Sellers to purchase the Mortgage Loans from the
Purchaser under certain circumstances, to the Trust pursuant to Section 2.01 of
the Pooling and Servicing Agreement and has assigned to the Trustee its right,
title and interest in this Agreement; provided, however, the neither the Trustee
nor the Trust assumes the obligation under any Credit Line Agreement that
provides for the funding of future advances to the Mortgagor thereunder, and
neither the Trust nor the Trustee shall be obligated or permitted to fund any
such future advances. The Sellers hereby covenant and agree with the Purchaser
for the benefit of the Purchaser, the Trustee, the Certificateholders and the
Credit Enhancer that the occurrence of a breach of any of the Sellers'
representations and warranties contained in Section 3.02 hereof shall constitute
events obligating the Seller, to the extent specified in Section 2.04 of the
Pooling and Servicing Agreement, and without further notice from the Purchaser
hereunder, to purchase any Mortgage Loan from the Trustee. It is understood and
agreed that the obligation of any Seller to purchase any Mortgage Loan as to
which a breach has occurred and is continuing shall, if such obligation is
fulfilled, constitute the sole remedy against such Seller for such breach
available to the Trustee, the Certificateholders or the Credit Enhancer.
Section 6.05. Indemnification
The Sellers shall indemnify the Purchaser for any liability as a result
of the failure of an Mortgage Loan to be originated in compliance with all
requirements of law. This indemnity obligation shall be in addition to any
obligation that the Sellers may otherwise have.
Section 6.06. Trust
The Sellers acknowledge that the Purchaser shall, pursuant to the
Pooling and Servicing Agreement, transfer the Mortgage Loans to the Trustee (for
the benefit of the Certificateholders), and the Purchaser shall assign its
rights hereunder to the Trustee (for the benefit of the Certificateholders) as
set forth in the Pooling and Servicing Agreement.
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.01. Amendment
This Agreement may be amended from time to time (upon prior notice to
each of the Rating Agencies and with the prior written consent of the Credit
Enhancer) by a written amendment duly executed and delivered by the Sellers and
the Purchaser; provided, however, that any such amendment that materially
adversely affects the rights of the Certificateholders under the Pooling and
Servicing Agreement must be consented to by a majority of the
Certificateholders.
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<PAGE> 18
Section 7.02. Waivers
No failure or delay on the part of the Purchaser in exercising any
power, right or remedy under this Agreement shall operate as a waiver thereof,
nor shall any single or partial exercise of any such power, right or remedy
preclude any other or further exercise thereof or the exercise of any other
power, right or remedy.
Section 7.03. Costs and Expenses
The Sellers agree to pay all reasonable out-of-pocket costs and
expenses of the Purchaser, including fees and expenses of counsel, in connection
with the perfection as against third parties of the Purchaser's right, title and
interest in, to and under the Mortgage Loans and the enforcement of any
obligation of the Sellers hereunder.
Section 7.04. Survival
The representations, warranties and covenants of the Seller set forth
in Sections 3.01 and 3.02 and Article V of this Agreement shall remain in full
force and effect and shall survive the closing under Section 2.07 and the
transfers contemplated by Sections 6.04 and 6.06.
Section 7.05. Confidential Information
The Purchaser agrees that it shall neither use nor disclose to any
person the names and addresses of the Mortgagors, except in connection with the
enforcement of the Purchaser's rights (i) hereunder, (ii) under the Mortgage
Loans or (iii) as required by law.
Section 7.06. Severability Clause
Any part, provision, representation or warranty of this Agreement which
is prohibited or which is held to be void or unenforceable shall be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof. Any part, provision, representation or warranty of
this Agreement which is prohibited or unenforceable or is held to be void or
unenforceable in any jurisdiction shall, 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 as to any Mortgage Loan shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 7.07. Headings and Cross-References
The various headings in this Agreement are included for convenience
only and shall not affect the meaning or interpretation of any provision of this
Agreement.
Section 7.08. Recordation of Agreement
To the extent permitted by applicable law, the Agreement is subject to
recordation in all appropriate public offices for real property records in all
the counties or other comparable jurisdictions in which any or all of the
properties subject to the Mortgages are situated, and in any other appropriate
public recording office or elsewhere, such recordation to be effected by the
Sellers at the Sellers' expense on direction of the Purchaser accompanied by an
Opinion of
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<PAGE> 19
Counsel to the effect that such recordation materially and beneficially affects
the interests of the Purchaser.
Section 7.09. Governing Law
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF
LAWS PROVISIONS AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 7.10. Notices
All demands, notices and communications under this Agreement shall be
in writing, personally delivered or mailed by certified mail with return receipt
requested, and shall be deemed to have been duly given upon receipt at the
appropriate address set forth in the Pooling and Servicing Agreement.
Section 7.11. Counterparts
This Agreement may be executed in two or more counterparts and by
different parties on separate counterparts, each of which shall be an original,
but all of which together shall constitute one and the same instrument.
Section 7.12. The Credit Enhancer
Any right conferred to the Credit Enhancer hereunder shall be suspended
during any period in which the Credit Enhancer is in default in its payment
obligations under the Policy. At such time as the Certificates are no longer
outstanding under the Pooling and Servicing Agreement, and no amounts owed to
the Credit Enhancer with respect to the Certificates remain unpaid, the Credit
Enhancer's rights hereunder shall terminate. The Credit Enhancer is an intended
third-party beneficiary of this Agreement.
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<PAGE> 20
IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
and year first above written.
PURCHASER
Banc One ABS Corporation
By:
------------------------------------------
Name: Daniel A. Long, Jr.
Title: Vice President
SELLERS
Bank One, N.A.
By:
------------------------------------------
Name: Daniel A. Long, Jr.
Title: Assistant Vice President -
Funds Management
Bank One, Arizona, N.A.
By:
------------------------------------------
Name: Daniel A. Long, Jr.
Title: Assistant Vice President -
Funds Management
Bank One, Colorado, N.A.
By:
------------------------------------------
Name: Daniel A. Long, Jr.
Title: Assistant Vice President -
Funds Management
Bank One, Illinois, N.A.
By:
------------------------------------------
Name: Daniel A. Long, Jr.
Title: Assistant Vice President -
Funds Management
[Signature Page to Mortgage Loan Purchase Agreement]
<PAGE> 21
Bank One, Indiana, N.A.
By:
------------------------------------------
Name: Daniel A. Long, Jr.
Title: Assistant Vice President -
Funds Management
Bank One, Kentucky, N.A.
By:
------------------------------------------
Name: Daniel A. Long, Jr.
Title: Assistant Vice President -
Funds Management
Bank One, Utah, N.A.
By:
------------------------------------------
Name: Daniel A. Long, Jr.
Title: Assistant Vice President -
Funds Management
Bank One, West Virginia, N.A.
By:
------------------------------------------
Name: Daniel A. Long, Jr.
Title: Assistant Vice President -
Funds Management
Bank One, Wisconsin
By:
------------------------------------------
Name: Daniel A. Long, Jr.
Title: Assistant Vice President -
Funds Management
[Signature Page to Mortgage Loan Purchase Agreement]
<PAGE> 22
EXHIBIT A
[RESERVED]
A-1
<PAGE> 23
EXHIBIT B-1
MORTGAGE LOANS TRANSFERRED BY
Bank One, N.A.
B-1
<PAGE> 24
EXHIBIT B-2
MORTGAGE LOANS TRANSFERRED BY
Bank One, Arizona, N.A.
B-2
<PAGE> 25
EXHIBIT B-3
MORTGAGE LOANS TRANSFERRED BY
Bank One, Colorado, N.A.
B-3
<PAGE> 26
EXHIBIT B-4
MORTGAGE LOANS TRANSFERRED BY
Bank One, Illinois, N.A.
B-4
<PAGE> 27
EXHIBIT B-5
MORTGAGE LOANS TRANSFERRED BY
Bank One, Indiana, N.A.
B-5
<PAGE> 28
EXHIBIT B-6
MORTGAGE LOANS TRANSFERRED BY
Bank One, Kentucky, N.A.
B-6
<PAGE> 29
EXHIBIT B-7
MORTGAGE LOANS TRANSFERRED BY
Bank One, Utah, N.A.
B-7
<PAGE> 30
EXHIBIT B-8
MORTGAGE LOANS TRANSFERRED BY
Bank One, West Virginia, N.A.
B-8
<PAGE> 31
EXHIBIT B-9
MORTGAGE LOANS TRANSFERRED BY
Bank One, Wisconsin
B-9
<PAGE> 32
EXHIBIT C
ACKNOWLEDGEMENT OF TRUSTEE AS TO RECEIPT OF MORTGAGE LOANS
THE BANK OF NEW YORK, as Trustee (the "Trustee") under the Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement"), dated as of August
31, 1998, among Banc One ABS Corporation, as Depositor (the "Depositor"), Bank
One, N.A. ("Bank One"), as Servicer, and the Trustee, hereby acknowledges
receipt of the Mortgage Loans, and further declares that it will hold the
documents delivered to it pursuant to Section 2.01 of the Pooling and Servicing
Agreement and Section 2.04 of the Mortgage Loan Purchase Agreement, dated as of
September 24, 1998 (the "Purchase Agreement"), among Bank One, Bank One,
Arizona, N.A., Bank One, Colorado, N.A., Bank One, Illinois, N.A., Bank One,
Indiana, N.A., Bank One, Kentucky, N.A., Bank One, Utah, N.A., Bank One, West
Virginia, N.A. and Bank One, Wisconsin (each, a "Seller," and collectively, the
"Sellers") and the Depositor, and any amendments, replacements or supplements
thereto, as well as any other assets transferred pursuant to the terms of the
Purchase Agreement.
The Trustee hereby also acknowledges the grant of security interest in
the Mortgage Loans by the Sellers to the Depositor and to the Trustee as its
successor and assignee under the Purchase Agreement.
THE BANK OF NEW YORK
By: __________________________
Name:
Title:
Dated:
B-10
