<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 9, 1998
REGISTRATION STATEMENT NO. 333-59845
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
PRE-EFFECTIVE AMENDMENT NO. 1 TO FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Banc One ABS Corporation
(Depositor of the Trusts described herein)
(Exact names of registrants as specified in governing instruments)
Ohio
(States or other jurisdictions of incorporation or organization)
None Available
(I.R.S. Employer Identification Number)
100 East Broad Street
Columbus, Ohio 43271-0158
(614) 248-5700
(Address of principal executive offices)
Steven Alan Bennett, Esq.
BANC ONE CORPORATION
100 East Broad Street
Columbus, Ohio 43271-0158
(614) 248-5700
(Name and address of agent for service)
Copies to:
Joshua E. Raff, Esq. Charles F. Andrews, Esq.
Orrick, Herrington & Sutcliffe LLP BANC ONE CORPORATION
666 Fifth Avenue 100 East Broad Street
New York, New York 10103 Columbus, Ohio 43271-0158
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable on or after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
plans, please check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / ____________
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ____________
If delivery of the prospectus is expected to be made pursuant to rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed maximum
TITLE TO SECURITIES BEING Amount being offering per price per Propose maximum Amount of
REGISTERED registered unit (1) aggregate offering price registration fee
- ---------- ---------- -------- ------------------------ ----------------
<S> <C> <C> <C> <C>
Asset Backed Notes $ 700,000,000 100% $ 700,000,000 $ 206,500
Asset Backed Certificates 2,800,000,000 100% 2,800,000,000 826,000
------------- ---- ------------- ------------
Total $3,500,000,000 $3,500,000,000 $1,032,500(2)
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Less $295.00 previously paid.
The Registrant hereby amends this Registration Statement on such date or
dates as maybe necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE> 2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold without the
delivery of a final Prospectus Supplement and Prospectus. This Prospectus
Supplement and the accompanying Prospectus shall not constitute an offer to sell
or the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of any
such State.
SUBJECT TO COMPLETION DATED SEPTEMBER 9, 1998
PROSPECTUS SUPPLEMENT
(To Prospectus dated ______________,_________)
$_______________
Banc One Home Equity Loan Trust 199__-__
Revolving Home Equity Loan Asset-Backed Certificates, Series 199__-__
___________________
___________________
as Seller
-----------
Bank One, N.A.,
as Servicer
-----------
Banc One ABS Corporation,
as Depositor
-----------
Each Revolving Home Equity Loan Asset-Backed Certificate, Series 199_-_
(collectively, the "Certificates") will represent an undivided interest in the
Banc One Home Equity Loan Trust 199_-_ (the "Trust") to be formed pursuant to a
Pooling and Servicing Agreement among ____________, as Seller, Bank One, N.A.
("Bank One"), as Servicer, Banc One ABS Corporation, as Depositor, and
_____________________, as Trustee. The property of the Trust will include a pool
of adjustable rate home equity revolving credit line loans (sometimes referred
to herein as "home equity loans") made or to be made in the future (the
"Mortgage Loans") under certain home equity revolving credit line loan
agreements. The Mortgage Loans are secured by first, second and third deeds of
trust or mortgages on one- to four-family residential properties.
The aggregate undivided interest in the Trust represented by the
Certificates will, as of _________, 199_ (the "Cut-Off Date"), represent
approximately ___% of the outstanding principal balances of the Mortgage Loans.
The remaining undivided interest in the Trust not represented by the
Certificates (the "Transferor Interest") will initially be equal to $_________,
which as of the Cut-Off Date is approximately ___% of the outstanding principal
balances of the Mortgage Loans. [The Transferor Interest will be initially
retained by Bank One.] Only the Certificates are offered hereby.
Distributions of principal and interest on the Certificates will be made
on the [fifteenth] day of each month or, if such date is not a Business Day,
then on the succeeding Business Day (each, a "Distribution Date"), commencing
___________, 199_. On each Distribution Date, holders of the Certificates will
be entitled to receive, from and to the limited extent of funds available in the
Collection Account (as defined herein), distributions with respect to interest
and principal calculated as set forth herein. The Certificates are not
guaranteed by the Depositor, Bank One or any affiliate thereof. [However, the
Certificates will be unconditionally and irrevocably guaranteed as to the
payment of the Guaranteed Distributions (as defined herein) on each Distribution
Date pursuant to the terms of a financial guaranty insurance policy (the
"Policy") to be issued by]
There is currently no market for the Certificates offered hereby and there
can be no assurance that such a market will develop or if it does develop that
it will continue. See "RISK FACTORS" herein and in the Prospectus.
-----------
Prospective investors should review the information set forth under "Risk
Factors" beginning on page S-__ herein and on page __ in the accompanying
Prospectus.
-----------
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST ONLY AND DO NOT REPRESENT
INTERESTS IN OR OBLIGATIONS OF THE DEPOSITOR, BANK ONE, THE TRUSTEE OR ANY
AFFILIATE THEREOF, EXCEPT TO THE EXTENT PROVIDED HEREIN. NEITHER THE
CERTIFICATES NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY ANY
GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to the
Public Discount (1) Depositor (2)
<S> <C> <C> <C>
Per Certificate............. % % %
Total....................... $ $ $
</TABLE>
(1) The Depositor has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(2) Before deducting expenses, estimated to be $
-----------
The Certificates are offered subject to prior sale and subject to the
Underwriters' right to reject orders in whole or in part. It is expected that
delivery of the Certificates will be made in book-entry form only through the
facilities of The Depository Trust Company, Cedel Bank societe anonyme and the
Euroclear System on or about ____________, 199__ (the "Closing Date").
________________, 199__
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
CERTIFICATES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
Until ninety days after the date of this Prospectus Supplement, all
dealers effecting transactions in the Certificates, whether or not participating
in this distribution, may be required to deliver a Prospectus Supplement and
Prospectus. This is in addition to the obligation of dealers acting as
underwriters to deliver a Prospectus Supplement and Prospectus with respect to
their unsold allotments or subscriptions.
The Certificates offered hereby constitute part of a separate series of
Revolving Home Equity Loan Asset Backed Certificates being offered by Banc One
ABS Corporation from time to time pursuant to its Prospectus dated __________,
199__. This Prospectus Supplement does not contain complete information about
the offering of the Certificates. Additional information is contained in the
Prospectus and investors are urged to read both this Prospectus Supplement and
the Prospectus in full. Sales of the Certificates may not be consummated unless
the purchaser has received both this Prospectus Supplement and the Prospectus.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are incorporated herein by reference all documents filed by the
Depositor with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the 1934 Act, on or subsequent to the date of this Prospectus and prior to the
termination of the offering of the Certificates made by this Prospectus
Supplement. The Depositor will provide without charge to each person to whom
this Prospectus Supplement and Prospectus are delivered, on request of such
person, a copy of any or all of the documents incorporated herein by reference
other than the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Requests should be directed to
Banc One ABS Corporation in writing at __________________, _______________ or by
telephone at (___) ___-____.
[In addition to the documents described above under "Incorporation of
Certain Documents by Reference," the financial statements of the Certificate
Insurer and subsidiaries included in, or as exhibits to, the following
documents, which have been filed with the Securities and Exchange Commission by
___________________, are hereby incorporated by reference in this Prospectus
Supplement:
(a) Annual Report on Form 10-K for the period ended ___________, ____;
and
(b) Quarterly Report on Form IO-Q for the period ended ___________,
____.
All financial statements of the Certificate Insurer included in documents
filed by Holdings pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act
subsequent to the date of this Prospectus Supplement and prior to the
termination of the offering of the Certificates shall be deemed to be
incorporated by reference into this Prospectus Supplement and to be a part
hereof from the respective dates of filing such documents.]
S-2
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[The Depositor hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the financial
statements of the Certificate Insurer included in or as an exhibit to the
documents of Holdings referred to above and filed pursuant to Section 13(a) or
Section 15(d) of the 1934 Act that is incorporated by reference in the
Registration Statement of which this Prospectus is a part shall be deemed to be
a new registration statement relating to the Certificates offered hereby, and
the offering of such Certificates at that time shall be deemed to be the initial
bona fide offering thereof.]
All reports and other documents filed by the Servicer, on behalf of the
Trust, pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
offering of the Certificates offered hereby shall be deemed incorporated by
reference into this Prospectus and to be a part hereof.
The Servicer will provide without charge to each person, including any
beneficial owner of Certificates, to whom a copy of this Prospectus is
delivered, on the written or oral request of any such person, a copy of any or
all the documents incorporated herein by reference (other than exhibits to such
documents). Written requests for such copies should be directed to BANC ONE
CORPORATION, 100 East Broad Street, Columbus, Ohio 43271-0133, Attention:
Structured Finance. Telephone requests for such copies should be directed to
BANC ONE CORPORATION at (614) 248-6347.
S-3
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SUMMARY
The following summary of certain pertinent information is qualified in its
entirety by reference to the detailed information appearing elsewhere in this
Prospectus Supplement and the accompanying Prospectus. Certain capitalized terms
used in the Summary are defined elsewhere in the Prospectus Supplement or in the
Prospectus. Reference is made to the Index of Defined Terms herein and the
Glossary of Terms in the Prospectus for the definitions of certain capitalized
terms.
Trust...................... Banc One Home Equity Loan Trust 199_-_ (the
"Trust") will be formed pursuant to a pooling and
servicing agreement (the "Agreement") to be dated
as of ______, 199_ (the "Cut-Off Date") among
___________, as Seller, Bank One, N.A. ("Bank
One"), as servicer (together with any successor in
such capacity, the "Servicer"), Banc One ABS
Corporation, as depositor (the "Depositor"), and
_____________, as trustee (the "Trustee"). The
property of the Trust will include: 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,
second or third mortgages on residential
properties that are primarily one- to four-family
properties (the "Mortgaged Properties"); the
collections in respect of the Mortgage Loans
received after the Cut-Off Date (exclusive of
payments in respect of accrued interest due on or
prior to 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 limited financial
guaranty insurance policy (the "Policy")]; an
assignment of the Depositor's rights under the
Purchase Agreement (as defined herein); rights
under certain hazard insurance policies covering
the Mortgaged Properties; and certain other
property, as described more fully herein.
The Trust property will include the unpaid
principal balance of each Mortgage Loan as of the
Cut-Off Date (the "Cut-Off Date Principal
Balance") plus any additions thereto as a result
of new advances made pursuant to the applicable
Credit Line Agreement (the "Additional Balances")
during the life of the Trust. With respect to any
date, the "Pool Balance" will be equal to the
aggregate of the Principal Balances of all
Mortgage Loans as of such date. The aggregate
Cut-Off Date Principal Balance of the Mortgage
Loans is $_____________ (the "Cut-Off Date
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S-4
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Pool Balance"). The "Principal Balance" of a
Mortgage Loan (other than a Liquidated Mortgage
Loan) on any day is equal to its Cut-Off Date
Principal Balance, plus (I) any Additional
Balances in respect of such Mortgage Loan, minus
(ii) all collections credited against the
Principal Balance of such Mortgage Loan in
accordance with the related Credit Line Agreement
prior to such day. The Principal Balance of a
Liquidated Mortgage Loan (as defined herein) after
final recovery of related Liquidation Proceeds (as
defined herein) shall be zero.
Securities Offered......... Each of the Revolving Home Equity Loan
Asset-Backed Certificates, Series 199_-_ offered
hereby (the "Certificates") represents an
undivided interest in the Trust. Each Certificate
represents the right to receive payments of
interest at the variable rate described below (the
"Certificate Rate"), payable monthly, and payments
of principal at such time and to the extent
provided below. The aggregate undivided interest
in the Trust represented by the Certificates as of
the Closing Date will equal $____________ (the
"Original Invested Amount"), which represents ___%
of the Cut-Off Date Pool Balance. The "Original
Certificate Principal Balance" will equal
$____________. Following the Closing Date, the
"Invested Amount" with respect to any date will be
an amount equal to the Original Invested Amount
minus (i) the amount of Investor Principal
Collections (as defined herein) previously
distributed to Certificateholders, and minus (ii)
an amount equal to the product of the Investor
Floating Allocation Percentage and the Liquidation
Loss Amounts (each as defined herein). The
Transferor (as described below) will own the
remaining undivided interest (the "Transferor
Interest") in the Mortgage Loans, which is equal
to the Pool Balance minus the Invested Amount and
will initially equal approximately __% of the
Cut-Off Date Pool Balance. The Transferor (the
"Transferor") as of any date is the owner of the
Transferor Interest, which initially will be Bank
One.
The Certificates will be issued pursuant to the
Agreement. The principal amount of the outstanding
Certificates (the "Certificate Principal Balance")
on any date is equal to the Original Certificate
Principal Balance minus the aggregate of amounts
actually distributed as principal to the
Certificateholders. See "DESCRIPTION OF THE
CERTIFICATES" herein.
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S-5
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Removal of Certain
Mortgage Loans;
Additional Balances...... Subject to certain conditions, on any Distribution
Date the Transferor may, but shall not be
obligated to, remove from the Trust certain
Mortgage Loans without notice to the
Certificateholders. The Transferor is permitted to
randomly designate the Mortgage Loans to be
removed. Mortgage Loans so designated will only be
removed upon satisfaction of certain conditions
specified in the Agreement, including: (i) the
Transferor Interest as of the Transfer Date (as
defined herein) (after giving effect to such
removal) exceeds the Minimum Transferor Interest
(as defined below); (ii) the Transferor shall have
delivered to the Trustee a "Mortgage Loan
Schedule" containing a list of all Mortgage Loans
remaining in the Trust after such removal; (iii)
the Transferor shall represent and warrant that no
selection procedures which are adverse to the
interests of the Certificateholders or the
Certificate Insurer were used by the Transferor in
selecting such Mortgage Loans; (iv) in connection
with any such retransfer of Mortgage Loans, the
Rating Agencies (as defined herein) shall have
been notified of the proposed transfer and prior
to the Transfer Date the Rating Agencies shall
have notified the Transferor in writing that such
transfer will not result in a reduction or
withdrawal of the ratings assigned to the
Certificates without regard to the Policy; and (v)
the Transferor shall have delivered to the Trustee
and the Certificate Insurer an officer's
certificate confirming the conditions set forth in
clauses (i) through (iii) above. See "DESCRIPTION
OF THE CERTIFICATES-Optional Transfers of Mortgage
Loans to the Transferor."
The "Minimum Transferor Interest" as of any date
is an amount equal to the lesser of (a) __% of the
Pool Balance on such date and (b) the Transferor
Interest as of the Closing Date. During the term
of the Trust, all Additional Balances will be
transferred to and become property of the Trust.
The Pool Balance at any time will generally
fluctuate from day to day because the amount of
Additional Balances and the amount of principal
payments with respect to the Mortgage Loans will
usually differ from day to day. Because the
Transferor Interest is equal to the Pool Balance
minus the Invested Amount, the amount of the
Transferor Interest will fluctuate from day to day
as draws are made with respect to the Mortgage
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S-6
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Loans and as Principal Collections are received.
The Mortgage Loans......... On the Closing Date, Bank One will sell the
Mortgage Loans to the Depositor, pursuant to a
purchase agreement (the "Purchase Agreement"). The
Cut-Off Date Principal Balance of the Mortgage
Loans was $____________. Weighted averages
described below are weighted on the basis of the
Cut-Off Date Principal Balance of all of the
Mortgage Loans. The Mortgage Loans are secured by
first, second or third mortgages on Mortgaged
Properties located in ___ states and the District
of Columbia. Approximately _____%, _____% and
_____% of the Mortgage Loans are secured by
Mortgaged Properties located in the states of
_______, ________ and ________, respectively. The
weighted average Combined Loan-to-Value Ratio of
the Mortgage Loans was _____% as of the Cut-Off
Date. The "Combined Loan-to-Value Ratio" or "CLTV"
of each Mortgage Loan is the ratio, expressed as a
percentage, of (a) the sum of (i) the greater of
the Cut-Off Date Principal Balance or the Credit
Limit and (ii) the principal balance of any senior
mortgage loan as of the origination of such
Mortgage Loan, over (b) the value (based on an
appraisal or other acceptable valuation method)
for the related Mortgaged Property determined at
the origination of such Mortgage Loan.
Interest accrues on each Mortgage Loan, payable
monthly, on the daily outstanding Principal
Balance thereof for each billing cycle at a
variable rate per annum (the "Loan Rate") equal at
any time to the sum of the applicable index, as
described herein under "DESCRIPTION OF THE
MORTGAGE LOANS Mortgage Loan Terms," as of the
first day of each related billing cycle (each such
date, an "Adjustment Date") plus a fixed
percentage amount (the "Gross Margin") specified
in the related Mortgage Note, computed on the
basis of a 365 day year times actual days elapsed.
The Gross Margins for the Mortgage Loans as of the
Cut-off Date ranged from __% to ____%. The
weighted average Gross Margins as of the Cut-Off
Date for Mortgage Loans indexed to a "prime rate"
and a "26 week T-Bill rate" were ____% and ____%
respectively. All of the Mortgage Loans are
subject to a maximum Loan Rate specified in the
related Credit Line Agreements (each, a "Maximum
Rate"). As of the Cut-off Date, the Maximum Rates
ranged from _____% per annum to _____% per annum
and the weighted average Maximum
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S-7
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Rate was _____% per annum. As of the Cut-Off Date,
_____% of the Mortgage Loans have a minimum Loan
Rate of ____% per annum and _____% of the Mortgage
Loans have a minimum Loan Rate of _____% per
annum. The remaining Mortgage Loans do not have a
minimum Loan Rate. As of the Cut-Off Date, the
Loan Rates on the Mortgage Loans ranged from
_____% per annum to _____% per annum and the
weighted average Loan Rate was _____% per annum.
The minimum Principal Balance of any Mortgage Loan
as of the Cut-Off Date was $_____, the maximum
Principal Balance of any Mortgage Loan as of the
Cut-Off Date was $_________, and the average
Principal Balance of any Mortgage Loan as of the
Cut-Off Date was $_________. Approximately _____%
of the Mortgage Loans were secured by first
mortgages on the related Mortgaged Property,
_____% were secured by second mortgages and _____%
were secured by third mortgages. As of the Cut-Off
Date, the Mortgage Loans had remaining terms to
maturity ranging from ____ month to _____ months
and the weighted average remaining term to
scheduled maturity was ___ months. See
"DESCRIPTION OF THE MORTGAGE LOANS" herein.
Denominations.............. The Certificates will be offered for purchase in
denominations of $1,000 and multiples of $1 in
excess thereof. The interest in the Trust
evidenced by a Certificate (the "Percentage
Interest") will be equal to the percentage derived
by dividing the denomination of such Certificate
by the Original Certificate Principal Balance.
Registration of
Certificates............... The Certificates will initially be issued in
book-entry form. Persons acquiring beneficial
ownership interests in the Certificates
("Certificate Owners") may elect to hold their
Certificate interests through The Depository Trust
Company ("DTC"), in the United States, or Cedel
Bank societe anonyme ("Cedel") or the Euroclear
System ("Euroclear"), in Europe. Transfers within
DTC, Cedel or Euroclear, as the case may be, will
be in accordance with the usual rules and
operating procedures of the relevant system. So
long as the Certificates are Book-Entry
Certificates (as defined herein), such
Certificates will be evidenced by one or more
Certificates registered in the name of Cede & Co.
("Cede"), as the nominee of DTC or one of the
relevant depositories (collectively, the "European
Depositaries"). Cross-market transfers
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S-8
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between persons holding directly or indirectly
through DTC, on the one hand, and counterparties
holding directly or indirectly through Cedel or
Euroclear, on the other, will be effected in DTC
through Citibank N.A. ("Citibank") or Chemical
Bank ("Chemical"), the relevant depositories of
Cedel or Euroclear, respectively, and each a
participating member of DTC. The Certificates will
initially be registered in the name of Cede. The
interests of the Certificateholders will be
represented by book entries on the records of DTC
and participating members thereof. No Certificate
Owner will be entitled to receive a definitive
certificate representing such person's interest,
except in the event that Definitive Certificates
(as defined herein) are issued under the limited
circumstances described herein. All references in
this Prospectus Supplement to any Certificates
reflect the rights of Certificate Owners only as
such rights may be exercised through DTC and its
participating organizations for so long as such
Certificates are held by DTC. See "RISK
FACTORS-Book Entry Certificates," "DESCRIPTION OF
THE CERTIFICATES-Book-Entry Certificates" and
"ANNEX I" hereto.
Depositor.................. Banc One ABS Corporation, a Delaware corporation.
The principal executive offices of the Depositor
are located at 100 East Broad Street, Columbus,
Ohio 43271 (Telephone: (614) 248-5800). See "THE
DEPOSITOR" in the Prospectus.
Servicer of the Mortgage
Loans...................... Bank One, N.A., a national banking association
headquartered in Columbus, Ohio. The principal
executive offices of the Servicer are located at
100 East Broad Street, Columbus, Ohio 43271
(Telephone: (614) 248-5800). See "SERVICING OF THE
MORTGAGE LOANS-The Servicer" herein.
Collections................ All collections on the Mortgage Loans will
generally be allocated in accordance with the
Credit Line Agreements between amounts collected
in respect of interest and amounts collected in
respect of principal. As to any Distribution Date,
"Interest Collections" will be equal to (i) the
amounts collected during the related Collection
Period, including the portion of Net Liquidation
Proceeds (as defined below) allocated to interest
pursuant to the terms of the Credit Line
Agreements less (ii) Servicing
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S-9
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Fees for the related Collection Period.
As to any Distribution Date, "Principal
Collections" will be equal to the sum of (i) the
amounts collected during the related Collection
Period, including the portion of Net Liquidation
Proceeds allocated to principal pursuant to the
terms of the Credit Line Agreements and (ii) any
Transfer Deposit Amounts (as defined herein).
"Net Liquidation Proceeds" with respect to a
Mortgage Loan are the proceeds (excluding amounts
drawn on the Policy) received in connection with
the liquidation of any Mortgage Loan, whether
through trustee's sale, foreclosure sale or
otherwise, reduced by related expenses, but not
including the portion, if any, of such amount that
exceeds the Principal Balance of the Mortgage Loan
plus any accrued and unpaid interest thereon to
the end of the Collection Period during which such
Mortgage Loan became a Liquidated Mortgage Loan.
With respect to any Distribution Date, the portion
of Interest Collections allocable to the
Certificates ("Investor Interest Collections")
will equal the product of (a) Interest Collections
for such Distribution Date and (b) the Investor
Floating Allocation Percentage. With respect to
any Distribution Date, the "Investor Floating
Allocation Percentage" is the percentage
equivalent of a fraction determined by dividing
the Invested Amount at the close of business on
the preceding Distribution Date (or at the Closing
Date in the case of the first Distribution Date)
by the Pool Balance at the beginning of the
related Collection Period. The remaining amount of
Interest Collections will be allocated to the
Transferor Interest as more fully described
herein.
On each Distribution Date, the Investor Interest
Collections will be applied in the following order
of priority: (i) as payment to the Trustee for its
fee for services rendered pursuant to the
Agreement; (ii) as payment for the premium for the
Policy; (iii) as payment for the accrued interest
due and any overdue accrued interest (with
interest thereon) on the Certificate Principal
Balance of the Certificates; (iv) as payment for
any Investor Loss Amount (as defined herein) for
such Distribution Date; (v) as payment for any
Investor Loss Amount for a previous Distribution
Date that was not
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previously (a) funded by Investor Interest
Collections allocable to the Certificateholders,
(b) absorbed by the Overcollateralization Amount,
(c) funded by amounts on deposit in the Spread
Account or (d) funded by draws on the Policy; (vi)
to reimburse prior draws made from the Policy
(with interest thereon); (vii) to pay principal on
the Certificates until the Invested Amount exceeds
the Certificate Principal Balance by the Required
Overcollateralization Amount, each as defined
herein (such amount, if any, paid pursuant to this
clause (vii) being referred to herein as the
"Accelerated Principal Distribution Amount");
(viii) any other amounts required to be deposited
in an account for the benefit of the Certificate
Insurer and Certificateholders pursuant to the
Agreement or amounts owed to the Certificate
Insurer pursuant to the Insurance Agreement; (ix)
certain amounts that may be required to be paid to
the Servicer pursuant to the Agreement; and (x) to
the Transferor to the extent permitted as
described herein.
Investor Interest Collections available after the
payment of interest on the Certificates may be
insufficient to cover any Investor Loss Amount. If
such insufficiency results in the Certificate
Principal Balance exceeding the Invested Amount, a
draw in an amount equal to such difference will be
made on the Policy in accordance with the terms of
the Policy.
The "Overcollateralization Amount" on any date of
determination is the amount, if any, by which the
Invested Amount exceeds the Certificate Principal
Balance on such day. Payments to
Certificateholders pursuant to clause (iii) above
will be interest payments on the Certificates.
Payments to Certificateholders pursuant to clauses
(iv), (v) and (vii) will be principal payments on
the Certificates and will therefore reduce the
Certificate Principal Balance, however, payments
pursuant to clause (vii) will not reduce the
Invested Amount. The Accelerated Principal
Distribution Amount is not guaranteed by the
Policy.
"Liquidation Loss Amount" means with respect to
any Liquidated Mortgage Loan, the unrecovered
Principal Balance thereof at the end of the
related Collection Period in which such Mortgage
Loan became a Liquidated Mortgage Loan, after
giving effect to the Net Liquidation Proceeds
received in connection therewith. The "Investor
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Loss Amount" shall be the product of the Investor
Floating Allocation Percentage and the aggregate
of the Liquidation Loss Amounts for such
Distribution Date. See "DESCRIPTION OF THE
CERTIFICATES Distributions on the Certificates."
Principal Collections will be allocated between
the Certificateholders and the Transferor
("Investor Principal Collections" and "Transferor
Principal Collections," respectively) in
accordance with their percentage interests in the
Mortgage Loans of ____% and ____%, respectively,
as of the Cut-Off Date (the "Fixed Allocation
Percentage"), but a lesser amount of Principal
Collections may be distributed to
Certificateholders during the Managed Amortization
Period, as described below. The "Investor Fixed
Allocation Percentage" shall be ____%.
The Servicer will deposit Interest Collections and
Principal Collections in respect of the Mortgage
Loans in an account established for such purpose
under the Agreement (the "Collection Account").
See "DESCRIPTION OF THE CERTIFICATES-Payments on
Mortgage Loans; Deposits to Collection Account."
Collection Period.......... As to any Distribution Date other than the first
Distribution Date, the "Collection Period" is the
calendar month preceding the month of such
Distribution Date. As to the first Distribution
Date, the "Collection Period" is the period
beginning on the day immediately following the
Cut-Off Date and ending on __________, 199_.
Interest................... Interest on the Certificates will be distributed
monthly on the [fifteenth] day of each month or,
if such day is not a Business Day, then the next
succeeding Business Day (each, a "Distribution
Date"), commencing on ______ 15, 199_, at the
Certificate Rate for the related Interest Period
(as defined below). The "Certificate Rate" for an
Interest Period will generally equal the sum of
(a) the London Interbank Offered Rate for
one-month Eurodollar deposits ("LIBOR") appearing
on the Telerate Screen Page 3750, as of the second
LIBOR Business Day (as defined herein) prior to
the first day of such Interest Period (or as of
two LIBOR Business Days prior to the Closing Date,
in the case of the first Interest Period) and (b)
%. Notwithstanding the foregoing, in no event will
the amount of interest required to be distributed
in respect of
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the Certificates on any Distribution Date exceed a
rate equal to the weighted average of the Loan
Rates (net of the Servicing Fee Rate, the fee
payable to the Trustee and the rate at which the
premium payable to the Certificate Insurer is
calculated) weighted on the basis of the daily
balance of each Mortgage Loan during the related
billing cycle prior to the Collection Period
relating to such Distribution Date or in the case
of the first Distribution Date, the weighted
average loan rate as of the Cut-Off Date. Interest
on the Certificates in respect of any Distribution
Date will accrue from the preceding Distribution
Date (or in the case of the first Distribution
Date, from the date of the initial issuance of the
Certificates (the "Closing Date") through the day
preceding such Distribution Date (each such
period, an "Interest Period") on the basis of the
actual number of days in the Interest Period and a
360-day year. Interest for any Distribution Date
due but not paid on such Distribution Date will be
due on the next succeeding Distribution Date
together with additional interest on such amount
at a rate equal to the sum of the applicable
Certificate Rate and 2% per annum.
Interest payments on the Certificates will be
funded from Investor Interest Collections, any
funds on deposit in the Spread Account and from
draws on the Policy. See "DESCRIPTION OF THE
CERTIFICATES" herein.
Principal Payments from
Principal Collections...... For the period beginning on the first Distribution
Date and, unless a Rapid Amortization Event (as
defined herein) shall have earlier occurred,
ending immediately following the Distribution Date
in ______ 200_ (the "Managed Amortization
Period"), the amount of Principal Collections
payable to Certificateholders as of each
Distribution Date during the Managed Amortization
Period will equal, to the extent funds are
available therefor, the Scheduled Principal
Collections Distribution Amount for such
Distribution Date. On any Distribution Date during
the Managed Amortization Period, the "Scheduled
Principal Collections Distribution Amount" shall
equal the lesser of (i) the Maximum Principal
Payment (as defined herein) and (ii) the
Alternative Principal Payment (as defined herein).
With respect to any Distribution Date, the
"Maximum Principal Payment" will equal the product
of the Investor Fixed Allocation Percentage and
Principal Collections for such Distribution Date.
With respect to any Distribution
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Date, the "Alternative Principal Payment" will
equal the amount, but not less than zero, of
Principal Collections for such Distribution Date
less the aggregate of Additional Balances created
during the related Collection Period.
Beginning with the first Distribution Date
following the end of the Managed Amortization
Period, the amount of Principal Collections
payable. to Certificateholders on each
Distribution Date will be equal to the Maximum
Principal Payment. See "DESCRIPTION OF THE
CERTIFICATES -- Distributions on the
Certificates."
In addition, to the extent funds are available
therefor [(including funds available under the
Policy)], on the Distribution Date in _____ 202_,
Certificateholders will be entitled to receive as
payment of principal an amount equal to the
outstanding Certificate Principal Balance.
Distributions of Principal Collections based upon
the Investor Fixed Allocation Percentage may
result in distributions of principal to
Certificateholders in amounts that are greater
relative to the declining Pool Balance than would
be the case if the Investor Floating Allocation
Percentage were used to determine the percentage
of Principal Collections distributed in respect of
the Invested Amount. The aggregate distributions
of principal to Certificateholders will not exceed
the Original Certificate Principal Balance.
[The Certificate Insurer... _______________________ (the "Certificate
Insurer") is a ______________ insurance company
engaged exclusively in the business of writing
financial guaranty insurance, principally in
respect of securities offered in domestic and
foreign markets. The Certificate Insurer's
claims-paying ability is rated ___ by Moody's
Investors Service, Inc. ("Moody's") and ___ by
Standard & Poor's Ratings Services ("Standard &
Poor's"), Nippon Investors Service, Inc. and
Standard & Poor's (Australia) Pty. Ltd. See "THE
CERTIFICATE INSURER" in this Prospectus
Supplement.]
[Policy.................... On or before the Closing Date, the Policy will be
issued by the Certificate Insurer pursuant to the
provisions of the Insurance and Indemnity
Agreement (the "Insurance Agreement") to be dated
as of ________, 199_, among Bank One, the
Depositor, the Trustee and the Certificate
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Insurer.
The Policy will irrevocably and unconditionally
guarantee payment on each Distribution Date to the
Trustee for the benefit of the Certificateholders
the full and complete payment of (i) the
Guaranteed Principal Distribution Amount (as
defined herein) with respect to the Certificates
for such Distribution Date and (ii) accrued and
unpaid interest due on the Certificates (together,
the "Guaranteed Distributions"), with such
Guaranteed Distributions having been calculated in
accordance with the original terms of the
Certificates or the Agreement except for
amendments or modifications to which the
Certificate Insurer has given its prior written
consent. The effect of the Policy is to guarantee
the timely payment of interest on, and the
ultimate payment of the principal amount of, all
of the Certificates.
The "Guaranteed Principal Distribution Amount" for
any Distribution Date shall be the amount by which
the Certificate Principal Balance (after giving
effect to all other amounts distributable and
allocable to principal on the Certificates on such
Distribution Date) exceeds the Invested Amount for
such Distribution Date. In addition, the Policy
will guarantee the payment of the outstanding
Certificate Principal Balance on the Distribution
Date in _______ 202_, (after giving effect to all
other amounts distributable and allocable to
principal on such Distribution Date).
In accordance with the Agreement, the Trustee will
be required to establish and maintain an account
(the "Spread Account") for the benefit of the
Certificate Insurer and the Certificateholders.
The Trustee shall deposit the amounts into the
Spread Account as required by the Agreement. The
amount required to be deposited therein may be
reduced or eliminated without consent of the
Certificateholders.
In the absence of payments under the Policy,
Certificateholders will directly bear the credit
and other risks associated with their undivided
interest in the Trust. See "DESCRIPTION OF THE
CERTIFICATES-The Policy."]
Overcollateralization
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Amount..................... The distribution of Accelerated Principal
Distribution Amounts, if any, to
Certificateholders may result in the Invested
Amount being greater than the Certificate
Principal Balance, thereby creating the
Overcollateralization Amount. The
Overcollateralization Amount, if any, will be
available to absorb any Investor Loss Amount not
covered by Investor Interest Collections.
[Payments of Accelerated Principal Distribution
Amounts are not covered by the Policy. Any
Investor Loss Amounts not covered by such
overcollateralization, amounts on deposit in the
Spread Account or Investor Interest Collections
will be covered by draws on the Policy to the
extent provided therein.]
Record Date................ The last day preceding a Distribution Date or, if
the Certificates are no longer Book-Entry
Certificates, the last day of the month preceding
a Distribution Date.
Servicing.................. The Servicer will be responsible for servicing,
managing and making collections on the Mortgage
Loans. The Servicer will deposit all collections
in respect of the Mortgage Loans into the
Collection Account as described herein. See
"DESCRIPTION OF THE CERTIFICATES-Payments on
Mortgage Loans; Deposits to Collection Account."
On the third Business Day prior to each
Distribution Date (the "Determination Date"), the
Servicer will calculate, and instruct the Trustee
regarding the amounts to be paid, as described
herein, to the Certificateholders on such
Distribution Date. See "DESCRIPTION OF THE
CERTIFICATES-Distributions on the Certificates."
With respect to each Collection Period, the
Servicer will receive from collections in respect
of interest on the Mortgage Loans, on behalf of
itself, a portion of such collections as a monthly
servicing fee (the "Servicing Fee") in the amount
of approximately ____% per annum (the "Servicing
Fee Rate") on the aggregate Principal Balances of
the Mortgage Loans as of the first day of each
such Collection Period. See "DESCRIPTION OF THE
CERTIFICATES-Servicing Compensation and Payment of
Expenses." In certain limited circumstances, the
Servicer may resign or be removed, in which event
either the Trustee or a third-party servicer will
be appointed as a successor Servicer. See
"DESCRIPTION OF THE CERTIFICATES-Certain Matters
Regarding the Servicer and the Transferor."
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Final Payment of
Principal; Termination..... The Trust will terminate on the Distribution Date
following the later of (A) payment in full of all
amounts owing to the Certificate Insurer and (B)
the earliest of (i) the Distribution Date on which
the Certificate Principal Balance has been reduced
to zero, (ii) the final payment or other
liquidation of the last Mortgage Loan in the
Trust, (iii) the optional retransfer to the
Transferor of the Certificates, as described below
and (iv) the Distribution Date in _____ 202_. The
Certificates will be subject to optional
retransfer to the Transferor on any Distribution
Date after the Certificate Principal Balance is
reduced to an amount less than or equal to
$________ (____% of the Original Certificate
Principal Balance) [and all amounts due and owing
to the Certificate Insurer and unreimbursed draws
on the Policy, together with interest thereon, as
provided under the Insurance Agreement,] have been
paid. The retransfer price will be equal to the
sum of the outstanding Certificate Principal
Balance and accrued and unpaid interest thereon at
the Certificate Rate through the day preceding the
final Distribution Date. See "DESCRIPTION OF THE
CERTIFICATES-Termination; Retirement of the
Certificates" herein and "DESCRIPTION OF THE
SECURITIES-Optional Purchase or Termination" and
"THE AGREEMENTS-Termination" in the Prospectus.
In addition, the Trust may be liquidated as a
result of certain events of bankruptcy, insolvency
or receivership relating to the Transferor. See
"DESCRIPTION OF THE CERTIFICATES-Rapid
Amortization Events" herein.
Trustee.................... _________________, a ______________ (the
"Trustee"), will act as Trustee on behalf of the
Certificateholders.
Mandatory Retransfer of
Certain Mortgage Loans..... The Seller will make certain representations and
warranties in the Agreement with respect to the
Mortgage Loans. If the Seller breaches certain of
its representations and warranties with respect to
any Mortgage Loan and such breach materially and
adversely affects the interests of the
Certificateholders or the Certificate Insurer and
is not cured within the specified period, the
Mortgage Loan will be removed from the Trust upon
the expiration of a specified period from the date
on which the Seller becomes aware or receives
notice of such breach and will
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be reassigned to the Seller. See "DESCRIPTION OF
THE CERTIFICATES-Assignment of Mortgage Loans"
herein.
Federal Tax
Considerations............. [Subject to the qualifications set forth in
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES" herein,
special tax counsel to the Depositor is of the
opinion that, under existing law, (i) a
Certificate will be treated as a debt instrument
for Federal income tax purposes as of the Closing
Date and (ii) the Trust will not be characterized
as an association (or publicly traded partnership)
taxable as a corporation or as a taxable mortgage
pool within the meaning of Section 7701 (i) of the
Code. Under the Agreement, the Transferor, the
Depositor and the Certificateholders will agree to
treat the Certificates as indebtedness for Federal
income tax purposes. See "CERTAIN FEDERAL INCOME
TAX CONSIDERATIONS" [herein and] in the Prospectus
for additional information concerning the
application of Federal income tax laws.]
ERISA Considerations....... [The Certificates may be purchased by or on behalf
of an employee benefit plan or other retirement
arrangement that is subject to the Employee
Retirement Income Security Act of 1974, as amended
("ERISA"), or Section 4975 of the Internal Revenue
Code of 1986, as amended (the "Code"), as well as
any entity whose source of funds for the purchase
of the Certificates includes plan assets by reason
of a plan or account investing in such entity
(each, a "Plan"), subject to the considerations
described herein. Any Plan fiduciary considering
whether to purchase any Certificate on behalf of a
Plan should consult with its counsel regarding the
applicability of the provisions of ERISA and the
Code. See "ERISA CONSIDERATIONS" [herein and] in
the Prospectus.]
Legal Investment
Considerations............. The Certificates will not constitute "mortgage
related securities" for purposes of the Secondary
Mortgage Market Enhancement Act of 1984 ("SMMEA"),
because not all of the Mortgages securing the
Mortgage Loans are first mortgages. Accordingly,
many institutions with legal authority to invest
in comparably rated securities based solely on
first mortgages may not be legally authorized to
invest in the Certificates. See "LEGAL INVESTMENT
CONSIDERATIONS" herein and "LEGAL
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INVESTMENT" in the Prospectus.
Certificate Rating......... It is a condition to the issuance of the
Certificates that they be rated "___" by
_____________ and "___" by ______ (each, a "Rating
Agency"). In general, ratings address credit risk
and do not address the likelihood of prepayments.
See "RATINGS" herein and "RISK FACTORS-Rating of
the Securities" in the Prospectus.
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<PAGE> 21
RISK FACTORS
Book-Entry Certificates. Issuance of the Certificates in book-entry form
may reduce the liquidity of such Certificates in the secondary trading market
since investors may be unwilling to purchase Certificates for which they cannot
obtain physical certificates. See "DESCRIPTION OF THE CERTIFICATES-Book-Entry
Certificates" herein.
Since transactions in the Certificates can be effected only through DTC,
Cedel, Euroclear, participating organizations, indirect participants and certain
banks, the ability of a Certificate Owner to pledge a Certificate to persons or
entities that do not participate in the DTC, Cedel or Euroclear system or
otherwise to take actions in respect of such Certificates, may be limited due to
lack of a physical certificate representing the Certificates. See "DESCRIPTION
OF THE CERTIFICATES-Book-Entry Certificates" herein.
Certificate Owners may experience some delay in their receipt of
distributions of interest and principal on the Certificates since such
distributions will be forwarded by the Trustee to DTC and DTC will credit such
distributions to the accounts of its Participants (as defined herein) which will
thereafter credit them to the accounts of Certificate Owners either directly or
indirectly through indirect participants. See "DESCRIPTION OF THE
CERTIFICATES-Book-Entry Certificates" herein.
Cash Flow Considerations. Minimum monthly payments on the Mortgage Loans
may be limited to accrued interest. Although borrowers under certain of the
Mortgage Loans may choose to pay down all or a part of their outstanding
principal balance prior to maturity, such borrowers are under no obligation to
do so and, in the event such balances have not been substantially paid down
prior to maturity, some borrowers may be unable to pay the required final
payment.
Even assuming that the Mortgaged Properties provide adequate security for
the Mortgage Loans, substantial delays could be encountered in connection with
the liquidation of Mortgage Loans that are delinquent and resulting shortfalls
in distributions to Certificateholders could occur [if the Certificate Insurer
were unable to perform on its obligations under the Policy.] Further,
liquidation expenses (such as legal fees, real estate taxes, and maintenance and
preservation expenses) will reduce the proceeds payable to Certificateholders
and thereby reduce the security for the Mortgage Loans. In the event any of the
Mortgaged Properties fail to provide adequate security for the related Mortgage
Loans, Certificateholders could experience a loss [if the Certificate Insurer
were unable to perform its obligations under the Policy].
Prepayment Considerations. Substantially all of the Mortgage Loans may be
prepaid in whole or in part at any time without penalty. Home equity loans, such
as the Mortgage Loans, have been originated in significant volume only during
the past few years and neither the Depositor nor the Servicer is aware of any
publicly available studies or statistics on the rate of prepayment of such
loans. Generally, home equity loans are not viewed by borrowers as permanent
financing. Accordingly, the Mortgage Loans may experience a higher rate of
prepayment than traditional mortgage loans. The Trust's prepayment experience
may be affected by a wide variety of factors, including general economic
conditions, interest rates, the availability of alternative financing and
homeowner mobility. In addition, substantially all of the
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<PAGE> 22
Mortgage Loans contain due-on-sale provisions and the Servicer intends to
enforce such provisions unless (i) such enforcement is not permitted by
applicable law or (ii) the Servicer, in a manner consistent with reasonable
commercial practice, permits the purchaser of the related Mortgaged Property to
assume the Mortgage Loan. To the extent permitted by applicable law, such
assumption will not release the original borrower from its obligation under any
such Mortgage Loan. See "DESCRIPTION OF THE CERTIFICATES" herein and "CERTAIN
LEGAL ASPECTS OF LOANS-`Due-on-Sale' Clauses" in the Prospectus for a
description of certain provisions of the Credit Line Agreements that may affect
the prepayment experience on the Mortgage Loans.
Certificate Rating. The rating of the Certificates will depend primarily
on an assessment by the Rating Agencies of the Mortgage Loans and [upon the
claims-paying ability of the Certificate Insurer]. [Any reduction in a rating
assigned to the claims-paying ability of the Certificate Insurer below the
rating initially given to the Certificates may result in a reduction in the
rating of the Certificates.] The rating by the Rating Agencies of the
Certificates is not a recommendation to purchase, hold or sell the Certificates,
inasmuch as such rating does not comment as to the market price or suitability
for a particular investor. There is no assurance that the ratings will remain in
place for any given period of time or that the ratings will not be lowered or
withdrawn by the Rating Agencies. In general, the ratings address credit risk
and do not address the likelihood of prepayments. The ratings of the
Certificates do not address the possibility of the imposition of United States
withholding tax with respect to non-U.S. persons.
Legal Considerations. The Mortgage Loans are secured by mortgages (which
are first, second or third mortgages) on the Mortgaged Properties. With respect
to Mortgage Loans that are secured by first mortgages, the Servicer has the
power under certain circumstances to consent to a new mortgage lien on the
Mortgaged Property having priority over such Mortgage Loan. Mortgage Loans
secured by junior mortgages are entitled to proceeds that remain from the
liquidation or similar sale of the related Mortgaged Property after payment of
liquidation expenses (such as legal fees, real estate taxes, and maintenance and
preservation expenses) and payments of any related senior mortgage lien and
prior statutory liens. In the event that such proceeds are insufficient to
satisfy such liquidation expenses, senior loans and prior liens in the aggregate
and the Certificate Insurer is unable to perform its obligations under the
Policy, the Certificateholders will bear (i) the risk of delay in distributions
while a deficiency judgment against the borrower is obtained and (ii) the risk
of loss if the deficiency judgment cannot be obtained or cannot be realized
upon. In addition, a junior mortgagee may not foreclose on the property securing
a junior mortgage unless it forecloses subject to all senior liens. See "CERTAIN
LEGAL ASPECTS OF LOANS" in the Prospectus.
Under the terms of the Agreement, so long as Bank One's long-term senior
unsecured debt is rated at least "___" by ________ and "___" by ________, the
Servicer will be entitled to maintain possession of the documentation relating
to each Mortgage Loan sold by it, including the Credit Line Agreements and the
Related Documents or other evidence of indebtedness signed by the borrower, and
the assignments of the related mortgages to the Trust will not be required to be
recorded. Failure to deliver the Related Documents to the Trustee will have the
result in most, if not all, of the states in which the Related Documents will be
held, and failure to record the assignments of the related mortgages to the
Trustee will have the result in certain states in which the Mortgaged Properties
are located, of making the sale of the Cut-Off Date Principal
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Balances, Additional Balances and Related Documents potentially ineffective
against (i) any creditors of Bank One, who may have been fraudulently or
inadvertently induced to rely on the Mortgage Loans as assets of Bank One or
(ii) any purchaser of a Mortgage Loan who had no notice of the prior conveyance
to the Trust Fund if such purchaser perfects his interest in the Mortgage Loan
by taking possession of the Related Documents or other evidence of indebtedness
or otherwise.
Bank One warrants in the Purchase Agreement that the transfer by it of all
of its right, title and interest in and to the Mortgage Loans subject to the
Agreement is either a valid transfer and assignment of the Mortgage Loans or the
grant to the Trust of a security interest in the Mortgage Loans. If the transfer
of Mortgage Loans to the Trust is deemed to create a security interest therein
under the Uniform Commercial Code (the "UCC") of an applicable state, any tax or
governmental lien on property of Bank One arising before any Mortgage Loan comes
into existence might have priority over the Trust's interest in such Mortgage
Loan. In addition, if the FDIC were appointed receiver of Bank One, the
receiver's administrative expenses might also have priority over the Trust's
interest in such Mortgage Loan. If an Insolvency Event were to occur with
respect to Bank One, then a Rapid Amortization Event would occur and, pursuant
to the terms of the Agreement, new Additional Balances would not be transferred
to the Trust by Bank One. In addition, if Bank One were to be dissolved as a
result of an Insolvency Event (other than pursuant to a merger, consolidation or
sale of substantially all of its assets), the Trustee, unless otherwise
instructed by more than 50% of the Certificateholders, would sell the Mortgage
Loans in a commercially reasonable manner as described below under "Description
of the Certificates-Rapid Amortization Events," thereby causing early
termination of the Trust and a loss to Certificateholders if the net proceeds of
such sale allocable to the Certificateholders were insufficient to pay such
Certificateholders in full. The proceeds from the sale, disposition or
liquidation of the Mortgage Loans will first be paid to the Certificate Insurer
to the extent of unreimbursed draws under the Policy and other amounts owing to
the Certificate Insurer pursuant to the Insurance Agreement.
The Federal Deposit Insurance Act (as amended, "FDIA") sets forth certain
powers that the FDIC could exercise if it were appointed conservator or receiver
of Bank One. To the extent (i) Bank One grants a security interest in the
Mortgage Loans to the Trust, (ii) such security interest is validly perfected
before the occurrence of an Insolvency Event and (iii) such security interest
was not taken in contemplation of insolvency or with the intent to hinder, delay
or defraud Bank One or its creditors, such security interest should not be
subject to avoidance by the FDIC if the FDIC is appointed as a conservator or
receiver of Bank One. Subject to clarification by regulations or
interpretations, positions taken by the staff of the FDIC prior to the passage
of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (as
amended "FIRREA") do not suggest that the FDIC, as receiver or conservator for
Bank One, would interfere with the timely transfer to the Trust of payments
collected on the Mortgage Loans. If, however, the FDIC were to assert a contrary
position, certain provisions of the FDIA which, at the request of the FDIC, have
been applied in recent lawsuits to avoid security interest in collateral granted
by depository institutions, may permit the FDIC to avoid such security interest,
thereby resulting in possible delays and reduction in payments to the
Certificateholders. Further, if the FDIC were to require the Trustee to comply
with certain administrative claims procedures under the FDIA before the Trust
could collect, sell, dispose of or otherwise liquidate the Mortgage Loans or if
the conservator or receiver were to obtain a stay of proceedings with
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<PAGE> 24
respect to Bank One as provided in the FDIA, delays in payment and possible
reductions in the amount of those payments could occur. Upon the occurrence of
an Insolvency Event, if no Rapid Amortization Event other than such Insolvency
Event exists, the FDIC may have the power to continue to require the Seller to
transfer new Additional Balances to the Trust and to prevent the early sale,
liquidation or disposition of the Mortgage Loans and the commencement of the
Rapid Amortization Period. In addition, such receiver may have the power to
cause the early sale of the Mortgage Loans and the early retirement of the
Certificates notwithstanding instructions from the Certificateholders
instructing the Trust not to sell the Mortgage Loans. In the event of an Event
of Servicing Termination if a conservator, receiver or liquidator is appointed
for the Servicer and no Event of Servicing Termination other than such
conservatorship, receivership, liquidation or insolvency of the Servicer exists,
the conservator, receiver or liquidator may have the power to prevent either the
Trust or the Certificateholders from appointing a successor Servicer.
Geographic Concentration. As of the Cut-Off Date, approximately ____%,
____% and _____% (by Cut-Off Date Pool Balance) of the Mortgaged Properties are
located in the States of _________, __________ and _________, respectively. An
overall decline in the residential real estate markets in these states could
adversely affect the values of the Mortgaged Properties securing such Mortgage
Loans such that the Principal Balances of the related Mortgage Loans, together
with any primary financing on such Mortgaged Properties, could equal or exceed
the value of such Mortgaged Properties. As the residential real estate market is
influenced by many factors, including the general condition of the economy and
interest rates, no assurances may be given that the residential real estate
markets in these states will not weaken. If these residential real estate
markets should experience an overall decline in property values after the dates
of origination of the Mortgage Loans, the rates of losses on the Mortgage Loans
would be expected to increase, and could increase substantially.
Servicer's Ability to Change the Terms of the Mortgage Loans. The Servicer
may agree to changes in the terms of a Credit Line Agreement, provided that such
changes (i) do not adversely affect the interest of the Certificateholders or
the Certificate Insurer, and (ii) are consistent with prudent business practice.
There can be no assurance that changes in applicable law or the marketplace for
home equity loans or prudent business practice will not result in changes in the
terms of the Mortgage Loans. In addition, the Agreement permits the Servicer,
within certain limitations described therein, to increase the Credit Limit of
the related Mortgage Loan or reduce the Margin for such Mortgage Loan.
[Delinquent Mortgage Loans. The Trust will include Mortgage Loans which
are 89 or fewer days delinquent as of the Cut-Off Date. The Cut-Off Date
Principal Balance of Mortgage Loans which are between 30 days and 89 days
delinquent as of the Cut-Off Date was $_________. If there are not sufficient
funds from the Investor Interest Collections to cover the Investor Loss Amounts
for any Distribution Date, the Overcollateralization Amount and the amount on
deposit in the Spread Account have been reduced to zero, and the Certificate
Insurer fails to perform its obligations under the Policy, the aggregate amount
of principal returned to the Certificateholders may be less than the Certificate
Principal Balance on the day the Certificates are issued.]
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For a discussion of additional risks pertaining to the Certificates, see
"RISK FACTORS" in the Prospectus.
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<PAGE> 26
[THE CERTIFICATE INSURER]
The following information set forth in this section has been provided by
the Certificate Insurer. Accordingly, neither the Depositor nor the Servicer
makes any representation as to the accuracy and completeness of such
information.
[INSERT IF APPLICABLE]
S-25
<PAGE> 27
THE SERVICER
General
The Servicer will service the Mortgage Loans in accordance with the terms
set forth in the Agreement. As of the Closing Date, the Servicer will service
the Mortgage Loans without subservicing arrangements. The Servicer may perform
any of its obligations under the Agreement through one or more subservicers and
is permitted under the Agreement to transfer servicing to affiliates, provided
such affiliate meets certain standards specified in the Agreement. See
"DESCRIPTION OF THE CERTIFICATES-Certain Matters Regarding the Servicer and the
Transferor." Notwithstanding any subservicing arrangements, the Servicer will
remain liable for its servicing duties and obligations under the Agreement as if
the Servicer alone were servicing the Mortgage Loans.
[Additional information to be added, if applicable]
The Servicer
Bank One, N.A. ("Bank One" and, in its capacity as servicer, the
"Servicer") is a national banking association and an indirect, wholly-owned
subsidiary of BANC ONE CORPORATION, an Ohio corporation. As of __________, 199_,
Bank One had consolidated total assets of approximately $___ billion, total
deposits of approximately $___ billion and total equity capital of approximately
$___ million. The principal executive offices of Bank One are located at 100
East Broad Street, Columbus, Ohio.
Servicing of the Mortgage Loans
The Servicer has established standard policies for the servicing and
collection of the home equity loans owned and serviced by it or serviced by it
for others. Servicing includes: (a) the collection and aggregation of payments
relating to the loans; (b) the supervision of delinquent loans, loss mitigation
efforts, foreclosure proceedings and, if applicable, the disposition of
mortgaged properties; and (c) the preparation of tax related information in
connection with the loans.
Billing statements are mailed monthly by the Servicer. The statement
details all debits and credits and specifies the minimum payment due and the
available credit line. Notice of changes in the applicable loan rate are
provided by the Servicer to the borrower with such statements.
Collections efforts are initiated once the loan becomes past due. Late fee
notices are sent to borrowers within 16 days after the Due Date and a collector
attempts to contact the borrower. It is the Servicer's policy to suspend drawing
privileges on overdue loans until the borrower brings the loan current. Once the
loan is 30 days delinquent, the Servicer reports the delinquency to credit
reporting bureaus. During the period when the loan is 45 to 59 days delinquent,
the
S-26
<PAGE> 28
Servicer sends a notice of default to the borrower informing the borrower of its
intent to initiate foreclosure proceedings on the mortgaged property within 30
days. During this time, the Servicer contacts senior lienholders, if any, to
determine the status of such liens. After a loan is 60 days past due, the
Servicer orders a broker's price opinion and/or a drive-by appraisal and
property inspection may be conducted.
When the notice of default to the borrower expires (during the period 75
to 89 days after the loan has become due), the Servicer determines whether to
initiate foreclosure proceedings on the mortgaged property after performing an
equity position analysis on the borrower's loan to determine if there is
sufficient equity in the underlying property to repay the senior mortgage, if
any, the borrower's home equity loan and estimated foreclosure expenses. The
general policy of the Servicer is to initiate foreclosure on the underlying
property after the loan is ninety days or more delinquent if the Servicer has
determined that no further action on its part will cause the default to be
cured.
The Servicer may terminate foreclosure proceedings if the delinquency is
cured. Foreclosures initiated on a junior lien are subject to the payment of
foreclosure expenses, the senior mortgage or mortgages and any outstanding
property taxes and other statutory liens. Once foreclosure proceedings are
initiated by the Servicer the loan is transferred to the Foreclosure Department.
The Foreclosure Department uses a tracking system to monitor the progress of
such proceedings. The tracking system includes parameters for each state in
which mortgaged properties are located, which are used to monitor whether the
foreclosure is progressing within a typical time frame for the state in which
the mortgaged property is located.
After foreclosure, if the loan is secured by a first mortgage lien, the
Servicer may liquidate the mortgaged property and charge-off the home equity
loan balance that was not recovered through proceeds of the liquidation, if any.
If the mortgaged property was subject to a senior lien, the Servicer will either
directly manage the foreclosure sale of the mortgaged property and satisfy such
lien at the time of sale or take other action as it deems necessary to protect
the interest in the mortgaged property. If, in the judgment of the Servicer, the
cost of maintaining or purchasing the senior lien exceeds the economic benefit
of such action, the Servicer will generally charge-off the entire unpaid
principal amount of the loan, seek a judgment against the borrower and not
pursue any recovery.
At __________, 199_, the Servicer serviced a total portfolio of
approximately ________ home equity loans having aggregate unpaid principal
balances of approximately $____ billion. The foregoing figures include home
equity loans that were originated or acquired by Bank One or its affiliates and
are serviced on a contractual basis.
Delinquency and Loss Experience.
The following table summarizes the delinquency and loss experience of home
equity loans owned by Bank One and its affiliates and serviced by the Servicer.
The statistical information in such tables does not include home equity loans
serviced by the Servicer for entities other than Bank One and its affiliates.
The information in the tables below has not been adjusted to eliminate the
effect of the unseasoned nature of the home equity loan portfolio during the
period shown. Accordingly, loss and delinquency as percentages of aggregate
principal
S-27
<PAGE> 29
balance of Mortgage Loans serviced for each period would be higher than those
shown if a group of Mortgage Loans were artificially isolated at a point in time
and the information showed the activity only in that isolated group. However,
since most of the mortgage loans in Bank One's and its affiliates' home equity
loan portfolio will not be fully seasoned and since the terms of most Mortgage
Loans will not call for payment of principal in full prior to maturity, the
delinquency and loss information for such an isolated group would also be
distorted to some degree. The tables below present real estate revolving credit
line loan data applicable to substantially all of the United States operations
of Bank One and its affiliates, including loans managed in states which are not
represented in the mortgage pool consisting of the Mortgage Loans currently
serviced by Bank One and real estate acquired through foreclosure.
Delinquency and Foreclosure Experience
(Dollars in Thousands)
<TABLE>
<CAPTION>
For the Four Year Ending ___________,
Months --------------------------------------------------------------------
Ending _________,
199_ 199_ 199_ 199_
--------------------- --------------------- --------------------- ---------------------
Principal Principal Principal Principal
Balance Percentage Balance Percentage Balance Percentage Balance Percentage
-------- ---------- -------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio(1) ..........
Delinquency
percentage(2)
30-59 days ..........
60-89 days ..........
90-119 days .........
120 + days .........
Total (3)..............
Foreclosure Rate (4)...
REO properties (5).....
</TABLE>
(1) [In 199_, the Servicer began servicing HELOC portfolios for _____
Bank One affiliates located in Ohio.]
(2) The period of delinquency is based on the number of days payments
are contractually past due.
(3) Certain total percentages and dollar amounts may not equal the sum
of the percentages and dollar amounts indicated in the columns due
to differences in rounding.
(4) "Foreclosure rate" is the dollar amount of mortgage loans in
foreclosure as a percent of the total principal balance of mortgage
loans outstanding as of the date indicated.
(5) REO properties (i.e. "real estate owned" properties-properties
related to mortgages foreclosed or for which deeds in lieu of
foreclosure have been accepted) percentages are calculated using the
total principal balance of mortgage loans.
Loss Experience
(Dollars in Thousands)
S-28
<PAGE> 30
<TABLE>
<CAPTION>
For the
Four Months
Ending ____, Year Ending __________,
----------- --------------------------------
199_ 199_ 199_ 199_
----------- --------- --------- ---------
Principal Principal Principal Principal
Balance Balance Balance Balance
----------- --------- --------- ---------
<S> <C> <C> <C> <C>
Average Amount Outstanding (1)(2)
Net Losses(3)
Net Losses as a percentage of
average amount outstanding
</TABLE>
- ----------
[(1) In 199_, the Servicer began servicing HELOC portfolios for seven Bank One
affiliates located in Ohio.]
(2) "Average Amount Outstanding" during the period is the arithmetic average
of the principal balances of the mortgage loans outstanding on the last
day of the period and on the first day of the period indicated. For 199_,
the outstanding balance as of ___________, 199_ is used to calculate the
Average Amount Outstanding.
(3) "Net Losses" represents the difference between (i) the amounts which have
been determined to be uncollectible relating to the mortgage loans for
each respective period and (ii) recoveries from liquidation proceeds and
deficiency judgments.
(4) For the four month period ended ____________, 199_, Net Losses as a
percentage of Average Amount Outstanding has been annualized.
The delinquency and loss experience presented in the preceding tables
represents the historical experience of the Servicer with respect to all home
equity loans owned by Bank One and its affiliates and serviced by the Servicer.
Such statistics are not indicative of the historical performance of the Mortgage
Loans, which consist of home equity loans purchased by Bank One and its
affiliates from third parties and which were not originated by Bank One
utilizing its standard underwriting criteria, nor are such statistics indicative
of the future performance of the Mortgage Loans or of all of the home equity
loans serviced by the Servicer. The actual delinquency and loss experience with
respect to the Mortgage Loans may be higher than the percentages indicated above
and may be substantially higher, because historical experience may not be
indicative of future performance and further, because a deterioration of the
real estate market or a weakening of the economy in the regions in which the
Mortgaged Properties are located may result in an increase in delinquencies of
loans secured by real estate and a reduction in the value of real estate in such
regions.
S-29
<PAGE> 31
DESCRIPTION OF THE MORTGAGE LOANS
General
All of the Mortgage Loans will be purchased on the Closing Date by the
Depositor from the Seller, without recourse, pursuant to the Purchase Agreement.
[The Seller acquired the Mortgage Loans from affiliated banks of the Seller.]
All weighted averages described below are weighted on the basis of Cut-Off
Date Principal Balance of the Mortgage Loans included in the Trust.
The Mortgage Loans were originated between ____ and ____. The Cut-Off Date
Principal Balance of the Mortgage Loans was $___________, which is equal to the
aggregate Principal Balances of the Mortgage Loans as of the close of business
on _________, 199_ (the "Cut-Off Date"). _____% of the Mortgage Loans were
secured by a first Mortgage on the related Mortgaged Property, _____% of the
Mortgage Loans were secured by second Mortgages and _____% of the Mortgage Loans
were secured by third Mortgages. The minimum Principal Balance of the Mortgage
Loans as of the Cut-Off Date was $____, the maximum Principal Balance of the
Mortgage Loans as of the Cut-Off Date was $_________, and the average Principal
Balance of the Mortgage Loans as of the Cut-Off Date was $__________. As of the
Cut-Off Date, the Loan Rates on the Mortgage Loans ranged from _____% per annum
to _____% per annum and the weighted average Loan Rate was _____% per annum. The
weighted average (weighted by Credit Limit) Credit Limit Utilization Rate
(defined below) of the Mortgage Loans was _____% as of the Cut-Off Date. The
weighted average Combined Loan-to-Value Ratio (defined below) of the Mortgage
Loans was _____% as of the Cut-Off Date and the weighted average junior mortgage
ratio of the Mortgage Loans (computed by dividing the greater of the Credit
Limit and the Cut-Off Date Principal Balance for each Mortgage Loan, provided
such Mortgage Loan was in a junior lien position, by the sum of such Credit
Limit or Cut-Off Date Principal Balance as applicable and the outstanding
balances at the time such Mortgage Loan was originated of all senior mortgage
loans affecting the Mortgaged Property) was approximately _____%. No Mortgage
Loan had a Combined Loan-to-Value Ratio greater than ____%. The latest scheduled
maturity of any Mortgage Loan is in ______ 20__. As of the Cut-Off Date, _____%
of the Mortgage Loans were secured by Mortgaged Properties that are detached
single-family residences, _____% of the Mortgage Loans were secured by Mortgage
Properties that are two- to four-family residences, _____% of the Mortgage Loans
are secured by Mortgaged Properties that are condominium units, and _____% of
the Mortgage Loans are secured by Mortgaged Properties that are units in planned
unit developments. As of the Cut-Off Date, _____% of the Mortgage Loans were
secured by Mortgaged Properties that are owner-occupied, and _____% of the
Mortgage Loans were secured by non-owner occupied Mortgaged Properties.
Approximately _____%, _____% and _____% of the Mortgage Loans were secured by
Mortgaged Properties in ____________, ___________ and __________, respectively.
_____% of the Mortgage Loans were contractually delinquent 30 days or more. No
Mortgage Loan was delinquent more than 89 days.
The "Combined Loan-to-Value Ratio" or "CLTV" of each Mortgage Loan is the
ratio, expressed as a percentage, of (a) the sum of (i) the greater of the
Cut-Off Date Principal Balance
S-30
<PAGE> 32
or the Credit Limit and (ii) the principal balance of any senior mortgage loan
as of the origination of such Mortgage Loan, over (b) the value (based on an
appraised value or other acceptable valuation method) for the related Mortgaged
Property determined in the origination of such Mortgage Loan. The "Credit Limit
Utilization Rate" is determined by dividing the Cut-Off Date Principal Balance
of a Mortgage Loan by the Credit Limit of such Mortgage Loan.
Mortgage Loan Terms
The Mortgage Loans were originated pursuant to loan agreements (the
"Credit Line Agreements"). Under the Credit Line Agreements, the borrowers may
receive advances (an "Additional Balance" or a "Draw") at any time either during
the term of such Mortgage Loan or during a specified period (the "Draw Period").
Bank One does not require Draws be in a minimum amount. The maximum amount of
each Draw with respect to any Mortgage Loan is equal to the excess, if any, of
the Credit Limit over the Principal Balance outstanding under such Mortgage Note
at the time of such Draw.
The borrower's right to make a Draw under a Mortgage Loan may be
suspended, or the Credit Limit may be reduced under a number of circumstances,
including, but not limited to, a material adverse change in the borrower's
financial circumstances, a significant decline in the Appraised Value of the
Mortgaged Property or a non-payment default by the borrower. Generally, such
suspension or reduction will not affect the payment terms for previously drawn
balances. In the event of default under a Mortgage Loan, the right of the
borrower to make a Draw may be terminated and the entire outstanding Principal
Balance of such Mortgage Loan may be declared immediately due and payable. A
"default" includes, but is not limited to, the borrower's failure to make any
payment as required, any action or inaction by the borrower that adversely
affects the Mortgaged Property or the rights in the Mortgaged Property or any
fraud or material misrepresentation by a borrower in connection with the
Mortgage Loan. The Credit Limit may also be increased, upon completion of
satisfactory underwriting review, as described below.
Interest (the "Finance Charge") accrues on each Mortgage Loan, payable
monthly, on the related average daily outstanding Principal Balance for each
Billing Cycle at a variable rate per annum (the "Loan Rate") equal at any time
to the sum of the applicable Index (defined below) as of the first day of each
related Billing Cycle (such date, the "Adjustment Date") as described below plus
a fixed percentage amount (the "Gross Margin") specified in the related Mortgage
Note, computed on the basis of a 365 day year times actual days elapsed. The
"Billing Cycle" for each Mortgage Loan is the calendar month preceding each Due
Date. The "Due Date" for payments under each Mortgage Loan is the twentieth day
of each month.
The Finance Charge accrued each month with respect to each Mortgage Loan
adjusts based on an index (each, an "Index"). _____% of the Mortgage Loans bear
interest at rates which adjust in accordance with the "prime rate" as published
in the "Money Rates" table in The Wall Street Journal on the related Adjustment
Date; _____% of the Mortgage Loans bear interest at rates which adjust in
accordance with the rate announced by Citibank, N.A. as its "base rate" on the
related Adjustment Date; _____% of the Mortgage Loans bear interest at rates
which adjust based on the current coupon equivalent of the rate for 26-Week U.S.
Treasury Bills in the calendar month immediately preceding the month in which
the related Adjustment Date occurs,
S-31
<PAGE> 33
as published in The Wall Street Journal, and _____% of the Mortgage Loans bear
interest at rates which adjust based on the current auction average of rates for
26-Week U.S. Treasury Bills as published in The Wall Street Journal. The Gross
Margins for the Mortgage Loans as of the Cut-Off Date ranged from _____% to
_____%. The weighted average Gross Margins as of the Cut-Off Date for Mortgage
Loans indexed to a "prime rate" and a "26 week T-Bill rate" were _____% and
_____% respectively. All of the Mortgage Loans are subject to a maximum Loan
Rate specified in the related Credit Line Agreements (each, a "Maximum Rate").
As of the Cut-Off Date, the Maximum Rates ranged from _____% per annum to _____%
per annum and the weighted average Maximum Rate was _____% per annum. As of the
Cut-Off Date, _____% of the Mortgage Loans have a minimum Loan Rate of _____%
per annum and _____% of the Mortgage Loans have a minimum Loan Rate of _____%
per annum. The remaining Mortgage Loans do not have a minimum Loan Rate. No
Mortgage Loan is subject to a periodic rate cap.
The Mortgage Loans had original terms to maturity ranging from ____ years
to ____ years. As of the Cut-Off Date, the Mortgage Loans had remaining terms to
maturity ranging from ____ month to ____ months and a weighted average months
remaining to scheduled maturity of ____ months.
Payments made by or on behalf of the borrower for each Mortgage Loan are
generally required to be applied, first, to any unpaid Finance Charges, second,
to any other unpaid Additional Charges and third, to the Principal Balance
outstanding with respect to such Mortgage Loan. With respect to certain of the
Mortgage.
Loans, payments are required to be applied to unpaid insurance premiums
and late charges (in that order) prior to application to Finance Charges, as
described above.
The Mortgage Loans have various loan terms, draw periods, amortization
periods and minimum monthly payment requirements as follows:
S-32
<PAGE> 34
<TABLE>
<CAPTION>
Minimum Monthly
Payment
Loan Amortization Requirement
Designation Loan Term Draw Period Period During Draw Period
----------- --------- ----------- ------ ------------------
<S> <C> <C> <C> <C>
</TABLE>
- ----------
(1) Loan designation three has a maximum draw period of 20 years; however,
after each five year period, the borrower's credit quality and recent
payment history are reviewed to determine if Bank One will either renew
the loan at the same rate and terms for an additional five years, (ii)
convert the existing balance to a fixed term loan with regular monthly
principal and interest payments sufficient to amortize the loan over the
remaining period of the 20 year term, or (iii) to renew the note at a new
rate, new index, and/or with such new terms that will be determined solely
at the discretion of Bank One.
(2) Following the 9.5 year draw period and subsequent three month
interest-only period, loans originated under designation five will
amortize monthly at the then applicable loan rate and remaining term to
produce a payment sufficient to amortize the loan to zero over its
remaining term.
Additional Information with Respect to the mortgage Loans
Set forth below is a description of certain characteristics of the
Mortgage Loans. The sum of certain percentages set forth in the following tables
may not equal exactly 100% due to differences in the rounding of percentages.
COMBINED LOAN-TO-VALUE RATIOS(1)
<TABLE>
<CAPTION>
Percent of
Mortgage Pool
Range of Combined Number of Cut-Off Date by Cut-Off Date
Loan-to-Value Ratios Mortgage Loans Principal Balance Principal Balance
- -------------------- -------------- ----------------- -----------------
<S> <C> <C> <C>
0.01% to 5.00%.......
5.01% to 10.00%.......
10.01% to 15.00%.......
15.01% to 20.00%.......
20.01% to 25.00%.......
25.01% to 30.00%.......
30.01% to 35.00%.......
35.01% to 40.00%.......
40.01% to 45.00%.......
45.01% to 50.00%.......
50.01% to 55.00%.......
55.01% to 60.00%.......
60.01% to 65.00%.......
</TABLE>
S-33
<PAGE> 35
<TABLE>
<S> <C> <C> <C>
65.01% to 70.00%.......
70.01% to 75.00%.......
75.01% to 80.00%.......
80.01% to 85.00%.......
85.01% to 90.00%.......
90.01% to 95.00%.......
95.01% to 100.00%.......
Total ..............
</TABLE>
- ----------
(1) The "Combined Loan-to-Value Ratio" or "CLTV" of each Mortgage Loan is the
ratio, expressed as a percentage, of (a) the sum of (i) the greater of the
Cut-Off Date Principal Balance or the Credit Limit and (ii) the principal
balance of any senior mortgage loan as of the origination of such Mortgage
Loan, over (b) the value (based on appraised value or other acceptable
valuation method) for the related Mortgaged Property determined in the
origination of such Mortgage Loan.
LIEN PRIORITY
<TABLE>
<CAPTION>
Percent of
Mortgage Pool
Number of Cut-Off Date by Cut-Off Date
Lien Priority Mortgage Loans Principal Balance Principal Balance
- ------------- -------------- ----------------- -----------------
<S> <C> <C> <C>
First Lien......................
Second Lien.....................
Third Lien......................
Total........................
</TABLE>
PROPERTY TYPE
<TABLE>
<CAPTION>
Percent of
Mortgage Pool
Number of Cut-Off Date by Cut-Off Date
Property Type Mortgage Loans Principal Balance Principal Balance
- ------------- -------------- ----------------- -----------------
<S> <C> <C> <C>
Single Family...................
Two to Four-Family..............
Condominium.....................
PUD.............................
Total........................
</TABLE>
OWNER OCCUPANCY STATUS
<TABLE>
<CAPTION>
Percent of
Mortgage Pool
Number of Cut-Off Date by Cut-Off Date
Owner Occupancy Status Mortgage Loans Principal Balance Principal Balance
- ---------------------- -------------- ----------------- -----------------
<S> <C> <C> <C>
Primary Home....................
Investment......................
Total........................
</TABLE>
S-34
<PAGE> 36
PRINCIPAL BALANCES
<TABLE>
<CAPTION>
Percent of
Mortgage Pool
Number of Cut-Off Date by Cut-Off Date
Range of Principal Balances Mortgage Loans Principal Balance Principal Balance
- --------------------------- -------------- ----------------- -----------------
<S> <C> <C> <C>
$ 0.00 to $ 10,000.00 ...
$ 10,000.01 to $ 20,000.00 ...
$ 20,000.01 to $ 30,000.00 ...
$ 30,000.01 to $ 40,000.00 ...
$ 50,000.01 to $ 60,000.00 ...
$ 60,000.01 to $ 70,000.00 ...
$ 70,000.01 to $ 80,000.00 ...
$ 80,000.01 to $ 90,000.00 ...
$ 90,000.01 to $100,000.00 ...
$100,000.01 to $125,000.00 ...
$125,000.01 to $150,000.00 ...
$150,000.01 to $175,000.00 ...
$175,000.01 to $200,000.00 ...
$200,000.01 to $225,000.00 ...
$225,000.01 to $250,000.00 ...
$250,000.01 and over..........
Total......................
</TABLE>
CREDIT LIMITS
<TABLE>
<CAPTION>
Percent of
Mortgage Pool
Number of Cut-Off Date by Cut-Off Date
Range of Credit Limits Mortgage Loans Principal Balance Principal Balance
- ---------------------- -------------- ----------------- -----------------
<S> <C> <C> <C>
$ 0.00 to $ 10,000.00 ...
$ 10,000.01 to $ 20,000.00 ...
$ 20,000.01 to $ 30,000.00 ...
$ 30,000.01 to $ 40,000.00 ...
$ 50,000.01 to $ 60,000.00 ...
$ 60,000.01 to $ 70,000.00 ...
$ 70,000.01 to $ 80,000.00 ...
$ 80,000.01 to $ 90,000.00 ...
$ 90,000.01 to $100,000.00 ...
$100,000.01 to $125,000.00 ...
$125,000.01 to $150,000.00 ...
$150,000.01 to $175,000.00 ...
$175,000.01 to $200,000.00 ...
$200,000.01 to $225,000.00 ...
$225,000.01 to $250,000.00 ...
$250,000.01 and over..........
Total......................
</TABLE>
S-35
<PAGE> 37
CREDIT LIMIT UTILIZATION RATES
<TABLE>
<CAPTION>
Percent of
Mortgage Pool
Range of Credit Limit Number of Cut-Off Date by Cut-Off Date
Utilization Rates Mortgage Loans Principal Balance Principal Balance
- --------------------- -------------- ----------------- -----------------
<S> <C> <C> <C>
0.00% to 5.00%.........
5.01% to 10.00%.........
10.01% to 15.00%.........
15.01% to 20.00%.........
20.01% to 25.00%.........
25.01% to 30.00%.........
30.01% to 35.00%.........
35.01% to 40.00%.........
40.01% to 45.00%.........
45.01% to 50.00%.........
50.01% to 55.00%.........
55.01% to 60.00%.........
60.01% to 65.00%.........
65.01% to 70.00%.........
70.01% to 75.00%.........
75.01% to 80.00%.........
80.01% to 85.00%.........
85.01% to 90.00%.........
90.01% to 95.00%.........
95.01% to 100.00%.........
100.01% to 105.00%.........
105.01% to 110.00%.........
Total.....................
</TABLE>
ORIGINAL TERM
<TABLE>
<CAPTION>
Percent of
Mortgage Pool
Number of Cut-Off Date by Cut-Off Date
Original Term In Months Mortgage Loans Principal Balance Principal Balance
- ----------------------- -------------- ----------------- -----------------
<S> <C> <C> <C>
120.....................
180.....................
240.....................
297.....................
360.....................
Total................
</TABLE>
S-36
<PAGE> 38
MONTHS REMAINING TO SCHEDULED MATURITY
<TABLE>
<CAPTION>
Percent of
Mortgage Pool
Range of Months Number of Cut-Off Date by Cut-Off Date
Remaining to Scheduled Maturity Mortgage Loans Principal Balance Principal Balance
- ------------------------------- -------------- ----------------- -----------------
<S> <C> <C> <C>
1 to 12.....................
13 to 24.....................
25 to 36.....................
36 to 48.....................
49 to 60.....................
61 to 72.....................
73 to 84.....................
85 to 96.....................
97 to 108.....................
109 to 120.....................
121 to 132.....................
133 to 144.....................
145 to 156.....................
157 to 168.....................
169 to 180.....................
181 to 192.....................
193 to 204.....................
205 to 216.....................
217 to 228.....................
229 to 240.....................
241 to 252.....................
253 to 264.....................
265 to 276.....................
277 to 288.....................
Total.....................
</TABLE>
LOAN DESIGNATION
<TABLE>
<CAPTION>
Percent of
Mortgage Pool
Number of Cut-Off Date by Cut-Off Date
Loan Designation(1) Mortgage Loans Principal Balance Principal Balance
- ------------------- -------------- ----------------- -----------------
<S> <C> <C> <C>
1
2..........................
3..........................
4..........................
5..........................
6..........................
Total...................
</TABLE>
- ----------
(1) The Loan Designation numbers correspond to the loan designation table set
forth on page S-25.
S-37
<PAGE> 39
LOAN RATES
<TABLE>
<CAPTION>
Percent of
Mortgage Pool
Range of Number of Cut-Off Date by Cut-Off Date
Loan Rates Mortgage Loans Principal Balance Principal Balance
- ---------- -------------- ----------------- -----------------
<S> <C> <C> <C>
7.001% to 8.000%.........
8.001% to 8.250%.........
8.251% to 8.500%.........
8.501% to 8.750%.........
8.751% to 9.000%.........
9.001% to 9.250%.........
9.251% to 9.500%.........
9.501% to 9.750%.........
9.751% to 10.000%.........
10.001% to 10.250%.........
10.251% to 10.500%.........
10.501% to 10.750%.........
10.751% to 11.000%.........
11.001% to 11.250%.........
11.251% to 11.500%.........
11.501% to 11.750%.........
12.001% to 12.250%.........
12.501% to 12.750%.........
12.751% to 13.000%.........
13.001%+...................
Total...................
</TABLE>
GROSS MARGIN
<TABLE>
<CAPTION>
Percent of
Mortgage Pool
Range of Number of Cut-Off Date by Cut-Off Date
Gross Margins Mortgage Loans Principal Balance Principal Balance
- ------------- -------------- ----------------- -----------------
<S> <C> <C> <C>
0.000% to 0.500%.............
0.501% to 1.000%.............
1.501% to 2.000%.............
2.001% to 2.500%.............
2.501% to 3.000%.............
3.501% to 4.000%.............
4.001% to 4.500%.............
4.501% to 5.000%.............
5.001% to 5.500%.............
5.501% to 6.000%.............
6.001% to 6.500%.............
Total.....................
</TABLE>
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<PAGE> 40
MAXIMUM RATES
<TABLE>
<CAPTION>
Percent of
Mortgage Pool
Range of Number of Cut-Off Date by Cut-Off Date
Maximum Rates Mortgage Loans Principal Balance Principal Balance
- ------------- -------------- ----------------- -----------------
<S> <C> <C> <C>
13.501% to 14.000%.............
14.001% to 14.500%.............
14.501% to 15.000%.............
15.001% to 15.500%.............
15.501% to 16.000%.............
16.001% to 16.500%.............
16.501% to 17.000%.............
17.001% to 17.500%.............
17.501% to 18.000%.............
18.001% to 18.500%.............
18.501% to 19.000%.............
19.001% to 19.500%.............
19.501% to 20.000%.............
20.001% to 20.500%.............
20.501% to 21.000%.............
21.501% to 25.000%.............
Total.......................
</TABLE>
INDEX
<TABLE>
<CAPTION>
Percent of
Mortgage Pool
Number of Cut-Off Date by Cut-Off Date
Index Mortgage Loans Principal Balance Principal Balance
- ----- -------------- ----------------- -----------------
<S> <C> <C> <C>
Prime Rates.........................
Based upon the Wall Street
Journal.......................
Based upon Citibank "base rate"..
26 week Treasury Bill Rate..........
Auction Average Rate.............
Coupon Equivalent Rate...........
Total............................
</TABLE>
ORIGINATING INSTITUTION
<TABLE>
<CAPTION>
Percent of
Mortgage Pool
Number of Cut-Off Date by Cut-Off Date
Originating Institution Mortgage Loans Principal Balance Principal Balance
- ----------------------- -------------- ----------------- -----------------
<S> <C> <C> <C>
Total........................
</TABLE>
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<PAGE> 41
ORIGINATION YEAR
<TABLE>
<CAPTION>
Percent of
Mortgage Pool
Number of Cut-Off Date by Cut-Off Date
Origination Year Mortgage Loans Principal Balance Principal Balance
- ---------------- -------------- ----------------- -----------------
<S> <C> <C> <C>
19__.......................
19__.......................
19__.......................
19__.......................
19__.......................
19__.......................
19__.......................
19__.......................
19__.......................
19__.......................
Total...................
</TABLE>
GEOGRAPHIC DISTRIBUTION(1)
<TABLE>
<CAPTION>
Percent of
Mortgage Pool
Number of Cut-Off Date by Cut-Off Date
State Mortgage Loans Principal Balance Principal Balance
- ----- -------------- ----------------- -----------------
<S> <C> <C> <C>
Alabama.........................
Arizona.........................
California......................
Colorado........................
Connecticut.....................
Delaware........................
Florida.........................
Georgia.........................
Illinois........................
Indiana.........................
Iowa............................
Louisiana.......................
Maine...........................
Maryland........................
Massachusetts...................
Michigan........................
Minnesota.......................
Missouri........................
Montana.........................
Nevada..........................
New Hampshire...................
New Jersey......................
New Mexico......................
New York........................
North Carolina..................
North Dakota....................
Ohio............................
Oregon..........................
Pennsylvania....................
</TABLE>
S-40
<PAGE> 42
<TABLE>
<CAPTION> Percent of
Number of Cut-Off Date Mortgage Pool
Mortgage Principal by Cut-Off Date
State Loans Balance Principal Balance
- ----- --------- ------------ -----------------
<S> <C> <C> <C>
Rhode Island....................
South Carolina..................
Tennessee.......................
Texas...........................
Utah............................
Vermont.........................
Virginia........................
Washington......................
Washington, D.C.................
Wisconsin.......................
Total........................
</TABLE>
- ----------
(1) Geographic location is determined by the address of the Mortgaged Property
securing the related Mortgage Loan.
DELINQUENCY STATUS
<TABLE>
<CAPTION>
Percent of
Mortgage Pool
Number of Cut-Off Date by Cut-Off Date
Number of Days Delinquent Mortgage Loans Principal Balance Principal Balance
- ------------------------- -------------- ----------------- -----------------
<S> <C> <C> <C>
Current.........................
30 to 59........................
60 to 89........................
Total........................
</TABLE>
S-41
<PAGE> 43
UNDERWRITING
[Insert to describe differences with respect to specific Pool]
MATURITY AND PREPAYMENT CONSIDERATIONS
The Agreement, except as otherwise described herein, provides that the
Certificateholders will be entitled to receive on each Distribution Date
distributions of principal, in the amounts described herein, until the
Certificate Principal Balance is reduced to zero. During the Managed
Amortization Period, Certificateholders will receive amounts from Principal
Collections based upon their Fixed Allocation Percentage subject to reduction as
described below. During the Rapid Amortization Period, Certificateholders will
receive amounts from Principal Collections based solely upon their Fixed
Allocation Percentage. Because prior distributions of Investor Principal
Collections to Certificateholders reduce the Investor Floating Allocation
Percentage but do not change the Fixed Allocation Percentage, allocations of
Principal Collections based on the Fixed Allocation Percentage may result in
distributions of principal to the Certificateholders in amounts that are, in
most cases, greater relative to the declining balance of the Mortgage Loans than
would be the case if the Investor Floating Allocation Percentage were used to
determine the percentage of Principal Collections distributed to
Certificateholders. This is especially true during the Rapid Amortization Period
when the Certificateholders are entitled to receive Investor Principal
Collections and not a lesser amount. In addition, Investor Interest Collections
may be distributed as principal to Certificateholders in connection with the
Accelerated Principal Distribution Amount, if any. Moreover, to the extent of
losses allocable to the Certificateholders, Certificateholders may also receive
as payment of principal the Floating Allocation Percentage of the amount of such
losses either from Investor Interest Collections or, in some instances, draws
under the Policy. The level of losses may therefore affect the rate of payment
of principal on the Certificates.
To the extent obligors make more Draws than principal payments, the
Transferor Interest may grow. Because during the Rapid Amortization Period the
Certificateholders share of Principal Collections is based upon its Fixed
Allocation Percentage (without reduction), an increase in the Transferor
Interest due to additional Draws may also result in Certificateholders receiving
principal at a greater rate than would otherwise occur if the Investor Floating
Allocation Percentage were used to determine the percentage of Principal
Collections distributed to Certificateholders. The Agreement permits the
Transferor, at its option, but subject to the satisfaction of certain conditions
specified in the Agreement, including the conditions described below, to remove
certain Mortgage Loans from the Trust at any time during the life of the Trust,
so long as the Transferor Interest (after giving effect to such removal) is not
less than the Minimum Transferor Interest. Such removals may affect the rate at
which principal is distributed to Certificateholders by reducing the overall
Pool Balance and thus the amount of Principal Collections. See "DESCRIPTION OF
THE CERTIFICATES-Optional Retransfers of Mortgage Loans to the Transferor."
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<PAGE> 44
All of the Mortgage Loans may be prepaid in full or in part at any time
without penalty. The prepayment experience with respect to the Mortgage Loans
will affect the weighted average life of the Certificates.
The rate of prepayment on the Mortgage Loans cannot be predicted. Neither
the Depositor nor the Servicer is aware of any publicly available studies or
statistics on the rate of prepayment of mortgage loans such as the Mortgage
Loans. Generally, home equity revolving credit lines are not viewed by borrowers
as permanent financing. Accordingly, the Mortgage Loans may experience a higher
rate of prepayment than traditional first mortgage loans. On the other hand,
because the Mortgage Loans amortize as described herein, rates of principal
payment on the Mortgage Loans will generally be slower than those of traditional
fully-amortizing first mortgages in the absence of prepayments on such Mortgage
Loans. The prepayment experience of the Trust with respect to the Mortgage Loans
may be affected by a wide variety of factors, including general economic
conditions, prevailing interest rate levels, the availability of alternative
financing, homeowner mobility, the frequency and amount of any future draws on
the Credit Line Agreements and changes affecting the deductibility for Federal
income tax purposes of interest payments on home equity credit lines.
Substantially all of the Mortgage Loans contain "due-on-sale" provisions, and
the Servicer intends to enforce such provisions, unless such enforcement is not
permitted by applicable law. The enforcement of a "due-on-sale" provision will
have the same effect as a prepayment of the related Mortgage Loan. See "CERTAIN
LEGAL ASPECTS OF LOANS-'Due-on-Sale' Clauses" in the Prospectus.
The yield to an investor who purchases the Certificates in the secondary
market at a price other than par will vary from the anticipated yield if the
rate of prepayment on the Mortgage Loans is actually different than the rate
anticipated by such investor at the time such Certificates were purchased.
Collections on the Mortgage Loans may vary because, among other things,
borrowers may make payments during any month as low as the minimum monthly
payment for such month or as high as the entire outstanding principal balance
plus accrued interest and the fees and charges thereon. It is possible that
borrowers may fail to make scheduled payments. Collections on the Mortgage Loans
may vary due to seasonal purchasing and payment habits of borrowers.
No assurance can be given as to the level of prepayments that will be
experienced by the Trust and it can be expected that a portion of borrowers will
not prepay their Mortgage Loans to any significant degree. See "DESCRIPTION OF
THE SECURITIES-Weighted Average Life of the Certificates" in the Prospectus.
POOL FACTOR AND TRADING INFORMATION
The "Pool Factor" is a seven-digit decimal which the Servicer will compute
monthly expressing the Certificate Principal Balance of the Certificates as of
each Distribution Date (after giving effect to any distribution of principal on
such Distribution Date) as a proportion of the Original Certificate Principal
Balance. On the Closing Date, the Pool Factor will be 1.0000000. See
"DESCRIPTION OF THE CERTIFICATES-Distributions on the Certificates." Thereafter,
the Pool Factor will decline to reflect reductions in the related Certificate
Principal Balance
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<PAGE> 45
resulting from distributions of principal to the Certificates and the Invested
Amount of any unreimbursed Liquidation Loss Amounts.
Pursuant to the Agreement, monthly reports concerning the Invested Amount,
the Pool Factor and various other items of information will be made available to
the Certificateholders. In addition, within 60 days after the end of each
calendar year, beginning with the ___ calendar year, information for tax
reporting purposes will be made available to each person who has been a
Certificateholder of record at any time during the preceding calendar year. See
"DESCRIPTION OF THE CERTIFICATES-Book-Entry Certificates" and "-Reports to
Certificateholders" herein.
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Agreement. The form of the
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus Supplement and the Prospectus are a part. The following
summaries describe certain provisions of the Agreement. The summaries do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all of the provisions of the Agreement.
General
The Certificates will be issued in denominations of $1,000 and multiples
of $1 in excess thereof and will evidence specified undivided interests in the
Trust. The property of the Trust will consist of, to the extent provided in the
Agreement: (i) each of the Mortgage Loans that from time to time are subject to
the Agreement (including any Additional Balances arising after the Cut-Off
Date); (ii) collections on the Mortgage Loans received after the Cut-Off Date
(exclusive of payments in respect of accrued interest due on or prior to the
Cut-Off Date); (iii) Mortgaged Properties relating to the Mortgage Loans that
are acquired by foreclosure or deed in lieu of foreclosure; (iv) the Collection
Account and the Distribution Account (excluding net earnings thereon); [(v) the
Policy]; (vi) the Spread Account (for the benefit of the Certificate Insurer and
the Certificateholders); and (vii) an assignment of the Depositor's rights under
the Purchase Agreement. Definitive Certificates (as defined below), if issued,
will be transferable and exchangeable at the corporate trust office of the
Trustee, which will initially act as Certificate Registrar. See "-Book-Entry
Certificates" below. No service charge will be made for any registration of
exchange or transfer of Certificates, but the Trustee may require payment of a
sum sufficient to cover any tax or other governmental charge.
The aggregate undivided interest in the Trust represented by the
Certificates as of the Closing Date will equal $_________ (the "Original
Invested Amount"), which represents _____% of the Cut-Off Date Pool Balance. The
"Original Certificate Principal Balance" will equal $__________. Following the
Closing Date, the "Invested Amount" with respect to any Distribution Date will
be an amount equal to the Original Invested Amount minus (i) the amount of
Investor Principal Collections previously distributed to Certificateholders, and
minus (ii) an amount equal to the product of the Investor Floating Allocation
Percentage and the Liquidation Loss Amounts (each as defined herein). The
principal amount of the outstanding Certificates (the "Certificate Principal
Balance") on any Distribution Date is equal to the Original Certificate
S-44
<PAGE> 46
Principal Balance minus the aggregate of amounts actually distributed as
principal to the Certificateholders. See "-Distributions on the Certificates"
below. Each Certificate represents the right to receive payments of interest at
the Certificate Rate and payments of principal as described below.
The Transferor will own the remaining undivided interest in the Mortgage
Loans (the "Transferor Interest"), which is equal to the Pool Balance less the
Invested Amount. The Transferor Interest will initially equal $_________, which
represents approximately _____% of the Cut-Off Date Pool Balance. The Transferor
as of any date is the owner of the Transferor Interest which initially will be
the Seller. In general, the Pool Balance will vary each day as principal is paid
on the Mortgage Loans, liquidation losses are incurred, Additional Balances are
drawn down by borrowers and Mortgage Loans are transferred to the Trust.
The Transferor has the right to sell or pledge the Transferor Interest at
any time, provided (i) the Rating Agencies (as defined herein) have notified the
Transferor and the Trustee in writing that such action will not result in the
reduction or withdrawal of the ratings assigned to the Certificates, and (ii)
certain other conditions specified in the Agreement are satisfied.
Book-Entry Certificates
The Certificates will be book-entry Certificates (the "Book-Entry
Certificates"). Persons acquiring beneficial ownership interests in the
Certificates ("Certificate Owners") may elect to hold their Certificates through
the Depository Trust Company ("DTC") in the United States, or Cedel or Euroclear
(in Europe) if they are participants of such systems, or indirectly through
organizations which are participants in such systems. The Book-Entry
Certificates will be issued in one or more certificates which equal the
aggregate principal balance of the Certificates and will initially be registered
in the name of Cede & Co., the nominee of DTC. Cedel and Euroclear will hold
omnibus positions on behalf of their participants through customers' securities
accounts in Cedel's and Euroclear's names on the books of their respective
depositories which in turn will hold such positions in customers' securities
accounts in the depositories' names on the books of DTC. Citibank will act as
depositary for Cedel and Chemical will act as depositary for Euroclear (in such
capacities, individually the "Relevant Depositary" and collectively the
"European Depositaries"). Investors may hold such beneficial interests in the
Book-Entry Certificates in minimum denominations representing Certificate
Principal Balances of $1,000 and in multiples of $1 in excess thereof. Except as
described below, no person acquiring a Book-Entry Certificate (each, a
"beneficial owner") will be entitled to receive a physical certificate
representing such Certificate (a "Definitive Certificate"). Unless and until
Definitive Certificates are issued, it is anticipated that the only
"Certificateholder" of the Certificates will be Cede & Co., as nominee of DTC.
Certificate Owners will not be Certificateholders as that term is used in the
Agreement. Certificate Owners are only permitted to exercise their rights
indirectly through Participants and DTC.
The beneficial owner's ownership of a Book-Entry Certificate will be
recorded on the records of the brokerage firm, bank, thrift institution or other
financial intermediary (each, a "Financial Intermediary") that maintains the
beneficial owner's account for such purpose. In turn, the Financial
Intermediary's ownership of such Book-Entry Certificate will be recorded on the
records of DTC (or of a participating firm that acts as agent for the Financial
Intermediary,
S-45
<PAGE> 47
whose interest will in turn be recorded on the records of DTC, if the beneficial
owner's Financial Intermediary is not a DTC participant and on the records of
Cedel or Euroclear, as appropriate).
Certificate Owners will receive all distributions of principal of, and
interest on, the Certificates from the Trustee through DTC and DTC participants.
While the Certificates are outstanding (except under the circumstances described
below), under the rules, regulations and procedures creating and affecting DTC
and its operations (the "Rules"), DTC is required to make book-entry transfers
among Participants on whose behalf it acts with respect to the Certificates and
is required to receive and transmit distributions of principal of, and interest
on, the Certificates. Participants and indirect participants with whom
Certificate Owners have accounts with respect to Certificates are similarly
required to make book-entry transfers and receive and transmit such
distributions on behalf of their respective Certificate Owners. Accordingly,
although Certificate Owners will not possess certificates, the Rules provide a
mechanism by which Certificate Owners will receive distributions and will be
able to transfer their interest.
Certificate Owners will not receive or be entitled to receive certificates
representing their respective interests in the Certificates, except under the
limited circumstances described below. Unless and until Definitive Certificates
are issued, Certificate Owners who are not Participants may transfer ownership
of Certificates only through Participants and indirect participants by
instructing such Participants and indirect participants to transfer
Certificates, by book-entry transfer, through DTC for the account of the
purchasers of such Certificates, which account is maintained with their
respective Participants. Under the Rules and in accordance with DTC's normal
procedures, transfers of ownership of Certificates will be executed through DTC
and the accounts of the respective Participants at DTC will be debited and
credited. Similarly, the Participants and indirect participants will make debits
or credits, as the case may be, on their records on behalf of the selling and
purchasing Certificate Owners.
Because of time zone differences, credits of securities received in Cedel
or Euroclear as a result of a transaction with a Participant will be made during
subsequent securities settlement processing and dated the business day following
the DTC settlement date. Such credits or any transactions in such securities
settled during such processing will be reported to the relevant Euroclear or
Cedel Participants on such business day. Cash received in Cedel or Euroclear as
a result of sales of securities by or through a Cedel Participant (as defined
below) or Euroclear Participant (as defined below) to a DTC Participant will be
received with value on the DTC settlement date but will be available in the
relevant Cedel or Euroclear cash account only as of the business day following
settlement in DTC. For information with respect to tax documentation procedures
relating to the Certificates, see "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES-Foreign Investors" and "Backup Withholding" herein and "GLOBAL
CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES-Certain U.S. Federal
Income Tax Documentation Requirements" in Annex I hereto.
Transfers between Participants will occur in accordance with DTC rules.
Transfers between Cedel Participants and Euroclear Participants will occur in
accordance with their respective rules and operating procedures. Cross-market
transfers between persons holding directly or indirectly through DTC, on the one
hand, and directly or indirectly through Cedel Participants or Euroclear
Participants, on the other, will be effected in DTC in accordance with DTC rules
on behalf of the relevant European international clearing system by the Relevant
S-46
<PAGE> 48
Depositary; however, such cross market transactions will require delivery of
instructions to the relevant European international clearing system by the
counterparty in such system in accordance with its rules and procedures and
within its established deadlines (European time). The relevant European
international clearing system will, if the transaction meets its settlement
requirements, deliver instructions to the Relevant Depositary to take action to
effect final settlement on its behalf by delivering or receiving securities in
DTC, and making or receiving payment in accordance with normal procedures for
same day funds settlement applicable to DTC. Cedel Participants and Euroclear
Participants may not deliver instructions directly to the European Depositaries.
DTC which is a New York-chartered limited purpose trust company, performs
services for its participants, some of which (and/or their representatives) own
DTC. In accordance with its normal procedures, DTC is expected to record the
positions held by each DTC participant in the Book-Entry Certificates, whether
held for its own account or as a nominee for another person. In general,
beneficial ownership of Book-Entry Certificates will be subject to the rules,
regulations and procedures governing DTC and DTC participants as in effect from
time to time.
Cedel is incorporated under the laws of Luxembourg as a professional
depository. Cedel holds securities for its participating organizations ("Cedel
Participants") and facilitates the clearance and settlement of securities
transactions between Cedel Participants through electronic book-entry changes in
accounts of Cedel Participants, thereby eliminating the need for physical
movement of certificates. Transactions may be settled in Cedel in any of 28
currencies, including United States dollars. Cedel provides to its Cedel
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. Cedel interfaces with domestic markets in several
countries. As a professional depository, Cedel is subject to regulation by the
Luxembourg Monetary Institute. Cedel participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. Indirect access to Cedel is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Cedel Participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of
Euroclear ("Euroclear Participants") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Transactions may now be settled in any of 32 currencies, including United
States dollars. Euroclear includes various other services, including securities
lending and borrowing and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described above. Euroclear is operated by the Brussels, Belgium office of Morgan
Guaranty Trust Company of New York (the "Euroclear Operator"), under contract
with Euroclear Clearance Systems S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for Euroclear on behalf of Euroclear Participants. Euroclear Participants
include banks (including central banks), securities brokers and dealers and
other professional financial intermediaries. Indirect access to Euroclear
S-47
<PAGE> 49
is also available to other firms that clear through or maintain a custodial
relationship with a Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear and
the related Operating Procedures of the Euroclear System and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear, and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear Participants, and has no record of or relationship with persons
holding through Euroclear Participants.
Distributions on the Book-Entry Certificates will be made on each
Distribution Date by the Trustee to DTC. DTC will be responsible for crediting
the amount of such payments to the accounts of the applicable DTC participants
in accordance with DTC's normal procedures. Each DTC participant will be
responsible for disbursing such payments to the beneficial owners of the
Book-Entry Certificates that it represents and to each Financial Intermediary
for which it acts as agent. Each such Financial Intermediary will be responsible
for disbursing funds to the beneficial owners of the Book-Entry Certificates
that it represents.
Under a book-entry format, beneficial owners of the Book-Entry
Certificates may experience some delay in their receipt of payments, since such
payments will be forwarded by the Trustee to Cede. Distributions with respect to
Certificates held through Cedel or Euroclear will be credited to the cash
accounts of Cedel Participants or Euroclear Participants in accordance with the
relevant system's rules and procedures, to the extent received by the Relevant
Depositary. Such distributions will be subject to tax reporting in accordance
with relevant United States tax laws and regulations. See "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES-Foreign Investors" and "-Backup Withholding" herein.
Because DTC can only act on behalf of Financial Intermediaries, the ability of a
beneficial owner to pledge Book-Entry Certificates to persons or entities that
do not participate in the Depository system, or otherwise take actions in
respect of such Book-Entry Certificates, may be limited due to the lack of
physical certificates for such Book-Entry Certificates. In addition, issuance of
the Book-Entry Certificates in book-entry form may reduce the liquidity of such
Certificates in the secondary market since certain potential investors may be
unwilling to purchase Certificates for which they cannot obtain physical
certificates.
Monthly and annual reports on the Trust provided by the Servicer to CEDE,
as nominee of DTC, may be made available to beneficial owners upon request, in
accordance with the rules, regulations and procedures creating and affecting the
Depository, and to the Financial Intermediaries to whose DTC accounts the
Book-Entry Certificates of such beneficial owners are credited.
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<PAGE> 50
DTC has advised the Transferor and the Trustee that, unless and until
Definitive Certificates are issued, DTC will take any action permitted to be
taken by the holders of the Book-Entry Certificates under the Agreement only at
the direction of one or more Financial Intermediaries to whose DTC accounts the
Book-Entry Certificates are credited, to the extent that such actions are taken
on behalf of Financial Intermediaries whose holdings include such Book-Entry
Certificates. Cedel or the Euroclear Operator, as the case may be, will take any
other action permitted to be taken by a Certificateholder under the Agreement on
behalf of a Cedel Participant or Euroclear Participant only in accordance with
its relevant rules and procedures and subject to the ability of the Relevant
Depositary to effect such actions on its behalf through DTC. DTC may take
actions, at the direction of the related Participants, with respect to some
Certificates which conflict with actions taken with respect to other
Certificates.
Definitive Certificates will be issued to beneficial owners of the
Book-Entry Certificates, or their nominees, rather than to DTC, only if (a) DTC
or the Transferor advises the Trustee in writing that DTC is no longer willing,
qualified or able to discharge properly its responsibilities as nominee and
depository with respect to the Book-Entry Certificates and the Transferor or the
Trustee is unable to locate a qualified successor, (b) the Transferor, at its
sole option, elects to terminate a book-entry system through DTC or (c) after
the occurrence of an Event of Servicing Termination (as defined herein),
beneficial owners having Percentage Interests aggregating not less than 51 % of
the Certificate Principal Balance of the Book-Entry Certificates advise the
Trustee and DTC through the Financial Intermediaries and the DTC participants in
writing that the continuation of a book-entry system through DTC (or a successor
thereto) is no longer in the best interests of beneficial owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Trustee will be required to notify all beneficial
owners of the occurrence of such event and the availability through DTC of
Definitive Certificates. Upon surrender by DTC of the global certificate or
certificates representing the Book-Entry Certificates and instructions for
re-registration, the Trustee will issue Definitive Certificates, and thereafter
the Trustee will recognize the holders of such Definitive Certificates as
Certificateholders under the Agreement.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of Certificates among participants of DTC,
Cedel and Euroclear, they are under no obligation to perform or continue to
perform such procedures and such procedures may be discontinued at any time.
Assignment of Mortgage Loans
At the time of issuance of the Certificates, the Depositor will transfer
to the Trust all of its right, title and interest in and to each Mortgage Loan
(including any Additional Balances arising in the future), related Credit Line
Agreements, mortgages and other related documents (collectively, the "Related
Documents"), including all collections received on or with respect to each such
Mortgage Loan after the Cut-Off Date (exclusive of payments in respect of
accrued interest due on or prior to the Cut-Off Date). The Trustee, concurrently
with such transfer, will deliver the Certificates to the Depositor and the
Transferor Certificate (as defined in the Agreement) to the Transferor. Each
Mortgage Loan transferred to the Trust will be identified on a schedule (the
"Mortgage Loan Schedule") delivered to the Trustee pursuant to the Agreement.
S-49
<PAGE> 51
Such schedule will include information as to the Cut-Off Date Principal Balance
of each Mortgage Loan, as well as information with respect to the Loan Rate.
The Agreement will permit the Seller to maintain possession of the Related
Documents and certain other documents relating to the Mortgage Loans (the
"Mortgage Files") and assignments of the related mortgages to the Trustee will
not be required to be recorded for so long as the long-term senior unsecured
debt of Bank One is rated at least "____" by _________ and "____" by______. In
the event that the Bank One long-term senior unsecured debt rating does not
satisfy the above-described standards (an "Assignment Event"), Bank One will
have 90 days to record assignments of the mortgages for each such Mortgage Loan
in favor of the Trustee and will have 60 days to deliver the Mortgage File
pertaining to each such Mortgage Loan to the Trustee (unless opinions of counsel
satisfactory to the Rating Agencies and the Certificate Insurer to the effect
that recordation of such assignments or delivery of such documentation is not
required in the relevant jurisdiction to protect the interest of Bank One and
the Trustee in the Mortgage Loans). In lieu of delivery of original
documentation, Bank One may deliver documents which have been imaged optically
upon delivery of an opinion of counsel that (i) such documents do not impair the
enforceability of the transfer to the Trust of the Mortgage Loans and (ii) the
optical image of such documents are enforceable in the relevant jurisdictions to
the same extent as the original documents.
Within 90 days of an Assignment Event, the Trustee will review the
Mortgage Files and if any Related Document is found to be defective in any
material respect and such defect is not cured within 90 days following
notification thereof to the Seller and the Depositor by the Trustee, the Seller
will be obligated to accept the transfer of such Mortgage Loan from the Trust.
Upon such transfer, the Principal Balance of such Mortgage Loan will be deducted
from the Pool Balance, thus reducing the amount of the Transferor Interest. If
the deduction would cause the Transferor Interest to become less than the
Minimum Transferor Interest at such time (a "Transfer Deficiency"), the Seller
will be obligated to either substitute an Eligible Substitute Mortgage Loan or
make a deposit into the Collection Account in the amount (the "Transfer Deposit
Amount") equal to the amount by which the Transferor Interest would be reduced
to less than the Minimum Transferor Interest at such time. Any such deduction,
substitution or deposit, will be considered for the purposes of the Agreement a
payment in full of such Mortgage Loan. Any Transfer Deposit Amount will be
treated as a Principal Collection. No such transfer shall be considered to have
occurred until the required deposit to the Collection Account is actually made.
The obligation of the Seller to accept a transfer of a Defective Mortgage Loan
is the sole remedy regarding any defects in the Mortgage File and Related
Documents available to the Trustee or the Certificateholders.
An "Eligible Substitute Mortgage Loan" is a mortgage loan substituted by
the Depositor for a Defective Mortgage Loan which must, on the date of such
substitution, (i) have 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) that is approximately equal to the Transfer
Deficiency relating to such Defective Mortgage Loan; (ii) have a Loan Rate not
less than the Loan Rate of the Defective Mortgage Loan and not more than ____%
in excess of the Loan Rate of such Defective Mortgage Loan; (iii) have a Loan
Rate based on the same Index with adjustments to such Loan Rate made on the same
Interest Rate Adjustment Date as that of the Defective Mortgage Loan; (iv) have
a Margin that is not less than the Margin of the
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Defective Mortgage Loan and not more than ____ basis points higher than the
Margin for the Defective Mortgage Loan; (v) have a mortgage of the same or
higher level of priority as the mortgage relating to the Defective Mortgage
Loan; (vi) have a remaining term to maturity not more than six months earlier
and not more than ____ months later than the remaining term to maturity of the
Defective Mortgage Loan; (vii) comply with each representation and warranty as
to the Mortgage Loans set forth in the Agreement (deemed to be made as of the
date of substitution); (viii) in general, have an original Combined
Loan-to-Value Ratio not greater than that of the Defective Mortgage Loan; and
(ix) satisfy certain other conditions specified in the Agreement. To the extent
the Principal Balance of an Eligible Substitute Mortgage Loan is less than the
Principal Balance of the related Defective Mortgage Loan and to the extent that
the Transferor Interest would be reduced below the Minimum Transferor Interest,
the Seller will be required to make a deposit to the Collection Account equal to
such difference.
The Seller will make certain representations and warranties as to the
accuracy in all material respects of certain information furnished to the
Trustee with respect to each Mortgage Loan (e.g., Cut-Off Date Principal Balance
and the Loan Rate). In addition, the Seller will represent and warrant on the
Closing Date that at the time of transfer to the Depositor, the Seller has
transferred or assigned all of its rights, title and interest in or granted a
security interest in each Mortgage Loan and the Related Documents, free of any
lien (subject to certain exceptions). Upon discovery of a breach of any such
representation and warranty which materially and adversely affects the interests
of the Certificateholders or the Certificate Insurer in the related Mortgage
Loan and Related Documents, the Seller will have a period of 90 days after
discovery or notice of the breach to effect a cure. If the breach cannot be
cured within the 90-day period, the Seller will be obligated to accept a
transfer of the Defective Mortgage Loan from the Trust. The same procedure and
limitations that are set forth in the second preceding paragraph for the
transfer of Defective Mortgage Loans will apply to the transfer of a Mortgage
Loan that is required to be transferred because of such breach of a
representation or warranty in the Agreement that materially and adversely
affects the interests of the Certificateholders.
Mortgage Loans required to be transferred to the Seller as described in
the preceding paragraphs are referred to as "Defective Mortgage Loans."
Pursuant to the Agreement, the Servicer will service and administer the
Mortgage Loans as more fully set forth above.
Amendments to Credit Line Agreements
Subject to applicable law, the Servicer may change the terms of the Credit
Line Agreements at any time provided that such changes (i) do not adversely
affect the interest of the Certificateholders or the Certificate Insurer, and
(ii) are consistent with prudent business practice. In addition, the Agreement
permits the Servicer, within certain limitations described therein, to increase
or reduce the Credit Limit of the related Mortgage Loan and increase or reduce
the Margin for such Mortgage Loan.
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Optional Transfers of Mortgage Loans to the Transferor
Subject to the conditions specified in the Agreement, on any Distribution
Date the Transferor may, but shall not be obligated to, remove on such
Distribution Date (the "Transfer Date") from the Trust, certain Mortgage Loans
without notice to the Certificateholders. The Transferor is permitted to
randomly designate the Mortgage Loans to be removed. Mortgage Loans so
designated will only be removed upon satisfaction of certain conditions
specified in the Agreement, including: (i) the Transferor Interest as of such
Transfer Date (after giving effect to such removal) exceeds the Minimum
Transferor Interest; (ii) the Transferor shall have delivered to the Trustee a
"Mortgage Loan Schedule" containing a list of all Mortgage Loans remaining in
the Trust after such removal; (iii) the Transferor shall represent and warrant
that no selection procedures which the Transferor reasonably believes are
adverse to the interests of the Certificateholders [or the Certificate Insurer]
were used by the Transferor in selecting such Mortgage Loans; (iv) in connection
with the first such retransfer of Mortgage Loans, the Rating Agencies shall have
been notified of the proposed transfer and prior to the Transfer Date the Rating
Agencies shall have notified the Transferor in writing that such transfer will
not result in a reduction or withdrawal of the ratings assigned to the
Certificates [without regard to the Policy;] and (v) the Transferor shall have
delivered to the Trustee [and the Certificate Insurer] an officer's certificate
confirming the conditions set forth in clauses (i) through (iii) above. (Section
2.06)
As of any date of determination, the "Minimum Transferor Interest" is an
amount equal to the lesser of (a) ____% of the Pool Balance on such date and (b)
the Transferor Interest as of the Closing Date.
Payments on Mortgage Loans; Deposits to Collection Account
The Trustee shall establish and maintain on behalf of the Servicer an
account (the "Collection Account") for the benefit of the Certificateholders and
the Transferor, as their interests may appear. The Collection Account will be an
Eligible Account (as defined herein). Subject to the investment provision
described in the following paragraphs, within two days of receipt by the
Servicer of amounts in respect of the Mortgage Loans (excluding amounts
representing the Servicing Fee, administrative charges, annual fees, taxes,
assessments, credit insurance charges, insurance proceeds to be applied to the
restoration or repair of a Mortgaged Property or similar items), the Servicer
will deposit such amounts in the Collection Account. Not later than the third
Business Day prior to each Distribution Date (the "Determination Date"), the
Servicer will notify the Trustee of the amount of such deposit to be included in
funds available for the related Distribution Date. Notwithstanding the
foregoing, under the terms of the Agreement, so long as Bank One's short-term
obligations are rated at least "____" by Standard & Poor's and "____" by
Moody's, all amounts collected in respect of the Mortgage Loans will be
commingled with the general collections of the Servicer and amounts collected
for a Collection Period will not be required to be deposited into the Collection
Account until one Business Day prior to the related Distribution Date. Amounts
so deposited may be invested in Eligible Investments (as described in the
Agreement) maturing no later than one Business Day prior to the date on which
the amount on deposit therein is required to be deposited in the
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Collection Account or on such Distribution Date if approved by the Rating
Agencies and the Certificate Insurer.
An "Eligible Account" is an account that is (i) maintained with a
depository institution whose debt obligations at the time of any deposit therein
have the highest short-term debt rating by the Rating Agencies, (ii) one or more
accounts with a depository institution which accounts are fully insured by
either the Savings Association Insurance Fund ("SAIF") or the Bank Insurance
Fund ("BIF") of the Federal Deposit Insurance Corporation established by such
fund with a minimum long-term unsecured debt rating of "____" by _____ and
"____" by __________, (iii) a segregated trust account maintained with the
Trustee or an Affiliate of the Trustee in its fiduciary capacity or (iv)
otherwise acceptable to each Rating Agency and the Certificate Insurer as
evidenced by a letter from each Rating Agency and the Certificate Insurer to the
Trustee, without reduction or withdrawal of their then current ratings of the
Certificates.
Eligible Investments are specified in the Agreement and are limited to
investments which meet the criteria of the Rating Agencies from time to time as
being consistent with their then current ratings of the Certificates.
Allocations and Collections
All collections on the Mortgage Loans will generally be allocated in
accordance with the Credit Line Agreements between amounts collected in respect
of interest and amounts collected in respect of principal. As to any
Distribution Date, "Interest Collections" will be equal to the amounts collected
during the related Collection Period, including such portion of Net Liquidation
Proceeds, allocated to interest pursuant to the terms of the Credit Line
Agreements less Servicing Fees for the related Collection Period.
As to any Distribution Date, "Principal Collections" will be equal to the
sum of (i) the amounts collected during the related Collection Period, including
such portion of Net Liquidation Proceeds allocated to principal pursuant to the
terms of the Credit Line Agreements and (ii) any Transfer Deposit Amounts. "Net
Liquidation Proceeds" with respect to a Mortgage Loan are equal to the
Liquidation Proceeds, reduced by related expenses, but not including the
portion, if any, of such amount that exceeds the Principal Balance of the
Mortgage Loan plus accrued and unpaid interest thereon to the end of the
Collection Period during which such Mortgage Loan became a Liquidated Mortgage
Loan. "Liquidation Proceeds" ire the proceeds (excluding any amounts drawn on
the Policy) received in connection with the liquidation of any Mortgage Loan,
whether through trustee's sale, foreclosure sale or otherwise.
With respect to any Distribution Date, the portion of Interest Collections
allocable to the Certificates ("Investor Interest Collections") will equal the
product of (a) Interest Collections for such Distribution Date and (b) the
Investor Floating Allocation Percentage. With respect to any Distribution Date,
the "Investor Floating Allocation Percentage" is the percentage equivalent of a
fraction determined by dividing the Invested Amount at the close of business on
the preceding Distribution Date (or the Closing Date in the case of the first
Distribution Date) by the Pool Balance at the beginning of the related
Collection Period. The remaining amount of Interest Collections will be
allocated to the Transferor Interest.
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Principal Collections will be allocated between the Certificateholders and
the Transferor ("Investor Principal Collections" and "Transferor Principal
Collections", respectively) as described herein.
The Trustee will deposit any amounts drawn under the Policy into the
Collection Account.
With respect to any date, the "Pool Balance" will be equal to the
aggregate of the Principal Balances of all Mortgage Loans as of such date. The
Principal Balance of a Mortgage Loan (other than a Liquidated Mortgage Loan) on
any day is equal to the Cut-Off Date Principal Balance thereof, plus (i) any
Additional Balances in respect of such Mortgage Loan minus (ii) all collections
credited against the Principal Balance of such Mortgage Loan in accordance with
the related Credit Line Agreement prior to such day. The Principal Balance of a
Liquidated Mortgage Loan after final recovery of related Liquidation Proceeds
shall be zero.
Distributions on the Certificates
Beginning with the first Distribution Date (which will occur on _____ 15,
199_), distributions on the Certificates will be made by the Trustee or the
Paying Agent on each Distribution Date to the persons in whose names such
Certificates are registered at the close of business on the day prior to each
Distribution Date or, if the Certificates are no longer Book-Entry Certificates,
at the close of business on the last day of the month preceding such
Distribution Date (the "Record Date"). The term "Distribution Date" means the
fifteenth day of each month or, if such day is not a Business Day, then the next
succeeding Business Day. Distributions will be made by check or money order
mailed (or upon the request of a Certificateholder owning Certificates having
denominations aggregating at least $1,000,000, by wire transfer or otherwise) to
the address of the person entitled thereto (which, in the case of Book-Entry
Certificates, will be DTC or its nominee) as it appears on the Certificate
Register in amounts calculated as described herein on the Determination Date.
However, the final distribution in respect of the Certificates will be made only
upon presentation and surrender thereof at the office or the agency of the
Trustee specified in the notice to Certificateholders of such final
distribution. For purposes of the Agreement, a "Business Day" is any day other
than (i) a Saturday or Sunday or (ii) a day on which banking institutions in the
States of Ohio, _______ or _______ are required or authorized by law to be
closed.
Application of Interest Collections. On each Distribution Date, the
Trustee or the Paying Agent will apply the Investor Interest Collections in the
following manner and order of priority:
(i) as payment to the Trustee for its fee for services rendered pursuant
to the Agreement;
(ii) as payment for the premium for the Policy;
(iii) as payment for the accrued interest due and any overdue accrued
interest (with interest thereon to the extent permitted by law) on the
Certificate Principal Balance of the Certificates;
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(iv) to pay Certificateholders the Investor Loss Amount for such
Distribution Date;
(v) as payment for any Investor Loss Amount for a previous Distribution
Date that was not previously (a) funded by Investor Interest Collections, (b)
absorbed by the Overcollateralization Amount, (c) funded by amounts on deposit
in the Spread Account or (d) funded by draws on the Policy;
(vi) to reimburse prior draws made from the Policy (with interest
thereon);
(vii) to pay principal on the Certificates until the Invested Amount
exceeds the Certificate Principal Balance by the Required Overcollateralization
Amount (such amount so paid, the "Accelerated Principal Distribution Amount");
(viii)any other amounts required to be deposited in an account for the
benefit of the Certificate Insurer and the Certificateholders or owed to the
Certificate Insurer pursuant to the Insurance Agreement;
(ix) certain amounts that may be required to be paid to the Servicer
pursuant to the Agreement; and
(x) to the Transferor to the extent permitted as described herein.
Payments to Certificateholders pursuant to clause (iii) will be interest
payments on the Certificates. Payments to Certificateholders pursuant to clauses
(iv), (v) and (vii) will be principal payments on the Certificates and will
reduce the Certificate Principal Balance; however, payments pursuant to clause
(vii) will not reduce the Invested Amount. The Accelerated Principal
Distribution Amount is not guaranteed by the Policy.
To the extent that Investor Interest Collections are applied to pay the
interest on the Certificates, Investor Interest Collections may be insufficient
to cover Investor Loss Amounts. If such insufficiency results in the Certificate
Principal Balance exceeding the Invested Amount, a draw will be made on the
Policy in accordance with the terms of the Policy.
The "Required Overcollateralization Amount" shall be an amount set forth
in the Insurance Agreement. "Liquidation Loss Amount" means with respect to any
Liquidated Mortgage Loan, the unrecovered Principal Balance thereof during the
Collection Period in which such Mortgage Loan became a Liquidated Mortgage Loan,
after giving effect to the Net Liquidation Proceeds received in connection
therewith. The "Investor Loss Amount" shall be the product of the Investor
Floating Allocation Percentage and the aggregate of the Liquidation Loss Amounts
for such Distribution Date.
A "Liquidated Mortgage Loan" means, as to any Distribution Date, any
Mortgage Loan in respect of which the Servicer has determined, based on the
servicing procedures specified in the Agreement, as of the end of the preceding
Collection Period that all Liquidation Proceeds which it expects to recover with
respect to the disposition of the related Mortgaged Property have been
recovered. The Investor Loss Amount will be allocated to the Certificateholders.
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As to any Distribution Date other than the first Distribution Date, the
"Collection Period" is the calendar month preceding each Distribution Date. As
to the first Distribution Date, the "Collection Period" is the period beginning
on the day after the Cut-Off Date and ending on __________, 199_.
Interest will be distributed on each Distribution Date at the Certificate
Rate for the related Interest Period (as defined below). The "Certificate Rate"
for a Distribution Date will generally equal the sum of (a) LIBOR, determined as
specified herein, as of the second LIBOR Business Day prior to the immediately
preceding Distribution Date (or as of two LIBOR Business Days prior to the
Closing Date, in the case of the first Distribution Date) plus (b) % per annum.
Notwithstanding the foregoing, in no event will the amount of interest required
to be distributed in respect of the Certificates on any Distribution Date exceed
a rate equal to the weighted average of the Loan Rates (net of the Servicing Fee
Rate, the fee payable to the Trustee and the rate at which the premium payable
to the Certificate Insurer is calculated) weighted on the basis of the daily
balance of each Mortgage Loan during the related billing cycle prior to the
Collection Period relating to such Distribution Date or in the case of the first
Distribution Date, the weighted average loan rate as of the Cut-Off Date.
Interest on the Certificates in respect of any Distribution Date will
accrue on the Certificate Principal Balance from the preceding Distribution Date
(or in the case of the first Distribution Date, from the date of the initial
issuance of the Certificates (the "Closing Date")) through the day preceding
such Distribution Date (each such period, an "Interest Period") on the basis of
the actual number of days in the Interest Period and a 360-day year. Interest
payments on the Certificates will be funded from Investor Interest Collections
[and, if necessary, from draws on the Policy]. Interest for any Distribution
Date due but not paid on such Distribution Date will be due on the next
succeeding Distribution Date together with additional interest on such amount at
a rate equal to the sum of the applicable Certificate Rate and 2% per annum.
Calculation of the LIBOR Rate. On each Distribution Date, LIBOR shall be
established by the Trustee and as to any Interest Period, LIBOR will equal the
rate for United States dollar deposits for one month which appears on the
Telerate Screen Page 3750 as of 11:00 A.M., London time, on the second LIBOR
Business Day prior to the first day of such Interest Period. "Telerate Screen
Page 3750" means 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). 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 selected by the Depositor after
consultation with the Trustee), the rate will be the Reference Bank Rate. The
"Reference Bank Rate" will be determined on the basis of the rates at which
deposits in U.S. Dollars are offered by the reference banks (which shall be
three major banks that are engaged in transactions in the London interbank
market, selected by the Depositor after consultation with the Trustee) 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 principal
amount of the Certificates then outstanding. The Trustee will request the
principal London office of each of the reference banks to provide a quotation of
its rate. If at least two such quotations are provided, the rate will be the
arithmetic mean of the quotations. If on such date fewer than two quotations
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are provided as requested, the 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 principal amount of the
Certificates then outstanding. If no such quotations can be obtained, the rate
will be LIBOR for the prior Distribution Date. "LIBOR Business Day" means 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.
Transferor Collections. Collections allocable to the Transferor Interest
will be distributed to the Transferor only to the extent that such distribution
will not reduce the amount of the Transferor Interest as of the related
Distribution Date below the Minimum Transferor Interest. Amounts not distributed
to the Transferor because of such limitations will be retained in the Collection
Account until the Transferor Interest exceeds the Minimum Transferor Interest,
at which time such excess shall be released to the Transferor.
Overcollateralization. The distribution of the aggregate Accelerated
Principal Distribution Amount, if any, to Certificateholders may result in the
Invested Amount being greater than the Certificate Principal Balance, thereby
creating overcollateralization. The Overcollateralization Amount, if any, will
be available to absorb any Investor Loss Amount that is not covered by Investor
Interest Collections.
Distributions of Principal Collections. For the period beginning on the
first Distribution Date and, unless a Rapid Amortization Event shall have
earlier occurred, ending immediately after the Distribution Date in _____ 200_
(the "Managed Amortization Period"), the amount of Principal Collections payable
to Certificateholders as of each Distribution Date during the Managed
Amortization Period will equal, to the extent funds are available therefor, the
Scheduled Principal Collections Distribution Amount for such Distribution Date.
On any Distribution Date during the Managed Amortization Period, the "Scheduled
Principal Collections Distribution Amount" shall equal the lesser of (i) the
Maximum Principal Payment (as defined below) and (ii) the Alternative Principal
Payment (as defined herein). With respect to any Distribution Date, the "Maximum
Principal Payment" will equal the product of the Investor Fixed Allocation
Percentage and Principal Collections for such Distribution Date. With respect to
any Distribution Date, the "Alternative Principal Payment" will equal the
amount, but not less than zero, of Principal Collections for such Distribution
Date less the aggregate of Additional Balances created during the related
Collection Period. The "Rapid Amortization Period" is the period beginning at
the earlier of (i) the occurrence of a Rapid Amortization Event and (ii)
immediately following the _____ 200_ Distribution Date and continuing until the
earlier of when (i) the Certificate Principal Balance has been reduced to zero
and (ii) the Trust is terminated. See "-Termination; Retirement of the
Certificates."
Beginning with the first Distribution Date of the Rapid Amortization
Period, the amount of Principal Collections payable to Certificateholders on
each Distribution Date will be equal to the Maximum Principal Payment.
Distributions of Principal Collections based upon the Investor Fixed
Allocation Percentage may result in distributions of principal to
Certificateholders in amounts that are
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greater relative to the declining Pool Balance than would be the case if the
Investor Floating Allocation Percentage were used to determine the percentage of
Principal Collections distributed in respect of the Invested Amount. Principal
Collections not allocated to the Certificateholders will be allocated to the
Transferor Interest. The aggregate distributions of principal to the
Certificateholders will not exceed the Original Certificate Principal Balance.
In addition, to the extent of funds available therefor (including funds
available under the Policy), on the Distribution Date in _____ 20__,
Certificateholders will be entitled to receive as a payment of principal an
amount equal to the outstanding Certificate Principal Balance.
The Paying Agent. The Paying Agent shall initially be the Trustee,
together with any successor thereto in such capacity (the "Paying Agent"). The
Paying Agent shall have the revocable power to withdraw funds from the
Collection Account for the purpose of making distributions to the
Certificateholders.
Rapid Amortization Events
As described above, the Rapid Amortization Period will commence if a Rapid
Amortization Event occurs. "Rapid Amortization Event" refers to any of the
following events:
(a) failure on the part of the Seller (i) to make a payment or
deposit required under the Agreement within three Business Days after the
date such payment or deposit is required to be made or (ii) to observe or
perform in any material respect any other covenants or agreements of the
Seller set forth in the Agreement, which failure continues unremedied for
a period of 60 days after written notice;
(b) any representation or warranty made by the Seller in the
Agreement proves to have been incorrect in any material respect when made
and continues to be incorrect in any material respect for a period of 60
days after written notice and as a result of which the interests of the
Certificateholders are materially and adversely affected; provided,
however, that a Rapid Amortization Event shall not be deemed to occur if
the Seller has purchased or made a substitution for the related Mortgage
Loan or Mortgage Loans if applicable during such period (or within an
additional 60 days with the consent of the Trustee) in accordance with the
provisions of the Agreement;
(c) the occurrence of certain events of bankruptcy, insolvency or
receivership relating to the Transferor;
(d) the Trust becomes subject to regulation by the Securities and
Exchange Commission as an investment company within the meaning of 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.
In the case of any event described in clause (a) or (b), a Rapid
Amortization Event will be deemed to have occurred only if, after the applicable
grace period, if any, described in such clauses, either the Trustee or
Certificateholders holding Certificates evidencing more than 51% of the
Percentage Interests [or the Certificate Insurer (so long as there is no default
by the
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Certificate Insurer in the performance of its obligations under the Policy)], by
written notice to the Depositor, the Transferor and the Servicer (and to the
Trustee, if given by the Certificateholders) declare that a Rapid Amortization
Event has occurred as of the date of such notice. In the case of any event
described in clause (c), (d) or (e), a Rapid Amortization Event will be deemed
to have occurred without any notice or other action on the part of the Trustee
or the Certificateholders immediately upon the occurrence of such event.
In addition to the consequences of a Rapid Amortization Event discussed
above, if the Transferor voluntarily files a bankruptcy petition or goes into
liquidation or any person is appointed a receiver or bankruptcy trustee of the
Transferor, on the day of any such filing or appointment no further Additional
Balances will be transferred to the Trust, the Transferor will immediately cease
to transfer Additional Balances to the Trust and the Transferor will promptly
give notice to the Trustee of any such filing or appointment. Within 15 days,
the Trustee will publish a notice of the liquidation or the filing or
appointment stating that the Trustee intends to sell, dispose of or otherwise
liquidate the Mortgage Loans in a commercially reasonable manner and to the best
of its ability. Unless otherwise instructed within a specified period by
Certificateholders representing undivided interests aggregating more than 51% of
the aggregate principal amount of the Certificates, the Trustee will sell,
dispose of or otherwise liquidate the Mortgage Loans in a commercially
reasonable manner and on commercially reasonable terms. Any proceeds will be
treated as collections allocable to the Certificateholders and the Investor
Fixed Allocation Percentage of such remaining proceeds and will be distributed
to the Certificateholders on the date such proceeds are received (the
"Dissolution Distribution Date"). If the portion of such proceeds allocable to
the Certificateholders are not sufficient to pay in full the remaining amount
due on the Certificates, the Policy will cover such shortfall.
Notwithstanding the foregoing, if a conservator, receiver or
trustee-in-bankruptcy is appointed for the Transferor and no Rapid Amortization
Event exists other than such conservatorship, receivership or insolvency of the
Transferor, the conservator, receiver or trustee-in-bankruptcy may have the
power to prevent the commencement of the Rapid Amortization Period or the sale
of Mortgage Loans described above.
The Policy
[describe Policy if applicable]
On or before the Closing Date, the Policy will be issued by the
Certificate Insurer pursuant to the provisions of the Agreement and the
Insurance and Indemnity Agreement (the "Insurance Agreement") to be dated as of
_________, 199_, among Bank One, the Depositor, the Trustee and the Certificate
Insurer.
Reports to Certificateholders
Concurrently with each distribution to the Certificateholders, the
Servicer will forward to the Trustee for mailing to such Certificateholder a
statement setting forth among other items:
(i) the Investor Floating Allocation Percentage for the preceding
Collection Period;
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(ii) the amount being distributed to Certificateholders;
(iii) the amount of interest included in such distribution and the
related Certificate Rate;
(iv) the amount, if any, of overdue accrued interest included in
such distribution (and the amount of interest thereon);
(v) the amount, if any, of the remaining overdue accrued interest
after giving effect to such distribution;
(vi) the amount, if any, of principal included in such distribution;
(vii) the amount, if any, of the reimbursement of previous
Liquidation Loss Amounts included in such distribution;
(viii)the amount, if any, of the aggregate unreimbursed Liquidation
Loss Amounts after giving effect to such distribution;
(ix) the Servicing Fee for such Distribution Date;
(x) the Invested Amount and the Certificate Principal Balance, each
after giving effect to such distribution;
(xi) the Pool Balance as of the end of the preceding Collection
Period;
(xii) the number and aggregate Principal Balances of the 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;
(xiii)the book value of any real estate which is acquired by the
Trust through foreclosure or grant of deed in lieu of foreclosure; and
(xiv) the amount of any draws on the Policy.
In the case of information furnished pursuant to clauses (iii), (iv), (v),
(vi), (vii) and (viii) above, the amounts shall be expressed as a dollar amount
per Certificate with a $1,000 denomination.
Each year commencing in 1997, the Servicer will be required to forward to
the Trustee a statement containing the information set forth in clauses (iii)
and (vi) above aggregated for such calendar year.
Collection and Other Servicing Procedures on Mortgage Loans
The Servicer will make reasonable efforts to collect all payments called
for under the Mortgage Loans and will, consistent with the Agreement, follow
such collection procedures as it follows from time to time with respect to the
home equity loans in its servicing portfolio
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comparable to the Mortgage Loans. Consistent with the above, the Servicer may in
its discretion waive any late payment charge or any assumption or other fee or
charge that may be collected in the ordinary course of servicing the Mortgage
Loans.
With respect to the Mortgage Loans, the Servicer may arrange with a
borrower a schedule for the payment of interest due and unpaid for a period,
provided that any such arrangement is consistent with the Servicer's policies
with respect to the home equity mortgage loans it owns or services. In
accordance with the terms of the Agreement, the Servicer may consent under
certain circumstances to the placing of a subsequent senior lien in respect of a
Mortgage Loan.
Hazard Insurance
The Agreement provides that the Servicer maintain certain hazard insurance
on the Mortgaged Properties relating to the Mortgage Loans. While the terms of
the related Credit Line Agreements generally require borrowers to maintain
certain hazard insurance, the Servicer will not monitor the maintenance of such
insurance.
The Agreement requires the Servicer to maintain for any Mortgaged Property
relating to a Mortgage Loan acquired upon foreclosure of a Mortgage Loan, or by
deed in lieu of such foreclosure, hazard insurance with extended coverage in an
amount equal to the lesser of (a) the maximum insurable value of such Mortgaged
Property or (b) the outstanding balance of such Mortgage Loan plus the
outstanding balance on any mortgage loan senior to such Mortgage Loan at the
time of foreclosure or deed in lieu of foreclosure, plus accrued interest and
the Servicer's good faith estimate of the related liquidation expenses to be
incurred in connection therewith. The Agreement provides that the Servicer may
satisfy its obligation to cause hazard policies to be maintained by maintaining
a blanket policy insuring against losses on such Mortgaged Properties. If such
blanket policy contains a deductible clause, the Servicer will be obligated to
deposit in the Collection Account the sums which would have been deposited
therein but for such clause. (Section 3.04) The Servicer will initially satisfy
these requirements by maintaining a blanket policy. As set forth above, all
amounts collected by the Servicer (net of any reimbursements to the Servicer)
under any hazard policy (except for amounts to be applied to the restoration or
repair of the Mortgaged Property) will ultimately be deposited in the Collection
Account.
In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements on the property by fire,
lightning, explosion, smoke, windstorm and hail, and the like, strike and civil
commotion, subject to the conditions and exclusions specified in each policy.
Although the policies relating to the Mortgage Loans will be underwritten by
different insurers and therefore will not contain identical terms and
conditions, the basic terms thereof are dictated by state laws and most of such
policies typically do not cover any physical damage resulting from the
following: war, revolution, governmental actions, floods and other water-related
causes, earth movement (including earthquakes, landslides and mudflows), nuclear
reactions, wet or dry rot, vermin, rodents, insects or domestic animals, theft
and, in certain cases vandalism. The foregoing list is merely indicative of
certain kinds of uninsured risks and is not intended to be all-inclusive or an
exact description of the insurance policies relating to the Mortgaged
Properties.
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Realization Upon Defaulted Mortgage Loans
The Servicer will foreclose upon or otherwise comparably convert to
ownership Mortgaged Properties securing such of the Mortgage Loans as come into
default when, in accordance with applicable servicing procedures under the
Agreement, no satisfactory arrangements can be made for the collection of
delinquent payments. In connection with such foreclosure or other conversion,
the Servicer will follow such practices as it deems necessary or advisable and
as are in keeping with its general subordinate mortgage servicing activities,
provided the Servicer will not be required to expend its own funds in connection
with foreclosure or other conversion, correction of default on a related senior
mortgage loan or restoration of any property unless, in its sole judgment, such
foreclosure, correction or restoration will increase Net Liquidation Proceeds.
The Servicer will be reimbursed out of Liquidation Proceeds for advances of its
own funds as liquidation expenses before any Net Liquidation Proceeds are
distributed to Certificateholders or the Transferor.
Servicing Compensation and Payment of Expenses
With respect to each Collection Period, the Servicer will receive from
interest collections in respect of the Mortgage Loans a portion of such interest
collections as a monthly Servicing Fee in the amount equal to approximately
_____% per annum ("Servicing Fee Rate") on the aggregate Principal Balances of
the Mortgage Loans as of the first day of the related Collection Period (or at
the Cut-Off Date for the first Collection Period). All assumption fees, late
payment charges and other fees and charges, to the extent collected from
borrowers, will be retained by the Servicer as additional servicing
compensation.
The Servicer will pay certain ongoing expenses associated with the Trust
and incurred by it in connection with its responsibilities under the Agreement.
In addition, the Servicer will be entitled to reimbursement for certain expenses
incurred by it in connection with defaulted Mortgage Loans and in connection
with the restoration of Mortgaged Properties, such right of reimbursement being
prior to the rights of Certificateholders to receive any related Net Liquidation
Proceeds.
Evidence as to Compliance
The Agreement provides for delivery on or before May 31 in each year,
beginning in May 31, 1997, to the Trustee of an annual statement signed by an
officer of the Servicer to the effect that the Servicer has fulfilled its
material obligations under the Agreement throughout the preceding fiscal year,
except as specified in such statement.
Certain Matters Regarding the Servicer and the Transferor
The Agreement provides that the Servicer may not resign from its
obligations and duties thereunder, except in connection with a permitted
transfer of servicing, unless (i) such duties and obligations are no longer
permissible under applicable law or are in material conflict by reason of
applicable law with any other activities of a type and nature presently carried
on by it or its affiliate or (ii) upon the satisfaction of the following
conditions: (a) the Servicer has proposed a
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successor servicer to the Trustee in writing and such proposed successor
servicer is reasonably acceptable to the Trustee; (b) the Rating Agencies have
confirmed to the Trustee that the appointment of such proposed successor
servicer as the Servicer will not result in the reduction or withdrawal of the
then current rating of the Certificates; and (c) such proposed successor
servicer is reasonably acceptable to the Certificate Insurer. No such
resignation will become effective until the Trustee or a successor servicer has
assumed the Servicer's obligations and duties under the Agreement.
Notwithstanding the foregoing, Bank One may transfer its servicing obligations
to any other direct or indirect wholly-owned subsidiary of BANC ONE CORPORATION
or another entity (which meets certain eligibility standards set forth in the
Agreement) and be relieved of its obligations and duties under the Agreement and
related agreements.
The Servicer may perform any of its duties and obligations under the
Agreement through one or more subservicers or delegates, which may be affiliates
of the Servicer. Notwithstanding any such arrangement, the Servicer will remain
liable and obligated to the Trustee and the Certificateholders for the
Servicer's duties and obligations under the Agreement, without any diminution of
such duties and obligations and as if the Servicer itself were performing such
duties and obligations.
Any person into which, in accordance with the Agreement, Bank One or the
Servicer may be merged or consolidated or any person resulting from any merger
or consolidation to which Bank One or the Servicer is a party, or any person
succeeding to the business of Bank One or the Servicer, will be the successor to
Bank One as servicer, or the Servicer, as the case may be, under the Agreement.
The Agreement provides that the Servicer will indemnify the Trust and the
Trustee from and against any loss, liability, expense, damage or injury suffered
or sustained as a result of the Servicer's actions or omissions in connection
with the servicing and administration of the Mortgage Loans which are not in
accordance with the provisions of the Agreement. Under the Agreement, the
Transferor will indemnify an injured party for the entire amount of any losses,
claims, damages or liabilities arising out of or based on the Agreement (other
than losses resulting from defaults under the Mortgage Loans). In the event of
an Event of Servicing Termination (as defined below) resulting in the assumption
of servicing obligations by a successor Servicer, the successor Servicer will
indemnify the Transferor for any losses, claims, damages and liabilities of the
Transferor as described in this paragraph arising from the successor Servicer's
actions or omissions. The Agreement provides that neither the Depositor, the
Transferor nor the Servicer nor their directors, officers, employees or agents
will be under any other liability to the Trust, the Trustee, the
Certificateholders or any other person for any action taken or for refraining
from taking any action pursuant to the Agreement. However, neither the
Depositor, the Transferor nor the Servicer will be protected against any
liability which would otherwise be imposed by reason of willful misconduct, bad
faith or gross negligence of the Depositor, the Transferor or the Servicer in
the performance of its duties under the Agreement or by reason of reckless
disregard of its obligations thereunder. In addition, the Agreement provides
that the Servicer will not be under any obligation to appear in, prosecute or
defend any legal action which is not incidental to its servicing
responsibilities under the Agreement and which in its opinion may expose it to
any expense or liability. The Servicer may, in its sole discretion, undertake
any such legal action which it may deem necessary or desirable
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with respect to the Agreement and the rights and duties of the parties thereto
and the interest of the Certificateholders thereunder.
Any corporation into which the Servicer may be merged or consolidated, or
any corporation resulting from any merger, conversion or consolidation to which
the Servicer shall be a party, or any corporation succeeding to the business of
the Servicer shall be the successor of the Servicer hereunder, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything in the Agreement to the contrary notwithstanding.
Events of Servicing Termination
"Events of Servicing Termination" will consist of: (i) any failure by the
Servicer to deposit in the Collection Account any deposit required to be made
under the Agreement, which failure continues unremedied for five Business Days
after the giving of written notice of such failure to the Servicer by the
Trustee, or to the Servicer and the Trustee by the Certificate Insurer or
Certificateholders evidencing an aggregate, undivided interest in the Trust of
at least 25% of the Certificate Principal Balance; (ii) any failure by the
Servicer duly to observe or perform in any material respect any other of its
covenants or agreements in the Agreement which, in each case, materially and
adversely affects the interests of the Certificateholders or the Certificate
Insurer and continues unremedied for 60 days after the giving of written notice
of such failure to the Servicer by the Trustee, or to the Servicer and the
Trustee by the Certificate Insurer or Certificateholders evidencing an
aggregate, undivided interest in the Trust of at least 25% of the Certificate
Principal Balance; or (iii) certain events of insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings relating to the
Servicer and certain actions by the Servicer indicating insolvency,
reorganization or inability to pay its obligations. Under certain other
circumstances, the Certificate Insurer with the consent of holders of Investor
Certificates evidencing an aggregate, undivided interest in the Trust of at
least 51% of the Certificate Principal Balance may deliver written notice to the
Servicer terminating all the rights and obligations of the Servicer under the
Agreement.
Notwithstanding the foregoing, a delay in or failure of performance
referred to under clause (i) above for a period of ten Business Days or referred
to under clause (ii) above 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 other similar occurrence. Upon
the occurrence of any such event the Servicer shall not be relieved from using
its best efforts to perform its obligations in a timely manner in accordance
with the terms of the Agreement and the Servicer shall provide the Trustee, the
Depositor, the Transferor, the Certificate Insurer and the Certificateholders
prompt notice of such failure or delay by it, together with a description of its
efforts to so perform its obligations.
Rights Upon an Event of Servicing Termination
So long as an Event of Servicing Termination remains unremedied, either
the Trustee, or Certificateholders evidencing an aggregate, undivided interest
in the Trust of at least 51% of the Certificate Principal Balance [or the
Certificate Insurer], may terminate all of the rights and
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obligations of the Servicer under the Agreement and in and to the Mortgage
Loans, whereupon the Trustee will succeed to all the responsibilities, duties
and liabilities of the Servicer under the Agreement and will be entitled to
similar compensation arrangements. In the event that the Trustee would be
obligated to succeed the Servicer but is unwilling or unable so to act, it may
appoint, or petition a court of competent jurisdiction for the appointment of, a
housing and home finance institution or other mortgage loan or home equity loan
servicer with all licenses and permits required to perform its obligations under
the Agreement and having a net worth of at least $__________ [and acceptable to
the Certificate Insurer] to act as successor to the Servicer under the
Agreement. Pending such appointment, the Trustee will be obligated to act in
such capacity unless prohibited by law. Such successor will be entitled to
receive the same compensation that the Servicer would otherwise have received
(or such lesser compensation as the Trustee and such successor may agree). A
receiver or conservator for the Servicer may be empowered to prevent the
termination and replacement of the Servicer where the only Event of Servicing
Termination that has occurred is an Insolvency Event.
Amendment
The Agreement may be amended from time to time by the Seller, the
Transferor, the Servicer, the Depositor and the Trustee [and with the consent of
the Certificate Insurer], but without the consent of the Certificateholders, to
cure any ambiguity, to correct or supplement any provisions therein which may be
inconsistent with any other provisions of the Agreement, to add to the duties of
the Depositor, the Seller, the Transferor or the Servicer or to add or amend any
provisions of the Agreement as required by the Rating Agencies in order to
maintain or improve any rating of the Certificates (it being understood that,
after obtaining the ratings in effect on the Closing Date, neither the
Transferor, the Trustee nor the Servicer is obligated to obtain, maintain, or
improve any such rating) or to add any other provisions with respect to matters
or questions arising under the Agreement which shall not be inconsistent with
the provisions of the Agreement, provided that such action will not, as
evidenced by an opinion of counsel, materially and adversely affect the
interests of any Certificateholder [or the Certificate Insurer]; provided, that
any such amendment will not be deemed to materially and adversely affect the
Certificateholders and no such opinion will be required to be delivered if the
person requesting such amendment obtains a letter from the Rating Agencies
stating that such amendment would not result in a downgrading of the then
current rating of the Certificates. The Agreement may also be amended from time
to time by the Seller, the Servicer, the Depositor, and the Trustee, with the
consent of Certificateholders evidencing an aggregate, undivided interest in the
Trust of at least 51% of the Certificate Principal Balance [and the Certificate
Insurer] for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of the Agreement or of modifying in any
manner the rights of the Certificateholders, provided that no such amendment
will (i) reduce in any manner the amount of, or delay the timing of, collections
of payments on the Certificates or distributions or payments under the Policy
which are required to be made on any Certificate without the consent of the
holder of such Certificate or (ii) reduce the aforesaid percentage required to
consent to any such amendment, without the consent of the holders of all
Certificates then outstanding.
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Termination; Retirement of the Certificates
The Trust will terminate on the Distribution Date following the later of
(A) payment in full of all amounts owing to the Certificate Insurer and (B) the
earliest of (i) the Distribution Date on which the Certificate Principal Balance
has been reduced to zero, (ii) the final payment or other liquidation of the
last Mortgage Loan in the Trust, (iii) the optional transfer to the Transferor
of the Certificates, as described below and (iv) the Distribution Date in _____
20__.
The Certificates will be subject to optional transfer to the Transferor on
any Distribution Date after the Certificate Principal Balance is reduced to an
amount less than or equal to _____% of the Original Certificate Principal
Balance and all amounts due and owing to the Certificate Insurer and
unreimbursed draws on the Policy, together with interest thereon, as provided
under the Insurance Agreement, have been paid. The transfer price will be equal
to the sum of the outstanding Certificate Principal Balance and accrued and
unpaid interest thereon at the Certificate Rate through the day preceding the
final Distribution Date. In no event, however, will the Trust created by the
Agreement continue for more than 21 years after the death of certain individuals
named in the Agreement. Written notice of termination of the Agreement will be
given to each Certificateholder, and the final distribution will be made only
upon surrender and cancellation of the Certificates at an office or agency
appointed by the Trustee which will be specified in the notice of termination.
In addition, the Trust may be liquidated as a result of certain events of
bankruptcy, insolvency or receivership relating to the Transferor. See "-Rapid
Amortization Events" herein.
The Trustee
___________________________, a ______________________ with its principal
place of business in ______________, has been named Trustee pursuant to the
Agreement.
The commercial bank or trust company serving as Trustee may own
Certificates and have normal banking [and the Certificate Insurer] and/or their
affiliates. relationships with the Depositor, the Servicer, the Seller [and the
Certificate Insurer] and/or their affiliates.
The Trustee may resign at any time, in which event the Depositor will be
obligated to appoint a successor Trustee, as approved by the Certificate
Insurer. The Depositor may also remove the Trustee if the Trustee ceases to be
eligible to continue as such under the Agreement or if the Trustee becomes
insolvent. Upon becoming aware of such circumstances, the Depositor will be
obligated to appoint a successor Trustee, as approved by the Certificate
Insurer. Any resignation or removal of the Trustee and appointment of a
successor Trustee will not become effective until acceptance of the appointment
by the successor Trustee.
No holder of a Certificate will have any right under the Agreement to
institute any proceeding with respect to the Agreement unless such holder
previously has given to the Trustee written notice of default and unless
Certificateholders evidencing an aggregate, undivided interest in the Trust of
at least 51% of the Certificate Principal Balance have made written requests
upon the Trustee to institute such proceeding in its own name as Trustee
thereunder and have offered to the Trustee reasonable indemnity and the Trustee
for 60 days has neglected or
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refused to institute any such proceeding. The Trustee will be under no
obligation to exercise any of the trusts or powers vested in it by the Agreement
or to make any investigation of matters arising thereunder or to institute,
conduct or defend any litigation thereunder or in relation thereto at the
request, order or direction of any of the Certificateholders, unless such
Certificateholders have offered to the Trustee reasonable security or indemnity
against the cost, expenses and liabilities which may be incurred therein or
thereby.
Certain Activities
The Trust will not: (i) borrow money; (ii) make loans; (iii) invest in
securities for the purpose of exercising control; (iv) underwrite securities;
(v) except as provided in the Agreement, engage in the purchase and sale (or
turnover) of investments; (vi) offer securities in exchange for property (except
Certificates for the Mortgage Loans); or (vii) repurchase or otherwise reacquire
its securities. See "-Evidence as to Compliance" above for information regarding
reports as to the compliance by the Servicer with the terms of the Agreement.
DESCRIPTION OF THE PURCHASE AGREEMENT
The Mortgage Loans to be transferred to the Trust by the Depositor will be
purchased by the Depositor from the Seller pursuant to the Purchase Agreement to
be entered into between the Depositor, as purchaser of the Mortgage Loans, and
______________, as Seller of the Mortgage Loans. Under the Purchase Agreement,
the Seller will agree to transfer the Mortgage Loans and related Additional
Balances to the Depositor. Pursuant to the Agreement, the Mortgage Loans will be
immediately transferred by the Depositor to the Trust, and the Depositor will
assign its rights in, to and under the Purchase Agreement to the Trust. The
following summary describes certain terms of the form of the Purchase Agreement
and is qualified in its entirety by reference to the Purchase Agreement.
Transfer of Mortgage Loans
Pursuant to the Purchase Agreement, the Seller will transfer and assign to
the Depositor, all of its right, title and interest in and to the Mortgage Loans
and all of the Additional Balances thereafter created. The purchase price of the
Mortgage Loans is a specified percentage of the face amount thereof as of the
time of transfer. The purchase price of each Additional Balance comprising the
Principal Balance of a Mortgage Loan is the amount of the related new advance.
Representations and Warranties
The Seller will represent and warrant to the Depositor that, among other
things, as of the Closing Date, it is duly organized and in good standing and
that it has the authority to consummate the transactions contemplated by the
Purchase Agreement. The Seller will also represent and warrant to the Depositor
that, among other things, immediately prior to the sale of the Mortgage Loans to
the Depositor, the Seller was the sole owner and holder of the Mortgage Loans
free and clear of any and all liens and security interests. The Seller will make
similar representations and warranties in the Agreement. The Seller will also
represent and warrant to the Depositor that, among other things, as of the
Closing Date, (a) the Purchase Agreement
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constitutes a legal, valid and binding obligation of the Seller and (b) the
Purchase Agreement constitutes a valid sale or security interest to the
Depositor of all right, title and interest of the Seller in and to the Mortgage
Loans and the proceeds thereof.
Assignment to Trust
The Seller expressly acknowledges and consents to the Depositor's transfer
of its rights relating to the Mortgage Loans under the Agreement to the Trust.
The Seller also agrees to perform its obligations under the Purchase Agreement
for the benefit of the Trust.
Termination
The Purchase Agreement will terminate upon the termination of the Trust.
USE OF PROCEEDS
The net proceeds to be received from the sale of the Certificates will be
applied by the Depositor towards the purchase of the Mortgage Loans.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
[Insert if applicable]
STATE TAXES
The Depositor makes no representations regarding the tax consequences of
purchase, ownership or disposition of the Certificates under the tax laws of any
state. Investors considering an investment in the Certificates should consult
their own tax advisors regarding such tax consequences.
All investors should consult their own tax advisors regarding the Federal,
state, local or foreign income tax consequences of the purchase, ownership and
disposition of the Certificates.
ERISA CONSIDERATIONS
[Insert as applicable]
LEGAL INVESTMENT CONSIDERATIONS
[Although, as a condition to their issuance, the Certificates will be
rated in the highest rating category of the Rating Agencies,] the Certificates
will not constitute "mortgage related securities" for purposes of the Secondary
Mortgage Market Enhancement Act of 1984 ("SMMEA"), because not all of the
Mortgages securing the Mortgage Loans are first mortgages.
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Accordingly, many institutions with legal authority to invest in comparably
rated securities based on first mortgage loans may not be legally authorized to
invest in the Certificates, which because they evidence interests in a pool that
includes junior mortgage loans are not "mortgage related securities" under
SMMEA. See "LEGAL INVESTMENT" in the Prospectus.
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting
agreement, dated _____ 199_ (the "Underwriting Agreement"), among the Depositor
and _______________________ (the "Underwriters"), the Depositor has agreed to
sell to the Underwriters, and the Underwriters have agreed to purchase from the
Depositor all the Certificates.
In the Underwriting Agreement, the Underwriters have agreed, subject to
the terms and conditions set forth therein, to purchase all the Certificates
offered hereby if any of the Certificates are purchased.
The Depositor has been advised by the Underwriters that it proposes
initially to offer the Certificates to the public in Europe and the United
States at the offering price set forth herein and to certain dealers at such
price less a discount not in excess of % of the Certificate denominations.
The Underwriters may allow and such dealers may reallow a discount not in excess
of % of the Certificate denominations to certain other dealers. After the
initial public offering, the public offering price, such concessions and such
discounts may be changed.
The Underwriting Agreement provides that the Depositor will indemnify the
Underwriters against certain civil liabilities, including liabilities under the
Act.
LEGAL MATTERS
Certain legal matters with respect to the Certificates will be passed upon
for _______________________________, for the Depositor by ______________________
and for the Underwriters by _________________.
EXPERTS
[The consolidated balance sheets of __________________________________ as
of ________________, ____ and ____ and the related consolidated statements of
income, changes in shareholder's equity, and cash flows for each of the three
years in the period ended _____________, ____, incorporated by reference in this
Prospectus Supplement, have been incorporated herein in reliance on the report
of _________________________, independent accountants, given on the authority of
that firm as experts in accounting and auditing.
RATINGS
It is a condition to issuance that the Certificates be rated "____" by
Standard & Poor's and "____" by Moody's.
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A securities rating addresses the likelihood of the receipt by
Certificateholders of distributions on the Mortgage Loans. The rating takes into
consideration the characteristics of the Mortgage Loans and the structural,
legal and tax aspects associated with the Certificates. The ratings on the
Certificates do not, however, constitute statements regarding the likelihood or
frequency of prepayments on the Mortgage Loans or the possibility that
Certificateholders might realize a lower than anticipated yield.
[The ratings assigned to the Certificates will depend primarily upon the
creditworthiness of the Certificate Insurer. Any reduction in a rating assigned
to the claims-paying ability of the Certificate Insurer below the ratings
initially assigned to the Certificates may result in a reduction of one or more
of the ratings assigned to the Certificates.]
A securities rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any time by the
assigning rating organization. Each securities rating should be evaluated
independently of similar ratings on different securities.
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ANNEX I
GLOBAL CLEARANCE, SETTLEMENT
AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Revolving
Home Equity Loan Asset-Backed Certificates, Series 199_-_ (the "Global
Securities") will be available only in book-entry form. Investors in the Global
Securities may hold such Global Securities through any of The Depository Trust
Company ("DTC"), Cedel or Euroclear. The Global Securities will be tradeable as
home market instruments in both the European and U.S. domestic markets. Initial
settlement and all secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities
through Cedel and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations and prior Home Equity Loan Asset-Backed
Certificates issues.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Certificates will be effected on a delivery-against-payment
basis through the respective Depositaries of Cedel and Euroclear (in such
capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
Initial Settlement
All Global Securities will be held in book-entry form by DTC in the name
of Cede & Co. as nominee of DTC. Investors' interests in the Global Securities
will be represented through financial institutions acting on their behalf as
direct and indirect Participants in DTC. As a result, Cedel and Euroclear will
hold positions on behalf of their participants through their respective
Depositaries, which in turn will hold such positions in accounts as DTC
Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to prior Home Equity Loan Asset-Backed
Certificates issues. Investor securities custody accounts will be credited with
their holdings against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will
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be credited to the securities custody accounts on the settlement date against
payment in same-day funds.
Secondary Market Trading
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to prior Home
Equity Loan Asset-Backed Certificates issues in same-day funds.
Trading between Cedel and/or Euroclear Participants. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC seller and Cedel or Euroclear purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a Cedel Participant or a Euroclear Participant, the purchaser will
send instructions to Cedel or Euroclear through a Cedel Participant or Euroclear
Participant at least one business day prior to settlement. Cedel or Euroclear
will instruct the respective Depositary, as the case may be, to receive the
Global Securities against payment. Payment will include interest accrued on the
Global Securities from and including the last coupon payment date to and
excluding the settlement date, on the basis of the actual number of days in such
accrual period and a year assumed to consist of 360 days. For transactions
settling on the 31st of the month, payment will include interest accrued to and
excluding the first day of the following month. Payment will then be made by the
respective Depositary of the DTC Participant's account against delivery of the
Global Securities. After settlement has been completed, the Global Securities
will be credited to the respective clearing system and by the clearing system,
in accordance with its usual procedures, to the Cedel Participant's or Euroclear
Participant's account. The securities credit will appear the next day (European
time) and the cash debt will be back-valued to, and the interest on the Global
Securities will accrue from, the value date (which would be the preceding day
when settlement occurred in New York). If settlement is not completed on the
intended value date (i.e., the trade fails), the Cedel or Euroclear cash debt
will be valued instead as of the actual settlement date.
Cedel Participants and Euroclear Participants will need to make available
to the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to preposition funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within Cedel or Euroclear. Under this approach,
they may take on credit exposure to Cedel or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit to
them, Cedel Participants or Euroclear Participants can elect not to preposition
funds and allow that credit line to be drawn upon the finance settlement. Under
this procedure, Cedel Participants or Euroclear Participants purchasing Global
Securities would incur overdraft charges for one day, assuming
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they cleared the overdraft when the Global Securities were credited to their
accounts. However, interest on the Global Securities would accrue from the value
date. Therefore, in many cases the investment income on the Global Securities
earned during that one-day period may substantially reduce or offset the amount
of such overdraft charges, although this result will depend on each Cedel
Participant's or Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective European Depositary for the benefit of Cedel Participants or
Euroclear Participants. The sale proceeds will be available to the DTC seller on
the settlement date. Thus, to the DTC Participants a cross-market transaction
will settle no differently than a trade between two DTC Participants.
Trading between Cedel or Euroclear Seller and DTC Purchaser. Due to time
zone differences in their favor, Cedel Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through the
respective Depositary, to a DTC Participant. The seller will send instructions
to Cedel or Euroclear through a Cedel Participant or Euroclear Participant at
least one business day prior to settlement. In these cases Cedel or Euroclear
will instruct the respective Depositary, as appropriate, to deliver the Global
Securities to the DTC Participant's account against payment. Payment will
include interest accrued on the Global Securities from and including the last
coupon payment to and excluding the settlement date on the basis of the actual
number of days in such accrual period and a year assumed to consist of 360 days.
For transactions settling on the 31st of the month, payment will include
interest accrued to and excluding the first day of the following month. The
payment will then be reflected in the account of the Cedel Participant or
Euroclear Participant the following day, and receipt of the cash proceeds in the
Cedel Participant's or Euroclear Participant's account would be back-valued to
the value date (which would be the preceding day, when settlement occurred in
New York). Should the Cedel Participant or Euroclear Participant have a line of
credit with its respective clearing system and elect to be in debt in
anticipation of receipt of the sale proceeds in its account, the back-valuation
will extinguish any overdraft incurred over that one-day period. If settlement
is not completed on the intended value date (i.e., the trade fails), receipt of
the cash proceeds in the Cedel Participant's or Euroclear Participant's account
would instead be valued as of the actual settlement date.
Finally, day traders that use Cedel or Euroclear and that purchase Global
Securities from DTC Participants for delivery to Cedel Participants or Euroclear
Participants should note that these trades would automatically fail on the sale
side unless affirmative action were taken. At least three techniques should be
readily available to eliminate this potential problem:
(a) borrowing through Cedel or Euroclear for one day (until the purchase
side of the day trade is reflected in their Cedel or Euroclear accounts) in
accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant no
later than one day prior to settlement, which would give the Global Securities
sufficient time to be reflected in their Cedel or Euroclear account in order to
settle the sale side of the trade; or
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(c) staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC Participant is at least one
day prior to the value date for the sale to the Cedel Participant or Euroclear
Participant.
Certain U.S. Federal Income Tax Documentation Requirements
A beneficial owner of Global Securities holding securities through Cedel
or Euroclear (or through DTC if the holder has an address outside the U.S.) will
be subject to the 30% U.S. withholding tax that generally applies to payments of
interest (including original issue discount) on registered debt issued by U.S.
Persons, unless (i) each clearing system, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or business
in the chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of Global
Securities that are non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status). If
the information shown on Form W-8 changes, a new Form W-8 must be filed within
30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
Exemption or reduced rate for non-U.S. Persons resident in treaty
countries (Form 1001). Non-U.S. Persons that are Certificate Owners residing in
a country that has a tax treaty with the United States can obtain an exemption
or reduced tax rate (depending on the treaty terms) by filing Form 1001
(Ownership, Exemption or Reduced Rate Certificate). If the treaty provides only
for a reduced rate, withholding tax will be imposed at that rate unless the
filer alternatively files Form W-8. Form 1001 may be filed by the Certificate
Owners or his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Certificate Owner of a
Global Security or, in the case of a Form 1001 or a Form 4224 filer, his agent,
files by submitting the appropriate form to the person through whom it holds
(the clearing agency, in the case of persons holding directly on the books of
the clearing agency). Form W-8 and Form 1001 are effective for three calendar
years and Form 4224 is effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States or any political subdivision thereof or (iii) an estate or trust
the income of which is includible in gross income for
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<PAGE> 76
United States tax purposes, regardless of its source. This summary does not deal
with all aspects of U.S. Federal income tax withholding that may be relevant to
foreign holders of the Global Securities. Investors are advised to consult their
own tax advisors for specific tax advice concerning their holding and disposing
of the Global Securities.
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<PAGE> 78
================================================================================
No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this Prospectus
Supplement or the Prospectus and, if given or made, such information or
representation must not be relied upon as having been authorized by the Company
or Lehman Brothers. This Prospectus Supplement and the Prospectus do not
constitute an offer of any securities other than those to which they relate or
an offer to sell, or a solicitation of an offer to buy, to any person in any
jurisdiction where such an offer or solicitation would be unlawful.. Neither the
delivery of this Prospectus Supplement and the Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that the
information herein is correct as of any time subsequent to their respective
dates.
-------------------
TABLE OF CONTENTS
Page
----
Prospectus Supplement
Incorporation of Certain Documents
By Reference
Summary
Risk Factors
The Certificate Insurer
The Servicer
Description of the Mortgage Loans
Underwriting
Maturity and Prepayment Considerations
Pool Factor and Trading Information
Description of the Certificates
Description of the Purchase Agreement
Use of Proceeds
Certain Federal Income Tax
Consequences
State Taxes
ERISA Considerations
Legal Investment Considerations
Underwriting
Legal Matters
Experts
Ratings
Annex I
Prospectus
Prospectus Supplement
Available Information
Reports to Holders
Summary of Terms
Risk Factors
Description of the Securities
The Trust Funds
Credit Enhancement
The Depositor, The Servicer and The
Originators
Servicing of Mortgage Loans
The Agreements
Certain Legal Aspects of Mortgage
Loans
Use of Proceeds
Certain Federal Income Tax
Considerations
State Tax Considerations
Legal Investment
Plan of Distribution
Legal Matters
Glossary of Terms
================================================================================
================================================================================
Banc One Home Equity
Loan Trust 199_-_
$___________
Revolving Home Equity Loan
Asset-Backed Certificates
Series 199_-_
______________
Seller
Bank One, N.A.
Servicer
Banc One ABS Corporation,
As Depositor
PROSPECTUS SUPPLEMENT
______, 199_
================================================================================
<PAGE> 79
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification.
SUBJECT TO COMPLETION DATED SEPTEMBER 9, 1998
PROSPECTUS
BANC ONE ABS CORPORATION
Asset-Backed Certificates
Asset-Backed Notes
(Issuable in Series)
Banc One ABS Corporation (the "Depositor") may offer from time to time
under this Prospectus and related Prospectus Supplements the Asset-Backed Notes
(the "Notes") and the Asset-Backed Certificates (the "Certificates" and,
together with the Notes, the "Securities") which may be sold from time to time
in one or more series (each, a "Series"). A Series of Securities may consist of
Notes, Certificates or both.
As specified in the related Prospectus Supplement, the Certificates of a
Series will evidence undivided interests in certain assets deposited into a
trust (each, a "Trust Fund") by the Depositor pursuant to a Pooling and
Servicing Agreement or a Trust Agreement, as described herein. As specified in
the related Prospectus Supplement, the Notes of a Series will be issued and
secured pursuant to an Indenture and will represent indebtedness of the related
Trust Fund. The Trust Fund for a Series of Securities will include assets
purchased from one or more bank or non-bank direct or indirect subsidiaries of
BANC ONE CORPORATION ("BANC ONE") specified in the related Prospectus Supplement
(each, a "Seller" and collectively, the "Sellers") composed of one or more pools
of revolving home equity loans and lines of credit (collectively, the "Mortgage
Loans"), secured by mortgages primarily on one- to four-family residential
properties, (b) all monies due thereunder net, if and as provided in the related
Prospectus Supplement, of certain amounts payable to Bank One, N.A., as servicer
of the Mortgage Loans or other servicer specified in the related Prospectus
Supplement (the "Servicer"), and (c) certain funds, Credit Enhancement (as
defined herein) and other assets as described herein and in the related
Prospectus Supplement.
Each Series of Securities will be issued in one or more classes (each, a
"Class"). Interest on and principal of the Securities of a Series will be
payable on each Distribution Date specified in the related Prospectus
Supplement, at the times, at the rates, in the amounts and in the order of
priority set forth in the related Prospectus Supplement.
If a Series includes multiple Classes, such Classes may vary with respect
to the amount, percentage and timing of distributions of principal, interest or
both and one or more Classes may be subordinated to other Classes with respect
to distributions of principal, interest or both as described herein and in the
related Prospectus Supplement. If so specified in the related Prospectus
Supplement, the Mortgage Loans and other assets comprising the Trust Fund may be
divided into one or more Asset Groups and each Class of the related Series will
evidence beneficial ownership of the corresponding Asset Group, as applicable.
The rate of reduction of the aggregate principal balance of each Class of
a Series may depend principally upon the rate of payment (including prepayments)
with respect to the Mortgage Loans. A rate of prepayment lower or higher than
anticipated will affect the yield on the Securities of a Series in the manner
described herein and in the related Prospectus Supplement. Under certain limited
circumstances described herein and in the related Prospectus Supplement, a
Series of Securities may be subject to termination or redemption under the
circumstances described herein and in the related Prospectus Supplement.
FOR A DISCUSSION OF CERTAIN RISKS ASSOCIATED WITH AN INVESTMENT
IN THE SECURITIES, SEE "RISK FACTORS" ON PAGE 9.
NOTES OF A SERIES REPRESENT OBLIGATIONS OF, AND CERTIFICATES OF A SERIES
EVIDENCE BENEFICIAL INTERESTS IN, THE RELATED TRUST FUND ONLY AND ARE NOT
DEPOSITS AND NEITHER THE NOTES OR THE CERTIFICATES ARE INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENTAL AGENCY OR BY THE DEPOSITOR, ANY SELLER,
THE TRUSTEE, THE SERVICER OR BY ANY OF THEIR RESPECTIVE
AFFILIATES OR, UNLESS OTHERWISE SPECIFIED IN THE RELATED
PROSPECTUS SUPPLEMENT, BY ANY OTHER PERSON OR ENTITY.
THE DEPOSITOR'S ONLY OBLIGATIONS WITH RESPECT TO ANY
SERIES OF SECURITIES WILL BE PURSUANT TO CERTAIN
REPRESENTATIONS AND WARRANTIES SET FORTH IN THE
RELATED AGREEMENT AS DESCRIBED HEREIN OR IN
THE RELATED PROSPECTUS SUPPLEMENT.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR THE PROSPECTUS SUPPLEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
The Securities offered by this Prospectus and by the related Prospectus
Supplement are offered by the underwriters set forth in the related Prospectus
Supplement, if any, subject to prior sale, to withdrawal cancellation or
modification of the offer without notice, to delivery to and acceptance by such
underwriters and certain further conditions. Retain this Prospectus for future
reference. This Prospectus may not be used to consummate sales of the Securities
offered hereby unless accompanied by a Prospectus Supplement.
- --------------------------------------------------------------------------------
Prospectus dated , 199
<PAGE> 80
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series of Securities to be offered
hereunder will, among other things, set forth with respect to such Series of
Securities: (i) the aggregate principal amount, interest rate, and authorized
denominations of each Class of such Securities; (ii) certain information
concerning the Mortgage Loans, the Seller and any Servicer; (iii) the terms of
any Credit Enhancement with respect to such Series; (iv) the terms of any
insurance related to the Mortgage Loans; (v) information concerning any other
assets in the related Trust Fund, including any Reserve Fund; (vi) the Final
Scheduled Distribution Date of each Class of such Securities; (vii) the method
to be used to calculate the amount of principal required to be applied to the
Securities of each Class of such Series on each Distribution Date, the timing of
the application of principal and the order of priority of the application of
such principal to the respective Classes and the allocation of principal to be
so applied; (viii) the Distribution Dates and any Assumed Reinvestment Rate (as
defined herein); and (ix) additional information with respect to the plan of
distribution of such Securities. To the extent that the terms of this Prospectus
conflict or are otherwise inconsistent with the terms of any Prospectus
Supplement, the terms of such Prospectus Supplement shall govern.
AVAILABLE INFORMATION
The Depositor has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement under the Securities Act of 1933, as
amended, with respect to the Securities. This Prospectus, which forms a part of
the Registration Statement, omits certain information contained in such
Registration Statement pursuant to the Rules and Regulations of the Commission.
The Registration Statement and the exhibits thereto may be inspected and copied
at the public reference facilities maintained by the Commission at a 450 Fifth
Street, N.W., Washington, D.C. 20549, and at its Regional Offices located as
follows: Chicago Regional Office, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511; and New York Regional Office, 7 World Trade Center, 3rd
Floor, New York, New York 10007. Copies of such material may also be obtained
from the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, the Commission
maintains a public access site on the Internet through the World Wide Web at
which site reports, information statements and other information, including all
electronic filings, regarding the Depositor may be viewed. The Internet address
of such World Wide Web site is http://www.sec.gov.
REPORTS TO HOLDERS
Periodic and annual reports concerning the related Trust Fund for a Series
of Securities are required under the related Agreement to be forwarded to
Holders. Unless otherwise specified in the related Prospectus Supplement, such
reports will not be examined and reported on by an independent public
accountant. If so specified in the Prospectus Supplement for a Series of
Securities, such Series or one or more Classes of such Series will be issued in
book-entry form. In such event (i) owners of beneficial interests in such
Securities will not be considered "Holders" under the Agreements and will not
receive such reports directly from the related Trust Fund; rather, such reports
will be furnished to such owners through the participants and indirect
participants of the applicable book-entry system and (ii) references herein to
the rights of "Holders" shall refer to the rights of such owners as they may be
exercised indirectly through such participants. See "THE AGREEMENTS-Reports to
Holders" herein.
<PAGE> 81
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and by reference to
the information with respect to each Series of Securities contained in the
Prospectus Supplement to be prepared and delivered in connection with the
offering of Securities of such Series. Capitalized terms used and not otherwise
defined herein or in the related Prospectus Supplement shall have the meanings
set forth in the "GLOSSARY OF TERMS".
Securities Offered........... Asset-Backed Certificates (the "Certificates")
and Asset-Backed Notes (the "Notes").
Certificates are issuable from time to time in
Series pursuant to a Pooling and Servicing
Agreement or Trust Agreement. Each Certificate of
a Series will evidence an interest in the Trust
Fund for such Series, or in an Asset Group
specified in the related Prospectus Supplement.
Notes are issuable from time to time in Series
pursuant to an Indenture. Each Series of
Securities will consist of one or more Classes,
each of which may differ in, among other things,
the amounts allocated to and the priority of
principal and interest payments, Final Scheduled
Distribution Dates, Distribution Dates and
interest rates. The Securities of each Class will
be issued in fully registered form in the
denominations specified in the related Prospectus
Supplement. If so specified in the related
Prospectus Supplement, the Securities or certain
Classes of such Securities offered thereby may be
available in book-entry form only.
Depositor.................... Banc One ABS Corporation (the "Depositor") was
incorporated in the State of Ohio on May 7, 1996,
and is a wholly-owned, special purpose subsidiary
of BANC ONE CORPORATION ("BANC ONE"). None of
BANC ONE, nor any other affiliate of the
Depositor, the Servicer, the Trustee or any
Seller has guaranteed or is otherwise obligated
with respect to the Securities of any Series. See
"THE DEPOSITOR."
Sellers...................... One or more bank or non-bank, direct or indirect,
subsidiaries of BANC ONE identified in the
Prospectus Supplement for a Series of Securities,
each of which is an affiliate of the Depositor
(each, a "Seller" and together, the "Sellers").
Servicer..................... Bank One, N.A. ("Bank One"), an affiliate of the
Depositor, or such other servicer as specified in
the related Prospectus Supplement.
Trustee...................... The Trustee for a Series of Securities identified
in the related Prospectus Supplement.
Interest Payments............ Interest payments on the Securities of a Series
entitled by their terms to receive interest will
be made on each Distribution Date, to the extent
set forth in, and at the applicable rate
specified in (or determined in the manner set
forth in), the related Prospectus Supplement. The
interest rate on Securities of a Series may be
fixed or may be variable or change with changes
in the rates of interest on the related Mortgage
Loans and/or as prepayments occur with respect to
such Mortgage Loans. Interest Only Securities may
be assigned a "Notional Amount" set forth in the
related Prospectus Supplement which is used
solely for convenience in expressing the
calculation of interest and for certain other
purposes and does not represent the right to
receive any distributions allocable to principal.
Principal Only Securities may not be entitled to
receive any interest payments or may be entitled
to receive only nominal interest payments.
Interest payable on the Securities of a Series on
a Distribution Date will include all interest
accrued during the period specified in the
related Prospectus Supplement. See "DESCRIPTION
OF THE SECURITIES--Payments of Interest."
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<PAGE> 82
Principal Payments........... All payments of principal of a Series of
Securities will be made in an aggregate amount
determined as set forth in the related Prospectus
Supplement and will be paid at the times and will
be allocated among the Classes of such Series in
the order and amounts, and will be applied either
on a pro rata or a random lot basis among all
Securities of any such Class, all as specified in
the related Prospectus Supplement. A Series of
Securities may provide for a period during which
no or only specified payments of principal are
made except upon the occurrence of certain
conditions, all as specified in the related
Prospectus Supplement.
Final Scheduled
Distribution Date
of the Securities.......... The Final Scheduled Distribution Date with respect
to each Class of Notes is the date on or before
which principal thereof will be fully paid and,
with respect to each Class of Certificates, is
the date after which no Certificates of such
Class are expected to remain outstanding, in each
case calculated on the basis of the assumptions
applicable to such Series described in the
related Prospectus Supplement. The Final
Scheduled Distribution Date of a Class may equal
the maturity date of the Mortgage Loan in the
related Trust Fund which has the latest stated
maturity or will be determined as described
herein and in the related Prospectus Supplement.
The actual final Distribution Date of the
Securities of a Series will depend primarily upon
the rate of payment (including prepayments,
liquidations due to default, the receipt of
proceeds from casualty insurance policies and
repurchases) of the Mortgage Loans in the related
Trust Fund. Unless otherwise specified in the
related Prospectus Supplement, the actual final
Distribution Date of any Security is likely to
occur earlier and may occur substantially earlier
or may occur later than its Final Scheduled
Distribution Date as a result of the application
of prepayments to the reduction of the principal
balances of the Securities and as a result of
defaults on the Mortgage Loans. The rate of
payments on the Mortgage Loans in the Trust Fund
for a Series will depend on a variety of factors,
including certain characteristics of such
Mortgage Loans and the prevailing level of
interest rates from time to time, as well as on a
variety of economic, demographic, tax, legal,
social and other factors. No assurance can be
given as to the actual prepayment experience with
respect to a Series. See "RISK FACTORS-Prepayment
and Yield Considerations" and "DESCRIPTION OF THE
SECURITIES - Weighted Average Life of the
Securities" herein.
Optional Termination......... One or more Classes of Securities of any Series
may be redeemed or repurchased in whole or in
part, at the Depositor's or the Servicer's
option, at such time and under the circumstances
specified in the related Prospectus Supplement,
at the price set forth therein. If so specified
in the related Prospectus Supplement for a Series
of Securities, the Depositor, the Servicer, or
such other entity that is specified in the
related Prospectus Supplement, may, at its
option, cause an early termination of the related
Trust Fund by repurchasing all of the Mortgage
Loans remaining in the Trust Fund on or after a
specified date, or on or after such time as the
aggregate principal balance of the Securities of
the Series or the Mortgage Loans relating to such
Series, as specified in the related Prospectus
Supplement, is less than the amount or percentage
specified in the related Prospectus Supplement.
See "DESCRIPTION OF THE SECURITIES-Optional
Purchase or Termination."
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<PAGE> 83
In addition, the Prospectus Supplement may provide
other circumstances under which Holders of
Securities of a Series could be fully paid
significantly earlier than would otherwise be the
case if payments or distributions were solely
based on the activity of the related Mortgage
Loans.
The Transferor Interest...... If so specified in the related Prospectus
Supplement, interests in a Trust Fund not
represented by the related Series of Securities
may be represented by a Transferor Interest,
which initially will be retained by the related
Seller or an affiliate thereof and which will not
be offered hereby. If so specified in the related
Prospectus Supplement, the principal amount of
the Transferor Interest will fluctuate as draws
are made with respect to the Mortgage Loans and
as Principal Collections are received. The
related Prospectus Supplement may specify a
minimum interest (the "Minimum Transferor
Interest") required to be maintained with respect
to a Trust Fund; provided that unless otherwise
specified in the related Prospectus Supplement,
the Minimum Transferor Interest may be reduced or
eliminated without the consent of the Holders of
the Securities of the applicable Series.
The Trust Fund............... The Trust Fund for a Series of Securities will
consist of one or more of the assets described
below, as described in the related Prospectus
Supplement.
A. Mortgage Loans......... The Mortgage Loans for a Series will consist of
revolving home equity loans and lines of credit
originated or purchased by the Seller or Sellers
specified in the related Prospectus Supplement,
each of which is an affiliate of the Depositor,
and sold each such Seller to the Depositor.
Mortgage Loans may, as specified in the related
Prospectus Supplement, have various payment
characteristics, including balloon or other
irregular payment features, and may accrue
interest at a fixed rate or an adjustable rate.
To the extent provided in the related Prospectus
Supplement, additional Mortgage Loans may be
periodically added to the Trust Fund, or may be
removed from time to time if certain conditions
are met, as described in the related Prospectus
Supplement. If so specified in the related
Prospectus Supplement, during the term of a Trust
Fund, all Additional Balances will be transferred
to and become Mortgaged Property of the Trust
Fund. As a result, the Pool Balance of a Trust
Fund may fluctuate from day to day because the
amount of Additional Balances and the amount of
principal payments with respect to the Mortgage
Loans will usually differ from day to day.
The Mortgage Loans will be secured by mortgages
or deeds of trust or other similar security
instruments creating a lien on a Mortgaged
Property, which may be subordinated to one or
more senior liens on the Mortgaged Property, as
described in the related Prospectus Supplement.
The related Prospectus Supplement will describe
certain characteristics of the Mortgage Loans for
a Series, including, without limitation, and to
the extent relevant: (a) the aggregate unpaid
principal balance of the Mortgage Loans (or the
aggregate unpaid principal balance included in
the Trust Fund for the related Series) and the
average outstanding principal balance of the
Mortgage Loans; (b) the weighted average Loan
Rate on the Mortgage Loans as of the Cut-off
Date; (c) the Combined Loan-to-Value Ratios or
Loan-to-Value Ratios, as applicable, of the
Mortgage Loans, computed in the manner described
in the related Prospectus Supplement; (d) the
percentage (by principal balance as of the
Cut-off Date) of Mortgage Loans that accrue
interest at adjustable or fixed interest rates;
(e) any Credit Enhancement relating to the
Mortgage Loans; (f) the geographic distribution
of any
5
<PAGE> 84
Mortgaged Properties securing the Mortgage Loans;
(g) the lien priority of the Mortgage Loans; (h)
the credit limit utilization rates of the
Mortgage Loans; and (i) the delinquency status
and year of origination of the Mortgage Loans.
B. Collection and
Distribution
Accounts.............. Unless otherwise provided in the related
Prospectus Supplement, all payments on or with
respect to the Mortgage Loans for a Series will
be remitted directly to an account (the
"Collection Account") to be established for such
Series with the Trustee or the Servicer, in the
name of the Trustee. Unless otherwise provided in
the related Prospectus Supplement, the Trustee
shall be required to apply a portion of the
amount in the Collection Account, together with
reinvestment earnings from eligible investments
specified in the related Prospectus Supplement,
to the payment of certain amounts payable to the
Servicer under the related Agreement and any
other person specified in the Prospectus
Supplement, and to deposit a portion of the
amount in the Collection Account into a separate
account (the "Distribution Account") to be
established for such Series, each in the manner
and at the times established in the related
Prospectus Supplement. All amounts deposited in
the Distribution Account will be available,
unless otherwise specified in the related
Prospectus Supplement, for (i) application to the
payment of principal of and interest on such
Series of Securities on the next Distribution
Date, (ii) the making of adequate provision for
future payments on certain Classes of Securities
and (iii) any other purpose specified in the
related Prospectus Supplement. After applying the
funds in the Collection Account as described
above, any funds remaining in the Collection
Account may be paid over to the Servicer, the
Depositor, any provider of Credit Enhancement
with respect to such Series (a "Credit Enhancer")
or any other person entitled thereto in the
manner and at the times established in the
related Prospectus Supplement.
Credit Enhancement........... If specified in the Prospectus Supplement relating
to a Series, the Depositor may obtain an
irrevocable letter of credit, surety bond,
securities insurance policy, pool or special
hazard insurance policy or other form of credit
support or will provide for overcollateralization
or one or more classes of subordinate securities
or reserve funds funded by an initial deposit
and/or application of all or a part of excess
cash flow for such Series (collectively, "Credit
Enhancement") in favor of the Trustee on behalf
of the Holders of such Series and any other
person specified in such Prospectus Supplement
from an institution acceptable to the rating
agency or agencies identified in the related
Prospectus Supplement as rating such Series of
Securities (collectively, the "Rating Agency")
for the purposes specified in such Prospectus
Supplement. Credit Enhancement will support the
payments on the Securities and may be used for
other purposes, to the extent and under the
conditions specified in such Prospectus
Supplement. See "CREDIT ENHANCEMENT".
Servicing.................... The Servicer will be responsible for servicing,
managing and making collections on the Mortgage
Loans for a Series. In addition, the Servicer, if
so specified in the related Prospectus
Supplement, will act as custodian and will be
responsible for maintaining custody of the
Mortgage Loans and related documentation on
behalf of the Trustee. Advances with respect to
delinquent payments of principal or interest on a
Mortgage Loan will be made by the Servicer only
to the extent described in the related Prospectus
Supplement. Such advances will be
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intended to provide liquidity only and, if
required with respect to a Series, will generally
be made only if the Servicer determines such
Advances to be recoverable. Unless otherwise
specified in the related Prospectus Supplement,
will be reimbursable to the Servicer from
scheduled payments of principal and interest,
late collections, or from the proceeds of
liquidation of the related Mortgage Loans or from
other recoveries relating to such Mortgage Loans
(including any insurance proceeds or payments
from other credit support). Under certain limited
circumstances, the Servicer may resign or be
removed, in which event either the Trustee or a
third-party servicer will be appointed as
successor servicer. The Servicer will receive a
periodic fee as servicing compensation (the
"Servicing Fee") and may, as specified herein and
in the related Prospectus Supplement, receive
certain additional compensation. See "SERVICING
OF LOANS--Servicing Compensation and Payment of
Expenses".
Federal Income
Tax Considerations
A. Debt Securities........ If so described in the related Prospectus
Supplement, a Series of Securities will include
one or more Classes of taxable debt obligations
under the Internal Revenue Code of 1986, as
amended (the "Code"). Stated interest with
respect to such Classes of Securities will be
reported by a Holder in accordance with the
Holder's method of accounting. Certain Classes of
Securities may, if specified in the related
Prospectus Supplement, be issued with original
issue discount that is not de minimis. In such
cases, the Holder will be required to include
original issue discount in gross income as it
accrues, which may be prior to the receipt of
cash attributable to such income. If a Security
is issued at a premium, the Holder may be
entitled to make an election to amortize such
premium on a constant yield method. See "CERTAIN
FEDERAL INCOME TAX CONSIDERATIONS."
B. Grantor Trust.......... If so specified in the Prospectus Supplement, the
Trust Fund will be treated as a grantor trust for
federal income tax purposes. A Certificateholder,
by its acceptance of a Certificate, will agree to
treat the related Trust as a grantor trust in
which such Certificateholder is a grantor for
federal income tax purposes.
C. Owner Trust
Securities............. If so specified in the Prospectus Supplement, the
Trust Fund will be treated as a partnership for
purposes of federal income tax. Each Noteholder,
by the acceptance of a Note of a given series,
will agree to treat such Note as indebtedness,
and each Certificateholder, by the acceptance of
a Certificate of a given series, will agree to
treat the related Trust as a partnership in which
such Certificateholder is a partner for federal
income tax purposes. In the event the Trust Fund
will be treated as a partnership, the
Certificates may not be transferred to non-U.S.
holders, and any such transfer shall be void.
Alternative characterizations of such Trust and
such Certificates are possible. See "CERTAIN
FEDERAL INCOME TAX CONSIDERATIONS."
ERISA Considerations......... A fiduciary of any employee benefit or other plan
subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or
Section 4975 of the Code should carefully review
with its own legal advisors whether the purchase
or holding of Securities could give rise to a
transaction prohibited or otherwise impermissible
under ERISA or the Code. See "ERISA
CONSIDERATIONS."
Legal Investment............. Unless otherwise specified in the related
Prospectus Supplement, Securities of each Series
offered by this Prospectus and the related
Prospectus Supplement will not constitute
"mortgage related securities"
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under the Secondary Mortgage Market Enhancement
Act of 1984 ("SMMEA"). Investors whose investment
authority is subject to legal restrictions should
consult their own legal advisors to determine
whether and to what extent the Securities
constitute legal investments for them. See "LEGAL
INVESTMENT."
Use of Proceeds.............. The Depositor will use the net proceeds from the
sale of each Series for one or more of the
following purposes: (i) to purchase the related
Mortgage Loans, (ii) to repay indebtedness which
has been incurred to obtain funds to acquire such
Mortgage Loans, (iii) to establish any Reserve
Funds described in the related Prospectus
Supplement and (iv) to pay costs of structuring
and issuing such Securities, including the costs
of obtaining Credit Enhancement, if any. If so
specified in the related Prospectus Supplement,
the purchase of the Mortgage Loans for a Series
may be effected by an exchange of Securities with
the Seller of such Mortgage Loans. See "USE OF
PROCEEDS."
Ratings...................... It will be a requirement for issuance of any
Series that the Securities offered by this
Prospectus and the related Prospectus Supplement
be rated by at least one Rating Agency in one of
its four highest applicable rating categories.
The rating or ratings applicable to Securities of
each Series offered hereby and by the related
Prospectus Supplement will be as set forth in the
related Prospectus Supplement. A securities
rating should be evaluated independently of
similar ratings on different types of securities.
A securities rating does not address the effect
that the rate of prepayments on Mortgage Loans
for a Series may have on the yield to investors
in the Securities of such Series. See "RISK
FACTORS-Rating of Securities."
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RISK FACTORS
Investors should consider, among other things, the following factors in
connection with the purchase of the Securities.
Securities
Limited Liquidity. There will be no market for the Securities of any
Series prior to the issuance thereof, and there can be no assurance that a
secondary market will develop or, if it does develop, that it will provide
Holders with liquidity of investment or will continue for the life of the
Securities of such Series. If so specified in the related Prospectus Supplement,
the underwriters for a Series specified in the related Prospectus Supplement,
may make a secondary market in the Securities, but have no obligation to do so.
None of the Securities will be listed on any securities exchange. Issuance of
any of the Securities in book-entry form may reduce the liquidity of such
Securities in the secondary trading market because investors may be unwilling to
purchase Securities for which they cannot obtain physical certificates. In
addition, because transactions in Securities of a Series in book-entry form may
be effected only through a depositary and its direct and indirect participants,
the ability of a Holder to pledge Securities to persons or entities that do not
participate in the depositary system may be limited.
Limited Obligations. The Securities of a Series will not represent an
interest in or an obligation of the Depositor, BANC ONE, any Seller, the
Servicer or any of their affiliates and will be payable solely from the assets
of the Trust Fund for such Securities. There will be no recourse to the
Depositor or any other person for any default on the Notes or any failure to
receive distributions on the Certificates. Consequently, Holders of Securities
of each Series must rely solely upon payments with respect to the Mortgage Loans
and the other assets constituting the Trust Fund for a Series of Securities,
including, if applicable, any amounts available pursuant to any Credit
Enhancement for such Series, for the payment of principal of and interest on the
Securities of such Series. The Depositor does not have, nor is it expected to
have, any significant assets.
Holders of Notes will be required under the Indenture to proceed only
against the Mortgage Loans and other assets constituting the related Trust Fund
in the case of a default with respect to such Notes and may not proceed against
any assets of the Depositor. If payments with respect to the Mortgage Loans and
such other assets securing a Series of Notes, including any Credit Enhancement,
were to become insufficient to make payments on such Notes, no other assets
would be available for payment of the deficiency.
The only obligations, if any, of the Depositor with respect to the
Securities of any Series will be to purchase, or substitute substantially
similar mortgage loans for, or cause the related Seller to purchase or
substitute, any Mortgage Loans as to which there is defective documentation or a
breach of certain representations and warranties. See "THE AGREEMENTS-Assignment
of Mortgage Loans". The Depositor does not have, and is not expected in the
future to have, any significant assets with which to meet any obligation to
repurchase Mortgage Loans with respect to which there has been a breach of any
representation or warranty.
Credit Enhancement. Although Credit Enhancement, if any, with respect to a
Series of Securities is intended to reduce the risk of delinquent payments or
losses to Holders of the Class or Classes of Securities entitled to the benefit
thereof, the amount of such Credit Enhancement will be limited, as set forth in
the related Prospectus Supplement, and will decline and could be depleted under
certain circumstances prior to the payment in full of the related Series of
Securities, and as a result Holders may suffer losses. See "CREDIT ENHANCEMENT."
Prepayment and Yield Considerations. The yield to maturity experienced by
a Holder of Securities may be affected by the rate of payment of principal of
the Mortgage Loans. The timing of principal payments of the Securities of a
Series will be affected by a number of factors, including the following: (i) the
extent of prepayments of the Mortgage Loans, which prepayments may be influenced
by a variety of factors, (ii) the manner of allocating principal payments among
the Classes of Securities of a Series as specified in the related Prospectus
Supplement and (iii) the exercise by the party entitled thereto of any right of
optional termination. See "DESCRIPTION OF THE SECURITIES- Weighted Average Life
of Securities; Prepayment and Yield Considerations." Prepayments may also result
from repurchases of loans due to material breaches of the Seller's or the
Depositor's warranties. The effective yield to Holders will also be affected by
the timing of interest accrual and payments and other factors specific to the
Mortgage Loans underlying a Series or the structural characteristics of the
Securities of a Series, all as more particularly described in the related
Prospectus Supplement.
The Depositor is not aware of any publicly available studies or statistics
on the rate of prepayment of mortgage loans such as the Mortgage Loans.
Generally, home equity loans and lines of credit are not viewed by
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mortgagors as permanent financing. Accordingly, the Mortgage Loans may
experience higher rates of prepayment than traditional mortgage loans. On the
other hand, it may be expected that a portion of the borrowers will not prepay
their Mortgage Loans to any significant degree.
Rating of the Securities. It will be a condition to the issuance of a
Series of Securities that they be rated in one of the four highest rating
categories by one or more Rating Agencies identified in the related Prospectus
Supplement. Any such rating would be based on, among other things, the adequacy
of the value of the Mortgage Loans and any Credit Enhancement with respect to
such Series. Such rating should not be deemed a recommendation to purchase, hold
or sell Securities, inasmuch as it does not address market price or suitability
for a particular investor. There is also no assurance that any such rating will
remain in effect for any given period of time or may not be lowered or withdrawn
entirely by the applicable Rating Agency if in its judgment circumstances in the
future so warrant. In addition to being lowered or withdrawn due to any erosion
in the adequacy of the value of the Mortgage Loans, such rating might also be
lowered or withdrawn, among other reasons, because of an adverse change in the
financial or other condition of an Enhancer or a change in the rating of such
Enhancer's long term debt.
Risks of the Mortgage Loans
Nature of Mortgage Loans and Mortgaged Properties. The Mortgage Loans are
expected to be secured by Mortgages which consist primarily of junior liens
subordinate to the rights of the mortgagee under the related senior mortgage or
mortgages. As a result, the proceeds from any liquidation, insurance or
condemnation proceedings will be available to satisfy the outstanding balance of
such Mortgage only to the extent that the claims of such senior mortgagees have
been satisfied in full, including any related foreclosure costs. In addition, a
junior mortgagee may not foreclose on the Mortgaged Property securing a junior
mortgage unless it forecloses subject to the senior mortgages, in which case it
must either pay the entire amount due on the senior mortgages to the senior
mortgagees at or prior to the foreclosure sale or undertake the obligation to
make payments on the senior mortgages in the event the mortgagor is in default
thereunder. The Trust Fund will not have any source of funds to satisfy the
senior mortgages or make payments due to the senior mortgagees.
There are several factors that could adversely affect the value of
Mortgaged Properties such that the outstanding balance of the related Mortgage
Loan, together with any senior financing on the Mortgaged Properties, would
equal or exceed the value of the Mortgaged Properties. Among such factors are an
overall decline in the residential real estate market in the areas in which the
Mortgaged Properties are located or a decline in the general condition of the
Mortgaged Properties as a result of failure of borrowers to maintain adequately
the Mortgaged Properties or of natural disasters that are not necessarily
covered by insurance, such as earthquakes and floods. Any such decline could
extinguish the value of a junior interest in a Mortgaged Property before having
any effect on the related senior interest therein. If such a decline occurs, the
actual rates of delinquencies, foreclosure and losses on the junior Mortgage
Loans could be higher than those currently experienced in the mortgage lending
industry in general.
Minimum monthly payments on the Mortgage Loans may be limited to accrued
interest. Although borrowers under certain of the Mortgage Loans may choose to
pay down all or a part of their outstanding principal balance prior to maturity,
such borrowers are under no obligation to do so and, if such balances have not
been substantially paid down prior to maturity, some borrowers may be unable to
pay the required final payment.
Environmental Risks. Real Mortgaged Property pledged as security to a
lender may be subject to certain environmental risks. Under the laws of certain
states, contamination of a Mortgaged Property may give rise to a lien on the
Mortgaged Property to assure the costs of clean-up. In several states, such a
lien has priority over the lien of an existing mortgage or owner's interest
against such Mortgaged Property. In addition, under the laws of some states and
under the federal Comprehensive Environmental Response, Compensation, and
Liability Act of 1980 ("CERCLA"), a lender may be liable, as an "owner" or
"operator," for costs of addressing releases or threatened releases of hazardous
substances that require remedy at a Mortgaged Property, if agents or employees
of the lender have become sufficiently involved in the operations of the
borrower, regardless of whether or not the environmental damage or threat was
caused by a prior owner. A lender also risks such liability on foreclosure of
the Mortgaged Property.
Certain Other Legal Considerations Regarding the Mortgage Loans.
Applicable state laws generally regulate interest rates and other charges and
require certain disclosures. In addition, other state laws, public policy and
general principles of equity relating to the protection of consumers, unfair and
deceptive practices and debt
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collection practices may apply to the origination, servicing and collection of
the Mortgage Loans. Depending on the provisions of the applicable law and the
specific facts and circumstances involved, violations of these laws, policies
and principles may limit the ability of the Servicer to collect all or part of
the principal of or interest on the Mortgage Loans, may entitle the borrower to
a refund of amounts previously paid and, in addition, could subject the owner of
the Mortgage Loan to damages and administrative enforcement.
The Mortgage Loans are also subject to Federal laws, including:
(i) the Federal Truth in Lending Act and Regulation Z promulgated
thereunder, which require certain disclosures to the borrowers regarding
the terms of the Mortgage Loans;
(ii) the Equal Credit Opportunity Act and Regulation B promulgated
thereunder, which prohibit discrimination on the basis of age, race,
color, sex, religion, marital status, national origin, receipt of public
assistance or the exercise of any right under the Consumer Credit
Protection Act, in the extension of credit; and
(iii) the Americans with Disabilities Act, which, among other
things, prohibits discrimination on the basis of disability in the full
and equal enjoyment of the goods, services, facilities, privileges,
advantages or accommodations of any place of public accommodation;
(iv) the Fair Credit Reporting Act, which regulates the use and
reporting of information related to the borrower's credit experience.
Violations of certain provisions of these Federal laws may limit the
ability of the Servicer to collect all or part of the principal of or interest
on the Mortgage Loans and in addition could subject the Trust Fund to damages
and administrative enforcement. The Mortgage Loans may be subject to the Home
Ownership and Equity Protection Act of 1994 (the "Act") which amended the Truth
in Lending Act as it applies to mortgages subject to the Act. The Act requires
certain additional disclosures, specifies the timing of such disclosures and
limits or prohibits inclusion of certain provisions in mortgages subject to the
Act. The Act also provides that any purchaser or assignee of a mortgage covered
by the Act is subject to all of the claims and defenses which the borrower could
assert against the original lender. The maximum damages that may be recovered
under the Act from an assignee is the remaining amount of indebtedness plus the
total amount paid by the borrower in connection with the Mortgage Loan. If the
Trust Fund includes Mortgage Loans subject to the Act, it will be subject to all
of the claims and defenses which the borrower could assert against the Seller.
Any violation of the Act which would result in such liability would be a breach
of the Seller's representations and warranties, and the Seller would be
obligated to cure, repurchase or, if permitted by the Agreement, substitute for
the Mortgage Loan in question. In addition, numerous other federal and state
statutory provisions, including the federal bankruptcy laws, the Soldiers' and
Sailors' civil Relief Act of 1940 and state debtor relief laws, also may
adversely affect the Servicer's ability to collect the principal of or interest
on the Mortgage Loans and also would affect the interests of the Holders in such
Mortgage Loans if such laws result in the Mortgage Loans being uncollectible.
See "CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS".
Transfer of Mortgage Loans. If so specified in the related Prospectus
Supplement, the Servicer may be entitled to maintain possession of the
documentation relating to each Mortgage Loan, including the Credit Line
Agreements and related documents or other evidence of indebtedness signed by the
borrower, and assignments of the related mortgage to the Trust Fund may not be
required to be recorded, in each case until the occurrence of the events
(generally related to the rating assigned to unsecured debt of the Servicer)
specified in the related Prospectus Supplement. Failure to deliver such
documents to the related Trustee (or a third-party custodian on behalf of the
Trustee) will have the result in most, if not all, states, and failure to record
the assignments of the related mortgages to the related Trustee will have the
result in certain states in which the Mortgaged Properties are located, of
making the sale of the Principal Balances as of the Cut-off Date, Additional
Balances and related documents potentially ineffective against certain creditors
of the related Seller or the purchaser of a Mortgage Loan who had no notice of
the prior conveyance to the Trust Fund if such purchaser perfects his interest
by taking possession of the evidence of indebtedness.
Each Seller will be required to represent in the related Purchase
Agreement that the transfer by it of all of its right, title and interest in the
Mortgage Loans underlying a Series of Securities is either a valid transfer and
assignment of such Mortgage Loans or the grant to the Trust Fund of a security
interest in the Mortgage Loans. If the transfer of the related Mortgage Loans to
the Trust Fund is deemed to create a security interest under the applicable
Uniform Commercial Code ("UCC"), tax or other governmental liens on the
Mortgaged Property of the Seller arising before any Mortgage Loan comes into
existence may have priority over the Trust's interest in such
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Mortgage Loan. In addition, if the FDIC were appointed receiver of a Seller, the
receiver's administrative expenses might also have priority over the Trust
Fund's interest in the Mortgage Loans, but under the Federal Deposit Insurance
Act, to the extent such Seller grants a security interest in the related
Mortgage Loans to the Trust Fund, such security interest is perfected prior to
the insolvency of such Seller and such security interest was not taken in
contemplation of insolvency or with the intent to hinder, delay or defraud
creditors, such security interest should not be subject to avoidance by the
FDIC, as conservator or receiver. The insolvency of a Seller may also have other
potential consequences described in the related Prospectus Supplement,
including, for example, an early termination of the related Trust Fund.
Geographic Concentration and Local Real Estate Markets. The Prospectus
Supplement related to a Series of Securities will contain information with
respect to the geographic concentration of Mortgaged Properties securing the
related Mortgage Loans. Any concentration of the Mortgage Loans relating to any
Series of Securities in a particular region may present risk considerations in
addition to those generally present for similar securities without such
concentration. Certain geographic regions of the United States from time to time
will experience weaker regional economic conditions and housing markets and
consequently will experience higher rates of loss and delinquency on mortgage
loans generally. Declines in values of the Mortgaged Properties in any region
may particularly affect the position of a junior mortgagee, and could extinguish
the interest of the holder of such junior lien.
In many cases, home equity revolving credit line borrowers have primary
residences with above average values, and those properties may experience
greater relative declines in value than other properties with lower values. A
rise in interest rates over a period of time and the general condition of the
Mortgaged Property as well as other factors may have the effect of reducing the
value of the Mortgaged Property from the appraised value at the time the
Mortgage Loan was originated. Such reduction may reduce the likelihood of
liquidation or other proceeds being sufficient to satisfy the related Mortgage
Loan after satisfaction of any senior liens. In addition, if the borrower has an
adjustable rate first mortgage loan, any increase in the interest rate thereon
may adversely affect the borrower's ability to make payments on the related
Mortgage Loan.
Servicer's Ability to Change the Terms of the Mortgage Loans. If and under
the terms specified in the related Prospectus Supplement, the Servicer may have
the ability to agree to changes in the terms of a Credit Line Agreement or other
document evidencing the Mortgage Loan indebtedness. No assurance can be given
that changes in applicable law or the market for home equity loans or prudent
business practice will not result in changes in the terms of the Mortgage Loans
after transfer to the related Trust Fund.
Other Considerations. There is no assurance that the market value of the
Mortgage Loans or any other assets for a Series will at any time be equal to or
greater than the aggregate principal amount of the Securities of such Series
then outstanding, plus accrued interest thereon. Moreover, upon an event of
default under the Indenture for a Series of Notes and a sale of the assets in
the Trust Fund or upon a sale of the assets of a Trust Fund for a Series of
Certificates, the Trustee, the Servicer, any Enhancer and any other service
provider specified in the related Prospectus Supplement generally will be
entitled to receive the proceeds of any such sale to the extent of unpaid fees
and other amounts owing to such persons under the related Agreement prior to
distributions to holders of Securities. Upon any such sale, the proceeds thereof
may be insufficient to pay in full the principal of and interest on the
Securities of such Series.
Liquidation expenses with respect to defaulted loans do not vary directly
with the outstanding principal balance of the loan at the time of default.
Therefore, assuming that a servicer took the same steps in realizing upon a
defaulted loan having a small remaining principal balance as it would in the
case of a defaulted loan having a larger principal balance, the amount realized
after expenses of liquidation would be smaller as a percentage of the
outstanding principal balance of the smaller loan than would be the case with a
larger loan. Because the average outstanding principal balances of the Mortgage
Loans are small relative to the size of the loans in a typical pool of first
mortgages, realizations net of liquidation expenses on defaulted Mortgage Loans
may also be smaller as a percentage of the principal amount of the Mortgage
Loans than would such net realizations in the case of a typical pool of first
mortgage loans.
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Further, foreclosure and similar actions are subject to delays and may
take several years to complete, resulting in delays in the receipt of proceeds
available for distribution to Holders of the related Securities. Such delays may
depend upon, among other things, the required procedures for foreclosure in the
jurisdiction in which the related Mortgaged Property is located, the
availability of defenses to such action, the timing of the foreclosure action
and other factors. See "CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS--Foreclosure
on Mortgages".
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DESCRIPTION OF THE SECURITIES
General
Each Series of Notes will be issued pursuant to an indenture (the
"Indenture") between the related Trust Fund and the entity named in the related
Prospectus Supplement as trustee (the "Trustee") with respect to such Series. A
form of Indenture has been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part. The Certificates will also be issued in
Series pursuant to separate agreements (each, a "Pooling and Servicing
Agreement" or a "Trust Agreement") among the Depositor, the Servicer and the
Trustee. A form of Pooling and Servicing Agreement has been filed as an exhibit
to the Registration Statement of which this Prospectus forms a part. A Series
may consist of Notes, Certificates or both.
The applicable Seller or Sellers may agree to reimburse the Depositor for
certain fees and expenses of the Depositor incurred in connection with the
offering of the Securities.
The following summaries describe certain provisions in the Agreements
common to each Series of Securities. The summaries do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, the
provisions of the Agreements and the Prospectus Supplement relating to each
Series of Securities. Where particular provisions or terms used in the
Agreements are referred to, the actual provisions (including definitions of
terms) are incorporated herein by reference as part of such summaries.
Each Series of Securities will consist of one or more Classes of
Securities, one or more of which may be Subordinate Securities. The Securities
of each Series will be issued only in fully registered form, without coupons, in
the authorized denominations for each Class specified in the related Prospectus
Supplement. Upon satisfaction of the conditions, if any, applicable to a Class
of a Series, as described in the related Prospectus Supplement, the transfer of
the Securities may be registered and the Securities may be exchanged at the
office of the Trustee specified in the Prospectus Supplement without the payment
of any service charge other than any tax or governmental charge payable in
connection with such registration of transfer or exchange. If specified in the
related Prospectus Supplement, one or more Classes of a Series may be available
in book-entry form only.
Unless otherwise provided in the related Prospectus Supplement, payments
of principal of and interest on a Series of Securities will be made on the
Distribution Dates specified in the Prospectus Supplement relating to such
Series by check mailed to Holders of such Series, registered as such at the
close of business on the record date specified in the related Prospectus
Supplement applicable to such Distribution Dates at their addresses appearing on
the security register, except that (a) payments may be made by wire transfer (at
the expense of the Holder requesting payment by wire transfer) in certain
circumstances described in the related Prospectus Supplement and (b) final
payments of principal in retirement of each Security will be made only upon
presentation and surrender of such Security at the office of the Trustee
specified in the Prospectus Supplement. Notice of the final payment on a
Security will be mailed to the Holder of such Security before the Distribution
Date on which the final principal payment on any Security is expected to be made
to the Holder of such Security.
Payments of principal of and interest on the Securities will be made by
the Trustee, or a paying agent on behalf of the Trustee, as specified in the
related Prospectus Supplement. Unless otherwise provided in the related
Prospectus Supplement, all payments with respect to the Mortgage Loans for a
Series, together with reinvestment income thereon, amounts withdrawn from any
Reserve Fund, and amounts available pursuant to any other Credit Enhancement
will be deposited directly into the Collection Account and, net, if and as
provided in the related Prospectus Supplement, of certain amounts payable to the
related Servicer and any other person specified in the Prospectus Supplement
will thereafter be deposited into the Distribution Account and will be available
to make payments on Securities of such Series on the next Distribution Date, as
the case may be. See "THE TRUST FUNDS-Collection and Distribution Accounts."
Valuation of the Mortgage Loans
If specified in the related Prospectus Supplement for a Series of Notes,
each Mortgage Loan included in the related Trust Fund for a Series may be
assigned an initial "Asset Value." Unless otherwise specified in the related
Prospectus Supplement, at any time the Asset Value of the Mortgage Loans will be
equal to the product of the Asset Value Percentage as set forth in the Indenture
and the lesser of (a) the stream of remaining regularly scheduled payments on
the Mortgage Loans, net, unless otherwise provided in the related Prospectus
Supplement, of certain
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amounts payable as expenses, together with income earned on each such scheduled
payment received through the day preceding the next Distribution Date at the
Assumed Reinvestment Rate, if any, discounted to present value at the highest
interest rate on the Notes of such Series over periods equal to the interval
between payments on the Notes, and (b) the then principal balance of the
Mortgage Loans. Unless otherwise specified in the related Prospectus Supplement,
the initial Asset Value of the Mortgage Loans will be at least equal to the
principal amount of the Notes of the related Series at the date of issuance
thereof.
The "Assumed Reinvestment Rate", if any, for a Series will be the highest
rate permitted by the Rating Agency or a rate insured by means of a surety bond,
guaranteed investment contract, Deposit Agreement or other arrangement
satisfactory to the Rating Agency. If the Assumed Reinvestment Rate is so
insured, the related Prospectus Supplement will set forth the terms of such
arrangement.
The Transferor Interest
If so specified in the related Prospectus Supplement, interests in a Trust
Fund not represented by the related Series of Certificates may be represented by
the Transferor Interest, which initially will be retained by the related Sellers
or one or more affiliates thereof and which will not be offered hereby. If so
specified in the related Prospectus Supplement, the principal amount of the
Transferor Interest will fluctuate as draws are made with respect to the
Mortgage Loans and as Principal Collections are received. The related Prospectus
Supplement may specify a minimum interest (the "Minimum Transferor Interest")
required to be maintained with respect to a Trust Fund.
If so specified in the related Prospectus Supplement, the holder of the
Transferor Interest may have the right to remove Mortgage Loans from the related
Trust Fund, under the circumstances described therein.
Allocations; Application of Collections
The related Prospectus Supplement will describe the allocation or means of
allocation of collections on the Mortgage Loans available to pay interest on and
principal of a Series of Securities. In general, except as otherwise described
in the related Prospectus Supplement, collections will generally be allocated in
accordance with the related Credit Line Agreements or other Loan Documents
between amounts collected in respect of interest ("Interest Collections") and
amounts collected with respect to principal ("Principal Collections" and, with
Interest Collections, "Collections"). With respect to a Series of Securities in
which a Transferor Interest represents the interests in the related Trust Fund
not represented by such Series of Securities, Collections will be allocated
between the Transferor Interest and the Classes of such Series of Securities as
specified in the related Prospectus Supplement. The related Prospectus
Supplement will also describe the allocation or means of allocation of losses,
if any, on the related Mortgage Loans, among the Classes of Securities and, if
applicable, the Transferor Interest. Unless otherwise specified in the related
Prospectus Supplement, the Transferor Interest in a Trust Fund will not be
subordinated to the related Series of Securities.
Interest Collections and Principal Collections on Mortgage Loans
underlying a Series of Securities will each be applied in the manner and
priority described in the related Prospectus Supplement. Certain fees and
expenses of the Trust Fund or the Servicer may be payable prior to payments due
on one or more Classes of a Series of Securities, as specified in the related
Prospectus Supplement.
Payments of Interest
The Securities of each Class by their terms entitled to receive interest
will bear interest (generally calculated as specified in the related Prospectus
Supplement on the basis of a 360-day year of twelve 30-day months or a 360-day
year and actual days elapsed) from the date and at the rate per annum specified,
or calculated in the method described, in the related Prospectus Supplement.
Interest on such Securities of a Series will be payable on the Distribution Date
specified in the related Prospectus Supplement. The rate of interest on
Securities of a Series may be fixed or may be variable or may change with
changes in the annual percentage rates of the Mortgage Loans included in the
related Trust Fund and/or as prepayments occur with respect to such Mortgage
Loans. A Class of Securities may be entitled to receive interest distributions
only, may not be entitled to receive any interest distributions or may be
entitled to receive only nominal interest distributions, as specified in the
related Prospectus Supplement. A Series of Securities may provide for a period
during which no or a specified amount of principal is payable except upon the
occurrence of certain events, as specified in the related Prospectus Supplement.
Interest payable on the Securities on a Distribution Date will include all
interest accrued during the period specified in the related Prospectus
Supplement. In the event interest accrues during the calendar month preceding a
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Distribution Date, the effective yield to Holders will be reduced from the yield
that would otherwise be obtainable if interest payable on the Securities were to
accrue through the day immediately preceding such Distribution Date.
Payments of Principal
On each Distribution Date for a Series, principal payments will be made to
the Holders of the Securities of such Series on which principal is then payable,
to the extent set forth in the related Prospectus Supplement. Such payments will
be made in an aggregate amount determined as specified in the related Prospectus
Supplement and will be allocated among the respective Classes of a Series in the
manner, at the times and in the priority (which may, in certain cases, include
allocation by random lot) set forth in the related Prospectus Supplement.
Final Scheduled Distribution Date
The Final Scheduled Distribution Date with respect to each Class of Notes
of a Series is the date no later than which principal thereof will be fully paid
and, with respect to each Class of a Series of Certificates, will be the date on
which the entire aggregate principal balance of such Class is expected to be
reduced to zero, in each case calculated on the- basis of the assumptions
applicable to such Series described in the related Prospectus Supplement. The
Final Scheduled Distribution Date for each Class of a Series will be specified
in the related Prospectus Supplement. Since payments on the Mortgage Loans will
be used to make distributions in reduction of the outstanding principal amount
of the Securities, it is likely that the actual final Distribution Date of any
such Class will occur earlier, and may occur substantially earlier, than its
Final Scheduled Distribution Date. Furthermore, with respect to a Series of
Certificates, unless otherwise specified in the related Prospectus Supplement,
as a result of delinquencies, defaults and liquidations of the Mortgage Loans in
the Trust Fund, the actual final Distribution Date of any Certificate may occur
later than its Final Scheduled Distribution Date. No assurance can be given as
to the actual prepayment experience with respect to a Series. See "--Weighted
Average Life of the Securities; Maturity and Prepayment Considerations".
Special Redemption
If so specified in the Prospectus Supplement relating to a Series of
Securities having other than monthly Distribution Dates, one or more Classes of
Securities of such Series may be subject to special redemption, in whole or in
part, on the day specified in the related Prospectus Supplement (a "Special
Redemption Date") if, as a consequence of prepayments on the Mortgage Loans
relating to such Securities or low yields then available for reinvestment, the
entity specified in the related Prospectus Supplement determines, based on
assumptions specified in the applicable Agreement, that the amount available for
the payment of interest that will have accrued on such Securities (the
"Available Interest Amount") through the designated interest accrual date
specified in the related Prospectus Supplement is less than the amount of
interest that will have accrued on such Securities to such date. In such event
and as further described in the related Prospectus Supplement, the Trustee will
redeem a principal amount of outstanding Securities of such Series as will cause
the Available Interest Amount to equal the amount of interest that will have
accrued through such designated interest accrual date for such Series of
Securities outstanding immediately after such redemption.
Optional Redemption, Purchase or Termination
The Depositor or the Servicer may, at its option, redeem, in whole or in
part, one or more Classes of Notes or purchase one or more Classes of
Certificates of any Series, on any Distribution Date under the circumstances, if
any, specified in the Prospectus Supplement relating to such Series.
Alternatively, if so specified in the related Prospectus Supplement for a Series
of Certificates, the Depositor, the Servicer, or another entity designated in
the related Prospectus Supplement may, at its option, cause an early termination
of a Trust Fund by repurchasing all of the Mortgage Loans from such Trust Fund
on or after a date specified in the related Prospectus Supplement, or on or
after such time as the aggregate outstanding principal amount of the
Certificates or Mortgage Loans, as specified in the related Prospectus
Supplement, is less than the amount or percentage specified in the related
Prospectus Supplement. Notice of such redemption, purchase or termination must
be given by the Depositor or the Trustee prior to the related date. The
redemption, purchase or repurchase price will be set forth in the related
Prospectus Supplement.
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In addition, the Prospectus Supplement may provide other circumstances
under which Holders of Securities of a Series could be fully paid significantly
earlier than would otherwise be the case if payments or distributions were
solely based on the activity of the related Mortgage Loans.
Weighted Average Life of the Securities; Maturity and Prepayment Considerations
Weighted average life refers to the average amount of time that will
elapse from the date of issue of a security until each dollar of principal of
such security will be repaid to the investor. Unless otherwise specified in the
related Prospectus Supplement, the weighted average life of the Securities of a
Class will be influenced by the rate at which the amount financed under the
Mortgage Loans included in the Trust Fund for a Series is paid, which may be in
the form of scheduled amortization or prepayments.
Prepayments on loans and other receivables can be measured relative to a
prepayment standard or model. The Prospectus Supplement for a Series of
Securities will describe the prepayment standard or model, if any, used therein
and may contain tables setting forth the projected weighted average life of each
Class of Securities of such Series and the percentage of the original principal
amount of each Class of Securities of such Series that would be outstanding on
specified Distribution Dates for such Series based on the assumptions stated in
such Prospectus Supplement, including assumptions that prepayments on the
Mortgage Loans included in the related Trust Fund are made at rates
corresponding to various percentages of the prepayment standard or model
specified in such Prospectus Supplement.
There is, however, no assurance that prepayment of the Mortgage Loans
included in the related Trust Fund will conform to any level of any prepayment
standard or model specified in the related Prospectus Supplement. The rate of
principal prepayments on pools of loans is influenced by a variety of economic,
demographic, geographic, legal, tax, social and other factors.
The rate of prepayments of conventional housing loans and other
receivables has fluctuated significantly in recent years. In general, however,
if prevailing interest rates fall significantly below the interest rates on the
Mortgage Loans for a Series, such loans are likely to prepay at rates higher
than if prevailing interest rates remain at or above the interest rates home by
such loans. In this regard, it should be noted that the Mortgage Loans for a
Series may have different interest rates. In addition, the weighted average life
of the Securities may be affected by the varying maturities of the Mortgage
Loans. If any Mortgage Loans for a Series have actual terms-to-stated maturity
of less than those assumed in calculating the Final Scheduled Distribution Date
of the related Securities, one or more Classes of the Series may be fully paid
prior to their respective Final Scheduled Distribution Dates, even in the
absence of prepayments and a reinvestment return higher than the Assumed
Reinvestment Rate.
The related Prospectus Supplement may describe additional prepayment and
yield considerations with respect to the characteristics of the Mortgage Loans
included in the related Trust Fund and the Classes of Securities of the related
Series offered thereby.
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THE TRUST FUNDS
General
The Notes of each Series will be secured by the pledge of the assets of
the related Trust Fund, and the Certificates of each Series will represent
interests in the assets of the related Trust Fund. The Trust Fund of each Series
will include assets purchased from the Seller composed of (i) the Mortgage
Loans, (ii) amounts available from the reinvestment of payments on such Mortgage
Loans at the Assumed Reinvestment Rate, if any, specified in the related
Prospectus Supplement, (iii) any Credit Enhancement, (iv) any Mortgaged Property
that secured a Mortgage Loan but which is acquired by foreclosure or deed in
lieu of foreclosure or repossession and (v) the amount, if any, initially
deposited in the Collection Account or Distribution Account for a Series as
specified in the related Prospectus Supplement.
The Securities will be non-recourse obligations of the related Trust Fund.
The assets of the Trust Fund specified in the related Prospectus Supplement for
a Series of Securities, unless otherwise specified in the related Prospectus
Supplement, will serve as collateral only for that Series of Securities. Holders
of a Series of Notes may only proceed against such collateral securing such
Series of Notes in the case of a default with respect to such Series of Notes
and may not proceed against any assets of the Depositor or the related Trust
Fund not pledged to secure such Notes.
The Mortgage Loans for a Series will be sold to the Depositor by one or
more bank or non-bank direct or indirect subsidiaries of BANC ONE CORPORATION
("BANC ONE") specified in the related Prospectus Supplement (each, a "Seller"
and collectively, the "Sellers") and will be transferred by the Depositor to the
Trust Fund. The Mortgage Loans will be originated by the related Seller or
purchased by such Seller in the open market or in privately negotiated
transactions. Mortgage Loans relating to a Series will be serviced by Bank One,
N.A. or other servicer, which may be the related Seller, specified in the
related Prospectus Supplement (the "Servicer"), pursuant to a Pooling and
Servicing Agreement, with respect to a Series of Certificates or a servicing
agreement (each, a "Servicing Agreement") between the Trust Fund and Servicer,
with respect to a Series of Notes.
As used herein, "Agreement" means, with respect to a Series of
Certificates, the Pooling and Servicing Agreement or Trust Agreement, and with
respect to a Series of Notes, the Indenture and the Servicing Agreement, as the
context requires.
If so specified in the related Prospectus Supplement, a Trust Fund
relating to a Series of Securities may be a business trust formed under the laws
of the state specified in the related Prospectus Supplement pursuant to a trust
agreement (each, a "Trust Agreement") between the Depositor and the trustee of
such Trust Fund specified in the related Prospectus Supplement.
With respect to each Trust Fund, prior to the initial offering of the
related Series of Securities, the Trust Fund will have no assets or liabilities.
No Trust Fund is expected to engage in any activities other than acquiring,
managing and holding the related Mortgage Loans and other assets contemplated
herein and in the related Prospectus Supplement and the proceeds thereof,
issuing Securities and making payments and distributions thereon and certain
related activities. No Trust Fund is expected to have any source of capital
other than its assets and any related Credit Enhancement.
The Mortgage Loans
The Mortgage Loans for a Series will consist of revolving home equity
loans and lines of credit (the "Mortgage Loans") secured by mortgages primarily
on single family properties (the "Mortgaged Properties") which may be
subordinated to other mortgages on the same Mortgaged Property. The Mortgage
Loans may have fixed interest rates or adjustable interest rates and may provide
for other payment characteristics, as described below and in the related
Prospectus Supplement.
As more fully described in the related Prospectus Supplement, interest on
each Mortgage Loan, excluding introductory rates offered from time to time
during promotional periods, may be computed and payable monthly on the average
daily outstanding principal balance of such loan. Principal amounts on the
Mortgage Loans may be drawn down (up to a maximum amount as set forth in the
related Prospectus Supplement) or repaid under each Mortgage Loan from time to
time. If so specified in the related Prospectus Supplement, new draws by
borrowers under the Mortgage Loans will automatically become part of the Trust
Fund for a Series. As a result, the aggregate
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balance of the Mortgage Loans will fluctuate from day to day as new draws by
borrowers are added to the Trust Fund and principal payments are applied to such
balances and such amounts will usually differ each day, as more specifically
described in the related Prospectus Supplement. Under certain circumstances, a
borrower may choose an interest only payment option and is obligated to pay only
the amount of interest which accrues on the loan during the billing cycle. An
interest only payment option may be available for a specified period before the
borrower must begin paying at least the minimum monthly payment of a specified
percentage of the average outstanding balance of the loan or, if so specified in
the related Prospectus Supplement, such interest only period may be extended for
one or more additional periods.
The Mortgaged Properties will include primarily one- to four-family
residential housing, including Condominium Units and Cooperative Dwellings and
may consist of detached individual dwellings, individual condominiums,
townhouses, duplexes, row houses, individual units in planned unit developments
and other attached dwelling units. Each Mortgaged Property will be located on
land owned in fee simple by the borrower or on land leased by the borrower for a
term at least ten years (unless otherwise provided in the related Prospectus
Supplement) longer than the term of the related Mortgage Loan. Attached
dwellings may include owner-occupied structures where each borrower owns the
land upon which the unit is built, with the remaining adjacent land owned in
common or dwelling units subject to a proprietary lease or occupancy agreement
in a cooperatively owned apartment building.
Unless otherwise specified in the related Prospectus Supplement, Mortgages
on Cooperative Dwellings consist of a lien on the shares issued by such
Cooperative Dwelling and the proprietary lease or occupancy agreement relating
to such Cooperative Dwelling.
The aggregate principal balance of Mortgage Loans secured by Mortgaged
Properties that are owner-occupied will be disclosed in the related Prospectus
Supplement. Unless otherwise specified in the Prospectus Supplement, the sole
basis for a representation that a given percentage of the Mortgage Loans are
secured by Mortgaged Property that is owner-occupied will be either (i) the
making of a representation by the Mortgagor at origination of the Mortgage Loan
either that the underlying Mortgaged Property will be used by the Mortgagor for
a period of at least six months every year or that the Mortgagor intends to use
the Mortgaged Property as a primary residence, or (ii) a finding that the
address of the underlying Mortgaged Property is the Mortgagor's mailing address
as reflected in the Servicer's records. To the extent specified in the related
Prospectus Supplement, the Mortgaged Properties may include non-owner occupied
investment properties and vacation and second homes.
Unless otherwise specified in the related Prospectus Supplement, the
initial Combined Loan-to-Value Ratio of a Mortgage Loan is computed in the
manner described in the related Prospectus Supplement, taking into account the
amounts of any related senior mortgage loans.
Additional Information. The selection criteria which shall apply with
respect to the Mortgage Loans for a Series, including, but not limited to, the
Combined Loan-to-Value Ratios or Loan-to-Value Ratios, as applicable, original
terms to maturity and delinquency information, will be specified in the related
Prospectus Supplement.
The Mortgage Loans for a Series may include Mortgage Loans that do not
amortize their entire principal balance by their stated maturity in accordance
with their terms and require a balloon payment of the remaining principal
balance at maturity, as specified in the related Prospectus Supplement. As
further described in the related Prospectus Supplement, the Mortgage Loans for a
Series may include Mortgage Loans that do not have a specified stated maturity.
The related Prospectus Supplement for each Series will provide information
with respect to the Mortgage Loans as of the Cut-off Date, including, among
other things, (a) the aggregate unpaid principal balance of the Mortgage Loans;
(b) the range and weighted average Loan Rate on the Mortgage Loans and, in the
case of adjustable rate Mortgage Loans, the range and weighted average of the
current Loan Rates and the Lifetime Rate Caps, if any; (c) the range and average
outstanding principal balance of the Mortgage Loans; (d) the weighted average
original and remaining term-to-stated maturity of the Mortgage Loans and the
range of original and remaining terms-to-stated maturity, if applicable; (e) the
range and weighted average of Combined Loan-to-Value Ratios or Loan-to-Value
Ratios for the Mortgage Loans, as applicable; (f) the percentage (by outstanding
principal balance as of the Cut-off Date) of Mortgage Loans that accrue interest
at adjustable or fixed interest rates; (g) any special hazard insurance policy
or bankruptcy bond or other enhancement relating to the Mortgage Loans; (h) the
geographic distribution of the Mortgaged Properties securing the Mortgage Loans;
(i) the lien priority of the Mortgage Loans; (j) the credit limit utilization
rate of the Mortgage Loans; and (k) the delinquency status and year
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of origination of the Mortgage Loans. The related Prospectus Supplement will
also specify any other limitations on the types or characteristics of Mortgage
Loans for a Series.
If information of the nature described above respecting the Mortgage Loans
is not known to the Depositor at the time the Securities are initially offered,
approximate or more general information of the nature described above will be
provided in the Prospectus Supplement and additional information will be set
forth in a Current Report on Form 8-K to be available to investors on the date
of issuance of the related Series and to be filed with the Commission within 15
days after the initial issuance of such Securities.
Collection and Distribution Accounts
A separate Collection Account will be established by the Trustee or the
Servicer, in the name of the Trustee, for each Series of Securities for receipt
of the amount of cash, if any, specified in the related Prospectus Supplement to
be initially deposited therein by the Depositor, all amounts received on or with
respect to the Mortgage Loans and, unless otherwise specified in the related
Prospectus Supplement, income earned thereon. Certain amounts on deposit in such
Collection Account and certain amounts available pursuant to any Credit
Enhancement, as provided in the related Prospectus Supplement, will be deposited
in a related Distribution Account, which will also be established by the Trustee
for each such Series of Securities, for distribution to the related Holders.
Unless otherwise specified in the related Prospectus Supplement, the Trustee
will invest the funds in the Collection and Distribution Accounts in Eligible
Investments maturing, with certain exceptions, not later, in the case of funds
in the Collection Account, than the day preceding the date such funds are due to
be deposited in the Distribution Account or otherwise distributed and, in the
case of funds in the Distribution Account, than the day preceding the next
Distribution Date for the related Series of Securities. Eligible Investments
include, among other investments, obligations of the United States and certain
agencies thereof, federal funds, certificates of deposit, commercial paper,
demand and time deposits and banker's acceptances, certain repurchase agreements
of United States government securities and certain guaranteed investment
contracts, in each case, acceptable to the Rating Agency.
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CREDIT ENHANCEMENT
If stated in the Prospectus Supplement relating to a Series of Securities,
simultaneously with the assignment by the Depositor of the Mortgage Loans to the
Trustee, the Depositor will obtain an irrevocable letter of credit, surety bond
or insurance policy, issue Subordinate Securities or obtain any other form of
enhancement or combination thereof (collectively, "Credit Enhancement") in favor
of the Trustee on behalf of the holders of the related Series or designated
Classes of such Series from an institution or by other means acceptable to the
Rating Agency. The Credit Enhancement will support the payment of principal and
interest on the Securities, and may be applied for certain other purposes to the
extent and under the conditions set forth in such Prospectus Supplement. Credit
Enhancement for a Series may include one or more of the following forms, or such
other form as may be specified in the related Prospectus Supplement. If so
specified in the related Prospectus Supplement, any of such Credit Enhancement
may be structured so as to protect against losses relating to more than one
Trust Fund, in the manner described therein.
Subordinate Securities
If specified in the related Prospectus Supplement, Credit Enhancement for
a Series may consist of one or more Classes of Subordinate Securities. The
rights of Holders of such Subordinate Securities to receive distributions on any
Distribution Date will be subordinate in right and priority to the rights of
Holders of Senior Securities of the Series, but only to the extent described in
the related Prospectus Supplement.
Financial Guaranty Insurance Policy
If so specified in the related Prospectus Supplement, a financial guaranty
insurance policy or surety bond (a "Securities Insurance Policy") may be
obtained and maintained for a Class or Series of Securities. The issuer of the
Securities Insurance Policy (the "Insurer") will be described in the related
Prospectus Supplement and a copy of the form of Securities Insurance Policy will
be filed with the related Current Report on Form 8-K.
Unless otherwise specified in the related Prospectus Supplement, a
Securities Insurance Policy will be unconditional and irrevocable and will
guarantee to Holders of the applicable Securities that an amount equal to the
full amount of distributions due to such Holders will be received by the Trustee
or its agent on behalf of such Holders for distribution on each Payment Date.
The specific terms of any Securities Insurance Policy will be set forth in
the related Prospectus Supplement. A Securities Insurance Policy may have
limitations and generally will not insure the obligation of the Depositors or
any Originator to purchase or substitute for a defective Mortgage Loan and will
not guarantee any specific rate of principal prepayments.
Unless otherwise specified in the related Prospectus Supplement, the
Insurer will be subrogated to the rights of each Holder to the extent the
Insurer makes payments under the Securities Insurance Policy.
Insurance
If stated in the related Prospectus Supplement, Credit Enhancement for a
Series may consist of special hazard insurance policies, bankruptcy bonds and
other types of insurance relating to the Mortgage Loans, as described below and
in the related Prospectus Supplement.
Pool Insurance Policy. If so specified in the Prospectus Supplement
relating to a Series of Securities, the Depositor will obtain a pool insurance
policy for the Mortgage Loans in the related Trust Fund. The pool insurance
policy will cover any loss (subject to the limitations described in a related
Prospectus Supplement) by reason of default, but will not cover the portion of
the principal balance of any Mortgage Loan that is required to be covered by any
primary mortgage insurance policy. The amount and terms of any such coverage
will be set forth in the related Prospectus Supplement.
Special Hazard Insurance Policy. If so specified in the Prospectus
Supplement relating to a Series of Securities, the Depositor will obtain a
special hazard insurance policy for the Mortgage Loans in the related Trust
Fund. Although the terms of such policies vary to some degree, a special hazard
insurance policy typically provides that, where there has been damage to the
Mortgaged Property securing a defaulted or foreclosed Mortgage Loan (title to
which has been acquired by the insured) and to the extent such damage is not
covered by the standard hazard
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insurance policy or any flood insurance policy, if applicable, required to be
maintained with respect to such Mortgaged Property, or in connection with
partial loss resulting from the application of the coinsurance clause in a
standard hazard insurance policy, the special hazard insurer will pay the lesser
of (i) the cost of repair or replacement of such Mortgaged Property or (ii) upon
transfer of such Mortgaged Property to the special hazard insurer, the unpaid
principal balance of such Mortgage Loan at the time of acquisition of such
Mortgaged Property by foreclosure or deed in lieu of foreclosure, plus accrued
interest to the date of claim settlement and certain expenses incurred by the
Servicer with respect to such Mortgaged Property. If the unpaid principal
balance plus accrued interest and certain expenses is paid by the special hazard
insurer, the amount of further coverage under the special hazard insurance
policy will be reduced by such amount less any net proceeds from the sale of
such Mortgaged Property. Any amount paid as the cost of repair of such Mortgaged
Property will reduce coverage by such amount. Special hazard insurance policies
typically do not cover losses occasioned by war, civil insurrection, certain
governmental actions, errors in design, faulty workmanship or materials (except
under certain circumstances), nuclear reaction, flood (if the Mortgaged Property
is in a federally designated flood area), chemical contamination and certain
other risks.
Restoration of the Mortgaged Property with the proceeds described under
(i) above is expected to satisfy the condition under any pool insurance policy
that such Mortgaged Property be restored before a claim under such pool
insurance policy may be validly presented with respect to the defaulted Mortgage
Loan secured by such Mortgaged Property. The payment described under (ii) above
will render unnecessary presentation of a claim in respect of such Mortgage Loan
under any pool insurance policy. Therefore, so long as such pool insurance
policy remains in effect, the payment by the special hazard insurer of the cost
of repair or of the unpaid principal balance of the related Mortgage Loan plus
accrued interest and certain expenses will not affect the total insurance
proceeds paid to Holders of the Securities, but will affect the relative amounts
of coverage remaining under the special hazard insurance policy and pool
insurance policy.
Bankruptcy Bond. In the event of a bankruptcy of a borrower, the
bankruptcy court may establish the value of the Mortgaged Property securing the
related Mortgage Loan at an amount less than the then outstanding principal
balance of such Mortgage Loan. The amount of the secured debt could be reduced
to such value, and the holder of such Mortgage Loan thus would become an
unsecured creditor to the extent the outstanding principal balance of such
Mortgage Loan exceeds the value so assigned to the Mortgaged Property by the
bankruptcy court. In addition, certain other modifications of the terms of a
Mortgage Loan can result from a bankruptcy proceeding. See "CERTAIN LEGAL
ASPECTS OF MORTGAGE LOANS." If so provided in the related Prospectus Supplement,
the Depositor or other entity, specified in the related Prospectus Supplement
will obtain a bankruptcy bond or similar insurance contract (the "bankruptcy
bond") covering losses resulting from proceedings with respect to borrowers
under the Bankruptcy Code. The bankruptcy bond will cover certain losses
resulting from a reduction by a bankruptcy court of scheduled payments of
principal of and interest on a Mortgage Loan or a reduction by such court of the
principal amount of a Mortgage Loan and will cover certain unpaid interest on
the amount of such a principal reduction from the date of the filing of a
bankruptcy petition.
The bankruptcy bond will provide coverage in the aggregate amount
specified in the related Prospectus Supplement for all Mortgage Loans in the
Trust Fund for such Series. Such amount will be reduced by payments made under
such bankruptcy bond in respect of such Mortgage Loans, unless otherwise
specified in the related Prospectus Supplement, and will not be restored.
Reserve Funds
If so specified in the Prospectus Supplement relating to a Series of
Securities, the Depositor will deposit into one or more funds to be established
with the Trustee as part of the Trust Fund for such Series or for the benefit of
any Enhancer with respect to such Series (the "Reserve Funds") cash, a letter or
letters of credit, cash collateral accounts, Eligible Investments, or other
instruments meeting the criteria of each Rating Agency rating any Series of the
Securities in the amount specified in such Prospectus Supplement. In the
alternative or in addition to such deposit, a Reserve Fund for a Series may be
funded over time through application of all or a portion of the excess cash flow
from the Mortgage Loans for such Series, to the extent described in the related
Prospectus Supplement. If applicable, the initial amount of the Reserve Fund and
the Reserve Fund maintenance requirements for a Series of Securities will be
described in the related Prospectus Supplement.
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Amounts withdrawn from any Reserve Fund will be applied by the Trustee to
make payments on the Securities of a Series, to pay expenses, to reimburse any
Enhancer or for any other purpose, in the manner and to the extent specified in
the related Prospectus Supplement.
Amounts deposited in a Reserve Fund will be invested by the Trustee, in
Eligible Investments maturing no later than the day specified in the related
Prospectus Supplement.
Overcollateralization
If so specified in the related Prospectus Supplement, Credit Enhancement
may be provided by overcollateralization created by the application of a portion
of interest collections to the payment of principal of the related Securities or
otherwise. The reduction of the principal balance of the Securities relative to
the outstanding balance of the underlying Mortgage Loans creates
overcollateralization and provides additional protection to the Holders of such
Securities.
Other Credit Enhancement
Credit enhancement may also be provided for a Series of Securities in the
form of overcollateralization, surety bond, insurance policy or other type of
credit enhancement approved by the applicable Rating Agencies to cover one or
more risks with respect to the Mortgage Loans or the Securities, as specified in
the related Prospectus Supplement.
THE DEPOSITOR, THE SERVICER AND THE ORIGINATORS
General
The Depositor was incorporated in the State of Ohio on May 7, 1996 for the
limited purpose of purchasing mortgage loans, automobile loans and other
receivables, transferring such loans or receivables to third parties, forming
trusts and engaging in related activities. All of the outstanding common stock
of the Depositor is owned by BANC ONE.
The Banc One Consumer Lending Division Home Equity Program
BANC ONE, through its affiliated Banks, has originated variable rate home
equity revolving lines of credit since the early 1980's. During the past several
years BANC ONE has undertaken a transition from managing its business activities
at the affiliate (legal entity) level to centralized management of such business
activities by nationally focused lines of business. As part of this transition,
all home equity lending originated directly with consumers was centralized in
early 1997 and is currently managed by the Banc One Retail Group's Consumer
Lending Division ("Consumer Lending"). Consumer Lending has created national
business units including marketing, product management, risk management, credit
underwriting, loan servicing and collections to manage its credit related
activities. To the extent material, the related Prospectus Supplement will
specify the amount of outstanding home equity revolving lines of credit and home
equity loans managed by Consumer Lending.
Home Equity Lines of Credit
Home equity lines of credit ("HELOCs") consist of variable or fixed rate,
open-ended, revolving lines of credit secured by a lien position against the
available equity of a borrower's related residential real estate Mortgaged
Property. A borrower may draw on a HELOC by writing a check, telephoning a
customer service representative and requesting funds to be transferred to a
pre-authorized depository account, requesting a cashier's check at a BANC ONE
banking center, or, with respect to certain HELOCs, credit card purchase
authorization.
HELOCs originated by Consumer Lending are secured by a lien on the related
Mortgaged Property subject to maximum loan-to-value ("LTV") limitations.
Currently, Consumer Lending offers its customers credit lines that allow them to
borrow against the value of the real estate up to either an 80% LTV (Option 1)
or a 100% LTV (Option 2) limit. The contractual term of a HELOC consists of a
revolving open-ended period (the "Draw Period"), during which borrowings may be
made periodically, and a period during which the contract converts to a fixed
payment, variable rate, amortizing closed-ended loan (the "Repayment Period").
The contractual term of the Draw Period is based upon the LTV provided by the
HELOC loan agreement. For Mortgage Loans with LTVs equal to or
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less than 80%, the Draw and Repayment Periods are 10 years and 10 years,
respectively. For Mortgage Loans with LTVs greater than 80% and less than or
equal to 100%, the Draw and Repayment Periods are 5 years and 10 years,
respectively. Draw periods may, at the election of Consumer Lending, be
extended.
During the Draw Period, the required minimum monthly payment is equal to
the greater of: i) 1% of the outstanding balance; ii) $100.00; or iii) the
interest accrued plus any annual fee assessments, late charges, administrative
charges, and credit or other insurance charges ("Assessed Fees"). At the
beginning of the Repayment Period, the required monthly payment is calculated
based on principal, interest, and Assessed Fees related to the amortization of
the outstanding balance due using the APR. Although the monthly amount due will
remain constant throughout the repayment period, the number of monthly payments
can either increase or decrease according to fluctuations in the variable annual
percentage rate and Assessed Fees. Payments are applied to a customer's account
first to interest, then to principal due, and then to Assessed Fees. Accounts
are generally identified as delinquent when less than 90% of the required
payment is remitted to the servicing agent.
Consumer Lending customers have several channels through which payments
can be made to their account including i) payment by check to lockbox remittance
processing centers, ii) payments by check submitted to tellers at the local BANC
ONE banking center, iii) automated debits to pre-authorized depository accounts,
and iv) automated teller machines.
Interest rates for HELOCs are established at a product level and are the
responsibility of a national pricing committee of Consumer Lending. Factors
considered in the price setting process include, among other things, targeted
product profitability and related returns, market competition, market
penetration, trends in market interest rates, and potential credit losses.
Pricing tiers are based on credit/bureau scoring techniques and the balance size
of the account being originated. This accommodates setting prices based on
credit risk characteristics ("risk-adjusted pricing") and the cost to acquire
new customers.
Consistent with industry practice, Consumer Lending utilizes introductory
offerings including interest rates ("Promo Rates") and waiving closing costs to
acquire new accounts. Promo rates are occasionally offered by Consumer Lending,
which may either be a variable introductory discount or fixed introductory rate.
The term of a Promo Rate may range from 1 to 12 months; however, the majority of
Promo Rates are offered for 6 months beginning at the inception of the Mortgage
Loan.
In general, HELOCs bear interest at a variable rate and generally are
subject to a maximum per annum interest rate of between 18% to 25%, depending
upon governing state laws. The interest rate on all HELOCs originated after
April 1,1997 adjusts monthly. The daily periodic rate is 1/365th (1/366th in the
case of leap years) of the APR, which represents the sum of a contractual
defined index (the "Index") plus a fixed percentage specified in the related
Agreement (the "Gross Margin"). Interest is calculated at a rate applied to the
daily balance of the account for each day of the billing cycle (the "Loan
Rate"). The index for all loans originated after April 1, 1997 is the average
weekly Bank Prime Loan Rate as published by the Board of Governors of the
Federal Reserve System (the "Index"). When a variable introductory discount
("Promo Discount") is offered, the Promo Rate is equal to the Loan Rate less the
Promo Discount.
The HELOCs may permit the customer to convert either the entire
outstanding balance due or any portion thereof, to a fixed rate closed-end loan
("Lock Feature"). The Lock Feature, if any, may be exercised during the Draw
Period, subject to certain limitations. The Lock Feature allows for a repayment
schedule of up to but not exceeding 10 years. When the Lock Feature is
exercised, the utilized portion of the HELOC credit line is equal to the
amortizing "locked" principal balance plus the revolving principal balance, the
combination of which can not exceed the established credit limit under the loan.
Product Management & Marketing Activities
The Mortgage Loans were or will be originated by one or more of the
Sellers (managed by Consumer Lending) utilizing a variety of marketing
strategies and product delivery channels. Product management and marketing
activities are conducted on a national level, with adjustments in response to
local market competitive offerings and pricing practices as reported by field
marketing managers and the banking center network. Marketing strategies are
developed on an annual basis and may include a combination of television, radio,
newspaper and outdoor media, direct mailings to existing and prospective
customers, banking center merchandising and other sales supporting tools.
Consumer Lending also develops various types of promotions to activate accounts
or increase utilization, including special balance transfer offers, sweepstakes,
promotional Lock Feature rates and related
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programs. Loans may be originated through BANC ONE's banking center distribution
network or Consumer Lending's Loan-by-Phone ("LBP") call centers. LBP centers
are located in Milwaukee, Wisconsin, Houston, Texas, and Tempe, Arizona, and are
intended to provide sales and service to Consumer Lending's customers, utilizing
technology and scoring techniques to reduce turnaround time to approve
applications, expedite processing and provide convenient customer-oriented
closings. Additionally, Consumer Lending may originate HELOCs within the banking
center distribution network or as part of a national equity lending program
throughout the United States. Additionally, Consumer Lending may utilize a
variety of brand names to promote its HELOC products, including Bank One or
First USA.
Underwriting
HELOCs originated through Consumer Lending are subject to standardized
underwriting criteria and approval processes. HELOCs are underwritten at a
minimum of $5,001 up to $250,000, with LTVs up to 100%. Single family residences
may be financed up to 100% LTV; attached single family (condo, townhouse, patio
homes) residences may be financed up to 70% LTV; mobile homes and lots may be
financed up to 80% LTV if the mobile homes are permanently affixed to the
Mortgaged Property; and second homes may be financed up to 70% LTV. HELOCs are
not available on any non-owner occupied properties or owner-occupied 2-4 family
properties. Generally all HELOCs are in a second lien position; however, some
non-purchase first position liens and third positions may exist. All third lien
positions are reviewed by a senior lender.
Each applicant for a HELOC is required to complete an application, which
generally lists the applicant's mortgage liabilities, income, employment history
and other demographic and personal information. A customer may submit an
application through one of several distribution channels such as with a
relationship banker at a local banking center, telephoning a LBP call center, or
telephoning a customer service representative at a teleservicing center. If the
application indicates sufficient income and equity in the related real estate
Mortgaged Property to justify extending a HELOC, a further credit investigation
will be conducted. This investigation is part of Consumer Lending's underwriting
activities managed by Consumer Lending's Credit Services unit and performed at
one of three processing sites located in Milwaukee, Wisconsin, Houston, Texas,
or Tempe, Arizona, utilizing policies developed and monitored jointly with
Consumer Lending's Risk Management group.
The credit approval process utilizes credit scoring and related techniques
and subjective assessments by experienced underwriters. Underwriters analyze the
equity position of the requested loan (including both the priority of the lien
and the combined loan-to-value ratio) and the applicant's creditworthiness. The
evaluation of creditworthiness is designed to assess the applicant's ability and
willingness to repay the loan. This evaluation primarily consists of (i)
reviewing and verifying customer and demographic information; (ii) obtaining and
reviewing an independent credit bureau report; (iii) reviewing the applicant's
credit bureau score and, if applicable, a BANC ONE proprietary custom credit
score; (iv) reviewing and verifying the applicant's employment and reported
income through a review of recent W-2's, pay stubs or telephone verification by
the applicant's current employer or assessments of tax returns and financial
statements; (v) evaluating the applicant's gross debt to income ratio; (vi)
reviewing the title status either by a written title search or insured title
policy to ensure that all liens (including Mortgaged Property taxes), except for
senior liens, are paid off prior to or at time of settlement of the loan; (vii)
obtaining and evaluating the value of the real estate through independent
appraisals or valuations; and (viii) evaluating flood risk and verifying flood
insurance coverage, if applicable.
Credit bureau information is reviewed for minimum acceptable credit scores
and consistent record of timely payments and to identify any major negative
events such as bankruptcy, repossession, foreclosure or a delinquency of greater
than 90 days, that have occurred within the past 5 years. Minimum acceptable
credit bureau scores are established by state through an on-going risk
management and credit scoring process. Applicants with a recent negative event
may be eligible for an exception, but any loans made pursuant to such exception
are limited to a maximum LTV of 80%. In some regions, a custom scorecard is used
in addition to credit bureau reports. Each area or region may have different
cutoffs based on specific data or market indicators determined through risk
analysis. The existing credit scoring process and related scorecards are
reviewed on a regular basis. Beginning in April 1998 and staggered in phases
thereafter, a national scorecard will be implemented, standardizing the data
gathering and assigning scores. Each applicant is assigned a grade or tier based
on their score(s) and associated risk. Most policies are linked to the tiers as
a risk factor.
Beginning in 1998, Consumer Lending implemented processes allowing certain
applicants to receive final loan approval through expedited real estate
appraisal, income, title searches and other related verifications
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("FASTRAC"). FASTRAC applications are identified during the initial process
based on the completeness of documentation provided with the application.
Although subject to all of the policies, procedures and authorization controls
required by Consumer Lending underwriting standards, the process is intended to
improve turnaround and overall customer service.
The extent of required income verification is determined based on an
applicant's assessed credit risk, loan amount, whether or not self-employed, and
the extent of unearned income. If salaried, income is verified through W-2's or
current pay stubs. For applicants with superior credit risk assessments (Tier
A1), income is verified if the requested amount exceeds $250,000. Income
verification is required for requests greater than $50,000 when an applicant's
credit risk assessment meets pre-defined score cutoffs (Tier A2 or A3). Income
for all other applicants is verified (Tier A4 or below). If unearned income is
greater than 50% of declared income or if the source of income is
self-employment and the requested loan amount exceeds $20,000, current
year-to-date and two previous year's financial statements, accompanied by
federal tax returns, are required.
A gross debt to income ratio test is applied to each applicant by dividing
the applicant's monthly payments on all existing obligations, including the
proposed HELOC payment (based on a fully funded balance), by the applicant's
gross monthly income. Maximum ratios are assigned by tier as follows: 55% (Tier
A1); 50% (Tier A2); 45% (Tier A3); and 40% (Tier A4).
Valuation methods are based upon the amount requested by the applicant and
the expected loan-to-value ratio ("LTV"). Appraisal values are generally
determined in one of several methods: (i) an appraisal completed on Fannie Mae
("FNMA") form 1004 ("Uniform Residential Appraisal Request" or "URAR"),
consisting of a complete inspection by a qualified appraiser which is usually
performed if the amount of the HELOC requested by the applicant is greater than
$ 100,000 with an LTV of greater than 80% or for any HELOC if the amount
requested is greater than $250,000 or is secured by certain types of Mortgaged
Property, (ii) by reference to the assessed value of the related real estate
Mortgaged Property shown on the tax records of applicable governing units, if
the Mortgaged Property is located in a county and State in which Consumer
Lending, in its discretion, has determined is a reliable indicator of the
appraised value of the Mortgaged Property, (iii) a "drive-by" appraisal,
completed on Freddie Mac ("FHLMC") form 704, consisting of an evaluation of
comparable properties on the basis of a visual inspection of the exterior of the
related real estate Mortgaged Property, (iv) a broker's opinion of value or
HUD-1 Settlement Statement that are less than 12 months old; or (v) through
automated appraisal techniques utilizing pre-approved national vendors to
validate and verify valuations of the related real estate properties. To qualify
for automated appraisals, the requested loan amount must be less than $100,000
and meet certain criteria, including Mortgaged Property type classification.
A title search is performed covering at least the period from the
conveyance of the related real estate Mortgaged Property to the applicant from
the last owner before the applicant. A full title search may be requested
depending upon the size of the amount requested by the applicant. Title
insurance is not required to be obtained by the borrower unless title defects
are identified or the requested loan amount exceeds $150,000. An insured title
policy (ALTA policy or its equivalent) which insures title for both lender and
owner is required on newly constructed homes less than six months old on which
the lien will be in first position and on all purchase money transactions.
Consumer Lending requires a flood determination on all improved Mortgaged
Property. Flood insurance, with the appropriate Affiliated Bank named as loss
payee, is required on all properties located in a Special Flood Hazard Area as
determined by the Federal Emergency Management Agency (FEMA), in an amount at
least equal to the lesser of the total encumbrances up to the maximum allowed
under the National Flood Insurance Program (NFIP), or replacement coverage or
value of the dwelling and improvements as defined by the evaluation method used.
Proof of flood insurance is required by providing either a copy of the existing
flood insurance policy or a copy of the application for flood insurance and
related proof of payment. Any Mortgaged Property located in a flood zone is
monitored until maturity.
In addition, adequate fire and casualty insurance coverage is required on
all dwellings and structural improvements with the appropriate Affiliated Bank
named as loss payee on all policies. The minimum coverage is the lesser of total
encumbrances or replacement coverage, or value of the dwelling and improvements.
No HELOC may close without a properly completed agreement to provide insurance
coverage. Verbal confirmation from the agent is required. Once verification has
taken place, no additional monitoring or forced placement is performed.
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Consumer Lending has implemented an internal quality control process to
ensure adherence to policies and underwriting standards. The quality control
process includes self-audits of underwriting decisions, real estate verification
processes, documentation and other activities on samples of applications and
approved loans. Credit policy exceptions are monitored regularly by senior
management of Credit Services and Consumer Lending, as appropriate.
Mortgage Loan Servicing
As part of BANC ONE's transition from managing its business activities on
an Affiliate (legal entity) level to centralized, nationally focused, lines of
business, loan servicing activities were consolidated and centralized. Consumer
Lending continues to standardize and redesign operational processes to improve
customer service and internal controls.
HELOCs are serviced by one of four regional processing centers operated by
Banc One Services Corporation ("BOSC"), a wholly-owned subsidiary of BANC ONE,
and located in Louisville and Lexington, Kentucky; Fort Worth, Texas; and Mesa,
Arizona. BOSC carries out loan servicing operations for most BANC ONE
subsidiaries under various servicing contracts between BOSC and the applicable
subsidiary. Consumer Lending's Loan Servicing unit ("Custodial Operations") is
currently responsible for management of the processing centers. Custodial
Operations has established practices and procedures governing the servicing of
owned and serviced accounts related to: funding and recordation of originated
loans, note and collateral documentation, filing verification and control,
statement and payment processing and preparation of tax related information.
Billing statements are mailed monthly which detail an account credit
limit, loan balance, interest rate applied, payment due date, minimum payment
amount, past due amounts, interest rate changes, and the available credit line.
Customers may utilize several payment methods such as by submitting checks to a
lock-box located at one of the loan processing centers; submitting checks to a
teller at a local banking center; pre-authorized automated debit from a
depository account; wire transfers; or automated teller machines.
Collections/Portfolio Management
Collections of HELOCs originated by Consumer Lending through the
Affiliated Banks is centrally managed by Consumer Lending's Portfolio Asset
Management unit ("PAM") at three collection sites located in Akron, Ohio,
Waukesha, Wisconsin and Tempe, Arizona. While the collection sites are managed
by Consumer Lending, they are currently owned by each of Bank One, N.A., Bank
One Wisconsin, and Bank One, Arizona, N.A., respectively. Collection management
for receivables originated by Bank One, N.A. and its predecessor banks located
in the state of Ohio are provided by Bank One, N.A. During the period from
mid-1995 through early-1997, the collections functions for HELOCs originated by
the Ohio banks was transferred to Bank One, N.A. Bank One, Wisconsin currently
performs collections functions for HELOCs originated by Bank One, Wisconsin and
its predecessor banks located in the state of Wisconsin, HELOCs originated by
Bank One, Indiana, N.A. and its predecessor banks located in the state of
Indiana, HELOCs originated by Bank One, Illinois, N.A. and its predecessor banks
located in the state of Illinois, HELOCs originated by Bank One, Kentucky, N.A.
and its predecessor banks located in the state of Kentucky and HELOCs originated
by Bank One, Louisiana, N.A. and its predecessor banks located in the state of
Louisiana. During the period from late 1995 through early 1998, the collections
functions of the HELOCs originated by these Wisconsin, Indiana, Illinois,
Kentucky and Louisiana banks was transferred to Bank One, Wisconsin. Bank One,
Arizona, N.A. currently performs collections functions for HELOCs originated by
Bank One, Arizona, N.A. and its predecessor banks located in the state of
Arizona, HELOCs originated by Bank One, Oklahoma, N.A. and its predecessor banks
located in the state of Oklahoma, HELOCs originated by Bank One, Utah, N.A. and
its predecessor banks located in the state of Utah, HELOCs originated by Bank
One, Colorado, N.A. and its predecessor banks located in the state of Colorado,
and HELOCs originated by Bank One, Texas, N.A. and its predecessor banks located
in the State of Texas. During 1997, the collections functions of HELOCs
originated by the Arizona, Oklahoma, Utah, Colorado and Texas banks was
transferred to Bank One, Arizona, N.A. The transfers of collection management
functions are substantially complete. In addition, BANC ONE and its affiliates
from time to time may acquire portfolios, which may be serviced by one of these
affiliates. Although Consumer Lending does not contemplate any servicing
disruptions developing as a result of these acquisitions, there can be no
assurance that such interruptions will not occur.
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The PAM has established standard policies governing the collection of
owned and serviced loans. Collections management primarily includes the
supervision of delinquent loans, loss mitigation efforts, foreclosure
proceedings and, if applicable, the disposition of mortgaged properties.
The PAM utilizes a variety of collections management programs and tools to
monitor and collect delinquent accounts, mitigate account losses, and recover
assets previously written off. Account monitoring begins once an account becomes
past due.
Collection efforts for delinquent accounts are initiated based on
behavioral and credit risk scoring. PAM uses the Triad Collection Activity
Prioritization System (the "Triad System") to manage the timing and extent of
collection efforts. The Triad System uses customer and account information to
define a variety of effective and efficient collection strategies by stratifying
delinquent accounts as low, medium or high risk based on payment history,
product type, and other account characteristics. Consumer Lending's policy is to
suspend drawing privileges on overdue loans when collection efforts are
initiated. Draw privileges are permanently suspended once an account becomes 60
days delinquent. Permanently suspended draw privileges may be reinstated with
management approval.
In accordance with industry practice, the Custodial Operations reports
accounts that are 30 days past due to the credit reporting bureaus. During the
period when the loan is 45 to 59 days delinquent, Consumer Lending sends notice
of default informing the borrower of intent to initiate foreclosure proceedings
on the Mortgaged Property within certain timeframes as allowed by law. Senior
lien holders, if any, may be contacted to determine the status of those liens.
Broker's price opinions, appraisals, and Mortgaged Property inspections may be
conducted once an account reaches 60 days past due.
When the notice of default to the borrower expires, the PAM determines
whether to initiate foreclosure proceedings. Analyses are performed and, at 90
days past due, foreclosure proceedings are initiated, if appropriate. If
accounts are determined to be collectable, collection managers may delay
foreclosure proceedings.
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SERVICING OF MORTGAGE LOANS
General
Customary servicing functions with respect to Mortgage Loans comprising
the Mortgage Loans in the Trust Fund will be provided by the Servicer directly
pursuant to the related Servicing Agreement or Pooling and Servicing Agreement,
as the case may be, with respect to a Series of Securities.
Collection Procedures; Escrow Accounts
The Servicer will make reasonable efforts to collect all payments required
to be made under the Mortgage Loans and will, consistent with the terms of the
related Agreement for a Series and any applicable Credit Enhancement, follow
such collection procedures as it follows with respect to comparable loans held
in its own portfolio. Consistent with the above, the Servicer may, in its
discretion, (i) waive any assumption fee, late payment charge, or other charge
in connection with a Mortgage Loan and (ii) to the extent provided in the
related HELOC agreement, arrange with an obligor a schedule for the liquidation
of delinquencies by extending the Due Dates for Scheduled Payments on such
Mortgage Loan.
If specified in the related Prospectus Supplement, the Servicer, to the
extent permitted by law, will establish and maintain escrow or impound accounts
("Escrow Accounts") with respect to Mortgage Loans in which payments by obligors
to pay taxes, assessments, mortgage and hazard insurance premiums, and other
comparable items will be deposited. Mortgage Loans may not require such payments
under the loan related documents, in which case the Servicer would not be
required to establish any Escrow Account with respect to such Mortgage Loans.
Withdrawals from the Escrow Accounts are to be made to effect timely payment of
taxes, assessments and mortgage and hazard insurance, to refund to obligors
amounts determined to be overages, to pay interest to obligors on balances in
the Escrow Account to the extent required by law, to repair or otherwise protect
the Mortgaged Property securing the related Mortgage Loan and to clear and
terminate such Escrow Account. The Servicer will be responsible for the
administration of the Escrow Accounts and generally will make advances to such
account when a deficiency exists therein.
Deposits to and Withdrawals from the Collection Account
Unless otherwise specified in the related Prospectus Supplement, the
Trustee or the Servicer will establish a separate account (the "Collection
Account") in the name of the Trustee. Unless otherwise indicated in the related
Prospectus Supplement, the Collection Account will be an account maintained (i)
at a depository institution, the unsecured debt obligations of which at the time
of any deposit therein are rated by each Rating Agency rating the Securities of
such Series at levels satisfactory to each Rating Agency or (ii) in an account
or accounts the deposits in which are insured to the maximum extent available by
the FDIC or which are secured in a manner meeting requirements established by
each Rating Agency.
Unless otherwise specified in the related Prospectus Supplement, the funds
held in the Collection Account may be invested, pending remittance to the
Trustee, in Eligible Investments. If so specified in the related Prospectus
Supplement, the Servicer will be entitled to receive as additional compensation
any interest or other income earned on funds in the Collection Account.
Unless otherwise specified in the related Prospectus Supplement, the
Servicer, the Depositor, the Trustee or the applicable Seller, as appropriate,
will deposit into the Collection Account for each Series on the Business Day
following the Closing Date any amounts representing Scheduled Payments due after
the related Cut-off Date but received by the Servicer on or before the Closing
Date, and thereafter, within two business days after the date of receipt
thereof, the following payments and collections received or made by it (other
than, unless otherwise provided in the related Prospectus Supplement, in respect
of principal of and interest on the related Mortgage Loans due on or before such
Cut-off Date):
(i) All payments on account of principal, including prepayments, on
such Mortgage Loans;
(ii) All payments on account of interest on such Mortgage Loans
after deducting therefrom, at the discretion of the Servicer but only to
the extent of the amount permitted to be withdrawn or withheld
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from the Collection Account in accordance with the related Agreement, the
Servicing Fee in respect of such Mortgage Loans;
(iii) All amounts received by the Servicer in connection with the
liquidation of Mortgage Loans or Mortgaged Property acquired in respect
thereof, whether through foreclosure sale, repossession or otherwise,
including payments in connection with such Mortgage Loans received from
the obligor, other than amounts required to be paid or refunded to the
obligor pursuant to the terms of the applicable loan documents or
otherwise pursuant to law ("Liquidation Proceeds"), exclusive of, in the
discretion of the Servicer, but only to the extent of the amount permitted
to be withdrawn from the Collection Account in accordance with the related
Agreement, the Servicing Fee, if any, in respect of the related Primary
Asset;
(iv) All proceeds under any title insurance, hazard insurance or
other insurance policy covering any Mortgage Loan, other than proceeds to
be applied to the restoration or repair of the related Mortgaged Property
or released to the obligor in accordance with the related Agreement;
(v) All amounts required to be deposited therein from any applicable
Reserve Fund for such Series pursuant to the related Agreement;
(vi) All Advances made by the Servicer required pursuant to the
related Agreement; and
(vii) All repurchase prices of any such Mortgage Loans purchased or
repurchased by the Depositor, the Servicer or the Seller pursuant to the
related Agreement.
Unless otherwise specified in the related Prospectus Supplement, the
Servicer is permitted, from time to time, to make withdrawals from the
Collection Account for each Series for the following purposes:
(i) to reimburse itself for Advances for such Series made by it
pursuant to the related Agreement; the Servicer's right to reimburse
itself is limited to amounts received on or in respect of particular
Mortgage Loans (including, for this purpose, Liquidation Proceeds and
amounts representing proceeds of insurance policies covering the related
Mortgaged Property) which represent late recoveries of Scheduled Payments
respecting which any such Advance was made;
(ii) to the extent provided in the related Agreement, to reimburse
itself for any Advances for such Series that the Servicer determines in
good faith it will be unable to recover from amounts representing late
recoveries of Scheduled Payments respecting which such Advance was made or
from Liquidation Proceeds or the proceeds of insurance policies;
(iii) to reimburse itself from Liquidation Proceeds for liquidation
expenses and for amounts expended by it in good faith in connection with
the restoration of damaged Mortgaged Property and, in the event deposited
in the Collection Account and not previously withheld, and to the extent
that Liquidation Proceeds after such reimbursement exceed the outstanding
principal balance of the related Mortgage Loan, together with accrued and
unpaid interest thereon to the Due Date for such Mortgage Loan next
succeeding the date of its receipt of such Liquidation Proceeds, to pay to
itself out of such excess the amount of any unpaid Servicing Fee and any
assumption fees, late payment charges, or other charges on the related
Mortgage Loan;
(iv) if it has elected not to pay itself the Servicing Fee out of
the interest component of any Scheduled Payment, late payment or other
recovery with respect to a particular Mortgage Loan prior to the deposit
of such Scheduled Payment, late payment or recovery into the Collection
Account, to pay to itself the Servicing Fee, as adjusted pursuant to the
related Agreement, from any such Scheduled Payment, late payment or such
other recovery, to the extent permitted by the related Agreement;
(v) to reimburse itself for expenses incurred by and recoverable by
or reimbursable to it pursuant to the related Agreement;
(vi) to pay to the applicable person with respect to each Mortgage
Loan or REO Mortgaged Property acquired in respect thereof that has been
repurchased or removed from the Trust Fund by the Depositor, the Servicer
or the Seller pursuant to the related Agreement, all amounts received
thereon and not distributed as of the date on which the related repurchase
price was determined;
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(vii) to make payments to the Trustee of such Series for deposit
into the Distribution Account, if any, or for remittance to the Holders of
such Series in the amounts and in the manner provided for in the related
Agreement; and
(viii) to clear and terminate the Collection Account pursuant to the
related Agreement.
In addition, if the Servicer deposits in the Collection Account for a
Series any amount not required to be deposited therein, it may, at any time,
withdraw such amount from such Collection Account.
Advances and Limitations Thereon
The related Prospectus Supplement will describe the circumstances, if any,
under which the Servicer will make Advances with respect to delinquent payments
on Mortgage Loans. If specified in the related Prospectus Supplement, the
Servicer will be obligated to make Advances, and such obligations may be limited
in amount, or may not be activated until a certain portion of a specified
Reserve Fund is depleted. Advances are intended to provide liquidity and, except
to the extent specified in the related Prospectus Supplement, not to guarantee
or insure against losses. Accordingly, any funds advanced are recoverable by the
Servicer out of amounts received on particular Mortgage Loans which represent
late recoveries of principal or interest, proceeds of insurance policies or
Liquidation Proceeds respecting which any such Advance was made. If an Advance
is made and subsequently determined to be nonrecoverable from late collections,
proceeds of insurance policies, or Liquidation Proceeds from the related
Mortgage Loan, the Servicer may be entitled to reimbursement from other funds in
the Collection Account or Distribution Account, as the case may be, or from a
specified Reserve Fund, as applicable, to the extent specified in the related
Prospectus Supplement.
Maintenance of Insurance Policies and Other Servicing Procedures
Standard Hazard Insurance; Flood Insurance. Except as otherwise specified
in the related Prospectus Supplement, the Servicer will be required to maintain
or to cause the obligor on each Mortgage Loan to maintain a standard hazard
insurance policy providing coverage of the standard form of fire insurance with
extended coverage for certain other hazards as is customary in the state in
which the related Mortgaged Property is located. The standard hazard insurance
policies will provide for coverage at least equal to the applicable state
standard form of fire insurance policy with extended coverage for Mortgaged
Property of the type securing the related Mortgage Loans. In general, the
standard form of fire and extended coverage policy will cover physical damage
to, or destruction of, the related Mortgaged Property caused by fire, lightning,
explosion, smoke, windstorm, hail, riot, strike and civil commotion, subject to
the conditions and exclusions particularized in each policy. Because the
standard hazard insurance policies relating to the Mortgage Loans will be
underwritten by different hazard insurers and will cover Properties located in
various states, such policies will not contain identical terms and conditions.
The basic terms, however, generally will be determined by state law and
generally will be similar. Most such policies typically will not cover any
physical damage resulting from war, revolution, governmental actions, floods and
other water-related causes, earth movement (including earthquakes, landslides,
and mudflows), nuclear reaction, wet or dry rot, vermin, rodents, insects or
domestic animals, theft and, in certain cases, vandalism. The foregoing list is
merely indicative of certain kinds of uninsured risks and is not intended to be
all inclusive. Uninsured risks not covered by a special hazard insurance policy
or other form of Credit Enhancement may adversely affect distributions to
Holders. When a Mortgaged Property securing a Mortgage Loan is located in a
flood area identified by HUD pursuant to the Flood Disaster Protection Act of
1973, as amended, the Servicer will be required to cause flood insurance to be
maintained with respect to such Mortgaged Property, to the extent available.
The standard hazard insurance policies covering Properties securing
Mortgage Loans typically will contain a coinsurance clause which, in effect,
will require the insured at all times to carry hazard insurance of a specified
percentage (generally 80% to 90%) of the full replacement value of the Mortgaged
Property, including the improvements on any Mortgaged Property, in order to
recover the full amount of any partial loss. If the insured's coverage falls
below this specified percentage, such clause will provide that the hazard
insurer's liability in the event of partial loss will not exceed the greater of
(i) the actual cash value (the replacement cost less physical depreciation) of
the Mortgaged Property, including the improvements, if any, damaged or destroyed
or (ii) such proportion of the loss, without deduction for depreciation, as the
amount of insurance carried bears to the specified percentage of the full
replacement cost of such Mortgaged Property and improvements. Since the amount
of hazard insurance to be maintained on the improvements securing the Mortgage
Loans declines as the principal balances owing thereon decrease, and since the
value of the Properties will fluctuate in value over time, the effect of this
requirement in the
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event of partial loss may be that hazard insurance proceeds will be insufficient
to restore fully the damage to the affected Mortgaged Property.
Unless otherwise specified in the related Prospectus Supplement, coverage
will be in an amount at least equal to the greater of (i) the amount necessary
to avoid the enforcement of any co-insurance clause contained in the policy or
(ii) the outstanding principal balance of the related Mortgage Loan. Unless
otherwise specified in the related Prospectus Supplement, the Servicer will also
maintain on REO Mortgaged Property that secured a defaulted Mortgage Loan and
that has been acquired upon foreclosure, deed in lieu of foreclosure, or
repossession, a standard hazard insurance policy in an amount that is at least
equal to the maximum insurable value of such REO Mortgaged Property. No
earthquake or other additional insurance will be required of any obligor or will
be maintained on REO Mortgaged Property acquired in respect of a defaulted
Mortgage Loan, other than pursuant to such applicable laws and regulations as
shall at any time be in force and shall require such additional insurance.
Any amounts collected by the Servicer under any such policies of insurance
(other than amounts to be applied to the restoration or repair of the Mortgaged
Property, released to the obligor in accordance with normal servicing procedures
or used to reimburse the Servicer for amounts to which it is entitled to
reimbursement) will be deposited in the Collection Account. In the event that
the Servicer obtains and maintains a blanket policy insuring against hazard
losses on all of the Mortgage Loans, written by an insurer then acceptable to
each Rating Agency which assigns a rating to such Series, it will conclusively
be deemed to have satisfied its obligations to cause to be maintained a standard
hazard insurance policy for each Mortgage Loan or related REO Mortgaged
Property. This blanket policy may contain a deductible clause, in which case the
Servicer will, in the event that there has been a loss that would have been
covered by such policy absent such deductible clause, deposit in the Collection
Account the amount not otherwise payable under the blanket policy because of the
application of such deductible clause.
Realization Upon Defaulted Mortgage Loans
The Servicer will use its reasonable best efforts to foreclose upon,
repossess or otherwise comparably convert the ownership of the Properties
securing the related Mortgage Loans as come into and continue in default and as
to which no satisfactory arrangements can be made for collection of delinquent
payments. In connection with such foreclosure or other conversion, the Servicer
will follow such practices and procedures as it deems necessary or advisable and
as are normal and usual in its servicing activities with respect to comparable
loans serviced by it. However, the Servicer will not be required to expend its
own funds in connection with any foreclosure or towards the restoration of any
Mortgaged Property unless it determines that: (i) such restoration or
foreclosure will increase the Liquidation Proceeds in respect of the related
Mortgage Loan available to the Holders after reimbursement to itself for such
expenses and (ii) such expenses will be recoverable by it either through
Liquidation Proceeds or the proceeds of insurance. While the holder of a
Mortgaged Property acquired through foreclosure can often maximize its recovery
by providing financing to a new purchaser, the Trust Fund, if applicable, will
have no ability to do so and neither the Servicer nor the Depositor will be
required to do so.
The Servicer may arrange with the obligor on a defaulted Mortgage Loan, a
modification of such Mortgage Loan (a "Modification") to the extent provided in
the related Prospectus Supplement. Such Modifications may only be entered into
if they meet the underwriting policies and procedures employed by the Servicer
in servicing receivables for its own account and meet the other conditions set
forth in the related Prospectus Supplement.
Enforcement of Due-On-Sale Clauses
Unless otherwise specified in the related Prospectus Supplement for a
Series, when any Mortgaged Property is about to be conveyed by the obligor, the
Servicer will, to the extent it has knowledge of such prospective conveyance and
prior to the time of the consummation of such conveyance, exercise its rights to
accelerate the maturity of the related Mortgage Loan under the applicable
"due-on-sale" clause, if any, unless it reasonably believes that such clause is
not enforceable under applicable law or if the enforcement of such clause would
result in loss of coverage under any primary mortgage insurance policy. In such
event, the Servicer is authorized to accept from or enter into an assumption
agreement 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 Mortgage
Loan and pursuant to which the original obligor is released from liability and
such person is substituted as the obligor and becomes liable under the Mortgage
Loan. Any fee collected in connection with an assumption will be retained by the
Servicer as additional servicing compensation. The terms of a Mortgage Loan may
not be changed in connection with an assumption.
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Servicing Compensation and Payment of Expenses
Except as otherwise provided in the related Prospectus Supplement, the
Servicer will be entitled to a periodic fee as servicing compensation (the
"Servicing Fee") in an amount to be determined as specified in the related
Prospectus Supplement. The Servicing Fee may be fixed or variable, as specified
in the related Prospectus Supplement. In addition, unless otherwise specified in
the related Prospectus Supplement, the Servicer will be entitled to servicing
compensation in the form of assumption fees, late payment charges and similar
items, or excess proceeds following disposition of Mortgaged Property in
connection with defaulted Mortgage Loans.
Unless otherwise specified in the related Prospectus Supplement, the
Servicer will pay certain expenses incurred in connection with the servicing of
the Mortgage Loans, including, without limitation, the payment of the fees and
expenses of the Trustee and independent accountants, payment of insurance policy
premiums and the cost of credit support, if any, and payment of expenses
incurred in preparation of reports to Holders.
When an obligor makes a principal prepayment in full between Due Dates on
the related Mortgage Loan, the obligor will generally be required to pay
interest on the amount prepaid only to the date of prepayment. If and to the
extent provided in the related Prospectus Supplement, in order that one or more
Classes of the Holders of a Series will not be adversely affected by any
resulting shortfall in interest, the amount of the Servicing Fee may be reduced
to the extent necessary to include in the Servicer's remittance to the Trustee
for deposit into the Distribution Account an amount equal to one month's
interest on the related Mortgage Loan (less the Servicing Fee). If the aggregate
amount of such shortfalls in a month exceeds the Servicing Fee for such month, a
shortfall to Holders may occur.
Unless otherwise specified in the related Prospectus Supplement, the
Servicer will be entitled to reimbursement for certain expenses incurred by it
in connection with the liquidation of defaulted Mortgage Loans. The related
Holders will suffer no loss by reason of such expenses to the extent expenses
are covered under related insurance policies or from excess Liquidation
Proceeds. If claims are either not made or paid under the applicable insurance
policies or if coverage thereunder has been exhausted, the related Holders will
suffer a loss to the extent that Liquidation Proceeds, after reimbursement of
the Servicer's expenses, are less than the outstanding principal balance of and
unpaid interest on the related Mortgage Loan which would be distributable to
Holders. In addition, the Servicer will be entitled to reimbursement of
expenditures incurred by it in connection with the restoration of Mortgaged
Property securing a defaulted Mortgage Loan, such right of reimbursement being
prior to the rights of the Holders to receive any related proceeds of insurance
policies, Liquidation Proceeds or amounts derived from other Credit Enhancement.
The Servicer is generally also entitled to reimbursement from the Collection
Account for Advances.
Unless otherwise specified in the related Prospectus Supplement, the
rights of the Servicer to receive funds from the Collection Account for a
Series, whether as the Servicing Fee or other compensation, or for the
reimbursement of Advances, expenses or otherwise, are not subordinate to the
rights of Holders of such Series.
Evidence as to Compliance
If so specified in the related Prospectus Supplement, the applicable
Agreement for each Series will provide that each year a firm of independent
public accountants will furnish a statement to the Trustee to the effect that
such firm has examined certain documents and records relating to the servicing
of the Mortgage Loans by the Servicer and that, on the basis of such
examination, such firm is of the opinion that the servicing has been conducted
in compliance with such Agreement, except for (i) such exceptions as such firm
believes to be immaterial and (ii) such other exceptions as are set forth in
such statement.
If so specified in the related Prospectus Supplement, the applicable
Agreement for each Series will also provide for delivery to the Trustee for such
Series of an annual statement signed by an officer of the Servicer to the effect
that the Servicer has fulfilled its obligations under such Agreement, throughout
the preceding calendar year.
Certain Matters Regarding the Servicer
The Agreement provides that the Servicer may resign from its obligations
and duties thereunder, except in connection with a permitted transfer of
servicing, unless (i) such duties and obligations are no longer permissible
under applicable law or are in material conflict by reason of applicable law
with any other activities of a type and nature presently carried on by it or its
affiliate or (ii) upon the satisfaction of the following conditions: (a) the
Servicer has proposed a successor servicer to the Trustee in writing and such
proposed successor servicer is
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reasonably acceptable to the Trustee; (b) the Rating Agencies have confirmed to
the Trustee that the appointment of such proposed successor servicer as the
Servicer will not result in the reduction or withdrawal of the then current
rating of the Certificates; and (c) such proposed successor servicer is
reasonably acceptable to the Enhancer, if any. No such resignation will become
effective until the Trustee or a successor servicer has assumed the Servicer's
obligations and duties under the Agreement. Notwithstanding the foregoing, Bank
One may transfer its servicing obligations to any other direct or indirect
wholly-owned subsidiary of BANC ONE or another entity (which meets certain
eligibility standards set forth in the Agreement) and be relieved of its
obligations and duties under the Agreement and related agreements.
The Servicer may perform any of its duties and obligations under the
Agreement through one or more subservicers or delegates, which may be affiliates
of the Servicer. Notwithstanding any such arrangement, the Servicer will remain
liable and obligated to the Trustee and the Certificateholders for the
Servicer's duties and obligations under the Agreement, without any diminution of
such duties and obligations and as if the Servicer itself were performing such
duties and obligations.
Any person into which, in accordance with the Agreement, the Servicer may
be merged or consolidated or any person resulting from any merger or
consolidation to which the Servicer is a party, or any person succeeding to the
business of the Servicer, will be the successor to Bank One as servicer, under
the Agreement.
The Agreement provides that the Servicer will indemnify the Trust and the
Trustee from and against any loss, liability, expense, damage or injury suffered
or sustained as a result of the Servicer's actions or omissions in connection
with the servicing and administration of the Mortgage Loans which are not in
accordance with the provisions of the Agreement. Under the Agreement, the
applicable Seller will indemnify an injured party for the entire amount of any
losses, claims, damages or liabilities arising out of or based on the Agreement
(other than losses resulting from defaults under the Mortgage Loans). The
Agreement provides that neither the Depositor, any Seller nor the Servicer nor
their directors, officers, employees or agents will be under any other liability
to the Trust, the Trustee, the Certificateholders or any other person for any
action taken or for refraining from taking any action pursuant to the Agreement.
However, neither the Depositor, any Seller nor the Servicer will be protected
against any liability which would otherwise be imposed by reason of willful
misconduct, bad faith or gross negligence of the Depositor, such Seller or the
Servicer in the performance of its duties under the Agreement or by reason of
reckless disregard of its obligations thereunder. In addition, the Agreement
provides that the Servicer will not be under any obligation to appear in,
prosecute or defend any legal action which is not incidental to its servicing
responsibilities under the Agreement and which in its opinion may expose it to
any expense or liability. The Servicer may, in its sole discretion, undertake
any such legal action which it may deem necessary or desirable with respect to
the Agreement and the rights and duties of the parties thereto and the interest
of the Certificateholders thereunder.
Any corporation into which the Servicer may be merged or consolidated, or
any corporation resulting from any merger, conversion or consolidation to which
the Servicer shall be a party, or any corporation succeeding to the business of
the Servicer shall be the successor of the Servicer hereunder, without the
execution or filing of any paper or any further act on the part of any of the
parties.
Events of Servicing Termination
Unless otherwise specified in the related Prospectus Supplement, "Events
of Servicing Termination" with respect to a Series will consist of (i) any
failure by the Servicer to deposit in the Collection Account any deposit
required to be made under the Agreement, which failure continues unremedied for
five Business Days after the giving of written notice of such failure to the
Servicer by the Trustee, or to the Servicer and the Trustee by the Enhancer, if
any, or Holders owning in the aggregate at least 25% of the Principal Balance of
all outstanding Securities; (ii) any failure by the Servicer duly to observe or
perform in any material respect any other of its covenants or agreements in the
Agreement which, in each case, materially and adversely affects the interests of
the Holders or the Enhancer, if any, and continues unremedied for 60 days after
the giving of written notice of such failure to the Servicer by the Trustee, or
to the Servicer and the Trustee by the Enhancer, if any, or Holders owning in
the aggregate at least 25% of the Principal Balance of all outstanding
Securities; or (iii) certain events of insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceedings relating to the
Servicer and certain actions by the Servicer indicating insolvency,
reorganization or inability to pay its obligations. Under certain other
circumstances, the Enhancer, if any, with the consent of Holders owning in the
aggregate at least 51% of the Principal Balance of all outstanding Securities
may deliver written notice to the Servicer terminating all the rights and
obligations of the Servicer under the Agreement.
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Notwithstanding the foregoing, the Agreement provides that a delay in or
failure of performance referred to under clause (i) above for a period of ten
Business Days or referred to under clause (ii) above for a period of 60 Business
Days, will 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 or such delay or failure was caused by an act of God or other similar
occurrence. Under the Agreement, upon the occurrence of any such event, the
Servicer will not be relieved from using reasonable efforts to perform its
obligations in a timely manner in accordance with the terms of the Agreement and
the Servicer will provide the Trustee, the Depositor, the applicable Sellers,
any Enhancer and the Holders prompt notice of such failure or delay by it,
together with a description of its efforts to so perform its obligations.
Rights Upon an Event of Servicing Termination
Unless otherwise specified in the related Prospectus Supplement, so long
as an Event of Servicing Termination remains unremedied, either the Trustee, or
Holders owning in the aggregate at least 51% of the Principal Balance of all
outstanding Securities or any Credit Enhancer, may terminate all of the rights
and obligations of the Servicer under the Agreement and in and to the Mortgage
Loans, whereupon the Trustee will succeed to all the responsibilities, duties
and liabilities of the Servicer under the Agreement and will be entitled to
similar compensation arrangements. If the Trustee would be obligated to succeed
the Servicer but is unwilling or unable so to act, it may appoint, or petition a
court of competent jurisdiction for the appointment of, a housing and home
finance institution or other mortgage loan or home equity servicer with all
licenses and permits required to perform its obligations under the Agreement and
having a net worth of at least $15,000,000 and acceptable to any Credit Enhancer
to act as successor to the Servicer under the Agreement. Pending such
appointment, the Trustee will be obligated to act in such capacity unless
prohibited by law. Such successor will be entitled to receive the same
compensation that the Servicer would otherwise have received (or such lesser
compensation as the Trustee and such successor may agree). A receiver or
conservator for the Servicer may be empowered to prevent the termination and
replacement of the Servicer where the only Event of Servicing Termination that
has occurred is an Insolvency Event.
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THE AGREEMENTS
The following summaries describe certain provisions of the Agreements. The
summaries do not purport to be complete and are subject to, and qualified in
their entirety by reference to, the provisions of the Agreements. Where
particular provisions or terms used in the Agreements are referred to, such
provisions or terms are as specified in the related Agreements.
Assignment of Mortgage Loans
At the time of issuance of the Certificates, the Depositor will transfer
to the Trust all of its right, title and interest in and to each Mortgage Loan
(including any Additional Balances arising in the future), related Credit Line
Agreements, mortgages and other related documents (collectively, the "Related
Documents"), including all collections received on or with respect to each such
Mortgage Loan after the Cut-off Date (exclusive of payments in respect of
accrued interest due on or prior to the Cut-off Date). The Trustee, concurrently
with such transfer, will deliver the Securities to the Depositor and any
Transferor Certificate (as defined in the Agreement) to the related Seller or
Sellers. Each Mortgage Loan transferred to the Trust will be identified on a
schedule (the "Mortgage Loan Schedule") delivered to the Trustee pursuant to the
Agreement. Such schedule will include information as to the Cut-off Date
Principal Balance of each Mortgage Loan, as well as information with respect to
the Loan Rate.
Unless otherwise specified in the related Prospectus Supplement, the
Agreement will permit the applicable Seller to maintain possession of the
Related Documents and certain other documents relating to the Mortgage Loans
(the "Mortgage Files") and assignments of the related mortgages to the Trustee
will not be required to be recorded for so long as the senior unsecured debt of
Bank One is rated at levels satisfactory to each Rating Agency rating the
related Securities. If such rating does not satisfy such standards (an
"Assignment Event"), Bank One will have 90 days to record assignments of the
mortgages for each such Mortgage Loan in favor of the Trustee and will have 60
days to deliver the Mortgage File pertaining to each such Mortgage Loan to the
Trustee (unless opinions of counsel satisfactory to the Rating Agencies and any
Enhancer to the effect that recordation of such assignments or delivery of such
documentation is not required in the relevant jurisdiction to protect the
interest of the Trustee in the Mortgage Loans). In lieu of delivery of original
documentation, Bank One may deliver documents which have been imaged optically
upon delivery of an opinion of counsel that (i) such documents do not impair the
enforceability of the transfer to the Trust of the Mortgage Loans and (ii) the
optical image of such documents are enforceable in the relevant jurisdictions to
the same extent as the original documents.
Within 90 days of an Assignment Event, the Trustee will review the
Mortgage Files and if any Related Document is found to be defective in any
material respect and such defect is not cured within 90 days following
notification thereof to the applicable Seller and the Depositor by the Trustee,
the applicable Seller will be obligated to accept the transfer of such Mortgage
Loan from the Trust. Upon such transfer, the Principal Balance of such Mortgage
Loan will be deducted from the Pool Balance. If the related Series includes a
Transferor Interest, such deduction would reduce the Transferor Interest. If the
deduction would cause the Transferor Interest to become less than the Minimum
Transferor Interest at such time (a "Transfer Deficiency"), the Seller will be
obligated to either substitute an Eligible Substitute Mortgage Loan or make a
deposit into the Collection Account in the amount (the "Transfer Deposit
Amount") equal to the amount by which the Transferor Interest would be reduced
to less than the Minimum Transferor Interest at such time. Any such deduction,
substitution or deposit, will be considered for the purposes of the Agreement a
payment in full of such Mortgage Loan. Any Transfer Deposit Amount will be
treated as a Principal Collection. No such transfer shall be considered to have
occurred until the required deposit to the Collection Account is actually made.
The obligation of a Seller to accept a transfer of a Defective Mortgage Loan is
the sole remedy regarding any defects in the Mortgage File and Related Documents
available to the Trustee or the Certificateholders.
Unless otherwise specified in the related Prospectus Supplement, an
"Eligible Substitute Mortgage Loan" is a mortgage loan substituted by the
Depositor for a Defective Mortgage Loan which must, on the date of such
substitution, (i) have 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) that is approximately equal to the Transfer
Deficiency relating to such Defective Mortgage Loan: (ii) have a Loan Rate not
less than the Loan Rate of the Defective Mortgage Loan and not more than 1% in
excess of the Loan Rate of such Defective Mortgage Loan; (iii) have a Loan Rate
based on the same Index with adjustments to such Loan Rate made on the same
Interest Rate Adjustment Date as that of the Defective Mortgage Loan; (iv) have
a Margin that is not less than the Margin of the
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Defective Mortgage Loan and not more than 100 basis points higher than the
Margin for the Defective Mortgage Loan; (v) have a mortgage of the same or
higher level of priority as the mortgage relating to the Defective Mortgage
Loan; (vi) have a remaining term to maturity not more than six months earlier
and not more than 60 months later than the remaining term to maturity of the
Defective Mortgage Loan; (vii) comply with each representation and warranty as
to the Mortgage Loans set forth in the Agreement (deemed to be made as of the
date of substitution); (viii) in general, have an original Combined
Loan-to-Value Ratio not greater than that of the Defective Mortgage Loan; and
(ix) satisfy certain other conditions specified in the Agreement. To the extent
the Principal Balance of an Eligible Substitute Mortgage Loan is less than the
Principal Balance of the related Defective Mortgage Loan and to the extent that
the Transferor Interest, if any, would be reduced below the Minimum Transferor
Interest, the applicable Seller will be required to make a deposit to the
Collection Account equal to such difference.
The applicable Seller will make certain representations and warranties as
to the accuracy in all material respects of certain information furnished to the
Trustee with respect to each Mortgage Loan. In addition, the applicable Seller
will represent and warrant on the Closing Date that at the time of transfer to
the Depositor, such Seller has transferred or assigned all of its rights, title
and interest in or granted a security interest in each Mortgage Loan sold by it
and the Related Documents, free of any lien (subject to certain exceptions).
Upon discovery of a breach of any such representation and warranty which
materially and adversely affects the interests of the Holders or any Credit
Enhancer in the related Mortgage Loan and Related Documents, the applicable
Seller will have a period of 90 days after discovery or notice of the breach to
effect a cure. If the breach cannot be cured within the 90-day period, such
Seller will be obligated to accept a transfer of the Defective Mortgage Loan
from the Trust. The same procedure and limitations that are set forth in the
second preceding paragraph for the transfer of Defective Mortgage Loans will
apply to the transfer of a Mortgage Loan that is required to be transferred
because of such breach of a representation or warranty in the Agreement that
materially and adversely affects the interests of the Certificateholders.
Mortgage Loans required to be transferred to the Seller as described in
the preceding paragraphs are referred to as "Defective Mortgage Loans."
Reports to Holders
The Trustee or other entity specified in the related Prospectus Supplement
will prepare and forward to each Holder on each Distribution Date, or as soon
thereafter as is practicable, a statement setting forth, to the extent
applicable to any Series, among other things:
(i) the amount of principal distributed to Holders of the related
Securities and the outstanding principal balance of such Securities
following such distribution;
(ii) the amount of interest distributed to Holders of the related
Securities and the current interest on such Securities;
(iii) the amounts of (a) any overdue accrued interest included in
such distribution, (b) any remaining overdue accrued interest with respect
to such Securities or (c) any current shortfall in amounts to be
distributed as accrued interest to holders of such Securities;
(iv) the amounts of (a) any overdue payments of scheduled principal
included in such distribution, (b) any remaining overdue principal amounts
with respect to such Securities, (c) any current shortfall in receipt of
scheduled principal payments on the related Mortgage Loans or (d) any
realized losses or Liquidation Proceeds to be allocated as reductions in
the outstanding principal balances of such Securities;
(v) the amount received under any related Credit Enhancement, and
the remaining amount available under such Credit Enhancement;
(vi) the amount of any delinquencies with respect to payments on the
related Mortgage Loans;
(vii) the book value of any REO Mortgaged Property acquired by the
related Trust Fund; and
(viii) such other information as specified in the related Agreement.
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In addition, within a reasonable period of time after the end of each
calendar year the Trustee, unless otherwise specified in the related Prospectus
Supplement, will furnish to each Holder of record at any time during such
calendar year: (a) the aggregate of amounts reported pursuant to clauses (i),
(ii), and (iv)(d) above for such calendar year and (b) such information
specified in the related Agreement to enable Holders to prepare their tax
returns including, without limitation, the amount of original issue discount
accrued on the Securities, if applicable. Information in the Distribution Date
and annual statements provided to the Holders will not have been examined and
reported upon by an independent public accountant. However, the Servicer will
provide to the Trustee a report by independent public accountants with respect
to the Servicer's servicing of the Mortgage Loans. See "SERVICING OF
LOANS--Evidence as to Compliance".
Events of Default; Rights Upon Event of Default
Pooling and Servicing Agreement; Servicing Agreement. Unless otherwise
specified in the related Prospectus Supplement, Events of Default under the
Pooling and Servicing Agreement or Servicing Agreement for each Series of
Certificates are limited to the Events of Servicing Termination described under
"Servicing of the Mortgage Loans-Events of Servicing Termination."
Indenture. Unless otherwise specified in the related Prospectus
Supplement, Events of Default under the Indenture for each Series of Notes
include: (i) a default for thirty (30) days or more in the payment of any
principal of or interest on any Note of such Series; (ii) failure to perform any
other covenant of the Depositor or the Trust Fund in the Indenture which
continues for a period of sixty (60) days after notice thereof is given in
accordance with the procedures described in the related Prospectus Supplement;
(iii) any representation or warranty made by the Depositor in the Indenture or
in any certificate or other writing delivered pursuant thereto or in connection
therewith with respect to or affecting such Series having been incorrect in a
material respect of the time made, and such breach is not cured within sixty
(60) days after notice thereof is given in accordance with the procedures
described in the related Prospectus Supplement; (iv) certain events of
bankruptcy, insolvency, receivership or liquidation of the Depositor or the
Trust Fund; or (v) any other Event of Default provided with respect to Notes of
that Series.
If an Event of Default with respect to the Notes of any Series at the time
outstanding occurs and is continuing, either the Trustee or the holders of a
majority of the then aggregate outstanding amount of the Notes of such Series
may declare the principal amount (or, if the Notes of that Series are Zero
Coupon Securities, such portion of the principal amount as may be specified in
the terms of that Series, as provided in the related Prospectus Supplement) of
all the Notes of such Series to be due and payable immediately. Such declaration
may, under certain circumstances, be rescinded and annulled by the Holders of a
majority in aggregate outstanding amount of the Notes of such Series.
If, following an Event of Default with respect to any Series of Notes, the
Notes of such Series have been declared to be due and payable, the Trustee may,
in its discretion, notwithstanding such acceleration, elect to maintain
possession of the collateral securing the Notes of such Series and to continue
to apply distributions on such collateral as if there had been no declaration of
acceleration if such collateral continues to provide sufficient funds for the
payment of principal of and interest on the Notes of such Series as they would
have become due if there had not been such a declaration. In addition, the
Trustee may not sell or otherwise liquidate the collateral securing the Notes of
a Series following an Event of Default, other than a default in the payment of
any principal or interest on any Note of such Series for thirty (30) days or
more, unless (a) the Holders of 100% of the then aggregate outstanding amount of
the Notes of such Series consent to such sale, (b) the proceeds of such sale or
liquidation are sufficient to pay in full the principal of and accrued interest,
due and unpaid, on the outstanding Notes of such Series at the date of such sale
or (c) the Trustee determines that such collateral would not be sufficient on an
ongoing basis to make all payments on such Notes as such payments would have
become due if such Notes had not been declared due and payable, and the Trustee
obtains the consent of the Holders of 66% of the then aggregate outstanding
amount of the Notes of such Series.
In the event that the Trustee liquidates the collateral in connection with
an Event of Default involving a default for thirty (30) days or more in the
payment of principal of or interest on the Notes of a Series, the Indenture
provides that the Trustee will have a prior lien on the proceeds of any such
liquidation for unpaid fees and expenses. As a result, upon the occurrence of
such an Event of Default, the amount available for distribution to the
Noteholders would be less than would otherwise be the case. However, the Trustee
may not institute a proceeding for the enforcement of its lien except in
connection with a proceeding for the enforcement of the lien of the Indenture
for the benefit of the Noteholders after the occurrence of such an Event of
Default.
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Unless otherwise specified in the related Prospectus Supplement, in the
event the principal of the Notes of a Series is declared due and payable, as
described above, the holders of any such Notes issued at a discount from par may
be entitled to receive no more than an amount equal to the unpaid principal
amount thereof less the amount of such discount which is unamortized.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing with respect
to a Series of Notes, the Trustee shall be under no obligation to exercise any
of the rights or powers under the Indenture at the request or direction of any
of the Holders of Notes of such Series, unless such Holders offered to the
Trustee security or indemnity satisfactory to it against the costs, expenses and
liabilities which might be incurred by it in complying with such request or
direction. Subject to such provisions for indemnification and certain
limitations contained in the Indenture, the Holders of a majority of the then
aggregate outstanding amount of the Notes of such Series shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee with respect to the Notes of such Series, and the Holders of a majority
of the then aggregate outstanding amount of the Notes of such Series may, in
certain cases, waive any default with respect thereto, except a default in the
payment of principal or interest or a default in respect of a covenant or
provision of the Indenture that cannot be modified without the waiver or consent
of all the Holders of the outstanding Notes of such Series affected thereby.
The Trustee
The identity of the commercial bank, savings and loan association or trust
company named as the Trustee for each Series of Securities will be set forth in
the related Prospectus Supplement. The entity serving as Trustee may have normal
banking relationships with the Depositor or the Servicer. In addition, for the
purpose of meeting the legal requirements of certain local jurisdictions, the
Trustee will have the power to appoint co-trustees or separate trustees of all
or any part of the Trust Fund relating to a Series of Securities. In the event
of such appointment, all rights, powers, duties and obligations conferred or
imposed upon the Trustee by the Agreement relating to such Series will be
conferred or imposed upon the Trustee and each such separate trustee or
co-trustee jointly, or, in any jurisdiction in which the Trustee shall be
incompetent or unqualified to perform certain acts, singly upon such separate
trustee or co-trustee who shall exercise and perform such rights, powers, duties
and obligations solely at the direction of the Trustee. The Trustee may also
appoint agents to perform any of the responsibilities of the Trustee, which
agents shall have any or all of the rights, powers, duties and obligations of
the Trustee conferred on them by such appointment; provided that the Trustee
shall continue to be responsible for its duties and obligations under the
Agreement.
Duties of the Trustee
The Trustee will make no representations as to the validity or sufficiency
of the Agreement, the Securities or of any Mortgage Loan or related documents.
If no Event of Default (as defined in the related Agreement) has occurred, the
Trustee is required to perform only those duties specifically required of it
under the Agreement. Upon receipt of the various certificates, statements,
reports or other instruments required to be furnished to it, the Trustee is
required to examine them to determine whether they are in the form required by
the related Agreement; however, the Trustee will not be responsible for the
accuracy or content of any such documents furnished by it or the Holders to the
Servicer under the Agreement.
The Trustee may be held liable for its own negligent action or failure to
act, or for its own misconduct; provided, however, that the Trustee will not be
personally liable with respect to any action taken, suffered or omitted to be
taken by it in good faith in accordance with the direction of the Holders in an
Event of Default. The Trustee is not required to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
under the Agreement, or in the exercise of any of its rights or powers, if it
has reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
Resignation of Trustee
The Trustee may, upon written notice to the Depositor, resign at any time,
in which event the Depositor will be obligated to use its best efforts to
appoint a successor Trustee. If no successor Trustee has been appointed and has
accepted the appointment within 30 days after giving such notice of resignation,
the resigning Trustee may petition any court of competent jurisdiction for
appointment of a successor Trustee. The Trustee may also be
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removed at any time (i) if the Trustee ceases to be eligible to continue as such
under the Agreement, (ii) if the Trustee becomes insolvent or (iii) by the
Holders of Securities evidencing over 50% of the aggregate voting rights of the
Securities in the Trust Fund upon written notice to the Trustee and to the
Depositor. Any resignation or removal of the Trustee and appointment of a
successor Trustee will not become effective until acceptance of the appointment
by the successor Trustee.
Amendment of Agreement
Unless otherwise specified in the Prospectus Supplement, the Agreement for
each Series of Securities may be amended by the Depositor, the Servicer (with
respect to a Series relating to Mortgage Loans), and the Trustee with respect to
such Series, without notice to or consent of the Holders (i) to cure any
ambiguity, (ii) to correct any defective provisions or to correct or supplement
any provision therein, (iii) to add to the duties of the Depositor, the Trust
Fund or Servicer, (iv) to add any other provisions with respect to matters or
questions arising under such Agreement or related Credit Enhancement, (v) to add
or amend any provisions of such Agreement as required by a Rating Agency in
order to maintain or improve the rating of the Securities, or (vi) to comply
with any requirements imposed by the Code; provided that any such amendment
except pursuant to clause (vi) above will not adversely affect in any material
respect the interests of any Holders of such Series, as evidenced by an opinion
of counsel. Any such amendment except pursuant to clause (vi) of the preceding
sentence shall be deemed not to adversely affect in any material respect the
interests of any Holder if the Trustee receives written confirmation from each
Rating Agency rating such Securities that such amendment will not cause such
Rating Agency to reduce the then current rating of each Class thereof. Unless
otherwise specified in the Prospectus Supplement, the Agreement for each Series
may also be amended by the Trustee, the Servicer, if applicable, and the
Depositor with respect to such Series with the consent of the Holders possessing
not less than 662/3% of the aggregate outstanding principal amount of the
Securities of such Series or, if only certain Classes of such Series are
affected by such amendment, 662/3% of the aggregate outstanding principal amount
of the Securities of each Class of such Series affected thereby, for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of such Agreement or modifying in any manner the rights of Holders of
such Series; provided, however, that no such amendment may (a) reduce the amount
or delay the timing of payments on any Security without the consent of the
Holder of such Security; or (b) reduce the aforesaid percentage of the aggregate
outstanding principal amount of Securities of each Class, the Holders of which
are required to consent to any such amendment without the consent of the Holders
of 100% of the aggregate outstanding principal amount of each Class of
Securities affected thereby.
Voting Rights
The related Prospectus Supplement will set forth the method of determining
allocation of voting rights with respect to a Series.
List of Holders
Upon written request of three or more Holders of record of a Series for
purposes of communicating with other Holders with respect to their rights under
the Agreement, which request is accompanied by a copy of the communication which
such Holders propose to transmit, the Trustee will afford such Holders access
during business hours to the most recent list of Holders of that Series held by
the Trustee.
No Agreement will provide for the holding of any annual or other meeting
of Holders.
Termination
Pooling and Servicing Agreement; Trust Agreement. The obligations created
by the Pooling and Servicing Agreement or Trust Agreement for a Series will
terminate upon the distribution to Holders of all amounts distributable to them
pursuant to such Agreement after the earlier of (i) the later of (a) the final
payment or other liquidation of the last Mortgage Loan remaining in the Trust
Fund for such Series and (b) the disposition of all Mortgaged Property acquired
upon foreclosure or deed in lieu of foreclosure or repossession in respect of
any Mortgage Loan or (ii) the repurchase, as described below, by the Servicer or
other entity specified in the related Prospectus Supplement from the Trustee for
such Series of all Mortgage Loans and other Mortgaged Property at that time
subject to such Agreement. The Agreement for each Series permits, but does not
require, the Servicer or other entity specified in the related Prospectus
Supplement to purchase from the Trust Fund for such Series all remaining
Mortgage Loans at a price equal to, unless otherwise specified in the related
Prospectus Supplement, 100% of the
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aggregate Principal Balance of such Mortgage Loans plus, with respect to any
Mortgaged Property acquired in respect of a Mortgage Loan, if any, the
outstanding Principal Balance of the related Mortgage Loan at the time of
foreclosure, less, in either case, related unreimbursed Advances (in the case of
the Mortgage Loans, only to the extent not already reflected in the computation
of the aggregate Principal Balance of such Mortgage Loans) and unreimbursed
expenses (that are reimbursable pursuant to the terms of the Pooling and
Servicing Agreement) plus, in either case, accrued interest thereon at the
weighted average rate on the related Mortgage Loans through the last day of the
Due Period in which such repurchase occurs. The exercise of such right will
effect early retirement of the Securities of such Series, but such entity's
right to so purchase is subject to the aggregate Principal Balance of the
Mortgage Loans at the time of repurchase being less than a fixed percentage, to
be set forth in the related Prospectus Supplement, of the aggregate Principal
Balance of the Mortgage Loans as of the Cut-off Date. In no event, however, will
the trust created by the Agreement continue beyond the expiration of 21 years
from the death of the last survivor of certain persons identified therein. For
each Series, the Servicer or the Trustee, as applicable, will give written
notice of termination of the Agreement to each Holder, and the final
distribution will be made only upon surrender and cancellation of the Securities
at an office or agency specified in the notice of termination. If so provided in
the related Prospectus Supplement for a Series, the Depositor or another entity
may effect an optional termination of the Trust Fund under the circumstances
described in such Prospectus Supplement. See "DESCRIPTION OF THE
SECURITIES--Optional Purchase or Termination".
Indenture. The Indenture will be discharged with respect to a Series of
Notes (except with respect to certain continuing rights specified in the
Indenture) upon the delivery to the Trustee for cancellation of all the Notes of
such Series or, with certain limitations, upon deposit with the Trustee of funds
sufficient for the payment in full of all of the Notes of such Series.
In addition to such discharge with certain limitations, the Indenture will
provide that, if so specified with respect to the Notes of any Series, the
related Trust Fund will be discharged from any and all obligations in respect of
the Notes of such Series (except for certain obligations relating to temporary
Notes and exchange of Notes, to register the transfer of or exchange Notes of
such Series, to replace stolen, lost or mutilated Notes of such Series, to
maintain paying agencies and to-hold monies for payment in trust) upon the
deposit with the Trustee, in trust, of money and/or direct obligations of or
obligations guaranteed by the United States of America which through the payment
of interest and principal in respect thereof in accordance with their terms will
provide money in an amount sufficient to pay the principal of and each
installment of interest on the Notes of such Series on the Last Scheduled
Distribution Date for such Notes and any installment of interest on such Notes
in accordance with the terms of the Indenture and the Notes of such Series. In
the event of any such defeasance and discharge of Notes of such Series, holders
of Notes of such Series would be able to look only to such money and/or direct
obligations for payment of principal and interest, if any, on their Notes until
maturity.
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CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
The following discussion contains summaries of certain legal aspects of
mortgage loans which are general in nature. Because certain of such legal
aspects are governed by applicable state law (which laws may differ
substantially), the summaries do not purport to be complete nor reflect the laws
of any particular state, nor encompass the laws of all states in which the
properties securing the Mortgage Loans are situated. The summaries are qualified
in their entirety by reference to the applicable federal and state laws
governing the Mortgage Loans.
Mortgages
The Mortgage Loans for a Series will be secured by either mortgages or
deeds of trust or deeds to secure debt, depending upon the prevailing practice
in the state in which the Mortgaged Property subject to a mortgage loan is
located. The filing of a mortgage, deed of trust or deed to secure debt creates
a lien or title interest upon the real Mortgaged Property covered by such
instrument and represents the security for the repayment of an obligation that
is customarily evidenced by a promissory note. It is not prior to the lien for
real estate taxes and assessments or other charges imposed under governmental
police powers and may also be subject to other liens pursuant to the laws of the
jurisdiction in which the Mortgaged Property is located. Priority with respect
to such instruments depends on their terms, the knowledge of the parties to the
mortgage and generally on the order of recording with the applicable state,
county or municipal office. There are two parties to a mortgage, the mortgagor,
who is the borrower/Mortgaged Property owner or the land trustee (as described
below), and the mortgagee, who is the lender. Under the mortgage instrument, the
mortgagor delivers to the mortgagee a note or bond and the mortgage. In the case
of a land trust, there are three parties because title to the Mortgaged Property
is held by a land trustee under a land trust agreement of which the
borrower/Mortgaged Property owner is the beneficiary; at origination of a
mortgage loan, the borrower executes a separate undertaking to make payments on
the mortgage note. A deed of trust transaction normally has three parties, the
trustor, who is the borrower/Mortgaged Property owner; the beneficiary, who is
the lender, and the trustee, a third-party grantee. Under a deed of trust, the
trustor grants the Mortgaged Property, irrevocably until the debt is paid, in
trust, generally with a power of sale, to the trustee to secure payment of the
obligation. The mortgagee's authority under a mortgage and the trustee's
authority under a deed of trust are governed by the law of the state in which
the real Mortgaged Property is located, the express provisions of the mortgage
or deed of trust, and, in some cases, in deed of trust transactions, the
directions of the beneficiary.
Foreclosure on Mortgages
Foreclosure of a mortgage is generally accomplished by judicial action.
Generally, the action is initiated by the service of legal pleadings upon all
parties having an interest of record in the real Mortgaged Property. Delays in
completion of the foreclosure occasionally may result from difficulties in
locating necessary parties defendant. When the mortgagee's right to foreclosure
is contested, the legal proceedings necessary to resolve the issue can be
time-consuming and expensive. After the completion of a judicial foreclosure
proceeding, the court may issue a judgment of foreclosure and appoint a receiver
or other officer to conduct the sale of the Mortgaged Property. In some states,
mortgages may also be foreclosed by advertisement, pursuant to a power of sale
provided in the mortgage. Foreclosure of a mortgage by advertisement is
essentially similar to foreclosure of a deed of trust by non-judicial power of
sale.
Foreclosure of a deed of trust is generally accomplished by a non-judicial
trustee's sale under a specific provision in the deed of trust which authorizes
the trustee to sell the Mortgaged Property upon any default by the borrower
under the terms of the note or deed of trust. In certain states, such
foreclosure also may be accomplished by judicial action in the manner provided
for foreclosure of mortgages. In some states, the trustee must record a notice
of default and send a copy to the borrower-trustor and to any person who has
recorded a request for a copy of the notice of sale. In addition, the trustee in
some states must provide notice of default to any other individual having an
interest in the real Mortgaged Property, including any junior lienholders. If
the deed of trust is not reinstated within any applicable cure period, a notice
of sale must be posted in a public place and, in most states, published for a
specified period of time in one or more newspapers. In addition, some state laws
require that a copy of the notice of sale be posted on the Mortgaged Property
and sent to all parties having an interest of record in the Mortgaged Property.
The trustor, borrower, or any person having a junior encumbrance on the real
estate, may, during a reinstatement period, cure the default by paying the
entire amount in arrears plus costs and expenses incurred in enforcing the
obligation. Generally, state law controls the amount of foreclosure expenses and
costs,
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including attorney's fees, which may be recovered by a lender. If the deed of
trust is not reinstated, a notice of sale must be posted in a public place and,
in most states, published for a specified period of time in one or more
newspapers. In addition, some state laws require that a copy of the notice of
sale be posted on the Mortgaged Property, recorded and sent to all parties
having an interest in the real Mortgaged Property.
An action to foreclose a mortgage is an action to recover the mortgage
debt by enforcing the mortgagee's rights under the mortgage. It is regulated by
statutes and rules and subject throughout to the court's equitable powers.
Generally, a mortgagor is bound by the terms of the related mortgage note and
the mortgage as made and cannot be relieved from his default if the mortgagee
has exercised his rights in a commercially reasonable manner. However, since a
foreclosure action historically was equitable in nature, the court may exercise
equitable powers to relieve a mortgagor of a default and deny the mortgagee
foreclosure on proof that either the mortgagor's default was neither willful nor
in bad faith or the mortgagee's action established a waiver, fraud, bad faith,
or oppressive or unconscionable conduct such as to warrant a court of equity to
refuse affirmative relief to the mortgagee. Under certain circumstances a court
of equity may relieve the mortgagor from an entirely technical default where
such default was not willful.
A foreclosure action is subject to most of the delays and expenses of
other lawsuits if defenses or counterclaims are interposed, sometimes requiring
up to several years to complete. Moreover, a non-collusive, regularly conducted
foreclosure sale may be challenged as a fraudulent conveyance, regardless of the
parties' intent, if a court determines that the sale was for less than fair
consideration and such sale occurred while the mortgagor was insolvent and
within one year (or within the state statute of limitations if the trustee in
bankruptcy elects to proceed under state fraudulent conveyance law) of the
filing of bankruptcy. Similarly, a suit against the debtor on the related
mortgage note may take several years and, generally, is a remedy alternative to
foreclosure, the mortgagee being precluded from pursuing both at the same time.
In the case of foreclosure under either a mortgage or a deed of trust, the
sale by the referee or other designated officer or by the trustee is a public
sale. However, because of the difficulty potential third party purchasers at the
sale have in determining the exact status of title and because the physical
condition of the Mortgaged Property may have deteriorated during the foreclosure
proceedings, it is uncommon for a third party to purchase the Mortgaged Property
at a foreclosure sale. Rather, it is common for the lender to purchase the
Mortgaged Property from the trustee or referee for an amount which may be equal
to the unpaid principal amount of the mortgage note secured by the mortgage or
deed of trust plus accrued and unpaid interest and the expenses of foreclosure,
in which event the mortgagor's debt will be extinguished or the lender may
purchase for a lesser amount in order to preserve its right against a borrower
to seek a deficiency judgment in states where such a judgment is available.
Thereafter, subject to the right of the borrower in some states to remain in
possession during the redemption period, the lender will assume the burdens of
ownership, including obtaining hazard insurance, paying taxes and making such
repairs at its own expense as are necessary to render the Mortgaged Property
suitable for sale. The lender will commonly obtain the services of a real estate
broker and pay the broker's commission in connection with the sale of the
Mortgaged Property. Depending upon market conditions, the ultimate proceeds of
the sale of the Mortgaged Property may not equal the lender's investment in the
Mortgaged Property. Any loss may be reduced by the receipt of any mortgage
guaranty insurance proceeds.
Rights of Redemption
In some states, after sale pursuant to a deed of trust or foreclosure of a
mortgage, the trustor or mortgagor and foreclosed junior lienors are given a
statutory period in which to redeem the Mortgaged Property from the foreclosure
sale. The right of redemption should be distinguished from the equity of
redemption, which is a non-statutory right that must be exercised prior to the
foreclosure sale. In some states, redemption may occur only upon payment of the
entire principal balance of the loan, accrued interest and expenses of
foreclosure. In other states, redemption may be authorized if the former
borrower pays only a portion of the sums due. The effect of a statutory right of
redemption is to diminish the ability of the lender to sell the foreclosed
Mortgaged Property. The exercise of a right of redemption would defeat the title
of any purchaser at a foreclosure sale, or of any purchaser from the lender
subsequent to foreclosure or sale under a deed of trust. Consequently, the
practical effect of a right of redemption is to force the lender to retain the
Mortgaged Property and pay the expenses of ownership until the redemption period
has run. In some states, there is no right to redeem Mortgaged Property after a
trustee's sale under a deed of trust.
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Junior Mortgages; Rights of Senior Mortgages
The mortgage loans included in the Trust Fund for a Series will be secured
by mortgages or deeds of trust which may be second or more junior mortgages to
other mortgages held by other lenders or institutional investors. The rights of
the Trust Fund (and therefore the Holders), as mortgagee under a junior
mortgage, are subordinate to those of the mortgagee under the senior mortgage,
including the prior rights of the senior mortgagee to receive hazard insurance
and condemnation proceeds and to cause the Mortgaged Property securing the
mortgage loan to be sold upon default of the mortgagor, thereby extinguishing
the junior mortgagee's lien unless the junior mortgagee asserts its subordinate
interest in the Mortgaged Property in foreclosure litigation and, possibly,
satisfies the defaulted senior mortgage. A junior mortgagee may satisfy a
defaulted senior loan in full and, in some states, may cure such default and
bring the senior loan current, in either event adding the amounts expended to
the balance due on the junior loan. In most states, absent a provision in the
mortgage or deed of trust, no notice of default is required to be given to a
junior mortgagee.
The standard form of the mortgage used by most institutional lenders
confers on the mortgagee the right both to receive all proceeds collected under
any hazard insurance policy and all awards made in connection with condemnation
proceedings, and to apply such proceeds and awards to any indebtedness secured
by the mortgage, in such order as the mortgagee may determine. Thus, in the
event improvements on the Mortgaged Property are damaged or destroyed by fire or
other casualty, or in the event the Mortgaged Property is taken by condemnation,
the mortgagee or beneficiary under underlying senior mortgages will have the
prior right to collect any insurance proceeds payable under a hazard insurance
policy and any award of damages in connection with the condemnation and to apply
the same to the indebtedness secured by the senior mortgages. Proceeds in excess
of the amount of senior mortgage indebtedness, in most cases, may be applied to
the indebtedness of a junior mortgage.
Another provision sometimes found in the form of the mortgage or deed of
trust used by institutional lenders obligates the mortgagor to pay before
delinquency all taxes and assessments on the Mortgaged Property and, when due,
all encumbrances, charges and liens on the Mortgaged Property which appear prior
to the mortgage or deed of trust, to provide and maintain fire insurance on the
Mortgaged Property, to maintain and repair the Mortgaged Property and not to
commit or permit any waste thereof, and to appear in and defend any action or
proceeding purporting to affect the Mortgaged Property or the rights of the
mortgagee under the mortgage. Upon a failure of the mortgagor to perform any of
these obligations, the mortgagee is given the right under certain mortgages to
perform the obligation itself, at its election, with the mortgagor agreeing to
reimburse the mortgagee for any sums expended by the mortgagee on behalf of the
mortgagor. All sums so expended by the mortgagee become part of the indebtedness
secured by the mortgage.
The form of credit line trust deed or mortgage used by most institutional
lenders which make revolving home equity loans typically contains a "future
advance" clause, which provides, in essence, that additional amounts advanced to
or on behalf of the borrower by the beneficiary or lender are to be secured by
the deed of trust or mortgage. The priority of the lien securing any advance
made under the clause may depend in most states on whether the deed of trust or
mortgage is called and recorded as a credit line deed of trust or mortgage. If
the beneficiary or lender advances additional amounts, the advance is entitled
to receive the same priority as amounts initially advanced under the trust deed
or mortgage, notwithstanding the fact that there may be junior trust deeds or
mortgages and other liens which intervene between the date of recording of the
trust deed or mortgage and the date of the future advance, and notwithstanding
that the beneficiary or lender had actual knowledge of such intervening junior
trust deeds or mortgages and other liens at the time of the advance. In most
states, the trust deed or mortgage lien securing mortgage loans of the type
which includes revolving home equity credit lines applies retroactively to the
date of the original recording of the trust deed or mortgage, provided that the
total amount of advances under the home equity credit line does not exceed the
maximum specified principal amount of the recorded trust deed or mortgage,
except as to advances made after receipt by the lender of a written notice of
lien from a judgment lien creditor of the trustor.
Anti-Deficiency Legislation and Other Limitations on Lenders
Certain states have imposed statutory prohibitions which limit the
remedies of a beneficiary under a deed of trust or a mortgagee under a mortgage.
In some states, statutes limit the right of the beneficiary or mortgagee to
obtain a deficiency judgment against the borrower following foreclosure or sale
under a deed of trust. A deficiency judgment is a personal judgment against the
former borrower equal in most cases to the difference between the net amount
realized upon the public sale of the real Mortgaged Property and the amount due
to the lender. Other
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statutes require the beneficiary or mortgagee to exhaust the security afforded
under a deed of trust or mortgage by foreclosure in an attempt to satisfy the
full debt before bringing a personal action against the borrower. In certain
other states, the lender has the option of bringing a personal action against
the borrower on the debt without first exhausting such security; however, in
some of these states, the lender, following judgment on such personal action,
may be deemed to have elected a remedy and may be precluded from exercising
remedies with respect to the security. Consequently, the practical effect of the
election requirement, when applicable, is that lenders will usually proceed
first against the security rather than bringing a personal action against the
borrower. Finally, other statutory provisions limit any deficiency judgment
against the former borrower following a foreclosure sale to the excess of the
outstanding debt over the fair market value of the Mortgaged Property at the
time of the public sale. The purpose of these statutes is generally to prevent a
beneficiary or a mortgagee from obtaining a large deficiency judgment against
the former borrower as a result of low or no bids at the foreclosure sale.
In addition to laws limiting or prohibiting deficiency judgments, numerous
other statutory provisions, including the federal bankruptcy laws, the Federal
Soldiers' and Sailors' Civil Relief Act, and state laws affording relief to
debtors, may interfere with or affect the ability of the secured lender to
realize upon collateral and/or enforce a deficiency judgment. For example, with
respect to federal bankruptcy law, the filing of a petition acts as a stay
against the enforcement of remedies for collection of a debt. Moreover, a court
with federal bankruptcy jurisdiction may permit a debtor through a Chapter 13
Bankruptcy Code rehabilitative plan to cure a monetary default with respect to a
loan on a debtor's residence by paying arrearages within a reasonable time
period and reinstating the original loan payment schedule even though the lender
accelerated the loan and the lender has taken all steps to realize upon his
security (provided no sale of the Mortgaged Property has yet occurred) prior to
the filing of the debtor's Chapter 13 petition. Some courts with federal
bankruptcy jurisdiction have approved plans, based on the particular facts of
the reorganization case, that effected the curing of a loan default by
permitting the obligor to pay arrearages over a number of years.
Courts with federal bankruptcy jurisdiction have also indicated that the
terms of a mortgage loan may be modified if the borrower has filed a petition
under Chapter 13. These courts have suggested that such modifications may
include reducing the amount of each monthly payment, changing the rate of
interest, altering the repayment schedule and reducing the lender's security
interest to the value of the residence, thus leaving the lender a general
unsecured creditor for the difference between the value of the residence and the
outstanding balance of the loan. Federal bankruptcy law and limited case law
indicate that the foregoing modifications could not be applied to the terms of a
loan secured by Mortgaged Property that is the principal residence of the
debtor. In all cases, the secured creditor is entitled to the value of its
security plus post-petition interest, attorney's fees and costs to the extent
the value of the security exceeds the debt.
In a Chapter 11 case under the Bankruptcy Code, the lender is precluded
from foreclosing without authorization from the bankruptcy court. The lender's
lien may be transferred to other collateral and/or be limited in amount to the
value of the lender's interest in the collateral as of the date of the
bankruptcy. The loan term may be extended, the interest rate may be adjusted to
market rates and the priority of the loan may be subordinated to bankruptcy
court-approved financing. The bankruptcy court can, in effect, invalidate
due-on-sale clauses through confirmed Chapter 11 plans of reorganization.
The Bankruptcy Code provides priority to certain tax liens over the
lender's security. This may delay or interfere with the enforcement of rights in
respect of a defaulted Mortgage Loan. In addition, substantive requirements are
imposed upon lenders in connection with the organization and the servicing of
mortgage loans by numerous federal and some state consumer protection laws. The
laws include the federal Truth-in-Lending Act, Real Estate Settlement Procedures
Act, Equal Credit Opportunity Act, Fair Credit Billing Act, Fair Credit
Reporting Act and related statutes and regulations. These federal laws impose
specific statutory liabilities upon lenders who originate loans and who fail to
comply with the provisions of the law. In some cases, this liability may affect
assignees of the loans.
Due-on-Sale Clauses in Mortgage Loans
Due-on-sale clauses permit the lender to accelerate the maturity of the
loan if the borrower sells or transfers, whether voluntarily or involuntarily,
all or part of the real Mortgaged Property securing the loan without the
lender's prior written consent. The enforceability of these clauses has been the
subject of legislation or litigation in many states, and in some cases,
typically involving single family residential mortgage transactions, their
enforceability has been limited or denied. In any event, the Garn-St. Germain
Depository Institutions Act of 1982
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(the "Garn-St. Germain Act") preempts state constitutional, statutory and case
law that prohibits the enforcement of due-on-sale clauses and permits lenders to
enforce these clauses in accordance with their terms, subject to certain
exceptions. As a result, due-on-sale clauses have become generally enforceable
except in those states whose legislatures exercised their authority to regulate
the enforceability of such clauses with respect to mortgage loans that were (i)
originated or assumed during the "window period" under the Garn-St. Germain Act
which ended in all cases not later than October 15, 1982, and (ii) originated by
lenders other than national banks, federal savings institutions and federal
credit unions. FHLMC has taken the position in its published mortgage servicing
standards that, out of a total of eleven "window period states," five states
(Arizona, Michigan, Minnesota, New Mexico and Utah) have enacted statutes
extending, on various terms and for varying periods, the prohibition on
enforcement of due-on-sale clauses with respect to certain categories of window
period loans. Also, the Garn-St. Germain Act does "encourage" lenders to permit
assumption of loans at the original rate of interest or at some other rate less
than the average of the original rate and the market rate.
In addition, under federal bankruptcy law, due-on-sale clauses may not be
enforceable in bankruptcy proceedings and may, under certain circumstances, be
eliminated in any modified mortgage resulting from such bankruptcy proceeding.
Enforceability of Prepayment and Late Payment Fees
Forms of notes, mortgages and deeds of trust used by lenders may contain
provisions obligating the borrower to pay a late charge if payments are not
timely made, and in some circumstances may provide for prepayment fees or
penalties if the obligation is paid prior to maturity. In certain states, there
are or may be specific limitations upon the late charges which a lender may
collect from a borrower for delinquent payments. Certain states also limit the
amounts that a lender may collect from a borrower as an additional charge if the
loan is prepaid. Late charges and prepayment fees are typically retained by
servicers as additional servicing compensation.
Equitable Limitations on Remedies
In connection with lenders' attempts to realize upon their security,
courts have invoked general equitable principles. The equitable principles are
generally designed to relieve the borrower from the legal effect of his defaults
under the loan documents. Examples of judicial remedies that have been fashioned
include judicial requirements that the lender undertake affirmative and
expensive actions to determine the causes of the borrower's default and the
likelihood that the borrower will be able to reinstate the loan. In some cases,
courts have substituted their judgment for the lender's judgment and have
required that lenders reinstate loans or recast payment schedules in order to
accommodate borrowers who are suffering from temporary financial disability. In
other cases, courts have limited the right of a lender to realize upon his
security if the default under the security agreement is not monetary, such as
the borrower's failure to adequately maintain the Mortgaged Property or the
borrower's execution of secondary financing affecting the Mortgaged Property.
Finally, some courts have been faced with the issue of whether or not federal or
state constitutional provisions reflecting due process concerns for adequate
notice require that borrowers under security agreements receive notices in
addition to the statutorily-prescribed minimums. For the most part, these cases
have upheld the notice provisions as being reasonable or have found that, in
cases involving the sale by a trustee under a deed of trust or by a mortgagee
under a mortgage having a power of sale, there is insufficient state action to
afford constitutional protections to the borrower.
Most conventional single-family mortgage loans may be prepaid in full or
in part without penalty. The regulations of the Federal Home Loan Bank Board
prohibit the imposition of a prepayment penalty or equivalent fee for or in
connection with the acceleration of a loan by exercise of a due-on-sale clause.
A mortgagee to whom a prepayment in full has been tendered may be compelled to
give either a release of the mortgage or an instrument assigning the existing
mortgage. The absence of a restraint on prepayment, particularly with respect to
mortgage loans having higher mortgage rates, may increase the likelihood of
refinancing or other early retirements of such mortgage loans.
Applicability of Usury Laws
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980, enacted in March 1980 ("Title V"), provides that state usury
limitations shall not apply to certain types of residential first mortgage loans
originated by certain lenders after March 31, 1980. Similar federal statutes
were in effect with respect to mortgage loans made during the first three months
of 1980. The Federal Home Loan Bank Board is authorized to
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issue rules and regulations and to publish interpretations governing
implementation of Title V. Title V authorizes any state to reimpose interest
rate limits by adopting, before April 1, 1983, a state law, or by certifying
that the voters of such state have voted in favor of any provision,
constitutional or otherwise, which expressly rejects an application of the
federal law. Fifteen states adopted such a law prior to the April 1, 1983
deadline. In addition, even where Title V is not so rejected, any state is
authorized by the law to adopt a provision limiting discount points or other
charges on mortgage loans covered by Title V.
Soldiers' and Sailors' Civil Relief Act of 1940
Under the Soldiers' and Sailors' Civil Relief Act of 1940, members of all
branches of the military on active duty, including draftees and reservists in
military service, (i) are entitled to have interest rates reduced and capped at
6% per annum, on obligations (including Mortgage Loans) incurred prior to the
commencement of military service for the duration of military service, (ii) may
be entitled to a stay of proceedings on any kind of foreclosure or repossession
action in the case of defaults on such obligations entered into prior to
military service for the duration of military service and (iii) may have the
maturity of such obligations incurred prior to military service extended, the
payments lowered and the payment schedule readjusted for a period of time after
the completion of military service. However, the benefits of (i), (ii), or (iii)
above are subject to challenge by creditors and if, in the opinion of the court,
the ability of a person to comply with such obligations is not materially
impaired by military service, the court may apply equitable principles
accordingly. If a borrower's obligation to repay amounts otherwise due on a
Mortgage Loan included in a Trust Fund for a Series is relieved pursuant to the
Soldiers' and Sailors' Civil Relief Act of 1940, none of the Trust Fund, the
Servicer, the Depositor nor the Trustee will be required to advance such
amounts, and any loss in respect thereof may reduce the amounts available to be
paid to the Holders of the Securities of such Series. Unless otherwise specified
in the related Prospectus Supplement, any shortfalls in interest collections on
Mortgage Loans included in a Trust Fund for a Series resulting from application
of the Soldiers' and Sailors' Civil Relief Act of 1940 will be allocated to each
Class of Securities of such Series that is entitled to receive interest in
respect of such Mortgage Loans in proportion to the interest that each such
Class of Securities would have otherwise been entitled to receive in respect of
such Mortgage Loans had such interest shortfall not occurred.
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USE OF PROCEEDS
The Depositor will apply all or substantially all of the net proceeds from
the sale of each Series of Securities for one or more of the following purposes:
(i) to purchase the related Mortgage Loans, (ii) to repay indebtedness which has
been incurred to obtain funds to acquire such Mortgage Loans, (iii) to establish
any Reserve Funds described in the related Prospectus Supplement and (iv) to pay
costs of structuring and issuing such Securities, including the costs of
obtaining Credit Enhancement, if any. If so specified in the related Prospectus
Supplement, the purchase of the Mortgage Loans for a Series may be effected by
an exchange of Securities with the Seller of such Mortgage Loans.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
General
The following is a summary of certain United States federal income tax
consequences of an investment in the Securities by Holders that acquire their
Securities in their initial offering. This summary is based on the Internal
Revenue Code of 1986 (the "Code") as well as Treasury regulations and
administrative and judicial rulings and practice. Legislative, judicial and
administrative changes may occur, possibly with retroactive effect, that could
alter or modify the continued validity of the statements and conclusions set
forth herein. This summary does not purport to address all federal income tax
matters that may be relevant to particular holders. For example, it generally is
addressed only to original purchasers of the Securities that are U.S. holders"
(as defined below), deals only with Securities held as capital assets within the
meaning of Section 1221 of the Code, and does not address tax consequences to
holders that may be relevant to investors subject to special rules, such as
non-U.S. investors, banks, insurance companies, tax-exempt organizations,
dealers in securities or currencies, electing large partnerships, mutual funds,
REITs, RICs, natural persons, cash method taxpayers, S corporations, estates and
trusts, investors that hold the Securities as part of a hedge, straddle or
integrated or conversion transaction, or holders whose "functional currency" is
not the United States dollar. Further, it does not address alternative minimum
tax consequences or the indirect effects on the holders of equity interests in a
Holder of Securities. Investors should consult their own tax advisors to
determine the United States federal, state, local and other tax consequences of
the purchase, ownership and disposition of the Securities.
For these purposes, a U.S. holder is (i) a citizen or resident of the
United States, (ii) a corporation or partnership organized in or under the laws
of the United States, any state thereof or the District of Columbia (except, in
the case of a partnership, to the extent provided in Treasury regulations) or
(iii) an estate or trust defined in Section 7701(a)(30)(D) or (E) of the Code,
respectively. "Non-U.S. holder" means any holder that is not a United States
holder.
Prospective investors should note that no rulings have been or will be
sought from the Internal Revenue Service ("IRS") with respect to any of the U.S.
federal income tax consequences discussed herein and opinions of counsel are not
binding on the IRS or the courts. Thus, no assurance can be given that the IRS
will not take positions contrary to those described below. The opinions of
Orrick, Herrington & Sutcliffe LLP, special counsel to the Depositor, described
herein will be based upon certain representations and assumptions, including,
but not limited to, the assumption that all relevant parties will comply with
the terms of the Trust Agreement and related documents.
This summary is intended as an explanatory discussion of the possible
effects of the classification of the securities as debt or equity and of the
Trust as a grantor trust or as a partnership for U.S. federal income tax
purposes on investors generally and related tax matters affecting investors
generally, but does not purport to furnish information in the level of detail or
with the attention to the investor's specific tax circumstances that would be
provided by an investor's own tax adviser. Accordingly, each investor is advised
to consult its own advisers with regard to the tax consequences to it of
investing in the Securities.
For purposes of the following discussion, except as otherwise provided
herein, the terms "Holder," "Noteholder" and "Certificateholder" refer,
respectively, to the beneficial owner of a Note or Certificate.
The federal income tax consequences to Holders will vary depending on
whether (i) the Securities of a Series are classified as indebtedness; (ii) the
Securities represent an ownership interest in some or all of the assets included
in the Trust Fund for a Series; or (iii) the Trust Fund relating to a particular
Series of Certificates is treated as a partnership. The Prospectus Supplement
for each Series of Securities will specify how the Securities will be treated
for federal income tax purposes.
Pass-Through Debt Certificates
The related Prospectus Supplement may provide that the Transferor will
express in the Pooling and Servicing Agreement the intent that for federal,
state and local income and franchise tax purposes, the Certificates will be debt
secured by the Receivables. Any such Certificates are referred to as
"Pass-Through Debt Certificates." The Transferor, by entering into the Pooling
and Servicing Agreement, and each Holder, by the acceptance of a beneficial
interest in a Pass-Through Debt Certificate, will agree to treat Pass-Through
Debt Certificates as debt for federal, state and local income and franchise tax
purposes. However, the Pooling and Servicing Agreement generally refers to the
transfer of Receivables as a "transfer" and "sale," and because different
criteria are used in determining the non-tax accounting treatment of the
transaction, the Transferor will treat the Pooling and Servicing Agreement for
certain non-tax accounting purposes as causing a transfer of an ownership
interest in the Receivables and not as creating a debt obligation.
A basic premise of federal income tax law is that the economic substance
of a transaction generally determines its tax consequences. The form of a
transaction, while a relevant factor, is not conclusive evidence of its economic
substance. In appropriate circumstances, the courts have allowed taxpayers as
well as the Internal Revenue Service (the "IRS") to treat a transaction in
accordance with its economic substance, as determined under federal income tax
law, even through the participants in the transaction have characterized it
differently for non-tax purposes.
The determination of whether the economic substance of a purchase of an
interest in property is instead a loan secured by the transferred property has
been made by the IRS and the courts on the basis of numerous factors designed to
determine whether the transferor has relinquished (and the purchaser has
obtained) substantial incidents of ownership in the property. Among those
factors, the primary ones examined are whether the purchaser has the opportunity
to gain if the property increases in value, and has the risk of loss if the
property decreases in value. The related Prospectus Supplement may indicate that
Orrick, Herrington & Sutcliffe LLP, special federal income tax counsel to the
Transferors ("Tax Counsel") is of the opinion that, under current law, although
no transaction closely comparable to that contemplated herein has been the
subject of any Treasury regulation, revenue ruling or judicial decision, for
federal income tax purposes the Pass-Through Debt Certificates offered hereunder
will properly be characterized as debt. Assuming that such securities are
characterized as debt for federal income tax purposes, the discussion below
under "Taxation of Debt Securities" will apply.
Assuming that the Pass-Through Debt Certificates are characterized as
debt, the Trust would be disregarded for federal income tax purposes.
Alternatively, if there is more than one Holder of Transferor's Interest, the
Trust might be characterized as a separate entity owning the Receivables,
issuing its own debt, and jointly owned by the holders of the Transferor's
Interest. However, Tax Counsel is of the opinion that any such entity
constituted by the Trust will not be an association or publicly traded
partnership taxable as a corporation.
Possible Treatment of the Trust as a Partnership or a Publicly Traded
Partnership. Although as described above, Tax Counsel is of the opinion that the
Certificates will properly be treated as debt for federal income tax purposes
and that the Trust will not be treated as an association or publicly traded
partnership taxable as a corporation, such opinion does not bind the IRS or the
courts and thus no assurance can be given that such treatment will prevail.
Further, such opinion is made with respect to current law, which is subject to
change. If the IRS were to contend successfully that the Pass-Through Debt
Certificates were equity in the Trust for federal income tax purposes, the Trust
could be classified as a partnership or as a publicly traded partnership taxable
as a corporation for such purposes. Because Tax Counsel is of the opinion that
the Pass-Through Debt Certificates will be characterized as debt for federal
income tax purposes and because any holder of an interest in a Pass-Through Debt
Certificate will agree to treat that interest as debt for such purposes, no
attempt will be made to comply with any tax reporting requirements that would
apply as a result of such alternative characterizations.
If the Trust were treated in whole or in part as a partnership in which
some or all holders of interests in the publicly offered Pass-Through Debt
Certificates were partners, that partnership could be classified as a publicly
traded partnership, and so could be treated as a corporation. If the Trust were
classified as a publicly traded partnership it would avoid treatment as a
corporation if its income was not derived in the conduct of a "financial
business"; however, whether the income of the Trust would be so classified is
unclear.
If the arrangement created by the Pooling and Servicing Agreement were
treated in whole or in part as a publicly traded partnership treated as a
corporation, that entity would be subject to federal income tax at corporate tax
rates on its taxable income generated by ownership of the Receivables. That tax
could result in reduced distributions to Holders. No distributions from the
Trust would be deductible in computing the taxable income of the corporation,
except to the extent that any Certificates were treated as debt of the
corporation and distributions to the related Certificate Holders were treated as
payments of interest thereon. In addition, distributions to Certificate Holders
not treated as holding debt would be dividend income to the extent of the
current and accumulated earnings and profits of the corporation and Certificate
Holders may not be entitled to any dividends received deduction in respect of
such income and non-U.S. persons would be subject to withholding tax on such
dividend.
If the Trust were treated as a partnership other than a publicly traded
partnership treated as a corporation, the Holders would be taxed in a manner
similar to that described below under "Tax Consequences to Holders of the
Certificates."
Taxation of Debt Securities
Interest and Acquisition Discount. Interest (other than original issue
discount) on Securities that are characterized as indebtedness for federal
income tax purposes, including those denominated as Certificates (as described
above under "Pass-Through Debt Certificates"), will be includible in income by
holders thereof in accordance with their usual methods of accounting. Securities
characterized as debt for federal income tax purposes will be referred to
hereinafter collectively as "Debt Securities."
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Debt Securities that are Compound Interest Securities will, and certain of
the other Debt Securities may, be issued with "original issue discount" ("OID").
The following discussion is based in part on the rules governing OID which are
set forth in Sections 1271-1275 of the Code and the Treasury regulations issued
thereunder (the "OID Regulations"). A Holder should be aware, however, that the
OID Regulations do not adequately address certain issues relevant to, and in
some instances provide that they are not applicable to, prepayable securities
such as the Debt Securities.
In general, OID, if any, will equal the difference between the stated
redemption price at maturity of a Debt Security and its issue price. A holder of
a Debt Security must include such OID in gross income as ordinary interest
income as it accrues. In general, OID is included in income in advance of (or
concurrent with) the receipt of the cash representing that income. The amount of
OID on a Debt Security will be considered to be zero if it is less than a de
minimis amount determined under the Code.
The issue price of a Debt Security is the first price at which a
substantial amount of Debt Securities of that class are sold to the public
(excluding sales to bond houses, brokers, underwriters or wholesalers). If less
than a substantial amount of a particular class of Debt Securities is sold for
cash on or prior to the Closing Date, the issue price for such class will be
treated as the fair market value of such class on the Closing Date. The issue
price of a Debt Security will also include the amount paid by an initial Debt
Security holder for accrued interest that relates to a period prior to the issue
date of the Debt Security.
The stated redemption price at maturity of a Debt Security is equal to the
total of all payments to be made on such Debt Security other than "qualified
stated interest." In addition, that portion of the first interest payment in
excess of interest accrued from the Closing Date to the first Distribution Date
will be treated for federal income tax reporting purposes as includible in the
stated redemption price at maturity, and as excludible from income when received
as a payment of interest on the first Distribution Date (except to the extent of
any accrued market discount as of that date). The OID Regulations suggest,
however, that some or all of this pre-issuance accrued interest may be treated
as a separate asset (and hence not includible in a Debt Securities' issue price
or stated redemption price at maturity), whose cost is recovered entirely out of
interest paid on the first Distribution Date. It is unclear how an election to
do so would be made under the OID Regulations and whether such election could be
unilaterally made by a Holder. Under the OID Regulations, qualified stated
interest generally means interest payable at a single fixed rate that
appropriately takes into account the length of the interval between payments or
certain qualified variable rates provided that such interest payments are
unconditionally payable at intervals of one year or less during the entire term
of the Debt Security. In the case of Compound Interest Securities, certain
Interest Weighted Securities, and certain of the other Debt Securities, none of
the payments under the instrument will be considered qualified stated interest,
and thus the aggregate amount of all payments will be included in the stated
redemption price at maturity.
Under the de minimis rule, OID on a Debt Security will be considered to be
zero if such OID is less an 0.25% of the stated redemption price at maturity of
the Debt Security multiplied by the weighted average maturity of the Debt
Security. For this purpose, the weighted average maturity of the Debt Security
is computed as the sum of the amounts determined by multiplying the number of
full years (i.e., rounding down partial years) from the issue date until each
distribution in reduction of stated redemption price at maturity is scheduled to
be made by a fraction, the numerator of which is the amount of each distribution
included in the stated redemption price at maturity of the Debt Security and the
denominator of which is the stated redemption price at maturity of the Debt
Security. The IRS may take the position that this rule should be applied taking
into account the Prepayment Assumption (defined below). Under the OID
Regulations, Debt Securities bearing only qualified stated interest except for
any "teaser" rate, interest holiday or other similar provision are treated as
subject to the de minimis rule if the greater of the foregone interest (as
described in such regulations) or any excess of the Debt Securities' stated
principal amount over their issue price is less than such de minimis amount.
Holders generally must report de minimis OID pro rata as principal payments are
received, and such income will be capital gain if the Debt Security is held as a
capital asset. However, accrual method holders may elect to accrue all de
minimis OID as well as market discount under a constant interest method.
The holder of a Debt Security issued with OID must include in gross
income, for all days during its taxable year on which it holds such Debt
Security, the sum of the "daily portions" of such original issue discount. The
amount of OID includible in income by a holder will be computed by allocating to
each day during a taxable year a pro rata portion of the original issue discount
that accrued during the relevant accrual period. In the case of a Debt Security
the principal payments on which are not subject to acceleration resulting from
prepayments on the Mortgage Loans, the amount of OID includible in income of a
Holder for an accrual period (generally the period
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over which interest accrues on the debt instrument) will equal the product of
the yield to maturity of the Debt Security and the adjusted issue price of the
Debt Security, reduced by any payments of qualified stated interest. The
adjusted issue price is the sum of its issue price plus prior accruals or OID,
reduced by the total payments made with respect to such Debt Security in all
prior periods, other than qualified stated interest payments.
The amount of OID to be included in income by a holder of a debt
instrument, such as certain Classes of the Debt Securities, that is subject to
acceleration due to prepayments on other debt obligations securing such
instruments (a "Pay-Through Security"), is computed by taking into account the
anticipated rate of prepayments assumed in pricing the debt instrument (the
"Prepayment Assumption"). The amount of OID that will accrue during an accrual
period on a Pay-Through Security is the excess (if any) of (i) the sum of (a)
the present value of all payments remaining to be made on the Pay-Through
Security as of the close of the accrual period and (b) the payments during the
accrual period of amounts included in the stated redemption price of the
Pay-Through Security, over (ii) the adjusted issue price of the Pay-Through
Security at the beginning of the accrual period. The present value of the
remaining payments referred to in the preceding sentence will be determined on
the basis of three factors: (i) the original yield to maturity (giving effect to
the Prepayment Assumption) of the Pay-Through Security (determined on the basis
of compounding at the end of each accrual period and properly adjusted for the
length of the accrual period), (ii) events (including actual prepayments) that
have occurred before the end of the accrual period and (iii) the assumption that
the remaining payments will be made in accordance with the original Prepayment
Assumption. The effect of this method is to increase the portions of OID
required to be included in income by a Holder to take into account prepayments
with respect to the Mortgage Loans at a rate that exceeds the Prepayment
Assumption, and to decrease (but not below zero for any period) the portions of
original issue discount required to be included in income by a Holder of a
Pay-Through Security to take into account prepayments with respect to the
Mortgage Loans at a rate that is slower than the Prepayment Assumption. Although
original issue discount will be reported to Holders of Pay-Through Securities
based on the Prepayment Assumption, no representation is made to Holders that
Mortgage Loans will be prepaid at that rate or at any other rate.
A subsequent holder of a Debt Security will also be required to include
OID in gross income, but such a holder who purchases a Debt Security for an
amount that exceeds its adjusted issue price will be entitled (as will an
initial holder who pays more than a Debt Security's issue price) to offset such
OID by comparable economic accruals of portions of such excess.
Effects of Defaults and Delinquencies. Holders will be required to report
income with respect to the related Securities under an accrual method without
giving effect to delays and reductions in distributions attributable to a
default or delinquency on the Mortgage Loans, except possibly to the extent that
it can be established that such amounts are uncollectible. As a result, the
amount of income (including OID) reported by a holder of a Debt Security in any
period could significantly exceed the amount of cash distributed to such holder
in that period. The holder will eventually be allowed a loss (or will be allowed
to report a lesser amount of income) to the extent that the aggregate amount of
distributions on the Securities is reduced as a result of a Mortgage Loan
default. However, the timing and character of such losses or reductions in
income are uncertain and, accordingly, holders of Securities should consult
their own tax advisors on this point.
Interest Weighted Securities. It is not clear how income should be accrued
with respect to Stripped Securities (as defined under "-Tax Status as a Grantor
Trust; General" herein) the payments on which consist solely or primarily of a
specified portion of the interest payments on mortgages held by the Trust Fund
("Interest Weighted Securities"). The Depositor intends to take the position
that all of the income derived from an Interest Weighted Security should be
treated as OID and that the amount and rate of accrual of such OID should be
calculated by treating the Interest Weighted Security as a Compound Interest
Security. Alternatively, the IRS could assert that an Interest Weighted Security
should be taxable under the rules governing bonds issued with contingent
payments.
Variable Rate Debt Securities. In the case of Debt Securities bearing
interest at a rate that varies directly, according to a fixed formula, with an
objective index, it appears that (i) the yield to maturity of such Debt
Securities and (ii) in the case of Pay-Through Securities, the present value of
all payments remaining to be made on such Debt Securities, should be calculated
as if the interest index remained at its value as of the issue date of such
Securities. Because the proper method of adjusting accruals of OID on a variable
rate Debt Security is uncertain, holders of variable rate Debt Securities should
consult their own tax advisers regarding the appropriate treatment of such
Securities for federal income tax purposes.
Market Discount. A purchaser of a Security may be subject to the market
discount rules of Sections 1276-1278 of the Code. A Holder that acquires a Debt
Security with more than a prescribed de minimis amount of
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"market discount" (generally, the excess of the principal amount of the Debt
Security or, in the case of a Debt security issued with OID, the Debt
Securities' adjusted issue price, over the purchaser's purchase price) will be
required to include accrued market discount in income as ordinary income in each
month, but limited to an amount not exceeding the principal payments on the Debt
Security received in that month and, if the Securities are sold, the gain
realized. Such market discount would accrue in a manner to be provided in
Treasury regulations but, until such regulations are issued, such market
discount would, in general, accrue either (i) on the basis of a constant yield,
or (ii) in the ratio of (a) in the case of Securities (or in the case of a
Pass-Through Security, as set forth below, the Mortgage Loans underlying such
Security) not originally issued with original issue discount, stated interest
payable in the relevant period to total stated interest remaining to be paid at
the beginning of the period or (b) in the case of Securities (or, in the case of
a Pass-Through Security, as described below, the Mortgage Loans underlying such
Security) originally issued with original issue discount, OID in the relevant
period to total OID remaining to be paid as of the beginning of such period. The
Prepayment Assumption, if any, used in calculating the accrual of OID is to be
used in calculating the accrual of market discount under any of the above
methods.
Section 1277 of the Code provides that the excess of interest paid or
accrued to purchase or carry a Security (or, in the case of a Pass-Through
Security, as described below, the underlying Mortgage Loans) with market
discount over interest received on such Security is allowed as a current
deduction only to the extent such excess is greater than the market discount
that accrued during the taxable year in which such interest expense was
incurred. In general, the deferred portion of any interest expense will be
deductible when such market discount is included in income, including upon the
sale, disposition, or repayment of the Security (or in the case of a
Pass-Through Security, an underlying Mortgage Loan). A holder may elect to
include market discount in income currently as it accrues, on all market
discount obligations acquired by such holder during the taxable year such
election is made and thereafter, in which case the interest deferral rule will
not apply. Any such election is irrevocable without the consent of the IRS.
Premium. A holder who purchases a Debt Security (other than an Interest
Weighted Security at a cost greater than its stated redemption price at
maturity, generally will be considered to have purchased the Security at a
premium, which it may elect to amortize as an offset to interest income on such
Security (and not as a separate deduction item) on a constant yield method.
Although no regulations addressing the computation of premium accrual on
securities similar to the Securities have been issued, the legislative history
of the 1986 Act indicates that premium is to be accrued in the same manner as
market discount. Accordingly, it appears that the accrual of premium on a Class
of Pay-Through Securities will be calculated using the prepayment assumption (if
any) used in pricing such Class. If a holder makes an election to amortize
premium on a Debt Security, such election will apply to all taxable debt
instruments (including all REMIC regular interests and all pass-through
certificates representing ownership interests in a trust holding debt
obligations) held by the holder at the beginning of the taxable year in which
the election is made, and to all taxable debt instruments acquired thereafter by
such holder, and will be irrevocable without the consent of the IRS. Purchasers
who pay a premium for the Securities should consult their tax advisers regarding
the election to amortize premium and the method to be employed.
Election to Treat All Interest as Original Issue Discount. The OID
Regulations permit a holder of a Debt Security to elect to accrue all interest,
discount (including de minimis market or original issue discount) and premium in
income as interest, based on a constant yield method. If such an election were
to be made with respect to a Debt Security with market discount, the holder of
the Debt Security would be deemed to have made an election to include in income
currently market discount with respect to all other debt instruments having
market discount that such holder of the Debt Security acquires during the year
of the election or thereafter. Similarly, a holder of a Debt Security that makes
this election for a Debt Security that is acquired at a premium will be deemed
to have made an election to amortize bond premium with respect to all debt
instruments having amortizable bond premium that such holder owns or acquires.
The election to accrue interest, discount and premium on a constant yield method
with respect to a Debt Security is irrevocable without the consent of the IRS.
Tax Status as a Grantor Trust
General. The related Prospectus Supplement may provide that Orrick,
Herrington & Sutcliffe LLP, special counsel to the Depositor, will deliver an
opinion generally to the effect that the Trust Fund relating to a Series of
Securities will be classified for federal income tax purposes as a grantor trust
under Subpart E, Part 1 of Subchapter J of the Code and not as an association
taxable as (or a publicly traded partnership treated as) a corporation (the
Securities of such Series, "Pass-Through Securities"). In some Series there will
be no separation of the principal and interest payments on the Mortgage Loans.
In such circumstances, a Holder will be considered to have
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purchased a pro rata undivided interest in each of the Mortgage Loans. In other
cases ("Stripped Securities"), sale of the Securities will produce a separation
in the interest payments on the ownership of all or a portion of the principal
payments from all or a portion of Mortgage Loans.
Each Holder must report on its federal income tax return its share of the
gross income derived from the Mortgage Loans (not reduced by the amount payable
as fees to the Trustee and the Servicer and similar fees (collectively, the
"Servicing Fee")), at the same time and in the same manner as such items would
have been reported under the Holder's tax accounting method had it held its
interest in the Mortgage Loans directly, received directly its share of the
amounts received with respect to the Mortgage Loans, and paid directly its share
of the Servicing Fees. In the case of Pass-Through Securities other than
Stripped Securities, such income will consist of a pro rata share of all of the
income derived from all of the Mortgage Loans and, in the case of Stripped
Securities, such income will consist of a pro rata share of the income derived
from each stripped bond or stripped coupon in which the Holder owns an interest.
The holder of a Security will generally be entitled to deduct such Servicing
Fees under Section 162 or Section 212 of the Code to the extent that such
Servicing Fees represent "reasonable" compensation for the services rendered by
the Trustee and the Servicer (or third parties that are compensated for the
performance of services). In the case of a noncorporate holder, however,
Servicing Fees (to the extent not otherwise disallowed, e.g., because they
exceed reasonable compensation) will be deductible in computing such holder's
regular tax liability only to the extent that such fees, when added to other
miscellaneous itemized deductions, exceed 2% of adjusted gross income and may
not be deductible to any extent in computing such holder's alternative minimum
tax liability.
Discount or Premium on Pass-Through Securities. The holder's purchase
price of a Pass-Through Security is to be allocated among the Mortgage Loans in
proportion to their fair market values, determined as of the time of purchase of
the Securities. In the typical case, the Trustee (to the extent necessary to
fulfill its reporting obligations) will treat each Mortgage Loan as having a
fair market value proportional to the share of the aggregate principal balances
of all of the Mortgage Loans that it represents, since the Securities, unless
otherwise specified in the applicable Prospectus Supplement, will have a
relatively uniform interest rate and other common characteristics. To the extent
that the portion of the purchase price of a Pass-Through Security allocated to a
Mortgage Loan (other than to a right to receive any accrued interest thereon and
any undistributed principal payments) is less than or greater than the principal
balance of the Mortgage Loan, the interest in the Mortgage Loan allocable to the
Pass-Through Security will be deemed to have been acquired at a discount or
premium, respectively.
The treatment of any discount will depend on whether the discount
represents OID or market discount. In the case of a Mortgage Loan with OID in
excess of a prescribed de minimis amount or a Stripped Security (see below), a
holder of a Security will be required to report as interest income in each
taxable year its share of the amount of OID that accrues during that year in the
manner described above. OID with respect to a Mortgage Loan could arise, for
example, by virtue of the financing of points by the originator of the Mortgage
Loan, or by virtue of the charging of points by the originator of the Mortgage
Loan in an amount greater than a statutory de minimis exception, in
circumstances under which the points are not currently deductible pursuant to
applicable Code provisions. Any market discount or premium on a Mortgage Loan
will be includible in income, generally in the manner described above, except
that in the case of Pass-Through Securities, market discount is calculated with
respect to the Mortgage Loans underlying the Certificate, rather than with
respect to the Security.
Stripped Securities. A Stripped Security may represent a right to receive
only a portion of the interest payments on the Mortgage Loans, a right to
receive only principal payments on the Mortgage Loans, or a right to receive
certain payments of both interest and principal. Certain Stripped Securities
("Ratio Strip Securities") may represent a right to receive differing
percentages of both the interest and principal on each Loan. Pursuant to Section
1286 of the Code, the separation of ownership of the right to receive some or
all of the interest payments on an obligation from ownership of the right to
receive some or all of the principal payments results in the creation of
"stripped bonds" with respect to principal payments and "stripped coupons" with
respect to interest payments. Section 1286 of the Code applies the OID rules to
stripped bonds and stripped coupons. For purposes of computing original issue
discount, a stripped bond or a stripped coupon is treated as a debt instrument
issued on the date that such stripped interest is purchased with an issue price
equal to its purchase price or, if more than one stripped interest is purchased,
the ratable share of the purchase price allocable to such stripped interest.
Servicing fees in excess of reasonable servicing fees ("excess servicing")
will be treated under the stripped bond rules. Under such rules, excess
servicing will be treated as a stripped coupon. If the excess servicing fee is
no more than 100 basis points (i.e. 1% interest on the Mortgage Loan principal
balance) or the Securities are initially
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sold with a de minimis discount (assuming no prepayment assumption is required),
any non-de minimis discount arising from a subsequent transfer of the Securities
should be treated as market discount. The IRS appears to require that reasonable
servicing fees be calculated on a Loan by Loan basis, which could result in some
Mortgage Loans being treated as having more than 100 basis points of interest
stripped off.
The Code, OID Regulations and judicial decisions provide no direct
guidance as to how the interest and original issue discount rules are to apply
to Stripped Securities and other Pass-Through Securities. Under the method
described above for Pay-Through Securities (the "Cash Flow Bond Method"), a
prepayment assumption is used and periodic recalculations are made which take
into account with respect to each accrual period the effect of prepayments
during such period. It is believed, however, that the Cash Flow Bond Method is a
reasonable method of reporting income for such Securities, and it is expected
that OID will be reported on that basis unless otherwise specified in the
related Prospectus Supplement. In applying the calculation to Pass-Through
Securities, the Trustee will treat all payments to be received by a holder with
respect to the underlying Mortgage Loans as payments on a single installment
obligation. The IRS could, however, assert that original issue discount must be
calculated separately for each Mortgage Loan underlying a Security.
Under certain circumstances, if the Mortgage Loans prepay at a rate faster
than the Prepayment Assumption, the use of the Cash Flow Bond Method may
accelerate a Holder's recognition of income. If, however, the Mortgage Loans
prepay at a rate slower than the Prepayment Assumption, the use of this method
may decelerate a Holder's recognition of income.
In the case of a Stripped Security that is an Interest Weighted Security,
the Trustee intends, absent contrary authority, to report income to Security
holders as OID, in the manner described above for Interest Weighted Securities.
Possible Alternative Characterizations. The characterizations of the
Stripped Securities described above are not the only possible interpretations of
the applicable Code provisions. Given the variety of alternatives for treatment
of the Stripped Securities and the different federal income tax consequences
that result from each alternative, potential purchasers are urged to consult
their own tax advisers regarding the proper, treatment of the Securities for
federal income tax purposes.
Sale or Exchange
Subject to the discussion below with respect to Trust Funds treated as a
partnership, a Holder's tax basis in its Security is the price such holder pays
for a Security, plus amounts of original issue or market discount included in
income and reduced by any payments received (other than qualified stated
interest payments), and any amortized premium. Gain or loss recognized on a
sale, exchange, or redemption of a Security, measured by the difference between
the amount realized and the Security's basis as so adjusted, will generally be
capital gain or loss, assuming that the Security is held as a capital asset.
Tax Treatment of Foreign Investors
Subject to the discussion below with respect to Trust Funds treated as a
partnership, unless interest (including OID) paid on a Security is considered to
be "effectively connected" with a trade or business conducted in the United
States by a nonresident alien individual, foreign partnership or foreign
corporation ("Nonresidents"), such interest will normally qualify as portfolio
interest (except where (i) the recipient is a holder, directly or by
attribution, of 10% or more of the capital or profits interest in the issuer or
any of the beneficial owners of the issuer (or, with respect to any beneficial
owner that is a corporation, 10% or more of the total combined voting power of
all classes of stock entitled to vote), or (ii) the recipient is a controlled
foreign corporation to which the issuer is a related person) and will be exempt
from federal income tax. Upon receipt of appropriate ownership statements, the
issuer normally will be relieved of obligations to withhold tax from such
interest payments. These provisions supersede the generally applicable
provisions of United States law that would otherwise require the issuer to
withhold at a 30% rate (unless such rate were reduced or eliminated by an
applicable tax treaty) on, among other things, interest and other fixed or
determinable, annual or periodic income paid to Nonresidents.
Interest and OID of Holders who are foreign persons are not subject to
withholding if they are effectively connected with a United States business
conducted by the Holder. They will, however, generally be subject to the regular
United States income tax.
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Tax Characterization of the Trust as a Partnership
The related Prospectus Supplement may provide that Orrick, Herrington &
Sutcliffe LLP, special counsel to the Depositor, will deliver its opinion
generally to the effect that the Trust Fund relating to a specific Series of
Securities will be a partnership (or possibly a grantor trust) and not an
association (or publicly traded partnership) taxable as a corporation for
federal income tax purposes. This opinion will be based on the assumption that
the terms of the Trust Agreement and related documents will be complied with,
and on counsel's conclusions that either the nature of the income of the Trust
Fund will exempt it from the rule that certain publicly traded partnerships are
taxable as corporations or the issuance of the Certificates has been structured
as a private placement under an IRS safe harbor, so that the Trust Fund will not
be characterized as a publicly traded partnership taxable as a corporation.
If the Trust Fund were taxable as a corporation for federal income tax
purposes, the Trust Fund would be subject to corporate income tax on its taxable
income. The Trust Fund's taxable income would include all its income, possibly
reduced by its interest expense on the Notes. Any such corporate income tax
could materially reduce cash available to make payments on the Notes and
distributions on the Certificates, and Certificateholders could be liable for
any such tax that is unpaid by the Trust Fund.
Tax Consequences to Holders of the Notes
Treatment of the Notes as Indebtedness. The Trust Fund will agree, and the
Noteholders will agree by their purchase of Notes, to treat the Notes as debt
for federal income tax purposes. Special counsel to the Depositor will, except
as otherwise provided in the related Prospectus Supplement, advise the Depositor
that the Notes will be classified as debt for federal income tax purposes. The
discussion below assumes this characterization of the Notes is correct.
OID, Stripped Securities, etc. The discussion below assumes that all
payments on the Notes are denominated in U.S. dollars, and that the Notes are
not Stripped Securities. Moreover, the discussion assumes that the interest
formula for the Notes meets the requirements for "qualified stated interest"
under the OID regulations, and that any OID on the Notes does not exceed a de
minimis amount, all within the meaning of the OID regulations. If these
conditions are not satisfied with respect to any given series of Notes,
additional tax considerations with respect to such Notes will be disclosed in
the applicable Prospectus Supplement.
Interest Income on the Notes. Based on the above assumptions, except as
discussed in the following paragraph, the Notes will not be considered issued
with OID. The stated interest thereon will be taxable to a Noteholder as
ordinary interest income when received or accrued in accordance with such
Noteholder's method of tax accounting. Under the OID regulations, a holder of a
Note issued with a de minimis amount of OID must include such OID in income, on
a pro rata basis, as principal payments are made on the Note. A purchaser who
buys a Note for more or less than its principal amount will generally be
subject, respectively, to the premium amortization or market discount rules of
the Code.
Sale or Other Disposition. If a Noteholder sells a Note, the holder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the holder's adjusted tax basis in the Note. The
adjusted tax basis of a Note to a particular Noteholder will equal the holder's
cost for the Note, increased by any market discount, acquisition discount, OID
and gain previously included by such Noteholder in income with respect to the
Note and decreased by the amount of bond premium (if any) previously amortized
and by the amount of principal payments previously received by such Noteholder
with respect to such Note. Any such gain or loss will be capital gain or loss if
the Note was held as a capital asset, except for gain representing accrued
interest and accrued market discount not previously included in income. Capital
losses generally may be used only to offset capital gains.
Foreign Holders. Interest payments made (or accrued) to a Noteholder who
is a nonresident alien, foreign corporation or other non-United States person (a
"foreign person") generally will be considered "portfolio interest", and
generally will not be subject to United States federal income tax and
withholding tax, if the interest is not effectively connected with the conduct
of a trade or business within the United States by the foreign person and the
foreign person (i) is not actually or constructively a "10% shareholder" (within
the meaning of Section 871(h)(3)(B) of the Code) of the Trust or of any
beneficial owner therein or a "controlled foreign corporation" with respect to
which the Trust or any beneficial owner is a "related person" within the meaning
of the Code and (ii) provides the proper certifications. If such interest is not
portfolio interest, then it will be subject to United States federal income and
withholding tax at a rate of 30 percent, unless reduced or eliminated pursuant
to an applicable tax treaty.
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Any capital gain realized on the- sale, redemption, retirement or other
taxable disposition of a Note by a foreign person will be exempt from United
States federal income and withholding tax, provided that (i) such gain is not
effectively connected with the conduct of a trade or business in the United
States by the foreign person and (ii) in the case of an individual foreign
person, the foreign person is not present in the United States for 183 days or
more in the taxable year.
Possible Alternative Treatments of the Notes. If, contrary to the opinion
of special counsel to the Depositor, the IRS successfully asserted that one or
more of the Notes did not represent debt for federal income tax purposes, the
Notes might be treated as equity interests in the Trust Fund. If so treated, the
Trust Fund might be a publicly traded partnership treated as a corporation, with
the adverse consequences described above (and the publicly traded partnership
would not be able to reduce its taxable income by deductions for interest
expense on Notes recharacterized as equity). Further, treatment of the Notes as
equity interests in such a publicly traded partnership could have adverse tax
consequences to certain holders. For example, income to certain tax-exempt
entities (including pension funds) would be "unrelated business taxable income",
income to foreign holders generally would be subject to U.S. tax and U.S. tax
return filing and withholding requirements, and individual holders might be
subject to certain limitations on their ability to deduct their share of the
Trust Fund's expenses.
Tax Consequences to Holders of the Certificates
Treatment of the Trust Fund as a Partnership. The Trust Fund and the
Servicer will agree, and the Certificateholders will agree by their purchase of
Certificates, to treat the Trust Fund as a partnership for purposes of federal
and state income tax, franchise tax and any other tax measured in whole or in
part by income, with the assets of the partnership being the assets held by the
Trust Fund, the partners of the partnership being the Certificateholders, and
the Notes being debt of the partnership. However, the proper characterization of
the arrangement involving the Trust Fund, the Certificates, the Notes and the
Servicer is not clear because there is no authority on transactions closely
comparable to that contemplated herein.
A variety of alternative characterizations are possible. For example,
because the Certificates have certain features characteristic of debt, the
Certificates (while unlikely) might be considered debt of the Trust Fund. The
following discussion assumes that the Certificates represent equity interests in
a partnership.
Stripped Securities, etc. The following discussion assumes that all
payments on the Certificates are denominated in U.S. dollars, none of the
Certificates are Stripped Securities, and that a Series of Securities includes a
single class of Certificates. If these conditions are not satisfied with respect
to any given Series of Certificates, additional tax considerations with respect
to such Certificates will be disclosed in the applicable Prospectus Supplement.
Partnership Taxation. As a partnership, the Trust Fund will not be subject
to federal income tax. Rather, each Certificateholder will be required to
separately take into account such holder's allocated share of income, gains,
losses, deductions and credits of the Trust Fund. Such items generally will have
the same character (ordinary or capital, short-term or long-term) and source in
the hands of each Certificateholder as they have in the hands of the Trust Fund.
The Trust Fund's income will consist primarily of interest and finance charges
earned on the Mortgage Loans (including appropriate adjustments for market
discount, OID and bond premium) and any gain upon collection or disposition of
Mortgage Loans. The Trust Fund's deductions will consist primarily of interest
accruing with respect to the Notes, servicing and other fees, and losses or
deductions upon collection or disposition of Mortgage Loans.
The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement (here, the
Trust Agreement and related documents). The Trust Agreement will provide, in
general, that the Certificateholders will be allocated taxable income of the
Trust Fund for each month equal to the sum of (i) the interest that accrues on
the Certificates in accordance with their terms for such month, including
interest accruing at the Pass Through Rate for such month and interest on
amounts previously due on the Certificates but not yet distributed; (ii) any
Trust Fund income attributable to discount on the Mortgage Loans that
corresponds to any excess of the principal amount of the Certificates over their
initial issue price; (iii) prepayment premium payable to the Certificateholders
for such month; and (iv) any other amounts of income payable to the
Certificateholders for such month. Such allocation will be reduced by any
amortization by the Trust Fund of premium on Mortgage Loans that corresponds to
any excess of the issue price of Certificates over their principal amount. All
remaining taxable income of the Trust Fund may be allocated to the Depositor or
may be allocated pro rata among the Certificateholders. Based on the economic
arrangement of the parties, this approach
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for allocating Trust Fund income should be permissible under applicable Treasury
regulations, although no assurance can be given that the IRS would not require a
greater amount of income to be allocated to the Certificateholders. Moreover,
even under the foregoing method of allocation, Certificateholders may be
allocated income equal to the entire Pass Through Rate plus the other items
described above even though the Trust Fund might not have sufficient cash to
make current cash distributions of such amount. Thus, cash basis holders will in
effect be required to report income from the Certificates on the accrual basis
and Certificateholders may become liable for taxes on Trust Fund income even if
they have not received cash from the Trust Fund to pay such taxes. In addition,
because tax allocations and tax reporting will be done on a uniform basis for
all Certificateholders, but Certificateholders may be purchasing Certificates at
different times and at different prices, Certificateholders may be required to
report on their tax returns taxable income that is greater or less than the
amount reported to them by the Trust Fund. In addition, if the Trust Fund's
payments on the Certificates is payable to the Certificateholders without regard
to the income of the Trust Fund, the Trust Fund's payment of such amounts to
Certificateholders may be treated as "guaranteed payments" within the meaning of
Section 707(c) of the Code, and not as a distributive share of the Trust Fund's
income. Such guaranteed payments will constitute ordinary income to a
Certificateholder but may not be considered interest income for U.S. federal
income tax purposes.
All of the taxable income allocated to a Certificateholder that is a
pension, profit sharing or employee benefit plan or other tax-exempt entity
(including an individual retirement account) will constitute "unrelated business
taxable income generally taxable to such a holder under the Code.
An individual taxpayer's share of expenses of the Trust Fund (including
fees to the Servicer but not interest expense) would be miscellaneous itemized
deductions. Such deductions might be disallowed to the individual in whole or in
part and might result in such holder being taxed on an amount of income that
exceeds the amount of cash actually distributed to such holder over the life of
the Trust Fund.
The Trust Fund intends to make all tax calculations relating to income and
allocations to Certificateholders on an aggregate basis. If the IRS were to
require that such calculations be made separately for each Mortgage Loan, the
Trust Fund might be required to incur additional expense but it is believed that
there would not be a material adverse effect on Certificateholders.
Discount and Premium. The trust may have OID income, since the Mortgage
Loans may have been issued with OID. In addition, the purchase price paid by the
Trust Fund for the Mortgage Loans may be greater or less than the remaining
principal balance of the Mortgage Loans at the time of purchase. If so, the
Mortgage Loan will have been acquired at a premium or discount, as the case may
be. (As indicated above, the Trust Fund will make this calculation on an
aggregate basis, but might be required to recompute it on a Loan by Loan basis.)
If the Trust Fund acquires the Mortgage Loans at a market discount or
premium, the Trust Fund will elect to include any such discount in income
currently as it accrues over the life of the Mortgage Loans or to offset any
such premium against interest income on the Mortgage Loans. As indicated above,
a portion of such market discount income or premium deduction may be allocated
to Certificateholders.
Section 708 Termination. Under Section 708 of the Code, the Trust Fund
will be deemed to terminate for federal income tax purposes if 50% or more of
the capital and profits interests in the Trust Fund are sold or exchanged within
a 12-month period. If such a termination occurs, the Trust Fund will be
considered to have transferred all of its assets and liabilities to a new
partnership and then to have immediately liquidated and distributed the
interests in the new partnership to the continuing Certificateholders. The Trust
Fund will not comply with certain technical requirements that might apply when
such a constructive termination occurs. As a result, the Trust Fund may be
subject to certain tax penalties and may incur additional expenses if it is
required to comply with those requirements. Furthermore, the Trust Fund might
not be able to comply due to lack of data.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of Certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificates sold.
A Certificateholder's tax basis in a Certificate will generally equal the
holder's cost increased by the holder's share of Trust Fund income and decreased
by any distributions received with respect to such Certificate. In addition,
both the tax basis in the Certificates and the amount realized on a sale of a
Certificate would include the holder's share of the Notes and other liabilities
of the Trust Fund. A holder acquiring Certificates at different prices may be
required to maintain a single aggregate adjusted tax basis in such Certificates,
and, upon sale or other disposition of some of the Certificates, allocate a
portion of such aggregate tax basis to the Certificates sold (rather than
maintaining a separate tax basis in each Certificate for purposes of computing
gain or loss on a sale of that Certificate).
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Any gain on the sale of a Certificate attributable to the holder's share
of unrecognized accrued market discount on the Mortgage Loans would generally be
treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The Trust Fund does not expect to have any other assets
that would give rise to such special reporting requirements. Thus, to avoid
those special reporting requirements, the Trust Fund will elect to include
market discount in income as it accrues.
If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash distributions with respect thereto, such excess will generally give rise to
a capital loss upon the retirement of the Certificates.
Allocations Between Transferors and Transferees. In general, the Trust
Fund's taxable income and losses will be determined monthly and the tax items
for a particular calendar month will be apportioned among the Certificateholders
in proportion to the principal amount of Certificates owned by them as of the
close of the last day of such month. As a result, a holder purchasing
Certificates may be allocated tax items (which will affect its tax liability and
tax basis) attributable to periods before it purchased its Certificates.
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or losses
of the Trust Fund might be reallocated among the Certificateholders. The Trust
Fund's method of allocation between transferors and transferees may be revised
to conform to a method permitted by future regulations.
Section 754 Election. In the event that a Certificateholder sells its
Certificates at a profit (loss), the purchasing Certificateholder will have a
higher (lower) basis in the Certificates than the selling Certificateholder had.
The tax basis of the Trust Fund's assets will not be adjusted to reflect that
higher (or lower) basis unless the Trust Fund were to file an election under
Section 754 of the Code. In order to avoid the administrative complexities that
would be involved in keeping accurate accounting records, as well as potentially
onerous information reporting requirements, the Trust Fund will not make such
election. As a result, Certificateholders might be allocated a greater or lesser
amount of Trust Fund income than would be appropriate based on their own
purchase price for Certificates.
Administrative Matters. The Owner Trustee is required to keep or have kept
complete and accurate books of the Trust Fund. Such books will be maintained for
financial reporting and tax purposes on an accrual basis and the fiscal year of
the Trust will be the calendar year. The Trustee will file a partnership
information return (IRS Form 1065) with the IRS for each taxable year of the
Trust Fund and will report each Certificateholder's allocable share of items of
Trust Fund income and expense to holders and the IRS on Schedule K-1. The Trust
Fund will provide the Schedule K-1 information to nominees that fail to provide
the Trust Fund with the information statement described below and such nominees
will be required to forward such information to the beneficial owners of the
Certificates. Generally, holders must file tax returns that are consistent with
the information return filed by the Trust Fund or be subject to penalties unless
the holder notifies the IRS of all such inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as a
nominee at any time during a calendar year is required to furnish the Trust Fund
with a statement containing certain information on the nominee, the beneficial
owners and the Certificates so held. Such information includes (i) the name,
address and taxpayer identification number of the nominee and (ii) as to each
beneficial owner (x) the name, address and identification number of such person,
(y) whether such person is a United States person, a tax-exempt entity or a
foreign government, an international organization, or any wholly owned agency or
instrumentality of either of the foregoing, and (z) certain information on
Certificates that were held, bought or sold on behalf of such person throughout
the year. In addition, brokers and financial institutions that hold Certificates
through a nominee are required to furnish directly to the Trust Fund information
as to themselves and their ownership of Certificates. A clearing agency
registered under Section 17A of the Exchange Act is not required to furnish any
such information statement to the Trust Fund. The information referred to above
for any calendar year must be furnished to the Trust Fund on or before the
following January 31. Nominees, brokers and financial institutions that fail to
provide the Trust Fund with the information described above may be subject to
penalties.
It is expected that the Depositor will be designated as (or the
attorney-in-fact for) the tax matters partner in the related Trust Agreement
and, as such, will be responsible for representing the Certificateholders in any
dispute with the IRS. The Code provides for administrative examination of a
partnership as if the partnership was a separate and distinct taxpayer.
Generally, the statute of limitations for partnership items does not expire
before three years
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after the date on which the partnership information return is filed. Any adverse
determination following an audit of the return of the Trust Fund by the
appropriate taxing authorities could result in an adjustment of the returns of
the Certificateholders, and, under certain circumstances, a Certificateholder
may be precluded from separately litigating a proposed adjustment to the items
of the Trust Fund. An adjustment could also result in an audit of a
Certificateholder's returns and adjustments of items not related to the income
and losses of the Trust Fund.
If and to the extent that the recognition of a Certificateholder's
distributive share of the partnership's losses reduces the Certificateholder's
adjusted tax basis in its Certificate below zero, the recognition of such losses
by the Certificateholder will be deferred until such time as the recognition of
such losses will not reduce its basis below zero. To the extent that the
partnership's cash distributions (or constructive cash distributions, as
described above) reduce a Certificateholder's adjusted tax basis in its
Certificate below zero, such distributions will constitute income to such holder
and will be treated as gain derived from the sale or exchange of the holder's
interest in the partnership.
Tax Consequences to Foreign Certificateholders. Under the terms of the
Trust Agreement, the Certificates may not be acquired by or for the account of
an individual or entity that is not a U.S. person as defined in Section
7701(a)(30) of the Code, and any transfer of a Certificate to a person that is
not a U.S. person shall be void.
STATE TAX CONSIDERATIONS
In addition to the federal income tax consequences described in "Certain
Federal Income Tax Considerations," potential investors should consider the
state and local income tax consequences of the acquisition, ownership, and
disposition of the Securities. State and local income tax law may differ
substantially from the corresponding federal law, and this discussion does not
purport to describe any aspect of the income tax laws of any state or locality.
Therefore, potential investors should consult their own tax advisors with
respect to the various state and local tax consequences of an investment in the
Securities.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA")
and Section 4975 of the Code impose certain restrictions on employee benefit
plans subject to ERISA and on plans and other arrangements subject to Section
4975 of the Code ("Plans"), and on persons who are parties in interest or
disqualified persons ("parties in interest") with respect to such Plans. Certain
employee benefit plans, such as governmental plans and church plans (if no
election has been made under Section 410(d) of the Code), are not subject to the
restrictions of ERISA or Section 4975 of the Code , and assets of such plans may
be invested in the Securities without regard to the ERISA considerations
described below, subject to other applicable federal and state law. However, any
such governmental or church plan which is qualified under Section 401(a) of the
Code and exempt from taxation under Section 501(a) of the Code is subject to the
prohibited transaction rules set forth in Section 503 of the Code.
Investments by most Plans are subject to ERISA's general fiduciary
requirements, including the requirement of investment prudence and
diversification and the requirement that a Plan's investments be made in
accordance with the documents governing the Plan.
Section 406 of ERISA prohibits parties in interest with respect to a Plan
from engaging in certain transactions ("prohibited transactions") involving a
Plan and its assets unless a statutory or administrative exemption applies to
the transaction. Section 4975 of the Code imposes certain excise taxes (or, in
some cases, a civil penalty may be assessed pursuant to Section 502(i) of ERISA)
on parties in interest which engage in nonexempt prohibited transactions.
The United States Department of Labor ("DOL") has issued a final
regulation (29 C.F.R. Section 2510.3-101) containing rules for determining what
constitutes the assets of a Plan. This regulation provides that, as a general
rule, the underlying assets and properties of corporations, partnerships, trusts
and certain other entities in which a Plan makes an investment in an "equity
interest" will be deemed, for purposes of ERISA and Section 4975 of the Code to
be assets of the Plan ("plan assets") unless certain exceptions apply.
Under the terms of the DOL regulation, the Trust Fund may be deemed to
hold plan assets by reason of a Plan's investment in a Security; such plan
assets would include an undivided interest in the Mortgage Loans and any other
assets held by the Trust Fund. In such an event, persons providing services with
respect to the assets of the Trust Fund may be parties in interest, subject to
the fiduciary responsibility provisions of ERISA, including the
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prohibited transaction provisions of Section 406 of ERISA and Section 4975 of
the Code, with respect to transactions involving such assets unless such
transactions are subject to a statutory or administrative exemption.
One such exception applies if the interest acquired by a Plan is treated
as indebtedness under applicable local law and has no substantial equity
features. Generally, a profits interest in a partnership, an undivided ownership
interest in Mortgaged Property and a beneficial ownership interest in a trust
are deemed to be "equity interests" under the DOL regulation. If Notes of a
particular Series were deemed to be indebtedness under applicable local law
without any substantial equity features, an investing Plan's assets would
include such Notes, but not, by reason of the Plan's investment, the underlying
assets of the Trust Fund.
Another such exception applies if the class of equity interests in
question is: (i) "widely held" (held by 100 or more investors who are
independent of the Depositor and each other); (ii) freely transferable; and
(iii) sold as part of an offering pursuant to (A) an effective registration
statement under the Securities Act of 1933, and then subsequently registered
under the Securities Exchange Act of 1934 or (B) an effective registration
statement under Section 12(b) or 12(g) of the Securities Exchange Act of 1934
("Publicly Offered Securities"). In addition, the DOL regulation provides that
if at all times more than 75% of the value of each class of equity interests in
the Trust Fund are held by investors other than benefit plan investors (which is
defined as including Plans, government, church and foreign plans and individual
retirement accounts), the investing Plan's assets will not include any of the
underlying assets of the Depositor or the Trust Fund.
An additional exemption may also be available. The DOL has granted to many
underwriters substantially similar administrative exemptions from certain of the
prohibited transaction rules of ERISA and Section 4975 of the Code with respect
to the initial purchase, the holding and the subsequent resale by Plans of
securities representing interests in asset-backed pass-through trusts that
consist of certain receivables, loans and other obligations that meet the
conditions and requirements of the exemption. These securities may include the
Certificates of a Series, and depending upon the particular characteristics of a
Series, may include the Notes. The obligations covered by such exemptions
include obligations such as the Mortgage Loans. The exemptions may apply to the
acquisition, holding and resale of the Securities by a Plan, provided that
certain conditions (certain of which are described below) are met.
Among the conditions which must be satisfied for the exemptions to apply
are the following:
(i) The acquisition of the Securities by a Plan is on terms
(including the price for the Securities) that are at least as favorable to
the Plan as they would be in an arm's-length transaction with an unrelated
party;
(ii) The rights and interests evidenced by the Securities acquired
by the Plan are not subordinated to the rights and interests evidenced by
other securities of the Trust Fund;
(iii) The Securities acquired by the Plan have received a rating at
the time of such acquisition that is in one of the three highest generic
rating categories from either Standard & Poor's Ratings Services
("Standard & Poor's"), Moody's Investors Service, Inc. ("Moody's"), Duff &
Phelps Credit Rating Co. ("D&P") or Fitch IBCA, Inc. ("Fitch");
(iv) The sum of all payments made to the underwriter in connection
with the distribution of the Securities represents not more than
reasonable compensation for underwriting the Securities. The sum of all
payments made to and retained by the Seller pursuant to the sale of the
obligations to the Trust represents not more than the fair market value of
such obligations. The sum of all payments made to and retained by the
Servicer represents not more than reasonable compensation for the
Servicer's services under the related servicing agreement and
reimbursement of the Servicer's reasonable expenses in connection
therewith;
(v) The Trustee must not be an affiliate of any other member of the
Restricted Group (as defined below); and
(vi) The Plan investing in the Securities is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the Securities
and Exchange Commission under the Securities Act of 1933.
In order for the exemptions to apply, the Trust Fund also must meet the
following requirements:
(i) the corpus of the Trust Fund must consist solely of assets of
the type which have been included in other investment pools;
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(ii) securities in such other investment pools must have been rated
in one of the three highest rating categories of Standard & Poor's,
Moody's, D&P or Fitch for at least one year prior to the Plan's
acquisition of securities; and
(iii) securities evidencing interests in such other investment pools
must have been purchased by investors other than Plans for at least one
year prior to any Plan's acquisition of Securities.
Moreover, the exemptions provide relief from certain self-dealing/conflict
of interest prohibited transactions that may occur when the Plan fiduciary
causes a Plan to acquire securities in a trust in which the fiduciary (or its
affiliate) is an obligor on the receivables held in the trust, provided that,
among other requirements, (i) in the case of an acquisition in connection with
the initial issuance of Securities, at least fifty (50) percent of each Class of
Securities in which Plans have invested is acquired by persons independent of
the Restricted Group and at least fifty (50) percent of the aggregate interest
in the trust is acquired by persons independent of the Restricted Group; (ii)
such fiduciary (or its affiliate) is an obligor with respect to five (5) percent
or less of the fair market value of the obligations contained in the trust;
(iii) the Plan's investment in Securities does not exceed twenty-five (25)
percent of all of the Securities issued by the Trust Fund outstanding after the
acquisition; and (iv) no more than twenty-five (25) percent of the assets of the
Plan are invested in securities representing an interest in one or more trusts
containing assets sold or serviced by the same entity. The Exemption does not
apply to Plans sponsored by the Depositor, the underwriters of the Securities,
the Trustee, the Servicer, any obligor with respect to obligations included in a
Trust Fund constituting more than five (5) percent of the aggregate unamortized
principal balance of the assets in a Trust Fund, or any affiliate of such
parties (the "Restricted Group").
Prospective Plan investors should consult with their legal advisors
concerning the impact of ERISA and the Code, the potential application of the
exemptions described above to the purchase and holding of the Securities, and
the potential consequences to their specific circumstances, prior to making an
investment in the Securities. Moreover, each Plan fiduciary should determine
whether, under the general fiduciary standards of investment procedure and
diversification, an investment in the Securities is appropriate for the Plan,
taking into account the overall investment policy of the Plan and the
composition of the Plan's investment portfolio.
LEGAL INVESTMENT
Unless otherwise specified in the related Prospectus Supplement, the
Securities will not constitute "mortgage-related securities" within the meaning
of SMMEA. Accordingly, investors whose investment authority is subject to legal
restrictions should consult their own legal advisors to determine whether and to
what extent the Securities constitute legal investments for them.
PLAN OF DISTRIBUTION
The Depositor may offer each Series of Securities through one or more
firms (including, if so specified, certain affiliates of Banc One Corporation)
designated at the time of each offering of such Securities and identified in the
related Prospectus Supplement. The Prospectus Supplement relating to each Series
of Securities will set forth the specific terms of the offering of such Series
of Securities and of each Class within such Series, the names of the
underwriters, the purchase price of the Securities, the proceeds to the
Depositor from such sale, any securities exchange on which the Securities may be
listed, and, if applicable, the initial public offering prices, the discounts
and commissions to the underwriters and any discounts and concessions allowed or
reallowed to certain dealers. The place and time of delivery of each Series of
Securities will also be set forth in the Prospectus Supplement relating to such
Series.
LEGAL MATTERS
Unless otherwise specified in the related Prospectus Supplement, certain
legal matters in connection with the Securities will be passed upon for the
Company by Orrick, Herrington & Sutcliffe LLP, New York, New York.
GLOSSARY OF TERMS
The following are abbreviated definitions of certain capitalized terms
used in this Prospectus. Unless otherwise provided in a "Supplemental Glossary"
in the Prospectus Supplement for a Series, such definitions shall apply to
capitalized terms used in such Prospectus Supplement. The definitions may vary
from those in the related
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Agreement for a Series and the related Agreement for a Series generally provides
a more complete definition of certain of the terms. Reference should be made to
the related Agreement for a Series for a more compete definition of such terms.
"Advance" means cash advanced by the Servicer in respect of delinquent
payments of principal of and interest on a Mortgage Loan, and for any other
purposes specified in the related Prospectus Supplement.
"Agreement" means, with respect to a Series of Certificates, the Pooling
and Servicing Agreement or Trust Agreement, and, with respect to a Series of
Notes, the Indenture and the Servicing Agreement, as the context requires.
"Appraised Value" means, with respect to Mortgaged Property securing a
Mortgage Loan, the lesser of the appraised value determined in an appraisal
obtained at origination of the Mortgage Loan or sales price of such Mortgaged
Property at such time.
"Assumed Reinvestment Rate" means, with respect to a Series, the per annum
rate or rates specified in the related Prospectus Supplement for a particular
period or periods as the "Assumed Reinvestment Rate" for funds held in any fund
or account for the Series.
"Available Distribution Amount" means the amount in the Distribution
Account (including amounts deposited therein from any reserve fund or other fund
or account) eligible for distribution to Holders on a Distribution Date.
"Bankruptcy Code" means the federal bankruptcy code, 11 United States Code
101 et seq., and related rules and regulations promulgated thereunder.
"Business Day" means a day that, in the City of New York or in the city or
cities in which the corporate trust office of the Trustee are located, is
neither a legal holiday nor a day on which banking institutions are authorized
or obligated by law, regulations or executive order to be closed.
"Certificate" means the Asset-Backed Certificates.
"Class" means a Class of Securities of a Series.
"Closing Date" means, with respect to a Series, the date specified in the
related Prospectus Supplement as the date on which Securities of such Series are
first issued.
"Code" means the Internal Revenue Code of 1986.
"Collection Account" means, with respect to a Series, the account
established in the name of the Servicer for the deposit by the Servicer of
payments received from the Mortgage Loans.
"Combined Loan-to-Value Ratio" means, with respect to a Mortgage Loan, the
ratio determined as set forth in the related Prospectus Supplement taking into
account the amounts of any related senior mortgage loans on the related
Mortgaged Property.
"Commission" means the Securities and Exchange Commission.
"Condominium" means a form of ownership of real Mortgaged Property wherein
each owner is entitled to the exclusive ownership and possession of his or her
individual Condominium Unit and also owns a proportionate undivided interest in
all parts of the Condominium Building (other than the individual Condominium
Units) and all areas or facilities, if any, for the common use of the
Condominium Units.
"Condominium Association" means the person(s) appointed or elected by the
Condominium Unit owners to govern the affairs of the Condominium.
"Condominium Building" means a multi-unit building or buildings, or a
group of buildings whether or not attached to each other, located on Mortgaged
Property subject to Condominium ownership.
"Condominium Loan" means a Loan secured by a Mortgage on a Condominium
Unit (together with its appurtenant interest in the common elements).
"Condominium Unit" means an individual housing unit in a Condominium
Building.
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"Cooperative" means a corporation owned by tenant-stockholders who,
through the ownership of stock, shares or membership securities in the
corporation, receive proprietary leases or occupancy agreements which confer
exclusive rights to occupy specific units and which is described in Section 216
of the Code.
"Cooperative Dwelling" means an individual housing unit in a building
owned by a Cooperative.
"Cooperative Loan" means a housing loan made with respect to a Cooperative
Dwelling and secured by an assignment by the borrower (tenant-stockholder) or
security interest in shares issued by the applicable Cooperative.
"Credit Enhancement" means the enhancement for a Series, if any, specified
in the related Prospectus Supplement.
"Cut-off Date" means the date designated as such in the related Prospectus
Supplement for a Series.
"Debt Securities" means Securities characterized as indebtedness for
federal income tax purposes, and Regular Interest Securities.
"Deferred Interest" means the excess of the interest accrued on the
outstanding principal balance of a Mortgage Loan during a specified period over
the amount of interest required to be paid by an obligor on such Mortgage Loan
on the related Due Date.
"Depositor" means Banc One ABS Corporation.
"Distribution Account" means, with respect to a Series, the account
established in the name of the Trustee for the deposit of remittances received
from the Servicer with respect to the Mortgage Loans.
"Distribution Date" means, with respect to a Series or Class of
Securities, each date specified as a distribution date for such Series or Class
in the related Prospectus Supplement.
"Due Date" means each date, as specified in the related Prospectus
Supplement for a Series, on which any payment of principal or interest is due
and payable by the obligor on any Primary Asset pursuant to the terms thereof.
"Eligible Investments" means any one or more of the obligations or
securities described as such in the related Agreement.
"Enhancer" means the provider of the Credit Enhancement for a Series
specified in the related Prospectus Supplement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Account" means an account, established and maintained by the
Servicer for a Mortgage Loan, into which payments by borrowers to pay taxes,
assessments, mortgage and hazard insurance premiums and other comparable items
required to be paid to the mortgagee are deposited.
"FHLMC" means the Federal Home Loan Mortgage Corporation.
"Final Scheduled Distribution Date" means, with respect to a Class of
Notes of a Series, the date no later than which principal thereof will be fully
paid and with respect to a Class of Certificates of a Series, the date after
which no Certificates of such Class will remain outstanding, in each case based
on the assumptions set forth in the related Prospectus Supplement.
"FNMA" means the Federal National Mortgage Association.
"Holder" means the person or entity in whose name a Security is
registered.
"HUD" means the United States Department of Housing and Urban Development.
"Indenture" means the indenture relating to a Series of Notes between the
Trust Fund and the Trustee.
"Index" means the index applicable to any adjustments in the Mortgage Loan
Rates of any adjustable rate Mortgage Loans.
"Insurance Policies" means certain mortgage insurance, hazard insurance
and other insurance policies required to be maintained with respect to Mortgage
Loans.
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"Insurance Proceeds" means amounts paid by the insurer under any of the
Insurance Policies covering any Mortgage Loan or Mortgaged Property.
"Interest Only Securities" means a Class of Securities entitled solely or
primarily to distributions of interest and which is identified as such in the
related Prospectus Supplement.
"IRS" means the Internal Revenue Service.
"Lifetime Rate Cap" means the lifetime limit, if any, on the Mortgage Loan
Rate during the life of each adjustable rate Mortgage Loan.
"Liquidation Proceeds" means amounts received by the Servicer in
connection with the liquidation of a Mortgage Loan, net of liquidation expenses.
"Loan Rate" means, unless otherwise indicated herein or in the Prospectus
Supplement, the interest rate borne by a Mortgage Loan.
"Loan-to-Value Ratio" means, with respect to a Mortgage Loan, the ratio
determined as set forth in the related Prospectus Supplement.
"Minimum Rate" means the lifetime minimum Loan Rate during the life of
each adjustable rate Mortgage Loan.
"Modification" means a change in any term of a Mortgage Loan.
"Mortgage" means the mortgage, deed of trust or other similar security
instrument securing a Mortgage Note.
"Mortgage Loan" means a revolving home equity loan or line of credit
secured by a Mortgaged Property.
"Mortgage Loan Group" means, with respect to the Mortgage Loans and other
assets comprising the Trust Fund of a Series, a group of such Mortgage Loans and
other assets having the characteristics described in the related Prospectus
Supplement.
"Mortgage Note" means the note or other evidence of indebtedness of a
Mortgagor under the Mortgage Loan.
"Mortgaged Property" means a Mortgaged Property securing a Mortgage Loan.
"Mortgagor" means the obligor on a Mortgage Note.
"1986 Act" means the Tax Reform Act of 1986.
"Notes" means the Asset-Backed Notes.
"Notional Amount" means the amount set forth in the related Prospectus
Supplement for a Class of Interest Only Securities.
"Participating Securities" means Securities entitled to receive payments
of principal and interest and an additional return on investment as described in
the related Prospectus Supplement.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust (including any beneficiary thereof),
unincorporated organization, or government or any agency or political
subdivision thereof.
"Pooling and Servicing Agreement" means the pooling and servicing
agreement relating to a Series of Certificates among the Depositor, the Servicer
and the Trustee.
"Principal Balance" means, with respect to a Mortgage Loan and as of a Due
Date, the original principal amount of the Mortgage Loan, plus the amount of any
Deferred Interest added to such principal amount, reduced by all payments, both
scheduled or otherwise, received on such Mortgage Loan prior to such Due Date
and applied to principal in accordance with the terms of the Mortgage Loan.
"Principal Only Securities" means a Class of Securities entitled solely or
primarily to distributions of principal and identified as such in the Prospectus
Supplement.
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"Qualified Insurer" means a mortgage guarantee or insurance company duly
qualified as such under the laws of the states in which the Mortgaged Properties
are located duly authorized and licensed in such states to transact the
applicable insurance business and to write the insurance provided.
"Rating Agency" means the nationally recognized statistical rating
organization (or organizations) which was (or were) requested by the Depositor
to rate the Securities upon the original issuance thereof.
"REO Mortgaged Property" means real Mortgaged Property which secured a
defaulted Mortgage Loan, beneficial ownership of which has been acquired upon
foreclosure, deed in lieu of foreclosure, repossession or otherwise.
"Reserve Fund" means, with respect to a Series, any Reserve Fund
established pursuant to the related Agreement.
"Retained Interest" means, with respect to a Mortgage Loan, the amount or
percentage specified in the related Prospectus Supplement which is not included
in the Trust Fund for the related Series.
"Scheduled Payments" means the scheduled payments of principal and
interest to be made by the borrower on a Mortgage Loan.
"Securities" means the Notes or the Certificates.
"Seller" means the seller of the Mortgage Loans to the Depositor
identified in the related Prospectus Supplement for a Series.
"Senior Securityholder" means a holder of a Senior Security.
"Senior Securities" means a Class of Securities as to which the Holders'
rights to receive distributions of principal and interest are senior to the
rights of Holders of Subordinate Securities, to the extent specified in the
related Prospectus Supplement.
"Series" means a separate series of Securities sold pursuant to this
Prospectus and the related Prospectus Supplement.
"Servicer" means, with respect to a Series, the Person if any, designated
in the related Prospectus Supplement to service Mortgage Loans for that Series,
or the successors or assigns of such Person.
"Single Family Mortgaged Property" means Mortgaged Property securing a
Mortgage Loan consisting of one- to four-family attached or detached residential
housing, including Cooperative Dwellings.
"Subordinate Securityholder" means a Holder of a Subordinate Security.
"Subordinated Securities" means a Class of Securities as to which the
rights of holders to receive distributions of principal, interest or both is
subordinated to the rights of holders of Senior Securities, and may be allocated
losses and shortfalls prior to the allocation thereof to other Classes of
Securities, to the extent and under the circumstances specified in the related
Prospectus Supplement.
"Trustee" means the trustee under the applicable Agreement and its
successors.
"Trust Fund" means, with respect to any Series of Securities, the trust
holding all money, instruments, securities and other Mortgaged Property,
including all proceeds thereof, which are, with respect to a Series of
Certificates, held for the benefit of the Holders by the Trustee under the
Pooling and Servicing Agreement or Trust Agreement, or, with respect to a Series
of Notes, pledged to the Trustee under the Indenture as a security for such
Notes, including, without limitation, the Mortgage Loans (except any Retained
Interests), all amounts in the Distribution Account, Collection Account or
Reserve Funds, distributions on the Mortgage Loans (net of servicing fees), and
reinvestment earnings on such net distributions and any Credit Enhancement and
all other Mortgaged Property and interests held by or pledged to the Trustee
pursuant to the related Agreement for such Series.
"UCC" means the Uniform Commercial Code.
"Zero Coupon Security" means a Security entitled to receive payments of
principal only.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below are the expenses expected to be incurred by Banc One
ABS Corporation (the "Registrant") in connection with the issuance and
distribution of the securities being registered other than underwriting
discounts and commissions and costs represented by the salaries and wages of
regular employees and officers of the Registrants. All such expenses, other than
the Filing Fee, are estimated expenses.
Filing Fee for Registration Statement..........................$1,032,500
Legal Fees and Expenses..........................................$500,000
Accounting Fees and Expenses.....................................$200,000
Trustees' Fees and Expenses (including counsel fees)..............$75,000
Printing and Engraving Fees......................................$100,000
Rating Agency Fees...............................................$250,000
Blue Sky and legal investment fees and expenses...................$25,000
Miscellaneous.....................................................$50,000
Total...................................................$2,232,500
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Neither any Pooling and Servicing Agreement to be entered into among
any of the trusts to be formed, the Registrant, Bank One, N.A. as Servicer and
the Trustee hereunder (the "Pooling and Servicing Agreement"), relating to the
securities being registered, will provide for the indemnification of any
director, officer, employee or agents of the Registrant or Bank One, N.A., in
its capacity as Servicer thereunder, or in connection with any loss, liability
or expense incurred in connection with legal action relating to the Pooling and
Servicing Agreement and the securities issued pursuant thereto or related
thereto. The Pooling and Servicing Agreement will provide that any director,
officer, employee or agent of Bank One, N.A., in its capacity as Servicer
thereunder, may rely on any document of any kind which it in good faith
reasonably believes to be genuine and to have been adopted or signed by the
proper authorities respecting any matters arising thereunder.
Section 1701.13(E) of the Ohio General Corporation Law sets forth
provisions which define the extent which a corporation may indemnify directors,
officers and employees. Those provisions have been adopted by the Registrant in
Article VI of Registrant's Code of Regulations, which provides as follows:
The Corporation may indemnify any director or officer, any
former director or officer of the Corporation and any person who is or
has served at the request of the Corporation as a director, officer or
trustee of any other corporation, partnership, joint venture, trust or
other enterprise (and his heirs, executors and administrators) against
expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement, actually and reasonably incurred by him by reason of the
fact that he is or was such director, officer or trustee in connection
with any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, to the full
extent and according to the procedures and requirements set forth in
the Ohio General Corporation Law as the same may be in effect from time
to time. The indemnification provided for herein shall not be deemed to
restrict the right of the Corporation to (i) indemnify employees,
agents and others permitted by such Law, (ii) purchase and maintain
insurance or provide similar protection on behalf of directors,
officers or such other persons against liabilities asserted against
them or expenses incurred by them arising out of their service to the
Corporation as contemplated herein, and (iii) enter into agreements
with such directors, officers, employees, agents or others indemnifying
them against any and all liabilities (or such lesser indemnification as
may be provided in such agreement) asserted against them or incurred by
them arising out of their service to the Corporation as contemplated
herein.
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The Registrant's parent, BANC ONE CORPORATION, has entered into
indemnification agreements with certain directors and executive officers of the
Registrant that provide for indemnification unless the indemnitee's conduct is
finally adjudged by a court be knowingly fraudulent, deliberately dishonest or
willful misconduct.
ITEM 16. FINANCIAL STATEMENTS AND EXHIBITS.
A list of exhibits included as part of this Registration Statement is
set forth in the Exhibit Index which immediately precedes such exhibits and is
hereby incorporated by reference herein.
ITEM 17. UNDERTAKINGS.
(A) UNDERTAKING PURSUANT TO RULE 415:
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or event arising after the
effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or
any material change to such information in this registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by
the Registrants pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in this
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(B) UNDERTAKING IN RESPECT OF DOCUMENTS SUBSEQUENTLY FILED THAT ARE
INCORPORATED BY REFERENCE:
The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the Registration
Statement shall be deemed a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
2
<PAGE> 147
(C) UNDERTAKING IN RESPECT OF INDEMNIFICATION
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
3
<PAGE> 148
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Banc One ABS
Corporation certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Pre-Effective Amendment No. 1 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Columbus,
State of Ohio, on the 2nd day of September 1998.
BANC ONE ABS CORPORATION
By: *
-------------------------------
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment No. 1 to the Registration Statement has been signed
below by the following person(s) in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Name Title Date
* Director and President September 2, 1998
<S> <C> <C>
----------------------
Peter W. Atwater (Principal Executive, Financial and
Accounting Officer)
/s/Suzanne Bachman Director September 2, 1998
----------------------
Suzanne Bachman
* Director September 2, 1998
----------------------
Ted R. Schindler
*By: /s/Suzanne Bachman
------------------
Attorney-in-Fact
</TABLE>
4
<PAGE> 149
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Exhibit Number Numbered Page
<S> <C>
1.1 - Form of Underwriting Agreement
3.1* - Articles of Incorporation of Banc One
ABS Corporation
3.2* - Code of Regulations of Banc One ABS Corporation
4.1* - Form of Pooling and Servicing Agreement
4.2 - Form of Trust Agreement
4.3 - Form of Indenture
5.1* - Opinion of Orrick, Herrington & Sutcliffe LLP With
Respect to Legality
8.1* - Opinion of Orrick, Herrington & Sutcliffe LLP With Respect
to Certain Tax Matters
10.1 - Form of Purchase Agreement
23.1* - Consent of Orrick, Herrington & Sutcliffe LLP (included in its opinions
filed as part of Exhibit 5.1 and Exhibit 8.1)
24.1* - Power of Attorney of Directors and Officers of Banc One ABS Corporation (included
on signature page)
</TABLE>
- ------------------
* Previously filed with the Banc One ABS Corporation Form S-3
Registration Statement.
<PAGE> 1
Exhibit 1.1
BANC ONE HELOC TRUST 199[__-_]
$__________
HELOC ASSET-BACKED CERTIFICATES
BANC ONE ABS CORPORATION
(DEPOSITOR)
UNDERWRITING AGREEMENT
[________ __], 199[_]
[___________________]
as Representative (the
"Representative") of the
Several Underwriters named herein
[___________________]
[___________________]
Ladies and Gentlemen:
1. Introductory. Banc One ABS Corporation, an Ohio corporation
(the "Depositor") and a wholly-owned limited purpose finance subsidiary of Banc
One ABS Corporation, proposes to cause Banc One HELOC Trust 199[_-_] (the
"Trust") to issue and sell $___________ principal amount of its HELOC
Asset-Backed Certificates (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 one- to four-family residential properties (the "Mortgaged Properties"); the
collections in respect of the Mortgage Loans due after _____________, 1998 (the
"Cut-off Date") [(exclusive of payments in respect of accrued interest due on or
prior to the Cut-off Date)]; property that secured a Mortgage Loan which has
been acquired by foreclosure or deed in lieu of foreclosure[; and an irrevocable
and unconditional certificate guaranty insurance policy (the "Policy") to be
issued by [_____________] (the "Insurer")].
The Trust will be formed, and the Certificates will be issued,
pursuant to a Pooling and Servicing Agreement to be dated as of [_____ __],
199[_] (the "Pooling and Servicing Agreement") among the Depositor, Bank One,
N.A., a national banking association, as servicer (the "Servicer") and
[_____________], a [_____________] as trustee (the "Trustee"). The Mortgage
Loans and certain other assets of the Trust Fund will be sold by each of
[_____________],[_____________] and [_____________] (each, a "Seller" and
together the
<PAGE> 1
EXHIBIT 4.2
TRUST AGREEMENT
AMONG
BANC ONE ABS CORPORATION
DEPOSITOR
AND
[ ]
OWNER TRUSTEE
DATED AS OF [__________ __], 199[_]
<PAGE> 2
TRUST AGREEMENT, dated as of [____________ __,] 199[__], among
BANC ONE ABS CORPORATION, (the "Depositor"), and [___________________], a
[_____________________], not in its individual capacity but solely as Owner
Trustee (the "Owner Trustee").
The Depositor and the Owner Trustee hereby agree as follows:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions. Certain capitalized terms used in this
Agreement shall have the respective meanings assigned them in Article I to the
Pooling and Servicing Agreement, of even date herewith (the "Pooling and
Servicing Agreement"), among the Depositor, Bank One, N.A., as Servicer, and the
Trust formed under this Agreement. All references herein to "the Agreement" or
"this Agreement" are to the Trust Agreement, and all references herein to
Articles, Sections and subsections are to Articles, Sections and subsections of
this Agreement unless otherwise specified.
ARTICLE II
ORGANIZATION
SECTION 2.1 Name. The Trust created hereby shall be known as
"Banc One HELOC Trust 199[__-__]", in which name the Owner Trustee may conduct
the business of the Trust, make and execute contracts and other instruments on
behalf of the Trust and sue and be sued on behalf of the Trust.
SECTION 2.2 Office. The office of the Trust shall be in care
of the Owner Trustee at its Corporate Trust Office or at such other address in
Delaware as the Owner Trustee may designate by written notice to the
Certificateholders and the Depositor.
SECTION 2.3 Purposes and Powers. (a) The purpose of the Trust
is to engage in the following activities:
(i) to accept the transfer of, manage and hold or, pursuant to
the Pooling and Servicing Agreement, cause the Servicer to manage, the
Mortgage Loans;
(ii) to issue the Notes pursuant to the Indenture and the
Certificates pursuant to this Agreement, and to sell the Notes pursuant
to the Underwriting Agreement dated as of [_____________ __,] 199[__]
among the Trust, the Depositor, [_________________] and
[_____________________________] (hereinafter the "Underwriting
Agreement"), and to register the transfer of or exchange the Notes and
the Certificates;
(iii) to acquire certain property and assets from the
Depositor pursuant to the Pooling and Servicing Agreement, to make
payments to the Noteholders and the
<PAGE> 3
Certificateholders and to pay the organizational, start-up and
transactional expenses of the Trust;
(iv) to assign, grant, transfer, pledge, mortgage and convey
the Collateral pursuant to the terms of the Indenture and to hold,
manage and distribute to the Certificateholders pursuant to the terms
of this Agreement and the Pooling and Servicing Agreement any portion
of the assets of the Trust released from the lien of, and remitted to
the Trust pursuant to, the Indenture;
(v) to enter into and perform its obligations under the Basic
Documents (as defined in the Indenture) to which it is to be a party
and the Underwriting Agreement;
(vi) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish
the foregoing or are incidental thereto or connected therewith; and
(vii) subject to compliance with the Basic Documents, to
engage in such other activities as may be required in connection with
conservation of the assets of the Trust and the making of distributions
to the Certificateholders and the Noteholders.
The Trust is hereby authorized to engage in the foregoing activities and shall
not engage in any activity other than in connection with the foregoing or other
than as required or authorized by the terms of this Agreement or the Basic
Documents.
SECTION 2.4 Appointment of Owner Trustee. The Depositor hereby
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein. The Owner
Trustee hereby accepts its appointment subject to the terms and conditions
hereof.
SECTION 2.5 Initial Capital Contribution of Assets of the
Trust. Pursuant to the Organizational Trust Agreement, the Depositor transferred
to the Owner Trustee, as of the date hereof, the sum of $1.00. The Owner Trustee
hereby acknowledges receipt in trust from the Depositor, as of the date hereof,
of the foregoing contributions which shall constitute the initial assets of the
Trust and shall be deposited in the Certificate Distribution Account. The
Depositor shall pay organizational expenses of the Trust as they may arise or
shall, upon the request of the Owner Trustee, promptly reimburse the Owner
Trustee for any such expenses paid by the Owner Trustee.
SECTION 2.6 Declaration of Trust. The Owner Trustee hereby
declares that it shall hold the assets of the Trust in trust upon and subject to
the conditions set forth herein for the use and benefit of the
Certificateholders, subject to the obligations of the Trust under the Basic
Documents. The Owner Trustee has, pursuant to authority in the Organizational
Trust Agreement, filed the Certificate of Trust. The Trust shall constitute a
business trust under the Business Trust Statute and this Agreement shall
constitute the governing instrument of such business trust. Solely for United
States federal and state income tax purposes, the Depositor's contribution of
$1.00 to the Trust in exchange for an interest in the Trust and the relations
created by the arrangements between the Trust, the Servicer and the Depositor is
intended to constitute the formation of a partnership. The sale by the Depositor
of Class [__] Certificates is
2
<PAGE> 4
intended to effect a termination of that partnership under Code Section 708 and
the creation of a new tax partnership (the "Tax Partnership") whose partners are
the Class[__] Certificateholders and the Class [__] Certificateholders. The Tax
Partnership shall be governed as set forth in the Tax Partnership Agreement
attached hereto as Annex A.
SECTION 2.7 Liability of the Depositor and the
Certificateholders.
(a) The Depositor shall be liable directly to and shall
indemnify an injured party for all losses, claims, damages, liabilities and
expenses of the Trust (including Expenses (as defined in Section 6.9(b)), to the
extent not paid out of the assets of the Trust) to the extent that the Depositor
would be liable if the Trust were a partnership under the Uniform Limited
Partnership Act in which the Depositor were a general partner; provided,
however, that the Depositor shall not be liable for (i) any losses incurred by a
Certificateholder or a Certificate Owner in its capacity as an investor in the
Certificates or by a Noteholder in its capacity as an investor in the Notes or
(ii) any losses, claims, damages, liabilities and expenses arising out of the
imposition by any taxing authority of any federal, state or local income or
franchise taxes or any other taxes imposed on or measured by gross or net
income, gross or net receipts, capital, net worth and similar items (including
any interest, penalties or additions with respect thereto) upon the
Certificateholders, the Certificate Owners, the Noteholders, the Owner Trustee
or the Indenture Trustee (including any liabilities, costs or expenses with
respect thereto) with respect to the Mortgage Loans not specifically indemnified
against or represented to hereunder. In addition, any third party creditors of
the Trust (other than in connection with the obligations described in the
preceding sentence for which the Depositors shall not be liable) shall be deemed
third party beneficiaries of this subsection 2.7(a). The obligations of the
Depositor under this subsection 2.7(a) shall be evidenced by the Class [__]
Certificates.
(b) No Certificate Owner or Certificateholder, other than to
the extent set forth in subsection 2.7(a) with respect to the Depositor, shall
have any personal liability for any liability or obligation of the Trust.
SECTION 2.8 Title to Trust Property. Legal title to all of the
assets of the Trust shall be vested at all times in the Trust as a separate
legal entity except where applicable law in any jurisdiction requires title to
any part of the assets of the Trust to be vested in a trustee or trustees, in
which case title shall be deemed to be vested in the Owner Trustee, a co-trustee
and/or a separate trustee, as the case may be.
SECTION 2.9 Situs of Trust. The Trust shall be located and
administered in the State of Delaware. All bank accounts maintained by the Owner
Trustee on behalf of the Trust shall be located in the State of Delaware or the
State of New York. The Trust shall not have any employees in any state other
than Delaware; provided, however, that nothing herein shall restrict or prohibit
the Owner Trustee from having employees within or without the State of Delaware.
Payments shall be received by the Trust only in Delaware or New York, and
payments will be made by the Trust only from Delaware or New York. The only
office of the Trust shall be the Corporate Trust Office in Delaware.
SECTION 2.10 Representations and Warranties of the Depositor.
The Depositor hereby represents and warrants to the Owner Trustee that:
3
<PAGE> 5
(a) The Depositor has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
[___________], with power and authority to own its properties and to conduct its
business as such properties are presently owned and such business is presently
conducted and had at all relevant times, and now has, power, authority and legal
right to acquire and own the Mortgage Loans.
(b) The Depositor is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary licenses
and approvals in all jurisdictions in which the ownership or lease of property
or the conduct of its business requires such qualifications.
(c) The Depositor has the power and authority to execute and
deliver this Agreement and to carry out its terms, the Depositor has full power
and authority to sell and assign the property to be sold and assigned to and
deposited with the Issuer as part of the Trust, and the Depositor has duly
authorized such sale and assignment to the Issuer by all necessary corporate
action; and the execution, delivery and performance of this Agreement have been
duly authorized by the Depositor by all necessary corporate action.
(d) The consummation of the transactions contemplated by this
Agreement and the other Basic Documents to which it is a party and the
fulfillment of the terms of this Agreement do not conflict with, result in any
breach of any of the terms and provisions of or constitute (with or without
notice or lapse of time) a default under, the certificate of incorporation or
by-laws of the Depositor, or any indenture, agreement or other instrument to
which the Depositor is a party or by which it is bound, or result in the
creation or imposition of any Lien upon any of its properties pursuant to the
terms of any such indenture, agreement or other instrument (other than pursuant
to the Basic Documents) or violate any law or, to the best of the Depositor's
knowledge, any order, rule or regulation applicable to the Depositor of any
court or of any federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Depositor or any of
its properties.
SECTION 2.11 Pledge by Class[__] Certificateholders of Spread
Account.
(a) The Class [__] Certificateholder, by accepting the Class
[__] Certificate, acknowledges that it has pledged all of its right, title and
interest in and to the Spread Account to the Indenture Trustee, for the benefit
of the Noteholders and the Class [__] Certificateholders and as security for
certain of the Trust's obligations under the Basic Documents, as set forth in
Section [____] of the Pooling and Servicing Agreement. The pledge contained
herein shall be binding upon the Class [__] Certificateholder, and its
successors and assigns.
(b) The Class [__] Certificateholder, by accepting the Class
[__] Certificate, agrees to take or cause to be taken such further actions, to
execute, deliver and file or cause to be executed, delivered and filed such
further documents and instruments (including, without limitation, any UCC
financing statements or this Agreement), as may be determined by the Indenture
Trustee or the Credit Enhancer, in order to perfect the interests created by
this Section 2.11 and otherwise fully to effectuate the purposes, terms and
conditions of this Section 2.11. In furtherance of this, the Class [__]
Certificateholders shall promptly execute, deliver and file any financing
statements, amendments, continuation statements, assignments, certificates and
other documents with respect to such interests and perform all other acts as the
Indenture Trustee or
4
<PAGE> 6
the Credit Enhancer may deem necessary in order to perfect or to maintain the
perfection of the Indenture Trustee's security interest in the Spread Account.
ARTICLE III
THE CERTIFICATES
SECTION 3.1 Initial Certificate Ownership. Upon the formation
of the Trust by the contribution by the Depositor pursuant to Section 2.5, the
Depositor shall be the initial beneficiary of the Trust. Upon the execution and
the initial delivery of Certificates pursuant to Section 3.3 below, the
Depositor shall be the only Certificateholder.
SECTION 3.2 Form of the Certificates.
(a) The Class [__] Certificates and the Class [__] Certificate
shall be substantially in the form set forth in Exhibits A-1 and A-2,
respectively, and the Class [__] Certificates shall be issued in minimum
denominations of $1,000 and in integral multiples thereof. The Certificates
shall be executed on behalf of the Trust by manual or facsimile signature of an
authorized signatory of the Owner Trustee. Certificates bearing the manual or
facsimile signatures of individuals who were, at the time when such signatures
shall have been affixed, authorized to sign on behalf of the Trust, shall be
valid and binding obligations of the Trust, notwithstanding that such
individuals or any of them shall have ceased to be so authorized prior to the
authentication and delivery of such Certificates or did not hold such offices at
the date of authentication and delivery of such Certificates.
(b) The Definitive Certificates shall be typewritten, printed,
lithographed or engraved or produced by any combination of these methods (with
or without steel engraved borders) all as determined by the authorized signatory
of the Owner Trustee or the Owner Trustee's authenticating agent executing such
Certificates, as evidenced by their execution of such Certificates.
(c) The terms of the Certificates set forth in Exhibits A-1
and A-2 shall form part of this Agreement.
SECTION 3.3 Execution, Authentication and Delivery.
Concurrently with the transfer of the Mortgage Loans to the Trust pursuant to
the Pooling and Servicing Agreement, the Owner Trustee shall execute, or cause
its authenticating agent to execute, (i) the Class [__] Certificates in an
aggregate principal amount equal to the Original Class [__] Principal Balance
and (ii) one Class [__] Certificate, to be executed on behalf of the Trust,
authenticated and delivered to or upon the written order of the Depositor,
signed by a Responsible Officer of the Depositor, without further corporate
action by the Depositor, in Authorized Denominations. No Certificate shall
entitle its holder to any benefit under this Agreement, or shall be valid for
any purpose, unless there shall appear on such Certificate a certificate of
authentication substantially in the form set forth in Exhibits A-1 and A-2,
executed by the Owner Trustee or [______________], as the Owner Trustee's
authenticating agent, by manual signature. Such authentication shall constitute
conclusive evidence that such Certificate shall have been duly
5
<PAGE> 7
authenticated and delivered hereunder. All Certificates shall be dated the date
of their authentication.
SECTION 3.4 Registration; Registration of Transfer and
Exchange of Certificates.
(a) The Certificate Registrar shall cause to be kept at its
office or agency in New York, New York, or at its designated agent, a
Certificate Register in which, subject to such reasonable regulations as it may
prescribe, it shall provide for the registration of Certificates and of
transfers and exchanges of Certificates as herein provided. Upon any resignation
of a Certificate Registrar, the Owner Trustee shall promptly appoint a successor
or, if it elects not to make such an appointment, assume the duties of the
Certificate Registrar. [_________________] shall be the initial Certificate
Registrar.
(b) The Class [___] Certificate has not been registered or
qualified under the Securities Act of 1933, as amended (the "1933 Act"), or any
state securities laws or "Blue Sky" laws. No transfer, sale, pledge or other
disposition of the Class [__] Certificate shall be made unless such disposition
is made pursuant to the proviso set forth in Section 3.10.
None of the Servicer, the Depositor, the Certificate Registrar
nor the Owner Trustee is obligated under this Agreement to register the Class
[__] Certificate under the 1933 Act or any other securities law or to take any
action not otherwise required under this Agreement to permit the transfer or
registration of transfer of the Class [__] Certificate without such registration
or qualification. Any Class [__] Certificateholder desiring to effect such
transfer shall, and does hereby agree to, promptly reimburse the Owner Trustee,
the Depositor, the Certificate Registrar and the Servicer for costs and expenses
incurred in connection with any liability that results if the transfer is not so
exempt or is not made in accordance with such applicable federal and state laws.
In addition to the restrictions set forth in Section 9.11,
none of the Trust, the Servicer, the Depositor, the Administrator or any Seller
shall be a Class [__] Certificateholder; provided, however, that the Depositor
may hold Class [__] Certificates upon receipt thereof until such Class [__]
Certificates are sold pursuant to the Underwriting Agreement. Any attempted or
purported transfer in violation of the preceding sentence shall be absolutely
null and void and shall vest no rights in the purported transferee. If any
purported transferee shall become a Holder of a Class [__]Certificate in
violation of such sentence, then the last preceding Holder shall be restored to
all rights as Holder thereof retroactive to the date of registration of transfer
of such Certificate. The Owner Trustee shall notify the Servicer of any transfer
in violation of this paragraph upon receipt of written notice thereof. None of
the Owner Trustee, the Certificate Registrar or any Paying Agent shall be liable
to any Person for any registration of transfer of a Class [__] Certificate not
permitted by this paragraph or for making any payments due on such Class [__]
Certificate to the Holder thereof or taking any other action with respect to
such Holder under the provisions of this Agreement so long as the transfer was
registered without such receipt. The Owner Trustee shall be entitled, but not
obligated, to recover from any Holder of a Class [__] Certificate that was in
fact not a permitted Holder under this paragraph, all payments made on such
Class [__] Certificate at and after such time. Any such payments so recovered by
6
<PAGE> 8
the Owner Trustee shall be paid and delivered by the Owner Trustee to the last
preceding Holder of such Class [__] Certificate.
Subject to the preceding paragraphs, upon surrender for
registration of transfer of any Certificate at the office or agency of the Owner
Trustee maintained pursuant to Section 3.8, the Owner Trustee shall execute, and
the Owner Trustee or its authenticating agent shall authenticate and deliver in
the name of the designated transferee or transferees, a new Certificate of the
same Class and Percentage Interest and dated the date of authentication by the
Owner Trustee or such authenticating agent.
At the option of the Certificateholders, Certificates may be
exchanged for other Certificates of Authorized Denominations of a like aggregate
Percentage Interest, upon surrender of the Certificates to be exchanged at such
office. Whenever any Certificates are so surrendered for exchange, the Owner
Trustee or its Authenticating Agent shall execute, authenticate and deliver the
Certificates which the Certificateholder making the exchange is entitled to
receive.
No service charge shall be made for any registration of
transfer or exchange of Certificates, but the Owner Trustee may require payment
of a sum sufficient to cover any tax or governmental charge that may be imposed
in connection with any registration of transfer or exchange of Certificates.
All Certificates surrendered for registration of transfer or
exchange shall be marked "canceled" by the Owner Trustee.
SECTION 3.5 Mutilated; Destroyed; Lost or Stolen Certificates.
(a) 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 Certificate Registrar, the Owner Trustee and the Trust
such security or indemnity as may be required by them to hold each of them
harmless, then, in the absence of notice to the Certificate Registrar or the
Owner Trustee that such Certificate has been acquired by a bona fide purchaser,
the Owner Trustee shall execute on behalf of the Trust and the Owner Trustee or
the Owner Trustee's Authenticating Agent shall authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a replacement Certificate of a like class and aggregate principal
amount; provided, however, that if any such destroyed, lost or stolen
Certificate, but not a mutilated Certificate, shall have become or within seven
days shall be due and payable, then, instead of issuing a replacement
Certificate, the Owner Trustee may pay such destroyed, lost or stolen
Certificate when so due or payable.
(b) If, after the delivery of a replacement Certificate or
payment in respect of a destroyed, lost or stolen Certificate pursuant to
subsection 3.5(a), a bona fide purchaser of the original Certificate in lieu of
which such replacement Certificate was issued presents for payment such original
Certificate, the Owner Trustee shall be entitled to recover such replacement
Certificate (or such payment) from the Person to whom it was delivered or any
Person taking such replacement Certificate from such Person to whom such
replacement Certificate was delivered or any assignee of such Person, except a
bona fide purchaser, and shall
7
<PAGE> 9
be entitled to recover upon the security or indemnity provided therefor to the
extent of any loss, damage, cost or expense incurred by the Owner Trustee in
connection therewith.
(c) In connection with the issuance of any replacement
Certificate under this Section 3.5, the Owner Trustee or the Certificate
Registrar may require the payment by the Holder of such Certificate of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other reasonable expenses (including the fees and
expenses of the Owner Trustee and the Certificate Registrar) connected
therewith.
(d) Any duplicate Certificate issued pursuant to this Section
3.5 in replacement of any mutilated, destroyed, lost or stolen Certificate shall
constitute an original additional contractual obligation of the Trust, whether
or not the mutilated, destroyed, lost or stolen Certificate shall be found at
any time or be enforced by anyone, and shall be entitled to all the benefits of
this Agreement equally and proportionately with any and all other Certificates
duly issued hereunder.
(e) The provisions of this Section 3.5 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Certificates.
SECTION 3.6 Persons Deemed Certificateholders. Prior to due
presentation of a Certificate for registration of transfer, the Owner Trustee,
the Certificate Registrar or any Paying Agent may treat the Person in whose name
any Certificate shall be registered in the Certificate Register as the
Certificateholder of such Certificate for the purpose of receiving distributions
pursuant to Article V and for all other purposes whatsoever, and neither the
Owner Trustee nor the Certificate Registrar shall be affected by any notice to
the contrary.
SECTION 3.7 Access to List of Certificateholders' Names and
Addresses. The Certificate Registrar shall furnish or cause to be furnished to
the Credit Enhancer, the Servicer or the Depositor, within 15 days after receipt
by the Certificate Registrar of a request therefor from the Credit Enhancer, the
Servicer or the Depositor in writing, as the case may be, a list, in such form
as the Credit Enhancer, the Servicer or the Depositor may reasonably require, of
the names and addresses of the Certificateholders as of the most recent Record
Date. Each Holder, by receiving and holding a Certificate, shall be deemed to
have agreed not to hold any of the Credit Enhancer, the Servicer, the Depositor,
the Certificate Registrar or the Owner Trustee accountable by reason of the
disclosure of its name and address, regardless of the source from which such
information was derived.
SECTION 3.8 Maintenance of Office For Surrenders. The Owner
Trustee shall maintain in the Borough of Manhattan, the City of New York, an
office or offices or agency or agencies where Certificates may be surrendered
for registration of transfer or exchange and where notices and demands to or
upon the Owner Trustee in respect of the Certificates and the Basic Documents
may be served. The Owner Trustee initially designates the offices of
[_______________],as its principal office for such purposes. The Owner Trustee
shall give prompt written notice to the Depositor and to the Certificateholders
of any change in the location of the Certificate Register or any such office or
agency.
8
<PAGE> 10
SECTION 3.9 Appointment of Paying Agent. The Paying Agent
shall make distributions to Certificateholders from the Certificate Distribution
Account pursuant to Section 5.2 and shall report the amounts of such
distributions to the Owner Trustee and the Servicer. Any Paying Agent shall have
the revocable power to withdraw funds from the Certificate Distribution Account
for the purpose of making the distributions referred to above. The Owner Trustee
may revoke such power and remove the Paying Agent if the Owner Trustee
determines in its sole discretion that the Paying Agent shall have failed to
perform its obligations under this Agreement in any material respect. The Paying
Agent shall initially be [_____________], and any co-paying agent chosen by
[__________________], and acceptable to the Owner Trustee. [________________]
shall be permitted to resign as Paying Agent upon 30 days' written notice to the
Owner Trustee and the Credit Enhancer. If [________________] shall no longer be
the Paying Agent, the Owner Trustee shall appoint a successor to act as Paying
Agent (which shall be a bank or trust company acceptable to the Credit Enhancer
and the Rating Agencies). The Owner Trustee shall cause such successor Paying
Agent or any additional Paying Agent appointed by the Owner Trustee to execute
and deliver to the Owner Trustee an instrument in which such successor Paying
Agent or additional Paying Agent shall agree with the Owner Trustee that as
Paying Agent, such successor Paying Agent or additional Paying Agent shall hold
all sums, if any, held by it for payment to the Certificateholders in trust for
the benefit of the Certificateholders entitled thereto until such sums shall be
paid to such Certificateholders. The Paying Agent shall return all unclaimed
funds to the Owner Trustee, and upon removal of a Paying Agent, such Paying
Agent shall also return all funds in its possession to the Owner Trustee. The
provisions of Article VI shall apply to the Owner Trustee also in its role as
Paying Agent, for so long as the Owner Trustee shall act as Paying Agent and, to
the extent applicable, to any other paying agent appointed hereunder. Any
reference in this Agreement to the Paying Agent shall include any co-paying
agent unless the context requires otherwise.
SECTION 3.10 Restriction on Transfers by Class [__]
Certificateholder. The Class [__] Certificateholder shall not sell, transfer,
assign or dispose of all or any portion of the Class [__] Certificate; provided,
that the Class [__] Certificateholder may, within ten Business Days of the
Closing Date, make a one-time transfer to a wholly-owned subsidiary of such
Class [__] Certificateholder; provided, that the Depositor shall retain at least
[two] percent of its original holdings in the Class [__] Certificate; and
provided, further, if the transferee is a wholly-owned subsidiary, the
transferee shall obtain no rights as a result of the transfer other than rights
to distributions and tax allocations. Upon completion of such transfer, the
Depositor shall certify to the Owner Trustee as to compliance with this Section
3.10.
SECTION 3.11 Book-Entry Certificates. The Class [__]
Certificates, upon original issuance, shall be issued in the form of a
typewritten Certificate or Certificates representing Book-Entry Certificates, to
be delivered to the Depository. Such Class [__] Certificate or Certificates
shall initially be registered on the Certificate Register in the name of Cede &
Co., the nominee of the initial Depository, and no Certificate Owner of a Class
[__] Certificate or Certificates shall receive a definitive Class [__]
Certificate representing such Certificate Owner's interest in such Class [__]
Certificate, except as provided in Section 3.13. Unless and until definitive
fully registered Class [__] Certificates (the "Definitive Certificates") shall
have been issued to Certificate Owners pursuant to Section 3.13:
(a) the provisions of this Section 3.11 shall be in full force
and effect;
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(b) the Certificate Registrar and the Owner Trustee shall be
entitled to deal with the Depository for all purposes of this Agreement
(including the payment of principal of and interest on the Certificates and the
giving of instructions or directions hereunder) as the sole Holder of the Class
[__] Certificates, and shall have no obligation to the Certificate Owners with
respect thereto;
(c) to the extent that the provisions of this Section 3.11
conflict with any other provisions of this Agreement, the provisions of this
Section 3.11 shall control;
(d) the rights of the Certificate Owners with respect to the
Class [__] Certificate or Certificates shall be exercised only through the
Depository and shall be limited to those established by law and agreements
between such Certificate Owners and the Depository and/or the Depository
Participants. Pursuant to the Certificate Depository Agreement in the form
attached as Exhibit C, unless and until Definitive Certificates are issued
pursuant to Section 3.13, the initial Depository will make book-entry transfers
among the Depository Participants and receive and transmit payments of principal
of and interest on the Class [__] Certificates to such Depository Participants;
(e) whenever this Agreement requires or permits actions to be
taken based upon instructions or directions of Holders of Certificates
evidencing a specified aggregate Percentage Interest, the Depository shall be
deemed to represent such percentage only to the extent that it has received
instructions to such effect from Certificate Owners and/or Depository
Participants owning or representing, respectively, such required aggregate
Percentage Interest of Class [__] Certificates (taking into account the proviso
contained in the definition of "Certificateholder" contained in the Pooling and
Servicing Agreement) and has delivered such instructions to the Owner Trustee;
provided, however, that the provisions of this Section 3.11 shall not be
applicable in respect of Class [__] Certificates issued to the Depositor. The
Depositor or the Owner Trustee may set a record date for the purpose of
determining the identity of Holders of Class [__] Certificates entitled to vote
or to consent to any action by vote as provided in this Agreement.
SECTION 3.12 Notices to Depository. Whenever a notice or other
communication to the Class [__] Certificateholders is required under this
Agreement, the Indenture or the Pooling and Servicing Agreement, unless and
until Definitive Certificates shall have been issued to Certificate Owners
pursuant to Section 3.13, the Owner Trustee shall give all such notices and
communications specified herein to be given to Class [__] Certificateholders to
the Depository and shall have no further obligation to the Certificate Owners of
the Class [__] Certificates.
SECTION 3.13 Definitive Certificates. (a) The Class [__]
Certificate shall be issued in the form of Definitive Certificates and (b) with
respect to the Class [__] Certificates, if (i) the Administrator advises the
Owner Trustee in writing that the Depository is no longer willing or able to
properly discharge its responsibilities with respect to the Class [__]
Certificates, and the Administrator is unable to locate a qualified successor;
(ii) the Administrator at its option advises the Owner Trustee in writing that
it elects to terminate the book-entry system through the Depository; or (iii)
after the occurrence of a Servicer Default under the Pooling and Servicing
Agreement, a Majority in Voting Interest of the Class [__]
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Certificates advise the Depository in writing that the continuation of a
book-entry system through the Depository is no longer in the best interest of
the Certificate Owners of the Class [__] Certificates, then the Depository shall
notify all Certificate Owners and the Owner Trustee of the occurrence of any
such event and of the availability of Definitive Certificates to Certificate
Owners requesting the same. Upon surrender to the Owner Trustee of the
typewritten Certificate or Certificates representing the Book-Entry Certificates
by the Depository, accompanied by registration instructions, the Owner Trustee
shall execute and authenticate the Definitive Certificates in accordance with
the instructions of the Depository. Neither the Certificate Registrar nor the
Owner 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, the Owner Trustee
shall recognize the Holders of the Definitive Certificates as
Certificateholders.
SECTION 3.14 Appointment of Authenticating Agent. At any time when any
of the Certificates remain outstanding the Owner Trustee may appoint an
authenticating agent or agents with respect to the Certificates which shall be
authorized to act on behalf of the Owner Trustee to authenticate Certificates
issued upon original issuance, exchange or registration of transfer. The Owner
Trustee may revoke such power and remove any authenticating agent at any time.
Chemical Bank shall initially be an authenticating agent hereunder.
If any authenticating agent is appointed hereunder, the
Certificates may have endorsed thereon, in addition to the Trustee's certificate
of authentication, an alternate certificate of authentication in the following
form:
This is one of the Certificates referred to in the
within-mentioned Trust Agreement.
[ ], not in
-----------------------
its individual capacity but
solely as Owner Trustee
By:
-------------------------------
As Authenticating Agent
By:
-------------------------------
Authorized Signatory
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
SECTION 4.1 Prior Notice to Certificateholders with Respect to Certain
Matters. The Owner Trustee shall not take action with respect to the following
matters, unless (i) the Owner Trustee shall have notified the Certificateholders
and the Credit Enhancer in writing of the proposed action at least 30 days
before the taking of such action, and (ii) the Majority in Voting Interest of
Class [__] Certificateholders or the Credit Enhancer shall not have notified the
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Owner Trustee in writing prior to the 30th day after such notice is given that
such Certificateholders or the Credit Enhancer have withheld consent or provided
alternative direction:
(a) the initiation of any claim or lawsuit by the Trust or the
compromise of any action, claim or lawsuit brought by or against the Trust;
(b) the election by the Trust to file an amendment to the
Certificate of Trust, a conformed copy of which is attached hereto as Exhibit B;
provided, however, that the Owner Trustee may, without consent of any
Certificateholder or the Credit Enhancer, amend the Certificate of Trust to the
extent it is required to do so under the Business Trust Statute;
(c) the amendment of the Indenture by a supplemental indenture
in circumstances where the consent of any Noteholder is required;
(d) the amendment of the Indenture by a supplemental indenture
in circumstances where the consent of any Noteholder is not required and such
amendment materially adversely affects the interest of the Certificateholders;
(e) the amendment, change or modification of the
Administration Agreement, except to cure any ambiguity or to amend or supplement
any provision in a manner that would not materially adversely affect the
interests of the Certificateholders; or
(f) the appointment pursuant to the Indenture of a successor
Note Registrar, Paying Agent or Indenture Trustee or pursuant to this Agreement
of a successor Certificate Registrar or Paying Agent, or the consent to the
assignment by the Note Registrar, Paying Agent, Indenture Trustee or Certificate
Registrar of its obligations under the Indenture or this Agreement, as
applicable.
SECTION 4.2 Action by Certificateholders with Respect to
Certain Matters. The Owner Trustee shall not have the power, except upon the
written direction of (i) the Majority in Voting Interest of the Class [__]
Certificates (with the written consent of the Credit Enhancer) or (ii) the
Credit Enhancer, to (a) remove the Administrator under the Administration
Agreement pursuant to Section 10 thereof, (b) appoint a successor Administrator
pursuant to Section 10 of the Administration Agreement, (c) remove the Servicer
under the Pooling and Servicing Agreement pursuant to Section 9.01 thereof or
(d) except as expressly provided in the Basic Documents, sell the Mortgage Loans
or any interest therein after the termination of the Indenture. The Owner
Trustee shall take the actions referred to in the preceding sentence only upon
written instructions signed by (i) the Majority in Voting Interest of the Class
[__] Certificates (with the written consent of the Credit Enhancer) or (ii) the
Credit Enhancer.
SECTION 4.3 Action by Certificateholders with Respect to
Bankruptcy. The Owner Trustee shall not have the power to commence a voluntary
proceeding in bankruptcy relating to the Trust without the unanimous prior
approval of all Class [__] Certificateholders and the delivery to the Owner
Trustee by each such Certificateholder of a certificate certifying that such
Certificateholder reasonably believes that the Trust is insolvent.
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SECTION 4.4 Restrictions on Certificateholders' Power. The
Certificateholders shall not direct the Owner Trustee to take or refrain from
taking any action if such action or inaction would be contrary to any obligation
of the Trust or the Owner Trustee under this Agreement or any of the Basic
Documents or would be contrary to Section 2.3, nor shall the Owner Trustee be
obligated to follow any such direction, if given.
SECTION 4.5 Majority Control. Except as expressly provided
herein, any action that may be taken or consent that may be given or withheld by
the Class [__] Certificateholders under this Agreement or the Pooling and
Servicing Agreement may be taken, given or withheld by not less than a Majority
in Voting Interest of Class [__] Certificates. Except as expressly provided
herein, any written notice of the Class [__] Certificateholders delivered
pursuant to this Agreement shall be effective if signed by a Majority in Voting
Interest of Class [__] Certificates.
ARTICLE V
APPLICATION OF ASSETS OF THE TRUST; CERTAIN DUTIES
SECTION 5.1 Establishment of Certificate Distribution Account.
(a) The Owner Trustee, for the benefit of the
Certificateholders, shall establish and maintain in the name of the Owner
Trustee an Eligible Account known as the "Banc One HELOC Trust 199[__]-[__]
Certificate Distribution Account" (the "Certificate Distribution Account"),
bearing an additional designation clearly indicating that the funds deposited
therein are held for the benefit of the Certificateholders.
(b) The Owner Trustee (and the Credit Enhancer as subrogee) on
behalf of the Trust shall possess all right, title and interest in and to all
funds on deposit from time to time in the Certificate Distribution Account and
in all proceeds thereof. Except as otherwise provided herein or in the Pooling
and Servicing Agreement, the Certificate Distribution Account shall be under the
sole dominion and control of the Owner Trustee for the benefit of the
Certificateholders. If, at any time, the Certificate Distribution Account ceases
to be an Eligible Account, the Owner Trustee (or the Administrator on behalf of
the Owner Trustee, if the Certificate Distribution Account is not then held by
the Owner Trustee or an Affiliate thereof) shall within 5 Business Days (or such
longer period, not to exceed 30 calendar days, as to which each Rating Agency
and the Credit Enhancer may consent) notify the Credit Enhancer, establish a new
Certificate Distribution Account as an Eligible Account and transfer any cash
and/or any investments to such new Certificate Distribution Account.
SECTION 5.2 Application of Funds.
(a) (i) On each Monthly Deposit Date, the Owner Trustee shall,
based upon the information delivered on the related Determination Date pursuant
to Section 5.03 of the Pooling and Servicing Agreement, distribute to the Class
[__] Certificateholders all amounts deposited into the Certificate Distribution
Account on or before such Monthly Deposit Date (and not previously distributed
to the Class [__] Certificateholders) pursuant to Sections [________],
[______________] and [___________] of the Pooling and Servicing Agreement; and
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(ii) on each Payment Date, the Owner Trustee shall, based upon
the information contained in the Remittance Report delivered on the related
Determination Date pursuant to Section 5.03 of the Pooling and Servicing
Agreement, distribute:
(A) to the Class [___] Certificateholders, all amounts
deposited into the Certificate Distribution Account on or before such
Payment Date (and not previously distributed to the Class [___]
Certificateholders) constituting the Class [__] Remittance Amount; and
(B) to the Class [___] Certificateholders, all amounts
deposited into the Certificate Distribution Account on or before such
Payment Date (and not previously distributed to the Class [___]
Certificateholders) pursuant to Sections[_________] and [___________],
[__________] and [_________] of the Pooling and Servicing Agreement.
(b) If the Owner Trustee on any Determination Date (other than
a Determination Date with respect to a Payment Date) receives written notice
from the Indenture Trustee pursuant to Section [____] of the Pooling and
Servicing Agreement that a Special Remittance shall occur on the following
Monthly Deposit Date (which shall be a "Special Remittance Date"), notice of
such remittance shall be given by the Owner Trustee by first-class mail, postage
prepaid, mailed not later than the Business Day following such Determination
Date, to each Class [__] Certificateholder of record on the related Special
Record Date at such Class [__] Certificateholder's address appearing in the
Certificate Register. Each such notice by the Indenture Trustee to the Owner
Trustee and by the Owner Trustee to the Class [__] Certificateholders shall set
forth: (i) the applicable Special Remittance Date; and (ii) the Special
Remittance Amount and the Special Remittance Amount per $1,000 original
denomination of Class [__] Certificates.
Notice of such Special Remittance shall be given by the Owner
Trustee at the expense of the Administrator. Failure to give notice of any
Special Remittance, or any defect therein, to any Class [__] Certificateholder
shall not impair or affect the validity of such Special Remittance.
(c) On each Special Remittance Date, the Owner Trustee shall,
based upon the information contained in the notice given to the Owner Trustee by
the Indenture Trustee pursuant to Section 5.2(b), distribute to the Class [__]
Certificateholders all amounts deposited into the Certificate Distribution
Account constituting the Special Remittance Amount on or before such Special
Payment Date pursuant to Section [_________] the Pooling and Servicing
Agreement.
(d) On each Payment Date, the Owner Trustee shall send to each
Certificateholder the statement provided to the Owner Trustee by the Indenture
Trustee pursuant to Section [____] of the Pooling and Servicing Agreement with
respect to such Payment Date.
(e) If the Indenture Trustee holds escheated funds for payment
to the Trust pursuant to Section 3.3(e) of the Indenture, the Administrator
shall, upon notice from the Indenture Trustee that such funds exist, submit on
behalf of the Trust an Issuer Order to the
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Indenture Trustee pursuant to Section 3.3(e) of the Indenture instructing the
Indenture Trustee to pay such funds to or at the order of the Depositor.
SECTION 5.3 Method of Payment. Subject to Section 7.1(c),
distributions required to be made to Class [___] Certificateholders on any
Payment Date or Special Payment Date shall be made to the applicable Class [__]
Certificateholders of record on the immediately preceding Record Date or Special
Record Date, as the case may be, (i) by wire transfer, in immediately available
funds, to each Class [__] Certificateholder owning of record Certificates which
in the aggregate evidence a denomination of not less than $1,000,000, to the
account of such Holder at a bank or other entity having appropriate facilities
therefor, if such Class [__] Certificateholder shall have provided to the
Certificate Registrar appropriate written instructions at least five Business
Days prior to such Record Date or Special Record Date, as the case may be, or,
otherwise, (ii) by check mailed to such Class [__] Certificateholder at the
address of such Holder appearing in the Certificate Register. Such distributions
will be made on a pro rata basis among the Class [__] Certificateholders based
on the Percentage Interest represented by their respective Class [__]
Certificates. Subject to subsection 7.1(c), distributions required to be made to
the Class [__] Certificateholders on any Monthly Deposit Date and Payment Date
shall be made to the Class [__] Certificateholder of record on the immediately
preceding Record Date by wire transfer, in immediately available funds, to the
account of each such Holder at a bank or other entity having appropriate
facilities thereof.
ARTICLE VI
THE OWNER TRUSTEE
SECTION 6.1 Duties of Owner Trustee.
(a) The Owner Trustee undertakes to perform such duties, and
only such duties, as are specifically set forth in this Agreement and the other
Basic Documents, including the administration of the Trust in the interest of
the Certificateholders, subject to the Basic Documents and in accordance with
the provisions of this Agreement. No implied covenants or obligations shall be
read into this Agreement against the Owner Trustee.
(b) Notwithstanding the foregoing, the Owner Trustee shall be
deemed to have discharged its duties and responsibilities hereunder and under
the Basic Documents to the extent the Administrator has agreed in the
Administration Agreement to perform any act or to discharge any duty of the
Owner Trustee hereunder or under any Basic Document, and the Owner Trustee shall
not be liable for the default or failure of the Administrator to carry out its
obligations under the Administration Agreement.
(c) In the absence of bad faith on its part, the Owner Trustee
may conclusively rely upon certificates or opinions furnished to the Owner
Trustee and conforming to the requirements of this Agreement in determining the
truth of the statements and the correctness of the opinions contained therein;
provided, however, that the Owner Trustee shall have examined such certificates
or opinions so as to determine compliance of the same with the requirements of
this Agreement.
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(d) The Owner Trustee may not be relieved from liability for
its own negligent action, its own negligent failure to act or its own bad faith
or wilful misconduct, except that:
(i) this subsection 6.1(d) shall not limit the effect of
subsection 6.1(a) or (b);
(ii) the Owner Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer unless it is
proved that the Owner Trustee was negligent in ascertaining the
pertinent facts; and
(iii) the Owner Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 4.1, 4.2 or 6.4.
(e) Subject to Sections 5.1 and 5.2, monies received by the
Owner Trustee hereunder need not be segregated in any manner except to the
extent required by law and may be deposited under such general conditions as may
be prescribed by law, and the Owner Trustee shall not be liable for any interest
thereon.
(f) The Owner Trustee shall not take any action that (i) is
inconsistent with the purposes of the Trust set forth in Section 2.3 or (ii)
would, to the actual knowledge of a Responsible Officer of the Owner Trustee,
result in the Trust's becoming taxable as a corporation for federal, state or
local income tax purposes. The Certificateholders shall not direct the Owner
Trustee to take action that would violate the provisions of this Section 6.1.
SECTION 6.2 Additional Duties of Owner Trustee. The Owner
Trustee is authorized and directed to execute and deliver the Basic Documents to
which it or the Trust is a party, each certificate or other document attached as
an exhibit to or contemplated by the Basic Documents to which it or the Trust is
to be a party and the Underwriting Agreement, in each case in such form as the
Depositor shall approve as evidenced conclusively by the Owner Trustee's or the
Depositor's execution thereof. In addition to the foregoing, the Owner Trustee
is authorized, but shall not be obligated, to take all actions required of the
Trust pursuant to the Basic Documents. The Owner Trustee is further authorized
from time to time to take such action as the Administrator recommends with
respect to the Basic Documents and the Underwriting Agreement.
SECTION 6.3 Acceptance of Trusts and Duties. Except as
expressly provided in this Article VI, in accepting the trusts hereby created
[_________________] acts solely as Owner Trustee hereunder and not in its
individual capacity, and all Persons having any claim against the Owner Trustee
by reason of the transactions contemplated by this Agreement or any Basic
Document shall look only to the assets of the Trust for payment or satisfaction
thereof. The Owner Trustee accepts the trusts hereby created and agrees to
perform its duties hereunder with respect to such trusts but only upon the terms
of this Agreement. The Owner Trustee also agrees to disburse all moneys actually
received by it constituting part of the assets of the Trust upon the terms of
the Basic Documents and this Agreement. The Owner Trustee shall not be liable or
accountable hereunder or under any Basic Document under any circumstances,
except (i) for its own negligent action, its own negligent failure to act or its
own willful misconduct or
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(ii) in the case of the inaccuracy of any representation or warranty contained
in Section 6.6 and expressly made by the Owner Trustee. In particular, but not
by way of limitation (and subject to the exceptions set forth in the preceding
sentence):
(a) the Owner Trustee shall at no time have any responsibility
or liability for or with respect to the legality, validity and enforceability of
any Mortgage Loan, or the perfection and priority of any security interest
created by any Mortgage Loan in any Mortgaged Property or the maintenance of any
such perfection and priority, or for or with respect to the sufficiency of the
assets of the Trust or their ability to generate the payments to be distributed
to Certificateholders under this Agreement or the Noteholders under the
Indenture, including, without limitation: the existence, condition and ownership
of any Mortgaged Property; the existence and enforceability of any insurance
thereon; the existence and contents of any Mortgage Loan on any computer or
other record thereof; the validity of the assignment of any Mortgage Loan to the
Trust or of any intervening assignment; the completeness of any Mortgage Loan;
the performance or enforcement of any Mortgage Loan; the compliance by the
Depositor or the Servicer with any warranty or representation made under any
Basic Document or in any related document or the accuracy of any such warranty
or representation or any action of the Administrator, the Indenture Trustee, the
Custodian or the Servicer taken in the name of the Owner Trustee.
(b) the Owner Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in accordance with the instructions of
the Administrator, the Credit Enhancer or any Certificateholder;
(c) no provision of this Agreement or any Basic Document shall
require the Owner Trustee to expend or risk funds or otherwise incur any
financial liability in the performance of any of its rights or powers hereunder
or under any Basic Document, if the Owner Trustee shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured or provided to it;
(d) under no circumstances shall the Owner Trustee be liable
for indebtedness evidenced by or arising under any of the Basic Documents,
including the Note Principal Balance and the interest on the Notes, the Class
[__] Principal Balance and interest on the Class [__] Certificates or amounts
payable with respect to the Class [__] Certificate;
(e) the Owner Trustee shall not be responsible for or in
respect of and makes no representation as to the validity or sufficiency of any
provision of this Agreement or for the due execution hereof by the Depositor or
for the form, character, genuineness, sufficiency, value or validity of any of
the assets of the Trust or for or in respect of the validity or sufficiency of
the Basic Documents, the Underwriting Agreement, the Notes, the Certificates
(other than the certificate of authentication on the Certificates) or of any
Mortgage Loans or any related documents, and the Owner Trustee shall in no event
assume or incur any liability, duty or obligation to any Noteholder or to any
Certificateholder, other than as expressly provided for herein and in the Basic
Documents;
(f) the Owner Trustee shall not be liable for the default or
misconduct of the Administrator, the Indenture Trustee, the Custodian, the
Depositor or the Servicer under any of
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the Basic Documents or otherwise and the Owner Trustee shall have no obligation
or liability to perform the obligations of the Trust under this Agreement or the
Basic Documents that are required to be performed by the Administrator under the
Administration Agreement, the Indenture Trustee under the Indenture, the
Custodian under the Custodial Agreement or the Servicer under the Pooling and
Servicing Agreement;
(g) the Owner Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Agreement, or to institute,
conduct or defend any litigation under this Agreement or otherwise or in
relation to this Agreement, the Underwriting Agreement or any Basic Document, at
the request, order or direction of any of the Credit Enhancer or any of the
Certificateholders, unless the Credit Enhancer or such Certificateholders have
offered to the Owner Trustee security or indemnity satisfactory to it against
the costs, expenses and liabilities that may be incurred by the Owner Trustee
therein or thereby. The right of the Owner Trustee to perform any discretionary
act enumerated in this Agreement or in any Basic Document shall not be construed
as a duty, and the Owner Trustee shall not be answerable for other than its
negligence or willful misconduct in the performance of any such act;
(h) The Owner Trustee shall have no responsibility for filing
any financing or continuation statement in any public office at any time or to
otherwise perfect or maintain the perfection of any security interest or lien
granted to it hereunder or to prepare, execute or file any Securities and
Exchange Commission filing or tax return for the Trust or to record this
Agreement or any Basic Document.
SECTION 6.4 Action upon Instruction by Certificateholders.
(a) Subject to Section 4.4, the Certificateholders may by
written instruction direct the Owner Trustee in the management of the Trust.
Such direction may be exercised at any time by written instruction of the
Certificateholders pursuant to Section 4.5.
(b) Notwithstanding the foregoing, the Owner Trustee shall not
be required to take any action hereunder or under any Basic Document if the
Owner Trustee shall have reasonably determined, or shall have been advised by
counsel, that such action is likely to result in liability on the part of the
Owner Trustee or is contrary to the terms hereof or of any Basic Document or is
otherwise contrary to law.
(c) Whenever the Owner Trustee is unable to decide between
alternative courses of action permitted or required by the terms of this
Agreement or any Basic Document, or is unsure as to the application, intent,
interpretation or meaning of any provision of this Agreement or the Basic
Documents, the Owner Trustee shall promptly give notice (in such form as shall
be appropriate under the circumstances) to the Credit Enhancer and the
Certificateholders requesting instruction as to the course of action to be
adopted, and, to the extent the Owner Trustee acts in good faith in accordance
with any such instruction received, the Owner Trustee shall not be liable on
account of such action to any Person. If the Owner Trustee shall not have
received appropriate instructions within ten days of such notice (or within such
shorter period of time as reasonably may be specified in such notice or may be
necessary under the circumstances) it may, but shall be under no duty to, take
or refrain from taking such action which is consistent, in its view, with this
Agreement or the Basic Documents, and as it shall
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deem to be in the best interests of the Certificateholders, and the Owner
Trustee shall have no liability to any Person for any such action or inaction.
SECTION 6.5 Furnishing of Documents. The Owner Trustee shall
furnish (a) to the Certificateholders, promptly upon receipt of a written
request therefor, duplicates or copies of all reports, notices, requests,
demands, certificates, financial statements and any other instruments furnished
to the Owner Trustee under the Basic Documents, and (b) to the Credit Enhancer,
copies of any reports, notices, requests, demands, certificates, financial
statements, and any other instruments relating to the Trust, the Certificates or
the Notes in the possession of the Owner Trustee, that the Credit Enhancer shall
request in writing.
SECTION 6.6 Representations and Warranties of Owner Trustee.
The Owner Trustee hereby represents and warrants to the Depositor, for the
benefit of the Certificateholders and the Credit Enhancer, that:
(a) It is a [banking corporation] duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
(b) It has full power, authority and legal right to execute,
deliver and perform its obligations under this Agreement, and has taken all
necessary action to authorize the execution, delivery and performance by it of
this Agreement.
(c) The execution, delivery and performance by it of this
Agreement (i) shall not violate any provision of any law or regulation governing
the banking and trust powers of the Owner Trustee or any order, writ, judgment
or decree of any court, arbitrator or governmental authority applicable to the
Owner Trustee or any of its assets, (ii) shall not violate any provision of the
corporate charter or by-laws of the Owner Trustee, or (iii) shall not violate
any provision of, or constitute, with or without notice or lapse of time, a
default under, or result in the creation or imposition of any lien on any
properties included in the Trust pursuant to the provisions of any mortgage,
indenture, contract, agreement or other undertaking to which it is a party,
which violation, default or lien could reasonably be expected to have a
materially adverse effect on the Owner Trustee's performance or ability to
perform its duties as Owner Trustee under this Agreement or on the transactions
contemplated in this Agreement.
(d) This Agreement has been duly executed and delivered by the
Owner Trustee and constitutes the legal, valid and binding agreement of the
Owner Trustee, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization, or
other similar laws affecting the enforcement of creditors' rights in general and
by general principles of equity, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
SECTION 6.7 Reliance; Advice of Counsel.
(a) The Owner Trustee shall incur no liability to anyone in
acting upon any signature, instrument, notice, resolution, request, consent,
order, certificate, report, opinion, bond or other document or paper believed by
it to be genuine and believed by it to be signed by the proper party or parties
and need not investigate any fact or matter in any such document. The Owner
Trustee may accept a certified copy of a resolution of the board of directors or
other
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governing body of any corporate party as conclusive evidence that such
resolution has been duly adopted by such body and that the same is in full force
and effect. As to any fact or matter the method of the determination of which is
not specifically prescribed herein, the Owner Trustee may for all purposes
hereof rely on a certificate, signed by the president or any vice president or
by the treasurer or other authorized officers of the relevant party, as to such
fact or matter, and such certificate shall constitute full protection to the
Owner Trustee for any action taken or omitted to be taken by it in good faith in
reliance thereon.
(b) In the exercise or administration of the trusts hereunder
and in the performance of its duties and obligations under this Agreement or the
Basic Documents, the Owner Trustee: (i) may act directly or through its agents,
attorneys, custodians or nominees (including the granting of a power of attorney
(x) to officers of [_________________] to execute and deliver any Basic
Document, Certificate, Note or other documents related thereto on behalf of the
Owner Trustee or (y) to the Administrator to execute any tax return of the Trust
or any document, report or other instrument to be filed with the Securities and
Exchange Commission or any state securities commission or administration)
pursuant to agreements entered into with any of them, and the Owner Trustee
shall not be liable for the conduct or misconduct of such agents, attorneys,
custodians or nominees if such agents, attorneys, custodians or nominees shall
have been selected by the Owner Trustee with reasonable care and (ii) may
consult with counsel, accountants and other skilled professionals to be selected
with reasonable care and employed by it. The Owner Trustee shall not be liable
for anything done, suffered or omitted in good faith by it in accordance with
the opinion or advice of any such counsel, accountants or other such Persons.
SECTION 6.8 Owner Trustee May Own Certificates and Notes. The
Owner Trustee in its individual or any other capacity may become the owner or
pledgee of Certificates or Notes and may deal with either Depositor, the
Administrator, the Custodian, the Indenture Trustee and the Servicer in
transactions in the same manner and with the same rights as it would have if it
were not the Owner Trustee.
SECTION 6.9 Compensation and Indemnity. (a) The Owner Trustee
shall receive from the Depositor as compensation for its services hereunder such
fees as have been separately agreed upon before the date hereof between the
Depositor and the Owner Trustee, and the Owner Trustee shall be entitled to be
reimbursed by the Depositor for its other reasonable expenses hereunder,
including the reasonable compensation, expenses and disbursements of such
agents, custodians, nominees, representatives, experts and counsel as the Owner
Trustee may employ in connection with the exercise and performance of its rights
and its duties hereunder. The Servicer shall indemnify the Owner Trustee and its
successors, assigns, agents and servants in accordance with the provisions of
Section 8.01 of the Pooling and Servicing Agreement.
(a) The Depositor shall be liable as primary obligor for, and
shall indemnify the Owner Trustee and its successors, assigns, agents and
servants (collectively, the "Indemnified Parties") from and against, any and all
liabilities, obligations, losses, damages, taxes, claims, actions and suits, and
any and all reasonable costs, expenses and disbursements (including reasonable
legal fees and expenses) of any kind and nature whatsoever (collectively,
"Expenses") which may at any time be imposed on, incurred by, or asserted
against the Owner Trustee or any Indemnified Party in any way relating to or
arising out of this Agreement, the
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Basic Documents, the assets of the Trust, the administration of the Trust or the
action or inaction of the Owner Trustee hereunder, except only that the
Depositor shall not be liable for or required to indemnify the Owner Trustee
from and against Expenses arising or resulting from the negligence or willful
misconduct of the Owner Trustee. The indemnities contained in this Section 6.9
shall survive the resignation of the Owner Trustee, termination of the Trust or
the termination of this Agreement. Any amounts paid to the Owner Trustee
pursuant to this Article VI shall be deemed not to be a part of the assets of
the Trust immediately after such payment.
SECTION 6.10 Replacement of Owner Trustee.
(a) The Owner Trustee may resign at any time and be discharged
from the trusts hereby created by giving 30 days' prior written notice thereof
to the Credit Enhancer and the Administrator. The Administrator shall appoint a
successor Owner Trustee with the consent of the Credit Enhancer by delivering a
written instrument, in duplicate, to the resigning Owner Trustee and the
successor Owner Trustee. If no successor Owner Trustee shall have been appointed
and have accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Owner Trustee may petition any court of competent
jurisdiction for the appointment of a successor Owner Trustee. The Administrator
shall remove the Owner Trustee if:
(i) the Owner Trustee shall cease to be eligible in accordance
with the provisions of Section 6.13 and shall fail to resign after
written request therefor by the Administrator;
(ii) the Owner Trustee shall be adjudged bankrupt or
insolvent;
(iii) a receiver or other public officer shall be appointed or
take charge or control of the Owner Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation;
or
(iv) the Owner Trustee shall otherwise be legally incapable of
acting.
(b) If the Owner Trustee resigns or is removed or if a vacancy
exists in the office of Owner Trustee for any reason the Administrator shall
promptly appoint a successor Owner Trustee, with the consent of the Credit
Enhancer, by written instrument, in duplicate (one copy of which instrument
shall be delivered to the outgoing Owner Trustee so removed and one copy to the
successor Owner Trustee) and shall pay all fees and other amounts owed to the
outgoing Owner Trustee.
(c) Any resignation or removal of the Owner Trustee and
appointment of a successor Owner Trustee pursuant to any of the provisions of
this Section 6.10 shall not become effective until a written acceptance of
appointment is delivered by the successor Owner Trustee to the outgoing Owner
Trustee and the Administrator and all fees and expenses due to the outgoing
Owner Trustee are paid. Any successor Owner Trustee appointed pursuant to this
Section 6.10 shall be eligible to act in such capacity in accordance with
Section 6.13 and, following compliance with the preceding sentence, shall become
fully vested with all the rights, powers, duties and obligations of its
predecessor under this Agreement, with like effect as if
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originally named as Owner Trustee. The Administrator shall provide notice of
such resignation or removal of the Owner Trustee to the Credit Enhancer and each
of the Rating Agencies.
(d) The predecessor Owner Trustee shall upon payment of its
fees and expenses deliver to the successor Owner Trustee all documents and
statements and monies held by it under this Agreement. The Administrator and the
predecessor Owner Trustee shall execute and deliver such instruments and do such
other things as may reasonably be required for fully and certainly vesting and
confirming in the successor Owner Trustee all such rights, powers, duties and
obligations.
(e) Upon acceptance of appointment by a successor Owner
Trustee pursuant to this Section 6.10, the Administrator (or if the
Administrator fails to so notify, the successor Owner Trustee, at the expense of
the Administrator) shall mail notice of the successor of such Owner Trustee to
all Certificateholders, the Indenture Trustee, the Noteholders, the Credit
Enhancer and each of the Rating Agencies.
SECTION 6.11 Merger or Consolidation of Owner Trustee. Any
corporation into which the Owner Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Owner Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Owner Trustee, shall be the successor of the Owner Trustee
hereunder, provided such corporation shall be eligible pursuant to Section 6.13,
and without the execution or filing of any instrument or any further act on the
part of any of the parties hereto; provided, however, that the Owner Trustee
shall mail notice of such merger or consolidation to the Credit Enhancer and
each of the Rating Agencies.
SECTION 6.12 Appointment of Co-Trustee or Separate Trustee.
(a) Notwithstanding any other provisions of this Agreement, at
any time, for the purpose of meeting any legal requirement of any jurisdiction
in which any part of the assets of the Trust or any Mortgaged Property may at
the time be located, the Administrator and the Owner Trustee (with the consent
of the Credit Enhancer) acting jointly shall have the power and shall execute
and deliver all instruments to appoint one or more Persons approved by the Owner
Trustee and the Credit Enhancer to act as co-trustee, jointly with the Owner
Trustee, or as separate trustee or trustees, of all or any part of the assets of
the Trust, and to vest in such Person, in such capacity, such title to the
Trust, or any part thereof, and, subject to the other provisions of this Section
6.12, such powers, duties, obligations, rights and trusts as the Administrator
and the Owner Trustee may consider necessary or desirable. If the Administrator
shall not have joined in such appointment within 15 days after the receipt by it
of a request so to do, the Owner Trustee (with the consent of the Credit
Enhancer) shall have the power to make such appointment. No co-trustee or
separate trustee under this Agreement shall be required to meet the terms of
eligibility as a successor trustee pursuant to Section 6.13 and no notice of the
appointment of any co-trustee or separate trustee shall be required pursuant to
Section 6.10.
(b) Each separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
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(i) all rights, powers, duties and obligations conferred or
imposed upon the Owner Trustee shall be conferred upon and exercised or
performed by the Owner 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 Owner Trustee joining
in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed,
the Owner Trustee shall be incompetent or unqualified to perform such
act or acts, in which event such rights, powers, duties and obligations
(including the holding of title to the Trust or any portion thereof in
any such jurisdiction) shall be exercised and performed singly by such
separate trustee or co-trustee, but solely at the direction of the
Owner Trustee;
(ii) no trustee under this Agreement shall be personally
liable by reason of any act or omission of any other trustee under this
Agreement; and
(iii) the Administrator and the Owner Trustee acting jointly
may at any time accept the resignation of or remove any separate
trustee or co-trustee; provided, however, that if the Administrator is
in default under the Administration Agreement, the Owner Trustee acting
alone may accept the resignation of or remove any separate trustee or
co-trustee.
(c) Any notice, request or other writing given to the Owner
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. 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 Owner
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Owner Trustee. Each such instrument shall be filed with the Owner
Trustee and a copy thereof given to the Administrator and the Credit Enhancer.
(d) Any separate trustee or co-trustee may at any time appoint
the Owner Trustee as its agent or attorney-in-fact with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Agreement on its behalf and in its name. If any separate trustee
or co-trustee shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Owner Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
SECTION 6.13 Eligibility Requirements for Owner Trustee. The Owner
Trustee shall at all times: (a) be a corporation satisfying the provisions of
Section 3807(a) of the Business Trust Statute; (b) be authorized to exercise
corporate trust powers; (c) have a combined capital and surplus of at least
$50,000,000 and be subject to supervision or examination by federal or state
authorities; (d) have (or have a parent which has) a long-term unsecured debt
rating of at least [BBB] by [Standard & Poor's Corporation] and at least [Baa2]
by the [Moody's Investors Service, Inc.]; and (e) be acceptable to the Credit
Enhancer. If such corporation shall publish reports of condition at least
annually, pursuant to law or to the requirements of the
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aforesaid supervising or examining authority, then for the purpose of this
Section 6.13, 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. If at any time the Owner Trustee shall cease
to be eligible in accordance with the provisions of this Section 6.13, the Owner
Trustee shall resign immediately in the manner and with the effect specified in
Section 6.10.
SECTION 6.14 Underwriting Agreement. For purposes of this
Article VI, the term "Basic Document" shall be deemed to include the
Underwriting Agreement.
ARTICLE VII
TERMINATION OF TRUST AGREEMENT
SECTION 7.1 Termination of Trust Agreement.
(a) This Agreement (other than Article VI) and the Trust shall
terminate and be of no further force or effect on the earlier of: (i) the final
distribution by the Owner Trustee of all moneys or other property or proceeds of
the assets of the Trust in accordance with the terms of the Indenture, the
Pooling and Servicing Agreement (including the exercise of the Class [__]
Certificateholder of its option to purchase the Mortgage Loans pursuant to
Section 10.01 of the Pooling and Servicing Agreement) and Article V, (ii) at the
time provided in Section 7.2 or (iii) the expiration of 21 years from the death
of the last survivor of Joseph P. Kennedy, former Ambassador to the Court of St.
James, living on the date of this Trust Agreement. The bankruptcy, liquidation,
dissolution, death or incapacity of any Certificateholder, other than the
Depositor as described in Section 7.2, shall not (x) operate to terminate this
Agreement or the Trust, nor (y) entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of all or any part of the
Trust or the assets of the Trust or (z) otherwise affect the rights, obligations
and liabilities of the parties hereto.
(b) Except as provided in Section 7.1(a), neither the
Depositor nor any Certificateholder shall be entitled to revoke or terminate the
Trust.
(c) Notice of any termination of the Trust, specifying the
Payment Date upon which the Certificateholders shall surrender their
Certificates to the Paying Agent for payment of the final distribution and
cancellation, shall be given by the Owner Trustee by letter to the Credit
Enhancer and the Certificateholders mailed within five Business Days of receipt
of notice of such termination from the Servicer given pursuant to subsection
10.01 of the Pooling and Servicing Agreement, stating: (i) the Payment Date upon
or with respect to which final payment of the Certificates shall be made upon
presentation and surrender of the Certificates at the office of the Paying Agent
therein designated; (ii) the amount of any such final payment; and (iii) that
the Record Date otherwise applicable to such Payment Date is not applicable,
payments being made only upon presentation and surrender of the Certificates at
the office of the Paying Agent therein specified. The Owner Trustee shall give
such notice to the Certificate Registrar (if other than the Owner Trustee) and
the Paying Agent at the time such notice is given to
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Certificateholders. Upon presentation and surrender of the Certificates, the
Paying Agent shall cause to be distributed to Certificateholders amounts
distributable on such Payment Date pursuant to Section 5.2.
(d) If all of the Certificateholders shall not surrender their
Certificates for cancellation within six months after the date specified in the
above mentioned written notice, the Owner Trustee shall give a second written
notice to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
one year after the second notice all the Certificates shall not have been
surrendered for cancellation, the Owner Trustee may take appropriate steps, or
may appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates, and the cost
thereof shall be paid out of the funds and other assets that shall remain
subject to this Agreement. Subject to applicable laws with respect to escheat of
funds, any funds remaining in the Trust after exhaustion of such remedies in the
preceding sentence shall be deemed property of the Depositor and distributed by
the Owner Trustee to the Depositor.
(e) Each Certificateholder is required, and hereby agrees, to
return to the Owner Trustee, any Certificate with respect to which the Owner
Trustee has made the final distribution due thereon. Any such Certificate as to
which the Owner Trustee has made the final distribution thereon shall be deemed
canceled and shall no longer be outstanding for any purpose of this Agreement,
whether or not such Certificate is ever returned to the Owner Trustee.
(f) Upon the winding up of the Trust and its termination, the
Owner Trustee shall cause the Certificate of Trust to be canceled by filing a
certificate of cancellation with the Secretary of State in accordance with the
provisions of Section 3810 of the Business Trust Statute.
SECTION 7.2 Dissolution upon Bankruptcy of the Depositor. This
Agreement shall be terminated in accordance with Section 7.1 90 days after the
occurrence of an Insolvency Event with respect to the Depositor, unless, before
the end of such 90 day period, the Owner Trustee shall have received written
instructions from (a) each of the Certificateholders (other than the Depositor)
and (b) each of the Noteholders, to the effect that each such party disapproves
of the liquidation of the Mortgage Loans and termination of the Trust. Promptly
after the occurrence of any Insolvency Event with respect to either Depositor:
(i) the Depositor shall give the Credit Enhancer, the Indenture Trustee, the
Rating Agencies and the Owner Trustee written notice of such Insolvency Event;
(ii) the Owner Trustee shall, upon the receipt of such written notice from the
Depositor, give prompt written notice to the Certificateholders and the
Indenture Trustee of the occurrence of such event and (iii) the Indenture
Trustee shall, upon receipt of written notice of such Insolvency Event from the
Owner Trustee or the Depositor, give prompt written notice to the Noteholders of
the occurrence of such event pursuant to Section 6.12 of the Indenture;
provided, however, that any failure to give a notice required by this sentence
shall not prevent or delay in any manner a termination of the Trust pursuant to
the first sentence of this Section 7.2. Upon a termination pursuant to this
Section 7.2, the Owner Trustee shall direct the Indenture Trustee promptly to
sell the assets of the Trust (other than the Accounts and the Certificate
Distribution Account) in a commercially reasonable manner and on commercially
reasonable terms. The proceeds of any such sale, disposition or liquidation of
the assets of the Trust shall be treated as collections on the Mortgage Loans
and deposited in the
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Principal and Interest Account pursuant to Section [___] of the Pooling and
Servicing Agreement.
ARTICLE VIII
AMENDMENTS
SECTION 8.1 Amendments Without Consent of Certificateholders or
Noteholders. This Agreement may be amended by the Depositor and the Owner
Trustee without the consent of any of the Noteholders or the Certificateholders
(but with the prior written consent of the Credit Enhancer and prior notice to
each of the Rating Agencies and the Administrator), to (i) cure any ambiguity,
(ii) correct or supplement any provision in this Agreement that may be defective
or inconsistent with any other provision in this Agreement, (iii) add or
supplement any credit enhancement for the benefit of the Noteholders or the
Certificateholders (provided that if any such addition shall affect any class of
Certificateholders differently than any other class of Certificateholders, then
such addition shall not, as evidenced by an Opinion of Counsel, adversely affect
in any material respect the interests of any class of Certificateholders), (iv)
add to the covenants, restrictions or obligations of the Depositor or the Owner
Trustee, (v) evidence and provide for the acceptance of the appointment of a
successor trustee with respect to the assets of the Trust and add to or change
any provisions as shall be necessary to facilitate the administration of the
trusts hereunder by more than one trustee pursuant to Article VI, and (vi) add,
change or eliminate any other provision of this Agreement in any manner that
shall not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of the Noteholders or the Certificateholders.
SECTION 8.2 Amendments With Consent of Certificateholders and
Noteholders. This Agreement may be amended from time to time by the Depositor
and the Owner Trustee with the consent of the Credit Enhancer, a Majority in
Voting Interest of Outstanding Notes and a Majority in Voting Interest of Class
[__] Certificates (which consent, whether given pursuant to this Section 8.2 or
pursuant to any other provision of this Agreement, shall be conclusive and
binding on such Person and on all future holders of such Notes or Certificates
and of any Notes or Certificates issued upon the transfer thereof or in exchange
thereof or in lieu thereof whether or not notation of such consent is made upon
the Notes or Certificates) for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement,
or of modifying in any manner the rights of the Noteholders or the
Certificateholders; provided, however, that no such amendment shall (a) increase
or reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on Mortgage Loans or distributions that shall be
required to be made on any Note or Certificate, the Note Interest Rate or the
Class [__] Pass-Through Rate or (b) reduce the aforesaid percentage required to
consent to any such amendment, without the consent of the Holders of all
Outstanding Notes and all of the Certificates then outstanding; provided,
further, that Annex A hereto may only be amended pursuant to Section 11 thereof.
The Depositor shall furnish written notice to each of the Rating Agencies prior
to obtaining consent to any proposed amendment under this Section 8.2.
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SECTION 8.3 Form of Amendments.
(a) Promptly after the execution of any amendment, supplement
or consent pursuant to Section 8.1 or 8.2, the Depositor shall furnish written
notification of the substance of such amendment or consent to each
Certificateholder, the Indenture Trustee, the Credit Enhancer and each Rating
Agency.
(b) It shall not be necessary for the consent of
Certificateholders, the Noteholders or the Indenture Trustee pursuant to Section
8.2 to approve the particular form of any proposed amendment or consent, but it
shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents (and any other consents of Certificateholders
provided for in this Agreement or in any other Basic Document) and of evidencing
the authorization of the execution thereof by Certificateholders shall be
subject to such reasonable requirements as the Owner Trustee may prescribe.
(c) Promptly after the execution of any amendment to the
Certificate of Trust, the Owner Trustee shall cause the filing of such amendment
with the Secretary of State.
(d) Prior to the execution of any amendment to this Agreement
or the Certificate of Trust, the Owner Trustee shall be entitled to receive and
rely upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and that all conditions precedent to
the execution and delivery of such amendment have been satisfied. The Owner
Trustee may, but shall not be obligated to, enter into any such amendment which
affects the Owner Trustee's own rights, duties or immunities under this
Agreement or otherwise.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 No Legal Title to Trust Assets. The
Certificateholders shall not have legal title to any part of the assets of the
Trust. The Certificateholders shall be entitled to receive distributions with
respect to their undivided ownership interest therein only in accordance with
Articles V and VII. No transfer, by operation of law or otherwise, of any right,
title, and interest of the Certificateholders to and in their ownership interest
in the assets of the Trust shall operate to terminate this Agreement or the
trusts hereunder or entitle any transferee to an accounting or to the transfer
to it of legal title to any part of the assets of the Trust.
SECTION 9.2 Limitations on Rights of Others. Except for
Section 2.7, the provisions of this Agreement are solely for the benefit of the
Credit Enhancer, the Owner Trustee, the Depositor, the Certificateholders, the
Administrator and, to the extent expressly provided herein, the Indenture
Trustee and the Noteholders, and nothing in this Agreement, whether express or
implied, shall be construed to give to any other Person any legal or equitable
right, remedy or claim in the assets of the Trust or under or in respect of this
Agreement or any covenants, conditions or provisions contained herein.
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SECTION 9.3 Notices.
(a) All demands, notices and communications hereunder shall be
in writing and shall be deemed to have been duly given if personally delivered
at or mailed by overnight mail, certified mail or registered mail, postage
prepaid, to (i) in the case of the Servicer and the Administrator,
[______________________],Attention: [_________________], such other addresses as
may hereafter be furnished to the Certificateholders and the Noteholders in
writing by the Administrator or the Servicer, as the case may be, (ii) in the
case of the Depositor, 100 East Broad Street, Columbus, Ohio 43271-0138,
Attention: [__________________], or such other addresses as may hereafter be
furnished to the Certificateholders and the Noteholders in writing by the
Depositor, (iii) in the case of the Issuer, [__________________________],
Attention: [________________], or such other addresses as may hereafter be
furnished to the Noteholders and the Certificateholders in writing by the
Issuer, (iv) in the case of the Owner Trustee, [___________________________],
Attention: Banc One HELOC Trust 199[__]-[__], (v) in the case of the
Certificateholders, as set forth in the Certificate Register, (vi) in the case
of the Indenture Trustee, [_________________________________], Attention:
[________________________], (vii) in the case of the Noteholders, as set forth
in the Note Register, (viii) in the case of [Moody's, 99 Church Street, New
York, New York 10007, Attention: Home Equity Monitoring Group], (ix) in the case
of [S&P, 26 Broadway, New York, New York 10004], Attention:
[_____________________], (x) in the case of [Fitch, IBCA Investors Service,
Inc., One State Street Plaza, New York, New York 10004], Attention: BANC ONE
HELOC Trust 199[__]-[__], (xi) in the case of the Credit Enhancer,
[_____________________], , Attention: [____________________] and (xii) in the
case of each Account Party, at the address specified by such Account Party. Any
such notices shall be deemed to be effective with respect to any party hereto
upon the receipt of such notice by such party, except that notices to the
Certificateholders or Noteholders shall be effective upon mailing or personal
delivery.
(b) Any notice required or permitted to be given to a
Certificateholder or Noteholder shall be given by first-class mail, postage
prepaid, at the address of such Holder as shown in the Certificate Register or
Note Register, as the case may be. Any notice so mailed within the time
prescribed in this Agreement shall be conclusively presumed to have been duly
given, whether or not the Certificateholder receives such notice.
SECTION 9.4 Severability. 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 Certificates
or the rights of the holders thereof.
SECTION 9.5 Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument.
SECTION 9.6 Successors and Assigns. All covenants and
agreements contained herein shall be binding upon, and inure to the benefit of,
the Depositor, the Owner
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Trustee and each Certificateholder and their respective successors and permitted
assigns, all as herein provided. Any request, notice, direction, consent, waiver
or other instrument or action by a Certificateholder shall bind the successors
and assigns of such Certificateholder.
SECTION 9.7 No Petition Covenant. Notwithstanding any prior
termination of this Agreement, the Trust (or the Owner Trustee on behalf of the
Trust), each Certificateholder or Certificate Owner, the Indenture Trustee and
each Noteholder or Note Owner shall not acquiesce, petition or otherwise invoke
or cause the Depositor or the Trust to invoke the process of any court or
governmental authority for the purpose of commencing or sustaining a case
against the Depositor or the Trust under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Depositor or
the Trust or any substantial part of its property, or ordering the winding up or
liquidation of the affairs of the Depositor or the Trust.
SECTION 9.8 No Recourse. Each Certificateholder by accepting a
Certificate acknowledges that such Certificateholder's Certificates represent
beneficial interests in the Trust only and do not represent interests in or
obligations of the Depositor, the Servicer, the Representative, the
Administrator, the Owner Trustee, the Indenture Trustee or any Affiliate thereof
and no recourse may be had against such parties or their assets, except as may
be expressly set forth or contemplated in this Agreement, the Certificates or
the Basic Documents.
SECTION 9.9 Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 9.10 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 9.11 Certificate Transfer Restrictions. None of the
Class [__] Certificates or the Class [__] Certificate may be acquired by or for
the account of (i) an employee benefit plan (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) that is
subject to the provisions of Title I of ERISA, (ii) a plan described in Section
4975(e)(1) of the Code (other than a Plan described in Section 4975(g)(2) or (3)
of the Code), or (iii) any entity whose underlying assets include plan assets by
reason of a plan's investment in the entity (each, a "Benefit Plan"). By
accepting and holding a Certificate, the Holder thereof and the Certificate
Owner shall each be deemed to have represented and warranted that it is not a
Benefit Plan and, if requested in writing to do so by the Depositor, with a copy
to the Certificate Registrar and the Owner Trustee, the Certificateholder and
the Certificate Owner shall execute and deliver to the Certificate Registrar an
Undertaking Letter in the form set forth in Exhibit D.
SECTION 9.12 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 Insurance
Policy, and its rights hereunder during
29
<PAGE> 31
such period shall vest in the Majority in Voting Interest of the Class [__]
Certificates. The Servicer shall give the Owner Trustee notice of such event. At
such time as the Notes are no longer outstanding under the Indenture and the
Class [__] Certificates are no longer outstanding hereunder, and no amounts
owned to the Credit Enhancer under any Basic Document remain unpaid, the Credit
Enhancer's rights hereunder shall terminate. The Credit Enhancer is an intended
third party beneficiary of this Agreement.
30
<PAGE> 32
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed by their respective officers hereunto duly
authorized, as of the day and year first above written.
[ ]
-------------------------- ,
as Owner Trustee
By:
------------------------------
Name:
Title:
DEPOSITOR
BANC ONE ABS CORPORATION
By:
------------------------------
Name:
Title:
Acknowledged and Accepted:
[BANK ONE, N.A.],
as Servicer and Administrator
By:
------------------------------
Name:
Title:
31
<PAGE> 33
EXHIBIT A-1
[FORM OF CLASS [__] CERTIFICATE]
Class [__] Certificate
$_____________
NUMBER CUSIP NO. [________]
[___-]___
SEE REVERSE FOR CERTAIN DEFINITIONS
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS CERTIFICATE MAY NOT BE ACQUIRED BY OR FOR THE ACCOUNT OF
(i) AN "EMPLOYEE BENEFIT PLAN" (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO
THE PROVISIONS OF TITLE I OF ERISA, (ii) A PLAN DESCRIBED IN SECTION 4975(e)(1)
OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (OTHER THAN A PLAN
DESCRIBED IN SECTION 4975(g)(2) OR (3) OF THE CODE), OR (iii) ANY ENTITY WHOSE
UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN'S INVESTMENT IN THE
ENTITY. BY ACCEPTING AND HOLDING THIS CERTIFICATE, THE HOLDER HEREOF AND THE
CERTIFICATE OWNER SHALL EACH BE DEEMED TO HAVE REPRESENTED AND WARRANTED THAT IT
IS NOT SUCH A PLAN AND NO ASSETS OF SUCH A PLAN WERE USED TO ACQUIRE THE
CERTIFICATE.
THE PRINCIPAL AMOUNT OF THIS CERTIFICATE IS PAYABLE AS SET
FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS CERTIFICATE
AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
A-1-1
<PAGE> 34
BANC ONE HELOC ASSET BACKED CERTIFICATES
<TABLE>
<S> <C>
Series 199[__]-[__] Original Class [__] Principal Amount:
Class [__] $[_____________]
Class[__] Pass-Through Original Dollar Amount as of the
Rate: [___]% Cut-off Date Represented by this
Certificate: $__________________
Date of Trust Agreement and Percentage Interest of this
Cut-off Date: as of Certificate: ______%
[____________ __], 199[__]
Servicer: [Bank One, N.A.] Original Pool Principal Balance:
$[________________]
First Payment Date:
[______________ __,] 199[__]
Closing Date: Owner Trustee: [_______________]
[________________,]
199[__]
Cusip:
</TABLE>
BANC ONE HELOC TRUST 1993-3
BANC ONE HELOC ASSET BACKED CERTIFICATE
SERIES 199[__]-[__], CLASS [__] [__]% PASS THROUGH RATE
evidencing a fractional undivided interest in the Trust, as defined below, the
property of which includes a pool of certain residential first and second
mortgage loans master serviced by [Bank One, N.A.] (hereinafter called the
"Servicer", in its capacity as Servicer, which term includes any successors
thereto).
(This Certificate does not represent an interest in or obligation of Banc One
Corporation, Banc One ABS Corporation, [Bank One, N.A.] or any of their
respective affiliates, except to the extent described below.)
THIS CERTIFIES THAT ____________ is the registered owner of a
nonassessable, fully-paid, fractional undivided interest in Banc One Trust
199[__]-[__] (the "Trust") formed by Banc One ABS Corporation (the "Depositor").
A-1-2
<PAGE> 35
The Trust was created pursuant to a Trust Agreement, dated as
of [____________ __], 199[__] (as amended and supplemented from time to time,
the "Trust Agreement"), among the Depositor and [_________________________], as
owner trustee (the "Owner Trustee"), a summary of certain of the pertinent
provisions of which is set forth below. To the extent not otherwise defined
herein, the capitalized terms used herein have the meanings assigned to them in
the Trust Agreement.
This Certificate is one of the duly authorized Certificates
designated as "Banc One HELOC Asset Backed Certificates Series 199[__]-[__],
Class [__] [___]% Pass Through Rate" (the "Class [__] Certificates"), and "Banc
One HELOC Asset Backed Certificates Series 199[__]-[__], Class [__]" (the "Class
[__] Certificates", and together with the Class [__] Certificates, the
"Certificates"). This Certificate is issued under and is subject to the terms,
provisions and conditions of the Trust Agreement, to which Trust Agreement the
holder of this Certificate by virtue of the acceptance hereof assents and by
which such holder is bound. Concurrently with the issuance of the Certificates,
the Issuer is issuing its [___]% Banc One HELOC Asset Backed Notes, Series
199[__]-[__], due [___________ __], 200[___] (the "Notes") in the original
aggregate principal amount of $[__________] pursuant to an Indenture dated as of
[___________ __], 199[__] (the "Indenture") between the
[______________________], National Association, as Trustee (the "Indenture
Trustee"). The property of the Trust includes a pool of certain residential
first and second mortgage loans (the "Mortgage Loans"). The Mortgage Loans were
originated or acquired by the Sellers and transferred from the Sellers to the
Depositor pursuant to a Mortgage Loan Purchase Agreement dated as of [_________
__], 199[__] (the "Purchase Agreement"). The Mortgage Loans have been
transferred to the Trust and will be serviced by the Servicer pursuant to the
terms and conditions of a Pooling and Servicing Agreement dated as of
[___________ __], 199[__] (the "Pooling and Servicing Agreement") among the
Depositor, the Trust and the Servicer, a summary of certain of the pertinent
provisions of which are set forth herein. The Mortgage Loans in the Mortgage
Pool have aggregate outstanding principal balances, at the close of business on
the Cut-Off Date herein referred to, after application of payments received by
the Servicer on or before such date, of $[____________]. The rights of the
holders of the Certificates are subordinated to the rights of the holders of the
Notes and the rights of the holders of the Class [__] Certificates are
subordinate to the rights of holders of the Class [__] Certificates, as set
forth in the Pooling and Servicing Agreement and the Indenture.
Under the Trust Agreement, there shall be distributed on the
15th day of each March, June, September and December or, if such 15th day is not
a Business Day, the next Business Day (each, a "Payment Date"), commencing on
[____________ __, 199[__]], to the Person in whose name this Certificate is
registered at the close of business on the Record Date (as defined below), such
Class [__] Certificateholder's Percentage Interest in the Class [__] Remittance
Amount to be distributed to Class [__] Certificateholders on such Payment Date;
provided, however, Class [__] Certificateholders shall not receive payments in
respect of the Class [__] Certificates if an Event of Default exists under the
Indenture. The "Record Date", with respect to any Payment Date, means the close
of business on the calendar day immediately preceding such Payment Date, or if
Definitive Certificates are issued, the last day of the calendar month preceding
the month in which the Payment Date occurs.
A-1-3
<PAGE> 36
The distributions in respect of the Class [__] Remittance
Amount on this Certificate are payable in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts. All payments made by the Trust on each Payment Date
with respect to this Certificate shall be applied first to interest due and
payable on this Certificate as provided above and then to the unpaid
distributions in respect of the Class [__] Principal Balance of this
Certificate.
The holder of this Certificate acknowledges and agrees that
its rights to receive distributions in respect of this Certificate are
subordinated to the rights of the Noteholders as and to the extent described in
the Pooling and Servicing Agreement and the Indenture.
Each Certificateholder or Certificate Owner, by its acceptance
of a Class [__] Certificate or, in the case of a Certificate Owner, a beneficial
interest in a Class [__] Certificate, covenants and agrees that such
Certificateholder or Certificate Owner, as the case may be, shall not, prior to
the date which is one year and one day after the termination of the Trust
Agreement, acquiesce, petition or otherwise invoke or cause the Depositor or the
Trust to invoke the process of any court or governmental authority for the
purpose of commencing or sustaining a case against the Depositor or the Trust
under any federal or state bankruptcy, insolvency, reorganization or similar law
or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator
or other similar official of the Depositor or the Trust or any substantial part
of its property, or ordering the winding up or liquidation of the affairs of the
Depositor or the Trust.
Distributions on this Certificate shall be made as provided in
the Trust Agreement by the Owner Trustee by wire transfer (as permitted by the
Trust Agreement) or check mailed to the Certificateholder of record in the
Certificate Register without the presentation or surrender of this Certificate
or the making of any notation hereon, except that with respect to Certificates
registered on the Record Date in the name of the nominee of the Depository
(initially, such nominee to be Cede & Co.), payments shall be made by wire
transfer in immediately available funds to the account designated by such
nominee. Except as otherwise provided in the Trust Agreement and notwithstanding
the above, the final distribution on this Certificate shall be made after due
notice by the Owner Trustee of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the office maintained for such
purpose by the Owner Trustee in the Borough of Manhattan, the City of New York.
Reference is hereby made to the further provisions of this
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have
been executed by an authorized signatory of the Owner Trustee by manual
signature, this Certificate shall not entitle the holder hereof to any benefit
under the Trust Agreement or the Pooling and Servicing Agreement or be valid for
any purpose.
THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND
A-1-4
<PAGE> 37
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust
and not in its individual capacity, has caused this Certificate to be duly
executed.
BANC ONE HELOC TRUST
199[__]-[__]
By: [________________________],
not in its individual capacity
but solely as Owner Trustee
Dated: __________ __, 199[__] By: __________________________
Authorized Signatory
A-1-5
<PAGE> 38
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned Trust
Agreement.
[___________________________], OR [__________________________],
not in its individual capacity not in its individual capacity but
but solely as Owner Trustee solely as Owner Trustee by
[___________________], as
Authenticating Agent
By: ___________________________ By: ___________________________
Authorized Signatory Authorized Signatory
A-1-6
<PAGE> 39
[Reverse of Certificate]
The Certificates do not represent an obligation, or an
interest in, the Depositor, the Servicer, any Seller, the Indenture Trustee, the
Owner Trustee or any Affiliates of any of them and no recourse may be had
against such parties or their assets, except as may be expressly set forth or
contemplated herein or in the Trust Agreement or in the Basic Documents. In
addition, this Certificate is not guaranteed by any governmental agency or
instrumentality and is limited in right of payment to certain collections and
recoveries with respect to the Mortgage Loans and amounts withdrawable from the
Spread Account (and certain other amounts), all as more specifically set forth
herein and in the Trust Agreement and the Pooling and Servicing Agreement. A
copy of each of the Pooling and Servicing Agreement and the Trust Agreement may
be examined during normal business hours at the principal office of the
Administrator, and at such other places, if any, designated by the
Administrator, by any Certificateholder upon written request.
[_________________________] has issued a guaranty surety bond
with respect to the Notes and the Class [__] Certificates, a copy of which is
attached as Exhibit I to the Pooling and Servicing Agreement. Pursuant to the
Pooling and Servicing Agreement and the Trust Agreement, the Class [__]
Certificateholder has pledged all of its right, title and interest in the Spread
Account to the Indenture Trustee to secure the Trust's payment obligations under
the Pooling and Servicing Agreement and the Indenture.
As provided in the Pooling and Servicing Agreement, deposits
and withdrawals from the Principal and Interest Account, the Collection Account,
the Spread Account, the Letter of Credit Fee Account and the Insurance Account
may be made by the Indenture Trustee from time to time for purposes other than
distributions to Noteholders and Certificateholders, such purposes including
reimbursement of certain expenses incurred by the Servicer and investment in
Permitted Investments.
The Trust Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor and the rights of the Certificateholders under the
Trust Agreement at any time by the Depositor and the Owner Trustee with the
consent of the Credit Enhancer and the Majority in Voting Interest of
Outstanding Notes and the Majority in Voting Interest of Class [__]
Certificates. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such holder and on all future Holders of this
Certificate and of any Certificate issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof whether or not notation of such
consent is made upon this Certificate. The Trust Agreement also permits the
amendment thereof, in certain circumstances, without the consent of the Holders
of any of the Certificates or the Notes.
It is the intent of the Depositor, the Servicer, their
Affiliates, the Noteholders and the Certificateholders to treat the Trust as a
partnership with the assets of the partnership being the assets held by the
Trust, the partners of the partnership being the Class [__] Certificateholders
and the Class [__]Certificateholder and the Notes being the debt of the
partnership, in each case for purposes of Federal and state income tax,
franchise tax, and any other tax measured in whole or in part by income. Except
as otherwise required by appropriate taxing authorities, the Depositor, the
Servicer, their Affiliates, the Noteholders, and the
A-1-7
<PAGE> 40
Certificateholders by acceptance of a Certificate, agree to treat, and to take
no action inconsistent with the treatment of, the Certificates for tax purposes
as interests in such partnership.
As provided in the Trust Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registerable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies of the Certificate Registrar maintained
by the Owner Trustee in the City of New York, accompanied by (i) a written
instrument of transfer in form satisfactory to the Owner Trustee and the
Certificate Registrar duly executed by the Holder hereof or such Holder's
attorney duly authorized in writing and (ii) if requested by the Depositor, the
Undertaking Letter required by Section 9.11 of the Trust Agreement, and
thereupon one or more new Certificates of authorized denominations evidencing
the same aggregate interest in the Trust will be issued to the designated
transferee. The initial Certificate Registrar appointed under the Trust
Agreement is [_______________________].
The Class [__] Certificates are issuable only as registered
Certificates without coupons in denominations of $1,000 and in integral
multiples thereof. As provided in the Trust Agreement and subject to certain
limitations therein set forth, Class [__] Certificates are exchangeable for new
Class [__] Certificates of authorized denominations evidencing the same
aggregate denomination, as requested by the Holder surrendering the same;
provided, however, that no Class [__] Certificate may be subdivided such that
the denomination of any resulting Class [__] Certificate is less than $1,000. No
service charge shall be made for any such registration of transfer or exchange,
but the Owner Trustee or the Certificate Registrar may require payment of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
The Owner Trustee, the Certificate Registrar and any agent of
the Owner Trustee or the Certificate Registrar may treat the Person in whose
name this Certificate is registered as the owner hereof for all purposes, and
none of the Owner Trustee, the Certificate Registrar or any such agent shall be
affected by any notice to the contrary.
The obligations and responsibilities created by the Trust
Agreement and the Trust created thereby shall terminate upon the payment to
Certificateholders of all amounts required to be paid to them pursuant to the
Trust Agreement and the Pooling and Servicing Agreement and the disposition of
all property held as part of the Trust. The Class [__] Certificateholder may at
its option cause the Mortgage Loans and REO Properties to be sold at a minimum
price specified in the Pooling and Servicing Agreement, and the proceeds of such
sale of the Mortgage Loans and REO Property shall effect early retirement of the
Certificates; provided, however, that such right of purchase is exercisable only
following the Payment Date as of which the Pool Principal Balance is 10% or less
of the Original Pool Principal Balance.
Unless the certificate of authentication hereon has been
executed by the Owner Trustee by manual signature, this Certificate shall not be
entitled to any benefit under the Trust Agreement or be valid for any purpose.
A-1-8
<PAGE> 41
EXHIBIT A-2
[FORM OF CLASS [__] CERTIFICATE]
Class [__] Certificate
NUMBER ________ %
[___-]___
THIS CERTIFICATE IS NOT TRANSFERABLE
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
THIS CERTIFICATE MAY NOT BE ACQUIRED BY OR FOR THE ACCOUNT OF
(i) AN "EMPLOYEE BENEFIT PLAN" (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")), THAT IS SUBJECT
TO THE PROVISIONS OF TITLE I OF ERISA, (ii) A PLAN DESCRIBED IN SECTION
4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (OTHER
THAN AS DESCRIBED IN SECTION 4975(g)(2) or (3) OF THE CODE), OR (iii) ANY ENTITY
WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN'S INVESTMENT IN
THE ENTITY. BY ACCEPTING AND HOLDING THIS CERTIFICATE, THE HOLDER HEREOF AND THE
CERTIFICATE OWNER SHALL EACH BE DEEMED TO HAVE REPRESENTED AND WARRANTED THAT IT
IS NOT A BENEFIT PLAN AND NO ASSETS OF SUCH A PLAN WERE USED TO ACQUIRE THE
CERTIFICATE.
BY ACCEPTING THIS CERTIFICATE THE HOLDER HEREOF AGREES TO
PLEDGE ALL OF ITS RIGHT, TITLE AND INTEREST IN AND TO THE SPREAD ACCOUNT (AS
DEFINED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN) TO THE
INDENTURE TRUSTEE FOR THE BENEFIT OF THE HOLDERS OF THE [__]% BANC ONE HELOC
ASSET BACKED NOTES, SERIES 199[__]-[__], DUE [_____________ ___, 200[__] AND OF
THE BANC ONE HELOC ASSET BACKED CERTIFICATES, SERIES 199[__]-[__], CLASS [__],
[___]% CLASS [__] PASS THROUGH RATE.
A-2-1
<PAGE> 42
BANC ONE HELOC ASSET BACKED CERTIFICATES
<TABLE>
<S> <C>
Series 199[__]-[__] Class [__]
No. [___-]
Date of Trust Agreement and Cut-off
Date: as of [_____________ __], Percentage Interest of this
199[__] Certificate: 100%
Servicer: [Bank One, N.A.] Original Pool Principal Balance:
$[______________]
First Payment Date: [_____________
__], 199[__]
Closing Date: [____________ __,] Owner Trustee: [_______________]
199[___]
</TABLE>
BANK ONE, N.A.TRUST 199[__]-[__]
BANK ONE, N.A. ASSET BACKED CERTIFICATE
SERIES 199[__]-[__], CLASS [__]
evidencing a fractional undivided interest in the Trust, as defined below, the
property of which includes a pool of certain residential first and second
mortgage loans master serviced by [Bank One, N.A.] (hereinafter called the
"Servicer", in its capacity as Servicer, which term includes any successors
thereto).
(This Certificate does not represent an interest in or obligation of Banc One
Corporation, Banc One ABS Corporation, [Bank One, N.A.] or any of their
respective affiliates, except to the extent described below.)
THIS CERTIFIES THAT ________________________ is the registered
owner of a nonassessable, fully-paid, fractional undivided interest in Banc One
HELOC Trust 199[__]-[__] (the "Trust") formed by Banc One ABS Corporation (the
"Depositor").
The Trust was created pursuant to a Trust Agreement, dated as
of [_____________ __], 199[__] (as amended and supplemented from time to time,
the "Trust Agreement"), among the Depositor and [__________________], as owner
trustee (the "Owner Trustee"), a summary of certain of the pertinent provisions
of which is set forth below. To the extent not otherwise defined herein, the
capitalized terms used herein have the meanings assigned to them in the Trust
Agreement.
This Certificate is one of the duly authorized Certificates
designated as "Banc One HELOC Asset Backed Certificates Series 199[__]-[__],
Class [__] [___]% Pass Through
A-2-2
<PAGE> 43
Rate" (the "Class [__] Certificates") and "Banc One HELOC Loan Asset Backed
Certificates Series 199[__]-[__], Class [__]" (the "Class [__] Certificates",
and together with the Class [__] Certificates, the "Certificates"). This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Trust Agreement, to which Trust Agreement the holder of this
Certificate by virtue of the acceptance hereof assents and by which such holder
is bound. Concurrently with the issuance of the Certificates, the Issuer is
issuing its [____]% Banc One HELOC Asset Backed Notes, Series 199[__]-[__], due
[__________ __], 200[__] (the "Notes") in the original aggregate principal
amount of $[____________] pursuant to an Indenture dated as of [_________ __],
199[__] (the "Indenture") between the Trust and [___________________], as
Trustee (the "Indenture Trustee"). The property of the Trust includes a pool of
certain revolving home equity loans and lines of credit (the "Mortgage Loans").
The Mortgage Loans were originated or acquired by the Sellers and transferred
from the Sellers to the Depositor pursuant to a Purchase Agreement dated as of
[____________ __, 199[__] (the "Purchase Agreement"). The Mortgage Loans have
been transferred to the Trust and will be serviced by the Servicer pursuant to
the terms and conditions of a Pooling and Servicing Agreement dated as of
[__________ __, 199[__] (the "Pooling and Servicing Agreement") among the
Depositor, the Trust and the Servicer, a summary of certain of the pertinent
provisions of which are set forth herein. The Mortgage Loans in the Mortgage
Pool have aggregate outstanding principal balances, at the close of business on
the Cut-Off Date herein referred to, after application of payments received by
the Servicer on or before such date, of $[__________________]. The rights of the
holders of the Certificates are subordinated to the rights of the holders of the
Notes and the rights of the holders of the Class [__] Certificates are
subordinated to the rights of the holders of the Class [__] Certificates, as set
forth in the Pooling and Servicing Agreement and the Indenture.
Under the Trust Agreement, there shall be distributed on the
15th day of each month or, if such 15th day is not a Business Day, the next
Business Day (each, a "Payment Date" if such month is March, June, September or
December, or a "Monthly Deposit Date" otherwise), commencing on [____________
__], 199[__], to the Person in whose name this Certificate is registered at the
close of business on the Record Date (as defined below), the amounts to be
distributed to Class [__] Certificateholders on such Payment Date or Monthly
Deposit Date pursuant to Sections [____] and [____] of the Pooling and Servicing
Agreement; provided, however, Class [__] Certificateholder shall not receive
payments in respect of the Class [__] Certificate if an Event of Default exists
under the Indenture. The "Record Date", with respect to any Payment Date or
Monthly Deposit Date, means the last day of the calendar month preceding the
month in which the Payment Date occurs.
The distributions on this Certificate are payable in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts.
The holder of this Certificate acknowledges and agrees that
its rights to receive distributions in respect of this Certificate are
subordinated to the rights of the Noteholders and the Class [__]
Certificateholders as and to the extent described in the Pooling and Servicing
Agreement and the Indenture. In addition, by acceptance of this Certificate the
holder of this Certificate agrees to pledge all of its right, title and interest
in the Spread Amount to the
A-2-3
<PAGE> 44
Indenture Trustee for the benefit of the Noteholders and Class [__]
Certificateholders pursuant to the terms of the Trust Agreement and the Pooling
and Servicing Agreement.
The Class [__] Certificateholder by its acceptance of the
Class [__] Certificate covenants and agrees that such Certificateholder shall
not, prior to the date which is one year and one day after the termination of
the Trust Agreement, acquiesce, petition or otherwise invoke or cause the
Depositor or the Trust to invoke the process of any court or governmental
authority for the purpose of commencing or sustaining a case against the
Depositor or the Trust under any federal or state bankruptcy, insolvency,
reorganization or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Depositor or
the Trust or any substantial part of its property, or ordering the winding up or
liquidation of the affairs of the Depositor or the Trust.
Distributions on this Certificate shall be made as provided in
the Trust Agreement by the Owner Trustee by wire transfer to the
Certificateholder of record in the Certificate Register without the presentation
or surrender of this Certificate or the making of any notation hereon. Except as
otherwise provided in the Trust Agreement and notwithstanding the above, the
final distribution on this Certificate shall be made after due notice by the
Owner Trustee of the pendency of such distribution and only upon presentation
and surrender of this Certificate at the office maintained for such purpose by
the Owner Trustee in the Borough of Manhattan, the City of New York.
Reference is hereby made to the further provisions of this
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have
been executed by an authorized signatory of the Owner Trustee by manual
signature, this Certificate shall not entitle the holder hereof to any benefit
under the Trust Agreement or the Pooling and Servicing Agreement or be valid for
any purpose.
THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
A-2-4
<PAGE> 45
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust
and not in its individual capacity, has caused this Certificate to be duly
executed.
BANC ONE HELOC TRUST
199[__]-[__]
By: [________________________],
not in its individual capacity
but solely as Owner Trustee
Dated:_______________, 199[__] By: __________________________
Authorized Signatory
A-2-5
<PAGE> 46
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned Trust
Agreement.
[ ], OR [ ],
---------------------------- ------------------------
not in its individual capacity not in its individual
but solely as Owner Trustee capacity but solely as Owner
Trustee by [ ],
--------------
as Authenticating Agent
By: By:
--------------------------- -------------------------
Authorized Signatory Authorized Signatory
A-2-6
<PAGE> 47
[Reverse of Certificate]
The Certificates do not represent an obligation, or an
interest in, the Depositor, the Servicer, any Seller, the Indenture Trustee, the
Owner Trustee or any Affiliates of any of them and no recourse may be had
against such parties or their assets, except as may be expressly set forth or
contemplated herein or in the Trust Agreement or in the Basic Documents. In
addition, this Certificate is not guaranteed by any governmental agency or
instrumentality and is limited in right of payment to certain collections and
recoveries with respect to the Mortgage Loans and amounts withdrawable from the
Spread Account (and certain other amounts), all as more specifically set forth
herein and in the Trust Agreement and the Pooling and Servicing Agreement. A
copy of each of the Pooling and Servicing Agreement and the Trust Agreement may
be examined during normal business hours at the principal office of the
Administrator, and at such other places, if any, designated by the
Administrator, by any Certificateholder upon written request.
[_________________________] has issued a guaranty surety bond
with respect to the Notes and the Class [__] Certificates, a copy of which is
attached as Exhibit I to the Pooling and Servicing Agreement. Pursuant to the
Pooling and Servicing Agreement and the Trust Agreement, the Class [__]
Certificateholders have pledged all of their right, title and interest in the
Spread Account to the Indenture Trustee to secure the Trust's payment
obligations under the Pooling and Servicing Agreement and the Indenture.
As provided in the Pooling and Servicing Agreement, deposits
and withdrawals from the Principal and Interest Account, the Collection Account,
the Spread Account, the Letter of Credit Fee Account and the Insurance Account
may be made by the Indenture Trustee from time to time for purposes other than
distributions to Noteholders and Certificateholders, such purposes including
reimbursement of certain expenses incurred by the Servicer and investment in
Permitted Investments.
The Trust Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor and the rights of the Certificateholders under the
Trust Agreement at any time by the Depositor and the Owner Trustee with the
consent of the Credit Enhancer and the Majority in Voting Interest of Notes and
the Majority in Voting Interest of Class [__] Certificates. Any such consent by
the Holder of this Certificate shall be conclusive and binding on such Holder
and on all future Holders of this Certificate and of any Certificate issued upon
the registration of transfer hereof or in exchange herefor or in lieu hereof
whether or not notation of such consent is made upon this Certificate. The Trust
Agreement also permits the amendment thereof, in certain circumstances, without
the consent of the Holders of any of the Certificates or the Notes.
It is the intent of the Depositor, the Servicer, their
Affiliates, the Noteholders and the Certificateholders to treat the Trust as a
partnership with the assets of the partnership being the assets held by the
Trust, the partners of the partnership being the Class [__] Certificateholders
and Class [__] Certificateholders and the Notes being the debt of the
partnership, in each case for purposes of Federal and state income tax,
franchise tax, and any other tax measured in whole or in part by income. Except
as otherwise required by appropriate taxing authorities, the Depositor, the
Servicer, their Affiliates, the Noteholders, and the
A-2-7
<PAGE> 48
Certificateholders by acceptance of a Certificate, agree to treat, and to take
no action inconsistent with the treatment of the Certificates for tax purposes
as interests in such partnership.
The Owner Trustee, the Certificate Registrar and any agent of
the Owner Trustee or the Certificate Registrar may treat the Person in whose
name this Certificate is registered as the owner hereof for all purposes, and
none of the Owner Trustee, the Certificate Registrar or any such agent shall be
affected by any notice to the contrary.
The obligations and responsibilities created by the Trust
Agreement and the Trust created thereby shall terminate upon the payment to
Certificateholders of all amounts required to be paid to them pursuant to the
Trust Agreement and the Pooling and Servicing Agreement and the disposition of
all property held as part of the Trust. The Class [__] Certificateholder may at
their option cause the Mortgage Loans and REO Properties to be sold at a minimum
price specified in the Pooling and Servicing Agreement, and the proceeds of such
sale of the Mortgage Loans and REO Property shall effect early retirement of the
Certificates; provided, however, that such right of purchase is exercisable only
following the Payment Date as of which the Pool Principal Balance is 10% or less
of the Original Pool Principal Balance.
Unless the certificate of authentication hereon has been
executed by the Owner Trustee by manual signature, this Certificate shall not be
entitled to any benefit under the Trust Agreement or be valid for any purpose.
A-2-8
<PAGE> 49
EXHIBIT B
CERTIFICATE OF TRUST OF
BANC ONE HELOC TRUST 199[__]-[__]
THIS Certificate of Trust of BANC ONE HELOC TRUST 199[__]-[__]
(the "Trust") dated as of [_____________ __], 199[__], is being duly executed
and filed by [_________________], a [______________] banking corporation, as
trustee, to form a business trust under the Delaware Business Trust Act (12
Del., Section 3801 et seq.).
1. Name. The name of the business trust formed hereby is Banc
One HELOC Trust 199[__]-[__].
2. Delaware Trustee. The name and business address of the
trustee of the Trust in the State of Delaware is [______________________],
[____________________], Attention: [__________________________].
3. This Certificate of Trust shall be effective as of its
filing.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of
the Trust, has executed this Certificate of Trust as of the date first above
written.
[________________________],
not in its individual capacity
but solely as Owner Trustee
By: _________________________________
Name:
Title:
B-1
<PAGE> 50
EXHIBIT C
[Form of Certificate Depository Agreement]
C-1
<PAGE> 51
EXHIBIT D
[Form of Undertaking Letter]
[Certificate Registrar]
[Owner Trustee]
Ladies and Gentlemen:
We hereby represent and warrant that, as a holder or owner of
Banc One HELOC Asset Backed Certificates, Series 199[__]-[__][, Class [__],] [,
Class [__]] we are not (i) an employee benefit plan (as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
that is subject to the provisions of Title I of ERISA, (ii) a plan described in
Section 4975(e)(1) of the Internal Revenue Code of 1986, as amended (other than
a plan described in Section 4975(g)(2) or (3) of the Code), or (iii) an entity
whose underlying assets include plan assets by reason of a plan's investment in
the entity.
[Certificate Owner/Holder]
By: ___________________________________
Name:
Title:
D-1
<PAGE> 52
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE.................................................1
Section 1.1 Definitions...........................................................................1
ARTICLE II ORGANIZATION...............................................................................1
Section 2.1 Name..................................................................................1
Section 2.2 Office................................................................................1
Section 2.3 Purposes and Powers...................................................................1
Section 2.4 Appointment of Owner Trustee..........................................................2
Section 2.5 Initial Capital Contribution of Assets of the Trust...................................2
Section 2.6 Declaration of Trust..................................................................2
Section 2.7 Liability of the Depositor and the Certificateholders.................................3
Section 2.8 Title to Trust Property...............................................................3
Section 2.9 Situs of Trust........................................................................3
Section 2.10 Representations and Warranties of the Depositor.......................................3
Section 2.11 Pledge by Class[__] Certificateholders of Spread Account..............................4
ARTICLE III THE CERTIFICATES...........................................................................5
Section 3.1 Initial Certificate Ownership.........................................................5
Section 3.2 Form of the Certificates..............................................................5
Section 3.3 Execution, Authentication and Delivery................................................5
Section 3.4 Registration; Registration of Transfer and Exchange of Certificates...................6
Section 3.5 Mutilated; Destroyed; Lost or Stolen Certificates.....................................7
Section 3.6 Persons Deemed Certificateholders.....................................................8
Section 3.7 Access to List of Certificateholders' Names and Addresses.............................8
Section 3.8 Maintenance of Office For Surrenders..................................................8
Section 3.9 Appointment of Paying Agent...........................................................8
Section 3.10 Restriction on Transfers by Class [__] Certificateholder..............................9
Section 3.11 Book-Entry Certificates...............................................................9
Section 3.12 Notices to Depository................................................................10
Section 3.13 Definitive Certificates..............................................................10
Section 3.14 Appointment of Authenticating Agent..................................................11
</TABLE>
i
<PAGE> 53
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE IV ACTIONS BY OWNER TRUSTEE..................................................................11
Section 4.1 Prior Notice to Certificateholders with Respect to Certain Matters...................11
Section 4.2 Action by Certificateholders with Respect to Certain Matters.........................12
Section 4.3 Action by Certificateholders with Respect to Bankruptcy..............................12
Section 4.4 Restrictions on Certificateholders' Power............................................13
Section 4.5 Majority Control.....................................................................13
ARTICLE V APPLICATION OF ASSETS OF THE TRUST; CERTAIN DUTIES........................................13
Section 5.1 Establishment of Certificate Distribution Account....................................13
Section 5.2 Application of Funds.................................................................13
Section 5.3 Method of Payment....................................................................15
ARTICLE VI THE OWNER TRUSTEE.........................................................................15
Section 6.1 Duties of Owner Trustee..............................................................15
Section 6.2 Additional Duties of Owner Trustee...................................................16
Section 6.3 Acceptance of Trusts and Duties......................................................16
Section 6.4 Action upon Instruction by Certificateholders........................................18
Section 6.5 Furnishing of Documents..............................................................19
Section 6.6 Representations and Warranties of Owner Trustee......................................19
Section 6.7 Reliance; Advice of Counsel..........................................................19
Section 6.8 Owner Trustee May Own Certificates and Notes.........................................20
Section 6.9 Compensation and Indemnity...........................................................20
Section 6.10 Replacement of Owner Trustee.........................................................21
Section 6.11 Merger or Consolidation of Owner Trustee.............................................22
Section 6.12 Appointment of Co-Trustee or Separate Trustee........................................22
Section 6.13 Eligibility Requirements for Owner Trustee...........................................23
Section 6.14 Underwriting Agreement...............................................................24
ARTICLE VII TERMINATION OF TRUST AGREEMENT............................................................24
Section 7.1 Termination of Trust Agreement.......................................................24
Section 7.2 Dissolution upon Bankruptcy of the Depositor.........................................25
ARTICLE VIII AMENDMENTS................................................................................26
Section 8.1 Amendments Without Consent of Certificateholders or Noteholders......................26
Section 8.2 Amendments With Consent of Certificateholders and Noteholders........................26
</TABLE>
ii
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 8.3 Form of Amendments...................................................................27
ARTICLE IX MISCELLANEOUS.............................................................................27
Section 9.1 No Legal Title to Trust Assets.......................................................27
Section 9.2 Limitations on Rights of Others......................................................27
Section 9.3 Notices..............................................................................28
Section 9.4 Severability.........................................................................28
Section 9.5 Counterparts.........................................................................28
Section 9.6 Successors and Assigns...............................................................29
Section 9.7 No Petition Covenant.................................................................29
Section 9.8 No Recourse..........................................................................29
Section 9.9 Headings.............................................................................29
Section 9.10 Governing Law........................................................................29
Section 9.11 Certificate Transfer Restrictions....................................................29
Section 9.12 The Credit Enhancer..................................................................30
</TABLE>
Exhibit A-1 Form of Class [__] Certificate
Exhibit A-2 Form of Class [__] Certificate
Exhibit B Form of Certificate of Trust
Exhibit C Form of Certificate Depository Agreement
Exhibit D Form of Undertaking Letter
Annex A Tax Partnership Agreement
iii
<PAGE> 1
Page 1
EXHIBIT 4.3
BANC ONE HELOC TRUST 199_-_
_____% HELOC ASSET BACKED NOTES DUE _____ __, ____
___________________
INDENTURE
Dated as of _____ 1, 199_
_____________________
____________________________
Indenture Trustee
<PAGE> 2
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
<S> <C>
SECTION 1.1 Definitions -2-
SECTION 1.2 Incorporation by Reference of Trust Indenture Act -2-
ARTICLE II
THE NOTES
SECTION 2.1 Form -3-
SECTION 2.2 Execution, Authentication and Delivery -3-
SECTION 2.3 Temporary Notes -4-
SECTION 2.4 Registration; Registration of Transfer and Exchange of Notes -5-
SECTION 2.5 Mutilated, Destroyed, Lost or Stolen Notes -6-
SECTION 2.6 Persons Deemed Noteholders -7-
SECTION 2.7 Payment of Principal and Interest -7-
SECTION 2.8 Cancellation of Notes -9-
SECTION 2.9 Release of Collateral -9-
SECTION 2.10 Book-Entry Notes -10-
SECTION 2.11 Notices to Depository -10-
SECTION 2.12 Definitive Notes -11-
SECTION 2.13 Depositors or Affiliates as Noteholder -11-
SECTION 2.14 Tax Treatment -12-
ARTICLE III
COVENANTS
SECTION 3.1 Note Payment Account; Payment of Principal and Interest -12-
SECTION 3.2 Maintenance of Agency Office -12-
SECTION 3.3 Money for Payments To Be Held in Trust -13-
SECTION 3.4 Existence -14-
SECTION 3.5 Protection of the Assets of the Trust: Acknowledgment of
Pledge of Spread Account -15-
SECTION 3.6 Opinions as to Trust Assets -15-
SECTION 3.7 Performance of Obligations; Servicing of Mortgage Loans -16-
SECTION 3.8 Negative Covenants -17-
SECTION 3.9 Annual Statement as to Compliance -18-
SECTION 3.10 Consolidation, Merger, etc., of Issuer; Disposition of Trust Assets -19-
SECTION 3.11 Successor or Transferee -21-
SECTION 3.12 No Other Business -21-
SECTION 3.13 No Borrowing -21-
SECTION 3.14 Guarantees, Loans, Advances and Other Liabilities -21-
SECTION 3.15 Servicer's Obligations -21-
SECTION 3.16 Capital Expenditures -22-
SECTION 3.17 Removal of Administrator -22-
SECTION 3.18 Restricted Payments -22-
SECTION 3.19 Notice of Events of Default and Other Events -22-
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
SECTION 3.20 Further Instruments and Acts -23-
SECTION 3.21 Representations and Warranties by the Issuer to the
Indenture Trustee -23-
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1 Satisfaction and Discharge of Indenture -23-
SECTION 4.2 Application of Trust Money -24-
SECTION 4.3 Repayment of Moneys Held by Paying Agent -25-
SECTION 4.4 Duration of Appointment of Indenture Trustee -25-
ARTICLE V
DEFAULT AND REMEDIES
SECTION 5.1 Events of Default -25-
SECTION 5.2 Acceleration of Maturity; Rescission and Annulment -27-
SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee -27-
SECTION 5.4 Remedies: Priorities -30-
SECTION 5.5 Optional Preservation of the Assets of the Trust -31-
SECTION 5.6 Limitation of Suits -32-
SECTION 5.7 Unconditional Rights of Noteholders To Receive Principal
and Interest -33-
SECTION 5.8 Restoration of Rights and Remedies -33-
SECTION 5.9 Rights and Remedies Cumulative -33-
SECTION 5.10 Delay or Omission Not a Waiver -33-
SECTION 5.11 Control by the Insurer -34-
SECTION 5.12 Waiver of Past Defaults -34-
SECTION 5.13 Undertaking for Costs -35-
SECTION 5.14 Waiver of Stay or Extension Laws -35-
SECTION 5.15 Action on Notes -36-
SECTION 5.16 Performance and Enforcement of Certain Obligations -36-
ARTICLE VI
THE INDENTURE TRUSTEE
SECTION 6.1 Duties of Indenture Trustee. -37-
SECTION 6.2 Certain Matters Affecting the Indenture Trustee -40-
SECTION 6.3 Indenture Trustee Not Liable for Notes or Mortgage Loans -41-
SECTION 6.4 Indenture Trustee May Own Notes -42-
SECTION 6.5 Indenture Trustee's Fees and Expenses -42-
SECTION 6.6 Eligibility; Disqualification -42-
SECTION 6.7 Resignation and Removal of the Indenture Trustee -43-
SECTION 6.8 Successor Trustee -44-
SECTION 6.9 Merger or Consolidation of Indenture Trustee -45-
SECTION 6.10 Appointment of Co-Indenture Trustee or Separate Indenture Trustee -45-
SECTION 6.11 Protection of Trust Assets -46-
SECTION 6.12 Notice of Defaults -47-
SECTION 6.13 Reports to Holders -47-
SECTION 6.14 Preferential Collection of Claims Against Issuer -47-
SECTION 6.15 Representations and Warranties of
</TABLE>
<PAGE> 4
Page 4
<TABLE>
<CAPTION>
<S> <C>
Indenture Trustee -48-
SECTION 6.16 Indenture Trustee May Enforce Claims Without Possession of Notes -48-
SECTION 6.17 Suit for Enforcement -49-
SECTION 6.18 Appointment of Custodians. -49-
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
SECTION 7.1 Issuer To Furnish Indenture Trustee Names and Addresses of
Noteholders -49-
SECTION 7.2 Preservation of Information, Communications to Noteholders -50-
SECTION 7.3 Reports by Issuer -50-
SECTION 7.4 Reports by Trustee -51-
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 8.1 Collection of Money -51-
SECTION 8.2 Accounts -51-
SECTION 8.3 General Provisions Regarding Accounts -52-
SECTION 8.4 Release of Trust Assets -53-
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1 Supplemental Indentures Without Consent of Noteholders -54-
SECTION 9.2 Supplemental Indentures With Consent of the Noteholders -55-
SECTION 9.3 Execution of Supplemental Indentures -57-
SECTION 9.4 Effect of Supplemental Indenture -57-
SECTION 9.5 Conformity with Trust Indenture Act -58-
SECTION 9.6 Reference in Notes to Supplemental
Indentures -58-
ARTICLE X
REDEMPTION OF NOTES
SECTION 10.1 Redemption -58-
SECTION 10.2 Form of Redemption Notice -59-
SECTION 10.3 Notes Payable on Payment Date -59-
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Compliance Certificates and
Opinions, etc -60-
SECTION 11.2 Form of Documents Delivered to Indenture Trustee -62-
SECTION 11.3 Acts of Noteholders -63-
SECTION 11.4 Notices -63-
SECTION 11.5 Notices to Noteholders; Waiver -64-
SECTION 11.6 Alternate Payment and Notice Provisions -65-
SECTION 11.7 Conflict with Trust Indenture Act -65-
SECTION 11.8 Effect of Headings and Table of Contents -66-
SECTION 11.9 Successors and Assigns -66-
</TABLE>
<PAGE> 5
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<TABLE>
<CAPTION>
<S> <C>
SECTION 11.10 Separability -66-
SECTION 11.11 Benefits of Indenture -66-
SECTION 11.12 Legal Holidays -66-
SECTION 11.13 GOVERNING LAW -66-
SECTION 11.14 Counterparts -67-
SECTION 11.15 Recording of Indenture -67-
SECTION 11.16 No Recourse -67-
SECTION 11.17 No Petition -68-
SECTION 11.18 Inspection -68-
</TABLE>
Exhibit A Form of Note Depositary Agreement
Exhibit B Form of Note
Exhibit C Mortgage Loan Schedule
<PAGE> 6
Page 6
CROSS-REFERENCE TABLE
TIA INDENTURE
SECTION SECTION
310 (a)(1) 6.6
(a)(2) 6.6
(a)(3) 6.10
(a)(4) 6.14
(b) 6.11
(c) N.A.
311 (a) 6.14
(b) 6.14
(c) N.A.
312 (a) 7.1, 7.2
(b) 7.2
(c) 7.2
313 (a) 7.4(a), 7.4(b)
(b)(1) 7.4(a)
(b)(2) 7.4(a)
(c) 7.4(a)
(d) 7.4(a)
314 (a) 7.3(a), 3.9
(b) 3.6
(c)(1) 2.2, 2.9, 4.1, 11.1(a)
(c)(2) 2.9, 11.1(a)
(c)(3) 2.9, 11.1(a)
(d) 2.9, 11.1(b)
(e) 11.1(a)
(f) 11.1(a)
315 (a) 6.1
(b) 6.12
(c) 6.1
(d) 6.2, 6.1
(e) 5.13
316 (a) last
sentence 1.1
(a)(1)(A) 5.11
(a)(1)(B) 5.12
(a)(2) Omitted
316 (b), (c) 5.7, 5.12
317 (a)(1) 5.3(b)
(a)(2) 5.3(d)
(b) 3.3
318 (a) 11.7
N.A. means Not Applicable.
Note: This Cross-Reference Table shall not, for any purpose, be deemed part of
this Indenture.
<PAGE> 7
Page 7
INDENTURE, dated as of _____ 1, 199_, between BANC ONE HELOC
TRUST 199_-_, a Delaware business trust (the "Issuer"), and
_________________________, a national banking association, as trustee and not in
its individual capacity (the "Indenture Trustee").
Each party agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders of the Issuer's
_____% HELOC Asset Backed Notes due _____ __, ____ (the "Notes"):
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee at the
Closing Date, as trustee for the benefit of the Noteholders and (only to the
extent expressly provided herein) the Certificateholders, all of the Issuer's
right, title and interest in, to and under: (a) the Mortgage Loans listed on the
Mortgage Loan Schedule attached hereto as Exhibit C, together with the Mortgage
Files relating thereto and all monies received with respect thereto on and after
the Cut-Off Date [(other than amounts received on and after the Cut-Off Date in
respect of interest accrued on the Mortgage Loans prior to the Cut-Off Date)],
(b) all REO, (c) the Principal and Interest Account, [Letter of Credit Fee
Account, Insurance Account] and Collection Account, including amounts on deposit
in such accounts and (except with respect to the Principal and Interest Account)
all earnings thereon, Eligible Investments relating thereto and proceeds
thereof, (d) all of the Issuer's rights under all insurance policies with
respect to the Mortgage Loans required to be maintained pursuant to the Pooling
and Servicing Agreement and any Insurance Proceeds, (e) the Policy, (f)
Liquidation Proceeds, (g) the Purchase Agreement, including the rights assigned
to the Issuer to cause the Sellers to purchase a Mortgage Loan as to which a
breach of representation or warranty has occurred, (h) the Pooling and Servicing
Agreement (including all rights of the Depositor under the Purchase Agreement
assigned to the Issuer pursuant to the Pooling and Servicing Agreement) and (i)
all present and future claims, demands, causes and choses in action in respect
of any or all of the foregoing and all payments on or under and all proceeds of
every kind and nature whatsoever in respect of any or all of the foregoing,
including all proceeds of the conversion, voluntary or involuntary, into cash or
other liquid property, all cash proceeds, accounts, accounts receivable, notes,
drafts, acceptances, chattel paper, checks, deposit accounts, insurance
proceeds, condemnation awards, rights to payment of any and every kind and other
forms of obligations, instruments and other property which at any time
constitute all or part of or are included in the proceeds of any of the
foregoing (collectively, the "Collateral").
The foregoing Grant is made in trust to secure the payment of
principal of and interest on, and any other amounts owing in respect of, the
Notes, equally and ratably without prejudice, priority or distinction, and to
secure compliance with the provisions of this Indenture, all as provided in this
Indenture.
The Indenture Trustee, as trustee on behalf of the
Noteholders, acknowledges such Grant and the pledge and assignment to it of the
Spread Account pursuant to Section 2.11 of the Trust Agreement, and hereby
accepts the trusts under this Indenture in accordance with the provisions of
this Indenture. In furtherance of such Grant, the Indenture Trustee acknowledges
transfer of the Mortgage Files, including each of the Mortgage Loan documents
(subject to such exceptions, if any, as are noted on the exception report
attached to the Indenture Trustee Initial Certification referred to in the
immediately succeeding sentence) set forth in Section 2.01 of the Pooling and
Servicing Agreement, which provisions are incorporated by reference as if more
particularly set forth herein. The Indenture Trustee shall execute and deliver
on the Closing Date an acknowledgement of receipt of, for each Mortgage Loan,
the items listed in Section 2.01(b)(i),
<PAGE> 8
Page 8
(ii), and (iii) of the Pooling and Servicing Agreement, in the form attached as
Exhibit C to the Pooling and Servicing Agreement, and declares that it will hold
such documents and any amendments, replacements or supplements thereto, as well
as any other assets delivered to it in trust upon and subject to the conditions
of the Indenture for the benefit of the Noteholders and, to the extent set forth
in the Pooling and Servicing Agreement and herein, for the benefit of the
Certificateholders.
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions. Certain capitalized terms used in
this Indenture shall have the respective meanings assigned them in Article 1 of
the Pooling and Servicing Agreement dated as of _____ 1, 199_ (the "Pooling and
Servicing Agreement") among the Issuer, Banc One ABS Corporation, as Depositor
(the "Depositor") and Bank One, N.A., as Servicer (the "Servicer"). All
references in this Indenture to Articles, Sections, subsections and exhibits are
to the same contained in or attached to this Indenture unless otherwise
specified. All terms defined in this Indenture shall have the defined meanings
when used in any certificate, notice, Note or other document made or delivered
pursuant hereto unless otherwise defined therein.
SECTION 1.2 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, such provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings: "Commission" means
the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture trustee" means the Indenture Trustee.
"obligor" on the indenture securities means the Issuer and any
other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by a Commission
rule have the respective meanings assigned to them by such definitions.
ARTICLE II
THE NOTES
SECTION 2.1 Form.
(a) The Notes with the Indenture Trustee's certificate of
authentication, shall be in substantially the form set forth in Exhibit B, with
such appropriate insertions, omissions, substitutions and other variations as
are required or permitted by this Indenture and may have such letters, numbers
or other marks of identification and such legends or endorsements placed thereon
as may, consistently herewith, be determined by the officers executing such
Notes, as evidenced by their execution of the Notes. Any portion of the text of
any Note may be set forth on the reverse thereof, with an appropriate reference
thereto on the face of the Note.
(b) The Definitive Notes shall be typewritten, printed,
lithographed or engraved or
<PAGE> 9
Page 9
produced by any combination of these methods (with or without steel engraved
borders) all as determined by the officers executing such Notes, as evidenced by
their execution of such Notes.
(c) The terms of the Notes set forth in Exhibit B are part of
the terms of this Indenture.
SECTION 2.2 Execution, Authentication and Delivery.
(a) The Notes shall be dated the date of their authentication,
and shall be issuable as registered Notes in minimum denominations of $1,000 and
in integral multiples thereof.
(b) The Notes shall be executed on behalf of the Issuer by any
of its Responsible Officers. The signature of any such Responsible Officer on
the Notes may be manual or facsimile.
(c) Notes bearing the manual or facsimile signature of
individuals who were at any time Responsible Officers of the Issuer shall bind
the Issuer, notwithstanding that such individuals or any of them have ceased to
hold such office prior to the authentication and delivery of such Notes or did
not hold such office at the date of such Notes.
(d) The Indenture Trustee, in exchange for the pledge and
assignment to it of (i) the Mortgage Loans and the other components of the Trust
by the Issuer and (ii) the pledge and assignment to it of the Spread Account by
the Class ___ Certificateholders, simultaneously with the assignment and
transfer to the Indenture Trustee of the Mortgage Loans, and the delivery to the
Indenture Trustee of the Mortgage Files and the other components and assets of
the Trust and the Spread Account, together with an Opinion of Counsel to the
Issuer (which may be counsel to the Depositor) relating to the issuance of the
Notes and the lien of the Indenture Trustee hereunder and an Officer's
Certificate relating to the same, shall, upon the order of the Issuer cause the
Notes to be authenticated and delivered for original issue in an aggregate
principal amount equal to the Original Note Principal Balance. The aggregate
principal amount of Notes outstanding at any time may not exceed that amount
except as provided in Section 2.5.
(e) No Notes shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose, unless there appears on
such Note a certificate of authentication substantially in the form set forth in
Exhibit B hereto, executed by the Indenture Trustee by the manual signature of
one of its Responsible Officers, and such certificate upon any Note shall be
conclusive evidence, and the only evidence, that such Note has been duly
authenticated and delivered hereunder.
SECTION 2.3 Temporary Notes.
(a) Pending the preparation of Definitive Notes, if any, the
Issuer may execute, and upon receipt of an Issuer Order the Indenture Trustee
shall authenticate and deliver, Temporary Notes which are printed, lithographed,
typewritten, mimeographed or otherwise produced, of the tenor of the Definitive
Notes in lieu of which they are issued and with such variations as are
consistent with the terms of this Indenture as the officers executing such Notes
may determine, as evidenced by their execution of such Notes.
(b) If Temporary Notes are issued, the Issuer shall cause
Definitive Notes to be prepared without unreasonable delay. After the
preparation of Definitive Notes, the Temporary Notes shall be exchangeable for
Definitive Notes upon surrender of the Temporary Notes at the Agency Office of
the Issuer to be maintained as provided in Section 3.2, without charge to the
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Noteholder. Upon surrender for cancellation of any one or more Temporary Notes,
the Issuer shall execute and the Indenture Trustee shall, at the Administrator's
cost and expense, authenticate and deliver in exchange therefor a like principal
amount of Definitive Notes of authorized denominations. Until so delivered in
exchange, the Temporary Notes shall in all respects be entitled to the same
benefits under this Indenture as Definitive Notes.
SECTION 2.4 Registration; Registration of Transfer and
Exchange of Notes.
(a) The Issuer shall cause to be kept the Note Register, in
which, subject to such reasonable regulations as it may prescribe, the Issuer
shall provide for the registration of the Notes. The Indenture Trustee shall
initially be the Note Registrar for the purpose of registering the Notes and
transfers of the Notes as herein provided. Upon any resignation of any Note
Registrar, the Issuer shall promptly appoint a successor or, if it elects not to
make such an appointment assume the duties of the Note Registrar.
(b) If a Person other than the Indenture Trustee is appointed
by the Issuer as Note Registrar, the Issuer will give the Indenture Trustee and
the Insurer prompt written notice of the appointment of such Note Registrar and
of the location, and any change in the location, of the Note Register. The
Indenture Trustee and the Insurer shall have the right to inspect the Note
Register at all reasonable times and to obtain copies thereof. The Indenture
Trustee shall have the right to rely upon a certificate executed on behalf of
the Note Registrar by a Responsible Officer thereof as to the names and
addresses of the Noteholders and the principal amounts and number of such Notes.
(c) Upon surrender for registration of transfer of any Note at
the Corporate Trust Office of the Indenture Trustee or the Agency Office of the
Issuer (and following the delivery, in the former case, of such Notes to the
Issuer by the Indenture Trustee) the Issuer shall execute, the Indenture Trustee
shall authenticate and the Noteholder shall obtain from the Indenture Trustee,
in the name of the designated transferee or transferees, one or more new Notes
in any authorized denominations, of a like aggregate principal amount.
(d) At the option of the Noteholder, Notes may be exchanged
for other Notes in any authorized denominations, of a like aggregate principal
amount, upon surrender of the Notes to be exchanged at the Corporate Trust
Office of the Indenture Trustee or the Agency Office; provided, however, that in
the latter case the Issuer agrees that such surrendered Notes shall be promptly
delivered to the Indenture Trustee. Whenever any Notes are so surrendered for
exchange, the Issuer shall execute, and the Indenture Trustee shall, at the
Administrator's cost and expense, authenticate, and the Noteholder shall obtain
from the Indenture Trustee, the Notes which the Noteholder making the exchange
is entitled to receive.
(e) All Notes issued upon any registration of transfer or
exchange of Notes shall be the valid obligations of the Issuer, evidencing the
same debt, and entitled to the same benefits under this Indenture, as the Notes
surrendered upon such registration of transfer or exchange.
(f) Every Note presented or surrendered for registration of
transfer or exchange shall be duly endorsed by, or be accompanied by a written
instrument of transfer in form satisfactory to the Indenture Trustee and the
Note Registrar, duly executed by the Holder thereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by a commercial bank
or trust company located, or having a correspondent located, in the City of New
York or the city in which the Corporate Trust Office of the Indenture Trustee is
located, or by a member firm of a national securities exchange, and such other
documents as the Indenture Trustee may require.
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(g) No service charge shall be made to a Noteholder for any
registration of transfer or exchange of Notes, but the Issuer or Indenture
Trustee may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any registration of
transfer or exchange of Notes, other than exchanges pursuant to Sections 2.3 or
9.6 not involving any transfer.
(h) The preceding provisions of this Section 2.4
notwithstanding, the Issuer shall not be required to transfer or make exchanges,
and the Note Registrar need not register transfers or exchanges, of Notes that:
(i) have been selected for redemption pursuant to Article X; or (ii) are due for
repayment within 15 days of submission to the Corporate Trust Office or the
Agency Office.
SECTION 2.5 Mutilated, Destroyed, Lost or Stolen Notes.
(a) If (i) any mutilated Note is surrendered to the Indenture
Trustee, or the Indenture Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Note, and (ii) there is delivered to the
Indenture Trustee such security or indemnity as may be required by it to hold
the Issuer, the Insurer and the Indenture Trustee harmless, then, in the absence
of notice to the Issuer, the Note Registrar or the Indenture Trustee that such
Note has been acquired by a bona fide purchaser, the Issuer shall execute and
upon the Issuer's request the Indenture Trustee shall authenticate and deliver,
in exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Note, a replacement Note of a like aggregate principal amount; provided,
however, that if any such destroyed, lost or stolen Note, but not a mutilated
Note, shall have become or within seven days shall be due and payable, or shall
have been called for redemption, instead of issuing a replacement Note, the
Issuer may pay to the Holder of such destroyed, lost or stolen Note when so due
or payable or upon the Payment Date or Special Redemption Date without surrender
thereof.
(b) If, after the delivery of a replacement Note or payment in
respect of a destroyed, lost or stolen Note pursuant to subsection (a), a bona
fide purchaser of the original Note in lieu of which such replacement Note was
issued presents for payment such original Note, the Issuer, the Credit Enhancer
and the Indenture Trustee shall be entitled to recover such replacement Note (or
such payment) from (i) any Person to whom it was delivered, (ii) the Person
taking such replacement Note from the Person to whom such replacement Note was
delivered; or (iii) any assignee of such Person, except a bona fide purchaser,
and the Issuer, the Credit Enhancer and the Indenture Trustee shall be entitled
to recover upon the security or indemnity provided therefor to the extent of any
loss, damage, cost or expense incurred by the Issuer, the Credit Enhancer or the
Indenture Trustee in connection therewith.
(c) In connection with the issuance of any replacement Note
under this Section 2.5, the Issuer may require the payment by the Holder of such
Note of a sum sufficient to cover any tax or other governmental charge that may
be imposed in relation thereto and any other reasonable expenses (including all
fees and expenses of the Indenture Trustee) connected therewith.
(d) Any duplicate Note issued pursuant to this Section 2.5 in
replacement for any mutilated, destroyed, lost or stolen Note shall constitute
an original additional contractual obligation of the Issuer, whether or not the
mutilated, destroyed, lost or stolen Note shall be found at any time or be
enforced by any Person, and shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Notes duly issued
hereunder.
(e) The provisions of this Section 2.5 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of
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mutilated, destroyed, lost or stolen Notes.
SECTION 2.6 Persons Deemed Noteholders. Prior to due
presentment for registration of transfer of any Note, the Issuer, the Credit
Enhancer, the Indenture Trustee and any agent of the Issuer, the Credit Enhancer
or the Indenture Trustee may treat the Person in whose name any Note is
registered (as of the day of determination) as the Noteholder for the purpose of
receiving payments of principal of and interest on such Note and for all other
purposes whatsoever, whether or not such Note be overdue, and neither the
Issuer, the Indenture Trustee nor any agent of the Issuer, the Credit Enhancer,
or the Indenture Trustee shall be affected by notice to the contrary.
SECTION 2.7 Payment of Principal and Interest.
(a) Interest on the Notes shall accrue at the Note Interest
Rate as provided in the form of such Note set forth in Exhibit B and such
interest shall be payable on each Payment Date as specified therein. Any
installment of interest payable on any Note which is punctually paid or duly
provided for by a deposit by or at the direction of the Issuer into the Note
Payment Account on the applicable Payment Date shall be paid to the Person in
whose name such Note (or one or more Predecessor Notes) is registered on the
applicable Record Date, by check mailed first-class, postage prepaid to such
Person's address as it appears on the Note Register on such Record Date or, in
the case of a Holder owning Notes in aggregate denominations of at least
$1,000,000, by wire transfer in immediately available funds to the account
notified by such Holder to the Indenture Trustee at least five days prior to
such Record Date; provided, however, that, unless and until Definitive Notes
have been issued pursuant to Section 2.12, with respect to Notes registered on
the applicable Record Date in the name of the Depository, payment shall be made
by wire transfer in immediately available funds to the account designated by the
Depository.
(b) (i) Prior to the occurrence of an Event of Default and a
declaration in accordance with Section 5.2 that the Notes have become
immediately due and payable, the principal of each Note unless earlier redeemed
as set forth herein, shall be payable in installments on each Payment Date, as
provided in the form of Note set forth in Exhibit B, until paid in full. All
principal payments (including by redemption) shall be made pro rata to the
Noteholders entitled thereto. Any installment of principal payable on, or any
Special Redemption Price of any Note which is punctually paid or duly provided
for by a deposit by or at the direction of the Issuer into the Note Payment
Account on the applicable Payment Date or Special Payment Date, as applicable,
shall be paid to the Person in whose name such Note (or one or more Predecessor
Notes) is registered on the applicable Record Date or Special Record Date, by
check mailed first-class, postage prepaid to such Person's address as it appears
on the Note Register on such Record Date or Special Record Date; or, in the case
of a Holder owning Notes in aggregate denominations of at least $1,000,000, by
wire transfer in immediately available funds to the account notified by such
Holder to the Indenture Trustee at least five days prior to such Record Date or
Special Record Date; provided, however, that, unless and until Definitive Notes
have been issued pursuant to Section 2.12, with respect to Notes registered on
the Record Date or Special Record Date in the name of the Depository, payment
shall be made by wire transfer in immediately available funds to the account
designated by the Depository, except for the final installment of principal with
respect to a Note on the Maturity Date or earlier redemption, which shall be
payable as provided herein. The funds represented by any such checks in respect
of interest or principal returned undelivered shall be held in accordance with
Section 3.3.
(c) The entire unpaid principal amount of the Notes shall be
due and payable, if not previously paid, if:
(i) an Event of Default shall have occurred and be continuing;
and
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(ii) the Indenture Trustee, at the direction or with the
consent of the Credit Enhancer, or at the direction of Noteholders
representing not less than a Majority in Voting Interest of the Notes,
with the consent of the Credit Enhancer, have declared the Notes to be
immediately due and payable in the manner provided in Section 5.2.
(d) Following an Event of Default and the acceleration of the
Notes as aforesaid, all principal payments shall be allocated among the Holders
of all of the Notes pro rata on basis of their respective unpaid principal
balances.
(e) The Indenture Trustee shall notify each Noteholder of
record as of the Record Date for a Payment Date of the fact that the final
installment of principal of and interest on such Note is to be paid on such
Payment Date. Such notice shall be sent (i) on such Record Date by facsimile, if
Book-Entry Notes are outstanding; or (ii) not later than three Business Days
after such Record Date in accordance with Section 11.5(a) if Definitive Notes
are outstanding, and shall specify that such final installment shall be payable
only upon presentation and surrender of such Note and shall specify the place
where such Note may be presented and surrendered for payment of such
installment. Notices in connection with redemptions of Notes shall be mailed to
Noteholders as provided in Section 10.2.
SECTION 2.8 Cancellation of Notes. All Notes surrendered for
payment, redemption, exchange or registration of transfer shall, if surrendered
to any Person other than the Indenture Trustee, be delivered to the Indenture
Trustee and shall be promptly canceled by the Indenture Trustee. The Issuer may
at any time deliver to the Indenture Trustee for cancellation any Notes
previously authenticated and delivered hereunder which the Issuer may have
acquired in any manner whatsoever, and all Notes so delivered shall be promptly
canceled by the Indenture Trustee. No Notes shall be authenticated in lieu of or
in exchange for any Notes canceled as provided in this Section 2.8, except as
expressly permitted by this Indenture. All canceled Notes may be held or
disposed of by the Indenture Trustee in accordance with its standard retention
or disposal policy as in effect at the time unless the Issuer shall direct by an
Issuer Order that they be destroyed or returned to it; provided, however, that
such Issuer Order is timely and the Notes have not been previously disposed of
by the Indenture Trustee.
SECTION 2.9 Release of Collateral. Subject to Section 11.1,
the Indenture Trustee shall release property from the lien of this Indenture
only upon receipt of an Issuer Request accompanied by an Officers' Certificate,
an Opinion of Counsel and Independent Certificates in accordance with TIA
Sections 314(c) and 314(d)(1) or an Opinion of Counsel in lieu of such
Independent Certificates to the effect that the TIA does not require any such
Independent Certificates.
SECTION 2.10 Book-Entry Notes. The Notes, upon original
issuance, shall be issued in the form of a typewritten Note or Notes
representing the Book-Entry Notes, to be delivered to the Depository. Such Note
or Notes shall be registered on the Note Register in the name of the Depository,
and no Note Owner shall receive a Definitive Note representing such Note Owner's
interest in such Note, except as provided in Section 2.12. Unless and until the
Definitive Notes have been issued to Note Owners pursuant to Section 2.12:
(a) the provisions of this Section 2.10 shall be in full force
and effect;
(b) the Note Registrar and the Indenture Trustee shall be
entitled to deal with the Depository for all purposes of this Indenture
(including the payment of principal of and interest on the Notes and
the giving of instructions or directions hereunder) as the sole holder
of the Notes and shall have no obligation to the Note Owners;
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(c) to the extent that the provisions of this Section 2.10
conflict with any other provisions of this Indenture, the provisions of
this Section 2.10 shall control;
(d) the rights of the Note Owners shall be exercised only
through the Depository and shall be limited to those established by law
and agreements between such Note Owners and the Depository and/or the
Depository Participants. Unless and until Definitive Notes are issued
pursuant to Section 2.12, the initial Depository shall make book-entry
transfers between the Depository Participants and receive and transmit
payments of principal of and interest on the Notes to such Depository
Participants, pursuant to the Note Depository Agreement; and
(e) whenever this Indenture requires or permits actions to be
taken based upon instructions or directions of Holders of Outstanding
Notes evidencing a specified Percentage Interest of the Notes, the
Depository shall be deemed to represent such percentage only to the
extent that it has (i) received instructions to such effect from Note
Owners and/or Depository Participants owning or representing,
respectively, such required percentage of the beneficial interest in
the Notes; and (ii) has delivered such instructions to the Indenture
Trustee.
SECTION 2.11 Notices to Depository. Whenever a notice or
other communication to the Noteholders is required under this Indenture, unless
and until Definitive Notes shall have been issued to Note Owners pursuant to
Section 2.12, the Indenture Trustee shall give all such notices and
communications specified herein to be given to Noteholders to the Depository and
shall have no obligation to the Note Owners.
SECTION 2.12 Definitive Notes.
If (i) the Servicer or the Depository advises the Indenture
Trustee in writing that the Depository is no longer willing or able to properly
discharge its responsibilities with respect to the Notes and the Issuer is
unable to locate a qualified successor; (ii) the Servicer, at its option,
advises the Indenture Trustee in writing that it elects to terminate the
book-entry system through the Depository; or (iii) after the occurrence of a
Servicer Default, Note Owners representing beneficial interests aggregating at
least a Majority in Voting Interest of the Notes advise the Depository in
writing that the continuation of a book-entry system through the Depository is
no longer in the best interests of the Note Owners, then the Depository shall
notify all Note Owners and the Indenture Trustee of the occurrence of any such
event and of the availability of Definitive Notes to Note Owners requesting the
same. Upon surrender to the Indenture Trustee of the typewritten Note or Notes
representing the Book-Entry Notes by the Depository, accompanied by registration
instructions, the Issuer shall, at the Administrator's cost and expense, execute
and the Indenture Trustee shall authenticate the Definitive Notes in accordance
with the instructions of the Depository. None of the Issuer, the Note Registrar
or the Indenture Trustee shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying on,
such instructions. Upon the issuance of Definitive Notes, the Indenture Trustee
shall recognize the Holders of the Definitive Notes as Noteholders.
SECTION 2.13 Depositor or Affiliates as Noteholder. None of
the Issuer, the Servicer, the Administrator, any Originator or the Depositor
shall be a Noteholder. Any attempted or purported transfer in violation of the
preceding sentence shall be absolutely null and void and shall vest no rights in
the purported transferee. If any purported transferee shall become a Noteholder
in violation of such sentence, then the last preceding Noteholder shall be
restored to all rights as Holder thereof retroactive to the date of registration
of transfer of such Note. The Indenture Trustee shall notify the Administrator
of any violation of this Section 2.13 upon receipt of
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written notice thereof. The Indenture Trustee shall be under no liability to any
Person for any registration of transfer of a Note not permitted in this Section
2.13 or for making payments due on such Note to the Holder thereof or taking any
other action with respect to such Holder under the provisions of this Indenture
so long as the transfer was registered without receipt. The Indenture Trustee
shall be entitled, but not obligated, to recover from any holder of a Note that
was in fact not a permitted Holder under this Section 2.13, all payments made on
such Note at and after such time. Any such payments so recovered by the
Indenture Trustee shall be paid and delivered by the Indenture Trustee to the
last preceding Holder of such Note.
SECTION 2.14 Tax Treatment. The Issuer and the Indenture
Trustee, by entering into this Indenture, and the Noteholders, by acquiring any
Note or interest therein, (i) express their intention that the Notes qualify
under applicable tax law as indebtedness secured by the Collateral, and (ii)
unless otherwise required by appropriate taxing authorities, agree to treat the
Notes as indebtedness secured by the Collateral for the purpose of federal
income taxes, state and local income and franchise taxes and any other taxes
imposed upon, measured by or based upon gross or net income.
ARTICLE III
COVENANTS
SECTION 3.1 Note Payment Account; Payment of Principal and
Interest. (a) The Indenture Trustee, for the benefit of the Noteholders, shall
establish and maintain in the name of the Indenture Trustee an Eligible Account
known as the "Banc One HELOC Trust 199_-_ Note Payment Account" (the "Note
Payment Account"), bearing an additional designation clearly indicating that the
funds deposited therein are held for the benefit of the Noteholders.
(b) The Issuer shall duly and punctually pay the principal of
and interest on the Notes in accordance with the terms of the Notes and this
Indenture. On each Payment Date and on each Special Redemption Date, the Issuer
shall cause all amounts on deposit in the Note Payment Account to be distributed
to the Noteholders in accordance with Section 8.2, less amounts properly
withheld under the Code by any Person from a payment to any Noteholder of
interest and/or principal. Any amounts so withheld shall be considered as having
been paid by the Issuer to such Noteholder for all purposes of this Indenture.
SECTION 3.2 Maintenance of Agency Office. As long as any of
the Notes remains outstanding, the Issuer shall maintain in the borough of
Manhattan, the City of New York, an office (the "Agency Office"), being an
office or agency where Notes may be surrendered to the Issuer for registration
of transfer or exchange, and where notices and demands to or upon the Issuer in
respect of the Notes and this Indenture may be served. The Issuer hereby
initially appoints [___________________________] to serve as its agent for the
foregoing purposes. The Issuer shall give prompt written notice to the Indenture
Trustee of the location, and of any change in the location, of any such office
or agency. If at any time the Issuer shall fail to maintain any such office or
agency or shall fail to furnish the Indenture Trustee with the address thereof,
such surrenders, notices and demands may be made or served at the Corporate
Trust Office of the Indenture Trustee, and the Issuer hereby appoints the
Indenture Trustee as its agent to receive all such surrenders, notices and
demands.
SECTION 3.3 Money for Payments To Be Held in Trust.
(a) As provided in Section 8.2(a) and (b), all payments of
amounts due and payable with respect to any Notes that are to be made from
amounts withdrawn from the Note Payment Account pursuant to Section 8.2(c) shall
be made on behalf of the Issuer by the
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Indenture Trustee or by another Paying Agent, and no amounts so withdrawn from
the Note Payment Account for payments of Notes shall be paid over to the Issuer
except as provided in this Section 3.3.
(b) On each Payment Date and Special Redemption Date, the
Issuer shall deposit or cause to be deposited in the Note Payment Account an
aggregate sum sufficient to pay the amounts then becoming due, such sum to be
held in trust for the benefit of the Persons entitled thereto and (unless the
Paying Agent is the Indenture Trustee) shall promptly notify the Indenture
Trustee of its action or failure so to act.
(c) The Issuer shall cause each Paying Agent other than the
Indenture Trustee, to execute and deliver to the Indenture Trustee (with a copy
to the Credit Enhancer) an instrument in which such Paying Agent shall agree
with the Indenture Trustee (and if the Indenture Trustee acts as Paying Agent,
it hereby so agrees), subject to the provisions of this Section 3.3, that such
Paying Agent shall:
(i) hold all sums held by it for the payment of amounts due
with respect to the Notes in trust for the benefit of the persons
entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and pay such sums to such
persons as herein provided;
(ii) give the Indenture Trustee and the Credit Enhancer
notice of any default by the Issuer of which it has actual knowledge
(or any other obligor upon the Notes) in the making of any payment
required to be made with respect to the Notes;
(iii) at any time during the continuance of any such default,
upon the written request of the Indenture Trustee or the Credit
Enhancer, forthwith pay to the Indenture Trustee all sums so held in
trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and forthwith pay
to the Indenture Trustee all sums held by it in trust for the payment
of Notes if at any time it ceases to meet the standards required to be
met by a Paying Agent in effect at the time of determination; and
(v) comply with all requirements of the Code with respect to
the withholding from any payments made by it on any Notes of any
applicable withholding taxes imposed thereon and with respect to any
applicable reporting requirements in connection therewith.
(d) The Issuer may at any time, for the purpose of obtaining
the satisfaction and discharge of this Indenture or for any other purpose, by
Issuer Order direct any Paying Agent to pay to the Indenture Trustee all sums
held in trust by such Paying Agent, such sums to be held by the Indenture
Trustee upon the same trusts as those upon which the sums were held by such
Paying Agent; and upon such payment by any Paying Agent to the Indenture
Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
(e) Subject to applicable laws with respect to escheat of
funds, any money held by the Indenture Trustee or any Paying Agent in trust for
the payment of any amount due with respect to any Note and remaining unclaimed
for one year after such amount has become due and payable shall be discharged
from such trust and be paid to the Issuer on Issuer Request; and the Holder of
such Note shall thereafter, as an unsecured general creditor, look only to the
Issuer for payment thereof (but only to the extent of the amounts so paid to the
Issuer) and all liability of the Indenture Trustee, the Credit Enhancer or such
Paying Agent with respect to such trust
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money shall thereupon cease; provided, however, that the Indenture Trustee or
such Paying Agent, before being required to make any such repayment, may at the
expense of the Issuer cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in the City of New York, notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such publication, any unclaimed balance of such money then
remaining shall be repaid to the Issuer. The Indenture Trustee may also adopt
and employ, at the expense of the Issuer, any other reasonable means of
notification of such repayment (including, but not limited to, mailing notice of
such repayment to Holders whose Notes have been called but have not been
surrendered for redemption or whose right to or interest in moneys due and
payable but not claimed is determinable from the records of the Indenture
Trustee or of any Paying Agent, at the last address of record for each such
Holder).
SECTION 3.4 Existence. The Issuer shall keep in full effect
its existence, rights and franchises as a business trust under the laws of the
State of Delaware (unless it becomes, or any successor Issuer hereunder is or
becomes, organized under the laws of any other State or of the United States of
America, in which case the Issuer shall keep in full effect its existence,
rights and franchises under the laws of such other jurisdiction) and shall
obtain and preserve its qualification to do business in each jurisdiction in
which such qualification is or shall be necessary to protect the validity and
enforceability of this Indenture, the Notes, the Collateral and each other
instrument or agreement included in the assets of the Trust.
SECTION 3.5 Protection of the Assets of the Trust:
Acknowledgment of Pledge of Spread Account.
(a) The Issuer 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 lien and security interest (and
the priority thereof) of this Indenture or carry out more effectively
the purposes hereof;
(ii) perfect, publish notice of or protect the validity of any
Grant made or to be made by this Indenture;
(iii) enforce any of the Collateral; or
(iv) preserve and defend title to the assets of the Trust and
the rights of the Indenture Trustee and the Noteholders in such assets
of the Trust and in the Spread Account against the claims of all
persons and parties, and the Issuer hereby designates the Indenture
Trustee its agent and attorney-in-fact to execute any financing
statement, continuation statement or other instrument required by the
Indenture Trustee pursuant to this Section 3.5.
(b) The Indenture Trustee acknowledges the pledge by the Class
__ Certificateholders to the Indenture Trustee pursuant to Section 2.11 of the
Trust Agreement of all of the Class __ Certificateholder's right, title and
interest in and to the Spread Account and all proceeds of the foregoing,
including, without limitation, all other accounts and investments held from time
to time in the Spread Account (whether in the form of deposit accounts, physical
property, book-entry securities, uncertificated securities or otherwise) in
order to provide for the prompt payment to the Noteholders, the
Certificateholders and the Servicer in accordance with 5.01 of the Pooling and
Servicing Agreement, to assure availability of the amounts maintained
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therein for the benefit of the Noteholders, the Certificateholders and the
Servicer, and as security for the performance by the Issuer of its obligations
under this Agreement, the Trust Agreement and the Pooling and Servicing
Agreement (collectively, the "Basic Documents").
SECTION 3.6 Opinions as to Trust Assets.
(a) On the Closing Date, the Issuer shall furnish to the
Indenture Trustee an Opinion of Counsel either stating that, in the opinion of
such counsel, such action has been taken with respect to the recording and
filing of this Indenture, any indentures supplemental hereto and any other
requisite documents, and with respect to the execution and filing or recording
of any financing statements and continuation statements and other documents as
are necessary to perfect and make effective the lien and security interest of
this Indenture and reciting the details of such action, or stating that, in the
opinion of such counsel, no such action is necessary to make such lien and
security interest effective.
(b) On or before the last day of the fourth month following
the end of the Issuer's fiscal year, which currently ends on [December 31], in
each calendar year, beginning with the fiscal year ending [December 31], 199_,
the Issuer shall furnish to the Indenture Trustee and the Credit Enhancer an
Opinion of Counsel either stating that, in the opinion of such counsel, such
action has been taken with respect to the recording, filing, re-recording and
refiling of this Indenture, any indentures supplemental hereto and any other
requisite documents and with respect to the execution and filing or recording of
any financing statements, continuation statements and other documents as is
necessary to maintain the lien and security interest created by this Indenture
and reciting the details of such action or stating that in the opinion of such
counsel no such action is necessary to maintain the lien and security interest
created by this Indenture. Such Opinion of Counsel shall also describe the
recording, filing, re-recording and refiling of this Indenture, any indentures
supplemental hereto and any other requisite documents and the execution and
filing of any financing statements and continuation statements that will, in the
opinion of such counsel, be required to maintain the lien and security interest
of this Indenture until the last day of the fourth month following the end of
the Issuer's next fiscal year.
SECTION 3.7 Performance of Obligations; Servicing of Mortgage
Loans.
(a) The Issuer shall not take any action and shall use its
best efforts not to permit any action to be taken by others that would release
any Person from any of such Person's material covenants or obligations under any
instrument or agreement included in the assets of the Trust or that would result
in the amendment, hypothecation, subordination, termination or discharge of, or
impair the validity or effectiveness of, any such instrument or any other Basic
Document.
(b) The Issuer may contract with other Persons to assist it in
performing its duties under this Indenture, and any performance of such duties
by a Person identified to the Indenture Trustee in an Officers' Certificate of
the Issuer shall be deemed to be action taken by the Issuer. Initially, the
Issuer has contracted with the Servicer and the Administrator to assist the
Issuer in performing its duties under this Indenture.
(c) The Issuer shall punctually perform and observe all of its
obligations and agreements contained in this Indenture, the Basic Documents and
in the instruments and agreements included in the assets of the Trust, including
but not limited to filing or causing to be filed all UCC financing statements
and continuation statements required to be filed by the terms of this Indenture
and the Pooling and Servicing Agreement in accordance with and within the time
periods provided for herein and therein.
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(d) If the Issuer shall have knowledge of the occurrence of a
Servicer Default or of an Event of Default hereunder, the Issuer shall promptly
notify the Indenture Trustee, the Credit Enhancer and the Rating Agencies
thereof, and shall specify in such notice the response or action, if any, the
Issuer has taken or is taking with respect of such default. If a Servicer
Default or an Event of Default shall arise from the failure of the Servicer to
perform any of its duties or obligations under the Pooling and Servicing
Agreement with respect to the Mortgage Loans, the Issuer and the Indenture
Trustee shall take all reasonable steps available to them pursuant to the
Pooling and Servicing Agreement to remedy such failure.
(e) Without derogating from the absolute nature of the
assignment granted to the Indenture Trustee under this Indenture or the rights
of the Indenture Trustee hereunder, the Issuer agrees that, except as set forth
in the Pooling and Servicing Agreement, it shall not, without the prior written
consent of the Credit Enhancer and the Indenture Trustee or a Majority in Voting
Interest of the Notes, amend, modify, waive, supplement, terminate or surrender,
or agree to any amendment, modification, supplement, termination, waiver or
surrender of, the terms of any Collateral or the Basic Documents, or waive
timely performance or observance by the Servicer or the Depositor under the
Pooling and Servicing Agreement, the Administrator under the Administration
Agreement or the Originators under the Purchase Agreement. If any such
amendment, modification, supplement or waiver shall be so consented to by the
Credit Enhancer and the Indenture Trustee or such Holders, as applicable, the
Issuer agrees, promptly following a request by the Indenture Trustee or the
Credit Enhancer to do so, to execute and deliver, in its own name and at its own
expense, such agreements, instruments, consents and other documents as the
Indenture Trustee or the Credit Enhancer may deem necessary or appropriate in
the circumstances.
SECTION 3.8 Negative Covenants. So long as any Notes are
outstanding, the Issuer shall not (except as expressly permitted herein or in
the Pooling and Servicing Agreement):
(a) sell, transfer, exchange or otherwise dispose of any of
the properties or assets of the Issuer, except in accordance with
Section 3.10(b) or Section 10.1(a) of this Indenture or Section 10.01
of the Pooling and Servicing Agreement;
(b) claim any credit on, or make any deduction from, the
principal or interest payable in respect of the Notes (other than
amounts properly withheld from such payments under the Code or
applicable state law) or assert any claim against any present or former
Noteholder by reason of the payment of the taxes levied or assessed
upon any part of the assets of the Trust;
(c) voluntarily commence any insolvency, readjustment of debt,
marshalling of assets and liabilities or other proceeding, or apply for
an order by a court or agency or supervisory authority for the
winding-up or liquidation of its affairs or any other event specified
in Section 5.1(e); or
(d) either (i) permit the validity or effectiveness of this
Indenture to be impaired, or permit the lien of this Indenture to be
amended, hypothecated, subordinated, terminated or discharged, or
permit any Person to be released from any covenants or obligations with
respect to the Notes under this Indenture except as may be expressly
permitted hereby; (ii) permit any lien, charge, excise, claim, security
interest, mortgage or other encumbrance (other than the lien of this
Indenture) to be created on or extend to or otherwise arise upon or
burden the assets of the Trust or any part thereof or any interest
therein or the proceeds thereof (other than tax liens, mechanics' liens
and other liens that arise by operation of law, in each case on a
Mortgaged Property and arising solely as a result of an action or
omission of the related Obligor); or (iii) permit the lien of this
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Indenture not to constitute a valid first priority security interest in
the assets of the Trust.
SECTION 3.9 Annual Statement as to Compliance. The Issuer
shall deliver to the Indenture Trustee and the Credit Enhancer, on or before the
last day of the fourth month following the end of the Issuer's fiscal year,
which currently ends on [December 31], beginning with the fiscal year ending on
[December 31], 199_, an Officer's Certificate signed by a Responsible Officer of
the Issuer, dated as of the last day of such fiscal year, stating that:
(a) a review of the activities of the Issuer during such
fiscal year and of performance under this Indenture has been made under
such Responsible Officer's supervision; and
(b) to the best of such Responsible Officer's knowledge, based
on such review, the Issuer has fulfilled all of its obligations under
this Indenture throughout such year, or, if there has been a default in
the fulfillment of any such obligation, specifying each such default
known to such Responsible Officer and the nature and status thereof. A
copy of such certificate may be obtained by any Noteholder by a request
in writing to the Issuer addressed to the Corporate Trust Office of the
Indenture Trustee.
SECTION 3.10 Consolidation, Merger, etc., of Issuer;
Disposition of Trust Assets.
(a) The Issuer shall not consolidate or merge with or into any
other Person, unless:
(i) the Person (if other than the Issuer) formed by or
surviving such consolidation or merger shall be a Person organized and
existing under the laws of the United States of America or any State
and shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Indenture Trustee, in form satisfactory
to the Indenture Trustee, the due and punctual payment of the principal
of and interest on all Notes and the performance or observance of every
agreement and covenant of this Indenture on the part of the Issuer to
be performed or observed, all as provided herein;
(ii) immediately after giving effect to such merger or
consolidation, no Default or Event of Default shall have occurred and
be continuing;
(iii) the Credit Enhancer shall have consented to such
transaction;
(iv) any action as is necessary to maintain the lien and
security interest created by this Indenture shall have been taken; and
(v) the Issuer shall have delivered to the Indenture Trustee
an Officers' Certificate and an Opinion of Counsel addressed to the
Issuer, each stating:
(A) that such consolidation or merger and
such supplemental indenture comply with this Section 3.10;
(B) that such consolidation or merger and
such supplemental indenture shall have no material adverse tax
consequence to the Trust or any Noteholder or
Certificateholder; and
(C) that all conditions precedent herein
provided for relating
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to such transaction have been complied with (including any filing
required by the Exchange Act).
(b) Except as expressly permitted by this Indenture or the
other Basic Documents, the Issuer shall not sell, convey, exchange,
transfer or otherwise dispose of any of its properties or assets,
including those included in the assets of the Trust, to any Person,
unless:
(i) the Person that acquires such properties or
assets of the Issuer (A) shall be a United States citizen or a Person
organized and existing under the laws of the United States of America
or any State and (B) by an indenture supplemental hereto, executed and
delivered to the Indenture Trustee, in form satisfactory to the
Indenture Trustee:
(1) expressly assumes the due and punctual
payment of the principal of and interest on all Notes and the
performance or observance of every agreement and covenant of
this Indenture on the part of the Issuer to be performed or
observed, all as provided herein;
(2) expressly agrees that all right, title
and interest so sold, conveyed, exchanged, transferred or
otherwise disposed of shall be subject and subordinate to the
rights of Noteholders;
(3) unless otherwise provided in such
supplemental indenture, expressly agrees to indemnify, defend
and hold harmless the Issuer against and from any loss,
liability or expense arising under or related to this
Indenture and the Notes; and
(4) expressly agrees that such Person (or if
a group of Persons, then one specified Person) shall make all
filings with the Commission (and any other appropriate Person)
required by the Exchange Act in connection with the Notes;
(ii) immediately after giving effect to such transaction,
no Default or Event of Default shall have occurred and be continuing;
(iii) the Credit Enhancer shall have consented to such
transaction;
(iv) any action as is necessary to maintain the lien and
security interest created by this Indenture shall have been taken; and
(v) the Issuer shall have delivered to the Indenture
Trustee an Officers' Certificate and an Opinion of Counsel addressed to
the Issuer, each stating that:
(A) such sale, conveyance, exchange,
transfer or disposition and such supplemental indenture comply
with this Section 3.10;
(B) such sale, conveyance, exchange,
transfer or disposition and such supplemental indenture has no
material adverse tax consequence to the Trust or to any
Noteholders or Certificateholders; and
(C) that all conditions precedent herein
provided for relating to such transaction have been complied
with (including any filing required by the Exchange Act).
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SECTION 3.11 Successor or Transferee.
(a) Upon any consolidation or merger of the Issuer in
accordance with Section 3.10(a), the Person formed by or surviving such
consolidation or merger (if other than the Issuer) shall succeed to, and be
substituted for, and may exercise every right and power of, the Issuer under
this Indenture with the same effect as if such Person had been named as the
Issuer herein.
(b) Upon a conveyance or transfer of all the assets and
properties of the Issuer pursuant to Section 3.10(b), the Issuer shall be
released from every covenant and agreement of this Indenture to be observed or
performed on the part of the Issuer with respect to the Notes immediately upon
the delivery of written notice to the Indenture Trustee from the Person
acquiring such assets and properties stating that the Issuer is to be so
released.
SECTION 3.12 No Other Business. The Issuer shall not engage
in any business or activity other than (i) acquiring, holding and managing the
Mortgage Loans and the other assets of the Trust and the proceeds therefrom in
the manner contemplated by the Basic Documents, (ii) issuing the Notes and the
Certificates, (iii) making payments on the Notes and the Certificates and (iv)
such other activities that are necessary, suitable or convenient to accomplish
the foregoing or are incidental thereto, as set forth in Section 2.3 of the
Trust Agreement.
SECTION 3.13 No Borrowing. The Issuer shall not issue, incur,
assume, guarantee or otherwise become liable, directly or indirectly, for any
indebtedness for money borrowed other than indebtedness for money borrowed in
respect of the Notes or in accordance with the Basic Documents.
SECTION 3.14 Guarantees, Loans, Advances and Other
Liabilities. Except as expressly permitted by this Indenture or the other Basic
Documents, the Issuer shall not make any loan or advance or credit to, or
guarantee (directly or indirectly or by an instrument having the effect of
assuring another's payment or performance on any obligation or capability of so
doing or otherwise) endorse or otherwise become contingently liable, directly or
indirectly, in connection with the obligations, stocks or dividends of, or own,
purchase, repurchase or acquire (or agree contingently to do so) any stock,
obligations, assets or securities of, or any other interest in, or make any
capital contribution to, any other Person.
SECTION 3.15 Servicer's Obligations. The Issuer shall use its
best efforts to cause the Servicer to comply with its obligations under the
Pooling and Servicing Agreement.
SECTION 3.16 Capital Expenditures. The Issuer shall not make
any expenditure (by long-term or operating lease or otherwise) for capital
assets (either realty or personalty).
SECTION 3.17 Removal of Administrator. So long as any Notes
are Outstanding, the Issuer shall not remove the Administrator without cause
unless the Credit Enhancer shall have consented to such removal.
SECTION 3.18 Restricted Payments. Except for payments of
principal or interest on or redemption of the Notes, so long as any Notes are
Outstanding, the Issuer shall not, directly or indirectly:
(a) pay any dividend or make any distribution (by reduction of
capital or otherwise) whether in cash, property, securities or a
combination thereof, to the Owner Trustee or any owner of a beneficial
interest in the Issuer or otherwise, in each case with
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respect to any ownership or equity interest or similar security in or
of the Issuer or to the Servicer;
(b) redeem, purchase, retire or otherwise acquire for value
any such ownership or equity interest or similar security (other than
investments of funds in the Accounts in Permitted Investments); or
(c) set aside or otherwise segregate any amounts for any such
purpose;
provided, however, that the Issuer may make, or cause to be made,
(i) distributions to the Servicer, the Owner Trustee, the Indenture Trustee and
the Certificateholders as permitted by, and to the extent funds are available
for such purpose under, the Pooling and Servicing Agreement or the Trust
Agreement (including without limitation proceeds from initial sale of the Notes
distributed to the Class __ Certificateholders pursuant to Section [___] of the
Pooling and Servicing Agreement), and (ii) payments to the Indenture Trustee
pursuant to the Administration Agreement. The Issuer shall not, directly or
indirectly, make payments to or distributions from the Collection Account except
in accordance with the Basic Documents.
SECTION 3.19 Notice of Events of Default and Other Events.
The Issuer agrees to give the Indenture Trustee, the Credit Enhancer and the
Rating Agencies prompt written notice of each Event of Default hereunder, each
Servicer Default, any Insolvency Event with respect to the Depositor, each
default on the part of the Depositor of its obligations under the Pooling and
Servicing Agreement and each default on the part of the Originators of their
respective obligations under the Purchase Agreement and the other Basic
Documents.
SECTION 3.20 Further Instruments and Acts. Upon request of
the Indenture Trustee, the Issuer shall execute and deliver such further
instruments and do such further acts as may be reasonably necessary or proper to
carry out more effectively the purpose of this Indenture.
SECTION 3.21 Representations and Warranties by the Issuer to
the Indenture Trustee. The Issuer hereby represents and warrants to the
Indenture Trustee and the Credit Enhancer as follows:
(a) Good Title. No Mortgage Loan has been sold, transferred,
assigned or pledged by the Trust to any Person other than the Indenture Trustee;
immediately prior to the conveyance of the Mortgage Loans pursuant to this
Indenture, the Trust had good and marketable title thereto, free of any Lien;
and, upon execution and delivery of this Indenture by the Trust, and the
endorsement of the Mortgage Notes to the order of and the delivery of the
Mortgage Notes to the Indenture Trustee, as set forth in Section 2.01 of the
Pooling and Servicing Agreement, the Indenture Trustee shall have all of the
right, title and interest of the Trust in, to and under the Mortgage Loans, the
unpaid indebtedness evidenced thereby and the collateral security therefor, free
of any Lien; and
(b) All Filings Made. All filings, recordings or other actions
necessary in any jurisdiction to give the Indenture Trustee a first perfected
security interest in the Mortgage Loans, the other assets of the Trust and the
Spread Account shall have been made.
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ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1 Satisfaction and Discharge of Indenture. This
Indenture shall cease to be of further effect with respect to the Notes except
as to: (i) rights of registration of transfer and exchange; (ii) substitution of
mutilated, destroyed, lost or stolen Notes; (iii) rights of Noteholders to
receive payments of principal thereof and interest thereon; (iv) Sections 2.14,
3.3, 3.4, 3.5, 3.8, 3.10, 3.12, 3.13, 3.19 and 3.21; (v) the rights, obligations
and immunities of the Indenture Trustee hereunder (including the rights of the
Indenture Trustee under Section 6.5 and the obligations of the Indenture Trustee
under Sections 4.2 and 4.4); (vi) the rights of Noteholders as beneficiaries
hereof with respect to the property so deposited with the Indenture Trustee
payable to all or any of them and (vii) the rights of the Credit Enhancer to
subrogation in respect of any Insured Payments, and the Indenture Trustee, on
demand of and at the expense of the Issuer, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture with respect to the
Notes, if:
(a) either:
(1) all Notes theretofore authenticated and delivered (other
than (A) Notes that have been destroyed, lost or stolen and that have
been replaced or paid as provided in Section 2.5 and (B) Notes for
whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Issuer and thereafter repaid to the
Issuer or discharged from such trust, as provided in Section 3.3) have
been delivered to the Indenture Trustee for cancellation; or
(2) all Notes not theretofore delivered to the Indenture
Trustee for cancellation:
(A) have become due and payable,
(B) shall become due and payable on the
Maturity Date, within one year, or
(C) are to be called for redemption within
one year under arrangements satisfactory to the
Indenture Trustee for the giving of notice of
redemption by the Indenture Trustee in the name, and
at the expense, of the Issuer,
and the Credit Enhancer has been reimbursed for all amounts owed to it
in respect of Monthly Premiums and Insured Payments, and the Issuer, in
the case of (A), (B) or (C) of subsection 4.1(a)(2) above, has
irrevocably deposited or caused to be irrevocably deposited with the
Indenture Trustee cash or direct obligations of or obligations
guaranteed by the United States of America (which will mature prior to
the date such amounts are payable), in trust for such purpose, in an
amount sufficient (as evidenced by an Independent certificate) to pay
and discharge the entire unpaid principal and accrued interest on such
Notes not theretofore delivered to the Indenture Trustee for
cancellation when due to the Maturity Date or Payment Date on which the
Notes shall have been called for redemption pursuant to Section
10.1(a), as the case may be;
(b) the Issuer has paid or caused to be paid all other sums
payable hereunder by the Issuer; and
(c) the Issuer has delivered to the Indenture Trustee an
Officer's Certificate, an Opinion of Counsel and (if required by the TIA or the
Indenture Trustee) an Independent Certificate from a firm of certified public
accountants, each meeting the applicable requirements of Section 11.1(a) and
each stating that all conditions precedent herein provided for relating to the
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satisfaction and discharge of this Indenture have been complied with.
SECTION 4.2 Application of Trust Money. All moneys deposited
with the Indenture Trustee pursuant to Section 4.1 shall be held in trust in a
segregated account and applied by it, in accordance with the provisions of the
Notes and this Indenture, to the payment, either directly or through any Paying
Agent, as the Indenture Trustee may determine, to the Holders of the particular
Notes for the payment or redemption of which such moneys have been deposited
with the Indenture Trustee, of all sums due and to become due thereon for
principal and interest.
SECTION 4.3 Repayment of Moneys Held by Paying Agent. In
connection with the satisfaction and discharge of this Indenture with respect to
the Notes, all moneys then held by any Paying Agent other than the Indenture
Trustee under the provisions of this Indenture with respect to such Notes shall,
upon demand of the Issuer, be paid to the Indenture Trustee to be held and
applied according to Section 3.3 and thereupon such Paying Agent shall be
released from all further liability with respect to such moneys.
SECTION 4.4 Duration of Appointment of Indenture Trustee.
Notwithstanding the earlier payment in full of all principal and interest due to
the Noteholders under the terms of the Notes and the cancellation of the Notes
pursuant to Section 3.1, the Indenture Trustee shall continue to act in the
capacity as Indenture Trustee hereunder and, for the benefit of the
Certificateholders, shall comply with all of its obligations under the Pooling
and Servicing Agreement, as appropriate, until such time as all payments
allocable to principal of the Certificates and interest due to the
Certificateholders have been paid in full.
ARTICLE V
DEFAULT AND REMEDIES
SECTION 5.1 Events of Default. For the purposes of this
Indenture, "Event of Default" wherever used herein, means any one of the
following events:
(a) failure to pay any interest on any Note as and when the
same becomes due and payable, and such default shall continue for a
period of five (5) days; or
(b) except as set forth in Section 5.1(c), failure to pay any
installment of the principal of any Note as and when the same becomes
due and payable, and such default shall continue for a period of thirty
(30) days after there shall have been given, by registered or certified
mail, to the Credit Enhancer, the Depositor and the Servicer by the
Credit Enhancer or the Indenture Trustee (with the consent of the
Credit Enhancer) or to the Issuer, the Depositor and the Servicer and
the Indenture Trustee by the Holders representing an aggregate
Percentage Interest of at least 25% of Outstanding Notes (with the
consent of the Credit Enhancer); or
(c) failure to pay in full the outstanding Note Principal
Balance on the Maturity Date; or
(d) default in the observance or performance in any material
respect of any covenant or agreement of the Issuer made in this
Indenture (other than a covenant or agreement, a default in the
observance or performance of which is elsewhere specifically addressed
in this Section 5.1) which failure materially and adversely affects the
rights of the Noteholders, and such default shall continue or not be
cured for a period of 30 days after there shall have been given, by
registered or certified mail, to the Issuer and the
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Depositor (or the Servicer, as applicable) by the Credit Enhancer or by
the Indenture Trustee (with the consent of the Credit Enhancer) or to
the Issuer, the Depositor and the Servicer and the Indenture Trustee by
the Holders representing aggregate Percentage Interest of at least 25%
of Outstanding Notes (with the consent of the Credit Enhancer), a
written notice specifying such default and requiring it to be remedied
and stating that such notice is a "Notice of Default" hereunder; or
(e) the filing of a decree or order for relief by a court
having jurisdiction in the premises in respect of the Issuer or any
substantial part of the assets of the Trust in an involuntary case
under any applicable federal or state bankruptcy, insolvency or other
similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Issuer or for any substantial part of the assets of the
Trust, or ordering the winding-up or liquidation of the Issuer's
affairs, and such decree or order shall remain unstayed and in effect
for a period of 90 consecutive days; or
(f) the commencement by the Issuer of a voluntary case under
any applicable federal or state bankruptcy, insolvency or other similar
law now or hereafter in effect, or the consent by the Issuer to the
entry of an order for relief in an involuntary case under any such law,
or the consent by the Issuer to the appointment or taking possession by
a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Issuer or for any substantial part of the
assets of the Trust, or the making by the Issuer of any general
assignment for the benefit of creditors, or the failure by the Issuer
generally to pay its debts as such debts become due, or the taking of
action by the Issuer in furtherance of any of the foregoing.
The Issuer shall deliver to the Indenture Trustee and the Credit Enhancer,
within five Business Days after learning of the occurrence thereof, written
notice in the form of an Officer's Certificate of any event which with the
giving of notice and the lapse of time would become an Event of Default under
Section 5.1(b), its status and what action the Issuer is taking or proposes to
take with respect thereto.
SECTION 5.2 Acceleration of Maturity; Rescission and
Annulment.
(a) If an Event of Default should occur and be continuing
hereunder, then and in every such case, unless the principal amount of the Notes
shall have already become due and payable, the Indenture Trustee at the
direction of the Credit Enhancer, or either the Indenture Trustee or the
Majority in Voting Interest of Notes, in each case with the consent of the
Credit Enhancer, may declare all the Notes to be immediately due and payable, by
a notice in writing to the Issuer (and to the Indenture Trustee and the Credit
Enhancer if given by the Noteholders) setting forth the Event or Events of
Default, and upon any such declaration the unpaid principal amount of such
Notes, together with accrued and unpaid interest thereon through the date of
acceleration, shall become immediately due and payable.
(b) At any time after such declaration of acceleration of
maturity has been made and before a judgment or decree for payment of the money
due has been obtained by the Indenture Trustee as hereinafter provided in this
Article V, the Indenture Trustee, at the direction of the Credit Enhancer or the
Majority in Voting Interest of Notes, in each case with the consent of the
Credit Enhancer, by written notice to the Issuer and the Indenture Trustee, may
waive all Defaults set forth in the notice delivered pursuant to Section 5.2(a),
and rescind and annul such declaration and its consequences; provided, however,
that no such rescission and annulment shall extend to or affect any subsequent
default or impair any right consequent thereto; and provided, further, that if
the Indenture Trustee shall have proceeded to enforce any right under this
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Indenture and such proceedings shall have been discontinued or abandoned because
of such rescission and annulment or for any other reason, or shall have been
determined adversely to the Indenture Trustee, then and in every such case, the
Indenture Trustee, the Issuer and the Noteholders, as the case may be, shall be
restored respectively to their former positions and rights hereunder, and all
rights, remedies and powers of the Indenture Trustee, the Issuer and the
Noteholders, as the case may be, shall continue as though no such proceedings
had been taken.
SECTION 5.3 Collection of Indebtedness and Suits for
Enforcement by Indenture Trustee.
(a) The Issuer covenants that if:
(i) default is made in the payment of any installment of
interest on any Note when the same becomes due and payable, and such
default continues unremedied for a period of five days after receipt by
the Servicer of notice thereof from the Credit Enhancer or the
Indenture Trustee or receipt by the Servicer and the Indenture Trustee
of notice thereof from the Credit Enhancer or the Holders representing
an aggregate Percentage Interest of at least 25% of Outstanding Notes
(with the consent of the Credit Enhancer); or
(ii) default is made in the payment of the principal of or any
installment of the principal of any Note when the same becomes due and
payable, and such default continues unremedied for a period of thirty
(30) days after receipt by the Servicer of notice thereof from the
Credit Enhancer or the Indenture Trustee or receipt by the Servicer and
the Indenture Trustee of notice thereof from the Credit Enhancer or the
Holders representing an aggregate Percentage Interest of at least 25%
of Outstanding Notes (with the consent of the Credit Enhancer);
then the Issuer shall, upon demand of the Indenture Trustee, pay to the
Indenture Trustee, for the ratable benefit of the Noteholders, the whole amount
then due and payable on such Notes for principal and interest, with interest
upon the overdue principal at the rate borne by the Notes, and in addition
thereto such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Indenture Trustee and its agents and counsel.
(b) If the Issuer shall fail forthwith to pay such amounts
upon such demand, the Credit Enhancer or the Indenture Trustee (with the consent
of the Credit Enhancer), in its own name and as trustee of an express trust,
shall, at the direction of the Credit Enhancer, or may, with the consent of the
Credit Enhancer, institute a Proceeding for the collection of the sums so due
and unpaid, and may prosecute such Proceeding to judgment or final decree, and
may enforce the same against the Issuer or other obligor upon such Notes and
collect in the manner provided by law out of the property of the Issuer or other
obligor upon such Notes, wherever situated, the moneys adjudged or decreed to be
payable.
(c) If an Event of Default occurs and is continuing, the
Indenture Trustee shall, at the direction of the Credit Enhancer, or may, with
the consent of the Credit Enhancer, as more particularly provided in Section
5.4, in its discretion, proceed to protect and enforce the rights of the
Indenture Trustee, the Credit Enhancer, and the Noteholders, by such appropriate
Proceedings as the Indenture Trustee shall deem most effective to protect and
enforce any such rights, whether for the specific enforcement of any covenant or
agreement in this Indenture or in aid of the exercise of any power granted
herein, or to enforce any other proper remedy or legal or equitable right vested
in the Credit Enhancer or the Indenture Trustee by this Indenture or by law.
(d) If there shall be pending, relative to the Issuer or any
other obligor upon the
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Notes or any Person having or claiming an ownership interest in the assets of
the Trust, proceedings under Title 11 of the United States Code or any other
applicable federal or state bankruptcy, insolvency or other similar law, or if a
receiver, assignee or trustee in bankruptcy or reorganization, liquidator,
sequestrator or similar official shall have been appointed for or taken
possession of the Issuer or its property or such other obligor or Person, or in
case of any other comparable judicial Proceedings relative to the Issuer or
other obligor upon the Notes, or to the creditors or property of the Issuer or
such other obligor, then the Indenture Trustee, irrespective of whether the
principal of any Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Indenture Trustee shall
have made any demand pursuant to the provisions of this Section 5.3, shall be
entitled and empowered to (and shall at the direction of the Credit Enhancer),
by intervention in such Proceedings or otherwise:
(i) file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the Notes and to
file such other papers or documents as may be necessary or advisable in
order to have the claims of the Indenture Trustee or the Credit
Enhancer (including any claim for reasonable compensation to the
Indenture Trustee and each predecessor Indenture Trustee or the Credit
Enhancer, and their respective agents, attorneys and counsel, and for
reimbursement of all expenses and liabilities incurred, and all
advances made, by the Indenture Trustee and each predecessor Indenture
Trustee, except as a result of negligence or bad faith) and of the
Noteholders allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations, vote
on behalf of the Noteholders in any election of a trustee, a standby
trustee or Person performing similar functions in any such Proceedings;
(iii) collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute all amounts
received with respect to the claims of the Noteholders, the Credit
Enhancer and of the Indenture Trustee on their behalf; and
(iv) file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the
Indenture Trustee, the Credit Enhancer or the Holders of Notes allowed
in any judicial proceedings relative to the Issuer, its creditors and
its property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Indenture Trustee or the Credit Enhancer, as applicable, and, if
the Indenture Trustee shall consent to the making of payments directly to such
Noteholders, to pay to the Indenture Trustee such amounts as shall be sufficient
to cover reasonable compensation to the Indenture Trustee, each predecessor
Indenture Trustee and their respective agents, attorneys and counsel, and all
other expenses and liabilities incurred, and all advances made, by the Indenture
Trustee and each predecessor Indenture Trustee except as a result of negligence
or bad faith.
(e) Nothing herein contained shall be deemed to authorize the
Indenture Trustee to authorize or consent to or vote for or accept or adopt on
behalf of any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any
Noteholder in any such proceeding except, as aforesaid, to vote for the election
of a trustee in bankruptcy or similar Person.
(f) All rights of action and of asserting claims under this
Indenture, or under any of the Notes, may be enforced by the Indenture Trustee
without the possession of any of the
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Notes or the production thereof in any trial or other Proceedings relative
thereto, and any such Proceedings instituted by the Indenture Trustee shall be
brought in its own name as trustee of an express trust, and any recovery of
judgment, subject to the payment of the expenses, disbursements and compensation
of the Indenture Trustee, each predecessor Indenture Trustee, the Credit
Enhancer and their respective agents and attorneys, shall be for the ratable
benefit of the Noteholders.
(g) In any Proceedings brought by the Indenture Trustee (and
also any Proceedings involving the interpretation of any provision of this
Indenture to which the Indenture Trustee shall be a party) the Indenture Trustee
shall be held to represent all the Noteholders, and it shall not be necessary to
make any Noteholder a party to any such Proceedings.
SECTION 5.4 Remedies: Priorities.
(a) If an Event of Default shall have occurred and be
continuing, the Indenture Trustee shall, at the direction of the Credit Enhancer
and may, with the consent of the Credit Enhancer, do one or more of the
following (subject to Section 5.5):
(i) institute Proceedings in its own name and as trustee of an
express trust for the collection of all amounts then payable on the
Notes or under this Indenture with respect thereto, whether by
declaration or otherwise, enforce any judgment obtained, and collect
from the Issuer and any other obligor upon such Notes moneys adjudged
due;
(ii) institute Proceedings from time to time for the complete
or partial foreclosure of this Indenture with respect to the assets of
the Trust;
(iii) exercise any remedies of a secured party under the UCC
and take any other appropriate action to protect and enforce the rights
and remedies of the Indenture Trustee, the Credit Enhancer and the
Noteholders; and
(iv) sell the assets of the Trust or any portion thereof or
rights or interest therein, at one or more public or private sales
called and conducted in any manner permitted by law;
provided, however, that the Indenture Trustee may not sell or otherwise
liquidate the assets of the Trust following an Event of Default, unless (A)(1)
the Holders of all of the Outstanding Notes consent thereto, (2) the proceeds of
such sale or liquidation distributable to the Noteholders are sufficient to
discharge in full the principal of and the accrued interest on the Notes at the
date of such sale or liquidation or (3) the Indenture Trustee determines that
the assets of the Trust will not continue to provide sufficient funds for the
payment of principal of and interest on the Notes as they would have become due
if the Notes had not been declared due and payable and (B) the Indenture Trustee
obtains the consent of the Credit Enhancer. In determining such sufficiency or
insufficiency with respect to clauses (A)(2) and (A)(3) of this proviso, the
Indenture Trustee may, but need not, obtain and rely upon an opinion of an
Independent investment banking or accounting firm of national reputation as to
the feasibility of such proposed action and as to the sufficiency of the assets
of the Issuer for such purpose.
(b) If the Indenture Trustee collects any money or property
pursuant to this Article V, it shall pay out the money or property in the
following order:
FIRST: to the Indenture Trustee for amounts due under Section
6.5;
SECOND: to Noteholders (including the Credit Enhancer as
subrogee) for amounts due and unpaid on the Notes for interest, ratably
among all Noteholders, without
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preference or priority of any kind, according to the amounts due and
payable on all the Notes for interest;
THIRD: to Noteholders (including the Credit Enhancer as
subrogee) for amounts due and unpaid on the Notes for principal,
ratably among all Noteholders, without preference or priority of any
kind, according to the amounts due and payable on all the Notes for
principal; and
FOURTH: to the Owner Trustee for deposit to the Certificate
Distribution Account for distribution to the Certificateholders
(including the Credit Enhancer as subrogee).
The Indenture Trustee may fix a record date and payment date
for any payment to Noteholders pursuant to this Section 5.4. At least 15 days
before such record date, the Indenture Trustee shall mail to each Noteholder,
the Credit Enhancer and the Indenture Trustee a notice that states the record
date, the payment date and the amount to be paid.
SECTION 5.5 Optional Preservation of the Assets of the Trust.
If the Notes have been declared to be due and payable under Section 5.2
following an Event of Default and such declaration and its consequences have not
been rescinded and annulled, the Indenture Trustee may (with the consent of the
Issuer), but need not, unless directed to do so by the Credit Enhancer, elect to
take and maintain possession of the assets of the Issuer. It is the desire of
the parties hereto and the Noteholders that there be at all times sufficient
funds for the payment of principal of and interest on the Notes, and the
Indenture Trustee shall take such desire into account when determining whether
or not to take and maintain possession of the assets of the Issuer. In
determining whether to take and maintain possession of the assets of the Issuer,
the Indenture Trustee may, but need not, obtain and rely upon an opinion of an
Independent investment banking or accounting firm of national reputation as to
the feasibility of such proposed action and as to the sufficiency of the assets
of the Issuer for such purpose.
SECTION 5.6 Limitation of Suits. No Holder of any Note shall
have any right to institute any Proceeding, judicial or otherwise, with respect
to this Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless:
(i) such Holder has previously given written notice to the
Indenture Trustee and the Credit Enhancer of a continuing Event of
Default;
(ii) the Holders of Outstanding Notes representing an
aggregate Percentage Interest of at least 25% (with the consent of the
Credit Enhancer) or the Credit Enhancer have made written request to
the Indenture Trustee to institute such Proceeding in respect of such
Event of Default in its own name as Indenture Trustee hereunder;
(iii) such Holder or Holders have offered to the Indenture
Trustee reasonable indemnity against the costs, expenses and
liabilities to be incurred in complying with such request;
(iv) the Indenture Trustee for 60 days after its receipt of
such notice, request and offer of indemnity has failed to institute
such Proceedings; and
(v) no direction inconsistent with such written request has
been given to the Indenture Trustee during such 60-day period by the
Holders, Credit Enhancer or by the Majority in Voting Interest of the
Notes; and
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(vi) such Holder has obtained the written consent of the
Credit Enhancer.
it being understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders of Notes or to obtain or to seek to obtain priority or preference over
any other Holders of Notes or to enforce any right under this Indenture, except
in the manner herein provided and for the equal, ratable and common benefit of
all Holders of Notes. For the protection and enforcement of the provisions of
this Section 5.6, each and every Noteholder shall be entitled to such relief as
can be given either at law or in equity.
If the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from the Credit Enhancer and one or more
groups of Holders of Notes, each representing less than a Majority in Voting
Interest of the Notes, the directions of the Credit Enhancer shall prevail
notwithstanding any other provisions of this Indenture.
SECTION 5.7 Unconditional Rights of Noteholders To Receive
Principal and Interest. Notwithstanding any other provisions in this Indenture,
the Holder of any Note shall have the right, which is absolute and
unconditional, to receive payment of the principal of and interest on such Note
on or after the respective due dates thereof expressed in such Note or in this
Indenture (or, in the case of redemption, on or after the Special Payment Date
or the applicable Payment Date pursuant to Section 10.01 of the Pooling and
Servicing Agreement) and to institute suit for the enforcement of any such
payment, and such right shall not be impaired without the consent of such
Holder.
SECTION 5.8 Restoration of Rights and Remedies. If the
Indenture Trustee, the Credit Enhancer or any Noteholder has instituted any
Proceeding to enforce any right or remedy under this Indenture and such
Proceeding has been discontinued or abandoned for any reason or has been
determined adversely to the Indenture Trustee, the Credit Enhancer or to such
Noteholder, then and in every such case the Issuer, the Indenture Trustee, the
Credit Enhancer and the Noteholders shall, subject to any determination in such
Proceeding, be restored severally and respectively to their former positions
hereunder, and thereafter all rights and remedies of the Indenture Trustee, the
Credit Enhancer and the Noteholders shall continue as though no such Proceeding
had been instituted.
SECTION 5.9 Rights and Remedies Cumulative. No right or remedy
herein conferred upon or reserved to the Indenture Trustee, the Credit Enhancer
or the Noteholders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 5.10 Delay or Omission Not a Waiver. No delay or
omission of the Indenture Trustee, the Credit Enhancer or any Holder of any Note
to exercise any right or remedy accruing upon any Default or Event of Default
shall impair any such right or remedy or constitute a waiver of any such Default
or Event of Default or an acquiescence therein. Every right and remedy given by
this Article V or by law to the Indenture Trustee, the Credit Enhancer or to the
Noteholders may be exercised from time to time, and as often as may be deemed
expedient, by the Indenture Trustee, the Credit Enhancer or by the Noteholders,
as the case may be.
SECTION 5.11 Control by the Credit Enhancer. The Credit
Enhancer or the Majority in Voting Interest of the Notes (with the consent of
the Credit Enhancer) shall, subject to provision being made for indemnification
against costs, expenses and liabilities in a form
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satisfactory to the Indenture Trustee, have the right to direct the time, method
and place of conducting any Proceeding for any remedy available to the Indenture
Trustee with respect to the Notes or exercising any trust or power conferred on
the Indenture Trustee; provided, however, that:
(i) such direction shall not be in conflict with any rule of
law or with this Indenture;
(ii) subject to the express terms of Section 5.4, any
direction to the Indenture Trustee to sell or liquidate the assets of
the Trust shall be by the Credit Enhancer, or by the Holders
representing an aggregate Percentage Interest of at least 100% of
Outstanding Notes (with the consent of the Credit Enhancer);
(iii) if the conditions set forth in Section 5.5 have been
satisfied and the Indenture Trustee elects to retain the assets of the
Trust pursuant to Section 5.5, then any direction to the Indenture
Trustee by Holders representing an aggregate Percentage Interest less
than 100% of Outstanding Notes without the consent of the Credit
Enhancer to sell or liquidate the assets of the Trust shall be of no
force and effect; and
(iv) the Indenture Trustee may take any other action deemed
proper by the Indenture Trustee that is not inconsistent with such
direction;
provided, however, that, subject to Section 6.1, the Indenture Trustee need not
take any action that it determines might cause it to incur any liability or
might materially adversely affect the rights of any Noteholders not consenting
to such action.
SECTION 5.12 Waiver of Past Defaults.
(a) Prior to the declaration of the acceleration of the
maturity of the Notes as provided in Section 5.2, the Credit Enhancer or not
less than a Majority in Voting Interest of the Notes (with the consent of the
Credit Enhancer) may waive any past Default or Event of Default and its
consequences except a Default (i) in the payment of principal of or interest on
any of the Notes or (ii) in respect of a covenant or provision hereof which
cannot be modified or amended without the consent of the Holder of each Note. In
the case of any such waiver, the Issuer, the Indenture Trustee and the
Noteholders shall be restored to their former positions and rights hereunder,
respectively; but no such waiver shall extend to any subsequent or other Default
or impair any right consequent thereto.
(b) Upon any such waiver, such Default shall cease to exist
and be deemed to have been cured and not to have occurred, and any Event of
Default arising therefrom shall be deemed to have been cured and not to have
occurred, for every purpose of this Indenture; but no such waiver shall extend
to any subsequent or other Default or Event of Default or impair any right
consequent thereto.
SECTION 5.13 Undertaking for Costs. All parties to this
Indenture agree, and each Holder of any Note by such Holder's acceptance thereof
shall be deemed to have agreed, that any court may in its discretion require, in
any Proceeding for the enforcement of any right or remedy under this Indenture,
or in any Proceeding against the Indenture Trustee for any action taken,
suffered or omitted by it as Indenture Trustee, the filing by any party litigant
in such proceeding of an undertaking to pay the costs of such proceeding, and
that such court may in its discretion assess reasonable costs, including
reasonable attorneys fees, against any party litigant in such proceeding, having
due regard to the merits and good faith of the claims or defenses made by such
party litigant; but the provisions of this Section 5.13 shall not apply to:
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(a) any proceeding instituted by the Indenture Trustee or the
Credit Enhancer;
(b) any proceeding instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate Notes representing an
aggregate Percentage Interest of at least 10% of Outstanding Notes; or
(c) any proceeding instituted by any Noteholder for the
enforcement of the payment of principal of or interest on any Note on or after
the respective due dates expressed in such Note and in this Indenture (or, in
the case of redemption, on or after the Special Payment Date or the applicable
Payment Date pursuant to Section 10.01 of the Pooling and Servicing Agreement).
SECTION 5.14 Waiver of Stay or Extension Laws. The Issuer
covenants (to the extent that it may lawfully do so) that it shall not at any
time insist upon, or plead or in any manner whatsoever, claim or take the
benefit or advantage of, any stay or extension law wherever enacted, now or at
any time hereafter in force, that may affect the covenants or the performance of
this Indenture. The Issuer (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
shall not hinder, delay or impede the execution of any power herein granted to
the Indenture Trustee or the Credit Enhancer, but shall suffer and permit the
execution of every such power as though no such law had been enacted.
SECTION 5.15 Action on Notes. The Indenture Trustee's right to
seek and recover judgment on the Notes or under this Indenture shall not be
affected by the seeking, obtaining or application of any other relief under or
with respect to this Indenture. Neither the lien of this Indenture nor any
rights or remedies of the Indenture Trustee, the Credit Enhancer or the
Noteholders shall be impaired by the recovery of any judgment by the Indenture
Trustee against the Issuer or by the levy of any execution under such judgment
upon any portion of the assets of the Trust or upon any of the assets of the
Issuer.
SECTION 5.16 Performance and Enforcement of Certain
Obligations.
(a) Promptly following a request from the Indenture Trustee or
the Credit Enhancer to do so and at the Administrator's expense, the Issuer
agrees to take all such lawful action as the Indenture Trustee or the Credit
Enhancer may request to compel or secure the performance and observance by the
Depositor and the Servicer, as applicable, of their respective obligations under
or in connection with the Pooling and Servicing Agreement or by the Originators
of their obligations under or in connection with the Purchase Agreement in
accordance with the terms thereof, and to exercise any and all rights, remedies,
powers and privileges lawfully available to the Issuer under or in connection
with the Pooling and Servicing Agreement to the extent and in the manner
directed by the Indenture Trustee, including the transmission of notices of
default on the part of the Depositor or the Servicer thereunder and the
institution of legal or administrative actions or proceedings to compel or
secure performance by the Depositor or the Servicer of each of their obligations
under the Pooling and Servicing Agreement.
(b) If an Event of Default has occurred and is continuing, the
Indenture Trustee may, and shall, at the direction (which direction shall be in
writing or by telephone (confirmed in writing promptly thereafter)) of (i) the
Credit Enhancer or (ii) the Holders representing an aggregate Percentage
Interest of at least 66-2/3% of Outstanding Notes (with the consent of the
Credit Enhancer), exercise all rights, remedies, powers, privileges and claims
of the Issuer against the Depositor or the Issuer under or in connection with
the Pooling and Servicing Agreement, including the right or power to take any
action to compel or secure performance or observance by
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the Depositor or the Servicer of each of their obligations to the Issuer
thereunder and to give any consent, request, notice, direction, approval,
extension or waiver under the Pooling and Servicing Agreement, and any right of
the Issuer to take such action shall be suspended.
(c) Promptly following a request from the Indenture Trustee
(with the consent of the Credit Enhancer) or the Credit Enhancer to do so and at
the Administrator's expense, the Issuer agrees to take all such lawful action as
the Indenture Trustee may request to compel or secure the performance and
observance by the Originators of each of their respective obligations to the
Depositor under or in connection with the Purchase Agreement in accordance with
the terms thereof, and to exercise any and all rights, remedies, powers and
privileges lawfully available to the Issuer under or in connection with the
Purchase Agreement to the extent and in the manner directed by the Indenture
Trustee, including the transmission of notices of default on the part of the
Depositor thereunder and the institution of legal or administrative actions or
proceedings to compel or secure performance by the Originators of each of their
respective obligations under the Purchase Agreement.
(d) If an Event of Default has occurred and is continuing, the
Indenture Trustee may, and, at the direction (which direction shall be in
writing or by telephone (confirmed in writing promptly thereafter)) of (i) the
Credit Enhancer or (ii) Holders representing an aggregate Percentage Interest of
at least 66-2/3% of Outstanding Notes (with the consent of the Credit Enhancer)
shall, exercise all rights, remedies, powers, privileges and claims of the
Depositor against the Originators under or in connection with the Purchase
Agreement, including the right or power to take any action to compel or secure
performance or observance by the Originators of each of their respective
obligations to the Depositor thereunder and to give any consent, request,
notice, direction, approval, extension or waiver under the Purchase Agreement,
and any right of the Depositor to take such action shall be suspended.
ARTICLE VI
THE INDENTURE TRUSTEE
SECTION 6.1 Duties of Indenture Trustee.
The Indenture Trustee, prior to the occurrence of an Event of
Default and after the curing of all Events of Default which may have occurred,
undertakes to perform such duties and only such duties to be performed by it as
are specifically set forth in this Indenture. If an Event of Default has
occurred and has not been cured or waived, the Indenture Trustee shall exercise
such of the rights and powers vested in it by this Indenture, and use the same
degree of care and skill in its exercise as a prudent person would exercise or
use under the circumstances in the conduct of such person's own affairs. The
Indenture Trustee is hereby authorized to acknowledge and accept the Pooling and
Servicing Agreement, and by so doing the Indenture Trustee undertakes to perform
the duties to be performed by the Indenture Trustee as set forth therein.
The Indenture Trustee, upon receipt of all resolutions,
certificates, statements, opinions, reports, documents, orders or other
instruments furnished to the Indenture Trustee which are specifically required
to be furnished pursuant to any provision of this Indenture, shall examine them
to determine whether they conform to the requirements of this Indenture;
provided, however that the Indenture Trustee shall not be responsible for the
accuracy or content of any resolution, certificate, statement, opinion, report,
document, order or other instrument furnished by the Issuer, the Servicer, the
Administrator, the Depositor or any Originator hereunder or under any other
Basic Document. If any such instrument is found not to conform to the
requirements of this Indenture or thereunder, the Indenture Trustee shall
notify the Credit Enhancer and request
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written instructions as to the action it deems appropriate to have the
instrument corrected, and if the instrument is not so corrected, the Indenture
Trustee will provide notice thereof to the Credit Enhancer who shall then direct
the Indenture Trustee as to the action, if any, to be taken.
No provision of this Indenture shall be construed to relieve the
Indenture 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 Default, and after
the curing of all such Events of Default which may have occurred, the
duties and obligations of the Indenture Trustee shall be determined
solely by the express provisions of this Indenture, the Indenture
Trustee shall not be liable except for the performance of such duties
and obligations as are specifically set forth in this Indenture, no
implied covenants or obligations shall be read into this Indenture
against the Indenture Trustee and, in the absence of bad faith on the
part of the Indenture Trustee, the Indenture 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 Indenture Trustee and conforming to the requirements of this
Indenture;
(ii) The Indenture Trustee shall not be personally liable for
an error of judgment made in good faith by a Responsible Officer or
other officers of the Indenture Trustee, unless it shall be proved that
the Indenture Trustee was negligent in ascertaining the pertinent
facts;
(iii) The Indenture Trustee shall not be personally liable
with respect to any action taken, suffered or omitted to be taken by it
in good faith in accordance with the direction of the Credit Enhancer
or the Noteholders, relating to the time, method and place of
conducting any Proceeding for any remedy available to the Indenture
Trustee, or exercising any trust or power conferred upon the Indenture
Trustee, under this Indenture;
(iv) The Indenture Trustee shall not be required to take
notice or be deemed to have notice or knowledge of any Default or Event
of Default unless a Responsible Officer of the Indenture Trustee shall
have received notice thereof. In the absence of receipt of such notice,
the Indenture Trustee may conclusively assume that there is no Default
or Event of Default;
(v) The Indenture Trustee shall not be required to expend or
risk its own funds or otherwise incur financial liability for the
performance of any of its duties hereunder or 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 and none of the provisions
contained in this Indenture shall in any event require the Indenture
Trustee to perform, or be responsible for the manner of performance of,
any of the obligations of the Issuer under this Indenture or the
Servicer under the Pooling and Servicing Agreement, except during such
time, if any, as the Indenture Trustee shall be the successor to, and
be vested with the rights, duties, powers and privileges of, the Issuer
in accordance with the terms of this Indenture or the Servicer in
accordance with the terms of the Pooling and Servicing Agreement;
(vi) Subject to the other provisions of this Indenture and
without limiting the generality of this Section, the Indenture Trustee
shall have no duty (A) to see to any recording, filing, or depositing
of this Indenture or any agreement referred to herein or any financing
statement or continuation statement evidencing a security interest, or
to see to the maintenance of any such recording or filing or depositing
or to any rerecording, refiling or
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redepositing of any thereof, (B) to see to any insurance, (C) to see to
the payment or discharge of any tax, assessment, or other governmental
charge or any lien or encumbrance of any kind owing with respect to,
assessed or levied against, any part of the assets of the Trust, (D) to
confirm or verify the contents of any reports or certificates of the
Issuer delivered to the Indenture Trustee pursuant to this Indenture
believed by the Indenture Trustee to be genuine and to have been signed
or presented by the proper party or parties;
(vii) The Indenture Trustee shall not be deemed a fiduciary
for the Credit Enhancer in its capacity as such, except to the extent
the Credit Enhancer has made an Insured Payment and is thereby
subrogated to the rights of the Noteholders with respect thereto; and
(viii) Money held in trust by the Indenture Trustee need not
be segregated from other funds except to the extent required by law or
the terms of this Indenture, the Pooling and Servicing Agreement or the
Trust Agreement.
(ix) Every provision of this Indenture relating to the
Indenture Trustee shall be subject to this Section 6.1 and to the
provisions of the TIA.
SECTION 6.2 Certain Matters Affecting the Indenture Trustee.
Except as otherwise provided in Section 6.1:
(i) The Indenture Trustee may rely and shall be protected in
acting or refraining from acting upon any resolution, Officers'
Certificate, Opinion of Counsel, certificate of auditors or any other
certificate, statement, instrument, opinion, report, notice, request,
consent, order, appraisal, bond or other paper or document believed by
it to be genuine and to have been signed or presented by the proper
party or parties;
(ii) The Indenture Trustee may consult with counsel and 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, in the absence of negligence, and in
accordance with such Opinion of Counsel;
(iii) The Indenture Trustee shall be under no obligation to
exercise any of the trusts or powers vested in it by this Indenture or
to institute, conduct or defend by litigation hereunder or in relation
hereto at the request, order or direction of the Credit Enhancer or any
of the Noteholders, pursuant to the provisions of this Indenture,
unless such Noteholders or the Credit Enhancer, as applicable, shall
have offered to the Indenture Trustee reasonable security or indemnity
against the costs, expenses and liabilities which may be incurred
therein or thereby; nothing contained herein shall, however, relieve
the Indenture Trustee of the obligation, upon the occurrence of an
Event of Default (which has not been cured), to exercise such of the
rights and powers vested in it by this Indenture, and to use the same
degree of care and skill in its exercise as a prudent person would
exercise or use under the circumstances in the conduct of such person's
own affairs;
(iv) The Indenture Trustee shall not be personally liable for
any action taken, suffered or omitted by it in good faith, in the
absence of negligence, and believed by it to be authorized or within
the discretion or rights or powers conferred upon it by this Indenture;
(v) Prior to the occurrence of an Event of Default hereunder
and after the curing
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of all Events of Default which may have occurred, the Indenture Trustee
shall not be bound to make any investigation into the facts or matters
stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, approval, bond or other paper
or document, unless requested in writing to do so by the Credit
Enhancer or Holders evidencing a Percentage Interest aggregating not
less than 25% of Outstanding Notes or any Account Party; provided,
however, that if the payment within a reasonable time to the Indenture
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
Indenture Trustee, not reasonably assured to the Indenture Trustee by
the security afforded to it by the terms of this Indenture, the
Indenture Trustee may require reasonable indemnity against such expense
or liability as a condition to taking any such action. The reasonable
expense of every such examination shall be paid by the Administrator
or, if paid by the Indenture Trustee, shall be repaid by the
Administrator upon demand from the Administrator's own funds;
(vi) The right of the Indenture Trustee to perform any
discretionary act enumerated in this Indenture shall not be construed
as a duty, and the Indenture Trustee shall not be answerable for other
than its negligence or willful misconduct in the performance of such
act;
(vii) The Indenture Trustee shall not be required to give any
bond or surety in respect of the execution of the Trust created hereby
or the powers granted hereunder; and
(viii) The Indenture Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through agents or attorneys.
SECTION 6.3 Indenture Trustee Not Liable for Notes or Mortgage
Loans.
The recitals contained herein and in the Notes (other than the
certificate of authentication on the Notes) shall be taken as the statements of
the Issuer, and the Indenture Trustee assumes no responsibility for their
correctness. The Indenture Trustee makes no representations as to the validity
or sufficiency of this Indenture or of the Notes or of any Mortgage Loan or any
other Basic Document. The Indenture Trustee shall not be accountable for the use
or application by the Issuer of any of the Notes or of the proceeds of such
Notes, or for the use or application of any funds paid to the Issuer in respect
of the Pooling and Servicing Agreement or deposited in or withdrawn from the
Principal and Interest Account by the Issuer. In the absence of bad faith,
negligence or willful misconduct, the Indenture Trustee shall not be responsible
for the legality or validity of the Indenture or the validity, priority,
perfection or sufficiency of the security for the Notes issued or intended to be
issued hereunder.
SECTION 6.4 Indenture Trustee May Own Notes.
The Indenture Trustee in its individual or any other capacity
may become the owner or pledgee of Notes with the same rights it would have if
it were not Indenture Trustee, and may otherwise deal with the parties hereto.
SECTION 6.5 Indenture Trustee's Fees and Expenses.
The Issuer has caused the Servicer under the Pooling and
Servicing Agreement to covenant and agree to pay to the Indenture Trustee from
time to time, and the Indenture 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
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powers and duties hereunder of the Indenture Trustee, and the Servicer will pay
or reimburse the Indenture Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Indenture Trustee in
accordance with any of the provisions of this Indenture (including the
reasonable compensation, 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, provided that the
Indenture Trustee shall have no lien on the assets of the Trust for the payment
of its fees and expenses. Failure by the Issuer to cause any such fees or other
expenses to be paid shall not relieve the Indenture Trustee of its obligations
hereunder. The Indenture Trustee and any director, officer, employee or agent of
the Indenture Trustee caused to be indemnified by the Servicer and held harmless
against any loss, liability or expense (i) incurred in connection with any legal
action relating to this Indenture or the Notes, other than any loss, liability
or expense incurred by reason of willful misfeasance, bad faith or negligence in
the performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder, and (ii) resulting from any error in any tax
or information return prepared by or on behalf of the Servicer. The obligations
of the Issuer and the Servicer under this Section 6.5 shall survive payment of
the Notes, and shall extend to any co-trustee appointed pursuant to this Article
VI. The compensation due to the Indenture Trustee pursuant to this Section 6.5
shall be paid by the Servicer from its own funds.
SECTION 6.6 Eligibility; Disqualification. The Indenture
Trustee shall at all times satisfy the requirements of TIA Section 310(a) and be
reasonably acceptable to the Credit Enhancer. The Indenture Trustee shall have a
combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition and it shall have a long term
deposit rating of at least "[BBB]" by [S&P] and "[Baa2]" by [Moody's]. The
Indenture Trustee shall comply with TIA Section 310(b); provided, however, that
there shall be excluded from the operation of TIA Section 310(b)(1) any
indenture or indentures under which other securities of the Issuer are
outstanding if the requirements for such exclusion set forth in TIA Section
310(b)(1) are met. If such banking association 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 6.6
its combined capital and surplus shall be deemed to be as set forth in its most
recent report of condition so published. In case at any time the Indenture
Trustee shall cease to be eligible in accordance with the provisions of this
Section 6.6, the Indenture Trustee shall give notice of such ineligibility to
the Credit Enhancer and any Account Party and shall resign, upon the request of
the Credit Enhancer or the Majority in Voting Interest of the Notes (with the
consent of the Credit Enhancer), in the manner and with the effect specified in
Section 6.7.
SECTION 6.7 Resignation and Removal of the Indenture Trustee.
The Indenture Trustee may at any time resign and be discharged
from the trusts hereby created by giving written notice thereof to the Issuer,
the Credit Enhancer, each Account Party, the Owner Trustee, the Servicer and to
all Noteholders. Upon receiving such notice of resignation, the Issuer (or the
Administrator on behalf of the Issuer) shall, with the consent of the Credit
Enhancer, promptly appoint a successor trustee who satisfies the requirements of
Section 6.6 by written instrument, in duplicate, which instrument shall be
delivered to the resigning Indenture Trustee and to the successor trustee. A
copy of such instrument shall be delivered to the Noteholders by the Issuer.
Unless a successor trustee shall have been so appointed and have accepted
appointment within 60 days after the giving of such notice of resignation, the
resigning Indenture Trustee may petition any court of competent jurisdiction for
the appointment of a successor trustee.
If at any time the Indenture Trustee shall cease to be
eligible in accordance with the provisions of Section 6.6 and shall fail to
resign after written request therefor by the Administrator, the Credit Enhancer
or the Majority in Voting Interest of the Notes, or if at any time
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the Indenture Trustee shall become incapable of acting, or shall be adjudged
bankrupt or insolvent, or a receiver of the Indenture Trustee or of its property
shall be appointed, or any public officer shall take charge or control of the
Indenture Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then the Servicer may remove the
Indenture Trustee and shall, within 30 days after such removal, appoint, subject
to the approval of the Credit Enhancer, which approval shall not be unreasonably
withheld, a successor trustee by written instrument, in duplicate, which
instrument shall be delivered to the Indenture Trustee so removed and to the
successor trustee. A copy of such instrument shall be delivered to the Credit
Enhancer, the Noteholders, the Owner Trustee and each Account Party by the
Issuer.
The Majority in Voting Interest of the Notes (with the consent
of the Credit Enhancer) or, if the Indenture Trustee fails to perform in
accordance with this Indenture, the Credit Enhancer, may remove the Indenture
Trustee and appoint a successor trustee by written instrument or instruments, in
triplicate, signed by such Noteholders or their attorneys-in-fact duly
authorized, or by the Credit Enhancer, as the case may be, one complete set of
such instruments shall be delivered to the Issuer, one complete set to the
Indenture Trustee so removed and one complete set to the successor Indenture
Trustee so appointed. A copy of such instruments shall also be provided to the
Credit Enhancer, the Owner Trustee, the Administrator and the Servicer.
Any resignation or removal of the Indenture Trustee and
appointment of a successor trustee pursuant to any of the provisions of this
Section shall become effective upon acceptance of appointment by the successor
trustee as provided in Section 6.8.
SECTION 6.8 Successor Trustee.
Any successor trustee appointed as provided in Section 6.7
shall execute, acknowledge and deliver to the Issuer 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 the like effect as if originally named as trustee
herein. The predecessor trustee shall deliver to the successor trustee all
Trustee's Mortgage Files and related documents and statements held by it
hereunder, and the Issuer and the predecessor trustee shall execute and deliver
such instruments and do such other things as may reasonably be required for more
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 unless at the time of such acceptance such successor trustee shall
be eligible under the provisions of Section 6.6.
Upon acceptance of appointment by a successor trustee as
provided in this Section, the Issuer shall mail notice of the succession of such
trustee hereunder to all Noteholders, to the Credit Enhancer and to the Rating
Agencies. If the Issuer fails to mail such notices within ten days after
acceptance of appointment by the successor trustee, the successor trustee shall
cause such notice to be mailed at the expense of the Issuer.
SECTION 6.9 Merger or Consolidation of Indenture Trustee.
Any Person into which the Indenture Trustee may be merged or
converted or with which it may be consolidated or any corporation or national
banking association resulting from any merger, conversion or consolidation to
which the Indenture Trustee shall be a party, or any corporation or national
banking association succeeding to the business of the Indenture Trustee,
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shall be the successor of the Indenture Trustee hereunder, provided such
corporation or national banking association shall be eligible under the
provisions of Section 6.6, 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.
SECTION 6.10 Appointment of Co-Indenture Trustee or Separate
Indenture Trustee.
Notwithstanding any other provisions hereof, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which any
part of the assets of the Trust or property securing the same may at the time be
located, the Issuer and the Indenture Trustee acting jointly shall have the
power and shall execute and deliver all instruments to appoint one or more
Persons approved by the Indenture Trustee and the Credit Enhancer to act as
co-trustee or co-trustees, jointly with the Indenture Trustee, or separate
trustee or separate trustees, of all or any part of the assets of the Trust, and
to vest in such Person or Persons, in such capacity, such title to the assets of
the Trust, or any part thereof, and, subject to the other provisions of this
Section 6.10, such powers, duties, obligations, rights and trusts as the Issuer
and the Indenture Trustee may consider necessary or desirable. If the Issuer
shall not have joined in such appointment within 15 days after the receipt by it
of a request so to do, or in case an Event of Default shall have occurred and be
continuing, the Indenture Trustee alone (with the consent of the Credit
Enhancer) 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 6.6 hereunder and no notice to Holders of
Notes of the appointment of co-trustee(s) or separate trustee(s) shall be
required under Section 6.8 hereof.
In the case of any appointment of a co-trustee or separate
trustee pursuant to this Section 6.10, all rights, powers, duties and
obligations conferred or imposed upon the Indenture Trustee shall be conferred
or imposed upon and exercised or performed by the Indenture Trustee and such
separate trustee or co-trustee jointly, except to the extent that under any law
of any jurisdiction in which any particular act or acts are to be performed
(whether as Indenture Trustee hereunder or as successor to the Issuer
hereunder), the Indenture Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such rights, powers, duties and obligations
(including the holding of title to the assets of the Trust or any portion
thereof in any such jurisdiction) shall be exercised and performed by such
separate trustee or co-trustee at the direction of the Indenture Trustee.
Any notice, request or other writing given to the Indenture
Trustee shall be deemed to have been given to each of the then separate trustees
and co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Indenture and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Indenture Trustee. Every such instrument shall be filed with
the Indenture Trustee.
Any separate trustee or co-trustee may, at any time,
constitute the Indenture Trustee, its agent or attorney-in-fact, with full power
and authority, to the extent not prohibited by law, to do any lawful act under
or in respect of this Indenture on its behalf and in its name. The Indenture
Trustee shall not be responsible for any action or inaction of any such separate
trustee or co-trustee. If any separate trustee or co-trustee shall die, become
incapable of acting, resign or be removed, all of its estates, properties,
rights, remedies and trusts shall vest in and be exercised by the Indenture
Trustee, to the extent permitted by law, without the appointment of a
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new or successor trustee.
SECTION 6.11 Protection of Trust Assets.
(a) The Indenture Trustee will hold the assets of the Trust
and the Spread Account in trust for the benefit of the Noteholders, the
Certificateholders (to the extent set forth in the Pooling and Servicing
Agreement) and the Credit Enhancer and, upon request of the Credit Enhancer, or,
with the consent of the Credit Enhancer, at the request of the Issuer or any
Account Party, will from time to time execute and deliver all such supplements
and amendments hereto pursuant to Section 9.1 and all instruments of further
assurance and other instruments, and will take such other action upon such
request to:
(i) more effectively hold in trust all or any portion of the
assets of the Trust and the Spread Account;
(ii) perfect, publish notice of, or protect the validity of
any grant made or to be made by this Indenture;
(iii) enforce any of the Mortgage Loans; or
(iv) preserve and defend title to the assets of the Trust, the
lien on the Spread Account and the rights of the Indenture Trustee, and
the interests of the Noteholders represented thereby, in such Trust and
the Spread Account against the claims of all Persons and parties.
The Indenture Trustee shall send copies of any request
received from any Account Party, the Credit Enhancer, the Owner Trustee or the
Issuer to take any action pursuant to this Section 6.11 to the others.
(b) Subject to Article V hereof, the Indenture Trustee shall
have the power to enforce, and shall enforce, the obligations of the other
parties to this Indenture, of any Letter of Credit Bank and of the Credit
Enhancer, by action, suit or proceeding at law or equity, and shall also have
the power to enjoin, by action or suit in equity, any acts or occurrences which
may be unlawful or in violation of the rights of the Noteholders; provided,
however, that nothing in this Section 6.11 shall require any action by the
Indenture Trustee unless the Indenture Trustee shall first (i) have been
furnished indemnity satisfactory to it and second (ii) when required by this
Indenture, have been requested to take such action by the Majority in Voting
Interest of the Notes, the Credit Enhancer, the Issuer or any Account Party in
accordance with the terms of this Indenture.
(c) The Indenture Trustee shall execute any instrument
required pursuant to this Section 6.11 so long as such instrument does not
conflict with this Indenture or with the Indenture Trustee's fiduciary duties.
SECTION 6.12 Notice of Defaults. If an Default occurs and is
continuing and if it is known to a Responsible Officer of the Indenture Trustee,
the Indenture Trustee shall mail to each Noteholder notice of the Default within
90 days after it occurs. Except in the case of an Default in payment of
principal of or interest on any Note (including payments pursuant to the
mandatory redemption provisions of such Note), the Indenture Trustee may
withhold the notice if and so long as a committee of its Responsible Officers in
good faith determines that withholding the notice is in the interests of
Noteholders.
SECTION 6.13 Reports to Holders. The Indenture Trustee shall
deliver to each
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Noteholder the information and documents set forth in Article VII, and, in
addition, the Indenture Trustee shall deliver to each Noteholder all such
information with respect to the Notes supplied to it by the Servicer pursuant to
Section 5.03 of the Pooling and Servicing Agreement as may be required to enable
such holder to prepare its federal and state income tax returns.
SECTION 6.14 Preferential Collection of Claims Against Issuer.
The Indenture Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A trustee who has resigned
or been removed shall be subject to TIA 311(a) to the extent indicated.
SECTION 6.15 Representations and Warranties of Indenture
Trustee. The Indenture Trustee represents and warrants as of the Closing Date
that:
(a) the Indenture Trustee is a national association duly
organized, validly existing and in good standing under the laws of the United
States of America;
(b) the Indenture Trustee has full power, authority and legal
right to execute, deliver and perform this Indenture, and has taken all
necessary action to authorize the execution, delivery and performance by it of
this Indenture;
(c) the execution, delivery and performance by the Indenture
Trustee of this Indenture (i) shall not violate any provision of any law or
regulation governing the banking and trust powers of the Indenture Trustee or
any order, writ, judgment or decree of any court, arbitrator, or governmental
authority applicable to the Indenture Trustee or any of its assets, (ii) shall
not violate any provision of the corporate charter or by-laws of the Indenture
Trustee, or (iii) shall not violate any provision of, or constitute, with or
without notice or lapse of time, a default under, or result in the creation or
imposition of any lien on any properties included in the Trust pursuant to the
provisions of any mortgage, indenture, contract, agreement or other undertaking
to which it is a party, which violation, default or lien could reasonably be
expected to have a materially adverse effect on the Indenture Trustee's
performance or ability to perform its duties under this Indenture or on the
transactions contemplated in this Indenture;
(d) the execution, delivery and performance by the Indenture
Trustee of this Indenture shall not require the authorization, consent or
approval of, the giving of notice to, the filing or registration with, or the
taking of any other action in respect of, any governmental authority or agency
regulating the banking and corporate trust activities of the Indenture Trustee;
and
(e) this Indenture has been duly executed and delivered by the
Indenture Trustee and constitutes the legal, valid and binding agreement of the
Indenture Trustee, enforceable in accordance with its terms.
SECTION 6.16 Indenture Trustee May Enforce Claims Without
Possession of Notes. All rights of action and claims under this Indenture or the
Notes may be prosecuted and enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any proceeding
relating thereto, and any such proceeding instituted by the Indenture Trustee
shall be brought in its own name as Indenture Trustee. Any recovery of judgment
shall, after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Indenture Trustee, its agents and counsel, be
for the ratable benefit of the Noteholders in respect of which such judgment has
been obtained.
SECTION 6.17 Suit for Enforcement. If an Event of Default
shall occur and be continuing, the Indenture Trustee, in its discretion may,
subject to the provisions of Section 6.1, proceed to protect and enforce its
rights and the rights of the Noteholders under this Indenture by proceeding
whether for the specific performance of any covenant or agreement contained in
this
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Indenture or in aid of the execution of any power granted in this Indenture or
for the enforcement of any other legal, equitable or other remedy as the
Indenture Trustee, being advised by counsel, shall deem most effectual to
protect and enforce any of the rights of the Indenture Trustee or the
Noteholders.
SECTION 6.18. Appointment of Custodians. The Indenture Trustee
may, with the consent of the Servicer and notice to the Credit Enhancer and the
Rating Agencies, appoint one or more Custodians acceptable to the Credit
Enhancer to hold all or a portion of the Mortgage Files as agent for the
Indenture Trustee, by entering into a Custodial Agreement. [__________________]
is initially appointed as Custodian. Subject to this Article VI, the Indenture
Trustee agrees to comply with the terms of each Custodial Agreement and to
enforce the terms and provisions thereof against the Custodian for the benefit
of the Noteholders and the Credit Enhancer. The Servicer shall be liable for the
fees of any Custodian appointed hereunder. Each Custodian shall be a deposit
institution subject to supervision by federal or state authorities and shall be
qualified to do business in the jurisdiction in which it holds any Mortgage
File.
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
SECTION 7.1 Issuer To Furnish Indenture Trustee Names and
Addresses of Noteholders. The Issuer shall furnish or cause to be furnished by
the Servicer to the Indenture Trustee (a) not more than five days before each
Payment Date or Special Payment Date, a list, in such form as the Indenture
Trustee may reasonably require, of the names and addresses of the Holders of
Notes as of the close of business on the immediately preceding Record Date or
Special Record Date, as the case may be, and (b) at such other times as the
Indenture Trustee may request in writing, within 14 days after receipt by the
Issuer of any such request, a list of similar form and content as of a date not
more than 10 days prior to the time such list is furnished; provided, however,
that so long as the Indenture Trustee is the Note Registrar, no such list shall
be required to be furnished.
SECTION 7.2 Preservation of Information, Communications to
Noteholders.
(a) The Indenture Trustee shall preserve, in as current a form
as is reasonably practicable, the names and addresses of the Holders of Notes
contained in the most recent list furnished to the Indenture Trustee as provided
in Section 7.1 and the names and addresses of Holders of Notes received by the
Indenture Trustee in its capacity as Note Registrar. The Indenture Trustee may
destroy any list furnished to it as provided in such Section 7.1 upon receipt of
a new list so furnished.
(b) Noteholders may communicate pursuant to TIA Section 312(b)
with other Noteholders with respect to their rights under this Indenture or
under the Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar
shall have the protection of TIA Section 312(c).
SECTION 7.3 Reports by Issuer.
(a) The Issuer shall:
(i) file with the Indenture Trustee, within 15 days after the
Issuer is required to file the same with the Commission, copies of the
annual reports and of the information, documents and other reports (or
copies of such portions of any of the foregoing as the
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Commission may from time to time by rules and regulations prescribe)
which the Issuer may be required to file with the Commission pursuant
to Section 13 or 15(d) of the Exchange Act;
(ii) file with the Indenture Trustee and the Commission in
accordance with rules and regulations prescribed from time to time by
the Commission such additional information, documents and reports with
respect to compliance by the Issuer with the conditions and covenants
of this Indenture as may be required from time to time by such rules
and regulations; and
(iii) supply to the Indenture Trustee (and the Indenture
Trustee shall transmit by mail to all Noteholders described in TIA
Section 313(c)) such summaries of any information, documents and
reports required to be filed by the Issuer pursuant to clauses (i) and
(ii) of this Section 7.3(a) as may be required by rules and regulations
prescribed from time to time by the Commission.
(iv) supply copies of each of the foregoing to the Indenture
Trustee and the Credit Enhancer.
(b) Unless the Issuer otherwise determines, the fiscal year of
the Issuer shall end on [December 31] of each year.
SECTION 7.4 Reports by Trustee.
(a) If required by TIA Section 313(a), within 60 days after
each [March 1], beginning with [March 1], 199_, the Indenture Trustee shall mail
to each Noteholder, in the manner required by TIA Section 313(c), a brief report
dated as of such date that complies with TIA Section 313(a). The Indenture
Trustee also shall comply with TIA Section 313(b). A copy of any report
delivered pursuant to this Section 7.4(a) shall, at the time of its mailing to
Noteholders, be filed by the Indenture Trustee with the Commission and each
stock exchange, if any, on which the Notes are listed. The Issuer shall notify
the Indenture Trustee if and when the Notes are listed on any stock exchange and
provided to the Credit Enhancer.
(b) On each Payment Date, the Indenture Trustee shall include
with each payment to each Noteholder a copy of the statement for the Due Period
applicable to such Payment Date as required pursuant to Section 5.03 of the
Pooling and Servicing Agreement.
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 8.1 Collection of Money. Except as otherwise expressly
provided herein, the Indenture Trustee may demand payment or delivery of, and
shall receive and collect, directly and without intervention or assistance of
any fiscal agent or other intermediary, all money and other property payable to
or receivable by the Indenture Trustee pursuant to this Indenture. The Indenture
Trustee shall apply all such money received by it as provided in this Indenture
and in the Pooling and Servicing Agreement. Except as otherwise expressly
provided in this Indenture, if any default occurs in the making of any payment
or performance under any agreement or instrument that is part of the assets of
the Trust, the Indenture Trustee may take such action as may be appropriate to
enforce such payment or performance, including the institution and prosecution
of appropriate Proceedings. Any such action shall be without prejudice to any
right to claim a Default or an Event of Default under this Indenture and any
right to proceed thereafter as provided in Article V.
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SECTION 8.2 Accounts.
(a) On or prior to the Closing Date, the Indenture Trustee
shall establish and maintain, in the name of the Indenture Trustee, for the
benefit of the Noteholders and the Certificateholders, the Accounts as provided
in Article V of the Pooling and Servicing Agreement.
(b) (i) On or before each Monthly Deposit Date, the applicable
amounts set forth in Section 3.02(b) of the Pooling and Servicing Agreement
shall be deposited into the Collection Account. On or before each Monthly
Deposit Date that is a Special Redemption Date, the Special Redemption Price
with respect to such Special Redemption Date shall be transferred from the
Collection Account to the Note Payment Account as provided in Section
5.02(a)(iv) of the Pooling and Servicing Agreement.
(ii) On each Monthly Deposit Date that is a Special
Redemption Date, the Indenture Trustee shall call for the redemption of Notes in
an amount equal to the Special Redemption Price and shall pay to Noteholders
such Special Redemption Price, until the Note Principal Balance is paid in full.
(c) (i) On or before each Payment Date, (i) the applicable
amounts set forth in Section 5.01 of the Pooling and Servicing Agreement shall
be deposited into the Collection Account. On or before each Payment Date, the
Note Payment Amount shall be transferred from the Collection Account to the Note
Payment Account as provided in Section 3.03 of the Pooling and Servicing
Agreement.
(ii) On each Payment Date, the Indenture Trustee shall pay to
Noteholders all amounts on deposit in the Note Payment Account in respect of the
Notes to the extent of amounts due and unpaid on the Notes for principal and
interest in the following order of priority:
(i) to accrued and unpaid interest on the Notes; provided,
however, that if there are not sufficient funds in the Note Payment
Account to pay the entire amount of accrued and unpaid interest then
due on the Notes, the amount in the Note Payment Account shall be
applied to the payment of such interest on the Notes pro rata on the
basis of the total such interest due on the Notes;
(ii) to principal of the Notes until the Note Principal
Balance is paid in full.
SECTION 8.3 General Provisions Regarding Accounts.
(a) Pursuant and subject to the provisions of Section [____]
of the Pooling and Servicing Agreement, all or a portion of the funds in the
Accounts shall be invested in Equitable Investments and reinvested by the
Indenture Trustee as directed in writing by the Servicer. The Servicer shall not
direct the Indenture Trustee to make any investment of any funds or to sell any
investment held in any of the Accounts unless the security interest granted and
perfected in such account shall continue to be perfected in such investment or
the proceeds of such sale, in either case without any further action by any
Person and, in connection with any direction to the Indenture Trustee to make
any such investment or sale, if requested by the Indenture Trustee, the Issuer
shall deliver to the Indenture Trustee an Opinion of Counsel, acceptable to the
Indenture Trustee, to such effect.
(b) Subject to Section 6.1, the Indenture Trustee shall not in
any way be held liable by reason of any insufficiency in any of the Accounts
resulting from any loss on any Permitted Instrument included therein except for
losses attributable to the Indenture Trustee's
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failure to make payments on such Equitable Investments issued by the Indenture
Trustee, in its commercial capacity as principal obligor and not as trustee, in
accordance with their terms.
(c) If (i) the Servicer, on behalf of the Issuer, shall have
failed to give investment directions for any funds on deposit in the Accounts to
the Indenture Trustee by 11:00 a.m., New York City Time (or such other time as
may be agreed by the Issuer and the Indenture Trustee) on any Business Day; or
(ii) an Default or Event of Default shall have occurred and be continuing with
respect to the Notes but the Notes shall not have been declared due and payable
pursuant to Section 5.2, or, if such Notes shall have been declared due and
payable following an Event of Default, amounts collected or receivable from the
assets of the Trust are being applied in accordance with Section 5.5 as if there
had not been such a declaration; then the Indenture Trustee shall, to the
fullest extent practicable, invest and reinvest funds in the Accounts in one or
more Equitable Investments selected by the Indenture Trustee.
SECTION 8.4 Release of Trust Assets.
(a) Subject to the payment of its fees and expenses pursuant
to Section 6.5 and the provisions of Section 8.5, the Indenture Trustee may, and
when required by the provisions of this Indenture shall, execute instruments to
release property from the lien of this Indenture, or convey the Indenture
Trustee's interest in the same, in a manner and under circumstances that are
consistent with the provisions of this Indenture. No party relying upon an
instrument executed by the Indenture Trustee as provided in this Article VIII
shall be bound to ascertain the Indenture Trustee's authority, inquire into the
satisfaction of any conditions precedent or see to the application of any
moneys.
(b) The Indenture Trustee shall, at such time as there are no
Notes Outstanding and all sums due to the Indenture Trustee pursuant to Section
6.5 have been paid, release any remaining portion of the assets of the Trust
that secured the Notes from the lien of this Indenture and release to the Issuer
or any other Person entitled thereto any funds then on deposit in the Accounts.
The Indenture Trustee shall release property from the lien of this Indenture
pursuant to this Section 8.4(b) only upon receipt of an Issuer Request
accompanied by an Officer's Certificate, an Opinion of Counsel and (if required
by the TIA) Independent Certificates in accordance with TIA Sections 314(c)
and 314(d)(1) meeting the applicable requirements of Section 11.1.
SECTION 8.5 Opinion of Counsel. The Indenture Trustee shall
receive at least seven days' notice when requested by the Issuer to take any
action pursuant to Section 8.4(a), accompanied by copies of any instruments
involved, and the Indenture Trustee shall also require as a condition to such
action, an Opinion of Counsel, in form and substance satisfactory to the
Indenture Trustee, stating the legal effect of any such action, outlining the
steps required to complete the same, and concluding that all conditions
precedent to the taking of such action have been complied with and such action
shall not materially and adversely impair the security for the Notes or the
rights of the Noteholders in contravention of the provisions of this Indenture;
provided, however, that such Opinion of Counsel shall not be required to express
an opinion as to the fair value of the assets of the Trust. Counsel rendering
any such opinion may rely, without independent investigation, on the accuracy
and validity of any certificate or other instrument delivered to the Indenture
Trustee in connection with any such action.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1 Supplemental Indentures Without Consent of
Noteholders.
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(a) Without the consent of the Holders of any Notes but with
the prior written consent of the Credit Enhancer and upon prior notice to the
Rating Agencies, the Issuer and the Indenture Trustee, when authorized by an
Issuer Order, at any time and from time to time, may enter into one or more
indentures supplemental hereto (which shall conform to the provisions of the
Trust Indenture Act as in force at the date of the execution thereof) in form
satisfactory to the Indenture Trustee, for any of the following purposes:
(i) to correct or amplify the description of any property at
any time subject to the lien of this Indenture, or better to assure,
convey and confirm unto the Indenture Trustee any property subject or
required to be subjected to the lien of this Indenture, or to subject
to additional property to the lien of this Indenture;
(ii) to evidence the succession, in compliance with Section
3.10 and the applicable provisions hereof, of another person to the
Issuer, and the assumption by any such successor of the covenants of
the Issuer contained herein and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the benefit
of the Noteholders, or to surrender any right or power herein conferred
upon the Issuer;
(iv) other than in connection with the substitution of
Mortgage Loans pursuant to Section 2.04 of the Pooling and Servicing
Agreement, to convey, transfer, assign, mortgage or pledge any property
to or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any
provision herein or in any supplemental indenture which may be
inconsistent with any other provision herein or in any supplemental
indenture;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes
and to add to or change any of the provisions of this Indenture as
shall be necessary to facilitate the administration of the trusts
hereunder by more than one trustee, pursuant to the requirements of
Article VI; or
(vii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA or under any similar
federal statute hereafter enacted and to add to this Indenture such
other provisions as may be expressly required by the TIA, and the
Indenture Trustee is hereby authorized to join in the execution of any
such supplemental indenture and to make any further appropriate
agreements and stipulations that may be therein contained.
(b) When authorized by an Issuer Order, the Issuer and the
Indenture Trustee may also, without the consent of any of the Noteholders but
with the prior written consent of the Credit Enhancer and upon prior notice to
the Rating Agencies, at any time and from time to time enter into one or more
indentures supplemental hereto for the purpose of adding any provisions to,
changing in any manner, or eliminating any of the provisions of, this Indenture
or modifying in any manner the rights of the Noteholders under this Indenture;
provided, however, that such action shall not, as evidenced by an Opinion of
Counsel, adversely affect in any material respect the interests of any
Noteholder.
SECTION 9.2 Supplemental Indentures With Consent of the
Noteholders.
(a) When authorized by an Issuer Order, the Issuer and the
Indenture Trustee also may, with the prior written consent of the Credit
Enhancer and upon prior notice to the Rating Agencies and with the consent of
the Holders of not less than a Majority in Voting Interest of the
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Notes, enter into an indenture or indentures supplemental hereto for the purpose
of adding any provisions to, changing in any manner, or eliminating any of the
provisions of, this Indenture or of modifying in any manner the rights of the
Noteholders under this Indenture; provided, however, that no such supplemental
indenture shall, without the consent of the Holder of each Outstanding Note
affected thereby:
(i) change the date of payment of any installment of principal
of or interest on any Note, or reduce the principal amount thereof, the
interest rate applicable thereto, the Special Redemption Price, or the
Termination Price, the provision of this Indenture relating to the
application of collections on, or the proceeds of the sale of, the
assets of the Trust to payment of principal of or interest on the
Notes, or change any place of payment where, or the coin or currency in
which, any Note or the interest thereon is payable, or impair the right
to institute suit for the enforcement of the provisions of this
Indenture requiring the application of funds available therefor, as
provided in Article V, to the payment of any such amount due on the
Notes on or after the respective due dates thereof (or, in the case of
a redemption, on or after the Special Redemption Date or Termination
Date, as applicable);
(ii) reduce the percentage of the Outstanding Notes, the
consent of the Holders of which is required for any such supplemental
indenture, or the consent of the Holders of which is required for any
waiver of compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences provided for in this
Indenture;
(iii) modify or alter the provisions of the proviso to the
definition of the term "Outstanding";
(iv) reduce the percentage of the Outstanding Notes required
to direct the Indenture Trustee to direct the Issuer to sell or
liquidate the assets of the Trust pursuant to Section 5.4 if the
proceeds of such sale would be insufficient to pay the principal amount
of and accrued but unpaid interest on the Outstanding Notes;
(v) modify any provision of this Section 9.2 except to
increase any percentage specified herein in favor of the Noteholders,
or to provide that certain additional provisions of this Indenture or
the Basic Documents cannot be modified or waived without the consent of
the Holder of each outstanding Note affected thereby;
(vi) modify any of the provisions of this Indenture in such
manner as to affect the calculation of the amount of any payment of
interest or principal due on any Note on any Payment Date (including
the calculation of any of the individual components of such
calculation) or to affect the rights of the Holders of Notes to the
benefit of any provisions for the mandatory redemption of the Notes
contained herein or in Article X of the Pooling and Servicing
Agreement; or
(vii) permit the creation of any Lien ranking prior to or on a
parity with the lien of this Indenture with respect to any part of the
assets of the Trust or, except as otherwise permitted or contemplated
herein, terminate the lien of this Indenture on any property at any
time subject hereto or deprive the Holder of any Note of the security
provided by the lien of this Indenture or by the Policy.
(b) The Indenture Trustee may in its discretion determine
whether or not any Notes would be affected (such that the consent of each would
be required) by any supplemental indenture proposed pursuant to this Section 9.2
and any such determination shall be conclusive
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upon the Holders of all Notes, whether authenticated and delivered thereunder
before or after the date upon which such supplemental indenture become
effective. The Indenture Trustee shall not be liable for any such determination
made in good faith.
(c) It shall be sufficient if a Majority in Voting Interest of the
Notes approves the substance, but not the form, of any proposed supplemental
indenture.
(d) Promptly after the execution by the Issuer and the Indenture
Trustee of any supplemental indenture pursuant to this Section 9.2, the
Indenture Trustee shall mail to the Noteholders to which such amendment or
supplemental indenture relates a notice setting forth in general terms the
substance of such supplemental indenture. Any failure of the Indenture Trustee
to mail such notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such supplemental indenture.
SECTION 9.3 Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modifications thereby of the trusts created
by this Indenture, the Indenture Trustee shall be entitled to receive, and
subject to Sections 6.1 and 6.2, shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Indenture Trustee may, but shall
not be obligated to, enter into any such supplemental indenture that affects the
Indenture Trustee's own rights, duties, liabilities or immunities under this
Indenture or otherwise.
SECTION 9.4 Effect of Supplemental Indenture. Upon the execution of any
supplemental indenture pursuant to the provisions hereof, this Indenture shall
be, and be deemed to be, modified and amended in accordance therewith with
respect to the Notes affected thereby, and the respective rights, limitations of
rights, obligations, duties, liabilities and immunities under this Indenture of
the Indenture Trustee, the Issuer and the Noteholders shall thereafter be
determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
SECTION 9.5 Conformity with Trust Indenture Act. Every amendment of
this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the TIA as then in effect so
long as this Indenture shall then be qualified under the TIA.
SECTION 9.6 Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Issuer or the Indenture
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Indenture Trustee and the Issuer, to any such supplemental indenture may
be prepared and executed by the Issuer and authenticated and delivered by the
Indenture Trustee in exchange for Outstanding Notes.
ARTICLE X
REDEMPTION OF NOTES
SECTION 10.1 Redemption.
(a) The Notes are subject to redemption in whole, but not in part, upon
the
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exercise by the Holders of the Class __ Certificates of their option to cause
the Issuer to sell the Mortgage Loans pursuant to Section 10.1 of the Pooling
and Servicing Agreement. Such redemption shall occur on the applicable Payment
Date as specified in Section 10.01 of the Pooling and Servicing Agreement. Upon
such redemption, the Noteholders shall receive an amount equal to 100% of the
Note Principal Balance plus accrued interest thereon to the date of redemption.
The Issuer shall furnish the Credit Enhancer and the Rating Agencies notice of
such redemption on the date the Mortgage Loans are sold. If the Notes are to be
redeemed pursuant to this Section 10.1(a), the Issuer shall furnish notice
thereof to the Indenture Trustee not later than the Determination Date with
respect to the Payment Date on which the Notes are to be redeemed and the Issuer
shall deposit into the Collection Account, on or before three Business Days
prior to the applicable Payment Date, the Termination Price, whereupon all Notes
shall be due and payable on such Payment Date.
(b) If, in accordance with the provisions of Section [____] of the
Pooling and Servicing Agreement, the Indenture Trustee determines that a Special
Redemption shall be made on a Monthly Deposit Date (which shall be a "Special
Redemption Date"), the Indenture Trustee shall notify the Noteholders thereof no
later than the Business Day following the Determination Date prior to such
Special Redemption Date pursuant to Section 10.2. The Indenture Trustee shall
withdraw the Special Redemption Price from the Collection Account on or before
the applicable Special Redemption Date pursuant to Section [____] of the Pooling
and Servicing Agreement and, on such Special Redemption Date, the Notes shall be
redeemed, pro rata in accordance with their respective Percentage Interests,
pursuant to Section 8.2(c) hereof and Section [____] of the Pooling and
Servicing Agreement. Payment of the Special Redemption Price shall be made to
Noteholders of record as of the related Special Record Date.
(c) If the assets of the Trust are sold pursuant to Section 7.2 of the
Trust Agreement, all amounts on deposit in the Note Payment Account shall be
paid to the Noteholders. If amounts are to be paid to Noteholders pursuant to
this Section 10.1(c), the Servicer or the Issuer shall, to the extent
practicable, furnish notice of such event to the Indenture Trustee and the
Credit Enhancer pursuant to Section 10.2.
SECTION 10.2 Form of Redemption Notice.
(a) Notice of redemption under Sections 10.1(a), (b) and (c) shall be
given by the Indenture Trustee by first-class mail, postage prepaid, mailed not
less than five days prior to the applicable Payment Date or Special Redemption
Date to each Noteholder of record on the related Record Date or Special Record
Date, as applicable, at such Noteholder's address appearing in the Note
Register.
(b) All notices of redemption shall state:
(i) the applicable Payment Date or Special Redemption Date;
(ii) the principal amount of Notes to be redeemed and the
principal amount of Notes per $1,000 original denomination to be
redeemed; and
(iii) in the case of a redemption pursuant to Section 10.1(a)
hereof, the place where such Notes are to be surrendered for final
payment (which shall be the Agency Office of the Indenture Trustee to
be maintained as provided in Section 3.2).
(c) Notice of redemption of the Notes shall be given by the Indenture
Trustee in the name and at the expense of the Administrator. Failure to give
notice of redemption, or any defect therein, to any Holder of any Note shall not
impair or affect the validity of the redemption of
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any other Note.
SECTION 10.3 Notes Payable on Payment Date and Special Redemption Date.
The Notes or portions thereof to be redeemed shall, following notice of
redemption as required by Section 10.2 (in the case of redemption pursuant to
Sections 10.1(a) or 10.1(b)) on the applicable Payment Date or Special
Redemption Date, as the case may be, cease to be Outstanding for purposes of
this Indenture and shall thereafter represent only the right to receive the
redemption price, and (unless the Issuer shall default in the payment of the
principal amount of Notes to be redeemed) no interest shall accrue on the
redemption price, for any period after the date to which accrued interest is
calculated for purposes of calculating the redemption price, as the case may be.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Compliance Certificates and Opinions, etc.
(a) Upon any application or request by the Issuer to the Indenture
Trustee to take any action under any provision of this Indenture, the Issuer
shall furnish to the Indenture Trustee: (i) an Officer's Certificate stating
that all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with, (ii) an Opinion of Counsel
stating that in the opinion of such counsel all such conditions precedent, if
any, have been complied with and (iii) (if required by the TIA) an Independent
Certificate from a firm of certified public accountants meeting the applicable
requirements of this Section 11.1; provided, however, that, in the case of any
such application or request as to which the furnishing of such documents is
specifically required by any provision of this Indenture, no additional
certificate or opinion need be furnished. Every certificate or opinion with
respect to compliance with a condition or covenant provided for in this
Indenture shall include:
(i) a statement that each signatory of such certificate or
opinion has read or has caused to be read such covenant or condition
and the definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(iii) a statement that, in the judgment of each such
signatory, such signatory has made such examination or investigation as
is necessary to enable such signatory to express an informed opinion as
to whether or not such covenant or condition has been complied with;
and
(iv) a statement as to whether, in the opinion of each such
signatory, such condition or covenant has been complied with.
(b) (i) Prior to the deposit with the Indenture Trustee of any
Collateral or other property or securities that is to be made the basis
for the release of any property or securities subject to the lien of
this Indenture, the Issuer shall, in addition to any obligation imposed
in Section 11.1(a) or elsewhere in this Indenture, furnish to the
Indenture Trustee an Officers' Certificate certifying or stating the
opinion of each person signing such certificate as to the fair value
(within 90 days of such deposit) to the Issuer of the Collateral or
other property or securities to be so deposited.
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(ii) Whenever the Issuer is required to furnish to the
Indenture Trustee an Officers' Certificate certifying or stating the
opinion of any signer thereof as to the matters described in clause
(b)(i) above, the Issuer shall also deliver to the Indenture Trustee an
Independent Certificate as to the same matters, if the fair value to
the Issuer of the securities to be so deposited and of all other such
securities made the basis of any such withdrawal or release since the
commencement of the then current fiscal year of the Issuer, as set
forth in the certificates delivered pursuant to clause (i) above and
this clause (b)(ii) is 10% or more of the Note Principal Balance then
outstanding, but such a certificate need not be furnished with respect
to any securities so deposited, if the fair value thereof to the Issuer
as set forth in the related Officers' Certificate is less than $25,000
or less than one percent of the Note Principal Balance then
outstanding.
(iii) Other than with respect to the release of any Mortgage
Loans to be purchased pursuant to Sections 2.05 and 3.03 of the Pooling
and Servicing Agreement, whenever any property or securities are to be
released from the lien of this Indenture, the Issuer shall also furnish
to the Indenture Trustee an Officer's Certificate certifying or stating
the opinion of each Person signing such certificate as to the fair
value (within 90 days of such release) of the property or securities
proposed to be released and stating that in the opinion of such person
the proposed release will not impair the security under this Indenture
in contravention of the provisions hereof.
(iv) Whenever the Issuer is required to furnish to the
Indenture Trustee an Officer's Certificate certifying or stating the
opinion of any signatory thereof as to the matters described in clause
(b)(iii) above, the Issuer shall also furnish to the Indenture Trustee
an Independent Certificate as to the same matters if the fair value of
the property or securities and of all other property, other than
Mortgage Loans to be purchased pursuant to Sections 2.05 and 3.03 of
the Pooling and Servicing Agreement, or securities released from the
lien of this Indenture since the commencement of the then current
calendar year, as set forth in the certificates required by clause
(b)(iii) above and this clause (b)(iv), equals 10% or more of the Note
Principal Balance then outstanding, but such certificate need not be
furnished in the case of any release of property or securities if the
fair value thereof as set forth in the related Officer's Certificate is
less than $25,000 or less than one percent of the Note Principal
Balance then outstanding.
(v) Notwithstanding Section 2.9 or any other provision of this
Section 11.1, the Issuer may (A) collect, liquidate, sell or otherwise
dispose of Mortgage Loans as and to the extent permitted or required by
the Basic Documents and (B) make cash payments out of the Accounts as
and to the extent permitted or required by the Basic Documents.
SECTION 11.2 Form of Documents Delivered to Indenture Trustee.
(a) In any case where several matters are required to be certified by,
or covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
(b) Any certificate or opinion of a Responsible Officer of the Issuer
may be based, insofar as it relates to legal matters, upon a certificate or
opinion of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
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opinion is based are erroneous. Any such certificate of an Responsible Officer
or Opinion of Counsel may be based, insofar as it relates to factual matters,
upon a certificate or opinion of, or representations by, an officer or officers
of the Servicer, the Depositor, the Issuer or the Administrator, stating that
the information with respect to such factual matters is in the possession of the
Servicer, the Depositor, the Issuer or the Administrator, unless such counsel
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to such matters are erroneous.
(c) Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
(d) Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article VI.
SECTION 11.3 Acts of Noteholders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture or the Pooling and Servicing
Agreement to be given or taken by Noteholders or a class of Noteholders may be
embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Noteholders in person or by agents duly appointed in
writing; and except as herein otherwise expressly provided such action shall
become effective when such instrument or instruments are delivered to the
Indenture Trustee, and, where it is hereby expressly required, to the Issuer.
Such instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Noteholders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and (subject to Section 6.1) conclusive in favor of
the Indenture Trustee and the Issuer, if made in the manner provided in this
Section 11.3.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Indenture Trustee
deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder of every
Note issued upon the registration thereof or in exchange therefor or in lieu
thereof, in respect of anything done, omitted or suffered to be done by the
Indenture Trustee or the Issuer in reliance thereon, whether or not notation of
such action is made upon such Note.
SECTION 11.4 Notices. Subject to Section 11.5, all demands, notices and
communications hereunder shall be in writing and shall be deemed to have been
duly given if personally delivered at or mailed by overnight mail, certified
mail or registered mail, postage prepaid, to (i) in the case of the Servicer and
the Administrator
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[______________________________] Attention: [_______________], or such other
addresses as may hereafter be furnished to the Certificateholders and the
Noteholders in writing by the Administrator or the Servicer, as the case may be,
(ii) in the case of the Depositor, [_____________________] Attention:
[_________________], or such other addresses as may hereafter be furnished to
the Certificateholders and the Noteholders in writing by the Depositor, (iii) in
the case of the Issuer, [_________________________], Attention:
[_________________], or such other addresses as may hereafter be furnished to
the Noteholders and the Certificateholders in writing by the Issuer, (iv) in the
case of the Owner Trustee, ______________________, ____________________,
_________, _________________________ Attention: Banc One HELOC Trust 199_-_,
(v) in the case of the Certificateholders, as set forth in the Certificate
Register, (vi) in the case of the Indenture Trustee, _________________________,
_________________ ______, _________, _______________________, Attention: Banc
One HELOC Trust 199_-_, (vii) in the case of the Noteholders, as set forth in
Section 11.5(a), (viii) in the case of [Moody's, 99 Church Street, New York, New
York 10007, Attention: Home Equity Monitoring Group], (ix) in the case of [S&P,
26 Broadway, New York, New York 10004, Attention: ______________], (x) in the
case of [Fitch, Fitch IBCA, One State Street Plaza, New York, New York 10004],
Attention: Banc One HELOC Trust 199_-_, (xi) in the case of the Credit Enhancer,
[__________________________________] Attention: Banc One HELOC Trust 199_-_ and
(xi) in the case of the Account Party, at the address specified by such Account
Party. Any such notices shall be deemed to be effective with respect to any
party hereto upon the receipt of such notice by such party, except that notices
to the Certificateholders or Noteholders shall be effective upon mailing or
personal delivery.
SECTION 11.5 Notices to Noteholders; Waiver.
(a) Where this Indenture provides for notice to Noteholders of any
event, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if it is in writing and mailed, first-class, postage prepaid
to each Noteholder affected by such event, at such Person's address as it
appears on the Note Register, not later than the latest date, and not earlier
than the earliest date, prescribed for the giving of such notice. If notice to
Noteholders is given by mail, neither the failure to mail such notice nor any
defect in any notice so mailed to any particular Noteholder shall affect the
sufficiency of such notice with respect to other Noteholders, and any notice
that is mailed in the manner herein provided shall conclusively be presumed to
have been duly given regardless of whether such notice is in fact actually
received.
(b) Where this Indenture provides for notice in any manner, such notice
may be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such a waiver.
(c) In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event of Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Indenture Trustee shall be deemed to
be a sufficient giving of such notice.
(d) Where this Indenture provides for notice to the Rating Agencies,
failure to give such notice shall not affect any other rights or obligations
created hereunder, and shall not under any circumstance constitute an Event of
Default.
SECTION 11.6 Alternate Payment and Notice Provisions.
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Notwithstanding any provision of this Indenture or any of the Notes to
the contrary, the Issuer may enter into any agreement with any Holder of a Note
providing for a method of payment, or notice by the Indenture Trustee or any
Paying Agent to such Holder, that is different from the methods provided for in
this Indenture for such payments or notices. The Issuer shall furnish to the
Indenture Trustee a copy of each such agreement and the Indenture Trustee shall
cause payments to be made and notices to be given in accordance with such
agreements.
SECTION 11.7 Conflict with Trust Indenture Act.
(a) If any provision hereof limits, qualifies or conflicts with another
provision hereof that is required to be included in this Indenture by any of the
provisions of the TIA, such required provision shall control.
(b) The provisions of TIA Sections 310 through 317 that impose
duties on any Person (including the provisions automatically deemed included
herein unless expressly excluded by this Indenture) are a part of and govern
this Indenture, whether or not physically contained herein.
SECTION 11.8 Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 11.9 Successors and Assigns.
(a) All covenants and agreements in this Indenture and the Notes by the
Issuer shall bind its successors and assigns, whether so expressed or not.
(b) All covenants and agreements of the Indenture Trustee in this
Indenture shall bind its successors and assigns, whether so expressed or not.
SECTION 11.10 Separability.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality, and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 11.11 Benefits of Indenture.
Nothing in this Indenture or in the Notes, express or implied, shall
give to any Person, other than the Credit Enhancer, the parties hereto and their
successors hereunder, and the Noteholders, and any other party secured
hereunder, and any other Person with an ownership interest in any part of the
assets of the Trust, any benefit or any legal or equitable right, remedy or
claim under this Indenture. The Credit Enhancer is an intended third-party
beneficiary under the Indenture.
SECTION 11.12 Legal Holidays.
If the date on which any payment is due shall not be a Business Day,
then (notwithstanding any other provision of the Notes or this Indenture)
payment need not be made on such date, but may be made on the next succeeding
Business Day with the same force and effect as if made on the date on which
nominally due, and no interest shall accrue for the period from and after any
such nominal date.
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SECTION 11.13 GOVERNING LAW.
THIS INDENTURE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
SECTION 11.14 Counterparts.
This Indenture may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
SECTION 11.15 Recording of Indenture.
If this Indenture is subject to recording in any appropriate public
recording offices, such recording is to be effected by the Issuer and at its
expense accompanied by an Opinion of Counsel (which may be counsel to the
Indenture Trustee or any other counsel reasonably acceptable to the Indenture
Trustee) to the effect that such recording is necessary either for the
protection of the Noteholders or any other Person secured hereunder or for the
enforcement of any right or remedy granted to the Indenture Trustee under this
Indenture.
SECTION 11.16 No Recourse.
No recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the
Notes or under this Indenture or any certificate or other writing delivered in
connection herewith or therewith, against:
(i) the Indenture Trustee or the Owner Trustee in its
individual capacity;
(ii) any Certificateholder or other owner of a beneficial
interest in the Issuer; or
(iii) any Certificateholder or other partner, owner,
beneficiary, agent, officer, director, employee or agent of the
Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture
Trustee or the Owner Trustee in its individual capacity, except as any
such Person may have expressly agreed (it being understood that the
Indenture Trustee and the Owner Trustee have no such obligations in
their individual capacity) and except that any such partner, owner or
beneficiary shall be fully liable, to the extent provided by applicable
law, for any unpaid consideration for stock, unpaid capital
contribution or failure to pay any installment or call owing to such
entity. For all purposes of this Indenture, in the performance of any
duties or obligations of the Issuer hereunder, the Owner Trustee shall
be subject to, and entitled to the benefits of, the terms and
provisions of Articles VI, VII and VIII of the Trust Agreement.
SECTION 11.17 No Petition.
The Indenture Trustee, by entering into this Indenture, and each
Noteholder, by accepting a Note issued hereunder, hereby covenant and agree that
they shall not, prior to the date which is one year and one day after the
termination of this Indenture with respect to the Trust pursuant to Section 4.1,
acquiesce, petition or otherwise invoke or cause the Depositor or the Trust to
invoke the process of any court or government authority for the purpose of
commencing
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or sustaining a case against the Depositor or the Trust under any federal or
state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Depositor or the Trust or any substantial part of its property, or
ordering the winding up or liquidation of the affairs of the Depositor or the
Trust.
SECTION 11.18 Inspection.
The Issuer agrees that, on reasonable prior notice, it shall permit any
representative of the Indenture Trustee or the Credit Enhancer, during the
Issuer's normal business hours, to examine all the books of account, records,
reports, and other papers of the Issuer, to make copies and extracts therefrom,
to cause such books to be audited by Independent certified public accountants,
and to discuss the Issuer's affairs, finances and accounts with the Issuer's
officers, employees and Independent certified public accountants, all at such
reasonable times and as often as may be reasonably requested. The Indenture
Trustee shall and shall cause its representatives to hold in confidence all such
information except to the extent disclosure may be required by law (and all
reasonable applications for confidential treatment are unavailing) and except to
the extent that the Indenture Trustee may reasonably determine that such
disclosure is consistent with its obligations hereunder.
SECTION 11.19 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, and its rights during such period shall vest in
the Majority in Voting Interest of the Notes. At such time as the Notes are no
longer outstanding under the Indenture and neither the Class ___ Certificates
nor the Class ___ Certificates are outstanding under the Trust Agreement, and no
amounts owed to the Credit Enhancer hereunder remain unpaid, the Credit
Enhancer's rights hereunder shall terminate.
The Indenture Trustee shall receive, as attorney-in-fact of each Holder
of a Note, any Insured Payment from the Credit Enhancer and disburse the same to
each Holder of a Note in accordance with the provisions of Article VIII. Insured
Payments disbursed by the Indenture Trustee from proceeds of the Policy shall
not be considered payment by the Trust nor shall such payments discharge the
obligation of the Trust with respect to such Notes, and the Credit Enhancer
shall become the owner of such unpaid amounts due from the Trust in respect of
Notes. The Indenture Trustee hereby agrees on behalf of each Holder of a Note
for the benefit of the Credit Enhancer that it recognizes that to the extent the
Credit Enhancer makes Insured Payments, either directly or indirectly (as by
paying through the Indenture Trustee), to the Noteholders, the Credit Enhancer
will be subrogated to the rights of the Noteholders with respect to such Insured
Payment, shall be deemed to the extent of payments so made to be a registered
Noteholder and shall receive all future distributions until all such Insured
Payments by the Credit Enhancer, together with interest thereon at the interest
rate borne by the Notes, have been duly reimbursed. To evidence such
subrogation, the Indenture Trustee shall, or shall cause the Note Registrar to,
note the Credit Enhancer's rights as subrogee on the registration books
maintained by the Indenture Trustee or the Note Registrar upon receipt from the
Credit Enhancer of proof of payment of any Insured Payment.
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IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused
this Indenture to be duly executed by their respective officers, thereunto duly
authorized and duly attested, all as of the day and year first above written.
BANC ONE HELOC TRUST 199_-_
_______________________________,
as Owner Trustee,
By:____________________________
Name:
Title:
_______________________________
___________, as Indenture
Trustee,
By:____________________________
Name:
Title:
ACKNOWLEDGED AND ACCEPTED:
[BANC ONE, N.A.]
as Servicer and Administrator
By: ______________________________
Name:
Title:
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STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared ______________, known to me to
be the person and officer whose name is subscribed to the foregoing instrument
and acknowledged to me that the same was the act of the said BANC ONE HELOC
TRUST 199_-_, a Delaware business trust, and that he executed the same as the
act of said business trust for the purpose and consideration therein expressed,
and in the capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ___th day of
__________ 199__.
________________________________
Notary Public in and for the
State of New York.
[Seal]
My commission expires:
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STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared ___________, known to me to be
the person and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said ______________________,
a national banking association, and that he executed the same as the act of said
corporation for the purpose and consideration therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ___th day of ___________,
199__.
________________________________
Notary Public in and for the
State of New York.
[Seal]
My commission expires:
<PAGE> 61
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EXHIBIT A
FORM OF NOTE DEPOSITORY AGREEMENT
See Attached
<PAGE> 62
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EXHIBIT B
[FORM OF NOTE]
REGISTERED$______________
No. R-___
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO. ___________
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC") TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
THIS NOTE WAS ISSUED ON ____ __, ____. IT IS POSSIBLE THAT APPLICABLE
LAW AND PROPOSED TREASURY REGULATIONS COULD BE INTERPRETED TO PROVIDE THAT ALL
INTEREST PAYMENTS ON THIS NOTE ARE TO BE TREATED AS PART OF THE STATED
REDEMPTION PRICE AT MATURITY OF THIS NOTE (I.E., PRINCIPAL) THEREBY CAUSING THIS
NOTE TO BE TREATED AS HAVING BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT ("OID")
FOR FEDERAL INCOME TAX PURPOSES. IN SUCH CASE, THE FOLLOWING INFORMATION WOULD
BE APPLICABLE, ASSUMING THAT THIS NOTE PAYS IN ACCORDANCE WITH PROJECTED CASH
FLOWS BASED ON CERTAIN ASSUMPTIONS USED IN PRICING THE NOTES: (I) THE AMOUNT OF
OID AS A PERCENTAGE OF THE ORIGINAL PRINCIPAL AMOUNT OF THIS NOTE WOULD BE
APPROXIMATELY ________%; AND (II) THE ANNUAL YIELD OF THIS NOTE FOR PURPOSES OF
COMPUTING OID WOULD BE APPROXIMATELY _______% PER ANNUM. THE ACTUAL YIELD TO
MATURITY AND OID ON THIS CERTIFICATE MAY DIFFER FROM THE PROJECTED AMOUNTS. THE
PREPAYMENT ASSUMPTION USED IN DETERMINING THE ANNUAL YIELD FOR FEDERAL INCOME
TAX PURPOSES IS 25% OF CPR.
THE PRINCIPAL OF THIS NOTE IS PAYABLE AS SET FORTH HEREIN. ACCORDINGLY,
THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE
AMOUNT SHOWN ON THE FACE HEREOF.
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BANC ONE HELOC TRUST 199_-_
______% HELOC ASSET BACKED NOTES DUE ____, __, ____
BANC ONE HELOC TRUST 199_-_, a business trust organized and existing
under the laws of the State of Delaware (herein referred to as the "Issuer") for
value received, hereby promises to pay to __________, or registered assigns, the
principal sum of ______________________________________________ ($___________)
payable in accordance with the Indenture, prior to the occurrence of an Event of
Default and a declaration that the Notes are due and payable, on each Payment
Date in an amount equal to the result obtained by multiplying (i) a fraction,
the numerator of which is $___________ and the denominator of which is
$___________ by (ii) the aggregate amount, if any, payable from the Note Payment
Account in respect of principal on the Notes pursuant to Section 3.1 of the
Indenture; provided, however, that the entire unpaid principal amount of this
Note shall be due and payable on _____ __, ____ (the "Maturity Date"). The
Issuer shall pay interest on this Note at the rate per annum shown above on each
Payment Date until the principal of this Note from time to time is paid or made
available for payment on the principal amount of this Note from time to time
outstanding as of the preceding Payment Date (after giving effect to all
payments of principal made on such preceding Payment Date and taking into
account all Special Redemptions of the Notes since the preceding Payment Date),
as more particularly set forth in the Indenture and the Pooling and Servicing
Agreement (each as defined herein). Interest on this Note will accrue for each
Payment Date from the most recent Payment Date on which interest has been paid
to but excluding such Payment Date or, if no interest has yet been paid, from
____ __, ____. Interest will be computed on the basis of a 360-day year of
twelve 30-day months. Such principal of and interest on this Note shall be paid
in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America which, at the time of payment, is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture referred to on the
reverse hereof or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Responsible Officer.
Date: _____________ BANC ONE HELOC TRUST 199_-_,
BY: ______________________________,
not in its individual capacity
but solely as Owner Trustee
under the Trust Agreement
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By: ___________________________
Name:
Title:
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INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
____________________________________
__________________,
not in its individual capacity but solely as
Indenture Trustee
By: ________________________
Name:
Title:
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[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its _____% Banc One HELOC Asset Backed Notes, Series 199_-_, due
_____ __, ____ (the "Notes"), all issued under an Indenture, dated as of _____
1, 199_ (as may be supplemented or amended, the "Indenture") between the Issuer
and _________________________, a national banking association, as trustee (the
"Indenture Trustee", which term includes any successor trustee under the
Indenture) to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights and obligations
thereunder of the Issuer, the Indenture Trustee and the Noteholders. The Notes
are subject to all terms of the Indenture. All terms used and not otherwise
defined in this Note that are defined in the Indenture, as supplemented or
amended, shall have the meanings assigned to them in or pursuant to the
Indenture.
The Notes issued pursuant to the Indenture are and will be equally and
ratably secured by the Collateral pledged as security therefor as provided in
the Indenture.
[_____________________________________] has issued a guaranty surety
bond with respect to the Notes, the Class ___ Certificates and the Class ___
Certificates, a copy of which is attached as Exhibit I to the Pooling and
Servicing Agreement. Pursuant to the Pooling and Servicing Agreement and the
Trust Agreement, the Class C Certificateholders have pledged all of their right,
title and interest in the Spread Account to the Indenture Trustee to secure the
Trust's payment obligations under the Pooling and Servicing Agreement and the
Indenture.
Principal of the Notes will be payable on each Payment Date in an
amount generally equal to approximately ____% of the "Basic Principal Amount"
(as defined in the Pooling and Servicing Agreement dated as of _____ 1, 199_
(the "Pooling and Servicing Agreement") among the Issuer, the Depositor named
therein and Old Stone Credit Corporation, as servicer (the "Servicer"). "Payment
Date" means the fifteenth day of March, June, September and December, or, if any
such date is not a Business Day, the next succeeding Business Day, commencing
_________ 15, 199_. In addition, as described in the Indenture, upon the receipt
of a certain level of Principal Prepayments and Curtailments on the Mortgage
Loans during a calendar month other than a month immediately preceding a month
in which a Payment Date occurs, the Notes will be subject to special redemption
on the related Special Payment Date in an amount generally equal to
approximately ____% of the "Special Payment Amount" (as defined in the Pooling
and Servicing Agreement). "Special Payment Date" means the fifteenth day of each
month other than a month in which a Payment Date occurs or if any such date is
not a Business Day, the next succeeding Business Day.
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the Maturity Date. Notwithstanding the foregoing,
the entire unpaid principal amount of this Note shall be due and payable on the
date on which an Event of Default shall have occurred and be continuing and the
Indenture Trustee or the Majority in Voting Interest of Notes (in each case with
the consent of the Credit Enhancer) have declared the Notes to be immediately
due and payable in the manner provided in Section 5.2 of the Indenture. All
principal payments on the Notes shall be made pro rata to the Noteholders.
Payments of interest on this Note at the rate of _____% per annum shall
be due and payable on each Payment Date, together with the installment of
principal described above, if any, if not in full payment of this Note, and
shall be made by check mailed to the Person whose name appears as the Registered
Holder of this Note (or one or more Predecessor Notes) on the Note Register as
of the close of business on each Record Date, or if the Holder hereof owns in
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the aggregate Notes having aggregate denominations of at least $1,000,000, by
wire transfer in immediately available funds to the account designated by the
Holder to the Indenture Trustee at least five Business Days prior to the related
Record Date, except that with respect to Notes registered on the Record Date in
the name of the nominee of the Depository (initially, such nominee to be Cede &
Co.), payments will be made by wire transfer in immediately available funds to
the account designated by such nominee. Such checks shall be mailed to the
Person entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment. The Record Date, with respect to any Payment
Date, means the close of business on the day prior to such Payment Date, or if
Definitive Notes are issued, the last day of the preceding calendar month. Any
reduction in the principal amount of this Note (or any one or more Predecessor
Notes) effected by any payments made on any Payment Date shall be binding upon
all future Holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof, whether or not noted
hereon. If funds are expected to be available, as provided in the Indenture, for
payment in full of the then remaining unpaid principal amount of this Note on a
Payment Date, then the Indenture Trustee, in the name of and on behalf of the
Issuer, shall notify the Person who is the Registered Holder hereof as of the
Record Date preceding such Payment Date by notice sent in accordance with
Section 2.7(e) of the Indenture, and the amount then due and payable shall be
payable only upon presentation and surrender of this Note at the Indenture
Trustee's principal Corporate Trust Office or at the office of the Indenture
Trustee's agent appointed for such purposes located in the City of New York.
Payments of the Special Redemption Price shall be due and payable on each
Special Payment Date pursuant to the terms of the Indenture.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by a commercial bank
or trust company located, or having a correspondent located, in the City of New
York or the city in which the Corporate Trust Office is located, or a member
firm of a national securities exchange, and such other documents as the
Indenture Trustee may require, and thereupon one or more new Notes of authorized
denominations and in the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Note, but the transferor may be
required to pay a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such registration of transfer or
exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Owner Trustee in their
individual capacities, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Owner Trustee in their individual capacities, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in their individual capacities, except as any such Person may have
expressly agreed, and except that any such partner, owner or beneficiary shall
be fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
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Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that by
accepting the benefits of the Indenture such Noteholder will not, prior to the
date which is one year and one day after the termination of the Indenture with
respect to the Issuer, acquiesce, petition or otherwise invoke or cause the
Depositor or the Issuer to invoke the process of any court or government
authority for the purpose of commencing or sustaining a case against the
Depositor or the Issuer under any federal or state bankruptcy, insolvency or
similar law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Depositor or the Issuer or any
substantial part of its property, or ordering the winding up or liquidation of
the affairs of the Depositor or the Issuer.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note shall
be overdue, and neither the Issuer, the Indenture Trustee nor any such agent
shall be affected by notice to the contrary.
The Notes are issuable only as registered Notes without coupons in
denominations of $1,000 and in integral multiples thereof. As provided in the
Indenture and subject to certain limitations therein set forth, the Notes are
exchangeable for new Notes of authorized denominations evidencing the same
aggregate denomination, as requested by the Holder surrendering the same;
provided, however, that no Note may be subdivided such that the denomination of
any resulting Note is less than $1,000. No service charge shall be made for any
such registration of transfer or exchange, but the Indenture Trustee or the Note
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge payable in connection therewith.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Notes under the Indenture at any time by the Issuer
with the consent of the Credit Enhancer and a Majority in Voting Interest of
Notes. The Indenture also contains provisions permitting the Holders of Notes
representing specified percentages of the Note Principal Balance (with the
consent of the Credit Enhancer), on behalf of the Holders of all the Notes, to
waive compliance by the Issuer with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Note (or any one of more predecessor
Notes) shall be conclusive and binding upon such Holder and upon all future
Holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange hereof or in lieu hereof whether or not notation of such
consent or waiver is made upon this Note. The Indenture also permits the
Indenture Trustee to amend or waive certain terms and conditions set forth in
the Indenture with the consent of the Credit Enhancer but without the consent of
the Noteholders.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Indenture Trustee and the
Holders of Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
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This Note and the Indenture shall be construed in accordance with the
laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, neither the Depositor, the Servicer, the
Indenture Trustee nor the Owner Trustee in their respective individual
capacities, any owner of a beneficial interest in the Issuer, nor any of their
respective partners, beneficiaries, agents, officers, directors, employees or
successors or assigns, shall be personally liable for, nor shall recourse be had
to any of them for, the payment of principal of or interest on, or performance
of, or omission to perform, any of the covenants, obligations or
indemnifications contained in this Note or the Indenture, it being expressly
understood that said covenants, obligations and indemnifications have been made
by the Owner Trustee solely as the Owner Trustee in the assets of the Issuer.
The Holder of this Note by the acceptance hereof agrees that, except as
expressly provided in the Basic Documents, in the case of an Event of Default
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
<PAGE> 70
Page 70
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of
assignee
____________________
FOR VALUE RECEIVED, the undersigned hereby sells,
assigns and transfers unto______________________________
________________________________________________________________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints _____________________________________, as attorney, to transfer
said Note on the books kept for registration thereof, with full power of
substitution in the premises.
Dated:___________________ _______________________________
Signature Guaranteed:
_______________________________
_________________________
<PAGE> 71
Page 71
EXHIBIT C
MORTGAGE LOAN SCHEDULE
<PAGE> 1
EXHIBIT 10.1
MORTGAGE LOAN PURCHASE AGREEMENT
AMONG
[--------------------------]
[--------------------------]
[--------------------------]
SELLERS
AND
BANC ONE ABS CORPORATION
PURCHASER
DATED AS OF , 199
--------- --- --
BANC ONE HELOC TRUST 199 -
-- --
<PAGE> 2
THIS MORTGAGE LOAN PURCHASE AGREEMENT is made as of _________
___, 199__, by and among THE SELLERS LISTED ON THE SIGNATURE PAGE HERETO (the
"Sellers"), and BANC ONE ABS CORPORATION (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 _________ __, 199__, among
the Purchaser, as Depositor, Bank One, N.A., as Servicer and
[_________________], as 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 the amount of cash and other
consideration to or to the order of the applicable Seller as set forth on
Exhibit A hereto, 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 Asset Balance (including all
Additional Balances) set forth in the applicable Mortgage Loan Schedules
attached hereto as Exhibit B-1, B-2 and B-3, together with the Mortgage Files
relating thereto and all proceeds thereof [(other than amounts received on and
after the Cut-off Date in respect of interest accrued on such Mortgage Loans
prior to the Cut-off Date)].
<PAGE> 3
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 its Mortgage Loans 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.
SECTION 2.04 Delivery of Mortgage Loan Documents.
Each Seller has delivered or caused to be delivered to the
Purchaser or its designee, in accordance with the instructions of the Purchaser,
each of the documents referred to in Section 2.01 of the Pooling and Servicing
Agreement, as follows:
[(a) the original Mortgage Note;
(b) the original recorded Mortgage or, if, in connection with
any Mortgage Loan, the original recorded Mortgage with evidence of recording
thereon cannot be delivered on or prior to the Closing Date because of a delay
caused by the public recording office where such original Mortgage has been
delivered for recordation or because such original Mortgage has been lost, the
related Seller shall deliver or cause to be delivered, at the direction of the
Purchaser, a true and correct copy of such Mortgage, together with an officer's
Certificate of such Seller stating that such original Mortgage has been
dispatched to the appropriate public recording official or has been lost;
(c) if applicable, the original intervening assignments, if
any ("Intervening Assignments"), with evidence of recording thereon, showing a
complete chain of title to the Mortgage from the originator to the related
Seller or, if any such original Intervening Assignment has not been returned
from the applicable recording office or has been lost, a true and correct copy
thereof, together with an Officer's Certificate of such Seller stating that such
original Intervening Assignment has been dispatched to the appropriate public
recording official for recordation or has been lost;
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<PAGE> 4
(d) for each Mortgage Loan either a title insurance policy or
a title search or guaranty of title with respect to the related Mortgaged
Property to the extent in possession of the related Seller or its Affiliates;
(e) the original of any guaranty executed in connection with
the Mortgage Note;
(f) the original of each assumption, modification,
consolidation or substitution agreement, if any, relating to the Mortgage Loan;
and
(g) any security agreement, chattel mortgage or equivalent
instrument executed in connection with the Mortgage.]
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.
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.
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 items listed in
Section 2.04 (a), (b) and (c) above, in the form attached as Exhibit C hereto,
and declare that it will hold such documents 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, the Custodial
Agreement and this Agreement, 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 after the Closing Date to ascertain
that all required documents set forth in this Section 2.04 have been executed
and received, and that such documents related 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 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 does not conform to the
requirements of Section 2.04 or substantively to the description thereof as set
forth in the Mortgage Loan Schedule, the Trustee is required by the Pooling and
Servicing Agreement to promptly give notice of the same. It
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<PAGE> 5
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 (other
than those described in Section 2.04(f)) 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 a
material defect in a document constituting part of a Mortgage File of which such
Seller is so notified by 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 (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 2.04, 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 Asset Balance of such Mortgage Loan shall be deducted from the Pool
Balance; provided, however, that interest accrued on the Asset 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 Asset 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 Seller, then
within five Business Days after the Business Day of such retransfer the 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. It is understood and agreed that the obligation of the
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 Seller.
The 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.
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<PAGE> 6
Notwithstanding any other provision of this Section 2.05(b), a
retransfer of a Defective Mortgage Loan to the 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 either the 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 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 at the direction of the Purchaser (or, if a Delivery Event
has occurred, 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 Purchasers.
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 executed, authenticated and 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.
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
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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 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 con templated by this Agreement and the other documents on the part
of such Seller and the
7
<PAGE> 8
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 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 second mortgage origination
and servicing business.
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<PAGE> 9
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,
as of the Cut-Off Date:
(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 Asset Balance), all monies due or to
become due with respect thereto, and all proceeds of such Cut-Off Date Asset
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(a) 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 Additional Balances and all other property specified in Section 2.01(a)
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 Asset Balance has not been
assigned or pledged, and such Seller is the sole owner and holder of such
Cut-Off Date Asset 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, under all
governmental and regulatory bodies having jurisdiction over the ownership of the
applicable Mortgage Loan, 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;
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(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, second or
more junior 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, second or more junior
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 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 [89] days
delinquent (measured on a contractual basis); and with respect to the Mortgage
Loans no more than _____% (by Cut-Off Date Pool Balance) were [30-59] days
delinquent (measured on contractual basis) and no more than ____% (by Cut-Off
Date Pool Balance) were [60-89] days delinquent (measured on a contractual
basis);
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(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) No more than ____% of the Mortgage Loans, by aggregate
principal balance, are secured by Mortgaged Properties located in one United
States postal zip code;
(p) The Combined Loan-to-Value Ratio for each Mortgage Loan
was not in excess of 100%;
(q) 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;
(r) Such Seller has not transferred the Mortgage Loans to the
Trust with any intent to hinder, delay or defraud any of its creditors;
(s) 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 Asset Balance during the interest period relating to the date on which
such Minimum Monthly Payment is due;
(t) Within 90 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
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respect to the Mortgage Loans;
(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, 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;
(v) 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;
(w) 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 C;
(x) The weighted average remaining term to maturity of the
Mortgage Loans on a contractual basis for the Mortgage Loans is approximately
___ months and no Mortgage Loan will mature according to its terms later
than____ _____. 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
_____% and __% per annum. The Margins range between ___% and _____%. The Loan
Rates on such Mortgage Loans range between ____% and _____% per annum and the
weighted average Loan Rate is approximately ____% per annum;
(y) 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;
(z) No more than ____% (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 _____% (by Cut-Off Date Pool Balance) of the
Mortgage Loans are secured by real property with a detached one-family residence
erected thereon;
(aa) The Credit Limits on the Mortgage Loans range between
$______ and $_______ with an average Credit Limit of approximately $________. No
Mortgage Loan had a principal balance in excess of approximately $__________ and
the average principal balance of the Mortgage Loans is equal to approximately
$__________; and
(bb) Approximately ________%, _______% and ______% of the
Mortgage Loans, by aggregate principal balance as of the Cut-
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Off Date for the Mortgage Loans, are first, second or more junior liens,
respectively.
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. Upon discovery by a Seller, the Purchaser, the
Servicer or a Responsible Officer of the Trustee of a breach of any of such
representations and warranties which 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 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 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 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
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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 Seller shall pay to the Trust the sum of the amount of the related Asset
Balances, plus unpaid accrued interest on each such Asset 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 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, in the form attached to
the Underwriting Agreement and 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 each Seller 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;
(iv) [A certificate or other evidence of merger or
change of name, signed or stamped by the applicable regulatory
authority, if any of the Mortgage Loans were acquired by the
applicable Seller by merger or acquired
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or originated by the applicable Seller while conducting
business under a name other than its present name.]
(c) Other Documents. At the Closing, Sellers 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 Third Party Servicers.
As of the Closing Date, the Sellers have represented to the
Purchaser that the Mortgage Loans are serviced by the Servicer or the Sellers
and are not subject to servicing agreements with third parties. It is understood
and agreed between the Sellers and the Purchaser that the Mortgage Loans which
are the subject of this Agreement are to be delivered free and clear of any
servicing agreements with third party servicers. Each Seller, without
reimbursement from the Purchaser, shall pay any fees or penalties required by
any third party servicer for releasing the Mortgage Loans from any such
servicing agreement and shall arrange for the orderly transfer of such servicing
from any such third party servicer to the Purchasers.]
SECTION 5.02 Enforceability; Merger or Consolidation of the
Sellers.
(a) Each Seller will keep in full effect its respective
existence, rights and franchises as a [national bank], 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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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 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, and each such Seller
agrees that it holds each Mortgage Loan in custody for the Purchaser subject to
the Purchaser's (i) right to reject any Mortgage Loan under the terms of this
Agreement and (ii) obligation to deliver cash and other consideration as set
forth in Section 2.01 for the Mortgage Loans. 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
16
<PAGE> 17
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 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 have assigned all
of their 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 an 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.
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<PAGE> 18
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 assign their
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.
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.
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<PAGE> 19
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 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.
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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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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:
Title:
SELLERS
[_______________________________]
By:_______________________________
Name:
Title:
[_______________________________]
By:_______________________________
Name:
Title:
[_______________________________]
By:_______________________________
Name:
Title:
<PAGE> 22
EXHIBIT A
AMOUNTS TRANSFERRED BY PURCHASER
TO SELLERS
BANC ONE ABS CORPORATION
HAS TRANSFERRED THE FOLLOWING AMOUNTS:
a) $____________ to [_________________________________]
b) $____________ to [_________________________________]
c) $____________ to [_________________________________]
d) $____________ to [_________________________________]
A-1
<PAGE> 23
EXHIBIT B-1
MORTGAGE LOANS TRANSFERRED BY
[_______________________________]
B-1-1
<PAGE> 24
EXHIBIT B-2
MORTGAGE LOANS TRANSFERRED BY
[_______________________________]
B-2-1
<PAGE> 25
EXHIBIT B-3
MORTGAGE LOANS TRANSFERRED BY
[_______________________________]
B-3-1
<PAGE> 26
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I
CERTAIN DEFINITIONS
<S> <C>
SECTION 1.01 ........................................................................................1
ARTICLE II
CONVEYANCE OF THE MORTGAGE LOANS
SECTION 2.01 Conveyance of Mortgage Loans............................................................1
SECTION 2.02 Possession of Mortgage Files............................................................2
SECTION 2.03 Books and Records.......................................................................2
SECTION 2.04 Delivery of Mortgage Loan Documents.....................................................2
SECTION 2.05 Acceptance by Purchaser of the Mortgage Loans;
Certain Substitutions; Certification
by the Trustee..........................................................................3
SECTION 2.06 Acceptance by the Purchasers............................................................5
SECTION 2.07 The Closing.............................................................................5
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01 Representations and Warranties of the Sellers...........................................6
SECTION 3.02 Representations and Warranties as to the
Mortgage Loans..........................................................................8
SECTION 3.03 Purchase and Substitution..............................................................12
ARTICLE IV
CONDITIONS
SECTION 4.01 Conditions to Obligation of the Purchaser..............................................13
SECTION 4.02 Conditions To Obligation of each Seller................................................14
ARTICLE V
THE SELLERS
SECTION 5.01 Third Party Servicers..................................................................14
SECTION 5.02 Enforceability; Merger or Consolidation of the
Sellers................................................................................15
SECTION 5.03 Mandatory Sale; Grant of Security Interest.............................................15
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01 Conflicts With Pooling and Servicing Agreement.........................................16
SECTION 6.02 Protection of Title to Trust...........................................................16
SECTION 6.03 Other Liens or Interests...............................................................16
SECTION 6.04 Purchase Events........................................................................17
SECTION 6.05 Indemnification........................................................................17
SECTION 6.06 Trust..................................................................................17
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
ARTICLE VII
MISCELLANEOUS PROVISIONS PAGE
<S> <C>
SECTION 7.01 Amendment..............................................................................18
SECTION 7.02 Waivers................................................................................18
SECTION 7.03 Costs and Expenses.....................................................................18
SECTION 7.04 Survival...............................................................................18
SECTION 7.05 Confidential Information...............................................................18
SECTION 7.06 Severability Clause....................................................................19
SECTION 7.07 Headings and Cross-References..........................................................19
SECTION 7.08 Recordation of Agreement...............................................................19
SECTION 7.09 Governing Law..........................................................................19
SECTION 7.10 Notices................................................................................19
SECTION 7.11 Counterparts...........................................................................20
SECTION 7.12 The Credit Enhancer....................................................................20
</TABLE>
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