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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest Event
Reported): April 27, 1999
MERRILL LYNCH MORTGAGE INVESTORS, INC.
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(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
Delaware 333-39127 13-5674085
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<S> <C> <C>
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
250 Vesey Street
World Financial Center, North Tower
New York, New York 10281
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(Address of Principal (Zip Code)
Executive Offices)
</TABLE>
Registrant's telephone number, including area code (212) 449-1000
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<PAGE>
Item 5. Other Events.
On April 27, 1999, Merrill Lynch Mortgage Investors, Inc. (the
"Company") entered into a Pooling and Servicing Agreement dated as of April 1,
1999 (the "Pooling and Servicing Agreement"), by and among the Company, as
depositor, Providian National Bank, as transferor (in such capacity, the
"Transferor") and service (in such capacity, the "Servicer"), and Bankers Trust
Company, as trustee (the "Trustee"), providing for the issuance of the Providian
Home Equity Loan Asset Certificates, Series 1999-PNB1. The Pooling and Servicing
Agreement is annexed hereto as Exhibit 99.1.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits:
99.1. The Pooling and Servicing Agreement, dated as of April 1,
1999, by and among the Company, the Transferor, the Servicer
and the Trustee.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
MERRILL LYNCH MORTGAGE INVESTORS, INC.
By: /s/ Peter Cerwin
---------------------------------
Name: Peter Cerwin
Title: Vice President
Dated: May 3, 1999
<PAGE>
Exhibit Index
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Exhibit Page
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99.1. Pooling and Servicing Agreement,
dated as of April 1, 1999, by
and among, the Company, the Transferor,
the Servicer and the Trustee. 6
EXHIBIT 99.1
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EXECUTION COPY
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PROVIDIAN NATIONAL BANK,
as Transferor and Servicer
MERRILL LYNCH MORTGAGE INVESTORS, INC.,
as Depositor
and
BANKERS TRUST COMPANY,
as Trustee
-----------------------
POOLING AND SERVICING AGREEMENT
Dated as of April 1, 1999
----------------------
Providian Home Equity Loan Asset Backed Certificates
Series 1999-PNB1
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<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
Definitions
Section 1.01. Definitions...................................................1
Section 1.02. Other Definitional Provisions................................19
Section 1.03. Interest Calculations........................................20
ARTICLE II
Conveyance of Initial Home Equity Loans; Original Issuance of Certificates
Section 2.01. Conveyance of Initial Home Equity Loans......................21
Section 2.02. Acceptance by Trustee; Removal of Home Equity Loans;
Substitution of Eligible Substitute Home Equity Loans;
Subsequent Home Equity Loans.................................24
Section 2.03. Representations and Warranties Regarding the Servicer........26
Section 2.04. Representations and Warranties of the Transferor
Regarding the Initial Home Equity Loans; Repurchase
and Substitution Obligations.................................27
Section 2.05. Execution and Authentication of Certificates.................30
Section 2.06. Removal of Home Equity Loans at Election of the
Transferor...................................................30
Section 2.07. Tax Treatment................................................32
Section 2.08. Covenants of the Depositor...................................32
ARTICLE III
Administration and Servicing of Home Equity Loans
Section 3.01. Providian to Act as Servicer; Certain Transferor
Repurchase Obligations.......................................33
Section 3.02. Collection of Certain Home Equity Loan Payments..............35
Section 3.03. Permitted Withdrawals from the Collection Account............37
Section 3.04. Flood Insurance Policy, Property Protection Expenses.........38
Section 3.05. Mortgagor Transfers of Mortgaged Properties..................38
Section 3.06. Realization Upon Defaulted Home Equity Loans.................40
Section 3.07. Trustee and Custodian to Cooperate...........................40
Section 3.08. Servicing Compensation; Payment of Certain Expenses by
Servicer.....................................................41
Section 3.09. Annual Statement as to Compliance............................41
Section 3.10. Annual Independent Public Accountants' Servicing Report......42
Section 3.11. Access to Certain Documentation and Information Regarding
the Home Equity Loans........................................42
Section 3.12. Maintenance of Fidelity Bond.................................42
Section 3.13. Reports to the Securities and Exchange Commission............42
Section 3.14. Information Required by the Internal Revenue Service
Generally and Reports of Foreclosures and Abandonments
of Mortgaged Property........................................43
Section 3.15. Tax Returns..................................................43
Section 3.16. Further Assurances...........................................43
ARTICLE IV
Servicing Certificate; Certificate Account Deposit
Section 4.01. Servicing Certificate........................................44
Section 4.02. Certificate Account..........................................46
Section 4.03. The Certificate Insurance Policy.............................47
ARTICLE V
Payments and Statements to Certificateholders
Section 5.01. Distributions................................................48
Section 5.02. Certain Calculations by the Trustee..........................51
Section 5.03. Statements to Certificateholders.............................51
Section 5.04. Rights of Certificateholders.................................53
ARTICLE VI
The Certificates and the Transferor's Interest
Section 6.01. The Certificates.............................................54
Section 6.02. Registration of Transfer and Exchange of Certificates;
Registrar....................................................54
Section 6.03. Mutilated, Destroyed, Lost or Stolen Certificates............56
Section 6.04. Persons Deemed Owners........................................56
Section 6.05. Restrictions on Assignment of Transferor's Interest..........56
Section 6.06. Actions of Certificateholders................................58
ARTICLE VII
The Servicer and the Transferor
Section 7.01. Liability of the Servicer....................................59
Section 7.02. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer or Transferor...................59
Section 7.03. Limitation on Liability of the Servicer and Others...........59
Section 7.04. Servicer Not to Resign.......................................60
Section 7.05. Limitation on Liability of Certain Persons...................60
Section 7.06. Liability of Servicer........................................61
Section 7.07. Servicer May Own Certificates................................61
ARTICLE VIII
Servicer Defaults
Section 8.01. Servicer Defaults............................................62
Section 8.02. Trustee to Act; Appointment of Successor.....................63
Section 8.03. Notification to Certificateholders...........................64
Section 8.04. Waiver of Past Servicer Defaults.............................64
ARTICLE IX
The Trustee
Section 9.01. Duties of Trustee............................................65
Section 9.02. Certain Matters Affecting the Trustee........................66
Section 9.03. Trustee Not Liable for Certificates or Home Equity Loans.....67
Section 9.04. Trustee May Own Certificates.................................67
Section 9.05. Servicer to Pay Trustee's Fees and Expenses..................67
Section 9.06. Eligibility Requirements for Trustee.........................68
Section 9.07. Resignation or Removal of Trustee............................68
Section 9.08. Successor Trustee............................................69
Section 9.09. Merger or Consolidation of Trustee...........................69
Section 9.10. Appointment of Co-Trustee or Separate Trustee................70
Section 9.11. Tax Returns..................................................71
ARTICLE X
Termination
Section 10.01. Termination..................................................72
Section 10.02. Termination by Certificate Insurer...........................74
ARTICLE XI
Rapid Amortization Events
Section 11.01. Rapid Amortization Events....................................75
Section 11.02. Additional Rights Upon an Insolvency Event...................76
ARTICLE XII
Miscellaneous Provisions
Section 12.01. Amendment....................................................79
Section 12.02. Recordation of Agreement; Counterparts.......................80
Section 12.03. Limitation on Rights of Certificateholders...................80
Section 12.04. The Certificate Insurer......................................81
Section 12.05. Governing Law................................................81
Section 12.06. Notices......................................................81
Section 12.07. Severability of Provisions...................................82
Section 12.08. Assignment...................................................82
Section 12.09. Certificates Nonassessable and Fully Paid....................82
Section 12.10. Counterparts.................................................82
Section 12.11. Effect of Headings and Table of Contents.....................82
Section 12.12. Third Party Beneficiaries....................................82
Section 12.13. Merger and Integration.......................................82
Section 12.14. Certain Activities...........................................82
SIGNATURES ..................................................................83
EXHIBIT A - Form of Certificate ......................................... A-1
EXHIBIT B - Form of Notice for Certificate Insurance Policy ............. B-1
EXHIBIT C - Home Equity Loan Schedule ................................... C-1
EXHIBIT D - Form of Release of Document ................................. D-1
EXHIBIT E - Form of Trustee's Initial Certification...................... E-1
EXHIBIT F - Form of Trustee's Final Certification........................ F-1
<PAGE>
This Pooling And Servicing Agreement, dated as of April 1, 1999, is by and
among Providian National Bank, a national banking association organized and
existing under the laws of the United States, as transferor and servicer (in
such capacities, the "Transferor" and "Servicer", respectively), Merrill Lynch
Mortgage Investors, Inc., a corporation organized and existing under the laws of
the State of Delaware, as depositor (the "Depositor"), and Bankers Trust
Company, a New York banking corporation, as trustee (the "Trustee").
WITNESSETH:
In consideration of the mutual agreements herein contained, the parties
hereto agree as follows:
ARTICLE I
Definitions
Section 1.01. DEFINITIONS. Whenever used in this Agreement, the following
words and phrases, unless the context otherwise requires, shall have the
meanings specified in this Article.
ACCELERATED PRINCIPAL DISTRIBUTION AMOUNT: As to any Distribution Date, the
amount, if any, required to reduce the Certificate Principal Balance (after
giving effect to the distribution of all other amounts distributed on the
Certificates on such Distribution Date) until the Invested Amount exceeds the
Certificate Principal Balance (as so reduced) by an amount equal to the Required
Overcollateralization Amount, to the extent such amount is paid out of available
Certificate Interest Collections pursuant to Section 5.01(a)(vii).
ACCOUNT AGREEMENT: As to any Home Equity Loan, the account agreement and
disclosure statement or other document or instrument pursuant to which the
Transferor or any other applicable party agreed to make a loan to the related
Mortgagor or pursuant to which the related Mortgagor agreed to repay such Home
Equity Loan on the terms and conditions provided in such document or instrument.
ACCRUAL PERIOD: As to any Distribution Date other than the first
Distribution Date, the actual number of days (based on a 360-day year) in the
period beginning on the preceding Distribution Date and ending on the day prior
to such Distribution Date, and, in the case of the first Distribution Date, the
period beginning on the Closing Date and ending on the day prior to the first
Distribution Date.
ADDITIONAL BALANCE: As to any date of determination and Home Equity Loan,
the aggregate amount of any principal advanced to the related Mortgagor after
the date on which the related Cut-off Date Principal Balance was calculated.
AGGREGATE INVESTOR LOSS AMOUNT: The aggregate amount of Investor Loss
Amounts for all prior Distribution Dates during the Managed and Rapid
Amortization Periods that were previously allocated to Certificateholders,
exclusive of any Investor Loss Amounts (or portions thereof) reallocated on such
Distribution Dates in reduction of the Transferor's Interest pursuant to Section
5.01(c)(ii).
AGREEMENT: This Pooling and Servicing Agreement and all amendments and
supplements hereto.
ALTERNATE CERTIFICATE RATE: As to any Accrual Period and Distribution Date,
the per annum rate equal to (i) the Weighted Average Loan Rate for such
Distribution Date minus (ii) the sum of 0.50% per annum, the Servicing Fee Rate
and the Premium Percentage.
ALTERNATIVE PRINCIPAL PAYMENT: As to any Distribution Date during the
Managed Amortization Period, the amount (but not less than zero) equal to
Principal Collections for the related Collection Period less the aggregate
amount of Additional Balances created during such Collection Period.
BIF: The Bank Insurance Fund, as from time to time constituted, created
under the Financial Institutions Reform, Recovery and Enhancement Act of 1989,
as amended, or if at any time after the execution of this instrument the Bank
Insurance Fund is not existing and performing duties now assigned to it, the
body performing such duties on such date.
BOOK-ENTRY CERTIFICATE: Any Certificate registered in the name of the
Depository or its nominee, ownership of which is reflected on the books of the
Depository or on the books of a Person maintaining an account with such
Depository (directly or as an indirect participant in accordance with the rules
of such Depository).
BUSINESS DAY: Any day other than (i) a Saturday or a Sunday or (ii) a day
on which national banks in the States of California, New Hampshire or New York
are required or authorized by law to be closed.
CERTIFICATE: Any one of the Certificates signed and countersigned by the
Trustee substantially in the form set forth in Exhibit A hereto.
CERTIFICATEHOLDER: The Person in whose name a Certificate is registered in
the Certificate Register, except that, solely for the purpose of giving any
consent pursuant to this Agreement, any Certificate registered in the name of
the Transferor or any affiliate of the Transferor shall be deemed not to be
outstanding and the Percentage Interest evidenced thereby shall not be taken
into account in determining whether the requisite Percentage Interest necessary
to effect any such consent has been obtained.
CERTIFICATE ACCOUNT: The trust account or accounts created and maintained
with the Trustee pursuant to Section 4.02 and which shall be an Eligible Account
and shall be entitled "Bankers Trust Company, in trust for the benefit of the
registered holders of the Providian Home Equity Loan Asset Backed Certificates,
Series 1999-PNB1, the Certificate Insurer and the owner of the Transferor's
Interest".
CERTIFICATE DISTRIBUTION AMOUNT: As to any Distribution Date, the sum of
all amounts to be distributed to the Certificateholders on such Distribution
Date pursuant to Article V and Article X hereof.
CERTIFICATE INSURANCE POLICY: The certificate insurance policy number
29097, dated as of the Closing Date, issued by the Certificate Insurer to the
Trustee for the benefit of the Holders of the Certificates.
CERTIFICATE INSURER: MBIA Insurance Corporation, or its successor in
interest.
CERTIFICATE INTEREST COLLECTIONS: As to any Distribution Date, the product
of (i) Interest Collections received by the Servicer during the related
Collection Period and (ii) the Floating Allocation Percentage for such
Distribution Date. In addition, Certificate Interest Collections shall include
any amount remitted by the Certificate Insurer (other than a payment under the
Certificate Insurance Policy) to the Trustee for deposit in the Collection or
Certificate Account as part of Certificate Interest Collections to be
distributed pursuant to Section 5.01(a)(i) through (iii).
CERTIFICATE OWNER: With respect to any Certificate that is a Book-Entry
Certificate, the Person that is the beneficial owner of such Book-Entry
Certificate.
CERTIFICATE PRINCIPAL BALANCE: As of any Distribution Date, the Original
Certificate Principal Balance less the aggregate amount actually distributed as
principal on the Certificates on all previous Distribution Dates (including any
Accelerated Principal Distribution Amounts).
CERTIFICATE RATE: As to any Distribution Date, One-Month LIBOR plus 0.29%
or, if less, the Alternate Certificate Rate.
CERTIFICATE REGISTER: The register maintained pursuant to Section 6.02.
CERTIFICATE REGISTRAR: The registrar appointed pursuant to Section 6.02.
CHARGED OFF AMOUNT: With respect to any Distribution Date, the portion of
the Principal Balance of a Partially Charged Off Home Equity Loan, or the entire
remaining Principal Balance of a Home Equity Loan that became a Fully Charged
Off Home Equity Loan during the related Collection Period, that the Servicer has
charged off on its servicing records during the related Collection Period in
accordance with the Servicer's normal servicing procedures.
CLOSING DATE: April 27, 1999.
CODE: The Internal Revenue Code of 1986, as the same may be amended from
time to time (or any successor statute thereto).
COLLECTION ACCOUNT: The trust account or accounts created and maintained
with the Trustee pursuant to Section 3.02(b) and which shall be an Eligible
Account and shall be entitled "Bankers Trust Company, in trust for the benefit
of the registered holders of the Providian Home Equity Loan Asset Backed
Certificates, Series 1999-PNB1, the Certificate Insurer and the owner of the
Transferor's Interest".
COLLECTION PERIOD: As to any Distribution Date other than the first
Distribution Date, the calendar month immediately preceding the month in which
such Distribution Date occurs, and in the case of the first Distribution Date,
the period commencing on the Initial Cut-off Date and ending on the last day of
the calendar month immediately preceding the month in which the first
Distribution Date occurs.
COMBINED LOAN-TO-VALUE RATIO: As of any date and as to any Home Equity
Loan, the fraction, expressed as a percentage, the numerator of which is the sum
of (i) the Credit Limit for such Home Equity Loan and (ii) the unpaid principal
balance and/or credit limit, as applicable, of any related senior mortgage loan
or loans as of such date, and the denominator of which is the applicable
Property Valuation of the related Mortgaged Property.
CONVERSION DATE: With respect to any Home Equity Loan, the date that is
approximately ten years following the origination thereof, when such Home Equity
Loan by its terms is scheduled to begin to amortize; provided, that in the event
of an Extension, the Conversion Date shall be the date to which such Extension
is made.
CORPORATE TRUST OFFICE: The principal corporate trust office of the Trustee
at which at any particular time its corporate trust business shall be
administered, which office at the date of the execution of this Agreement is
located at 4 Albany Street, New York, NY 10006, Attention: Providian Home Equity
Loan Asset Backed Certificates, Series 1991-PNB1.
CREDIT LIMIT: As to any Home Equity Loan, the maximum principal balance
permitted under the terms of the related Account Agreement.
CUSTODIAL AGREEMENT: A Custodial Agreement entered into between the
Custodian (other than the Trustee) and the Trustee, relating to the custody of
the Mortgage File documents.
CUSTODIAN: The Trustee or, if applicable, the custodian appointed by the
Trustee under the Custodial Agreement to maintain all or a portion of the
Mortgage Files pursuant to Section 2.01(b).
CUT-OFF DATE: With respect to each Initial Home Equity Loan, the Initial
Cut-off Date, and with respect to any Subsequent Home Equity Loan, the related
Subsequent Cut-off Date.
CUT-OFF DATE PRINCIPAL BALANCE: As to any Home Equity Loan, the unpaid
principal balance thereof (which may be $0) transferred and assigned to the
Trust as of the related Cut-off Date.
DEFECTIVE HOME EQUITY LOAN: Any Home Equity Loan that is required to be
repurchased or replaced pursuant to Sections 2.02(b), 2.04 or 3.01.
DEFICIENCY AMOUNT: With respect to any Distribution Date, the excess, if
any, of the total amount payable on such Distribution Date pursuant to clauses
(i) through (v) of Section 5.01(a) over the aggregate amount of Certificate
Interest Collections for such Distribution Date.
DEFINITIVE CERTIFICATES: As defined in Section 6.02(c).
DEPOSITOR: Merrill Lynch Mortgage Investors, Inc., a Delaware corporation,
or its successor in interest.
DEPOSITORY: Initially, The Depository Trust Company, the nominee of which
is Cede & Co., as the registered Holder of one or more Certificates evidencing
the Original Certificate Principal Balance. The Depository shall at all times be
a "clearing corporation" as defined in Section 8-102(a)(5) of the Uniform
Commercial Code of the State of New York.
DEPOSITORY PARTICIPANT: A broker, dealer, bank or other financial
institution or other Person for whom from time to time a Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
DETERMINATION DATE: As to any Distribution Date, the third (3rd) Business
Day preceding such Distribution Date.
DISSOLUTION DISTRIBUTION DATE: The date on which the proceeds from the
sale, disposition or liquidation of the Home Equity Loans are received and
distributed to Certificateholders pursuant to Section 11.02 hereof.
DISTRIBUTION DATE: The 25th day of each month, beginning in June 1999 (or,
if such 25th day is not a Business Day, the immediately succeeding Business
Day).
DRAW AMOUNT: As defined in Section 5.01(d).
ELIGIBLE ACCOUNT: One or more accounts:
(i) that are maintained with a depository institution or trust
company whose short-term unsecured debt obligations (or, in the case of
a depository institution or trust company that is the principal
subsidiary of a bank holding company, the debt obligations of such
holding company) at the time of deposit therein have been rated by each
Rating Agency in its highest short-term rating category (provided, that
if there at any time shall be a downgrading, withdrawal or suspension
of the short-term unsecured debt obligations of such depository
institution or trust company, the Servicer shall, within ten Business
Days thereof, move such account to another depository institution or
trust company having such required ratings);
(ii) that are maintained with a depository institution or
trust company the long-term unsecured debt obligations of which have
been rated Baa3 or higher by Moody's and AA- or higher by Standard &
Poor's (provided, that if there at any time shall be a downgrading,
withdrawal or suspension of the long-term unsecured debt obligations of
such depository institution or trust company, the Servicer shall,
within ten Business Days thereof, move such account to another
depository institution or trust company having such required ratings),
and the deposits in which are fully insured by the Federal Deposit
Insurance Corporation acting through either the BIF or the SAIF;
(iii) that are segregated trust accounts maintained with the
corporate trust department of a depository institution or trust
company, acting in its fiduciary capacity; or
(iv) such other accounts that are 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 the rating of the Certificates.
The depository institution or trust company with which the Eligible Account
is maintained shall be organized under the laws of the United States or any
state thereof, have a net worth in excess of $100,000,000 and deposits insured
to the full extent permitted by law by the Federal Deposit Insurance Corporation
and be subject to supervision and examination by federal or state banking
authorities. An Eligible Account may bear interest, and may include, if
otherwise permitted by this definition, an account maintained with the Trustee.
ELIGIBLE SUBSTITUTE HOME EQUITY LOAN: Any Home Equity Loan or Home Equity
Loans to be substituted for a Defective Home Equity Loan pursuant to Section
2.02(b), 2.04 or 3.01, which on the date of such substitution shall:
(i) have a Principal Balance (or, in the case of the
substitution of more than one Eligible Substitute Mortgage Loan for a
Defective Home Equity Loan, an aggregate Principal Balance) not
substantially greater or less than the Principal Balance of the
Defective Home Equity Loan it replaces;
(ii) have a Loan Rate not less than the Loan Rate of the
Defective Home Equity Loan it replaces;
(iii) have a Loan Rate based on the same index as that of the
Defective Home Equity Loan it replaces;
(iv) have a Margin that is not less than the Margin of the
Defective Home Equity Loan it replaces;
(v) have a Mortgage in a lien position the same or higher than
the lien position of the Mortgage relating to the Defective Home Equity
Loan it replaces;
(vi) have a remaining term to maturity not more than six
months earlier and not more than six months later than the remaining
term to maturity of the Defective Home Equity Loan it replaces, and in
no case later than May 31, 2025;
(vii) comply with the representations and warranties set forth
in Section 2.04 (which representations and warranties shall be deemed
to be made as of the date of substitution);
(viii) have a Combined Loan-to-Value Ratio as of its date of
origination that is not greater than the Combined Loan-to-Value Ratio
of the Defective Home Equity Loan it replaces as of the date of
origination of such Defective Home Equity Loan; and
(ix) be secured by a Mortgaged Property that is subject to the
same use (owner-occupied, second home or rental property) and that has
the same structural characteristics (attached or detached) as the
Mortgaged Property securing the Defective Home Equity Loan it replaces;
provided, however, that in the case of clause (ix), an owner-occupied, detached
Mortgaged Property will satisfy the requirements of clause (ix) in all cases.
The Servicer shall give the Trustee a notice of any proposed substitutions of
Defective Home Equity Loans that contains a list of the Home Equity Loans being
substituted therefor.
EXCESS OVERCOLLATERALIZATION AMOUNT: With respect to any Distribution Date,
the amount, if any, by which the Overcollateralization Amount for such
Distribution Date exceeds the Required Overcollateralization Amount for such
Distribution Date.
EXTENSION: The extension by the Servicer of the Conversion Date of a Home
Equity Loan pursuant to Section 3.01(f).
FINAL TERMINATION PRICE: With respect to any purchase by the Transferor of
the assets of the Trust pursuant to Section 10.01(b), an amount equal to the sum
of the Certificate Principal Balance and accrued and unpaid interest thereon at
the Certificate Rate through the day preceding the Distribution Date on which
such purchase is made.
FIXED ALLOCATION PERCENTAGE: With respect to any date, the greater of (i)
98% and (ii) the percentage equivalent (but not in excess of 100%) of a
fraction, the numerator of which is the Invested Amount and the denominator of
which is the Pool Balance as of the beginning of the related Collection Period.
FLOATING ALLOCATION PERCENTAGE: With respect to any Distribution Date, the
percentage equivalent (but not in excess of 100%) of a fraction, the numerator
of which is the Invested Amount and the denominator of which is the Pool Balance
as of the beginning of the related Collection Period.
FULLY CHARGED OFF HOME EQUITY LOAN: A defaulted Home Equity Loan that is
not a Liquidated Home Equity Loan and as to which (i) collection procedures by
the Servicer are ongoing and (ii) the Servicer has charged off the related
Principal Balance in its entirety.
GUARANTEED DISTRIBUTIONS: As defined in the Certificate Insurance Policy.
HOLDER: A Certificateholder.
HOME EQUITY LOAN SCHEDULE: As of any date, the schedule of Home Equity
Loans included in the Trust Fund on such date. The initial Home Equity Loan
Schedule as of the Statistical Calculation Date is attached hereto as Exhibit C
or delivered in the form of a magnetic tape or computer file to the Trustee and
sets forth as to each Initial Home Equity Loan (i) the Principal Balance as of
the Statistical Calculation Date, (ii) the Credit Limit, (iii) the stated
maturity upon which any outstanding Principal Balance is due and payable, (iv)
the loan identification number and (v) the state of the related Mortgaged
Property.
HOME EQUITY LOANS: Such home equity loans transferred and assigned to the
Trust pursuant to Section 2.01 as from time to time are held as a part of the
Trust Fund (such home equity loans so held being identified in the Home Equity
Loan Schedule), including any defaulted Home Equity Loan in respect of which the
Servicer has not yet received all Liquidation Proceeds that it expects to
receive.
HOME PROTECTION: The Transferor's payment deferral plan available to
Mortgagors.
INDIRECT PARENT: Merrill Lynch & Co., Inc.
INITIAL CUT-OFF DATE: The close of business on the Closing Date.
INITIAL CUT-OFF DATE POOL BALANCE: The aggregate of the Principal Balances
of the Initial Home Equity Loans as of the Initial Cut-off Date.
INITIAL HOME EQUITY LOANS: The revolving home equity loans (including the
rights to receive payments thereunder) transferred and assigned to the Trust on
the Closing Date pursuant to Section 2.01, together with the related Mortgage
File documents and the rights thereunder conveyed to the Trust on the Closing
Date pursuant to Section 2.01.
INSURANCE AGREEMENT: The Insurance and Reimbursement Agreement dated as of
the Closing Date, among the Transferor, the Servicer, the Depositor, the Trustee
and the Certificate Insurer, including any amendments and supplements thereto.
INSURANCE PROCEEDS: As to any Home Equity Loan and Collection Period, an
amount equal to the proceeds paid by any insurer pursuant to any insurance
policy covering such Home Equity Loan or the related Mortgaged Property (net of
any expenses incurred by or on behalf of the Servicer in connection with
obtaining such proceeds) paid to the Servicer during such Collection Period,
that are not (i) Liquidation Proceeds, (ii) applied to the restoration or repair
of such Mortgaged Property or (iii) released to the related Mortgagor in
accordance with the normal servicing procedures of the Servicer.
INSURED PAYMENT: With respect to any Distribution Date, any Guaranteed
Distributions for such Distribution Date paid to the Trustee by the Certificate
Insurer.
INTEREST COLLECTIONS: As to any payment on a Home Equity Loan made by or on
behalf of the related Mortgagor and collected during a Collection Period, the
portion of such payment allocable to interest in accordance with the terms of
the related Account Agreement, including for these purposes any Net Liquidation
Proceeds allocable to interest on such Home Equity Loan, any assumption fees,
late payment charges, returned payment check fees, returned cash advance check
fees, overlimit fees, annual fees, Home Protection and other fee-based product
fees collected in the ordinary course of servicing such Home Equity Loan, any
post-liquidation recoveries thereon if such Home Equity Loan becomes a
Liquidated Home Equity Loan, and any other recoveries with respect to
Liquidation Loss Amounts. In addition, Interest Collections shall include net
investment earnings on funds deposited into the Collection Account or
Certificate Account pursuant to Section 3.02(c) or Section 4.02, respectively.
INVESTED AMOUNT: With respect to any date, an amount equal to the Original
Invested Amount minus the sum of (i) the total of Principal Collections
previously distributed to Certificateholders (other than any such collections
applied to reimburse Investor Loss Amounts), (ii) the Aggregate Investor Loss
Amount as of such date and (iii) the aggregate amount of any Excess
Overcollateralization Amounts released on or before such Distribution Date.
INVESTOR LOSS AMOUNT: With respect to any Distribution Date, the amount
equal to the Floating Allocation Percentage of the aggregate Liquidation Loss
Amounts for such Distribution Date.
LIBOR BUSINESS DAY: Any day that is (i) a Business Day and (ii) a day on
which banking institutions in the City of London, England are not required or
authorized by law to be closed.
LIQUIDATED HOME EQUITY LOAN: A Home Equity Loan that was in default during
the related Collection Period and with respect to which the Servicer has
determined during the related Collection Period that all related Liquidation
Proceeds that it expects to recover from such Home Equity Loan have been
recovered.
LIQUIDATION EXPENSES: With respect to any Home Equity Loan and Collection
Period, expenses incurred by the Servicer during such Collection Period in
connection with the liquidation of any defaulted Home Equity Loan and not
recovered under any insurance policy or from the related Mortgagor, including
legal fees and expenses, real estate brokerage commissions, any unreimbursed
amount expended by the Servicer pursuant to Section 3.06 with respect to such
Home Equity Loan (including amounts advanced to correct defaults on any mortgage
on the Mortgaged Property that is senior to such defaulted Home Equity Loan) and
any related previously unreimbursed Property Protection Expenses.
LIQUIDATION LOSS AMOUNT: With respect to any Distribution Date and the
related Collection Period, the amount charged off, either in full or in part, by
the Servicer in accordance with its normal servicing procedures, including (i)
as to any Home Equity Loan that became a Liquidated Home Equity Loan during such
Collection Period, the unrecovered Principal Balance thereof at the end of such
Collection Period (after giving effect to the application of the principal
portion of any Net Liquidation Proceeds realized in connection therewith) and
(ii) as to any Home Equity Loan that is a Partially or Fully Charged Off Home
Equity Loan during such Collection Period, the Charged Off Amount for such Home
Equity Loan and Collection Period.
LIQUIDATION PROCEEDS: With respect to any Home Equity Loan and Collection
Period, cash or funds received in connection with the liquidation of any
defaulted Home Equity Loan, whether through trustee's sale, foreclosure sale or
otherwise, during such Collection Period.
LOAN RATE: As to any Home Equity Loan and day, the rate of interest
applicable to the calculation of interest for such day on the Principal Balance
thereof.
MANAGED AMORTIZATION PERIOD: The period beginning on the earlier of (i)
September 1, 1999 and (ii) the first day of the calendar month during which a
Deficiency Amount exists, and ending on August 31, 2004 (or, if earlier, upon
the occurrence of a Rapid Amortization Event).
MARGIN: As to any Home Equity Loan, the spread over the applicable index,
as specified in the related Account Agreement.
MAXIMUM PRINCIPAL PAYMENT: As to any Distribution Date after the end of the
Revolving Period, an amount equal to the product of the Fixed Allocation
Percentage and Principal Collections for the related Collection Period.
MINIMUM TRANSFEROR'S INTEREST: As to any date, an amount equal to the
greater of (i) 2.00% of the Invested Amount on such date and (ii) the Transferor
Subordinated Amount on such date.
MOODY'S: Moody's Investors Service, Inc., or its successor in interest.
MORTGAGE: The mortgage, deed of trust or other instrument creating a first
or junior lien on an estate in fee simple interest in real property securing a
Home Equity Loan or creating a first or junior lien on a leasehold interest
insofar as such leasehold interest exceeds the term of the related mortgage by
five years.
MORTGAGE FILE: The mortgage documents listed in Section 2.01(b) pertaining
to a Home Equity Loan and any additional documents required to be added to the
related Mortgage File pursuant to this Agreement.
MORTGAGED PROPERTY: The underlying property securing a Home Equity Loan.
MORTGAGOR: As to any Home Equity Loan, the obligor under the related
Account Agreement.
NET LIQUIDATION PROCEEDS: As to any Liquidated Home Equity Loan and
Collection Period, Liquidation Proceeds realized by the Servicer during such
Collection Period net of related Liquidation Expenses.
NONPAYMENT: With respect to any Distribution Date, any Guaranteed
Distributions owing in respect of such Distribution Date.
OFFICER'S CERTIFICATE: A certificate signed by the Chief Executive Officer,
the President, the Chief Financial Officer, an Executive Vice President, a
Senior Vice President, the Treasurer, the Controller or a Vice President of the
Servicer or the Transferor, as the case may be, and delivered to the Trustee.
ONE-MONTH LIBOR: As to any Distribution Date:
(i) the posted rate for United States dollar deposits for one month which
appears on Telerate Page 3750 (as defined below) as of 11:00 A.M., London time,
on the second LIBOR Business Day prior to the immediately preceding Distribution
Date (or as of the second LIBOR Business Day before the Closing Date in the case
of the first Distribution Date). If no such posted rate appears, One-Month LIBOR
shall be determined on such date as described in clause (ii) below. "Telerate
Page 3750" means the display page designated on the Bridge Information Systems
Telerate Service (or such other page as may replace such page on such service,
or such other service as may be nominated as the information vendor for the
purpose of displaying London interbank offered rates of major banks).
(ii) if on such date no posted rate appears on Telerate Page 3750 as
described in clause (i) above, the Trustee shall request the principal London
office of each of three reference banks (which shall be Chase Manhattan Bank,
Citibank, N.A., and The Bank of New York, so long as each such bank is engaged
in transactions in the London interbank market) ("Reference Banks") to provide
the Trustee with its offered quotation for United States dollar deposits for one
month to prime banks in the London interbank market as of 11:00 A.M., London
time, on such date. If at least two Reference Banks provide the Trustee with
such offered quotations, then One-Month LIBOR on such date shall be the
arithmetic mean (rounded, if necessary, to the nearest 1/100th of a percent
(0.0001), with a 5/1,000th of a percent (0.00005) rounded upwards) of all such
quotations. If on such date fewer than two of the Reference Banks provide the
Trustee with such an offered quotation, One-Month LIBOR on such date shall be
the arithmetic mean (rounded, if necessary, to the nearest 1/100,000th of a
percent (0.0000001), with five one-millionths of a percent (0.00000005) rounded
upwards) of the offered per annum rates which one or more leading banks in The
City of New York selected by the Trustee (after consultation with the Servicer)
are quoting as of 11:00 A.M., New York City time, on such date to leading
European banks for United States dollar deposits for one month; provided,
however, that if such banks are not quoting as described above, One-Month LIBOR
shall be the One-Month LIBOR applicable to the immediately preceding
Distribution Date.
OPINION OF COUNSEL: A written opinion of counsel acceptable to the Trustee
and the Certificate Insurer, who may be internal counsel for the Servicer.
ORIGINAL CERTIFICATE PRINCIPAL BALANCE and ORIGINAL INVESTED AMOUNT:
$500,000,000.
ORIGINAL TRANSFEROR'S INTEREST BALANCE: An amount equal to the Initial
Cut-off Date Pool Balance minus the Original Invested Amount.
OVERCOLLATERALIZATION AMOUNT: With respect to any Distribution Date, the
excess, if any, of the Invested Amount over the Certificate Principal Balance as
of such Distribution Date (after giving effect to any distributions of principal
to be made on such Distribution Date (other than any Accelerated Principal
Distribution Amounts)).
OWNERSHIP INTEREST: With respect to any Certificate, any ownership or
security interest in such Certificate, including any interest in such
Certificate as the Holder thereof and any other interest therein, whether direct
or indirect, legal or beneficial, as owner or as pledgee.
PARTIALLY CHARGED OFF HOME EQUITY LOAN: A defaulted Home Equity Loan that
is not a Liquidated Home Equity Loan and as to which (i) collection procedures
by the Servicer are ongoing and (ii) the Servicer has charged off a portion, but
not all, of the related Principal Balance.
PERCENTAGE INTEREST: As to any Certificate, the percentage interest
evidenced thereby in distributions required to be made thereon, such percentage
interest being equal to the percentage obtained by dividing the initial
principal balance of such Certificate by the Original Certificate Principal
Balance.
PERMITTED INVESTMENTS: One or more of the following:
(i) obligations of, or guaranteed as to timely principal and interest by,
the United States or any agency or instrumentality thereof when such obligations
are backed by the full faith and credit of the United States;
(ii) repurchase agreements on obligations specified in clause (i) maturing
not more than one month from the date of acquisition thereof, provided that the
short-term unsecured obligations of the party agreeing to repurchase such
obligations are at the time rated by each Rating Agency in one of its two
highest short-term rating categories;
(iii) certificates of deposit, demand and time deposits and bankers'
acceptances (which shall each have an original maturity of not more than 365
days) of any U.S. depository institution or trust company incorporated under the
laws of the United States or any state; provided, that the short-term debt
obligations of such depository institution or trust company (or, if the only
Rating Agency is Standard & Poor's, in the case of the principal depository
institution in a depository institution holding company, debt obligations of the
depository institution holding company) at the date of acquisition thereof shall
be rated by each Rating Agency in its highest short-term rating category;
(iv) commercial paper (having original maturities of not more than 270
days) of any corporation incorporated under the laws of the United States or any
state thereof which on the date of acquisition shall be rated by each Rating
Agency in its highest short-term rating category;
(v) investments in money market mutual funds registered under the
Investment Company Act of 1940, as amended, that are rated by each Rating Agency
in its highest rating category; provided, that if Standard & Poor's is a Rating
Agency, the rating of such money market funds shall be AAAm or AAAm-G; and
(vi) other obligations or securities that are acceptable to each Rating
Agency as a Permitted Investment hereunder and that will not result in a
reduction in the then-current rating or ratings of the Certificates without
taking into account the Certificate Insurance Policy, as evidenced by a letter
to such effect from such Rating Agency.
PERSON: Any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
POOL BALANCE: As to any date, the sum of (i) the aggregate of the unpaid
Principal Balances of all Home Equity Loans, including any Additional Balances
relating thereto, as of such date, and (ii) amounts, if any, otherwise allocable
to the Transferor's Interest that are required to be retained in the Collection
Account pursuant to Section 5.01(h) when the Transferor's Interest is less than
the Minimum Transferor's Interest.
POOL FACTOR: As to any Distribution Date, the percentage (carried to six
places) obtained by dividing the Certificate Principal Balance for such
Distribution Date (before taking into account any distributions of principal to
be made on such Distribution Date) by the Original Certificate Principal
Balance.
PREFERENCE AMOUNT: As defined in the Certificate Insurance Policy.
PREMIUM AMOUNT: An amount equal to the "Premium" specified in the Insurance
Agreement or in any side letter with respect to such agreement by and between
the Certificate Insurer and the Transferor.
PREMIUM PERCENTAGE: The percentage specified in the Insurance Agreement or
in any side letter with respect to such agreement by and between the Certificate
Insurer and the Transferor.
PRINCIPAL BALANCE: As to any Home Equity Loan (other than a Liquidated Home
Equity Loan or a Fully Charged Off Home Equity Loan which, in both cases, has a
Principal Balance of zero) and day, its Initial Cut-off Date Principal Balance
or Subsequent Cut-off Date Principal Balance, as applicable, plus any related
Additional Balances, minus the sum of (i) all collections credited against the
Principal Balance of such Home Equity Loan in accordance with the related
Account Agreement prior to such day and any Insurance Proceeds received prior to
such day and applied to the reduction of the Principal Balance of such Home
Equity Loan, and (ii) all Charged Off Amounts, if any, with respect to such Home
Equity Loan and applied to the reduction of the Principal Balance of such Home
Equity Loan prior to such day. For purposes of this definition, a Liquidated
Home Equity Loan shall be deemed to have a Principal Balance equal to the
Principal Balance of the related Home Equity Loan immediately prior to the final
recovery of related Liquidation Proceeds and a Principal Balance of zero
thereafter.
PRINCIPAL COLLECTIONS: As to any Home Equity Loan and Collection Period,
the sum of (i) the portion of the payment received from the related Mortgagor
during such Collection Period and applied in reduction of the principal balance
of such Home Equity Loan in accordance with the terms of the related Account
Agreement; (ii) the principal portion of Net Liquidation Proceeds and Insurance
Proceeds for such Home Equity Loan and Collection Period; and (iii) the
principal portion of any Transfer Deposit Amount of a retransferred Home Equity
Loan.
PROPERTY PROTECTION EXPENSES: Expenses paid or incurred by or for the
account of the Servicer in connection with the preservation or protection of a
Mortgaged Property or the security of a Mortgaged Property including (i) hazard
insurance policy premiums, (ii) real estate taxes and property repair,
replacement, protection and preservation expenses, (iii) amounts expended to
cure, prevent or repay any default with respect to any mortgage senior to that
of the related Home Equity Loan, and (iv) similar expenses reasonably paid or
incurred to preserve or protect the value of such security.
PROPERTY VALUATION: As to any Mortgaged Property and time referred to
herein, the appraised value of such Mortgaged Property based upon the most
recent appraisal made by or on behalf of the Servicer or, if no such appraisal
was made, the most recent evaluation of the value thereof made by the Servicer.
PROVIDIAN: Providian National Bank, a national banking association.
RAPID AMORTIZATION EVENT: As defined in Section 11.01.
RAPID AMORTIZATION PERIOD: The period beginning on September 1, 2004 (or,
if earlier, upon the occurrence of a Rapid Amortization Event) and ending upon
the termination of the Trust pursuant to Section 10.01.
RATING AGENCY: Any statistical credit rating agency, or its successor, that
rated the Certificates at the request of the Transferor at the time of the
initial issuance of the Certificates. If such agency or a successor is no longer
in existence, "Rating Agency" shall be such statistical credit rating agency, or
other comparable Person, designated by the Servicer, notice of which designation
shall be given to the Trustee and the Transferor. References herein to the
highest rating categories of a Rating Agency shall mean AAA (long-term), AAAm or
AAAm-G (money market funds) and A-1 (short-term) in the case of Standard &
Poor's and Aaa (long-term) and P-1 (short-term) in the case of Moody's and in
the case of any other Rating Agency shall mean such equivalent ratings.
RECORD DATE: As to any Distribution Date, the last day of the month (or if
such last day is not a Business Day, the Business Day immediately preceding such
last day) preceding the month of such Distribution Date; provided, that as to
the first Distribution Date, the Record Date shall be the Closing Date.
REIMBURSEMENT AMOUNT: As to any Distribution Date, the sum of (i) all
Insured Payments paid by the Certificate Insurer for which the Certificate
Insurer has not been reimbursed prior to such Distribution Date pursuant to
Section 5.01(a), together with interest accrued thereon calculated at the rate
specified in the Insurance Agreement from the date the Trustee received the
related Insured Payments, and (ii) any other amounts then due and owing to the
Certificate Insurer under the Insurance Agreement or the Certificate Insurance
Policy, together with interest on such amounts at the rate specified in the
Insurance Agreement. The Certificate Insurer shall notify the Trustee and the
Servicer of the amount of any Reimbursement Amount on or before the related
Determination Date.
REMOVAL DATE: With respect to any Collection Period prior to the
commencement of the Rapid Amortization Period, the last business day of such
Collection Period.
REMOVAL NOTICE DATE: As defined in Section 2.06.
REQUIRED ENHANCEMENT AMOUNT: As to the Closing Date, $10,000,000. For each
Distribution Date thereafter, an amount equal to the product of the Required
Enhancement Percentage and the Certificate Principal Balance; provided, however,
that in no event will the Required Enhancement Amount be less than a floor
amount equal to the greater of (i) $7,500,000 and (ii) the sum of (a) $5,000,000
and (b) the aggregate Principal Balance of all Home Equity Loans that are 180 or
more days delinquent.
REQUIRED ENHANCEMENT PERCENTAGE: As defined in the Insurance Agreement.
REQUIRED OVERCOLLATERALIZATION AMOUNT: With respect to any Distribution
Date, the amount, if any, by which the Required Enhancement Amount for such
Distribution Date exceeds the Transferor Subordinated Amount for such
Distribution Date.
RESPONSIBLE OFFICER: When used with respect to the Trustee, the Chairman or
Vice Chairman of the Board of Directors or Trustees, the Chairman or Vice
Chairman of the Executive or Standing Committee of the Board of Directors or
Trustees, the President, the Chairman of the Committee on Trust Matters, any
Vice President, any Assistant Vice President, the Secretary, any Assistant
Secretary, the Treasurer, any Assistant Treasurer, the Cashier, any Assistant
Cashier, any Trust Officer or Assistant Trust Officer, the Controller and any
Assistant Controller or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also, with respect to a particular matter, to whom such matter is referred
because of such officer's knowledge of and familiarity with the particular
subject.
REVOLVING PERIOD: The period beginning on the Closing Date and ending on
the day immediately preceding the day on which the Managed Amortization Period
begins (or, if earlier, upon the occurrence of a Rapid Amortization Event).
SAIF: The Savings Association Insurance Fund, as from time to time
constituted, created under the Financial Institutions Reform, Recovery and
Enhancement Act of 1989, as amended, or if at any time after the execution of
this instrument the Savings Association Insurance Fund is not existing and
performing duties now assigned to it, the body performing such duties on such
date.
SALE AGREEMENT: The Home Equity Loan Sale Agreement dated as of the Closing
Date, between the Transferor and the Depositor.
SCHEDULED MATURITY DATE: The Distribution Date in June 2025.
SCHEDULED PRINCIPAL COLLECTIONS PAYMENT: With respect to any Distribution
Date during the Revolving Period, $0. With respect to any Distribution Date
during the Managed Amortization Period, an amount equal to the lesser of (i) the
Maximum Principal Payment and (ii) the Alternative Principal Payment. With
respect to any Distribution Date during the Rapid Amortization Period, an amount
equal to the Maximum Principal Payment.
SERVICER: Providian, or its successor in interest or any successor servicer
appointed as herein provided.
SERVICER DEFAULT: As defined in Section 8.01.
SERVICING CERTIFICATE: A certificate completed by and executed on behalf of
the Servicer in accordance with Section 4.01.
SERVICING FEE: As defined in Section 3.08.
SERVICING FEE RATE: 0.65% per annum.
SERVICING OFFICER: Any officer of the Servicer whose name and facsimile
signature appear on a list of servicing officers furnished to the Trustee by the
Servicer, as such list may from time to time be amended.
STANDARD & POOR'S: Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., or its successor in interest.
STATISTICAL CALCULATION DATE: The close of business on February 28, 1999.
SUBSEQUENT CUT-OFF DATE: With respect to any Subsequent Home Equity Loan,
the date as of which such Subsequent Home Equity Loan is transferred to the
Trust, as specified in the related Subsequent Transfer Agreement.
SUBSEQUENT HOME EQUITY LOANS: The revolving home equity loans (including
the rights to receive payments thereunder) transferred and assigned to the Trust
pursuant to a Subsequent Transfer Agreement, together with the related Mortgage
File documents and the rights thereunder conveyed to the Trust as of the related
Subsequent Cut-off Date.
SUBSEQUENT SELECTION DATE: With respect to any Subsequent Home Equity Loan,
the date as of which such Subsequent Home Equity Loan is selected by the
Transferor for inclusion in the Trust.
SUBSEQUENT TRANSFER AGREEMENT: Each subsequent transfer agreement dated as
of a Subsequent Cut-off Date and executed by the Transferor and the Trustee
substantially in the form of Exhibit 2 to the Sale Agreement, by which the
related Subsequent Home Equity Loans are sold to the Trust.
TRANSFER: Any direct or indirect transfer, sale, pledge, hypothecation or
other form of assignment of any Ownership Interest in a Certificate.
TRANSFER DATE: With respect to any Eligible Substitute Home Equity Loan,
the date on which such Eligible Substitute Home Equity Loan is conveyed to the
Trust under the terms hereof.
TRANSFER DEFICIENCY: As defined in Section 2.02(b).
TRANSFER DEPOSIT AMOUNT: As defined in Section 2.02(b).
TRANSFEREE: Any Person who is acquiring by Transfer any Ownership Interest
in a Certificate.
TRANSFEROR: Providian, or its successor in interest, as transferor of the
Initial Home Equity Loans to the Depositor and transferor of any Additional
Balances and Subsequent Home Equity Loans to the Trust.
TRANSFEROR INTEREST COLLECTIONS: With respect to any Distribution Date,
Interest Collections for the related Collection Period less Certificate Interest
Collections for such Distribution Date.
TRANSFEROR PRINCIPAL COLLECTIONS: With respect to any Distribution Date,
Principal Collections for the related Collection Period less the portion of such
Principal Collections required to be distributed to Certificateholders on such
Distribution Date pursuant to Section 5.01(b).
TRANSFEROR SUBORDINATED AMOUNT: As to any Distribution Date, an amount (but
not in excess of the Transferor Subordinated Amount on the immediately preceding
Distribution Date) equal to the least of:
(i) $10,000,000 less the sum of (A) the aggregate amount of
Transferor Interest Collections and Transferor Principal Collections
otherwise allocable to the Transferor's Interest that previously have
been distributed to Certificateholders pursuant to Section 5.01(c)(i)
and (B) the aggregate amount of Investor Loss Amounts that previously
have been reallocated to the Transferor's Interest pursuant to Section
5.01(c)(ii); and
(ii) the Required Enhancement Amount.
TRANSFEROR'S INTEREST: The uncertificated ownership interest in the
remainder of the Trust Fund not allocated to the Certificates.
TRANSFEROR'S INTEREST BALANCE: As of any date of determination, an amount
equal to the Pool Balance as of the end of the day next preceding such date of
determination minus the Invested Amount as of the end of such day.
TRUST: The trust created by this Agreement and designated "Providian Home
Equity Loan Trust 1999-1".
TRUST FUND: The corpus of the Trust consisting of the following:
(i) the Cut-off Date Principal Balance of each Home Equity Loan and the
amount of any Additional Balances, and all payments of interest and principal
due and received thereon, from whatever source derived, received on or with
respect to such Home Equity Loans after the related Cut-off Date and with
respect to such Additional Balances;
(ii) property that secured a Home Equity Loan and that has been acquired by
foreclosure, deed in lieu of foreclosure or otherwise;
(iii) the related Mortgage File documents for each Home Equity Loan;
(iv) such assets as shall from time to time be identified as deposited in
the Collection Account and the Certificate Account in accordance with this
Agreement;
(v) the Certificate Insurance Policy;
(vi) all of the Depositor's rights under the Sale Agreement;
(vii) any insurance policies relating to the Home Equity Loans, including
hazard insurance policies; and
(viii) all proceeds of each of the foregoing.
TRUSTEE: The institution executing this Agreement as Trustee, or its
successor in interest, or any successor trustee that has been appointed in
accordance with the terms of this Agreement.
UCC: The Uniform Commercial Code as in effect in any state where the filing
of a financing statement is required to perfect the Trust's interest in the
Trust Fund and any proceeds thereof.
UNPAID INVESTOR LOSS AMOUNT: With respect to any Distribution Date, the
aggregate amount of Investor Loss Amounts (or portions thereof) for all prior
Distribution Dates that were not previously (i) paid to Certificateholders from
Certificate Interest Collections pursuant to Section 5.01(a)(iv) or (v), (ii)
paid to Certificateholders from Transferor Interest Collections and Transferor
Principal Collections pursuant to Section 5.01(c)(i), (iii) reallocated to the
Transferor's Interest pursuant to Section 5.01(c)(ii), or (iv) paid to
Certificateholders from Insured Payments pursuant to Section 5.01(d).
WEIGHTED AVERAGE LOAN RATE: With respect to any Distribution Date, the
weighted average of the applicable Loan Rates on the Home Equity Loans as of the
last Business Day of the third calendar month preceding such Distribution Date,
weighted based on the outstanding Principal Balances of the Home Equity Loans as
of the last Business Day of the third calendar month preceding such Distribution
Date.
Section 1.02. OTHER DEFINITIONAL PROVISIONS. All terms defined in this
Agreement shall have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined therein.
As used in this Agreement and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined in this
Agreement or in any such certificate or other document, and accounting terms
partly defined in this Agreement or in any such certificate or other document,
to the extent not defined, shall have the respective meanings given to them
under generally accepted accounting principles. To the extent that the
definitions of accounting terms in this Agreement or in any such certificate or
other document are inconsistent with the meanings of such terms under generally
accepted accounting principles, the definitions contained in this Agreement or
in any such certificate or other document shall control.
The words "hereof," "herein," "hereunder" and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement; Section and Exhibit references contained
in this Agreement are references to Sections and Exhibits in or to this
Agreement unless otherwise specified; the term "including" shall mean "including
without limitation"; "or" shall include "and/or"; and the term "proceeds" shall
have the meaning ascribed thereto in the UCC.
The definitions contained in this Agreement are applicable to the singular
as well as the plural forms of such terms and to the masculine as well as the
feminine and neuter genders of such terms.
Any agreement, instrument or statute defined or referred to herein or in
any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to such Person's permitted successors and assigns.
Section 1.03. INTEREST CALCULATIONS. All calculations of the interest on
the Certificates shall be made on the basis of the actual number of days in an
Accrual Period and a year assumed to consist of 360 days and all calculations of
the Servicing Fee shall be made on the basis of the actual number of days in the
Collection Period and a year assumed to consist of 360 days.
<PAGE>
ARTICLE II
Conveyance of Initial Home Equity Loans;
Original Issuance of Certificates
Section 2.01. CONVEYANCE OF INITIAL HOME EQUITY LOANS.
(a) In consideration of the Trustee's delivery to or upon the order of
the Depositor of the Certificates in an aggregate amount equal to the Original
Certificate Principal Balance, the Depositor does hereby transfer, assign, set
over and otherwise convey to the Trustee without recourse (except as provided
herein) all the right, title and interest of the Depositor in and to the Trust
Fund; provided, however, that the Transferor retains the obligation under each
Account Agreement to provide for the future funding of any Additional Balances
thereunder, and neither the Depositor, the Trustee nor the Trust assumes the
obligation to fund any such Additional Balances.
Notwithstanding the characterization of the Certificates as debt for
federal, state and local income and franchise tax purposes, the parties hereto
intend to treat the transfer of the Initial Home Equity Loans from the
Transferor to the Depositor and from the Depositor to the Trust as provided
herein as a sale for non-tax purposes from the Transferor to the Depositor and
from the Depositor to the Trust, respectively, of all of their respective right,
title and interest in and to the Initial Home Equity Loans and other property
described above. In the event the transaction set forth herein is deemed not to
be a sale for the purposes described in the preceding sentence, the Transferor
and the Depositor hereby grant to the Custodian for the benefit of the Trustee a
first priority security interest in all of their respective right, title and
interest in and to (i) the assets of the Trust Fund, and (ii) any Eligible
Substitute Home Equity Loans, Subsequent Home Equity Loans or Additional
Balances added to the Trust Fund from time to time; and this Agreement shall
constitute a security agreement under applicable law.
In connection with such assignment, transfer and conveyance of the Trust
Fund, on or before the Closing Date (i) the Transferor shall file in the
appropriate office of any applicable state, county or other relevant
jurisdiction a UCC-1 financing statement executed by the Transferor as debtor,
naming the Depositor as secured party and listing as collateral the Initial Home
Equity Loans identified on the Home Equity Loan Schedule and all other property
constituting the Trust Fund, and (ii) the Depositor will file in the appropriate
office in the State in which the principal place of business of the Depositor is
located a UCC-1 financing statement executed by the Depositor as debtor, naming
the Trustee as secured party and listing as collateral the Initial Home Equity
Loans identified on the Home Equity Loan Schedule and all other property
constituting the Trust Fund. In connection with such filings, the Transferor and
the Depositor agree that they shall each cause to be filed all necessary
continuation statements thereof and to take or cause to be taken such actions
and execute such documents as are necessary to perfect and protect the
Certificateholders' interests in the Initial Home Equity Loans and the proceeds
thereof allocable thereto.
(b) In connection with the foregoing assignment, transfer and
conveyance by the Transferor and Depositor, and except as provided in the
immediately following paragraph, the Transferor shall deliver to, and deposit
with, the Custodian, on or before the Closing Date, the Mortgage Files,
including but not limited to the following documents or instruments with respect
to each Initial Home Equity Loan so assigned and transferred (other than any
Initial Home Equity Loans that have been prepaid in full before or on the
Initial Cut-off Date):
(i) the original Account Agreement;
(ii) the related Mortgage with evidence of recording indicated
thereon;
(iii) subject to paragraph (e) below, an assignment in blank of
the Mortgage in recordable form (which may be a blanket assignment);
and
(iv) as to each Initial Home Equity Loan with title insurance,
evidence of such insurance (but only to the extent such evidence is
included in the related Mortgage File).
If the Transferor cannot deliver a Mortgage with evidence of recording
thereon concurrently with the execution and delivery of this Agreement, the
Transferor shall deliver to the Custodian, as agent for the Trustee, an
Officer's Certificate, with a photocopy of such Mortgage attached thereto,
stating that such Mortgage has been delivered to the appropriate public
recording office for recordation. Promptly upon receipt thereof from the
applicable public recording office, the Transferor shall deliver to the
Custodian either (i) such Mortgage with evidence of recording thereon or (ii) a
true copy of such Mortgage issued by such public recording office.
(c) The Servicer further confirms to the Trustee and the Certificate
Insurer that it has caused its computer files relating to the Initial Home
Equity Loans or those of any subservicer to clearly and unambiguously indicate
that the Initial Home Equity Loans have been assigned and transferred to the
Trust and constitute part of the Trust Fund in accordance with the terms hereof.
(d) Within sixty(60) days following delivery of the Mortgage Files to
the Custodian, the Custodian shall review or cause to be reviewed each Mortgage
File to ascertain that all required documents set forth in this Section have
been executed and received, and that such documents relate to the Home Equity
Loans identified on the Home Equity Loan Schedule. In so doing, the Custodian
may rely on the purported due execution and genuineness of any signature
thereon. If within such sixty (60) day period the Custodian finds any document
constituting a part of a Mortgage File not to have been executed or received or
to be unrelated to the Home Equity Loans identified in the Home Equity Loan
Schedule, the Custodian shall promptly notify the Transferor, and the Transferor
shall have a period of sixty (60) days after such notice within which to correct
or cure any such defect.
(e) The Transferor shall deliver to the Custodian, within ninety (90)
days of the Closing Date, assignments of each Mortgage in recordable form, which
may be blanket assignments for each county where the Mortgages are located. The
Custodian shall review or cause to be reviewed such assignments within thirty
(30) days of receipt to ascertain that they have been executed, and that they
relate to the Home Equity Loans identified on the Home Equity Loan Schedule. If
the Custodian determines that any required assignments have not been delivered
or any assignments have not been executed, the Custodian shall promptly notify
the Transferor and the Certificate Insurer, and the Transferor shall correct or
cure any such defect.
Within ninety (90) days after the Closing Date, the Transferor shall at its
own expense either (i) submit the assignments of the Mortgages for recording in
the appropriate public offices for real property records and instruct the
recording offices to return the original recorded assignments to the Custodian
or (ii) deliver to the Custodian, an Opinion of Counsel to the effect that the
failure to record the assignments of Mortgage will not impair the validity of
the transfer of the related Home Equity Loans to the Trustee, in which case the
Custodian shall not submit the assignments of Mortgage for recording but instead
shall hold the assignments of Mortgage. The Custodian shall retain a copy of
each assignment of Mortgage submitted for recording. In the event that any such
assignment of Mortgage is lost or returned unrecorded because of a defect
therein, the Transferor, at its own expense, shall promptly prepare a substitute
assignment of Mortgage or cure any such defect, as the case may be, and
thereafter the Transferor shall submit each such assignment of Mortgage for
recording.
If the Transferor fails to deliver to the Custodian or record the
assignments of the Home Equity Loans as provided above, the Custodian shall
prepare and file or cause to be prepared and filed, at the expense of the
Transferor, such assignments in the appropriate real property or other records
and the Transferor hereby appoints the Custodian as its attorney-in-fact with
full power and authority acting in its stead for the purpose of such preparation
and filing.
The Custodian shall have no responsibility for reviewing any Mortgage File
except as expressly provided in Section 2.01(d) and (e). Without limiting the
effect of the preceding sentence, in reviewing any Mortgage File, the Custodian
shall have no responsibility for determining whether any document is valid and
binding, whether the text of any assignment is in proper form (except to
determine that the Trustee is the assignee), whether any document has been
recorded in accordance with the requirements of any applicable jurisdiction or
whether a blanket assignment is permitted in any applicable jurisdiction, but
shall only be required to determine whether a document has been executed, that
it appears to be what it purports to be, and, where applicable, that it purports
to be recorded.
(f) On the Closing Date, the Transferor shall deliver the Certificate
Insurance Policy to the Trustee.
Section 2.02. ACCEPTANCE BY TRUSTEE; REMOVAL OF HOME EQUITY LOANS;
SUBSTITUTION OF ELIGIBLE SUBSTITUTE HOME EQUITY LOANS; SUBSEQUENT HOME EQUITY
LOANS.
(a) The Trustee acknowledges the assignment and transfer of the
Account Agreements and the Mortgages pursuant to Section 2.01, and declares that
it will hold the Trust Fund in trust, upon the terms herein set forth, for the
use and benefit of all present and future Holders, the owner of the Transferor's
Interest and the Certificate Insurer.
(b) If the time to correct or cure any defect of which the Trustee has
notified the Transferor and the Certificate Insurer following any review by the
Trustee of the Mortgage Files pursuant to Section 2.01 has expired without any
correction or cure or if any loss that materially and adversely affects the
interests of the Certificateholders is incurred in respect of any Home Equity
Loan as a result of a material defect in any document constituting a part of a
Mortgage File, then on the Business Day next preceding the Distribution Date in
the month following the Collection Period in which the time to correct or cure
such defect expired or such loss occurred, the Transferor shall deposit in the
Certificate Account 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 Home Equity Loan shall be deemed to be removed,
reassigned and otherwise reconveyed, without recourse, representation or
warranty, to the Transferor or its designee on such Business Day, and the
Principal Balance of such Home Equity Loan shall be deducted from the Pool
Balance; provided, however, that interest accrued on the Principal Balance of
such Home Equity Loan to the end of the related Collection Period shall be the
property of the Trust. The Servicer shall determine if the removal of such
Principal Balance from the Pool Balance in accordance with the preceding
sentence would cause the Transferor's Interest Balance to be less than the
Minimum Transferor's Interest (a "Transfer Deficiency"), in which event the
Servicer shall deliver written notice of such deficiency to the Trustee and to
the Certificate Insurer, and within five Business Days after the Business Day of
such removal, the Transferor shall either (i) substitute one or more Eligible
Substitute Home Equity Loans or (ii) deposit into the Certificate 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 any such Defective Home Equity
Loan.
Upon receipt of any Eligible Substitute Home Equity Loan or of written
notification signed by a Servicing Officer to the effect that the Transfer
Deposit Amount in respect of a Defective Home Equity Loan has been deposited
into the Certificate Account or, if the Transferor's Interest Balance is not
reduced below the Minimum Transferor's Interest as a result of the deemed
removal of a Defective Home Equity Loan, then as promptly as practicable
following such deemed transfer, the Trustee shall execute and deliver such
instrument of transfer or assignment presented to it by the Servicer, in each
case without recourse, as shall be necessary to vest in the Transferor legal and
beneficial ownership of such repurchased or removed Home Equity Loan (including
any property acquired in respect thereof and any insurance policy or Insurance
Proceeds with respect thereto). It is understood and agreed that the obligation
of the Transferor to accept a transfer of a Defective Home Equity Loan and to
either convey an Eligible Substitute Home Equity Loan or to make a deposit of
any related Transfer Deposit Amount into the Certificate Account shall
constitute the sole remedy respecting such defect available to
Certificateholders, the Trustee or the Certificate Insurer.
Notwithstanding any other provision of this paragraph (b), a removal of a
Defective Home Equity Loan to the Transferor pursuant to this Section that would
cause the Transferor's Interest Balance to be less than the Minimum Transferor's
Interest shall not occur if the Transferor fails to either convey an Eligible
Substitute Home Equity Loan or to deposit into the Certificate Account any
related Transfer Deposit Amount required by this paragraph (b) with respect to
the transfer of such Defective Home Equity Loan.
(c) For any Collection Period during which there is a Transfer
Deficiency, the Servicer shall determine the Transfer Deposit Amount, if any,
which shall be deposited by the Transferor into the Certificate Account on the
Business Day next preceding the Distribution Date occurring in the month
following such Collection Period. If the Transferor substitutes one or more
Eligible Substitute Home Equity Loans, all amounts received in respect of the
Eligible Substitute Home Equity Loan or Loans during the Collection Period in
which the circumstances giving rise to the relevant substitution occur shall not
be a part of the Trust Fund and shall not be deposited by the Servicer into the
Certificate Account. All amounts received by the Servicer in respect of any
Defective Home Equity Loan removed from the Trust Fund during the Collection
Period in which the circumstances giving rise to such removal occur shall be
deposited by the Servicer into the Certificate Account. Upon the substitution of
an Eligible Substitute Home Equity Loan or Loans, such Home Equity Loans shall
be subject to the terms of this Agreement in all respects, and the Transferor
shall be deemed to have (i) entered into or made with respect to such Eligible
Substitute Home Equity Loan or Loans, as of the date of substitution, the
covenants, representations and warranties set forth in Section 2.04 and (ii)
represented that such Eligible Substitute Home Equity Loan satisfies the
criteria set forth in the definition of "Eligible Substitute Home Equity Loan"
herein. The procedures applied by the Transferor in selecting each Eligible
Substitute Home Equity Loan shall not be adverse to the interests of the
Trustee, the Certificate Insurer and the Certificateholders.
The provisions of this paragraph (c) shall apply to (i) any removal of a
Defective Home Equity Loan or Loans and (ii) the substitution of Eligible
Substitute Home Equity Loan or Loans pursuant to Section 2.04 and 3.01(e).
The Home Equity Loan Schedule shall be amended from time to time by the
Servicer to reflect the removal of any Home Equity Loans from the Trust Fund,
the substitution of any Eligible Substitute Home Equity Loans, and the
conveyance of any Subsequent Home Equity Loans to the Trust Fund. When so
amended, the Home Equity Loan Schedule shall include the information set forth
above with respect to each Eligible Substitute Home Equity Loan and/or
Subsequent Home Equity Loan as of the date of substitution or related Cut-off
Date, respectively.
Section 2.03. REPRESENTATIONS AND WARRANTIES REGARDING THE SERVICER.
(a) The Servicer represents and warrants to the Trustee, the
Certificate Insurer and the Certificateholders that:
(i) The Servicer is a national banking association duly
organized, validly existing and in good standing under the laws of
the United States and has the corporate power to own its assets and to
transact the business in which it is currently engaged;
(ii) The Servicer has the power and authority to make,
execute, deliver and perform this Agreement and all of the
transactions contemplated under this Agreement, and has taken all
necessary corporate action to authorize the execution, delivery and
performance of this Agreement. When executed and delivered, this
Agreement will constitute the legal, valid and binding obligation of
the Servicer enforceable in accordance with its terms, except as
enforcement of such terms may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally
and the rights of creditors of national banking associations and by
the availability of equitable remedies;
(iii) The Servicer is not required to obtain the consent of any
other party or any consent, license, approval or authorization from,
or registration or declaration with, any governmental authority,
bureau or agency, which consent the Servicer has not already obtained
in connection with the execution, delivery, performance, validity or
enforceability of this Agreement; provided, that the Servicer makes no
representation or warranty regarding state securities or blue sky laws
in connection with the distribution of the Certificates;
(iv) The execution, delivery and performance of this Agreement
by the Servicer will not violate any provision of any existing law or
regulation or any order or decree of any court applicable to the
Servicer or the charter or bylaws of the Servicer, or constitute a
material breach of any mortgage, indenture, contract or other
agreement to which the Servicer is a party or by which the Servicer is
bound;
(v) No litigation or administrative proceeding of or before any
court, tribunal or governmental body is currently pending or, to the
knowledge of the Servicer, threatened, against the Servicer or any of
its properties or with respect to this Agreement or the Certificates
which, in the opinion of the Servicer, would have a material adverse
effect on the transactions contemplated by this Agreement; and
(vi)On the Closing Date, pursuant to the Sale Agreement, the
Transferor will assign and transfer all of its right, title and
interest in the Initial Home Equity Loans to the Depositor.
(b) Upon discovery by the Depositor, the Servicer or the Trustee of a
breach of any of the foregoing representations and warranties in paragraph (a)
above that materially and adversely affects the interests of the
Certificateholders, the party discovering such breach shall give prompt written
notice to the other parties. Within sixty (60) days of its discovery or receipt
of notice of any such breach, the Transferor shall use all reasonable efforts to
cure such breach in all material respects.
Section 2.04. REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR REGARDING
THE INITIAL HOME EQUITY LOANS; REPURCHASE AND SUBSTITUTION OBLIGATIONS. As
indicated in Section 2.03(a)(vi), on the Closing Date the Initial Home Equity
Loans are being assigned and transferred by the Transferor to the Depositor
pursuant to the Sale Agreement. In connection with such assignment and transfer,
the Transferor is making the representations and warranties in this Section 2.04
to the Depositor. As a condition of the purchase by the Depositor, the Depositor
has required that the Transferor make such representations and warranties
directly to the Trustee, the Certificate Insurer and the Certificateholders, so
that the Trustee may recover directly against the Transferor on such
representations and warranties rather than indirectly through claims by the
Depositor against the Transferor. Consequently, the Transferor represents and
warrants to the Trustee, the Certificate Insurer and the Certificateholders as
to each Initial Home Equity Loan that, as of the Statistical Calculation Date
(unless otherwise specified):
(i) The information set forth in the Home Equity Loan Schedule
was true and correct in all material respects as of the date or dates
respecting which such information was furnished;
(ii) As of the Closing Date, each Mortgage is a valid lien on
the related Mortgaged Property subject only to (a) the lien of current
real property taxes and assessments, (b) any related senior mortgage,
(c) covenants, conditions and restrictions, rights of way, easements
and other matters of public record as of the date of recording of such
Mortgage, such exceptions appearing of record being acceptable to
mortgage lending institutions generally in the area in which the
related Mortgaged Property is located or specifically reflected in the
Property Valuation obtained in connection with its origination and (d)
other matters to which like properties are commonly subject which do
not materially interfere with the benefits of the security intended to
be provided by such Mortgage;
(iii) As of the Closing Date, immediately prior to the transfer
and assignment by the Transferor to the Depositor referred to in
Section 2.03(a)(vi) hereof and the transfer and assignment by the
Depositor to the Trust Fund referred to in Section 2.01, the
Transferor had good title to each Initial Home Equity Loan and was
authorized to assign and transfer each Initial Home Equity Loan to the
Depositor;
(iv) No payment of interest on or in respect of any Initial Home
Equity Loan is more than ninety (90) days delinquent;
(v) To the best knowledge of the Transferor, there is no
mechanics' lien or claim for work, labor or material affecting the
premises subject to any Mortgage which is or may be a lien prior to,
or equal or concurrent with, the lien of such Mortgage except those
which are insured against by a title insurance policy referred to in
(x) below or which are immaterial in nature;
(vi) To the best knowledge of the Transferor, there is no
delinquent tax or assessment lien against any Mortgaged Property;
(vii) As of the Closing Date, to the best knowledge of the
Transferor, there is no valid offset, defense or counterclaim to any
Account Agreement or Mortgage;
(viii) To the best knowledge of the Transferor, without
independent investigation, the related Mortgaged Property is free of
material damage, including damage by water, flood or similar casualty,
and is in good repair (excluding any damage to such Mortgaged Property
from the presence of hazardous wastes or hazardous substances, as to
which no representation or warranty is made);
(ix) As of the date of origination of each Initial Home Equity
Loan and as of the Closing Date, all applicable requirements of
federal, state or local laws, including truth-in-lending, real estate
settlement procedures, consumer credit protection, equal credit
opportunity and disclosure laws and the regulations promulgated
thereunder that are applicable to the origination and servicing of
such Initial Home Equity Loans have been complied with in all material
respects, and the consummation of the transactions herein
contemplated, including the payment of interest to Certificateholders,
will not violate such laws in any material respect;
(x) As of the Closing Date, as to each Initial Home Equity Loan
for which title insurance is included in the related Mortgage File, a
lender's title insurance policy or binder, or other assurance of title
customary in the relevant jurisdiction therefor, was issued on or as
of the date of the recording of the related Mortgage, and each such
policy or binder is valid and remains in full force and effect;
(xi) The Transferor has not received a notice of default of any
senior mortgage related to a Mortgaged Property that has not been
cured by a party other than the Transferor;
(xii) As of the Closing Date and as to each Initial Home Equity
Loan, the definition of "Prime Rate" for each day set forth in the
related Account Agreement is the highest prime rate published on the
last Business Day of the preceding month in the "Money Rates" section
of The Wall Street Journal (and during such Home Equity Loan's
amortization period as determined every six (6) months);
(xiii) At the date of the origination of each Initial Home
Equity Loan, the Combined Loan-to-Value Ratio for each Initial Home
Equity Loan was not in excess of 125%;
(xiv) Approximately 98.68% of the Initial Home Equity Loans by
Initial Cut-off Date Principal Balance were, as of the date of their
origination, the primary residences of the related Mortgagors, based
on representations made by such Mortgagors;
(xv) With respect to each Initial Home Equity Loan originated by
the Transferor, the Transferor performed or obtained an evaluation of
the value of the related Mortgaged Property in connection with the
origination of such Initial Home Equity Loan;
(xvi) As of the Closing Date, no selection procedure believed by
the Transferor to be adverse to the interests of the
Certificateholders and the Certificate Insurer was used in selecting
the Initial Home Equity Loans for inclusion in the Trust Fund;
(xvii) On or before the date of origination of each Initial Home
Equity Loan with a Credit Limit of $50,000 or more originated before
June 1998, the Transferor verified that: (a) the related Mortgagor had
procured a hazard insurance policy that insures against loss by fire
and by hazards included within the term "extended coverage" for the
related Mortgaged Property in an amount acceptable to the Transferor;
(b) such policy contained a standard mortgagee's clause with an
appropriate endorsement in favor of the Transferor; and (c) the
coverage would extend for at least thirty (30) days following the
origination of such Initial Home Equity Loan. In general, such hazard
insurance policy for each Initial Home Equity Loan was in an amount
approximately equal to the lesser of: (y) the full insurable value of
the improvements located on the related Mortgaged Property; or (z) the
sum of the Credit Limit of such Initial Home Equity Loan and the
outstanding balance of any mortgage senior to such Initial Home Equity
Loan; and
(xviii) If, at the time of origination, the related Mortgaged
Property was located in an area designated by the Federal Emergency
Management Agency as having special flood hazards, the Transferor
required that the related Mortgagor obtain a flood insurance policy
that met the then-current guidelines of the Federal Emergency
Management Agency from an insurance carrier that was acceptable to the
Transferor in an amount representing coverage not less than the least
of: (a) the sum of the Credit Limit of such Initial Home Equity Loan
and the outstanding balance of any mortgage senior to such Initial
Home Equity Loan; (b) the full insurable value of improvements located
on such Mortgaged Property; or (c) the minimum amount of insurance
which is available under the federal flood insurance laws.
The representations and warranties set forth in this Section shall survive
the transfer and assignment of the Initial Home Equity Loans to the Depositor,
and the transfer and assignment thereof by the Depositor to the Trust. Upon
discovery by the Depositor, the Servicer or the Trustee of a breach of any of
the foregoing representations and warranties, without regard to any limitation
set forth in such representation or warranty concerning the knowledge of the
Transferor as to the facts stated therein, which materially and adversely
affects the interests of the Certificateholders or the Certificate Insurer in
the related Initial Home Equity Loan, the party discovering such breach shall
give prompt written notice to the other parties hereto. Within sixty (60) days
of its discovery or receipt of notice by the Transferor of any such breach, the
Transferor shall use all reasonable efforts to cure such breach in all material
respects. Unless at the expiration of such sixty (60)-day period, such breach
has been cured in all material respects or otherwise does not exist or continue
to exist, if as a result of such breach the Certificateholders' or Certificate
Insurer's rights with respect to such Home Equity Loan are impaired, the
Transferor shall, not later than the Business Day next preceding the
Distribution Date in the month following the related Collection Period in which
any such cure period expired, either (i) repurchase such Defective Home Equity
Loan (including any property acquired in respect thereof and any insurance
policy or Insurance Proceeds with respect thereto) from the Trust Fund or (ii)
remove such Defective Home Equity Loan from the Trust Fund and substitute in its
place an Eligible Substitute Home Equity Loan or Loans, in either case in the
same manner and subject to the same conditions as set forth in Section 2.02.
Upon making any such repurchase or removal, the Transferor shall be entitled to
receive an instrument of assignment of the repurchased or removed Home Equity
Loan from the Trustee to the extent set forth in Section 2.02. The obligation of
the Transferor to repurchase or remove any such Defective Home Equity Loan (or
property acquired in respect thereof) shall constitute the sole remedy against
the Transferor with respect to such breach of the foregoing representations or
warranties available to Certificateholders, the Trustee on behalf of
Certificateholders, or the Certificate Insurer.
Section 2.05. EXECUTION AND AUTHENTICATION OF CERTIFICATES. The Trustee has
caused to be executed, countersigned and delivered to or upon the order of the
Depositor, concurrently with the transfer and assignment by the Depositor to the
Trust of the Initial Home Equity Loans, Certificates in authorized denominations
that, together with the Transferor's Interest, evidence the entire ownership
interest in the Trust Fund.
Section 2.06. REMOVAL OF HOME EQUITY LOANS AT ELECTION OF THE TRANSFEROR.
Subject to the conditions set forth below, the Transferor may, but shall
not be obligated to, require the removal of certain Home Equity Loans from the
Trust to the Transferor as of the related Removal Date. On or before the fifth
(5th) Business Day (each, a "Removal Notice Date") prior to the Removal Date
designated in such notice, the Transferor shall give the Trustee a notice of the
proposed removal that contains a list of the Home Equity Loans to be so removed.
Such removal of Home Equity Loans shall be permitted upon satisfaction of the
following conditions:
(i) No Rapid Amortization Event shall have occurred;
(ii) On the Removal Notice Date, the Transferor's Interest
Balance (after giving effect on a pro forma basis to the removal from
the Trust of the Home Equity Loans to be removed) is at least equal to
the Minimum Transferor's Interest;
(iii) The removal of any Home Equity Loan on any Removal Date
shall not, in the reasonable belief of the Transferor, cause a Rapid
Amortization Event to occur or an event that with notice or lapse of
time or both would constitute a Rapid Amortization Event;
(iv) Within ten days after the Removal Date, the Transferor
shall have delivered to the Trustee a revised Home Equity Loan
Schedule, reflecting the proposed removal and on the Removal Date, the
Transferor shall have caused the portions of its records relating
to the Home Equity Loans to be clearly and unambiguously marked to
show that the Home Equity Loans removed from the Trust and transferred
to the Transferor are no longer owned by the Trust;
(v) The Transferor shall represent and warrant that no selection
procedures reasonably believed by the Transferor to be adverse to the
interests of the Certificateholders or the Certificate Insurer were
utilized in selecting the Home Equity Loans to be removed from the
Trust;
(vi) In connection with the first removal of Home Equity Loans
pursuant to this Section, each Rating Agency shall have received on or
prior to the related Removal Notice Date written notice of such
proposed removal of Home Equity Loans and, prior to such Removal Date,
shall have notified the Transferor in writing that such removal of
Home Equity Loans would not result in a qualification, reduction or
withdrawal of its then-current rating of the Certificates without
taking into account the Certificate Insurance Policy; and
(vii) The Transferor shall have delivered to the Trustee and the
Certificate Insurer an Officer's Certificate certifying that the items
set forth in subparagraphs (i) through (vi) have been performed or are
true and correct, as the case may be. The Trustee may conclusively
rely on such Officer's Certificate, shall have no duty to make
inquiries with regard to the matters set forth therein and shall incur
no liability in so relying.
Upon satisfaction of the above conditions, on the related Removal Date, the
Trustee shall execute and deliver to the Transferor such instruments of
assignment and other documents prepared by the Transferor as shall be reasonably
necessary to remove such Home Equity Loan or Loans from the Trust and transfer
the same to the Transferor. Any such transfer of the Trust's right, title and
interest in and to Home Equity Loans to the Transferor shall be without
recourse, representation or warranty by the Trust to the Transferor.
The Home Equity Loan Schedule shall be amended to reflect all removals of
Home Equity Loans provided for in this Section.
Section 2.07. TAX TREATMENT. It is the intention of the Transferor, the
Depositor, the Servicer, the owner of the Transferor's Interest and the
Certificateholders (and Certificate Owners) that the Certificates will be
treated as indebtedness for federal, state and local income and franchise tax
purposes and for purposes of any other tax imposed on or measured by income. The
Transferor, the Depositor, the Servicer, the owner of the Transferor's Interest,
the Trustee and each Certificateholder (and Certificate Owner) by acceptance of
its Certificate (or, in the case of a Certificate Owner, by virtue of such
Certificate Owner's acquisition of a beneficial interest therein) agree to treat
the Certificates (or beneficial interest therein), for purposes of federal,
state and local income and franchise tax, as indebtedness secured by the Home
Equity Loans and to report the transactions contemplated by this Agreement on
all applicable tax returns in a manner consistent with such treatment. Each
Certificateholder agrees that it will cause any Certificate Owner acquiring an
interest in a Certificate through it to comply with this Agreement as to
treatment as indebtedness for federal, state and local income and franchise tax
purposes and for purposes of any other tax imposed on or measured by income.
Furthermore, the Trustee shall treat the Trust as a security device only, and
shall not file tax returns or obtain an employer identification number on behalf
of the Trust.
Section 2.08. COVENANTS OF THE DEPOSITOR. The Depositor shall not, without
the prior written consent of the Certificate Insurer and the Trustee (which
consent of the Trustee shall be given only upon the delivery to the Trustee by
the Depositor of a letter from each Rating Agency to the effect that any of the
following will not result in a qualification, reduction or withdrawal of its
then-current rating of the Certificates), do any of the following:
(i) dissolve or liquidate, in whole or in part, or file a
petition to take advantage of any applicable insolvency, bankruptcy or
reorganization statute;
(ii) merge or consolidate with any other corporation other than
a corporation wholly owned, directly or indirectly, by the Indirect
Parent, having a certificate of incorporation containing provisions
identical to the covenants of this Section and executing an agreement
of assumption to perform every obligation of the Depositor hereunder;
or
(iii) incur any indebtedness except in connection with, or
relating to, the issuance of obligations that are rated in the highest
rating category of each Rating Agency.
<PAGE>
ARTICLE III
Administration and Servicing of Home Equity Loans
Section 3.01. PROVIDIAN TO ACT AS SERVICER; CERTAIN TRANSFEROR REPURCHASE
OBLIGATIONS.
(a) The Servicer shall service and administer the Home Equity Loans in
accordance with its customary servicing procedures. The Servicer shall have full
power and independent authority to do any and all things which, in the judgment
of the Servicer, are required or advisable to service and administer the Home
Equity Loans. Without limiting the generality of the foregoing, the Servicer
shall continue, and is hereby authorized and empowered by the Trustee, to
execute and deliver, on behalf of itself, the Certificateholders and the Trustee
or any of them, any and all instruments of satisfaction or cancellation, or of
partial or full release or discharge and all other comparable instruments, with
respect to the Home Equity Loans and the related Mortgaged Properties. The
Trustee shall execute, at the Servicer's direction, any special or limited
powers of attorney and other documents necessary or appropriate to enable the
Servicer to carry out its servicing and administrative duties hereunder.
The relationship of the Servicer (and of any successor to the Servicer as
servicer under this Agreement) to the Trustee under this Agreement is intended
by the parties to be that of an independent contractor and not that of a joint
venturer, partner or agent.
(b) In connection with its servicing and administration of the Home
Equity Loans, the Servicer may consent to the placing or refinancing of a lien
senior to that of the Mortgage on the related Mortgaged Property. Any such
consent shall be consistent with the Servicer's then current practice respecting
comparable home equity loans held in its own portfolio and may be given only in
the following situations:
(i) the Combined Loan-to-Value Ratio of the related Home Equity
Loan following such placing or refinancing of a senior lien, based
upon a current evaluation of the Mortgaged Property, does not exceed
the Combined Loan-to-Value Ratio at origination of such Home Equity
Loan; or
(ii) such placement of a new senior lien is in connection with
the refinancing of an outstanding senior lien and the principal
balance of the new senior lien does not exceed the unpaid principal
balance of the outstanding senior lien (excluding increases in the
principal balance of the new senior lien due to closing costs, points
and other funds for the Mortgagor's use, not to exceed 10% of the
principal balance of the new senior lien);
provided, however, that any such consent shall be in compliance with the
negative covenants made by the Servicer in the Insurance Agreement with respect
to the placing or refinancing of a lien senior to that of the Mortgage on the
related Mortgaged Properties for the Home Equity Loans.
(c) Subject to the provisions of subsection (d), in connection with
its servicing and administration of the Home Equity Loans, the Servicer may
increase the Credit Limit specified in the related Account Agreement by
modifying such Account Agreement to provide for an additional amount. The
Combined Loan-to-Value Ratio of such Home Equity Loan immediately following such
modification, based on a current evaluation of the related Mortgaged Property,
shall not exceed 125%. In addition, and subject to subsection (d), the Servicer
may decrease the Margin of a Home Equity Loan specified in the related Account
Agreement by modifying such Account Agreement.
(d) In connection with its servicing and administration of the Home
Equity Loans and at the request of a Mortgagor or at its own initiative, the
Servicer may, subject to applicable law, agree to amend, modify or waive
compliance by such Mortgagor with the related Account Agreement or any provision
thereof; provided, that any such amendment, modification or waiver (i) is
required by law or (ii) (A) is consistent with the Servicer's then current
practice respecting comparable home equity loans held in its own portfolio, (B)
does not materially and adversely affect the interests of the
Certificateholders, and (C) is consistent with prudent lending business
practices. Any modification, waiver or change of the nature described in Section
3.01(a) shall be deemed not to violate this paragraph (d).
(e) In the event that:
(i) the Transferor or the Servicer (if not the Transferor), at
the direction of the Transferor, consents to (A) the placing or
refinancing of a senior lien that does not satisfy the requirements of
Section 3.01(b), (B) the modification of an Account Agreement to
provide for an increased Credit Limit resulting in a Combined Loan-to-
Value Ratio exceeding the limitation specified in Section 3.01(c), or
(C) the modification or waiver of an Account Agreement that does not
satisfy the requirements of Section 3.01(d); or
(ii) any loss is suffered by the Trust Fund in respect of any
Home Equity Loan as a result of the Transferor's failure to file on or
within ninety (90) days subsequent to the Closing Date of the UCC-1
financing statements referred to in Section 2.01(a);
then, in each case, the Transferor shall, not later than the Business Day
immediately preceding the Distribution Date in the month following the
Collection Period in which such modification, change, loss or consent occurred,
either repurchase the applicable Home Equity Loan or Loans, or substitute one or
more Eligible Substitute Home Equity Loans for such Home Equity Loan or Loans.
Each repurchase or substitution shall be accomplished in the same manner
and subject to the same conditions as set forth in Section 2.02. Upon completing
any such repurchase or substitution, the Transferor shall be entitled to receive
an instrument of assignment or transfer from the Trustee to the same extent as
set forth in Section 2.02.
The Home Equity Loan Schedule shall be amended to reflect all deletions or
substitutions of Home Equity Loans provided for in this Section.
(f) The Servicer, in its sole discretion, may grant an extension of
the Conversion Date of any Home Equity Loan; provided, that the extension does
not cause the Home Equity Loan's maturity to occur after the Scheduled Maturity
Date.
(g) Any Home Equity Loans as to which payments have been deferred
pursuant to a Home Protection Plan or any similar plan offered by the Transferor
providing for deferral of payments shall not be considered delinquent or in
default for any purpose under this Agreement.
Section 3.02. COLLECTION OF CERTAIN HOME EQUITY LOAN PAYMENTS.
(a) The Servicer shall make reasonable efforts to collect all payments
called for under the terms and provisions of the Home Equity Loans and shall, to
the extent such procedures shall be consistent with this Agreement, follow such
collection procedures as it follows with respect to home equity loans in its own
servicing portfolio comparable to the Home Equity Loans. Consistent with, and
without limiting the generality of, the foregoing, the Servicer may, in its
discretion, do the following:
(i) waive any late payment charge or any assumption fees or
other fees that may be collected in the ordinary course of servicing
the Home Equity Loans;
(ii) if a Mortgagor is in default or about to be in default
because of such Mortgagor's financial condition, arrange with such
Mortgagor a schedule for the payment of any unpaid interest or
principal, if such arrangement is determined by the Servicer to be
reasonable and consistent with its then-current practice respecting
comparable home equity loans held in its own portfolio, including its
practices regarding home equity loans secured by mortgaged properties
located in federally designated disaster areas; and
(iii) waive compliance with or modify the terms of a Home Equity
Loan as appropriate to permit the related Mortgagor to bring such Home
Equity Loan current and/or remedy any deviations from compliance with
the documentation for such Home Equity Loan.
(b) On or before the Closing Date, the Servicer shall establish and
maintain with the Trustee the Collection Account as a single, separate trust
account. After the Closing Date, the Servicer shall, on a daily basis, deposit
into the Collection Account, within two (2) Business Days following the date of
processing (or, in the case of any repurchases or removals pursuant to Section
2.02, 2.04 or 3.01, the Servicer shall deposit into the Collection Account on
the Business Day immediately preceding the related Distribution Date), the
following payments on and collections in respect of the Home Equity Loans:
(i) All Interest Collections and, except during the Revolving
Period, Principal Collections (but only to the extent specified
below);
(ii) The Transfer Deposit Amount in respect of any Home Equity
Loans transferred, substituted or repurchased pursuant to Sections
2.02, 2.04 and 3.01;
(iii) All Net Liquidation Proceeds; and
(iv) All Insurance Proceeds (including, for this purpose, any
amounts required to be applied by the Servicer pursuant to the last
sentence of the following paragraph).
The foregoing requirements with respect to deposits to the Collection
Account are exclusive. Without limiting the generality of the preceding
sentence, the Servicer shall not be required to deposit into the Collection
Account amounts received by the Servicer for the account of Mortgagors for
application towards the payment of taxes, insurance premiums, assessments and
similar items. If any such amounts are deposited into the Collection Account,
the Trustee shall remit such amounts to the Servicer at the Servicer's direction
in accordance with the Servicer's normal servicing procedures. The Servicer
shall apply any Insurance Proceeds received in respect of a Home Equity Loan in
reduction of the Principal Balance thereof.
Notwithstanding anything to the contrary in this subsection (b), for so
long as Providian remains the Servicer and at such future time as Providian
receives a certificate of deposit rating of "P-1" by Moody's and "A-1" or better
by S&P, then the Servicer need not make the daily deposits into the Collection
Account as provided in this subsection (b), but may make a single monthly
remittance by wire transfer to the Trustee for deposit into the Collection
Account not later than the Business Day preceding the related Distribution Date.
Subject to the foregoing, during the Managed Amortization Period, deposits
of Principal Collections into the Collection Account for any Collection Period
and day during such Collection Period shall be made in an amount (but only if
such amount is greater than $0) equal to the aggregate amount of Principal
Collections for such Collection Period through such day less the sum of (i) the
aggregate amount of draws by Mortgagors for such Collection Period through such
day and (ii) the aggregate amount of Principal Collections for such Collection
Period previously deposited into the Collection Account prior to such day.
Notwithstanding the foregoing and regardless of whether the Servicer is
required to make deposits into the Collection Account on a daily basis or a
monthly basis pursuant to this subsection (b), so long as (i) the Transferor's
Interest Balance exceeds the Minimum Transferor's Interest and (ii) the Servicer
(A) maintains long-term unsecured debt ratings of "Baa3" or higher by Moody's
and "BBB-" or higher by S&P or (B) has provided to the Trustee a letter of
credit covering collection risk of the Servicer acceptable to each Rating
Agency, the Servicer shall only be required to deposit funds into the Collection
Account in an amount up to, but not in excess of, the amount to be distributed
to Certificateholders and the Certificate Insurer on the related Distribution
Date.
(c) At the direction of the Servicer signed by a Servicing Officer, to
the extent reasonably practical the Trustee shall invest any funds in the
Collection Account in Permitted Investments specified in such direction
(including obligations of the Trustee or any of its affiliates, if such
obligations otherwise qualify as Permitted Investments). Such direction (i)
shall be in writing, (ii) may be in the form of standing instructions and (iii)
shall certify that the specified investments constitute Permitted Investments
and mature at the time required by this paragraph (c). Each investment shall
mature not later than the Business Day immediately preceding the Distribution
Date next following the date of such investment (unless the obligor in respect
of such investment is the Trustee and the Trustee is making the distributions
specified in Article V, in which case such investment may mature on such
Distribution Date) and shall not be sold or disposed of prior to its maturity.
All net income and gain realized from any such investment of funds shall be
included in Interest Collections and deposited into the Collection Account on
each Distribution Date. The Trustee shall not be liable for any loss incurred in
connection with any such investment except with respect to any investment issued
or guaranteed by the Trustee in its individual capacity.
Section 3.03. PERMITTED WITHDRAWALS FROM THE COLLECTION ACCOUNT.
(a) The Trustee may, from time to time, make withdrawals from the
Collection Account, subject to the conditions (including the receipt of
directions from the Servicer) and for the purposes set forth in this Agreement,
including the following:
(i) to make deposits into the Certificate Account pursuant to
Section 4.02;
(ii) to reimburse or indemnify the Servicer to the extent
required or permitted by Section 7.03;
(iii) to pay accrued and unpaid Servicing Fees;
(iv) to pay the Transferor amounts received in respect
of Defective Home Equity Loans during the Collection Period in which
such Defective Home Equity Loans were replaced, substituted for or
repurchased or which were otherwise reflected in the calculation of
the related Transfer Deposit Amount;
(v) to pay the Transferor any remaining funds in the Collection
Account after terminating the Collection Account in connection with
the termination of the Trust in accordance with Section 10.01;
(vi) to pay the Transferor an amount equal to the excess of the
amount on deposit in the Collection Account over the amount required
to be distributed on the following Distribution Date pursuant to
Section 5.01; and
(vii) to pay the Transferor any Transfer Deposit Amount, or
portion thereof, that is no longer required to be deposited in the
Collection Account when no Transfer Deficiency exists.
(b) Any provision herein to the contrary notwithstanding, if the
Servicer deposits into the Collection Account any amount not required to be
deposited therein pursuant to Section 3.02(b), the Servicer may at any time
instruct the Trustee to withdraw such amount from the Collection Account and to
pay such amount to the Servicer. The Servicer shall deliver an Officer's
Certificate to the Trustee which states that it is submitted pursuant to this
subsection (b) and specifies any amounts deposited in error. If the facts set
forth on the face of such Officer's Certificate indicate that amounts deposited
were not required to be deposited into the Collection Account pursuant to
Section 3.02(b), the Trustee shall withdraw such amount and pay over such amount
to the Servicer.
(c) Any provision herein to the contrary notwithstanding, the Servicer
may debit against any amount required to be deposited into the Collection
Account any amount previously deposited into the Collection Account in respect
of any payments by Mortgagors made by checks subsequently returned for
insufficient funds or other reason for non-payment.
Section 3.04. FLOOD INSURANCE POLICY, PROPERTY PROTECTION EXPENSES. If a
Mortgaged Property is in an area identified at the time of origination in the
Federal Register by the Federal Emergency Management Agency as having special
flood hazards, the Servicer shall cause to be maintained flood insurance
coverage, if available, with a generally acceptable insurance carrier, in an
amount representing coverage not less than the least of (i) the Credit Limit of
the related Home Equity Loan plus the outstanding balance of any mortgage senior
to that of such Home Equity Loan, (ii) the full insurable value of any
improvements located on such Mortgaged Property or (iii) the minimum amount
required under the federal flood insurance laws.
The Servicer shall incur, or refrain from incurring, Liquidation Expenses
and Property Protection Expenses with respect to Home Equity Loans in a manner
consistent with this Agreement and the Servicer's then-current practice
respecting comparable home equity loans in its own portfolio. Anything contained
herein to the contrary notwithstanding, the Servicer shall have the right to
assign, transfer, abandon or surrender any Mortgaged Property if, in the good
faith judgment of the Servicer, continued retention of such interest in such
Mortgaged Property could result in Liquidation Expenses and Property Protection
Expenses with respect to the related Home Equity Loan that may exceed
Liquidation Proceeds. Notwithstanding the immediately preceding sentence, the
Servicer shall be reimbursed for amounts expended for Property Protection
Expenses and Liquidation Expenses with respect to Home Equity Loans in
accordance with the terms of this Agreement.
Section 3.05. MORTGAGOR TRANSFERS OF MORTGAGED PROPERTIES. In any case in
which the Servicer becomes aware that a Mortgaged Property has been conveyed by
the related Mortgagor (except to, or for the benefit of, such Mortgagor, a
co-mortgagor or relative of such Mortgagor), the Servicer shall take reasonable
steps to freeze the Credit Limit of the related Home Equity Loan at the level of
the current outstanding Principal Balance thereof. Notwithstanding the
Servicer's efforts to freeze a Credit Limit under such circumstances, the
Principal Balance of the related Home Equity Loan may include any charges which
may accrue subsequent to the date of such freeze. The Servicer shall exercise or
refrain from exercising its right to undertake to collect the full amount due
under the related Account Agreement consistent with the then-current practice of
the Servicer and without regard to the inclusion of such Home Equity Loan in the
Trust Fund rather than the Servicer's own portfolio. If the Servicer elects not
to enforce its right to accelerate and collect the full amount of such Home
Equity Loan or if it is prevented from doing so by applicable law, the Servicer
is authorized to take or enter into an assumption and modification agreement
from or with the Person to whom such Mortgaged Property has been or is about to
be conveyed, pursuant to which such Person becomes liable under the related
Account Agreement. If deemed appropriate by the Servicer, after the Person to
whom such Mortgaged Property has been or is about to be conveyed enters into an
assumption and modification agreement, the original Mortgagor may be released
from liability. The Servicer shall notify the Trustee that any assumption and
modification agreement has been completed by delivering to the Trustee an
Officer's Certificate certifying that such agreement is in compliance with this
Section, and by forwarding to the Custodian, as agent for the Trustee, the
original copy of such assumption and modification agreement. Any such assumption
and modification agreement shall, for all purposes, be considered a part of the
related Mortgage File to the same extent as all other documents and instruments
constituting a part thereof. No change in the terms of the related Account
Agreement may be made by the Servicer in connection with any such assumption to
the extent that such change would not be permitted to be made in respect of the
original Account Agreement pursuant to Section 3.01(d).
Notwithstanding any provision of this Agreement to the contrary, the
Servicer shall not be deemed to be in default, breach or otherwise in violation
of its obligations hereunder by reason of any transfer of a Mortgaged Property
which occurs by operation of law or which the Servicer is restricted by law from
preventing.
Section 3.06. REALIZATION UPON DEFAULTED HOME EQUITY LOANS. The Servicer
shall foreclose upon or otherwise comparably convert to ownership Mortgaged
Properties securing such of the Home Equity Loans as come into and continue in
delinquency or default and as to which no satisfactory arrangements can be made
for collection of delinquent payments pursuant to Section 3.02. In connection
with such foreclosure or other conversion, the Servicer shall follow such
practices (including, in the case of any delinquency or default on a related
senior mortgage, the advancing of funds to correct such delinquency or default)
and procedures as it shall deem necessary or advisable and as shall be normal
and usual in the general home equity loan servicing activities of the Servicer.
The Servicer shall be reimbursed for Property Protection Expenses incurred by it
out of the related Liquidation Proceeds or, if such proceeds are inadequate, out
of other amounts in the Collection Account. Notwithstanding the foregoing, the
Servicer shall not be required (i) to expend its own funds in connection with
any foreclosure or towards the correction of any delinquency or default on a
related senior mortgage or restoration of any property unless, in the reasonable
judgment of the Servicer, such foreclosure, correction or restoration will
increase Net Liquidation Proceeds, or (ii) to foreclose upon or otherwise
convert to ownership any Mortgaged Property which the Servicer has determined
may be materially contaminated with hazardous wastes or hazardous substances.
All Net Liquidation Proceeds or other proceeds of any defaulted Home Equity Loan
(net of any related Property Protection Expenses) shall be deposited into the
Collection Account.
In the event that title to any Mortgaged Property securing a Home Equity
Loan is acquired in foreclosure or by deed in lieu of foreclosure, the deed or
certificate of sale shall be issued to the Servicer on behalf of the Trust, to
the Trustee on behalf of Certificateholders or to the Trustee's nominee on
behalf of Certificateholders. The Servicer or an affiliate of the Servicer shall
maintain a blanket hazard insurance policy covering hazard losses on such
Mortgaged Property for the benefit of the Trust.
Section 3.07. TRUSTEE AND CUSTODIAN TO COOPERATE. Upon the payment in full
of the Principal Balance of any Home Equity Loan and closing of the related
account or the recovery of all Net Liquidation Proceeds with respect to any Home
Equity Loan, the Servicer shall notify the Trustee by a certification (which
certification shall include a statement to the effect that all amounts received
in connection with such payment which are required to be deposited into the
Collection Account pursuant to Section 3.02 have been so deposited) of a
Servicing Officer. Such notification shall be made each month at the time that
the Servicer delivers the Servicing Certificate to the Trustee pursuant to
Section 4.01. Upon any such payment or recovery, the Servicer is authorized to
execute, pursuant to the authorization contained in Section 3.01, if the
Principal Balance of such Home Equity Loan equals zero, an instrument of
satisfaction regarding the related Mortgage, which instrument of satisfaction
shall be recorded by the Servicer if required by applicable law and be delivered
to the Person entitled thereto. No expenses incurred in connection with such
instrument of satisfaction shall be reimbursed from amounts at the time on
deposit in the Collection Account.
If the Trustee or the Custodian is holding the Mortgage Files, from time to
time and as appropriate for the servicing or foreclosure of any Home Equity
Loan, the Trustee or the Custodian, as applicable, shall, upon request of the
Servicer and delivery to the Trustee or the Custodian of a receipt, in the form
of Exhibit D, signed by a Servicing Officer, release the related Mortgage File
to the Servicer and shall execute at the Servicer's direction such documents as
shall be necessary to the prosecution of any such proceedings. Such trust
receipt shall obligate the Servicer to return such Mortgage File to the Trustee
or the Custodian, as applicable, when the need therefor by the Servicer no
longer exists, unless such Home Equity Loan shall be liquidated, in which case,
upon receipt of a certificate of a Servicing Officer similar to that specified
above, such trust receipt shall be released by the Trustee or the Custodian to
the Servicer.
In order to facilitate the foreclosure of the Mortgage securing any
delinquent or defaulted Home Equity Loan following any recordation of the
assignments of Mortgage in accordance with the provisions of this Agreement, the
Trustee shall, if so requested, assign such delinquent or defaulted Home Equity
Loan for the purpose of collection to the Servicer or to another assignee for
collection designated by the Servicer (any such assignment shall unambiguously
indicate that the assignment is for the purpose of collection only), and upon
such assignment, such assignee for collection shall thereupon bring all required
actions in its own name and otherwise enforce the terms of the Home Equity Loan,
and the Servicer shall deposit any Net Liquidation Proceeds received with
respect thereto in the Collection Account. In the event that all delinquent
payments due under any such Home Equity Loan are paid by the related Mortgagor
and any other defaults are cured, the Servicer shall cause the assignee for
collection to promptly reassign such Home Equity Loan to the Trustee and return
it to the place where the related Mortgage File was being maintained.
Section 3.08. SERVICING COMPENSATION; PAYMENT OF CERTAIN EXPENSES BY
SERVICER.
(a) The Servicer shall be entitled to receive servicing compensation,
computed monthly, in an amount (the "Servicing Fee") equal to the product of
1/12th of the Servicing Fee Rate and the Invested Amount as of the first day of
the immediately preceding Collection Period (except with respect to the first
Distribution Date, for which the Servicing Fee Rate shall be multiplied by the
Original Invested Amount and a fraction equal to the actual number of days in
the first Collection Period divided by 360).
(b) The Servicer shall be required to pay all expenses incurred by it
in connection with its activities hereunder (including payment of Trustee and
Custodian fees, and all other fees and expenses not expressly stated hereunder
to be for the account of the Certificateholders) and shall not be entitled to
reimbursement therefor except as specifically provided herein.
Section 3.09. ANNUAL STATEMENT AS TO COMPLIANCE. The Servicer shall deliver
to the Trustee on or before March 31 of each year, beginning March 31, 2000, an
Officers' Certificate stating that such officer is familiar with the servicing
activities of the Servicer under this Agreement during the preceding calendar
year and, to the best of such officer's knowledge, the Servicer has fulfilled
all of its obligations under this Agreement in all material respects throughout
such year, or, if there has been a default in the fulfillment of any such
obligation in any material respect, specifying each such default known to such
officer and the nature and status thereof. Copies of such statement shall be
provided by the Servicer to each Rating Agency, the Certificate Insurer, the
Depositor and, upon request therefor, to any Certificateholder. If the Servicer
shall fail to provide such copies and the Trustee is aware that the Servicer has
not so provided such copies, the Trustee shall provide such copies at the
Servicer's expense if the Trustee has received such statement.
Section 3.10. ANNUAL INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING REPORT. On
or before March 31 of each year, beginning March 31, 2000, the Servicer at its
expense shall cause a nationally recognized firm of independent public
accountants to furnish a report to the Trustee to the effect that (i) the
servicing of all Home Equity Loans serviced by the Servicer under this Agreement
complied with the minimum servicing standards set forth in the Uniform Single
Attestation Program for Mortgage Bankers (or such other audit or review program
applicable to the Servicer), and (ii) such examination has disclosed no items of
material noncompliance with the provisions of the Uniform Single Attestation
Program for Mortgage Bankers (or such other program), except for such items of
noncompliance as shall be set forth in such report. Copies of such report shall
be provided to the Rating Agencies, the Certificate Insurer and the Depositor.
Section 3.11. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING THE
HOME EQUITY LOANS.
(a) The Servicer shall provide to the Trustee and the Certificate
Insurer access to the documentation regarding the Home Equity Loans, such access
being afforded without charge but only upon reasonable request and during normal
business hours at the offices of the Servicer. Nothing in this Section shall
derogate from the obligation of the Servicer to observe any applicable law
prohibiting disclosure of information regarding the Mortgagors and the failure
of the Servicer to provide access as provided in this Section as a result of
such obligation shall not constitute a breach of this Section.
(b) The Servicer shall supply information, in such form as the Trustee
shall reasonably request, to the Trustee on or before the start of the second
Business Day preceding each Distribution Date, as is required in the Trustee's
reasonable judgment to enable the Trustee to make required distributions and to
furnish the required reports to Certificateholders and to make any draws under
the Certificate Insurance Policy.
Section 3.12. MAINTENANCE OF FIDELITY BOND. The Servicer shall during the
term of its service as Servicer maintain in force a financial institutions bond
with fidelity coverage in respect of its officers, employees or agents. Such
bond shall be in an amount as is commercially available at a cost that is not
generally regarded as excessive by industry standards.
Section 3.13. REPORTS TO THE SECURITIES AND EXCHANGE COMMISSION. The
Servicer or the Trustee shall, on behalf of the Trust, cause to be filed with
the Securities and Exchange Commission any periodic reports required to be filed
under the provisions of the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Securities and Exchange Commission thereunder.
Section 3.14. INFORMATION REQUIRED BY THE INTERNAL REVENUE SERVICE
GENERALLY AND REPORTS OF FORECLOSURES AND ABANDONMENTS OF MORTGAGED PROPERTY. In
addition to the requirements set forth in Section 3.01, the Servicer shall
prepare and deliver, or cause to be prepared and delivered, to the Trustee for
the Trustee's signature, and shall file or cause to be filed, all federal and
state information reports when and as required by all applicable state and
federal income tax laws, including reports required by Section 6050J of the
Code.
Section 3.15. TAX RETURNS. In accordance with Section 2.07, the Trustee
shall not file any federal, state or local income tax return for the Trust or
apply for a taxpayer identification number on behalf of the Trust. The
Transferor shall treat the Home Equity Loans as its property for all federal,
state and local income and franchise tax purposes and shall report all income
earned thereon (including amounts payable as fees to the Servicer) as its income
for federal income tax purposes. In the event the Trust shall be required
pursuant to an audit or administrative proceeding or change in applicable
regulations to file federal, state, local income or franchise tax returns, the
Servicer shall prepare, or cause to be prepared, any tax returns required to
filed by the Trust, and the Servicer, as agent on behalf of the Trust, shall
promptly sign and file such returns. The Servicer shall also prepare or shall
cause to be prepared all tax information required by and to be distributed to
Certificateholders. In no event shall the Trustee or the Servicer be liable for
any liabilities, costs or expenses of the Trust, the Certificateholders or the
Certificate Owners arising under any tax law, including federal, state or local
income, franchise or excise taxes or any other tax imposed on or measured by
income (or any interest or penalty with respect thereto or arising from a
failure to comply therewith).
Section 3.16. FURTHER ASSURANCES. The Servicer shall provide any
certifications and other information reasonably requested by the Trustee.
<PAGE>
ARTICLE IV
Servicing Certificate; Certificate Account Deposit
Section 4.01. SERVICING CERTIFICATE.
With respect to each Distribution Date, not later than the third Business
Day prior to such Distribution Date, the Servicer shall deliver to the Trustee,
the Certificate Insurer and to the Rating Agencies a Servicing Certificate
stating the related Collection Period, Distribution Date, the series number of
the Certificates, the date of this Agreement, and including the following
information:
(i) the aggregate amount of Interest Collections for such
Collection Period;
(ii) the aggregate amount of Principal Collections for such
Collection Period;
(iii) the aggregate of any Insurance Proceeds received during
the related Collection Period;
(iv) the aggregate of any Net Liquidation Proceeds received
during the related Collection Period;
(v) the amount of any Transfer Deposit Amount paid by the
Transferor pursuant to Section 2.02, 2.04 or 3.01;
(vi) the Floating Allocation Percentage and the Fixed Allocation
Percentage for such Distribution Date;
(vii) the Certificate Interest Collections for such Distribution
Date;
(viii) the amount to be distributed as accrued interest on the
Certificates for the related Accrual Period, together with a
specification as to the Certificate Rate applicable to such
Distribution Date and whether it is derived from One-Month LIBOR or
the Alternate Certificate Rate;
(ix) the Transferor Interest Collections and Transferor
Principal Collections for such Distribution Date;
(x) the Accelerated Principal Distribution Amount, if any, for
such Distribution Date;
(xi) the Scheduled Principal Collections Payment, if any, for
such Distribution Date;
(xii) the aggregate of the Liquidation Loss Amounts and the
Investor Loss Amount for such Distribution Date;
(xiii) the Unpaid Investor Loss Amount for such Distribution
Date;
(xiv) the Pool Balance as of the end of the preceding Collection
Period;
(xv) the Invested Amount as of the end of the preceding
Collection Period;
(xvi) the Required Enhancement Amount for such Distribution
Date;
(xvii) the Overcollateralization Amount before giving effect to
the application of any Accelerated Principal Distribution Amount with
respect to such Distribution Date;
(xviii) the Overcollateralization Amount after giving effect to
the application of any Accelerated Principal Distribution Amount with
respect to such Distribution Date;
(xix) the Transferor Subordinated Amount for such Distribution
Date;
(xx) the amount, if any, by which the Invested Amount exceeds
the Certificate Principal Balance (after giving effect to the
distribution to be made on such Distribution Date);
(xxi) the Certificate Principal Balance and Pool Factor after
giving effect to the distribution to be made on such Distribution
Date;
(xxii) the Transferor's Interest Balance (based on the Pool
Balance as of the end of the preceding Collection Period) after giving
effect to the distribution to be made on such Distribution Date;
(xxiii) the aggregate amount of Additional Balances created
during the previous Collection Period;
(xxiv) whether a Rapid Amortization Event has occurred since the
prior Distribution Date, specifying each such Rapid Amortization Event
if one has occurred;
(xxv) the Guaranteed Distributions and any Preference Amount;
(xxvi) the Reimbursement Amount, if any, for such Distribution
Date;
(xxvii) the amount to be distributed to or at the direction of
the owner of the Transferor's Interest pursuant to Section 5.01(a)
(viii) for such Distribution Date;
(xxviii) the number and aggregate outstanding balances of Home
Equity Loans delinquent (a) 30 to 59 days, (b) 60 to 89 days and (c)
90 days or more, respectively, as of the end of the related Collection
Period;
(xxix) the aggregate book value as of the end of the related
Collection Period of any Mortgaged Property acquired through
foreclosure or grant of a deed in lieu of foreclosure;
(xxx) the aggregate of the Principal Balances as of the end of
the related Collection Period of all Home Equity Loans that became
Liquidated Home Equity Loans during such Collection Period;
(xxxi) the cumulative amount of Liquidation Loss Amounts and
Investor Loss Amounts for such Distribution Date and all prior
Distribution Dates; and
(xxxii) the number and aggregate Principal Balances of Home
Equity Loans to be removed from the Trust and transferred to the
Transferor on the related Removal Date and the cumulative number and
aggregate Principal Balance of all Home Equity Loans that have been
so removed on all prior Removal Dates.
Section 4.02. CERTIFICATE ACCOUNT. The Servicer shall establish and
maintain with the Trustee the Certificate Account as a single, separate trust
account. For so long as the Collection Account is maintained with the Trustee,
not later than 2:00 p.m., New York City time, on the Business Day immediately
prior to each Distribution Date, the Trustee shall transfer from the Collection
Account to the Certificate Account an amount equal to the aggregate of the
amounts specified in clauses (i) through (v), inclusive, of the Servicing
Certificate furnished to the Trustee pursuant to Section 4.01. If the Collection
Account is not so maintained with the Trustee, not later than the Business Day
immediately prior to each Distribution Date, the amount specified in the
preceding sentence shall be remitted by the Servicer to the Trustee by wire
transfer of immediately available funds for deposit into the Certificate
Account.
At the direction of the Servicer signed by a Servicing Officer to the
extent reasonably practical, the Trustee shall invest any funds in the
Certificate Account in Permitted Investments specified in such direction
(including obligations of the Trustee or any of its affiliates, if such
obligations otherwise qualify as Permitted Investments). Such direction shall be
in writing, signed by a Servicing Officer, and may be in the form of standing
instructions. Each investment shall mature not later than the Business Day next
preceding the Distribution Date following the date of such investment (unless
the obligor in respect of such investment is the Trustee, in which case such
investment may mature on such Distribution Date) and shall not be sold or
disposed of prior to its maturity. All income and gain realized from any such
investment shall be included in Interest Collections and deposited into the
Collection Account on each Distribution Date. The Trustee shall not be liable
for any loss incurred in connection with any such investment except with respect
to any investment issued or guaranteed by the Trustee in its individual
capacity.
Section 4.03. THE CERTIFICATE INSURANCE POLICY.
(a) If the statement delivered to the Trustee pursuant to Section 4.01
indicates that there will be the payment of Guaranteed Distributions for the
related Distribution Date, the Trustee shall complete the Notice for Payment (as
defined and included in the form specified by the Certificate Insurance Policy).
The Trustee shall submit such notice to the Certificate Insurer or its fiscal
agent no later than 12:00 noon, New York City time, on the second Business Day
preceding such Distribution Date as a claim for an Insured Payment.
(b) Upon receipt of an Insured Payment from the Certificate Insurer on
behalf of Certificateholders, the Trustee shall deposit such Insured Payment
into the Certificate Account. In addition, the Certificate Insurer may, in its
sole discretion, remit funds (other than Insured Payments) to the Trustee for
deposit in the Collection or Certificate Account as part of Certificate Interest
Collections to be distributed pursuant to Section 5.01(a)(i) through (iii).
(c) The Trustee shall (i) receive, as attorney-in-fact of each
Certificateholder receiving any Insured Payment from the Certificate Insurer,
such Insured Payment and (ii) disburse such Insured Payment to the
Certificateholders as set forth in Section 5.01(d). Insured Payments disbursed
by the Trustee from proceeds of the Certificate Insurance Policy shall not be
considered payment by the Trust Fund with respect to such Certificates, and the
Certificate Insurer shall be entitled to receive the related Reimbursement
Amount pursuant to Section 5.01(a)(vi). The Trustee hereby agrees on behalf of
each Certificateholder and the Trust Fund for the benefit of the Certificate
Insurer that it recognizes that to the extent the Certificate Insurer makes
Insured Payments, either directly or indirectly (as by paying through the
Trustee), to the Certificateholders, the Certificate Insurer will be entitled to
receive the related Reimbursement Amount pursuant to Section 5.01(a)(vi).
(d) Subject only to the priority of payment provisions of this
Agreement, each of the Depositor, the Transferor, the Servicer and the Trustee
acknowledges that, to the extent of any payment made by the Certificate Insurer
pursuant to the Certificate Insurance Policy, the Certificate Insurer is to be
fully subrogated to the extent of such payment and any interest due thereon as
part of the Reimbursement Amount, to the rights of the Certificateholders to any
moneys paid or payable in respect of the Certificates under this Agreement or
otherwise. Each of the Depositor, the Transferor, the Servicer and the Trustee
agrees to such subrogation and agrees to execute such instruments and to take
such actions as, in the sole judgment of the Certificate Insurer (as evidenced
in writing to the Depositor, the Transferor, the Servicer and the Trustee), are
necessary to evidence such subrogation and, subject to the priority of payment
provisions of this Agreement, to perfect the rights of the Certificate Insurer
to receive any moneys paid or payable in respect of the Certificates under this
Agreement or otherwise.
<PAGE>
ARTICLE V
Payments and Statements to
Certificateholders
Section 5.01. DISTRIBUTIONS.
(a) DISTRIBUTION OF CERTIFICATE INTEREST COLLECTIONS. On each
Distribution Date, the Trustee shall, based upon information set forth in the
Servicing Certificate, distribute out of the Certificate Account, to the extent
of Certificate Interest Collections collected during the related Collection
Period, the following amounts in the following order of priority to the
following Persons:
(i) to pay the Servicer any accrued and unpaid Servicing Fees;
(ii) to pay the Certificate Insurer the Premium Amount;
(iii) to pay Certificateholders the accrued interest due at the
Certificate Rate on the Certificate Principal Balance for the related
Accrual Period and any overdue accrued interest;
(iv)to pay to the Transferor during the Revolving Period and to
pay to Certificateholders during the Managed and Rapid Amortization
Periods the Investor Loss Amount for such Distribution Date;
(v) to pay to the Transferor during the Revolving Period and to
pay to Certificateholders during the Managed and Rapid Amortization
Periods any Unpaid Investor Loss Amount;
(vi) to pay the Certificate Insurer any Reimbursement Amount;
(vii) to pay the Certificateholders, as principal in reduction
of the Certificate Principal Balance, any Accelerated Principal
Distribution Amount; and
(viii) to or at the direction of the owner of the Transferor's
Interest, any remaining amount;
provided, however, that notwithstanding the above prioritization of the
distribution of the Certificate Interest Collections on deposit in the
Certificate Account, on each Distribution Date, any Insured Payment received by
the Trustee and deposited in the Certificate Account shall be applied by the
Trustee solely for the benefit of the Certificateholders.
(b) DISTRIBUTION OF PRINCIPAL COLLECTIONS. On each Distribution Date
during the Revolving Period, no principal (other than Accelerated Principal
Distribution Amounts) shall be paid to Certificateholders and all Principal
Collections shall be retained by the Transferor. Subject to Section 11.02(b), on
each Distribution Date (other than the Scheduled Maturity Date) during the
Managed Amortization Period and the Rapid Amortization Period, the Trustee shall
distribute out of the Certificate Account to Certificateholders the Principal
Collections up to the Scheduled Principal Collections Payment (but not in excess
of the Certificate Principal Balance). On the Scheduled Maturity Date, the
Trustee shall distribute out of the Certificate Account the Principal
Collections up to the Certificate Principal Balance. On each Distribution Date,
the Trustee shall distribute out of the Certificate Account to the Transferor
all Principal Collections on deposit therein not distributed to
Certificateholders; provided, that any such distributions to the Transferor
shall be subject to Section 5.01(h).
(c) APPLICATION OF TRANSFEROR SUBORDINATED AMOUNT.
(i) If, after applying Certificate Interest
Collections as provided in Section 5.01(a) above, there exists any
Deficiency Amount, the Trustee shall, based on information set forth in
the Servicing Certificate, apply Transferor Interest Collections and
Transferor Principal Collections (but only up to the Transferor
Subordinated Amount prior to such application) to pay such Deficiency
Amount to Certificateholders, and the Transferor Subordinated Amount
shall be reduced in accordance with clause (i)(A) of the definition
thereof to the extent of such application of funds.
(ii)If Transferor Interest Collections and Transferor
Principal Collections applied in the preceding paragraph (i) are
insufficient to cover the amount payable pursuant to clauses (iv) and
(v) of Section 5.01(a) on such Distribution Date, then the remaining
Investor Loss Amount and/or Unpaid Investor Loss Amount shall be
reallocated to (and debited against) the Transferor's Interest on such
Distribution Date to cover such insufficiency (but only to the extent
of the remaining Transferor Subordinated Amount on such Distribution
Date), and the Transferor Subordinated Amount shall be reduced in
accordance with clause (i)(B) of the definition thereof to the extent
of such reallocation.
(d) DISTRIBUTION OF THE INSURED PAYMENT. With respect to any
Distribution Date, to the extent that:
(i) the amount on deposit in the Certificate Account on such
Distribution Date and available to be distributed pursuant to Section
5.01(a), together with the amount of Transferor Interest Collections
and Transferor Principal Collections to be applied pursuant to Section
5.01(c)(i), is less than the amount payable pursuant to Section
5.01(a)(iii) on such Distribution Date;
(ii) after the Transferor Subordinated Amount has been reduced
to zero, the amount, if any, by which the Certificate Principal
Balance as of such Distribution Date (after giving effect to all other
amounts distributable and allocable to principal on the Certificates
on such Distribution Date) exceeds the Invested Amount as of such
Distribution Date (after giving effect to all other amounts
distributable and allocable to principal on the Certificates on such
Distribution Date); or
(iii) any portion of the Certificate Principal Balance remains
outstanding on the Scheduled Maturity Date or the Dissolution
Distribution Date (after giving effect to all other amounts
distributable and allocable to principal on the Certificates on such
Distribution Date);
then the Trustee shall make a draw on the Certificate Insurance Policy equal to
the sum of (x) the deficiency set forth in clause (i) above, (y) the excess set
forth in clause (ii) above and (z) the outstanding balance set forth in clause
(iii) above (such sum, the "Draw Amount"), and pay such Draw Amount to
Certificateholders from the Insured Payment pursuant to Section 4.04.
(e) METHOD OF DISTRIBUTION. On each Distribution Date, the Trustee
shall distribute to each Certificateholder of record on the related Record Date
(other than as provided in Section 10.01 respecting the final distribution) by
check mailed to such Certificateholder at its address appearing in the
Certificate Register, or upon written request of a Certificateholder received by
the Trustee at least five Business Days prior to the related Record Date, by
wire transfer (but only if such Certificateholder is the Depository or such
Certificateholder owns of record one or more Certificates which have principal
denominations aggregating at least $5,000,000), or by such other means of
payment as such Certificateholder and the Trustee shall agree, such
Certificateholder's Percentage Interest of the amounts to be distributed to
Certificateholders on such Distribution Date pursuant to this Article V.
(f) FINAL DISTRIBUTION. Except as otherwise provided in Section 10.01
and Section 11.02, when the Trustee receives written notice from the Servicer
that the final distribution with respect to the Certificates shall be made on
the next Distribution Date, the Trustee shall, not later than three (3) days
after the related Determination Date, to the extent such written notice was
received, mail to each Certificateholder a notice to the effect that: (i) the
Trustee expects that the final distribution with respect to the Certificates
will be made on such Distribution Date but only upon presentation and surrender
of such Certificates at the office of the Trustee or as otherwise specified
therein, and (ii) no interest shall accrue on the Certificates from and after
the end of the related Interest Accrual Period. In the event that
Certificateholders do not surrender their Certificates for final cancellation,
the Trustee shall follow the procedures set forth in Section 10.01(e).
(g) DISTRIBUTIONS ON BOOK-ENTRY CERTIFICATES. Each distribution with
respect to a Book-Entry Certificate shall be paid to the Depository, which shall
credit the amount of such distribution to the accounts of its Depository
Participants in accordance with its normal procedures. Each Depository
Participant shall be responsible for disbursing such distribution to the
Certificate Owners it represents and to each indirect participating brokerage
firm (a "brokerage firm" or "indirect participating firm") for which it acts as
agent. Each brokerage firm shall be responsible for disbursing funds to the
Certificate Owners it represents. All such credits and disbursements with
respect to a Book-Entry Certificate shall be made by the Depository and the
Depository Participants in accordance with the provisions of the Certificates.
None of the Trustee, the Depositor, the Transferor nor the Servicer shall have
any responsibility therefor except as otherwise provided by applicable law.
(h) DISTRIBUTIONS TO THE OWNER OF THE TRANSFEROR'S INTEREST.
Collections allocable to the Transferor's Interest shall be retained by or
distributed to, as applicable, the owner of the Transferor's Interest only to
the extent that such retention or distribution will not reduce the Transferor's
Interest Balance as of such Distribution Date below the Minimum Transferor's
Interest. Amounts not distributed to or at the direction of the owner of the
Transferor's Interest because of such limitations shall be retained in the
Collection Account until the Transferor's Interest Balance exceeds the Minimum
Transferor's Interest, at which time such excess shall be released to or at the
direction of the owner of the Transferor's Interest. If any such amounts are
still retained in the Collection Account upon the commencement of the Rapid
Amortization Period, such amounts shall be paid to the Certificateholders as a
reduction of the Certificate Principal Balance.
(i) AGGREGATE PRINCIPAL DISTRIBUTIONS. Notwithstanding anything to the
contrary in this Agreement, the aggregate amount of principal distributed to
Certificateholders under this Article V shall not exceed the Original
Certificate Principal Balance.
Section 5.02. CERTAIN CALCULATIONS BY THE TRUSTEE. On the second LIBOR
Business Day preceding each Distribution Date, the Trustee shall determine
One-Month LIBOR for the next Accrual Period. The Trustee shall promptly advise
the Servicer of such determination by tested telex or telecopy to the address
provided herein.
The determination of One-Month LIBOR by the Trustee for each Accrual Period
(excluding the first Accrual Period) shall (in the absence of manifest error) be
final, conclusive and binding upon the Certificateholders, the Servicer and any
of their respective partners, beneficiaries, agents, officers, directors,
employees or successors or assigns.
Section 5.03. STATEMENTS TO CERTIFICATEHOLDERS.
(a) Not later than the second Business Day prior to each Distribution
Date, the Servicer shall deliver to the Trustee for mailing to each
Certificateholder and the Certificate Insurer a statement with respect to such
Distribution Date setting forth:
(i) the Certificate Distribution Amount;
(ii) the amount of interest included in such distribution and
the related Certificate Rate or, if applicable, the Alternate
Certificate Rate;
(iii) the amount, if any, of overdue accrued interest included
in such distribution;
(iv) the amount, if any, of the remaining overdue accrued
interest after giving effect to such distribution;
(v) the amount, if any, of principal in such distribution;
(vi) the amount, if any, of the reimbursements of the previous
Investor Loss Amounts in such distribution;
(vii) the amount, if any, of the aggregate unreimbursed Investor
Loss Amounts after giving effect to such distribution;
(viii) the Floating Allocation Percentage for the preceding
Collection Period;
(ix) the Invested Amount, the Certificate Principal Balance and
the Pool Factor, each after giving effect to the distribution to be
made on such Distribution Date;
(x) the Required Enhancement Amount for such Distribution Date;
(xi) the Transferor Subordinated Amount after giving effect to
such distribution;
(xii) the Pool Balance as of the end of the preceding Collection
Period;
(xiii) during the Revolving Period, the amount of Principal
Collections to be retained by the Transferor in respect of such
Distribution Date;
(xiv) the Servicing Fee for such Distribution Date;
(xv) the number and aggregate outstanding balances of Home
Equity Loans delinquent (a) 30 to 59 days, (b) 60 to 89 days and (c)
90 days or more, respectively, as of the end of the preceding
Collection Period;
(xvi) the number and aggregate outstanding balance of any Home
Equity Loans in foreclosure as of the end of the preceding Collection
Period;
(xvii) the book value of any real estate acquired by the Trust
through foreclosure or grant of a deed in lieu of foreclosure during
the preceding Collection Period;
(xviii) the amount of any Insured Payments by the Certificate
Insurer; and
(xix) the number and aggregate Principal Balance of Home Equity
Loans to be removed from the Trust and transferred to the Transferor
on the related Removal Date, and the cumulative number and aggregate
Principal Balance of all Home Equity Loans that have been so removed
on all prior Removal Dates.
In the case of information furnished pursuant to clauses (ii) through (vii)
above, the amounts shall be expressed as a dollar amount per Certificate with a
$1,000 denomination. In lieu of delivering such a statement to the Trustee for
mailing to each Certificateholder, the Servicer may deliver the Servicing
Certificate for such Distribution Date to the Trustee modified, as necessary, to
provide the information required by this Section 5.03(a).
(b) Within ninety (90) days after the end of each calendar year, the
Servicer shall deliver to the Trustee for mailing to each Person who at any time
during the calendar year was a Certificateholder (which shall be Cede & Co., as
the nominee of the Depository, unless and until Definitive Certificates are
issued pursuant hereto) and to the Certificate Insurer a statement containing
the information set forth in clauses (ii) and (v) above aggregated for such
calendar year or, at the request of a Person who was a Certificateholder for a
portion of such calendar year, setting forth such information for each month
thereof. Such obligation of the Servicer shall be deemed to have been satisfied
to the extent that substantially comparable information shall be provided by the
Servicer or the Trustee pursuant to any requirements of the Code.
(c) The Trustee shall prepare or cause to be prepared (based on
information provided to it by the Servicer and in a manner consistent with the
treatment of the Certificates as indebtedness) Internal Revenue Service Form
1099 (or any successor form) and any other tax forms required to be filed or
furnished to Certificateholders in respect of distributions by the Trustee on
the Certificates, and shall file and distribute such forms as required by law.
Section 5.04. RIGHTS OF CERTIFICATEHOLDERS. The Certificates shall
represent fractional undivided interests in the Trust Fund, including the right
to receive distributions in the amounts and at the times specified in this
Agreement. The Transferor's Interest shall represent the remaining interest in
the Trust Fund.
<PAGE>
ARTICLE VI
The Certificates and the Transferor's Interest
Section 6.01. THE CERTIFICATES. The Certificates shall be substantially in
the form set forth in Exhibit A and shall, upon original issuance, be executed,
countersigned and delivered by the Trustee to or upon the order of the Depositor
concurrently with the transfer and assignment by the Depositor to the Trustee of
the Initial Home Equity Loans. The Certificates shall be initially evidenced by
one or more certificates representing, in the aggregate, the entire Original
Certificate Principal Balance. Beneficial ownership of Certificates that are
Book-Entry Certificates may be held in minimum dollar denominations of $1,000
and multiples of $1 in excess thereof. The Transferor's Interest shall be in
uncertificated form. The Transferor's Interest shall initially be assigned to
the Depositor, and the Depositor shall, in turn, assign the Transferor's
Interest to the Transferor.
The Certificates shall be executed by manual or facsimile signature on
behalf of the Trustee by an authorized officer thereof. Certificates bearing the
manual or facsimile signatures of individuals who were, at the time when such
signatures were affixed, authorized to sign on behalf of the Trustee shall bind
the Trustee, notwithstanding that such individuals or any of them have ceased to
be so authorized prior to the authentication and delivery of such Certificates
or did not hold such offices on the date such Certificates were issued. No
Certificate shall be entitled to any benefit under this Agreement, or be valid
for any purpose, unless such Certificate shall have been manually countersigned
by the Trustee substantially in the form provided for herein, and such
countersignature upon any Certificate shall be conclusive evidence, and the only
evidence, that such Certificate has been duly authenticated and delivered
hereunder. All Certificates shall be dated the date of their countersignature.
Subject to Section 6.02(c), the Certificates shall be Book-Entry Certificates.
Section 6.02. REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES;
REGISTRAR.
(a) The Certificate Registrar shall cause to be kept at the Corporate
Trust Office a Certificate Register in which, subject to such reasonable
regulations as it may prescribe, the Certificate Registrar shall provide for the
registration of Certificates, ownership of the Transferor's Interest and of
transfers and exchanges of Certificates and assignments of the Transferor's
Interest as herein provided. The Trustee shall initially serve as Certificate
Registrar for the purpose of registering Certificates and transfers and
exchanges of Certificates as herein provided.
Upon surrender for registration of Transfer of any Certificate at any
office or agency of the Trustee maintained for such purpose pursuant to the
foregoing paragraph, the Trustee shall execute, countersign and deliver, in the
name of the designated Transferee or Transferees, one or more new Certificates
of the same aggregate Percentage Interest.
At the option of the Certificateholders, Certificates may be exchanged for
other Certificates of authorized denominations of the same aggregate Percentage
Interest, upon surrender of the Certificates to be exchanged at any such office
or agency. Whenever any Certificates are so surrendered for exchange the Trustee
shall execute, countersign and deliver the Certificates which the
Certificateholder making the exchange is entitled to receive. Every Certificate
presented or surrendered for Transfer or exchange shall (if so required by the
Trustee) be duly endorsed by, or be accompanied by a written instrument of
Transfer in form satisfactory to the Trustee duly executed by, the Holder
thereof or its attorney duly authorized in writing.
No service charge shall be made for any Transfer or exchange of
Certificates, but the Trustee may require payment of a sum sufficient to cover
any tax or governmental charge that may be imposed in connection with any
Transfer or exchange of Certificates.
All Certificates surrendered for Transfer and exchange shall be cancelled
by the Trustee.
(b) Except as provided in Section 6.02(c), the Book-Entry Certificates
shall at all times remain registered in the name of the Depository or its
nominee and, at all times: (i) registration of the Certificates may not be
transferred by the Trustee except to another Depository; (ii) the Depository
shall maintain book-entry records with respect to the Certificate Owners and
with respect to ownership and transfers of such Certificates; (iii) ownership
and transfers of registration of the Certificates on the books of the Depository
shall be governed by applicable rules established by the Depository; (iv) the
Depository may collect its usual and customary fees, charges and expenses from
its Depository Participants; (v) the Trustee shall deal solely with the
Depository for purposes of exercising the rights of Certificateholders under
this Agreement, and requests and directions for and votes of such
representatives shall not be deemed to be inconsistent if they are made with
respect to different Certificate Owners; and (vi) the Trustee may rely and shall
be fully protected in relying upon information furnished by the Depository with
respect to its Depository Participants and furnished by the Depository
Participants with respect to indirect participating firms and persons shown on
the books of such indirect participating firms as direct or indirect Certificate
Owners.
All transfers by Certificate Owners of Book-Entry Certificates shall be
made in accordance with the procedures established by the Depository Participant
or brokerage firm representing such Certificate Owner. Each Depository
Participant shall only transfer Book-Entry Certificates of Certificate Owners it
represents or of brokerage firms for which it acts as agent in accordance with
the Depository's normal procedures.
Whenever notice or other communication to the Certificateholders is
required under this Agreement, unless and until Definitive Certificates shall
have been issued to Certificate Owners pursuant to Section 6.02(c), the Trustee
shall give to the Depository all such notices and communications specified
herein to be given to Certificateholders.
(c) If (x) the Servicer advises the Trustee and the Certificate
Insurer in writing that the Depository is no longer willing or able to properly
discharge its responsibilities as Depository, and the Servicer is unable to
locate a qualified successor, (y) the Servicer, at its option, advises the
Trustee in writing that it elects to terminate the book-entry system through the
Depository or (z) after the occurrence of a Servicer Default, Certificate Owners
representing Percentage Interests aggregating not less than 50% of the aggregate
Percentage Interests of the Certificates together advise the Trustee and the
Depository through the Depository Participants in writing that the continuation
of a book-entry system through the Depository is no longer in the best interests
of the Certificate Owners, then the Trustee shall notify all Certificate Owners,
through the Depository, of the occurrence of any such event and of the
availability of definitive, fully registered Certificates (the "Definitive
Certificates") to Certificate Owners requesting the same. Upon surrender to the
Trustee of the Certificates by the Depository, accompanied by registration
instructions from the Depository for registration, the Trustee shall, at the
expense of the Servicer, issue the Definitive Certificates. The Definitive
Certificates shall be issued in minimum denominations of $1,000 and multiples of
$1 in excess thereof. Neither the Servicer nor the Trustee shall be liable for
any delay in delivery of such instructions and may conclusively rely on, and
shall be protected in relying on, such instructions. Upon the issuance of
Definitive Certificates all applicable references herein to obligations imposed
upon or to be performed by the Depository shall be deemed to be imposed upon and
performed by the Trustee, to the extent applicable with respect to such
Definitive Certificates, and the Trustee shall recognize the Holders of the
Definitive Certificates as Certificateholders hereunder.
Section 6.03. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If (i) any
mutilated Certificate is surrendered to the Trustee or the Trustee receives
evidence to its satisfaction of the destruction, loss or theft of any
Certificate, and (ii) there is delivered to the Trustee, the Servicer, the
Transferor and the Depositor such security or indemnity as may be required by
them to save each of them harmless, then, in the absence of notice to the
Trustee that such Certificate has been acquired by a bona fide purchaser, the
Trustee shall execute, countersign and deliver, in exchange for or in lieu of
any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of
like tenor and Percentage Interest. Upon the issuance of any new Certificate
under this Section, the Trustee may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Trustee)
connected therewith. Any new Certificate issued pursuant to this Section shall
constitute complete and indefeasible evidence of ownership in the Trust Fund, as
if originally issued, whether or not the lost, stolen or destroyed Certificate
shall be found at any time.
Section 6.04. PERSONS DEEMED OWNERS. The Servicer, the Depositor, the
Transferor, the Certificate Insurer, the Trustee and any agent of the Servicer,
the Depositor, the Transferor or the Trustee may treat the Person in whose name
any Certificate is registered as the owner of such Certificate for the purpose
of receiving distributions pursuant to Section 5.01 and for all other purposes
whatsoever, and neither the Servicer, the Depositor, the Transferor, the
Certificate Insurer, the Trustee nor any agent of the Servicer, the Depositor,
the Transferor, the Certificate Insurer or the Trustee shall be affected by
notice to the contrary.
Section 6.05. RESTRICTIONS ON ASSIGNMENT OF TRANSFEROR'S INTEREST.
(a) The Transferor's Interest may be assigned, transferred, exchanged,
pledged, financed, hypothecated or otherwise conveyed (collectively, for
purposes of this Section and any other Section referring to the Transferor's
Interest, "assigned" or an "assignment") only in accordance with this Section.
(b) No assignment of all or any part of the Transferor's Interest
shall be made unless such assignment is exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Act"), and any
applicable state securities laws or is made in accordance with the Act and such
laws. The Trustee and the Servicer shall require a written Opinion of Counsel
acceptable to and in form and substance satisfactory to the Trustee and the
Servicer that such assignment may be made pursuant to an exemption, describing
the applicable exemption and the basis therefor, from the Act and such laws or
is being made pursuant to the Act and such laws, which Opinion of Counsel shall
not be an expense of the Trustee or the Servicer, and the Trustee and the
Servicer shall require the assignee to execute an investment letter acceptable
to and in form and substance satisfactory to the Trustee and the Servicer
certifying to the Trustee and the Servicer the facts surrounding such
assignment, which investment letter shall not be an expense of the Trustee or
the Servicer; provided that such Opinion of Counsel shall not be required in the
case of assignments by the Transferor or the Depositor to the Transferor, the
Depositor or an affiliate thereof. The owner of the Transferor's Interest
desiring to effect such assignment shall, and does hereby agree to, indemnify
the Trustee, the Depositor, the Servicer and the Certificate Insurer against any
liability that may result if the assignment is not so exempt or if not made in
accordance with such federal and state laws.
(c) No assignment of all or any part of the Transferor's Interest
shall be made except upon satisfaction of the following conditions precedent:
(i) the Person to whom the Transferor's Interest or any interest therein is
assigned shall (A) be organized and existing under the laws of the United States
of America or any state or the District of Columbia, (B) expressly assume, by an
agreement supplemental hereto, executed and delivered to the Trustee, the
performance of every covenant and obligation of the Transferor hereunder and
under the Sale Agreement with respect to the assets evidenced by the assigned
portion of the Transferor's Interest, and (C) as part of its acquisition of the
Transferor's Interest, acquire all rights of the Transferor or any assignee
under this paragraph (c) to amounts payable to the Transferor or such assignee
under Sections 5.01(a)(viii) and 5.01(h) with respect to the assigned portion of
the Transferor's Interest; (ii) the Transferor shall deliver to the Trustee an
Officer's Certificate stating that such assignment and such supplemental
agreement comply with this paragraph (c) and that all conditions precedent
provided by this paragraph (c) have been complied with, and the Trustee may
conclusively rely on such Officer's Certificate, shall have no duty to make
inquiries with regard to the matters set forth therein and shall incur no
liability in so relying; (iii) the Transferor shall deliver to the Trustee a
letter from each Rating Agency confirming that its rating of the Certificates,
after giving effect to such assignment and without taking into account the
Certificate Insurance Policy, will not be reduced or withdrawn; (iv) the
Transferor shall deliver to the Trustee an Opinion of Counsel to the effect that
(A) such assignment will not adversely affect the treatment of the Certificates
after such assignment as debt for federal and applicable state income tax
purposes, (B) such assignment will not result in the Trust being subject to tax
at the entity level for federal or applicable state tax purposes, (C) such
assignment will not have any material adverse impact on the federal or
applicable state income taxation of a Certificateholder or any Certificate Owner
and (D) such assignment will not result in the arrangement created by this
Agreement or any portion of the assets being treated as a taxable mortgage pool
as defined in Section 7701(i) of the Code; and (v) all filings and other actions
necessary to continue the perfection of the interest of the Trust in the assets
and the other property conveyed hereunder shall have been taken or made.
Notwithstanding the foregoing, the requirement set forth in subclause (i)(A) of
this paragraph (c) shall not apply in the event the Trustee shall have received
a letter from each Rating Agency confirming that its rating of the Certificates,
after giving effect to a proposed assignment to a Person that does not meet the
requirement set forth in subclause (i)(A) above, without taking into account the
Certificate Insurance Policy, will not be reduced or withdrawn.
Section 6.06. ACTIONS OF CERTIFICATEHOLDERS.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement to be given or taken by any
Certificateholder may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Certificateholder in person or by its
agent duly appointed in writing; and except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
are delivered to the Trustee and, where required, to the Depositor, the
Transferor, the Certificate Insurer or the Servicer. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Agreement and conclusive in favor of the Trustee, the
Depositor, the Transferor, the Certificate Insurer and the Servicer, if made in
the manner provided in this Section.
(b) The fact and date of the execution by any Certificateholder of any
such instrument or writing may be proved in any reasonable manner which the
Trustee deems sufficient.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other action by a Certificateholder shall bind every Holder of every
Certificate issued upon the registration of Transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done, or omitted to be done,
by the Trustee, the Depositor, the Transferor or the Servicer in reliance
thereon, whether or not notation of such action is made upon such Certificate.
(d) The Trustee may require such additional proof of any matter
referred to in this Section as it shall deem necessary.
(e) The ownership of Certificates and the Transferor's Interest shall
be proved by the Certificate Register.
<PAGE>
ARTICLE VII
The Servicer and the Transferor
Section 7.01. LIABILITY OF THE SERVICER. The Servicer shall be liable in
accordance herewith only to the extent of the obligations specifically imposed
upon and undertaken by the Servicer herein.
Section 7.02. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS
OF, THE SERVICER OR TRANSFEROR. Any corporation into which the Servicer or
Transferor may be merged or consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Servicer or Transferor shall be
a party, or any corporation succeeding to the business of the Servicer or
Transferor, which executes an agreement of assumption to perform every
obligation of the Servicer or Transferor hereunder, shall be the successor of
the Servicer or Transferor hereunder, without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding; provided, however, that the successor
servicer shall satisfy the requirements of this Section 7.02 with respect to the
qualifications of a successor servicer, and shall be approved by the Certificate
Insurer.
Notwithstanding anything to the contrary contained in this Section or in
Section 7.04, the Servicer may assign its rights and delegate its duties and
obligations under this Agreement; provided, that (i) the purchaser or transferee
accepting such assignment or delegation shall be a Person reasonably
satisfactory to the Trustee and which shall be qualified to service home equity
loans, and shall execute and deliver to the Trustee and the Certificate Insurer
an agreement, in form and substance reasonably satisfactory to the Trustee,
which contains an assumption by such Person of the due and punctual performance
and observance of each covenant and condition to be performed or observed by the
Servicer under this Agreement from and after the date of such agreement; and
(ii) each Rating Agency's rating of the Certificates, without taking into
account the Certificate Insurance Policy, in effect immediately prior to such
assignment, sale or transfer will not be qualified, downgraded or withdrawn as a
result of such assignment, sale or transfer, as evidenced by a letter to such
effect from each Rating Agency; and provided further, that the requirements in
clauses (i) and (ii) of this sentence shall not apply to any delegation by the
Servicer of its duties and obligations hereunder to the Transferor or any
affiliate of the Transferor, Total System Services, Inc., M&I Data Services or
Altell Communications, Inc. or to any delegation of its duties and obligations
hereunder that are not material. In the case of any such assignment and
delegation, the Servicer shall remain liable for all liabilities and obligations
incurred by it as Servicer hereunder prior to the satisfaction of the conditions
to such assignment and delegation set forth in clauses (i) and (ii) of the
preceding sentence.
Section 7.03. LIMITATION ON LIABILITY OF THE SERVICER AND OTHERS. Neither
the Servicer nor any of the directors or officers or employees or agents of the
Servicer shall be under any liability to the Trust or the Holders for any action
taken or for refraining from the taking of any action by the Servicer pursuant
to this Agreement, or for errors in judgment; provided, however, that this
provision shall not protect the Servicer or any such person against any
liability that would otherwise be imposed by reason of willful misfeasance, bad
faith or gross negligence in the performance of duties of the Servicer or by
reason of reckless disregard of obligations and duties of the Servicer
hereunder. The Servicer and any director or officer or employee or agent of the
Servicer may rely in good faith on any document of any kind prima facie properly
executed and submitted by any Person respecting any matters arising hereunder.
The Servicer shall not be under any obligation to appear in, prosecute or defend
any legal action that is not incidental to duties to service the Home Equity
Loans in accordance with this Agreement, and that in its opinion may involve it
in any expense or liability; provided, however, that the Servicer may in its
sole discretion undertake any such action that it may deem necessary or
desirable in respect of this Agreement, and the rights and duties of the parties
hereto and the interests of the Certificateholders hereunder. In the event of
any such loss, liability or expense, the legal expenses and costs of such action
and any liability resulting therefrom shall be expenses, costs and liabilities
for which the Servicer shall be entitled to reimbursement therefor only from
amounts otherwise distributable to the Holder of the Transferor's Interest on
any subsequent Distribution Date. The Servicer's right to reimbursement pursuant
to this Section shall survive any resignation or termination of the Servicer
pursuant to Section 7.04 or 8.01 with respect to any such losses, liabilities or
expenses arising prior to such resignation or termination (or arising from
events that occurred prior to such resignation or termination). Any claims under
this Section by or on behalf of the Holders or the Trust shall be made only
against the Servicer, who shall be liable hereunder with respect to its own acts
and omissions as well as the acts and omissions of its directors, officers,
employees and agents.
Section 7.04. SERVICER NOT TO RESIGN. Subject to the provisions of Section
7.02, the Servicer shall not resign from the obligations and duties hereby
imposed on it except upon determination that the performance of its duties
hereunder is no longer permissible under applicable law or is in material
conflict by reason of applicable law with any other activities carried on by it
or its subsidiaries or other affiliates, the other activities of the Servicer so
causing such a conflict being of a type and nature carried on by the Servicer or
such subsidiaries or other affiliates at the date of this Agreement.
Any resignation under this Section shall not relieve the Servicer of
responsibility for any of the obligations specified in Sections 8.01 and 8.02 as
obligations that survive the resignation or termination of the Servicer;
provided, however, that no resignation by the Servicer shall become effective
until the Trustee or a successor servicer shall have assumed the
responsibilities and obligations of the Servicer in accordance with Section
8.02. The Servicer shall have no claim (whether by subrogation or otherwise) or
other action against any Certificateholder for any amounts paid by the Servicer
pursuant to any provision of this Agreement. Any determination permitting the
resignation of the Servicer shall be evidenced by an Opinion of Counsel to such
effect delivered to the Trustee and the Certificate Insurer.
Section 7.05. LIMITATION ON LIABILITY OF CERTAIN PERSONS. No recourse under
or upon any obligation or covenant of this Agreement, or of any Certificate, or
for any claim based thereon or otherwise in respect thereof, shall be had
against any incorporator, shareholder, officer or director, as such, past,
present or future, of the Servicer or of any successor corporation, either
directly or through the Servicer, whether by virtue of any constitution, statute
or rule of law, or by the enforcement of any assessment or penalty or otherwise.
This Agreement and the obligations issued hereunder are solely corporate
obligations, and that no such personal liability whatever shall attach to, or is
or shall be incurred by the incorporators, shareholders, officers or directors
as such, of the Servicer, or any of them, because of the issuance of the
Certificates, or under or by reason of the obligations, covenants or agreements
contained in this Agreement or in any of the Certificates or implied therefrom;
and that any and all such personal liability, either at common law or in equity
or by constitution or statute, of, and any and all such rights and claims
against, every such incorporator, shareholder, officer or director, as such,
because of the issuance of the Certificates, or under or by reason of the
obligations, covenants or agreements contained in this Agreement or in any of
the Certificates or implied therefrom, are hereby expressly waived and released
as a condition of, and as a consideration for, the execution of this Agreement
and the issuance of the Certificates.
Section 7.06. LIABILITY OF SERVICER. Notwithstanding Section 7.05 and any
other provisions of this Agreement (other than Section 2.04 and Section
3.01(e)), the Servicer, by entering into this Agreement, agrees to be liable,
directly to the injured party, for the entire amount of any losses, claims,
damages or liabilities (other than those that would be incurred by a
Certificateholder if the Certificates were notes secured by the Trust Fund, for
example, as a result of the performance of the Trust Fund, market fluctuations,
a shortfall or failure to make payment under the Certificate Insurance Policy or
other similar market or investment risks associated with ownership of the
Certificates) arising out of or based on the actions or omissions of the
Servicer pursuant hereto (to the extent that, if the Trust Fund at the time the
claim is made was used to pay in full all outstanding Certificates, the Trust
Fund that would remain after the Certificateholders and Certificate Insurer were
paid in full would be insufficient to pay any such losses, claims, damages or
liabilities). The rights created by this Section shall run directly to and be
enforceable by the injured party subject to the limitations hereof.
Section 7.07. SERVICER MAY OWN CERTIFICATES. The Servicer and any Person
controlling, controlled by or under common control with the Servicer may in its
individual or any other capacity become the owner or pledgee of Certificates
with the same rights as it would have if it were not the Servicer or such an
affiliate thereof, except as otherwise provided in the definition of the term
"Certificateholder" specified in Section 1.01. Certificates so owned by or
pledged to the Servicer or such controlling or commonly controlled Person shall
have an equal and proportionate benefit under the provisions of this Agreement,
without preference, priority or distinction as among all of the Certificates,
except as otherwise provided in the definition of the term "Certificateholder"
specified in Section 1.01.
<PAGE>
ARTICLE VIII
Servicer Defaults
Section 8.01. SERVICER DEFAULTS.
(a) If any one of the following events ("Servicer Default") shall
occur and be continuing:
(i) Any failure by the Servicer to remit to the Trustee or the
Transferor, as applicable, any payment required to be made under the
terms of the Certificates, the Transferor's Interest and this
Agreement which continues unremedied for a period of five (5) Business
Days after the date upon which written notice of such failure shall
have been given to the Servicer by the Trustee or to the Servicer and
the Trustee by Certificateholders evidencing not less than 51% of the
aggregate Percentage Interests of the Certificates or by the
Certificate Insurer;
(ii) Failure on the part of the Servicer duly to observe or
perform in any material respect any other covenants or agreements of
the Servicer set forth in the Certificates or in this Agreement, which
covenants and agreements (A) materially affect the rights of
Certificateholders and (B) continue unremedied for a period of sixty
(60) days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the
Servicer by the Trustee, or to the Servicer and the Trustee by
Certificateholders evidencing not less than 51% of the aggregate
Percentage Interests of the Certificateholders or by the Certificate
Insurer;
(iii) The entry against the Servicer of a decree or order by a
court or agency or supervisory authority having jurisdiction in the
premises for the appointment of a conservator, receiver or liquidator
in any insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings, or for the winding up or
Liquidation of its affairs, and the continuance of any such decree or
order unstayed and in effect for a period of sixty (60) consecutive
days; or
(iv) The consent by the Servicer to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment
of debt, marshalling of assets and liabilities or similar proceedings
of or relating to the Servicer or of or relating to substantially all
of its property; or the Servicer shall admit in writing its inability
to pay its debts generally as they become due, file a petition to take
advantage of any applicable insolvency or reorganization statute, make
an assignment for the benefit of its creditors, or voluntarily suspend
payment of its obligations;
then, and in each and every such case, so long as a Servicer Default shall not
have been remedied by the Servicer, either the Trustee (with the consent of the
Certificate Insurer, which consent shall not be unreasonably withheld), or
Certificateholders evidencing not less than 51% of the aggregate Percentage
Interests of the Certificates (with the consent of the Certificate Insurer,
which consent shall not be unreasonably withheld) or the Certificate Insurer, by
notice then given in writing to the Servicer (and to the Trustee if given by
Certificateholders or the Certificate Insurer) may terminate all of the rights
and obligations of the Servicer as servicer under this Agreement.
(b) Any written notice of termination provided to the Servicer under
this Section shall be simultaneously provided to the Certificate Insurer and the
Rating Agencies. On or after the receipt by the Servicer of such written notice,
all authority and power of the Servicer under this Agreement, whether with
respect to the Certificates or the Home Equity Loans or otherwise, shall pass to
and be vested in the Trustee pursuant to and under this Section; and, without
limitation, the Trustee is hereby authorized and empowered to execute and
deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, any and
all documents and other instruments, and to do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement of the Home Equity
Loans and related documents, or otherwise. The Servicer agrees to cooperate with
the Trustee in effecting the termination of the responsibilities and rights of
the Servicer hereunder, including the transfer to the Trustee for the
administration by it of all cash amounts that shall have been deposited by the
Servicer into the Collection Account or the Certificate Account, or thereafter
received by the Servicer with respect to the Home Equity Loans. Notwithstanding
such termination, the Servicer shall be entitled to receive any amounts that are
then, or, notwithstanding the termination of its activities as servicer, may
become, payable to the Servicer under this Agreement.
Section 8.02. TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR.
(a) On and after the time the Servicer receives a notice of
termination pursuant to Section 8.01 or the Servicer's resignation in accordance
with the terms of Section 7.04, the Trustee shall be the successor in all
respects to the Servicer in its capacity as servicer under this Agreement and
the transactions set forth or provided for herein and shall be subject to all
the responsibilities, duties and liabilities relating thereto placed on the
Servicer by the terms and provisions hereof; provided, however, that the
responsibilities and duties of the Servicer pursuant to Section 2.02 shall not
be the responsibilities, duties or obligations of the Trustee. As compensation
therefor, the Trustee shall, except as provided in Section 8.01, be entitled to
such compensation as the Servicer would have been entitled to hereunder if no
such notice of termination had been given. Notwithstanding the above, (i) if the
Trustee is unwilling to act as successor Servicer or (ii) if the Trustee is
legally unable so to act, the Trustee may (in the situation described in clause
(i)) or shall (in the situation described in clause (ii)) appoint, with the
consent of the Certificate Insurer, or petition a court of competent
jurisdiction to appoint, any established financial institution that is then
servicing a home equity loan portfolio and has all licenses, permits and
approvals required by applicable law, and has a net worth of not less than
$10,000,000, as the successor to the Servicer hereunder in the assumption of all
or any part of the responsibilities, duties or liabilities of the Servicer
hereunder; provided, however, that the appointment of any such successor
Servicer shall not result in the reduction, suspension or withdrawal of the
ratings assigned to the Certificates by any Rating Agency without taking into
account the Certificate Insurance Policy. Pending appointment of a successor to
the Servicer hereunder, unless the Trustee is prohibited by law from so acting,
the Trustee shall act in such capacity as hereinabove provided. In connection
with such appointment and assumption, the Trustee may make such arrangements for
the compensation of such successor out of payments on Home Equity Loans as it
and such successor shall agree; provided, however, that no such compensation
shall be in excess of that permitted the Servicer hereunder. The Trustee and
such successor shall take such action, consistent with this Agreement, as shall
be necessary to effectuate any such succession.
(b) Any successor, including the Trustee, to the Servicer as servicer
shall during the term of its service as servicer maintain in force (i) a policy
or policies of insurance covering errors and omissions in the performance of its
obligations as servicer hereunder, and (ii) a fidelity bond in respect of its
officers, employees and agents to the same extent as the Servicer is so required
pursuant to Section 3.12. No successor servicer (other than the Trustee as
successor to the Servicer) shall have the right to retain and commingle payments
on, and collections in respect of, the Home Equity Loans with its own funds
pursuant to Section 3.02(c).
Section 8.03. NOTIFICATION TO CERTIFICATEHOLDERS. Upon any termination or
appointment of a successor to the Servicer pursuant to this Article VIII, the
Trustee shall give prompt written notice thereof (i) to Certificateholders and
the Holder of the Transferor's Interest at their respective addresses appearing
in the Certificate Register, (ii) to each Rating Agency at its address set forth
in Section 12.06, and (iii) to the Certificate Insurer at its address set forth
in Section 12.06.
Section 8.04. WAIVER OF PAST SERVICER DEFAULTS. Certificateholders
evidencing not less than 51% of the aggregate Percentage Interests of the
Certificates, with the consent of the Certificate Insurer (which consent shall
not be unreasonably withheld), may, on behalf of all Certificateholders, waive
any Servicer Default by the Servicer in the performance of its obligations
hereunder and its consequences, except a default in making any required deposits
to the Certificate Account in accordance with this Agreement. Upon any such
waiver of a past Servicer Default, such Servicer Default shall cease to exist
and shall be deemed to have been remedied for every purpose of this Agreement.
No such waiver shall extend to any subsequent or other default or impair any
right consequent thereon.
<PAGE>
ARTICLE IX
The Trustee
Section 9.01. DUTIES OF TRUSTEE.
(a) The Trustee, prior to the occurrence of a Servicer Default and
after the curing of all Servicer Defaults which may have occurred, undertakes to
perform such duties and only such duties as are specifically set forth in this
Agreement. If a Servicer Default shall have occurred and shall not have been
cured, the Trustee shall exercise such of the rights and powers vested in it by
this Agreement, and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.
(b) The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee that are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement.
(c) No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own misconduct; provided, however, that:
(i) Prior to the occurrence of a Servicer Default, and after the
curing of all Servicer Defaults that may have occurred, the duties and
obligations of the Trustee shall be determined solely by the express
provisions of this Agreement, the Trustee shall not be liable except
for the performance of such duties and obligations as are specifically
set forth in this Agreement, no implied covenants or obligations shall
be read into this Agreement against the Trustee and, in the absence of
bad faith on the part of the Trustee, the Trustee may conclusively
rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions
furnished to the Trustee and conforming to the requirements of this
Agreement;
(ii) The Trustee shall not be liable for an error of judgment
made in good faith by a Responsible Officer of the Trustee, unless it
shall be proved that the Trustee was negligent in performing its
duties in accordance with the terms of this Agreement;
(iii) The Trustee shall not be personally liable with respect to
any action taken, suffered or omitted to be taken by it in good faith
in accordance with the direction of Certificateholders evidencing not
less than 51% of the aggregate Percentage Interests of the
Certificates with the consent of the Certificate Insurer relating to
the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred
upon the Trustee under this Agreement; and
(iv) The Trustee shall not be charged with knowledge of any
failure by the Servicer to comply with the obligations of the
Servicer referred to in clauses (i) and (ii) of Section 8.01(a) unless
a Responsible Officer of the Trustee at the Corporate Trust Office
obtains actual knowledge of such failure or the Trustee receives
written notice of such failure from the Servicer, Certificateholders
evidencing not less than 25% of the aggregate Percentage Interests of
the Certificates or the Certificate Insurer.
(d) The Trustee shall not be required to expend or risk its own funds
or otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it, and
none of the provisions contained in this Agreement shall in any event require
the Trustee to perform, or be responsible for the manner of performance of, any
of the obligations of the Servicer under this Agreement, except during such
time, if any, as the Trustee shall be the successor to, and be vested with the
rights, duties, powers and privileges of, the Servicer in accordance with the
terms of this Agreement.
Section 9.02. CERTAIN MATTERS AFFECTING THE TRUSTEE. Except as otherwise
provided in Section 9.01:
(a) The Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officer's Certificate, certificate
of auditors or any other certificate, statement, instrument, opinion, report,
notice, request, consent, order, 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;
(b) The 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 and in accordance
with such Opinion of Counsel;
(c) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement, or to institute, conduct or
defend any litigation hereunder or in relation hereto, at the request, order or
direction of any of the Certificateholders, pursuant to the provisions of this
Agreement, unless such Certificateholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby; nothing contained herein shall,
however, relieve the Trustee of the obligations, upon the occurrence of a
Servicer Default that has not been cured, to exercise such of the rights and
powers vested in it by this Agreement, and to use the same degree of care and
skill in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs;
(d) The Trustee shall not be personally liable for any action taken,
suffered or omitted by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this Agreement;
(e) Prior to the occurrence of a Servicer Default and after the curing
of all Servicer Defaults which may have occurred, the Trustee shall not be bound
to make any investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request, consent,
order, approval, bond or other paper or document, unless requested in writing to
do so by Certificateholders evidencing not less than 25% of the aggregate
Percentage Interests of the Certificates or the Certificate Insurer; provided,
however, that if the payment within a reasonable time to the Trustee of the
costs, expenses or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured to the
Trustee by the security afforded to it by the terms of this Agreement, the
Trustee may require reasonable indemnity against such cost, expense or liability
as a condition to such proceeding. The reasonable expense of every such
examination shall be paid by the Servicer or, if paid by the Trustee, shall be
reimbursed by the Servicer upon demand. Nothing in this paragraph (e) shall
derogate from the obligation of the Servicer to observe any applicable law
prohibiting disclosure of information regarding the Mortgagors; and
(f) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys or a custodian.
Section 9.03. TRUSTEE NOT LIABLE FOR CERTIFICATES OR HOME EQUITY LOANS. The
recitals contained herein and in the Certificates (other than the signature and
countersignature of the Trustee on the Certificates) shall be taken as the
statements of the Servicer, the Depositor or the Transferor, as the case may be,
and the Trustee assumes no responsibility for the correctness of the same. The
Trustee makes no representations as to the validity or sufficiency of this
Agreement or of the Certificates (other than the signature and countersignature
of the Trustee on the Certificates) or of any Home Equity Loan or related
document. The Trustee shall not be accountable for the use or application by the
Servicer or the Transferor of any of the Certificates or of the proceeds of such
Certificates, or for the use or application of any funds paid to the Servicer or
the Transferor in respect of the Home Equity Loans or deposited in or withdrawn
from the Certificate Account by the Servicer.
Section 9.04. TRUSTEE MAY OWN CERTIFICATES. The Trustee in its individual
or any other capacity may become the owner or pledgee of Certificates with the
same rights as it would have if it were not Trustee.
Section 9.05. SERVICER TO PAY TRUSTEE'S FEES AND EXPENSES. The Servicer
covenants and agrees to pay to the Trustee from time to time, and the Trustee
shall be entitled to, reasonable compensation (which shall not be limited by any
provision of law in regard to the compensation of a trustee of an express trust)
for all services rendered by it in the execution of the trusts hereby created
and in the exercise and performance of any of the powers and duties hereunder of
the Trustee, and the Servicer will pay or reimburse the Trustee upon its request
for all reasonable expenses, disbursements and advances incurred or made by the
Trustee in accordance with any of the provisions of this Agreement (including
the reasonable compensation and the expenses and disbursements of its counsel
and of all persons not regularly in its employ) except any such expense,
disbursement or advance as may arise from the Trustee's negligence or bad faith
or which is the responsibility of Certificateholders hereunder. In addition, the
Servicer covenants and agrees to indemnify the Trustee from, and hold it
harmless against, any and all losses, liabilities, damages, claims, legal
actions, including any pending or threatened claims or legal actions, or
expenses arising out of or based on the Home Equity Loans or this Agreement,
except to the extent caused by the Trustee's negligence, willful misconduct or
bad faith.
Section 9.06. ELIGIBILITY REQUIREMENTS FOR TRUSTEE. The Trustee hereunder
shall at all times (i) be a Person having its principal office in the State of
New York or in the same state as that in which the initial Trustee under this
Agreement has its principal office and organized and doing business under the
laws of such State or the United States of America, authorized under such laws
to exercise corporate trust powers, having a combined capital and surplus of at
least $50,000,000 and subject to supervision or examination by federal or state
authority and (ii) have at all times a long term unsecured debt rating (or the
direct or indirect corporate parent of the Trustee shall have a long term
unsecured debt rating if the Trustee does not have such a rating) that will not
result in the downgrading or withdrawal of the rating or ratings then assigned
to the Certificates by each Rating Agency. If such Person 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, the combined capital and surplus of such Person shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section, the Trustee shall
resign immediately in the manner and with the effect specified in Section 9.07.
Section 9.07. RESIGNATION OR REMOVAL OF TRUSTEE. The Trustee may at any
time resign and be discharged from the trusts hereby created by giving written
notice thereof to the Servicer. Upon receiving such notice of resignation, the
Servicer shall promptly appoint a successor Trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered to the resigning
Trustee and one copy to the successor Trustee; provided, however, that (i) such
appointment does not result in a reduction or withdrawal of the then current
rating of the Certificates and (ii) so long as such consent is not unreasonably
withheld, the Certificate Insurer consents to such appointment. The Servicer
shall make a good faith effort to appoint a successor within 30 days of its
receipt of such notice. If the Servicer does not appoint a successor Trustee
within such 30 day period and it is not making a good faith effort to appoint a
successor Trustee, then the Certificate Insurer may appoint a successor Trustee.
The Servicer shall indemnify the Trustee for any loss, liability, or expense
incurred as a result of the Servicer's failure to make a good faith effort to
appoint a successor Trustee. If no successor Trustee shall have been so
appointed and accepted appointment within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If at any time (i) the Trustee shall cease to be eligible in accordance
with the provisions of Section 9.06 and shall fail to resign after written
request therefor by the Servicer, (ii) the Servicer has delivered to the Trustee
a letter from any Rating Agency to the effect that the rating of the
Certificates has been or is about to be reduced or withdrawn on account of a
reduction in the long-term credit rating of the Trustee or the parent of the
Trustee (provided that if (a) the Trustee proposes to the Servicer to enter into
an agreement with the Trustee and the Servicer, in its sole discretion, elects
to enter into such agreement and (b) such agreement is consented to by the
Certificate Insurer (which consent shall not be unreasonably withheld) and is
satisfactory to the Rating Agencies without resulting in a reduction in or
withdrawal of any rating of the Certificates, then upon the execution and
delivery of such agreement the Servicer shall not request such resignation
pursuant to this clause (ii)) and the Trustee shall fail to resign after written
request therefor by the Servicer, or (iii) the Trustee shall become incapable of
acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the
Trustee or all or substantially all of its property shall be appointed, or any
public officer shall take charge or control of the Trustee or all or
substantially all of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then the Servicer may remove the Trustee and
appoint a successor trustee, subject to the following paragraph and to the
consent of the Certificate Insurer to such appointment (which consent shall not
be unreasonably withheld), by written instrument, in duplicate, one copy of
which instrument shall be delivered to the Trustee so removed and one copy to
the successor trustee.
Any resignation or removal of the Trustee and appointment of a successor
Trustee pursuant to any of the provisions of this Section shall not become
effective until acceptance of appointment by the successor Trustee as provided
in Section 9.08.
Section 9.08. SUCCESSOR TRUSTEE. Any successor Trustee appointed as
provided in Section 9.07 shall execute, acknowledge and deliver to the Servicer,
the Certificate Insurer and to its predecessor Trustee an instrument accepting
such appointment hereunder, and thereupon the resignation or removal of the
predecessor Trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become fully vested with all the
rights, powers, duties and obligations of its predecessor hereunder, with like
effect as if originally named as Trustee. The Servicer and the predecessor
Trustee shall execute and deliver such instruments and do such other things as
may reasonably be required for fully and certainly vesting and confirming in the
successor Trustee all such rights, powers, duties and obligations.
No successor Trustee shall accept appointment as provided in this Section
unless at the time of such acceptance such successor Trustee shall be eligible
under the provisions of Section 9.06.
Upon acceptance of appointment by a successor Trustee as provided in this
Section, the Servicer shall mail notice of the succession of such Trustee
hereunder to all Certificateholders at their addresses as shown in the
Certificate Register and to the Certificate Insurer. If the Servicer fails to
mail such notice within 10 days after acceptance of appointment by the successor
Trustee, the successor Trustee shall cause such notice to be mailed at the
expense of the Servicer.
Section 9.09. MERGER OR CONSOLIDATION OF TRUSTEE. Any corporation into
which the 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 Trustee shall be a party, or any corporation
succeeding to the business of the Trustee, shall be the successor of the Trustee
hereunder, provided that such corporation shall be eligible under the provisions
of Section 9.06, without the execution or filing of any paper or any further act
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding.
Section 9.10. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
(a) Notwithstanding any other provision of this Agreement, at any
time, for the purpose of meeting any legal requirements of any jurisdiction in
which any part of the Trust Fund or any Mortgaged Property may at the time be
located, the Servicer and the Trustee acting jointly shall have the power and
shall execute and deliver all instruments to appoint one or more Persons
approved by the Trustee to act as co-trustee or co-trustees, jointly with the
Trustee, or separate trustee or separate trustees, of all or any part of the
Trust Fund, and to vest in such Person or Persons, in such capacity and for the
benefit of the Certificateholders, such title to the Trust Fund, or any part
thereof, and, subject to the other provisions of this Section, such powers,
duties, obligations, rights and trusts as the Servicer and the Trustee may
consider necessary or desirable. If the Servicer shall not have joined in such
appointment within 15 days after the receipt by it of a request so to do, or in
the case a Servicer Default shall have occurred and be continuing, the Trustee
alone shall have the power to make such appointment. No co-trustee or separate
trustee hereunder shall be required to meet the terms of eligibility as a
successor trustee under Section 9.06 and no notice to Certificateholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 9.08.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) All rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or co-
trustee jointly (and such separate trustee or co-trustee is not
authorized to act separately without the Trustee joining in such act),
except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed (whether as Trustee
hereunder or as successor to the Servicer hereunder), the Trustee
shall be incompetent or unqualified to perform such act or acts, in
which event such rights, powers, duties and obligations (including the
holding of title to the Trust Fund or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such separate
trustee or co-trustee, but solely at the direction of the Trustee;
(ii) No trustee hereunder shall be held personally liable by
reason of any act or omission of any other trustee hereunder; and
(iii) The Servicer and the Trustee acting jointly may at any
time accept the resignation of or remove any separate trustee or co-
trustee.
(c) Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article IX. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Servicer.
(d) Any separate trustee or co-trustee may, at any time, constitute
the Trustee, its agent or attorney-in-fact, with full power and authority, to
the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
Section 9.11. TAX RETURNS. The Trustee, upon request, shall furnish the
Servicer with all such information as may be reasonably required and within the
Trustee's reasonable control or knowledge in the event the Servicer is required
to prepare any tax returns pursuant to Section 3.15.
<PAGE>
ARTICLE X
Termination
Section 10.01. TERMINATION.
(a) The respective obligations and responsibilities of the parties
hereto created hereby (other than the obligation of the Trustee to make certain
payments to Certificateholders and to or at the direction of the owner of the
Transferor's Interest after the final Distribution Date and the obligation of
the Servicer to send certain notices as hereinafter set forth) shall terminate
upon the completion of the last action required to be taken by the Trustee on
the final Distribution Date pursuant to this Article X following the later of
(x) payment in full of all amounts owing to the Certificate Insurer and (y) the
earliest of:
(i) the transfer, under the conditions specified in Section
10.01(b), to the Transferor of the Certificateholders' interest in
each Home Equity Loan and all property acquired in respect of any Home
Equity Loan remaining in the Trust Fund for the Final Termination
Price;
(ii) the day following the Distribution Date on which the
distribution made to Certificateholders has reduced the Certificate
Principal Balance to zero;
(iii) the final payment or other liquidation of the Principal
Balance of the last Home Equity Loan remaining in the Trust Fund
(including the disposition of the Home Equity Loans pursuant to
Section 10.02) or the disposition of all property acquired upon
foreclosure or deed in lieu of foreclosure of any Home Equity Loan;
and
(iv) the Distribution Date in June 2025.
(b) The Transferor shall have the right to exercise the option to
transfer to itself each Home Equity Loan on any Distribution Date on or after
the Distribution Date on which the Certificate Principal Balance is less than or
equal to five percent (5%) of the Original Certificate Principal Balance and all
amounts due and owing to the Certificate Insurer for unpaid premiums and
unreimbursed draws on the Certificate Insurance Policy, together with interest
thereon as provided under the Insurance Agreement, have been paid. The purchase
price for any such transfer shall be the Final Termination Price. If such right
is exercised and the Trustee is holding the Mortgage Files, the Trustee shall,
promptly following payment of the Final Termination Price, release to the
Servicer the Mortgage Files pertaining to the Home Equity Loans being so
transferred.
(c) Notice of any termination, specifying the Distribution Date upon
which the Certificateholders may surrender their Certificates to the Trustee for
payment of the final distribution and cancellation, shall be given promptly by
the Trustee (upon receipt of written directions from the Transferor to the
Trustee no later than the 20th day of the month preceding the month of such
final distribution, if the Transferor is exercising its right to repurchase the
assets of the Trust Fund) by letter to Certificateholders and the Certificate
Insurer mailed not earlier than the first day and not later than the tenth day
of the month of such final distribution specifying (i) the Distribution Date
upon which final distribution of the Certificates will be made upon presentation
and surrender of Certificates at the office or agency of the Trustee therein
designated, (ii) the amount of any such final distribution and (iii) that the
Record Date otherwise applicable to such Distribution Date is not applicable,
distributions being made only upon presentation and surrender of the
Certificates at the office or agency of the Trustee therein specified. In the
event written directions are delivered by the Transferor to the Trustee as
described in the preceding sentence, the Transferor shall deposit in the
Certificate Account before the Distribution Date for such final distribution in
immediately available funds an amount equal to the Final Termination Price for
the assets of the Trust Fund. Such deposit shall be in lieu of the deposit
otherwise required to be made in respect of such Distribution Date.
(d) Upon presentation and surrender of the Certificates, the Trustee
shall cause to be distributed to the Certificateholders on the Distribution Date
for such final distribution, in proportion to the Percentage Interests of their
respective Certificates, an amount equal to (i) if such final distribution is
not being made pursuant to the transfer to the Transferor pursuant to Section
10.01(b), the amount required to be distributed to Certificateholders pursuant
to Section 5.01 for such Distribution Date and (ii) if such final distribution
is being made pursuant to such a transfer to the Transferor, the Final
Termination Price. The distribution on such final Distribution Date pursuant to
a transfer pursuant to Section 10.01(b) shall be in lieu of the distribution
otherwise required to be made on such Distribution Date in respect of the
Certificates. On the final Distribution Date, prior to having made the
distributions called for above, the Trustee shall withdraw from the Certificate
Account and remit to the Certificate Insurer the lesser of (x) the amount
available for distribution on such final Distribution Date, net of any portion
thereof necessary to pay the amounts described in clauses (d)(i) or (ii) above,
as applicable, and (y) the unpaid amounts due and owing to the Certificate
Insurer for unpaid premiums and unreimbursed draws on the Certificate Insurance
Policy, together with interest thereon as provided under the Insurance
Agreement.
(e) In the event that all of the Certificateholders shall not
surrender their Certificates for final payment and cancellation on or before
such final Distribution Date, the Trustee shall on such date cause all funds in
the Certificate Account not distributed in final distribution to the Certificate
Insurer or to the Certificateholders to be withdrawn therefrom and credited to
the remaining Certificateholders by depositing such funds in a separate escrow
account for the benefit of such Certificateholders and the Transferor, and the
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, any funds
deposited in such escrow account and remaining unclaimed shall be paid by the
Trustee to the Transferor and thereafter Certificateholders shall look only to
the Transferor with respect to any claims in respect of such funds.
Section 10.02. TERMINATION BY CERTIFICATE INSURER. In the event the
Transferor does not exercise its option to transfer to itself the Home Equity
Loans pursuant to Section 10.01(b), the Certificate Insurer may do so on the
same terms.
<PAGE>
ARTICLE XI
Rapid Amortization Events
Section 11.01. RAPID AMORTIZATION EVENTS. If any one of the following
events shall occur during the Revolving Period or the Managed Amortization
Period:
(a) failure on the part of the Servicer (i) to make any payment or
deposit required by the terms of this Agreement, on or before the date occurring
five (5) Business Days after the date such payment or deposit is required to be
made herein, or (ii) duly to observe or perform in any material respect any
other covenants or agreements of the Servicer set forth in this Agreement, which
failure, in the case of clause (ii), materially and adversely affects the
interests of the Certificateholders or the Certificate Insurer, and continues
unremedied for a period of sixty (60) days after the date on which written
notice of such failure, requiring the same to be remedied, shall have been given
to the Servicer by the Trustee, the Certificate Insurer or Certificateholders
evidencing Percentage Interests aggregating not less than 51%;
(b) any representation or warranty made by the Servicer in this
Agreement shall prove to have been incorrect in any material respect when made,
as a result of which the interests of the Certificateholders or the Certificate
Insurer are materially and adversely affected and which continues to be
incorrect in any material respect and continues to affect materially and
adversely the interests of the Certificateholders or the Certificate Insurer for
a period of sixty (60) days after the date on which written notice of such
failure, requiring the same to be remedied, shall have been given to the
Servicer by the Trustee, or to the Servicer and the Trustee by either the
Certificate Insurer or Certificateholders evidencing Percentage Interests
aggregating not less than 51%; provided, however, that a Rapid Amortization
Event pursuant to this subparagraph (b) shall not be deemed to have occurred
hereunder if the Transferor has accepted transfer of the related Home Equity
Loan or Home Equity Loans during such period (or such longer period (not to
exceed an additional sixty (60) days) as the Trustee, with the consent of the
Certificate Insurer, which consent shall not be unreasonably withheld, may
specify) in accordance with the provisions hereof;
(c) the Transferor shall go into liquidation, consent to the
appointment of a conservator or receiver or liquidator or similar person in any
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings of or relating to the Transferor of or relating to all or
substantially all of its property, or a decree or order of a court or agency or
supervisory authority having jurisdiction in the premises for the appointment of
a conservator, receiver, liquidator or similar person in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall have
been entered against the Transferor and such decree or order shall have remained
in force undischarged or unstayed for a period of sixty (60) days; or the
Transferor shall admit in writing its inability to pay its debts generally as
they become due, file a petition to take advantage of any applicable insolvency
or reorganization statute, make an assignment for the benefit of its creditors
or voluntarily suspend payment of its obligations;
(d) the Trust shall become subject to registration as an "investment
company" under the Investment Company Act of 1940, as amended;
(e) any Servicer Default shall occur; or
(f) the occurrence of a "Trigger Event" specified in Section 6.1 of
the Insurance Agreement with respect to which the Certificate Insurer may
declare, and has declared, a Rapid Amortization Event to occur;
then, in the case of any event described in subparagraph (a), (b) or (e) after
the applicable grace or cure period, if any, set forth in such subparagraphs,
either the Trustee or Certificateholders evidencing Percentage Interests
aggregating not less than 51% or the Certificate Insurer (so long as there is no
default by the Certificate Insurer in the performance of its obligations under
the Certificate Insurance Policy), by notice given in writing to the Transferor
and Servicer (and to the Trustee if given by either the Certificate Insurer or
the Certificateholders) may declare that a Rapid Amortization Event has occurred
as of the date of such notice. In the case of any event described in
subparagraphs (c) or (d), a Rapid Amortization Event shall occur without any
notice or other action on the part of the Trustee, the Certificate Insurer or
the Certificateholders, immediately upon the occurrence of such event. In the
case of any event described in subparagraph (f), a Rapid Amortization Event
shall be deemed to have occurred only if, after the applicable grace or cure
period, if any, set forth in the Insurance Agreement, the Certificate Insurer
gives written notice to the Transferor, the Servicer and the Trustee that a
Rapid Amortization Event has occurred.
Section 11.02. ADDITIONAL RIGHTS UPON AN INSOLVENCY EVENT.
(a) If the Transferor goes into liquidation or consents to the
appointment of a conservator or receiver or liquidator or similar person in any
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings of or relating to the Transferor or of or relating to all or
substantially all of its property, or a decree or order of a court or agency or
supervisory authority having jurisdiction in the premises for the appointment of
a conservator or receiver or liquidator or similar person in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall have
been entered against the Transferor, and such decree shall have remained in
force undischarged or unstayed for a period of sixty (60) days; or the
Transferor shall admit in writing its inability to pay its debts generally as
they become due, file a petition to take advantage of any applicable insolvency
or reorganization statute, make an assignment for the benefit of its creditors
or voluntarily suspend payment of its obligations (such voluntary liquidation,
appointment, entering of such decree, admission, filing, making, suspension or
violation or other event described above, an "Insolvency Event"), then the
Transferor shall, on the day of such appointment, voluntary liquidation,
entering of such decree, admission, filing, making, suspension or inability, as
the case may be (the "Appointment Day"), promptly give notice to the Trustee and
the Certificate Insurer of such Insolvency Event.
The Transferor shall on the Appointment Day immediately cease to transfer
Additional Balances to the Trust. Notwithstanding any cessation of the transfer
to the Trust of Additional Balances, Additional Balances transferred to the
Trust prior to the occurrence of such Insolvency Event, and Principal
Collections and Interest Collections, whenever created, accrued in respect of
such Home Equity Loans shall continue to be a part of the Trust, and shall
continue to be allocated and paid in accordance with Article V.
Within fifteen (15) days of the Appointment Day, the Trustee shall send
written notice to the Certificateholders describing the provisions of this
Section and requesting instructions from such Certificateholders. If directed by
the Certificate Insurer or if the Trustee shall have received written
instructions from Certificateholders evidencing not less than 51% of the
aggregate Percentage Interests to the effect that such Certificateholders desire
the liquidation of the Trust assets, with the consent of the Certificate
Insurer, the Trustee shall sell, dispose of or otherwise liquidate the Trust
assets in a commercially reasonable manner and on commercially reasonable terms,
which shall include the solicitation of competitive bids. The Trustee may obtain
a prior determination from any such conservator, receiver or liquidator that the
terms and manner of any proposed sale, disposition or liquidation are
commercially reasonable. The provisions of Sections 11.01 and this Section shall
not be deemed to be mutually exclusive.
(b) The proceeds from the sale, disposition or liquidation of the
Trust assets pursuant to Section 11.02(a) shall be treated as collections on the
Home Equity Loans received during the Rapid Amortization Period; provided,
however, that such proceeds will, based on amounts specified in writing to the
Servicer to the Trustee, first be paid to the Certificate Insurer to reimburse
the Certificate Insurer for previously unreimbursed Insured Payments and other
amounts owing under the Insurance Agreement and second be paid to the Trustee in
reimbursement of expenses incurred in connection with the sale, disposition or
liquidation of the Trust assets pursuant to Section 11.02(a); and provided,
further, that the Fixed Allocation Percentage of such remaining proceeds shall
be paid to Certificateholders in the following amounts and order of priority:
(i) all accrued and unpaid interest on the Certificate Principal
Balance through the Accrual Period immediately preceding the
Distribution Date on which such proceeds are distributed to the
Certificateholders; and
(ii) an amount of principal up to the Certificate Principal
Balance.
The Certificate Insurance Policy shall cover any shortfall in the event
such proceeds are insufficient to make a full distribution to Certificateholders
pursuant to this Section 11.02(b). On the day following the final Distribution
Date on which such proceeds are distributed to the Certificateholders, the Trust
shall terminate.
(c) The Trustee may appoint an agent or agents to assist with its
responsibilities pursuant to this Article XI with respect to competitive bids or
any other of its duties, and the expenses of such agents shall be payable from
amounts otherwise distributable to Certificateholders.
<PAGE>
ARTICLE XII
Miscellaneous Provisions
Section 12.01. AMENDMENT. This Agreement may be amended from time to time
by the parties hereto with the consent of the Certificate Insurer so long as
such consent is not unreasonably withheld and without the consent of any of the
Certificateholders, (i) to cure any ambiguity or mistake, (ii) to correct or
supplement any provisions herein or therein which may be inconsistent with any
other provisions herein or therein, as the case may be, or (iii) to add or
delete any other provisions not inconsistent herewith with respect to matters or
questions arising under this Agreement, including provisions relating to the
issuance of Definitive Certificates to Certificate Owners in the event that
book-entry registration of Certificates is no longer permitted; provided,
however, that in each case such action shall not, as evidenced by an Opinion of
Counsel, adversely affect in any material respect the interests of any
Certificateholder; provided further, that any such amendment will be deemed not
to adversely affect in any material respect the interests of any
Certificateholder and no such Opinion of Counsel will be required to be
delivered if the Person requesting such amendment obtains either (x) a letter
from each Rating Agency to the effect that such amendment would not result in a
downgrading or withdrawal of the then current rating of the Certificates by such
Rating Agency or (y) the written consent of the Certificate Insurer to such
amendment.
This Agreement may also be amended from time to time by the parties hereto
with the consent of Certificateholders evidencing Percentage Interests
aggregating not less than 51% and the consent of the Certificate Insurer (which
consent of the Certificate Insurer shall not be unreasonably withheld), for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement or the Certificate Insurance Policy, or of
modifying in any manner the rights of the Certificateholders; provided, however,
that no such amendment shall (a) reduce in any manner the amount of, or delay
the timing of, distributions which are required to be made on any Certificate
without the consent of the applicable Certificateholder or (b) reduce the
aforesaid percentage required to consent to any such amendment, without the
consent of all Certificateholders.
Notwithstanding the foregoing, this Agreement may not be amended unless, in
connection with such amendment, an Opinion of Counsel is furnished to the
Trustee to the effect that such amendment will not (i) adversely affect the
treatment of the Certificates as indebtedness for tax purposes; (ii) result in
the Trust being taxed at the entity level; or (iii) result in the Trust being
taxed as a taxable mortgage pool (as defined in Section 7701(i) of the Code).
Not later than the time of obtaining any such consent, the Trustee shall
furnish written notification of the substance of such amendment to each Rating
Agency. Promptly after the execution of any such amendment or consent, the
Trustee shall furnish written notification of such amendment to each
Certificateholder.
It shall not be necessary for the consent of Certificateholders under this
Section to approve the particular form of any proposed amendment or consent, but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject to such reasonable
requirements as the Trustee may prescribe.
In no event shall any Opinion of Counsel provided pursuant to this Section
be an expense of the Trustee.
Section 12.02. RECORDATION OF AGREEMENT; COUNTERPARTS. Although no
recordation of this Agreement is contemplated on the date hereof, this Agreement
may be recorded 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
Servicer and at its expense on direction by the Trustee, but only upon direction
of the Trustee accompanied by an Opinion of Counsel to the effect that such
recordation materially and beneficially affects the interests of
Certificateholders.
For the purpose of facilitating the recordation of this Agreement as herein
provided and for other purposes, this Agreement may be executed simultaneously
in any number of counterparts, each of which counterparts shall be deemed to be
an original, and such counterparts shall constitute but one and the same
instrument.
Section 12.03. LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS. The death or
incapacity of any Certificateholder shall not operate to terminate this
Agreement or to dissolve the Trust, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust,
nor otherwise affect the rights, obligations and liabilities of the parties
hereto or such party.
No Certificateholder shall have any right to vote (except as provided in
Section 12.01) or in any manner otherwise control the operation and management
of the Trust Fund, or the obligations of the parties hereto, nor shall anything
herein set forth, or contained in the terms of the Certificates, be construed so
as to constitute the Certificateholders from time to time as partners or members
of an association; nor shall any Certificateholder be under any liability to any
third person by reason of any action taken by the parties to this Agreement
pursuant to any provision hereof.
No Certificateholder shall have any right by virtue or by availing itself
of any provisions of this Agreement to institute any suit, action or proceeding
in equity or at law upon or under or with respect to this Agreement, unless such
Certificateholder previously shall have given to the Trustee a written notice of
default and of the continuance thereof, as hereinbefore provided, and unless
Certificateholders evidencing Percentage Interests aggregating not less than 51%
shall have made written request upon the Trustee to institute such action, suit
or proceeding in its own name as Trustee hereunder and shall have offered to the
Trustee such reasonable indemnity as it may require against the costs, expenses
and liabilities to be incurred therein or thereby, and the Trustee, for sixty
(60) days after its receipt of such notice, request and offer of indemnity,
shall have neglected or refused to institute any such action, suit or
proceeding. Each Certificateholder expressly covenants with every other
Certificateholder and the Trustee that no one or more Certificateholders shall
have any right in any manner whatever by virtue or by availing itself or
themselves of any provisions of this Agreement to affect, disturb or prejudice
the rights of any other Certificateholder, or to obtain or seek to obtain
priority over or preference to any other such Holder, or to enforce any right
under this Agreement, except in the manner herein provided and for the equal,
ratable and common benefit of all Certificateholders. For the protection and
enforcement of the provisions of this Section 12.03, each and every
Certificateholder and the Trustee shall be entitled to such relief as can be
given either at law or in equity.
Section 12.04. THE CERTIFICATE INSURER. The Certificate Insurer is a
third-party beneficiary of this Agreement. Any right conferred to the
Certificate Insurer shall be suspended during any period in which the
Certificate Insurer is in default in its payment obligations under the
Certificate Insurance Policy. During any period of suspension the Certificate
Insurer's rights hereunder shall vest in the Holders of the Certificates and
shall be exercisable by Certificateholders evidencing Percentage Interests
aggregating not less than 51% of the outstanding Certificates. At such time as
the Certificates are no longer outstanding hereunder and the Certificate Insurer
has been reimbursed for all Insured Payments to which it is entitled hereunder
and has been paid all Premium Amounts due and owing under the Insurance
Agreement, the Certificate Insurer's rights hereunder shall terminate.
Section 12.05. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES AND THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION), AND
THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 12.06. NOTICES. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given when delivered
to (a) in the case of the Transferor and the Servicer, Providian National Bank,
c/o Providian Financial Corporation, 201 Mission Street, San Francisco,
California 94105, Attention: Chief Financial Officer, (b) in the case of the
Depositor, Merrill Lynch Mortgage Investors, Inc., 250 Vesey Street, North
Tower, World Financial Center, New York, New York 10281, Attention: President,
(c) in the case of the Trustee, at the Corporate Trust Office, (d) in the case
of Moody's, ABS Monitoring Department, 4th Floor, 99 Church Street, New York,
New York 10007, (e) in the case of the Certificate Insurer, MBIA Insurance
Corporation, 113 King Street, Armonk, New York 10504, Attention: Insured
Portfolio Management Structured Finance, (f) in the case of Standard and Poor's,
Debt Rating Division, 25 Broadway, 20th Floor, New York, New York 10004,
Attention: Asset-Backed Surveillance Group, or, as to each party, at such other
address as shall be designated by such party in a written notice to each other
party. Any notice required or permitted to be mailed to a Certificateholder
shall be given by first class mail, postage prepaid, at the address of such
Holder as shown in the Certificate Register. Any notice so mailed to a
Certificateholder within the time prescribed in this Agreement shall be
conclusively presumed to have been duly given when mailed, whether or not the
Certificateholder receives such notice.
Section 12.07. SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Certificates
or the rights of Certificateholders.
Section 12.08. ASSIGNMENT. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 6.05, 7.02 and 7.04, this
Agreement may not be assigned by the Transferor or the Servicer without the
prior written consent of Certificateholders evidencing Percentage Interests
aggregating not less than 51%.
Section 12.09. CERTIFICATES NONASSESSABLE AND FULLY PAID. The parties agree
that the Certificateholders shall not be personally liable for obligations of
the Trust, that the beneficial ownership interests represented by the
Certificates shall be nonassessable for any losses or expenses of the Trust or
for any reason whatsoever, and that Certificates upon execution,
countersignature and delivery thereof by the Trustee pursuant to Section 6.01
are and shall be deemed fully paid.
Section 12.10. COUNTERPARTS. This instrument may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section 12.11. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
Section 12.12. THIRD PARTY BENEFICIARIES. This Agreement shall inure to the
benefit of and be binding upon the parties hereto, and, in addition, shall inure
to the benefit of Certificateholders and, to the extent provided herein, the
Certificate Insurer and their respective successors and permitted assigns.
Except as otherwise provided in this Agreement, no other Person shall have any
right or obligation hereunder.
Section 12.13. MERGER AND INTEGRATION. Except as specifically stated
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, and all contemporaneous oral understandings, are superseded by
this Agreement. This Agreement may not be modified, amended, waived or
supplemented except as provided herein.
Section 12.14. CERTAIN ACTIVITIES. The Trust shall not: (i) issue
securities (except for the Certificates); (ii) borrow money; (iii) make loans;
(iv) invest in securities for the purpose of exercising control; (v) underwrite
securities; (vi) except as provided herein, engage in the purchase and sale (or
turnover) of investments; (vii) offer securities in exchange for property
(except the Certificates for the Home Equity Loans and any Additional Balances);
or (viii) repurchase or otherwise reacquire its securities.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers all as of the day and year first
above written.
PROVIDIAN NATIONAL BANK,
as Transferor and Servicer
By: /s/ MIMI MENGIS
----------------------------------------
Name: Mimi Mengis
Title: Vice President
MERRILL LYNCH MORTGAGE INVESTORS, INC.,
as Depositor
By: /s/ MICHAEL M. MCGOVERN
----------------------------------------
Name: Michael M. McGovern
Title: Secretary
BANKERS TRUST COMPANY,
not in its individual capacity but solely
as Trustee
By: /s/ PATRICIA M. F. RUSSO
----------------------------------------
Name: Patricia M. F. Russo
Title: Vice President
<PAGE>
State of California )
) ss.:
County of San Francisco )
On April ___, 1999 before me, ______________________, personally appeared
_________, _________________ of Providian National Bank, personally known to me
(or proved to me on the basis of satisfactory evidence) to be the person whose
name is subscribed to the within instrument and acknowledged to me that he/she
executed the same in his/her authorized capacity, and that his/her signature on
the instrument the person, or the entity upon behalf of which the person acted,
executed the instrument.
WITNESS my hand and official seal.
___________________________________________
Signature of Notary
(Seal)
<PAGE>
State of New York )
) ss.:
County of New York )
On the ____ day of April, 1999 before me, a notary public in and for the
State of New York, personally appeared __________, known to me who, being by me
duly sworn, did depose and say that he is located at ____________________; that
he is a _______ of Merrill Lynch Mortgage Investors, Inc., a corporation formed
under the laws of the State of Delaware, one of the parties that executed the
foregoing instrument; and that she signed her name thereto by order of the Board
of Directors of said corporation.
___________________________________________
Notary Public
[Notarial Seal]
<PAGE>
State of )
) ss.:
County of )
On the ____ day of April, 1999 before me, a notary public in and for the
State of ________, personally appeared Patricia M.F. Russo, known to me who,
being by me duly sworn, did depose and say that she is located at ___________;
that she is a Vice President of Bankers Trust Company, a New York banking
corporation, one of the parties that executed the foregoing instrument; and that
he signed her name thereto under authority granted by the Board of Directors of
said corporation.
___________________________________________
Notary Public
[Notarial Seal]
<PAGE>
EXHIBIT A
FORM OF CERTIFICATES
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT IS MADE TO CEDE
& CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
Original Certificate Principal
Balance of this
Certificate : $
Certificate Rate : Variable
Original Certificate Principal
Balance of all
Certificates : $
CUSIP No. :
Date of Pooling and
Servicing Agreement :
Certificate No. : R-1
Initial Cut-Off Date :
First Distribution
Date: :
Scheduled Maturity Date :
<PAGE>
PROVIDIAN HOME EQUITY LOAN ASSET BACKED CERTIFICATES,
SERIES 1999-PNB1
CERTIFICATE
evidencing a percentage interest in the distributions
allocable to the Certificates evidencing an undivided
interest in a Trust consisting primarily of a pool of
variable rate revolving home equity loans serviced by
Providian National Bank
This Certificate does not represent an obligation of or interest in Merrill
Lynch Mortgage Investors, Inc. (the "Depositor"), Providian National Bank
("Providian") or the Trustee referred to below or any of their affiliates.
Neither this Certificate nor the Home Equity Loans are guaranteed or insured by
any governmental agency or instrumentality.
This certifies that CEDE & CO. is the registered owner of the Percentage
Interest evidenced by this Certificate (obtained by dividing the Original
Certificate Principal Balance of this Certificate by the Original Certificate
Principal Balance of all Certificates) in certain monthly distributions with
respect to a Trust consisting primarily of a pool of variable rate revolving
home equity loans (the "Initial Home Equity Loans"), transferred by Providian
(in such capacity, the "Transferor") to the Depositor and by the Depositor to
the Trust, and any additional balances relating thereto, and certain revolving
home equity loans (the "Subsequent Home Equity Loans") and any additional
balances relating thereto transferred by the Transferor to the Trust subsequent
to the date of initial issuance of the Certificates, and serviced by Providian
National Bank (in such capacity, the "Servicer", including any successor
Servicer under the Agreement referred to below). The Trust was created pursuant
to a Pooling and Servicing Agreement dated as specified above (the "Agreement")
among the Transferor and Servicer, the Depositor and Bankers Trust Company, as
trustee (the "Trustee"), a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.
On each Distribution Date, the Trustee shall distribute to each
Certificateholder of record on the related Record Date (other than the final
distribution) by check mailed to such Certificateholder at the address appearing
in the Certificate Register, or upon written request of a Certificateholders
received by the Trustee at least five Business Days prior to the related Record
Date, by wire transfer (but only if such Certificateholder is the Depository or
such Certificateholder owns of record one or more Certificates which have
principal denominations aggregating at least $5,000,000), or by such other means
of payment as such Certificateholder and the Trustee shall agree. Distributions
among Certificateholders shall be made in proportion to the Percentage Interests
evidenced by the Certificates held by such Certificateholders. Notwithstanding
the above, the final distribution on this Certificate will be made after due
notice by the Trustee, of the pendency of such distribution, and only upon
presentation and surrender of this Certificate at the office or agency appointed
by the Trustee for that purpose.
Pursuant to the terms of the Agreement, a distribution will be made on the
25th day of each month or if such day is not a Business Day, then on the next
succeeding Business Day (the "Distribution Date"), commencing on the first
Distribution Date specified above, to the Person in whose name this Certificate
is registered at the close of business on the last business day of the month
preceding the month of such Distribution Date (the "Record Date"), in an amount
equal to the product of the Percentage Interest evidenced by this Certificate
and the amount required to be distributed to Certificateholders on such
Distribution Date under the terms of the Agreement.
As provided in the Agreement, withdrawals from the Certificate Account may
be made from time to time for purposes other than distributions to the
Certificateholders and, subject to certain conditions in the Agreement, Home
Equity Loans may, at the election of the Transferor, be removed from the Trust
and transferred to the Transferor (as defined in the Agreement).
It is the intention of the Servicer, the Depositor and the
Certificateholders that the Certificates will be treated as indebtedness for
federal, state and local income and franchise tax purposes and for purposes of
any other tax imposed on or measured by income. The Trustee and the Holder of
this Certificate (or Certificate Owner) by acceptance of this Certificate (or,
in the case of a Certificate Owner, by virtue of such Certificate Owner's
acquisition of a beneficial interest herein) agrees to treat the Certificates
(or beneficial interest therein), for purposes of federal, state and local
income or franchise taxes and any other tax imposed on or measured by income, as
indebtedness secured by the Trust Fund and to report the transactions
contemplated by the Agreement on all applicable tax returns in a manner
consistent with such treatment. Each Holder of this Certificate agrees that it
will cause any Certificate Owner acquiring an interest in this Certificate
through it to comply with the Agreement as to treatment as indebtedness for
federal, state and local income and franchise tax purposes and for purposes of
any other tax imposed on or measured by income.
The Transferor (or in the event the Servicer does not exercise its option
to terminate the Trust Fund, the Certificate Insurer) may effect an early
retirement of the Certificates by exercising an option to transfer to itself
each Home Equity Loan pursuant to the Agreement on any Distribution Date on or
after the Distribution Date immediately prior to which the Certificate Principal
Balance is less than or equal to five percent (5%) of the Original Certificate
Principal Balance and all amounts due and owing to the Certificate Insurer for
unpaid premiums and unreimbursed draws on the Certificate Insurance Policy,
together with interest thereon as provided under the Insurance Agreement, have
been paid. The purchase price for any such transfer shall be the Final
Termination Price. Upon retirement of the Certificates in accordance with the
Agreement, the Trustee shall execute such documents and instruments of transfer
presented by the Transferor, the Servicer or Certificate Insurer and take such
other actions as the Transferor, the Servicer or Certificate Insurer may
reasonably request to effect the transfer of the Home Equity Loans to the
Transferor or Certificate Insurer.
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.
This Certificate shall not be entitled to any benefit under the Agreement
or be valid for any purpose unless manually countersigned by an authorized
officer of the Trustee.
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed as of the date set forth.
Dated:
BANKERS TRUST COMPANY,
not in its individual capacity but solely
as Trustee
___________________________________________
Authorized Officer
Countersigned:
BANKERS TRUST COMPANY
By: __________________________________
Authorized Officer of
Bankers Trust Company,
not in its individual capacity
but solely as Trustee
<PAGE>
[REVERSE OF CERTIFICATE]
This Certificate is one of the Certificates from a duly authorized issue of
Certificates designated as Providian Home Equity Loan Asset Backed Certificates,
Series 1999-PNB1, representing, to the extent specified in the Agreement, an
undivided interest in: (i) the Cut-off Date Principal Balance of each Home
Equity Loan and the amount of any Additional Balances, and all payments of
interest and principal due and received thereon, from whatever source derived,
received on or with respect to such Home Equity Loans after the related Cut-off
Date and with respect to such Additional Balances; (ii) property that secured a
Home Equity Loan and that has been acquired by foreclosure, deed in lieu of
foreclosure or otherwise; (iii) the related Mortgage File documents for each
Home Equity Loan; (iv) such assets as shall from time to time be identified as
deposited in the Collection Account and the Certificate Account in accordance
with this Agreement; (v) the Certificate Insurance Policy; (vi) any insurance
policies relating to the Home Equity Loans, including hazard insurance policies;
and (vii) all proceeds of each of the foregoing.
The Certificates are limited in right of payment to certain payments on and
collections in respect of the Home Equity Loans, all as more specifically set
forth in the Agreement. The Certificateholder, by its acceptance of this
Certificate, agrees that it will look solely to the funds on deposit in the
Certificate Account for payment hereunder and that the Trustee in its individual
capacity is not personally liable to the Certificateholders for any amount
payable under this Certificate or the Agreement or, except as expressly provided
in the Agreement, subject to any liability under the Agreement.
This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for the interests, rights and limitations of rights,
benefits, obligations and duties evidenced hereby, and the rights, duties and
immunities of the Trustee.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
parties thereto, and the rights of the Certificateholders under the Agreement,
at any time by the parties thereto with the consent of (i) Certificateholders
evidencing Percentage Interests aggregating not less than 51% and (ii) the
Certificate Insurer. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of any Certificateholders.
As provided in the Agreement and subject to certain limitations therein set
forth, the transfer of this Certificate is registrable in the Certificate
Register of the Certificate Registrar upon surrender of this Certificate for
registration of transfer at the office or agency maintained by the Certificate
Registrar for such purpose, accompanied by a written instrument of transfer in
form satisfactory to the Trustee, if so required by the Trustee, be duly
executed by the Holder of this Certificate or such Holder's attorney duly
authorized in writing, and thereupon one or more new Certificates of authorized
denominations, if applicable, and evidencing the same aggregate Percentage
Interest will be issued to the designated transferee or transferees.
The Certificates are issuable only as registered Certificates without
coupons in denominations specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of a like tenor in authorized denominations
and evidencing the same aggregate Percentage Interest, as requested by the
Certificateholder surrendering the same.
No service charge will be made for any such registration of transfer or
exchange, but the Trustee or the Certificate Registrar may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
The Trustee, the Depositor, the Transferor, the Servicer, the Certificate
Insurer and the Certificate Registrar and any agent of the foregoing may treat
the Person in whose name this Certificate is registered as the owner hereof for
all purposes, and neither the Trustee, the Depositor, the Transferor, the
Servicer, the Certificate Insurer, the Certificate Registrar nor any such agent
shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Agreement and the Trust
created thereby shall terminate upon distribution to the Certificateholders, or
provision therefor, of the amount required to be so distributed in accordance
with the Agreement upon the later of (A) payment in full of all amounts owing to
the Certificate Insurer and (B) the earliest of: (i) the transfer to the
Transferor of the Certificateholders' interest in each Home Equity Loan and all
property acquired in respect of any Home Equity Loan remaining in the Trust Fund
for an amount equal to the sum of (a) the outstanding Certificate Principal
Balance, (b) accrued interest thereon at the Certificate Rate through the day
preceding the final Distribution Date, and (c) any Unpaid Investor Loss Amount
through the day preceding such final Distribution Date; (ii) the day following
the Distribution Date on which the distribution made to Certificateholders has
reduced the Certificate Principal Balance to zero; (iii) the final payment or
other liquidation of the Principal Balance of the last Home Equity Loan
remaining in the Trust Fund (including the disposition of the Home Equity Loans)
or the disposition of all property acquired upon foreclosure or deed in lieu of
foreclosure of any Home Equity Loan; and (iv) the Distribution Date in June
2025.
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
(PLEASE INSERT SOCIAL SECURITY* OR TAXPAYER IDENTIFICATION NUMBER OF ASSIGNEE)
__________________________________
__________________________________
_______________________________________________________________________________
(Please Print or Type Name and Address of Assignee)
_______________________________________________________________________________
the within Certificate, and all rights thereunder, and hereby does irrevocably
constitute and appoint
_______________________________________________________________________________
attorney-in-fact to transfer the within Certificate on the books kept for the
registration thereof, with full power of substitution in the premises.
Dated:
(Signature guaranty) ___________________________________________
NOTICE: The signature to this assignment
must correspond with the name as it appears
upon the face of the within Certificate in
every particular, without alteration or
enlargement or any change whatever.
(*This information, which is voluntary, is being requested to ensure that the
assignee will not be subject to backup withholding under Section 3406 of the
Code.)
<PAGE>
EXHIBIT B
FORM OF NOTICE FOR CERTIFICATE INSURANCE POLICY
MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Attention: Insured Portfolio Management,
Structured Finance
NOTICE FOR PAYMENT
UNDER POLICY NUMBER 29097
Bankers Trust Company, as trustee (the "Trustee"), hereby certifies to MBIA
Insurance Corporation ("MBIA") with reference to that certain Policy, Number
[________] dated April 27, 1999 (the "Policy"), issued by MBIA in favor of the
Trustee under the Pooling and Servicing Agreement, dated as of April 1, 1999
(the "Agreement") among Merrill Lynch Mortgage Investors, Inc., as depositor,
Providian National Bank, as transferor (the "Transferor") and as servicer (the
"Servicer"), and Bankers Trust Company, as trustee (the "Trustee") as follows:
1. The Trustee is the Beneficiary under the Policy.
2. The Trustee is entitled to make a demand under the Policy [pursuant to
Section 4.03 of the Agreement][as a result of the occurrence of a Preference
Event] [as a result of a shortfall on a Dissolution Distribution Date or on the
Scheduled Maturity Date].
[For a Notice for Payment in respect of a Distribution Date, a Dissolution
Distribution Date or the Scheduled Maturity Date use the following paragraphs
3,4, and 5.]
3. This notice relates to the [insert date] Distribution Date. The Net
Principal Policy Amount, as specified to the Trustee by the Servicer, for such
Distribution Date is $[______]. The amount demanded by this notice for the
benefit of the Certificateholders in respect of principal does not exceed such
Net Principal Policy Amount.
4. The Trustee demands payment of $[_____], which consists of [interest in
the amount of $[_____]]; [and principal in the amount of $[_____]].
5. The amount demanded is to be paid in immediately available funds to the
Certificate Account at [_____], account number [_____].
[For a Notice for Payment in respect of Preference Amounts use the following
paragraphs 3, 4, and 5.]
3. The Trustee hereby represents and warrants, based upon information
available to it, that (i) the Preference Amount entitled to be drawn under the
Policy on the date hereof is $[_____], (ii) each Certificateholder with respect
to which the drawing is being made under the Policy has paid or simultaneously
with such draw on the Policy will pay such Preference Amount, and (iii) the
documents required by the Policy to be delivered in connection with such
Preference Amount have previously been presented to MBIA or are attached hereto.
4. The Trustee hereby demands payment of the Preference Amount of $[_____]
and the Trustee hereby represents and warrants, based upon information available
to it, that such amount is not in excess of the Net Principal Policy Amount, as
of the date hereof, together with interest thereon (which interest is the amount
paid to the Certificateholders on the date the Trust made the payment that has
been voided).
5. The amount demanded is to be paid in immediately available funds by wire
transfer to [_____].
Capitalized terms used herein and not otherwise defined herein shall have
the meanings assigned to them in the Agreement.
IN WITNESS WHEREOF, this notice has been executed this [_____] day of
[_____], [_____].
BANKERS TRUST COMPANY, as Trustee
By: _______________________________________
Authorized Officer
<PAGE>
EXHIBIT C
HOME EQUITY LOAN SCHEDULE
A COPY ON ELECTRONIC MEDIUM (FLOPPY DISK OR TAPE) OF THE HOME EQUITY LOAN
SCHEDULE HAS BEEN FORWARDED TO THE TRUSTEE FOR ITS FILES. A COPY OF THE HOME
EQUITY LOAN SCHEDULE MAY BE OBTAINED FROM THE TRUSTEE.
<PAGE>
EXHIBIT D
REQUEST FOR RELEASE OF DOCUMENTS
To: Bankers Trust Company
3 Park Plaza, 16th Floor
Irvine, California 92614
Re: Providian Home Equity Loan Asset Backed Certificates,
SERIES 1999-PNB1
-----------------------------------------------------
In connection with the administration of the Home Equity Loans held by you
as Trustee pursuant to the Pooling and Servicing Agreement dated as of April 1,
1999 for the above referenced transaction, we request the release, and hereby
acknowledge receipt, of the Mortgage File for the Home Equity Loan described
below, for the reason indicated.
LOAN NUMBER: Address to which Trustee should
Deliver the Trustee's
Mortgage File:_____________________________
___________________________________________
___________________________________________
___________________________________________
Reason for Requesting Trustee's Mortgage File (check one)
___ 1. Home Equity Loan Paid in Full
___ 2. Home Equity Loan Liquidated
___ 3. Home Equity Loan in Foreclosure
___ 4. Other (explain)
___________________________________________
___________________________________________
If box 1 or 2 above is checked, and the Mortgage File was previously
released to us, please release to us our previous receipt on file with you.
If box 3 or 4 above is checked, upon our return of the above specified
Mortgage File to you as Trustee, please acknowledge your receipt by signing in
the space indicated below, and returning this form.
PROVIDIAN NATIONAL BANK
By: ________________________________
Name: ______________________________
Title: _____________________________
Date: ______________________________
Mortgage File returned to
Trustee
Bankers Trust Company, as Trustee
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
Date: _____________________________________
<PAGE>
EXHIBIT E
[FORM OF TRUSTEE'S INITIAL CERTIFICATION]
April 27, 1999
Merrill Lynch Mortgage Investors, Inc.
World Financial Center
North Tower
New York, New York 10281
Providian National Bank
201 Mission Street
San Francisco, California 94105
MBIA Insurance Corporation
885 Third Avenue, 14th Floor
New York, New York 10022
Re: Providian Home Equity Loan Trust 1999-1,
Providian Home Equity Loan Asset Backed Certificates, Series 1999-PNB1
----------------------------------------------------------------------
Ladies and Gentlemen:
Pursuant to Section 2.01 of the Pooling and Servicing Agreement (the
"Pooling Agreement"), dated as of April 1, 1999, among Merrill Lynch Mortgage
Investors, Inc. as depositor, Providian National Bank, as transferor and
servicer, and Bankers Trust Company, as trustee, we certify that, as to each
Initial Home Equity Loan listed in the Home Equity Loan Schedule (other than any
Initial Home Equity Loan paid in full or any Initial Home Equity Loan
specifically identified in the exception report annexed hereto as Annex I), the
documents set forth in Section 2.01(b) of the Pooling Agreement required to be
delivered to us are in our possession.
Attached is the Trustee's exceptions in accordance with Section 2.01 of the
Pooling Agreement. Capitalized terms used but not otherwise defined herein shall
have the meanings ascribed to them in the Pooling Agreement.
The Trustee has made no independent examination of any documents contained
in each Mortgage File beyond the review specifically required in the
above-referenced Pooling Agreement. The Trustee makes no representations as to:
(i) the validity, legality, sufficiency, enforceability due authorization,
recordability or genuineness of any of the documents contained in the Mortgage
File of any of the Initial Home Equity Loans identified on the Home Equity Loan
Schedule, or (ii) the collectability, insurability, effectiveness or suitability
of any such Initial Home Equity Loan.
<PAGE>
BANKERS TRUST COMPANY,
as Trustee
By: _______________________________________
Name:
Title:
<PAGE>
ANNEX I
TRUSTEE'S EXCEPTIONS
<PAGE>
EXHIBIT F
[FORM OF TRUSTEE'S FINAL CERTIFICATION]
[DATE]
Merrill Lynch Mortgage Investors, Inc.
World Financial Center
North Tower
New York, New York 10281
Providian National Bank
201 Mission Street
San Francisco, California 94105
MBIA Insurance Corporation
885 Third Avenue, 14th Floor
New York, New York 10022
Re: Providian Home Equity Loan Trust 1999-1,
Home Equity Loan Asset Backed Certificates, Series 1999-PNB1
------------------------------------------------------------
Ladies and Gentlemen:
In accordance with the provisions of Section 2.01 of the Pooling and
Servicing Agreement, dated as of April 1, 1999 (the "Pooling Agreement"), among
Merrill Lynch Mortgage Investors, Inc., as depositor (the "Depositor"),
Providian National Bank, as transferor and servicer, and Bankers Trust Company,
as trustee, the undersigned, as Trustee, hereby certifies that it has reviewed
each Mortgage File delivered to it and that with respect to each Initial Home
Equity Loan listed on the Home Equity Loan Schedule (other than any Initial Home
Equity Loan paid in full or any Initial Home Equity Loan specifically identified
in Annex I hereto), and as to any document noted in an exception included in the
Trustee's initial certification:
1. all documents constituting part of such Mortgage File required to be
delivered to us pursuant to Section 2.01 of the Pooling Agreement are in our
possession; and
2. such documents have been reviewed by us, appear to be what they purport
to be and relate to such Initial Home Equity Loan.
We have made no independent examination of any documents contained in each
Mortgage File beyond the review specifically required in the above-referenced
Pooling Agreement. We make no representations as to: (i) the validity, legality,
sufficiency, enforceability due authorization, recordability or genuineness of
any of the documents contained in the Mortgage File of any of the Initial Home
Equity Loans identified on the Home Equity Loan Schedule, or (ii) the
collectability, insurability, effectiveness or suitability of any such Initial
Home Equity Loan.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the Pooling Agreement.
BANKERS TRUST COMPANY,
as Trustee
By: ______________________________________
Name:
Title:
<PAGE>
ANNEX I
TRUSTEE'S EXCEPTIONS
